document stringlengths 8.64k 13.4k | summary stringlengths 179 2.97k | __index_level_0__ int64 0 16.8k |
|---|---|---|
our key vendors include aruba/hpe , axis , audiocodes , avaya , barco , bematech , brocade/ruckus wireless , centurylink , cisco , comcast business , datalogic , dell , dialogic , elo , epson , extreme , hanwha , honeywell , hid , hp , ingenico , jabra , level 3 , march networks , mitel , ncr , oracle , panasonic , plantronics , polycom , samsung , shoretel , sony , spectralink , toshiba global commerce solutions , ubiquiti , unify , verifone , verizon , windstream , xo and zebra technologies . recent developments on july 31 , 2017 we acquired substantially all the assets of pos portal , a leading provider of payment devices and services primarily to the smb market segment in the united states . pos portal joined our worldwide barcode , networking & security operating segment . with the addition of pos portal , we intend to create the industry 's leading payments channel , ensuring customers have access to the solutions , services and support that can help them be successful . our strategy our objective is to continue to grow profitable sales in the technologies we sell and to focus on growth in higher margin businesses . we continue to evaluate strategic acquisitions to enhance our technological offerings and service capabilities . in doing so , we face numerous challenges that require attention and resources . certain business units and geographies are experiencing increased competition for the products we sell . this competition may come in the form of pricing , credit terms , service levels and product availability . as this competition could affect both our market share and pricing of our products , we may change our strategy in order to effectively compete in the marketplace . cost control/profitability our operating income is driven by gross profits and by a disciplined control of operating expenses . our operations feature scalable information systems , streamlined management and centralized distribution , enabling us to achieve the economies of scale necessary for cost-effective order fulfillment . from inception , we have managed our general and administrative expenses by maintaining strong cost controls . however , in order to continue to grow in our markets , we have continued to invest in new technologies and increased marketing efforts to recruit new customers . results of operations the following table sets forth for the periods indicated certain income and expense items as a percentage of net sales : 19 index to financial statements replace_table_token_5_th comparison of fiscal years ended june 30 , 2017 , 2016 and 2015 during the current year , we elected to transition a portion of our latin american business from the worldwide barcode , networking & security segment to the worldwide communications & services segment . we have reclassified prior period results for each business segment to provide comparable information . net sales we have two reportable segments , which are based on technologies . prior period results have been reclassified in the current year to account for the movement of certain business operations from the worldwide barcode , networking & security segment to the worldwide communications & services segment . the following tables summarize our net sales results by business segment and by geographic location for the comparable fiscal years ending june 30 , 2017 , 2016 and 2015 . fiscal year 2017 compared to fiscal year 2016 2017 2016 $ change % change % change constant currency , excluding acquisitions ( a ) ( in thousands ) sales by segment : worldwide barcode , networking & security $ 2,389,256 $ 2,361,670 $ 27,586 1.2 % ( 2.0 ) % worldwide communications & services 1,178,930 1,178,556 374 — % ( 3.2 ) % total net sales $ 3,568,186 $ 3,540,226 $ 27,960 0.8 % ( 2.4 ) % sales by geography category : north american $ 2,685,820 $ 2,620,184 $ 65,636 2.5 % ( 1.1 ) % international 882,366 920,042 ( 37,676 ) ( 4.1 ) % ( 6.1 ) % total net sales $ 3,568,186 $ 3,540,226 $ 27,960 0.8 % ( 2.4 ) % ( a ) a reconciliation of non-gaap net sales in constant currency , excluding acquisitions is presented at the end of results of operations , under non-gaap financial information . worldwide barcode , networking & security 20 index to financial statements the worldwide barcode , networking & security segment consists of sales to technology customers in north america , europe , and latin america . during fiscal year 2017 net sales for this segment increased $ 27.6 million or 1.2 % compared to fiscal year 2016 , primarily resulting from sales growth in north america . excluding the foreign exchange positive impact of $ 10.2 million and sales from the kbz acquisition for the three months ended september 30 , 2016 and 2015 , adjusted net sales for fiscal year 2017 decreased $ 47.3 million , or 2.0 % , compared to fiscal year 2016 . the decrease in adjusted net sales is primarily due to lower sales volume in our international business and a large transaction with our kbz business in the prior year december quarter that did not recur , nor did we expect it to recur . worldwide communications & services the worldwide communications & services segment consists of sales to technology customers in north america , europe and latin america . during fiscal year 2017 , net sales for this segment increased $ 0.4 million compared to fiscal year 2016 , primarily due to the intelisys acquisition , partially offset by lower net sales in all geographies . excluding the foreign exchange positive impact of $ 8.6 million and sales from the intelisys acquisition , adjusted net sales for fiscal year 2017 decreased $ 37.6 million , or 3.2 % , compared to fiscal year 2016 . the decrease in adjusted net sales is due to overall lower sales volume in all geographies . story_separator_special_tag the increase in interest income is primarily due to approximately $ 1.4 million of interest accrued on a tax settlement in brazil . net foreign exchange gains and losses consist of foreign currency transactional and functional currency re-measurements , offset by net foreign currency exchange contract gains and losses . foreign exchange gains and losses are generated as the result of fluctuations in the value of the u.s. dollar versus the brazilian real , the u.s. dollar versus the euro , the british pound versus the euro , the canadian dollar versus the u.s. dollar and other currencies versus the u.s. dollar . while we utilize foreign exchange contracts and debt in non-functional currencies to hedge foreign currency exposure , our foreign exchange policy prohibits the use of derivative financial instruments for speculative transactions . we partially offset foreign currency exposure with the use of foreign exchange forward contracts to hedge against these exposures . the costs associated with foreign exchange forward contracts are included in the net foreign exchange loss . other income for the fiscal year ended 2017 increased $ 12.7 million primarily due to the recognition of a legal settlement in the us , net of attorney fees compared to the prior year . fiscal year 2016 compared to fiscal year 2015 25 index to financial statements replace_table_token_13_th the interest expense increased in fiscal 2016 over 2015 , principally from additional borrowings on our multi-currency revolving credit facility . interest income for the year ended june 30 , 2016 was generated on interest-bearing customer receivables and interest earned on cash and cash equivalents , principally in brazil . the increase in interest income year-over-year is largely driven by a higher effective interest rate on higher deposit levels in our brazilian entity . we experienced foreign exchange losses as foreign currency exchange rates weakened against the u.s. dollar . losses were partially offset by the use of foreign exchange forward contracts to hedge against currency exposures . provision for income taxes income tax expense was $ 32.2 million , $ 32.4 million , and $ 34.5 million for the fiscal years ended june 30 , 2017 , 2016 and 2015 respectively , reflecting an effective tax rate of 31.8 % , 33.7 % , and 34.5 % , respectively . the decrease in the effective tax rate for fiscal year 2017 as compared to fiscal year 2016 is primarily due to a favorable tax recovery recognized by the brazilian supreme court during the quarter ending june 30 , 2017 . the decrease in the effective tax rate for fiscal year 2016 as compared to fiscal year 2015 is primarily due to additional tax credits generated during 2016. we expect the fiscal year 2018 effective tax rate to range between 35 % and 36 % . quarterly results the following tables set forth certain unaudited quarterly financial data . the information has been derived from unaudited financial statements that , in the opinion of management , reflect all adjustments . 26 index to financial statements replace_table_token_14_th non-gaap financial information evaluating financial condition and operating performance in addition to disclosing results that are determined in accordance with united states generally accepted accounting principles ( `` us gaap '' ) , we also disclose certain non-gaap financial measures . these measures include non-gaap operating income , non-gaap pre-tax income , non-gaap net income , non-gaap eps , return on invested capital ( `` roic '' ) and `` constant currency . '' constant currency is a measure that excludes the translation exchange impact from changes in foreign currency exchange rates between reporting periods . we use non-gaap financial measures to better understand and evaluate performance , including comparisons from period to period . these non-gaap financial measures have limitations as analytical tools , and the non-gaap financial measures that we report may not be comparable to similarly titled amounts reported by other companies . analysis of results and outlook on a non-gaap basis should be considered in addition to , and not in substitution for or as superior to , measurements of financial performance prepared in accordance with us gaap . net sales in constant currency , excluding acquisitions we make references to `` constant currency , '' a non-gaap performance measure that excludes the foreign exchange rate impact from fluctuations in the average foreign exchange rates between reporting periods . constant currency is calculated by translating current period results from currencies other than the u.s. dollar into u.s. dollars using the comparable average foreign exchange rates from the prior year period . we also exclude the impact of acquisitions prior to the first full year of operations from the acquisition date in order to show net sales results on an organic basis . this information is provided to analyze underlying trends without the translation impact of fluctuations in foreign currency rates and the impact of acquisitions . below we provide a non-gaap reconciliation of net sales in constant currency , excluding acquisition ( organic growth ) : 27 index to financial statements net sales by segment : fiscal year ended june 30 , 2017 2016 $ change % change worldwide barcode , networking & security : ( in thousands ) net sales , as reported $ 2,389,256 $ 2,361,670 $ 27,586 1.2 % foreign exchange impact ( a ) ( 10,229 ) — net sales , constant currency 2,379,027 2,361,670 17,357 0.7 % less : acquisitions ( 99,332 ) ( 34,628 ) net sales , constant currency excluding acquisitions $ 2,279,695 $ 2,327,042 $ ( 47,347 ) ( 2.0 ) % worldwide communications & services : net sales , as reported $ 1,178,930 $ 1,178,556 $ 374 — % foreign exchange impact ( a ) ( 8,599 ) — net sales , constant currency 1,170,331 1,178,556 ( 8,225 ) ( 0.7 ) % less : acquisitions ( 29,421 ) — net sales , constant currency excluding acquisitions $ 1,140,910 $ 1,178,556 $ ( 37,646 ) ( 3.2 ) % consolidated : net sales , as reported $ 3,568,186 $ 3,540,226 $ 27,960 0.8 % foreign exchange impact ( a ) ( 18,828 ) —
| results of operations , under non-gaap financial information . worldwide barcode , networking & security during fiscal year 2016 net sales for this segment increased $ 242.9 million , or 11.5 % , compared to fiscal year 2015 primarily from the inclusion of sales from kbz , acquired in september 2015. excluding the foreign exchange negative impact of $ 80.4 million and sales from acquisitions of $ 309.4 million , adjusted net sales fiscal year 2016 increased $ 13.9 million , or 0.7 % , compared to fiscal 2015 . the increase in adjusted net sales is primarily due to growth in our pos and barcode business in north america . worldwide communications & services during fiscal year 2016 , net sales for this segment increased $ 78.7 million or 7.2 % compared to fiscal year 2015 primarily driven by the inclusion of a full year of sales for network1 . excluding foreign exchange negative impact of $ 22.8 million and sales from acquisitions of $ 118.9 million , adjusted net sales fiscal year 2016 decreased $ 12.8 million , or 1.2 % , compared to fiscal 2015 . the decrease in adjusted net sales is primarily due to lower sales in north america , partially offset by sales growth in europe . gross profit the following tables summarize our gross profit for the fiscal years ended june 30 , 2017 , 2016 and 2015 : fiscal year 2017 compared to fiscal year 2016 21 index to financial statements replace_table_token_6_th worldwide barcode , networking & security gross profit dollars for the worldwide barcode , networking & security segment decreased for fiscal year 2017 and gross profit margin decreased slightly to 8.2 % , compared to 8.3 % for fiscal year 2016 , primarily due to vendor program changes from the prior year . worldwide communications & services gross profit dollars and gross profit margin for the worldwide communications & services segment increased $ 29.2
| 7,900 |
however , qualification and taxation as a reit depends upon our ability to meet the various qualification tests imposed under the code , including tests related to the percentage of income that we earn from specified sources and the percentage story_separator_special_tag the following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes appearing elsewhere in this annual report on form 10-k. this discussion contains forward-looking statements based upon our 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 , but not limited to , those set forth under `` item 1a . risk factors '' in this report . overview we are a maryland reit focused on acquiring , renovating , leasing and operating single-family homes as rental properties . we commenced operations in november 2012 to continue the investment activities of ah llc , which was founded by our chairman , b. wayne hughes , in 2011 to take advantage of the dislocation in the single-family home market . as of december 31 , 2015 , we owned 38,780 single-family properties in selected sub-markets of msas in 22 states , compared to 34,599 single-family properties in 22 states as of december 31 , 2014 . as of december 31 , 2015 , we had an additional 12 properties in escrow that we expected to acquire , subject to customary closing conditions , for an aggregate purchase price of approximately $ 1.7 million . as of december 31 , 2015 , 36,403 , or 93.9 % , of our total properties were leased , compared to 28,250 , or 81.6 % , of our total properties as of december 31 , 2014 . as of december 31 , 2015 , our entire portfolio of single-family properties was internally managed through our proprietary property management platform . our properties and key operating metrics the following table provides a summary of our single-family properties as of december 31 , 2015 : replace_table_token_8_th ( 1 ) represents 31 markets in 19 states . 39 the following table summarizes our leasing experience through december 31 , 2015 : replace_table_token_9_th ( 1 ) includes properties under renovation and excludes vacant properties available for lease and properties held for sale . ( 2 ) a property is classified as leased upon execution ( i.e. , signature ) of a lease agreement . ( 3 ) a property is classified as occupied upon commencement ( i.e. , start date ) of a lease agreement , which can occur contemporaneously with or subsequent to execution ( i.e. , signature ) . ( 4 ) a property is classified as stabilized once it has been renovated and then initially leased or available for rent for a period greater than 90 days . ( 5 ) represents 31 markets in 19 states . recent developments on december 3 , 2015 , we , arpi and certain of our and their subsidiaries entered into the merger agreement . subject to the terms and conditions of the merger agreement , arpi will merge with and into a wholly owned subsidiary of us in a stock-for-stock transaction , with our subsidiary continuing as the surviving entity , which was unanimously approved by the members of our board of trustees present at the meeting and by the board of directors of arpi . if the merger is completed , each holder of arpi common stock will receive 1.135 of our class a common shares for each share of arpi common stock and each holder of limited partnership interests in arpi 's operating partnership will receive 1.135 class a units of our operating partnership . the exchange ratio is fixed and will not be adjusted to reflect changes in the price of our class a common shares or the price of arpi common stock occurring prior to the completion of the merger . it is anticipated that we will issue approximately 36,553,308 class a common shares and 1,370,626 class a units in connection with the merger , representing approximately 12.7 % of the total pro forma class a common shares , class b common shares and units of our operating partnership , collectively . the proposed merger , which was approved by the stockholders of arpi on february 26 , 2016 , is subject to customary closing conditions . we anticipate the transaction to close on february 29 , 2016. key transactions in 2015 rj american homes 4 rent one , llc and rj american homes 4 rent two , llc acquisition in october 2015 , the company acquired the remaining 67 % outside ownership interest in two of its consolidated joint ventures , rj american homes 4 rent one , llc and rj american homes 4 rent two , llc , which own a total of 377 single-family properties , for a purchase price of $ 44.4 million ( see note 11 ) . factors that affect our results of operations and financial condition our results of operations and financial condition are affected by numerous factors , many of which are beyond our control . key factors that impact our results of operations and financial condition include our ability to identify and acquire properties ; our pace of property acquisitions ; the time and cost required to gain access to the properties and then to renovate and lease a newly acquired property at acceptable rental rates ; occupancy levels ; rates of tenant turnover ; the length of vacancy in properties between tenant leases ; our expense ratios ; our ability to raise capital ; and our capital structure . 40 property acquisitions since our formation , we have rapidly but systematically grown our portfolio of single-family homes . our ability to identify and acquire single-family homes that meet our investment criteria is impacted by home prices in our target markets , the inventory of properties available-for-sale through our acquisition channels , competition for our target assets and our available capital . story_separator_special_tag based on 25,071 and 15,020 leases that expired during the years ended december 31 , 2015 and 2014 , respectively , we experienced tenant renewal rates of 76.5 % and 78.3 % , respectively , at an average rental rate increase on non-month-to-month leases of 3.2 % and 3.6 % , respectively . including the impact of 3,318 and 2,292 early terminated tenants during the years ended december 31 , 2015 and 2014 , respectively , we experienced tenant retention rates of 67.5 % and 69.1 % , respectively . expenses we monitor the following categories of expenses that we believe most significantly affect our results of operations . property operating expenses once a property is available for lease , which we refer to as `` rent-ready , '' we incur ongoing property-related expenses , primarily hoa fees ( when applicable ) ; property taxes ; insurance ; marketing expenses ; repairs and maintenance ; and turnover costs , which may not be subject to our control . property management expenses as we now internally manage our entire portfolio of single-family properties through our proprietary property management platform , we incur costs such as salary expenses for property management personnel , lease expenses for property management offices and technology expenses for maintaining the property management platform . as part of developing our property management platform , we have made significant investments in our infrastructure , systems and technology . we believe that these investments will enable the costs of our property management platform to become more efficient over time and as our overall portfolio grows in size . seasonality we believe that our business and related operating results will be impacted by seasonal factors throughout the year . in particular , we have experienced higher levels of tenant move-outs during the summer months , which impacts both our rental revenues and related turnover costs . further , our property operating costs are seasonally impacted in certain markets for expenses such as hvac repairs , turn costs and landscaping expenses during the summer season . general and administrative expense general and administrative expense primarily consists of payroll and personnel costs , trustees ' and officers ' insurance expenses , audit and tax fees , state taxes , trustee fees and other expenses associated with our corporate and administrative functions . note regarding our historical operations and presentation of our financial results from our formation through june 10 , 2013 , we were externally managed and advised by the advisor and the leasing , managing and advertising of our properties was overseen and directed by the property manager , both of which were subsidiaries of ah llc . on june 10 , 2013 , we entered into the management internalization and acquired the advisor and the property manager from ah llc in exchange for 4,375,000 series d convertible units and 4,375,000 series e convertible units in our operating partnership . we now have an integrated operating platform that provides our property management , marketing , leasing , financial and administrative functions . prior to the management internalization , ah llc exercised control over the company through the contractual rights provided to the advisor through an advisory management agreement . accordingly , our consolidated financial statements retroactively reflect two transactions between us and ah llc as transactions between entities under common control . in december 2012 , ah llc contributed 367 properties to us with an agreed-upon value of $ 49.4 million and made a cash investment of $ 0.6 million , in exchange for 3,300,000 class a common shares , 667 class b common shares and 32,667 class a units of our operating partnership . in february 2013 , ah llc contributed a portfolio of 2,770 single-family properties to us with an agreed-upon value of $ 491.7 million , in exchange for 31,085,974 series c units of our operating partnership and 634,408 of our class b common shares ( `` the 2,770 property contribution '' ) . as noted in our consolidated financial statements , the accounts relating to the properties acquired in those transactions have been reflected retroactively at ah llc 's net book value . ah llc commenced acquiring these properties on june 23 , 2011 , and , accordingly , the consolidated statements of operations reflect activity prior to our date of formation . our consolidated financial statements are not indicative of our past or future results and do not reflect our financial position , results of operations , changes in equity and cash flows had they been presented as if we had been operating independently during the period presented . accordingly , this discussion of our financial statements encompasses certain aspects of the historical operations of ah llc . 42 story_separator_special_tag assets for the same period in 2014 . interest expense interest expense was $ 89.4 million and $ 19.9 million for the years ended december 31 , 2015 and 2014 , respectively . this increase was primarily due to a rise in aggregate borrowings to $ 2.6 billion at december 31 , 2015 , from $ 1.8 billion at december 31 , 2014 . acquisition fees and costs expensed all costs of our internal acquisition function are expensed in accordance with gaap . for the year ended december 31 , 2015 , acquisition fees and costs expensed totaled $ 19.6 million , including $ 17.0 million of costs associated with purchases of single-family properties and $ 2.6 million of transaction costs related to the merger , portfolio and bulk transactions . for the year ended december 31 , 2014 , acquisition fees and costs expensed totaled $ 22.4 million , including $ 22.1 million of acquisition fees and related costs associated with single-family properties acquired with in-place leases , as well as the beazer rental homes acquisition and the 45 ellington portfolio acquisition , and $ 0.3 million of transaction costs incurred in pursuing unsuccessful single-family property acquisitions . depreciation and amortization depreciation and amortization expense consists primarily of depreciation of buildings .
| results of operations as we have rapidly grown our portfolio and have many properties in the early stages of operations , beginning january 1 , 2014 , we distinguish our portfolio of initially leased homes between same-home properties and non-same-home properties in evaluating our operating performance . we classify a property as same-home if it has been stabilized longer than 90 days prior to the beginning of the earliest period presented under comparison , which allows the performance of these properties to be compared between periods . a property is considered stabilized once it has been renovated and then initially leased or available for rent for a period greater than 90 days . all other properties that have been initially leased , whether or not currently leased , are classified as non-same-home . one of the primary financial measures we use in evaluating the operating performance of our initially leased , whether or not currently leased , single-family properties is core net operating income ( `` initially leased property core noi '' ) , which we define as rents and fees from single-family properties , net of bad debt expense , less property operating expenses for leased single-family properties , excluding expenses reimbursed by tenant charge-backs and bad debt expense . we use initially leased property core noi as a primary financial measure as it reflects the economic operating performance of our properties that have been initially leased , without the impact of certain tenant reimbursed operating expenses that are presented gross in the consolidated statements of operations in accordance with gaap .
| 7,901 |
overview owl rock capital corporation ( the “ company ” , “ we ” , “ us ” or “ our ” ) is a maryland corporation formed on october 15 , 2015. we were formed primarily to originate and make loans to , and make debt and equity investments in , u.s. middle market companies . we invest in senior secured or unsecured loans , subordinated loans or mezzanine loans and , to a lesser extent , equity and equity-related securities including warrants , preferred stock and similar forms of senior equity , which may or may not be convertible into a portfolio company 's common equity . our investment objective is to generate current income , and to a lesser extent , capital appreciation by targeting investment opportunities with favorable risk-adjusted returns . we are managed by owl rock capital advisors llc ( “ the adviser ” or “ our adviser ” ) . the adviser is registered with the sec as an investment adviser under the investment advisers act of 1940 , as amended ( the `` advisers act '' ) . subject to the overall supervision of our board of directors ( “ the board ” or “ our board ” ) , the adviser manages our day-to-day operations , and provides investment advisory and management services to us . the adviser or its affiliates may engage in certain origination activities and receive attendant arrangement , structuring or similar fees . the adviser is responsible for managing our business and activities , including sourcing investment opportunities , conducting research , performing diligence on potential investments , structuring our investments , and monitoring our portfolio companies on an ongoing basis through a team of investment professionals . the board consists of eight directors , five of whom are independent . on july 22 , 2019 , we closed our initial public offering ( “ ipo ” ) , issuing 10 million shares of our common stock at a public offering price of $ 15.30 per share , and on august 2 , 2019 , the underwriters exercised their option to purchase an additional 1.5 million shares of common stock at a purchase price of $ 15.30 per share . net of underwriting fees and offering costs , we received total cash proceeds of $ 164.0 million . our common stock began trading on the new york stock exchange ( “ nyse ” ) under the symbol “ orcc ” on july 18 , 2019. in connection with the ipo , on july 22 , 2019 , we entered into a stock repurchase plan ( the “ company 10b5-1 plan ” ) , to acquire up to $ 150 million in the aggregate of our common stock at prices below its net asset value per share over a specified period , in accordance with the guidelines specified in rule 10b-18 and rule 10b5-1 of the securities exchange act of 1934 , as amended ( the `` exchange act '' ) . under the company 10b5-1 plan , we acquired 12,515,624 shares for approximately $ 150 million . the company 10b5-1 plan commenced on august 19 , 2019 and was exhausted on august 4 , 2020. the adviser also serves as investment adviser to owl rock capital corporation ii and owl rock core income corp. the adviser is under common control with owl rock technology advisors llc ( “ orta ” ) , owl rock capital private fund advisors llc ( “ orpfa ” ) and owl rock diversified advisors llc ( “ orda ” ) , which also are investment advisers and subsidiaries of owl rock capital partners . orta serves as investment adviser to owl rock technology finance corp. and orda serves as investment adviser to owl rock capital corporation iii . the adviser , orta , orpfa and orda are referred to as the “ owl rock advisers ” and together with owl rock capital partners are referred to , collectively , as “ owl rock. ” on december 23 , 2020 , owl rock capital group , llc ( “ owl rock capital group ” ) , the parent of the adviser ( and a subsidiary of owl rock capital partners ) , and dyal capital partners ( “ dyal ” ) announced they are merging to form blue owl capital inc. ( “ blue owl ” ) . blue owl will enter the public market via its acquisition by altimar acquisition corporation ( nyse : atac ) ( “ altimar ” ) , a special purpose acquisition company ( the “ transaction ” ) . if the transaction is consummated , there will be no changes to the company 's investment strategy or the adviser 's investment team or investment process with respect to the company ; however , the transaction will result in a change in control of the adviser , which will be deemed an assignment of the investment advisory agreement in accordance with the 1940 act . as a result , the board , after considering the transaction and subsequent change in control , has determined that upon consummation of the transaction and subject to the approval of the company 's shareholders at a special meeting expected to be held on march 17 , 2021 , the company should enter into a third amended and restated investment advisory agreement with the adviser on terms that are identical to the investment advisory agreement . the board also determined that upon consummation of the transaction , the company should enter into an amended and restated administration agreement with the adviser on terms that are identical to the administration agreement . see “ item 1. business – the adviser and administrator – owl rock capital advisors llc. ” we may be prohibited under the 1940 act from participating in certain transactions with our affiliates without the prior approval of our directors who are not interested persons and , in some cases , the prior approval of the sec . story_separator_special_tag these increases have led to the re-introduction of restrictions and business shutdowns in certain states , counties and cities in the united states and globally and could continue to lead to the re-introduction of such restrictions and business shutdowns elsewhere . additionally , as of late december 2020 , travelers from the united states are not allowed to visit canada , australia or the majority of countries in europe , asia , africa and 83 south america . these continued travel restrictions may prolong the global economic downturn . in addition , although the federal food and drug administration authorized vaccines for emergency use starting in december 2020 , it remains unclear how quickly the vaccines will be distributed nationwide and globally or when “ herd immunity ” will be achieved and the restrictions that were imposed to slow the spread of the virus will be lifted entirely . the delay in distributing the vaccines could lead people to continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time . even after the covid-19 pandemic subsides , the u.s. economy and most other major global economies may continue to experience a recession , and we anticipate our business and operations could be materially adversely affected by a prolonged recession in the united states and other major markets . some economists and major investment banks have expressed concerns that the continued spread of the virus globally could lead to a world-wide economic downturn . we are unable to predict the duration of any business and supply-chain disruptions , the extent to which covid-19 will negatively affect our portfolio companies ' operating results or the impact that such disruptions may have on our results of operations and financial condition . though the magnitude of the impact remains to be seen , we expect our portfolio companies and , by extension , our operating results to be adversely impacted by covid-19 and depending on the duration and extent of the disruption to the operations of our portfolio companies , we expect that certain portfolio companies will experience financial distress and possibly default on their financial obligations to us and their other capital providers . some of our portfolio companies have significantly curtailed business operations , furloughed or laid off employees and terminated service providers and deferred capital expenditures , which could impair their business on a permanent basis and we except that additional portfolio companies may take similar actions . we have built out our portfolio management team to include workout experts and continue to closely monitor our portfolio companies , which includes assessing each portfolio company 's operational and liquidity exposure and outlook . we have executed amendments to our loan documents which provide covenant modifications or additional liquidity , sometimes by allowing a portion of our loan to be paid in pik rather than cash and in connection with these amendments we may receive increased economics . any of these developments would likely result in a decrease in the value of our investment in any such portfolio company . in addition , to the extent that the impact to our portfolio companies results in reduced interest payments or permanent impairments on our investments , we could see a decrease in our net investment income which could result in an increase in the percentage of our cash flows dedicated to our debt obligations and could require us to reduce the future amount of distributions to our shareholders . during the year ended december 31 , 2020 , we experienced a decrease in originations , which reflects the lower levels of private equity deal activity in that time period ; however , for the three months ended december 31 , 2020 , we experienced an increase in originations compared to prior quarter . for the three months ending march 31 , 2021 , we expect the performance of our portfolio companies to continue to be impacted by covid-19 and the related economic slowdown , and therefore , while we have highlighted our liquidity and available capital , we are focused on preserving that capital for our existing portfolio companies in order to protect the value of our investments . our investment framework we are a maryland corporation organized primarily to originate and make loans to , and make debt and equity investments in , u.s. middle market companies . our investment objective is to generate current income , and to a lesser extent , capital appreciation by targeting investment opportunities with favorable risk-adjusted returns . since our adviser and its affiliates began investment activities in april 2016 through december 31 , 2020 , our adviser and its affiliates have originated $ 27.7 billion aggregate principal amount of investments , of which $ 25.8 billion of aggregate principal amount of investments prior to any subsequent exits or repayments , was retained by either us or a corporation or fund advised by our adviser or its affiliates . we seek to generate current income primarily in u.s. middle market companies through direct originations of senior secured loans or originations of unsecured loans , subordinated loans or mezzanine loans and , to a lesser extent , investments in equity and equity-related securities including warrants , preferred stock and similar forms of senior equity . we define “ middle market companies ” generally to mean companies with earnings before interest expense , income tax expense , depreciation and amortization , or “ ebitda , ” between $ 10 million and $ 250 million annually and or annual revenue of $ 50 million to $ 2.5 billion at the time of investment , although we may on occasion invest in smaller or larger companies if an opportunity presents itself . we generally seek to invest in companies with a loan-to-value ratio of 50 % or below . we expect that generally our portfolio composition will be majority debt or income producing securities , which may include “ covenant-lite ” loans ( as defined below ) , with a lesser allocation to equity or equity-linked opportunities .
| results of operations the following table represents the operating results for the years ended december 31 , 2020 , 2019 and 2018 : replace_table_token_34_th net increase ( decrease ) in net assets resulting from operations can vary from period to period as a result of various factors , including the level of new investment commitments , expenses , the recognition of realized gains and losses and changes in unrealized appreciation and depreciation on the investment portfolio . 119 investment income investment income for the years ended december 31 , 2020 , 2019 and 2018 were as follows : replace_table_token_35_th for the years ended december 31 , 2020 and 2019 investment income increased to $ 803.3 million for the year ended december 31 , 2020 from $ 718.0 million for the same period in prior year primarily due to an increase in our investment portfolio , which , at par , increased from $ 8.9 billion as of december 31 , 2019 , to $ 10.7 billion as of december 31 , 2020 , partially offset by a decrease in our portfolio 's weighted average yield from 8.6 % as of december 31 , 2019 to 8.0 % as of december 31 , 2020. included in interest income are other fees such as prepayment fees and accelerated amortization of upfront fees from unscheduled paydowns . period over period , income generated from these fees represented $ 23.6 million and $ 21.1 million , for the years ended december 31 , 2020 and 2019 , respectively . in addition to the growth in the portfolio , the incremental increase in investment income was primarily due to an increase in dividend income earned from our investment in moore holdings , llc of $ 10.2 million , that was not earned in 2019 , partially offset by a decrease in dividend income from sebago lake of $ 0.9 million period over period .
| 7,902 |
during 2007 , the company reassessed its participation on the joint steering committee and concluded that its participation in the joint steering committee had become inconsequential and perfunctory . as a result , the company determined that it had no further performance obligations under this collaboration and consideration received after this date is recognized in the company 's financial statements in the period in which it was earned . the company received contingent payments from genentech totaling $ 3,000,000 , $ 10,000,000 and $ 14,000,000 during the years ended december 31 , 2014 , 2013 and 2012 , respectively , for the achievement of certain clinical and regulatory development objectives related to erivedge described above . the company has recorded these amounts as revenue within license fees in the revenues section of its consolidated statement of operations for the years ended december 31 , 2014 , 2013 and 2012. as a result of its licensing agreements with various universities , the company is obligated to make payments to these university licensors when certain payments are received from genentech . through december 31 , 2014 , the company has incurred aggregate story_separator_special_tag the following discussion and analysis of financial condition and results of operations should be read together with selected financial data , and our financial statements and accompanying notes appearing elsewhere in this report . this discussion contains forward-looking statements , based on current expectations and related to future events and our future financial performance , that involve risks and uncertainties . our actual results may differ materially from those anticipated in these forward-looking statements as a result of many important factors , including those set forth under item 1a , risk factors and elsewhere in this report . story_separator_special_tag to which debiopharm has returned to us all future development and commercialization rights to debio 0932 , which we have redesignated as cudc-305 . while we do not plan to continue to investigate cudc-305 in non-small cell lung cancer , we are evaluating initiating 70 clinical studies with cudc-305 in 2015 , including trials in patients with systemic mastocytosis and glioblastoma multiforme , either in company-sponsored or investigator sponsored studies . erivedge . erivedge is the first and only fda approved medicine for the treatment of metastatic or locally advanced basal cell carcinoma , or bcc , and is being developed and commercialized by roche and genentech under a collaboration agreement between curis and genentech . in january 2012 , the fda approved the erivedge for treatment of adults with bcc that has spread to other parts of the body , or that has come back after surgery or that their healthcare provider decides can not be treated with surgery or radiation , collectively considered as advanced bcc . in may 2013 , australia 's therapeutic goods administration , or tga , approved erivedge and in july 2013 , the european commission granted conditional approval for the marketing of erivedge in all 28 european union member states . erivedge 's approval in the united states , europe , australia and several other countries are based on positive clinical data from the erivance bcc/shh4476g trial , a pivotal phase 2 study of erivedge in patients with advanced bcc . under the provisions of the conditional approval in europe , roche is expected to provide additional data on erivedge in advanced bcc from the ongoing global safety study , known as stevie , which is an international , single-arm , open-label multicenter trial in patients with advanced forms of bcc . the stevie trial has completed enrollment of approximately 1,200 patients and interim analyses from the study confirmed a safety profile similar to that observed in previous studies of erivedge in bcc patients . roche and genentech are also continuing erivedge 's clinical development in less severe forms of bcc as well as pursuing its potential development in other non-oncology indications . our collaborations and license agreements our current collaborations and license agreements are summarized as follows : aurigene collaboration overview . on january 18 , 2015 , we entered into a collaboration agreement with aurigene for the discovery , development and commercialization of small molecule compounds in the areas of immuno-oncology and precision oncology . under the collaboration agreement , aurigene granted us option to obtain exclusive , royalty-bearing licenses under relevant aurigene technology to develop , manufacture and commercialize products containing certain of such compounds . the lead compounds under our collaboration agreement are directed at developing orally available small molecules that will target the modulation of the pd-l1 pathway and irak4 kinase , respectively . for each program , aurigene has granted us an exclusive option , exercisable within 90 days after aurigene delivers the relevant data regarding a development candidate , to obtain an exclusive , royalty-bearing license to develop , manufacture and commercialize compounds from such program , including the development candidate and products containing such compounds , anywhere in the world with the exception of india and russia . upon exercise of the option for a particular program , aurigene will grant us the royalty-bearing license described above for such program , and we will grant aurigene an exclusive , royalty-free , fully paid license under our relevant technology to develop , manufacture and commercialize compounds from such program and products containing such compounds in india and russia . up-front equity issuance . in connection with the collaboration agreement , we issued to aurigene 17,120,131 shares of our common stock in partial consideration for the rights granted to us under the collaboration agreement . the shares were issued pursuant to a stock purchase agreement with aurigene dated january 18 , 2015 . 71 research payments , option exercise fees and milestone payments . story_separator_special_tag the loan and accrued interest will be repaid by curis royalty using such royalty and royalty-related payments . the loan constitutes an obligation of curis royalty , and is intended to be non-recourse to curis . as of december 31 , 2014 , curis royalty owed a total of $ 28,699,000 , gross , to biopharma-ii comprised of principal and accrued interest . future royalty payments related to erivedge will service the outstanding debt and accrued interest to biopharma-ii , up to the quarterly caps for 2015 , and until the debt is fully repaid thereafter . we are also obligated to make payments to university licensors on royalties that curis royalty earns in all territories other than australia in an amount that is equal to 5 % of the royalty payments that curis royalty receives from genentech . this obligation is for a period of 10 years from the first commercial sale of erivedge , which occurred in february 2012. for royalties that curis royalty earns from roche 's sales of erivedge in australia , we are obligated to make payments to university licensors of 2 % of roche 's direct net sales in australia until expiration of the australian patent in april 2019 , after which the amount will decrease to 5 % of the royalty payments that curis royalty receives from genentech for the remainder of the period ending 10 years from the first commercial sale of erivedge , or february 2022. cost of royalty revenues were $ 340,000 during the year ended december 31 , 2014. we have incurred an aggregate of $ 713,000 to university licensors upon receipt of royalties since erivedge was approved , including a one-time milestone payment to a university licensor of $ 100,000 on the first commercial sale of erivedge in 2012. genentech iap inhibitor license agreement . in november 2012 , we licensed from genentech the exclusive , worldwide rights for the development and commercialization of cudc-427 , a small molecule that is designed to promote cancer cell death by antagonizing iap proteins . under the terms of the license agreement , we have the sole right and responsibility for all research , development , manufacturing and commercialization activities related to cudc-427 . during the fourth quarter of 2012 , we incurred expenses of $ 9,500,000 representing an up-front license payment and technology transfer costs payable to genentech . in addition , genentech is entitled to receive milestone payments upon the first commercial sale of cudc-427 in certain territories and tiered single-digit royalties on net sales of cudc-427 . 73 the leukemia & lymphoma society agreement . in november 2011 , we entered into an agreement with lls , under which lls will provide approximately 50 % of the direct costs of the development of cudc-907 , up to $ 4,000,000 , through milestone payments upon our achievement of specified development objectives , in patients with relapsed or refractory lymphomas and multiple myeloma . during the years ended december 31 , 2013 and 2012 , we earned milestone payments of $ 650,000 and $ 1,000,000 , respectively , under the terms of the agreement with lls . we will be obligated to make future contingent payments , including potential royalty payments under our agreement with lls upon our successful entry into a partnering agreement for cudc-907 or upon the achievement of regulatory and commercial objectives , with such future payments capped at 2.5 times the milestone payments that we receive from lls under this agreement . debiopharm in august 2009 , we granted a worldwide , exclusive royalty-bearing license to develop , manufacture , market and sell our hsp90 inhibitor technology , including debio 0932 , to debiopharm . debiopharm completed phase 1 testing of this drug candidate and in august 2012 , debiopharm initiated the halo , or h sp90 inhibition a nd l ung cancer o utcomes , phase 1/2 clinical trial of debio 0932 in combination with various chemotherapy regimens in patients with stage iiib or iv non-small cell lung cancer , or nsclc , without known epidermal growth factor receptor , or egfr , mutations . the primary objective of this trial was to analyze the effect of adding debio 0932 to combination chemotherapy with cisplatin/pemetrexed or cisplatin/ gemcitabine on the rate of progression-free survival at 6 months in first-line therapy of patients in this trial population . debiopharm reviewed data from the phase 1 portion of the halo study and determined that the results from the phase 1 portion of the halo study were inconclusive although safety observations were generally consistent with the previously observed side effects of debio 0932 and or the respective chemotherapeutic regimens administered in the trial . in february 2015 , we entered into a termination and transition agreement , which we refer to as the transition agreement , with debiopharm to terminate our august 2009 license agreement , effective february 5 , 2015. we have redesignated the molecule cudc-305 . while we do not plan to continue to investigate cudc-305 in non-small cell lung cancer , we are evaluating initiating clinical studies with cudc-305 in 2015 and we are exploring the potential to test the molecule in other indications , including in systemic mastocytosis and glioblastoma multiforme , either in company-sponsored or investigator sponsored studies . under the terms of the transition agreement , the licenses and all other rights granted by us related to cudc-305 have been terminated and reverted to curis effective as of the termination date . debiopharm ceased enrollment in all clinical trials as of the termination date . in addition , we exercised our right , pursuant to the license agreement , to obtain a non-exclusive , worldwide , royalty-bearing license , with the right to sublicense , under other intellectual property rights of debiopharm to develop , make , have made , use , sell , offer for sale , have sold and import cudc-305 , and debiopharm will transfer to us the u.s. investigational new drug application related to cudc-305 . debiopharm also assigned its sole patent application related to cudc-305 to us .
| overview we are a biotechnology company seeking to develop and commercialize innovative drug candidates for the treatment of human cancers . our most advanced drug candidate is cudc-907 , an orally-available , small molecule inhibitor of histone deacetylase , or hdac , and phosphatidylinositol-3-kinase , or pi3k enzymes , which has completed dose escalation stage of a first-in-man phase 1 clinical study in patients with relapsed , refractory lymphoma or multiple myeloma . in addition , we recently entered into an exclusive collaboration agreement focused on immuno-oncology and selected precision oncology targets with aurigene discovery technologies limited , or aurigene , a specialized , discovery stage biotechnology company and wholly-owned subsidiary of dr. reddy 's laboratories that is developing novel therapies to treat cancer and inflammatory diseases . we expect to exercise our options during the first half of 2015 to obtain two exclusive licenses under this collaboration including for drug candidates that target an orally-available small molecule antagonist of programmed death ligand-1 , or pd-l1 immune checkpoint target , and an orally-available small molecule inhibitor of interleukin-1 receptor-associated kinase 4 , or irak4 kinase . our proprietary pipeline also includes cudc-427 , an orally-available , small molecule antagonist inhibitor of apoptosis , or iap proteins , which has recently completed dose escalation in a phase 1 clinical trial in patients with solid tumors or lymphoma . we also recently regained rights to our heat shock protein 90 , or hsp90 , inhibitor debio 0932 from debiopharm international s.a. , or debiopharm . we have redesignated this drug candidate as cudc-305 and are evaluating initiating clinical studies with cudc-305 in 2015. our collaborators f. hoffmann-la roche ltd , or roche , and genentech inc. , or genentech , a member of the roche group , are commercializing erivedge ® ( vismodegib ) , a first-in-class orally-administered small molecule hedgehog pathway inhibitor , in advanced basal cell carcinoma , or bcc .
| 7,903 |
losses had been in a loss position for less than 12 months . cost and fair value of investments based on two maturity groups were ( in thousands ) : replace_table_token_31_th 65 replace_table_token_32_th the following table represents the company 's fair value hierarchy for its financial assets ( cash equivalents and investments ) as of december 31 , 2015 and 2014 ( in thousands ) : replace_table_token_33_th replace_table_token_34_th there were no transfers in or out of level 1 and level 2 securities during the years ended december 31 , 2015 and 2014. note 4 : sale of i/o technology in march 2012 , the company entered into an asset purchase agreement for an exclusive license of a portion of its intellectual property pertaining to its high-speed serial i/o technology for approximately $ 4.3 million . as part of the agreement , the company provided certain technology transfer support services , and 15 employees of the company 's india subsidiary accepted employment with the purchaser . consistent with the previous payments received , the approximately $ 2.2 million , net of transaction costs , in cash upon execution of the agreement . the the final payment of $ 0.6 million which was received in march 2013 , was recorded as a gain on sale of assets and reduction of operating expenses in the consolidated statements of operations and comprehensive loss . 66 note 5 : income taxes the income tax provision consisted of the following ( in thousands ) : replace_table_token_35_th deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes . significant components of the company 's deferred tax assets and liabilities were ( in thousands ) : replace_table_token_36_th the valuation allowance increased by $ 12.9 million and $ 12.1 million for the years ended december 31 , 2015 and december 31 , 2014 , respectively . as of december story_separator_special_tag this management 's discussion and analysis of financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and notes included in this report . overview our strategy and primary business objective is to become a fabless semiconductor company focused on the development and sale of integrated circuits , or ics , for the high-speed networking , communications , storage and data center markets . our solutions deliver time-to-market , performance , power , area and economic benefits for system original equipment manufacturers , or oems . we have developed two families of ics under the bandwidth engine® and linespeed product names . bandwidth engine ics combine our proprietary 1t-sram® high-density embedded memory , integrated macro functions and high-speed serial interface , or serdes , i/o , with our intelligent access technology and a highly efficient interface protocol . the linespeed ic product line , which was announced in march 2013 , is comprised of non-memory , high-speed serdes i/o devices with clock data recovery , gearbox and retimer functionality , which convert lanes of data received on line cards or by optical modules into different configurations and or ensure signal integrity . certain serdes products have been developed under a strategic development and marketing agreement with credo semiconductor ltd. , or credo . as of december 31 , 2015 , the company had paid credo $ 4.8 million cumulatively for achievement of development milestones , as well as for mask costs and wafer purchases from third-party vendors . all amounts incurred have been recorded as research and development expenses . currently , under the strategic development and marketing agreement , the company is entitled to a remaining reimbursement amount of $ 3.6 million of development costs based on payments made to credo to date . this amount is subject to increase as additional payments are made to credo . the reimbursement will be funded by the gross profits earned by the company from the sale of the relevant serdes products , with the initial gross profits being primarily applied to reimbursing the company for these development payments and a portion paid to credo . once the full amount has been reimbursed , the gross profits from these products will be shared equally by the company and credo . historically , our primary business was the design , development , marketing , sale and support of differentiated intellectual property , or ip , including embedded memory and high-speed parallel and serdes i/o used in advanced systems-on-chips , or socs . currently , we are focused on developing differentiated ip-rich ic products and are dedicating all our research and development , marketing and sales budget to these ic products . our future success and ability to achieve and maintain profitability are dependent on the marketing and sales of our ic products into networking , communications and other markets requiring high-bandwidth memory access . in january 2016 , we committed to effect a reduction in our workforce and associated operating expenses , net loss and cash burn and to realign resources , as we have substantially concluded development of new products , including our third generation bandwidth engine ic product family , and expect to bring these products to market in 2016. we reduced united states headcount by approximately 16 % and will cease operations at our subsidiary in hyderabad , india , which has 18 employees . we anticipate that we will fully implement the planned reductions by the end of the second quarter of 2016 , and expect to realize approximately $ 3.2 million of savings on an annual basis from the reductions . we expect operating expenses to decrease in 2016 as a result of the workforce reductions and subsequent reduction in computer-aided design software expenses . 33 we expect product revenue to increase in 2016 primarily driven by increased bandwidth engine 2 ic revenues , as our existing customers commence full production of systems utilizing our ics . story_separator_special_tag this assessment is subjective in nature and requires significant management judgment to forecast future operating results , projected cash flows and current period market capitalization levels . if our estimates and assumptions change in the future , it could result in a material write-down of long-lived assets . we amortize our finite-lived intangible assets , such as developed technology and patent license , on a straight-line basis over their estimated useful lives of three to seven years . we recognize an impairment charge as the difference between the net book value of such assets and the fair value of the assets on the measurement date . goodwill we review goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable . we first assess qualitative factors to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than the carrying amount as a basis for determining whether it is necessary to perform the two-step impairment test . if the qualitative assessment warrants further analysis , we compare the fair value of 35 the reporting unit to its carrying value . the fair value of the reporting unit is determined using the market approach . if the fair value of the reporting unit exceeds the carrying value of net assets of the reporting unit , goodwill is not impaired , and no further testing is performed . if the carrying value of the reporting unit 's goodwill exceeds its implied fair value , then we must record an impairment charge equal to the difference . we have determined that we have a single reporting unit for purposes of performing the goodwill impairment test . we use the market approach to assess impairment in the second step of the analysis . we performed the annual impairment test in september 2015 , and the test did not indicate impairment of goodwill . as of december 31 , 2015 , we did not identify any factors to indicate there was an impairment of our goodwill and determined that no additional impairment analysis was required . deferred tax valuation allowance when we prepare our consolidated financial statements , we estimate our income tax liability for each of the various jurisdictions where we conduct business . this requires us to estimate our actual current tax exposure and to assess temporary differences that result from differing treatment of certain items for tax and accounting purposes . these differences result in deferred tax assets , which we show on our consolidated balance sheet under the category of other current assets . the net deferred tax assets are reduced by a valuation allowance if , based upon weighted available evidence , it is more likely than not that some or all of the deferred tax assets will not be realized . we must make significant judgments to determine our provision for income taxes , our deferred tax assets and liabilities and any valuation allowance to be recorded against our net deferred tax asset . stock-based compensation we recognize stock-based compensation for equity awards on a straight-line basis over the requisite service period , usually the vesting period , based on the grant-date fair value . we estimate the value of employee stock options on the date of grant using the black-scholes model . the determination of fair value of share-based payment awards on the date of grant using an option- pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables . these variables include , but are not limited to , the expected stock price volatility over the term of the awards , and actual and projected employee stock option exercise behaviors . the expected term of options granted is derived from historical data on employee exercises and post-vesting employment termination behavior . the expected volatility is based on the historical volatility of our stock price . story_separator_special_tag style= '' font-family : times ; ; margin-left:10.0pt ; text-indent : -10.0pt ; '' > gain on sale of assets . replace_table_token_11_th in march 2012 , we entered into an asset purchase agreement for an exclusive license of a portion of our intellectual property pertaining to our high-speed serial i/o technology for approximately $ 4.3 million . as part of the agreement , we provided certain technology transfer support services , and 15 employees of our india subsidiary accepted employment with the purchaser . in march 2013 , we received the final payment of $ 0.6 million under the agreement . other income , net . replace_table_token_12_th other income , net primarily consisted of interest income on our investments , which was $ 0.1 million for the year ended december 31 , 2015 and $ 0.2 million for each of the years ended december 31 , 2014 and 2013 , partially offset by other non-operating items . income tax provision . replace_table_token_13_th our income tax provisions were primarily attributable to taxes on earnings of our foreign subsidiaries and branches . as of december 31 , 2015 , we had net operating loss carryforwards of approximately $ 163 million for u.s. federal income tax purposes and approximately $ 107 million for state income tax purposes that are available to reduce future income tax liabilities to the extent permitted under federal and state income tax laws . these net operating loss carryforwards expire from 2016 to 2035. in 2016 , we anticipate that our effective income tax rate will continue to be less than the federal statutory tax rate because of expected losses . as of december 31 , 2015 and 2014 , we had net deferred tax assets of approximately $ 81 million and $ 67 million , respectively .
| results of operations net revenue . replace_table_token_5_th product revenue increased in 2015 and 2014 due to increased volume of shipments for our ics , mainly bandwidth engine , as we gained more customers . in 2015 , our bandwidth engine 2 ic products were the primary source of ic revenue , while in 2014 , our bandwidth engine 1 ic products accounted for most of our ic revenue . in 2014 , we recognized $ 0.3 million of revenue from the reversal of sales return reserves recorded in prior periods following the completion of system-level tests in the field by 36 customers , which reduced our expected risk of returns . we expect our product revenues to increase in the future in absolute dollars , as we expect our design wins to commence their production ramps . replace_table_token_6_th royalty and other revenue is primarily comprised of revenue generated from licensing agreements . the sequential decreases were primarily due to a decrease in shipment volumes by licensees whose products incorporate our licensed ip and a decrease in revenue recognized from residual licensing agreements entered into in 2011 and prior years . we expect royalty and other revenue to decline in 2016 , as we expect a decline in shipments of units incorporating our technology by licensees , as their products approach their end of life . cost of net revenue and gross profit . replace_table_token_7_th replace_table_token_8_th in each of 2015 , 2014 and 2013 , cost of net revenue primarily consisted of direct and indirect costs related to the sale of ic products . cost of net revenue increased in 2015 and 2014 , primarily due to the increase in product material testing and other production costs related to our increased ic shipments . we expect the cost of net revenue to increase in the future in absolute dollars , because we anticipate an increase in sales of our ic products .
| 7,904 |
asu 2014-09 provides enhancements to the quality and consistency of how revenue is reported by companies while also improving comparability in the financial statements of companies reporting using international financial reporting standards or gaap . the main purpose of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which a company expects to be entitled in exchange for those goods or services . the new standard also will result in enhanced disclosures about revenue , provide guidance for transactions that were not previously addressed comprehensively and improve guidance for multiple-element arrangements . in july 2015 , the fasb voted to approve a one-year deferral of the effective date of asu 2014-09 , which will be effective for the company in the first quarter of fiscal year 2018 and may be applied on a full retrospective or story_separator_special_tag 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 and other financial information appearing elsewhere in this form 10-k. the following discussion contains forward-looking statements that involve risks and uncertainties . our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors , including those set forth in this form 10-k under “ item 1a . risk factors. ” overview we are a biotechnology company advancing two innovative platform programs : a new class of oral therapeutics for the treatment of hepatitis b virus ( hbv ) infection and novel class of oral biological therapeutics , which are deigned to restore health to a dysbiotic microbiome . the company 's hbv-cure program is aimed at increasing the current low cure rate for patients with hbv and is pursuing several drug candidates that inhibit multiple viral targets throughout the hbv lifecycle . assembly has discovered several novel core protein allosteric modulators ( cpams ) , which are small molecules that directly target and allosterically modulate a number of hbc functions . the company 's microbiome program consists of a fully integrated platform that includes a robust strain identification and selection process , methods for strain isolation and growth under cgmp conditions , and a patent pending delivery system , gemicel tm , which allows for targeted oral delivery of live biologic and conventional therapies to the lower gastrointestinal , or gi tract . the lead program from this platform is in development for the treatment of c. difficile infections ( cdi ) . using its microbiome platform , the company is developing additional product candidates . 30 the target of our hbv program is to develop novel drugs that achieve higher cure rates than current therapies . to achieve this goal , we are developing a series of new compounds , known as core protein allosteric modulators , or cpams , with the potential to modulate the hbv core protein- -at multiple points in the viral lifecycle . our microbiome program consists of a fully integrated platform that includes a robust strain identification and selection process , methods for strain isolation and growth under cgmp conditions , and a patent pending delivery system , gemicel tm , which allows for targeted oral delivery of live biologic as well as conventional therapies to the lower gi tract . the lead program from this platform , ab-m101 , is in development for the treatment of cdi . on july 11 , 2014 , assembly biosciences merged with a private company assembly pharmaceuticals , inc. , which was founded in 2012. the merger resulted in a shift in strategic focus , the addition of a new lead drug development program for us , and changes in personnel . in connection with the merger , our board of directors and stockholders approved a 1-for-5 reverse stock split of our common stock . the reverse stock split became effective on july 11 , 2014. all share and per share amounts in the consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to this reverses stock split , including reclassifying an amount equal to the reduction in par value of common stock to the additional paid-in capital . in connection with the merger , the shares of common stock issued and outstanding of assembly pharmaceuticals were converted into an aggregate of 4,008,848 shares of our common stock . also pursuant to the terms of the merger , the outstanding options to purchase shares of assembly pharmaceuticals ' common stock were assumed by us and became exercisable for an aggregate of 621,651 shares of our common stock . effective upon the consummation of the merger , assembly acquisition , inc. , our wholly owned subsidiary ( the “ merger sub ” ) was merged with and into assembly pharmaceuticals , with assembly pharmaceuticals being the surviving entity and becoming our wholly owned subsidiary . we accounted for the acquisition of assembly pharmaceuticals , inc. as a business combination under accounting standards codification ( “ asc ” ) 805 with ventrus biosciences , inc. as the accounting acquirer . we determined ventrus biosciences , inc. was the accounting acquirer in accordance with asc 805-10-25-5 as ventrus biosciences , inc. gained control of assembly pharmaceuticals , inc. upon completion of the merger . to make this determination , we considered factors as indicated in asc 805-10-55 , including which entity issued equity interest to effect the combination , board of directors ' composition , shareholder ownership , voting control , restrictions on shareholder voting rights , anticipated management positions and the relative size of the two companies . we have not derived any revenue from product sales to date as we currently have no approved products . we anticipate initiating clinical trials in the second half of 2016 with our microbiome therapy for recurrent cdi and our lead antiviral compound for the treatment of hbv . story_separator_special_tag product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development , primarily due to the increased size and duration of later-stage clinical trials . we expect research and development costs to increase significantly for the foreseeable future as our product candidate development programs progress . however , we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization . there are numerous factors associated with the successful commercialization of any of our product candidates , including future trial design and various regulatory requirements , many of which can not be determined with accuracy at this time based on our stage of development . additionally , future commercial and regulatory factors beyond our control will impact our clinical development programs and plans . general and administrative expenses general and administrative expenses consist primarily of salaries and other related costs , including stock-based compensation , for personnel in executive , finance , accounting , business development , legal and human resources functions . other significant costs include facility costs not otherwise included in research and development expenses , legal fees relating to patent and corporate matters and fees for accounting and consulting services . we anticipate that our general and administrative expenses will increase in the future to support continued research and development activities , potential commercialization of our product candidates and increased costs of operating as a public company . these increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants , lawyers and accountants , among other expenses . additionally , we anticipate increased costs associated with being a public company including expenses related to services associated with maintaining compliance with exchange listing and sec requirements , insurance , and investor relations costs . interest income interest income consists of interest earned on our cash and cash equivalents and available-for-sale securities . 32 critical accounting policies and significant judgments and estimates our management 's discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements , which we have prepared in accordance with accounting principles generally accepted in the u.s. the preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements , as well as the reported amounts of revenues and expenses during the reporting periods . on an ongoing basis , we evaluate our estimates and judgments , including those described in greater detail below . we base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . while our significant accounting policies are described in more detail in the notes to our consolidated financial statements included elsewhere in this annual report on form 10-k , we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial condition and results of operations . marketable securities we have designated marketable securities as of december 31 , 2015 as available-for-sale securities and measure these securities at their respective fair values . marketable securities are classified as short-term or long-term based on the maturity date and their availability to meet current operating requirements . marketable securities that mature in one year or less are classified as short-term available-for-sale securities and are reported as a component of current assets . marketable securities that are not considered available for use in current operations are classified as long-term available-for-sale securities and are reported as a component of long-term assets . securities that are classified as available-for-sale are measured at fair value with temporary unrealized gains and losses reported in other comprehensive income ( loss ) , and as a component of stockholders ' equity until their disposition . we review all available-for-sale securities at each period end to determine if they remain available-for-sale based on then current intent and ability to sell the security if it is required to do so . marketable securities are subject to a periodic impairment review . we may recognize an impairment charge when a decline in the fair value of investments below the cost basis is determined to be other-than-temporary . goodwill and other intangible assets goodwill is the excess of purchase price over the fair value of identified net assets of businesses acquired . our intangible assets with an indefinite life are related to in-process research and development ( `` ipr & d '' ) programs acquired in the merger , as we expect future research and development on these programs to provide us with substantial benefit for a period that extends beyond the foreseeable horizon . intangible assets with indefinite useful lives are measured at their respective fair values as of the acquisition date . we do not amortize goodwill and intangible assets with indefinite useful lives . intangible assets related to ipr & d projects are considered to be indefinite lived until the completion or abandonment of the associated r & d efforts . if and when development is complete , which generally occurs if and when regulatory approval to market a product is obtained , the associated assets would be deemed finite lived and would then be amortized based on their respective estimated useful lives at that point in time . we review goodwill and indefinite-lived intangible assets at least annually for possible impairment . goodwill and indefinite-lived intangible assets are reviewed for possible impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit or the indefinite-lived intangible assets below their carrying values .
| results of operations general to date , we have not generated any revenues from operations and , at december 31 , 2015 , we had an accumulated deficit of approximately $ 164.0 million primarily as a result of research and development expenses , purchases of in-process research and development and general and administrative expenses . while we may in the future generate revenue from a variety of sources , including license fees , milestone payments , research and development payments in connection with strategic partnerships and or product sales , our product candidates are at an early stage of development and may never be successfully developed or commercialized . accordingly , we expect to continue to incur substantial losses from operations for the foreseeable future and there can be no assurance that we will ever generate significant revenues . comparison of the years ended december 31 , 2015 and december 31 , 2014 research and development expense research and development expense was $ 18,357,937 for the year ended december 2015 , an increase of $ 7,641,200 or 71.3 % from $ 10,716,737 for the same period in 2014. the net increase in research and development expenses was primarily due to an increase of $ 8,274,140 in research expenses for our hbv program which was started in july 2014 , an increase of $ 2,737,173 for preclinical development of our microbiome program , additional stock-based compensation of $ 550,394 due to new options granted to employees and nonemployees , and offset by a decrease of $ 3,920,507 in expenses due to termination of the ven 307 study in the second quarter of 2014. general and administrative expense general and administrative expense was $ 11,297,693 for the year ended december 2015 , a decrease of $ 1,942,022 or 14.7 % from $ 13,239,715 for the same period in 2014. the primary reason was a decrease of stock-based compensation expense of $ 3,311,304 due to
| 7,905 |
if , after opting to complete a qualitative assessment , the company determines that it is more likely than not that the estimated fair value of the reporting unit exceeded its carrying amount , it may conclude that no impairment exists . if the company concludes otherwise , a goodwill story_separator_special_tag the following discussion and analysis should be read in conjunction with the “ selected financial data ” and the consolidated financial statements and related notes included elsewhere in this annual report on form 10-k. this discussion and analysis 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 could differ materially from those anticipated in the forward-looking statements . factors that could cause or contribute to our actual results differing materially from those anticipated include those discussed in “ risk factors ” and elsewhere in this annual report on form 10-k. this section of this form 10-k generally discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018. discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this form 10-k can be found in “ management 's discussion and analysis of financial condition and results of operations ” in part ii , item 7 of our annual report on form 10-k for the fiscal year ended december 31,2018 , which was filed with the sec on february 27 , 2019 , and is incorporated by reference into this management 's discussion and analysis of financial condition and results of operations . overview and outlook we provide professional services and technology-based solutions to government and commercial clients . our services include management , marketing , technology , and policy consulting and implementation services . we help our clients conceive , develop , implement , and improve solutions that address complex business , natural resource , social , technological , and public safety issues . our clients operate in four key markets : energy , environment , and infrastructure ; health , education , and social programs ; safety and security ; and consumer and financial . drawing from our domain knowledge and staff experience in working in multi-disciplinary teams for clients in a variety of markets , we provide services that deliver value throughout the entire life cycle of a policy , program , project , or initiative , from initial research , analysis , assessment and advice to design and implementation of programs and technology-based solutions , and the provision of engagement services and programs . our clients utilize our services because we combine diverse institutional knowledge and experience with the deep subject matter expertise of our highly educated staff , which we deploy in multi-disciplinary teams . we have successfully worked with many of our clients for decades , with the result that we have a thorough and nuanced perspective of their objectives and needs . we serve both governmental and commercial clients . our government clients include those from departments and agencies of the federal government , state ( including territories ) and local governments , and international governments . our government efforts include work performed under subcontract agreements to commercial clients whose ultimate customer is government agencies and departments . our largest clients are u.s. federal government departments and agencies . in fact , our federal government clients have included every cabinet-level department , most significantly hhs , dos , and dod . federal government clients generated approximately 38 % , 41 % , and 45 % of our revenue in 2019 , 2018 , and 2017 , respectively . state and local government clients generated approximately 19 % , 14 % , and 10 % of our revenue in 2019 , 2018 , and 2017 , respectively . international government clients generated approximately 8 % , 9 % , and 7 % of our revenue in 2019 , 2018 , and 2017 , respectively . we also serve a variety of commercial clients worldwide , including : airlines , airports , electric and gas utilities , oil companies , hospitals , health insurers and other health-related companies , banks and other financial services companies , transportation , travel and hospitality firms , non-profits/associations , law firms , manufacturing firms , retail chains , and distribution companies . our commercial clients , which include clients outside the u.s. , generated approximately 35 % , 36 % , and 38 % of our revenue in 2019 , 2018 , and 2017 , respectively . we report operating results and financial data as a single segment based on the consolidated information used by our chief operating decision-maker in evaluating the financial performance of our business and allocating resources . our single segment represents our core business—professional services for government and commercial clients . although we describe our multiple service offerings to clients that operate in four markets to provide a better understanding of the scope and scale of our business , we do not manage our business or allocate our resources based on those service offerings or client markets . rather , on a project by project basis , we assemble the best team from throughout the enterprise to deliver highly customized solutions that are tailored to meet the needs of each client . we believe that demand for our services will continue to grow as government , industry , and other stakeholders seek 33 to address critical long-term societal and natural resource issues due to heightened concerns about clean energy and energy efficiency ; health promotion , treatment , and cost control ; and ongoing homeland security threats . we also see significant opportunity to further leverage our digital and client engagement capabilities across our commercial and government client base . story_separator_special_tag the preparation of these consolidated financial statements requires us to make certain estimates , assumptions and judgments that affect the reported amounts of assets , liabilities , revenue , and expenses during the reporting period and our application of critical accounting policies , including : revenue recognition , impairment of goodwill and other intangible assets , income taxes , and stock-based compensation . if any of these estimates or judgments prove to be incorrect , our reported results could be materially affected . actual results may differ significantly from our estimates under different assumptions or conditions . we believe that the estimates , assumptions and judgments involved in the accounting practices described below have the greatest potential impact on our financial statements and , therefore , consider them to be critical accounting policies . significant accounting policies , including the critical accounting policies listed below , are more fully described and discussed in “ note 2—summary of significant accounting policies ” in the “ notes to consolidated financial statements. ” 35 revenue recognition we periodically evaluate our critical accounting policies and estimates based on changes in u.s. gaap that may have an effect on our consolidated financial statements . in may 2014 , fasb issued accounting standards update ( “ asu ” ) 2014-09 , revenue from contracts with customers ( topic 606 ) . asu 2014-09 provides a single comprehensive revenue recognition framework and supersedes existing revenue recognition guidance . included in the new principles-based revenue recognition model are changes to the basis for determining the timing for revenue recognition . in addition , the standard expands and improves revenue disclosures . we implemented asu 2014-09 on january 1 , 2018 using the modified retrospective method . this method requires that we apply the requirements of the new standard in the year of adoption to new contracts and those that were not completed as of the adoption date , but not retroactively restate prior years . management evaluated those contracts not completed as of january 1 , 2018 ( the adoption date ) and concluded that the impact of adopting asu 2014-09 did not have a material impact on our consolidated financial statements taken as a whole . contract assets and contract liabilities were formerly reported as unbilled accounts receivable and deferred revenue , respectively . for further discussion see “ note 2 – summary of significant accounting policies – revenue recognition ” in the “ notes to consolidated financial statements. ” under the modified retrospective method , we were required to maintain dual reporting during the year of adoption in order to present revenue under both the previous and new accounting for contracts initiated on or after the date of adoption and for those contracts having remaining obligations as of the adoption date . revenue timing differences between the two methods resulted primarily from contracts with performance incentives . under the new accounting , we have included in revenue the most likely amount of priced incentives earned as contract work was performed rather than , as under the old accounting , waiting to recognize revenue from incentives until specific quantitative goals were achieved , generally at the end of each contractually-stipulated performance assessment period . while there were differences in the amount of revenue recognized during each quarter of the year , the timing differences did not result in a material change to our annual revenue since most incentives have performance assessment periods which are aligned with our fiscal year . we primarily provide services and technology-based solutions for clients that operate in a variety of markets and the solutions may span the entire program life cycle , from initial research and analysis to the design and implementation of solutions . we enter into agreements with clients that create enforceable rights and obligations and for which it is probable that we will collect the consideration to which we will be entitled as services and solutions are transferred to the client . except in certain narrowly defined situations , our agreements with our clients are written and revenue is generally not recognized on oral or implied arrangements . we recognize revenue based on the consideration specified in the applicable agreement and exclude from revenue amounts collected on behalf of third parties . accordingly , sales and similar taxes which are collected for third parties are excluded from the transaction price . we also evaluate whether two or more agreements should be accounted for as one single contract and whether combined or single agreements should be accounted for as more than one performance obligation . for most contracts , the client requires that we perform a number of tasks in providing an integrated output and , hence , each of these contracts is tracked as having only one performance obligation . when contracts are separated into multiple performance obligations , we allocate the total transaction price to each performance obligation based on the estimated relative standalone selling prices of the promised services underlying each performance obligation . we generally provide customized solutions in which the pricing is based on specific negotiations with each client , and , in these cases , we use a cost-plus margin approach to estimate the standalone selling price of each performance obligation . it is common for our long-term contracts to contain award fees , incentive fees or other provisions that can either increase or decrease the transaction price . these variable amounts are generally awarded at the completion of a prescribed performance assessment period based on the achievement of performance metrics , program milestones or cost targets , and the amount awarded may be subject to client discretion . variable consideration is estimated based on the most likely amount . estimates of variable consideration will be constrained only to the extent that it is probable that significant reversal in the amount of cumulative revenue recognized will not occur . 36 we evaluate contractual arrangements to determine whether revenue should be recognized on a gross versus net basis . our assessment is based on the nature of the promise to the client .
| results of operations the following table sets forth certain items from our consolidated statements of comprehensive income , expresses these items as a percentage of revenue for the periods indicated and the period-over-period rate of change in each of them . years ended december 31 , 2019 , 2018 , and 2017 ( dollars in thousands ) replace_table_token_8_th year ended december 31 , 2019 compared to year ended december 31 , 2018 revenue . revenue for the year ended december 31 , 2019 , was $ 1,478.5 million , compared to $ 1,338.0 million for the year ended december 31 , 2018 , representing an increase of $ 140.6 million or 10.5 % . the increase in revenue was attributable to an increase in governmental revenue of $ 111.5 million or 13.1 % and an increase in commercial revenue of $ 29.0 million or 6.0 % . the growth in governmental revenue by client markets was driven by increases in revenue from energy , environment , and infrastructure , health , education , and social program clients and safety and security clients compared to the prior year . the changes in government revenue by client type were driven by the increase in state and local government revenue , from our disaster recovery clients , an increase in federal government revenue , and flat international government revenue . the increase in our commercial revenue by client market was driven by increases in revenue from consumer and financial clients , energy , environments and infrastructure clients , and health , education , and social program clients , partially offset by a decrease in safety and security clients compared to the prior year .
| 7,906 |
story_separator_special_tag forward-looking statements : statements in this annual report on form 10-k that are based on other than historical data are “ forward-looking statements ” within the meaning of the private securities litigation reform act of 1995. forward-looking statements provide current expectations or forecasts of future events and include , among others : statements with respect to the beliefs , plans , objectives , goals , guidelines , expectations , anticipations , and future financial condition , results of operations and performance of the company and its subsidiary ( collectively , “ we , ” “ our , ” or “ us ” ) , including the bank ; and statements preceded by , followed by or that include the words “ may , ” “ could , ” “ should , ” “ would , ” “ believe , ” “ anticipate , ” “ estimate , ” “ expect , ” “ intend , ” “ plan , ” “ projects , ” “ outlook ” or similar expressions . these forward-looking statements are not guarantees of future performance , nor should they be relied upon as representing the company 's or the bank management 's views as of any subsequent date . forward-looking statements involve significant risks and uncertainties ( both known and unknown ) and actual results may differ materially from those presented , either expressed or implied , including , but not limited to , those presented in this management 's discussion and analysis section . factors that might cause such differences include , but are not limited to : the ability of the company , the bank , and mvb mortgage to successfully execute business plans , manage risks , and achieve objectives ; changes in local , national and international political and economic conditions , including without limitation changes in the political and economic climate , economic conditions and fiscal imbalances in the united states and other countries , potential or actual downgrades in rating of sovereign debt issued by the united states and other countries , and other major developments , including wars , natural disasters , military actions , and terrorist attacks ; changes in financial market conditions , either internationally , nationally or locally in areas in which the company , the bank , and mvb mortgage conduct operations , including without limitation , reduced rates of business formation and growth , commercial and residential real estate development and real estate prices ; fluctuations in markets for equity , fixed-income , commercial paper and other securities , including availability , market liquidity levels , and pricing ; changes in interest rates , the quality and composition of the loan and securities portfolios , demand for loan products , deposit flows and competition ; the ability of the company , the bank , and mvb mortgage to successfully conduct acquisitions and integrate acquired businesses ; potential difficulties in expanding the businesses of the company , the bank , and mvb mortgage in existing and new markets ; increases in the levels of losses , customer bankruptcies , bank failures , claims , and assessments ; changes in fiscal , monetary , regulatory , trade and tax policies and laws , including the recently enacted tax reform act , and regulatory assessments and fees , including policies of the u.s. department of treasury , the federal reserve , and the fdic ; the impact of executive compensation rules under the dodd-frank act and banking regulations which may impact the ability of the company and its subsidiaries , and other american financial institutions to retain and recruit executives and other personnel necessary for their businesses and competitiveness ; the impact of the dodd-frank act and of new international standards known as basel iii , and rules and regulations thereunder , many of which have not yet been promulgated , on our required regulatory capital and liquidity levels , governmental assessments on us , the scope of business activities in which we may engage , the manner in which the company , the bank , and mvb mortgage engage in such activities , the fees that the company 's subsidiaries may charge for certain products and services , and other matters affected by the dodd-frank act and these international standards ; continuing consolidation in the financial services industry ; new legal claims against the company , the bank , and mvb mortgage , including litigation , arbitration and proceedings brought by governmental or self-regulatory agencies , or changes in existing legal matters ; success in gaining regulatory approvals , when required , including for proposed mergers or acquisitions ; changes in consumer spending and savings habits ; increased competitive challenges and expanding product and pricing pressures among financial institutions ; inflation and deflation ; technological changes and the implementation of new technologies by the company and its subsidiaries ; the ability of the company , the bank , and mvb mortgage to develop and maintain secure and reliable information technology systems ; 33 legislation or regulatory changes which adversely affect the operations or business of the company , the bank , and mvb mortgage ; the ability of the company , the bank , and mvb mortgage to comply with applicable laws and regulations ; changes in accounting policies or procedures as may be required by the financial accounting standards board or regulatory agencies ; and costs of deposit insurance and changes with respect to fdic insurance coverage levels . certain risk factors that might cause actual results may differ materially from those presented are more fully described in this annual report on form 10-k within part i , item 1a , risk factors , and from time to time , in other filings with the sec . actual results may differ materially from those expressed in or implied by any forward-looking statement . readers are cautioned not to place undue reliance on these forward-looking statements , which speak only as of the date of this report . story_separator_special_tag for debt securities , management considers whether the present value of future cash flows expected to be collected are less than the security 's amortized cost basis ( the difference defined as the credit loss ) , the magnitude and duration of the decline , the reasons underlying the decline and the company 's intent to sell the security or whether it is more likely than not that the company would be required to sell the security before its anticipated recovery in market value , to determine whether the loss in value is other than temporary . once a decline in value is determined to be other than temporary , if the company does not intend to sell the security , and it is more-likely-than-not that it will not be required to sell the security , before recovery of the security 's amortized cost basis , the charge to earnings is limited to the amount of credit loss . any remaining difference between fair value and amortized cost ( the difference defined as the non-credit portion ) is recognized in other comprehensive income , net of applicable taxes . a decline in value that is considered to be other-than-temporary is recorded as a loss within noninterest income in the consolidated statement of income . common stock of the fhlb represents ownership in an institution which is wholly owned by other financial institutions . these equity securities are accounted for at cost , less impairment and are classified as other assets . see note 2 , “ investment securities ” of the notes to the consolidated financial statements included in item 8 , financial statements and supplementary data , of this annual report on form 10-k for the company 's policy regarding the other than temporary impairment of investment securities . goodwill and other intangible assets as discussed in note 1 , “ summary of significant accounting policies ” of the notes to the consolidated financial statements included in item 8 , financial statements and supplementary data , of this annual report on form 10-k , the company must assess goodwill and other intangible assets each year for impairment . this assessment involves estimating the fair value of the company 's reporting units . if the fair value of the reporting unit is less than its carrying value including goodwill , the company would be required to take a charge against earnings to write down the assets to the lower value . deferred tax assets the company uses an estimate of future earnings to support our position that the benefit of our deferred tax assets will be realized . if future income should prove non-existent or less than the amount of the deferred tax assets within the tax years to which they may be applied , the asset may not be realized and our net income will be reduced . management also evaluates deferred tax assets to determine if it is more likely than not that the deferred tax benefit will be utilized in future periods . if not , a valuation allowance is recorded . our deferred tax assets are described further in note 8 , “ income taxes ” of the notes to the consolidated financial statements included in item 8 , financial statements and supplementary data , of this annual report on form 10-k. 35 recent accounting pronouncements and developments in february 2018 , the financial accounting standards board ( “ fasb ” ) issued accounting standards update ( “ asu ” ) 2018-02 , income statement - reporting comprehensive income ( topic 220 ) : reclassification of certain tax effects from accumulated other comprehensive income . this update requires a reclassification from accumulated other comprehensive income ( “ aoci ” ) to retained earnings for stranded tax effects resulting from the newly enacted federal corporate income tax rate in the tax reform act , which was enacted on december 22 , 2017. the tax reform act included a reduction to the corporate income tax rate from 34 percent to 21 percent effective january 1 , 2018. the amendments in the asu are effective for fiscal years beginning after december 15 , 2018 , including interim periods within those fiscal years . the company elected to early adopt asu 2018-02 during the first quarter of 2018 and elected to reclassify the income tax effects of the tax reform act from aoci to retained earnings . the amount of the reclassification is the difference between the historical corporate income tax rate and the newly enacted 21 percent corporate income tax rate , which amounted to $ 646 thousand . in august 2017 , the fasb issued asu 2017-12 , targeted improvements to accounting for hedging activities , which amends the existing hedge accounting model and expands an entity 's ability to hedge nonfinancial and financial risk components and reduce complexity in fair value hedges of interest-rate risk . the asu eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item . the asu also changes certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness . this asu is effective for public business entities for fiscal years beginning after december 15 , 2018 , with early adoption permitted . the company is early adopting this asu in accordance with paragraph asc 815-20-65-3 subpart c. the adoption of this asu did not have a significant impact on the company 's financial condition , results of operations and consolidated financial statements . however , by early adopting , the company is now able to pursue additional hedging strategies as described above , including the ability to apply fair value hedge accounting to a specified pool of assets by excluding the portion of the hedged items related to prepayments , defaults and other events .
| results of 0.52 % and 5.23 % , respectively . basic earnings per share were $ 1.04 in 2018 compared to $ 0.69 in 2017 . diluted earnings per share were $ 1.00 in 2018 compared to $ 0.68 in 2017 . excluding discontinued operations , the company earned $ 7.6 million in 2017 compared to $ 9.0 million in 2016 , a decrease of $ 1.4 million . the 2017 earnings equated to a return on average assets of 0.52 % and a return on average equity of 5.23 % , compared to 2016 results of 0.63 % and 7.30 % , respectively . basic earnings per share were $ 0.69 in 2017 compared to $ 0.96 in 2016 . diluted earnings per share were $ 0.68 in 2017 compared to $ 0.92 in 2016 . net interest income increased $ 7.8 million , noninterest income decreased $ 2.1 million , and noninterest expenses increased by $ 2.4 million during 2018 compared to 2017 . the company 's yield on earning assets in 2018 was 4.58 % compared to 4.17 % in 2017 . total loans increased by $ 198.4 million to $ 1.3 billion at december 31 , 2018 . net interest income increased $ 1.3 million , noninterest income decreased $ 2.5 million and noninterest expenses increased by $ 1.3 million during 2017 compared to 2016 . the company 's yield on earning assets in 2017 was 4.17 % compared to 4.05 % in 2016 . total loans increased by $ 53.1 million to $ 1.1 billion at december 31 , 2017 . deposits increased $ 149.6 million to $ 1.3 billion at december 31 , 2018 , from $ 1.2 billion at december 31 , 2017 . the bank offers an uncomplicated product design accompanied by a simple fee structure that is attractive to customers .
| 7,907 |
based on evaluation of available evidence , including recent changes in market interest rates , credit rating information and information obtained from regulatory filings , management believes the declines in fair value for these securities are temporary . should the impairment of any of these securities become other than temporary , the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified . f- 16 the following tables present securities with unrealized losses at december 31 , 2020 and 2019 : replace_table_token_42_th replace_table_token_43_th the unrealized loss on the securities portfolio decreased by $ 0.15 million as of december 31 , 2020 , from the prior year . management reviews these securities on a quarterly basis and has determined that no impairment exists . management evaluates securities for other-than-temporary impairment at least on a quarterly basis , and more frequently when economic or market concern warrants such evaluation . when the company does not intend to sell a debt security , and it is more likely than not the company will not have to sell the security before recovery of its cost basis , it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income . note 5 : loans and allowance for loan losses the following tables present the categories of loans at december 31 , 2020 and 2019 : replace_table_token_44_th f- 17 the company makes commercial , agri-business , consumer and residential loans to customers throughout its defined market area . commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract . commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee . since a portion of the commitments may expire without being drawn upon , the total commitment amounts do not necessarily represent future cash requirements . each customer 's creditworthiness is evaluated on a case-by-case basis . the amount of collateral obtained , if deemed necessary , is based on management 's credit evaluation of the customer . collateral held varies , but may include accounts receivable , inventory , property , plant and equipment , commercial real estate and residential real estate . standby letters of credit are conditional commitments issued by the company to guarantee the performance of a customer to a third party . those guarantees are primarily issued to support public and private borrowing arrangements , including commercial paper , bond financing and similar transactions . the credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers . forward sale commitments are commitments to sell groups of residential mortgage loans that the company originates or purchases as part of its mortgage banking activities . the company commits to sell the loans at specified prices in a future period , typically within forty-five days . these commitments are acquired to reduce market risk on mortgage story_separator_special_tag sb financial group , inc. ( “ sb financial ” ) , is a financial holding company registered with the federal reserve board and subject to regulation under the bank holding company act of 1956 , as amended . through its direct and indirect subsidiaries , sb financial is engaged in commercial and retail banking , wealth management and private client financial services . the following discussion provides a review of the consolidated financial condition and results of operations of sb financial and its subsidiaries ( collectively , the “ company ” ) . this discussion should be read in conjunction with the company 's consolidated financial statements and related footnotes as of and for the years ended december 31 , 2020 and 2019. strategic discussion the focus and strategic goal of the company is to grow into and remain a top decile ( > 90 th percentile ) independent financial services company . the company intends to achieve and maintain that goal by executing our five key initiatives . increase profitability through ongoing diversification of revenue streams : for the twelve months ended december 31 , 2020 , the company generated $ 30.1 million in noninterest income , or 45.6 percent of total operating revenue from fee-based products . these revenue sources include fees generated from saleable residential mortgage loans , retail deposit products , wealth management services , saleable business-based loans ( small business and farm service ) and title agency revenue . for the twelve months ended december 31 , 2019 , the company generated $ 18.0 million in revenue from fee-based products , or 34.1 percent of total operating revenue . strengthen our penetration in all markets served : over our 118-year history of continuous operation in northwest ohio , we have established a significant presence in our traditional markets in defiance , fulton , paulding and williams counties in ohio . in our newer markets of bowling green , columbus , findlay , toledo ( ohio ) and ft. wayne ( indiana ) , our current market penetration is minimal but we believe our potential for growth is significant . we have expanded and committed additional resources to our presence in the findlay and wauseon markets . we continue to seek to expand the presence and penetration in all of our markets . expand product utilization by new and existing customers : as of december 31 , 2020 , we served 32,519 households and provided 95,210 products and services ( 2.93 products & services per household ) to these households . our strategy is to continue to expand the scope of our relationship with each household via our dynamic “ on-boarding ” process . proactively identifying client needs is a key ingredient of our value proposition . story_separator_special_tag the company 's most recent evaluation has determined that the company will more likely than not be able to realize the remaining deferred tax liability . income tax accounting : the company files a consolidated federal income tax return . the provision for income taxes is based upon income in the consolidated financial statements , rather than amounts reported on our income tax return . deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases . deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled . the effect of a change in rates on the deferred tax assets and liabilities is recognized as income or expense in the period that includes the enactment date . 37 changes in financial condition total assets at december 31 , 2020 , were $ 1.26 billion , compared to $ 1.04 billion at december 31 , 2019. loans ( excluding loans held for sale ) were $ 872.7 million at december 31 , 2020 , compared to $ 825.5 million at december 31 , 2019. total deposits were $ 1.05 billion at december 31 , 2020 , compared to $ 840.2 million at december 31 , 2019. deposit and loan balances were elevated due to the ppp initiative and the acquisition of the edon state bank . total equity was $ 142.9 million at december 31 , 2020 , up 5.0 percent from $ 136.1 million at december 31 , 2019. net income less dividends increase retained earnings by $ 11.8 million for 2020. replace_table_token_17_th replace_table_token_18_th loans held for investment increased $ 47.2 million , or 5.7 percent , to $ 872.7 million at december 31 , 2020. the largest component of this increase was in commercial business loans , which rose $ 55.7 million . the 2020 results were impacted by the company 's participation in the ppp , which increased commercial balances by approximately $ 70.5 million . in addition , the company acquired the edon state bank in june of 2020 that increased loan balances by $ 16.4 million . deposits increased $ 208.8 million , or 24.9 percent , to $ 1.05 billion at december 31 , 2020. deposit growth for the year included $ 139.0 million in demand deposits and $ 98.0 million in savings and money market deposits . the company added approximately $ 51.0 million in deposit balances from the edon state bank acquisition in 2020 . 38 stockholders ' equity at december 31 , 2020 , was $ 142.9 million or 11.4 percent of total assets compared to $ 136.1 million or 13.1 percent of total assets at december 31 , 2019. replace_table_token_19_th nonperforming assets consisting of loans , other real estate owned ( “ oreo ” ) and accruing tdrs totaled $ 7.3 million , or 0.58 percent of total assets at december 31 , 2020 , an increase of $ 0.6 million or 8.7 percent from 2019. net charge offs were up during 2020 , at $ 0.68 million , which was a $ 0.47 million increase compared to 2019. the company 's loan loss allowance at december 31 , 2020 , now covers nonperforming loans at 174 percent , up from 137 percent at december 31 , 2019. as detailed in the risk factors , the cares act provided for significant consumer and small business relief due to the impact of the covid-19 pandemic . the company provided payment relief to a number of consumer and small business customers throughout 2020. as detailed in the table below , loans in forbearance/deferral status as of december 31 , 2020 were $ 23.2 million . an additional $ 11.7 million of sold mortgage relationships were also in deferral at year-end . replace_table_token_20_th regulatory capital reporting is required for state bank only , as the company is now exempt from quarterly regulatory capital level measurement pursuant to the small bank holding company policy statement . as of december 31 , 2020 , state bank met all regulatory capital levels required to be considered well-capitalized ( see note 17 to the consolidated financial statements ) . earnings summary – 2020 vs. 2019 net income for 2020 was $ 14.9 million , or $ 1.96 per diluted share , compared with net income of $ 12.0 million and net income available to common of $ 11.0 million , or $ 1.51 per diluted share , for 2019. state bank reported net income for 2020 of $ 16.0 million , which was up from the $ 12.5 million in net income in 2019. sbfg title reported net income for 2020 of $ 0.6 million , which was up from the $ 0.3 million in 2019. positive results for 2020 included loan growth of $ 47.2 million , and deposit growth of $ 208.8 million . the mortgage banking business line continues to contribute significant revenues , with residential real estate loan production of $ 694.2 million for the year , resulting in $ 25.4 million of revenue from gains on sale . the level of mortgage origination was up from the $ 445.3 million in 2019. the company 's loans serviced for others ended the year at $ 1.3 billion , up from $ 1.2 billion at december 31 , 2019. the company realized over $ 1.4 million in revenue from the ppp initiative . 39 operating revenue was up compared to the prior year by $ 13.2 million , or 25.0 percent , which was impacted by a $ 3.6 million temporary omsr impairment .
| results of operations replace_table_token_21_th 1 operating revenue equals net interest income plus noninterest income . net interest income years ended december 31 , ( $ in thousands ) 2020 2019 % change total net interest income $ 35,930 $ 34,826 3.2 % net interest income was $ 35.9 million for 2020 compared to $ 34.8 million for 2019 , an increase of $ 1.1 million or 3.2 percent . average earning assets increased to $ 1.07 billion in 2020 , compared to $ 915.0 million in 2019 , an increase of $ 157.4 million or 17.2 percent due to higher loan volume . the consolidated 2020 full year net interest margin on an fte basis decreased 46 basis points to 3.36 percent compared to 3.82 percent for the full year of 2019. ppp activity during 2020 increased margin revenue by $ 2.0 million for the full year of 2020. we will continue to realize fee income from the forgiveness of these phase i ppp loans throughout 2021 and we are beginning phase ii of the program in early 2021 . 40 provision for loan losses of $ 4.5 million was taken in 2020 compared to $ 0.8 million taken for 2019. for 2020 , net charge offs totaled $ 0.68 million , or 0.08 percent of average loans . this charge off level was higher than 2019 , in which net charge offs were $ 0.21 million or 0.03 percent of average loans . replace_table_token_22_th total noninterest income was $ 30.1 million for 2020 compared to $ 18.0 million for 2019 , representing an increase of $ 12.1 million , or 67.0 percent , year-over-year . this increase was driven by a 201.3 percent increase in gains on sale of residential real estate loans and the addition of our title agency .
| 7,908 |
leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful lives of the improvements . capitalization of software costs the company capitalizes certain significant costs incurred in the acquisition and development of software for internal use , including the costs of the software , materials , and consultants during the application development stage . costs incurred prior to the application development stage , costs incurred once story_separator_special_tag this discussion and analysis should be read in conjunction with our audited consolidated financial statements and the accompanying notes thereto included in this annual report on form 10-k for the year ended december 31 , 2015. operating results for the year ended december 31 , 2015 are not necessarily indicative of results that may occur in future periods . overview since our inception in 1991 , we have devoted substantially all of our efforts and resources to the research , development , clinical testing and commercialization of the intercept blood system . the intercept blood system is designed for three blood components : platelets , plasma and red blood cells . the intercept blood system for platelets , or platelet system , and the intercept blood system for plasma , or plasma system , have received ce marks and are being marketed and sold in a number of countries around the world . in december 2014 , we received approval of our premarket applications , or pmas , from the united states food and drug administration , or fda , for the platelet system and the plasma system . the platelet system is approved in the united states for ex vivo preparation of pathogen-reduced apheresis platelet components in order to reduce the risk of transfusion-transmitted infection , or tti , including sepsis , and to potentially reduce the risk of transfusion-associated graft versus host disease or ta-gvhd . the plasma system is approved in the united states for ex vivo preparation of plasma in order to reduce the risk of tti when treating patients requiring therapeutic plasma transfusion . we have ongoing studies under an investigational device exemption , or ide , to treat plasma derived from convalesced patients that were previously infected with the ebola virus and have recovered from the disease according to the criteria set by the centers for disease control and prevention . the transfusion of convalesced plasma from ebola survivors is believed to pass on antibodies to the disease from the survivor to the recipient of the plasma transfusion . intercept use under this ide is limited to pathogen reduction claims that rely on existing clinical data that we have regarding reduction of certain pathogens in donated plasma , and we do not have any clinical or commercial data on the efficacy of intercept to inactivate the ebola virus and therefore do not know the effectiveness of intercept to inactivate the ebola virus . in addition , we have another ongoing study under an expanded use ide , to use intercept to treat platelet donations in areas of the u.s. that have had outbreaks of the chikungunya and dengue viruses . both of these studies are ongoing and are expected to be completed within the next year . the intercept blood system for red blood cells , or the red blood cell system , is currently in development and has not been commercialized anywhere in the world . we completed our european phase iii clinical trial of our red blood cell system for acute anemia patients and have another ongoing european phase iii clinical trial of our red blood cell system for chronic anemia patients . although we plan to undertake additional development and chemistry , manufacturing and control , or cmc , activities to support an anticipated ce mark submission for the red blood cell system in the second half of 2016 , such studies , including any additional studies required by the fda prior to its review of any proposed u.s. phase iii clinical trial protocol , could prolong development of the red blood cell system , and we do not expect to receive any regulatory approvals of our red blood cell system in the next twelve months , if ever . we understand that while the acute anemia phase iii clinical trial in europe may be sufficient to receive ce mark approval in europe , we may need to generate additional safety data from commercial use and or achieve a successful outcome in the ongoing chronic anemia phase iii clinical trial for our red blood cell system in order to achieve broad market acceptance . in addition , the trials may need to be supplemented by additional , successful phase iii clinical trials for approval in certain countries . if such additional phase iii clinical trials are required , they would likely need to demonstrate equivalency of intercept-treated red blood cells compared to conventional red blood cells and significantly lower lifespan for intercept-treated red blood cells compared to non-treated red blood cells may limit our ability to obtain regulatory approval for the product . as part of our development and cmc activities , we will need to complete a 55 number of in vitro studies , finalize development of the final commercial configuration of the red blood cell system and manufacture and validate sufficient quantities of the final red blood cell system prior to receiving any regulatory approvals in europe and may have to complete additional activities prior to receiving regulatory approvals in the u.s. successful completion of these activities may require capital beyond that which we currently have , and we may be required to obtain additional capital in order to complete the development of and obtain any regulatory approvals for the red blood cell system . if we experience delays in testing , conducting trials or obtaining approvals , our product development costs will increase . story_separator_special_tag accordingly , we may never achieve a profitable level of operations in the future . aduro biotech we hold an investment in aduro biotech inc. , or aduro , common stock totaling 396,700 shares . aduro trades on the nasdaq global select market , under the symbol adro . as of december 31 , 2015 , the fair value of aduro 's common stock was $ 28.14 per share . we account for the investment in aduro as an available-for-sale security on our consolidated balance sheet and adjust the carrying value of this investment to fair value each quarterly reporting period with changes in fair value recorded within other comprehensive income ( loss ) , net of tax . prior to aduro 's ipo in april 2015 , we held the investment in aduro at zero on our consolidated balance sheet . fresenius through june 30 , 2015 , we paid royalties to fresenius kabi ag , or fresenius , on intercept blood system product sales under certain agreements that arose from the sale of the transfusion therapies division of baxter international inc. , or baxter , in 2007 to fenwal inc. , or fenwal ( fenwal was subsequently acquired by fresenius in 2012 ) , at rates that varied by product : 10 % of product sales for the platelet system and 3 % of product sales for the plasma system . fresenius assumed fenwal 's rights and obligations under those agreements , including our manufacturing and supply agreement . in this report , references to fresenius include references to its predecessors-in-interest , fenwal and baxter . in november 2013 , we amended our manufacturing and supply agreement with fresenius with the new terms effective january 1 , 2014 , which we refer to as the 2013 agreement . under the 2013 agreement , fresenius was obligated to sell , and we were obligated to purchase up to a certain specified annual volume of finished disposable kits for the platelet and plasma systems from fresenius for both clinical and commercial use . once the specified annual volume of disposable kits was purchased from fresenius , we were able to purchase additional quantities of disposable kits from other third-party manufacturers . the amended terms also provided for fixed pricing for finished kits with successive decreasing pricing tiers at various annual production volumes . in addition , the 2013 agreement required us to purchase additional specified annual volumes of sets if and when an additional fresenius manufacturing site was identified and qualified to make intercept disposable kits , subject to mutual agreement on pricing for disposable kits manufactured at the additional site . fresenius was also obligated to purchase and maintain specified inventory levels of our proprietary inactivation compounds and compound adsorption devices from us at fixed prices . 57 in october 2015 , we entered into a ten year amended and restated manufacturing and supply agreement , or the 2015 agreement , with fresenius , which amended and restated the 2013 agreement . under the 2015 agreement , fresenius continues to be obligated to sell and we are obligated to purchase finished disposable kits for our platelet , plasma and red blood cell systems . the 2015 agreement permits us to purchase platelet , plasma and red blood cell systems from third parties to the extent necessary to maintain supply qualifications with such third parties or where local or regional manufacturing is needed to obtain product registrations or sales . pricing terms are initially fixed and decline at specified annual production levels , and are subject to certain adjustments after the initial pricing term . under the 2015 agreement , we are no longer required to make royalty payments to fresenius for the sale of products after june 30 , 2015. under the 2013 agreement and 2015 agreement , we maintain the amounts due from the components sold to fresenius as a current asset on our accompanying consolidated balance sheets until such time as we purchase finished disposable kits using those components . the 2015 agreement also requires us to make certain payments totaling 8.6 million ( manufacturing and development payments ) to fresenius in 2016 and on december 31st of the earlier of ( a ) the year of achievement of certain production volumes or ( b ) 2022. because these payments represent unconditional payment obligations , we recognize its liability for these payments at their net present value . the manufacturing and development payments liability is accreted through interest expense based on the estimated timing of its ultimate settlement . as of december 31 , 2015 , we had accrued $ 7.8 million ( 7.2 million ) related to the manufacturing and development payments . the manufacturing and development payments will be made to support certain projects fresenius will perform on behalf of us related to research and development activities and manufacturing efficiency activities . we allocated $ 4.8 million to research and development activities and $ 2.4 million to manufacturing efficiency activities based on their market value . the prepaid asset related to amounts paid up front for the r & d activities to be conducted by fresenius on behalf of the company is expensed over the period which such activities occur . the manufacturing efficiency asset is expensed on a straight line basis over the life of the 2015 agreement . the initial term of the 2015 agreement extends through july 1 , 2025 ( the initial term ) and is automatically renewed thereafter for additional two year terms ( each , a renewal term ) , subject to termination by either party upon ( i ) two years written notice prior to the expiration of the initial term or ( ii ) one year written notice prior to the expiration of any renewal term . under 2015 agreement we shall have the right , but not the obligation , to purchase certain assets and assume certain liabilities from fresenius .
| results of operations years ended december 31 , 2015 , 2014 and 2013 revenue replace_table_token_6_th revenue decreased by $ 2.2 million during the year ended december 31 , 2015 , compared to the year ended december 31 , 2014. the primary driver for the decline in reported revenue was the weakening of the average euro relative to our reporting currency , the u.s. dollar , of approximately 16 % during the year ended december 31 , 2015 , compared to the year ended december 31 , 2014. during the periods presented , most of our revenue was invoiced and transacted in euros with reported revenue in u.s. dollars . the decrease in revenue during 2015 was partially offset by a higher unit sales volume of our disposable platelet and plasma system kits of 15 % . revenue decreased by $ 3.2 million during the year ended december 31 , 2014 , compared to the year ended december 31 , 2013 , primarily as a result of lower unit sales volume of our disposable platelet and plasma system kits and a weaker euro relative to the u.s. dollar in the latter half of 2014 , partially offset by increased average selling prices for both our disposable platelet and plasma system kits and higher unit sales volume for our illuminator devices . in early 2014 , we transitioned certain markets in southern europe from an exclusive distributor to our direct sales force . this transition resulted in lower revenue in the territory as the distributor sold down its remaining inventory of disposable kits to end-user customers in the territory contributing to the year-over-year reduction in demand for disposable kits by approximately 5 % . we anticipate revenue for both our platelet and plasma systems will increase in future periods as the intercept blood system gains market acceptance in geographies where commercialization efforts are underway , including anticipated contribution from u.s. sales and newly accessible geographies .
| 7,909 |
this report contains cautionary statements identifying important factors that could cause actual results to differ materially from those projected herein , and in any other statements made by company officials in communications with the financial community and contained in documents filed with the securities and exchange commission ( sec ) . forward-looking statements are not based on historical information and relate to future operations , strategies , financial results or other developments . furthermore , forward-looking information is subject to numerous assumptions , risks and uncertainties . in particular , statements containing words such as “ expect , ” “ anticipate , ” “ believe , ” “ goal , ” “ objective , ” “ may , ” “ should , ” “ estimate , ” “ intends , ” “ projects , ” “ will , ” “ assumes , ” “ potential , ” “ target ” or similar words as well as specific projections of future results , generally qualify as forward-looking . aflac undertakes no obligation to update such forward-looking statements . we caution readers that the following factors , in addition to other factors mentioned from time to time , could cause actual results to differ materially from those contemplated by the forward-looking statements : difficult conditions in global capital markets and the economy governmental actions for the purpose of stabilizing the financial markets defaults and credit downgrades of securities in our investment portfolio exposure to significant financial and capital markets risk fluctuations in foreign currency exchange rates significant changes in investment yield rates credit and other risks associated with aflac 's investment in perpetual securities differing judgments applied to investment valuations significant valuation judgments in determination of amount of impairments taken on our investments limited availability of acceptable yen-denominated investments concentration of our investments in any particular single-issuer or sector concentration of business in japan decline in creditworthiness of other financial institutions deviations in actual experience from pricing and reserving assumptions subsidiaries ' ability to pay dividends to aflac incorporated ineffective risk management policies and procedures changes in law or regulation by governmental authorities ability to attract and retain qualified sales associates and employees decreases in our financial strength or debt ratings ability to continue to develop and implement improvements in information technology systems interruption in telecommunication , information technology and other operational systems , or a failure to maintain the security , confidentiality or privacy of sensitive data residing on such systems changes in u.s. and or japanese accounting standards failure to comply with restrictions on patient privacy and information security level and outcome of litigation ability to effectively manage key executive succession catastrophic events including , but not necessarily limited to , epidemics , pandemics , tornadoes , hurricanes , earthquakes , tsunamis , acts of terrorism and damage incidental to such events ongoing changes in our industry events that damage our reputation increased expenses for pension and other postretirement plans failure of internal controls or corporate governance policies and procedures 34 md & a overview management 's discussion and analysis of financial condition and results of operations ( md & a ) is intended to inform the reader about matters affecting the financial condition and results of operations of aflac incorporated and its subsidiaries for the three-year period ended december 31 , 2014 . as a result , the following discussion should be read in conjunction with the related consolidated financial statements and notes . this md & a is divided into the following sections : our business performance highlights critical accounting estimates results of operations , consolidated and by segment analysis of financial condition , including discussion of market risks of financial instruments capital resources and liquidity , including discussion of availability of capital and the sources and uses of cash our business aflac incorporated ( the parent company ) and its subsidiaries ( collectively , the company ) primarily sell supplemental health and life insurance in the united states and japan . the company 's insurance business is marketed and administered through american family life assurance company of columbus ( aflac ) , which operates in the united states ( aflac u.s. ) and as a branch in japan ( aflac japan ) . most of aflac 's policies are individually underwritten and marketed through independent agents . aflac u.s. also markets and administers group products through continental american insurance company ( caic ) , branded as aflac group insurance . our insurance operations in the united states and our branch in japan service the two markets for our insurance business . story_separator_special_tag unamortized balance of dac reflects actual persistency . see note 6 of the notes to the consolidated financial statements for a detail of the dac activity for the past two years . policy liabilities the following table provides details of policy liabilities by segment and in total as of december 31. policy liabilities replace_table_token_11_th our policy liabilities , which are determined in accordance with applicable guidelines as defined under gaap and actuarial standards of practice , include two components that involve analysis and judgment : future policy benefits and unpaid policy claims , which accounted for 78 % and 4 % of total policy liabilities as of december 31 , 2014 , respectively . future policy benefits provide for claims that will occur in the future and are generally calculated as the present value of future expected benefits to be incurred less the present value of future expected net benefit premiums . we calculate future policy benefits based on assumptions of morbidity , mortality , persistency and interest . these assumptions are generally established at the time a policy is issued . the assumptions used in the calculations are closely related to those used in developing the gross premiums for a policy . as required by gaap , we also include a provision for adverse deviation , which is intended to accommodate adverse fluctuations in actual experience . story_separator_special_tag in the event we determine it is not more likely than not that we will be able to realize all or part of our deferred tax assets in the future , a valuation allowance would be charged to earnings in the period such determination is made . likewise , if it is later determined that it is more likely than not that those deferred tax assets would be realized , the previously provided valuation allowance would be reversed . future economic conditions and market volatility , including increases in interest rates or widening credit spreads , can adversely impact the company 's tax planning strategies and in particular the company 's ability to utilize tax benefits on previously recognized capital losses . our judgments and assumptions are subject to change given the inherent uncertainty in predicting future performance and specific industry and investment market conditions . interest rates and credit spreads in both the united states and japan are not the only factors that impact the company 's unrealized gain/loss position and the evaluation of a need for a valuation allowance on the company 's deferred tax asset , but they do have a direct and significant effect on both . based on our methodology described above for evaluating the need for a valuation allowance , we have determined that it is more likely than not that our deferred tax assets will be realized in the future , therefore we have not recorded a valuation allowance as of december 31 , 2014. see note 10 of the notes to the consolidated financial statements for additional information . new accounting pronouncements during the last three years , various accounting standard-setting bodies have been active in soliciting comments and issuing statements , interpretations and exposure drafts . for information on new accounting pronouncements and the impact , if any , on our financial position or results of operations , see note 1 of the notes to the consolidated financial statements . results of operations the following discussion includes references to our performance measures , operating earnings and operating earnings per diluted share , that are not based on accounting principles generally accepted in the united states of america ( “ gaap ” ) . operating earnings is the measure of segment profit or loss we use to evaluate segment performance and allocate resources . consistent with gaap accounting guidance for segment reporting , operating earnings is our measure of segment performance . aflac believes that an analysis of operating earnings is vitally important to an understanding of our underlying profitability drivers and trends of our insurance business . furthermore , because a significant portion of our business is conducted in japan , we believe it is equally important to understand the impact of translating japanese yen into u.s. dollars . aflac defines operating earnings ( a non-gaap financial measure ) as the profits derived from operations . operating earnings includes interest cash flows associated with notes payable but excludes items that can not be predicted or that are outside of management 's control , such as realized investment gains and losses from securities transactions , impairments , and derivative and hedging activities ; nonrecurring items ; and other non-operating income ( loss ) from net earnings . aflac 's derivative activities are primarily used to hedge foreign exchange and interest rate risk in our investment portfolio as well as manage foreign exchange risk for certain notes payable and forecasted cash 39 flows denominated in yen . our management uses operating earnings to evaluate the financial performance of aflac 's insurance operations because realized gains and losses from securities transactions , impairments , and derivative and hedging activities , as well as other and nonrecurring items , tend to be driven by general economic conditions and events or related to infrequent activities not directly associated with the company 's insurance operations , and therefore may obscure the underlying fundamentals and trends in aflac 's insurance operations . the following table is a reconciliation of items impacting operating and net earnings and operating and net earnings per diluted share for the years ended december 31. reconciliation of operating earnings to net earnings replace_table_token_14_th ( 1 ) excludes a gain of $ 28 and $ 6 , after tax , in 2014 and 2013 , respectively , related to the interest rate component of the change in fair value of foreign currency swaps on notes payable which is classified as an operating gain when analyzing segment operations realized investment gains and losses our investment strategy is to invest in fixed-income securities to provide a reliable stream of investment income , which is one of the drivers of the company 's growth and profitability . this investment strategy incorporates asset-liability matching ( alm ) to align the expected cash flows of the portfolio to the needs of the company 's liability structure . we do not purchase securities with the intent of generating capital gains or losses . however , investment gains and losses may be realized as a result of changes in the financial markets and the creditworthiness of specific issuers , tax planning strategies , and or general portfolio management and rebalancing . the realization of investment gains and losses is independent of the underwriting and administration of our insurance products , which are the principal drivers of our profitability . securities transactions and impairments during 2014 , we realized pretax investment gains , net of losses , of $ 215 million ( $ 140 million after-tax ) from sales and redemptions of securities . these net gains primarily resulted from gains on sales of jgbs and our u.s. treasury holdings , currency gains from transactions by our externally managed portfolio of u.s. dollar-denominated bank loans , and assorted other bond sales and calls . we realized pretax investment losses of $ 31 million ( $ 20 million after-tax ) as a result of the recognition of other-than-temporary impairment losses on certain securities .
| performance highlights yen-denominated income statement accounts are translated to u.s. dollars using a weighted-average japanese yen/u.s . dollar foreign exchange rate , while yen-denominated balance sheet accounts are translated to u.s. dollars using a spot japanese yen/u.s . dollar foreign exchange rate . the spot yen/dollar exchange rate at december 31 , 2014 was 120.55 , or 12.6 % weaker than the december 31 , 2013 spot yen/dollar exchange rate of 105.39 . the weighted-average yen/dollar exchange rate for the year ended december 31 , 2014 was 105.46 , or 7.5 % weaker than the weighted-average yen/dollar exchange rate of 97.54 for the same period in 2013 . reflecting the weaker yen/dollar exchange rate , total revenues were down 5.1 % to $ 22.7 billion in 2014 , compared with $ 23.9 billion in 2013 . net earnings in 2014 were $ 3.0 billion , or $ 6.50 per diluted share , compared with $ 3.2 billion , or $ 6.76 per diluted share , in 2013 . results for 2014 included pretax net realized investment gains of $ 215 million ( $ 140 million after-tax ) , compared with net realized investment gains of $ 399 million ( $ 259 million after-tax ) in 2013 . net investment gains in 2014 consisted of $ 31 million ( $ 20 million after-tax ) of other-than-temporary impairment losses ; $ 215 million of net gains ( $ 140 million after-tax ) from the sale or redemption of securities ; and $ 31 million of net gains ( $ 20 million after-tax ) from valuing derivatives . shareholders ' equity included a net unrealized gain on investment securities and derivatives of $ 4.7 billion at december 31 , 2014 , compared with a net unrealized gain of $ 1.0 billion at december 31 , 2013 . in november 2014 , the parent company issued $ 750 million of senior notes through a u.s. public debt offering .
| 7,910 |
the guidance is effective for annual and interim reporting periods beginning after december 15 , 2017. our partnership 's revenues are substantially attributable to oil and gas sales . based on our initial review of our contracts , we believe the timing and presentation of revenues under asu 2014-09 will be consistent with our current revenue recognition policy as described above . the partnership will continue to monitor specific developments for our industry as it relates to asu 2014-09. in february 2016 , the fasb issued asu 2016-02 , which requires lessees to record most leases on the balance sheet . under the new guidance , lease classification as either a finance lease or an operating lease will determine how lease-related revenue and expense are recognized . the guidance is effective for fiscal years beginning after december 15 , 2018 , including interim periods within those fiscal years . we are currently reviewing these new requirements to determine the impact of this guidance on our financial statements . our current corporate office lease expires before december 31 , 2018. the lease obligations that will be in place upon adoption of asu 2016-02 may be significantly different than our current obligations . accordingly , at this time we can not estimate the amount that will be capitalized when this standard is adopted . f-11 dorchester minerals , l.p. ( a delaware limited partnership ) notes to consolidated financial statements december 31 , 2016 , 2015 , and 2014 oil and natural gas reserve and standardized measure the npis represent net profits overriding royalty interests in various properties owned by the operating partnership . the royalty properties consist of producing and nonproducing mineral , royalty , overriding royalty , net profits , and leasehold interests located in 574 counties and parishes in 25 states . amounts set forth herein attributable to the npis reflect our 96.97 % net share . although new activity has occurred on certain of the royalty properties , based on engineering studies available to date , no events have occurred since december 31 , 2016 that would have a material effect on our estimated proved developed reserves . in accordance with fasb asc 932 and securities and exchange commission rules and regulations , the following information is presented with regard to the royalty properties and npis oil and natural gas reserves , all of which are proved , developed and located in the united states . these rules require inclusion as a supplement to the basic financial statements a standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves . the standardized measure , in management 's opinion , should be examined with caution . the basis for these disclosures are petroleum engineers ' reserve studies which contain imprecise estimates of quantities and rates of production of reserves . revision of prior year estimates can have a significant impact on the results . changes in production costs may result in significant revisions to previous estimates of proved reserves and their future value . therefore , the standardized measure is not necessarily a best estimate of the fair value of oil and natural gas properties or of future net cash flows . the following summaries of changes in reserves and standardized measure of discounted future net cash flows were prepared from estimates of proved reserves . the production volumes and reserve volumes included for properties formerly owned by dorchester hugoton are wellhead volumes , which differ from sales volumes shown in “ item 7 . — management 's discussion and analysis of financial condition and results of operations ” because of fuel , shrinkage and pipeline loss . the standardized measure of discounted future net cash flows reflects adjustments for such fuel , shrinkage and pipeline loss . replace_table_token_20_th ( 1 ) changes in oil reserves for the years ended december 31 , 2016 , 2015 and 2014 , includes upward revisions of 2,335 mmbls , 904 mmbls and 1,380 mbbls , respectively , predominately due to ongoing development on our permian basin properties and well performance exceeding previous projections in various areas . changes in natural gas reserves for the years ended december 31 , 2016 , 2015 and 2014 , includes downward revisions of 1,718 mmcf and upward revisions of 416 mmcf and 4,910 mmcf , respectively . the downward revision at year-end 2016 was predominately a result of shorter economic limits on producing properties as a result of lower natural gas prices . the upward revisions of 416 mmcf and 4,910 mmcf for the years ended december 31 , 2015 and 2016 , respectively , are predominately due to well performance exceeding previous projections in various areas . ( 2 ) the partnership and dmolp sold kansas working interests in the hugoton npi . f-12 story_separator_special_tag 2016 overview our results during 2016 were affected by industrywide decreases in realized oil and natural gas prices and the related reduction in drilling activity . we experienced an increase in leasing activity in the latter part of the year . significant results include the following : ● net income of $ 21.0 million ; ● distributions of $ 26.3 million to our limited partners ; ● identification of 270 new wells completed on our royalty properties in seven states , and 39 new wells completed on our npi properties in three states . included in these totals are wells in which we own both a royalty interest and a net profits interest . wells with such overlapping interests are counted in both categories . ● consummation of 37 leases and pooling elections of our mineral interest in undeveloped properties located in 22 counties and parishes in seven states . story_separator_special_tag the current state of development of many state and federal climate change regulatory initiatives makes it difficult to predict with certainty the future impact on us , including accurately estimating the related compliance costs that the operating partnership and oil and natural gas operators that develop our properties may incur . see item 1a . risk factors – “ environmental costs and liabilities and changing environmental regulation could affect our cash flow ” and “ the adoption of climate change legislation by congress or executive orders or regulations could result in increased operating costs and reduced demand for the oil and natural gas production from our properties. ” texas margin tax texas imposes a franchise tax ( commonly referred to as the texas margin tax ) at a rate of 0.75 % on gross revenues less certain deductions , as specifically set forth in the texas margin tax statute . the texas margin tax applies to corporations and limited liability companies , general and limited partnerships ( unless otherwise exempt ) , limited liability partnerships , trusts ( unless otherwise exempt ) , business trusts , business associations , professional associations , joint stock companies , holding companies , joint ventures and certain other business entities having limited liability protection . limited partnerships that receive at least 90 % of their gross income from designated passive sources , including royalties from mineral properties and other non-operated mineral interest income , and do not receive more than 10 % of their income from operating an active trade or business , are generally exempt from the texas margin tax as “ passive entities. ” we believe our partnership meets the requirements for being considered a “ passive entity ” for texas margin tax purposes and , therefore , it is exempt from the texas margin tax . if the partnership is exempt from texas margin tax as a passive entity , each unitholder that is considered a taxable entity under the texas margin tax would generally be required to include its portion of partnership revenues in its own texas margin tax computation . the texas administrative code provides such income is sourced according to the principal place of business of the partnership , which would be the state of texas . each unitholder is urged to consult an independent tax advisor regarding the requirements for filing state income , franchise and texas margin tax returns . 26 l iquidity and capital resources capital resources our primary sources of capital are our cash flow from the royalty properties and the npis . we are not directly liable for the payment of any exploration , development or production costs . we do not have any transactions , arrangements or other relationships that could materially affect our liquidity or the sustainability of capital resources . pursuant to the terms of our partnership agreement , we can not incur indebtedness , other than trade payables ( i ) in excess of $ 50,000 in the aggregate at any given time or ( ii ) which would constitute `` acquisition indebtedness '' ( as defined in section 514 of the internal revenue code of 1986 , as amended ) . our only cash requirements are the distributions of all our net cash flow to our unitholders , the payment of oil and natural gas production and property taxes not otherwise deducted from gross production revenues and general and administrative expenses incurred on our behalf and allocated in accordance with our partnership agreement . since the distributions to our unitholders are , by definition , determined after the payment of all expenses actually paid by us , the only cash requirements that may create liquidity concerns for us are the payments of expenses . since many of these expenses vary directly with oil and natural gas prices and sales volumes , such as production taxes , we anticipate that sufficient funds will be available at all times for payment of these expenses . of the expenses that do not vary with oil and natural gas prices and sales volumes , most are reimbursements to our general partner for allocable general and administrative costs including home office rent , salaries , and employee benefit plans . such reimbursements are generally limited to 5 % of an amount primarily based on annual distributions to our limited partners . historically , all such reimbursements have been substantially below the 5 % limit established by the partnership agreement . consequently , our business risks were essentially limited to distribution amount decreases . see “ item 1. business – credit facilities and financing plans. ” see “ item 1a . risk factors – risks related to our business – cash distributions are affected by production and other costs , some of which are outside of our control. ” see “ item 1a . risk factors – risks inherent in an investment in our common units – cost reimbursement due our general partner may be substantial and reduce our cash available to distribute to our unitholders . '' see `` notes to consolidated financial statements – note 3 – related party transactions . '' off-balance sheet arrangements we have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition , changes in financial condition , revenues or expenses , results of operations , liquidity , capital expenditures or capital resources that are material to unitholders . expenses and capital expenditures depending upon gas prices , the operating partnership plans to continue its efforts to increase production in oklahoma by techniques that may include fracture treating , deepening , recompleting , and drilling .
| results of operations normally , our period-to-period changes in net income and cash flows from operating activities are principally determined by changes in oil and natural gas sales volumes and prices , and to a lesser extent , by capital expenditures deducted under the npi calculation . our portion of oil and natural gas sales volumes and weighted average sales prices are shown in the following table . replace_table_token_11_th comparison of the twelve-month periods ended december 31 , 201 6 , 201 5 and 20 14 royalty properties ' oil sales volumes increased 4 % from 502 mbbls during 2014 to 524 mbbls during 2015 and further increased 18 % to 620 mbbls during 2016. these increases are primarily due to activity in the permian basin which more than offset natural declines in other regions . royalty properties ' gas sales volumes increased 4 % from 3,574 mmcf during 2014 to 3,704 mmcf during 2015 , and then decreased 12 % to 3,271 mmcf during 2016. the increase in 2015 versus the prior year was primarily due to the release of suspended payments for prior periods , partially offset by natural declines . the decrease in 2016 was primarily due to natural declines in the fayetteville shale . npi properties ' oil sales volumes increased 82 % from 219 mbbls during 2014 to 399 mbbls during 2015 and subsequently decreased 5 % to 381 mbbls during 2016 due to declined activity in the bakken region offset by increased activity in the permian basin . npi properties ' gas sales volumes decreased 4 % from 3,383 mmcf during 2014 to 3,248 mmcf during 2015 and further decreased 14 % to 2,807 mmcf in 2016 due to the sale of kansas working interests in 2014 and subsequent natural declines in the fayetteville shale .
| 7,911 |
a control system , no matter how well designed and operated , can provide only reasonable , not absolute , assurance that the control system 's objectives will be met . internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures . in addition , the design of any system of controls is based in part on certain assumptions about the likelihood of future events , and controls may become inadequate if conditions change . there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions . changes to internal control over financial reporting there were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected , or are reasonably likely to materially affect , our internal control over financial reporting . item 9b . other information . none . 40 part iii item 10. directors , executive officers and corporate governance . the information required by item 10 is incorporated by reference to the sections entitled “ questions and answers about the 2019 annual meeting and voting , ” “ election of directors , ” “ section 16 ( a ) beneficial ownership reporting compliance , ” “ corporate governance , ” and “ executive officers ” in our definitive proxy statement relating to our 2019 annual meeting of stockholders . item 11. executive compensation . the information required by item 11 is incorporated by reference to the sections entitled “ executive compensation ” and “ director compensation ” in our definitive proxy statement relating to our 2019 annual meeting of stockholders . item 12. security ownership of certain beneficial owners and management and related stockholder matters . the information required by item 12 is incorporated by reference to the sections entitled “ security ownership of principal stockholders , ” “ security ownership of directors and management ” and “ equity compensation plan information ” in our definitive proxy statement relating to our 2019 annual meeting of stockholders . item 13. certain relationships and related transactions , and director independence . the information required by item 13 is incorporated by reference to the sections entitled “ corporate governance ” and “ certain transactions and business relationships ” in our definitive proxy statement relating to our 2019 annual meeting of stockholders . item 14. principal accounting fees and services the information required by item 14 is incorporated by reference to the section entitled “ independent registered public accountant firm ” in our definitive proxy statement relating to our 2019 annual meeting of stockholders . 41 part iv item 15. exhibits , financial statement schedules . ( a ) financial statements . the following financial statements are included in part ii , item 8 of this annual report on form 10-k : report of eide bailly , llp on consolidated financial statements as of november 30 , 2018 and 2017 consolidated balance sheets as of november 30 , 2018 and 2017 consolidated statements of operations for each of the years ended november 30 , 2018 and 2017 consolidated statements of comprehensive income for each of the years ended november 30 , 2018 and 2017 consolidated statements of stockholders ' equity for each of the years ended november 30 , 2018 and 2017 consolidated story_separator_special_tag . this report contains forward-looking statements that involve significant risks and uncertainties . the following discussion , which focuses on our results of operations , contains forward-looking information and statements . actual events or results may differ materially from those indicated or anticipated , as discussed in the section entitled “ forward looking statements. ” the following discussion of our financial condition and results of operations should also be read in conjunction with our financial statements and notes to financial statements contained in item 8 of this report . financial condition in our 62 years , we have maneuvered the peaks and valleys of the agriculture market many times , but the last several years of the struggling economy have been especially trying . with our core business struggling from the depressed agriculture economy , we were not able to properly provide resources to turn around prior acquisitions and had to make difficult decisions to abandon some of these segments . our strategy going forward is to focus on the key product lines that support our customer base , provide us with an opportunity to distinguish ourselves from competition , and enable us to grow in both volume and profitability . we continued our balance sheet cleanup in the 2018 fiscal year and we believe that our consolidated balance sheet indicates a stable financial position as of november 30 , 2018. despite showing a net loss from continuing operations of $ ( 3,336,000 ) for the 2018 fiscal year we were able to decrease our total liabilities by $ 100,000 compared to the 2017 fiscal year . our debt dropped to the lowest level it has been in almost ten years after the sale of our west union facility on december 14 , 2018 , and we made indirect cuts in december of 2018 to help us continue to weather this economic storm . 11 we expect to have access to capital as needed in 2019 through the sale of inventory and from our line of credit . at november 30 , 2018 we had $ 1,494,470 available on our line of credit . our banking relationship has remained in good favor despite the recent losses , due to our transparency and ongoing corporate strategy . story_separator_special_tag contract losses are recognized when current estimates of total contract revenue and contract cost indicate a loss . estimated contract costs include any and all costs appropriately allocable to the contract . the provision for these contract losses will be the excess of estimated contract costs over estimated contract revenues . changes in job performance , job conditions and estimated profitability , including those changes arising from contract change orders , penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined . costs and profit in excess of amounts billed are classified as current assets and billings in excess of cost and profit are classified as current liabilities . we lease modular buildings to certain customers and account for these transactions as operating or sales-type leases . these leases have terms of up to 36 months and are collateralized by a security interest in the related modular building . on sales-type leases , the lessee has a bargain purchase option available at the end of the lease term . a minimum lease receivable is recorded net of unearned interest income and profit on sale at the time the building is substantially complete . profit related to the sale of the building is recorded upon fulfillment of our obligation to the lessee . on operating leases , we recognize rent when the lessee has all the rights and benefits of ownership of the asset . story_separator_special_tag absorb fixed costs . operating expenses were $ 709,000 for the 2018 fiscal year compared to $ 825,000 for the 2017 fiscal year , a decrease of $ 116,000 , or 14.1 % . this decrease is largely a reduction of our sales force from two traveling salesmen to one , along with decreased commissions as a result of lower revenues . results of operations – discontinued operations during the third quarter of the 2016 fiscal year , we made the decision to exit the pressure vessels industry . on march 29 , 2018 we disposed of the remaining assets for $ 1,500,000. we did not have net sales from our pressurized vessels segment in 2018 or 2017. we continued to incur expenses during the 2018 and 2017 fiscal years due to holding the facility in dubuque , iowa . an impairment to our assets of $ 289,000 was recorded in the 2017 fiscal year . our pretax loss in the 2018 fiscal year was $ ( 67,000 ) compared to $ ( 401,000 ) in the 2017 fiscal year , a decrease of $ 334,000 , or 83.3 % . trends and uncertainties we are subject to a number of trends and uncertainties that may affect our short-term or long-term liquidity , sales revenues , and operations . similar to other farm equipment manufacturers , we are affected by items unique to the farm industry , including fluctuations in farm income resulting from the change in commodity prices , crop damage caused by weather and insects , government farm programs , interest rate fluctuations , and other unpredictable variables . other uncertainties include our oem customers and the decisions they make regarding their current supply chain structure , inventory levels , and overall business conditions . management believes that our business is dependent on the farming industry for the bulk of our sales revenues . as such , our business tends to reap the benefits of increases in farm net income , as farmers tend to purchase equipment in lucrative times and forgo purchases in less profitable years . direct government payments are declining and costs of agricultural production are increasing ; therefore , we anticipate that further increases in the value of production will benefit our business , while any future decreases in the value of production will decrease farm net income and may harm our financial results . 14 as with other farm equipment manufacturers , we depend on our network of dealers to influence customers ' decisions , and dealer influence is often more persuasive than a manufacturer 's reputation or the price of the product . seasonality sales of our agricultural products are seasonal ; however , we have tried to decrease the impact of this seasonality through the development of beet harvesting machinery coupled with private labeled products , as the peak periods for these different products occur at different times . we believe that our tool sales are not seasonal . our modular building sales are somewhat seasonal , and we believe that this is due to the budgeting and funding cycles of the universities that commonly purchase our modular buildings . we believe that this cycle can be offset by building backlogs of inventory and by increasing sales to other public and private sectors . liquidity and capital resources our main source of funds during the 2018 fiscal year was cash generated by investing activities , which was primarily from the sale of our dubuque , iowa facility . we used approximately $ 435,000 of cash to update facilities and equipment which includes software and hardware related to information technology advances , transportation equipment , and manufacturing equipment . we used another $ 330,000 to add additional assets held for lease to our modular building rental fleet . on september 28 , 2017 , we entered into a new credit facility with bank midwest , which superseded and replaced in its entirety our previous credit facility with u.s. bank national association ( “ u.s . bank ” ) . the bank midwest credit facility consists of a $ 5,000,000 revolving line of credit , pursuant to which we had borrowed $ 3,505,530 , with $ 1,494,470 remaining , as of november 30 , 2018 , and two term loans , which had outstanding principal balances of $ 2,517,510 and $ 0 as of november 30 , 2018. proceeds of the new line of credit and two term loans were used to
| results of operations – continuing operations fiscal year ended november 30 , 201 8 compared to fiscal year ended november 30 , 201 7 our consolidated net sales for continuing operations totaled $ 19,727,000 for the 2018 fiscal year , which represents a 4.8 % decrease from our consolidated net sales of $ 20,715,000 for the 2017 fiscal year . the decrease in revenue is due to decreased sales in our agricultural products and tools segments . we experienced fairly steady demand in the 2018 fiscal year in our agricultural products segment and attribute the sales decrease to our decision to terminate a relationship to sell passthrough beet equipment and to liquidate our canadian operations . the decrease in our tools segment is due to the loss of a high-volume customer . our consolidated gross profit decreased as a percentage of net sales to 17.8 % in the 2018 fiscal year from 19.7 % of net sales in the 2017 fiscal year . our gross profit was down in all three segments for the 2018 fiscal year , mainly due to increased material costs . the increased material costs drove price increases at the end of the 2018 fiscal year to help mitigate this concern for the 2019 fiscal year . our consolidated operating expenses increased by 13.8 % , from $ 5,804,000 in the 2017 fiscal year to $ 6,607,000 in the 2018 fiscal year . this was due largely to one-time non-cash expenses in our agricultural products segment further described below .
| 7,912 |
see note 11 – “ financial instruments and risk management ” to the consolidated financial statements for additional information concurrently with the execution of the merger agreement , vertiv holdings co entered into subscription agreements with certain investors and executive officers ( `` pipe investors `` ) . the pipe investors subscribed for 123,900,000 shares of class a common stock for an aggregate purchase price equal to $ 1,239.0 ( the `` pipe investment `` ) . the company used $ 1,464.0 of the proceeds from the business combination to pay down its existing debt . acquisition-related transaction costs and related charges are not included as a component of consideration transferred but were charged against the proceeds from the pipe investment and the trust account . in connection with the business combination , gs acquisition holdings corp changed its name to vertiv holdings co and changed the trading symbols for its units , each unit representing one share of class a common stock and one-third of one redeemable warrant to story_separator_special_tag unless the context otherwise indicates or requires , references to ( 1 ) “ the company , ” “ we , ” “ us ” and “ our ” refer to vertiv holdings co , a delaware corporation , and its consolidated subsidiaries following the business combination ; ( 2 ) “ gsah ” refers to gs acquisition holdings corp prior to the business combination ; and ( 3 ) “ vertiv ” refers to vertiv holdings , llc and its subsidiaries prior to the business combination . in addition , dollar amounts are stated in millions , except for per share amounts . you should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this annual report on form 10-k. overview we are a global leader in the design , manufacturing and servicing of critical digital infrastructure technology that powers , cools , deploys , secures and maintains electronics that process , store and transmit data . we provide this technology to data centers , communication networks and commercial & industrial environments worldwide . we aim to help create a world where critical technologies always work , and where we empower the vital applications of the digital world . key developments below is a summary of selected key developments affecting our business since december 31 , 2019 : on february 7 , 2020 , the company ( formerly known as gsah ) , consummated its previously announced business combination pursuant to that certain agreement and plan of merger , dated as of december 10 , 2019 ( the “ merger agreement ” ) , by and among the company , vertiv , a delaware limited liability company , vpe holdings , llc , a delaware limited liability company ( the “ vertiv stockholder ” ) , crew merger sub i llc , a delaware limited liability company and a direct , wholly-owned subsidiary of gsah ( “ first merger sub ” ) , and crew merger sub ii llc , a delaware limited liability company and a direct , wholly-owned subsidiary of gsah ( “ second merger sub ” ) . as contemplated by the merger agreement , ( 1 ) first merger sub merged with and into vertiv , with vertiv continuing as the surviving entity ( the “ first merger ” ) and ( 2 ) immediately following the first merger and as part of the same overall transaction as the first merger , vertiv merged with and into second merger sub , with second merger sub continuing as the surviving entity and renamed “ vertiv holdings , llc ” ( collectively with the first merger and the other transactions contemplated by the merger agreement , the “ business combination ” ) . the business combination was approved by gsah shareholders on february 6 , 2020 , and on february 10 , 2020 , the company announced the completion of the business combination . the company began trading on the new york stock exchange beginning on monday , february 10 , 2020. on march 2 , 2020 , vertiv group and holdings closed a new seven-year $ 2,200.0 term loan ( the “ term loan facility ” ) , the proceeds of which were used , together with the proceeds of certain borrowings under the abl revolving credit facility referred to below , to repay in full vertiv group 's prior term loan facility ( as defined herein ) , to redeem in full the prior notes ( as defined herein ) , and to pay certain fees and expenses ( collectively , the “ refinancing transactions ” ) . in connection with the repayment of indebtedness from the business combination and the subsequent refinancing transactions , we recognized a $ 99.0 write-off of deferred financing fees and a $ 75.0 early redemption premium on prior notes . at december 31 , 2020 , the term loan facility bears annual interest at libor plus an applicable margin of 3.00 % ( 3.15 % all-in ) , which applicable margin is 1.0 % lower than under the previous term loan . in addition , holdings , vertiv group and certain of its subsidiaries closed an amendment on their $ 455.0 asset-based lending ( abl ) revolving credit facility ( the “ abl revolving credit facility ” , and together with the term loan facility , collectively , the `` senior secured credit facilities '' ) which , among other changes , extended the maturity to march 2 , 2025 and lowered the applicable margin on loans thereunder by 0.25 % . concurrently with the closing of the term loan facility , vertiv group executed interest rate swaps on a notional amount of $ 1,200.0 in 2020 , and $ 1,000.0 in the remaining tenor of the term loan . combined with the economics of the term loan , this results in an all-in rate of approximately 4.1 % . story_separator_special_tag europe , middle east & africa replace_table_token_6_th emea net sales were $ 961.6 in 2020 , an increase of $ 37.5 , or 4.1 percent from 2019. sales increases were primarily due to increased demand from large colocation providers . by product offering category , critical infrastructure & solutions and service & spares increased by $ 43.3 and $ 3.9 , respectively , offset by a decline in integrated rack solutions of $ 9.7. additionally , europe , middle east & africa net sales were positively impacted by foreign currency of approximately $ 8.4. earnings before interest and taxes in 2020 was $ 90.5 , an increase of $ 25.7 compared with 2019. margin improved 2.4 percentage points primarily due to fixed cost savings and contribution margin improvements ( mix , operations productivity , and pricing ) , offset by a net increase in restructuring charges of $ 31.6. corporate and other corporate and other costs include costs associated with our headquarters located in columbus , ohio , as well as centralized global functions including finance , treasury , risk management , strategy & marketing , it , legal , and global product platform development and offering management . corporate and other costs were $ 616.1 and $ 369.3 in 2020 and 2019 , respectively . the $ 246.8 increase in corporate and other expenses in 2020 versus the comparable prior year was primarily due to the loss on extinguishment of debt of $ 174.0 , as described in note 5 to the consolidated financial statements , higher restructuring charges of $ 4.9 , and asset impairment charges of $ 12.3 . 42 capital resources and liquidity our primary future cash needs relate to working capital , operating activities , capital spending , strategic investments and debt service . in connection with the consummation of the business combination on february 7 , 2020 , the company used $ 1,464.0 of the proceeds from the merger consideration and pipe investment to pay down its existing debt . on march 2 , 2020 , vertiv announced the closing of a new seven-year $ 2,200.0 term loan facility , the proceeds of which were used to repay in full its prior term loan facility , redeem in full its prior notes and pay certain fees and expenses . additionally , holdings , vertiv group and certain of its subsidiaries closed an amendment on their $ 455.0 abl revolving credit facility which extended the maturity to march 2 , 2025. in addition to the cash inflow generated from the closing of the merger with gsah , we believe that net cash provided by operating activities , augmented by long-term debt arrangements and the abl revolving credit facility , will provide adequate near-term liquidity for the next 12 months of independent operations , as well as the resources necessary to invest for growth in existing businesses and manage our capital structure on a short- and long-term basis . we expect to continue to opportunistically access the capital markets and financing markets from time to time . access to capital and the availability of financing on acceptable terms in the future will be affected by many factors , including our credit rating , economic conditions , and the overall liquidity of capital markets . there can be no assurance that we will continue to have access to the capital markets and financing markets on acceptable terms . at december 31 , 2020 , we had $ 534.6 in cash and cash equivalents , which includes amounts held outside of the u.s. , primarily in europe and asia . non-u.s. cash is generally available for repatriation without legal restrictions , subject to certain taxes , mainly withholding taxes . we are not asserting indefinite reinvestment of cash or outside basis for our non-u.s. subsidiaries due to the outstanding debt obligations in instances where alternative repatriation options other than dividends are not available . our abl revolving credit facility provides for up to $ 455.0 of revolving borrowings , with separate sublimits for letters of credit , swingline borrowings and borrowings made to certain non-u.s. subsidiaries , and an uncommitted accordion of up to $ 145.0. at december 31 , 2020 , vertiv group and certain other subsidiaries of the company had $ 434.2 of availability ( subject to customary borrowing base and other conditions ) under the abl revolving credit facility , net of letters of credit outstanding in the aggregate principal amount of $ 20.8 , and taking into account the borrowing base limitations set forth in the abl revolving credit facility . long-term debt obligations see note 5 — `` debt '' of the consolidated financial statements of the long-term debt arrangements issued by the company with certain of our subsidiaries named as guarantors or co-borrowers . summary statement of cash flows year ended december 31 , 2020 compared to year ended december 31 , 2019 replace_table_token_7_th net cash provided by operating activities net cash provided by operating activities was $ 208.9 in 2020 , a $ 151.4 increase in cash generation compared to 2019. the increase in cash generation was primarily driven by lower cash interest as a result of our overall reduction in long-term debt and our first quarter debt refinancing as well as lower transformation-related spending . net cash used for investing activities net cash used for investing activities was $ 45.7 in 2020 compared to net cash used for investing activities of $ 65.3 in 2019. the lower use of cash over the comparable period was primarily the result of reduced investment in capitalized software partly due from a strategic shift in the implementation of an erp platform in the americas segment .
| results of operations year ended december 31 , 2020 compared to year ended december 31 , 2019 the following discussion compares our results for the year ended december 31 , 2020 , to the year ended december 31 , 2019. the discussion comparing our results for the year ended december 31 , 2019 to the year ended december 31 , 2018 is included within “ management 's discussion and analysis of financial condition and results of operation ” included as exhibit 99.2 in the company 's current report on form 8-k/a , filed with the sec on march 12 , 2020. replace_table_token_3_th net sales net sales were $ 4,370.6 in 2020 , a decrease of $ 60.6 , or 1.4 percent , compared with $ 4,431.2 in 2019. the decrease in sales was primarily driven from the impacts of the covid-19 pandemic . by offering , critical infrastructure & solutions sales decreased $ 9.8 including the negative impacts from foreign currency of $ 20.7. services & spares sales decreased $ 13.3 , offset by positive impacts from foreign currency of $ 0.1. integrated rack solutions sales decreased $ 37.5 including the negative impacts from foreign currency of $ 3.9. excluding intercompany sales , net sales were $ 2,040.6 in the americas , $ 1,368.4 in asia pacific and $ 961.6 in emea . movements in net sales by segment and offering are each detailed in the business segments section below . cost of sales cost of sales were $ 2,896.9 in 2020 , a decrease of $ 81.3 , or 2.7 percent compared to 2019. the decrease in cost of sales was primarily due to the flow-through impact of lower net sales volume , manufacturing productivity , pricing and favorable mix .
| 7,913 |
our vision is to ensure that cancer patients and their families live fulfilling lives . our mission is to transform cancer care through the smart design and development of targeted solutions based on a deep understanding of cancer pathways and biological markers . our strategy is to ( 1 ) understand the biological problems we are trying to solve , ( 2 ) design specific solutions against the problems we are trying to solve and ( 3 ) develop those solutions for biomarker-selected patients . this three-pronged strategy seeks to ensure optimal patient outcomes . we own worldwide development and commercial rights to all of our clinical and preclinical programs . on april 3 , 2017 , we began operating as a refocused research and clinical development company in connection with the completion of our previously announced transaction , or the asset sale , with ipsen s.a. , or ipsen . pursuant to the asset purchase and sale agreement , dated as of january 7 , 2017 , or the asset sale agreement , between us and ipsen , ipsen acquired our right , title and interest in the non-cash assets , equipment , inventory , contracts and intellectual property primarily related to or used in our business operations and activities involving or relating to developing , manufacturing and commercializing onivyde , our first commercial product , and mm-436 , or the commercial business . we received $ 575.0 million in cash , plus a working capital adjustment of $ 5.7 million , and are eligible to receive up to $ 450.0 million in additional regulatory approval-based milestone payments . we also retained the right to receive net milestone payments that may become payable for the ex-u.s. development and commercialization of onivyde for up to $ 33.0 million pursuant to a license and collaboration agreement between ipsen and les laboratoires servier sas , or servier ( as assignee from shire plc ) , which we refer to as the servier agreement . to date , we have received $ 28.0 million of the potential $ 33.0 million in milestone payments under the servier agreement . we entered into the servier agreement in 2014 , and on april 3 , 2017 , the servier agreement was assigned to ipsen in connection with the completion of the asset sale . as a result of the asset sale , the commercial business is accounted for as a discontinued operation for all periods presented . our non-commercial assets , including our clinical and preclinical development programs , were not included in the asset sale and remain assets of ours . our only clinical stage asset in active development is mm-310 . mm-310 is an antibody-directed nanotherapeutic that targets the ephrin receptor a2 , or epha2 , receptor and contains a novel cytotoxic taxane . the epha2 receptor is highly expressed in most solid tumor types , such as prostate , ovarian , bladder , gastric , pancreatic and lung cancers . we are conducting a phase 1 clinical trial to evaluate safety and preliminary activity of mm-310 in patients with solid tumors and to identify the maximum tolerated dose . our two most promising preclinical programs are mm-401 , an agonistic antibody targeting a novel immuno-oncology target , tnfr2 , and mm-201 , a highly stabilized agonist-fc fusion protein targeting death receptors 4 and 5. 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 providing general and administrative support for these operations . we currently have no products approved for sale and all of our revenue to date has been collaboration revenue and through sales of onivyde and , to date , we have financed our operations primarily through private placements of convertible preferred stock , collaborations , public offerings of our securities , secured debt financings , sales of onivyde and the asset sale . on june 25 , 2018 , we announced top-line results from our global , double-blinded , placebo-controlled , phase 2 randomized carrie clinical trial evaluating the addition of mm-141 ( istiratumab ) to standard-of-care treatment in patients with previously untreated metastatic pancreatic cancer and high serum levels of the insulin-like growth factor 1 , or igf-1 . the carrie clinical trial did not meet its primary or secondary efficacy endpoints in patients who received mm-141 in combination with nab-paclitaxel and gemcitabine , compared to nab-paclitaxel and gemcitabine alone . these results were consistent in all subgroups analyzed . based on these results , we are not devoting additional resources to and have ceased all of our development activities for mm-141 . on october 19 , 2018 , we announced the termination of our global , open-label , biomarker-selected , phase 2 randomized sherloc clinical trial evaluating mm-121 ( seribantumab ) in combination with docetaxel in patients with heregulin positive non-small cell lung cancer , or nsclc . the decision to terminate the sherloc clinical trial was made based on an interim analysis triggered by the occurrence of 75 % of events required for trial completion , which demonstrated that the addition of mm-121 to docetaxel did not improve progression free survival over docetaxel alone in this patient population . 53 on november 7 , 2018 , based on the results of the interim analysis of the randomized phase 2 sherloc clinical trial that were announced on october 19 , 2018 , we announced that we are discontinuing de velopment of all ongoing mm-121 programs , including terminating the global , double-blinded , placebo-controlled , biomarker-selected , phase 2 randomized sherboc clinical trial evaluating mm-121 in combination with fulvestrant in patients with heregulin posit ive , hormone receptor positive , erbb2 ( her2 ) negative , metastatic breast cancer . on november 7 , 2018 , we announced that we were implementing a reduction in headcount as part of a corporate restructuring , after which we expected to have approximately 27 employees . the corporate restructuring followed a comprehensive review of our drug candidate pipeline . story_separator_special_tag actavis in november 2013 , we entered into a development , license and supply agreement with watson laboratories , inc. , or actavis , which we refer to as the actavis agreement , pursuant to which we agreed to develop , manufacture and exclusively supply the bulk form of doxorubicin hydrochloride ( hcl ) liposome injection , or the initial product , to actavis . on april 3 , 2017 , in connection with the completion of the asset sale , the actavis agreement was assigned to ipsen . silver creek pharmaceuticals , inc. in august 2010 , we acquired a controlling financial interest in silver creek , a research and development company focused on areas outside of oncology . at such time , we had the ability to direct the activities of silver creek that most significantly impacted silver creek 's economic performance through our ownership percentage and through the board of director seats we controlled . as such , we initially consolidated silver creek . in the third quarter of 2017 , silver creek completed its series c preferred stock financing , which reduced our ownership percentage in silver creek below 50 % and resulted in us no longer controlling the silver creek board of directors . we determined that we were no longer the primary beneficiary of silver creek , as we do not control the board of directors and do not direct the activities that have the most significant impact on silver creek 's economic performance . as a result , we deconsolidated silver creek from our financial statements on july 13 , 2017 and we recorded a gain on the deconsolidation of silver creek of $ 10.8 million for the year ended december 31 , 2017 in our consolidated statement of operations and comprehensive loss . starting on july 14 , 2017 , we accounted for our investment in silver creek under the equity method of accounting as we have the ability to exercise significant influence over silver creek . the carrying value of our investment in silver creek was $ 7.4 million and $ 10.6 million at december 31 , 2018 and 2017 , respectively . financial obligations related to the license and development of onivyde in september 2005 , hermes biosciences , inc. , or hermes , which we acquired in october 2009 , entered into a license agreement with pharmaengine , inc. , or pharmaengine , under which pharmaengine received an exclusive license to research , develop , manufacture and commercialize onivyde in europe and certain countries in asia . in may 2011 , we entered into a new agreement with pharmaengine , which we refer to as the pharmaengine agreement , under which we reacquired all previously licensed rights for onivyde , other than rights to commercialize onivyde in taiwan . as a result , we had the exclusive right to commercialize onivyde in all territories in the world , except for taiwan , where pharmaengine has an exclusive commercialization right . on april 3 , 2017 , the pharmaengine agreement and all related agreements and any associated obligations , including our agreement related to commercial supply of onivyde to pharmaengine , were assigned to ipsen in connection with the asset sale . 55 financial operations overview revenues our revenue through december 31 , 2018 has been derived from license fees , milestone payments and research , development , manufacturing and other payments received from collaborations , as well as from sales of onivyde . as a result of the asset sale , all revenue related to the commercial business has been reclassified under discontinued operations . in the future , we may generate revenue from a combination of research and development payments , license fees and other upfront payments , milestone payments , product sales and royalties in connection with any future collaborations and licenses . we expect that any revenue we generate will fluctuate in future periods as a result of the timing of our or a collaborator 's achievement of preclinical , clinical , regulatory and commercialization milestones , if at all , the timing and amount of any payments to us relating to such milestones and the extent to which any of our product candidates are approved and successfully commercialized by us or a collaborator . if we fail , or any future collaborator fails , to develop product candidates in a timely manner or to obtain regulatory approval for them , our ability to generate future revenue , and our results of operations and financial position , would be materially adversely affected . research and development expenses research and development expenses consist of the costs associated with our research and discovery activities , including investment in our systems biology approach , conduct of preclinical studies and clinical trials , manufacturing development efforts and activities related to regulatory filings . our research and development expenses consist of : employee salaries and related expenses , which include stock-based compensation and benefits for the personnel involved in our drug discovery and development activities ; external research and development expenses incurred under agreements with third-party contract research organizations and investigative sites ; manufacturing material expense for third-party manufacturing organizations and consultants , including costs associated with manufacturing product prior to product approval ; license fees for and milestone payments related to in-licensed products and technologies ; and facilities , depreciation and other allocated expenses , which include direct and allocated expenses for rent and maintenance of facilities , depreciation of leasehold improvements and equipment , and laboratory and other supplies . we expense research and development costs as incurred . 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 .
| results of operations comparison of the years ended december 31 , 2018 and 2017 replace_table_token_2_th research and development expenses research and development expenses were $ 50.0 million for the year ended december 31 , 2018 compared to $ 67.3 million for the year ended december 31 , 2017 , a decrease of $ 17.3 million , or 26 % . this decrease was primarily attributable to : $ 21.8 million decrease in expenses related to our preclinical , general research and discovery and legacy programs related to the refocus of our early stage development spend and prioritization of our most advanced programs ; $ 5.8 million decrease in stock-based compensation related to reduction in headcount ; and $ 2.4 million decrease in expenses related to the timing and activity and services incurred related to the ongoing mm-310 phase 1 clinical trial ; offset by $ 12.7 million increase in expenses related to the progression of the mm-121 clinical trials and the timing of manufacturing expenses due to the nature of when runs were performed . 60 general and administrative expenses general and administrative expenses were $ 15.6 million for the year ended december 31 , 2018 compared to $ 28.5 million for the year ended december 31 , 2017 , a decrease of $ 12.9 million , or 45 % . this decrease was primarily attributable to a decrease in corporate expenses related to reduced headcount levels and stock-based compensation in 2018 compared to 2017. interest income interest income was $ 1.3 million for the year ended december 31 , 2018 , primarily attributable to the interest income associated with our marketable securities . interest income was $ 0.9 million for the year ended december 31 , 2017 , primarily attributable to our interest bearing cash accounts . interest expense interest expense was $ 1.0 million for the year ended december 31 , 2018 , primarily attributable to the loan agreement with hercules .
| 7,914 |
intangible assets acquired in connection with the merger are related to propane customer relationships ( $ 3.5 million ) and story_separator_special_tag this section provides management 's discussion of chesapeake and its consolidated subsidiaries , with specific information on results of operations and liquidity and capital resources , as well as discussion on how certain accounting principles affect our financial statements . it includes management 's interpretation of financial results of the company and its operating segments , the factors affecting these results , the major factors expected to affect future operating results , investment and financing plans . this discussion should be read in conjunction with our consolidated financial statements and notes thereto . several factors exist that could influence our future financial performance , some of which are described in item 1a above , risk factors. they should be considered in connection with evaluating forward-looking statements contained in this report , or otherwise made by or on behalf of us , since these factors could cause actual results and conditions to differ materially from those set out in such forward-looking statements . the following discussions and those later in the document on operating income and segment results include use of the term gross margin. gross margin is determined by deducting the cost of sales from operating revenue . cost of sales includes the purchased cost of natural gas , electricity and propane and the cost of labor spent on direct revenue-producing activities . gross margin should not be considered an alternative to operating income or net income , which are determined in accordance with gaap . we believe that gross margin , although a non-gaap measure , is useful and meaningful to investors as a basis for making investment decisions . it provides investors with information that demonstrates the profitability achieved by the company under its allowed rates for regulated energy operations and under its competitive pricing structure for unregulated natural gas marketing and propane distribution operations . chesapeake 's management uses gross margin in measuring its business units ' performance and has historically analyzed and reported gross margin information publicly . other companies may calculate gross margin in a different manner . in addition , certain information is presented , which excludes for comparison purposes , result of operations of fpu for the period from the merger closing ( october 28 , 2009 ) to december 31 , 2009 and all merger-related costs incurred in connection with the fpu merger . although the non-gaap measures are not intended to replace the gaap measures for evaluation of chesapeake 's performance , we believe that the portions of the presentation which excludes fpu 's financial results for the post-merger period and merger-related costs provide a helpful comparative basis for investors to understand chesapeake 's performance . ( a ) introduction chesapeake is a diversified utility company engaged , directly or through subsidiaries , in regulated energy businesses , unregulated energy businesses , and other unregulated businesses , including advanced information services . our strategy is focused on growing earnings from a stable utility foundation and investing in related businesses and services that provide opportunities for returns greater than traditional utility returns . the key elements of this strategy include : executing a capital investment program in pursuit of organic growth opportunities that generate returns equal to or greater than our cost of capital ; expanding the regulated energy distribution and transmission businesses through expansion into new geographic areas and providing new services in our current service territories ; expanding the propane distribution business in existing and new markets through leveraging our community gas system services and our bulk delivery capabilities ; utilizing our expertise across our various businesses to improve overall performance ; enhancing marketing channels to attract new customers ; providing reliable and responsive customer service to retain existing customers ; chesapeake utilities corporation 2009 form 10-k page 33 maintaining a capital structure that enables us to access capital as needed ; maintaining a consistent and competitive dividend for shareholders ; and creating and maintaining diversified customer base , energy portfolio and utility foundation . ( b ) highlights and recent developments on october 28 , 2009 , we completed the previously announced merger with fpu . as a result of the merger , fpu became a wholly-owned subsidiary of chesapeake . the merger allowed us to become a larger energy company serving approximately 200,000 customers in the mid-atlantic and florida markets , which is twice the number of energy customers we served previously . the merger increased our overall presence in florida by adding approximately 51,000 natural gas distribution customers and 12,000 propane distribution customers to our existing natural gas and propane distribution operations in florida . it also introduces us to the electric distribution business as it incorporates fpu 's approximately 31,000 electric customers in northwest and northeast florida . total consideration paid by chesapeake in the merger was approximately $ 75.7 million , which included approximately $ 16,000 paid in cash and 2,487,910 shares of common stock issued at a price per share of $ 30.42. net fair value of the assets acquired and liabilities assumed in the merger was estimated at $ 42.3 million . this resulted in a purchase premium of $ 33.4 million , which was reflected as goodwill . all of the purchase premium paid in the merger was related to the regulated energy segment . chesapeake also incurred approximately $ 3.0 million in merger-related costs related to consummating the merger , merger-related litigation costs and costs incurred in integrating operations of the two companies . story_separator_special_tag we continued to experience low short-term interest rates throughout 2009 as our short-term weighted average interest rate decreased to 1.28 percent in 2009 , compared to 2.79 percent in 2008. the level of our short-term borrowings in 2009 was reduced by the placement of $ 30.0 million of 5.93 percent unsecured senior notes in october 2008 and a decline in working capital requirements due to lower commodity prices , lower trading volume by the propane wholesale marketing subsidiary , lower income tax payments from bonus depreciation and the timing of our capital expenditures . ( c ) critical accounting policies we prepare our financial statements in accordance with gaap . application of these accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosures of contingencies during the reporting period . we base our estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . since most of our businesses are regulated and the accounting methods used by these businesses must comply with the requirements of the regulatory bodies , the choices available are limited by these regulatory requirements . in the normal course of business , estimated amounts are subsequently adjusted to actual results that may differ from estimates . management believes that the following policies require significant estimates or other judgments of matters that are inherently uncertain . these policies and their application have been discussed with our audit committee . chesapeake utilities corporation 2009 form 10-k page 35 regulatory assets and liabilities as a result of the ratemaking process , we record certain assets and liabilities in accordance with fasb accounting standards codification ( asc ) topic 980 , regulated operations , consequently , the accounting principles applied by our regulated energy businesses differ in certain respects from those applied by the unregulated businesses . costs are deferred when there is a probable expectation that they will be recovered in future revenues as a result of the regulatory process . as more fully described in item 8 under the heading notes to the consolidated financial statements note a , summary of accounting policies , we have recorded regulatory assets of $ 21.1 million and regulatory liabilities of $ 46.3 million , at december 31 , 2009. if we were required to terminate application of this topic , we would be required to recognize all such deferred amounts as a charge or a credit to earnings , net of applicable income taxes . such an adjustment could have a material effect on our results of operations . valuation of environmental assets and liabilities as more fully described in item 8 under the heading notes to the consolidated financial statements note o , environmental commitments and contingencies , we have completed our responsibilities related to one environmental site and are currently participating in the investigation , assessment or remediation of seven other former manufactured gas plant sites . amounts have been recorded as environmental liabilities and associated environmental regulatory assets based on estimates of future costs provided by independent consultants . there is uncertainty in these amounts , because the united states environmental protection agency ( epa ) , or other applicable state environmental authority , may not have selected the final remediation methods . in addition , there is uncertainty with regard to amounts that may be recovered from other potentially responsible parties . since we believe that recovery of these expenditures , including any litigation costs , is probable through the regulatory process , we have recorded a regulatory asset and corresponding environmental liability . at december 31 , 2009 , we have recorded an environmental regulatory asset of $ 7.5 million and a liability of $ 12.8 million for environmental costs . derivatives we use derivative and non-derivative instruments to manage the risks related to obtaining adequate supplies and the price fluctuations of natural gas , electricity and propane . we also use derivative instruments to engage in propane marketing activities . we continually monitor the use of these instruments to ensure compliance with our risk management policies and account for them in accordance with appropriate gaap . if these instruments do not meet the definition of derivatives or are considered normal purchases and sales , they are accounted for on an accrual basis of accounting . the following is a review of our use of derivative instruments at december 31 , 2009 and 2008 : during 2009 and 2008 , our natural gas distribution , electric distribution , propane distribution and natural gas marketing operations entered into physical contracts for purchase or sale of natural gas , electricity and propane . these contracts either did not meet the definition of derivatives as they did not have a minimum requirement to purchase/sell or were considered normal purchases and sales as they provided for the purchase or sale of natural gas , electricity or propane to be delivered in quantities expected to be used and sold by our operations over a reasonable period of time in the normal course of business . accordingly , these contracts were accounted for on the accrual basis of accounting . during 2008 , the propane distribution operation entered into a swap agreement to protect it from the impact of price increases on the pro-cap ( propane price-cap ) plan that we offer to customers . the propane prices declined significantly in late 2008 and we recorded a mark-to-market adjustment of approximately $ 939,000 , which increased our cost of propane sales in 2008. in january 2009 , we terminated this swap agreement .
| income taxes 2009 compared to 2008 income tax expense was $ 10.9 million in 2009 , compared to $ 8.8 million in 2008 , representing an increase of $ 2.1 million . during 2009 , we expensed approximately $ 871,000 in merger-related costs that were determined to be non-deductible for income tax purposes . excluding the impact of these costs , our effective income tax rate for 2009 and 2008 remained primarily unchanged at 39.4 percent and 39.3 percent , respectively . the increase in income tax expense reflects the increased taxable income in 2009 . 2008 compared to 2007 income tax expense was $ 8.8 million in 2008 , compared to $ 8.6 million in 2007 , representing an increase of $ 200,000. our effective income tax rate for 2008 and 2007 remained primarily unchanged at 39.3 percent and 39.4 percent , respectively . the increase in income tax expense reflects the increased taxable income in 2008. discontinued operations during 2007 , we decided to close the distributed energy services subsidiary , onsight , which had experienced operating losses since its inception in 2004. the results of operations for onsight have been reclassified to discontinued operations and shown net of tax for all periods presented . the discontinued operations experienced a net loss of $ 20,000 for 2007. we did not have any discontinued operations in 2008 and 2009 . ( e ) liquidity and capital resources our capital requirements reflect the capital-intensive nature of our business and are principally attributable to investment in new plant and equipment and retirement of outstanding debt . we rely on cash generated from operations , short-term borrowing , and other sources to meet normal working capital requirements and to finance capital expenditures . during 2009 , net cash provided by operating activities was $ 45.8 million , cash used in investing activities was $ 23.1 million , and cash used in financing activities was $ 21.4 million .
| 7,915 |
the company is also required to estimate forfeitures at the time of grant , and revise those estimates in 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 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 . 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 . operating overview we are a biopharmaceutical company focused on developing and delivering novel therapeutics for patients based on hypoxia-inducible factor , or hif , biology , and building our pipeline while leveraging our development and commercial expertise in renal disease . hif is the primary regulator of the production of red blood cells , or rbcs , in the body , as well as other important metabolic functions . pharmacologic modulation of the hif pathway may have broad therapeutic applications . our lead product candidate , vadadustat , is an oral therapy in phase 3 development , which has the potential to set a new standard of care in the treatment of anemia associated with chronic kidney disease ( ckd ) . our management team has extensive experience in developing and commercializing drugs for the treatment of renal and metabolic disorders , as well as a deep understanding of hif biology . this unique combination of hif and renal expertise is enabling us to advance a pipeline of hif-based therapies to address serious diseases . hif , a pathway involving hundreds of genes , is responsible for orchestrating the body 's natural response to lower levels of oxygen , or hypoxia . in response to hypoxia , a coordinated adaptive response occurs resulting in both an increase in red blood cell production , a normal biological process known as erythropoiesis , and enhancement of the delivery of iron to the bone marrow to support erythropoiesis . the significance of the hif pathway was recognized by the 2016 albert lasker basic medical research award , which honored the three physician-scientists who discovered the hif pathway and elucidated this primary oxygen sensing mechanism that is essential for survival . hif protein is constantly being produced under normal oxygen conditions , but is quickly degraded by prolyl hydroxylases , or ph . under hypoxic conditions , hif-ph 's are inhibited , allowing hif to stimulate erythropoiesis . these findings have opened up new possibilities for developing therapeutics , such as hif-phi , which have the potential to treat many diseases . our lead product candidate , vadadustat , a hif-ph inhibitor in phase 3 development for the treatment of anemia of ckd . anemia is a serious medical condition in which blood is deficient in hemoglobin , which is critical for delivering oxygen to organs and tissue . untreated anemia is associated with chronic fatigue , increased risk of progression of multiple diseases and death . anemia is common in patients with ckd , cancer , heart failure , inflammatory diseases and other critical illnesses . more than 30 million people in the united states have ckd , with estimates that over 1.8 million of these patients suffer from anemia . anemia from ckd is currently treated by injectable recombinant erythropoiesis-stimulating agents , or resas , such as epogen ® and aranesp ® , as well as with iron supplementation or red blood cell transfusion . based on the reported revenues of companies that market and sell resas , global sales of injectable resas were estimated to be between $ 6.5 and $ 7.0 billion in 2015. the vast majority of these sales were for the treatment of anemia associated with renal disease . resas deliver supra-physiological levels of exogenous erythropoietin , or epo , to stimulate production of rbcs . while injectable resas may be effective in raising hemoglobin levels , they carry significant potential side effects , and need to be injected under the skin ( subcutaneously ) or into a vein ( intravenously ) . in particular , injectable resas may lead to thrombosis , stroke , myocardial infarction and death . these safety concerns , which became evident starting in 2006 , have led to a significant reduction in the use of injectable resas . today , anemia is either not treated or inadequately treated in the majority of non-dialysis dependent ( ndd ) ckd patients . we believe that novel treatment options that address these concerns are needed and would have significant market potential . because it mimics the body 's natural adaptive response to hypoxia , vadadustat 's hif-ph inhibition may raise hemoglobin levels without causing supra-physiological levels of epo . vadadustat has the potential to set a new standard of care for the treatment of anemia in ckd . early clinical studies of vadadustat demonstrated that diurnal variation of epo was maintained resulting in predictable increases in hemoglobin in normal human volunteers and similar results were seen in ndd-ckd . these data led us to the design of our phase 3 clinical program . the vadadustat phase 3 program in ndd-ckd patients with anemia , called pro 2 tect , and in dialysis dependent ( dd ) ckd patients with anemia , called inno 2 vate , is designed to enroll approximately 5,700 patients evaluating once daily oral dosing of vadadustat against an resa active comparator , darbepoetin alfa . the enrollment numbers and the completion of the phase 3 program will be driven by the rate of major adverse cardiovascular events , or mace . story_separator_special_tag through 2016 we have raised approximately $ 254.1 million of net proceeds from five underwritten public offerings , including $ 61.0 million of net proceeds raised in january 2016 whereby we sold 7,250,000 shares of common stock at a price of $ 9.00 per share and $ 5.7 million of net proceeds whereby we sold 615,293 shares of common in an at-the-market offering , or atm , pursuant to a sales agreement with cantor fitzgerald & co. entered into in may 2016. financial overview in the quarter ended december 31 , 2015 , we identified and corrected an error in the historical classification of certain operating costs between research and development and general and administrative expenses . we concluded the effect of this classification error was not material to our consolidated financial statements for any prior period . the classification correction had no effect on our current or historical total operating expenses or net loss . revenue to date , we have not generated any revenue from the sales of products . our revenues have been derived from collaboration agreements . revenue recognition for our mtpc collaboration will commence when all criteria as required under asc 605 have been satisfied , which the company expects will be in the second half of 2017. therefore , collaboration revenue in 2016 is generated exclusively from our collaboration arrangement with otsuka . the terms of this arrangement contain multiple deliverables , which include at inception : ( i ) license under certain of our intellectual property to develop , perform medical affairs activities with respect to and conduct non-promotional and commercialization activities related to vadadustat ( the license deliverable ) , ( ii ) development services to be performed pursuant to the current global development plan ( the r & d services deliverable ) , ( iii ) rights to future intellectual property and ( iv ) joint committee services . we have identified three units of accounting in connection with our obligations under the collaboration agreement with otsuka as follows : ( i ) license unit of accounting , which combines the license deliverable and the r & d services deliverable ( ii ) rights to future intellectual property unit of accounting and ( iii ) joint committee services unit of accounting . we recognize arrangement consideration allocated to each unit of accounting when all of the revenue recognition criteria in financial accounting standards board , or fasb , accounting standards codification , or asc , topic 605 , revenue recognition , or asc 605 , are satisfied for that particular unit of accounting . the company will recognize revenue related to amounts allocated to the license unit of accounting on a proportional performance basis as the underlying services are performed . our ability to generate product revenue and become profitable depends upon our ability to successfully develop and commercialize products . we expect to incur losses for the foreseeable future , and we expect these losses to increase as we continue our development of , and seek regulatory approvals for , our product candidates and begin to commercialize any approved products . because of the numerous risks and uncertainties associated with product development , we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability . even if we are able to generate revenue from the sale of our products , 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 our operations . for the foreseeable future , we expect substantially all of our revenue will be generated from our collaborations with otsuka and mtpc and any other collaborations we may enter into . 51 research and development expenses research and development expenses consist primarily of costs incurred for the development of our product candidates , which include : employee-related expenses , including salaries , benefits , recruiting fees , travel and stock-based compensation expense ; expenses incurred under agreements with the cros and investigative sites that conduct our clinical studies ; the cost of acquiring , developing and manufacturing clinical study materials ; facilities , depreciation and other expenses , which include direct and allocated expenses for rent and maintenance of facilities , insurance and other supplies ; and costs associated with preclinical and clinical activities . research and development costs are expensed as incurred . costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites . we can not determine with certainty the duration and completion costs of the current or future clinical studies of our product candidates or if , when , or to what extent we will generate revenue from the commercialization and sale of any of our product candidates that obtain regulatory approval . we may never succeed in achieving regulatory approval for any of our product candidates . the duration , costs and timing of clinical studies and development of our product candidates will depend on a variety of factors , including : the results of our meetings with the fda and the ema and other regulatory authorities and the consequential effect on our study design , study size and resulting operating costs ; the size , rate of progress , results and costs of completing our global phase 3 development of vadadustat ; difficulties or delays in enrolling patients in our clinical trials ; assuming favorable phase 3 clinical results , the timing of , and the costs involved in , obtaining regulatory approvals for vadadustat in dialysis and non-dialysis indications , including to fund the preparation and filing of regulatory submissions for vadadustat with the fda , the ema and other regulatory authorities , and whether we will seek regulatory approval for both indications simultaneously ; the cost , timing and outcome of our efforts to obtain
| results of operations comparison of the years ended december 31 , 2016 and 2015 replace_table_token_3_th collaboration revenue . collaboration revenue was $ 1.5 million for the year ended december 31 , 2016 under our agreement with otsuka . research and development expenses . research and development expenses were $ 115.8 million for the year ended december 31 , 2016 , compared to $ 43.0 million for the year ended december 31 , 2015. the increase of $ 72.8 million was primarily due to the following : ( in millions ) vadadustat development $ 65.5 manufacture of drug substance 3.1 regulatory and other clinical and non-clinical activities ( 2.7 ) total increase related to the continued development of vadadustat 65.9 headcount , consulting and facilities 6.5 other 0.4 total net increase $ 72.8 the increase in the costs related to the development of vadadustat is primarily attributable to external costs related to the pro 2 tect and inno 2 vate phase 3 program . the increase in headcount , consulting and facility related costs is primarily due to additional headcount and consulting costs to support the phase 3 programs as well as rent associated with our leasing of additional office and lab space to support our additional headcount . we expect our research and development expenses to increase in future periods in support of the phase 3 programs and other studies and our pipeline development . general and administrative expenses . general and administrative expenses were $ 22.2 million for the year ended december 31 , 2016 , compared to $ 18.5 million for the year ended december 31 , 2015. the increase of $ 3.7 million was primarily due to an increase in costs to support our phase 3 program , including : $ 3.1 million of headcount and compensation-related costs and $ 0.7 million in facility-related costs .
| 7,916 |
on october 31 , 2012 , the company 's audit committee approved an increase to approximately $ 40,700 per month ( effective as of september 1 , 2012 ) in the monthly sublease and administrative support services rate , which increased rate the company believed , was necessary to provide for the increased personnel and space requirements necessary for an operating company . on may 13 , 2014 , the company 's audit committee approved a decrease to approximately $ 27,600 per month ( effective as of june 1 , 2014 ) in the monthly sublease and administrative support services rate , which decreased rate is part of the company 's effort to control and reduce costs . operating expenses for the year ended december 31 , 2014 and 2013 , includes $ 397,000 and $ 488 , 000 , respectively , related to the sublease arrangement with bedford oak . see note 15 ( d ) for a description and the terms of the company 's recent sublease transaction for its new corporate headquarters . in march 2015 the audit committee approved the elimination of the monthly sublease and administrative support services fee effective march 31 , 2015. wright acts as an investment advisor , its subsidiary acts as a principal underwriter and one officer of winthrop is also an officer for a family of mutual funds from which investment management and distribution fees are earned based on the net asset values of the respective funds . such fees , which are included in other investment advisory services , amounted to $ 794,000 and $ 938,000 for the years ended december 31 , 2014 and 2013 , respectively . 42 item 9. changes in and disagreements with accountants on accounting and financial disclosure . none . item 9a . controls and procedures . ( a ) evaluation of disclosure controls and procedures we carried out an evaluation , under the supervision and with the participation of our management including our chief executive officer and our chief financial officer , of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to rule 13a-15 ( e ) of the securities exchange act of 1934 , as amended . based on that evaluation , our chief executive officer and chief financial officer concluded that our disclosure controls and procedures as of december 31 , 2014 were effective . the company 's principal executive officer and principal financial officer have also concluded that there have not been any changes in the company 's internal control over financial reporting during the quarter ended december 31 , 2014 that have materially effected or are reasonably likely to materially effect , the company 's internal control over financial reporting . ( b ) management 's annual report on internal control over financial reporting our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in exchange act rule 13a-15 ( f ) . our internal control processes and procedures are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements in accordance with united states generally accepted accounting principles . our internal control over financial reporting includes those policies and procedures that reasonably allow us to record , process , summarize , and report information and financial data within prescribed time periods and in accordance with rule 13a-15 ( e ) of the securities exchange act of 1934 , as amended . because of its inherent limitations , internal control over financial reporting may not prevent or detect misstatements . also , projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions , or that the degree of compliance with the policies or procedures may deteriorate . under the supervision and with the participation of management , including our chief executive officer and chief financial officer , we conducted an evaluation of internal control over financial reporting as of december 31 , 2014 based on the criteria set forth by the committee of sponsoring organizations of the treadway commission in internal control – integrated framework ( 1992 ) ( “ coso framework ” ) . based upon our evaluation , we concluded that our internal control over financial reporting was effective as of december 31 , 2014. this annual report does not include an attestation report of the company 's registered public accounting firm regarding internal control over financial reporting . management 's report was not subject to attestation by the company 's registered public accounting firm pursuant to rules of the sec that permit the company to provide only management 's report in this annual report . item 9b . other information none 43 part iii item 10. directors , executive officers and corporate governance . the information required by this item is incorporated by reference to the company 's definitive proxy statement to be filed pursuant to regulation 14a within 120 days after the company 's fiscal year end of december 31 , 2014 , for its annual stockholders ' meeting for 2013 ( the “ proxy statement ” ) under the captions “ directors and executive officers ” , “ corporate governance ” , “ compliance with section 16 ( a ) of the exchange act ” , “ code of ethics ” and “ audit committee . ” item 11. executive compensation . story_separator_special_tag under the terms of the settlement agreement , the plan administrator was required to file with the bankruptcy court , no later than august 9 , 2013 , a motion to approve the settlement agreement ( the “ settlement motion ” ) and a proposed order approving relief to be requested in the settlement motion ( the “ proposed order ” ) . pursuant to the settlement agreement , the company agreed to make a settlement payment of $ 2,375,000 ( the “ settlement payment ” ) to the plan administrator conditioned upon the entry of an order ( the “ approval order ” ) by the bankruptcy court approving the settlement motion , that is in a form acceptable to the company and in substantially the same form as the proposed order . the bankruptcy court entered an order approving the settlement agreement on september 4 , 2013 , and the settlement agreement required the company to make the settlement payment within fifteen days of the approval order becoming a final , non-appealable order ( a “ final order ” ) . on october 3 , 2013 , the company made a payment of $ 2,375,000 to the plan administrator pursuant to the terms of the settlement agreement . the settlement agreement also provides for general mutual releases by each of the parties , including a general release in favor of the company and its affiliates , and the company 's and its affiliates ' officers , directors , employees , agents , and professionals . the mutual releases became effective upon entry of the final order and receipt of the settlement payment by the plan administrator . in addition , pursuant to the terms of the settlement agreement , on october 9 , 2013 the plan administrator made the requisite filings to dismiss , with prejudice , the avoidance action and a second pending adversary complaint against the company . upon entry of the final order by the bankruptcy court , the company resolved all claims and causes of action that have been or could have been asserted against it by the plan administrator . as a result of entering into the settlement agreement , during the second quarter ended june 30 , 2013 , the company recorded a loss in discontinued operations of $ 2,375,000 in connection with the avoidance action . in april 2014 , the company agreed to a settlement of its insurance claim related to this matter , and received a net payment of $ 525,000 , which was recorded as income in discontinued operations in 2014. on september 26 , 2014 , the connecticut department of energy and environmental protection ( “ deep ” ) issued two orders requiring the investigation and repair of two dams in which the company and its subsidiaries have certain ownership interests . the first order requires that the company investigate and make specified repairs to the acme pond dam located in killingly , connecticut . the second order , as subsequently revised by deep on october 10 , 2014 , requires that the company investigate and make specified repairs to the killingly pond dam located in killingly , connecticut . the company has administratively appealed and contested the allegations in both orders . as the administrative appeal of both orders is in its early stages , it is not possible at this time to evaluate the likelihood of , or to estimate the range of loss from , an unfavorable outcome investments investment in undeveloped land s the company owns certain non-strategic assets , including an investment and interests in land and flowage rights in undeveloped property in killingly , connecticut . the company monitors this investment for impairment by considering current factors , including the economic environment , market conditions , operational performance and other specific factors relating to the business underlying the investment , and records impairments in carrying values when necessary . investment in mxl operation the company had a 19.9 % interest in mxl carried at its cost of $ 275,000. on february 3 , 2014 mxl exercised its right to purchase the company 's 19.9 % interest . the company received $ 994,000 for its 19.9 % interest on march 26 , 2014 , resulting in a gain of $ 719,000. management discussion of critical accounting policies the following discussion and analysis of the financial condition and results of operations are based on the consolidated financial statements and notes to consolidated financial statements contained in this report that have been prepared in accordance with the rules and regulations of the sec and include all the disclosures normally required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the united states of america . the preparation of these financial statements requires us to make estimates that affect the reported amounts of assets , liabilities , sales and expenses , and related disclosures of contingent assets and liabilities . we base these estimates on historical results and various other assumptions believed to be reasonable , all of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources . actual results may differ from these estimates . 21 certain of our accounting policies require higher degrees of judgment than others in their application . these include stock based compensation and accounting for income taxes which are summarized below . employees ' stock based compensation . stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period , which is generally the vesting period .
| results of operations year ended december 31 , 2014 compared to the year ended december 31 , 2013 for the year ended december 31 , 2014 , the company had a loss from continuing operations before income taxes of $ 2,727,000 compared to a loss from continuing operations before income taxes of $ 3,934,000 for the year ended december 31 , 2013. discontinued operations reflect expenses incurred to resolve outstanding issues in connection with the sale of five star on january 5 , 2010. the reduced loss of $ 1,207,000 was primarily the result of the $ 719,000 gain realized on the sale of the company 's 19.9 % interest in mxl in march 2014. in addition , there were reduced compensation and benefits of $ 315,000 and reduced other operating expenses of $ 167,000. included in winthrop 's operating loss for the years ended december 31 , 2014 and 2013 are the following ; ( i ) amortization of intangibles of $ 637,000 , ( ii ) stay and retention bonuses of $ 150,000 and ( iii ) compensation expense of $ 295,000 and $ 289,000 for the years ended december 31 , 2014 and 2013 , respectively , related to rsu 's issued to winthrop employees . assets under management ( aum ) winthrop earns revenue primarily by charging fees based upon aum . at december 31 , 2014 , aum was $ 1.45 billion , as compared to $ 1.39 billion at december 31 , 2013. the change in aum was due to deposits of $ 245 million and increased market value of $ 51 million , partially offset by redemptions and withdrawals of $ 228 million . revenue winthrop markets its investment management products and services to plan sponsors , trade unions , endowments , corporations , state and local governments , municipalities and foundations .
| 7,917 |
subject to adjustment resulting from a stock split or the payment of a stock dividend or any other increase or decrease in the number of issued shares of the company 's stock effected without receipt of consideration by the company , the total number of shares reserved for issuance under the espp was 1,200,000 shares of common stock . as of january 3 , 2020 , 386,628 shares were available for grant . weighted average purchase prices for shares sold under the espp plan in 2019 , story_separator_special_tag overview exponent is an engineering and scientific consulting firm providing solutions to complex problems . exponent 's interdisciplinary organization of scientists , physicians , engineers , and business consultants draws from more than 90 technical disciplines to solve the most pressing and complicated challenges facing stakeholders today . the firm leverages over 50 years of experience in analyzing accidents and failures to advise clients as they innovate their technologically complex products and processes , ensure the safety and health of their users , and address the challenges of sustainability . critical accounting estimates in preparing our consolidated financial statements , we make assumptions , judgments and estimates that can have a significant impact on our revenue , operating income and net income , as well as on the value of certain assets and liabilities on our consolidated balance sheet . we base our assumptions , judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances . on a regular basis we evaluate our assumptions , judgments and estimates and make changes accordingly . we believe that the assumptions , judgments and estimates involved in accounting for revenue recognition and estimating the allowance for contract losses and doubtful accounts have a potential impact on our consolidated financial statements , so we consider these to be our critical accounting policies . we discuss below the assumptions , judgments and estimates associated with these policies . historically , our assumptions , judgments and estimates relative to our critical accounting policies have not differed materially from actual results . for further information on our critical accounting policies , see “ note 1 : summary of significant accounting policies ” of our notes to consolidated financial statements . revenue recognition . we derive our revenues primarily from professional fees earned on consulting engagements , fees earned for the use of our equipment and facilities , as well as reimbursements for outside direct expenses associated with the services that are billed to our clients . substantially all of our engagements are service contracts performed under time and material or fixed-price billing arrangements . for time and material and fixed-price service projects , revenue is generally recognized as the services are performed . for substantially all of our fixed-price service engagements , we recognize revenue based on the relationship of incurred labor hours at standard rates to our estimate of the total labor hours at standard rates we expect to incur over the term of the contract . our estimate of total labor hours we expect to incur over the term of the contract is based on the nature of the project and our past experience on similar projects . we believe this methodology achieves a reliable measure of the revenue from the consulting services we provide to our customers under fixed-price contracts . management judgments and estimates must be made and used in connection with the revenues recognized in any accounting period . these judgments and estimates include an assessment of the estimate as to the total effort required to complete fixed-price projects . estimating the allowance for contract losses and doubtful accounts . we make estimates of our ability to collect accounts receivable and our unbilled but recognized work-in-process . in circumstances where we are aware of a specific customer 's inability to meet its financial obligations to us or for disputes with customers that affect our ability to fully collect our accounts receivable and unbilled work-in-process , we record a specific allowance to reduce the net recognized receivable to the amount we reasonably believe will be collected . for all other customers we recognize allowances for contract losses and doubtful accounts taking into consideration factors such as historical write-offs , customer concentration , customer credit-worthiness , current economic conditions , and aging of amounts due . 21 the following table sets forth , for the periods indicated , the percentage of revenues of certain items in our consolidated statements of income and the perce ntage increase ( decrease ) in the dollar amount of such items year to year : replace_table_token_3_th story_separator_special_tag roman ; font-weight : bold ; font-size:10pt ; font-style : normal ; text-transform : none ; font-variant : normal ; '' > compensation and related expenses ( in thousands except percentages ) fiscal years percent 2019 2018 change compensation and related expenses $ 252,197 $ 215,052 17.3 % percentage of total revenues 60.5 % 56.7 % the increase in compensation and related expenses during 2019 was due to an increase in payroll expense , an increase in bonus expense , an increase in fringe benefits , and a change in the value of assets associated with our deferred compensation plan . during 2019 , payroll and fringe benefits increased $ 13,629,000 and $ 1,735,000 , respectively , due to the increase in technical full-time equivalent employees , the impact of our annual salary increase and fiscal 2019 having one additional week of activity than fiscal 2018. during 2019 , bonus expense increased by $ 4,576,000 due to a corresponding increase in income before income taxes , before bonus expense , and before stock-based compensation . during 2019 , deferred compensation expense increased $ 16,734,000 with a corresponding increase to other income , net , as compared to the prior year due to the change in value of assets associated with our deferred compensation plan . story_separator_special_tag during 2018 , billable hours for this segment increased by 1.8 % to 282,000 as compared to 277,000 during 2017. the increase in billable hours was due to growth in our chemical regulation and food safety practice where we expanded our proactive services . utilization decreased to 68 % for 2018 as compared to 69 % for 2017. the decrease in utilization was partially due to the completion of a large human factors assessment for a client in the consumer products industry during the third quarter of 2018. technical full-time equivalents increased 3.1 % to 199 during 2018 as compared to 193 for 2017 due to our recruiting and retention efforts . revenues are primarily derived from services provided in response to client requests or events that occur without notice and engagements are generally terminable or subject to postponement or delay at any time by our clients . as a result , backlog at any particular time is small in relation to our quarterly or annual revenues and is not a reliable indicator of revenues for any future periods . compensation and related expenses ( in thousands except percentages ) fiscal years percent 2018 2017 change compensation and related expenses $ 215,052 $ 210,289 2.3 % percentage of total revenues 56.7 % 60.5 % the increase in compensation and related expenses during 2018 was due to an increase in payroll expense , an increase in fringe benefits , an increase in bonus expense , and an increase in stock-based compensation expense partially offset by a change in the value of assets associated with our deferred compensation plan . during 2018 , payroll and fringe benefits increased $ 7,188,000 and $ 2,043,000 , respectively , due to the increase in technical full-time equivalent employees and our annual salary increase . during 2018 , bonus expense increased by $ 5,107,000 due to a corresponding increase in income before income taxes , before bonus expense , and before stock-based compensation . stock-based compensation increased $ 788,000 due primarily to an increase in the amortization of restricted stock unit grants . during 2018 , deferred compensation expense decreased $ 10,447,000 with a corresponding decrease to other income as compared with the prior year due to the change in value of assets associated with our deferred compensation plan . this decrease consisted of a decrease in the value of the plan assets of $ 3,900,000 during 2018 as compared to an increase in the value of the plan assets of $ 6,547,000 during 2017. we expect our compensation expense , excluding the change in value of deferred compensation plan assets , to increase as we selectively add new talent and adjust compensation to market conditions . other operating expenses ( in thousands except percentages ) fiscal years percent 2018 2017 change other operating expenses $ 30,599 $ 29,544 3.6 % percentage of total revenues 8.1 % 8.5 % other operating expenses include facilities-related costs , technical materials , computer-related expenses and depreciation and amortization of property , equipment and leasehold improvements . the increase in other operating expenses was primarily due to an increase in occupancy expense of $ 871,000 due to our increase in technical full- 26 time equivalent employees . we expect other operating expense to grow as we selectively add new ta lent and make investments in our corporate infrastructure . reimbursable expenses ( in thousands except percentages ) fiscal years percent 2018 2017 change reimbursable expenses $ 24,884 $ 18,135 37.2 % percentage of total revenues 6.6 % 5.2 % the increase in reimbursable expenses was primarily due to an increase in travel related costs associated with our large human factors assessment project . the amount of reimbursable expenses will vary from year to year depending on the nature of our projects . general and administrative expenses ( in thousands except percentages ) fiscal years percent 2018 2017 change general and administrative expenses $ 17,532 $ 17,780 -1.4 % percentage of total revenues 4.6 % 5.1 % the decrease in general and administrative expenses during 2018 was primarily due to a decrease in travel and meals of $ 249,000 due to a firm-wide managers meeting during 2017. we expect general and administrative expenses to increase as we selectively add new talent , expand our business development efforts , and pursue staff development initiatives . other income ( in thousands except percentages ) fiscal years percent 2018 2017 change other income $ 1,861 $ 10,458 -82.2 % percentage of total revenues 0.5 % 3.0 % other income consists primarily of interest income earned on available cash , cash equivalents and short-term investments , changes in the value of assets associated with our deferred compensation plan and rental income from leasing excess space in our silicon valley facility . the decrease in other income was primarily due to the change in value of assets associated with our deferred compensation plan partially offset by an increase in interest income . during 2018 , other income decreased $ 10,447,000 with a corresponding decrease to deferred compensation expense as compared to 2017. this change consisted of a decrease in the value of the plan assets of $ 3,900,000 during 2018 as compared to an increase in the value of the plan assets of $ 6,547,000 during 2017. the increase in interest income of $ 1,457,000 was due to higher interest rates for our cash equivalents and short-term investments . income taxes replace_table_token_7_th the decrease in income tax expense was due to the impact of the u.s. tax legislation that was signed into law during the fourth quarter of 2017 , partially offset by a decrease in the excess tax benefit associated with share-based payment awards . this u.s. tax legislation lowered the u.s. corporate income tax rate from 35 % to 21 % beginning in 2018. in addition , we recorded income tax expense of $ 16,507,000 during the fourth quarter of 2017 associated with the tax legislation .
| executive summary revenues for 2019 increased 10 % and revenues before reimbursements also increased 10 % as compared to the prior year . the increase in revenues before reimbursements was due to an increase in billable hours and an increase in billing rates . we experienced strong demand for our consulting services from a diverse set of clients for both proactive and reactive projects . during 2019 we experienced demand from a broad set of industries involving energy storage and battery technologies , continued our integrity management assessments related to the utilities industry , and saw our international arbitration work expand geographically . our human factors product studies continue to provide unique insights into the operability , usability and safety of human-machine systems . we were engaged by clients throughout the year to determine what happened when a disaster occurs . these events ranged from structural failures on major infrastructure to nanoscale components . we also continued to see demand for our scientists to assess increasing concerns regarding the impact of chemicals on human health and the environment . during 2019 , we had strong growth in our biomedical engineering , buildings & structures , chemical regulation & food safety , construction consulting , human factors , materials & corrosion engineering , thermal sciences , and polymer science & materials chemistry practices . net income increased 14 % to $ 82,460,000 during 2019 as compared to $ 72,254,000 during 2018. diluted earnings per share increased to $ 1.53 for 2019 as compared to $ 1.33 for 2018. the increases in net income and diluted earnings per share were primarily due to the 10 % increase in revenues before reimbursements and a decrease in our effective tax rate due to an increase in the excess tax benefit associated with stock-based awards .
| 7,918 |
the acquisition of the matrical assets provides the company with the opportunity to enhance its existing product story_separator_special_tag certain statements in this form 10-k , and in particular in “ management 's discussion and analysis of financial condition and results of operations , ” constitute forward-looking statements , which are subject to the safe harbor provisions created by the private securities litigation reform act of 1995. certain , but not all , of the forward-looking statements in this report are specifically identified as forward-looking , by use of phrases and words such as “ we believe , ” “ we estimate , ” “ we expect , ” “ may , ” “ should , ” “ could , ” “ intend , ” “ likely , ” and other future-oriented terms . the identification of certain statements as “ forward-looking ” is not intended to mean that other statements not specifically identified are not forward-looking . forward-looking statements include , but are not limited to , statements that relate to our future revenue , margin , costs , earnings , product development , demand , acceptance and market share , competitiveness , market opportunities and performance , levels of research and development , or r & d , the success of our marketing , sales and service efforts , outsourced activities and operating expenses , anticipated manufacturing , customer and technical requirements , the ongoing viability of the solutions that we offer and our customers ' success , tax expenses , our management 's plans and objectives for our current and future operations and business focus , the levels of customer spending , general economic conditions , the sufficiency of financial resources to support future operations , and capital expenditures . such statements are based on current expectations and are subject to risks , uncertainties , and changes in condition , significance , value and effect , including without limitation those discussed above under the heading “ risk factors ” within item 1a and elsewhere in this report and other documents we file from time to time with the securities and exchange commission ( the “ sec ” ) , such as our quarterly reports on form 10-q and our current reports on form 8-k. such risks , uncertainties and changes in condition , significance , value and effect could cause our actual results , performance or achievements to differ materially from those expressed in this report and in ways we can not readily foresee . readers are cautioned not to place undue reliance on these forward-looking statements , which speak only as of the date hereof and are based on information currently and reasonably known to us . we do not undertake any obligation to release the results of any 21 revisions to these forward-looking statements , which may be made to reflect events or circumstances that occur after the date of this report or to reflect the occurrence or effect of anticipated or unanticipated events . precautionary statements made herein should be read as being applicable to all related forward-looking statements wherever they appear in this report . story_separator_special_tag style= '' line-height:120 % ; padding-top:12px ; text-align : left ; font-size:10pt ; '' > critical accounting policies and estimates the preparation of the consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenue and expenses , and related disclosure of contingent assets and liabilities . on an ongoing basis , we evaluate our estimates , including those related to revenue , bad debts , inventories , derivative instruments , intangible assets , goodwill , income taxes , warranty obligations , pensions and stock-based compensation . we base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances , including current and anticipated worldwide economic conditions both in general and specifically in relation to the semiconductor and life science industries , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . using different estimates could have a material impact on our financial condition and results of operations . we believe the following critical accounting policies incorporate our more significant judgments and estimates used in the preparation of our consolidated financial statements . revenue product revenue is associated with the sale of hardware systems , components and spare parts as well as product license revenue . service revenue is associated with service contracts , repairs , upgrades and field service . shipping and handling fees billed to customers , if any , are recognized as revenue . the related shipping and handling costs are recognized in cost of revenue . we recognize revenue when the following criteria have been met : persuasive evidence of an arrangement exists with the customer ; delivery of the specified products has occurred or services have been rendered ; fees are fixed or determinable ; and collection of the related receivable is reasonably assured . the arrangements for the sale of certain of our products include customer acceptance provisions . these provisions are included in these arrangements to ensure that the product delivered to the customer meets published specifications . prior to shipment of our products , we typically inspect the product , test its functionality and document that it meets the published specifications . in general , our inspections and testing replicate the testing that will be performed at the customer site prior to final acceptance by the customer . in situations where we have sufficient history of objectively demonstrating that the acceptance criteria in the arrangement have been achieved prior to delivery , which are typically for products with limited customization , we recognize revenue in advance of final customer acceptance because there are no remaining substantive contingencies . story_separator_special_tag we currently have four reporting units that have goodwill , including two components that are part of our brooks product solutions operating segment and sole reporting units that are our brooks global services and brooks life science systems operating segments . goodwill impairment testing is a two-step process . the first step of the goodwill impairment test , used to identify potential impairment , compares the fair value of each reporting unit to its respective carrying amount , including goodwill . if the fair value of the reporting unit exceeds its carrying amount , goodwill of the reporting unit is not considered impaired . if the reporting unit 's carrying amount exceeds the fair value , the second step of the goodwill impairment test must be completed to measure the amount of the impairment loss , if any . the second step compares the implied fair value of goodwill with the carrying value of goodwill . the implied fair value is determined by allocating the fair value of the reporting unit to all of the assets and liabilities of that unit , and the excess of the fair value over amounts assigned to its assets and liabilities is the implied fair value of goodwill . the implied fair value of goodwill determined in this step is compared to the carrying value of goodwill . if the implied fair value of goodwill is less than the carrying value of goodwill , an impairment loss is recognized equal to the difference . we determine the fair value of our reporting units using an income approach , specifically the discounted cash flow method , or dcf method . the dcf method includes future cash flow projections , which are discounted to present value , and an estimate of terminal values , which are also discounted to present value . terminal values represent the present value an investor would pay today for the rights to the cash flows of the business for the years subsequent to the discrete cash flow projection period . we consider the dcf method to be the most appropriate valuation indicator as the dcf analyses are based on management 's long-term financial projections . given the dynamic nature of the cyclical semiconductor equipment market , management 's projections as of the valuation date are considered more objective since other market metrics for peer companies fluctuate over the cycle . however , we also use market-based valuation techniques to test the reasonableness of the reporting 24 unit fair values determined by the dcf method . in addition , we compare the aggregate fair value of our reporting units plus our net corporate assets to our overall market capitalization . for our annual goodwill impairment test as of september 30 , 2014 , we determined that the estimated fair value of each reporting unit substantially exceeded its carrying value and that no impairment existed . the observable inputs used in our dcf approach include discount rates that are at or above our weighted-average cost of capital . we derive discount rates that are commensurate with the risks and uncertainties inherent in the respective businesses and our internally developed projections of future cash flows . in addition , we determine the terminal value of each reporting unit using the gordon growth method . the gordon growth method assumes that the reporting unit will grow and generate free cash flow at a constant rate . we believe that the gordon growth method is the most appropriate method for determining the terminal value because the terminal value was calculated at the point in which we have assumed that our reporting units have reached stable growth rates . we are required to test long-lived assets , other than goodwill , when indicators of impairment are present . for purposes of this test , long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities . when we determine that indicators of potential impairment exist , the next step of the impairment test requires that the potentially impaired long-lived asset group is tested for recoverability . the test for recoverability compares the undiscounted future cash flows of the long-lived asset group to its carrying value . if the carrying values of the long-lived asset group exceed the future cash flows , the assets are potentially impaired . the next step in the impairment process is to determine the fair value of the individual net assets within the long-lived asset group . if the aggregate fair values of the individual net assets of the group are less than the carrying values , an impairment charge is recorded equal to the excess of the aggregate carrying value of the group over the aggregate fair value . the loss is allocated to each asset within the group based on their relative carrying values , with no asset reduced below its fair value . we determined that impairment indicators were present for long-lived assets related to the celigo product line as of september 30 , 2013. indicators of impairment for this asset group included declining sales in the trailing twelve months and negative cash flows from the asset group . we tested the recoverability of the asset group by comparing the sum of the expected future undiscounted cash flows directly attributable to the assets to their carrying values , which resulted in the conclusion that the carrying amounts of the assets were not recoverable . the fair value of the long-lived assets related to the celigo products was based primarily on market-based valuation techniques reflecting the view of a market participant using the assets in the group to their best possible use .
| overview we are a leading provider of automation and cryogenic solutions for multiple markets including semiconductor manufacturing and life sciences and are a valued business partner to original equipment manufacturers , or oems , and equipment users throughout the world . we serve markets where equipment productivity and availability is a critical factor for our customers ' success , typically in demanding temperature and or pressure environments . our largest served market is the semiconductor capital equipment industry , for which products sold through our brooks product solutions segment represented approximately 51 % , 52 % and 56 % of our consolidated revenue for fiscal years 2014 , 2013 and 2012 , respectively . the decrease in the portion of our total revenues represented by products sold through our brooks product solutions segment is due in part to the cyclical nature of the demand from the customer for semiconductor capital equipment combined with the growth of sales of our brooks life science systems segment . the non-semiconductor markets served by us also includes industrial capital equipment and other adjacent technology markets . we expect the semiconductor equipment market will continue to be a key end market for our products , and we continue to make investments to maintain and grow our semiconductor product and service offerings . we acquired dms dynamic micro systems semiconductor equipment gmbh , or dms , in april 2014 for approximately $ 31.6 million . dms is a german based provider of automated contamination control solutions for front opening unified pod , or foup , carriers and reticle storage , for improving yield of semiconductor processes at semiconductor fabrication plants . in october 2012 , we acquired crossing automation inc. , or crossing , a u.s. based provider of automation solutions for the global semiconductor front-end markets . the purchase price was $ 59.0 million .
| 7,919 |
forward-looking statements in accordance with safe harbor provisions of the private securities litigation reform act of 1995 , this annual report contains forward-looking statements that reflect management 's current views and estimates of future economic circumstances , industry conditions , company performance and financial results . the words may , should , expect , anticipate , intend , plan , continue , believe , seek , estimate , project , forecast and similar expressions are intended to identify forward-looking statements . all such forward-looking statements are subject to risks and uncertainties , and our future results of operations could differ materially from our historical results or current expectations reflected by such forward-looking statements . some of these risks are discussed in item 1a . risk factors and include , without limitation : general economic or business conditions , either nationally or regionally , may be less favorable than expected , resulting in , among other things , a deterioration in credit quality and or a reduced demand for credit or other services ; disruptions to the credit and financial markets , either nationally or globally , including the impact of a downgrade of u.s. government obligations by one of the credit ratings agencies and the adverse effects of the ongoing sovereign debt crisis in europe ; changes in the interest rate environment may reduce net interest margins and or the volumes and values of loans made or held as well as the value of other financial assets held ; competitive pressures among depository and other financial institutions may increase significantly ; legislative , regulatory or accounting changes , including changes resulting from the implementation of the dodd-frank act may adversely affect the businesses in which hancock is engaged ; local , state or federal taxing authorities may take tax positions that are adverse to us ; reduction in hancock 's credit ratings ; adverse changes may occur in the securities markets ; unpredictable natural or other disasters could have an adverse effect on us by materially interrupting our operations or the ability or willingness of our customers to access the financial services we offer ; and deposit attrition , customer loss and or revenue loss following completed mergers and acquisitions may be greater than expected . we undertake no obligation to update any forward-looking statements . you are cautioned that forward-looking statements are not guarantees of future performance , our actual results may differ materially from those anticipated , projected or assumed in the forward-looking statements and you should not place undue reliance on these forward-looking statements . executive overview recent economic and industry developments recent reports from the federal reserve indicate a moderate improvement of economic activity throughout most of hancock 's market areas . activity at energy-related businesses , which are concentrated mainly in hancock 's 32 south louisiana and houston , texas market areas , remained generally strong . tourism and convention activity , which is important to several of the company 's market areas , showed expanding levels of activity in both leisure and business travel , and is expected to continue to grow in 2014 based on advanced booking reports . retail sales for the 2013 holiday season were generally positive , despite prior concerns from retailers about the fewer number of shopping days in 2013 compared to 2012. manufacturing activity has strengthened , with an increase in employment and orders of production , accompanied by decreasing finished inventory levels . nearly one-half of manufacturers within the company 's footprint expect production to increase over the next three to six months . the real estate market for residential properties has begun to slow down . although sales have been either flat or slightly up compared to prior year , they have been below brokers ' expectations in recent months . home sales are expected to remain flat or increase slightly year-over-year . new home construction activity is meeting expectations . most builders had increases in sales year-over-year and the forecast for new home sales is positive . the sustainability of a housing market recovery will be sensitive to the continued availability of attractive financing rates , the ability of prospective homeowners to meet underwriting standards , the rate of foreclosed properties entering the market and consumer expectations about future economic conditions , among other factors . commercial construction activity has improved modestly , with new build-to-suit projects breaking ground , while landlords are continuing to develop apartments to attract renters . the majority of companies within our market had stable employment levels . pricing pressures remained stable in most industries , increasing between one and three percent . however , some skilled and professional positions are seeing above-average wage increases and higher starting pay due to competition . currently , there are acute labor shortages for auditors , engineers , construction workers , and truck drivers . in addition , many companies have hired contract labor instead of permanent staff , amid concerns about healthcare reform . loan demand across most of the markets that hancock serves has increased slightly , but competition for quality borrowers remains stiff . auto lending , energy lending , and some commercial real estate development financing all had increased activity , while retail remained virtually flat . mortgage lending on both new and existing homes began to slow down as mortgage rates started to increase . the implementation of qualified mortgage requirements in 2014 may have a further negative impact on mortgage lending . the overall u.s. economy continued to expand , with most all regions showing modest to moderate growth rates . confidence in the prospect of a higher rate of sustained growth is improving for businesses and consumers alike , although uncertainties remain about such matters as the health of the international economy and the implications of pending or proposed changes in u.s. fiscal and tax policies and regulations . story_separator_special_tag this decline was partially offset by an increase in merchant processing revenue starting in the third quarter of 2012 that was related to the reacquisition of the company 's merchant business and a change in the terms of the servicing agreement . fees from secondary mortgage operations totaled $ 12.5 million in 2013 , down $ 3.9 million ( 24 % ) from a year earlier . the decline reflects a slowdown in mortgage loan activity in the last half of 2013 , reflecting mainly the impact of higher longer-term interest rates . the decline also reflects a lower level of loans sold as a result of a strategic decision to retain more residential mortgages on the balance sheet . accretion on the fdic loss share receivable decreased $ 7.2 million from the prior year . the current year 's $ 2.2 million negative accretion , or amortization , of the fdic loss share receivable reflects a reduction in the amount of reimbursements under the loss sharing agreements due to lower loss projections for the related covered loan pools . higher levels of amortization of the loss share receivable are anticipated in 2014 as projected losses from the covered portfolio have decreased . noninterest income for 2012 totaled $ 253.7 million , a $ 47.4 million ( 23 % ) increase from 2011. the full-year impact of the acquired whitney operations in 2012 was the primary factor behind this overall increase . 38 income from service charges on deposit accounts increased $ 23.0 million ( 42 % ) in 2012 compared to 2011 , primarily due to the full-year impact of whitney 's operations , in addition to the new and standardized products and services introduced across the company 's footprint in conjunction with the core systems integration in march 2012. bank card and atm fees were up $ 6.2 million ( 14 % ) , but would have shown a decline excluding the full-year impact of whitney 's operations , due to the restrictions on debit card interchange rates that arose from the implementation of the durbin amendment to the dodd-frank act . also impacting this category was the increase in merchant processing revenue discussed earlier . fees from secondary mortgage market operations increased $ 6.0 million in 2012 ( 57 % ) compared to 2011. in addition to the favorable impact from a full-year of whitney 's operations in 2012 , the company 's origination volume and fees benefited as consumers took advantage of historically low rates to refinance or purchase homes in an improving economic environment . table 3 presents the components of noninterest income for the prior three years along with the percentage changes between years : table 3. noninterest income replace_table_token_10_th n/m = not meaningful noninterest expense noninterest expense for 2013 totaled $ 678.3 million , down $ 34.8 million ( 5 % ) compared to 2012. excluding one-time expenses related primarily to the expense and efficiency initiative and merger-related activities , which totaled $ 38.0 million in 2013 and $ 51.1 million in 2012 , noninterest expense decreased $ 21.7 million ( 3 % ) to $ 640.3 million in 2013 compared to 2012. the overall decrease is primarily related to cost savings realized from the successful integration of whitney 's operations , including the impact of the core systems conversion and consolidations of the branch networks and back-office operations . cost savings resulting from the company 's expense and efficiency initiative began having a favorable effect in the last half of 2013 and will continue into 2014. table 4 presents the components of noninterest expense for the prior three years along with the percentage changes between years . in table 4 and the related discussion , one-time expenses are excluded from the individual components and addressed separately . 39 table 4. noninterest expense replace_table_token_11_th the components of one-time expenses : replace_table_token_12_th other expense includes branch closure write-downs in 2013 and merger-related expenses in 2012 and 2011. total personnel expense ( excluding one-time expenses ) decreased $ 9.5 million ( 3 % ) in 2013 compared to the prior year . full-time equivalent employees were 3,978 at december 31 , 2013 , compared to 4,235 at december 31 , 2012 . 40 occupancy and equipment expense decreased by a combined $ 7.0 million due to the decreases associated with the conversion and consolidations . other expense categories that experienced declines related to the conversion and consolidations included telecommunications and postage , printing and supplies and insurance expense . ore expense totaled $ 8.0 million in 2013 , a $ 4.2 million ( 34 % ) decline from 2012 as the prior year included valuation losses on ore acquired from whitney and unreimbursed losses on the increased volume of covered loans moving through the foreclosure process into ore and to final resolution . noninterest expense for 2012 increased $ 119.1 million ( 20 % ) to $ 713.1 million , primarily due to the impact of the whitney acquisition , partially offset by cost savings associated with the merger . excluding one-time expenses totaling $ 51.1 million in 2012 and $ 86.8 million in 2011 , noninterest expense increased $ 154.7 million ( 30 % ) . total personnel expense ( excluding merger-related expenses ) increased $ 84.1 million ( 31 % ) in 2012 compared to the prior year . the effect of the whitney acquisition would have added approximately $ 200 million absent significant cost savings as a result of reductions in force associated with the completion of the core systems conversion and branch consolidations . full-time equivalent employees were 4,235 at december 31 , 2012 , compared to 4,736 at december 31 , 2011. occupancy , equipment and data processing expense increased by a combined $ 22.8 million due to the whitney acquisition , partially offset by decreases associated with the conversion and consolidations . amortization of intangible assets increased $ 15.5 million ( 94 % ) due to the full year effect of the whitney acquisition .
| highlights of 2013 financial results net income for the year ended december 31 , 2013 was $ 163.4 million , compared to $ 151.7 million in 2012. this increase was mainly due to a decrease in expenses , resulting from cost savings realized as whitney 's acquired operations were successfully integrated into hancock . diluted earnings per share for 2013 were $ 1.93 , an $ 0.18 increase from 2012. operating income , which excludes tax-effected one-time noninterest expenses , and securities gains and losses , totaled $ 188.0 million , a $ 4.0 million ( 2 % ) increase over 2012. diluted earnings per share on 33 operating income were $ 2.22 for 2013 , a $ 0.09 improvement over 2012. hancock 's return on average assets ( roa ) for 2013 was 0.86 % compared to 0.80 % for 2012 , while the operating roa increased to 0.99 % in 2013 , compared to 0.97 % in 2012. as part of its ongoing planning process , management determined that certain areas of the company needed to be right-sized or retooled in order to achieve our long-term profitability and efficiency targets . as a result , management announced an expense and efficiency initiative in early 2013 that is designed to reduce overall annual expense levels by $ 50 million as compared to annualized expenses for the first quarter of 2013. management set a target for one-half of the expense reduction to be achieved by the first quarter of 2014 and the remainder by the fourth quarter of 2014. in addition to the expense reduction target , the company also set a longer-term sustainable efficiency ratio target of 57 % -59 % for 2016. the company remains on track to achieve the expense targets , with a significant portion of the first quarter 's target being derived from branch consolidation and sales . in 2013 , the company completed the previously announced consolidation of 28 branch locations across its five-state footprint .
| 7,920 |
11 application of critical accounting policies the sec defines critical accounting policies as those that are , in management 's view , most important to the portrayal of our financial condition and results of operations and most demanding of our judgment . the discussion and analysis of our financial condition and results of operations are based upon our financial statements , which were prepared in accordance with accounting principles generally accepted in the u.s. , which is referred to as `` gaap . '' the preparation of these 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 . on an on-going basis , we evaluate these estimates , including those related to stock-based compensation , customer programs and incentives , bad debts , supply inventories , intangible assets , income taxes , contingencies and litigation . we base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . we consider the following accounting policies to be those most important to the portrayal of our financial condition and those that require the most subjective judgment : revenue recognition and deferred revenue the company derives its revenue from four sources : ( 1 ) managed print services revenue ; ( 2 ) equipment revenue ; ( 3 ) software subscription services revenue , which is comprised of subscription fees from customers accessing the company 's enterprise cloud computing services and customers purchasing additional ongoing managed services beyond the standard support that is included in the basic software subscription fees ; and ( 4 ) cyber security professional services such as penetration testing , cyber security risk assessments and security program strategy development . the company commences revenue recognition when all of the following conditions are satisfied : · there is persuasive evidence of an arrangement ; · the service has been or is being provided to the customer ; · the collection of the fees is reasonably assured ; and · the amount of fees to be paid by the customer is fixed or determinable . · managed print services and equipment revenue revenue is recognized pursuant to asc topic 605 , `` revenue recognition '' ( asc 605 ) . monthly service and supply revenue is earned monthly during the term of the contract , as services and supplies are provided . revenues from equipment sales transactions are earned when there is persuasive evidence of an arrangement , delivery has occurred , the sales price has been determined and collectability has been reasonably assured . for equipment that is to be placed at a customer 's location at a future date , revenue is deferred until the placement of such equipment . we enter into arrangements that include multiple deliverables , which typically consist of the sale of multi-function device ( `` mfd '' ) equipment and a support services contract . we account for each element within an arrangement with multiple deliverables as separate units of accounting . revenue is allocated to each unit of accounting under the guidance of asc topic 605-25 , multiple-deliverable revenue arrangements , which provides criteria for separating consideration in multiple-deliverable arrangements by establishing a selling price hierarchy for determining the selling price of a deliverable . the selling price used for each deliverable is based on vendor-specific objective evidence ( `` vsoe '' ) if available , third-party evidence if vsoe is not available , or estimated selling price if neither vsoe nor third-party evidence is available . we are required to determine the best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis . we generally do not separately sell mfd equipment or service on a standalone basis . therefore , we do not have vsoe for the selling price of these units . as we purchase the equipment , we have third-party evidence of the cost of this element . we estimate the proceeds from the arrangement to allocate to the service unit based on historical cost experiences . based on the relative costs of each unit to the overall cost of the arrangement , we utilize the same relative percentage to allocate the total arrangement proceeds . the company 's contracts with customers may include provisions that relate to guaranteed savings amounts and shared savings . such provisions are considered by management during the company 's initial proprietary client assessment and are charged and accrued when deemed by management to be probable . the company 's historical settlement of such amounts has been within management 's estimates . 12 · software subscriptions and managed services revenue software subscriptions and managed services revenues are recognized ratably over the contract terms beginning on the commencement date of each contract , which is the date the company 's service is made available to customers . amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue , depending on whether the revenue recognition criteria have been met . the company 's software subscription service arrangements are non-cancelable and do not contain refund-type provisions . · cyber security professional services revenue the majority of the company 's cyber security services contracts are on a time and material basis . when these services are not combined with subscription revenues as a single unit of accounting , these revenues are recognized as the services are rendered for time and material contracts , and when the milestones are achieved and accepted by the customer for fixed price contracts . story_separator_special_tag accounts receivable valuation and related reserves we estimate the losses that may result from that portion of our accounts receivable that may not be collectible as a result of the inability of our customers to make required payments . management specifically analyzes customer concentration , customer credit-worthiness , current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts . we review past due accounts on a monthly basis and record an allowance for doubtful accounts where we deem appropriate . new customer implementation costs we ordinarily incur additional costs to implement our services for new customers . these costs are comprised primarily of additional labor and support . these costs are expensed as incurred , and have a negative impact on our statements of income and cash flows during the implementation phase . impairment review of goodwill and intangible assets the company performs an impairment test of goodwill and intangible assets at least annually or on an interim basis if any triggering events occur that would merit another test . the goodwill impairment test first involves assessing qualitative factors to determine if there is a possible impairment and if it is necessary to perform the first step of the two-step impairment test that compares the fair value based on market capitalization of the company with its book value of net assets , including goodwill and intangibles . we have not had to perform step 2 of the impairment test because the fair value has exceeded the carrying amount . for other intangible assets with definite lives , we compare future undiscounted cash flow forecasts prepared by management to the carrying value of the related intangible asset group to determine if there is impairment . stock-based compensation under the fair value recognition provisions of the authoritative guidance , stock-based compensation cost granted to employees is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service or performance period , which is the vesting period . stock options and warrants issued to consultants and other non-employees as compensation for services to be provided to us are accounted for based upon the fair value of the services provided or the estimated fair value of the option or warrant , whichever can be more clearly determined . we currently use the black-scholes option pricing model to determine the fair value of stock options . the determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables . these variables include our expected stock price volatility over the term of the awards , the expected term of the award , the risk-free interest rate and any expected dividends . compensation cost associated with grants of restricted stock units are also measured at fair value . we evaluate the assumptions used to value restricted stock units on a quarterly basis . when factors change , including the market price of the stock , stock-based compensation expense may differ significantly from what has been recorded in the past . if there are any modifications or cancellations of the underlying unvested securities , we may be required to accelerate , increase or cancel any remaining unearned stock-based compensation expense . 13 income taxes deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial reporting requirements and those imposed under federal and state tax laws . deferred taxes are provided for timing differences in the recognition of revenue and expenses for income tax and financial reporting purposes and are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled . the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date . deferred income tax expense represents the change during the period in the deferred tax assets and liabilities . the components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics . realization of the deferred tax asset is dependent on generating sufficient taxable income in future years . 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 . the above listing is 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 , with no need for management 's judgment in its application . there are also areas in which management 's judgment in selecting any available alternative would not produce a materially different result . please see our audited financial statements and notes thereto which begin on page f-1 of this annual report on form 10-k , which contain accounting policies and other disclosures required by gaap and please refer to the disclosures in note 1 of our financial statements for a summary of our significant accounting policies . story_separator_special_tag roman ' , times , serif ; text-align : left ; line-height : 1.25 ; text-indent : 36pt '' > 15 liquidity and capital resources at december 31 , 2015 , our cash and cash equivalents were $ 6,436,732 and our working capital was $ 3,243,652. by comparison , our working capital was $ 2,790,005 as of december 31 , 2014. our principal cash requirements were for operating expenses , including equipment , supplies , employee costs , and capital expenditures and funding of the operations . our primary sources of cash were from service and equipment sale revenues . during the year ended december
| results of operations year ended december 31 , 2015 compared to the year ended december 31 , 2014 net revenue revenues consist of managed print services revenue , equipment revenue , software subscription services revenue and cyber security professional services . net revenue increased by $ 17,221,777 to $ 61,253,853 for the year ended december 31 , 2015 , as compared to the same period in 2014. of this increase , approximately $ 8,200,000 is a result of the addition of new recurring service revenue contracts in 2015. we added approximately $ 4,400,000 in cyber security professional services and software subscriptions from our newly acquired businesses , delphiis , inc. and redspin . partially offsetting these increases was a net reduction of approximately $ 400,000 from existing customers , where there was a reduction in unit price and sales volume , and non-renewing contracts , offset by the expansion of services . we still anticipate overall revenue growth as a result of the expansion of our customer base . equipment sales for 2015 were approximately $ 7,800,000 as compared to approximately $ 3,600,000 in 2014. equipment sales in 2015 were primarily from copier fleet refresh activities at five customers compared to three in 2014. these fleet refreshes are typically done every five years at any one customer facility and vary widely in total revenue value . cost of revenues cost of revenues consists of document imaging equipment , parts , supplies and salaries expense for field services personnel .
| 7,921 |
, assets within the scope of topic 360 , property , plant , and equipment , and intangible assets within the scope of topic 350 , intangibles—goodwill and other ) are amended to be consistent with the guidance on recognition and measurement ( including the constraint on revenue ) in this asu . the core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services . to achieve that core principle , an entity should apply the following steps : step 1 : identify the contract ( s ) with a customer . step 2 : story_separator_special_tag as used herein , the terms “ ebix , ” “ the company , ” “ we , ” “ our ” and “ us ” refer to ebix , inc. , a delaware corporation , and its consolidated subsidiaries as a combined entity . the information contained in this section has been derived from our historical financial statements and should be read together with our historical financial statements and related notes included elsewhere in this document . the discussion below contains forward-looking statements within the meaning of section 27a of the securities act of 1933 , as amended , and section 21e of the securities exchange act of 1934 , as amended . these forward-looking statements involve risks and uncertainties including , but not limited to : demand and acceptance of services offered by us , our ability to achieve and maintain acceptable cost levels , pricing levels and actions by competitors , regulatory matters , general economic conditions , and changing business strategies . forward-looking statements are subject to a number of factors that could cause actual results to differ materially from our expressed or implied expectations , including , but not limited to our performance in future periods , our ability to generate working capital from operations , the adequacy of our insurance coverage , and the results of litigation or investigations . our forward-looking statements can be identified by the use of terminology such as “ anticipates , ” “ expects , ” “ intends , ” “ believes , ” “ will ” or the negative thereof or variations thereon or comparable terminology . except as required by law , we undertake no obligation to publicly update or revise any forward-looking statement , whether as a result of new information , future events or otherwise . overview ebix is a leading international supplier of on-demand software and e-commerce solutions to the insurance industry . ebix provides application software products for the insurance industry including carrier systems , agency systems and exchanges , as well as custom software development . approximately 78 % of the company 's revenues are recurring . rather than license our products in perpetuity , we typically either license them for a few years with ongoing support revenues , or license them on a limited term basis using a subscription hosting or asp model . our goal is to be the leading powerhouse of back-end insurance transactions in the world . during 2014 , combined subscription-based and transaction-based revenues increased by $ 9.6 million to $ 167.6 million , while as a percentage of the company 's total revenues increased to 78 % in 2014 , as compared to 77 % in the year 2013. subscription based revenues increased by $ 8.8 million to $ 135.2 million , and as a percentage of the company 's total revenues increased to 63 % in 2014 , as compared to 62 % in the year 2013 . 6 % of subscription revenues are consulting staffing related . the company 's technology vision is to focus on the convergence of all insurance processes in a manner such that data can seamlessly flow from entity to entity once an initial data entry has been made . our customers include many of the top insurance and financial sector companies in the world . the insurance industry is undergoing significant consolidation and therefore benefits from , economies of scale and scope in providing insurance in a competitive environment . the insurance markets have also seen a steady increase in initiatives to reduce paper-based processes and facilitate improvements in efficiency both at the back-end side and also at the consumer-end side . such consolidation has involved both insurance carriers and insurance brokers and is directly impacting the manner in which insurance products are distributed . management believes the insurance industry will continue to experience significant change and increased efficiencies through online exchanges as reduced paper-based processes are becoming increasingly a norm across the world insurance markets . management focuses on a variety of key indicators to monitor operating and financial performance . these performance indicators include measurements of revenue growth , operating income , operating margin , income from continuing operations , diluted earnings per share , and cash provided by operating activities . we monitor these indicators , in conjunction with our corporate governance practices , to ensure that our business is efficiently managed and that effective controls are maintained . the key performance indicators for the twelve months ended december 31 , 2014 , 2013 , and 2012 were as follows : 22 replace_table_token_6_th story_separator_special_tag $ ( 3.8 ) million , and $ ( 1.2 ) million , respectively . the specific components of our revenue and the changes experienced during the past year are discussed further below . exchange division revenues increased by $ 5.5 million , or 3 % , principally due to new exchange clients , and cross selling of products and services to existing clients as facilitated by the 2013 acquisition of qatarlyst , and the 2014 acquisitions of healthcare magic and oakstone . broker systems division revenue decreased by $ 430 thousand , or 2 % , principally due to the effects of exchange rate fluctuations in our foreign operations . story_separator_special_tag , and additional deductible interest expense in singapore providing a tax benefit of $ 1.7 million . thusly , the tax expense excluding such discrete items was $ 7.4 million , reflecting an effective tax rate of 9.5 % as compared to the 4.6 % effective tax rate for the year 2013. the effective rate increased primarily due to the a greater proportion of taxable income being derived from jurisdictions with higher tax rates . overall the company enjoys a relatively lower effective tax rate from conducting significant operating activities in certain foreign low tax jurisdictions . the pre-tax income from and the applicable statutory tax rates in each jurisdiction in which the company had operations for the year ending december 31 , 2014 are as follows : replace_table_token_9_th 26 twelve months ended december 31 , 2013 and 2012 operating revenue the company derives its revenues primarily from professional and support services , which includes subscription and transaction fees pertaining to services delivered over our exchanges or from our asp platforms , revenue generated from software development projects and associated fees for consulting , implementation , training , and project management provided to customers using our systems , and business process outsourcing revenue . ebix 's revenue streams come from four product channels . presented in the table below is the breakout of our revenues for each of those product channels for the years ended december 31 , 2013 and 2012. replace_table_token_10_th during the twelve months ended december 31 , 2013 our total revenue increased $ 5.3 million , or 2.7 % , to $ 204.7 million compared to $ 199.4 million in 2012. the increase in revenues is a summation of revenue from business acquisitions completed during 2013 and 2012 , and the growth achieved in our carrier and exchange channels , somewhat partially offset in the aggregate by a reduction in bpo revenues which were affected by the depressed construction industry , and a small reduction in broker system revenues , mainly due to exchange rate fluctuations impacting international revenues . the company continues to immediately and efficiently leverage product cross-selling opportunities across all channels , as facilitated by our operating philosophy and business acquisition strategy . with respect to business acquisitions completed during the fiscal years 2013 and 2012 on a pro forma basis , as disclosed in the table in note 4 “ pro forma financial information ” to the enclosed consolidated financial statements , combined pro forma revenues decreased 4.4 % to $ 205.6 million for the year 2013 from the $ 215.0 million of pro forma revenue for the year 2012 , whereas there was a 2.7 % increase in reported revenues for the same comparative periods . the cause for the difference between the 2.7 % increase in reported 2013 revenue versus 2012 revenue , as compared to the 4.4 % decrease in 2013 pro forma versus 2012 pro forma revenue is due to the effect of combining the additional revenue derived from those businesses acquired during the years 2013 and 2012 , specifically qatarlyst , bsi , taimma , planetsoft , fintechnix , and trisystems , with the company 's pre-existing operations . the 2013 and 2012 pro forma financial information assumes that all such business acquisitions were made on january 1 , 2012 , whereas the company 's reported financial statements for 2013 only includes the operating results from the businesses since the effective date that they were acquired by ebix , and thus includes only nine months of actual financial results of qatarlyst . similarly , the 2012 pro forma financial includes a full year of results for taimma , bsi , planetsoft , fintechnix , trisystems , and qatarlyst as if they had been acquired on january 1 , 2012 , whereas the company 's reported financial statements for the 2012 only includes nine months of actual financial results for bsi and taimma , seven months for planetsoft , seven months for fintechnix , five months for trisystems , and no financial results for qatarlyst . the above pro forma analysis is based on the following premises : 2013 and 2012 pro forma revenue contains actual revenue of the acquired entities before acquisition date , as reported by the sellers , as well as actual revenue of the acquired entities after acquisition . growth in revenues of the acquired entities after acquisition date are only reflected for the period after their acquisition . revenue billed to existing clients from the cross selling of acquired products has been assigned to the acquired section of our business . any existing products sold to new customers acquired through the acquisition customer base , has also been assigned to the acquired section of our business . 2012 pro forma revenues include revenues from some product lines whose sale was discontinued after the acquisition date and revenues from some customers whose contracts were discontinued . this is typically done for efficiency and or competitive reasons . the impact from fluctuations of the exchange rates for the foreign currencies in the countries in which we conduct operations also partially affected reported revenues . during each of the years 2013 and 2012 the change in foreign currency exchange rates decreased reported consolidated operating revenues by $ ( 3.8 ) million , and $ ( 1.2 ) million respectively . 27 the specific components of our revenue and the changes experienced during the past year are discussed further below . exchange division revenues increased by $ 4.2 million , or 3 % , principally due to increased number of new exchange clients , and cross selling of services to existing clients as facilitated by the recent acquisitions of planetsoft , trisystems , fintechnix , and qatarlyst . broker systems division revenue decreased by $ 234 thousand , or 1 % , due to a drop in consulting services supporting our on-demand back-end systems , being used by insurance brokers .
| results of operations replace_table_token_7_th twelve months ended december 31 , 2014 and 2013 operating revenue the company derives its revenues primarily from professional and support services , which includes subscription and transaction fees pertaining to services delivered over our exchanges or from our asp platforms , revenue generated from software development projects and associated fees for consulting , implementation , training , and project management provided to customers using our systems , and business process outsourcing revenue . ebix 's revenue streams come from four product channels . presented in the table below is the breakout of our revenues for each of those product channels for the years ended december 31 , 2014 and 2013 . 23 replace_table_token_8_th during the twelve months ended december 31 , 2014 our total revenue increased $ 9.6 million , or 5 % , to $ 214.3 million compared to $ 204.7 million in 2013 . the company continues to leverage product cross-selling opportunities across all channels , as facilitated by our operating philosophy and business acquisition strategy . with respect to business acquisitions completed during the fiscal years 2014 and 2013 on a pro forma basis , as disclosed in the table in note 4 “ pro forma financial information ” to the enclosed consolidated financial statements , combined pro forma revenues increased 2.3 % to $ 262.7 million for the year 2014 from the $ 260.5 million of pro forma revenue for the year 2013 , with the change in exchange rates adversely effecting reported revenues by ( $ 3.2 ) million , whereas there was a 4.7 % increase in reported revenues for the same comparative periods .
| 7,922 |
some of the information contained in this discussion and analysis or set forth elsewhere in this annual report , including information with respect to our plans and strategy for our business , includes forward-looking statements that involve risks and uncertainties . you should review item 1a . `` risk factors '' and `` special note regarding forward-looking statements '' in this annual report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis . executive overview story_separator_special_tag december 31 , 2016 , we supported over 70 marketplaces , up from over 50 at december 31 , 2015 . global growth in e-commerce . we believe the growth in e-commerce globally presents an opportunity for retailers and branded manufacturers to engage in international sales . however , country-specific marketplaces are often the market share leaders in their regions , as is the case for alibaba in asia . in order to help our customers capitalize on this potential market opportunity , and to address our customers ' needs with respect to cross-border trade , we intend to continue to invest in our international operations , specifically in the asia pacific region . doing business overseas involves substantial challenges , including management attention and resources needed to adapt to multiple languages , cultures , laws and commercial infrastructure , as further described in this report under the caption `` risks related to our international operations . '' our senior management continuously focuses on these and other trends and challenges , and we believe that our culture of innovation and our history of growth and expansion will contribute to the success of our business . we can not , however , assure you that we will be successful in addressing and managing the many challenges and risks that we face . 31 key financial and operating metrics the average revenue generated by our customers is a primary determinant of our revenue . we calculate this metric by dividing our revenue for a particular period by the average monthly number of customers during the period , which is calculated by taking the sum of the number of customers at the end of each month in the period and dividing by the number of months in the period . we typically calculate average revenue per customer in absolute dollars on a rolling twelve-month basis , but we may also calculate percentage changes in average revenue per customer on a quarterly basis in order to help us evaluate our period-over-period performance . for purposes of this metric and the number of customers metric described below , we include all customers who subscribe to at least one of our solutions , excluding customers subscribing only to certain legacy product offerings that are no longer part of our strategic focus . the number of customers declined in 2016 as a result of our continued focus on obtaining large retailer and branded manufacturer customers , which represent a smaller number of customers , but a potentially larger source of predictable or sustaining recurring revenue . adjusted ebitda represents our earnings before interest expense , income tax expense ( benefit ) and depreciation and amortization , adjusted to eliminate stock-based compensation expense , which is a non-cash item , headquarters relocation and related costs in 2015 , one-time severance and related costs in 2015 and acquisition-related costs in 2014. accordingly , we believe that adjusted ebitda provides useful information to management and others in understanding and evaluating our operating results . however , adjusted ebitda is not a measure calculated in accordance with gaap and should not be considered as an alternative to any measure of financial performance calculated and presented in accordance with gaap . in addition , adjusted ebitda may not be comparable to similarly titled measures of other companies because other companies may not calculate adjusted ebitda in the same manner that we do . please refer to item 6 . `` selected financial data—adjusted ebitda '' in this annual report for a discussion of the limitations of adjusted ebitda and a reconciliation of adjusted ebitda to net loss , the most comparable gaap measurement . 32 results of operations the following tables set forth our consolidated statement of operations data and such data expressed as a percentage of revenues for each of the periods indicated . replace_table_token_5_th * not meaningful . replace_table_token_6_th reclassification previously , we presented depreciation and amortization expense as a separate component , both of cost of revenue and of operating expenses , in our consolidated statements of operations . beginning with the first quarter of 2016 , we now include depreciation and amortization expense in cost of revenue and the applicable line items of operating expenses . since the first 33 quarter of 2016 , we have also disclosed the depreciation and amortization expense amounts included in each financial statement line item in the notes to our consolidated financial statements . in addition , we revised the classification of certain operating expenses to better align the income statement line items with how operations are managed . the financial results for the years ended december 31 , 2015 and 2014 shown in this management 's discussion and analysis reflect the reclassification of relevant items to conform to the new presentation , and the specific reclassifications are shown in note 2 to our audited consolidated financial statements included elsewhere in this report . all reclassifications had no effect on our reported gross profit or net loss for the years ended december 31 , 2015 and 2014. revenue we derive the majority of our revenue from subscription fees paid to us by our customers for access to and usage of our saas solutions for a specified contract term , which is usually one year . a portion of the subscription fee is typically fixed and based on a specified minimum amount of gmv or advertising spend that a customer expects to process through our platform . story_separator_special_tag average revenue per customer increased 9.9 % to $ 34,513 for the year ended december 31 , 2015 as compared to $ 31,400 for the year ended december 31 , 2014 , which accounted for 55.8 % of the increase in revenue during the period . the increase in 35 the average revenue per customer is due to the same reasons as are described in the preceding discussion of 2016 compared to 2015. in addition , our number of customers increased 2.0 % at december 31 , 2015 as compared to december 31 , 2014. the increase in customers accounted for 44.2 % of the increase in revenue during the year ended december 31 , 2015. our revenue from international operations of $ 24.1 million , or 24.0 % of total revenue , for the year ended december 31 , 2015 increased from $ 19.9 million , or 23.5 % of total revenue , for the year ended december 31 , 2014. the increase in revenue from our international operations was primarily attributable to an increase in average revenue per customer stimulated by the growth of our solutions for branded manufacturers . cost of revenue cost of revenue primarily consists of : salaries and personnel-related costs for employees providing services to our customers and supporting our platform infrastructure , including benefits , bonuses and stock-based compensation ; co-location facility costs for our data centers ; infrastructure maintenance costs ; and fees we pay to credit card vendors in connection with our customers ' payments to us . comparison of 2016 to 2015 cost of revenue increased by 6.9 % , or $ 1.8 million , to $ 27.6 million for the year ended december 31 , 2016 , with the change being comprised of increases ( decreases ) of : $ 1.7 million in compensation and employee-related costs mainly due to additional headcount to support our customers ; $ 0.4 million in contractor costs primarily to support our international services team ; $ 0.2 million in rent and facilities costs due to the relocation of our corporate headquarters in the fourth quarter of 2015 ; and $ ( 0.4 ) million in hosting , co-location and infrastructure maintenance costs primarily due to our migration to a public cloud infrastructure . comparison of 2015 to 2014 cost of revenue increased by 6.7 % , or $ 1.6 million , to $ 25.8 million for the year ended december 31 , 2015 , with the change being comprised of increases ( decreases ) of : $ 1.5 million in depreciation due to an increase in capital expenditures associated with equipment for our data centers for additional capacity to support the growth in our business ; $ 0.4 million in rent and facilities costs due to the relocation of our corporate headquarters in the fourth quarter of 2015 ; $ 0.4 million in salaries and personnel-related costs , mainly due to stock-based compensation ; and $ ( 0.6 ) million due to a charge incurred during the year ended december 31 , 2014 for translation costs associated with a short-term initiative designed to expand our customers ' presence in certain european countries . as this was a 2014 initiative , we did not incur any comparable translation costs during the year ended december 31 , 2015 . 36 operating expenses sales and marketing expense sales and marketing expense consists primarily of : salaries and personnel-related costs for our sales and marketing and customer support employees , including benefits , bonuses , stock-based compensation and commissions ; marketing , advertising and promotional event programs ; and corporate communications . comparison of 2016 to 2015 sales and marketing expense increased by 5.3 % , or $ 2.8 million , to $ 56.6 million for the year ended december 31 , 2016 with the change being comprised of increases of : $ 2.5 million in compensation and employee-related costs , mainly due to additional headcount , stock-based compensation and the payment of increased sales commissions ; and $ 0.3 million in recruiting fees , namely for expanding our international sales personnel , and consulting fees . comparison of 2015 to 2014 sales and marketing expense decreased by 4.9 % , or $ 2.8 million , to $ 53.8 million for the year ended december 31 , 2015 with the change being comprised of decreases of : $ ( 2.5 ) million in our marketing and advertising expenses , promotional event programs and travel costs to support our strategic effort to strengthen margins in our business ; and $ ( 0.4 ) million in recruiting and consulting costs , resulting from a reduction in headcount and operating efficiencies . research and development expense research and development expense consists primarily of : salaries and personnel-related costs for our research and development employees , including benefits , bonuses and stock-based compensation ; costs related to the development , quality assurance and testing of new technology and enhancement of our existing platform technology ; and consulting . comparison of 2016 to 2015 research and development expense increased by 7.1 % , or $ 1.2 million , to $ 17.7 million for the year ended december 31 , 2016 , with the change being comprised of an increase of $ 1.0 million in compensation and employee-related costs , mainly due to additional headcount and stock-based compensation . comparison of 2015 to 2014 research and development expense remained relatively stable , decreasing by 0.1 % , or $ 19.0 thousand , to $ 16.6 million for the year ended december 31 , 2015 . 37 general and administrative expense general and administrative expense consists primarily of : salaries and personnel-related costs for administrative , finance and accounting , information systems , legal and human resource employees , including benefits , bonuses and stock-based compensation ; consulting and professional fees ; insurance ; bad debt expense ; and costs associated with compliance with the sarbanes-oxley act and other regulations governing public companies .
| financial results total revenue of $ 113.2 million increased 12.5 % year over year ; average revenue per customer of $ 39,339 increased 14.0 % compared with $ 34,513 at the end of 2015 ; fixed and variable subscription fees of 76.0 % and 24.0 % for 2016 , respectively , compared with fixed and variable subscription fees of 75.8 % and 24.2 % for 2015 , respectively ; 21.7 % of total revenue derived from customers located outside of the united states ; gross margin of 75.6 % and operating margin of ( 12.2 ) % improved by 130 and 890 basis points year over year , respectively ; net loss of $ 8.0 million decreased 61.8 % compared to net loss of $ 21.0 million in prior year ; adjusted ebitda of $ 7.4 million increased 415.3 % year over year ; cash balance of $ 65.4 million at the end of 2016 compared with $ 60.5 million at the end of 2015 ; and operating cash flow of $ 11.6 million in 2016 compared with $ ( 1.5 ) million in 2015 . trends in our business the following trends have contributed to the results of our consolidated operations , and we anticipate that they will continue to impact our future results : growth in online shopping . consumers continue to move more of their retail spending from offline to online retail . the continuing shift to online shopping and overall growth has contributed to our historical growth and we expect that this online shift will continue to benefit our business . product offering expansion . as online shopping evolves , we continue to expand our product offerings to reflect the needs of companies seeking to attract consumers . this expansion may result in additional research and development investment . growth in mobile usage .
| 7,923 |
cautionary information the discussions set forth in this annual report on form 10-k may contain forward-looking statements within the meaning of section 27a of the securities act of 1933 , as amended , and section 21e of the securities exchange act of 1934 , as amended . in addition , management may make forward-looking statements orally or in other writings , including , but not limited to , in press releases , quarterly earnings calls , executive presentations , in the annual report to stockholders and in other filings with the securities and exchange commission . readers can identify these forward-looking statements by the use of such verbs as “ expects , ” “ anticipates , ” “ believes ” or similar verbs or conjugations of such verbs . these statements involve a number of risks and uncertainties . actual results could materially differ from those anticipated by such forward-looking statements . such differences could be caused by a number of factors or combination of factors including , but not limited to , the factors identified below and those discussed under item 1a of this form 10-k , “ risk factors. ” readers are strongly encouraged to consider these factors and the following factors when evaluating any forward-looking statements concerning the company : fluctuations in the market price for the company 's common stock ; kcs 's dividend policy and limitations on its ability to pay dividends on its common stock ; kcs 's potential need for and ability to obtain additional financing ; kcs 's ability to successfully implement its business strategy , including the strategy to convert customers from using trucking services to rail transportation services ; the impact of competition , including competition from other rail carriers , trucking companies and maritime shippers in the united states and mexico ; united states , mexican and global economic , political and social conditions ; the effects of the north american free trade agreement , or nafta , on the level of trade among the united states , mexico and canada ; uncertainties regarding the litigation kcs faces and any future claims and litigation ; the effects of employee training , stability of the existing information technology systems , technological improvements and capital expenditures on labor productivity , operating efficiencies and service reliability ; the adverse impact of any termination or revocation of kcsm 's concession by the mexican government ; legal or regulatory developments in the united states , mexico or canada ; kcs 's ability to generate sufficient cash , including its ability to collect on its customer receivables , to pay principal and interest on its debt , meet its obligations and fund its other liquidity needs ; the effects of adverse general economic conditions affecting customer demand and the industries and geographic areas that produce and consume the commodities kcs carries ; material adverse changes in economic and industry conditions , including the availability of short and long-term financing , both within the united states and mexico and globally ; natural events such as severe weather , fire , floods , hurricanes , earthquakes or other disruptions to the company 's operating systems , structures and equipment or the ability of customers to produce or deliver their products ; market and regulatory responses to climate change ; disruption in fuel supplies , changes in fuel prices and the company 's ability to assess fuel surcharges ; kcs 's ability to attract and retain qualified management personnel ; changes in labor costs and labor difficulties , including work stoppages affecting either operations or customers ' abilities to deliver goods for shipment ; 26 credit risk of customers and counterparties and their failure to meet their financial obligations ; the outcome of claims and litigation , including those related to environmental contamination , personal injuries , and occupational illnesses arising from hearing loss , repetitive motion and exposure to asbestos and diesel fumes ; acts of terrorism , violence or crime or risk of such activities ; war or risk of war ; political and economic conditions in mexico and the level of trade between the united states and mexico ; and legislative , regulatory , or legal developments involving taxation , including enactment of new foreign , federal or state income or other tax rates , revisions of controlling authority , and the outcome of tax claims and litigation . forward-looking statements reflect the information only as of the date on which they are made . the company does not undertake any obligation to update any forward-looking statements to reflect future events , developments , or other information . if kcs does update one or more forward-looking statements , no inference should be drawn that additional updates will be made regarding that statement or any other forward-looking statements . corporate overview kansas city southern , a delaware corporation , is a transportation holding company that has railroad investments in the u.s. , mexico and panama . in the u.s. , the company serves the central and south central u.s. its international holdings serve northeastern and central mexico and the port cities of lazaro cardenas , tampico and veracruz , and a fifty percent interest in panama canal railway company provides ocean-to-ocean freight and passenger service along the panama canal . kcs 's north american rail holdings and strategic alliances are primary components of a nafta railway system , linking the commercial and industrial centers of the u.s. , canada and mexico . story_separator_special_tag fuel expense increased $ 30.0 million for the year ended december 31 , 2013 , compared to 2012 , due to higher diesel fuel prices and consumption . the average price per gallon , including the effects of the strengthening of the mexican peso against the u.s. dollar , was $ 3.05 in 2013 , compared to $ 2.86 in 2012 . equipment costs . equipment costs decreased $ 6.6 million for the year ended december 31 , 2013 , compared to 2012 , due to lower locomotive lease expense as a result of the purchase of 103 locomotives late in the second quarter of 2013 , which were previously leased by the company under operating lease agreements . as a result of reduced lease expense from the locomotive lease conversion and the 2014 activity under the lease conversion program , offset by expected carload/unit volume growth , total equipment costs are expected to decrease by approximately 15 % - 20 % for the year ended december 31 , 2014 , as compared to the same period in 2013. in addition , the company expects to incur lease termination costs of approximately $ 34.0 million in the first half of 2014 for the purchase of certain equipment under existing operating leases . depreciation and amortization . depreciation and amortization increased $ 24.5 million for the year ended december 31 , 2013 , compared to 2012 , due to a larger asset base , including the purchase of 103 locomotives late in the second quarter of 2013 , which were previously leased by the company under operating lease agreements . as a result of expected capital expenditures , the locomotive lease conversion and the 2014 asset acquisitions under the lease conversion program , total depreciation and amortization expense is expected to increase by approximately 15 % - 20 % for the year ended december 31 , 2014 , as compared to the same period in 2013. materials and other . materials and other increased $ 8.2 million for the year ended december 31 , 2013 , compared to 2012 , due to a $ 1.3 million increase in personal injury expense recognized in 2013 , compared to an $ 8.4 million reduction in personal injury expense recognized in 2012 , as a result of changes in estimates . in addition , materials and other expense increased due to a $ 4.9 million increase in concession duty expense . kcsm paid concession duty of 0.5 % of gross revenues for the first 15 years of the concession period , and on june 24 , 2012 , kcsm began paying 1.25 % of gross revenues , which is 32 effective for the remaining years of the concession . these increases were partially offset by lower derailment expense , a recovery from a legal dispute in 2013 and the settlement of a legal dispute recognized in 2012. elimination of deferred statutory profit sharing liability , net . as a result of the organizational restructuring in the second quarter of 2012 , kcsm 's obligation to pay mexican statutory profit sharing terminated as of may 1 , 2012 , and accordingly , kcsm recognized a $ 43.0 million net reduction to operating expense . this reduction includes the elimination of $ 47.8 million of the deferred mexican statutory profit sharing liability , net of $ 4.8 million of transaction costs . non-operating expenses equity in net earnings of unconsolidated affiliates . equity in net earnings from unconsolidated affiliates decreased $ 0.5 million for the year ended december 31 , 2013 , compared to 2012 , due to decreased net earnings from southern capital due to lower lease income . interest expense . interest expense decreased $ 19.8 million for the year ended december 31 , 2013 , compared to 2012 , due to lower average interest rates as a result of the company 's refinancing activities , partially offset by an increase in average debt balances . for the year ended december 31 , 2013 , the average debt balance and average interest rate were $ 1,852.3 million and 4.2 % , compared to $ 1,620.9 million and 6.0 % , respectively , in 2012 . as a result of the financing activities during 2013 , interest expense is expected to decrease by approximately $ 6.0 million for the year ended december 31 , 2014 , as compared to the same period in 2013. debt retirement costs . debt retirement costs were $ 119.2 million and $ 20.1 million for the years ended december 31 , 2013 and 2012 , respectively , related to the tender and call premiums , original issue discounts and write-off of unamortized debt issuance costs associated with the various debt refinancing and redemption activities . foreign exchange gain ( loss ) . for the year ended december 31 , 2013 , foreign exchange loss was $ 5.2 million , compared to a foreign exchange gain of $ 2.7 million in 2012 . foreign exchange gain ( loss ) includes the re-measurement and settlement of monetary assets and liabilities denominated in mexican pesos and the gain ( loss ) on foreign currency forward contracts . for the year ended december 31 , 2013 and 2012 , the re-measurement and settlement of monetary assets and liabilities denominated in mexican pesos resulted in a foreign exchange loss of $ 4.5 million , compared to a foreign exchange gain of $ 2.7 million , respectively . during 2013 , the company entered into foreign currency forward contracts to hedge its net exposure to fluctuations in the mexican cash tax obligation due to changes in the value of the mexican peso against the u.s. dollar . during the first half of 2013 , the company entered into foreign currency forward contracts maturing on december 31 , 2013 , with an aggregate notional amount of $ 325.0 million and a weighted average exchange rate of ps.12.93 to each u.s. dollar .
| results of operations year ended december 31 , 2013 , compared with the year ended december 31 , 2012 the following summarizes kcs 's consolidated income statement components ( in millions ) : replace_table_token_5_th revenues the following summarizes revenues ( in millions ) , carload/unit statistics ( in thousands ) and revenue per carload/unit : replace_table_token_6_th freight revenues include both revenue for transportation services and fuel surcharges . for the year ended december 31 , 2013 , revenues and carload/unit volumes increased 6 % and 2 % , respectively , compared to the prior year , driven by strong growth in intermodal , automotive and industrial and consumer products . agriculture and minerals revenues decreased $ 16.6 million for the year ended december 31 , 2013 , due to a 5 % reduction in grain volumes as the severe drought conditions experienced in the midwestern region of the u.s. affected grain volumes in the second half of 2012 through the first half of 2013. revenue per carload/unit increased by 3 % for the year ended december 31 , 2013 , compared to the prior year , due to 29 positive pricing impacts , fuel surcharge and the strengthening of the mexican peso against the u.s. dollar , partially offset by commodity mix . kcs 's fuel surcharge is a mechanism to adjust revenue based upon changing fuel prices . fuel surcharges are calculated differently depending on the type of commodity transported . for most commodities , fuel surcharge is calculated using a fuel price from a prior time period that can be up to 60 days earlier . in a period of volatile fuel prices or changing customer business mix , changes in fuel expense and fuel surcharge may differ . the following discussion provides an analysis of revenues by commodity group : revenues by commodity group for 2013 chemical and petroleum .
| 7,924 |
this discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that we believe are reasonable but may prove to be inaccurate . certain risks , uncertainties and other factors , including those set forth under “ forward-looking statements , ” “ risk factors ” and elsewhere in this annual report on form 10-k , may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis . we assume no obligation to update any of these forward-looking statements . forward-looking statements this annual report on form 10-k contains forward-looking statements . these forward-looking statements reflect our current views with respect to , among other things , future events and our financial performance . these statements are often , but not always , made through the use of words or phrases such as “ may , ” “ should , ” “ could , ” “ predict , ” “ potential , ” “ believe , ” “ will likely result , ” “ expect , ” “ continue , ” “ will , ” “ anticipate , ” “ seek , ” “ estimate , ” “ intend , ” “ plan , ” “ projection , ” “ would ” and “ outlook , ” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature . these forward-looking statements are not historical facts , and are based on current expectations , estimates and projections about our industry , management 's beliefs and certain assumptions made by management , many of which , by their nature , are inherently uncertain and beyond our control . accordingly , we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks , assumptions and uncertainties that are difficult to predict . although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made , actual results may prove to be materially different from the results expressed or implied by the forward-looking statements . there are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements , including , but not limited to , the following : our ability to prudently manage our growth and execute our strategy ; risks associated with our acquisition and de novo branching strategy ; business and economic conditions generally and in the financial services industry , nationally and within our primary markets ; deterioration of our asset quality ; changes in the value of collateral securing our loans ; changes in management personnel ; liquidity risks associated with our business ; interest rate risk associated with our business ; our ability to maintain important deposit customer relationships and our reputation ; operational risks associated with our business ; volatility and direction of market interest rates ; increased competition in the financial services industry , particularly from regional and national institutions ; changes in the laws , rules , regulations , interpretations or policies relating to financial institution , accounting , tax , trade , monetary and fiscal matters ; further government intervention in the u.s. financial system ; natural disasters and adverse weather , acts of terrorism , an outbreak of hostilities or other international or domestic calamities , and other matters beyond our control ; and other factors that are discussed in `` item 1a . risk factors . '' the foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this annual report on form 10-k. if one or more events related to these or other risks or uncertainties materialize , or if our underlying assumptions prove to be incorrect , actual results may differ materially from what we anticipate . accordingly , you should not place undue reliance on any such forward-looking 47 statements . any forward-looking statement speaks only as of the date on which it is made , and we do not undertake any obligation to publicly update or review any forward-looking statement , whether as a result of new information , future developments or otherwise . new factors emerge from time to time , and it is not possible for us to predict which will arise . in addition , we can not assess the impact of each factor on our business or the extent to which any factor , or combination of factors , may cause actual results to differ materially from those contained in any forward-looking statements . general the following discussion and analysis presents our financial condition and results of operations on a consolidated basis . however , because we conduct all of our material business operations through guaranty bank & trust , the discussion and analysis relates to activities primarily conducted by guaranty bank & trust . as a bank holding company that operates through one segment , we generate most of our revenue from interest on loans and investments , customer service and loan fees , fees related to the sale of mortgage loans , and trust and wealth management services . we incur interest expense on deposits and other borrowed funds , as well as noninterest expense , such as salaries and employee benefits and occupancy expenses . we analyze our ability to maximize income generated from interest earning assets and control the interest expenses of our liabilities , measured as net interest income , through our net interest margin and net interest spread . net interest income is the difference between interest income on interest-earning assets , such as loans and securities , and interest expense on interest-bearing liabilities , such as deposits and borrowings , which are used to fund those assets . net interest margin is a ratio calculated as net interest income divided by average interest-earning assets . net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities . story_separator_special_tag management considers delinquency status to be the most meaningful indicator of the credit quality of one-to-four single family residential , home equity loans and lines of credit and other consumer loans . in general , loans do not begin to show signs of credit deterioration or default until they have been outstanding for some period of time , a process we refers to as “ seasoning. ” as a result , a portfolio of older loans will usually behave more predictably than a portfolio of newer loans . we consider the majority of our loans to be “ seasoned ” and that the credit quality and current level of delinquencies and defaults represents the level of reserve needed in the allowance for loan losses . if delinquencies and defaults were to increase , we may be required to increase our provision for loan losses , which would adversely affect our results of operations and financial condition . delinquency statistics are updated at least monthly . internal risk ratings are considered the most meaningful indicator of credit quality for new commercial and industrial , construction , and commercial real estate loans . internal risk ratings are a key factor in identifying loans that are individually evaluated for impairment and impact management 's estimates of loss factors used in determining the amount of the allowance for loan losses . internal risk ratings are updated on a continuous basis . loans are considered impaired when , based on current information and events , it is probable we will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement , including scheduled principal and interest payments . if a loan is impaired , a specific valuation allowance is allocated , if necessary . interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured , in which case interest is recognized on a cash basis . impaired loans , or portions thereof , are charged off when deemed uncollectible . 49 our policy requires measurement of the allowance for an impaired collateral dependent loan based on the fair value of the collateral . other loan impairments are measured based on the present value of expected future cash flows or the loan 's observable market price . at december 31 , 2018 and december 31 , 2017 , all significant impaired loans have been determined to be collateral dependent and the allowance for loss has been measured utilizing the estimated fair value of the collateral . from time to time , we modify our loan agreement with a borrower . a modified loan is considered a troubled debt restructuring when two conditions are met : ( i ) the borrower is experiencing financial difficulty and ( ii ) concessions are made by us that would not otherwise be considered for a borrower with similar credit risk characteristics . modifications to loan terms may include a lower interest rate , a reduction of principal , or a longer term to maturity . we review each troubled debt restructured loan and determine on a case by case basis if the loan is subject to impairment and the need for a specific allowance for loan loss allocation . an allowance for loan loss allocation is based on either the present value of estimated future cash flows or the estimated fair value of the underlying collateral . we have certain lending policies and procedures in place that are designed to maximize loan income with an acceptable level of risk . management reviews and approves these policies and procedures on a regular basis and makes changes as appropriate . management receives frequent reports related to loan originations , quality , concentrations , delinquencies , non-performing and potential problem loans . diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions , both by type of loan and geography . commercial and industrial loans are underwritten after evaluating and understanding the borrower 's ability to operate profitably and effectively . underwriting standards are designed to determine whether the borrower possesses sound business ethics and practices and to evaluate current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed . commercial and industrial loans are primarily made based on the identified cash flows of the borrower and , secondarily , on the underlying collateral provided by the borrower . most commercial and industrial loans are secured by the assets being financed or other business assets , such as accounts receivable or inventory , and include personal guarantees . real estate loans are also subject to underwriting standards and processes similar to commercial and industrial loans . these loans are underwritten primarily based on projected cash flows and , secondarily , as loans secured by real estate . the repayment of real estate loans is generally largely dependent on the successful operation of the property securing the loans or the business conducted on the property securing the loan . real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy . the properties securing our real estate portfolio are generally diverse in terms of type and geographic location throughout the state of texas . this diversity helps us reduce the exposure to adverse economic events that affect any single market or industry . we utilize methodical credit standards and analysis to supplement our policies and procedures in underwriting consumer loans . our loan policy addresses types of consumer loans that may be originated as well as the underlying collateral , if secured , which must be perfected . the relatively small individual dollar amounts of consumer loans that are spread over numerous individual borrowers also minimizes risk . emerging growth company the jobs act permits an “ emerging growth company ” to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies . however , we have “ opted out ” of this provision .
| results of operations for the years ended december 31 , 2018 , 2017 and 2016 net interest income our operating results depend primarily on our net interest income . fluctuations in market interest rates impact the yield and rates paid on interest-earning assets and interest-bearing liabilities , respectively . changes in the amount and type of interest-earning assets and interest-bearing liabilities also impact our net interest income . to evaluate net interest income , we measure and monitor ( 1 ) yields on our loans and other interest-earning assets , ( 2 ) the costs of our deposits and other funding sources , ( 3 ) our net interest spread and ( 4 ) our net interest margin . because noninterest-bearing sources of funds , such as noninterest-bearing deposits and shareholders ' equity also fund interest-earning assets , net interest margin includes the benefit of these noninterest-bearing sources . 2018 vs. 2017 . net interest income for the year ended december 31 , 2018 was $ 68.9 million , compared to $ 59.6 million for the same period in 2017 , an increase of $ 9.3 million , or 15.6 % . the increase in net interest income was comprised of a $ 16.7 million , or 23.2 % , increase in interest income offset by a $ 7.4 million , or 60.8 % , increase in interest expense . the growth in interest income was primarily attributable to a $ 241.5 million , or 18.8 % , increase in average loans outstanding for the year ended december 31 , 2018 , compared to the same period in 2017 , as well as a 31 basis point increase in the yield on average total loans . the increase in average loans outstanding was primarily due to the addition of $ 154.7 million of loans with the acquisition of westbound bank in june 2018 , as well as organic growth in all of our markets . the $ 7.4
| 7,925 |
revenue and expenses for these subsidiaries are translated using rates that approximate those in effect during the period . for the year ended december 31 , 2017 , the company realized a loss on foreign currency of $ 54 thousand as compared to a gain of $ 14 thousand for the year ended december 31 , 2016. the loss for the year ended december 31 , 2017 , was primarily due to exchange rate fluctuations in the british pound and the euro . 12 revaluation of contingent consideration in connection with the london acquisition , the company recorded contingent consideration in 2015. the payment of this consideration was based upon london achieving certain benchmarks for the years ending 2015 and 2016. in 2016 , the company increased the contingent consideration by $ 30 thousand based on london 's expectation of meeting its benchmark for 2016. the contingent consideration of $ 0.1 million was paid in january 2017. interest expense the company incurs interest expense as a result a term loan with amegy bank . interest expense increased 58 % for the year ended december 31 , 2017 compared to the year ended december 31 , 2016 due to the loan being drawn during 2016 and including a partial year of interest in 2016 compared to a full year of interest expense in 2017. unconsolidated affiliate wilhelmina previously owned a non-consolidated 50 % interest in wilhelmina kids & creative management llc , a new york city-based modeling agency that specialized in representing child models . the company incurred losses for the years ended december 31 , 2017 and 2016 , attributable to its pro rata ownership interest in kids . on december 9 , 2016 , the owners of kids agreed to dissolve wilhelmina kids & creative management llc and ceased related business operations of kids , and the final expenses to wind down the operations of kids were incurred in early 2017. income before income taxes income before income taxes declined $ 1.4 million to a loss of $ 0.5 million for the year ended december 31 , 2017 , compared to income of $ 0.9 million for the year ended december 31 , 2016 , primarily as a result of decreased revenues outpacing reduction in expenses . income taxes generally , the company 's combined effective tax rate is high relative to reported net income as a result of certain amounts of amortization and depreciation expense , stock based compensation , and corporate overhead not being deductible and income being attributable to certain states in which it operates . the company operates in four states which have relatively high tax rates : california , new york , illinois , and florida . as of december 31 , 2017 , the company had federal income tax loss carryforwards of $ 1.9 million . the u.s. tax cuts and jobs act ( “ the act ” ) reduces the u.s. statutory tax rate from 35 % to 21 % for years after 2017 and imposes a repatriation tax on deemed repatriated earnings of foreign subsidiaries . the company remeasured all deferred taxes as of december 31 , 2017 to reflect the reduced rate that will apply in future periods when these deferred taxes are settled or realized . we recognized a deferred tax benefit of $ 0.7 million attributable to the effects of the tax act . the company 's deemed repatriation liability is not deemed material due to a foreign deficit . net income net income increased 71.6 % , to $ 0.2 million , for the year ended december 31 , 2017 , compared to $ 0.1 million for the year ended december 31 , 2016 , primarily due to a $ 1.5 million decrease in income tax expense due to the recognition of deferred income tax benefits , partially offset by the $ 1.4 million decline in income before income taxes . liquidity and capital resources the company 's cash balance decreased to $ 4.3 million at december 31 , 2017 from $ 5.7 million at december 31 , 2016. the cash balances decreased primarily as a result of $ 0.3 million net cash used by operating activities , $ 0.7 million cash used in investing activities , and $ 0.5 million cash used in financing activities . the $ 0.7 million cash used in investing activities was attributable to purchases of property and equipment , including software , office furniture , and computer equipment . the $ 0.5 million of cash used in financing activities was attributable to interest payments on the company 's term loan . the company 's primary liquidity needs are for working capital associated with performing services under its client contracts and servicing its term loan . generally , the company incurs significant operating expenses with payment terms shorter than its average collections on billings . based on 2018 budgeted and year-to-date cash flow information , management believes that the company has sufficient liquidity to meet its projected operational expenses and capital expenditure requirements for the next twelve months . 13 amegy bank credit agreement the company has a credit agreement with amegy bank which provides a $ 4.0 million revolving line of credit and previously provided up to a $ 3.0 million term loan which could be drawn through october 24 , 2016. the revolving line of credit is subject to a borrowing base derived from 80 % of eligible accounts receivable ( as defined ) and the company 's minimum net worth covenant of $ 20.0 million . the revolving line of credit bears interest at prime plus 0.50 % payable monthly . as of december 31 , 2017 , the company had a $ 0.2 million irrevocable standby letter of credit outstanding under the revolving line of credit . the revolving line of credit presently expires on october 24 , 2018. on august 16 , 2016 , the company drew $ 2.7 million of the term loan and used the story_separator_special_tag revenue and expenses for these subsidiaries are translated using rates that approximate those in effect during the period . for the year ended december 31 , 2017 , the company realized a loss on foreign currency of $ 54 thousand as compared to a gain of $ 14 thousand for the year ended december 31 , 2016. the loss for the year ended december 31 , 2017 , was primarily due to exchange rate fluctuations in the british pound and the euro . 12 revaluation of contingent consideration in connection with the london acquisition , the company recorded contingent consideration in 2015. the payment of this consideration was based upon london achieving certain benchmarks for the years ending 2015 and 2016. in 2016 , the company increased the contingent consideration by $ 30 thousand based on london 's expectation of meeting its benchmark for 2016. the contingent consideration of $ 0.1 million was paid in january 2017. interest expense the company incurs interest expense as a result a term loan with amegy bank . interest expense increased 58 % for the year ended december 31 , 2017 compared to the year ended december 31 , 2016 due to the loan being drawn during 2016 and including a partial year of interest in 2016 compared to a full year of interest expense in 2017. unconsolidated affiliate wilhelmina previously owned a non-consolidated 50 % interest in wilhelmina kids & creative management llc , a new york city-based modeling agency that specialized in representing child models . the company incurred losses for the years ended december 31 , 2017 and 2016 , attributable to its pro rata ownership interest in kids . on december 9 , 2016 , the owners of kids agreed to dissolve wilhelmina kids & creative management llc and ceased related business operations of kids , and the final expenses to wind down the operations of kids were incurred in early 2017. income before income taxes income before income taxes declined $ 1.4 million to a loss of $ 0.5 million for the year ended december 31 , 2017 , compared to income of $ 0.9 million for the year ended december 31 , 2016 , primarily as a result of decreased revenues outpacing reduction in expenses . income taxes generally , the company 's combined effective tax rate is high relative to reported net income as a result of certain amounts of amortization and depreciation expense , stock based compensation , and corporate overhead not being deductible and income being attributable to certain states in which it operates . the company operates in four states which have relatively high tax rates : california , new york , illinois , and florida . as of december 31 , 2017 , the company had federal income tax loss carryforwards of $ 1.9 million . the u.s. tax cuts and jobs act ( “ the act ” ) reduces the u.s. statutory tax rate from 35 % to 21 % for years after 2017 and imposes a repatriation tax on deemed repatriated earnings of foreign subsidiaries . the company remeasured all deferred taxes as of december 31 , 2017 to reflect the reduced rate that will apply in future periods when these deferred taxes are settled or realized . we recognized a deferred tax benefit of $ 0.7 million attributable to the effects of the tax act . the company 's deemed repatriation liability is not deemed material due to a foreign deficit . net income net income increased 71.6 % , to $ 0.2 million , for the year ended december 31 , 2017 , compared to $ 0.1 million for the year ended december 31 , 2016 , primarily due to a $ 1.5 million decrease in income tax expense due to the recognition of deferred income tax benefits , partially offset by the $ 1.4 million decline in income before income taxes . liquidity and capital resources the company 's cash balance decreased to $ 4.3 million at december 31 , 2017 from $ 5.7 million at december 31 , 2016. the cash balances decreased primarily as a result of $ 0.3 million net cash used by operating activities , $ 0.7 million cash used in investing activities , and $ 0.5 million cash used in financing activities . the $ 0.7 million cash used in investing activities was attributable to purchases of property and equipment , including software , office furniture , and computer equipment . the $ 0.5 million of cash used in financing activities was attributable to interest payments on the company 's term loan . the company 's primary liquidity needs are for working capital associated with performing services under its client contracts and servicing its term loan . generally , the company incurs significant operating expenses with payment terms shorter than its average collections on billings . based on 2018 budgeted and year-to-date cash flow information , management believes that the company has sufficient liquidity to meet its projected operational expenses and capital expenditure requirements for the next twelve months . 13 amegy bank credit agreement the company has a credit agreement with amegy bank which provides a $ 4.0 million revolving line of credit and previously provided up to a $ 3.0 million term loan which could be drawn through october 24 , 2016. the revolving line of credit is subject to a borrowing base derived from 80 % of eligible accounts receivable ( as defined ) and the company 's minimum net worth covenant of $ 20.0 million . the revolving line of credit bears interest at prime plus 0.50 % payable monthly . as of december 31 , 2017 , the company had a $ 0.2 million irrevocable standby letter of credit outstanding under the revolving line of credit . the revolving line of credit presently expires on october 24 , 2018. on august 16 , 2016 , the company drew $ 2.7 million of the term loan and used the
| overview the company 's primary business is fashion model management and complementary business activities . the business of talent management firms , such as wilhelmina , depends heavily on the state of the advertising industry , as demand for talent is driven by internet , print and television advertising campaigns for consumer goods and retail clients . wilhelmina believes it has strong brand recognition which enables it to attract and retain top agents and talent to service a broad universe of clients . in order to take advantage of these opportunities and support its continued growth , the company will need to continue to successfully allocate resources and staffing in a way that enhances its ability to respond to new opportunities . the company continues to focus on tightly managing costs , recruiting top agents , and scouting and developing talent . although wilhelmina has a large and diverse client base , it is not immune to global economic conditions . the company closely monitors economic conditions , client spending , and other industry factors and continually evaluates opportunities to increase the market share of its existing boards and further expand its geographic reach . there can be no assurance as to the effects on wilhelmina of future economic circumstances , technological developments , client spending patterns , client credit worthiness and other developments and whether , or to what extent , wilhelmina 's efforts to respond to them will be effective . results of operations of the company for the year ended december 31 , 2017 compared to year ended december 31 , 2016 in addition to net income , the key financial indicators that the company reviews to monitor its business are revenues , model costs , operating expenses and cash flows .
| 7,926 |
these statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed or implied by such forward-looking statements . for a detailed discussion of these risks and uncertainties , see the “ risk factors ” section in item 1a of this form 10-k. we caution the reader not to place undue reliance on these forward-looking statements , which reflect management 's analysis only as of the date of this form 10-k. we undertake no obligation to update forward-looking statements , which reflect events or circumstances occurring after the date of this form 10-k. overview we are a late-stage clinical biologics platform company focused on the global biosimilar market . biosimilars are an emerging class of protein-based therapeutics with high similarity to approved originator products on the basis of various physicochemical and structural properties , as well as in terms of safety , purity and potency . our goal is to become a global leader in the biosimilar market by leveraging our team 's collective expertise in key areas such as process science , analytical characterization , protein production and clinical-regulatory development . our clinical-stage biosimilar pipeline includes the following product candidates : chs-1701 ( our pegfilgrastim ( neulasta ) biosimilar candidate ) . our long-acting g-csf product candidate , chs-1701 , is being developed as a pegfilgrastim ( neulasta ) biosimilar . in october 2015 , we completed a pivotal pharmacokinetic ( pk ) and pharmacodynamics ( pd ) study ( chs-1701-03 ) for chs-1701 in the united states . although it did not meet the pk auc bioequivalence endpoint due to low , anomalous pk profile in the first period neulasta group , this study was provided as a supportive study in the bla in the united states as it met all the other co-primary endpoints , including the pd endpoints and provided additional safety data . in august 2016 , we completed a follow-on pk/pd study ( chs-1701-05 ) which met all of its co-primary endpoints . in february 2016 , an immunogenicity study in healthy volunteers pursuant to this bla met its primary endpoints . in august 2016 , we filed a bla which was accepted by the u.s. food and drug administration ( fda ) in october 2016. the european medicines agency ( ema ) accepted our maa for chs-1701 in november 2016. chs-0214 ( our etanercept ( enbrel ) biosimilar candidate ) . chs-0214 is an anti-tnf product candidate for which we have partnered with daiichi sankyo company , limited ( daiichi sankyo ) , to develop and commercialize in japan . in september 2016 , we regained development and commercial rights from baxalta incorporated , baxalta us inc. , and baxalta gmbh , ( collectively “ baxalta ” , part of shire plc as of june 2016 ) for europe , canada , brazil , the middle east and other territories . we completed two phase 3 clinical trials with chs-0214 in rheumatoid arthritis and psoriasis , which met their primary clinical endpoints in november 2015 and january 2016 , respectively . in october 2016 , we completed two bridging phase 1 pk studies of chs-0214 , one comparing chs-0214 to enbrel manufactured in europe , and the other providing additional relative bioavailability data for chs-0214 . we expect that results from these trials , combined with data from our phase 1 studies , will support the expected filing of marketing applications in europe in the first half of 2017 and in japan in the second half of 2017. in march 2017 , we completed a study to compare the relative bioavailability data of chs-0214 at two different concentrations for the marketing application in japan . we have retained the development and commercial rights to this product in the united states . however , the therapeutic protein in etanercept is subject to certain originator-controlled united states patents expiring in 2028 and 2029. assuming these patents are valid and enforceable , and that we are unable to obtain a license to them , we do not expect to commercialize chs-0214 in the united states prior to their expiration . chs-1420 ( our adalimumab ( humira ) biosimilar candidate ) . our second anti-tnf product candidate , chs-1420 , is being developed as an adalimumab ( humira ) biosimilar . this product candidate successfully completed a pivotal phase 1 pk study in august 2014 by meeting the primary pk bioequivalence endpoint . we initiated a phase 3 study in psoriasis in august 2015 and announced positive 12-week data from that study in august 2016 , followed by confirmatory 24-week results in january 2017 , to support the planned filing of a bla in the united states and an maa in europe in the first half of 2017. we completed a bridging pk study comparing the phase 3 chs-1420 material to united states manufactured adalimumab ( humira ) in march 2017. in january 2017 , we initiated a pk study bridging chs-1420 to european manufactured humira and a pk study comparing u.s. humira to e.u . humira . we reported positive phase 2b efficacy data on chs-131 , an oral , small-molecule drug candidate , in relapsing remitting multiple sclerosis ( ms ) . this six-month study demonstrated significant reduction in contrast-enhancing lesions meeting its primary endpoint . chs-131 was generally well-tolerated and without evidence of immune suppression or the side-effects commonly seen in other oral ms therapies . we seek to partner chs-131 for further development . 70 our revenue to date has been generated primarily from collaboration and license payments pursuant to our license agreements with daiichi sankyo and baxalta . we have not generated any commercial product revenue . we have incurred significant losses in the past and expect to incur significant and increasing losses in the foreseeable future as we advance our product candidates into later stages of development and , if approved , commercialization . story_separator_special_tag our external research and development expenses consist primarily of : expenses incurred under agreements with consultants , third-party contract research organizations , or cros , and investigative sites where a substantial portion of our preclinical studies and all of our clinical trials are conducted ; costs of acquiring originator comparator materials and manufacturing preclinical study and clinical trial supplies and other materials from contract manufacturing organizations , or cmos , and related costs associated with release and stability testing ; and costs associated with manufacturing process development activities . internal costs are associated with activities performed by our research and development organization and generally benefit multiple programs . these costs are not separately allocated by product candidate . unallocated , internal research and development costs consist primarily of : personnel-related expenses , which include salaries , benefits and stock-based compensation ; and facilities and other allocated expenses , which include direct and allocated expenses for rent and maintenance of facilities , depreciation and amortization of leasehold improvements and equipment and laboratory and other supplies . the largest component of our total operating expenses has historically been our investment in research and development activities , including the clinical development of our product candidates . we expect our research and development expenses to be similar or slightly lower in the future as our late-stage product candidates work through the regulatory approval process and we prepare for commercialization . also , if we receive regulatory approval , a substantial portion of our future manufacturing costs will be capitalized as inventory and subsequently expensed as costs of goods sold when the inventory is sold . the process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming . furthermore , in the past we have entered into collaborations with third parties to participate in the development and commercialization of our product candidates , and we may enter into additional collaborations in the future . in situations in which third parties have substantial influence over the development activities for product candidates , the estimated completion dates are not fully under our control . for example , pursuant to our collaboration agreements with respect to chs-0214 , our partners in licensed territories may exert considerable influence on the regulatory filing process globally . therefore , we can not forecast with any degree of certainty the duration and completion costs of these or other current or future clinical trials of our product candidates . we may never succeed in achieving regulatory approval for any of our product candidates . in addition , we may enter into other collaboration arrangements for our other product candidates , which could affect our development plans or capital requirements . the following table summarizes our research and development expenses incurred during the respective periods : replace_table_token_5_th ( 1 ) our research and development expenses have been reduced by reimbursements of certain research and development expenses pursuant to the cost-sharing provision of our licensing agreement with daiichi sankyo . reimbursement of research and development expenses under the baxalta licensing agreement was recognized as revenue pursuant to the revenue recognition accounting policy applicable to that agreement . ( 2 ) amount consists of costs for other pipeline candidates . 72 general and administrative expenses general and administrative expenses consist primarily of personnel costs , allocated facilities costs and other expenses for outside professional services , including legal , human resources , audit and accounting services . personnel costs consist of salaries , benefits and stock-based compensation . if any of our product candidates receive regulatory approval for commercial sale , we expect to incur significant additional expenses associated with the establishment of our sales force in the u.s. , as we undertake commercial infrastructure initiatives to implement information technology systems , quality and compliance systems and personnel support for the commercial organization . interest expense interest expense consists primarily of interest incurred on our outstanding indebtedness and non-cash interest related to the amortization of debt discount and debt issuance costs associated with our various debt agreements outstanding during the years ended december 31 , 2016 and 2014. other expense , net other expense , net for the years ended december 31 , 2016 and 2015 consists primarily of losses resulting from the remeasurement of our contingent consideration and foreign exchange gains and losses resulting from currency fluctuations . additionally , for the year ended december 31 , 2014 , other expense , net includes gains and losses resulting from the remeasurement of the fair value of our convertible preferred stock warrant liability , derivative liability associated with our convertible notes , and the gain on the extinguishment of our convertible notes issued in 2013. in november 2014 , in connection with the closing of our ipo all of our outstanding warrants for convertible preferred stock were exercised , for cash or on a net basis , and the convertible preferred stock warrant liability was reclassified to equity . as such , we no longer record adjustments to reflect the remeasurement of the fair values . in march 2015 , the contingent consideration related to the earn-out payment was settled for shares and cash , and the contingent liability related to the earn-out payment was reclassified to equity . as such , we ceased recording adjustments to reflect the remeasurement of the earn-out payment to fair value . we will still continue to record adjustments to the estimated fair value of our contingent consideration related to the compound transaction payment until the contingency settles or expires . critical accounting policies and estimates our management 's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements , which have been prepared in accordance with united states generally accepted accounting principles , or u.s. gaap .
| results of operations comparison of years ended december 31 , 2016 , 2015 and 2014 revenue replace_table_token_6_th ( 1 ) represents revenue from daiichi sankyo through november 12 , 2014 as a related party , a holder of more than 10 % of our common stock until the closing of our ipo . total revenue for the year ended december 31 , 2016 was $ 190.1 million compared to $ 30.0 million for the same period in 2015 , an increase of $ 160.1 million . the increase is primarily due to revenue recognized in connection with the termination of the baxalta agreement . in june 2016 , shire completed its acquisition of baxalta and as part of its strategic portfolio review issued a termination notice of the baxalta agreement in its entirety on september 26 , 2016. as such , we regained from shire all development and commercial rights previously licensed under chs-0214 to baxalta for europe , canada , brazil , the middle east and other territories , and recognized the outstanding balances of deferred revenue and c ontingent liability to collaborator related to the baxalta agreement of $ 85.8 million and $ 76.7 million , respectively , as revenue in 2016. as of december 31 , 2016 , our remaining deferred revenue balance of $ 1.6 million is solely attributed to the daiichi sankyo agreement , and will be recognized over the remaining performance period . total revenue for the year ended december 31 , 2015 was $ 30.0 million compared to $ 31.1 million for the same period in 2014 , a decrease of $ 1.1 million . the decrease was primarily due to the $ 10.0 million receipt received for the achievement of a substantive milestone in the third quarter of 2014 under our license agreement with baxalta .
| 7,927 |
e-series bond investor note in july 2011 , the company issued to certain accredited investors a principal amount of $ 100,000 of e-series bonds ( the `` bonds `` ) . at december 31 , 2011 , the outstanding balance of the bonds totaled $ 30,000 . the bonds are due and payable upon maturity , a three-year period from the issuance date . interest on the bonds is payable at the rate of 7.5 % per annum , and is payable semiannually . the bondholder may require the company to convert the bond ( including any unpaid interest ) into shares of common stock at any time only during the first year , but not thereafter . if the bonds are converted under this option , the company will issue shares representing 100 % of the bond principal and unpaid interest calculated through maturity . the common stock issued under this option will be valued at the five days closing price average of the common shares for the five days prior to the notification . if the bond is converted within the first year the company will issue a warrant to purchase one share of energy broadband inc. , common stock at a price of $ 4.00 for every $ 2.00 of bond principal . at the company 's discretion at any time after the first year , the bonds , including the interest payments calculated through the date of conversion may be redeemed in cash or in shares of our common stock erf wireless inc. , ( erfb ) , which shares will be valued at the average last sales price of our common stock over the 5-trading-day period preceding any payment date . if the company chooses to issue shares of our common stock as redemption of the bond principal , we will issue shares representing a value equal to 125 % of the bond principal . if the company elects to issue shares of our common stock as payment of interest , we will issue shares representing a value equal to 100 % of the interest due . the bonds were determined to include various embedded derivative liabilities . the derivative liabilities are the conversion feature and the redemption option ( compound embedded derivative liability ) . at the date of issuance the bond , compound embedded derivative liabilities were measured at fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques . these derivative liabilities will be marked-to-market each quarter with the change in fair value recorded in the income statement . the company uses the effective interest method to record interest expense from the accretion of the debt discount and accretes the unamortized discount upon conversion which totaled $ 57,239 for the year ended december 31 , 2011. the estimated debt accretion for subsequent years is story_separator_special_tag this management 's discussion and analysis of financial condition and results of operations ( md & a ) should be read in conjunction with the other sections of this annual report on form 10-k , including the financial statements . overview historically , our revenues have been generated primarily from internet and construction services . our internet revenues result from our offering of broadband and basic communications services to residential and enterprise customers . our construction revenues result from the construction of bank networks and other services associated with providing wireless products and services to the regional banking industry . during fiscal 2011 , approximately 41 % of our revenues were generated from internet services , 51 % of our revenues were generated from providing broadband services to the energy industry and 8 % of our revenues were generated from construction services . we expect that the most growth during fiscal 2012 will continue to come from devoting significant capital resources to developing the oil and gas market utilizing wireless services . the company 's financial condition improved dramatically in 2011 as compared to the prior fiscal year ended december 31 , 2010. such improvements are highlighted as follows : ● the company reported revenues of $ 5,320,000 for the year ended december 31 , 2011 , as compared to revenues of $ 3,708,000 for the same prior year ended december 31 , 2010 ; an increase of $ 1,612,000 or 43 % . ● the company reported total comprehensive loss of $ 3,404,000 for the year ended december 31 , 2011 , as compared to a net loss to applicable to common shareholders of $ 8,511,000 for the same prior year ended december 31 , 2010 ; an improvement of $ 5,107,000 or 60 % . ● the company 's energy broadband , inc. subsidiary reported revenues of $ 2,713,000 for the year ended december 31 , 2011 , as compared to revenues of $ 916,000 for the same prior year ended december 31 , 2010 ; an increase of $ 1,797,000 or 196 % . ● the company reported a reduction of $ 2,193,000 or 28 % decline in operating expenses in the year ended december 31 , 2011 , as compared to the same prior year ended december 31 , 2010 . ● the company 's liquidity position improved by $ 2,819,000 for the year ended december 31 , 2011 , as compared to prior year ended december 31 , 2010 ; including a $ 1,228,000 increase in current assets , a $ 1,591,000 decrease in current liabilities that included $ 1,450,000 retirement of long-term debt and capital lease obligations . story_separator_special_tag ● the completion of a master services agreement with advanced data technologies to allow energy broadband to utilize advanced data technologies wireless networks to deliver digital oilfield solutions in portions of the eagle ford shale formation in south texas . the company records revenues from its fixed-price , long-term contracts using the percentage-of-completion method . revenues are recorded based on construction costs incurred to date as a percentage of estimated total cost at completion . the percentage-of-completion , determined by using total costs incurred to date as a percentage of estimated total costs at completion , reflects the actual physical completion of the project . this method of revenue recognition is used because management considers total cost to be the best available measure of progress on the contracts . the company recognizes product sales generally at the time the product is shipped . concurrent with the recognition of revenue , the company provides for the estimated cost of product warranties and reduces revenue for estimated product returns . sales incentives are generally classified as a reduction of revenue and are recognized at the later of when revenue is recognized or when the incentive is offered . shipping and handling costs are included in cost of goods sold . service revenue is principally derived from wireless broadband services , including internet , voice , and data and monitoring service . subscriber fees are recorded as revenues in the period during which the service is provided . 22 story_separator_special_tag margin-right : 0pt '' > operations expenses the following table sets forth summarized operating expense information for the years ended december 31 , 2011 and 2010 : replace_table_token_6_th for the year ended december 31 , 2011 , operating expenses decreased by 28 % to $ 5,694,000 , as compared to $ 7,887,000 for the year ended december 31 , 2010. the changes that occurred , as evidenced by the immediately preceding table , are discussed below : ● a $ 758,000 decrease in employment expense . the decrease is primarily attributable to the centralization of our operations thus reducing our employee headcount to 63 at december 31 , 2011 as compared to 80 at december 31 , 2010 ; ● a $ 1,196,000 decrease in professional services . primarily related to a decrease in settlement expense . ● a $ 24,000 decrease in rent and maintenance . ● a $ 114,000 decrease in depreciation and amortization ; ● a $ 101,000 decrease in other general and administrative expense . 24 other ( income ) expense , net for the year ended december 31 , 2011 , the increase in other income is primarily attributable to gain on sale of assets of $ 1,176,000 on the asset sale of non-core assets of our north and central texas network on february 14 , 2011 , gain on sale of other assets of $ 7,000 and a decrease in other expense is primarily attributable to interest expense , net of debt obligations and other income net totaling $ 817,000 , and offset with a net derivative income of $ 33,000 as compared to interest expense , net and other expense net of $ 1,445,000 , loss on extinguishment of debt of $ 63,000 , loss on sale of assets of $ 16,000 and offset with derivative income of $ 363,000 for the year ended december 31 , 2010. the derivative expense represents the net unrealized ( non-cash ) charge during the years ended december 31 , 2011 and 2010 , in the fair value of our derivative instrument liabilities related to warrants and embedded derivatives in our debt instruments that have been bifurcated and accounted for separately . net loss for the year ended december 31 , 2011 , our net loss was $ 3,379,000 compared to a loss of $ 8,511,000 for the year ended december 31 , 2010. the decrease in the loss for the year ended december 31 , 2011 as compared to the year ended december 31 , 2010 is primarily attributable as evidenced by the immediately preceding tables , are discussed above . cash flows the company 's operating activities increased net cash used by operating activities to $ 2,822,000 in the year ended december 31 , 2011 , compared to net cash used of $ 2,081,000 in the year ended december 31 , 2010. the increase in net cash used by operating activities was primarily attributable to decreased accrued expense liabilities , accounts payables with an increase in accounts receivables and inventory over prior year . the company 's net operating loss of $ 3,379,000 adjusted for net non-cash charges of $ 1,395,000 combined with $ 838,000 of cash used by fluctuations in working capital requirements totaled cash used by operating activities of $ 2,822,000 , which consisted of the combination of accounts receivable , inventory , prepaid expenses , accounts payable , accrued expenses , deferred liability lease and deferred revenue . the company 's investing activities provided net cash of $ 566,000 in the year ended december 31 , 2011 , compared to use of net cash of $ 690,000 in the year ended december 31 , 2010. the increase in investing activities is primarily the sale of non-core assets of our north and central texas network . the company 's financing activities provided net cash of $ 2,804,000 in the year ended december 31 , 2011 , compared to $ 2,586,000 of cash provided in year ended december 31 , 2010. the cash provided in the year ended december 31 , 2011 , was primarily associated with proceeds from debt financing and the line of credit , net . liquidity and capital resources general at december 31 , 2011 , the company 's current assets totaled $ 2,147,000 ( including cash and cash equivalents of $ 591,000 ) total current liabilities were $ 1,977,000 , resulting in working capital of $ 170,000.
| results of operations year ended december 31 , 2011 , compared to year ended december 31 , 2010 the following table sets forth summarized consolidated financial information for the years ended december 31 , 2011 and 2010 : replace_table_token_2_th for the year ended december 31 , 2011 , the company 's business operations reflected an increase in sales for energy broadband , inc. ( “ ebi ” ) , and enterprise network services ( “ ens ” ) with an offset of decreased sales for wireless bundled services ( “ wms ” ) , and for wireless messaging services ( “ wms ” ) . for the year ended december 31 , 2011 , the company 's consolidated operations generated net sales of $ 5,320,000 compared to prior-year net sales of $ 3,708,000 for the year ended december 31 , 2010. the $ 1,612,000 increase in net sales is primarily attributable to $ 1,797,000 increased sales in ebi from deployment of our mobile broadband trailers ( “ mbt 's ” ) in the oil and gas regions , $ 137,000 increased sales in ens due to increased network installations for schools and existing bank customers with an offset of $ 243,000 in decreased sales in wbs due to a reduction in our retail wireless and dialup customer base , and a $ 79,000 decreased sales in wms attributable to a decline in infrastructure sales and services . services sales increased $ 1,475,000 and product sales increased $ 137,000 for a total increase of $ 1,612,000. for the year ended december 31 , 2011 , the company had a gross profit margin of 37 % , compared to a gross profit margin of 25 % for the prior year .
| 7,928 |
was a wholly-owned subsidiary of camden national corporation until its merger with camden national bank , a wholly-owned subsidiary of camden national corporation , on november 30 , 2016. irs : internal revenue service afs : available-for-sale libor : london interbank offered rate alco : asset/liability committee ltip : long-term performance share plan all : allowance for loan losses management alco : management asset/liability committee aoci : accumulated other comprehensive income ( loss ) mbs : mortgage-backed security asc : accounting standards codification merger : on october 16 , 2015 , the two-step merger of camden national corporation , sbm financial , inc. and atlantic acquisitions , llc , a wholly-owned subsidiary of camden national corporation , was completed asu : accounting standards update merger agreement : plan of merger , dated as of march 29 , 2015 , by and among camden national corporation , sbm financial , inc. and atlantic acquisitions , llc , a wholly-owned subsidiary of camden national corporation bank : camden national bank , a wholly-owned subsidiary of camden national corporation msha : maine state housing authority boli : bank-owned life insurance msrs : mortgage servicing rights board alco : board of directors ' asset/liability committee mspp : management stock purchase plan bsa : bank secrecy act otti : other-than-temporary impairment ccta : camden capital trust a , an unconsolidated entity formed by camden national corporation nim : net interest margin on a fully-taxable basis cdars : certificate of deposit account registry system n.m. : not meaningful cds : certificate of deposits non-agency : non-agency private issue collateralized mortgage obligation company : camden national corporation nrv : net realizable value cmo : collateralized mortgage obligation occ : office of the comptroller of the currency dcrp : defined contribution retirement plan oci : other comprehensive income ( loss ) eps : earnings per share ofac : office of foreign assets control fasb : financial accounting standards board oreo : other real estate owned fdic : federal deposit insurance corporation sbm : sbm financial , inc. , the parent company of the bank of maine fhlb : federal home loan bank serp : supplemental executive retirement plans fhlbb : federal home loan bank of boston tdr : troubled-debt restructured loan frb : federal reserve system board of governors ubct : union bankshares capital trust i , an unconsolidated entity formed by union bankshares company that was subsequently acquired by camden national corporation frbb : federal reserve bank of boston u.s. : united states of america gaap : generally accepted accounting principles in the united states 2003 plan : 2003 stock option and incentive plan hpfc : healthcare professional funding corporation , a wholly-owned subsidiary of camden national bank 2012 plan : 2012 equity and incentive plan htm : held-to-maturity 2013 repurchase program : 2013 common stock repurchase program , approved by the company 's board of directors 23 executive overview in the fourth quarter of 2015 , we completed the acquisition of sbm , the parent company of the bank of maine , and much of our attention for 2016 was focused on executing the merger strategies , integrating the two banks , and delivering on the commitments we had made to our shareholders and stakeholders . through the successful execution of our merger strategies and the ongoing hard work and efforts of all our employees and the board of directors , we were able to meet our commitments and report solid financial results for the year ended december 31 , 2016 , including net income of $ 40.1 million and diluted eps of $ 2.57 per share ; return on average assets and equity of 1.04 % and 10.47 % , respectively ; and an efficiency ratio ( non-gaap ) of 57.53 % . our strong financial and operating results for the year ended december 31 , 2016 was largely due to the culmination of the merger , which provided us with a larger presence in southern and central maine , as well as an established mortgage banking business , but also our focus and commitment on driving organic growth through consistent delivery of our value proposition across all of our delivery channels . total assets at december 31 , 2016 were $ 3.9 billion , representing an increase over last year of 4 % . our asset growth in 2016 was driven by solid loan growth ( excluding loans held for sale ) of 4 % and higher investment balances of 5 % . total deposits at december 31 , 2016 were $ 2.8 billion , representing an increase over last year of 4 % , which was driven by core deposit growth ( demand , interest checking , savings and money market ) of 4 % . our asset quality at december 31 , 2016 continues to remain strong with non-performing assets to total assets of 0.67 % and non-performing loans to total loans of 0.97 % , representing slight increases over last year of 1 basis point and 4 basis points , respectively . our ratio of loans 30-89 days past due to total loans at december 31 , 2016 was 0.24 % , compared to 0.40 % last year . our provision for credit losses for the year ended december 31 , 2016 was $ 5.3 million compared to $ 1.9 million last year . the increase was driven by our aforementioned loan growth year-over-year , as well as the credit deterioration of two significant loan relationships during 2016 : ( i ) a syndication relationship we acquired as part of the merger that resulted in incremental provision expense in 2016 of $ 1.4 million ; and ( ii ) a large commercial real estate loan that was downgraded from passing to substandard in 2016 that resulted in incremental provision expense for 2016 of $ 1.3 million . story_separator_special_tag the change in our internal policy will be effective for periods beginning on january 1 , 2017. the remaining loan portfolio is separated into risk pools by portfolio segment and subject to a general reserve factor . at least annually , we reassess and revise the loss allocation factor used in constructing the reserve for each risk pool . the factors we consider in constructing each risk pool include : ( i ) risk rating ; ( ii ) historical losses ; ( iii ) market conditions ; and ( iv ) other environmental factors . in assessing the risk rating of a particular loan , we consider , among other factors , the obligor 's debt capacity , financial condition , the level of the obligor 's earnings , the amount and sources of repayment , the performance with respect to loan terms , the adequacy of collateral , the level and nature of contingent liabilities , management strength , and the industry in which the obligor operates . these factors are based on an evaluation of historical information , as well as a subjective assessment and interpretation of current conditions . emphasizing one factor over another , or considering additional factors that may be relevant in determining the risk rating of a particular loan but which are not currently an explicit part of our methodology , could impact the risk rating assigned to that loan . three times a year , management conducts a thorough review of adversely risk rated commercial and commercial real estate exposures exceeding certain thresholds to re-evaluate the risk rating and identify impaired loans . this extensive review takes into account the obligor 's repayment history and financial condition , collateral value , guarantor support , local economic and industry trends , and other factors relevant to the particular loan relationship . because the methodology is based upon historical experience and trends as well as management 's judgment , factors may arise that result in different estimations . significant factors that could give rise to changes in these estimates may include , but are not limited to , changes in economic conditions in our market area , concentration of risk , declines in local property values , and the results of regulatory examinations . while management 's evaluation of the all as of december 31 , 2016 determined it to be appropriate , under adversely different conditions or assumptions , we may need to increase the all . monthly , management reviews the all to assess recent asset quality trends and impact on the company 's financial condition . quarterly , the all is brought before the bank 's board of directors for discussion , review , and approval . the adequacy of the reserve for unfunded commitments is determined in a similar manner as the all , with the exception that management must also estimate the likelihood of these commitments being funded and becoming loans . this is accomplished by evaluating the historical utilization of each type of unfunded commitment and estimating the likelihood that the historical utilization rates could change in the future . purchase price allocation and impairment of goodwill and identifiable intangible assets . we record all acquired assets and liabilities at fair value , which is an estimate determined by the use of internal valuation techniques . we also may engage external valuation services to assist with the valuation of material assets and liabilities acquired , including , but not limited to , loans , core deposit intangibles , real estate and time deposits . as part of purchase accounting , we typically acquire goodwill and other intangible assets as part of the purchase price . these assets are subject to ongoing periodic impairment tests under differing accounting models . on october 16 , 2015 , we completed the acquisition of sbm , the parent company of the bank of maine . we did not acquire any other company or assets in 2016. goodwill impairment evaluations are required to be performed at least annually , but may be required more frequently if certain conditions indicate a potential impairment may exist . our policy is to perform the goodwill impairment analysis annually as of november 30 th , or more frequently as warranted . the goodwill impairment evaluation is required to be performed at the reporting unit level - ( i ) banking and ( ii ) financial services - and is performed using the two-step process outlined in gaap . the banking reporting unit is representative of our core banking business line , while the financial services reporting unit is representative of our wealth management and trust services business line . for the year ended december 31 , 2016 and 2015 , we performed step one of the annual goodwill impairment test for each reporting unit and in doing so , we concluded that the estimated fair value of each reporting unit exceeded its respective carrying value . as such , we concluded that goodwill was not impaired as of november 30 , 2016 and 2015 . furthermore , we are not 28 aware of any indications and or triggers subsequent to our goodwill impairment analysis performed as of november 30 , 2016 that would lead us to believe there may be subsequent impairment of goodwill . core deposit intangible assets have a finite life and are amortized over their estimated useful lives . core deposit intangible assets are subject to impairment tests if events or circumstances indicate a possible inability to realize the carrying amount . core deposit intangible assets are measured for impairment utilizing a cost recovery model . we did not identify any events or circumstances that occurred for the year ended december 31 , 2016 or 2015 that would indicate that our core deposit intangible assets may be impaired and should be evaluated for such . otti of investments . we record an investment impairment charge at the point we believe an investment has experienced a decline in value that is other-than-temporary .
| results of operations for the year ended december 31 , 2016 , we reported net income of $ 40.1 million compared to $ 21.0 million for the year ended december 31 , 2015 , and $ 24.6 million for the year ended december 31 , 2014 . diluted eps for each of these years were $ 2.57 , $ 1.73 , and $ 2.19 , respectively . the major components of these results , which include net interest income , provision for credit losses , non-interest income , non-interest expense , and income tax expense , are discussed below . net interest income net interest income is interest earned on loans , securities , and other interest-earning assets , plus net loan fees , origination costs and fair value marks on loans and or time deposits created in purchase accounting , less the interest paid on interest-bearing deposits and borrowings . net interest income , which is our largest source of revenue accounting for approximately 74 % of total revenues , is affected by factors including , but not limited to : changes in interest rates , loan and deposit pricing strategies and competitive conditions , loan prepayment speeds , the volume and mix of interest-earning assets and interest-bearing liabilities , and the level of non-performing assets . nim is calculated as net interest income on a fully-taxable equivalent basis as a percentage of average interest-earning assets . our nim on a fully-taxable equivalent basis for the year ended december 31 , 2016 , 2015 , and 2014 was 3.32 % , 3.19 % , and 3.11 % . 2016 vs. 2015 net interest income . net interest income was $ 115.2 million on a fully-taxable equivalent basis for 2016 , compared to $ 88.2 million for 2015 , representing an increase of $ 27.0 million , or 31 % . interest income on a fully-taxable equivalent basis for 2016 was $ 131.7 million , representing an increase over 2015 of $ 30.8 million , or 31 % .
| 7,929 |
999 999 accretion to redemption value on series a redeemable convertible preferred stock ( 149 ) ( 149 ) stock-based compensation 9,609 9,609 net loss ( 24,661 ) ( 24,661 ) balance , december 31 , 2000 193 15,000 9,249 93 story_separator_special_tag the following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes thereto included in this annual report on form 10-k. overview we are a biopharmaceutical company focused on the discovery and development of therapeutic products for diseases such as diabetes . our lead product candidate , afrezza , is an ultra rapid-acting insulin therapy that is intended to improve glycemic control in adults with type 1 or type 2 diabetes . 44 we are a development stage enterprise and have incurred significant losses since our inception in 1991. as of december 31 , 2013 , we have incurred a cumulative net loss of $ 2.3 billion and a stockholders ' deficit of $ 30.7 million . we incurred net losses of approximately $ 160.8 million , $ 169.4 million and $ 191.5 million in the years ended december 31 , 2011 , 2012 and 2013 , respectively . to date , we have not generated any product revenues and have funded our operations through the sale of equity securities and convertible debt securities , the facility agreement , and borrowings under a loan arrangement provided by our principal stockholder , or the loan arrangement . as discussed below in liquidity and capital resources , if we are unable to obtain additional funding in the future , there will continue to be substantial doubt about our ability to continue as a going concern . we do not expect to record sales of any product prior to regulatory approval and commercialization of afrezza . we currently do not have the required approvals to market any of our product candidates , and we may not receive such approvals . we may not be able to achieve positive cash flow from operations even if we succeed in commercializing any of our product candidates . we expect to make substantial expenditures and to incur additional operating losses for at least the next several years as we : continue the clinical development of afrezza and new inhalation systems for the treatment of diabetes ; seek regulatory approval to sell afrezza in the united states and other markets ; seek development and commercialization collaborations for afrezza ; and develop additional applications of our proprietary technosphere formulation technology for the pulmonary delivery of other drugs . our business is subject to significant risks , including but not limited to the risks inherent in our ongoing clinical trials and the regulatory approval process , our potential inability to enter into sales and marketing collaborations or to commercialize afrezza in a timely manner . additional significant risks also include the results of our research and development efforts , competition from other products and technologies and uncertainties associated with obtaining and enforcing patent rights . research and development expenses our research and development expenses consist mainly of costs associated with the clinical trials of our product candidates that have not yet received regulatory approval for marketing and for which no alternative future use has been identified . this includes the salaries , benefits and stock-based compensation of research and development personnel , raw materials , such as insulin purchases , laboratory supplies and materials , facility costs , costs for consultants and related contract research , licensing fees , and depreciation of equipment . we track research and development costs by the type of cost incurred . we partially offset research and development expenses with the recognition of estimated amounts receivable from the state of connecticut pursuant to a program under which we can exchange qualified research and development income tax credits for cash . our research and development staff conducts our internal research and development activities , which include research , product development , clinical development , manufacturing and related activities . this staff is located in our facilities in valencia , california ; paramus , new jersey ; and danbury , connecticut . we expense research and development costs as we incur them . clinical development timelines , likelihood of success and total costs vary widely . we are focused on advancing afrezza through regulatory filings . at this time , due to the risks inherent in the clinical trial process and given the early stage of development of our product candidates other than afrezza , we are unable to estimate with any certainty the costs that we will incur in the continued development of our product candidates for commercialization . the costs required to complete the development of afrezza will be largely dependent on the cost and efficiency of our clinical trial operations and discussions with the fda regarding its requirements . during the first quarter of 2011 , we implemented a restructuring to streamline operations , reduce operating expenses , extend our cash runway and focus our resources on securing fda approval of the nda for afrezza . in connection with the restructuring , we recorded charges to research and development expenses of 45 approximately $ 4.7 million for employee severance and other related termination benefits . the restructuring resulted in research and development operating cost savings of approximately $ 9.5 million in 2011. these savings were partially offset by increased costs associated with the additional trials required by the fda . general and administrative expenses our general and administrative expenses are driven by salaries , benefits and stock-based compensation for administrative , finance , business development , human resources , legal and information systems support personnel . story_separator_special_tag the assets are considered to be impaired if we determine that the carrying value may not be recoverable based upon our assessment of the following events or changes in circumstances : significant changes in our strategic business objectives and utilization of the assets ; a determination that the carrying value of such assets can not be recovered through undiscounted cash flows ; loss of legal ownership or title to the assets ; a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset ( asset group ) , including an adverse action or assessment by a regulator ; or the impact of significant negative industry or economic trends . if we believe our assets to be impaired , the impairment we recognize is the amount by which the carrying value of the assets exceeds the fair value of the assets . any write-downs would be treated as permanent reductions in the carrying amount of the asset and an operating loss would be recognized . in addition , we base the useful lives and related amortization or depreciation expense on our estimate of the useful lives of the assets . if a change were to occur in any of the above-mentioned factors or estimates , our reported results could materially change . to date , we have had recurring operating losses , and the recoverability of our long-lived assets is contingent upon executing our business plan . if we are unable to execute our business plan , we may be required to write down the value of our long-lived assets in future periods . clinical trial expenses our clinical trial accrual process seeks to account for expenses resulting from our obligations under contract with vendors , consultants , and clinical site agreements in connection with conducting clinical trials . the financial terms of these contracts are subject to negotiations which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to us under such 47 contracts . our objective is to reflect the appropriate trial expenses in our financial statements by matching period expenses with period services and efforts expended . we account for these expenses according to the progress of the trial as measured by patient progression and the timing of various aspects of the trial . we determine accrual estimates through discussions with internal clinical personnel and outside service providers as to the progress or state of completion of trials , or the services completed . service provider status is then compared to the contractual obligated fee to be paid for such services . during the course of a clinical trial , we adjust our rate of clinical expense recognition if actual results differ from our estimates . in the event that we do not identify certain costs that have begun to be incurred or we underestimate or overestimate the level of services performed or the costs of such services , our reported expenses for a period would be too low or too high . the date on which certain services commence , the level of services performed on or before a given date and the cost of the services are often judgmental . we make these judgments based upon the facts and circumstances known to us in accordance with generally accepted accounting principles . although we do not expect our estimates to be materially different from amounts actually incurred , our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in our reporting amounts that are too high or too low for any particular period . stock-based compensation we account for stock-based compensation in accordance with asc 718 compensation- stock compensation . asc 718 requires all share-based payments to employees , including grants of stock options , restricted stock units , performance-based awards and the compensatory elements of employee stock purchase plans , to be recognized in the income statement based upon the fair value of the awards at the grant date . we use the black-scholes option valuation model to estimate the grant date fair value of employee stock options and the compensatory elements of employee stock purchase plans . restricted stock units are valued based on the market price on the grant date . we evaluate stock awards with performance conditions as to the probability that the performance conditions will be met and estimate the date at which the performance conditions will be met in order to properly recognize stock-based compensation expense over the requisite service period . as of december 31 , 2013 , we had $ 107,108 and $ 3.7 million of unrecognized expenses related to performance-based options and restricted stock units , respectively , for milestones where achievement was not considered probable . forward contracts in february and october 2012 , we entered into agreements with the mann group whereby we agreed to sell and the mann group agreed to purchase common stock and or warrants . these agreements have been accounted for as forward contracts , having met the definition of derivative instruments in accordance with the provisions of asc 815. we determine the fair value of the forward contract upon its issuance , record fair value adjustments of the forward contract to other income ( expense ) during the reporting period and through the settlement of the forward contract , and reclassify the forward contract to equity upon settlement of the forward contract . the fair value of the forward purchase contract is highly sensitive to the discount applied for lack of marketability and the stock price , and changes in this discount and or the stock price could cause the value of the forward purchase contract to change significantly . accounting for income taxes we must make management judgments when determining our provision for income taxes , our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets .
| results of operations years ended december 31 , 2012 and 2013 revenues during the year ended december 31 , 2012 , we recognized $ 35,000 in revenue under a license agreement , and during the year ended december 31 , 2013 , we recognized no revenue . we do not anticipate sales of any product prior to regulatory approval and commercialization of afrezza . research and development expenses the following table provides a comparison of the research and development expense categories for the years ended december 31 , 2012 and 2013 ( dollars in thousands ) : replace_table_token_3_th the increase in research and development expenses for the year ended december 31 , 2013 compared to the year ended december 31 , 2012 , was driven by an increase in stock-based compensation expense of $ 14.2 million in connection with company-wide performance-based grants in the first and second quarters of 2013 , as well as a full year of expense from grants in early 2012 , and the achievement of predetermined milestones in the fourth quarter of 2013. this increase is offset by a decrease of $ 5.2 million in clinical study related expenses from the completion of two phase 3 studies in the second quarter of 2013 , and $ 1.3 million in reduced research expenses resulting from the positive effect of our cost cutting measures in addition to decreasing efforts in other non-afrezza related research as we focused on our primary objective of gaining approval of afrezza . we anticipate that our overall research and development expenses will increase in 2014 compared to 2013 due to the preparation for commercialization of afrezza .
| 7,930 |
our financial condition and financing capability will be dependent on many factors , including the level of income and cash flow of its subsidiaries , conditions in the bank and capital markets , economic conditions , interest rates and legislative and regulatory developments . networks electric transmission and distribution and natural gas distribution the operating subsidiaries of networks are regulated electric distribution and transmission and natural gas transportation and distribution utilities whose structure and operations are significantly affected by legislation and regulation . the ferc regulates , under the fpa , the interstate transmission and wholesale sale of electricity by these regulated utilities , including transmission rates and allowed roe on transmission assets . further , the distribution rates and allowed roes for networks ' regulated utilities in new york , maine , connecticut and massachusetts are subject to regulation by the nypsc , the mpuc , pura and dpu , respectively . legislation and regulatory decisions implementing legislation establish a framework for networks ' operations . other 46 factors affecting networks ' financial results are operational matters , such as the ability to manage expenses , uncollectibles and capital expenditures , in addition to major weather disturbances and environmental regulation . networks expects to continue to make significant capital investments in its distribution and transmission infrastructure . pursuant to maine law , cmp earns revenue for the delivery of energy to its retail customers , but is prohibited from selling power to them . cmp generally does not enter into purchase or sales arrangements for power with iso-ne , the new england power pool , or any other iso or similar entity . cmp generally sells all of its power entitlements under its nonutility generator and other ppas to unrelated third parties under bilateral contracts . if the mpuc does not approve the terms of bilateral contracts , it can direct cmp to sell power entitlements that it receives from those contracts on the spot market through iso-ne . nyseg and rg & e enter into power purchase and sales transactions with the nyiso to have adequate supplies for their customers who choose to purchase energy directly from them . customers may also choose to purchase energy from other energy supply companies . under connecticut law , ui 's retail electricity customers are able to choose their electricity supplier while ui remains their electric distribution company . ui purchases power for those of its customers under standard service rates who do not choose a retail electric supplier and have a maximum demand of less than 500 kilowatts and its customers under supplier of last resort service for those who are not eligible for standard service and who do not choose to purchase electric generation service from a retail electric supplier . the cost of the power is a “ pass-through ” to those customers through the generation services charge on their bills . ui has wholesale power supply agreements in place for its entire standard service load for the first half of 2019 , 80 % of its standard service load for the second half of 2019 and 20 % of its standard service load for the first half of 2020. supplier of last resort service is procured on a quarterly basis and ui has a wholesale power supply agreement in place for the second quarter of 2019. however , from time to time there are no bidders in the procurement process for supplier of last resort service and in such cases ui manages the load directly . for additional information regarding networks , including a comprehensive overview of our regulated businesses , please see the section entitled , “ business—networks ” in part i , item 1 in this report . revenues networks utilizes regulatory deferrals to evaluate its financial condition and operating performance by reconciling differences between actual revenue received or cost incurred with the rate allowances provided under the tariffs set by the state utilities commissions and the ferc . regulatory deferrals create regulatory assets and liabilities under the ferc , consistent with generally accepted accounting principles for financial reporting in the united states , or u.s. gaap . regulatory deferrals in new york include electric and gas supply costs , ppas , net plant reconciliations ( downward only ) , revenue decoupling , system benefit charges , rps , energy efficiency portfolio standards , economic development programs , earnings sharing mechanism , low income programs , pension costs , other post-employment benefits costs , environmental remediation costs , major storm costs , distribution vegetation management costs ( downward only ) , research and development , incremental maintenance initiatives ( downward only ) , property taxes , reforming the energy vision , or rev , initiatives , nuclear electric insurance limited credits , credit and debit card fees , exogenous costs and certain legislative , accounting , regulatory and tax related actions . regulatory deferrals in maine include stranded costs , revenue decoupling , power tax regulatory asset , environmental remediation , storm reserve accounting , electric thermal storage pilot costs , standard offer retainage costs , ami opt-out program costs , ami deferral costs , ami legal / health proceeding costs , conservation program costs , demand side management costs , low income program costs , electric lifeline program costs , make-ready line extension costs , electric vehicle pilot program costs and transmission planning and related cost allocation . story_separator_special_tag any dollars due to customers from the esm continue to be first applied against any storm regulatory asset balance ( if one exists at that time ) or refunded to customers through a bill credit if such storm regulatory asset balance does not exist . in december 2017 , pura approved new tariffs for scg effective january 1 , 2018 , for a three-year rate plan with rate increases of $ 1.5 million , $ 4.7 million and $ 5.0 million in 2018 , 2019 , and 2020 , respectively . the new tariffs also include an rdm and distribution integrity management program , or dimp , a mechanism similar to the mechanisms authorized for cng , esm , the amortization of certain regulatory liabilities ( most notably accumulated hardship deferral balances and certain accumulated deferred income taxes ) and tariff increases based on a roe of 9.25 % and approximately 52 % equity level . any dollars due to customers from the esm will be first applied against any environmental regulatory asset balance as defined in the settlement agreement ( if one exists at that time ) or refunded to customers through a bill credit if such environmental regulatory asset balance does not exist . on june 29 , 2018 , cng filed an application with pura for new tariffs to become effective january 1 , 2019. on august 30 , 2018 , cng entered into a settlement agreement with the office of consumer counsel and pura prosecutorial staff that provides for new rates effective january 1 , 2019. the settlement agreement was approved by pura on december 19 , 2018. the settlement agreement included an increase in rates of $ 9.9 million in 2019 , an incremental increase of $ 4.6 million in 2020 and an incremental increase of $ 5.2 million in 2021 , for a total increase of $ 19.7 million over the three-year rate plan . the settlement agreement is based on an roe of 9.30 % , and an equity ratio of 54 % in 2019 , 54.50 % in 2020 and 55 % in 2021. bgc 's rates are established by the dpu . bgc 's ten-year rate plan , which was approved by the dpu and included an approved roe of 10.5 % , expired on january 31 , 2012. bgc continues to charge the rates that were in effect at the end of the rate plan . on may 17 , 2018 , bgc filed a petition with the dpu seeking approval of a distribution rate increase to be effective january1 , 2019. on december 4 , 2018 , bgc and the massachusetts attorney general 's office filed a settlement agreement with the dpu . the settlement agreement provides for a $ 1.6 million distribution base rate increase effective january 1 , 2019 , or february 1 , 2019 48 if the dpu did not approve the settlement agreement prior to january 1 , 2019 , and an additional $ 0.7 million base distribution increase effective november 1 , 2019 , if certain investments are made by bgc . the settlement agreement contained a make-whole provision if the dpu approved the agreement after january 1 , 2019. the distribution rate increase is based on a 9.70 % roe and 55 % equity ratio . the settlement agreement provides for the implementation of a rdm and pension expense tracker and also provides that bgc will not file to change base distribution to become effective before november 1 , 2021. the settlement agreement was approved by the dpu on january 18 , 2019. on may 20 , 2015 , nyseg and rg & e initiated a distribution rate case to ensure that the companies are able to continue to provide safe , adequate and reliable service , continue to make investments to modernize infrastructure , enhance low income programs and improve both gas and electric reliability , while maintaining their financial integrity . on february 19 , 2016 , the nyseg , rg & e and other signatory parties filed a joint proposal , with the nypsc for a three-year rate plan for electric and gas service at nyseg and rg & e commencing may 1 , 2016 , which was approved on june 15 , 2016 by the nypsc . the joint proposal balanced the varied interests of the signatory parties including but not limited to maintaining the companies ' credit quality and mitigating the rate impacts to customers . the proposal reflects many customer attributes including acceleration of the companies ' natural gas leak prone main replacement programs and increased electric vegetation management to provide continued safe and reliable service . the delivery rate increase in the proposal can be summarized as follows : replace_table_token_14_th the allowed rate of return on common equity for nyseg electric , nyseg gas , rg & e electric and rg & e gas is 9.00 % . the equity ratio for each company is 48 % ; however , the actual equity ratio of up to 50 % is used for earnings sharing calculation purposes . the customer share of any earnings above allowed levels increases as roe increases , with customers receiving 50 % , 75 % and 90 % of earnings over 9.5 % , 10.0 % and 10.5 % roe , respectively , in the first rate year covering the period may 1 , 2016 – april 30 , 2017. the earnings sharing levels increase in rate year two ( may 1 , 2017 – april 30 , 2018 ) to 9.65 % , 10.15 % and 10.65 % roe , respectively . the earnings sharing levels further increase in rate year three ( may 1 , 2018 – april 30 , 2019 ) to 9.75 % , 10.25 % and 10.75 % roe , respectively . the joint proposal reflects the recovery of deferred nyseg electric storm costs of approximately $ 262 million , of which $ 123 million will be
| results of operations the following table sets forth financial information by segment for each of the periods indicated . based on the quantitative assessment and due to the disposition of gas trading and storage businesses ( see note 26 to our consolidated financial statements contained in this annual report on form 10-k for further discussion ) , the gas business no longer meets the reportable segment criteria effective in the first quarter of 2018. as a result , the prior periods segment information has been restated to conform to the 2018 presentation . additionally , as a result of the adoption of the amendments to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost , we have reclassified the non-service components of those costs from operations and maintenance to other expense within the consolidated statements of income and applied these amendments retrospectively to prior periods . for further details , refer to note 3 to our consolidated financial statements contained in this annual report on form 10-k. results of operations discussed herein are based on the revised financial results for the years ended december 31 , 2017 and 2016 . 58 replace_table_token_15_th replace_table_token_16_th 59 replace_table_token_17_th ( 1 ) other amounts represent corporate , gas and intersegment eliminations . comparison of period to period results of operations our operating revenues increased by 9 % , from $ 5,963 million for the year ended december 31 , 2017 , to $ 6,478 million for the year ended december 31 , 2018 . our purchased power , natural gas and fuel used increased by 24 % , from $ 1,338 million for the year ended december 31 , 2017 , to $ 1,653 million for the year ended december 31 , 2018 .
| 7,931 |
certain risks , uncertainties and other factors , including those set forth under `` forward-looking statements , '' `` risk factors '' and elsewhere in this annual report on form 10-k , may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis . we assume no obligation to update any of these forward-looking statements . special note regarding forward-looking statements congress passed the private securities litigation act of 1995 in an effort to encourage corporations to provide information about a company 's anticipated future financial performance . this act provides a safe harbor for such disclosure , which protects us from unwarranted litigation , if actual results are different from management expectations . this discussion and analysis contains forward-looking statements and reflects management 's current views and estimates of future economic circumstances , industry conditions , company performance and financial results . the words `` may , '' `` should , '' `` expect , '' `` anticipate , '' `` intend , '' `` plan , '' `` continue , '' `` believe , '' `` seek , '' `` estimate '' and similar expressions are intended to identify forward-looking statements . these forward-looking statements are subject to a number of factors and uncertainties , including , changes in general economic conditions , either nationally or in our market areas , that are worse than expected ; competition among depository and other financial institutions ; inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments ; adverse changes in the securities markets ; changes in laws or government regulations or policies affecting financial institutions , including changes in regulatory fees and capital requirements ; our ability to enter new markets successfully and capitalize on growth opportunities ; our ability to successfully integrate acquired entities , if any ; changes in consumer spending , borrowing and savings habits ; changes in accounting policies and practices , as may be adopted by the bank regulatory agencies , the financial accounting standards board , the securities and exchange commission and the public company accounting oversight board ; changes in our organization , compensation and benefit plans ; changes in our financial condition or results of operations that reduce capital available to pay dividends ; and changes in the financial condition or future prospects of issuers of securities that we own , which could cause our actual results and experience to differ from the anticipated results and expectations , expressed in such forward-looking statements . overview first guaranty bancshares is a louisiana corporation and a bank holding company headquartered in hammond , louisiana . our wholly-owned subsidiary , first guaranty bank , a louisiana-chartered commercial bank , provides personalized commercial banking services primarily to louisiana customers through 21 banking facilities primarily located in the msas of hammond , baton rouge , lafayette and shreveport-bossier city . we emphasize personal relationships and localized decision making to ensure that products and services are matched to customer needs . we compete for business principally on the basis of personal service to customers , customer access to officers and directors and competitive interest rates and fees . total assets were $ 1.5 billion at december 31 , 2016 and december 31 , 2015. total deposits were $ 1.3 billion at december 31 , 2016 and december 31 , 2015. total loans were $ 948.9 million at december 31 , 2016 , an increase of $ 107.3 million , or 12.8 % , compared with december 31 , 2015. common shareholders ' equity was $ 124.3 million and $ 118.2 million at december 31 , 2016 and december 31 , 2015 , respectively . net income was $ 14.1 million , $ 14.5 million and $ 11.2 million for the years ended december 31 , 2016 , 2015 and 2014 , respectively . we generate most of our revenues from interest income on loans , interest income on securities , sales of securities and service charges , commissions and fees . we incur interest expense on deposits and other borrowed funds and noninterest expense such as salaries and employee benefits and occupancy and equipment expenses . net interest income is the difference between interest income earned on interest-earning assets such as loans and securities and interest expense paid on interest-bearing liabilities such as deposits and borrowings which are used to fund those assets . net interest income is our largest source of revenue . to evaluate net interest income , we measure and monitor : ( 1 ) yields on our loans and other interest-earning assets ; ( 2 ) the costs of our deposits and other funding sources ; ( 3 ) our net interest spread and ( 4 ) our net interest margin . net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities . net interest margin is calculated as net interest income divided by average interest-earning assets . because noninterest-bearing sources of funds , such as noninterest-bearing deposits also fund interest-earning assets , net interest margin includes the benefit of these noninterest-bearing sources . changes in market interest rates and interest rates we earn on interest-earning assets or pay on interest-bearing liabilities , as well as the volume and types of interest-earning assets , interest-bearing and noninterest-bearing liabilities are usually the largest drivers of periodic changes in net interest spread , net interest margin and net interest income . fluctuations in market interest rates are driven by many factors , including governmental monetary policies , inflation , deflation , macroeconomic developments , changes in unemployment , the money supply , political and international conditions and conditions in domestic and foreign financial markets . periodic changes in the volume and types of loans in our loan portfolio are affected by , among other factors , economic and competitive conditions in louisiana and our other out-of-state market areas . story_separator_special_tag certain critical accounting policies require judgment and estimates which are used in the preparation of the financial statements . allowance for loan losses . the allowance for loan losses is established through a provision for loan losses charged to expense . loans are charged against the allowance for loan losses when management believes that the collectability of the principal is unlikely . the allowance , which is based on evaluation of the collectability of loans and prior loan loss experience , is an amount that , in the opinion of management , reflects the risks inherent in the existing loan portfolio and exists at the reporting date . the evaluations take into consideration a number of subjective factors including changes in the nature and volume of the loan portfolio , overall portfolio quality , review of specific problem loans , current economic conditions that may affect a borrower 's ability to pay , adequacy of loan collateral and other relevant factors . in addition , regulatory agencies , as an integral part of their examination process , periodically review the estimated losses on loans . such agencies may require additional recognition of losses based on their judgments about information available to them at the time of their examination . the following are general credit risk factors that affect our loan portfolio segments . these factors do not encompass all risks associated with each loan category . construction and land development loans have risks associated with interim construction prior to permanent financing and repayment risks due to the future sale of developed property . farmland and agricultural loans have risks such as weather , government agricultural policies , fuel and fertilizer costs , and market price volatility . one- to four-family residential , multi-family , and consumer credits are strongly influenced by employment levels , consumer debt loads and the general economy . non-farm non-residential loans include both owner-occupied real estate and non-owner occupied real estate . common risks associated with these properties is the ability to maintain tenant leases and keep lease income at a level able to service required debt and operating expenses . commercial and industrial loans generally have non-real estate secured collateral which requires closer monitoring than real estate collateral . although management uses available information to recognize losses on loans , because of uncertainties associated with local economic conditions , collateral values and future cash flows on impaired loans , it is reasonably possible that a material change could occur in the allowance for loan losses in the near term . however , the amount of the change that is reasonably possible can not be estimated . the evaluation of the adequacy of loan collateral is often based upon estimates and appraisals . because of changing economic conditions , the valuations determined from such estimates and appraisals may also change . accordingly , we may ultimately incur losses that vary from management 's current estimates . adjustments to the allowance for loan losses will be reported in the period such adjustments become known or can be reasonably estimated . all loan losses are charged to the allowance for loan losses when the loss actually occurs or when the collectability of the principal is unlikely . recoveries are credited to the allowance at the time of recovery . the allowance consists of specific , general , and unallocated components . the specific component relates to loans that are classified as doubtful , substandard , and impaired . for such loans that are also classified as impaired , an allowance is established when the discounted cash flows ( or collateral value or observable market price ) of the impaired loan is lower than the carrying value of that loan . also , a specific reserve is allocated for our syndicated loans . the general component covers non-classified loans and special mention loans and is based on historical loss experience adjusted for qualitative factors . an unallocated component is maintained to cover uncertainties that could affect the estimate of probable losses . the allowance for loan losses is reviewed on a monthly basis . the monitoring of credit risk also extends to unfunded credit commitments , such as unused commercial credit lines and letters of credit . a reserve is established as needed for estimates of probable losses on such commitments . other-than-temporary impairment of investment securities . management evaluates securities for other-than-temporary impairment ( `` otti '' ) at least on a quarterly basis , and more frequently when economic or market conditions warrant such an evaluation . declines in the fair value of securities below their cost that are other-than-temporary are reflected as realized losses . in estimating other-than-temporary losses , management considers the length of time and extent that fair value has been less than cost and the financial condition and near term prospects of the issuer . management also assesses whether it intends to sell , or it is more likely than not that it will be required to sell , a security in an unrealized loss position before recovery of its amortized cost basis . if either of the criteria regarding intent or requirement to sell is met , the entire difference between amortized cost and fair value is recognized as impairment through earnings . for debt securities that do not meet the aforementioned criteria , the amount of impairment is split into two components as follows : 1 ) otti related to credit loss , which must be recognized in the income statement and 2 ) otti related to other factors , which is recognized in other comprehensive income . the credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis . for equity securities , the entire amount of impairment is recognized through earnings . -38- valuation of goodwill , intangible assets and other purchase accounting adjustments . intangible assets are comprised of goodwill , core deposit intangibles and mortgage servicing rights .
| performance summary year ended december 31 , 2016 compared with year ended december 31 , 2015 . net income for the year ended december 31 , 2016 was $ 14.1 million , a decrease of $ 0.4 million , or 2.8 % , from $ 14.5 million for the year ended december 31 , 2015. net income available to common shareholders for the year ended december 31 , 2016 was $ 14.1 million which was a decrease of $ 28,000. the decrease in net income of $ 0.4 million for the year ended december 31 , 2016 was primarily the result of increased interest expense and increased noninterest expense , partially offset by an increase in interest income and noninterest income . net gains on securities sales for the years ended december 31 , 2016 and 2015 were $ 3.8 million and $ 3.3 million , respectively . earnings per common share for the year ended december 31 , 2016 was $ 1.85 per common share , a decrease of 8.0 % or $ 0.16 per common share from $ 2.01 per common share for the year ended december 31 , 2015 ( as adjusted for the 10 % stock dividend in december 2015 ) . year ended december 31 , 2015 compared with year ended december 31 , 2014. net income for the year ended december 31 , 2015 was $ 14.5 million , an increase of $ 3.3 million , or 29.2 % , from $ 11.2 million for the year ended december 31 , 2014. net income available to common shareholders for the year ended december 31 , 2015 was $ 14.1 million which was an increase of $ 3.3 million from $ 10.8 million for 2014. the increase in net income for the year ended december 31 , 2015 was primarily the result of increased loan interest income , increased noninterest income , and lower interest expense .
| 7,932 |
our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors , including those set forth under the section titled “ risk factors ” and elsewhere in this report . overview we are a clinical-stage gene therapy company pioneering the development of product candidates using our targeted and evolved aav vectors . we seek to unlock the full potential of gene therapy using our platform , therapeutic vector evolution , which combines the power of directed evolution with our approximately one billion synthetic capsid sequences to invent evolved vectors for use in targeted gene therapy products . our targeted and evolved vectors are invented with the goal of being delivered through clinically routine , well-tolerated and minimally invasive routes of administration , of transducing diseased cells in target tissues efficiently , of having reduced immunogenicity and , where relevant , of having resistance to pre-existing antibodies . we believe these key design features will help us to potentially create targeted gene therapy product candidates with improved therapeutic profiles , and address a broad range of diseases from rare to large patient populations , including those that other gene therapies are unable to address . each of our product candidates is created with our targeted and evolved aav vectors . our platform is designed to be modular , in that an evolved vector invented for a given set of diseases can be equipped with different transgene payloads to treat other diseases affecting the same tissue types . we believe this modularity will help inform the clinical development of subsequent product candidates using the same vector . we have built a deep portfolio of gene therapy product candidates initially focused in three therapeutic areas : ophthalmology ( intravitreal vector ) , cardiology ( intravenous vector ) and pulmonology ( aerosol vector ) . we have three product candidates that are in clinical trials . we are developing 4d-125 for the treatment of x-linked retinitis pigmentosa ( “ xlrp ” ) , currently in phase 1/2 clinical trial with initial clinical data expected in the second half of 2021. we are advancing 4d-110 for the treatment of choroideremia , currently in a phase 1 clinical trial with initial clinical data expected in 2022. roche holds an exclusive worldwide license to 4d-110 and has the exclusive option to in-license 4d-125 prior to initiation of pivotal clinical trials . we received fda fast track designation for 4d-310 for the treatment of fabry disease , which is currently in a phase 1/2 clinical trial , with initial clinical data expected in the second half of 2021. our two ind candidates are 4d-150 for the treatment of wet age-related macular degeneration ( “ wet amd ” ) , and 4d-710 for the treatment of cystic fibrosis lung disease . we expect to file the ind and to initiate clinical trials for both of these programs in the second half of 2021. we have funded our operations primarily through the sale and issuance of equity securities and to a lesser extent from cash received pursuant to our collaboration and license agreements . in december 2020 , we completed our ipo and issued and sold 9,660,000 shares of common stock at a price to the public of $ 23.00 per share . the aggregate net proceeds from our ipo were $ 204.7 million after deducting underwriting discounts and commissions and other offering costs . as of december 31 , 2020 , we had cash and cash equivalents of $ 276.7 million . we have incurred significant operating losses and expect that our operating losses will increase significantly as we , among other things , continue to advance our product candidates through preclinical and clinical development , seek regulatory approval , and prepare for , and , if approved , proceed to commercialization ; broaden and improve our platform ; acquire , discover , validate and develop additional product candidates ; maintain , protect and enforce our intellectual property portfolio ; and hire additional personnel . in addition , we expect to incur additional costs associated with operating as a public company . 140 our net losses were $ 56.7 million and $ 49.3 million for the years ended december 31 , 2020 and 2019 , respectively . as of december 31 , 2020 , we had an accumulated deficit of $ 135.7 million . we do not expect positive cash flows from operations in the foreseeable future . our net losses may fluctuate significantly from quarter-to-quarter and year-to-year , depending on the timing of our clinical trials and our expenditures on other research and development activities . we do not have any products approved for sale and have not generated any revenue from product sales since our inception . our ability to generate product revenue will depend on the successful development , regulatory approval and eventual commercialization of one or more of our product candidates , if approved . we will require substantial additional funding to support our continuing operations and further the development of our product candidates . until such time as we can generate significant revenue from product sales , if ever , we expect to finance our operations through the sale of equity , debt financings , or other capital sources , which could include income from collaborations , strategic partnerships or other strategic arrangements , for the foreseeable future . adequate funding may not be available when needed or on terms acceptable to us , or at all . if we are unable to raise additional capital as needed , we may have to significantly delay , scale back or discontinue development of our product candidates . our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to , and volatility in , the credit and financial markets in the united states and worldwide resulting from the ongoing covid-19 pandemic and otherwise . story_separator_special_tag we do not allocate our costs by product candidate , as a significant amount of research and development expenses includes internal costs , such as payroll and other personnel expenses , laboratory supplies and allocated overhead , and external costs , such as fees paid to third parties to conduct research and development activities on our behalf , none of which are tracked by product candidate . in particular , with respect to internal costs , several of our departments support multiple product candidate research and development programs , and therefore the costs can not be allocated to a particular product candidate or development program . at this time , we can not reasonably estimate or know the nature , timing or estimated costs of the efforts that will be necessary to complete the development of , and obtain regulatory approval for , any of our product candidates . we expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates , as our product candidates advance into later stages of development , as we begin to conduct larger clinical trials , as we seek regulatory approvals for any product candidates that successfully complete clinical trials , and incur expenses associated with hiring additional personnel to support our research and development efforts . the process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming , and the successful development of our product candidates is highly uncertain . see the section titled “ risk factors ” for additional risks regarding regulatory development and approval . general and administrative our general and administrative expenses consist primarily of personnel-related expenses , including salaries , employee benefit costs and stock-based compensation expense for our personnel in executive , finance and accounting , human resources , business development and other administrative functions . general and administrative expenses also include professional fees for legal , patent , consulting , accounting and tax services , allocated overhead , including rent , equipment , depreciation , information technology costs and utilities , and other general operating expenses not otherwise classified as research and development expenses . we expect our general and administrative expenses to increase as a result of increased personnel-related costs , patent costs for our product candidates , consulting , legal and accounting services associated with maintaining compliance with stock exchange listing and requirements of the sec , investor relations costs , director and officer insurance premiums and other costs associated with being a public company . other income ( expense ) our other income ( expense ) primarily consists of interest income earned on our cash equivalents and adjustments for the change in the fair value of our derivative liability which must be remeasured at each reporting period . 143 story_separator_special_tag support our operations and the outlays and operating expenditures necessary to complete the development of our product candidates and build additional manufacturing capacity , and we may use our available capital resources sooner than we currently expect . our future capital requirements will depend on many factors , including : the progress of our current and future product candidates through preclinical and clinical development ; potential delays in our preclinical studies and clinical trials , whether current or planned , due to the covid-19 pandemic , or other factors ; expanding our manufacturing facilities and working with our contract manufacturers to scale up the manufacturing processes for our product candidates ; continuing our research and discovery activities ; continuing the development of our therapeutic vector evolution platform ; initiating and conducting additional preclinical , clinical or other studies for our product candidates ; changing or adding additional contract manufacturers or suppliers ; seeking regulatory approvals and marketing authorizations for our product candidates ; establishing sales , marketing and distribution infrastructure to commercialize any products for which we obtain approval ; acquiring or in-licensing product candidates , intellectual property and technologies ; making milestone , royalty or other payments due under any current or future collaboration or license agreements ; obtaining , maintaining , expanding , protecting and enforcing our intellectual property portfolio ; attracting , hiring and retaining qualified personnel ; potential delays or other issues related to our operations ; meeting the requirements and demands of being a public company ; defending against any product liability claims or other lawsuits related to our products ; and the impact of the covid-19 pandemic , which may exacerbate the magnitude of the factors discussed above . we believe that our existing cash and cash equivalents will allow us to fund our planned operations for at least one year from the date of the issuance of the financial statements for the year ended december 31 , 2020. we have based our estimates as to how long we expect we will be able to fund our operations on assumptions that may prove to be wrong , and we could use our available capital resources sooner than we currently expect , in which case we would be required to obtain additional financing sooner than 146 currently projected , which may not be available to us on acceptable terms , or at all . our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy . see the section titled “ risk factors ” for additional risks associated with our substantial capital requirements . we do not have any committed external sources of funds . accordingly , we will be required to obtain further funding through public or private equity offerings , debt financings , collaborations and licensing arrangements or other sources to complete the clinical development for the product candidates in treatment of fabry disease , xlrp or choroideremia or any other indication we may pursue . if we raise additional funds by issuing equity securities , our stockholders may experience dilution .
| results of operations comparison of the years ended december 31 , 2020 and 2019 the following table summarizes our results of operations for the periods indicated ( dollars in thousands ) : replace_table_token_1_th * percentage is not meaningful revenue revenue increased $ 6.6 million , or 95 % , from the year ended december 31 , 2019 to the year ended december 31 , 2020 due to a $ 6.6 million increase in revenue recognized under our collaboration and license agreement with roche and a $ 0.7 million increase in revenue recognized under our collaboration and license agreement with uniqure , which was partially offset by a decline in revenue recognized from other collaboration and license agreements . research and development expenses the following table provides a breakout of research and development expenses for the periods indicated ( dollars in thousands ) : replace_table_token_2_th research and development expense increased $ 14.3 million , or 37 % , from the year ended december 31 , 2019 to the year ended december 31 , 2020. the increase was due to the following : an $ 8.1 million increase in external costs as we continue to develop novel vectors , identify potential product candidates and progress our preclinical studies and clinical trials ; a $ 3.9 million increase in payroll and personnel expenses due to increased headcount of research and development personnel , including a $ 0.5 million increase in employee stock-based compensation expense ; and 144 a $ 2.3 million increase in other research and development expenses primarily for allocated overhead , including rent , equipment , depreciation , information technology costs and utilities .
| 7,933 |
the risk-free rate is based on the rate at the grant date of zero-coupon u.s. treasury notes with a term equal to the expected term of the option . expected volatility is estimated using historical volatility rates based on historical weekly price changes over a term equal to the expected term of the options . the company 's dividend yield is based on historical data . the company recognizes compensation expense using the straight-line method over the vesting period of the options except for those issued to certain retirement-eligible participants , which are expensed on an accelerated basis . 67 forfeitures forfeitures of share-based awards are estimated at the time of grant and revised , if necessary , in subsequent periods if actual forfeitures differ from those estimates . earnings per share basic earnings per common share ( “ eps story_separator_special_tag the following discussion and analysis of our results of operations and financial condition for the fiscal years ended march 31 , 2019 , 2018 and 2017 , should be read in conjunction with our audited consolidated financial statements and the notes to those statements included in item 8. financial statements and supplementary data , of this annual report on form 10-k. our discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties , such as our plans , objectives , opinions , expectations , anticipations and intentions and beliefs . actual results and the timing of events could differ materially from those anticipated in those forward-looking statements as a result of a number of factors . see “ cautionary note regarding forward-looking statements , ” “ business ” and “ risk factors , ” sections elsewhere in this annual report on form 10-k. in the following discussion and analysis of results of operations and financial condition , certain financial measures may be considered “ non-gaap financial measures ” under the sec rules . these rules require supplemental explanation and reconciliation , which is provided in this annual report on form 10-k. enersys ' management uses the non-gaap measures , ebitda and adjusted ebitda , in its computation of compliance with loan covenants . these measures , as used by enersys , adjust net earnings determined in accordance with gaap for interest , taxes , depreciation and amortization , and certain charges or credits as permitted by our credit agreements , that were recorded during the periods presented . enersys ' management uses the non-gaap measures , `` primary working capital '' and `` primary working capital percentage '' ( see definition in “ liquidity and capital resources ” below ) along with capital expenditures , in its evaluation of business segment cash flow and financial position performance . these non-gaap disclosures have limitations as analytical tools , should not be viewed as a substitute for cash flow or operating earnings determined in accordance with gaap , and should not be considered in isolation or as a substitute for analysis of the company 's results as reported under gaap , nor are they necessarily comparable to non-gaap performance measures that may be presented by other companies . this supplemental presentation should not be construed as an inference that the company 's future results will be unaffected by similar adjustments to operating earnings determined in accordance with gaap . overview enersys ( the “ company , ” “ we , ” or “ us ” ) is the world 's largest manufacturer , marketer and distributor of industrial batteries . we also manufacture , market and distribute products such as battery chargers , power equipment , battery accessories , and outdoor cabinet enclosures . additionally , we provide related aftermarket and customer-support services for our products . we market our products globally to over 10,000 customers in more than 100 countries through a network of distributors , independent representatives and our internal sales force . we operate and manage our business in three geographic regions of the world—americas , emea and asia , as described below . our business is highly decentralized with manufacturing locations throughout the world . more than half of our manufacturing capacity is located outside the united states , and approximately 50 % of our net sales were generated outside the united states . the company currently has three reportable business segments based on geographic regions , defined as follows : americas , which includes north and south america , with our segment headquarters in reading , pennsylvania , u.s.a. ; emea , which includes europe , the middle east and africa , with our segment headquarters in zug , switzerland ; and asia , which includes asia , australia and oceania , with our segment headquarters in singapore . we evaluate business segment performance based primarily upon operating earnings exclusive of highlighted items . highlighted items are those that the company deems are not indicative of ongoing operating results , including those charges that the company incurs as a result of restructuring activities , impairment of goodwill and indefinite-lived intangibles and other assets , acquisition activities and those charges and credits that are not directly related to operating unit performance , such as significant legal proceedings , erp system implementation , amortization of recently acquired intangible assets and tax valuation allowance changes , including those related to the adoption of the tax cuts and jobs act . because these charges are not incurred as a result of ongoing operations , or are incurred as a result of a potential or previous acquisition , they are not as helpful a measure of the performance of our underlying business , particularly in light of their unpredictable nature and are difficult to forecast . all corporate and centrally incurred costs are allocated to the business segments based principally on net sales . we evaluate business segment cash flow and financial position performance based primarily upon capital expenditures and primary working capital levels ( see definition of primary working capital in “ liquidity and capital resources ” below ) . story_separator_special_tag a substantial majority of the company 's cash and investments are held by foreign subsidiaries . the majority of that cash and investments is expected to be utilized to fund local operating activities , capital expenditure requirements and acquisitions . the company believes that it has sufficient sources of domestic and foreign liquidity . we believe that our strong capital structure and liquidity affords us access to capital for future capital expenditures , acquisition and stock repurchase opportunities and continued dividend payments . cost savings initiatives cost savings programs remain a continuous element of our business strategy and are directed primarily at further reductions in plant manufacturing ( labor and overhead ) , raw material costs and our operating expenses ( primarily selling , general and administrative ) . in order to realize cost savings benefits for a majority of these initiatives , costs are incurred either in the form of capital expenditures , funding the cash obligations of previously recorded restructuring expenses or current period expenses . in january 2017 , we started our operational excellence program , referred to as the enersys operating system , or eos , which serves as our continuous improvement engine . during fiscal 2018 and 2019 , we were able to fund our investment in new product development and digital core with savings of approximately $ 25 million in each year , primarily from restructuring programs . our global deployment of eos has slowed in fiscal 2019 and we have struggled to maintain pace with surging customer demand for tppl amidst disruptions from our erp implementation . we constantly evaluate the return on investment to ensure we achieve our targeted improvement by the end of fiscal 2021 , but accomplishing this will require strong results in fiscal 2020 and 2021. critical accounting policies and estimates our significant accounting policies are described in note 1 - summary of significant accounting policies to the consolidated financial statements in item 8. in preparing our financial statements , management is required to make estimates and assumptions that , among other things , affect the reported amounts in the consolidated financial statements and accompanying notes . these estimates and assumptions are most significant where they involve levels of subjectivity and judgment necessary to account for highly uncertain matters or matters susceptible to change , and where they can have a material impact on our financial condition and operating performance . we discuss below the more significant estimates and related assumptions used in the preparation of our consolidated financial statements . if actual results were to differ materially from the estimates made , the reported results could be materially affected . revenue recognition we adopted the new accounting standard for the recognition of revenue under asc 606 for the fiscal year beginning on april 1 , 2019. under this standard , we recognize revenue only when we have satisfied a performance obligation through transferring 28 control of the promised good or service to a customer . the standard indicates that an entity must determine at contract inception whether it will transfer control of a promised good or service over time or satisfy the performance obligation at a point in time through analysis of the following criteria : ( i ) the entity has a present right to payment , ( ii ) the customer has legal title , ( iii ) the customer has physical possession , ( iv ) the customer has the significant risks and rewards of ownership and ( v ) the customer has accepted the asset . our primary performance obligation to our customers is the delivery of finished goods and products , pursuant to purchase orders . control of the products sold typically transfers to our customers at the point in time when the goods are shipped as this is also when title generally passes to our customers under the terms and conditions of our customer arrangements . we assess collectibility based primarily on the customer 's payment history and on the creditworthiness of the customer . management believes that the accounting estimates related to revenue recognition are critical accounting estimates because they require reasonable assurance of collection of revenue proceeds and completion of all performance obligations . also , revenues are recorded net of provisions for sales discounts and returns , which are established at the time of sale . these estimates are based on our past experience . for additional information on the new accounting standard for the recognition of revenue see note 1 of notes to the consolidated financial statements . asset impairment determinations we test for the impairment of our goodwill and indefinite-lived trademarks at least annually and whenever events or circumstances occur indicating that a possible impairment has been incurred . we perform our annual goodwill impairment test on the first day of our fourth quarter for each of our reporting units based on the income approach , also known as the discounted cash flow ( “ dcf ” ) method , which utilizes the present value of future cash flows to estimate fair value . we also use the market approach , which utilizes market price data of companies engaged in the same or a similar line of business as that of our company , to estimate fair value . a reconciliation of the two methods is performed to assess the reasonableness of fair value of each of the reporting units . the future cash flows used under the dcf method are derived from estimates of future revenues , operating income , working capital requirements and capital expenditures , which in turn reflect specific global , industry and market conditions . the discount rate developed for each of the reporting units is based on data and factors relevant to the economies in which the business operates and other risks associated with those cash flows , including the potential variability in the amount and timing of the cash flows . a terminal growth rate is applied to the final year of the projected period and reflects our estimate of stable growth to perpetuity .
| overview our sales in fiscal 2019 were $ 2.8 billion , an 8.8 % increase from prior year 's sales . this increase was the result of a 6 % increase due to the alpha acquisition ( as discussed in part i , item 1 of this annual report ) , a 3 % increase in organic volume and a 2 % increase in pricing , partially offset by a 2 % decrease in foreign currency translation impact . 32 a discussion of specific fiscal 2019 versus fiscal 2018 operating results follows , including an analysis and discussion of the results of our reportable segments . net sales segment sales replace_table_token_3_th the americas segment 's net sales increased by $ 261.1 million or 18.3 % in fiscal 2019 , as compared to fiscal 2018 , primarily due to an 11 % increase due to the alpha acquisition , a 6 % increase in organic volume and a 3 % increase in pricing , partially offset by a 2 % decrease in currency translation impact . the emea segment 's net sales increased by $ 11.1 million or 1.3 % in fiscal 2019 , as compared to fiscal 2018 , primarily due to a 5 % increase in organic volume , partially offset by a 4 % decrease in currency translation impact . the asia segment 's net sales decreased by $ 46.0 million or 15.2 % in fiscal 2019 , as compared to fiscal 2018 , primarily due to a 14 % decrease in organic volume reflecting dramatic declines in china telecom demands and a general softening of demand in australia , and a 3 % decrease in currency translation impact , partially offset by a 2 % increase in pricing .
| 7,934 |
on june 7 , 2012 , we entered into a sublease and master landlord consent agreement for our headquarters office facility located in redwood city , california . this lease covers approximately 21,620 square feet and will expire on february 18 , 2017. the lease provides for escalating payments over the story_separator_special_tag 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 included elsewhere in this form 10-k. the following discussion includes forward-looking statements . please see the section entitled “ risk factors ” in item 1a of this report for important information to consider when evaluating these statements . overview support.com , inc. is a leading provider of cloud-based software and services that enable technology support for a connected world . our technology support services programs help leading brands create new revenue streams and deepen customer relationships . we offer turnkey , outsourced support services for service providers , retailers and technology companies . our technology support services programs are designed for both the consumer and small business markets , and include computer and mobile device set-up , security and support , virus and malware removal , wireless network set-up , and home security and automation system support . total revenue for the year ended december 31 , 2014 decreased by $ 5.2 million , or 6 % , from 2013. revenue from services increased by $ 2.4 million , or 3 % , from 2013. the increase in services revenue over the prior year was due to growth in our partner programs , primarily the programs for comcast . revenue from software and other decreased by $ 7.6 million , or 57 % , from 2013 due to a decision to discontinue our largest advertising placements in the second half of 2013 because they were no longer profitable . cost of services for the year ended december 31 , 2014 increased by 40 % from 2013 primarily as a result of the hiring of additional technology specialists for our home networking support bundle program and xfinity home program with comcast . cost of software and other for the year ended december 31 , 2014 decreased by 28 % year-over-year due to lower sales of end-user software products driven by our decision to discontinue our largest advertising placements in the second half of 2013. total gross margin declined from 50 % to 26 % year-over-year due to a higher percentage of revenue generated by the lower margin comcast home networking support bundle program and comcast xfinity home program which replaced the higher margin comcast xfinity signature support program . operating expenses for the year ended december 31 , 2014 decreased by 25 % from 2013 , driven by a decision to discontinue our largest advertising placements in the second half of 2013 because they were no longer profitable . we expect to increase research and development and sales and marketing investment related to nexus during 2015. our key goals for 2015 are to increase saas revenue from nexus , to expand existing service programs , to launch service programs with new partners , to improve service delivery efficiency and to execute on our product roadmap to provide full lifecycle support for the internet of things . we intend the following discussion of our financial condition and results of operations to provide information that will assist in understanding our consolidated financial statements , the changes in certain key items in those consolidated financial statements from year to year , and the primary factors that accounted for those changes , as well as how certain accounting principles , policies and estimates affect our consolidated financial statements . critical accounting policies and estimates in preparing our consolidated financial statements in conformity with generally accepted accounting principles in the united states , we make assumptions , judgments and estimates that can have a significant impact on our revenue and operating results , as well as on the value of certain assets and liabilities on our consolidated balance sheet . we base our assumptions , judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances . actual results could differ materially from these estimates under different assumptions or conditions . on a regular basis we evaluate our assumptions , judgments and estimates and make changes accordingly . we believe that the assumptions , judgments and estimates involved in the accounting for revenue recognition , fair value measurements , purchase accounting in business combinations , accounting for goodwill and other intangible assets , stock-based compensation and accounting for income taxes have the greatest potential impact on our consolidated financial statements , so we consider these to be our critical accounting policies . we discuss below the critical accounting estimates associated with these policies . for further information on the critical accounting policies , see note 1 of our notes to consolidated financial statements . 23 revenue recognition our revenue recognition policy is one of our critical accounting policies because revenue is a key component of our results of operations , and revenue recognition is based on complex rules which require us to make judgments . in accordance with the provisions of asc 605 , revenue recognition , we recognize revenue only when all of the following criteria are met : ( i ) persuasive evidence of an arrangement exists , ( ii ) delivery has occurred , ( iii ) collection is considered probable , and ( iv ) the fees are fixed or determinable . we do not record revenue on sales transactions when the collection of cash is in doubt at the time of sale , and we use management judgment in determining collectability . from time to time , we may enter into agreements which involve us making payments to our partners . story_separator_special_tag an impairment loss would be recognized when the sum of the future net cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying value . if our estimates regarding future cash flows derived from such assets were to change , we may record an impairment charge to the value of these assets . such impairment loss would be measured as the difference between the carrying value of the asset and its fair value . stock-based compensation we account for stock-based compensation in accordance with the provisions of asc 718 , compensation - stock compensation . under the fair value recognition provisions of asc 718 , stock-based compensation cost is estimated at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period of the award . we estimate the fair value of stock-based awards on the grant date using ( i ) the black-scholes-merton option-pricing model for service-based stock options , ( ii ) the monte-carlo simulation model for market-based stock options , and ( iii ) the quoted prices of the company 's common stock for restricted stock units . determining the appropriate fair value model and calculating the fair value of stock-based awards requires judgment , including estimating stock price volatility , forfeiture rates and expected life . if any of these assumptions used in the option-pricing models change , our stock-based compensation expense could change on our consolidated financial statements . accounting for income taxes we are required to estimate our income taxes in each of the tax jurisdictions in which we operate . this process involves management 's estimation of our current tax exposures together with an assessment of temporary differences determined based on the difference between the financial statement and tax basis of certain items . these differences result in net deferred tax assets and liabilities , which are included in our consolidated balance sheet . we must assess the likelihood that we will be able to recover our deferred tax assets . if recovery is not likely , we must increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable . we currently have provided a full valuation allowance on our u.s. deferred tax assets that management determined are not likely to be realized due to cumulative net losses since inception and the difficulty in accurately forecasting the company 's results . in addition , we currently have provided a partial valuation allowance on certain foreign deferred tax assets . if any of our estimates change , we may change the likelihood of recovery and our tax expense as well as the value of our deferred tax assets would change . our deferred tax assets do not include excess tax benefits related to stock-based compensation post asc 718 adoption . the total excess tax benefit component of our federal and state net operating loss carryforwards is $ 4.3 million as of december 31 , 2014. consistent with prior years , the excess tax benefit reflected in our net operating loss carryforwards will be accounted for as a credit to stockholders ' equity , if and when realized . in determining if and when excess tax benefits have been realized , we have elected to utilize the with-and-without approach with respect to such excess tax benefits . our income tax calculations are based on the application of the respective u.s. federal , state or foreign tax law . the company 's tax filings , however , are subject to audit by the respective tax authorities . accordingly , we recognize tax liabilities based on our estimate of whether , and the extent to which , additional taxes will be due when such estimates are more-likely-than-not to be sustained . an uncertain income tax position will not be recognized if it has less than a 50 % likelihood of being sustained . our policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense . to the extent the final tax liabilities are different than the amounts originally accrued , the increases or decreases are recorded as income tax expense or benefit in the consolidated statements of operations . 25 story_separator_special_tag a $ 1.0 million increase in advertising costs for end-user software products ( prior to our decision to discontinue our largest advertising placements in the second half of 2013 ) . general and administrative . general and administrative expense consists primarily of compensation costs and related overhead costs for administrative personnel and professional fees for legal , accounting and other professional services . general and administrative expense was consistent year-over-year at $ 11.3 million . the decrease of $ 858,000 in general and administrative expense for the year ended december 31 , 2013 compared to 2012 resulted from a $ 683,000 decrease in stock-based compensation expense , a $ 262,000 decrease in franchise taxes and a $ 241,000 decrease in professional services and legal related fees , offset by a $ 541,000 increase in recruiting fees for certain corporate positions and hiring expenses to support the growth in our services programs . amortization of intangible assets and other . the decrease of $ 230,000 in amortization of intangible assets and other for the year ended december 31 , 2014 compared to 2013 was due to certain intangible assets becoming fully amortized as of the end of 2013. the decrease of $ 201,000 in amortization of intangible assets and other for the year ended december 31 , 2013 compared to 2012 was due to the re-measurement of milestone based earn-outs associated with the acquisitions of righthand it corporation in january 2012 and superantispyware in june 2011. interest income and other , net ( $ in thousands ) 2014 % change 2013 to 2014 2013 % change 2012 to 2013 2012 interest income and other , net $ 294 ( 20 ) % $ 369 24 % $ 297 28 interest income
| results of operations the following table presents certain consolidated statements of operations data for the periods indicated as a percentage of total revenue : replace_table_token_4_th years ended december 31 , 2014 , 2013 , and 2012 : revenue replace_table_token_5_th services . services revenue consists primarily of fees for technology services generated from our partners . we provide these services remotely , generally using service delivery personnel who utilize our proprietary technology to deliver the services . services revenue is also comprised of the licensing of nexus . services revenue for the year ended december 31 , 2014 increased by $ 2.4 million from 2013. the increase was mainly due to continued growth in our comcast programs . for the year ended december 31 , 2014 , services revenue generated from our partnerships was $ 70.9 million compared to $ 70.6 million for 2013. for the year ended december 31 , 2014 , direct services revenue was $ 6.4 million compared to $ 4.2 million for 2013 . services revenue for the year ended december 31 , 2013 increased by $ 17.2 million from 2012. the increase was due primarily to continued growth in our partner programs , primarily the programs for comcast . for the year ended december 31 , 2013 , services revenue generated from our partnerships was $ 70.6 million compared to $ 54.4 million for 2012. direct services revenue was $ 4.2 million compared to $ 3.2 million for 2012 . 26 software and other . software and other revenue is comprised primarily of fees for end-user software products provided through direct customer downloads , and , to a lesser extent , through the sale of these software products via partners .
| 7,935 |
( 3 ) property and equipment , net the components of property and equipment as of january 30 , 2016 and january 31 , 2015 are as follows ( in thousands ) : replace_table_token_16_th ( 4 ) fair value measurements fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market at the measurement date . fair value is established according to a hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels , which are described below : f- story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with the section entitled selected financial and operating data and our audited consolidated financial statements and the respective related notes included elsewhere in this annual report on form 10-k. this discussion may contain forward-looking statements that involve risks and uncertainties . as a result of many factors , such as those set forth under the section entitled risk factors and elsewhere in this report , our actual results may differ materially from those anticipated in these forward-looking statements . overview we are an off-price retailer of urban fashion apparel and accessories for the entire family . our merchandise offerings are designed to appeal to the preferences of fashion conscious consumers , particularly african-americans . we operate 521 stores in both urban and rural markets in 31 states . after opening thirteen new stores in fiscal 2015 , we plan to open fifteen to twenty in fiscal 2016. we will continue to evaluate our growth strategy as we monitor operating results in fiscal 2016. we measure performance using key operating statistics . one of the main performance measures we use is comparable store sales growth . we define a comparable store as a store that has been open for an entire fiscal year . therefore , a store will not be considered a comparable store until its 13th month of operation at the earliest or until its 24th month at the latest . as an example , stores opened in fiscal 2014 and fiscal 2015 were not considered comparable stores in fiscal 2015. relocated and expanded stores are included in the comparable store sales results . we also use other operating statistics , most notably average sales per store , to measure our performance . as we typically occupy existing space in established shopping centers rather than sites built specifically for our stores , store square footage ( and therefore sales per square foot ) varies by store . we focus on overall store sales volume as the critical driver of profitability . in addition to sales , we measure cost of sales as a percentage of sales and store operating expenses , with a particular focus on labor , as a percentage of sales . these results translate into store level contribution , which we use to evaluate overall performance of each individual store . finally , we monitor corporate expenses against budgeted amounts . all of the statistics discussed above are critical components of earnings before interest , taxes , depreciation and amortization ( ebitda ) and adjusted ebitda ( comprised of ebitda , excluding non-cash asset impairment expense and the 2013 gain on sale of our former distribution center ) , which are considered our most important operating statistics . although ebitda and adjusted ebitda provide useful information on an operating cash flow basis , they are limited measures in that they exclude the impact of cash requirements for capital expenditures , income taxes and interest expense and should not be regarded as comparable to similarly titled measures used by other companies . therefore , ebitda and adjusted ebitda should be used as supplements to results of operations and cash flows as reported under generally accepted accounting principles ( gaap ) and should not be used as the only measures of operating performance or as a substitute for gaap results . 19 provided below is a reconciliation of net income to ebitda and to adjusted ebitda for fiscal years ended january 30 , 2016 , january 31 , 2015 and february 1 , 2014 : replace_table_token_6_th basis of the presentation net sales consist of store sales and layaway fees , net of returns by customers . cost of sales consists of the cost of products we sell and associated freight costs . depreciation is not considered a component of cost of sales and is included as a separate line item in the consolidated statements of operations . selling , general and administrative expenses are comprised of store costs , including payroll and occupancy costs , corporate and distribution center costs and advertising costs . we operate on a 52- or 53-week fiscal year , which ends on the saturday closest to january 31. each of our fiscal quarters consists of four 13-week periods , with an extra week added to the fourth quarter every five to six years . the years ended january 30 , 2016 , january 31 , 2015 , february 1 , 2014 , february 2 , 2013 and january 28 , 2012 are referred to as fiscal 2015 , 2014 , 2013 , 2012 and 2011 , respectively . fiscal 2012 is comprised of 53 weeks , while fiscal years 2015 , 2014 , 2013 and 2011 are each comprised of 52 weeks . story_separator_special_tag style= '' font-size:10.0pt ; '' > income tax expense . income tax expense increased $ 6.7 million to $ 8.8 million in fiscal 2015 from $ 2.1 million in fiscal 2014 due to pretax income increasing $ 13.2 million , accompanied by an increase in the effective income tax rate to 36.1 % from 19.3 % . the increase in the effective tax rate from last year resulted from tax credits being lower as a percentage of pretax income in fiscal 2015 due to the significant increase in pretax income at the same time that work opportunity tax credits declined . story_separator_special_tag due to our strong cash and cash equivalents position as of january 30 , 2016 ( $ 39.1 million ) , we believe that we will likely not have to borrow under the credit facility during fiscal 2016. cash flows fiscal 2015 compared to fiscal 2014 as of january 30 , 2016 , we had total cash and cash equivalents of $ 39.1 million , compared with $ 74.5 million as of january 31 , 2015. additionally , we had $ 32.7 million and $ 30.9 million of short-term and long-term investment securities , respectively , as of january 30 , 2016 , compared with $ 15.9 million and $ 22.4 million , respectively , as of january 31 , 2015. these securities are comprised of bank certificates of deposit and obligations of the u.s. treasury , states and municipalities . inventory represented 43.6 % of our total assets as of january 30 , 2016 , compared with 41.2 % as of january 31 , 2015. management 's ability to manage our inventory can have a significant impact on our cash flows from operations during a given interim period or fiscal year . in addition , inventory purchases can be seasonal in nature , such as the purchase of warm-weather or christmas-related merchandise . cash flows provided by operating activities . net cash provided by operating activities was $ 27.5 million in fiscal 2015 compared with $ 40.3 million in fiscal 2014. net income , adjusted for noncash expenses such as depreciation , asset impairment , loss on disposal of property and equipment , deferred income taxes and stock-based compensation expense , provided cash of $ 39.0 million in fiscal 2015 ( compared with $ 34.2 million in fiscal 2014 ) . other significant sources of cash provided by operating activities in fiscal 2015 included a $ 2.4 million decrease in prepaid and other current assets ( compared with a $ 3.4 million increase in fiscal 2014 ) due primarily to a decrease in charge card receivables resulting from significant sales decreases in late january 2016. significant uses of cash included ( 1 ) a $ 6.0 million increase in inventory ( compared with a $ 4.6 million increase in fiscal 2014 ) due to having thirteen more stores than at the previous year end and holding more next-season-buy merchandise that was purchased opportunistically at very low costs ; ( 2 ) a $ 5.0 million decrease in accounts payable ( compared with a $ 12.1 million increase in fiscal 2014 ) due to significant sales increases in the fourth quarter of 2014 which required an increase in merchandise purchases in january 2015 ; since this higher level of purchases occurred in the last month of the fiscal year , all such purchases would have still been in accounts payable as of january 31 , 2015 ; the relationship between inventory and accounts payable was distorted due to a higher level of next-season-buy inventory at the end of fiscal 2015 , with such merchandise being already paid for since it was purchased earlier than 60 days before year end ; and ( 3 ) a $ 1.9 million decrease in accrued compensation ( compared with a $ 5.4 million increase in fiscal 2014 ) primarily as a result of lower incentive compensation accruals this year due to better financial performance relative to budget in 2014 . 23 cash flows used in investing activities . cash used in investing activities was $ 44.9 million in fiscal 2015 compared with $ 23.5 million in fiscal 2014. purchases of investment securities , net of sales/redemptions , used cash of $ 25.3 million in fiscal 2015 and $ 12.5 million in fiscal 2014. cash used for the purchase of property and equipment was $ 19.6 million in fiscal 2015 and $ 11.0 million in fiscal 2014 , with the increase resulting primarily from opening , relocating and expanding more stores in fiscal 2015 , together with capital expenditures made to enhance certain point-of-sale and other equipment in all stores . cash flows used in financing activities . cash used in financing activities was $ 18.0 million in fiscal 2015 compared with $ 1.2 million in fiscal 2014. cash used for the repurchase of 667,438 shares of common stock totaled $ 15.0 million in fiscal 2015. dividends paid to stockholders in the third and fourth quarters of fiscal 2015 used cash of $ 1.8 million . until required for other purposes , we maintain cash and cash equivalents in deposit or money market accounts . fiscal 2014 compared to fiscal 2013 as of january 31 , 2015 , we had total cash and cash equivalents of $ 74.5 million , compared with $ 58.9 million as of february 1 , 2014. additionally , we had $ 15.9 million and $ 22.4 million of short-term and long-term investment securities , respectively , as of january 31 , 2015 , compared with $ 6.0 million and $ 19.8 million , respectively , as of february 1 , 2014. these securities are comprised of bank certificates of deposit and obligations of the u.s. treasury , states and municipalities . inventory represented 41.2 % of our total assets as of january 31 , 2015 , compared with 43.4 % as of february 1 , 2014. management 's ability to manage our inventory can have a significant impact on our cash flows from operations during a given interim period or fiscal year . in addition , inventory purchases can be seasonal in nature , such as the purchase of warm-weather or christmas-related merchandise . cash flows provided by operating activities . net cash provided by operating activities was $ 40.3 million in fiscal 2014 compared with $ 35.4 million in fiscal 2013. net income , adjusted for noncash expenses such as depreciation , asset impairment , loss on disposal of property and equipment , deferred income taxes and stock-based compensation expense , provided cash of $ 34.2 million in fiscal 2014 ( compared with $ 24.1 million in fiscal 2013 ) .
| results of operations the following discussion of our financial performance is based on the consolidated financial statements set forth in the financial pages of this report . the nature of our business is seasonal . historically , sales in the first and fourth quarters have been higher than sales achieved in the second and third quarters of the fiscal year . expenses and , to a greater extent , operating income , vary by quarter . results of a period shorter than a full year may not be indicative of results expected for the entire year . furthermore , the seasonal nature of our business may affect comparisons between periods . 20 net sales and additional operating data the following table sets forth , for the periods indicated , selected consolidated statement of operations data expressed both in dollars and as a percentage of net sales : replace_table_token_7_th the following table provides information , for the years indicated , about the number of total stores open at the beginning of the year , stores opened and closed during each year , total stores open at the end of each year and the change in comparable store sales for each year : replace_table_token_8_th ( 1 ) stores included in the comparable store sales calculation for any year are those stores that were opened prior to the beginning of the preceding fiscal year and were still open at the end of such year . relocated stores and expanded stores are included in the comparable store sales results . ( 2 ) the company is reporting comparable store sales on a comparable store and comparable weeks basis ; for fiscal 2013 , the 52 weeks ended february 1 , 2014 were compared to the 52 weeks ended february 2 , 2013 . 21 fiscal 2015 compared to fiscal 2014 net sales .
| 7,936 |
overview we are primarily a hotel franchisor with franchise agreements representing 6,340 hotels open and 503 hotels under construction , awaiting conversion or approved for development as of december 31 , 2013 , with 506,058 rooms and 38,957 rooms , respectively , in 50 states , the district of columbia and more than 35 countries and territories outside the united states . our brand names include comfort inn , comfort suites , quality , clarion , ascend hotel collection , sleep inn , econo lodge , rodeway inn , mainstay suites , suburban extended stay hotel and cambria suites ( collectively , the `` choice brands '' ) . the company 's domestic franchising operations are conducted through direct franchising relationships while its international franchise operations are conducted through a combination of direct franchising and master franchising relationships . master franchising relationships are governed by master franchising agreements which generally provide the master franchisee with the right to use our brands and sub-license the use of our brands in a specific geographic region , usually for a fee . our business philosophy has been to conduct direct franchising in those international markets where both franchising is an accepted business model and we believe our brands can achieve significant scale . we elect to enter into master franchise agreements in those markets where direct franchising is currently not a prevalent or viable business model . when entering into master franchising relationships , we strive to select partners that have professional hotel and asset management capabilities together with the financial capacity to invest in building the choice brands in their respective markets . master franchising relationships typically provide lower revenues to the company as the master franchisees are responsible for managing certain necessary services ( such as training , quality assurance , reservations and marketing ) to support the franchised hotels in the master franchise area and therefore retain a larger percentage of the hotel franchise fees to cover their expenses . in certain circumstances , the company has and may continue to make equity investments in our master franchisees . as a result of our use of master franchising relationships and international market conditions , revenues from international franchising operations comprised 8 % of our total revenues in both 2013 and 2012 while representing approximately 18 % and 19 % of our franchise system hotels open at december 31 , 2013 and 2012 , respectively . therefore , our description of the franchise system is primarily focused on the domestic operations . our company generates revenues , income and cash flows primarily from initial , relicensing and continuing royalty fees attributable to our franchise agreements . revenues are also generated from qualified vendor arrangements , hotel operations and other sources . the hotel industry is seasonal in nature . for most hotels , demand is lower in december through march than during the remainder of the year . our principal source of revenues is franchise fees based on the gross room revenues of our franchised properties . the company 's franchise fee revenues and operating income reflect the industry 's seasonality and historically have been lower in the first quarter than in the second , third or fourth quarters . with a focus on hotel franchising instead of ownership , we benefit from the economies of scale inherent in the franchising business . the fee and cost structure of our business provides opportunities to improve operating results by increasing the number of franchised hotel rooms and effective royalty rates of our franchise contracts resulting in increased initial and relicensing fee revenue ; ongoing royalty fees and procurement services revenues . in addition , our operating results can also be improved through our company-wide efforts related to improving property level performance . at december 31 , 2013 , the company estimates , based on its current domestic portfolio of hotels under franchise , that a 1 % change in revenue per available room ( `` revpar '' ) or rooms under franchise would increase or decrease royalty revenues by approximately $ 2.5 million and a 1 basis point change in the company 's effective royalty rate would increase or decrease domestic royalties by 38 approximately $ 0.6 million . in addition to these revenues , we also collect marketing and reservation system fees to support centralized marketing and reservation activities for the franchise system . the company 's hotel franchising business currently has relatively low capital expenditure requirements . the principal factors that affect the company 's results are : the number and relative mix of franchised hotel rooms in the various hotel lodging price categories ; growth in the number of hotel rooms under franchise ; occupancy and room rates achieved by the hotels under franchise ; the effective royalty rate achieved ; the level of franchise sales and relicensing activity ; and our ability to manage costs . the number of rooms at franchised properties and occupancy and room rates at those properties significantly affect the company 's results because our fees are based upon room revenues at franchised hotels . the key industry standard for measuring hotel-operating performance is revpar , which is calculated by multiplying the percentage of occupied rooms by the average daily room rate realized . our variable overhead costs associated with franchise system growth of our established brands have historically been less than incremental royalty fees generated from new franchises . accordingly , continued growth of our franchise business should enable us to realize benefits from the operating leverage in place and improve operating results . we are required by our franchise agreements to use the marketing and reservation system fees we collect for system-wide marketing and reservation activities . these expenditures , which include advertising costs and costs to maintain our central reservations and property management systems , help to enhance awareness and increase consumer preference for our brands . story_separator_special_tag in march 2013 , the company announced the launch of a new division , skytouch technology ( `` skytouch '' ) , which develops and markets cloud-based technology products for the hotel industry . in conjunction with this new division , the company incurred selling , general and administrative ( `` sg & a '' ) expenses of $ 11.5 million during the year ending december 31 , 2013 primarily related to business development , sales and marketing and continued software development . notwithstanding investments in skytouch and other alternative growth strategies , the company expects to continue to return value to its shareholders through a combination of share repurchases and dividends , subject to the discretion of our board of directors as well as to business performance , economic conditions , changes in income tax regulations and other factors . we believe these investments and strategic priorities , when properly implemented , will enhance our profitability , maximize our financial returns and continue to generate value for our shareholders . the ultimate measure of our success will be reflected in the items below . results of operation : royalty fees , operating income , net income and diluted earnings per share ( `` eps '' ) represent key measurements of these value drivers . these measurements are primarily driven by the operations of our franchise system and therefore our analysis of the company 's operations is primarily focused on the size , performance and potential growth of the franchise system as well as our variable overhead costs . refer to md & a heading `` operations review '' for additional analysis of our results . liquidity and capital resources : historically , the company has generated significant cash flows from operations . since our business does not currently require significant reinvestment of capital , we typically utilize cash in ways that management believes provide the greatest returns to our shareholders which include share repurchases and dividends . however , we may determine to utilize cash for acquisitions and other investments in the future . we believe the company 's cash flow from operations and available financing capacity is sufficient to meet the expected future operating , investing and financing needs of the business . refer to md & a heading `` liquidity and capital resources '' for additional analysis . inflation : inflation has been moderate in recent years and has not had a significant impact on our business . non-gaap financial statement measurements the company utilizes certain measures which do not conform to generally accepted accounting principles accepted in the united states ( `` gaap '' ) when analyzing and discussing its results with the investment community . this information should not be considered as an alternative to any measure of performance as promulgated under gaap . the company 's calculation of these measurements may be different from the calculations used by other companies and therefore comparability may be limited . we have included a reconciliation of these measures to the comparable gaap measurement below as well as our reasons for reporting these non-gaap measures . 40 franchising revenues : the company utilizes franchising revenues , which exclude revenues from marketing and reservation system activities , the skytouch division and hotel operations , rather than total revenues when analyzing the performance of the business . marketing and reservation activities are excluded from franchising revenues since the company is contractually required by its franchise agreements to use the fees collected for marketing and reservation activities ; as such , no income or loss to the company is generated . cumulative marketing and reservation system fees not expended are recorded as a liability in the company 's financial statements and are carried over to the next fiscal year and expended in accordance with the franchise agreements . cumulative marketing and reservation expenditures incurred in excess of fees collected for marketing and reservation activities are deferred and recorded as an asset in the company 's financial statements and recovered in future periods . hotel operations reflect the company 's ownership of three mainstay suites hotels . skytouch is a division of the company that develops and markets cloud-based technology products , including inventory management , pricing and connectivity to third party channels , to hoteliers not under franchise agreements with the company . hotel and skytouch operations are excluded from franchising revenue since they do not reflect the company 's core franchising business but are adjacent , complimentary lines of business . this non-gaap measure is a commonly used measure of performance in our industry and facilitates comparisons between the company and its competitors . calculation of franchising revenues replace_table_token_15_th adjusted ebitda : we also utilize adjusted earnings before interest , taxes , depreciation and amortization ( `` adjusted ebitda '' ) to analyze our results which reflects earnings excluding the impact of interest expense , interest income , loss on extinguishment of debt , provision for income taxes , depreciation and amortization , other ( gains ) and losses and equity in net income of unconsolidated affiliates . we consider adjusted ebitda to be an indicator of operating performance because we use it to measure our ability to service debt , fund capital expenditures , and expand our business . we also use adjusted ebitda , as do analysts , lenders , investors and others , to evaluate companies because it excludes certain items that can vary widely across different industries or among companies within the same industry . for example , interest expense can be dependent on a company 's capital structure , debt levels and credit ratings . accordingly , the impact of interest expense on earnings can vary significantly among companies . the tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate . as a result , effective tax rates and provision for income taxes can vary considerably among companies .
| results of operations the company recorded net income of $ 120.7 million for the year ended december 31 , 2012 , a $ 10.3 million or 9 % increase from the year ended december 31 , 2011. the increase in net income for the year ended december 31 , 2012 is primarily attributable to a $ 21.3 million or 12 % increase in operating income and a lower effective income tax rate than the prior year . net income was further increased by a $ 4.4 million decline in other ( gains ) and losses . the decline in other ( gains ) and losses was due to a $ 2.0 million appreciation in the fair value of investments held in the company 's non-qualified benefit plans compared to a decline of $ 0.6 million in the fair value of these investments in the prior year and a $ 1.8 million loss on assets held for sale incurred in the prior year . these items were partially offset by a $ 14.3 million increase in interest expense resulting from the issuance of debt to finance the company 's $ 600.7 million special dividend paid on august 23 , 2012 and a $ 0.5 million loss on extinguishment of debt incurred as a result of refinancing the company 's $ 300 million revolving credit facility which was scheduled to mature in february 2016. adjusted ebitda increased $ 21.5 million or 12 % as the company 's franchising revenues increased by $ 16.8 million or 6 % and sg & a expenses declined $ 4.6 million or 4 % . the key drivers of these fluctuations are described in more detail below . 50 franchising revenues : franchising revenues were $ 302.2 million for the year ended december 31 , 2012 compared to $ 285.4 million for the year ended december 31 , 2011 , a 6 % increase .
| 7,937 |
healthcare trust advisors , llc ( the `` advisor `` ) , formerly known as american realty capital healthcare ii advisors , llc , has been retained by the company to manage the company 's affairs on a day-to-day basis . the company has retained healthcare trust properties , llc ( the `` property manager `` ) , formerly known as american realty capital healthcare ii properties , llc , to serve as the company 's property manager . the advisor and property manager are under common control with ar story_separator_special_tag the following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements . the following information contains forward-looking statements , which are subject to risks and uncertainties . should one or more of these risks or uncertainties materialize , actual results may differ materially from those expressed or implied by the forward-looking statements . please see `` forward-looking statements '' elsewhere in this annual report on form 10-k for a description of these risks and uncertainties . overview we invest in healthcare real estate , such as seniors housing and medical office buildings ( `` mob '' ) , located in the united states for investment purposes . as of december 31 , 2015 , we owned 166 properties located in 29 states and comprised of 8.5 million rentable square feet . we were incorporated on october 15 , 2012 as a maryland corporation that elected and qualified to be taxed as a reit beginning with our taxable year ended december 31 , 2013. substantially all of our business is conducted through healthcare trust operating partnership , lp ( the `` op '' ) , formerly known as american realty capital healthcare trust ii operating partnership , lp . in february 2013 , we commenced our initial public offering ( `` ipo '' ) on a `` reasonable best efforts '' basis of up to $ 1.7 billion of common stock , $ 0.01 par value per share , at a price of $ 25.00 per share , subject to certain volume and other discounts . we closed our ipo in november 2014 , which resulted in net proceeds to us of $ 2.1 billion . 55 on march 18 , 2015 , we announced our intention to list our common stock on a national stock exchange under the symbol “ hti ” ( the `` listing '' ) during the third quarter of 2015. on september 24 , 2015 , we announced that our board of directors had determined that it was in our best interest to not pursue the listing during the third quarter of 2015. our board of directors continues to monitor market conditions and other factors with a view toward reevaluating the listing decision when market conditions are more favorable . there can be no assurance that our shares of common stock will be listed . we anticipate publishing an estimate of per share net asset value ( `` nav '' ) on or prior to april 11 , 2016 ( the `` nav pricing date '' ) , and subsequent valuations will occur periodically , at the discretion of our board of directors , provided that such calculations will be made at least annually . in the interim , we will continue to offer shares pursuant to our distribution reinvestment plan ( `` drip '' ) at $ 23.75 per share , and to repurchase shares pursuant to our share repurchase program ( as amended , the `` srp '' ) . beginning with the nav pricing date , the per share price for shares under the drip and srp will vary periodically and will be based upon our nav . we have no direct employees . healthcare trust advisors , llc ( the `` advisor '' ) , formerly known as american realty capital healthcare ii advisors , llc , has been retained by us to manage our affairs on a day-to-day basis . we have retained healthcare trust properties , llc ( the `` property manager '' ) , formerly known as american realty capital healthcare ii properties , llc , to serve as our property manager . the advisor and property manager are under common control with ar global investments , llc ( the successor business to ar capital , llc , `` ar global '' ) , the parent of our sponsor , american realty capital vii , llc ( the `` sponsor '' ) , as a result of which they are related parties , and each have received or will receive compensation , fees and expense reimbursements for services related to managing of our business . the advisor , property manager and our former dealer manager , realty capital securities , llc ( the `` former dealer manager '' ) , also have received or will receive compensation , fees and expense reimbursements from us related to the investment and management of our assets . our former dealer manager served as the dealer manager of our ipo and , together with certain of its affiliates , continued to provide us with various services through december 31 , 2015. rcs capital corporation , the parent company of the former dealer manager and certain of its affiliates that provided us with services , filed for chapter 11 bankruptcy protection in january 2016 , prior to which it was also under common control with ar global , the parent of our sponsor . significant accounting estimates and critical accounting policies set forth below is a summary of the significant accounting estimates and critical accounting policies that management believes are important to the preparation of our financial statements . certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by our management . as a result , these estimates are subject to a degree of uncertainty . story_separator_special_tag real estate investments that are intended to be sold are designated as `` held for sale '' on the consolidated balance sheets at the lesser of the carrying amount or fair value less estimated selling costs when they meet specific criteria to be presented as held for sale . real estate investments are no longer depreciated when they are classified as held for sale . if the disposal , or intended disposal , of certain real estate investments represents a strategic shift that has had or will have a major effect on our operations and financial results , the operations of such real estate investments would be presented as discontinued operations in the consolidated statements of operations and comprehensive loss for all applicable periods . depreciation and amortization depreciation is computed using the straight-line method over the estimated useful lives of up to 40 years for buildings , 15 years for land improvements , five years for fixtures and improvements , and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests . construction in progress , including capitalized interest , insurance and real estate taxes , is not depreciated until the development has reached substantial completion . capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases . capitalized below-market lease values are accreted as an increase to rental income over the remaining terms of the respective leases and expected below-market renewal option periods . capitalized above-market ground lease values are accreted as a reduction of property operating expense over the remaining terms of the respective leases . capitalized below-market ground lease values are amortized as an increase to property operating expense over the remaining terms of the respective leases and expected below-market renewal option periods . the value of in-place leases , exclusive of the value of above-market and below-market in-place leases , is amortized to expense over the remaining periods of the respective leases . 57 the assumed mortgage premiums or discounts are amortized as an increase or reduction to interest expense over the remaining term of the respective mortgages . impairment of long lived assets if circumstances indicate that the carrying value of a property may not be recoverable , we review the asset for impairment . this review is based on an estimate of the future undiscounted cash flows , excluding interest charges , expected to result from the property 's use and eventual disposition . these estimates consider factors such as expected future operating income , market and other applicable trends and residual value , as well as the effects of leasing demand , competition and other factors . if impairment exists due to the inability to recover the carrying value of a property , an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used . for properties held for sale , the impairment loss is the adjustment to fair value less estimated cost to dispose of the asset . these assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net income . recently issued accounting pronouncements in may 2014 , the financial accounting standards board ( “ fasb ” ) issued revised guidance relating to revenue recognition . under the revised guidance , an entity is required to recognize revenue when it transfers 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 . the revised guidance was to become effective for fiscal years , and interim periods within those fiscal years , beginning after december 15 , 2016. early adoption was not permitted under gaap . the revised guidance allows entities to apply the full retrospective or modified retrospective transition method upon adoption . in july 2015 , the fasb deferred the effective date of the revised guidance by one year to annual reporting periods beginning after december 15 , 2017 , although entities will be allowed to early adopt the guidance as of the original effective date . we have not yet selected a transition method and are currently evaluating the impact of this new guidance . in january 2015 , the fasb issued updated guidance that eliminates from gaap the concept of an event or transaction that is unusual in nature and occurs infrequently being treated as an extraordinary item . the revised guidance is effective for fiscal years , and for interim periods within those fiscal years , beginning after december 15 , 2015. any amendments may be applied either prospectively or retrospectively to all prior periods presented in the financial statements . early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption . we elected to adopt this new guidance as of september 30 , 2015. the adoption of this guidance did not have a material impact to our financial position , results of operations and cash flows . in february 2015 , the fasb amended the accounting for consolidation of certain legal entities . the amendments modify the evaluation of whether certain legal entities are variable interest entities ( `` vies '' ) or voting interest entities , eliminate the presumption that a general partner should consolidate a limited partnership and affect the consolidation analysis of reporting entities that are involved with vies ( particularly those that have fee arrangements and related party relationships ) . the revised guidance is effective for fiscal years , and for interim periods within those fiscal years , beginning after december 15 , 2015. early adoption was permitted , including adoption in an interim period .
| results of operations on january 1 , 2014 , we owned seven properties ( our `` same store '' properties ) . we acquired 159 properties during the period from january 1 , 2014 through december 31 , 2015 ( our `` acquisitions '' ) . accordingly , our results of operations for the year ended december 31 , 2015 as compared to the year ended december 31 , 2014 reflect significant increases in most categories primarily due to our acquisitions . net loss attributable to stockholders was $ 41.7 million and $ 37.7 million for the years ended december 31 , 2015 and 2014 , respectively . comparison of the year ended december 31 , 2015 to the year ended december 31 , 2014 rental income rental income increased $ 70.2 million to $ 93.2 million for the year ended december 31 , 2015 from $ 23.0 million for the year ended december 31 , 2014 . the increase was primarily due to our acquisitions . operating expense reimbursements operating expense reimbursements increased $ 9.2 million to $ 12.8 million for the year ended december 31 , 2015 from $ 3.6 million for the year ended december 31 , 2014 . generally , operating expense reimbursements increase in proportion with the increase in property operating expenses in our mob segment . pursuant to many of our lease agreements , tenants are required to pay their pro rata share of property operating expenses , in addition to base rent , whereas under certain other lease agreements , the tenants are generally directly responsible for all operating costs of the respective properties . the increase in operating expense reimbursements was primarily related to our acquisitions . resident services and fee income resident services and fee income increased $ 109.1 million to $ 140.9 million for the year ended december 31 , 2015 from $ 31.8 million for the year ended december 31 , 2014 .
| 7,938 |
our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors , including those set forth under special note regarding forward-looking statements , item 1a . risk factors and elsewhere in this annual report on form 10-k. overview we are a blank check company incorporated as a delaware corporation and formed for the purpose of effecting an initial business combination . we have reviewed , and continue to review , a number of opportunities to enter into an initial business combination with operating businesses , but we are not able to determine at this time 64 whether we will complete an initial business combination with any of the target businesses that we have reviewed or with any other target business . we intend to effectuate an initial business combination using cash from the proceeds of our public offering and sale of the private placement warrants , and from additional issuances of , if any , our capital stock and our debt , or a combination of cash , stock and debt . at december 31 , 2018 , we had cash and cash equivalents of $ 835,544 , current liabilities of $ 1,277,528 and deferred underwriting compensation of $ 24,150,000. further , we expect to continue to incur significant costs in the pursuit of our acquisition plans . we can not assure you that our plans to complete an initial business combination will be successful . story_separator_special_tag style= '' margin-top:0pt ; margin-bottom:0pt ; font-size:8pt '' > 66 critical accounting policies the preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the united states requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities at the date of the condensed financial statements , and income and expenses during the periods reported . actual results could materially differ from those estimates . we have identified the following as our critical accounting policies : net income per common share we comply with accounting and disclosure requirements of fasb asc topic 260 , earnings per share . net income per share of common stock is computed by dividing net income by the weighted average number of common shares outstanding during the period . we apply the two-class method in calculating earnings per share . accretion associated with the redeemable shares of class a common stock is excluded from eps as the redemption value approximates fair value . at december 31 , 2018 , we had outstanding warrants to purchase of up to 33,533,333 shares of class a common stock . the weighted average of these shares was excluded from the calculation of diluted net income per share of common stock since the exercise of the warrants is contingent upon the occurrence of future events . at december 31 , 2018 , we did not have any dilutive securities or other contracts that could , potentially , be exercised or converted into shares of common stock and then share in our earnings . as a result , diluted net income per share of common stock is the same as basic net income per share of common stock for the year . redeemable shares of class a common stock all of the 69,000,000 shares of class a common stock sold as parts of the units in the public offering contain a redemption feature . in accordance with fasb asc 480 , redemption provisions not solely within our control require the security to be classified outside of permanent equity . ordinary liquidation events , which involve the redemption and liquidation of all of the entity 's equity instruments , are excluded from the provisions of fasb asc 480. although we have not specified a maximum redemption threshold , our amended and restated certificate of incorporation provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $ 5,000,001. accordingly , at december 31 , 2018 , 66,100,835 of the 69,000,000 shares of our class a common stock were classified outside of permanent equity at their redemption value . offering costs we comply with the requirements of the fasb asc 340-10-s99-1 and sec staff accounting bulletin topic 5a expenses of offering. we incurred offering costs in connection with our public offering of $ 992,949. these costs , together with the upfront underwriter discount and deferred discount of $ 37,950,000 , were charged to the shares of our class a common stock and warrants upon the closing of our public offering . recent accounting pronouncements in november 2016 , the fasb issued accounting standards update no . 2016-18 , statement of cash flows ( topic 230 ) : restricted cash ( asu 2016-18 ) , which requires companies to include cash and cash equivalents that have restrictions on withdrawal or use in total cash and cash equivalents on the statement of cash flows . asu 2016-18 is effective for emerging growth companies with fiscal years beginning after december 15 , 2018 , and interim periods within those years , with early adoption permitted . the company expects to adopt asu 2016-18 on january 1 , 2019 , the first day of the company 's first quarter for the year ending december 31 , 2019. the company is evaluating the new guidance and expects that this standard will have retrospective impact on the amount currently presented in investing activities . 67 item 7a . story_separator_special_tag our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors , including those set forth under special note regarding forward-looking statements , item 1a . risk factors and elsewhere in this annual report on form 10-k. overview we are a blank check company incorporated as a delaware corporation and formed for the purpose of effecting an initial business combination . we have reviewed , and continue to review , a number of opportunities to enter into an initial business combination with operating businesses , but we are not able to determine at this time 64 whether we will complete an initial business combination with any of the target businesses that we have reviewed or with any other target business . we intend to effectuate an initial business combination using cash from the proceeds of our public offering and sale of the private placement warrants , and from additional issuances of , if any , our capital stock and our debt , or a combination of cash , stock and debt . at december 31 , 2018 , we had cash and cash equivalents of $ 835,544 , current liabilities of $ 1,277,528 and deferred underwriting compensation of $ 24,150,000. further , we expect to continue to incur significant costs in the pursuit of our acquisition plans . we can not assure you that our plans to complete an initial business combination will be successful . story_separator_special_tag style= '' margin-top:0pt ; margin-bottom:0pt ; font-size:8pt '' > 66 critical accounting policies the preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the united states requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities at the date of the condensed financial statements , and income and expenses during the periods reported . actual results could materially differ from those estimates . we have identified the following as our critical accounting policies : net income per common share we comply with accounting and disclosure requirements of fasb asc topic 260 , earnings per share . net income per share of common stock is computed by dividing net income by the weighted average number of common shares outstanding during the period . we apply the two-class method in calculating earnings per share . accretion associated with the redeemable shares of class a common stock is excluded from eps as the redemption value approximates fair value . at december 31 , 2018 , we had outstanding warrants to purchase of up to 33,533,333 shares of class a common stock . the weighted average of these shares was excluded from the calculation of diluted net income per share of common stock since the exercise of the warrants is contingent upon the occurrence of future events . at december 31 , 2018 , we did not have any dilutive securities or other contracts that could , potentially , be exercised or converted into shares of common stock and then share in our earnings . as a result , diluted net income per share of common stock is the same as basic net income per share of common stock for the year . redeemable shares of class a common stock all of the 69,000,000 shares of class a common stock sold as parts of the units in the public offering contain a redemption feature . in accordance with fasb asc 480 , redemption provisions not solely within our control require the security to be classified outside of permanent equity . ordinary liquidation events , which involve the redemption and liquidation of all of the entity 's equity instruments , are excluded from the provisions of fasb asc 480. although we have not specified a maximum redemption threshold , our amended and restated certificate of incorporation provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $ 5,000,001. accordingly , at december 31 , 2018 , 66,100,835 of the 69,000,000 shares of our class a common stock were classified outside of permanent equity at their redemption value . offering costs we comply with the requirements of the fasb asc 340-10-s99-1 and sec staff accounting bulletin topic 5a expenses of offering. we incurred offering costs in connection with our public offering of $ 992,949. these costs , together with the upfront underwriter discount and deferred discount of $ 37,950,000 , were charged to the shares of our class a common stock and warrants upon the closing of our public offering . recent accounting pronouncements in november 2016 , the fasb issued accounting standards update no . 2016-18 , statement of cash flows ( topic 230 ) : restricted cash ( asu 2016-18 ) , which requires companies to include cash and cash equivalents that have restrictions on withdrawal or use in total cash and cash equivalents on the statement of cash flows . asu 2016-18 is effective for emerging growth companies with fiscal years beginning after december 15 , 2018 , and interim periods within those years , with early adoption permitted . the company expects to adopt asu 2016-18 on january 1 , 2019 , the first day of the company 's first quarter for the year ending december 31 , 2019. the company is evaluating the new guidance and expects that this standard will have retrospective impact on the amount currently presented in investing activities . 67 item 7a .
| results of operations for the years ended december 31 , 2018 , 2017 and for the period ended december 31 , 2016 , we had net income/ ( loss ) of $ 5,030,748 , $ ( 1,276 ) and $ ( 303,418 ) , respectively . our income for 2018 consist solely of dividends earned . our business activities from inception to december 31 , 2018 consisted primarily of our formation and completing our public offering , and since the offering , our activity has been limited to identifying and evaluating prospective acquisition targets for an initial business combination . liquidity and capital resources until the closing of the public offering , our only source of liquidity was an initial sale of shares ( the founder shares ) of class b common stock , par value $ 0.0001 per share , to an affiliate of our sponsor and the proceeds of a promissory note ( the note ) from an affiliate of our sponsor , in the amount of $ 300,000 , as well as the proceeds of the 2016 note from an affiliate of our sponsor in 2016 , in the amount of $ 300,000. the note and the 2016 note were repaid upon the closing of the public offering and in december 2016 , respectively . on june 12 , 2018 , we closed the public offering of 69,000,000 units , including 9,000,000 units issued pursuant to the exercise by the underwriters of their option to purchase additional units in full , at a price of $ 10.00 per unit , generating proceeds to us of $ 690,000,000 before underwriting discounts and expenses .
| 7,939 |
( 3 ) this table does not include any milestone payments or royalty payments to third parties as the amounts , timing and likelihood of such payments are not known . ( 4 ) this table excludes unrecognized tax benefits of $ 666,000 as of december 31 , 2015 because these uncertain tax positions , if recognized , would be an adjustment to our deferred tax assets . critical accounting policies and estimates our management 's discussion and analysis of our financial condition and results of operations is based on our financial statements , which have been prepared in accordance with united states generally accepted accounting principles ( “ u.s . gaap ” ) . the preparation of these financial statements requires our management to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements , as well as the reported revenue generated and expenses incurred during the reporting periods . our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material . we believe that the accounting policies discussed below are critical to understanding our historical and future performance , as these policies relate to the more significant areas involving management 's judgments and estimates . revenue recognition we recognize revenue when all of the following criteria are met : persuasive evidence of an arrangement exists ; transfer of technology has been completed or services have been rendered ; the price to the customer is fixed or determinable and collectability is reasonably assured . 78 our revenues are primarily derived through its license , research , development and commercialization agreements . the terms of t hese types of agreements may include ( i ) licenses to our technology , ( ii ) research and development services , and ( ii ) services or obligations in connection with participation in research or steering committees . payments to us under these arrangements typic ally include one or more of the following : nonrefundable upfront and license fees , research funding , milestone and other contingent payments for the achievement of defined collaboration objectives and certain preclinical , clinical , regulatory and sales-based events , as well as royalties on sales of any commercialized products . in arrangements involving the delivery of more than one element , each required deliverable is evaluated to determine whether it qualifies as a separate unit of accounting . the determination is based on whether the deliverable has “ standalone value ” to the customer . if a deliverable does not qualify as a separate unit of accounting , it is combined with the other applicable undelivered item ( s ) within the arrangement and these combined deliverables are treated as a single unit of accounting . the arrangement 's consideration that is fixed or determinable is allocated to each separate unit of accounting based on the relative selling price methodology in accordance with the selling price hierarchy , which includes vendor-specific objective evidence ( “ vsoe ” ) of selling price , if available , or third-party evidence of selling price if vsoe is not available , or the best estimate of selling price , if neither vsoe nor third-party evidence is available . payments or reimbursements for our research and development efforts for the arrangements where such efforts are considered as deliverables are recognized as the services are performed and are presented on a gross basis . when upfront payments are received and if there is no discernible pattern of performance and or objectively measurable performance measures do not exist , we recognize revenue ratably over the associated period of performance . our collaboration and license agreements may include contingent payments related to specified research , development and regulatory milestones and sales-based milestones . such payments are typically payable under the collaborations when the collaboration partner claims or selects a target , or initiates or advances a covered product candidate in preclinical or clinical development , upon submission for marketing approval of a covered product with regulatory authorities , upon receipt of actual marketing approvals of a covered product or for additional indications , or upon the first commercial sale of a covered product . sales-based milestones are typically payable when annual sales of a covered product reach specified levels . each contingent and milestone payment is evaluated to determine whether it is substantive and at risk to both parties . we recognize any payment that is contingent upon the achievement of a substantive milestone entirely in the period in which the milestone is achieved . any payments that are contingent upon achievement of a non-substantive milestone are recognized as revenue prospectively , when such payments become due and collectible , over the remaining expected performance period under the arrangement , which is generally the remaining period over which the research and development services are expected to be provided . stock-based compensation we recognize compensation costs related to stock options granted to employees based on the estimated fair value of the awards on the date of grant , net of estimated forfeitures . we estimate the grant date fair value , and the resulting stock-based compensation expense , using the black-scholes option-pricing model . the grant date fair value of stock-based awards is expensed on a straight-line basis over the period during which the employee is required to provide service in exchange for the award ( generally the vesting period ) . we estimate the fair value of our stock-based awards using the black-scholes option-pricing model , which requires the input of highly subjective assumptions . our assumptions story_separator_special_tag ( 3 ) this table does not include any milestone payments or royalty payments to third parties as the amounts , timing and likelihood of such payments are not known . ( 4 ) this table excludes unrecognized tax benefits of $ 666,000 as of december 31 , 2015 because these uncertain tax positions , if recognized , would be an adjustment to our deferred tax assets . critical accounting policies and estimates our management 's discussion and analysis of our financial condition and results of operations is based on our financial statements , which have been prepared in accordance with united states generally accepted accounting principles ( “ u.s . gaap ” ) . the preparation of these financial statements requires our management to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements , as well as the reported revenue generated and expenses incurred during the reporting periods . our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material . we believe that the accounting policies discussed below are critical to understanding our historical and future performance , as these policies relate to the more significant areas involving management 's judgments and estimates . revenue recognition we recognize revenue when all of the following criteria are met : persuasive evidence of an arrangement exists ; transfer of technology has been completed or services have been rendered ; the price to the customer is fixed or determinable and collectability is reasonably assured . 78 our revenues are primarily derived through its license , research , development and commercialization agreements . the terms of t hese types of agreements may include ( i ) licenses to our technology , ( ii ) research and development services , and ( ii ) services or obligations in connection with participation in research or steering committees . payments to us under these arrangements typic ally include one or more of the following : nonrefundable upfront and license fees , research funding , milestone and other contingent payments for the achievement of defined collaboration objectives and certain preclinical , clinical , regulatory and sales-based events , as well as royalties on sales of any commercialized products . in arrangements involving the delivery of more than one element , each required deliverable is evaluated to determine whether it qualifies as a separate unit of accounting . the determination is based on whether the deliverable has “ standalone value ” to the customer . if a deliverable does not qualify as a separate unit of accounting , it is combined with the other applicable undelivered item ( s ) within the arrangement and these combined deliverables are treated as a single unit of accounting . the arrangement 's consideration that is fixed or determinable is allocated to each separate unit of accounting based on the relative selling price methodology in accordance with the selling price hierarchy , which includes vendor-specific objective evidence ( “ vsoe ” ) of selling price , if available , or third-party evidence of selling price if vsoe is not available , or the best estimate of selling price , if neither vsoe nor third-party evidence is available . payments or reimbursements for our research and development efforts for the arrangements where such efforts are considered as deliverables are recognized as the services are performed and are presented on a gross basis . when upfront payments are received and if there is no discernible pattern of performance and or objectively measurable performance measures do not exist , we recognize revenue ratably over the associated period of performance . our collaboration and license agreements may include contingent payments related to specified research , development and regulatory milestones and sales-based milestones . such payments are typically payable under the collaborations when the collaboration partner claims or selects a target , or initiates or advances a covered product candidate in preclinical or clinical development , upon submission for marketing approval of a covered product with regulatory authorities , upon receipt of actual marketing approvals of a covered product or for additional indications , or upon the first commercial sale of a covered product . sales-based milestones are typically payable when annual sales of a covered product reach specified levels . each contingent and milestone payment is evaluated to determine whether it is substantive and at risk to both parties . we recognize any payment that is contingent upon the achievement of a substantive milestone entirely in the period in which the milestone is achieved . any payments that are contingent upon achievement of a non-substantive milestone are recognized as revenue prospectively , when such payments become due and collectible , over the remaining expected performance period under the arrangement , which is generally the remaining period over which the research and development services are expected to be provided . stock-based compensation we recognize compensation costs related to stock options granted to employees based on the estimated fair value of the awards on the date of grant , net of estimated forfeitures . we estimate the grant date fair value , and the resulting stock-based compensation expense , using the black-scholes option-pricing model . the grant date fair value of stock-based awards is expensed on a straight-line basis over the period during which the employee is required to provide service in exchange for the award ( generally the vesting period ) . we estimate the fair value of our stock-based awards using the black-scholes option-pricing model , which requires the input of highly subjective assumptions . our assumptions
| summary statement of cash flows the following table summarizes our cash flows for the periods presented : replace_table_token_7_th cash flows from operating activities during the year ended december 31 , 2015 , cash used in operating activities was $ 27.4 million , which consisted of a net loss of $ 35.4 million , adjusted by non-cash charges of $ 8.2 million and a net decrease of $ 0.2 million in our net operating assets . the non-cash charges primarily consist of $ 4.0 million in stock-based compensation , $ 1.2 million in depreciation and amortization , $ 1.2 million in amortization premiums on our short-term investments , $ 1.1 million in revaluation of the convertible preferred stock liability and $ 0.6 million in remeasurement of the convertible preferred stock warrant liability . the change in our net operating assets and liabilities was primarily due to a decrease of $ 6.1 million in deferred revenue due to the recognition of upfront fees received , partially offset by an increase of $ 3.2 million in accrued liabilities and $ 2.9 million in accounts payable . during the year ended december 31 , 2014 , cash provided by operating activities was $ 31.8 million , which consisted of a net loss of $ 30.3 million adjusted by non-cash charges of $ 1.4 million , adjusted by a net change of $ 60.8 million in our net operating assets . the non-cash charges primarily consist of $ 0.8 million from depreciation and amortization and $ 0.6 million from stock-based compensation .
| 7,940 |
the shares have a three year 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 . on january 30 , 2020 , the world health organization ( “ who ” ) announced a global health emergency because of a new strain of coronavirus originating in wuhan , china ( the “ covid-19 outbreak ” ) and the risks to the international community as the virus spreads globally beyond its point of origin . in march 2020 , the who classified the covid-19 outbreak as a pandemic , based on the rapid increase in exposure globally . the full impact of the covid-19 outbreak continues to evolve as of the date of this report . as such , it is uncertain as to the full magnitude that the pandemic will have on the company 's financial condition , liquidity , and future results of operations . management is actively monitoring the global situation on its financial condition , liquidity , operations , suppliers , industry , and workforce . given the daily evolution of the covid-19 outbreak and the global responses to curb its spread , the company is not able to estimate the effects of the covid-19 outbreak on its results of operations , financial condition , or liquidity for fiscal year 2020. the discussions below , including without limitation with respect to outlooks by product line and liquidity , are subject to the future effects of the covid-19 outbreak . in this respect , should the outbreak cause serious economic harm in our areas of operation , our revenue expectations are unlikely to be fulfilled . overview overall , the company 's financial performance was higher in 2019 when compared to 2018. the company had net income for 2019 in the amount of $ 1,959 compared to net income of $ 1,687 for 2018. sales increased by $ 6,471 to $ 46,691 in 2019 from $ 40,220 in 2018. the increase in sales is mainly attributed to the significant increase in shipping and installation revenue , which in return unfavorably impacted gross margins , excluding royalties , with a reduction to 18 % in 2019 from 23 % in 2018. the company is currently recognizing revenue and related costs associated with the 'sale to customer with a buy-back guarantee ' as further described under 'revenue recognition ' in the 'summary of significant accounting policies ' section . the company completed construction of the new north carolina plant and began production at the facility during the fourth quarter of 2019. the new facility has the ability to double production , as compared to the previous north carolina facility , with additional space to expand in the future . currently , management expects an increase in production in north carolina towards the end of 2020. also during 2019 , the company entered into an agreement to purchase barrier previously sold to a customer . this agreement increased the barrier rental fleet to 250,000 linear feet of barrier , and also added 75 crash cushion attenuators . the expansion of the barrier rental fleet allows the company to bid larger projects in the future , while giving the company the ability to be a full-service highway safety supplier . the current backlog of $ 30.9 million as of march 5 , 2020 has grown 8 % since the third quarter 2019. even with the increase in backlog , production has been lower in the first quarter of 2020 than expected . although the company has experienced a relatively weak first quarter , management expects 2020 overall will be another strong financial year for the company , although no assurance can be given . story_separator_special_tag margin-right : 0px ; text-indent : 0px '' > 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 2019 , miscellaneous product sales increased by 8.2 % when compared to 2018. management expects miscellaneous product sales to be similar in 2020 as compared to 2019 , although no assurance can be given . these products are typically small in nature and the company focuses it 's priorities on larger , more profitable jobs . story_separator_special_tag net income – the company had net income of $ 1,959 for the year ended december 31 , 2019 , compared to net income of $ 1,687 for the same period in 2018. the basic and diluted income per share was $ 0.38 for 2019 , compared to basic and diluted income per share of $ 0.33 for the year ended december 31 , 2018. there were 5,142 basic and 5,147 diluted weighted average shares outstanding in 2019 and 5,080 basic and 5,096 diluted weighted average shares outstanding in the 2018. liquidity and capital resources the company financed its capital expenditures requirements for 2019 with cash flows from operations , cash balances on hand and notes payable to a bank . the company had $ 5,011 of debt obligations at december 31 , 2019 , of which $ 925 is scheduled to mature within twelve months . during the twelve months ended december 31 , 2019 , the company made repayments of outstanding debt in the amount $ 769 and received $ 2,277 in proceeds of borrowings for the financing of the north carolina property and a vehicle . the company had draws on the line of credit of $ 500 and had repayments of $ 1,500 on the line of credit during the twelve months ended december 31 , 2019. the company has a note payable to summit community bank ( the “ bank ” ) with a balance of $ 519 as of december 31 , 2019. the note has a remaining term of approximately two 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 maintains a limit of $ 3,500 for annual capital expenditures , excluding acquisitions and plant expansions . at december 31 , 2019 , the company was in compliance with all covenants pursuant to the loan agreement . the company has a mortgage note payable to the bank for the purchase of the columbia , south carolina facility . such loan is evidenced by a promissory note , dated july 19 , 2016. the note provides for a 15 year term , a fixed annual interest rate of 5.29 % , monthly fixed payments of $ 11 and a security interest in favor of the bank in respect to the land , building and fixtures purchased with the proceeds of the loan . the balance of the loan at december 31 , 2019 was $ 1,103. on october 11 , 2019 , the company completed the financing for the construction of it 's new north carolina facility with a note payable to the bank in the amount of $ 2,228. the note carries a ten year term at a fixed interest rate of 3.64 % annually per the promissory note rate conversion agreement , with monthly payments of $ 22 , and is secured by all of the assets of smith-carolina and a guarantee by the company . the balance of the note payable at december 31 , 2019 was $ 2,197. the company additionally has 13 smaller installment loans with annual interest rates between 3.49 % and 5.75 % , maturing between 2020 and 2024 , with varying balances totaling $ 1,192. in addition to the notes payable discussed above , the company also has a $ 4,000 line of credit with the bank with no balance at december 31 , 2019. the line of credit is evidenced by a commercial revolving promissory note which carries a variable interest rate of prime and matures on october 1 , 2020. 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 october 31 , 2019 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 october 31 , 2020. as of december 31 , 2019 , the company had not purchased any equipment pursuant to the $ 1,500 commitment . 16 at december 31 , 2019 , the company had cash totaling $ 1,364 and $ 1,176 of investment securities available for sale compared to cash totaling $ 1,946 and $ 1,107 of investment securities available for sale at december 31 , 2018. investment securities at december 31 , 2019 consist of shares of usvax ( a virginia bond fund ) . during 2019 , the company 's operating activities provided $ 3,935 of cash due mainly to the decrease in inventories . in 2019 , investing activities used $ 4,744 in cash primarily for the north carolina expansion and for the purchase of rental barrier and capital equipment . financing activities provided $ 227 in cash in 2019 , resulting primarily from new loan for the north carolina expansion and the financing of capital expenditures .
| results of operations year ended december 31 , 2019 compared to the year ended december 31 , 2018 for the year ended december 31 , 2019 , the company had total revenue of $ 46,691 compared to total revenue of $ 40,220 for the year ended december 31 , 2018 , an increase of $ 6,471 , or 16.1 % . revenue includes product sales , barrier rentals , royalty income , and shipping and installation revenues . product sales are further divided into soundwall , architectural and slenderwall panels , miscellaneous wall panels , highway barrier , easi-set®/easi-span® buildings , utility products , and miscellaneous precast products . the following table summarizes the revenue by type and a comparison for the years ended december 31 , 2019 and 2018 ( in thousands ) : replace_table_token_0_th 13 soundwall sales – soundwall panel sales decreased by 21.6 % in 2019 compared to 2018 due primarily to the smaller number of projects in production during 2019 at the north carolina and south carolina facilities as compared to 2018. the company had slightly higher soundwall sales out of the midland , virginia facility which is expected to continue through 2020. soundwall bid projects continue to be competitive in all regions of the mid-atlantic . the company expects 2020 soundwall sales to remain flat compared to 2019 , although no assurance can be given on future sales . architectural sales – architectural panel sales increased by 26.0 % in 2019 compared to 2018. the company was awarded one larger architectural wall panel project to produce during 2019 , as well as two additional architectural wall panel projects that coincided with slenderwall production ( see the slenderwall section below ) . the company has recently been awarded a few architectural wall panel projects that will be in production during 2020. management believes that 2020 architectural sales will exceed the 2019 sales volume , although no assurance can be given .
| 7,941 |
for a description of factors that may cause our actual results to differ materially from those anticipated in these forward-looking statements , please refer to the section titled risk factors , contained in item 1a of this annual report on form 10-k. overview we are a medical device company focused on the treatment of neurological complications of diabetes . people with diabetes do not effectively regulate their blood glucose , or sugar , levels leading to chronically high levels of glucose in the blood , called hyperglycemia , and occasionally bouts of low glucose in the blood , called hypoglycemia . the primary reason that glucose levels are not effectively regulated in people with diabetes is that those with the disease do not produce insulin ( type i diabetes ) or are resistant to the normal physiological action of insulin ( type ii diabetes ) . many type ii diabetics eventually require insulin because production of the hormone by their pancreas decreases with time . type i diabetes usually affects children and teenagers whereas type ii diabetes has typically been a disease of adults over the age of 50. however , over the past decade , type ii diabetes is occurring in younger adults , which can probably be attributed to higher levels of obesity in this age group . we believe that there are large and important unmet needs in the treatment of diabetic neuropathies . as a medical device company with both unique and substantial experience in devices to measure and alter peripheral nerve function , we believe we are in the unique position to address these unmet needs through the development of novel proprietary medical devices . therefore , we are focused on developing and marketing medical devices for the diagnosis and treatment of diabetic neuropathies . we believe that we are the only medical device company with a strategic focus on the diabetic neuropathy market and our goal is to be the dominant player in this field . since we shifted our strategic focus to the diabetic neuropathy market in 2011 , we have launched two products with the potential to change medical practice for the treatment of diabetes . sensus , our therapeutic device for relief of chronic , intractable pain , was launched in january 2013. sensus is a convenient and wearable non-invasive device that offers physicians and their patients a non-narcotic pain relief option as a complement to medications . the device is lightweight and can be worn during the day while remaining active , or at night while sleeping . we believe it is the only transcutaneous electrical nerve stimulator designed specifically for people with diabetes that suffer from chronic pain . we believe this product will be attractive to pain medicine physicians , neurologists , endocrinologists , podiatrists , primary care physicians , and other physicians that are challenged with trying to manage pain in their patients with painful diabetic neuropathy , or pdn and other forms of neuropathic pain . we believe that pdn impacts 3 to 5 million people in the united states alone . in the united states , sensus is a prescription product and our early challenge has been and will continue to be to obtain broad , national exposure and acceptance among physicians as well as a broad distribution channel to fulfill prescriptions . we are working to create demand in several distinct channels : independent regional and national durable medical equipment , or dme , suppliers that employ sales representatives who detail physicians , large direct sale customers such as orthotic and prosthetic clinics and chronic pain treatment centers , and national diabetes mail order dmes . we believe there may be future opportunities to expand our sensus revenue and gross margin by developing an over-the-counter version of sensus and a direct sales channel . nc-stat dpncheck , our diagnostic test for diabetic peripheral neuropathy , or dpn , has been on the market since launch in late 2011. revenues were approximately $ 1.4 million in 2012 and were $ 1.3 million for the year ended december 31 , 2013. our sales efforts in the u.s. market are focused on medicare advantage providers . medicare advantage providers assume financial responsibility and the associated risks for the health care costs of their patients . for medicare advantage providers , we believe that nc-stat dpncheck presents an attractive clinical case that provides early detection of neuropathy allowing for earlier clinical intervention to help mitigate the effects of neuropathy on both patient quality of life and cost of care . also , the diagnosis and documentation of neuropathy provided by nc-stat dpncheck helps clarify the patient 33 health profile which , in turn , may have a direct , positive effect on the medicare advantage premium received by the provider . attractive international market opportunities are developing in japan , china , the middle east and mexico . these are led by our distributors with support from our corporate office . we are currently involved in seven studies that use nc-stat dpncheck in the evaluation of neuropathy in persons with diabetes under various study conditions . we anticipate that these studies will expand the clinical foundation for use of nc-stat dpncheck which , in turn , should support future adoption by customers . we are also developing plans for clinical studies employing sensus . we continue to manage our historical neurodiagnostics business which is centered on the advance system . this business generated $ 6.1 million in revenue during 2012 and $ 3.8 million in 2013. there are few direct cash operating expenses for this business which has been in decline for several years due to reimbursement challenges . we believe that revenue will continue to decline in this legacy business as we operate it for cash flow . story_separator_special_tag $ 83,000 for taxes and fees , $ 81,000 for travel costs , $ 55,000 for insurance and outside administration , and $ 43,000 for stock-based compensation . story_separator_special_tag on june 4 , 2013 , we entered into a purchase agreement providing for the issuance of ( i ) 248,147 shares of common stock at a price of $ 2.095 per share , ( ii ) 1,066.254 shares of series a-1 preferred stock at a price of $ 1,000 per share , ( iii ) 3,370.510 shares of series a-2 preferred stock at a price of $ 1,000 per share , and ( iv ) five year warrants to purchase up to 2,365,934 shares of common stock with an exercise price of $ 2.00 per share , which we collectively refer to as the 2013 offering . the 2013 offering resulted in approximately $ 4.5 million in net proceeds , after deducting placement agent fees and other expenses . during the second half of 2013 , all of the series a-1 preferred stock and series a-2 preferred stock issued in the 2013 offering was converted at the election of the holder into a total of 2,117,787 shares of common stock . in addition , during the fourth quarter of 2013 , we issued 1,308,611 shares of common stock as a result of the exercise of warrants issued in the 2013 offering resulting in proceeds to us of $ 2.6 million . see note 14 , stockholders ' equity , of our notes to financial statements contained elsewhere in this annual report on form 10-k for further information regarding this transaction . our ability to generate revenue to operate our business will largely depend on the success of our diabetes business initiative and our ability to manage our legacy neurodiagnostics business to optimize cash flow . a low level of market interest in nc-stat dpncheck or sensus , an accelerated decline in our neurodiagnostics consumables sales , or unanticipated increases in our operating costs would have an adverse effect on our liquidity and ability to fund operations . 37 december 31 , 2013 december 31 , 2012 change change ( in thousands ) cash and cash equivalents $ 9,195.8 $ 8,699.5 $ 496.3 5.7 % in order to supplement our access to capital , we are party to an amended loan and security agreement , with a bank which provides us with a credit facility in the amount of $ 2.5 million on a revolving basis . the amended credit facility expires on january 15 , 2015. under terms of the amended and extended agreement the amount of the credit facility will remain at $ 2.5 million until december 31 , 2014. thereafter , until its expiry on january 15 , 2015 , the credit facility will be reduced to $ 750,000 if the company has not yet completed an equity offering as defined in the agreement . amounts borrowed under the credit facility will bear interest equal to the prime rate plus 0.5 % . any borrowings under the credit facility will be collateralized by our cash , accounts receivable , inventory , and equipment . the credit facility includes traditional lending and reporting covenants . these include certain financial covenants applicable to liquidity that are to be maintained by us . as of december 31 , 2013 , we were in compliance with these covenants and had not borrowed any funds under the credit facility . of the credit facility limit , $ 225,000 is restricted to support a letter of credit issued in favor of our landlord in connection with the lease of our facilities in waltham , massachusetts . consequently , the amount available for borrowing under the credit facility as of december 31 , 2013 was $ 2,275,000. during the year ended december 31 , 2013 , our cash and cash equivalents increased by $ 496,300 due mainly to net cash provided by the 2013 offering of $ 4.5 million and the $ 2.6 million received from the exercise of warrants , partially offset by $ 6.6 million of net cash used in operations . in managing our working capital , two of the financial measurements we monitor are days sales outstanding and inventory turnover rate , which are presented in the table below for the years ended december 31 , 2013 and 2012 : replace_table_token_8_th payment terms extended to our customers generally require payment within 30 days from invoice date . the inventory turnover rate has improved since december 31 , 2012 as a result of reduced inventory balances . the following sets forth information relating to sources and uses of our cash : replace_table_token_9_th our operating activities used $ 6.6 million for the year ended december 31 , 2013 primarily attributable to our net loss of $ 8.0 million . this loss included charges of $ 376,300 for offering costs allocated to warrants in the 2013 offering , $ 289,700 for the change in fair value of the warrant liability , $ 245,800 for stock-based compensation , $ 151,600 for inventory charges , and $ 150,700 for depreciation and amortization . during the year ended december 31 , 2013 , our investing activities reflected $ 86,000 spent for the acquisition of fixed assets . financing activities for the year ended december 31 , 2013 included $ 4.5 million from the net proceeds of the 2013 offering and $ 2.6 million of proceeds from the exercise of 1,308,611 common stock warrants . at december 31 , 2013 , there remain 1,057,323 outstanding common stock warrants from the 2013 offering with an exercise price of $ 2.00 per share .
| results of operations comparison of years ended december 31 , 2013 and december 31 , 2012 revenues the following table summarizes our revenues : years ended december 31 , 2013 2012 change % change ( in thousands ) revenues $ 5,278.8 $ 7,575.3 $ ( 2,296.5 ) ( 30.3 ) % revenues include sales from sensus , our therapeutic device for relief of chronic , intractable pain launched in january 2013 ; nc-stat dpncheck , our diagnostic test for dpn ; and our legacy advance neurodiagnostics business . during the year ended december 31 , 2013 , we shipped approximately 1,300 sensus devices and recorded revenue of approximately $ 200,000. as we worked to develop distribution in several sales channels , including dme suppliers addressing pain physicians , primary care physicians and endocrinologists , large clinic organizations and direct mail diabetes suppliers . we recorded nc-stat dpncheck revenue of $ 1.3 million compared to $ 1.4 million in the prior year when we had a direct sales force focused on the podiatry market . that sales force was disbanded at the end of 2012. our market focus for nc-stat dpncheck during 2013 was on the medicare advantage sector and on selected international opportunities in asia , the middle east and mexico where we continue to believe that attractive near-term opportunities for nc-stat dpncheck exist . advance revenues totaled $ 3.8 million in 2013 in comparison with $ 6.1 million in 2012. the decline in advance revenue continues the historical trend for this product line which has few direct operating expenses and is managed for cash flow .
| 7,942 |
subject to the terms and conditions of the 2020 sales agreement , cowen will use commercially reasonable efforts consistent with its normal trading and sales practices to sell the common stock based upon the company 's instructions ( including any price , time or size limits or other customary parameters or conditions the company may impose ) . the 2020 sales agreement may be terminated by the company at any time upon 10 days ' notice . f-13 as of december 31 , 2020 , 39,607 shares have been sold under the 2020 sales agreement for an aggregate of approximately $ 4.8 million in gross proceeds . net proceeds to the company were approximately $ 4.4 million after deducting commissions and other transaction costs . approximately $ 195.2 million remained reserved under the company 's shelf registration statement and the applicable prospectus supplement for possible future issuance under the 2020 sales agreement . june 2018 registered offering of common stock in june 2018 , the company entered into an underwriting agreement with goldman sachs & co. llc , as representative of the several underwriters named therein ( the “ june 2018 underwriters ” ) , relating to an underwritten public offering ( the “ june 2018 offering ” ) of 1,079,580 shares of the company 's common stock , including 95,973 shares of the company 's common stock purchased by the june 2018 underwriters pursuant to a 30 -day option to purchase such additional shares granted therein , at a public offering price of $ 305.00 per share . the june 2018 offering resulted in gross proceeds to the company of approximately $ 329.3 million , and net proceeds to the company of approximately $ 311.8 million , after deducting the june 2018 underwriters ' discount and other offering costs . the june 2018 offering closed on june 11 , 2018 . 7. stock-based compensation the 2015 stock plan , as amended , is our primary plan through which equity based grants are awarded . we ceased making new awards under the 2006 stock plan upon adoption of the 2015 stock plan . the 2015 stock plan provides for the grant of incentive stock options , non-statutory stock options , restricted stock and other stock-based compensation awards to employees , officers , directors , and consultants of the company . the administration of the 2015 stock plan is under the general supervision of the compensation committee of the board of directors . the terms of stock options awarded under the 2015 stock plan , in general , are determined by the compensation committee , provided the exercise price per share generally shall not be set at less than the fair market value of a share of the common stock on the date of grant and the term shall not be greater than ten years from the date the option is granted . as of december 31 , 2020 , the company had options outstanding to purchase 1,837,540 shares of its common stock , which includes options outstanding under its 2006 stock plan . as of december 31 , 2020 , 936,407 shares were available for future issuance . the following table summarizes stock option activity during the twelve months ended december 31 , 2020 : replace_table_token_17_th the total cash received by the company as a result of stock option exercises was $ 0.7 million , $ 0.2 million and $ 2.5 million for the years ended december 31 , 2020 , 2019 , and 2018. the total intrinsic value of options exercised was $ 4.1 million in the year ended december 31 , 2020. the weighted-average grant date fair values , based on the black-scholes option model , of options granted during the year ended december 31 , 2020 , 2019 and 2018 was $ 68.07 , $ 91.19 and $ 137.49 , respectively . restricted common stock the company 's share-based compensation plan provides for awards of restricted shares of common stock to employees , officers , directors and consultants to the company . restricted stock awards are subject to forfeiture if employment or service terminates during the prescribed retention period . restricted shares vest over the service period . there were no outstanding restricted shares or activity in 2020. f-14 stock-based compensation expense stock-based compensation expense during the years ended december 31 , 2020 , story_separator_special_tag the risk factors in part i , item 1a and disclosures under “ cautionary note regarding forward-looking statements ” within this annual report on form 10-k , the audited financial statements and accompanying notes , included elsewhere in this annual report on form 10-k , and this management 's discussion and analysis of financial condition and results of operations should be read together . 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 exchange act of 1934 , as amended , or the exchange act , that involve risks and uncertainties , such as statements of our plans , objectives , expectations and intentions . as disclosed in this report , our actual results could differ materially from those discussed in these forward-looking statements . factors that could cause or contribute to such differences include , but are not limited to , those discussed in “ cautionary note regarding forward-looking statements ” and in the “ risk factors ” sections contained in part i , item 1a in this annual report on form 10-k. our operating results are not necessarily indicative of results that may occur for the full fiscal year or any other future period . the term “ synta ” refers to synta pharmaceuticals corp. prior to the consummation of the merger described herein . story_separator_special_tag except for serial liver biopsies , the study protocol is similar to the maestro-nash study with resmetirom doses of 80 mg or 100 mg or placebo and includes key secondary lipid , mri-pdff and nash biomarker endpoints . enrollment objectives for this study have been exceeded , with approximately 1,200 patients enrolled overall . in october 2020 we completed enrollment of the double-blind , placebo controlled arms of the study . the maestro-nafld-1 study will help support the adequacy of the safety database at the time of nda submission for subpart h approval for treatment of nash in patients with f2 or f3 fibrosis ( maestro-nash , nash resolution surrogate endpoint ) . recent developments ongoing maestro-nash phase 3 clinical trial in march of 2019 we initiated a phase 3 trial in nash , described in detail above under “ about madrigal ; our ongoing and planned studies. ” ongoing maestro-nafld-1 phase 3 clinical trial and completion of enrollment of the double-blind , placebo controlled arm in december 2019 we initiated a phase 3 trial in presumed nash , described in detail above under “ about madrigal ; our ongoing and planned studies. ” in october 2020 we completed enrollment of the double-blind , placebo controlled arms of the study . fda grants fast track designation for resmetirom in nash in october 2019 , fda granted fast track designation to resmetirom for nash . covid-19 pandemic effects on madrigal in april 2020 we announced that in response to guidance from regulatory agencies , measures for covid-19 at impacted sites have been put in place for its phase 3 maestro-nash and maestro-nafld-1 studies , allowing both studies to continue without changes to the protocol . at a recently conducted data monitoring committee ( dmc ) meeting it was recommended that phase 3 studies proceed without modification . the covid-19 pandemic had no material adverse impact on our operating results , maestro-nafld-1 study or liquidity for the period ended december 31 , 2020 , but it did introduce clinical trial and operational risks and uncertainties that are both general in nature and relate specifically to our maestro-nash study . these risks and uncertainties , which are beyond our control , are summarized in the section entitled “ risk factors ” in part i , item 1a of this annual report . other key developments reverse merger on july 22 , 2016 , synta completed its business combination with private madrigal in accordance with the terms of an agreement and plan of merger and reorganization , dated as of april 13 , 2016 , or the merger agreement . pursuant to the merger agreement , synta formed a wholly-owned subsidiary that merged with and into private madrigal , with private madrigal surviving the merger and becoming a wholly-owned subsidiary of synta , or the merger . in connection with , and prior to the consummation of , the merger , synta effected a 1-for-35 reverse stock split of its common stock , or the reverse stock split , and , following the merger , changed its name to “ madrigal pharmaceuticals , inc. ” all shares and per share amounts have been retrospectively adjusted to give effect to the reverse stock split , except as otherwise disclosed . following the consummation of the merger , our business became the business conducted by private madrigal prior to the consummation of the merger . 48 basis of presentation research and development expenses research and development expenses primarily consist of costs associated with our research activities , including the preclinical and clinical development of our product candidates . we expense our research and development expenses as incurred . we contract with clinical research organizations to manage our clinical trials under agreed upon budgets for each study , with oversight by our clinical program managers . we account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received . manufacturing expense includes costs associated with drug formulation development and clinical drug production . we do not track employee and facility related research and development costs by project , as we typically use our employee and infrastructure resources across multiple research and development programs . we believe that the allocation of such costs would be arbitrary and not be meaningful . our research and development expenses consist primarily of : salaries and related expense , including stock-based compensation ; external expenses paid to clinical trial sites , contract research organizations , laboratories , database software and consultants that conduct clinical trials ; expenses related to development and the production of nonclinical and clinical trial supplies , including fees paid to contract manufacturers ; expenses related to preclinical studies ; expenses related to compliance with drug development regulatory requirements ; and other allocated expenses , which include direct and allocated expenses for depreciation of equipment and other supplies . we expect to continue to incur substantial expenses related to our development activities for the foreseeable future as we conduct our clinical studies programs , manufacturing and toxicology studies . product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development , primarily due to the increased size and duration of later-stage clinical trials , additional drug manufacturing requirements , and later stage toxicology studies such as carcinogenicity studies . our research and development expenses have increased year over year in each of 2018 , 2019 , and 2020 and we expect that our research and development expenses will increase substantially in the future . the process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time consuming .
| results of operations comparison of the years ended december 31 , 2020 and 2019 revenue we did not generate any revenue during the years ended december 31 , 2020 and 2019 , respectively . 50 operating expenses the following table provides comparative results of our operating expenses for the years ended december 31 , 2020 and 2019 ( in thousands ) : replace_table_token_4_th research and development expense our research and development expenses were $ 184.8 million for the year ended december 31 , 2020 compared to $ 72.3 million for the year ended december 31 , 2019. research and development expenses increased by $ 112.5 million in the 2020 period due primarily to the additional activities related to the phase 3 clinical trials initiated in 2019 , an increase in manufacturing costs to support ongoing clinical trials and to prepare for commercialization , and an increase in head count and related expenses . we expect our research and development expenses to increase over the next couple years as we advance our clinical and preclinical development programs for resmetirom and as we increase our research and development efforts in connection therewith . general and administrative expense our general and administrative expenses were $ 21.9 million for the year ended december 31 , 2020 compared to $ 22.6 million for the year ended december 31 , 2019. general and administrative expenses decreased by $ 0.7 million in the 2020 period due primarily to a decrease in non-cash stock compensation from stock option awards , partially offset by increases in other general and administrative expenses . we expect our general and administrative expenses may increase over time as we advance our clinical and preclinical development programs for resmetirom and expand our operating activities , which will likely result in an increase in our headcount , consulting services , and related overhead needed to support those efforts .
| 7,943 |
4 to loan and security agreement dated april 24 , 2020 , the “ credit agreement ” ) , dated as of april 9 , 2018 , by and among the company 's subsidiaries securus365 , inc. , evance capital , inc. , and evance inc. , ( the “ purchasers ” ) and gacp finance co. , llc , a delaware limited liability company ( “ gacp ” ) , as administrative agent and collateral agent ( “ agent ” ) , and as the initial sole lender thereunder . the purpose of amendment no . 5 was to remove the financial covenant whereby the company 's was required to have a fixed charge coverage ratio not be less than 1.20:1.00 , measured in each case on a trailing twelve-month basis . in consideration for the removal of the financial covenant requirement , the credit agreement was amended to include a requirement that the company maintain a cash balance in its controlled operating bank account of not less than $ 1,000,000 . further , the repayment schedule under the note was amended whereby the company paid an amount equal to $ 450,000 upon execution of amendment no . 5. on may 6 , 2020 , the company received a paycheck protection program loan under the cares act for $ 236,231 ( the “ ppp loan ” ) . the ppp loan matures on may 7 , 2022 and bears interest at 1 % per annum . monthly amortized principal and interest payments are deferred for 6 months after the date of the agreement . the paycheck protection program provides that the use of ppp loan proceeds were limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the cares act . the company believes it has used the ppp loan for permitted uses , although no assurance can be given that the company will obtain forgiveness of all or any portion of amounts due under the ppp loan . the loan has been accounted for as long-term debt , which , if forgiven will result in a gain on forgiveness of debt in the period forgiveness is obtained . note 6 – stock options on january 1 , 2019 , pursuant to the terms on the employment agreement with mr. yakov he was granted 6,667 common stock options . the grant shall vest at the rate of 1/3 beginning on each anniversary of the effective date of grant . the options have an exercise price of $ 0.03 and expire in three years after each vest date . the aggregate fair value of the options totaled $ 39,814 based on the black scholes merton pricing model using the following estimates : exercise price of $ 0.03 , 2.47 % risk free rate , 104.8 % volatility and expected life of the options of 3 years . the fair value is being amortized over the applicable vesting period and credited to additional paid in capital . on november 13 , 2019 , the company entered into an agreement with the above holder of 265,172 common stock options and on november 25 , 2019 , the company entered into an agreement with the holder of 13,334 common stock options , whereby the company and option holders each agreed that the exercise price pertaining to those options would not be adjusted for the effects of the reverse stock split . as are result , the exercise price of $ 0.03 associated with the options granted to the vp of finance was modified to be $ 0.0001 , and the exercise price of $ 0.03 associated with the options granted to mr. yakov was modified to be $ 0.001 . the company evaluated the impact of the option modification and concluded that there was no material impact to the consolidated financial statements . on january 1 , 2020 , the company granted stock options to purchase 6,667 shares of common stock pursuant to the terms on the company 's employment agreement with mr. yakov . the grant shall vest at the rate of 1/3 beginning on each anniversary of the effective date of grant . the options have an exercise price of $ 0.001 and expire in three years after each vest date . the aggregate fair value of the options totaled $ 99,994 based on the black scholes merton pricing model using the following estimates : exercise price of $ 0.001 , 1.63 % risk free rate , 95.3 % volatility and expected life of the options of 3 years . the fair value is being amortized over the applicable vesting period and credited to additional paid in capital . a summary of the status of the company 's outstanding stock options and changes during the year ended december 31 , 2020 is presented below : replace_table_token_14_th f- 16 note 7 – warrants on august 6 , 2020 , the company entered into an underwriting agreement ( the “ underwriting agreement ” ) with aegis capital corp. , acting as representative of the underwriters ( “ aegis ” ) , pursuant to which the company agreed to sell to the underwriters in a firm commitment underwritten public offering ( the “ offering ” ) an aggregate of 700,000 units ( the “ units ” ) , with each unit consisting of : ( a ) one share of our common stock ; ( b ) two series a warrants ( the “ series a warrants ” ) , with each series a warrant entitling the holder thereof to purchase one share of our common stock at an exercise price equal to $ 9.00 story_separator_special_tag the $ 150,000 represents the purchase price in connection with the posabit asset acquisition . for the year ended december 31 , 2019 , no cash was used for investing activities . for the year ended december 31 , 2020 , we received net cash of $ 3,794,142 from financing activities . $ 1,845,155 was repaid on our loan to gacp . we received $ 236,231 from the paycheck protection program loan under the cares act and a total of $ 5,192,761 from the sale of stock and warrants . for the year ended december 31 , 2019 , $ 151,616 in cash was provided by financing activities . we received $ 361,467 from related party loans which was offset by $ 210,305 of deferred offering costs . liquidity and capital resources at december 31 , 2020 , the company had cash of $ 3,824,491 and working capital of $ 3,205,807. in connection with the response to the covid-19 pandemic in the united states , the company has experienced disruptions to its business and has observed disruptions with its customers and merchants , which has resulted in a decline in transaction volume . while the volume of processing transactions by merchants in march was relatively in-line with the company 's expectations that the number of transactions during march would be below the prior year because states in the united states began to implement stay-at-home orders , the number of transactions and resulting revenue was approximately 15 % lower in march than in february and 30 % lower in april than in march . in may , when some states began to reopen businesses and relax stay-at-home orders , the number of transactions increased whereby they were 5 % higher than in april , and in june , transactions were 7 % higher than may . july , august and september have shown month over month increases of 3 % , 3 % and 7 % , respectively . the company 's revenue during the period of time decreased and then increased in the amount of similar to the percentage of month-to-month transaction volume . the company 's revenue during the period of time decreased and then increased in the amount similar to the percentage of month-to-month transaction volume . despite recent increases in volume , the company estimates that the number of transactions will continue to stay at a depressed level , along with revenues , until the economic impact of and response to the covid-19 pandemic allows customers to make more point of purchase transactions for merchants , customers become more comfortable shopping in stores and or more merchants provide for additional contactless and online purchase options . the anticipated amount of decline from prior year is unknown , but it will be impacted by when consumers return to the level of purchasing that occurred in the prior year and before the pandemic . however , additional closings and reopenings of businesses or if additional businesses cease to operate in the future will likely result in a month over month decline and then increase similar to what occurred in march through june 2020. on august 11 , 2020 , the company closed an offering of its securities ( the “ offering ” ) for gross proceeds of $ 6.45 million . the company sold 700,000 units consisting of ( a ) one share of our common stock ; ( b ) two series a warrants , and ( c ) one-half of one series b warrant . in addition , the underwriter fully exercised its option to purchase 210,000 series a warrants and 52,500 series b warrants . while 20 % of the net proceeds of $ 5.5 million was used to repay a portion of our outstanding term loan , immediately following the offering , the company had cash of $ 5.6 million on hand . as such , the company believes it will be able fund future liquidity and capital requirements through cash flows generated from its operating activities for a period of at least twelve months from the date its condensed consolidated financial statements are issued . 48 on august 11 , 2020 , mr. herzog converted $ 3,612,940 of indebtedness into 3,612 shares of series a preferred stock ( the terms of which are described below ) and 802,875 series a conversion warrants with an exercise price of $ 9.00 and 200,719 series b conversion warrants with an exercise price of $ 4.50. also , on august 11 , 2020 , mr. yakov converted $ 1,021,512 of indebtedness into 1,021 shares of series a preferred stock ( the terms of which are described below ) and 227,003 series a conversion warrants with an exercise price of $ 9.00 and 56,751 series b conversion warrants with an exercise price of $ 4.50. on march 2 , 2021 , the company , utilizing a portion of funds received upon the exercise of outstanding warrants , paid approximately $ 7.7 million to the agent under the credit agreement ( the “ prepayment ” ) . this prepayment resulted in the discharge in full of all of the obligations under the credit agreement . in connection with the extinguishment of the obligations under the credit agreement , 40,000 warrants to purchase common stock were cancelled . following the payment and discharge of the term loan and conversion of indebtedness held by messrs. herzog and yakov , the company has approximately $ 549,200 of outstanding liabilities . in addition , the company has received a paycheck protection program loan under the cares act for approximately $ 236,000 ( the “ ppp loan ” ) . the paycheck protection program provides that the use of ppp loan proceeds was limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the cares act . the company believes it has used the ppp loan for permitted uses whereby it will be forgiven in
| results of operations year ended december 31 , 2020 compared to the year ended december 31 , 2019 for the year ended december 31 , 2020 , we had total revenue of $ 9,766,621 compared to $ 10,291,524 of revenue for the year ended december 31 , 2019 , a decrease of $ 524,903 or 5.1 % . we earned $ 8,358,459 in transaction and processing fees , $ 88,538 in merchant equipment sales and $ 1,319,624 in other revenue from monthly recurring subscriptions , compared to $ 10,177,931 in transaction and processing fees , $ 88,797 in merchant equipment sales and $ 24,796 in other revenue during the prior year . our transaction and processing fee revenue decreased $ 1,819,475 in the current year primarily due to merchant attrition and the initial impact of the covid-19 pandemic and the reduction in transactions processed while businesses were closed and customers stayed home . while the volume of processing transactions by merchants in march 2020 was relatively in-line with the company 's expectations that the number of transactions during march would be below the prior year because states in the united states began to implement stay-at-home orders , the number of transactions and resulting revenue was approximately 15 % lower in march than in february and 30 % lower in april than in march . in may , when some states began to reopen businesses and relax stay-at-home orders , the number of transactions increased whereby they were 5 % higher than in april , and in june , transactions were 7 % higher than may . july , august and september have shown month over month increases of 3 % , 3 % and 7 % respectively . this trend continued through the year-end with the three months ended december 31 , 2020 increasing 4 % compered to the three months ended september 30 , 2020 .
| 7,944 |
the variable interest model applies to entities that meet both of the following criteria : a legal structure has been established to conduct business activities and to hold assets ; such entity can be in the form of a partnership , limited liability company or corporation , among others ; and the entity established has variable interests – i.e . it has variable interests that are contractual , such as equity ownership or other financial interests that change with changes story_separator_special_tag the following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this annual report on form 10-k. forward-looking statements involve inherent risks and uncertainties regarding events , conditions , and financial trends that may affect our future plans of operations , business strategy , results of operations , and financial position . a number of important factors could cause actual results to differ materially from those included within or contemplated by such forward-looking statements , including , but not limited to , those described under “ item 1a . risk factors ” in this annual report on form 10-k. we do not undertake any responsibility to update any of these factors or to announce publicly any revisions to any of the forward-looking statements contained in this or any other document , whether as a result of new information , as a result of future events , or otherwise . as used in this report , references to the “ company , ” “ alexandria , ” “ we , ” “ us , ” and “ our ” refer to alexandria real estate equities , inc. and its consolidated subsidiaries . story_separator_special_tag balance sheet $ 2.0 billion of liquidity as of december 31 , 2015 6.6x net debt to adjusted ebitda – fourth quarter of 2015 annualized , with goal of achieving less than 6.0x 6.9x net debt to adjusted ebitda – fourth quarter of 2015 annualized , excluding $ 7.7 million of investment income for the fourth quarter of 2015 7.0 x net debt to adjusted ebitda – fourth quarter of 2015 trailing 12 months 3.6 x fixed-charge coverage ratio – fourth quarter of 2015 annualized in november 2015 , we completed an offering of $ 300.0 million of unsecured senior notes payable at a stated interest rate of 4.30 % with a maturity of january 15 , 2026 . during the three months ended december 31 , 2015 , proceeds from sales of equity investments and investment income from life science entities aggregated $ 27.5 million and $ 7.7 million , respectively during the year ended december 31 , 2015 , we sold an aggregate of 889,856 shares of common stock under our atm program for gross proceeds of $ 80.3 million , or $ 90.29 per share , and net proceeds of approximately $ 78.5 million in october 2015 , we closed a secured construction loan with commitments available for borrowing aggregating $ 350.0 million , which bears interest at a rate of libor+1.50 % , for our 98 % leased development project at 50/60 binney street in our cambridge submarket in june 2015 , we completed a partial principal repayment of $ 25.0 million , extended the maturity date of the remaining $ 350.0 million unsecured senior bank term loan from 2016 to 2021 , and reduced pricing to libor+1.10 % from libor+1.20 % in june 2015 , we exercised the first of two one-year extensions on a $ 47.6 million secured construction loan , which extended the maturity date from july 1 , 2015 , to july 1 , 2016 during the year ended december 31 , 2015 , we executed additional interest rate swap agreements with an aggregate notional amount of $ 1.7 billion during the year ended december 31 , 2015 , to provide a minimum of hedged variable-rate debt of $ 1.1 billion and $ 650.0 million as of december 31 , 2016 and 2017 , respectively $ 10.9 billion total market capitalization as of december 31 , 2015 15 % of gross investments in real estate in value-creation pipeline as of december 31 , 2015 , with a target range from 10 % to 15 % as of the fourth quarter of 2016 limited debt maturities through 2018 and well-laddered maturity profile 12 % unhedged variable-rate debt as a percentage of total debt as of december 31 , 2015 leed certifications 57 % of our total abr will be generated from leed projects upon completion of our in-process projects during 2015 , we received leed gold certifications at 360 longwood avenue in our longwood medical area submarket and 3033 science park road in our torrey pines submarket 62 value-creation projects and external growth the following table summarizes development and redevelopment projects commenced during the year ended december 31 , 2015 ( dollars in thousands ) : replace_table_token_25_th the value-creation development and redevelopment projects that commenced in 2015 were on average 88 % leased or under lease negotiation as of december 31 , 2015 . in addition , we expect to commence development of a 100 % leased 150,000 rsf project at 505 brannan street in the first quarter of 2016 . 63 external growth – value-creation development and redevelopment projects placed into service the following table presents value-creation development and redevelopment projects , including our unconsolidated real estate joint ventures , placed into service during the year ended december 31 , 2015 ( dollars in thousands ) : rsf in service % of project in service unlevered yields placed in service 2015 total project average cash initial stabilized cash basis initial stabilized property/market/submarket date prior to 1/1/15 first quarter second quarter third quarter fourth quarter total leased/ negotiating investment consolidated development projects 75/125 binney street/ greater boston/cambridge march 2015 — 388,270 — — — 388,270 100 % 100 % $ 361,000 ( 1 ) 9.3 % ( 1 ) 8.4 % ( 1 ) 8.3 % ( 1 ) 430 east 29th street/ new york city/manhattan various 241,417 43,209 3,611 62,490 3,534 354,261 85 % 98 % $ 463,245 7.1 % ( 2 ) 6.6 % ( 2 ) story_separator_special_tag for sales of less than 100 % of the property , noi , cash noi , and sales price represent the proportional interest sold and the noi amounts represent the annualized amounts for the quarter ended prior to the date of sale . amounts exclude transaction and closing costs . ( 2 ) represents the sale of a class b lab building located in our palo alto/stanford research park submarket . ( 3 ) we acquired this land parcel and subsequently developed the property with an initial stabilized yield ( cash basis ) of 8.2 % . ( 4 ) we acquired this land parcel and subsequently developed the property with an initial stabilized yield ( cash basis ) of 7.5 % . ( 5 ) we acquired 409/499 illinois street , comprised at acquisition of one operating building and one partially complete building undergoing development . we completed 499 illinois ( development project ) with an initial stabilized yield ( cash basis ) of 6.7 % . ( 6 ) aggregate proceeds of $ 453.1 million were received and accounted for as an equity financing transaction . the excess sales price over our cost basis , net of selling costs , $ 141.9 million was recognized as an adjustment to additional paid in capital . execution of capital strategy during 2015 , we continued to execute on many of the long-term components of our capital strategy . some of our key accomplishments include : 2015 capital strategy achieved targeted key credit metric ratios , including a net debt to adjusted ebitda ratio of 6.6 x and a fixed charge coverage ratio of 3.6 x for the fourth quarter of 2015 on an annualized basis ; continued the process of prudently laddering our debt maturities as we completed the successful offering in november 2015 of $ 300.0 million of unsecured senior notes payable with a stated interest rate of 4.30 % due in 2026 and extended the average remaining term of outstanding debt to 5.6 years as of december 31 , 2015 ; $ 2.0 billion of liquidity as of december 31 , 2015 ; executed additional interest rate swap agreements with an aggregate notional amount of $ 1.7 billion during the year ended december 31 , 2015 to provide a minimum of hedged variable-rate debt of $ 1.1 billion and $ 650.0 million as of december 31 , 2016 and 2017 , respectively ; in october 2015 , we closed a secured construction loan with commitments available for borrowing aggregating $ 350.0 million , which bears interest at a rate of libor+1.50 % , for our 98 % leased development project at 50/60 binney street in our cambridge submarket ; in june 2015 , we exercised the first of two one-year extensions on a $ 47.6 million secured construction loan , which extended the maturity date from july 1 , 2015 , to july 1 , 2016 ; 66 i n june 2015 , we completed a partial principal repayment of $ 25.0 million , extended the maturity date of the remaining $ 350 million unsecured senior bank term loan from 2016 to 2021 , and reduced pricing to libor+1.10 % from libor+1.20 % ; and maintained a high-quality tenant base as of december 31 , 2015 , with 54 % of our total abr rent from investment-grade tenants . during 2016 , we intend to continue to execute our capital strategy to achieve further improvements to our credit rating , which will allow us to further reduce our cost of capital and continue our disciplined approach to capital allocation that generates strong yields . for further information , refer to the “ projected results ” section below within this item 7. balance sheet management as described above , we successfully executed our long-term capital strategy in 2015 , continuing to strengthen our balance sheet and credit profile . consistent with 2015 , our capital strategy for 2016 consists of the following elements : allocate capital to class a assets located in unique collaborative science and technology campuses in aaa urban innovation clusters ; continue to improve our credit profile ; maintain access to diverse sources of capital , which includes cash flows from operating activities after dividends , incremental debt supported by our growth in ebitda , assets sales , joint venture capital , and other capital such as the sale of equity ; commitment to long-term capital to fund growth ; prudently ladder of debt maturities ; maintain significant balance sheet liquidity ; and maintain a stable and flexible balance sheet . given the anticipated delivery of significant incremental ebitda from our development and redevelopment projects , we expect to have capacity to obtain debt funding for a significant portion of our capital requirements to fund the construction of high-value , class a , highly pre-leased development and redevelopment projects on a leverage-neutral basis . we expect to continue to maintain access to a diverse source of debt , including unsecured senior notes payable , as well as secured construction loans for our development and redevelopment projects from time to time . we expect to continue to maintain a significant proportion of our noi unencumbered to allow for future flexibility for accessing both unsecured and secured debt markets , although we expect traditional secured mortgage notes payable will remain a small component of our capital structure . in addition to debt funding on a leverage-neutral basis , we intend to supplement our remaining capital needs with cash flows from operating activities , after dividends and proceeds from asset sales , real estate joint ventures , and other equity capital . we pursued a strategy of assets sales in 2015 that combined the sales of partial real estate joint venture interests in low cap rate operating assets to high-quality institutional investors and the sales of certain land parcels and non-core operating assets , which allowed us to increase the quality of our asset base and to monetize a portion of the significant incremental nav we created in the class a properties we sold .
| executive summary we concluded another successful year where our best-in-class team delivered strong results and continued growth . below are the key highlights : ffo per share – diluted , as adjusted , for the year ended december 31 , 2015 , of $ 5.25 , up 9.4 % , compared to $ 4.80 for the year ended december 31 , 2014 ; in december 2015 , we completed $ 453.1 million in sales of partial interests in three class a assets at an average capitalization rate of 4.6 % ; $ 2.0 billion of liquidity as of december 31 , 2015 ; 6.6x net debt to adjusted ebitda – fourth quarter of 2015 annualized , with goal of achieving less than 6.0x ; 7.0x net debt to adjusted ebitda – fourth quarter of 2015 trailing 12 months ; executed leases for 5.0 million rsf during the year ended december 31 , 2015 ; the highest annual leasing volume in the company 's 20-year history ; rental rate increases of 19.6 % and 9.9 % ( cash basis ) on lease renewals and re-leasing of space aggregating 2.2 million rsf ( included in the 5.0 million rsf above ) ; highly leased value-creation pipeline : 89 % leased , 1.5 million rsf , targeted for completion in 2016 ( weighted toward the fourth quarter of 2016 ) , expected to generate $ 75 to $ 80 million of incremental annual noi upon stabilization 67 % leased , 1.9 million rsf , targeted for completion in 2017 and 2018 , expected to generate $ 105 to $ 110 million of incremental annual noi upon stabilization same property noi growth of 1.3 % and 4.7 % ( cash basis ) for the year ended december 31 , 2015 , compared to the year ended december 31 , 2014 ; in november 2015 , we completed an offering of $ 300.0 million of unsecured senior notes payable at a stated interest rate of 4.30 % with a maturity of january 15 , 2026
| 7,945 |
basis for opinion the company 's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying management 's report on internal control over financial reporting . our responsibility is to express an opinion on the company 's internal control over financial reporting based on our audit . we are a public accounting firm registered with the pcaob and are required to be independent with respect to the company in accordance with u.s. federal securities laws and the applicable rules and regulations of the securities and exchange commission and the pcaob . we conducted our audit in accordance with the standards of the pcaob . those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects . our audit included obtaining an understanding of internal control over financial reporting , assessing the risk that a material weakness exists , and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk . our audit also included performing such other procedures as we considered necessary in the circumstances . we believe that our audit provides a reasonable basis for our opinion . definition and limitations of internal control over financial reporting a company 's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles . a company 's internal control over financial reporting includes those policies and procedures that ( 1 ) pertain to the maintenance of records that , in reasonable detail , accurately and fairly reflect the transactions and dispositions of the assets of the company ; ( 2 ) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles , and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company ; and ( 3 ) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition , use or disposition of the company 's assets that could have a material effect on the financial statements . because of its inherent limitations , internal control over financial reporting may not prevent or detect misstatements . also , projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions , or story_separator_special_tag executive summary petmed express was incorporated in the state of florida in january 1996. the company 's common stock is traded on the nasdaq global select market under the symbol “ pets. ” the company began selling pet medications and other pet health products in september 1996. in march 2010 the company started offering for sale additional pet supplies on its website , and these items are drop shipped to customers by third party vendors . presently , the company 's product line includes approximately 2,500 of the most popular pet medications , health products , and supplies for dogs , cats , and horses . the company markets its products through national advertising campaigns which aim to increase the recognition of the “ 1-800-petmeds ” brand name , and “ petmeds ” family of trademarks , increase traffic on its website at www.1800petmeds.com , acquire new customers , and maximize repeat purchases . approximately 84 % of all sales were generated via the internet in fiscal 2020 , compared to 85 % in fiscal 2019. the company 's sales consist of products sold mainly to retail consumers . the twelve-month average purchase was approximately $ 87 per order for both of the fiscal years ended march 31 , 2020 and 2019. critical accounting policies our discussion and analysis of our financial condition and the results of our operations contained herein are based upon our consolidated financial statements and the data used to prepare them . the company 's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the united states of america . on an ongoing basis we re-evaluate our judgments and estimates including those related to product returns , bad debts , inventories , and income taxes . we base our estimates and judgments on our historical experience , knowledge of current conditions , and our beliefs of what could occur in the future considering available information . actual results may differ from these estimates under different assumptions or conditions . our estimates are guided by observing the following critical accounting policies . revenue recognition the company generates revenue by selling pet medication products and pet supplies mainly to retail customers . certain pet supplies offered on the company 's website are drop shipped to customers . the company considers itself the principal in the arrangement because the company controls the specified good before it is transferred to the customer . revenue contracts contain one performance obligation , which is delivery of the product ; customer care and support is deemed not to be a material right to the contract . the transaction price is adjusted at the date of sale for any applicable sales discounts and an estimate of product returns , which are estimated based on historical patterns ; however this is not considered a key judgment . there are no amounts excluded from variable consideration . revenue is recognized when control transfers to the customer at the point in time in which shipment of the product occurs . story_separator_special_tag depreciation depreciation expense for the fiscal year ended march 31 , 2020 increased slightly to approximately $ 2.3 million from approximately $ 2.2 million for the fiscal year ended march 31 , 2019. this increase to depreciation expense for the fiscal year ended march 31 , 2020 can be attributed to an increase in new property and equipment additions in fiscal 2020. other income other income remained relatively flat at $ 2.9 million for both the fiscal years ended march 31 , 2020 and 2019. other income includes interest income , advertising income , and rental income . interest income may decrease in the future as the company utilizes its cash balances on its share repurchase plan , with approximately $ 28.7 million remaining at march 31 , 2020 , on any quarterly dividend payment , on its operating activities , or with further decreases in interest rates . 20 provision for income taxes for the fiscal years ended march 31 , 2020 and 2019 , the company recorded an income tax provision for approximately $ 8.0 million and $ 11.4 million , respectively . the decrease to the income tax provision for fiscal 2020 is related to a decrease in operating income , and reduction to the florida state corporate income tax rate . the effective tax rate for the fiscal years ended march 31 , 2020 and 2019 were 23.7 % and 23.2 % , respectively . the increase to the effective rate for the fiscal year ended march 31 , 2020 can be attributed to a $ 322,000 income tax charge related to restricted stock compensation , which was recognized in september 2019. the company estimates its effective tax rate will be approximately 23.5 % for fiscal 2021. net income net income decreased by approximately $ 11.9 million , or 31.5 % , to approximately $ 25.9 million for the fiscal year ended march 31 , 2020 from approximately $ 37.7 million for the fiscal year ended march 31 , 2019. the decrease to net income was primarily related to a decrease in gross profit due to price reductions given to customers to stimulate sales , and an increase to product costs . fiscal 2019 compared to fiscal 2018 sales sales increased by approximately $ 9.6 million , or 3.5 % , to approximately $ 283.4 million for the fiscal year ended march 31 , 2019 , from approximately $ 273.8 million for the fiscal year ended march 31 , 2018. the increase in sales for the fiscal year ended march 31 , 2019 was primarily due to increased reorder sales , offset by decreased new order sales . the company acquired approximately 467,000 new customers for the fiscal year ended march 31 , 2019 , compared to approximately 521,000 new customers for the same period the prior year . the following chart illustrates sales by various sales classifications : replace_table_token_9_th going forward sales may be adversely affected due to increased competition and consumers giving more consideration to price . no guarantees can be made that sales will grow in the future . the majority of our product sales are affected by the seasons , due to the seasonality of mainly flea , tick , and heartworm medications . for the quarters ended june 30 , september 30 , december 31 , and march 31 of fiscal 2019 , the company 's sales were approximately 31 % , 25 % , 21 % , and 23 % , respectively . for the quarters ended june 30 , september 30 , december 31 , and march 31 of fiscal 2018 , the company 's sales were approximately 29 % , 24 % , 22 % , and 25 % , respectively . cost of sales cost of sales increased by $ 12.1 million , or 6.9 % to $ 188.1 million for the fiscal year ended march 31 , 2019 , from $ 176.0 million for the fiscal year ended march 31 , 2018. as a percentage of sales , cost of sales was 66.4 % in fiscal 2019 , as compared to 64.3 % in fiscal 2018. the cost of sales increase is due to increased sales and the percentage increase can be attributed to increases in discounts given to customers to stimulate sales in response to increased online competition , and an increase in product costs during the fiscal year . 21 gross profit gross profit decreased by $ 2.5 million , or 2.6 % , to $ 95.3 million for the fiscal year ended march 31 , 2019 , from $ 97.8 million for the fiscal year ended march 31 , 2018. the decrease in gross profit in fiscal 2019 is directly related to increased discounts given to customers to stimulate sales . gross profit as a percentage of sales for fiscal 2019 was 33.6 % compared to 35.7 % for fiscal 2018. the gross profit percentage decrease in fiscal 2019 can be mainly attributed to increases in discounts given to customers to stimulate sales in response to increased online competition , and an increase in product costs during the fiscal year . going forward gross profit may be adversely affected due to increased competition and consumers giving more consideration to price . general and administrative expenses general and administrative expenses increased by $ 477,000 , or 2.0 % , to $ 24.8 million for the fiscal year ended march 31 , 2019 from $ 24.3 million for the fiscal year ended march 31 , 2018. the increase in general and administrative expenses for the fiscal year ended march 31 , 2019 was primarily due to the following : a $ 291,000 increase in property expenses related to increased property taxes in fiscal 2019 ; a $ 257,000 increase in bank service fees due to increased sales ; a $ 142,000 increase in professional fees which is related to increased legal and it related expenses ; and a $
| results of operations the following should be read in conjunction with the company 's consolidated financial statements and the related notes thereto included elsewhere herein . the following table sets forth , as a percentage of sales , certain operating data appearing in the company 's consolidated statements of comprehensive income : replace_table_token_7_th 18 fiscal 2020 compared to fiscal 2019 covid-19 as an essential business , 1-800-petmeds has been open during our normal business hours without any material disruptions to our operations . due to covid-19 , consumer demand has increased for the e-commerce channel with pet owners shifting their purchases to online . we are dedicated to making every effort to ensure the health and safety of our employees . we have implemented working from home where possible and enhanced disinfection and social distancing within our work place . we are also dedicated to making every effort to ensure our customers ' pets receive the medications they need . see risk factor “ the recent outbreak of the covid-19 global pandemic and related government , private sector and individual consumer responsive actions may adversely affect our business operations , employee availability , financial performance , liquidity and cash flow for an unknown period of time ” in part i , item 1a of this form 10-k. sales sales increased slightly to approximately $ 284.1 million for the fiscal year ended march 31 , 2020 , from approximately $ 283.4 million for the fiscal year ended march 31 , 2019. the increase in sales for the fiscal year ended march 31 , 2020 was primarily due to increased reorder sales , offset by decreased new order sales . the company acquired approximately 421,000 new customers for the fiscal year ended march 31 , 2020 , compared to approximately 467,000 new customers for the same period the prior year . the following chart illustrates sales by various sales classifications : replace_table_token_8_th going forward sales may be adversely affected due to covid-19 , increased competition , and consumers giving more consideration to price .
| 7,946 |
additionally , in designing disclosure controls and procedures , our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures . the design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events , and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions . our management , with the participation of story_separator_special_tag story_separator_special_tag style= '' page-break-after : always ; width : 100 % '' > 13 proprietary chelation technology provides enhanced nutrient absorption for various species of production and companion animals . in october 2008 , we introduced a rumen-protected lysine for use in dairy rations , aminoshure ® -l , which gives nutritionists and dairy producers a precise and consistent source of rumen-protected lysine . anh also manufactures and supplies basic choline chloride , an essential nutrient for animal health , predominantly to the poultry and swine industries . choline , which is manufactured and sold in both dry and aqueous forms , plays a vital role in the metabolism of fat . choline deficiency can result in reduced growth and perosis in poultry ; fatty liver , kidney necrosis and general poor health condition in swine . certain derivatives of choline chloride are also manufactured and sold into industrial applications predominately as a component for hydraulic fracturing of shale natural gas wells . the anh segment also includes the manufacture and sale of methylamines . methylamines are a primary building block for the manufacture of choline products and are also used in a wide range of industrial applications . sales of specialty products for the animal nutrition and health industry are highly dependent on dairy industry economics as well as the ability of the company to leverage the results of university research on the animal health benefits of the company 's products . management believes that success in the commodity-oriented basic choline chloride marketplace is highly dependent on the company 's ability to maintain its strong reputation for excellent product quality and customer service . in addition , the company must continue to increase production efficiencies in order to maintain its low-cost position to effectively compete in a highly competitive global marketplace . the company sells products for all three segments through its own sales force , independent distributors , and sales agents . the following tables summarize consolidated net sales by segment and business segment earnings from operations for the three years ended december 31 , 2012 , 2011 and 2010 ( in thousands ) : business segment net sales : replace_table_token_4_th business segment earnings from operations : replace_table_token_5_th fiscal year 2012 compared to fiscal year 2011 ( all amounts in thousands , except share and per share data ) net sales net sales for 2012 were $ 310,393 as compared with $ 291,867 for 2011 , an increase of $ 18,526 or 6.3 % . net sales for the specialty products segment were $ 49,990 for 2012 , as compared with $ 47,851 for 2011 , an increase of $ 2,139 or 4.5 % . approximately 83 % of this increase in sales was from ethylene oxide products for medical device sterilization , resulting from higher volumes and modest price increases to partially offset rising raw material costs . the balance of the increased sales is principally a result of higher sales from propylene oxide for use in the fumigation of certain nut meats and spice fumigation . net sales for the food , pharma & nutrition segment were $ 44,070 for 2012 compared with $ 42,525 for 2011 , an increase of $ 1,545 or 3.6 % . this result was primarily due to a $ 2,547 increase in sales of human choline for both food applications and the supplement markets . partially offsetting this was a 6.1 % decrease in sales in 14 the food market , principally due to lower volumes sold of encapsulated ingredients . also offsetting the increased sales was lower sales of calcium products , which were down approximately $ 301 , a result of our having sold this business in late 2010 , but which was still winding down in 2011. net sales of $ 216,333 were realized for 2012 for the animal nutrition & health segment , as compared with $ 201,491 for the prior year comparable period , an increase of $ 14,842 or 7.4 % . the anh specialty ingredients , largely targeted to the ruminant and companion animal markets , realized 22.3 % sales growth from the prior year comparable period . the improvement was due to volume increases , as some regional improvement in global dairy economics supported greater demand , particularly for our rumen protected choline , lysine , and methionine products . however , during the second quarter of 2012 , the company announced a decision to suspend sales of its aminoshure®-l , 52 % lysine ( the “ product ” ) . there were no safety concerns relating to the product ; however , research indicated that the lysine bioavailability of the product was lower than originally designed and projected , hence found to not meet our internal expectations . the sales credits issued related to this decision were approximately $ 1.0 million in this period . global feed grade choline product sales decreased by approximately 2.4 % due to lower volumes , partially offset by modest price increases , implemented globally , partially offsetting rising raw material costs . in addition , sales of the company 's european produced product were unfavorably impacted by foreign currency fluctuations totaling $ 2,838 or a 2.7 % decline in global feed grade choline product sales . the company experienced increased sales of various choline and choline derivative products used for industrial applications , predominantly in north america , including usage in fracking for oil and natural gas . story_separator_special_tag fiscal year 2011 compared to fiscal year 2010 ( all amounts in thousands , except share and per share data ) net sales net sales for 2011 were $ 291,867 as compared with $ 255,071 for 2010 , an increase of $ 36,796 or 14.4 % . net sales for the specialty products segment were $ 47,851 for 2011 , as compared with $ 42,239 for 2010 , an increase of $ 5,612 or 13.3 % . approximately 80 % of this increase in sales was from our ethylene oxide products for medical device sterilization , resulting from modest price increases to partially offset rising raw material costs , and volume improvements . the balance of the increased sales is principally a result of higher sales from propylene oxide in support of our acquisition of aberco , a marketer and distributor of propylene oxide for use in the fumigation of certain nut meats and spice fumigation . net sales for the food , pharma & nutrition segment were $ 42,525 for 2011 compared with $ 41,994 for 2010 , an increase of $ 531 or 1.3 % . this result was driven by a $ 2,900 increase in sales of human choline products for both food applications and the supplement markets . this increase was partially offset by lower sales of calcium products , which were down approximately $ 720 , a result of our having sold this business in late 16 2010 and lower sales in the domestic food market , primarily due to lower volumes sold of encapsulated ingredients for certain flavor and confection markets . net sales of $ 201,491 were realized for 2011 for the animal nutrition & health segment , as compared with $ 170,838 for the prior year comparable period , an increase of $ 30,653 or 17.9 % . global feed grade choline product sales improved by approximately 9 % reflecting modest price increases , implemented globally , to partially offset rising raw material costs . the anh specialty ingredients , largely targeted to the ruminant and companion animal markets , realized 24.1 % sales growth from the prior year comparable period ; 98 % of the improvement was due to volume increases , as some regional improvement in global dairy economics supported greater demand for these products , particularly reashure® and aminoshure®-l , our rumen protected lysine . the company experienced increased sales of various choline and choline derivative products used for industrial applications , predominantly in north america , but also in europe , including usage in fracking for oil and natural gas . industrial sales grew 33.7 % over the prior year period with the increase coming equally from volume and increased average selling prices . sales for industrial applications comprised approximately 29 % of the sales in this segment for 2011. gross margin gross margin for 2011 increased to $ 86,001 compared to $ 78,037 for 2010 , an increase of 10.2 % . this $ 7,964 increase was principally a result of a 6.1 % increase in sales volumes . gross margin percentage for 2011 decreased to 29.5 % , as compared to 30.6 % in the prior year comparative period , primarily due to increases in certain key raw material costs . gross margin percentage for the specialty products segment was even with the prior year . gross margin percentage in the food , pharma & nutrition segment increased by 0.7 % primarily due to the sale of the non-core calcium carbonate product line in the fourth quarter of 2010. gross margin percentage in the animal nutrition and health segment decreased by 1.2 % , principally from increases in the cost of certain petro-chemical raw materials used to manufacture choline , and temporary operating inefficiencies at certain of the company 's choline plants . operating expenses operating expenses for 2011 were $ 29,776 , as compared to $ 28,267 for 2010 , an increase of $ 1,509 or 5.3 % . this increase was primarily due to increased amortization and consulting costs totaling approximately $ 180 related to the 2010 aberco acquisition , a modest increase of employee headcount and additional compensation-related expenses totaling approximately $ 758 , increased consultancy fees of approximately $ 111 , primarily incurred to study acquisition opportunities , and increased outside contract research expense of $ 237 , partially offset by a reduction in recruiting and relocation fees of $ 201 and patent expense of $ 51. operating expenses were 10.2 % of sales or 0.9 percentage points less than the operating expenses as a percent of sales in last year 's comparable period . during 2011 and 2010 , the company spent $ 2,890 and $ 3,190 respectively , on research and development programs , substantially all of which pertained to the company 's food , pharma & nutrition and animal nutrition & health segments . earnings from operations earnings from operations for 2011 increased to $ 56,225 as compared to $ 49,770 for 2010 , an increase of $ 6,455 or 13.0 % . this increase was principally driven by increased sales volumes over the prior year comparable period , partially offset by higher raw material costs , increased operating expenses , and temporary operating inefficiencies at certain of the company 's choline plants . earnings from operations as a percentage of sales ( “ operating margin ” ) for 2011 decreased to 19.3 % from 19.5 % for 2010. the company is continuing to focus on leveraging its plant capabilities , driving efficiencies from core volume growth , broadening product applications of human and animal health specialty products into both the domestic and international markets , as well as capitalizing logistically on the company 's varied choline production capabilities .
| overview we develop , manufacture , distribute and market specialty performance ingredients and products for the food , nutritional , pharmaceutical , animal health and medical device sterilization industries . our reportable segments are strategic businesses that offer industrial products and services to different markets . we presently have three reportable segments : specialty products ; food , pharma & nutrition ; and animal nutrition & health . the following discussion and analysis of our financial condition and results of operations should be read in conjunction with item 6 — “ selected financial data ” and our consolidated financial statements and the related notes included in this report . those statements in the following discussion that are not historical in nature should be considered to be forward-looking statements that are inherently uncertain . see “ cautionary statement regarding forward-looking statements. ” 12 specialty products our specialty products segment operates in industry as arc specialty products . ethylene oxide , at the 100 % level , is sold as a sterilant gas , primarily for use in the health care industry . it is used to sterilize a wide range of medical devices because of its versatility and effectiveness in treating hard or soft surfaces , composites , metals , tubing and different types of plastics without negatively impacting the performance of the device being sterilized . our 100 % ethylene oxide product is distributed in uniquely designed , recyclable , double-walled , stainless steel drums to assure compliance with safety , quality and environmental standards as outlined by the epa and the dot . our inventory of these specially built drums , along with our two filling facilities , represents a significant capital investment . contract sterilizers , medical device manufacturers , and medical gas distributors are our principal customers for this product . in addition , we also sell single use canisters with 100 % ethylene oxide for use in medical device sterilization .
| 7,947 |
in analyzing an issuer 's financial condition , the company may consider whether the securities are issued by the federal government or its agencies , whether downgrades by bond rating agencies have occurred , the sector or industry trends and cycles affecting the issuer , and the results of reviews of story_separator_special_tag management 's discussion and analysis of financial condition and results of operations analyzes the consolidated financial condition and results of operations of porter bancorp , inc. and its wholly owned subsidiary , pbi bank . porter bancorp , inc. is a louisville , kentucky-based bank holding company which operates 18 full-service banking offices in twelve counties through its wholly-owned subsidiary , pbi bank . our markets include metropolitan louisville in jefferson county and the surrounding counties of henry and bullitt , and extend south along the interstate 65 corridor to tennessee . we serve south central kentucky and southern kentucky from banking offices in butler , green , hart , edmonson , barren , warren , ohio , and daviess counties . we also have an office in lexington , the second largest city in kentucky . our markets have experienced annual positive deposit growth rates in recent years with the trend expected to continue . the bank is both a traditional community bank with a wide range of commercial and personal banking products and an innovative online bank which delivers competitive deposit products and services through an on-line banking division operating under the name of ascencia . historically , we have focused on commercial and commercial real estate lending , both in markets where we have banking offices and other growing markets in our region . commercial , commercial real estate and real estate construction loans accounted for 60.5 % of our total loan portfolio as of december 31 , 2011 , and 62.7 % as of december 31 , 2010. commercial lending generally produces higher yields than residential lending , but involves greater risk and requires more rigorous underwriting standards and credit quality monitoring . overview the following discussion should be read in conjunction with our consolidated financial statements and accompanying notes and other schedules presented elsewhere in the report . for the year ended december 31 , 2011 , we reported a net loss of $ 107.3 million compared to net loss of $ 4.4 million for the year ended december 31 , 2010. after deductions for dividends on preferred stock , accretion on preferred stock , and earnings allocated to participating securities , the net loss to common shareholders was $ 105.2 million for the year ended december 31 , 2011 , compared to net loss to common shareholders of $ 6.2 million for the year ended december 31 , 2010. basic and diluted loss per common share were $ ( 8.98 ) for the year ended december 31 , 2011 , compared to loss per common share of $ ( 0.60 ) for 2010. the decline in our financial performance in 2011 was primarily due to losses in our commercial real estate and construction and land development loan portfolios . weakness in demand for housing units in our markets continues to negatively impact values of collateral securing our loans and other real estate owned ( oreo ) , as well as some customers ' ability to repay their loans . as a result of these trends we charged off a high level of commercial real estate and construction and land development loans . we also wrote down other real estate owned to reflect declining real estate values reflected in new appraisals and our strategy to bulk sell certain properties . non-performing loans were 8.22 % of total loans and nonperforming assets stood at 9.26 % of total assets at december 31 , 2011. we remain diligent in the management of our portfolio and are striving to improve credit quality by working throughout our markets with our clients to balance selective new customer acquisition , customer service for our existing clients and prudent risk management . in addition , we recorded a pre-tax goodwill impairment charge of $ 23.8 million during the second quarter of 2011. the write-off of goodwill was a non-cash accounting entry that had no effect on liquidity , regulatory capital or regulatory capital ratios . approximately $ 6.2 million of the impairment charge was deductible for federal tax purposes . the after tax impact of the goodwill impairment charge was $ 21.6 million , or $ ( 1.84 ) per common share . we also established a 100 % deferred tax valuation allowance of $ 31.7 million in december 2011 based upon a detailed analysis of our past performance and our expected future performance . we considered all evidence currently available , both positive and negative , in determining , based on the weight of that evidence , the likelihood that the deferred tax asset would be realized . during that review , we determined that the level of our recent historical losses , the level of our non-performing assets , our inability to meet our forecasted levels of earnings in 2011 , our intent to defer payment of dividends on our subordinated debentures and series a preferred stock , and our non-compliance with the capital requirements of our consent order outweighed our forecasted taxable earnings levels for the near and long term . as such , we established a 100 % deferred tax valuation allowance . a return to profitability would enable us to reduce the valuation allowance and thereby offset income tax expense that would otherwise be recognized . 26 significant developments for the year ended december 31 , 2011 were : ■ loans decreased 12.8 % to $ 1.1 billion compared to $ 1.3 billion at december 31 , 2010 . ■ total assets decreased 15.6 % to $ 1.5 billion since the 2010 year-end . ■ deposits declined 9.8 % to $ 1.3 billion compared with $ 1.5 billion at december 31 , 2010 . ■ net interest margin decreased to 3.40 % for 2011 compared with 3.59 % for 2010 . story_separator_special_tag o although we were carrying our oreo at fair market value less estimated cost to sell , we subsequently adjusted our valuations for land development and residential development properties held in oreo similar to the properties we sold earlier in 2011. our 2011 fair value adjustments totaled approximately $ 25.6 million to reflect our intent to market these properties more aggressively to retail and bulk buyers . additionally , we recorded approximately $ 9.3 million of fair value adjustments related to new appraisals received for properties in the portfolio during 2011. o in summary , we recorded net construction and development oreo fair value adjustments and loss on sale of oreo totaling $ 38.7 and $ 10.4 million in 2011 and 2010 , respectively . this represents approximately 89 % and 71 % of our total oreo fair value adjustments and loss on sale in 2011 and 2011 , respectively . ● we are committed to reducing loan concentrations and balance sheet risk . o our consent order calls for us to reduce our construction and development loans to not more than 75 % of total risk-based capital . these loans totaled $ 101.5 million , or 85 % of total risk-based capital , at december 31 , 2011. o our consent order also requires us to reduce non-owner occupied commercial real estate loans , construction and development loans , and multifamily residential real estate loans as a group , to not more than 250 % of total risk based capital . these loans totaled $ 414.6 million , or 349 % of total risk-based capital , at december 31 , 2011. o we are working to reduce these loans by curtailing new construction and development lending and new non-owner occupied commercial real estate lending . we are also receiving principal reductions from amortizing credits and pay-downs from our customers who sell properties built for resale . while we have not yet reduced our balances in these categories to the required percentages , we have reduced the construction loan portfolio from $ 199.5 million at december 31 , 2010 to $ 101.5 million at december 31 , 2011. our non-owner occupied commercial real estate loans declined from $ 293.3 million at december 31 , 2010 to $ 252.7 million at december 31 , 2011 . ● raise capital by selling common stock through a public offering or private placement to existing and new investors . ● evaluate other strategic alternatives , such as the sale of assets or branches . bank regulatory agencies can exercise discretion when an institution does not meet the terms of a consent order . based on individual circumstances , the agencies may issue mandatory directives , impose monetary penalties , initiate changes in management , or refrain from formal sanctions . application of critical accounting policies our accounting and reporting policies comply with gaap and conform to general practices within the banking industry . we believe that of our significant accounting policies , the following may involve a higher degree of management assumptions and judgments that could result in materially different amounts to be reported if conditions or underlying circumstances were to change . 28 allowance for loan losses – pbi bank maintains an allowance for loan losses believed to be sufficient to absorb probable incurred credit losses existing in the loan portfolio , and the board of directors evaluates the adequacy of the allowance for loan losses on a quarterly basis . we evaluate the adequacy of the allowance using , among other things , historical loan loss experience , known and inherent risks in the portfolio , adverse situations that may affect the borrower 's ability to repay , estimated value of the underlying collateral and current economic conditions and trends . the allowance may be allocated for specific loans or loan categories , but the entire allowance is available for any loan that , in management 's judgment , should be charged off . the allowance consists of specific and general components . the specific component relates to loans that are individually classified as impaired . the general component is based on historical loss experience adjusted for environmental factors . we develop allowance estimates based on actual loss experience adjusted for current economic conditions and trends . allowance estimates are a prudent measurement of the risk in the loan portfolio which we apply to individual loans based on loan type . if the mix and amount of future charge-off percentages differ significantly from those assumptions used by management in making its determination , we may be required to materially increase our allowance for loan losses and provision for loan losses , which could adversely affect our results . other real estate owned – other real estate owned ( oreo ) is real estate acquired as a result of foreclosure or by deed in lieu of foreclosure . it is classified as real estate owned until such time as it is sold . when property is acquired as a result of foreclosure or by deed in lieu of foreclosure , it is recorded at its fair market value less estimated cost to sell . any write-down of the property at the time of acquisition is charged to the allowance for loan losses . subsequent reductions in fair value are recorded as non-interest expense . to determine the fair value of oreo for smaller dollar single family homes , we consult with internal real estate sales staff and external realtors , investors , and appraisers . if the internally evaluated market price is below our underlying investment in the property , appropriate write-downs are recorded . for larger dollar commercial real estate properties , we obtain a new appraisal of the subject property in connection with the transfer to other real estate owned . we do not obtain updated appraisals on a quarterly basis after the receipt of the initial appraisal .
| results of operations the following table summarizes components of income and expense and the change in those components for 2011 compared with 2010 : replace_table_token_5_th net loss of $ 107.3 million for the year ended december 31 , 2011 , increased $ 102.9 million from net loss of $ 4.4 million for 2010. net loss to common shareholders of $ 105.2 million for the year ended december 31 , 2011 , increased $ 99.0 million from net loss to common shareholders of $ 6.2 million for 2010. this decrease in earnings was primarily attributable to a one-time goodwill impairment charge of $ 23.8 million , establishment of a deferred tax asset valuation allowance of $ 31.7 million , increased provision for loan losses expense , and non-interest expenses associated with our oreo . goodwill was determined to be impaired during the second quarter of 2011 as the result of operating losses and a significant drop in value of our common stock which trades on nasdaq . the deferred tax asset is dependent on future levels of income . given our net loss for the past two years , and evaluation of other positive and negative evidence , we established a 100 % valuation allowance for our deferred tax asset in the fourth quarter of 2011. provision for loan losses expense increased $ 32.5 million , or 108.0 % , in comparison with 2010 as a result of an increase in non-performing loans , and an increase in net loan charge-offs to $ 44.3 million , or 3.56 % of average loans for 2011 , compared with $ 22.2 million , or 1.64 % of average loans for 2010. non-interest income decreased $ 261,000 , or 3.7 % , in comparison with 2010 primarily as a result of decreased service charges on deposit accounts . gains on sales of investment securities decreased $ 4.0 million , or 78.5 % in comparison with 2010 due to fewer sales of securities during the year .
| 7,948 |
the milestone payments are evaluated at inception to determine whether the milestone events are considered probable of achievement and estimates are made of the amount of the milestone payments to include in the transaction price using the most likely amount method which is the single amount in a range of possible amounts . if it is probable that a significant revenue reversal will story_separator_special_tag restatement of 2017 financial information the accompanying management 's discussion and analysis of financial condition and results of operations gives effect to the restatement adjustments made to the previously reported consolidated financial statements for the year ended december 31 , 2017. for additional information and a detailed discussion of the restatement , see the explanatory note to this annual report on form 10-k and note 2 , `` restatement of consolidated financial statements '' to our consolidated financial statements included in part ii , item 8 of this annual report on form 10-k. overview as a leading industrial biotechnology company , we apply our technology platform to engineer , manufacture and sell high performance , natural , sustainably-sourced products into the health & wellness , clean beauty , and flavor & fragrance markets . our proven technology platform enables us to rapidly engineer microbes and use them as catalysts to metabolize renewable , plant-sourced sugars into large volume , high-value ingredients . our biotechnology platform and industrial fermentation process replace existing complex and expensive manufacturing processes . we have successfully used our technology to develop and produce eight distinct molecules at commercial volumes , leading to more than 15 commercial ingredients used by thousands of leading global brands . 45 we believe that industrial synthetic biology represents a third industrial revolution , bringing together biology and engineering to generate new , more sustainable materials to meet the growing global demand for bio-based replacements for petroleum-based and traditional animal- or plant-derived ingredients . we continue to build demand for our current portfolio of products through an extensive sales network provided by our collaboration partners that represent leading companies for our target market sectors . we also have a small group of direct sales and distributors who support our clean beauty market . via our partnership model , our partners invest in the development of each molecule to bring it from the lab to commercial scale and use their extensive sales force to sell our ingredients and formulations to their customers as part of their core business . we capture long-term revenue both through the production and sale of the molecule to our partners and through royalty revenues from our partners ' product sales to their customers . we were founded in 2003 in the san francisco bay area by a group of scientists from the university of california , berkeley . our first major milestone came in 2005 when , through a grant from the bill & melinda gates foundation , we developed technology capable of creating microbial strains that produce artemisinic acid , which is a precursor of artemisinin , an effective anti-malarial drug . in 2008 , we granted royalty-free licenses to allow sanofi-aventis to produce artemisinic acid using our technology . building on our success with artemisinic acid , in 2007 we began applying our technology platform to develop , manufacture and sell sustainable alternatives to a broad range of markets . we focused our initial development efforts primarily on the production of biofene® , our brand of renewable farnesene , a long-chain , branched hydrocarbon molecule that we manufacture through fermentation using engineered microbes . our farnesene derivatives are sold in hundreds of products as nutraceuticals , skincare products , fragrances , solvents , polymers , and lubricant ingredients . the commercialization of farnesene pushed us to create a more cost efficient , faster and accurate development process in the lab and drive manufacturing costs down . this investment has enabled our technology platform to rapidly develop microbial strains and commercialize target molecules . in 2014 , we began manufacturing additional molecules for the flavor & fragrance industry ; in 2015 we began investing to expand our capabilities to other small molecule chemical classes beyond terpenes via our collaboration with the defense advanced research projects agency ( darpa ) ; and in 2016 we expanded into proteins . we have invested over $ 600 million in infrastructure and technology to create microbes that produce molecules from sugar or other feedstocks at commercial scale . this platform has been used to design , build , optimize and upscale strains producing eight distinct molecules at commercial volumes , leading to more than 15 commercial ingredients used by thousands of leading global brands . our time to market for molecules has decreased from seven years to less than a year for our most recent molecule , mainly due to our ability to leverage the technology platform we have built . our technology platform has been in active use since 2007 and has been integrated with our commercial production since 2011 , creating an organism development process that we believe makes us an industry leader in the successful scale-up and commercialization of biotech-produced ingredients . the key performance characteristics of our platform that we believe differentiate us include our proprietary computational tools , strain construction tools , screening and analytics tools , and advanced lab automation and data integration . having this fully integrated with our large scale manufacturing process and capability enables us to always engineer with the end specification and requirements guiding our technology . our state-of-the-art infrastructure includes industry-leading strain engineering and lab automation located in emeryville , california , pilot scale production facilities in emeryville , california and campinas , brazil , a demonstration-scale facility in campinas , brazil and a commercial-scale production facility in leland , north carolina , which is owned and operated by our aprinnova joint venture to convert our biofene into squalane and other final products . story_separator_special_tag in june 2018 , dsm paid us a nonrefundable minimum royalty revenue payment of $ 9.3 million and will also pay us a nonrefundable minimum royalty amount in 2019. the future nonrefundable minimum annual royalty payments were determined to be fixed and determinable at december 31 , 2017 with a fair value of $ 17.8 million and were included as part of the total arrangement consideration subject to allocation of this overall multiple-element divestiture transaction . in november 2018 and april 2019 , we amended the supply agreement with dsm to secure capacity at the brotas facility for reb m production through 2022. under the amended supply agreement , we paid dsm $ 1.7 million in cash and $ 7.3 million in common stock as of december 31 , 2018 and will pay an additional $ 21.0 million in cash installments over the next 12 months for a total of $ 30.0 million to secure the manufacturing capacity . we also entered into other agreements with dsm in november 2018 that resulted in our ( i ) evaluating the series of fourth quarter transactions including the amended supply agreement and other transactions with dsm in 2018 as a combined arrangement , and then ( ii ) determining and allocating the fair value to each element transferred . see note 10 , “ revenue recognition ” , note 11 , `` related party transactions '' and note 16 , “ subsequent events ” in part ii , item 8 of this annual report on form 10-k for information regarding the accounting treatment of this combined arrangement and for a full listing of our agreements with dsm . 47 sales and revenue we recognize revenue from product sales , license fees and royalties , and grants and collaborations . we have research and development collaboration arrangements for which we receive payments from our collaboration partners , which include darpa , dsm , firmenich sa ( firmenich ) , givaudan international sa ( givaudan ) , and others . some of our collaboration arrangements provide for advance payments to us in consideration for grants of exclusivity or research efforts that we will perform . in 2017 we signed collaboration agreements for an infant nutrition ingredient , and in 2018 we signed a collaboration agreement for two vitamins that we expect will contribute to our collaboration revenue and ultimately product sales . our collaboration agreements , which may require us to achieve milestones prior to receiving payments , are expected to contribute revenues from product sales and royalties if and when they are commercialized . see note 10 , “ revenue recognition ” in part ii , item 8 of this annual report on form 10-k for additional information . all of our non-government partnerships include commercial terms for the supply of molecules we successfully upscale and produce at commercial volumes . the first molecule to generate revenue for us outside of farnesene was a fragrance molecule launched in 2015. since the launch , the product has continued to grow in sales year over year . in 2016 , we launched our second fragrance molecule and in 2017 , we launched our third fragrance molecule as well as our first cosmetic active ingredient . our partners for these molecules are indicating continued strong growth due to their cost advantaged position , high purity and sustainable production method . we are continuing to identify new opportunities to apply our technology and deliver sustainable access to key molecules . as a result , we have a pipeline that we believe can deliver two to three new molecules each year over the coming years with a flavor ingredient , a cosmetic active ingredient and a fragrance molecule . in 2019 , we are commercially producing and shipping our reb m product that is a sweetener and sugar replacement for food and beverages . as part of the dsm acquisition in 2017 of our farnesene for vitamin e business , we would receive a royalty payment on certain sales by nenter & co. , inc. of vitamin e utilizing farnesene produced and sold by dsm from our technology . in addition , dsm would be obligated to pay us minimum royalties totaling $ 18.1 million for 2019 and 2020 , of which we received $ 9.3 million as a discounted accelerated payment ( from an original payment amount of $ 10.0 million ) during 2018. in april 2019 , we assigned the right to receive such royalty payments to dsm ; see note 16 , “ subsequent events ” in part ii , item 8 of this 2018 form 10-k for additional information . we have several other collaboration molecules in our development pipeline with partners including dsm , givaudan and firmenich that we expect will contribute revenues from product sales and royalties if and when they are commercialized . critical accounting policies and estimates management 's discussion and analysis of results of operations and financial condition are based on our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the u.s. ( u.s. gaap ) . we believe that the critical accounting policies described in this section are those that significantly impact our financial condition and results of operations and require the most difficult , subjective or complex judgements , often as a result of the need to make estimates about the effects of matters that are inherently uncertain . because of this uncertainty , actual results may vary from these estimates . our most critical accounting estimates include : recognition of revenue including arrangements with multiple performance obligations ; valuation and allocation of fair value to various elements of complex related party transactions ; the valuation of freestanding and embedded derivatives , which impacts gains or losses on such derivatives , the carrying value of debt , preferred stock , interest expense and deemed dividends ; and the valuation of debt for which we have elected fair value accounting .
| results of operations revenue replace_table_token_2_th 2018 compared to 2017 : total revenue decreased by 50 % to $ 63.6 million in 2018. renewable products revenue decreased by 21 % to $ 33.6 million in 2018 , primarily due to ( i ) no product revenue from nenter in 2018 as compared to $ 12.1 million in 2017 , as the result of our late-2017 assignment of a farnesene supply agreement to dsm , and ( ii ) a $ 5.9 million decrease in product revenue from firmenich , partly offset by increases of $ 5.1 million and $ 5.0 million in clean beauty and health & wellness products , respectively . licenses and royalties revenue decreased by 84 % to $ 7.7 million in 2018 , primarily due to $ 58.0 million of one-time license revenue in 2017 upon the license of farnesene for use in certain fields to dsm that did not recur in 2018 , and a $ 13.1 million revenue offset in 2017 in connection with a ginkgo partnership agreement , partly offset by an additional $ 7.4 million of new vitamin e-related royalty revenue in 2018 from dsm . grants and collaborations revenue decreased by 39 % to $ 22.3 million in 2018 , primarily due to no collaboration revenue from manufacture francaise de pnematiques michelin ( michelin ) and braskem s.a. ( braskem ) in 2018 as compared to $ 6.2 million in 2017 , and a $ 3.9 million decrease in collaboration revenue from darpa as the project approaches completion . our revenues are dependent on the timing and nature of arrangements entered into with our customers , which may include multiple performance obligations for which revenue accounting requires significant judgement and estimates . based on the nature of our customer arrangements , our revenues may vary significantly from one period to the next .
| 7,949 |
asc 715 did not change the recognition of pension income or expense in the statement of operations . since the company has recognized the funded status of its defined benefit pension plans since its adoption of the accelerated method , the adoption of asc story_separator_special_tag special note regarding forward-looking statements this annual report ( including but not limited to factors discussed below , in the “ management 's discussion and analysis of financial condition and results of operations , ” as well as those discussed elsewhere in this annual report on form 10-k ) may include certain forward-looking statements ( within the meaning of sections 27a of the securities act of 1933 and 21e of the securities exchange act of 1934 ) and information relating to the company that are based on the beliefs of the management of the company as well as assumptions made by and information currently available to the management of the company . when used in this annual report , the words “ anticipate , ” “ believe , ” “ estimate , ” “ expect , ” “ intend , ” “ plan , ” and similar expressions , as they relate to the company or the management of the company , identify forward-looking statements . such statements reflect the current views of the company with respect to future events , the outcome of which is subject to certain risks , including among others ; general economic and market conditions , decreased consumer demand for the company 's products , possible disruptions in the company 's computer or telephone systems , possible work stoppages , or increases in labor costs , effects of competition , possible disruptions or delays in the opening of new stores or inability to obtain suitable sites for new stores , higher than anticipated store closings or relocation costs , higher interest rates , unanticipated increases in merchandise or occupancy costs and other factors which may be outside the company 's control , including the risk factors disclosed in item 1a of this annual report on form 10-k. should one or more of these risks or uncertainties materialize , or should underlying assumptions prove incorrect , actual results or outcomes may vary materially from those described herein as anticipated , believed , estimated , expected , intended or planned . subsequent written and oral forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements in this paragraph and described elsewhere in this annual report and other reports filed with the securities and exchange commission . 12 the company does not assume the obligation to update any forward-looking statement . shareholders should carefully evaluate such statements in light of factors , including risk factors , described in the company 's filings with the sec , especially on forms 10-k , 10-q and 8-k. in item 1a. , “ risk factors ” of this annual report on form 10-k , the company discusses in more detail various important risk factors that could cause actual results to differ from expected or historic results . the company notes these factors for readers as permitted by the private securities litigation reform act of 1995. shareholders should understand that it is not possible to predict or identify all such factors . consequently , shareholders should not consider any such list to be a complete statement of all potential risks or uncertainties . critical accounting policies and estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states of america 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 the financial statements and related notes . since future events and their impact can not be determined with certainty , the actual results will inevitably differ from the company 's estimates . such differences could be material to the financial statements . the company believes that its application of accounting policies , and the estimates inherently required by the policies , are reasonable . these accounting policies and estimates are constantly reevaluated , and adjustments are made when facts and circumstances dictate a change . historically , the company has found the application of accounting policies to be appropriate , and actual results have not differed materially from those determined using necessary estimates . the company 's accounting policies are more fully described in note 1 of the notes to consolidated financial statements presented elsewhere in this annual report . the company has identified certain critical accounting policies that are described below . merchandise invento r y – merchandise inventories are stated at the lower of cost or market on a first-in , first-out ( fifo ) basis , as determined by the retail inventory method . under the retail method , inventory cost and the resulting gross margins are calculated by applying a cost to retail ratio between the costs of goods available for sale and the retail value of inventories . for a brief period , from october 4 , 2009 through october 2 , 2010 , the syms stores utilized a different method , the moving weighted average cost method . under the moving weighted average cost method , inventory cost and the resulting gross margins are calculated by applying an average cost based on the cost of goods available for sale divided by the number of units available for sale . after we completed the acquisition of filene 's , the company found itself in the position that a portion of its business was utilizing the moving average cost method and a portion of its business was utilizing the retail inventory method . the company thus was faced with the choice of either converting filene 's to the moving average cost method or transitioning the syms stores back to the system that they had previously utilized . the company determined that it would be more effective to revert back to the retail inventory method . story_separator_special_tag % of net sales during fiscal 2010 compared to $ 1.5 million or 0.4 % of net sales during fiscal 2009. for fiscal 2010 , interest expense was a result of borrowings on the company 's revolving credit facility . during the prior year period , interest expense was due to borrowings against the cash surrender value of officers ' life insurance policies and borrowings on the company 's revolving credit facility . the sales and gross profit increase attributable to the acquisition of filene 's were insufficient to offset the expense increases and impairment and restructuring charges incurred during fiscal 2010. as a result of the above-noted items , the loss before income taxes for fiscal 2010 was $ 51.7 million as compared to a loss of $ 6.4 million for fiscal 2009. for fiscal 2010 , the effective income tax rate was 36.5 % as compared to 230.2 % for fiscal 2009. in fiscal 2010 , the difference between the effective income tax rate and the federal statutory rate resulted primarily from state income taxes , adjustments related to prior year income taxes , and to a lesser extent permanent differences in the deductibility of expenses for book and tax . in fiscal 2009 , this difference related mostly to the non-taxable nature of the life insurance proceeds received and recorded in income , partially offset by the effect of adjustments related to prior year taxes . the change in the effective income tax rate is primarily due to the above noted items occurring in one year and not the other . 15 fiscal year ended february 27 , 2010 ( fiscal 2009 ) compared to fiscal year ended february 28 , 2009 ( fiscal 2008 ) net sales for fiscal 2009 were $ 377.3 million , an increase of $ 135.3 million or 56 % as compared to net sales of $ 242.0 million for fiscal 2008. net sales for fiscal 2009 included sales from filene 's from june 19 , 2009 ( first date of operating ownership ) . comparable store sales , which are for syms stores only , decreased 15 % or approximately $ 32.4 million , reflective of the continued economic recession in the u.s. which resulted in lower retail sales across most markets . in our comparable store computation , we only include stores that have been opened for a period of at least 12 months and stores that were open during both fiscal years . syms closed a store in virginia and opened a new store in close proximity to the previous location . this location is included in the comparable store comparisons . we opened no new locations in fiscal 2009 and there was no expansion in square footage in existing stores . partially offsetting the above sales increase was the loss of $ 9.8 million of sales resulting from the closing of five stores during fiscal 2009. gross profit for fiscal 2009 was $ 145.1 million or 38.5 % of net sales compared with $ 100.5 million or 41.5 % of net sales for the prior year , an increase of $ 44.6 million or 44 % . gross profit for fiscal 2009 included gross profit from filene 's from june 19 , 2009 ( first date of operating ownership ) . gross profit for syms , exclusive of filene 's , decreased by $ 24.4 million which is attributable to decreased sales from declines in store traffic commensurate with the recessionary trend in the u.s. economy and a reduction in gross profit percentage from 41.5 % to 38.1 % . this decline in gross profit percentage is attributable to reduced margin on close-out sales at five stores that were closed in fiscal 2009 , reduced margin on selected merchandise at two stores in preparation for co-branding of syms and filene 's merchandise in the same location , and overall margin decline across all stores due to a re-pricing strategy to reduce prices to 2001 retail levels . the company 's gross profit excludes the cost of its distribution network . for the fiscal years ended february 27 , 2010 and february 28 , 2009 , the amounts incurred for our distribution network that were classified in selling , general and administrative expenses and occupancy costs were $ 15.6 million and $ 7.9 million , respectively . selling , general and administrative expense ( “ sg & a ” ) increased $ 35.6 million to $ 109.5 million or 29.0 % of net sales for fiscal 2009 as compared to $ 73.9 million or 30.6 % of net sales for fiscal 2008. sg & a for fiscal 2009 included sg & a from filene 's from june 19 , 2009 ( first date of operating ownership ) . sg & a for syms , exclusive of filene 's , decreased , predominately as a result of reductions in personnel and other controllable expenses commensurate with the reduction in sales previously discussed . advertising expense for fiscal 2009 was $ 8.2 million or 2.2 % of net sales compared with $ 6.3 million or 2.6 % of net sales for the prior year , an increase of $ 1.9 million . advertising expense for fiscal 2009 included advertising expense from filene 's from june 19 , 2009 ( first date of operating ownership ) . for fiscal 2009 vs. fiscal 2008 , advertising expense for syms , exclusive of filene 's , decreased , primarily due to shifts away from tv advertising to a lower-cost and more geographically focused usage of radio , e-mail and in-store promotional activities . occupancy costs for fiscal 2009 were $ 49.5 million or 13.1 % of net sales compared with $ 16.3 million or 6.7 % of net sales for the prior year , an increase of $ 33.2 million . occupancy costs for fiscal 2009 included occupancy costs from filene 's from june 19 , 2009 ( first date of operating ownership ) . occupancy costs for syms , exclusive of filene 's , decreased , primarily as a result of the closure of five store locations .
| results of operations the following discussion compares the fiscal years ended february 26 , 2011 , february 27 , 2010 and february 28 , 2009. all of the fiscal years were comprised of 52 weeks . fiscal year ended february 26 , 2011 ( fiscal 2010 ) compared to fiscal year ended february 27 , 2010 ( fiscal 2009 ) net sales increased by $ 67.8 million or 18 % to $ 445.1 million during fiscal 2010 from $ 377.3 million in fiscal 2009. this increase was primarily the result of having a full 12 months of sales in fiscal 2010 from the filene 's stores which were acquired in fiscal 2009. net sales in fiscal 2009 included sales from filene 's from june 19 , 2009 ( first day of operating ownership ) . comparable store sales , including filene 's sales for comparable periods , were flat in fiscal 2010. comparable store sales in the prior year , excluding filene 's sales , decreased 15 % . the company 's comparable store sales computation only includes stores that have been owned and operated by the company for a period of at least twelve full fiscal months . in addition , the company opened one store during fiscal 2010 which contributed $ 1.9 million of the sales increase .
| 7,950 |
factors that could cause or contribute to such differences include those discussed below and elsewhere in this report , as well as those discussed in other filings made by biocryst with the securities and exchange commission . the following management 's discussion and analysis ( “ md & a ” ) is intended to help the reader understand our results of operations and financial condition . md & a is provided as a supplement to , and should be read in conjunction with , our audited financial statements and the accompanying notes to the financial statements and other disclosures included in this annual report on form 10-k ( including the disclosures under “ item 1a . risk factors ” ) . cautionary statement the discussion herein contains forward-looking statements within the meaning of section 21e of the securities exchange act of 1934 , as amended , which are subject to the “ safe harbor ” created in section 21e . forward looking statements regarding our financial condition and our results of operations that are based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted within the united states ( “ u.s . gaap ” ) , as well as projections for the future . the preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . we evaluate our estimates on an ongoing basis . our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances . the results of our estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . 33 we operate in a highly competitive environment that involves a number of risks , some of which are beyond our control . we are subject to risks common to biotechnology and biopharmaceutical companies , including risks inherent in our drug discovery , drug development and commercialization efforts , clinical trials , uncertainty of regulatory actions and marketing approvals , reliance on collaborative partners , enforcement of patent and proprietary rights , the need for future capital , competition associated with products , potential competition associated with our product candidates and retention of key employees . in order for any of our product candidates to be commercialized , it will be necessary for us , or our collaborative partners , to conduct clinical trials , demonstrate efficacy and safety of the product candidate to the satisfaction of regulatory authorities , obtain marketing approval , enter into manufacturing , distribution and marketing arrangements , and obtain market acceptance and adequate reimbursement from government and private insurers . we can not provide assurance that we will generate significant revenues or achieve and sustain profitability in the future . in addition , we can provide no assurance that we will have sufficient funding to meet our future capital requirements . statements contained in management 's discussion and analysis of financial condition and results of operations and elsewhere in this report which are not historical facts are , or may constitute , forward-looking statements . forward-looking statements involve known and unknown risks that could cause our actual results to differ materially from expected results . the most significant known risks are discussed in the section entitled “ risk factors. ” although we believe the expectations reflected in the forward-looking statements are reasonable , we can not guarantee future results , levels of activity , performance or achievements . we caution you not to place undue reliance on any forward-looking statements . our revenues are difficult to predict and depend on numerous factors , including the prevalence and severity of influenza in regions for which peramivir has received regulatory approval , seasonality of influenza , ongoing discussions with government agencies regarding future rapivab and or bcx4430 development and stockpiling procurement , as well as entering into , or modifying , licensing agreements for our product candidates . furthermore , revenues related to our collaborative development activities are dependent upon the progress toward and the achievement of developmental milestones by us or our collaborative partners . our operating expenses are also difficult to predict and depend on several factors , including research and development expenses ( and whether these expenses are reimbursable under government contracts ) , drug manufacturing , and clinical research activities , the ongoing requirements of our development programs , and the availability of capital and direction from regulatory agencies , which are difficult to predict . management may be able to control the timing and level of research and development and general and administrative expenses , but many of these expenditures will occur irrespective of our actions due to contractually committed activities and or payments . as a result of these factors , we believe that period to period comparisons are not necessarily meaningful and you should not rely on them as an indication of future performance . due to all of the foregoing factors , it is possible that our operating results will be below the expectations of market analysts and investors . in such event , the prevailing market price of our common stock could be materially adversely affected . overview we are a biotechnology company that designs , optimizes and develops novel small molecule drugs that block key enzymes involved in the pathogenesis of diseases . we focus on the treatment of rare diseases in which significant unmet medical needs exist and align with our capabilities and expertise . we integrate the disciplines of biology , crystallography , medicinal chemistry and computer modeling to discover and develop small molecule pharmaceuticals through the process known as structure-guided drug design . critical accounting policies and estimates the accompanying discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements and the related disclosures , which have been prepared in accordance with u.s. gaap . story_separator_special_tag furthermore , we do not expect to incur significant ulodesine expenses in the future because we do not plan to initiate phase 3 development of ulodesine without a partner . in 2013 , we recognized approximately $ 5.0 million of r & d costs related to a write-off of deferred collaboration costs associated with our pnp licensing agreement with aecom/irl . g & a expenses decreased to $ 6.0 million in 2013 compared to $ 9.1 million in the prior year . the decrease of $ 3.1 million is primarily due to the december 2012 restructuring that reduced our cost structure and operations . 36 interest expense increased slightly to $ 4.8 million in 2013 as compared to $ 4.7 million in 2012. in addition , a mark to market gain of $ 5.3 million was recognized in 2013 related to the foreign currency hedge compared to a mark to market loss of $ 0.7 million in the prior year , both resulting from changes in the u.s. dollar/japanese yen exchange rate during the respective years . restructuring in december 2012 , we announced that we had restructured our operations during the fourth quarter of 2012 to significantly reduce the size and operations of our company in order to extend our existing cash runway . we eliminated approximately 50 % of our workforce and decreased other costs , which significantly decreased our 2013 operating expenses and operating cash utilization , as compared to 2012 levels . in connection with the restructuring , we recorded restructuring charges of approximately $ 1.8 million for the year ended december 31 , 2012 , which was reported in a separate line item in our consolidated statements of comprehensive loss . significant components of the restructuring charge were termination benefits for employees impacted by the restructuring and losses associated with leased lab and office space that became underutilized . we do not expect to incur any additional restructuring changes as a result of our december 2012 restructuring and there was no restructuring accrual remaining at december 31 , 2013. liquidity and capital resources cash expenditures have exceeded revenues since our inception and we expect our 2015 operating expenses to exceed our 2015 revenues . our operations have principally been funded through public offerings and private placements of equity securities ; cash from collaborative and other research and development agreements , including u.s. government contracts for peramivir and bcx4430 ; and to a lesser extent , the pharma notes financing . to date , we have been awarded a barda/hhs peramivir development contract totaling $ 234.8 million , which expired on june 30 , 2014 , and a niaid/hhs bcx4430 development contract totaling $ 29.1 million ( as of february 12 , 2015 ) , which is ongoing . the total amount of niaid/hhs funding obligated under awarded options ( as of february 12 , 2015 ) in the contract is $ 25.0 million . most recently , we completed a successful public offering in june 2014 of 11.5 million shares of common stock at a price of $ 10.00 per share following the release of our opus-1 clinical trial results , which provided net proceeds to us of approximately $ 106.6 million . this financing provides us liquidity through the middle of 2016. we retain the ability to offer for sale approximately $ 10.0 million of securities , including common stock , preferred stock , debt securities , depositary shares and warrants from an effective shelf registration statement , which we filed with the sec on november 6 , 2013. in addition to the above , we have received funding from other sources , including other collaborative and other research and development agreements ; government grants ; equipment lease financing ; facility leases ; research grants ; and interest income on our investments . as of december 31 , 2014 , we had net working capital of $ 31.7 million , an increase of approximately $ 4.8 million from $ 26.9 million at december 31 , 2013. the increase in working capital was principally due to $ 106.6 million in net proceeds derived from our june 2014 public offering , largely offset by our normal operating expenses associated with the development of our product candidates and the reclassification of our non-recourse notes payable to current liabilities . our principal sources of liquidity at december 31 , 2014 were approximately $ 54.7 million in cash and cash equivalents ; approximately $ 59.3 million in investments considered available-for-sale ; approximately $ 2.8 million in u.s. government receivables ; and approximately $ 5.6 million of receivables from product sales of rapivab . we anticipate our cash and investments will fund our operations through the middle of fiscal 2016. we intend to contain costs and reduce cash flow requirements by closely managing our third party costs and headcount , leasing scientific equipment and facilities , contracting with other parties to conduct certain research and development projects and using consultants . we expect to incur additional expenses , potentially resulting in significant losses , as we continue to pursue our research and development activities , primarily related to our clinical trial activity . we may incur additional expenses related to the filing , prosecution , maintenance , defense and enforcement of patent and other intellectual property claims and additional regulatory costs as our clinical programs advance through later stages of development . the objective of our investment policy is to ensure the safety and preservation of invested funds , as well as maintaining liquidity sufficient to meet cash flow requirements . we place our excess cash with high credit quality financial institutions , commercial companies , and government agencies in order to limit the amount of our credit exposure . we have not realized any significant losses on our investments . we extended or executed additional lease obligations in 2015 for our birmingham , alabama operations which increases the obligation by $ 5.1 million and for which these new obligations extend out through 2026. these operating lease obligations encompass future rental obligations of our birmingham operating facilities .
| recent corporate highlights rapivab ( peramivir injection ) rapivab was approved by the fda on december 19 , 2014 for the treatment of acute uncomplicated influenza in adult patients who have been symptomatic for no more than two days . we supplied rapivab to our specialty distributors and made it available to patients on december 26 , 2014. we have elected the “ sell-through ” revenue recognition and recognized approximately $ 33,000 of rapivab product sales in 2014. with the approval and commercial availability of rapivab , we are now moving our focus to obtaining a stock-piling procurement contract with the u.s. government to realize the strategic value of this program . the $ 234.8 million development contract from barda/hhs in which peramivir was being developed expired on june 30 , 2014 upon completion of all our responsibilities under the contract . hae program 34 bcx4161 on december 18 , 2014 , we announced the dosing of the first patient in opus-2 ( oral prophylaxis-2 ) , a blinded , randomized , placebo-controlled clinical trial of orally-administered bcx4161 in patients with hae . opus-2 is a 12-week , three-arm , parallel cohort design trial to evaluate the efficacy and safety of two doses of bcx4161 , 300 mg and 500 mg , administered three-times daily compared with placebo . this trial is being conducted in the u.s. and select european countries and is expected to enroll approximately 100 hae patients . the primary efficacy endpoint for the trial will be the mean angioedema attack rate for each bcx4161 dose group compared to placebo . in december 2014 and january 2015 , the fda granted bcx4161 orphan drug designation and fast track designation for the treatment of hae . in addition , the comp of the ema issued a positive opinion on the application for orphan drug designation for bcx4161 for the treatment of patients with hae and the european commission recently affirmed this designation .
| 7,951 |
the absolute 61 difference in excess of 5 % of the expected return is added to the market-related value over two years ; the remainder is added to the market-related value immediately . to the extent the company 's unrecognized net losses and unrecognized prior service costs , including the amount recognized through accumulated other comprehensive income , are not reduced by future favorable plan experience , they will be recognized as a component of the net periodic cost in future years . the company 's unrecognized net loss in its pension plans is primarily attributable to recent declines in interest rates and unfavorable investment returns in 2008. the company has classified $ 3.6 million of its accrued pension liability as a current liability at december 31 , 2011. company contributions into pension investment funds totaled $ 37.2 story_separator_special_tag management 's discussion and analysis ( “ md & a ” ) is intended to help the reader understand the results of operations and financial condition of the company . md & a is provided as a supplement to , and should be read in conjunction with , our consolidated financial statements and the accompanying notes . overview our reportable segments : paper machine clothing , engineered fabrics , aec and primaloft® products all draw on the same paper machine clothing advanced textiles and materials processing capabilities , and compete on the basis of proprietary , product-based advantage that is grounded in those core capabilities . as a result , technology and manufacturing advances in one tend to benefit the other . while not enjoying comparable synergies with paper machine clothing , engineered fabrics and aec , primaloft® products is also based on expertise in textiles and material processing , and also competes on the basis of product advantage . paper machine clothing is the company 's long-established core business and primary generator of cash . while the paper and paperboard industry in our traditional geographic markets has suffered from well-documented overcapacity in publication grades , especially newsprint , the industry is still expected to grow on a global basis , driven by demand for packaging and tissue grades , as well as the expansion of paper consumption and production in asia and south america . although we do not consider the market for paper machine clothing as having significant growth potential , we do believe it provides the company with significant prospects for long-term cash generation . we feel we are now well-positioned in these markets , with high-quality , low-cost production in growth markets , substantially lower fixed costs in mature markets , and continued strength in new product development , field services , and manufacturing technology . we seek to maintain the cash-generating potential of this business by maintaining the low costs that we achieved through restructuring , and competing vigorously by using our differentiated products and services to reduce our customers ' total cost of operation and improve their paper quality . the engineered fabrics segment supplies consumable fabrics used to process paper pulp , as well as fabrics used in a range of industries other than papermaking . these other products include belts used to make non wovens , fiber cement building products , roofing shingles and corrugated sheets used in boxboard , as well as belts used in tannery and textile applications . we believe that aec provides the greatest growth potential , both near and long term , for our company . our strategy is to grow organically by focusing our proprietary technology on high-value aerospace and defense applications that can not be served effectively by conventional composites . aec supplies a number of customers in the aerospace industry . aec 's most significant aerospace customer is the safran group , for whom we make braces for the boeing 787-8 main landing gear , outer guide vanes for the cfm-56 engine , and fan blades and other components for the leap engine . aec is also developing other new and potentially significant composite products for aerospace ( engine and airframe ) applications . 25 recent announcements during the third quarter of 2011 , we announced plans to combine our paper machine clothing and engineered fabrics operating and reporting segments into a single business segment . the combined segment will be referred to in this and future reports as “ machine clothing ” . this report presents separate segment results for paper machine clothing and engineered fabrics through december 31 , 2011. the cash generating potential of this segment will be enhanced as the result of expected technical , manufacturing and administrative synergies resulting from the merger of the engineered fabrics and paper machine clothing segments . during october 2011 , we announced an agreement to sell the assets and liabilities of our albany door systems ( ads ) business to assa abloy for $ 130 million . the transaction was closed on january 11 , 2012. as a result of this transaction , the ads segment is reported as a discontinued operation in this report . consolidated results of operations net sales the following table summarizes our net sales by business segment : replace_table_token_6_th 2011 vs. 2010 · changes in currency translation rates had the effect of increasing net sales by $ 16.1 million during 2011 as compared to 2010 . · excluding the effect of changes in currency translation rates , 2011 net sales increased 4.3 % as compared to 2010 . · sales volume in 2011 increased in all of our business segments as worldwide economic conditions improved . · excluding the effect of changes in currency translation rates : net sales in paper machine clothing increased 3.2 % . net sales in ef increased 3.4 % net sales in engineered composites increased 14.8 % net sales in primaloft® products increased 17.8 % 2010 vs. 2009 · changes in currency translation rates had the effect of decreasing net sales by $ 2.2 million during 2010 as compared to 2009 . · excluding the effect of changes in currency translation rates , 2010 net sales increased 4.1 % as compared to 2009 . story_separator_special_tag on february 23 , 2012 , we announced that our subsidiary in france has initiated consultation with the employee works council in france regarding a proposal to cease operations at the company 's facility in st. junien . the consultation will be completed in accordance with applicable french legislation . restructuring expenses for 2009 and 2010 were the result of previously announced restructuring and performance improvement plans affecting each of our reportable segments . the restructuring activities were driven by the need for us to balance our manufacturing capacity with anticipated demand . we also took actions to reduce costs and to create process efficiencies within stg & r improve efficiency in all aspects of our business , and to strengthen our competitive position . restructuring expenses totaled $ 68.2 million in 2009 and $ 3.7 million in 2010. restructuring expense was reduced by pension and postretirement net curtailment gains of $ 6.6 million in 2009 and $ 1.2 million in 2010. paper machine clothing restructuring activities in 2009 and 2010 included closure or significant reductions of manufacturing in canada , france , finland , germany , sweden , australia , and the united states . restructuring expense included provisions for property , plant , and equipment impairments of $ 1.2 million in 2010 , and $ 8.6 million in 2009. restructuring expense in 2009 included $ 5.1 million in impairment provisions related to a joint venture investment located in south africa . the engineered fabrics business was affected by the announcement of a plan in june 2009 to discontinue manufacturing at its plant in gosford , australia , and to transfer production to its st. stephen , south carolina , 29 manufacturing facility . the actions as part of that plan resulted in net restructuring charges in our ef segment of $ 4.3 million in 2009 and $ 1.1 million in 2010. restructuring expense in 2009 included a $ 4.8 million charge for the impairment of plant and equipment . other earnings items replace_table_token_11_th interest expense , net interest expense increased $ 0.9 million in 2011 due to the effect of higher interest rates under our new revolving credit agreement that we entered into during 2010 , which offset the effect of lower average debt . interest expense , net , decreased $ 3.4 million from 2009 to 2010 principally due to lower average debt in 2010. see the capital resources section below for further discussion of borrowings and interest rates . other ( income ) /expense , net other ( income ) /expense , net included the following : · foreign currency revaluations of intercompany balances resulted in gains of $ 0.1 million in 2011 , $ 4.6 million in 2010 and $ 2.3 million in 2009. the changes in the gains were principally due to the euro 's relative strength against the u.s. dollar , canadian dollar , australian dollar , and japanese yen . · extinguishment of debt during 2009 resulted in gains totaling $ 52.0 million . · amortization of capitalized debt issuance costs were $ 1.8 million , $ 1.7 million , and $ 1.9 million in 2011 , 2010 , and 2009 , respectively . · fees for a letter-of-credit ( loc ) were $ 1.5 million , $ 1.8 million , and $ 1.5 million in 2011 , 2010 , and 2009 , respectively . the fees were associated with an loc required by the canadian government until pending tax issues are resolved . income tax expense/ ( benefit ) the income tax expense during 2011 includes the following : · $ 22.8 million of expense for valuation allowances , principally in germany that results from the company 's sale of albany door systems . while the gain associated with that transaction will be recorded in 2012 , the expected reduction of future taxable income in germany resulted in the discrete tax charge in 2011 . · income tax expense in 2011 includes a favorable adjustment of $ 3.5 million to correct errors from periods prior to 2006. the company does not believe that the corrected item is or was material to any previously reported quarterly or annual financial statements . as a result , the company has not restated its previously issued annual or quarterly financial statements . · $ 3.3 million of reduction to expense resulting from a change in the applicable tax regime in mexico . · $ 1.2 million net tax benefit related to the settlement of audits and other discrete tax matters . · the income tax rate on continuing operations , excluding the items noted above , was 34 % . the income tax expense during 2010 includes the following : · $ 9.4 million of expense due to the redemption of our company-owned life insurance policies . · $ 2.3 million of benefit due to the repatriation of prior year 's earnings from our subsidiary in mexico , which is a discrete item . · $ 0.5 million of benefit resulting from other discrete income tax adjustments . · the income tax rate on continuing operations , excluding the items noted above , was 31 % . income tax expense during 2009 includes the following : · $ 20.3 million of expense from gains on note buybacks . · $ 5.3 million of expense to reflect a change in reserve associated with an uncertain tax position . · $ 0.6 million of expense resulting from other discrete income tax adjustments . · the income tax rate on continuing operations , excluding the items noted above , was 20 % . 30 discontinued operations on october 27 , 2011 we entered into a contract to sell the assets and liabilities of our albany door systems business to assa abloy ab for $ 130 million .
| cash flow summary replace_table_token_16_th operating activities the increase in cash provided by operating activities in 2011 was principally due to favorable changes in working capital balances as compared to 2010. in comparison to 2009 , the increase in cash provided by operating activities in 2010 was principally due to improvement in net income . changes in working capital include changes in inventories and accounts receivable . inventories decreased $ 7.1 million , $ 16.6 million , and $ 42.1 million in 2011 , 2010 , and 2009 , respectively . accounts receivable increased $ 12.1 million in 2011 and $ 9.5 million in 2010 , and decreased $ 43.5 million in 2009. the significant change from 2009 to 2010 in other operating items was principally due to the 2009 early retirement of debt . contributions to the united states qualified pension plan amounted to $ 15.0 million in 2011 , $ 10.0 million in 2010 , and $ 20.0 million in 2009. the company has developed a plan to use approximately $ 70 million of the cash received from the sale of albany door systems , as well as about $ 30 million of cash held outside of the u.s. , to fund and , in some areas , permanently settle part of our global pension liabilities . our target is to have this plan substantially completed by the end of q2 2012. we expect that , upon completion of the plan , global unfunded pension liabilities will drop from around $ 100 million to $ 30 million .
| 7,952 |
additionally , we have a strong presence in the energy markets , including oil & gas , downstream processing , and specialty energy . in aggregate , these markets represent about 70 % of our revenue . ati is a market leader in manufacturing differentiated products that require our materials science capabilities and unique process technologies , including our new product development competence . effective january 1 , 2020 , the company began operating under two revised business segments : high performance materials & components ( hpmc ) and advanced alloys & solutions ( aa & s ) . all segment reporting information for 2020 and prior periods below reflect these two revised business segments . in addition , in the fourth quarter 2020 , the company changed its segment performance measure from segment operating profit to segment ebitda , based on internal reporting changes . prior period results are presented using the new performance measure . the measure of segment ebitda is defined further below . management believes segment ebitda , as defined , provides an appropriate measure of controllable operating results at the business segment level . hpmc is comprised of the specialty materials and forged products businesses , as well as our ati europe distribution operations . the revised hpmc segment intensifies its primary focus on maximizing aero-engine materials and components growth , with approximately 80 % of its revenue derived from the aerospace & defense markets and nearly half of its revenue from products for commercial jet engines . commercial aerospace products have been the main source of sales and ebitda growth for hpmc over the last few years , and are expected to continue to drive hpmc and overall ati results for the next several years as demand from these markets recovers from reduced 2020 levels resulting from the covid-19 pandemic . other major hpmc end markets include medical and energy . hpmc produces a wide range of high performance materials , and components , and advanced metallic powder alloys made from nickel-based alloys and superalloys , titanium and titanium-based alloys , and a variety of other specialty materials . capabilities range from cast/wrought and powder alloy development to final production of highly engineered finished components , including those used for next-generation jet engine forgings and 3d-printed aerospace products . the new aa & s segment combines our specialty alloys & components ( sac ) business , including the primary titanium operations in richland , wa and albany , or , with ati 's former flat rolled products ( frp ) business segment , which included the frp business , consisting of the specialty rolled products and standard stainless sheet products product lines , the 60 % -owned stal joint venture , and the uniti and a & t stainless 50 % -owned joint ventures that are reported in aa & s segment results under the equity method of accounting . aa & s is focused on delivering high-value flat products primarily to the energy , aerospace , and defense end-markets , which comprise approximately 50 % of its revenue . aa & s was created to align melting technologies with hot-rolling capabilities to produce products with faster flow times and lower costs . financial results of aerospace-grade titanium plate products also transferred from hpmc to aa & s effective january 1 , 2020. other important end markets for aa & s include automotive and electronics . aa & s produces nickel-based alloys , specialty alloys , and titanium and titanium-based alloys , and stainless products in a variety of forms including plate , sheet , and strip products . on december 2 , 2020 , we announced a strategic repositioning of our frp business , which includes exiting standard stainless sheet products , streamlining the production footprint of the aa & s segment and making certain capital investments to increase our focus on higher-margin products and our aerospace & defense end markets . overview of 2020 financial performance sales in 2020 decreased 28 % , to $ 2.98 billion , and gross profit decreased 54 % , to $ 293 million , compared to 2019 , reflecting weakened market conditions resulting from the covid-19 pandemic . loss before taxes in 2020 included $ 1.1 billion of restructuring and other charges , $ 287 million of goodwill impairment charges , and $ 22 million in debt extinguishment charges . results in 2020 also reflect a $ 78 million income tax provision primarily for valuation allowances on u.s. federal and state net deferred tax assets . the company 's net loss in 2020 was $ 1.57 billion , or ( $ 12.43 ) per share . adjusted ebitda was $ 196.3 million , or 6.6 % of sales , for 2020 , compared to $ 439.4 million , or 10.7 % of sales , for 2019. see the financial condition and liquidity section of management 's discussion and analysis for these non-gaap definitions and calculations . despite these weak market conditions , the company maintained strong liquidity in 2020 , ending the year with $ 646 million in cash and $ 950 million of total liquidity . revenues in our largest end markets , aerospace & defense , decreased $ 771 million , or 36 % , over 2019 , and represented 46 % of our 2020 sales . international sales , including both u.s. exports and foreign sales from our foreign manufacturing operations , were $ 1.17 billion in 2020 and represented 39 % of total sales . 20 a summary of our results is as follows . replace_table_token_6_th our major accomplishments during 2020 include the following : we took decisive steps toward becoming a more profitable , aerospace & defense focused company . on december 2 , 2020 , we announced a strategic repositioning of our frp business within the aa & s segment , with a focus on increasing emphasis on the specialty rolled products portion of its product portfolio , which comprise titanium-based alloys including aerospace-grade titanium plate products , nickel-based alloys , and stainless products with more differentiated characteristics for specialty applications , including thin-gauge prs . story_separator_special_tag through december 31 , 2019 , we continued to maintain valuation allowances for u.s. federal and state deferred taxes , and results in all periods include impacts from income taxes that differ from the applicable standard tax rate , primarily related to these income tax valuation allowances . at december 31 , 2019 , we determined that a substantial portion of these income tax valuation allowances were no longer required , and a $ 45.1 million discrete tax benefit was recognized . in 2019 , we completed several strategic actions to improve future financial performance , liquidity and our financial condition . these items noted below are excluded from business segment results unless otherwise noted . during the second quarter of 2019 , we completed the sale of two non-core forging facilities in our hpmc segment for $ 37 million . sales from these two forging facilities in 2018 were $ 86 million . we received net cash proceeds of $ 33.0 million on the sale of this business and recognized an $ 8.1 million pre-tax loss in 2019 , including $ 10.4 million of allocated goodwill . during the third quarter of 2019 , we completed the sale of our cast products titanium investment castings business in our hpmc segment for $ 127 million . cast products ' sales were $ 105 million in 2018. we received net cash proceeds of $ 125.1 million on the sale of this business and recognized a $ 6.2 million gain in 2019. results of these businesses are included in hpmc segment results to the dates of their respective sale . see note 8 of the notes to consolidated financial statements for further information on business divestitures . during the second and third quarters of 2019 , we recognized $ 91.7 million in cash gains on sales of certain oil and gas rights in eddy county , nm . these oil and gas rights were initially acquired in 1972 along with land purchased by teledyne , inc. , which later became part of ati . the land was subsequently sold , with the company retaining underlying oil and gas rights that it sold in 2019. during the fourth quarter of 2019 , a $ 4.5 million restructuring charge was recorded for severance obligations for the reduction of approximately 70 positions to streamline ati 's salaried workforce , primarily to improve the cost competitiveness of the u.s.-based flat rolled products business . also during the fourth quarter of 2019 , we recorded an $ 11.4 million impairment charge for the a & t stainless joint venture , including ati 's share of a long-lived asset impairment charge recognized by the joint venture on the carrying value of its production facility in midland , pa. in the fourth quarter of 2019 , we issued $ 350 million of 5.875 % senior notes due 2027 ( 2027 notes ) . proceeds from the 2027 notes and cash on hand were used to redeem the $ 500 million 5.95 % senior notes due 2021 ( 2021 notes ) , which had a january 15 , 2021 maturity date . a $ 21.6 million debt extinguishment charge was recorded as part of this action . results for 2019 included $ 67.7 million in other ( non-operating ) income , net on the consolidated statements of operations , which included the net loss on the sales of the cast products and industrial forgings businesses discussed above , gains to monetize oil and gas rights , an $ 11.4 million a & t stainless joint venture impairment charge , and $ 10.7 million of net losses from operating results of joint ventures accounted for under the equity method . equity method joint venture operating results are included in the results of the aa & s segment . other ( non-operating ) income , net in 2018 included a $ 15.9 million pre-tax gain on the sale of a 50 % noncontrolling interest and subsequent deconsolidation of the a & t stainless joint venture in march 2018 . 23 results by business segment we operated in two business segments during 2020 , hpmc and aa & s , and management evaluates financial results on this basis . hpmc sales decreased in 2020 by 41 % , driven by a 42 % decrease in sales to the aerospace & defense markets , which comprise 81 % of the sales in this segment , due to declines in demand for products to the commercial aerospace market resulting from the covid-19 pandemic . sales decreased 15 % in 2020 in the aa & s segment , reflecting lower sales across most markets , particularly an 18 % decline in sales to the aerospace & defense markets and a 20 % decrease in energy market sales . hpmc sales increased in 2019 compared to 2018 by 1 % , despite a 5 % decline from business divestitures , driven by a 4 % increase in sales to the aerospace & defense markets , which comprised 82 % of the sales in this segment . sales increased 3 % in 2019 compared to 2018 in the aa & s segment , primarily due to 26 % higher sales to the aerospace & defense markets , and a 13 % increase in medical market sales , partially offset by declines in sales to most general industrial markets for standard stainless products . overall , aa & s energy markets sales in 2019 were in line with 2018 , with increases in sales of products for specialty energy offset by declines in sales to the oil & gas market .
| results of operations 2020 compared to 2019 results for 2020 were sales of $ 2.98 billion and loss before tax of $ 1,481.9 million , compared to sales of $ 4.12 billion and income before tax of $ 241.6 million in 2019. results in 2019 included $ 95 million of sales and minimal segment operating profit related to the divested titanium investment castings and industrial forgings businesses . our gross profit was $ 292.8 21 million , or 9.8 % of sales , a $ 345.0 million decline compared to 2019 , reflecting covid-19 impacts . the 2020 results included $ 1,443.0 million of pretax charges , all of which are excluded from segment ebitda and consisted of the following : $ 1,132.1 million of restructuring and other charges , $ 287.0 million for impairment of a portion of goodwill at our forged products operations , $ 21.5 million for debt extinguishment on $ 203.2 million , or 71 % , of the principal balance of the outstanding 2022 convertible notes , and $ 2.4 million of severance charges at our a & t stainless joint venture . the 2020 restructuring and other charges of $ 1,132.1 million predominantly related to the company 's december 2020 announcement to cease production of standard stainless sheet products . these restructuring and other charges consisted of the following : $ 1,107.5 million of restructuring charges recorded on the consolidated statement of operations . these restructuring charges consist of $ 1,041.5 of non-cash long-lived asset impairment charges , $ 60.5 million of employee benefit costs for hourly and salary employees , and $ 5.5 million of other costs related to facility idlings . $ 17.4 million of termination benefits for pension and postretirement medical obligations related to facility closures from the standard stainless exit . these costs are classified within nonoperating retirement benefit expense in the consolidated statements of operations .
| 7,953 |
we are currently developing a portfolio of 15 generic abbreviated new drug applications , or andas , three biosimilar product candidates and five proprietary product candidates , which are in various stages of development and target a variety of indications . five andas and one nda are currently on file with the fda . our largest products by net revenues currently include enoxaparin sodium injection , naloxone hydrochloride injection , lidocaine jelly and sterile solution , phytonadione , and medroxyprogesterone acetate . we launched neostigmine methysulfate in the fourth quarter of 2017 , medroxyprogesterone acetate in the first quarter of 2018 , isoproterenol hydrochloride injection in the third quarter of 2018 , and primatene ® mist in the fourth quarter of 2018. 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 . included in these acquisitions are marketing authorizations for 33 products in the uk , ireland , australia , and new zealand , representing 11 different injectable chemical entities from ucb pharma gmbh . we are in the process of transferring the manufacturing of these products to our facilities in california , which will require approvals from the uk medicines and healthcare products regulatory agency before we can relaunch the products . in july 2018 , our chinese subsidiary , anp , completed a private placement of its common equity interest to accredited investors for aggregate gross proceeds of approximately $ 57 million , of which $ 38.0 million had been received by anp as of december 31 , 2018. while investors were initially required to complete their contributions in cash by december 31 , 2018 , anp granted an extension to certain investors . subsequently , including the funds from the extension , the proceeds anp has received from the private placement totaled $ 56.3 million . in connection with the private placement , all of our executive officers , stephen shohet , howard lee , and richard koo , our directors , and certain employees of anp entered into subscription agreements for the indirect investment in anp . the aggregate gross proceeds received from management and directors was approximately $ 29.7 million . we have retained approximately 58 % of the equity interest in anp immediately after the private placement . anp intends to use the net proceeds from the private placement for its business expansion plans . anp 's net income or loss after july 2 , 2018 , is attributed to us in accordance with our equity interest of approximately 58 % in anp . business segments as of december 31 , 2018 , our performance is assessed and resources are allocated based on the following two reportable segments : ( 1 ) finished pharmaceutical products and ( 2 ) api products . the finished pharmaceutical products segment manufactures markets and distributes enoxaparin , naloxone , phytonadione , lidocaine , medroxyprogesterone acetate , primatene ® mist , as well as various other critical and non-critical care drugs . the api segment manufactures and distributes rhi api and porcine insulin api for external customers and internal product development . information 71 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 . 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 implementation of new quality standards and increased hourly rates . expenses also increased at our anp facility in 2018 as we added headcount and brought more equipment online . in addition , for the year ended december 31 , 2018 , a charge of $ 12.9 million was recorded to adjust certain inventory items and related purchase commitments to their net realizable value , as compared with $ 8.5 million recorded for the year ended december 31 , 2017. in june 2018 , we received fda approval of our anda supplement for the manufacture of semi-purified heparin at anp , our subsidiary in china , and the manufacture of heparin sodium at ims , our subsidiary in california . the cost of heparin , which is the starting material for enoxaparin , has increased and is expected to increase further , putting downward pressure on our gross margins . however , we believe that this trend will be offset by sales of our higher-margin products , such as medroxyprogesterone acetate , neostigmine , isoproterenol , and primatene ® mist , which were recently launched . selling , distribution , and marketing , and general and administrative replace_table_token_7_th 73 the increase in selling , distribution , and marketing expenses was primarily due to increased freight costs and also due to marketing expenses related to our launch of primatene ® mist . the increase in general and administrative expense was primarily due to increased legal expenses ( see note 19 to the consolidated financial statements for more information regarding litigation matters ) . we expect that general and administrative expenses will increase on an annual basis due to increased costs associated with ongoing compliance with public company reporting obligations and an increase in legal fees associated with patent challenges . research and development replace_table_token_8_th research and development costs consist primarily of costs associated with the research and development of our product candidates . we expense research and development costs as incurred . salaries and personnel-related expenses increased primarily due to the expansion of our anp facility . pre-launch inventory expenses increased due to the production of primatene ® mist and purchases of apis for anda candidates ahead of their launches . story_separator_special_tag in addition , for 2017 , a charge of $ 8.5 million was recorded to adjust certain inventory to their net realizable value , including $ 5.5 million for enoxaparin inventory due to a decrease in the forecasted average selling price . for 2016 , a charge of $ 7.3 million was recorded to adjust certain inventory items to their net realizable value , including $ 3.1 million for enoxaparin inventory items and $ 3.3 million for epinephrine injection , usp vial inventory items and related firm inventory purchase commitments . declining average selling prices and unit volume of enoxaparin and the discontinuance of our epinephrine injection , usp vial product will continue to put downward pressure on our gross margins . however , we believe that this trend will be offset by new product launches , including neostigmine methylsulfate , medroxyprogesterone acetate and sodium nitroprusside . selling , distribution , and marketing , and general and administrative replace_table_token_12_th the increase in general and administrative expense was primarily due to an increase in legal expenses relating to our july 2017 patent trial ( see note 19 to the consolidated financial statements for more information ) . we expect that general and administrative expenses will increase on an annual basis due to increased costs associated with ongoing compliance with public company reporting obligations . 76 research and development replace_table_token_13_th 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 supplies , depreciation and other related expenses . we expense research and development costs as incurred . testing , operating and lab supplies increased due to expenditures on materials for our pipeline products , particularly production of apis for our pipeline at our anp facility . fda fees decreased in 2017 due to the nda filing of our intranasal naloxone product candidate that was submitted in the second quarter of 2016. pre-launch inventory increased due to pre-approval purchases of apis for medroxyprogesterone acetate and sodium nitroprusside . clinical trials expense increased due to spending on pilot trials for inhalation products . gain on sale of intangible assets year ended december 31 , change 2017 2016 dollars % ( in thousands ) gain on sale of intangible assets $ ( 2,643 ) $ — $ ( 2,643 ) n/a in february 2017 , we sold certain andas that we acquired in march 2016 and recognized a gain of $ 2.6 million ( see note 3 and note 9 to the consolidated financial statements for more information ) . provision for income tax expense ( benefit ) replace_table_token_14_th the difference in income tax expense ( benefit ) in 2017 compared to 2016 was primarily due to changes in pre-tax income positions and excess share-based compensation benefits directly recorded as income tax benefit in 2017. liquidity and capital resources cash requirements and sources we need capital resources to maintain and expand our business . we expect our cash requirements to increase significantly in the foreseeable future as we sponsor clinical trials for , seek regulatory approvals of , and develop , manufacture and market our current development‑stage product candidates and pursue strategic acquisitions of businesses or assets . our future capital expenditures include projects to upgrade , expand and improve our manufacturing facilities in the united states , china , and france . our cash obligations include the principal and interest payments due on our existing loans and lease payments , as described below and throughout this annual report on form 10-k. as of december 31 , 2018 , our foreign subsidiaries collectively held $ 37.8 million in cash and cash equivalents . cash or cash equivalents held at foreign subsidiaries are not available to fund the parent company 's operations in the united states . 77 we believe that our cash reserves , operating cash flows , and borrowing availability under our credit facilities will be sufficient to fund our operations for at least the next 12 months . we expect additional cash flows to be generated in the longer term from future product introductions , although there can be no assurance as to the receipt of regulatory approval for any product candidates that we are developing or the timing of any product introductions , which could be lengthy or ultimately unsuccessful . in july 2018 , our chinese subsidiary , anp , completed a private placement of its common equity interest to accredited investors for aggregate gross proceeds of approximately $ 57 million , of which $ 38.0 million had been received by anp as of december 31 , 2018. while investors were initially required to complete their contributions in cash by december 31 , 2018 , anp granted an extension to certain investors . subsequently , including the funds from the extension , the proceeds anp received from the private placement totaled $ 56.3 million . the proceeds from this private placement will be used to fund the cash requirements of the expansion of our manufacturing facility in china . we maintain a shelf registration statement on form s-3 pursuant to which we may , from time to time , sell up to an aggregate of $ 250 million of our common stock , preferred stock , depositary shares , warrants , units , or debt securities . if we require or elect to seek additional capital through debt or equity financing in the future , we may not be able to raise capital on terms acceptable to us or at all . to the extent we raise additional capital through the sale of equity or convertible debt securities , the issuance of such securities will result in dilution to our stockholders . if we are required and unable to raise additional capital when desired , our business , operating results and financial condition may be adversely affected .
| results of operations year ended december 31 , 2018 compared to year ended december 31 , 2017 net revenues replace_table_token_5_th the increase in net revenues of finished pharmaceutical products for 2018 was primarily due to the following changes : replace_table_token_6_th we launched medroxyprogesterone acetate in a vial form in january 2018 and in a pre-filled syringe form in february 2018. these products were both approved by the fda in november 2017. additionally , we launched isoproterenol hydrochloride injection in july 2018 and primatene ® mist in december 2018. the increase in sales of enoxaparin was primarily driven by higher average selling price due to a price increase and an increase in non-contract sales at list prices in the third and fourth quarters , which resulted in an increase of $ 11.3 million . increased unit volumes of enoxaparin due to market shortages in the third and fourth quarters also contributed to the sales increase . $ 4.0 million of the increase in sales of lidocaine was due to higher unit volumes , while the remainder was due to higher average selling price . the increase in sales of phytonadione was primarily driven by a higher average selling price . the decrease in sales of naloxone was primarily driven by lower unit volumes . we anticipate that the sales of naloxone , enoxaparin , and medroxyprogesterone acetate will continue to fluctuate in the future as a result of competition . sales of epinephrine decreased primarily as a result of the discontinuation of our epinephrine injection , usp vial product in the second quarter of 2017 in accordance with the fda 's request . our epinephrine injection , usp vial product , was 72 marketed under the “ grandfather ” exception to the fda 's “ prescription drug wrap-up ” program . for the year ended december 31 , 2017 , we recognized $ 17.8 million in net revenues for the sale of the discontinued vial product .
| 7,954 |
to supplement our results prepared in accordance with gaap , we use the measure of adjusted eps , which is a non-gaap financial measure as defined by the securities and exchange commission ( “ sec ” ) . the non-gaap financial measure of adjusted eps is not intended as a substitute or as an alternative to diluted earnings per share as an indicator of our performance or any other measure of performance derived in accordance with gaap . in addition , our non-gaap financial measures may be different from non-gaap financial measures used by other companies , limiting their usefulness for comparison purposes . we use the non-gaap financial measure of adjusted eps to enhance the usefulness of our financial information by providing a measure which management internally uses to assess and evaluate the overall performance and highlight trends in the ongoing business . adjusted eps excludes certain income and expense items that are not representative of our ongoing business and operations , which are included in the calculation of diluted earnings per share in accordance with gaap . the following items are not all-inclusive , but are examples of reconciling items in prior comparative and future periods . they would include the results of operations of our insurance subsidiaries , write-offs of assets and liabilities , the effect of derivative instruments not designated as hedging instruments , significant gains or losses from the disposition or restructuring of businesses , gains and losses on assets held for sale , transaction-related costs , income and loss on the extinguishment of debt and other significant items that would not be representative of our ongoing business . in order to provide a meaningful basis for comparison , we are providing information with respect to our adjusted eps for the twelve months ended december 31 , 2013 , 2012 and 2011 , respectively , reconciled for each such period to diluted earnings per share , which is believed to be the most directly comparable measure under gaap ( in millions , except per share amounts ) : replace_table_token_28_th ( 1 ) additional information is provided in the reconciling items table below . 50 replace_table_token_29_th ( 1 ) represents operating losses for our insurance subsidiaries . during 2012 , we transitioned our remaining insurance business to run-off and recorded additional losses of $ 7 million primarily relating to adverse loss development and reserve increases . ( 2 ) for additional information , see item 8. financial statements and supplementary information — note 14. supplementary information — net write-offs ( gains ) . ( 3 ) in 2011 , we recorded a $ 9 million gain on the sale of two landfill gas projects . ( 4 ) for additional information , see item 8. financial statements and supplementary information — note 16. employee benefit plans . ( 5 ) in 2013 , we recorded a $ 4 million gain related to a distribution received from an insurance subsidiary grantor trust . ( 6 ) for additional information , see item 8. financial statements and supplementary information — note 11. consolidated debt . ( 7 ) in 2012 and 2011 , we recorded a foreign exchange ( gain ) loss related to intercompany loans , respectively . ( 8 ) for additional information , see item 8. financial statements and supplementary data — note 15. income taxes . ( i ) the expiration of the statute of limitations during 2011 triggered a contractual liability to pay restricted funds to third party claimants and resulted in other non-operating expense of $ 15 million with no related income tax benefit . these payments related to tax liabilities set up in connection with covanta energy 's emergence from bankruptcy . 51 ( ii ) for the twelve months ended december 31 , 2011 , the income tax provision includes a $ 24 million benefit due to the reversal of uncertain tax positions , following the expiration of applicable statutes of limitations related to pre-emergence tax matters in the covanta energy bankruptcy . ( 9 ) for additional information , see item 8. financial statements and supplementary data — note 4. dispositions and discontinued operations . supplementary financial information — adjusted ebitda ( non-gaap discussion ) to supplement our results prepared in accordance with gaap , we use the measure of adjusted ebitda , which is a non-gaap financial measure as defined by the sec . this non-gaap financial measure is described below , and is not intended as a substitute and should not be considered in isolation from measures of financial performance prepared in accordance with gaap . in addition , our use of non-gaap financial measures may be different from non-gaap financial measures used by other companies , limiting their usefulness for comparison purposes . the presentation of adjusted ebitda is intended to enhance the usefulness of our financial information by providing a measure which management internally uses to assess and evaluate the overall performance of its business and those of possible acquisition candidates , and highlight trends in the overall business . we use adjusted ebitda to provide further information that is useful to an understanding of the financial covenants contained in the credit facilities of our most significant subsidiary , covanta energy , and as additional ways of viewing aspects of its operations that , when viewed with the gaap results and the accompanying reconciliations to corresponding gaap financial measures , provide a more complete understanding of our core business . the calculation of adjusted ebitda is based on the definition in covanta energy 's credit facilities ( as defined and described below under liquidity and capital resources ) , which we have guaranteed . adjusted ebitda is defined as earnings before interest , taxes , depreciation and amortization , as adjusted for additional items subtracted from or added to net income . because our business is substantially comprised of that of covanta energy , our financial performance is substantially similar to that of covanta energy story_separator_special_tag to supplement our results prepared in accordance with gaap , we use the measure of adjusted eps , which is a non-gaap financial measure as defined by the securities and exchange commission ( “ sec ” ) . the non-gaap financial measure of adjusted eps is not intended as a substitute or as an alternative to diluted earnings per share as an indicator of our performance or any other measure of performance derived in accordance with gaap . in addition , our non-gaap financial measures may be different from non-gaap financial measures used by other companies , limiting their usefulness for comparison purposes . we use the non-gaap financial measure of adjusted eps to enhance the usefulness of our financial information by providing a measure which management internally uses to assess and evaluate the overall performance and highlight trends in the ongoing business . adjusted eps excludes certain income and expense items that are not representative of our ongoing business and operations , which are included in the calculation of diluted earnings per share in accordance with gaap . the following items are not all-inclusive , but are examples of reconciling items in prior comparative and future periods . they would include the results of operations of our insurance subsidiaries , write-offs of assets and liabilities , the effect of derivative instruments not designated as hedging instruments , significant gains or losses from the disposition or restructuring of businesses , gains and losses on assets held for sale , transaction-related costs , income and loss on the extinguishment of debt and other significant items that would not be representative of our ongoing business . in order to provide a meaningful basis for comparison , we are providing information with respect to our adjusted eps for the twelve months ended december 31 , 2013 , 2012 and 2011 , respectively , reconciled for each such period to diluted earnings per share , which is believed to be the most directly comparable measure under gaap ( in millions , except per share amounts ) : replace_table_token_28_th ( 1 ) additional information is provided in the reconciling items table below . 50 replace_table_token_29_th ( 1 ) represents operating losses for our insurance subsidiaries . during 2012 , we transitioned our remaining insurance business to run-off and recorded additional losses of $ 7 million primarily relating to adverse loss development and reserve increases . ( 2 ) for additional information , see item 8. financial statements and supplementary information — note 14. supplementary information — net write-offs ( gains ) . ( 3 ) in 2011 , we recorded a $ 9 million gain on the sale of two landfill gas projects . ( 4 ) for additional information , see item 8. financial statements and supplementary information — note 16. employee benefit plans . ( 5 ) in 2013 , we recorded a $ 4 million gain related to a distribution received from an insurance subsidiary grantor trust . ( 6 ) for additional information , see item 8. financial statements and supplementary information — note 11. consolidated debt . ( 7 ) in 2012 and 2011 , we recorded a foreign exchange ( gain ) loss related to intercompany loans , respectively . ( 8 ) for additional information , see item 8. financial statements and supplementary data — note 15. income taxes . ( i ) the expiration of the statute of limitations during 2011 triggered a contractual liability to pay restricted funds to third party claimants and resulted in other non-operating expense of $ 15 million with no related income tax benefit . these payments related to tax liabilities set up in connection with covanta energy 's emergence from bankruptcy . 51 ( ii ) for the twelve months ended december 31 , 2011 , the income tax provision includes a $ 24 million benefit due to the reversal of uncertain tax positions , following the expiration of applicable statutes of limitations related to pre-emergence tax matters in the covanta energy bankruptcy . ( 9 ) for additional information , see item 8. financial statements and supplementary data — note 4. dispositions and discontinued operations . supplementary financial information — adjusted ebitda ( non-gaap discussion ) to supplement our results prepared in accordance with gaap , we use the measure of adjusted ebitda , which is a non-gaap financial measure as defined by the sec . this non-gaap financial measure is described below , and is not intended as a substitute and should not be considered in isolation from measures of financial performance prepared in accordance with gaap . in addition , our use of non-gaap financial measures may be different from non-gaap financial measures used by other companies , limiting their usefulness for comparison purposes . the presentation of adjusted ebitda is intended to enhance the usefulness of our financial information by providing a measure which management internally uses to assess and evaluate the overall performance of its business and those of possible acquisition candidates , and highlight trends in the overall business . we use adjusted ebitda to provide further information that is useful to an understanding of the financial covenants contained in the credit facilities of our most significant subsidiary , covanta energy , and as additional ways of viewing aspects of its operations that , when viewed with the gaap results and the accompanying reconciliations to corresponding gaap financial measures , provide a more complete understanding of our core business . the calculation of adjusted ebitda is based on the definition in covanta energy 's credit facilities ( as defined and described below under liquidity and capital resources ) , which we have guaranteed . adjusted ebitda is defined as earnings before interest , taxes , depreciation and amortization , as adjusted for additional items subtracted from or added to net income . because our business is substantially comprised of that of covanta energy , our financial performance is substantially similar to that of covanta energy
| results of operations the following general discussions should be read in conjunction with the consolidated financial statements , the notes to the consolidated financial statements and other financial information appearing and referred to elsewhere in this report . additional detail relating to changes in operating revenues and operating expenses and the quantification of specific factors affecting or causing such changes , is provided in the segment discussion below . during the fourth quarter of 2013 , assets related to our development activities in the united kingdom met the criteria for classification as discontinued operations and as such all prior periods have been reclassified to conform to this presentation . see item 8. financial statements and supplementary data — note 4. dispositions and discontinued operations for additional information . the comparability of the information provided below with respect to our revenues , expenses and certain other items for periods during each of the years presented was affected by several factors . as outlined in item 8. financial statements and supplementary data — note 3. acquisitions and asset management , our business development initiatives , contract transitions , and acquisitions resulted in various transactions which are reflected in comparative revenues and expenses . these factors must be taken into account in developing meaningful comparisons between the periods compared below . the results of operations discussion below compares our revenues , expenses and certain other items during each of the years presented for continuing operations . 41 results of operations — operating income year ended december 31 , 2013 vs. year ended december 31 , 2012 replace_table_token_10_th operating revenues waste and service revenues waste and service revenues decreased by $ 2 million on both a consolidated and north america segment basis .
| 7,955 |
such funds were used to redeem the 9.75 % notes and 15 % notes on december 7 , 2009. as a result of these transactions , associated materials recorded a loss on debt extinguishment of approximately $ 8.8 million , which primarily consisted of call premiums of approximately $ 2.9 million , interest from november 5 , 2009 to december 7 , 2009 ( the redemption date of the 9.75 % notes and the 15 % notes ) of approximately $ 1.6 million and the story_separator_special_tag overview amh holdings , llc ( amh ) , formerly amh holdings , inc. , was created on february 19 , 2004. amh has no material assets or operations other than its 100 % ownership of associated materials holdings , llc ( holdings ) , which in turn has no material assets or operations other than its 100 % ownership of associated materials , llc ( associated materials ) . amh , holdings and associated materials are collectively referred to as the company . the company is a leading , vertically integrated manufacturer and distributor of exterior residential building products in the united states and canada . the company 's core products are vinyl windows , vinyl siding , aluminum trim coil , and aluminum and steel siding and accessories . in addition , the company distributes third-party manufactured products primarily through its supply centers . during 2009 , vinyl windows comprised approximately 37 % , vinyl siding comprised approximately 20 % , metal products , which includes aluminum and steel products , comprised approximately 16 % , and third-party manufactured products comprised approximately 20 % of the company 's total net sales . these products are generally marketed under the alside ® , revere ® and gentek ® brand names and sold on a wholesale basis to more than 50,000 professional contractors engaged in home remodeling and new home construction principally through the company 's network of 122 supply centers , as well as through approximately 250 independent distributors across the united states and canada . approximately 65 % of the company 's products are sold to contractors engaged in the home repair and remodeling market with approximately 35 % sold to the new construction market . the supply centers provide one-stop shopping to the company 's contractor customers , carrying products , accessories and tools necessary to complete a vinyl window or siding project . in addition , the supply centers provide product literature , product samples and installation training to these customers . because its exterior residential building products are consumer durable goods , the company 's sales are impacted by , among other things , the availability of consumer credit , consumer interest rates , employment trends , changes in levels of consumer confidence , national and regional trends in new housing starts and general economic conditions . the company 's sales are also affected by changes in consumer preferences with respect to types of building products . overall , the company believes the long-term fundamentals for the building products industry remain strong as the population continues to age , homes continue to get older , household formation is expected to be strong and vinyl remains optimal material for exterior cladding and window solutions , all of which the company believes bodes well for the demand for its products in the future . in the short term , however , the company believes the building products industry will continue to be negatively impacted by the weak housing market . since 2006 , sales of existing single-family homes have decreased from peak levels previously experienced , the inventory of homes available for sale has increased , and in many areas , home values have declined significantly . in addition , the pace of new home construction has slowed dramatically , as evidenced by declines in 2006 through 2009 in single-family housing starts and announcements from home builders of significant decreases in their orders . increased delinquencies on sub-prime and other mortgages , increased foreclosure rates and tightening consumer credit markets over the same time period have further hampered the housing market . the company 's sales volumes are dependent on the strength in the housing market , including both residential remodeling and new residential construction activity . continued reduced levels of existing homes sales and housing price depreciation has had a significant negative impact on the company 's remodeling sales . in addition , a reduced number of new housing starts has had a negative impact on the company 's new construction sales . as a result of the continuation in the prolonged housing market downturn , competition in the building products market may intensify , which could result in lower sales volumes and reduced selling prices for the company 's products and lower gross margins . in the event that the company 's expectations regarding the outlook for the housing market result in a reduction in its forecasted sales and operating income , and related growth rates , the company may be required to record an impairment of certain of its assets , including goodwill and intangible assets . moreover , the prolonged downturn in the housing market and the general economy may have other consequences to the company , including further accounts receivable write-offs due to financial distress of customers and lower of cost or market reserves related to the company 's inventories . 26 the principal raw materials used by the company are vinyl resin , aluminum , steel , resin stabilizers and pigments , glass , window hardware , and packaging materials , all of which have historically been subject to price changes . raw material pricing on the company 's key commodities has increased significantly over the past three years . in response , the company announced price increases over the past several years on certain of its product offerings to offset the inflation of raw materials , and continually monitors market conditions for price changes as warranted . story_separator_special_tag interest expense of $ 72.6 million for the year ended january 2 , 2010 primarily consisted of accretion and interest expense on the 11.25 % notes , interest expense on the 9.75 % notes through october 2009 , the 15 % notes for the period of july 2009 through october 2009 , the 9.875 % notes for the period of november through december 2009 , the abl facility and amortization of deferred financing costs . the 9.75 % notes and 15 % notes were redeemed and discharged in november 2009 in conjunction with the issuance of the 9.875 % notes . interest expense of $ 70.8 million for the year ended january 3 , 2009 primarily consisted of accretion of the 11.25 % notes , interest expense on the 9.75 % notes , the prior credit facility , the abl facility and amortization of deferred financing costs . excluding the write-off of $ 1.3 million of deferred financing costs included in the 2008 total interest expense amount , interest expense increased $ 3.1 million primarily due to incremental accretion and interest expense on the 11.25 % notes , increased principal note balances at higher interest rates and increased amortization of deferred financing costs related to the note issuances in 2009 , partially offset by lower borrowings under the abl facility at lower interest rates in 2009 . 30 the net gain on debt extinguishment of approximately $ 0.1 million was a result of the $ 8.9 million gain on debt extinguishment in connection with the amh ii purchase of $ 15.0 million par value of amh 's 11.25 % notes directly from the amh debtholders with funds loaned from associated materials for approximately $ 5.9 million , partially offset by debt extinguishment costs of $ 8.8 million incurred with the redemption of the previously outstanding 9.75 % notes and 15 % notes and the issuance of the new 9.875 % notes . the income tax provision for the year ended january 2 , 2010 reflects an effective income tax rate of ( 311.3 ) % , compared to an effective income tax rate of ( 499.0 ) % for the 2008 fiscal year . the change in the effective income tax rate in 2009 is primarily due to the impact of the changes in the valuation allowance between years . this valuation allowance was recorded based upon the review of historical earnings , trends , forecasted earnings and current economic conditions . the company incurred a net loss of $ 7.3 million for the year ended january 2 , 2010 compared to $ 69.1 million for the year ended january 3 , 2009. ebitda was $ 93.0 million for the year ended january 2 , 2010 compared to ebitda of $ 81.9 million for the year ended january 3 , 2009. for the year ended january 2 , 2010 , adjusted ebitda was $ 100.5 million compared to adjusted ebitda of $ 86.9 million for the 2008 fiscal year . adjusted ebitda for the 2009 fiscal year excludes manufacturing restructuring costs of $ 5.3 million , employee termination costs of $ 1.2 million , tax restructuring costs of $ 0.5 million , amortization related to prepaid management fees of $ 0.5 million , a net debt extinguishment gain of $ 0.1 million and bank audit fees of $ 0.1 million . adjusted ebitda for the 2008 fiscal year excludes manufacturing restructuring costs of $ 2.6 million , loss upon the disposal of assets other than by sale of $ 1.8 million and $ 0.5 million of amortization related to prepaid management fees . year ended january 3 , 2009 compared to year ended december 29 , 2007 net sales decreased 5.8 % to $ 1,134.0 million for the year ended january 3 , 2009 compared to $ 1,204.1 million for the same period in 2007 primarily due to decreased unit volumes , principally in vinyl siding and vinyl windows , partially offset by price increases implemented throughout 2008. compared to the 2007 fiscal year , vinyl window unit volumes decreased by 6 % , while vinyl siding unit volumes decreased by 17 % , which is comprised of a decrease in u.s. vinyl siding unit volumes of 21 % due to the negative economic factors surrounding the u.s. housing market , and a decrease in canadian vinyl siding unit volumes of 4 % . gross profit for the fiscal year ended january 3 , 2009 was $ 274.8 million , or 24.2 % of net sales , compared to gross profit of $ 304.2 million , or 25.3 % of net sales , for the 2007 fiscal year . the decrease in gross profit as a percentage of net sales was primarily a result of reduced leverage of fixed manufacturing costs due to lower sales volumes , partially offset by the impact of cost reduction initiatives . selling , general and administrative expense increased to $ 212.0 million , or 18.7 % of net sales , for the fiscal year ended january 3 , 2009 versus $ 208.0 million , or 17.3 % of net sales , for the 2007 fiscal year . selling , general and administrative expense for the fiscal year ended january 3 , 2009 includes a loss upon the disposal of assets other than by sale of $ 1.8 million , while selling , general and administrative expense for the 2007 fiscal year includes $ 0.7 million of separation costs related to the resignation of the company 's former chief operating officer , $ 1.2 million of transaction costs relating to an unsuccessful bid for an acquisition target and $ 1.0 million of tax restructuring costs . excluding these items , selling , general and administrative expense for the fiscal year ended january 3 , 2009 increased $ 5.0 million compared to the 2007 fiscal year .
| results of operations the following table sets forth for the periods indicated the results of the company 's operations ( in thousands ) : replace_table_token_3_th the following table sets forth for the periods presented a summary of net sales by principal product offering ( in thousands ) : replace_table_token_4_th ( 1 ) ebitda is calculated as net income plus interest , taxes , depreciation and amortization . adjusted ebitda excludes certain items . the company considers ebitda and adjusted ebitda to be important indicators of its operational strength and performance of its business . the company has included adjusted ebitda because it is a key financial measure used by management to ( i ) assess the company 's ability to service its debt and / or incur debt and meet the company 's capital expenditure requirements ; ( ii ) internally measure the company 's operating performance ; and ( iii ) determine the company 's incentive compensation programs . in addition , associated materials ' abl facility has certain covenants that apply ratios utilizing this measure of adjusted ebitda . ebitda and adjusted ebitda have not been prepared in accordance with u.s. generally accepted accounting principles ( gaap ) . adjusted ebitda as presented by the company may not be comparable to similarly titled measures reported by other companies . ebitda and adjusted ebitda are not measures determined in accordance with gaap and should not be considered as an alternative to , or more meaningful than , net income ( as determined in accordance with gaap ) as a measure of the company 's operating results or cash flows from operations ( as determined in accordance with gaap ) as a measure of the company 's liquidity .
| 7,956 |
words such as `` expects , '' `` believes , '' `` anticipates , '' `` may , '' and `` estimates '' and similar expressions are intended to identify forward-looking statements . such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected . such risks and uncertainties are set forth below . our expectations , beliefs and projections are expressed in good faith and we believe that they have a reasonable basis , including without limitation , our examination of historical operating trends , data contained in our records and other data available from third parties . there can be no assurance that our expectations , beliefs or projections will result , be achieved , or be accomplished . in addition to other factors and matters discussed elsewhere in this form 10-k , the following are important factors that in our view could cause material adverse affects on our financial condition and results of operations : the risks and uncertainties related to our future operational and financial results , the risks and uncertainties relating to our internet operations , competitive factors , the timing of the openings of other clubs , the availability of acceptable financing to fund corporate expansion efforts , our dependence on key personnel , the ability to manage operations and the future operational strength of management , and the laws governing the operation of adult entertainment businesses . we have no obligation to update or revise these forward-looking statements to reflect the occurrence of future events or circumstances . story_separator_special_tag that fair value was not substantially in excess of carrying value ) in either year . fair value of financial instruments the company calculates the fair value of its assets and liabilities which qualify as financial instruments and includes this additional information in the notes to consolidated financial statements when the fair value is different than the carrying value of these financial instruments . the estimated fair value of accounts receivable , accounts payable and accrued liabilities approximate their carrying amounts due to the relatively short maturity of these instruments . the carrying value of short and long-term debt also approximates fair value since these instruments bear market rates of interest . none of these instruments are held for trading purposes . derivative financial instruments the company accounts for financial instruments that are indexed to and potentially settled in , its own stock , including stock put options , in accordance with the provisions of fasb asc 815-40 , derivatives and hedging – contracts in entity 's own equity . under certain circumstances that would require the company to settle these equity items in cash , and without regard to probability , fasb asc 815-40 would require the classification of all or part of the item as a liability and the adjustment of that reclassified amount to fair value at each reporting date , with such adjustments reflected in the company 's consolidated statements of income . the first instrument to meet the requirements of fasb asc 815-40 for derivative accounting occurred in the quarter ended june 30 , 2009 when the company renegotiated the payback terms of certain put options and agreed to pledge as collateral to certain holders a second lien on certain property . revenue recognition the company recognizes revenue from the sale of alcoholic beverages , food and merchandise , other revenues and services at the point-of-sale upon receipt of cash , check , or credit card charge . the company recognizes internet revenue from monthly subscriptions to its online entertainment sites when notification of a new or existing subscription and its related fee are received from the third party hosting company or from the credit card company , usually two to three days after the transaction has occurred . the monthly fee is not refundable . the company recognizes internet auction revenue when payment is received from the credit card as revenues are not deemed estimable nor collection deemed probable prior to that point . revenues from the sale of magazines and advertising content are recognized when the issue is published and shipped . revenues and external expenses related to the company 's annual expo convention are recognized upon the completion of the convention in august . sales and liquor taxes the company recognizes sales and liquor taxes paid as revenues and an equal expense in accordance with fasb asc 605-45 , revenue recognition – principal agent considerations . total sales and liquor taxes aggregated $ 6.0 million , $ 5.6 million and 4.5 million for the years ended september 30 , 2011 , 2010 and 2009 , respectively . advertising and marketing advertising and marketing expenses are primarily comprised of costs related to public advertisements and giveaways , which are used for promotional purposes . advertising and marketing expenses are expensed as incurred and are included in operating expenses in the accompanying consolidated statements of income . 25 income taxes deferred income taxes are determined using the liability method in accordance with fasb asc 740 , income taxe s. deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases . deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled . the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date . in addition , a valuation allowance is established to reduce any deferred tax asset for which it is determined that it is more likely than not that some portion of the deferred tax asset will not be realized . fasb asc 740 creates a single model to address accounting for uncertainty in tax positions by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements . story_separator_special_tag our cost of goods sold for the nightclub operations for the year ended september 30 , 2011 was 12.4 % of our total revenues from club operations compared to 12.3 % for the year ended september 30 , 2010. cost of goods sold for same-location-same-period decreased to 12.1 % for the year ended september 30 , 2011 compared to 12.2 % for the year ended september 30 , 2010. we continued our efforts to achieve reductions in cost of goods sold of the club operations through improved inventory management . we are continuing a program to improve margins from liquor and food sales and food service efficiency . our cost of sales from our internet operations for the year ended september 30 , 2011 was 2.0 % compared to 2.3 % of related revenues for the year ended september 30 , 2010 . 27 the increase in payroll and related costs , stated as “ salaries & wages ” above , was primarily due to the addition of the new clubs in 2010 and 2011. payroll for same-location-same-period of club continuing operations increased to $ 13.0 million for the year ended september 30 , 2011 from $ 12.6 million for the previous year . management currently believes that its labor and management staff levels are appropriate . the decrease in stock-based compensation in 2011 results from the issuance of 465,000 options at september 30 , 2010 to employees and board of directors . these options were exercisable immediately , resulting in the related cost being recognized entirely during the 2010 fiscal year . taxes and permits consists principally of payroll taxes , property taxes , sales and alcohol taxes , licenses and permits and the patron tax in our nightclubs in texas . the increase in 2011 results principally from the new clubs acquired . patron taxes amounted to $ 2.9 million and $ 2.8 million for the years ended september 30 , 2011 and 2010 , respectively . rent expense increased principally due to new leases in two new clubs in fort worth . legal and professional expenses decreased principally due to a decrease in the costs related to litigation involving claims under the fair labor standards act . we incurred approximately $ 100,000 and $ 88,000 in legal fees related to new acquisitions in 2011 and 2010 , respectively . depreciation and amortization increased approximately $ 679,000 from the year ended september 30 , 2010 , due to the new clubs purchased . utilities increased due to new clubs and the heat and drought in texas in 2011. the decrease in interest expense was attributable to the continued decrease in debt as we amortize the loans . also included in interest expense in 2010 is the write off of the unamortized portion of certain loan origination costs relating to our redeemed convertible debt , amounting to $ 274,425. as of september 30 , 2011 , the balance of long-term debt was $ 35.6 million compared to $ 42.7 million a year earlier . gain on settlement of debt in 2011 represents the gain from settlement of certain cross-litigation with the former sellers of the las vegas club . see “ derivative financial instrument ” above for information on the company 's derivative financial instrument at september 30 , 2011. following is our adjusted ebitda for the years ended september 30 : ( in thousands , except per share data ) 2011 2010 2009 adjusted ebitda $ 23,637 $ 17,915 $ 17,890 in the table above , we have included a financial statement measure that was not derived in accordance with gaap . we use adjusted ebitda ( earnings before interest expense , income taxes , depreciation , amortization and impairment charges ) as a non-gaap performance measure . in calculating adjusted ebitda , we exclude our largest recurring non-cash charge , depreciation , amortization and impairment charges . adjusted ebitda provides a core operational performance measurement that compares results without the need to adjust for federal , state and local taxes which have considerable variation between domestic jurisdictions . also , we exclude interest cost in our calculation of adjusted ebitda . the results are , therefore , without consideration of financing alternatives of capital employed . we use adjusted ebitda as one guideline to assess our unleveraged performance return on our investments . adjusted ebitda is also the target benchmark for our acquisitions of nightclubs . reconciliations from net earnings from continuing operations to adjusted editda are provided below for the years ended september 30 : replace_table_token_4_th 28 our adjusted ebitda does not include interest expense , income taxes , depreciation , amortization and impairment charges . because we have borrowed money in order to finance our operations , interest expense is a necessary element of our costs and our ability to generate revenues . because we use capital assets , depreciation , amortization and impairment charges are also necessary elements of our costs . also , the payment of income taxes is a necessary element of our operations . therefore , any measures that exclude these elements have material limitations . to compensate for these limitations , we believe that it is appropriate to consider both net earnings ( loss ) determined under gaap , as well as adjusted ebitda , to evaluate our performance . also , we separately analyze any significant fluctuations in interest expense , depreciation , amortization , impairment charges and income taxes . discontinued operations in march 2011 , we made the decision to sell our las vegas location and , in april 2011 , sharply reduced its operations in order to eliminate losses as we sought a buyer for the property . we believe that we have done everything possible to make this location viable since its acquisition in 2008 and now believed it was in our shareholders ' best interests not to continue these efforts .
| general information we operate in three businesses in the adult entertainment industry : 1. we own and or operate upscale adult nightclubs serving primarily businessmen and professionals . our nightclubs offer live adult entertainment , restaurant and bar operations . through our subsidiaries , we currently own and or operate a total of twenty-three adult nightclubs that offer live adult entertainment , restaurant and bar operations . eight of our clubs operate under the name `` rick 's cabaret '' ; four operate under the name “ club onyx ” , upscale venues that welcome all customers but cater especially to urban professionals , businessmen and professional athletes ; six operate under the name `` xtc cabaret '' ; one club operates as “ tootsie 's cabaret ” , one operates as “ cabaret north ” and one operates as “ downtown cabaret ” , one operates as “ cabaret east ” , and one operates as “ temptations ” . additionally , we own a 40 % interest in “ the mansion ” nightclub in austin , texas . our nightclubs are in houston , austin , san antonio , dallas and fort worth , texas ; charlotte , north carolina ; minneapolis , minnesota ; new york , new york ; miami gardens , florida ; philadelphia , pennsylvania and indianapolis , indiana . no sexual contact is permitted at any of our locations . 2. we have extensive internet activities . a ) we currently own two adult internet membership web sites at www.coupletouch.com and www.xxxpassword.com . we acquire xxxpassword.com site content from wholesalers . b ) we operate an online auction site www.naughtybids.com . this site provides our customers with the opportunity to purchase adult products and services in an auction format . we earn revenues by charging fees for each transaction conducted on the automated site . 3. in april 2008 , we acquired a media division , including the leading trade magazine serving the multi-billion dollar adult nightclubs industry .
| 7,957 |
70 3. properties and equipment , net properties and equipment , net are comprised of the following : replace_table_token_32_th capitalized exploratory well costs the following table reflects the net changes in capitalized exploratory well costs : year ended december 31 , ( in thousands ) 2020 2019 2018 balance at beginning of period $ — $ — $ 19,511 additions to capitalized exploratory well costs pending the determination of proved reserves — — — reclassifications to wells , facilities , and equipment based on the determination of proved reserves — — — capitalized exploratory well costs charged to expense — — ( 19,511 ) balance at end of period $ — $ — $ — the following table provides an aging of capitalized exploratory well costs based on the date the drilling was completed : december 31 , ( in thousands ) 2020 2019 2018 capitalized exploratory well costs that have been capitalized for a period of one year or less $ — $ — $ — capitalized exploratory well costs that have been capitalized for a period greater than one year — — — $ — $ story_separator_special_tag the following discussion is intended to assist you in understanding our results of operations and our present financial condition . our consolidated financial statements and the accompanying notes to the consolidated financial statements included elsewhere in this annual report on form 10-k contain additional information that should be referred to when reviewing this material . overview financial and operating overview financial and operating results for the year ended december 31 , 2020 compared to the year ended december 31 , 2019 are as follows : natural gas production decreased 7.6 bcf , or one percent , from 865.3 bcf in 2019 to 857.7 bcf in 2020. the slight decrease was driven by strategic curtailments of production during a portion of the second half of 2020 due to weaker natural gas prices . average realized natural gas price for 2020 was $ 1.68 per mcf , 31 percent lower than the $ 2.45 per mcf price realized in 2019. total capital expenditures were $ 569.8 million in 2020 compared to $ 783.3 million in 2019. drilled 74 gross wells ( 64.3 net ) with a success rate of 100 percent in 2020 compared to 96 gross wells ( 94.0 net ) with a success rate of 100 percent in 2019. completed 86 gross wells ( 77.3 net ) in 2020 compared to 99 gross wells ( 97.0 net ) in 2019. average rig count during 2020 was approximately 2.3 rigs in the marcellus shale , compared to an average rig count in the marcellus shale of approximately 3.1 rigs during 2019. repaid $ 87.0 million of our 6.51 % weighted-average senior notes , which matured in july 2020. market conditions and commodity prices our financial results depend on many factors , particularly commodity prices and our ability to market our production on economically attractive terms . commodity prices are affected by many factors outside of our control , including changes in market supply and demand , which are impacted by pipeline capacity constraints , inventory storage levels , basis differentials , weather conditions and other factors . our realized prices are also further impacted by our hedging activities . our revenues , operating results , financial condition and ability to borrow funds or obtain additional capital depend substantially on prevailing commodity prices , particularly natural gas prices . since substantially all of our production and reserves are natural gas , significant declines in natural gas prices could have a material adverse effect on our operating results , financial condition , liquidity and ability to obtain financing . lower natural gas prices also may reduce the amount of natural gas that we can produce economically . in addition , in periods of low natural gas prices , we may elect to curtail a portion of our production from time to time . historically , natural gas prices have been volatile , with prices fluctuating widely , and they are likely to continue to be volatile . as a result , we can not accurately predict future commodity prices and , therefore , can not determine with any degree of certainty what effect increases or decreases in these prices will have on our capital program , production volumes or revenues . in addition to commodity prices and production volumes , finding and developing sufficient amounts of natural gas reserves at economical costs are critical to our long-term success . we account for our derivative instruments on a mark-to-market basis with changes in fair value recognized in operating revenues in the consolidated statement of operations . as a result of these mark-to-market adjustments associated with our derivative instruments , we will experience volatility in our earnings due to commodity price volatility . refer to “ impact of derivative instruments on operating revenues ” below and note 6 of the notes to the consolidated financial statements for more information . the ongoing covid-19 outbreak , which the world health organization ( who ) declared as a pandemic on march 11 , 2020 , has reached more than 200 countries and territories and there continues to be considerable uncertainty regarding the extent to which covid-19 will continue to spread , the development , availability and administration of effective treatments and vaccines and the extent and duration of governmental and other measures implemented to try to slow the spread of the virus and alleviate strain on the healthcare system and the economic impact of such actions . one of the impacts of the covid-19 41 pandemic has been a significant reduction in demand for crude oil , and to a lesser extent , natural gas . the supply/demand imbalance driven by the covid-19 pandemic , as well as production disagreements among members of opec+ , has led to significant global economic contraction generally and continues to have disruptive impacts on the oil and gas industry . story_separator_special_tag the borrowing base under the terms of our revolving credit facility is redetermined annually in april . in addition , either we or the banks may request an interim redetermination twice a year or in connection with certain acquisitions or divestitures of oil and gas properties . effective april 23 , 2020 , the borrowing base and available commitments were reaffirmed at $ 3.2 billion and $ 1.5 billion , respectively . as of december 31 , 2020 , there were no borrowings outstanding under our revolving credit facility and our unused commitments remained at $ 1.5 billion . a decline in commodity prices could result in the future reduction of our borrowing base and related commitments under our revolving credit facility . unless commodity prices decline significantly from current levels , we do not believe that any such reductions would have a significant impact on our ability to service our debt and fund our drilling program and related operations . we strive to manage our debt at a level below the available credit line in order to maintain borrowing capacity . our revolving credit facility includes a covenant limiting our total debt . we believe that , with internally generated operating cash flow , cash on hand and availability under our revolving credit facility , we have the capacity to finance our spending plans . at december 31 , 2020 , we were in compliance with all restrictive financial covenants for both our revolving credit facility and senior notes . refer to note 5 of the notes to the consolidated financial statements for further details regarding restrictive covenants . cash flows our cash flows from operating activities , investing activities and financing activities are as follows : replace_table_token_13_th operating activities . operating cash flow fluctuations are substantially driven by commodity prices , changes in our production volumes and operating expenses . commodity prices have historically been volatile , primarily as a result of supply and demand for natural gas , pipeline infrastructure constraints , basis differentials , inventory storage levels , seasonal influences , and other factors . in addition , fluctuations in cash flow may result in an increase or decrease in our capital expenditures . our working capital is substantially influenced by the variables discussed above and fluctuates based on the timing and amount of borrowings and repayments under our revolving credit facility , repayments of debt , the timing of cash collections and payments on our trade accounts receivable and payable , respectively , payment of dividends , repurchases of our securities and changes in the fair value of our commodity derivative activity . from time to time , our working capital will reflect a deficit , while at other times it will reflect a surplus . this fluctuation is not unusual . at december 31 , 2020 and 2019 , we had a working capital surplus of $ 25.5 million and $ 240.2 million , respectively . we believe we have adequate liquidity and availability under our revolving credit facility to meet our working capital requirements over the next twelve months . net cash provided by operating activities in 2020 decreased by $ 667.6 million compared to 2019. this decrease was primarily due to lower natural gas revenue and lower derivative settlement gains . these decreases were partially offset by favorable changes in working capital and other assets and liabilities . the decrease in natural gas revenue was primarily due to a 43 decrease in realized natural gas prices and marginally lower natural gas production . average realized natural gas prices decreased by 31 percent in 2020 compared to 2019. natural gas production decreased by one percent for 2020 compared to 2019 , which was driven by strategic curtailments of production during a portion of the second half of 2020 due to weaker natural gas prices . refer to `` results of operations '' for additional information relative to commodity price , production and operating expense fluctuations . we are unable to predict future commodity prices and , as a result , can not provide any assurance about future levels of net cash provided by operating activities . investing activities . cash flows used in investing activities increased by $ 40.6 million from 2019 compared to 2020. the increase was due to lower proceeds of $ 258.8 million from sale of our investment in meade in november 2019 and constitution in january 2020 , partially offset by $ 212.5 million of lower capital expenditures as a result of the implementation of our maintenance capital program in 2020 and $ 9.3 million of lower capital contributions associated with our equity method investments . financing activities . cash flows used in financing activities decreased by $ 434.5 million from 2019 compared to 2020. the decrease was due to $ 519.9 million of lower repurchases of our common stock in 2020 compared to 2019 and $ 7.4 million of lower debt issuance costs associated with the amendment of our revolving credit facility in 2019. these decreases were partially offset by $ 80.0 million higher net repayments of debt primarily related to maturities of certain of our senior notes in 2020 and $ 13.9 million of higher dividend payments related to an increase in our dividend rate in 2019 . 2019 and 2018 compared . for additional information on the comparison of operating , investing and financing cash flows for the year ended december 31 , 2018 compared to the year ended december 31 , 2019 , refer to financial condition ( cash flows ) included in the cabot oil & gas corporation annual report on form 10-k for the year ended december 31 , 2019. capitalization information about our capitalization is as follows : replace_table_token_14_th _ ( 1 ) includes $ 188.0 million and $ 87.0 million of current portion of long-term debt at december 31 , 2020 and december 31 , 2019 , respectively . there were no borrowings outstanding under our revolving credit facility as of december 31 , 2020 and 2019 , respectively .
| results of operations 2020 and 2019 compared we reported net income for 2020 of $ 200.5 million , or $ 0.50 per share , compared to net income for 2019 of $ 681.1 million , or $ 1.64 per share . the decrease in net income was primarily due to lower operating revenues and lower earnings on equity method investments , partially offset by lower operating and income tax expenses . revenue , price and volume variance our revenues vary from year to year as a result of changes in commodity prices and production volumes . below is a discussion of revenue , price and volume variances . replace_table_token_17_th natural gas revenues replace_table_token_18_th the decrease in natural gas revenues of $ 580.3 million was due to lower production and lower natural gas prices . the slight decrease in production was driven by strategic curtailments of production during a portion of the second half of 2020 due to weaker natural gas prices . impact of derivative instruments on operating revenues replace_table_token_19_th 49 operating and other expenses replace_table_token_20_th total costs and expenses from operations decreased by $ 19.0 million from 2019 to 2020. the primary reasons for this fluctuation are as follows : direct operations decreased $ 3.6 million primarily due to lower production and continued efficiencies in our operations in the marcellus shale offset by higher workover expenses during the period . transportation and gathering decreased $ 3.6 million due to lower throughput as a result of lower marcellus shale production , partially offset by higher demand charges .
| 7,958 |
determining the fair value of assets acquired and liabilities assumed requires management 's judgment and often involves the use of significant estimates and assumptions , including assumptions with respect to future cash inflows and outflows , discount rates , asset lives and market multiples , among other items . intangible assets : intangible assets consist principally of federal communication commission ( “ fcc ” ) broadcast licenses and other definite-lived intangible assets . fcc licenses , which have been recorded at their estimated fair value as of the date of acquisition , have an indefinite useful life and therefore are not amortized . the fair value of our fcc licenses is estimated to be the story_separator_special_tag the following management 's discussion and analysis is intended to provide the reader with an overall understanding of our financial condition , results of operations , cash flows and sources and uses of cash . this section also includes general information about our business and a discussion of our management 's analysis of certain trends , risks and opportunities in our industry . in addition , we also provide a discussion of accounting policies that require critical judgments and estimates . this discussion should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this annual report . the following discussion contains forward-looking statements and our actual results could differ materially from those discussed in the forward-looking statements as a result of a number of factors , including those set forth in the sections entitled “ risk factors ” and “ forward-looking statements ” and elsewhere in this annual report . note about forward-looking statements this report includes estimates , projections , statements relating to our business plans , objectives and expected operating results that are “ forward-looking statements ” within the meaning of the private securities litigation reform act of 1995 , section 27a of the securities act and section 21e of the exchange act . forward-looking statements often discuss our current expectations and projections relating to our financial condition , results of operations , plans , objectives , future performance and business . you can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts . see the section of this annual report titled , “ forward-looking statements ” above for further information regarding forward-looking statements . our business townsquare is a community-focused digital media , digital marketing solutions and radio company focused outside the top 50 markets in the u.s. we own and operate 322 radio stations and more than 330 local websites in 67 u.s. markets , a digital marketing subscription business ( townsquare interactive ) providing websites , search engine optimization , social platforms and online reputation management for approximately 22,750 small to medium sized businesses , a proprietary digital programmatic advertising technology with an in-house demand and data management platform ( townsquare ignite ) , an e-commerce offering , and we own and operate numerous local live events each year . many of our radio stations are considered market leaders and we also participate in the digital , mobile , video and social media arena . almost all of our radio stations have local companion websites that utilize the station brands and are populated with proprietary , original content created or curated by our local media personalities . in addition , we create , promote and produce a diverse range of live events , including , concerts , expositions and other experiential events within and beyond our radio markets . our integrated and diversified product and service offerings enable local , regional and national advertisers to target audience engagement across multiple platforms , including on-air , online and at live events . advertising revenue for our businesses is highly correlated to changes in gross domestic product ( “ gdp ” ) as dollars spent on advertising has historically trended in line with , and in our experience often lags , changes in gdp . according to the u.s. department of commerce estimate as of january 28 , 2021 , u.s. gdp decreased 3.5 % for the year ended december 31 , 2020. we believe our product and service offerings , combined with our leading market position in small and mid-sized markets , enable us to generate higher total net revenue per audience member than radio station owners focused on larger markets . our primary sources of net revenue are the sale of advertising on our radio stations , owned and operated websites , radio stations ' online streams and mobile applications . our sales of advertisements are primarily affected by the demand for advertising from local , regional and national advertisers and the advertising rates we charge . advertising demand and rates are based primarily on our ability to attract audiences to our various products in the demographic groups targeted by advertisers , as measured principally by various services on a periodic basis . we endeavor to develop strong audience loyalty and believe that the diversification of formats on our radio stations and websites helps to insulate 49 our radio stations and websites from the effects of changes in musical tastes of the public with respect to any particular format . we believe that the sale of our online and mobile advertisements , which currently have rates per advertisement that are less than those of terrestrial radio advertisements , has not negatively impacted our terrestrial radio advertising net revenue . should a significant and sudden shift in demand for these products toward online and mobile occur , there could be a material adverse impact on our financial condition and results of operations if we are unable to increase rates accordingly . however , we believe that as a result of our strong brands and high quality online and mobile offerings we are well positioned to increase rates as demand increases for these products . in addition , we offer precision customer targeting solutions to advertisers through townsquare ignite , our digital programmatic advertising platform . story_separator_special_tag covid-19 pandemic impact the covid-19 pandemic has materially and adversely impacted the u.s. economy and financial markets , with legislative and regulatory responses including unprecedented monetary and fiscal policy actions across all sectors , and there is significant uncertainty as to the timing of stabilization and recovery . the extent of the covid-19 impact will depend on future actions and outcomes , which are highly uncertain and can not be predicted with confidence , including the scope , severity and duration of the outbreak , the short-term and long-term economic impact of the outbreak ( including the effect on advertising activity , consumer discretionary spending and our employees in the markets in which we operate ) , the actions taken to mitigate the impact of the pandemic , and the pace of economic and financial market recovery when the covid-19 pandemic subsides , among others . the covid-19 pandemic and measures taken to contain it have subjected our business , results of operations , financial condition , stock price and liquidity to a number of material risks and uncertainties , all of which may continue or worsen . our operations had performed strongly in the first two months of 2020 before the effects of covid-19 began to impact our operations in early march 2020 , as the challenges that covid-19 created for advertisers and consumers has materially and adversely impacted our net revenues since mid-march . in particular , our clients canceled a significant amount of advertising , and we experienced a material decline in the purchase of new advertising by our clients . in addition , we canceled a large number of our live events . while our advertising revenue and live events revenue significantly declined , townsquare interactive continued its revenue growth . see part i , item 1a. , “ risk factors ” for additional information on the current and potential impacts of covid-19 and related risks and uncertainties to our business , results of operations , financial condition , liquidity , and stock price . we continue to closely monitor the impact of the covid-19 pandemic on all aspects of our business . see “ liquidity and capital resources - covid-19 response ” for certain proactive initiatives we have taken to preserve financial flexibility , mitigate the impact of the recent and uncertain decline in net revenue , as well as position us for growth as advertising demand rebounds . 51 story_separator_special_tag $ 18.1 million , or 6.0 % , when compared with the same period in 2019. our advertising direct operating expenses for year ended december 31 , 2020 decreased $ 13.5 million , or 5.5 % , as compared to the same period in 2019. this decrease was primarily driven by lower compensation , partially offset by higher operating expenses due to the covid-19 pandemic . our live events segment reported direct operating expenses of $ 2.2 million , a decline of $ 11.5 million from the year ended december 31 , 2019 , primarily driven by the cancellation of live events as a result of the covid-19 pandemic . our townsquare interactive segment reported an increase in direct operating expenses of $ 6.9 million from $ 42.4 million for the year ended december 31 , 2019 to $ 49.3 million for the same period in 2020. the increase in direct operating expenses from the prior year for our townsquare interactive segment was due to the increase in headcount to support subscriber and revenue growth . depreciation and amortization depreciation and amortization expense for the year ended december 31 , 2020 was $ 20.1 million representing a decrease of $ 5.7 million or 22.2 % compared to $ 25.8 million for same period of 2019. the decrease is primarily due to higher amortization expense in 2019 of capitalized software development costs due to significant projects that were placed in service in 2019 and 2018 , with no comparable projects placed in service in 2020. corporate expenses corporate expenses are of a general corporate nature or managed on a corporate basis . these costs ( net of allocations to the business segments ) primarily represent corporate stewardship and administration activities . corporate expenses for the year ended december 31 , 2020 decreased $ 1.7 million , or 6.0 % , as compared to the year ended december 31 , 2019 , primarily due to lower compensation costs , partially offset by an increase in professional fees . 54 stock-based compensation stock-based compensation expense for the year ended december 31 , 2020 , as compared with the same period ended december 31 , 2019 , decreased $ 0.5 million or 19.6 % , primarily due to the timing of options that vested in january 2019 , with no comparable activity during 2020. transaction costs transaction costs for the year ended december 31 , 2020 increased $ 1.1 million or 74.8 % , primarily due to fees incurred as a result of the amendment of the company 's term loans related to a waiver of any default under the credit agreement , as more fully described in note 9 , long-term debt . business realignment costs business realignment costs for the year ended december 31 , 2020 were $ 3.1 million , primarily due to employee-related costs incurred as a result of headcount reductions in response to the covid-19 pandemic . impairment of goodwill in early 2019 , we implemented changes to our reportable operating segments , which followed changes in the information reviewed by our ceo and chief operating decision maker ( “ codm ” ) . as a result of these changes , the company 's traditional broadcast operations were assigned to a standalone reporting unit , local advertising , representing a component of our advertising reportable operating segment for the purposes of our annual goodwill impairment test . in conjunction with our annual goodwill impairment test we determined that the carrying value of our local advertising reporting unit exceeded its fair value as of our impairment assessment date , primarily as a result of this change .
| highlights of our financial performance certain key financial developments in our business for the year ended december 31 , 2020 as compared to 2019 are summarized below : net revenue for the year ended december 31 , 2020 as compared with the year ended december 31 , 2019 decreased $ 60.1 million , or 13.9 % , primarily driven by a decrease of $ 54.3 million in our advertising net revenue as a result of advertising cancellations and declines in the purchase of new advertising and a $ 14.6 million decline in our live events net revenue as a result of the cancellation of live events , both primarily due to the covid-19 pandemic , offset by an increase of $ 8.8 million in our townsquare interactive segment , due to additional net subscribers in 2020. excluding revenue related to political advertising of $ 16.0 million and $ 3.1 million for the years ended december 31 , 2020 and 2019 , respectively , net revenue for the year ended december 31 , 2020 as compared with the year ended december 31 , 2019 decreased $ 73.0 million , or 17.0 % . operating loss increased $ 37.8 million from an operating loss of $ 37.1 million for the year ended december 31 , 2019 to an operating loss of $ 75.0 million for the year ended december 31 , 2020 , an increase of 101.9 % .
| 7,959 |
the value of each such annual cash incentive bonus will be based on the attainment of performance criteria and targets established and administered by the compensation committee related to relative total stockholder return , relative same store net operating income growth , on-time and on-budget completion story_separator_special_tag the following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of bluerock residential growth reit , inc. , and the notes thereto . as used herein , the terms we , our and us refer to bluerock residential growth reit , inc. , a maryland corporation , and , as required by context , bluerock residential holdings , l.p. , a delaware limited partnership , which we refer to as our operating partnership , and to their subsidiaries . we refer to bluerock real estate , l.l.c. , a delaware limited liability company , as bluerock , and we refer to our former external manager , brg manager , llc , as our former manager. both bluerock and our former manager are affiliated with the company . see also forward-looking statements preceding part i. overview we were incorporated as a maryland corporation on july 25 , 2008. our principal business objective is to maximize returns through investments in class a institutional-quality apartment properties in demographically attractive growth markets across the united states where we believe we can drive substantial growth in our funds from operations and net asset value through one or more of our core-plus , value-add , opportunistic and invest-to-own investment strategies . on august 4 , 2017 , we and brg manager , llc , or our former manager , announced that the parties had entered into a contribution and sale agreement ( as amended by that certain amendment no . 1 thereto , dated august 9 , 2017 ) , or the contribution agreement , and other definitive agreements providing for our acquisition of a newly-formed entity to own the assets used by the former manager in its performance of the management functions then provided to us pursuant to the management agreement , or the internalization . a special committee comprised entirely of independent and disinterested members of our board of directors , or the special committee , which retained independent legal and financial advisors , unanimously determined that the entry into the contribution agreement and the completion of the internalization were in the best interests of the company . our board of directors , by unanimous vote , made a similar determination , and on october 26 , 2017 , the company held its annual meeting of stockholders , at which our stockholders approved the proposals necessary for the completion of the internalization . 61 on october 31 , 2017 , we completed the internalization pursuant to the contribution agreement for total consideration of approximately $ 41.24 million , as determined pursuant to a formula established in the management agreement at the time of our ipo in april 2014. upon completion of the internalization , our current management and investment teams , who were previously employed by an affiliate of our former manager , became employed by our indirect subsidiary , and we became an internally managed real estate investment trust . in order to further align the interests of our management with those of our stockholders , payment of the aggregate internalization consideration was paid 99.9 % in equity : we caused the operating partnership to issue an aggregate of 3,753,593 op units , and we issued an aggregate of 76,603 shares of a newly reclassified class c common stock and paid an aggregate of approximately $ 40,794 in cash to the applicable contributor and its affiliates and related persons in connection with the internalization . following the internalization , our senior management team continues to oversee , manage and operate the company , and we are no longer externally managed by our former manager . as an internally managed company , we no longer pay the former manager any fees or expense reimbursements arising from the management agreement . we conduct our operations through our operating partnership , of which we are the sole general partner . the consolidated financial statements include our accounts and those of the operating partnership . as of december 31 , 2017 , we owned interests in thirty-nine real estate properties , twenty-eight consolidated operating properties and eleven through preferred equity and mezzanine loan investments . of the property interests held through preferred equity and mezzanine loan investments , six are under development , four are in leaseup and one property is stabilized . the thirty-nine properties contain an aggregate of 12,408 units , comprised of 9,608 consolidated operating units and 2,800 units through preferred equity and mezzanine loan investments . as of december 31 , 2017 , our consolidated operating properties were approximately 94 % occupied . we have elected to be taxed as a real estate investment trust ( reit ) under sections 856 through 860 of the code and have qualified as a reit commencing with our taxable year ended december 31 , 2010. in order to continue to qualify as a reit , we must distribute to our stockholders each calendar year at least 90 % of our taxable income ( excluding net capital gains ) . if we qualify as a reit for federal income tax purposes , we generally will not be subject to federal income tax on income that we distribute to our stockholders . if we fail to qualify as a reit in any taxable year , we will be subject to federal income tax on our taxable income at regular corporate rates and will not be permitted to qualify as a reit for four years following the year in which our qualification is denied . such an event could materially and adversely affect our net income and results of operations . we intend to continue to organize and operate in such a manner as to remain qualified as a reit . story_separator_special_tag property management fees expense increased $ 0.9 million , or 64.3 % , to $ 2.3 million for the year ended december 31 , 2016 as compared to $ 1.4 million in the same prior year period . property management fees increased $ 1.1 million from the acquisition of nine properties in 2016 and the full year impact of eight properties acquired in 2015 , offset by a $ 0.2 million decrease in property management fees driven by the sales of four properties in 2016 and 2015. general and administrative expenses amounted to $ 5.9 million for the year ended december 31 , 2016 as compared to $ 4.1 million for the same prior year period . excluding non-cash amortization of ltips and restricted stock expense of $ 3.0 million and $ 2.1 million , for the years ended december 31 , 2016 and 2015 , respectively , general and administrative expenses increased to $ 2.8 million , or 3.7 % of revenues for the year ended december 31 , 2016 as compared to $ 2.0 million , or 4.4 % of revenues , for the same prior year end period . management fees amounted to $ 6.5 million for the year ended december 31 , 2016 as compared to $ 4.2 million for the same prior year period . base management fees were $ 6.4 million and $ 3.3 million for the years ended december 31 , 2016 and 2015 , respectively . incentive fees were $ 0.2 million and $ 0.9 million 66 for the years ended december 31 , 2016 and 2015 , respectively . these increases were primarily due to the significant increase in our equity base as a result of our follow-on offerings . ltip units were issued for the payment of base management and incentive fees of $ 6.5 million and $ 3.7 million for the years ended december 31 , 2016 and 2015 , respectively , while cash payment was made for none and $ 0.5 million for the years ended december 31 , 2016 and 2015 , respectively . acquisition and pursuit costs amounted to $ 4.6 million for the year ended december 31 , 2016 as compared to $ 3.5 million for the same prior year period . these costs relate to the acquisition of 13 properties during 2016 and 14 acquisitions in 2015. depreciation and amortization expenses increased to $ 31.2 million for the year ended december 31 , 2016 as compared to $ 16.2 million for the same prior year period . depreciation and amortization expense increased $ 15.6 million from the acquisition of nine properties in 2016 and the full year impact of eight properties acquired in 2015 , offset by a $ 0.6 million decrease in depreciation and amortization expense driven by the sales of four properties in 2016 and 2015. other income and expenses other income and expenses amounted to net other expense of $ 1.9 million for the year ended december 31 , 2016 as compared to net other income of $ 9.3 million for the same prior year period . this was primarily due to an increase in the gain on the sale of assets of $ 2.2 million in 2016 related to springhouse at newport news , an increase in income from unconsolidated joint venture interest of $ 5.0 million due to additional investments , and a $ 3.8 million gain related to the revaluation of equity on business combination , partially offset by a gain on the sale of an unconsolidated joint venture interest of $ 11.3 million in 2015 related to berry hill , an $ 8.5 million increase in interest expense , net , as the result of the increase in mortgage payables resulting from the acquisition of interests in the properties mentioned above , and loss on early extinguishment of debt of $ 2.4 million . property operations we define same store properties as those that we owned and operated for the entirety of both periods being compared , except for properties that are in the construction or lease-up phases , or properties that are undergoing development or significant redevelopment . we move properties previously excluded from our same store portfolio for these reasons into the same store designation once they have stabilized or the development or redevelopment is complete and such status has been reflected fully in all quarters during the applicable periods of comparison . for newly constructed or lease-up properties or properties undergoing significant redevelopment , we consider a property stabilized upon attainment of 90 % physical occupancy , subject to loss-to-lease , bad debt and rent concessions . for comparison of our twelve months ended december 31 , 2017 and 2016 , the same store properties included properties owned at january 1 , 2016. our same store properties for the twelve months ended december 31 , 2017 and 2016 were enders place at baldwin park , arium grandewood , park & kingston , ashton reserve , arium palms , sovereign , arium gulfshore , and arium at palmer ranch . our non-same store properties for the same period were fox hill , sorrel , the preserve at henderson beach , arium westside , arium glenridge , roswell city walk , arium pine lakes , the brodie , james on south first , vickers village , village green of ann arbor , mda apartments , lansbrook village , crescent perimeter , preston view , wesley village , marquis at crown ridge , marquis at stone oak , marquis at the cascades , marquis at tpc , arium hunter 's creek , arium metrowest , citrus tower , villages at cypress creek , outlook at greystone and the mills . certain amounts in prior year same store presentation have been reclassified to conform to the current period presentation .
| results of operations note 3 , sale of real estate assets and joint venture equity interests and abandonment of development project , to our consolidated financial statements provides a discussion of the various purchases and sales of properties and joint venture equity interests . these transactions have resulted in material changes to the presentation of our financial statements . the following is a summary of our stabilized consolidated operating real estate investments as of december 31 , 2017 : replace_table_token_12_th ( 1 ) represents date of most recent significant renovation or date built if no renovations . year ended december 31 , 2017 as compared to the year ended december 31 , 2016 revenue net rental income increased $ 29.6 million , or 40.3 % , to $ 103.0 million for the year ended december 31 , 2017 as compared to $ 73.4 million for the same prior year period . net rental income increased $ 48.4 million from the acquisition of twelve properties in 2017 and the full year impact of nine properties acquired in 2016 , offset by a $ 18.8 million decrease in net rental income driven by the sales of five properties in 2017 and 2016. see item 1. business summary of investments and dispositions . other property revenue increased $ 4.6 million , or 59.7 % , to $ 12.3 million for the year ended december 31 , 2017 as compared to $ 7.7 million for the same prior year period .
| 7,960 |
the program was suspended by the company in june 2012 and there was no story_separator_special_tag overview we design , develop and manufacture communications network equipment for enterprises and telecommunications operators worldwide . our products enable both enterprises and network service providers to deliver high speed fiber access , while transporting voice , video and data to the end user . our next-generation solutions are based upon our slms architecture . from its inception , this slms architecture was specifically designed for the delivery of multiple classes of subscriber services ( such as voice , data and video distribution ) , rather than being based on a particular protocol or media . in other words , our slms products are built to support the migration from legacy circuit to packet technologies and from copper to fiber technologies . this flexibility and versatility allows our products to adapt to future technologies while allowing service providers to focus on the delivery of additional high bandwidth services . because this slms architecture is designed to interoperate with existing legacy equipment , service providers can leverage their existing networks to deliver a combination of voice , data and video services today , while they migrate , either simultaneously or at a future date , from legacy equipment to next-generation equipment with minimal interruption . we believe that our slms solution provides an evolutionary path for service providers from their existing infrastructures , as well as gives newer service providers the capability to deploy cost-effective , multi-service networks that can support voice , data and video . in addition to our established product offerings in our core business , our fiberlan passive optical lan product provides an alternative to switched copper-based ethernet lans . our global customer base in our core business includes regional , national and international telecommunications carriers . to date , our products are deployed by over 750 network service providers on six continents worldwide . our global fiberlan customer base includes hotels , universities , military bases , government institutions , manufacturing facilities and businesses . we believe that we have assembled the employee base , technological breadth and market presence to provide a simple yet comprehensive set of next-generation solutions to the bandwidth bottleneck in the access network and the other problems encountered by network service providers when delivering communications services to subscribers . we have incurred significant losses to date and expect that our operating losses and negative cash flows from operations may continue . our net loss was $ 4.1 million for the year ended december 31 , 2014 and we had an accumulated deficit of $ 1,041.0 million at december 31 , 2014. if we are unable to access or raise the capital needed to meet liquidity needs and finance capital expenditures and working capital , or if the economic , market and geopolitical conditions in the united states and the rest of the world deteriorate , we may experience material adverse impacts on our business , operating results and financial condition . during the past five years , we have continued our focus on cost control and operating efficiency along with restrictions on discretionary spending . in september 2012 , we closed our development center in portsmouth , new hampshire to reduce occupancy and personnel-related expenses . going forward , our key financial objectives include the following : increasing revenue while continuing to carefully control costs ; continued investments in strategic research and product development activities that will provide the maximum potential return on investment ; and minimizing consumption of our cash and cash equivalents . critical accounting policies and estimates management 's discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements , which have been prepared in accordance with generally accepted accounting principles in the united 24 states of america . the preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets , liabilities , revenue and expenses , and related disclosure of contingent assets and liabilities . the policies discussed below are considered by management to be critical because changes in such estimates can materially affect the amount of our reported net income or loss . for all of these policies , management cautions that actual results may differ materially from these estimates under different assumptions or conditions . revenue recognition we recognize revenue when the earnings process is complete . we recognize product revenue upon shipment of product under contractual terms which transfer title to customers upon shipment , under normal credit terms , net of estimated sales returns and allowances at the time of shipment . revenue is deferred if there are significant post-delivery obligations or if the fees are not fixed or determinable . when significant post-delivery obligations exist , revenue is deferred until such obligations are fulfilled . our arrangements generally do not have any significant post-delivery obligations . if our arrangements include customer acceptance provisions , revenue is recognized upon obtaining the signed acceptance certificate from the customer , unless we can objectively demonstrate that the delivered products or services meet all the acceptance criteria specified in the arrangement prior to obtaining the signed acceptance . in those instances where revenue is recognized prior to obtaining the signed acceptance certificate , we use successful completion of customer testing as the basis to objectively demonstrate that the delivered products or services meet all the acceptance criteria specified in the arrangement . we also consider historical acceptance experience with the customer , as well as the payment terms specified in the arrangement , when revenue is recognized prior to obtaining the signed acceptance certificate . when collectability is not reasonably assured , revenue is recognized when cash is collected . we make certain sales to product distributors . these customers are given certain privileges to return a portion of inventory . return privileges generally allow distributors to return inventory based on a percent of purchases made within a specific period of time . story_separator_special_tag the expected stock price volatility is based on the weighted average of the historical volatility of our common stock over the most recent period commensurate with the estimated expected life of our stock options . we base our expected life assumption on our historical experience and on the terms and conditions of the stock awards we grant to employees . risk free interest rates reflect the yield on zero-coupon u.s. treasury securities . we do not anticipate paying any cash dividends in the foreseeable future and therefore use an expected dividend yield of zero . if factors change , and we employ different assumptions for estimating stock-based compensation expense in future periods , or if we decide to use a different valuation model , the future periods may differ significantly from what we have recorded in the current period and could materially affect our operating income , net income ( loss ) and net income ( loss ) per share . we are also required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates . on august 9 , 2012 , our board of directors approved the acceleration of vesting of all unvested options to purchase shares of zhone common stock that were held by our senior management and employees as of that date . the acceleration for shares held by senior management was effective as of august 9 , 2012 and the acceleration of shares held by all other employees was effective as of september 30 , 2012. options to purchase an aggregate of approximately 0.6 million shares of zhone common stock were subject to the acceleration and resulted in a compensation charge of $ 0.7 million which was fully expensed in the three month period ended september 30 , 2012. the acceleration of these options was undertaken to partially offset previous reductions in cash compensation and other benefits by our senior management and employees . on july 17 , 2014 , the compensation committee of our board of directors approved the grant of an inducement award to mr. norrod in connection with his appointment as zhone 's president and chief executive officer and as a member of the board . the award consisted of a stock option to purchase 1,250,000 shares of zhone 's common stock at an exercise price equal to the closing price of zhone 's common stock on the grant date , which stock option was granted on july 21 , 2014. the estimated fair value of the stock option award at the grant date was $ 2.8 million and will be amortized to expense over the service period of four years . inventories inventories are stated at the lower of cost or market , with cost being determined using the first-in , first-out ( fifo ) method . in assessing the net realizable value of inventories , we are required to make judgments as to future demand requirements and compare these with the current or committed inventory levels . once inventory has been written down to its estimated net realizable value , its carrying value can not be increased due to subsequent changes in demand forecasts . to the extent that a severe decline in forecasted demand occurs , or we experience a higher incidence of inventory obsolescence due to rapidly changing technology and customer requirements , we may incur significant charges for excess inventory . 26 accounting for impairment of long-lived assets long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be fully recoverable based on expected undiscounted cash flows attributable to that asset . recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to the future net undiscounted cash flows expected to be generated by the asset . if the carrying amount of an asset exceeds its estimated future net undiscounted cash flows , an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset . any assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell , and would no longer be depreciated . the assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet . during the year ended december 31 , 2014 , we did not record any impairment charges related to the impairment of long-lived assets . story_separator_special_tag headcount in 2014 as compared with 2013 , increased accounting and legal costs of $ 0.5 million , higher stock-based compensation expenses of $ 0.3 million , and higher bad debt expenses of $ 0.1 million . impairment of fixed assets impairment of fixed assets was zero for both 2014 and 2013 and $ 0.1 million for 2012. interest expense interest expense for 2014 remained flat at $ 0.1 million . our outstanding debt balances remained constant and interest rates remained low during 2014. other income ( expense ) other income ( expense ) for 2014 and 2013 remained flat and was immaterial . income tax provision we recorded an income tax provision of $ 0.07 million and $ 0.04 million related to foreign and state taxes for the years ended december 31 , 2014 and 2013 , respectively . no material provision or benefit for income taxes was recorded in 2014 and 2013 , due to our recurring operating losses and the significant uncertainty regarding the realization of our net deferred tax assets , against which we have continued to record a full valuation allowance .
| results of operations we list in the table below the historical consolidated statement of comprehensive income ( loss ) as a percentage of net revenue for the periods indicated . replace_table_token_4_th 2014 compared with 2013 net revenue information about our net revenue for products and services for 2014 and 2013 is summarized below ( in millions ) : replace_table_token_5_th 27 information about our net revenue for north america and international markets for 2014 and 2013 is summarized below ( in millions ) : replace_table_token_6_th net revenue decreased 1 % or $ 1.6 million to $ 120.6 million for 2014 compared to $ 122.2 million for 2013. the decrease in net revenue was attributable to the decrease in service revenue . product revenue for 2014 remained flat . service revenue decreased 20 % or $ 1.6 million in 2014. service revenue represents revenue from maintenance and other services associated with product shipments . the decrease in service revenue was primarily due to decreased sales of installation services . international net revenue increased 1 % or $ 0.9 million to $ 81.5 million in 2014 and represented 68 % of total net revenue compared with 66 % in 2013. the increase in international net revenue was primarily due to increased sales in europe and the middle east as a result of recent growth in demand for our products in these regions , which was partially offset by lower revenue from latin america and asia . domestic net revenue decreased 6 % or $ 2.5 million to $ 39.1 million in 2014 compared to $ 41.6 million in 2013. the decrease was primarily due to fewer broadband development projects in connection with federal stimulus funding . for the years ended december 31 , 2014 and 2013 , three customers represented 31 % and 33 % of net revenue , respectively .
| 7,961 |
we recognize the compensation expense for restricted stock awards and restricted stock units with only service conditions on a straight-line basis over the requisite service period . we granted restricted stock awards with both service and performance conditions during the year ended september 30 , 2020. we did not grant story_separator_special_tag you should read the following discussion together with the `` selected financial data '' and the consolidated financial statements and the related notes included elsewhere in this annual report on form 10-k. this discussion contains forward-looking statements that are based on our 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 ” “ cautionary note regarding forward-looking statements ” and elsewhere in this annual 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 full-time enrollment and graduates . we also provide programs for welders and cnc machining technicians . we offer certificate , diploma or degree programs at 12 campuses across the united states , excluding the norwood , massachusetts campus which was closed on july 31 , 2020. additionally , we offer msat programs , including student-paid electives , at our campuses and manufacturer or dealer sponsored training at certain campuses and dedicated training centers . founded in 1965 , we have provided technical education for more than 55 years and have graduated more than 220,000 technicians . our revenues consist primarily of student tuition and fees derived from the programs we provide after reductions are made for discounts and scholarships that we sponsor and for refunds for students who wi t hdraw from our programs prior to specified dates . tuition and fee revenue is recognized ratably over the term of the course or program offered . approximately 99 % , 99 % and 98 % of our revenues for each of the years ended september 30 , 2020 , 2019 and 2018 , respectively , consisted of gross tuition . we supplement our tuition and fee revenues with additional revenues from sales of textbooks and program supplies and other revenues , which are recognized as the transfer of goods or services occurs . through our proprietary loan program , we , in substance , provide the students who participate in this program with extended payment terms for a portion of their tuition . under asc 606 , the portion of tuition revenue related to the proprietary loan program is considered a form of variable consideration . we estimate the amount we ultimately expect to collect from the portion of tuition that is funded by the proprietary loan program , resulting in a note receivable . estimating the collection rate requires significant management judgment . the estimated amount is determined at the inception of the contract and we recognize the related revenue as the student progresses through school . each reporting period , we update our assessment of the variable consideration associated with the proprietary loan program . accordingly , we recognize tuition and loan origination fees financed by the loan and any related interest revenue under the effective interest method required under the loan based on this collection rate . tuition revenue and fees generally vary based on the average number of students enrolled and average tuition charged per program . we also provide dealer technician training or instructor staffing services to manufacturers , and we recognize revenue as the transfer of services occurs . average full-time 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 full-time enrollments are influenced by the : attractiveness of our program offerings to high school graduates and potential adult students ; effectiveness of our marketing efforts ; depth of our industry relationships ; strength of employment markets and long-term career prospects ; quality of our instructors and student services professionals ; persistence of our students ; the length of our education programs ; availability of federal and alternative funding for our programs ; and 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 full-time enrollment . we currently offer start dates at our campuses that range from every three to six weeks throughout the year in our core programs . the number of start dates of advanced training programs varies by the 40 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 core or advanced training . we implemented tuition rate increases of up to 3.5 % , 3.0 % and 2.5 % for each of the years ended september 30 , 2020 , 2019 and 2018 , respectively . 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 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 66 % of our revenues , on a cash basis , were collected from funds distributed under title iv programs for the year ended september 30 , 2020 as calculated under the 90/10 rule . story_separator_special_tag additionally , as of september 30 , 2020 , approximately 5 % of students had not returned to campus to complete the in-person labs and remain only in the online portion of the curriculum , essentially only completing half of each course , while approximately 28 % of students were completing catch up labs , but over an extended period of time . we continue to recognize revenue ratably over the term of the course or program offered , taking into consideration those only completing the online curriculum , and the catch up period for active students and the impact it has on expected graduation dates . as a result , as of september 30 , 2020 , we had deferred revenue of $ 6.1 million . while we have reopened all of our campus locations , some students have delayed returning to campus for in-person labs even with the new social distancing protocols in place and remain on leave of absence or continue only with the online instruction portion of the curriculum . if students continue to remain on a leave of absence , withdraw , or do not make up the required in person labs on a timely basis , our revenues could continue to be impacted in fiscal 2021. student metrics end of period undergraduate full-time student enrollment as of september 30 , 2020 and 2019 was 12,524 and 12,363 , respectively , representing growth of 1.3 % despite the impacts of the covid-19 pandemic . we experienced a 2.0 % decline in our average full-time enrollment to 10,462 students for the year ended september 30 , 2020 as compared to the prior year period . excluding the norwood , massachusetts campus , we started 11,283 students during the year ended september 30 , 2020 , which represents a decrease of 2.4 % from the same period during fiscal 2019. the decrease in full-time enrollment and starts was primarily the result of the covid-19 pandemic . our ability to start new students continues to be influenced by various factors including : unemployment rates ; competition ; adverse media coverage , legislative hearings , regulatory actions and investigations by attorneys general and various agencies related to allegations of wrongdoing on the part of other companies within the education and training services industry , which have cast the industry in a negative light ; and the state of the general macro-economic environment and its impact on price sensitivity and the ability and willingness of students and their families to incur debt . for more information , see item 1a . “ risk factors. ” operations our revenues for the year ended september 30 , 2020 were $ 300.8 million , a decrease of $ 30.7 million , or 9.3 % , from the prior year . the decrease in revenue was primarily due to the covid-19 pandemic as more students were on leave of absence during the year and our campuses suspended operations for a period of time . while we have transitioned to a blended learning model , the covid-19 pandemic has impacted the pace in which students are progressing through their programs . as a result , our total graduates in fiscal 2020 decreased by 19 % as compared to the prior year . additionally , our revenue was impacted by our exit of the norwood , massachusetts campus in july 2020. we had $ 1.4 million of revenue from norwood in fiscal 2020 , compared to $ 8.5 million in the prior year . revenues were favorably impacted in fiscal 2020 from the opening of our bloomfield , new jersey campus in fiscal 2018. we had $ 14.6 million in revenue from bloomfield in fiscal 2020 , as compared to $ 10.9 million in fiscal 2019 when the campus was still ramping up . 42 in fiscal 2020 , we had an operating loss of $ 3.9 million , as compared to an operating loss of $ 7.8 million for the same period in the prior year . our operating expenses for fiscal 2020 decreased 10.2 % as compared to the prior year primarily due to cost management initiatives , as well as decreases in compensation and benefit costs , depreciation expense , and contract and professional services expenses . productivity improvements and proactive cost actions have been a key part of our operating model for the past several years , and we continue to identify and execute on efficiency opportunities throughout our cost structure , while improving and investing in the overall student experience . net income for the year ended september 30 , 2020 was $ 8.0 million , compared to a net loss of $ 7.9 million in the prior year , and includes a $ 10.7 million tax benefit resulting from the application of revised net operating loss carryback regulations from the cares act . during fiscal 2020 , we were granted approximately $ 33.0 million in heerf funds under the cares act , with $ 16.5 million exclusively for emergency financial aid grants to students impacted by covid-19 and $ 16.5 million to cover institutional costs associated with significant changes to the delivery of instruction due to coronavirus . as of september 30 , 2020 , we have awarded all $ 16.5 million designated for student grants . during the year ended september 30 , 2020 , we drew down $ 13.9 million of the institutional funds into our operating cash account as partial reimbursement for the $ 15.7 million of eligible costs incurred during fiscal 2020. we continue to focus on the following key strategies as we identify opportunities for growth : expanding into new geographic markets either organically or through strategic acquisitions ; offering new programs , such as expanding our welding program to additional campus locations , and offering associate level degree programs at additional campus locations ; maintaining and expanding our manufacturer brand partners and other employers to provide career opportunities and tuition reimbursement for our graduates ; identifying and executing on a variety of affordability initiatives for our students , including employer financial support and institutional scholarships and
| 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_7_th 43 year ended september 30 , 2020 compared to year ended september 30 , 2019 revenues our revenues for the year ended september 30 , 2020 were $ 300.8 million , a decrease of $ 30.7 million , or 9.3 % , as compared to revenues of $ 331.5 million for the year ended september 30 , 2019. our average full-time student enrollment decreased by 2.0 % primarily due to a higher number of students who went on a leave of absence during the three months ended june 30 , 2020 due to the covid-19 pandemic . additionally , timing of revenue recognition for active students has been impacted by additional time needed to complete in-person catch-up labs that were unable to be completed during the time the campuses were closed and by students retaking courses that were previously completed . as a result of the catch up labs not yet completed , as of september 30 , 2020 , we have deferred revenue of $ 6.1 million . we recognized $ 5.1 million on an accrual basis related to revenues and interest under our proprietary loan program for the year ended september 30 , 2020 , as compared to $ 6.8 million recognized for the year ended september 30 , 2019. the decrease in overall fiscal year 2020 revenues was also partially attributable to a $ 1.5 million decrease in revenues from student-paid msats for the year ended september 30 , 2020 as compared to the prior year period .
| 7,962 |
actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance . in addition to risk factors previously disclosed in blackrock 's securities and exchange commission ( sec ) reports and those identified elsewhere in this report the following factors , among others , could cause actual results to differ materially from forward-looking statements or historical performance : ( 1 ) the introduction , withdrawal , success and timing of business initiatives and strategies ; ( 2 ) changes and volatility in political , economic or industry conditions , the interest rate environment , foreign exchange rates or financial and capital markets , which could result in changes in demand for products or services or in the value of assets under management ; ( 3 ) the relative and absolute investment performance of blackrock 's investment products ; ( 4 ) the impact of increased competition ; ( 5 ) the impact of future acquisitions or divestitures ; ( 6 ) the unfavorable resolution of legal proceedings ; ( 7 ) the extent and timing of any share repurchases ; ( 8 ) the impact , extent and timing of technological changes and the adequacy of intellectual property and information security protection ; ( 9 ) the impact of legislative and regulatory actions and reforms , including the dodd-frank wall street reform and consumer protection act , and regulatory , supervisory or enforcement actions of government agencies relating to blackrock or the pnc financial services group , inc. ( pnc ) ; ( 10 ) terrorist activities , international hostilities and natural disasters , which may adversely affect the general economy , domestic and local financial and capital markets , specific industries or blackrock ; ( 11 ) the ability to attract and retain highly talented professionals ; ( 12 ) fluctuations in the carrying value of blackrock 's economic investments ; ( 13 ) the impact of changes to tax legislation , including income , payroll and transaction taxes , and taxation on products or transactions , which could affect the value proposition to clients and , generally , the tax position of the company ; ( 14 ) blackrock 's success in maintaining the distribution of its products ; ( 15 ) the impact of blackrock electing to provide support to its products from time to time and any potential liabilities related to securities lending or other indemnification obligations ; and ( 16 ) the impact of problems at other financial institutions or the failure or negative performance of products at other financial institutions . overview blackrock , inc. ( blackrock or the company ) is the world 's largest publicly traded investment management firm . blackrock has portfolio managers located around the world , including the united states , the united kingdom , the netherlands , japan , hong kong , singapore , australia and germany . at december 31 , 2012 , the company managed $ 3.792 trillion of assets under management ( aum ) on behalf of institutional and individual investors worldwide . the company provides a wide array of products , including passively and actively managed products in various equity , fixed income , multi-asset class , alternative investment and cash management products . blackrock offers clients diversified access to global markets through separate accounts , collective investment trusts , open-end and closed-end mutual funds , exchange-traded products , hedge funds and funds of funds . blackrock also provides global advisory services for private investment funds and retail products . the company 's non-u.s. investment funds are based in a number of domiciles and cover a range of asset classes , including equities , fixed income , cash management and alternatives . in addition , blackrock solutions ® provides market risk management , financial markets advisory and enterprise investment system services to a broad base of clients . financial markets advisory services include valuation services relating to illiquid securities , dispositions and workout assignments ( including long-term portfolio liquidation assignments ) , risk management and strategic planning and execution . in the united states , retail offerings include various open-end and closed-end funds , including ishares ® , the global product leader in exchange-traded products for institutional , retail and hnw investors . there were 621 ishares products at december 31 , 2012 compared with 504 at december 31 , 2011 globally across equities , fixed 34 income and commodities , which trade like common stocks on 20 exchanges worldwide . ishares aum totaled $ 752.7 billion at december 31 , 2012 . the blackrock global funds , the company 's primary retail fund group offered outside the united states , are authorized for distribution in 35 jurisdictions worldwide . additional fund offerings include structured products , real estate funds , hedge funds , hedge funds of funds , private equity funds and funds of funds , managed futures funds and exchange-traded products . these products are sold to both u.s. and non-u.s. hnw , retail and institutional investors in a wide variety of active and passive strategies covering both equity and fixed income assets . blackrock 's client base consists of financial institutions and other corporate clients , pension plans , charities , official institutions , such as central banks , sovereign wealth funds , supranational authorities and other government entities , hnw individuals and retail investors around the world . blackrock maintains a significant sales and marketing presence both inside and outside the united states that is focused on establishing and maintaining retail and institutional investment management relationships by marketing its services to investors directly and through financial professionals , pension consultants and establishing third-party distribution relationships . blackrock also distributes its products and services through merrill lynch under a global distribution agreement in effect until january 2014. after such term , the agreement will renew for one automatic three-year extension if certain conditions are met . story_separator_special_tag future opportunities blackrock intends to continue to invest in its people , its platform and its global brand . the company will continue to build out its product offering and geographic presence , including in emerging markets , and to grow its ishares franchise , both through organic growth and targeted acquisitions . 38 non-gaap financial measures blackrock reports its financial results in accordance with gaap ; however , management believes evaluating the company 's ongoing operating results may be enhanced if investors have additional non-gaap basis financial measures . management reviews non-gaap financial measures to assess ongoing operations and , for the reasons described below , considers them to be effective indicators , for both management and investors , of blackrock 's financial performance over time . blackrock 's management does not advocate that investors consider such non-gaap financial measures in isolation from , or as a substitute for , financial information prepared in accordance with gaap . computations for all periods are derived from the consolidated statements of income as follows : ( a ) operating income , as adjusted , and operating margin , as adjusted : operating income , as adjusted , equals operating income , gaap basis , excluding certain items management deems non-recurring , or transactions that ultimately will not impact blackrock 's book value , as indicated in the table below . operating income used for operating margin measurement equals operating income , as adjusted , excluding the impact of closed-end fund launch costs and commissions . operating margin , as adjusted , equals operating income used for operating margin measurement , divided by revenue ( net of distribution and servicing costs and amortization of deferred sales commissions ) used for operating margin measurement , as indicated in the table below . replace_table_token_21_th management believes operating income , as adjusted , and operating margin , as adjusted , are effective indicators of blackrock 's financial performance over time and , therefore , provide useful disclosure to investors . operating income , as adjusted : operating income , as adjusted reflects non-gaap expense adjustments . bgi transaction and integration costs consisted principally of compensation expense , legal fees , marketing and promotional , occupancy and consulting expenses incurred in conjunction with the bgi acquisition from barclays . u.k. lease exit costs represent costs to exit two locations in london in the third quarter 2011. the amount in 2012 represents an adjustment related to the estimated costs initially recorded in third quarter 2011. the contribution to stifs represents a one-time contribution to certain of the company 's bank-managed stifs ( see liquidity and capital resources for more information ) . restructuring charges consist of compensation costs and professional fees . 39 the portion of compensation expense associated with certain long-term incentive plans ( ltip ) funded or to be funded through share distributions to participants of blackrock stock held by pnc and a merrill lynch & co. , inc. ( merrill lynch ) cash compensation contribution , has been excluded because it ultimately does not impact blackrock 's book value . the expense related to the merrill lynch cash compensation contribution ceased at the end of third quarter 2011. as of first quarter 2012 , all of the merrill lynch contributions had been received . compensation expense associated with appreciation ( depreciation ) on investments related to certain blackrock deferred compensation plans has been excluded as returns on investments set aside for these plans , which substantially offset this expense , are reported in non-operating income ( expense ) . management believes operating income exclusive of these items is a useful measure in evaluating blackrock 's operating performance and helps enhance the comparability of this information for the reporting periods presented . operating margin , as adjusted : operating income used for measuring operating margin , as adjusted , is equal to operating income , as adjusted , excluding the impact of closed-end fund launch costs and commissions . management believes the exclusion of such costs and commissions is useful because these costs can fluctuate considerably and revenues associated with the expenditure of these costs will not fully impact the company 's results until future periods . operating margin , as adjusted , allows the company to compare performance from period-to-period by adjusting for items that may not recur , recur infrequently or may have an economic offset in non-operating income ( expense ) . examples of such adjustments include bgi transaction and integration costs , u.k. lease exit costs , contribution to stifs , restructuring charges , closed-end fund launch costs , commissions paid to certain employees as compensation and fluctuations in compensation expense based on mark-to-market movements in investments held to fund certain compensation plans . the company also uses operating margin , as adjusted , to monitor corporate performance and efficiency and as a benchmark to compare its performance with other companies . management uses both the gaap and non-gaap financial measures in evaluating the financial performance of blackrock . the non-gaap measure by itself may pose limitations because it does not include all of the company 's revenues and expenses . revenue used for operating margin , as adjusted , excludes distribution and servicing costs paid to related parties and other third parties . management believes the exclusion of such costs is useful because it creates consistency in the treatment for certain contracts for similar services , which due to the terms of the contracts , are accounted for under gaap on a net basis within investment advisory , administration fees and securities lending revenue . amortization of deferred sales commissions is excluded from revenue used for operating margin measurement , as adjusted , because such costs , over time , substantially offset distribution fee revenue earned by the company . for each of these items , blackrock excludes from revenue used for operating margin , as adjusted , the costs related to each of these items as a proxy for such offsetting revenues .
| executive summary replace_table_token_20_th ( 1 ) net of net income ( loss ) attributable to non-controlling interests ( nci ) ( redeemable and nonredeemable ) . ( 2 ) as adjusted items are described in more detail in non-gaap financial measures . ( 3 ) unvested restricted stock units ( rsus ) that contain non-forfeitable rights to dividends are not included as they are deemed to be participating securities in accordance with accounting principles generally accepted in the unites states ( gaap ) . upon vesting of the participating rsus the shares are added to the weighted-average shares outstanding that results in an increase to the percentage of net income attributable to common shares . in addition , non-voting preferred shares are considered to be common stock equivalents for purposes of determining basic and diluted earnings per share . ( 4 ) total blackrock stockholders ' equity , excluding appropriated retained earnings , divided by total common and preferred shares outstanding at december 31 of the respective year-end . 36 2012 compared with 2011. gaap . operating income of $ 3,524 million and operating margin of 37.7 % increased $ 275 million and 190 bps , respectively , from 2011 reflecting growth in base fees and higher performance fees . operating income in 2012 included a $ 30 million charge related to a contribution to certain of the company 's bank-managed short-term investment funds ( stifs ) .
| 7,963 |
asset securitization program under story_separator_special_tag the following discussion should be read in conjunction with the other sections of this report , including the consolidated financial statements and related notes contained in item 8 of this annual report on form 10-k. business overview we operate in three reportable business segments of the heating , ventilation , air conditioning and refrigeration ( “ hvacr ” ) industry . our reportable segments are residential heating & cooling , commercial heating & cooling , and refrigeration . for more detailed information regarding our reportable segments , see note 19 in the notes to the consolidated financial statements . we sell our products and services through a combination of direct sales , distributors and company-owned parts and supplies stores . the demand for our products and services is seasonal and significantly impacted by the weather . warmer than normal summer temperatures generate demand for replacement air conditioning and refrigeration products and services , and colder than normal winter temperatures have a similar effect on heating products and services . conversely , cooler than normal summers and warmer than normal winters depress the demand for hvacr products and services . in addition to weather , demand for our products and services is influenced by national and regional economic and demographic factors , such as interest rates , the availability of financing , regional population and employment trends , new construction , general economic conditions and consumer spending habits and confidence . a substantial portion of the sales in each of our business segments is attributable to replacement business , with the balance comprised of new construction business . the principal elements of cost of goods sold are components , raw materials , factory overhead , labor , estimated costs of warranty expense and freight and distribution costs . the principal raw materials used in our manufacturing processes are steel , copper and aluminum . in recent years , pricing volatility for these commodities and related components has impacted us and the hvacr industry in general . we seek to mitigate the impact of higher commodity prices through a combination of price increases , commodity contracts , improved production efficiency and cost reduction initiatives . we also partially mitigate volatility in the prices of these commodities by entering into futures contracts and fixed forward contracts . recent developments on march 22 , 2013 , the company sold its service experts business to a majority-owned entity of american capital , ltd. ( the `` buyer '' ) in an all cash transaction for proceeds of $ 10.4 million , excluding transaction costs . the gain on sale of the business , the operating results for the business through march 22 , 2013 , and other gains and losses associated with the business are presented in discontinued operations . the company also entered into a two-year equipment and parts supply agreement with the buyer . financial highlights net sales increased $ 250 million , or 8 % , to $ 3,199 million in 2013 from $ 2,949 million in 2012. operational income from continuing operations in 2013 was $ 289 million compared to $ 219 million in 2012. the increase was primarily due to higher volumes , higher margins from improved price and mix and material cost savings . net income in 2013 increased to $ 172 million from $ 90 million in 2012. diluted earnings per share from continuing operations were $ 3.55 per share in 2013 compared to $ 2.63 per share in 2012. we generated $ 210 million of cash flow from operating activities in 2013 compared to $ 221 million in 2012. in 2013 , we returned $ 125 million to shareholders through share repurchases and $ 34 million through dividend payments . overview of results the residential heating & cooling segment led our overall financial performance in 2013 , with a 15 % increase in net sales and a $ 77 million increase in segment profit compared to 2012. this segment 's results benefited from industry growth in the replacement and new construction markets as well as market share gains . our commercial heating & cooling segment also performed well in 2013 with an 8 % increase in net sales and a $ 19 million increase in segment profit compared to 2012. this segment 's results benefited from market share gains , market growth in north america and material cost savings . sales in our refrigeration segment were down 2 % and segment profit increased $ 8 million compared to 2012. this segment 's sales were impacted by volume declines and unfavorable foreign currency exchange rates . however , the segment 's profits increased due to product price increases , favorable product mix , lower material costs and growth in the australian refrigerant distribution business , improved price and mix and favorable material product costs . 17 on a consolidated basis , our product profit margins improved to 26.9 % in 2013 due to volume increases in our residential heating & cooling and commercial heating & cooling segments , favorable commodity and non-commodity material costs across all of our segments and favorable price and mix across all of our segments . these improvements were partially offset by higher distribution costs in the residential heating & cooling segment , higher non-material product costs primarily in our refrigeration segment and higher warranty costs in our residential heating & cooling segment . story_separator_special_tag favorable price and mix . partially offsetting these increases were $ 4 million of higher distribution expenses due to continued investment in distribution initiatives , $ 6 million 20 of higher sg & a expenses and $ 5 million of increases primarily to investments in our commercial services network . refrigeration the following table presents our refrigeration segment 's net sales and profit for 2013 and 2012 ( dollars in millions ) : replace_table_token_10_th refrigeration net sales were down 2 % in 2013 compared to 2012 due to volume declines and unfavorable foreign currency exchange rates , partially offset by growth in australia . story_separator_special_tag the hearth business had a pre-tax loss in discontinued operations of $ 14 million in 2012 compared to a pre-tax loss of $ 26 million in 2011. the pre-tax loss in 2012 included $ 3 million of operating losses , a $ 6 million charge to write down the related 22 assets to their fair value , a $ 6 million pension settlement charge for the realization of pension losses related to the transfer of a pension obligation to the buyer , a $ 1 million loss on the sale of the business , $ 2 million of other expenses and a $ 4 million gain for the realization of foreign currency translation adjustments . the pre-tax loss in 2011 included operating losses of $ 12 million and goodwill and long-lived asset impairments of $ 7 million each . year ended december 31 , 2012 compared to year ended december 31 , 2011 - results by segment residential heating & cooling the following table details our residential heating & cooling segment 's net sales and profit for 2012 and 2011 ( dollars in millions ) : replace_table_token_12_th residential heating & cooling net sales increased by 9 % in 2012 compared to 2011. sales volumes increased by 11 % in 2012 and were partially offset by lower sales mix of 2 % . the increase in sales volumes was attributable to industry growth and market share gains in our new construction and replacement businesses during the year . sales mix was negatively affected by the growth in the new construction business , which generally trends towards lower efficiency products . segment profit for 2012 increased $ 15 million due to $ 40 million in higher sales volumes , $ 16 million in material cost savings and $ 4 million in favorable pricing . partially offsetting these increases were $ 25 million in unfavorable mix , $ 13 million in higher sg & a costs due primarily to higher incentive compensation from improved operating results in 2012 , and higher freight and distribution expenses of $ 7 million due to continued investment in distribution initiatives . commercial heating & cooling the following table details our commercial heating & cooling segment 's net sales and profit for 2012 and 2011 ( dollars in millions ) : replace_table_token_13_th commercial heating & cooling net sales increased 1 % in 2012 compared to 2011 , or increased 3 % when excluding the 2 % unfavorable impact from foreign currency exchange rates . sales volumes increased 2 % and price and mix increased by 1 % . sales volume growth was somewhat muted during the second half of 2012 as certain customers slowed order rates due to broad economic uncertainties . segment profit in 2012 increased $ 12 million compared to 2011 , with increases of $ 5 million for higher sales volumes , $ 11 million for favorable price and mix and $ 5 million for productivity initiatives . partially offsetting these increases were $ 5 million in higher sg & a expenses due primarily to higher incentive compensation and higher freight and distribution expenses of $ 4 million . 23 refrigeration the following table details our refrigeration segment 's net sales and profit for 2012 and 2011 ( dollars in millions ) : replace_table_token_14_th net sales decreased by 2 % in 2012 compared to 2011 , or were flat excluding the 2 % unfavorable impact from foreign currency exchange rates . price and mix improvements of approximately 3 % were offset by volume declines of 3 % . sales volumes were challenged in the second half of 2012 as we experienced some slowing in our european refrigeration markets as well as some customers pushing out orders due to broad economic uncertainties . segment profit in 2012 increased $ 4 million over 2011 , with increases of $ 14 million from growth in our distribution business in australia and overall favorable price and mix , and increases of approximately $ 5 million in material and other cost savings . partially offsetting these increases were volume declines of $ 4 million , higher freight and distribution costs of $ 2 million , and higher sg & a expenses of $ 9 million due primarily to higher incentive compensation . corporate and other corporate and other expenses increased $ 5 million to $ 60 million in 2012 from $ 55 million in 2011. the increase was driven by a $ 12 million increase in incentive compensation due to improved overall operating results that was partially offset by a $ 7 million reduction in self-insurance costs . accounting for futures contracts realized gains and losses on settled futures contracts are a component of segment profit ( loss ) . unrealized gains and losses on unsettled futures contracts are excluded from segment profit ( loss ) as they are subject to changes in fair value until their settlement date . both realized and unrealized gains and losses on futures contracts are a component of losses and other expenses , net in the accompanying consolidated statements of operations . see note 8 of the notes to consolidated financial statements for more information on our derivatives and note 19 of the notes to the consolidated financial statements for more information on our segments and for a reconciliation of segment profit to net income . liquidity and capital resources our working capital and capital expenditure requirements are generally met through internally generated funds , bank lines of credit and an asset securitization arrangement . working capital needs are generally greater in the first and second quarters due to the seasonal nature of our business cycle . statement of cash flows the following table summarizes our cash flow activity for the years ended 2013 , 2012 and 2011 ( in millions ) : replace_table_token_15_th net cash provided by operating activities - net cash provided by operating activities decreased $ 11 million to $ 210 million in 2013 compared to $ 221 million in 2012 .
| results of operations the following table provides a summary of our financial results , including information presented as a percentage of net sales ( dollars in millions ) : replace_table_token_5_th the following table provides net sales by geographic market ( dollars in millions ) : replace_table_token_6_th year ended december 31 , 2013 compared to year ended december 31 , 2012 - consolidated results net sales net sales increased 8 % in 2013 compared to 2012 , with sales volumes up approximately 8 % and price and mix up approximately 1 % . also , foreign currency exchange rates had an unfavorable impact of less than 1 % . the increase in volume was driven by our residential heating & cooling and commercial heating & cooling segments capturing additional replacement and new construction business . the benefit of price and mix was a combination of price increases across all segments and favorable product mix predominantly in our residential heating & cooling segment . gross profit gross profit margins improved 240 basis points to 26.9 % in 2013 compared to 24.5 % in 2012. increased volume , along with favorable price and mix contributed 200 basis points to profit margin and lower commodity and non-commodity product costs contributed a collective 130 basis points . partially offsetting these improvements were 70 basis points of higher distribution costs and 20 basis points of higher warranty costs . 18 selling , general and administrative expenses sg & a expenses increased by $ 63 million in 2013 compared to 2012. as a percentage of net sales , sg & a expenses increased 60 basis points from 17.2 % to 17.8 % in the same periods . the increase in sg & a expenses was principally due to higher employee compensation .
| 7,964 |
business overview throughout 2016 , we and our csi compressco lp subsidiary ( `` cclp '' ) continued to take steps to improve our liquidity and strengthen our balance sheet . in may 2016 , and pursuant to tender offers ( the “ tender offers ” ) to purchase for cash any and all of the outstanding series 2010-a senior notes , series 2010-b senior notes , and series 2013 senior notes ( together the `` tender offer senior notes '' ) , we purchased tender offer senior notes in an aggregate principal amount of $ 100.0 million , representing the total outstanding principal amount of the tender offer senior notes . in june 2016 , upon the closing of an offering of our common stock , we issued 11.5 million shares of common stock and used a portion of the proceeds to repay the remaining balance outstanding under our senior secured notes . in december 2016 , upon the closing of an additional offering of our common stock , we issued 22.3 million shares of common stock and warrants ( the “ warrants ” ) to purchase 11.2 million shares of common stock . these common stock offerings resulted in aggregate net proceeds of $ 168.3 million after deducting certain offering expenses . proceeds from these common stock offerings were primarily used to retire outstanding indebtedness . in addition , in july 2016 and december 2016 , we entered into amendments of the agreements governing our bank revolving credit facility ( as amended , the `` credit agreement '' ) and our 11 % senior note due november 5 , 2022 ( as amended , the `` amended and restated 11 % senior note agreement '' ) whereby , among other modifications , certain covenants under the credit agreement and the amended and restated 11 % senior note agreement were favorably amended . in august 2016 and september 2016 , cclp received $ 76.9 million of aggregate net proceeds , after deducting certain offering expenses , from the private placements of its series a convertible preferred units ( the `` cclp preferred units '' ) and such proceeds were used to pay additional offering expenses and reduce outstanding indebtedness of cclp under the cclp credit agreement and its 7.25 % senior notes due 2022 ( the `` cclp 7.25 % senior notes '' ) . we purchased a portion of the cclp preferred units for $ 10.0 million . in may 2016 and november 2016 , cclp entered into amendments of the agreement governing its bank revolving credit facility ( as amended , the `` cclp credit agreement '' ) by , among other things , favorably amending certain covenants . in addition , we and cclp also continued to maintain a low operating and administrative cost structure while aggressively reducing capital expenditure activity . in light of a long-anticipated recovery for our industry , each of the above described liquidity and balance sheet measures were taken not only to ensure compliance with debt covenants , but also to position us and cclp to be able to capitalize on growth opportunities as they arise . we and cclp plan to consider additional debt and or equity financing transactions as needed with a view of generating additional cash to reduce the amounts of our outstanding borrowings under our respective credit agreements , repay or refinance additional amounts of our respective senior notes , and generate additional liquidity . our consolidated results of operations during the year ended december 31 , 2016 reflected the challenges experienced by each of our businesses in the current oil and gas services environment . decreased demand for most of our products and services reflects the industry-wide reduction in drilling and completion activity which has resulted in decreased revenues for each of our segments during 2016 compared to the prior year . the 38.5 % decrease in consolidated revenues during 2016 compared to the prior year reflects both the decrease in activity and the competitive pricing pressures experienced by the majority of our businesses in each of their operating regions . consolidated gross profit decreased 72.8 % largely due to decreased gross profit from the fluids division , which benefited during 2015 from increased activity and a favorable mix of products and services , including from a customer project associated with a completion fluids technology that was introduced during 2015. this decrease in consolidated gross profit was realized despite the aggressive reductions in operating costs that each of our businesses have made through headcount reductions , salary reductions , work week reductions , suspension of company matching contributions under the 401 ( k ) retirement plan , and other cost reduction efforts designed to partially mitigate the impact of decreased revenues . a portion of the reduced salaries was restored in january 2017. we also continue to negotiate with our suppliers and service providers to reduce costs in the current environment . the significant decrease in consolidated general and administrative expenses compared to the prior year was partially offset by increased interest and other expenses caused primarily by the impact from increased interest rates and from the issuance of the cclp preferred units . as a result of the expected continuing challenges of the current environment and the decreased prices of our common stock and the common unit price of cclp during early 2016 , we recorded $ 116.9 million of goodwill and other asset impairments as of march 31 , 2016 and $ 7.2 33 million of asset impairments as of december 31 , 2016 . during early 2017 , we are seeing indicators of an improving demand for our products and services . the impact from decreased consolidated cash provided from operating activities during 2016 compared to 2015 was largely offset by decreased capital expenditure activity for these periods . growth and maintenance capital expenditure levels continue to be significantly reduced for each of our businesses , as we are conserving cash in the current environment until such reductions are no longer justified . story_separator_special_tag this decrease reflects the decreased overall offshore activity levels as a result of continued low oil and natural gas prices and the reduced well completion projects compared to 2015 primarily due to reduced activity from a single customer using new completion fluid technology that was introduced earlier in 2015. although demand for the fluids division 's cbf products is driven primarily by completion activity rather than drilling activity , the gulf of mexico rig count is a useful indicator of future demand for offshore cbf products . the gulf of mexico rig count dropped during 2016 as a result of low oil and natural gas prices and remains low in early 2017. demand for certain of the fluids division 's other products and services , particularly for its manufactured products and for its cbf products in u.s. onshore and international markets , has also been negatively affected by current low oil and natural gas prices . the fluids water management business is also dependent upon domestic drilling activity , particularly in unconventional shale gas and oil reservoirs . north american onshore rig counts again decreased significantly during 2016 compared to the prior year , but have begun to increase in late 2016 and early 2017 , approaching end of 2015 levels . our production testing division generates revenues and cash flows by performing frac flowback , production well testing , offshore rig cooling , early production , and other associated services and products . the primary markets served by the production testing division include many of the major oil and gas producing regions in the united states , mexico , and canada , as well as in oil and gas basins in certain regions in south america , africa , europe , the middle east , and australia . the production testing division 's production testing operations are generally driven by the demand for natural gas and oil and the resulting levels of drilling and completion activities in the markets that the production testing division serves . many of the markets served by the production testing division are characterized by high lifting costs for oil and natural gas , such as in certain unconventional shale gas and oil reservoirs and located in certain basins in the u.s. , canada , and certain other international markets . as a 35 result of decreased oil and natural gas commodity prices , and the corresponding declines in the plans of its customers for drilling and capital expenditures , production testing activity levels have declined , particularly in certain markets in which it operates that are characterized by higher lifting costs . the production testing division 's revenues decreased by $ 70.3 million in 2016 compared to 2015 , due to decreased overall market activity . the impact of continued low oil and natural gas pricing has negatively impacted demand for services in each of our areas of operations , including certain shale reservoir markets that were a source of revenue growth during the past several years . increased competition for decreased industry activity negatively affected pricing levels for services . although many of the production testing division 's customers continue to have reduced drilling and capital expenditure levels compared to 2015 , recent increased rig counts in certain domestic and canadian markets in which the production testing division operates indicate that future activity levels may be increasing compared to 2016. our compression division , through cclp , generates revenues and cash flows by providing compression services and equipment for natural gas and oil production , gathering , transportation , processing , and storage . the compression division 's equipment sales business includes the fabrication and sale of standard compressor packages , custom-designed compressor packages , and oilfield pump systems designed and fabricated at the compression division 's facilities . the compression division 's aftermarket business provides a wide range of services including operation , maintenance , overhaul and reconfiguration services as well as the sale of compressor package parts and components manufactured by third-party suppliers . the compression division provides its services and equipment to a broad base of natural gas and oil exploration and production , midstream , transmission , and storage companies operating throughout many of the onshore producing regions of the united states as well as in a number of foreign countries , including mexico , canada and argentina . compression division revenues decreased $ 146.3 million in 2016 as compared to 2015 , primarily attributable to decreased demand for new equipment sales , reflecting the decreased capital expenditure levels of its customers . compression division service revenues have also been negatively affected by current low oil and natural gas pricing , particularly resulting in decreased demand for low-horsepower compression services in liquids-rich and dry gas markets . the decrease in demand for new compressor sales and low-horsepower compression services , due to reduced oil and natural gas prices , is expected to continue going forward until such commodity pricing improves . our offshore division consists of two operating segments : offshore services and maritech . the offshore services segment generates revenues and cash flows by performing ( 1 ) downhole and subsea services such as oil and gas well plugging and abandonment and workover 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 diving services . the services provided by the offshore services segment are marketed to offshore operators , primarily in the u.s. gulf of mexico . gulf of mexico platform decommissioning and well abandonment activity levels are driven primarily by bureau of safety and environmental enforcement ( `` bsee '' ) regulations ; the declining production levels of producing fields ; the age of 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 .
| 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 . 2016 compared to 2015 consolidated comparisons replace_table_token_7_th consolidated revenues for 2016 decreased compared to the prior year due to continuing overall oil and gas services industry market challenges as a result of lower oil and natural gas commodity prices compared to 2014 and early 2015. each of our segments reported decreased revenues due to the impact of reduced demand for our products and services . the fluids division reported the most significant reduction in revenues , with decreased completion services and products , water management services , and manufactured product sales combining for $ 177.5 million of decreased revenues . our compression division also reported significantly decreased revenues during 2016 , primarily due to reduced sales of compressor units and from decreased demand for compression services . lower industry demand and activity levels continue to negatively impact each of the domestic and international markets we serve , although during early 2017 we are seeing indicators of an improving demand for our products and services . see divisional comparisons section below for additional discussion . consolidated gross profit decreased significantly during 2016 compared to the prior year due to the reduced demand for our products and services , as well as the impact of pricing pressures in each of our businesses . our fluids division reported the most significant reduction in gross profit , due to the impact from decreased offshore completion fluids products and services , including those associated with fluid technology projects during the prior year . our compression division reported a decrease in gross profit compared to the prior year primarily due to the decrease in compression services .
| 7,965 |
performance fees on certain equity fund products may also impact revenues , either positively or negatively . various products may have different fees , so changes in our product mix may also affect revenues . for example , international equity products will generally have a higher fee than fixed income products , so changes in assets in those products will have a larger impact on revenues . while products are offered for a wide variety of markets , the company has traditionally focused on gold mining and exploration , natural resources , and emerging markets . these markets are volatile and cyclical . the rally in gold that began at the start of 2016 and continued into early fall 2016 led to an increase in assets in our gold funds . however , gold then began to stall as investors awaited the results of the u.s. presidential election and anticipated a december rate hike . immediately following donald trump 's win , equities took off and the u.s. dollar surged , causing gold to fall out of favor . in addition , in the quarter ended june 30 , 2017 , the largest junior gold miner etf reorganized its index methodology , triggering a wave of price weakness throughout the junior gold stocks universe . junior miners are generally companies in the exploration and development stage . the etf was getting close to owning 20 percent of the outstanding shares of many of the junior gold mining companies in its index , so its managers chose to downsize their weights in existing holdings and reinvest the proceeds in more mid-tiered gold producers . as our gold funds had investments in most of these same junior gold stocks , this event also had a negative impact on our gold funds towards the end of fiscal year 2017. the company 's emerging markets products experienced favorable conditions . for example , the china region has had strong expansion and gross domestic product ( gdp ) growth . in addition , key markets in emerging europe including poland , the czech republic , romania and hungary , are currently among the fastest growing in the world . in addition to its gold , natural resources and emerging markets funds , the company has domestic equity and fixed income funds in the u.s. and , through a subsidiary , canada . while these products do not drive the company 's profitability as much as the more specialized products , they provide an opportunity to offer shareholders diversification and less volatility than the niche markets . a highly contentious u.s. election cycle concluded with the election of donald trump in november 2016. while congress has had little success so far in delivering on president trump 's political agenda , consumer spending appears to be robust , and domestic financial markets have continued their bull run . mutual funds in general continued to see outflows compared to other investment alternatives , including etfs . in april 2015 , the company launched its first etf product , the u.s. global jets etf ( ticker jets ) , which concentrates on the u.s. and international airline industry . the industry experienced a positive market in fiscal year 2017 , driven by airlines reporting record profits due to post-financial crisis capacity discipline , depressed labor costs and cheap oil . this led to growth in our jets etf assets in fiscal year 2017. the company launched its second etf offering in june 2017 , the u.s. global go gold and precious metal miners etf ( ticker goau ) . this will enable the company to expand its expertise in precious metals in a different product structure . to manage expenses , the company maintains a flexible structure for one of its largest costs , compensation expense , by setting relatively low base salaries with bonuses that are tied to fund performance . thus , our expense model somewhat expands and contracts with asset swings and performance . 15 business segments the company , with principal operations located in san antonio , texas , manages three business segments : 1. investment management services , through which the company offers , to u.s. global investors funds ( “ usgif ” or the “ fund ( s ) ” ) , u.s. global etfs , and offshore clients , a range of investment management products and services to meet the needs of individual and institutional investors ; 2. investment management services - canada , through which the company owns a 65 percent controlling interest in galileo global equity advisors inc. ( “ galileo ” ) , a privately held toronto-based asset management firm which offers investment management products and services in canada ; and 3. corporate investments , through which the company invests for its own account in an effort to add growth and value to its cash position . although the company generates the majority of its revenues from its investment advisory segments , the company holds a significant amount of its total assets in investments . replace_table_token_6_th on june 30 , 2017 , total aum as of period end was $ 760 million versus $ 883 million on june 30 , 2016 , a decrease of 14.0 percent . the decrease was primarily due to market depreciation and shareholder redemptions in usgif , the galileo funds and other canadian advisory clients , somewhat offset by market appreciation of the offshore funds and growth of the etf clients . during fiscal year 2017 , average aum was $ 843 million versus $ 744 million in fiscal year 2016 , an increase of 13.3 percent . the increase was primarily due to market appreciation and shareholder purchases in the gold funds starting in fiscal year 2016 and continuing into the beginning of fiscal year 2017 , although that trend started to reverse later in fiscal year 2017 due to sector market conditions . the following is a brief discussion of the company 's three business segments . story_separator_special_tag 2. unrealized gains and losses on available-for-sale securities are excluded from earnings and recorded in other comprehensive income ( loss ) as a separate component of shareholders ' equity until realized . in addition , as of june 30 , 2017 , and 2016 , the company owned other investments of approximately $ 2.1 million and $ 1.9 million , respectively , accounted for under the cost method of accounting . the company also had invested in notes receivable of approximately $ 2.2 million and $ 2.2 million at june 30 , 2017 , and 2016 , respectively . as of june 30 , 2017 , and 2016 , the company held approximately $ 4.1 million and $ 4.0 million , respectively , in investments other than the clients the company advises . investments in securities classified as trading are reflected as current assets on the consolidated balance sheets at their fair market value . unrealized gains and losses on trading securities are included in earnings in the consolidated statements of operations . investments in securities classified as available for sale , which may not be readily marketable , are reflected as non-current assets on the consolidated balance sheets at their fair value . unrealized gains and losses on available-for-sale securities are excluded from earnings and reported in other comprehensive income ( loss ) as a separate component of shareholders ' equity until realized . 18 investment income ( loss ) from the company 's investments includes : · realized gains and losses on sales of securities ; · unrealized gains and losses on trading securities ; · realized foreign currency gains and losses ; · other-than-temporary impairments on available-for-sale securities ; · other-than-temporary impairments on held-at-cost securities ; and · dividend and interest income . investment income can be volatile and may vary depending on market fluctuations , the company 's ability to participate in investment opportunities , and timing of transactions . a significant portion of the unrealized gains and losses is concentrated in a small number of issuers . for fiscal years 2017 , 2016 , and 2015 , the company had total investment income of $ 346,000 ; $ 485,000 ; and $ 434,000 , respectively . due to market volatility , the company expects that gains or losses will continue to fluctuate in the future . story_separator_special_tag roman ' , times , serif ; width : 100 % '' > advertising increased $ 77,000 , or 57.0 percent , primarily due to marketing costs related to the etf launched in april 2015. other income total consolidated other income for the year ended june 30 , 2016 , increased $ 51,000 , or 11.8 percent , compared with the year ended june 30 , 2015. this increase was primarily attributable to lower unrealized losses on trading securities in fiscal 2016 compared to fiscal 2015 , offset somewhat by an increase in other-than-temporary impairment losses and a decrease in dividend and interest income . discontinued operations effective december 10 , 2015 , the company ceased to be the distributor for usgif and no longer received distribution fees and shareholder services fees from usgif . due to this transition , the company is no longer responsible for paying certain distribution and shareholder servicing related expenses and is reimbursed for certain distribution expenses from the new distributor for usgif . the operations associated with providing these services are considered discontinued operations . see additional information in note 17 , discontinued operations . loss attributed to discontinued operations for the distributor for the year ended june 30 , 2016 , declined $ 63,000 , or 77.8 percent , compared to the year ended june 30 , 2015. the fiscal 2015 loss reflects a full year of distribution operations , while the fiscal 2016 loss reflects operations until the transition to the new distributor in december 2015 . 21 operating revenues and other income replace_table_token_12_th advisory fees . advisory fees , the largest component of the company 's revenues , are derived from four sources : usgif advisory fees , galileo advisory fees , exchange-traded fund advisory fees and offshore advisory fees . in fiscal year 2017 , these sources accounted for 75.4 percent , 17.0 percent , 5.5 percent and 2.1 percent , respectively , of the company 's total advisory fees . investment advisory fees from usgif are calculated as a percentage of average net assets , ranging from 0.375 percent to 1.25 percent , and are paid monthly . these usgif advisory fees increased by approximately $ 1.3 million , or 34.5 percent , in fiscal year 2017 compared to fiscal year 2016 , primarily as a result of an increase in average assets under management driven by market appreciation , primarily in the gold funds . usgif advisory fees decreased by approximately $ 885,000 , or 19.6 percent , in fiscal year 2016 compared to fiscal year 2015 , primarily as a result of a decrease in average net assets under management due to market depreciation and redemptions , primarily in the natural resources funds . mutual fund investment advisory fees are also affected by changes in assets under management , which include : · market appreciation or depreciation ; · the addition of new fund shareholder accounts ; · fund shareholder contributions of additional assets to existing accounts ; · withdrawals of assets from and termination of fund shareholder accounts ; · exchanges of assets between accounts or products with different fee structures ; and · the amount of fees voluntarily reimbursed . the fees on the equity funds within usgif consist of a base advisory fee that is adjusted upward or downward based on performance . for the years ended june 30 , 2017 , 2016 , and 2015 , the company adjusted its base advisory fees downward by $ 49,000 ; $ 132,000 ; and $ 1.0 million , respectively . galileo provides advisory services for clients in canada and receives advisory fees based on the net asset values of the clients .
| consolidated results of operations the following is a discussion of the consolidated results of operations of the company and a detailed discussion of the company 's revenues and expenses . replace_table_token_11_th 19 year ended june 30 , 2017 , compared with year ended june 30 , 2016 the company posted a net loss attributable to u.s. global investors , inc. , as shown in the consolidated statements of operations , of $ 513,000 ( $ 0.03 loss per share ) for the year ended june 30 , 2017 , compared with a net loss attributable to u.s. global investors , inc. of $ 3,675,000 ( $ 0.24 loss per share ) for the year ended june 30 , 2016. the change is mainly due to an increase in revenues , resulting from an increase in average assets under management , and a decrease in expenses , as discussed further below . operating revenues total consolidated operating revenues for the year ended june 30 , 2017 , increased $ 1.3 million , or 22.9 percent , compared with the year ended june 30 , 2016. this increase was primarily attributable to the following : advisory fees increased by $ 1.3 million , or 25.0 percent , as the result of higher assets under management and performance fees received . usgif advisory fees are comprised of two components : a base management fee and a performance fee . o base management fees increased approximately $ 1.2 million , primarily as a result of higher average assets under management in usgif due to market appreciation , primarily in the gold funds . o performance fee adjustments paid out in the current period were $ 49,000 compared to $ 132,000 paid out in the prior year , a positive difference of $ 83,000 .
| 7,966 |
these statements are based on current expectations , estimates , forecasts and projections about the industry in which we operate and the beliefs and assumptions of our management . in some cases , forward-looking statements can be identified by the use of words such as “ believe , ” “ could , ” “ expect , ” “ may , ” “ estimate , ” “ continue , ” “ anticipate , ” “ intend , ” “ should , ” “ plan , ” “ predict , ” “ will , ” “ would , ” “ project , ” “ potential , ” or the negative thereof or other comparable terminology . in addition , any statements that refer to projections of our future financial performance , our anticipated growth and trends in our business and industry and other characterizations of future events or circumstances are forward-looking statements . readers are cautioned that these forward-looking statements are only predictions and are subject to risks , uncertainties and assumptions that are difficult to predict , including those identified in the risk factors discussed in item 1a , in the discussion below , as well as in other sections of this annual report on form 10-k. therefore , actual results may differ materially and adversely from those expressed in any forward-looking statements . all forward-looking statements and reasons why results may differ included in this report are made as of the date hereof , and we assume no obligation to update these forward-looking statements or reasons why actual results might differ . overview we are a leading global provider of cloud and software platforms , systems and services for fiber- and copper-based network architectures and a pioneer in software defined access and cloud products focused on access networks and the subscriber . our portfolio allows for a broad range of subscriber services to be provisioned and delivered over a single unified network . our access systems can deliver voice and data services , advanced broadband services , mobile broadband , as well as high-definition video and online gaming . our most recent generation of premises systems enable csps to address the complexity of the smart home and business and offer new services to their device enabled subscribers . we have designed all of our current platforms and related systems so that they can be monitored , analyzed , managed and supported by calix cloud . we market our cloud and software platforms , systems and services to csps globally through our direct sales force as well as select resellers . our customers range from smaller , regional csps to some of the world 's largest csps . we have enabled approximately 1,600 customers to deploy passive optical , active ethernet and point-to-point ethernet fiber access networks . in the third quarter of 2018 , the united states enacted 10 % tariffs on certain goods manufactured in china and increased these tariffs to 25 % in may 2019. in september 2019 , the united states imposed a new 15 % tariff covering a broader list of products manufactured in china . as a result of these tariffs , we incurred u.s. tariff and tariff-related costs of $ 3.2 million in 2018 and $ 6.2 million in 2019. in order to mitigate the impact of the tariffs enacted by the united states , we undertook a broad plan to realign our global supply chain by moving substantially all of our production outside of china in addition to other supply chain improvements in the first half of 2019. as a result of the tariffs imposed in september 2019 covering a broader list of products , we have expanded the scope of our global supply chain realignment plan , which is expected to take until mid-2020 to complete . our revenue decreased to $ 424.3 million in 2019 from $ 441.3 million in 2018 and $ 510.4 million in 2017 . the decrease in revenue from 2018 to 2019 was primarily due to lower revenue from our legacy incumbent local exchange carrier , or ilec , customers as well as centurylink as they continued to reduce capital investments in response to broadband subscriber losses . our revenue and potential revenue growth will depend on our ability to sell and license our cloud and software platforms , systems and services to strategically aligned customers , including from market segments such as cable msos , wisps , fiber overbuilders , municipalities and electric cooperatives , in the united states and internationally . revenue fluctuations result from many factors , including , but not limited to : increases or decreases in customer orders for our products and services , market , financial or other factors that may delay or materially impact customer purchasing decisions , 45 non-availability of products due to supply chain challenges , including disruptions from the recent coronavirus outbreak in china , contractual terms with customers that result in delayed revenue recognition and varying budget cycles and seasonal buying patterns of our customers . more specifically , our customers tend to spend less in the first quarter as they are finalizing their annual budgets , and in certain regions , customers are challenged by winter weather conditions that inhibit fiber deployment in outside infrastructure . our revenue is also dependent upon our customers ' timing of purchases , capital expenditure plans and decisions to upgrade their network or adopt new technologies , including adoption of our software and cloud platform solutions , as well as our ability to grow our customer base . cost of revenue is strongly correlated to revenue and tends to fluctuate due to all of the above factors that may cause revenue fluctuations . story_separator_special_tag for such arrangements , we allocate the contract 's transaction price to each performance obligation using the relative stand-alone selling price of each distinct good or service in the contract . we generally determine stand-alone selling prices based on the prices charged to customers or our best estimate of stand-alone selling price . our estimate of stand-alone selling price is established considering multiple factors including , but not limited to , geographies , market conditions , competitive landscape , internal costs , gross margin objectives , characteristics of targeted customers and pricing practices . the determination of estimated stand-alone selling price is made through consultation with and formal approval by management , taking into consideration the go-to-market strategy . for certain revenue arrangements involving delivery of both systems and professional services , each is considered a distinct performance obligation . systems revenue is recognized at a point in time when management has determined that control over systems has transferred to the customer , which is generally when legal title has transferred to the customer . for the same revenue arrangements , management believes that the output of the associated professional services is transferred to the customer over time . as such , professional services revenue is recognized over the period in which the services are provided using a cost input measure . we recognize revenue when control of the systems and services has been transferred to the customer , which may be earlier than system installation or customer acceptance , in accordance with the agreed-upon specifications in the contract . inventory valuation inventory , which primarily consists of finished goods purchased from cms or odms , is stated at the lower of cost ( determined by the first-in , first-out method ) and net realizable value . inbound shipping costs and tariffs are included in the cost of inventory . in addition , we , from time to time , procure component inventory primarily as a result of manufacturing discontinuation of critical components by suppliers . we regularly monitor inventory quantities on-hand and record write-downs for excess and obsolete inventory based on our estimate of demand for our products , potential obsolescence of technology , product life cycle and whether pricing trends or forecasts indicate that the carrying value of inventory exceeds our estimated selling price . these factors are impacted by market and economic conditions , technology changes and new product introductions and require estimates that may include elements that are uncertain . actual demand may differ from forecasted demand and may have a material effect on gross profit . if inventory is written down , a new cost basis is established that can not be increased in future periods . the sale of previously reserved inventory has not had a material impact on our gross margin . recent accounting pronouncements not yet adopted there have been no additional accounting pronouncements or changes in accounting pronouncements that are significant or potentially significant to us . story_separator_special_tag style= '' line-height:120 % ; padding-top:12px ; font-size:12pt ; '' > gain on sale of product line during 2018 , we recognized a gain of $ 6.7 million relating to the sale of our outdoor cabinet product line to clearfield , inc. for $ 10.4 million . interest and other income ( expense ) , net the following table sets forth our interest and other income ( expense ) , net ( dollars in thousands ) : replace_table_token_9_th interest and other income ( expense ) increased by $ 0.9 million in 2019 , compared with 2018 , mainly due to higher interest expense related to new financing agreements and reduced foreign currency transaction gains in 2019 as compared to 2018. provision for income taxes the provision for income taxes primarily consist of state and foreign income taxes . the following table sets forth our provision for income taxes ( dollars in thousands ) : replace_table_token_10_th the provision for income taxes increased by $ 0.6 million from $ 0.5 million in 2018 to $ 1.2 million in 2019 . the increase was primarily due to a provision for foreign withholding taxes on the repatriation of cash from our foreign subsidiaries . on december 22 , 2017 , the u.s. government enacted comprehensive tax legislation commonly referred to as the “ tax cuts and jobs act ” , or the tax act . the significant impacts from the tax act include a net , one-time transition tax of $ 1.1 million on unrepatriated earnings of foreign subsidiaries , which was offset by our current net operating loss , and a tax expense of $ 84.4 million related to the revaluation of our deferred tax assets and liabilities due to the reduction of the u.s. corporate tax rate from 34 % to 21 % , which was offset by a reduction in our valuation allowance . as of december 31 , 2019 , we had unrecognized tax benefits of $ 22.3 million , none of which would affect our effective tax rate if recognized . 50 2018 compared to 2017 for a comparison of our results of operations for the years ended december 31 , 2018 and 2017 , see item 7 “ management 's discussion and analysis of financial condition and results of operations ” of our annual report on form 10-k for the year ended december 31 , 2018 , filed with the sec on march 1 , 2019. liquidity and capital resources we have funded our operations and investing activities primarily through cash generated from operations , borrowings on our line of credit , financing arrangements for certain lab equipment and consulting services for our erp migration and sales of our common stock . as of december 31 , 2019 , we had cash and cash equivalents of $ 46.8 million , which consisted of deposits held at banks and money market mutual funds held at major financial institutions . this includes $ 2.4 million of cash primarily held by our china subsidiary .
| results of operations for years ended december 31 , 2019 , 2018 and 2017 revenue our revenue is comprised of the following : systems – includes revenue from the sale of access and premises systems , software platform licenses and cloud-based software subscriptions . services – includes revenue from professional services , customer support , software- and cloud-based maintenance , extended warranty subscriptions , training and managed services . 47 the following table sets forth our revenue ( dollars in thousands ) : replace_table_token_3_th our revenue is principally derived in the united states . revenue generated in the united states represented approximately 86 % of our total revenue in 2019 , 88 % in 2018 and 89 % in 2017 . the decrease in revenue during 2019 compared with 2018 was due to lower systems revenue of $ 12.7 million and lower services revenue of $ 4.3 million . the decline in systems revenue was primarily due to reduced demand from centurylink , frontier and our medium-sized ilec customer base partially offset by growth in our small-sized customers as we continued to see strong demand for our software and cloud platform offerings and the addition of new customers . the decrease in services revenue was primarily due to lower volume of deployment services associated with caf-funded customer deployments . centurylink accounted for more than 10 % of our total revenue in 2019 , 2018 and 2017. see note 12 “ revenue from contracts with customers ” to the consolidated financial statements set forth in this report for more details on concentration of revenue for the periods presented .
| 7,967 |
we are required to test goodwill and other intangible assets deemed to have indefinite useful lives for impairment at least annually , or more often if circumstances or events indicate a change in the impairment status , in accordance with the “ intangibles – goodwill and other ” topic of the financial accounting standards board , or fasb , accounting standards codification , or asc , ( topic 350 ) . we have the option to perform a qualitative assessment with respect to any of our reporting units to determine whether a quantitative impairment test is needed . we are permitted to assess based on qualitative factors whether it is more likely than not that a reporting unit 's fair value is less than its carrying amount before applying the quantitative goodwill impairment test . if it is more likely than not that the fair value of a reporting unit is less than its carrying amount , we would conduct a quantitative goodwill impairment test . if not , we do not need to apply the quantitative test . the qualitative test is elective and we can go directly to the quantitative test rather than making a more-likely-than-not assessment based on an evaluation of qualitative factors . when performing a quantitative test , we use a discounted cash flow approach to estimate the fair value of our reporting units . management 's judgment is required in developing the assumptions for the discounted cash flow model . these assumptions include revenue growth rates , profit margin percentages , discount rates , etc . due to the many variables inherent in the estimation of a business 's fair value and the relative size of our goodwill , if different assumptions and estimates were used , it could have an adverse effect on our impairment analysis . for additional information on goodwill and intangible asset impairment testing , see notes 2 and 9 of the notes to consolidated financial statements set forth in item 8 of this annual report . income taxes income taxes are accounted for under the asset and liability method in accordance with the “ accounting for income taxes , ” topic of the fasb asc ( topic 740 ) . deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax basis of assets and liabilities and operating loss and tax credit carry forwards . deferred tax assets and liabilities are measured by applying enacted tax rates and laws and are released in the years in which the temporary differences are expected to be recovered or settled . the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date . valuation allowances are provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized . accounting for tax positions requires judgments , including estimating reserves for potential uncertainties . we also assess our ability to utilize tax attributes , including those in the form of carryforwards , for which the benefits have already been reflected in the financial statements . we do not record valuation allowances for deferred tax assets that we believe will be realized in future periods . while we believe the resulting tax balances as of december 31 , 2018 and 2017 are appropriately accounted for in accordance with topic 740 , as applicable , the ultimate outcome of such matters could result in favorable or unfavorable adjustments to our consolidated financial statements and such adjustments could be material . 29 on december 22 , 2017 , the tax cuts and jobs act ( the tax act ) was signed into law making significant changes to the internal revenue code , including , but not limited to : a u.s. corporate tax rate decrease from 35 % to 21 % , effective for tax years beginning after december 31 , 2017 ; the transition of u.s. international taxation from a worldwide tax system to a territorial system ; and a one-time transition tax ( i.e . toll charge ) on the mandatory deemed repatriation of cumulative foreign earnings as of december 31 , 2017 at an income tax rate of 15.5 % to the extent such cumulative earnings were attributable to foreign cash and certain other net current assets , and 8 % on the remainder . in december 2017 , the securities and exchange commission ( sec ) staff issued staff accounting bulletin no . 118 ( sab 118 ) , “ income tax accounting implications of the tax cuts and jobs act , ” which allowed us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date . in march 2018 , the financial accounting standards board ( fasb ) issued asu 2018-05 , “ income taxes ( topic 740 ) : amendments to sec paragraphs pursuant to sec staff accounting bulletin no . 118 , ” which added sec guidance related to sab 118. our provision for income taxes for 2017 included a net expense of $ 143.4 million attributable to the tax act , including a provisional amount representing our estimate of the u.s. federal and state tax impact of the transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of december 31 , 2017. during 2018 , we continued to analyze the impact of the tax act and interpreted the additional guidance issued by the u.s. treasury department , the internal revenue service , and other standard-setting bodies . our provision for income taxes for 2018 included a net expense true-up of $ 13.3 million associated with the tax act based upon our final analysis . as of december 31 , 2018 , we have completed our analysis and the final net expense associated with the tax act was $ 156.7 million . story_separator_special_tag however , the continued absence of any legislation confirming the terms on which the uk will leave the eu as the march 2019 deadline draws closer has contributed to increased uncertainty and could adversely affect lease and sales volumes in 2019. in asia pacific , real estate leasing and investment markets have been active since late 2016. while leasing activity continued to grow solidly in 2018 , investment levels cooled in 2018 as investors became more cautious . however , asia pacific investors remain a significant source of real estate investment both in the region and across other parts of the world . 31 real estate investment management and property development markets have been generally favorable with abundant debt and equity capital flows into commercial real estate . actively managed real estate equity strategies have been pressured by a shift in investor preferences from active to passive portfolio strategies and concerns about higher interest rates . the performance of our global real estate services and real estate investment businesses depends on sustained economic growth and job creation ; stable , healthy global credit markets ; and continued positive business and investor sentiment . effects of acquisitions we historically have made significant use of strategic acquisitions to add and enhance service competencies around the world . for example , on september 1 , 2015 , cbre , inc. , our wholly-owned subsidiary , pursuant to a stock and asset purchase agreement with johnson controls , inc. ( jci ) , acquired jci 's global workplace solutions ( jci-gws ) business ( which we refer to as the gws acquisition ) . the acquired jci-gws business was a market-leading provider of integrated facilities management solutions for major occupiers of commercial real estate and had significant operations around the world . the purchase price was $ 1.475 billion , paid in cash , plus adjustments totaling $ 46.5 million for working capital and other items . we completed the gws acquisition in order to advance our strategy of delivering globally integrated services to major occupiers in our americas , emea and asia pacific segments . we merged the acquired jci-gws business with our existing occupier outsourcing business line , which adopted the “ global workplace solutions ” name . additionally , on june 12 , 2018 , cbre jason acquisition llc ( merger sub ) , our wholly-owned subsidiary , and facilitysource holdings , llc ( facilitysource ) , wp x finance , lp and warburg pincus x partners , lp ( collectively , the stockholders ) entered into a stock purchase agreement and plan of merger ( the merger agreement ) . as part of the merger agreement , ( i ) we purchased from the stockholders all the outstanding shares of capital stock of fs wp holdco , inc ( blocker corp ) , which owned 1,686,013 class a units ( the blocker units ) and ( ii ) immediately following the acquisition of blocker corp , merger sub merged with facilitysource , with facilitysource continuing as the surviving company and our wholly-owned subsidiary within our americas segment ( the facilitysource acquisition ) , with the remaining blocker units not held by blocker corp. canceled and converted into the right to receive cash consideration as set forth in the merger agreement . the estimated net initial purchase price was approximately $ 266.5 million , with $ 263.0 million paid in cash . we financed the transaction with cash on hand and borrowings under our revolving credit facility . we completed the facilitysource acquisition to help us ( i ) build a tech-enabled supply chain capability for the occupier outsourcing industry and ( ii ) drive meaningfully differentiated outcomes for leading occupiers of real estate . strategic in-fill acquisitions have also played a key role in strengthening our service offerings . the companies we acquired have generally been regional or specialty firms that complement our existing platform , or independent affiliates in which , in some cases , we held a small equity interest . during 2018 , we acquired a retail leasing and property management firm in australia , two firms in israel ( our former affiliate and a majority interest in a local facilities management provider ) , a commercial real estate services provider in san antonio , a provider of real estate and facilities consulting services to healthcare companies across the united states and the remaining 50 % equity interest in our longstanding new england joint venture . during 2017 , we completed 11 in-fill acquisitions , including two leading software as a service ( saas ) platforms – one that produces scalable interactive visualization technologies for commercial real estate and one that provides technology solutions for facilities management operations , a healthcare-focused project manager in australia , a full-service brokerage and management boutique in south florida , a technology-enabled national boutique commercial real estate finance and consulting firm in the united states , a retail consultancy in france , a majority interest in a toronto-based investment management business specializing in private infrastructure and private equity investments , a san francisco-based technology-focused boutique real estate brokerage firm , a project management and design engineering firm operating across the united states , a washington , d.c.-based retail brokerage operation and a leading technical engineering services provider in italy . we believe that strategic acquisitions can significantly decrease the cost , time and commitment of management resources necessary to attain a meaningful competitive position within targeted markets or to expand our presence within our current markets . in general , however , most acquisitions will initially have an adverse impact on our operating and net income as a result of transaction-related expenditures . these include severance , lease termination , transaction and deferred financing costs , among others , and the charges and costs of integrating the acquired business and its financial and accounting systems into our own .
| ncial condition and results of operations overview we are the world 's largest commercial real estate services and investment firm , based on 2018 revenue , with leading global market positions in our leasing , property sales , occupier outsourcing and valuation businesses . as of december 31 , 2018 , we operated in more than 480 offices worldwide with over 90,000 employees , excluding independent affiliates . our business is focused on providing services to both occupiers of and investors in real estate . for occupiers , we provide facilities management , project management , transaction ( both property sales and tenant leasing ) and consulting services , among others . for investors , we provide capital markets ( property sales , commercial mortgage brokerage , loan origination and servicing ) , leasing , investment management , property management , valuation and development services , among others . we provide commercial real estate services under the “ cbre ” brand name , investment management services under the “ cbre global investors ” brand name and development services under the “ trammell crow company ” brand name . our revenue mix has shifted in recent years toward more contractual revenue as occupiers and investors increasingly prefer to purchase integrated , account-based services from firms that meet the full spectrum of their needs nationally and globally . we believe we are well-positioned to capture a growing share of this business . we generate revenue from both management fees ( large multi-year portfolio and per-project contracts ) and commissions on transactions . our contractual , fee-for-services businesses generally involve occupier outsourcing ( including facilities and project management ) , property management , investment management , appraisal/valuation and loan servicing . in addition , our leasing services business line is largely recurring in nature over time . in 2018 , we generated revenue from a highly diversified base of clients , including more than 90 of the fortune 100 companies .
| 7,968 |
forward-looking statements in this md & a are not guarantees of future performance and may involve risks and uncertainties that could cause actual results to differ materially from those projected . refer to `` cautionary note regarding forward-looking statements '' elsewhere in this report and item 1a . risk factors for a discussion of these risks and uncertainties . a comparison of our results of operations and cash flows for fiscal year 2019 compared to fiscal year 2018 can be found under “ item 7. management 's discussion and analysis of financial condition and results of operations ” in our annual report on form 10-k for the fiscal year ended december 28 , 2019 , filed with the sec on february 19 , 2020. overview wingstop is the largest fast casual chicken wings-focused restaurant chain in the world and has demonstrated strong , consistent growth . as of december 26 , 2020 , we had a total 1,538 restaurants in our system . our restaurant base is 98 % franchised , with 1,506 franchised locations ( including 179 international locations ) and 32 company-owned restaurants as of december 26 , 2020. we generate revenues by charging royalties , advertising fees and franchise fees to our franchisees and by operating a number of our own restaurants . historically , the company had two reporting segments : franchise operations and company restaurant operations . in accordance with accounting standards codification 280 “ segment reporting ” , the company uses the management approach for determining its reportable segments . the management approach is based upon the way management reviews performance and allocates resources . during the second fiscal quarter of 2020 , the company reevaluated its operating segments and determined it has one operating segment and one reporting segment due to changes in how the company 's chief operating decision maker assesses the company 's performance and allocates resources . we plan to grow our business by opening new franchised restaurants and increasing our same store sales , while leveraging our franchise model to create shareholder value . domestic same store sales have increased for 17 consecutive years beginning in 2004 , which includes 5-year cumulative domestic same stores sales growth of 44.8 % since the beginning of fiscal year 2016. we believe our asset-light , highly-franchised business model generates strong operating margins and requires low capital expenditures , creating shareholder value through strong and consistent free cash flow and capital-efficient growth . impact of covid-19 in march 2020 , the novel coronavirus ( `` covid-19 '' ) outbreak was declared a pandemic by the world health organization , significantly changing consumer behaviors as individuals are being encouraged to practice social distancing . this pandemic led to restaurants reducing restaurant seating capacity , and in some cases restaurant closures , due to various restrictions mandated by governments around the world . as of march 16 , 2020 , we made the decision to close our domestic dining rooms and limit our service to carryout and delivery only . several of our international franchisees also closed their dining rooms as a result of the outbreak . our domestic business was well-positioned for the transition to largely off-premise dining that has resulted from the outbreak . as a result of the required changes to consumer behavior to largely off-premise dining , as well as promotional activities associated with delivery , we experienced an increase in domestic same store sales growth through the end of the fourth quarter of 2020. our international markets , which have historically had a higher mix of dine-in sales , have seen an overall decline in same store sales growth due to the required closure of dining rooms and , in some cases , temporary restaurant closures . highlights for fiscal year 2020 : system-wide restaurant count increased 11.0 % over the prior fiscal year to a total of 1,538 worldwide locations , driven by 153 net unit openings ; domestic same store sales increased 21.4 % over the prior fiscal year ; company-owned restaurant same store sales increased 14.2 % over the prior fiscal year ; digital sales increased to 62.5 % over the prior fiscal year ; domestic restaurant auv increased to approximately $ 1.5 million ; system-wide sales increased 28.8 % over the prior fiscal year to approximately $ 2.0 billion ; total revenue increased 24.6 % over the prior fiscal year to $ 248.8 million ; and net income increased 13.8 % over the prior fiscal year to $ 23.3 million , or $ 0.78 per diluted share , compared to $ 20.5 million , or $ 0.69 per diluted share in the prior fiscal year . adjusted net income and adjusted earnings per diluted share 30 increased 49.7 % over the prior fiscal year to $ 32.5 million , or $ 1.09 per diluted share , compared to $ 21.7 million and $ 0.73 per diluted share in the prior fiscal year . adjusted ebitda increased 26.1 % over the prior fiscal year to $ 71.9 million . key performance indicators key measures that we use in evaluating our restaurants and assessing our business include the following : number of restaurants . management reviews the number of new restaurants , the number of closed restaurants , and the number of acquisitions and divestitures of restaurants to assess net new restaurant growth , system-wide sales , royalty and franchise fee revenue and company-owned restaurant sales . replace_table_token_4_th system-wide sales . system-wide sales represents net sales for all of our company-owned and franchised restaurants . this measure allows management to better assess changes in our royalty revenue , our overall store performance , the health of our brand and the strength of our market position relative to competitors . our system-wide sales growth is driven by new restaurant openings as well as increases in same store sales . domestic average unit volume ( “ auv ” ) . domestic auv consists of the average annual sales of all restaurants that have been open for a trailing 52-week period or longer . story_separator_special_tag ebitda and adjusted ebitda have limitations as analytical tools and should not be considered in isolation , or as an alternative to , or a substitute for net income or other financial statement data presented in our consolidated financial statements as indicators of financial performance . some of the limitations are : such measures do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments ; such measures do not reflect changes in , or cash requirements for , our working capital needs ; such measures do not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt ; such measures do not reflect our tax expense or the cash requirements to pay our taxes ; although depreciation and amortization are non-cash charges , the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements ; and other companies in our industry may calculate such measures differently than we do , limiting their usefulness as comparative measures . due to these limitations , ebitda and adjusted ebitda should not be considered as measures of discretionary cash available to us to invest in the growth of our business . we compensate for these limitations by relying primarily on our gaap results and using these non-gaap measures only supplementally . as noted in the table below , adjusted ebitda includes adjustments for losses on debt extinguishment and refinancing transactions , transaction costs , costs and fees associated with investments in our strategic initiatives , gains and losses on the disposal of assets , and stock-based compensation expense . it is reasonable to expect that these items will occur in future periods . however , we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period , do not directly relate to the ongoing operations of our restaurants , and complicate comparisons of our internal operating results and operating results of other restaurant companies over time . each of the normal recurring adjustments and other adjustments described in this paragraph and in the reconciliation table below help management measure our core operating performance over time by removing items that are not related to day-to-day operations . 33 the following table reconciles net income to ebitda and adjusted ebitda for the fiscal years ended december 26 , 2020 and december 28 , 2019 ( in thousands ) : replace_table_token_6_th ( a ) represents costs and expenses related to the refinancing of our securitized financing facility and payment of a special dividend ; all transaction costs are included in loss on debt extinguishment and refinancing transactions on the consolidated statements of operations , with the exception of $ 151,000 during the year ended december 26 , 2020 that is included in selling , general and administrative expense on the consolidated statements of operations . ( b ) represents a gain resulting from the re-franchise of company-owned restaurants to franchisees , which is included in gain on sale of restaurants and other expenses , net on the consolidated statements of operations . ( c ) represents costs and expenses related to consulting projects to support the company 's strategic initiatives , which are included in selling , general and administrative expense on the consolidated statements of operations . ( d ) includes non-cash , stock-based compensation . ( 3 ) adjusted net income and adjusted earnings per diluted share are supplemental measures of operating performance that do not represent and should not be considered alternatives to net income and earnings per share , as determined by gaap . these measures have not been prepared in accordance with article 11 of regulation s-x promulgated under the securities act . management believes adjusted net income and adjusted earnings per diluted share supplement gaap measures and enable management to more effectively evaluate the company 's performance period-over-period and relative to competitors . 34 the following table reconciles net income to adjusted net income and calculates adjusted earnings per diluted share for the fiscal years ended december 26 , 2020 and december 28 , 2019 ( in thousands ) : replace_table_token_7_th ( a ) represents costs and expenses related to the refinancing of our securitized financing facility and payment of a special dividend ; all transaction costs are included in loss on debt extinguishment and refinancing transactions with the exception of $ 151,000 during the year ended december 26 , 2020 that is included in selling , general and administrative expense on the consolidated statements of operations . ( b ) represents a gain resulting from the re-franchise of company-owned restaurants to franchisees which is included in gain on sale of restaurants and other expenses , net on the consolidated statements of operations . ( c ) represents costs and expenses related to a consulting project to support the company 's strategic initiatives , which are included in selling , general and administrative expense on the consolidated statements of operations . ( d ) represents the tax effect of the aforementioned adjustments to reflect corporate income taxes at an assumed effective tax rate of 24 % for the periods ended december 26 , 2020 and december 28 , 2019 , which includes provisions for u.s. federal income taxes , and assumes the respective statutory rates for applicable state and local jurisdictions . 35 story_separator_special_tag in the prior fiscal year . the increase in sg & a expense was primarily due to approximately $ 5.5 million in higher variable performance-based compensation expense , inclusive of stock-based compensation expense , and $ 1.9 million in headcount-related expenses to support the growth in our business , and an increase of $ 1.4 million associated with additional expenses to support our national advertising campaign , which has an equal and offsetting contribution in revenue .
| results of operations year ended december 26 , 2020 compared to year ended december 28 , 2019 the following table sets forth the consolidated statements of operations for fiscal year 2020 and fiscal year 2019 ( in thousands , except for percentages ) : replace_table_token_8_th ( 1 ) cost of sales includes all operating expenses of company-owned restaurants , including advertising expenses , and excludes depreciation and amortization , which are presented separately . total revenue . total revenue consists of the collection of development fees , franchise fees , royalties , and other fees associated with franchise and development rights , contributions to the ad fund , and sales of wings and other food and beverage products by our company-owned restaurants . total revenue was $ 248.8 million in fiscal year 2020 , an increase of $ 49.1 million , or 24.6 % , compared to $ 199.7 million in the prior fiscal year . these changes in revenues are more fully described below . royalty revenue , franchise fees and other . royalty revenue and franchise fees were $ 108.9 million in fiscal year 2020 , an increase of $ 20.6 million , or 23.3 % , compared to $ 88.3 million in the prior fiscal year . royalty revenue increased by $ 23.4 million primarily due to 152 net franchise restaurant openings since december 28 , 2019 as well as domestic same store sales growth of 21.4 % . other revenue decreased $ 2.4 million primarily due to contributions received for our franchisee convention that occurred in the fourth quarter of 2019. advertising fees . ad fund contributions are earned from domestic franchisees based on a percentage of gross sales net of discounts .
| 7,969 |
words or phrases such as “ does not believe ” and “ believes , ” or similar expressions , when used in this form 10-k or other filings with the sec , are intended to identify “ forward-looking statements ” within the meaning of the private securities litigation reform act of 1995. overview the trust was organized in 1888 and holds title to extensive tracts of land in numerous west texas counties which were previously the property of the texas and pacific railway company . we continue to manage those lands for the benefit of the holders of certificates of proprietary interest in the trust . our revenues are derived primarily from sales of land , oil and gas royalties , grazing leases of the land and interest . due to the nature of our operations , our revenue is subject to substantial fluctuations from quarter to quarter and year to year . we are a passive seller of land and do not actively solicit sales of land . in addition , the demand for , and sale price of , particular tracts of land is influenced by many factors beyond our control , including general economic conditions , the rate of development in nearby areas and the suitability of the particular tract for the ranching uses prevalent in western texas . the trust is not an oil and gas producer . rather , its oil and gas revenue is derived from retained perpetual non-participating oil and gas royalty interests . thus , in addition to being subject to fluctuations in response to the market prices for oil and gas , our oil and gas royalty revenues are also subject to decisions made by the owners and operators of the oil wells to which our royalty interests relate as to investments in and production from those wells . we monitor production reports by the oil and gas companies to assure that we are being paid the appropriate royalties . we review conditions in the agricultural industry in the areas in which our lands are located and seek to keep as much of our lands as possible under lease to local ranchers at competitive rates . in recent years , we have been successful at keeping over 96 % of our land subject to grazing leases . 9 story_separator_special_tag 10pt '' > rentals , royalties and other income ( including interest on investments ) were $ 22,445,924 in 2011 compared to $ 17,353,602 in 2010 , an increase of 29.3 % . oil and gas royalty revenue in 2011 was $ 14,685,502 compared to $ 11,573,563 in 2010 , an increase of 26.9 % . oil royalty revenue was $ 11,434,640 and gas royalty revenue was $ 3,250,862 in 2011. crude oil production from trust royalty wells increased 8.4 % in 2011 from 2010. the average prices per royalty barrel of crude oil for 2011 and 2010 were $ 89.21 and $ 74.57 , respectively . total gas production increased 14.6 % , and the average price of gas increased by 2.9 % , during 2011 compared to 2010. grazing lease income in 2011 was $ 499,400 compared to $ 506,211 in 2010. interest revenue ( including interest on investments ) was $ 898,277 in 2011 compared to $ 1,107,726 in 2010 , a decrease of 18.9 % . interest on notes receivable amounted to $ 879,749 in 2011 compared to $ 1,082,019 in 2010. at year end 2011 , notes receivable from land sales were $ 10,354,103 compared to $ 14,342,898 at year end 2010. interest on investments amounted to $ 18,528 in 2011 and $ 25,707 in 2010 , respectively . total principal cash payments on notes receivable were $ 4,163,545 in 2011 including $ 2,683,841 of prepaid principal . 11 easement and sundry income revenue in 2011 was $ 6,362,745 compared to $ 4,166,102 in 2010. the increase in easement and sundry income revenue was primarily attributable to increases in the amount of pipeline easement income and the amount of sundry lease rental income received in 2011 compared to 2010. easement and sundry income is unpredictable and may vary significantly from period to period . taxes , other than income taxes were $ 922,951 in 2011 compared to $ 775,380 in 2010. oil and gas production taxes were $ 769,807 in 2011 compared to $ 612,362 in 2010. ad valorem taxes were $ 102,625 in 2011 compared to $ 112,531 in 2010. all other expenses were $ 2,640,167 in 2011 compared to $ 2,892,111 in 2010. liquidity the trust 's principal sources of liquidity are its revenues from oil and gas royalties , lease rentals and receipts of interest and principal payments on the notes receivable arising from its sales of land . in the past , these sources have generated more than adequate amounts of cash to meet the trust 's needs and , in the opinion of management , should continue to do so in the foreseeable future . off-balance sheet arrangements the trust has not engaged in any off-balance sheet arrangements . tabular disclosure of contractual obligations as of december 31 , 2012 , the trust 's known contractual obligations were as follows : replace_table_token_4_th effects of inflation we do not believe that inflation has had a material impact on our operating results . we can not assure you , however , that future increases in our costs will not occur or that any such increases that may occur will not adversely affect our results of operations . 12 critical accounting policies and estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states of america ( gaap ) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements . it is our opinion that we fully disclose our significant accounting policies in the notes to the financial statements . consistent with our disclosure policies , story_separator_special_tag words or phrases such as “ does not believe ” and “ believes , ” or similar expressions , when used in this form 10-k or other filings with the sec , are intended to identify “ forward-looking statements ” within the meaning of the private securities litigation reform act of 1995. overview the trust was organized in 1888 and holds title to extensive tracts of land in numerous west texas counties which were previously the property of the texas and pacific railway company . we continue to manage those lands for the benefit of the holders of certificates of proprietary interest in the trust . our revenues are derived primarily from sales of land , oil and gas royalties , grazing leases of the land and interest . due to the nature of our operations , our revenue is subject to substantial fluctuations from quarter to quarter and year to year . we are a passive seller of land and do not actively solicit sales of land . in addition , the demand for , and sale price of , particular tracts of land is influenced by many factors beyond our control , including general economic conditions , the rate of development in nearby areas and the suitability of the particular tract for the ranching uses prevalent in western texas . the trust is not an oil and gas producer . rather , its oil and gas revenue is derived from retained perpetual non-participating oil and gas royalty interests . thus , in addition to being subject to fluctuations in response to the market prices for oil and gas , our oil and gas royalty revenues are also subject to decisions made by the owners and operators of the oil wells to which our royalty interests relate as to investments in and production from those wells . we monitor production reports by the oil and gas companies to assure that we are being paid the appropriate royalties . we review conditions in the agricultural industry in the areas in which our lands are located and seek to keep as much of our lands as possible under lease to local ranchers at competitive rates . in recent years , we have been successful at keeping over 96 % of our land subject to grazing leases . 9 story_separator_special_tag 10pt '' > rentals , royalties and other income ( including interest on investments ) were $ 22,445,924 in 2011 compared to $ 17,353,602 in 2010 , an increase of 29.3 % . oil and gas royalty revenue in 2011 was $ 14,685,502 compared to $ 11,573,563 in 2010 , an increase of 26.9 % . oil royalty revenue was $ 11,434,640 and gas royalty revenue was $ 3,250,862 in 2011. crude oil production from trust royalty wells increased 8.4 % in 2011 from 2010. the average prices per royalty barrel of crude oil for 2011 and 2010 were $ 89.21 and $ 74.57 , respectively . total gas production increased 14.6 % , and the average price of gas increased by 2.9 % , during 2011 compared to 2010. grazing lease income in 2011 was $ 499,400 compared to $ 506,211 in 2010. interest revenue ( including interest on investments ) was $ 898,277 in 2011 compared to $ 1,107,726 in 2010 , a decrease of 18.9 % . interest on notes receivable amounted to $ 879,749 in 2011 compared to $ 1,082,019 in 2010. at year end 2011 , notes receivable from land sales were $ 10,354,103 compared to $ 14,342,898 at year end 2010. interest on investments amounted to $ 18,528 in 2011 and $ 25,707 in 2010 , respectively . total principal cash payments on notes receivable were $ 4,163,545 in 2011 including $ 2,683,841 of prepaid principal . 11 easement and sundry income revenue in 2011 was $ 6,362,745 compared to $ 4,166,102 in 2010. the increase in easement and sundry income revenue was primarily attributable to increases in the amount of pipeline easement income and the amount of sundry lease rental income received in 2011 compared to 2010. easement and sundry income is unpredictable and may vary significantly from period to period . taxes , other than income taxes were $ 922,951 in 2011 compared to $ 775,380 in 2010. oil and gas production taxes were $ 769,807 in 2011 compared to $ 612,362 in 2010. ad valorem taxes were $ 102,625 in 2011 compared to $ 112,531 in 2010. all other expenses were $ 2,640,167 in 2011 compared to $ 2,892,111 in 2010. liquidity the trust 's principal sources of liquidity are its revenues from oil and gas royalties , lease rentals and receipts of interest and principal payments on the notes receivable arising from its sales of land . in the past , these sources have generated more than adequate amounts of cash to meet the trust 's needs and , in the opinion of management , should continue to do so in the foreseeable future . off-balance sheet arrangements the trust has not engaged in any off-balance sheet arrangements . tabular disclosure of contractual obligations as of december 31 , 2012 , the trust 's known contractual obligations were as follows : replace_table_token_4_th effects of inflation we do not believe that inflation has had a material impact on our operating results . we can not assure you , however , that future increases in our costs will not occur or that any such increases that may occur will not adversely affect our results of operations . 12 critical accounting policies and estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states of america ( gaap ) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements . it is our opinion that we fully disclose our significant accounting policies in the notes to the financial statements . consistent with our disclosure policies ,
| results of operations the trust 's primary sources of income are revenue derived from sales of land , either for cash or a combination of cash and mortgage notes , and revenue derived from the trust 's land and mineral interests . 2012 compared to 2011 total operating revenues and investing revenues in 2012 aggregated $ 32,606,891 , a decrease of $ 1,712,145 , or 5.0 % , from the $ 34,319,036 of total operating revenues and investing revenues recorded in 2011. this decrease resulted primarily from decreases in land sales , interest income from notes receivable and , to a much lesser extent , modest decreases in oil and gas royalty revenue and grazing lease revenue . these decreases were partially offset by an increase in easements and sundry income . earnings per sub-share certificate were $ 2.20 for 2012 compared to $ 2.21 in 2011. the trust purchased and retired 380,156 sub-shares during 2012 , leaving 8,795,258 sub-shares outstanding at december 31 , 2012. land sales in 2012 were $ 5,809,747 compared to $ 11,873,112 in 2011 , a decrease of $ 6,063,365 , or 51.1 % . a total of 7,252 acres were sold in 2012 at an average price of $ 801 per acre , compared to 31,446 acres in 2011 at an average price per acre of $ 378. rentals , royalties and other income ( including interest on investments ) were $ 26,797,144 in 2012 compared to $ 22,445,924 in 2011 , an increase of 19.4 % . oil and gas royalty revenue in 2012 was $ 14,670,915 compared to $ 14,685,502 in 2011 , a decrease of 0.1 % . oil royalty revenue was $ 11,870,354 and gas royalty revenue was $ 2,800,561 in 2012. crude oil production from trust royalty wells increased 5.8 % in 2012 from 2011. the average prices per royalty barrel of crude oil for 2012 and 2011 were $ 87.56 and $ 89.21 , respectively .
| 7,970 |
we are engaged in the design , production , licensing , marketing , and direct-to-consumer sales of branded apparel , footwear , accessories , jewelry , home goods , and other consumer products , and the acquisition of dynamic consumer lifestyle brands . we have developed a fast-to-market capability driven by our proprietary integrated technology platform . currently , our brand portfolio consists of the isaac mizrahi , judith ripka , h halston , c wonder , and the highline collective brands . our in-house designers and marketing executives work with our licensees to help design , promote , and elevate each brand within their respective distribution channels . we license our own brands for promotion and distribution through a ubiquitous-channel retail sales strategy , which includes promotion through interactive television , internet , and traditional brick-and-mortar retail channels . our objective is to build a diversified portfolio of lifestyle consumer brands through organic growth and the strategic acquisition of new brands . to achieve growth under our brands , we are focused on three primary strategies : · licensing our brands for distribution through interactive television ( i.e . qvc , the shopping channel ) whereby we design , manage production , merchandise the shows , and manage the on-air talent ; · licensing our brands to manufacturers and retailers for promotion and distribution through e-commerce , social commerce , and traditional brick-and mortar retail channels whereby we provide certain design services and , in certain cases , manage supply and merchandising ; and · entering into strategic supply agreements directly with overseas factories for distribution to our retail partners and through our own direct-to-consumer e-commerce sites . we believe that xcel offers a unique value proposition to its licensees and customers for the following reasons : · our management team , including our officers ' and directors ' historical track records and relationships within the industry ; · our fast-to-market supply chain and integrated technology platform enables us to design and distribute trend-right product ; · our operating strategy of licensing brands with significant media presence and driving sales through our ubiquitous-channel retail sales strategy ; and · our ability to provide retail licensees with design and fast-to-market vertical production capabilities . we license our brands to third parties , provide certain design , production , marketing and distribution services , and generate licensing , design , and service fee revenues through contractual arrangements with manufacturers and retailers . this includes licensing our own brands for promotion and distribution through a ubiquitous-channel retail sales strategy , which includes distribution through interactive television , the internet , and traditional brick-and-mortar retail channels . we believe that this strategy distinguishes us from other consumer product wholesale companies and brand management companies that rely primarily on their licensees for design , production , and distribution , and enables us to leverage the media reach of our interactive television partners , including through television , digital , and social media , to drive sales of products under our brands across distribution channels . our vision is intended to reimagine shopping , entertainment , and social as one . by leveraging digital and social media content across all distribution channels , we seek to drive customer ( follower ) engagement and generate retail sales across our brands . our strong relationships with leading retailers and interactive television companies and cable networks enable us to reach consumers in over 400 million homes worldwide and hundreds of millions of social media followers . we believe our service-fee based fast-to-market production platform provides significant competitive advantages compared with traditional wholesale apparel companies that design , manufacture , and distribute products . we focus on our core competencies of design , integrated technologies , fast-to-market production , marketing , and brand development , while outsourcing manufacturing and the related inventory ownership to best-in-class licensees , manufacturers , and retailers . we believe that we offer 360 degrees of service for a comprehensive solution for our retail partners that addresses many of the challenges facing the retail industry today . we believe our platform is highly scalable due to our business model 's low overhead and working capital requirements , coupled with minimum guaranteed income levels through our multi-year licensing contracts . additionally , we believe we can quickly integrate additional brands into our platform leveraging our design , production , and marketing capabilities , and distribution relationships . 26 discontinued operations we opened a full-price store and an outlet store under the mizrahi brands in 2013 and 2014 , respectively . in december 2014 , we decided to close our retail stores . accordingly , our retail operations have been reclassified as discontinued operations for all periods presented . our e-commerce operations , which were previously reported as a component of retail operations , are reported as a component of our licensing business . summary of critical accounting policies the preparation of consolidated 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 financial statements and the reported amounts of revenues and expenses during the reporting period . critical accounting policies are those that are the most important to the portrayal of our financial condition and results of operations , and that require our most difficult , subjective , and complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain . while our significant accounting policies are described in more detail in the notes to our financial statements , our most critical accounting policies , discussed below , pertain to revenue recognition , trademarks , goodwill and other intangible assets , stock-based compensation , fair value of contingent obligations and income taxes . in applying such policies , we must use some amounts that are based upon our informed judgments and best estimates . estimates , by their nature , are based upon judgments and available information . story_separator_special_tag during 2017 , management was continuously monitoring the company 's stock price and its market capitalization and expectations were that the sector would eventually improve and the company 's stock would trade again at a higher value , able to support the implied premium included in the fair value obtained through the above-mentioned weighted approach , and more representative of the company 's expected long-term target stock price . our stock trading price gradually improved during 2017 , however , beginning early november , the stock trading price began to trend back down . we believed this to be a temporary trend , and that our stock price would soon improve . this position was supported by management consideration of some of our competitors ' highly leveraged business and that investors would eventually realize that our fair value was penalized by the resulting sector performance on the stock market . although our stock price did improve toward the end of this year , due to the volatility and with continuing low stock trading prices , management decided to increase the relative weight of the market approach in its fair value model , and consequently increase the emphasis on its market peers , which ultimately resulted in the recording of the goodwill impairment . the inputs and assumptions utilized in the goodwill impairment analysis are classified as level 3 inputs in the fair value hierarchy . 27 with reference to our definite-lived intangible assets impairment process , the company groups assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of undiscounted future cash flows . if the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable , an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flows analysis or appraisals . the inputs utilized in the definite-lived intangible assets impairment analysis are classified as level 3 inputs within the fair value hierarchy as defined in asc 820. stock-based compensation we account for stock-based compensation in accordance with asc topic 718 , “ compensation - stock compensation , ” by recognizing the fair value of stock-based compensation as an operating expense over the service period of the award or term of the corresponding contract , as applicable . stock option awards are valued using a black-scholes option pricing model , which requires the input of subjective assumptions including expected stock price volatility and the estimated life of each award . restricted stock awards are valued using the fair value of our common stock at the date the common stock is granted . for stock option awards for which vesting is contingent upon the achievement of certain performance targets , the timing and amount of compensation expense recognized is based upon the company 's projections and estimates of the relevant performance metric ( s ) . fair value of contingent obligations management continues to analyze and quantify contingent obligations ( expected earn-out payments ) over the applicable pay-out period . management will assess no less frequently than each reporting period the fair value of contingent obligations . any change in the expected obligation will result in an expense or income recognized in the period in which it is determined the fair market value of the obligation has changed . we recognized a contingent obligation in connection with the acquisition of judith ripka trademarks in 2014. asc 805-50-30 requires that , when accounting for asset acquisitions , when the fair value of the assets acquired is greater than the consideration paid , any contingent obligations shall be recognized and recorded as the positive difference between the fair value of the assets acquired and the consideration paid for the acquired assets . we also recognized a contingent obligation in 2015 in connection with our acquisition of the c wonder trademarks . asc 805-50-30 requires that when the fair value of the assets acquired are equal to the consideration paid , any contingent obligations shall be recognized based upon the company 's best estimate of the amount that will be paid to settle the liability . income taxes income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities . deferred income taxes are determined based on the temporary difference between the financial reporting and tax bases of assets and liabilities using enacted rates in effect during the year in which the differences are expected to reverse . valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized . asc topic 740 , “ accounting for income taxes ” clarifies the accounting for uncertainty in income taxes recognized in an enterprise 's financial statements . tax positions shall initially be recognized in the financial statements when it is more likely than not that the position will be sustained upon examination by the tax authorities . such tax positions shall initially and subsequently be measured as the largest amount of tax benefit that has a probability of fifty percent or greater of being realized upon ultimate settlement with the tax authority , assuming full knowledge of the position and all relevant facts . the tax cuts and jobs act ( “ the act ” ) was enacted on december 22 , 2017. the income tax effects of changes in tax laws are recognized in the period when enacted .
| summary of operating results the consolidated financial statements and related notes included elsewhere in this form 10-k are as of , or for the year ended december 31 , 2017 ( the “ current year ” ) , and the year ended december 31 , 2016 ( the “ prior year ” ) . net revenues current year net revenues decreased approximately $ 0.98 million to $ 31.71 million from $ 32.69 million for the prior year . this decrease was primarily due to ( i ) lower revenues of approximately $ 1.90 million associated with the termination and transition of the c wonder brand from qvc and ( ii ) lower revenues of approximately $ 1.13 million associated with the management and design of the lcny brand ( for which our contract ended in july 2016 ) . these decreases were partially offset by ( i ) higher net revenues from our ongoing interactive television business of $ 1.27 million and ( ii ) higher net revenues from our wholesale department store business of approximately $ 0.78 million . the increase in our wholesale department store business was primarily driven by an increase in the number of retail stores our brands are sold in , including the launch at dillard 's this year , and expanding into more product categories for our fast-to-market production platform in our department store business . operating costs and expenses current year operating costs and expenses were $ 40.93 million , compared with $ 31.24 million for the prior year . the increase of approximately $ 9.69 million was primarily related to the recording of a non-cash impairment charge for the total amount of goodwill on our balance sheet of approximately $ 12.37 million , driven by the current public trading price of our common stock on the market and the ensuing decrease in our market capitalization .
| 7,971 |
royalty revenues are recognized as customers sell story_separator_special_tag overview lattice semiconductor and its subsidiaries ( “ lattice , ” the “ company , ” “ we , ” “ us , ” or “ our ” ) is a delaware corporation that develops semiconductor technologies that we monetize through products , solutions , design services , and licenses . we engage in smart connectivity , control , and compute solutions , providing intellectual property ( `` ip '' ) and low-power , small form-factor programmable logic devices that enable global customers to quickly and easily develop innovative , smart , and connected products . we help their products become more aware , interact more intelligently , and make better and faster connections . in an increasingly intense global technology market , we help our customers get their products to market faster than their competitors . our broad end-market exposure extends from mobile devices and consumer electronics to industrial and automotive equipment , communications and computing infrastructure , and licensing and services . lattice was founded in 1983 and is headquartered in hillsboro , oregon . discontinuation of millimeter wave business in the second quarter of 2018 , we made the strategic decision to discontinue our millimeter wave business , which included certain assets related to our wireless products , and our board of directors approved a related internal restructuring plan . this action was designed to improve profitability , reduce our infrastructure costs , and re-focus on our core business activities . approximately $ 24.1 million of total expense was recorded in our consolidated statements of operations in fiscal 2018 , including $ 11.9 million charged to impairment of acquired intangible assets , $ 8.0 million charged to cost of product revenue for inventory reserves , and $ 4.2 million charged to restructuring charges for severance and other personnel costs , and for other asset restructuring . see notes 6 , 8 , 10 , and 15 to our consolidated financial statements presented in part 2 , item 8 of this report for additional details on the charges and costs related to the discontinuation of our millimeter wave business . critical accounting policies and use of estimates critical accounting policies are those that are both most important to the portrayal of a company 's financial condition and results , and that require management 's most difficult , subjective , and complex judgments , often as a result of the need to make estimates about the effect of matters that are inherently uncertain . the preparation of financial statements in conformity with u.s. generally accepted accounting principles ( `` u.s. gaap '' ) requires management to make estimates and assumptions that affect the reported amounts and classification of assets , such as marketable securities , accounts receivable , contract assets included in prepaid expenses and other current assets , inventory , goodwill ( including the assessment of reporting unit ) , intangible assets , current and deferred income taxes , accrued liabilities ( including restructuring charges and bonus arrangements ) , disclosure of contingent assets and liabilities at the date of the financial statements , amounts used in acquisition valuations and purchase accounting , impairment assessments , the fair value of equity awards , and the reported amounts of product revenue , licensing and services revenue , and expenses during the fiscal periods presented . we base our estimates and judgments on historical experience , knowledge of current conditions , and our beliefs of what could occur in the future considering available information . while we believe that our estimates , assumptions , and judgments are reasonable , they are based on information available when made , and because of the uncertainty inherent in these matters , actual results may differ from these estimates under different assumptions or conditions . we evaluate our estimates and judgments on an ongoing basis . we believe the following accounting policies and the related estimates are critical in the portrayal of our financial condition and results of operations , and require management 's most difficult , subjective , or complex judgments . see `` note 1 - nature of operations and significant accounting policies `` under part ii , item 8 of this report for further information on the significant accounting policies and methods used in the preparation of the consolidated financial statements . revenue from contracts with customers we adopted asc 606 , revenue from contracts with customers , effective on december 31 , 2017 , the first day of our 2018 fiscal year , using the modified retrospective method . under this standard , we recognize revenue under the core principle of depicting the transfer of control to our customers . we measure revenue based on the amount of consideration we expect to be entitled to in exchange for products or services . for revenue recognized on both sales to distributors and related to hdmi royalties , the amount of consideration we expect to be entitled to receive is based on estimates that require assumptions and judgments relating to trends in recent and historical activity . see `` note 2 - revenue from contracts with customers `` under part ii , item 8 of this report for further information on our recognition of revenue . 26 sales to most distributors are made under terms allowing certain price adjustments and limited rights of return of our products held in their inventory or upon sale to their end customers . such price adjustments are estimated using the expected value method based on an analysis of historical price adjustments , at the distributor and product level , over a period of time considered adequate to account for current pricing and business trends , typically 6 months . any differences between the estimated consideration and the actual amount received from the customer is recorded in the period that the actual consideration becomes known . to date , these differences have not been material . story_separator_special_tag to the extent it is determined it is more likely than not ( a likelihood of more than 50 percent ) that some portion or all of a tax reporting position will ultimately not be recognized and sustained , a provision for unrecognized tax benefit is provided by either reducing the applicable deferred tax asset or accruing an income tax liability . our judgment regarding the sustainability of our tax reporting positions may change in the future due to changes in u.s. or international tax laws and other factors . these changes , if any , may require material adjustments to the related deferred tax assets or accrued income tax liabilities and an accompanying reduction or increase in income tax expense which may result in a corresponding increase or decrease in net income in the period when such determinations are made . story_separator_special_tag computing mobile and consumer industrial and automotive licensing and services wireless smart-phones security and surveillance ip royalties wireline cameras machine vision adopter fees data backhaul displays industrial automation ip licenses client computing wearables human computer interaction patent sales data center computing televisions automotive testing services data storage home theater drones design services the composition of our revenue by end market is presented in the following table : replace_table_token_3_th * results for 2017 and 2016 are presented in accordance with asc 605 , which was in effect during those fiscal years . 29 our revenue in the communications and computing end market is largely dependent on a small number of large telecommunications equipment providers . for fiscal 2018 , communications and computing end market revenue increased 9 % primarily due to continued demand increases for server products , partially offset by the discontinuation of our millimeter wave business . for fiscal 2017 , communications and computing end market revenue declined 8 % primarily in the communications market , which saw a significant decrease in revenue from a major telecommunications customer whose business was affected by commerce department actions , and by conversion of materials from 200mm to 300mm wafers . this was partially offset by growth in the communications and computing end market due to the initial production ramp of the server platform reference design being widely adopted in that sector . mobile and consumer end market revenue decreased 9 % in fiscal 2018 , after decreasing 15 % in fiscal 2017. mobile and consumer end market revenue decreased in fiscal 2018 primarily due to a decline in demand for products supporting a major handset manufacturer , partially offset by increased demand for home automation and handset screen replacement products . consumer end market revenue decreased in fiscal 2017 primarily due to a significant decrease in volume for a major mobile handset provider . the production volume for this mobile handset peaked in the fourth quarter of fiscal 2016 , and the associated revenue stream has declined in subsequent quarters as the end product completes its lifecycle . these decreases were coupled with declines in revenue from hdmi devices used in dtv and home theater related products and from mhl devices used in mobile handsets . for fiscal 2018 , industrial and automotive end market revenue increased 17 % when compared to fiscal 2017. this is primarily due to broad market increases in the industrial end market as well as growth from the products supporting industrial video applications and factory automation robotics applications . for fiscal 2017 , industrial and automotive end market revenue decreased 4 % when compared to fiscal 2016. this is primarily due to a decline from the line item reduction caused by the obsoleting of tin leaded assembly material in one of the cpld devices for which shipments predominately occurred in fiscal 2016 but did not recur in fiscal 2017. this decrease was substantially offset by broad market growth in this end market , especially from our xo2/xo3 fpga product families . revenue from the licensing and services end market decreased by 38 % in fiscal 2018 compared to fiscal 2017 predominantly due to revenue from a patent sale in the first half of fiscal 2017 that did not recur in the current year , and by the absence of revenue from simplay labs testing activities after the transfer of certain assets related to that business unit at the end of the third quarter of fiscal 2017. these decreases are partially offset by hdmi royalties that we recognized as revenue in fiscal 2018 under asc 606 but were not able to recognize in fiscal 2017 under the previous guidance . licensing and services revenue decreased by 19 % in fiscal 2017 primarily due to lower revenue from hdmi licensing and adopter fees as a new royalty sharing agreement had not been finalized , and by the termination of our role as agent for the hdmi consortium . as a result of the amended model for sharing revenue and the appointment of a new independent agent for the hdmi consortium , we will be entitled to a reduced share of adopter fees paid by parties adopting the hdmi standard in 2017 and future years . the termination of our role as agent for the hdmi consortium resulted in a decrease of approximately $ 11 million for fiscal 2017 compared to fiscal 2016. while a new royalty sharing agreement is being negotiated , the hdmi agent is collecting royalties but is unable to distribute a majority of the royalties to the founders . given that a new royalty sharing agreement was not fully executed under previous revenue guidance , the fixed and determinable revenue recognition criteria was not met , and we were unable to recognize all of the hdmi royalty revenue in fiscal 2017. revenue attributable to hdmi royalties is down approximately $ 9 million for fiscal 2017 compared to fiscal 2016 mainly as a result of the royalty sharing formula not being finalized .
| results of operations key elements of our consolidated statements of operations are presented in the following table : replace_table_token_1_th * results for 2017 and 2016 are presented in accordance with asc 605 , which was in effect during those fiscal years . we adopted asc 606 , revenue from contracts with customers , on december 31 , 2017 using the modified retrospective method . we have not restated any prior financial statements presented . see `` note 2 - revenue from contracts with customers `` to our consolidated financial statements and the revenue discussions , below , for the impact of the adoption of asc 606. revenue replace_table_token_2_th * results for 2017 and 2016 are presented in accordance with asc 605 , which was in effect during those fiscal years . 28 revenue increased $ 12.8 million , or 3 % , in fiscal 2018 compared to fiscal 2017 , primarily driven by ( 1 ) increased demand for our products that perform control applications in server reference designs , ( 2 ) broad market increases from industrial market customers , particularly in growth from the products supporting industrial video applications and factory automation robotics applications , ( 3 ) growth in products used by several handset screen replacement customers , ( 4 ) increased demand for products used in home automation devices , and ( 5 ) increases in royalties that we recognized as revenue in fiscal 2018 under asc 606. these were partially offset by a decline in demand for products supporting a major handset manufacturer , by the discontinuation of our millimeter wave business , and by a patent sale that was recognized in fiscal 2017 but which did not recur in fiscal 2018. for fiscal 2018 , adoption of asc 606 increased our revenues by $ 15.6 million compared to revenue that would have been recognized under previous guidance .
| 7,972 |
the fair value of the convertible senior notes at december 31 , 2014 was $ 190.6 million instead of the amount originally disclosed in the company 's annual report on form 10-k , which inappropriately reflected only the book value of the long-term debt component of the convertible senior notes , which was $ 142.1 million . the revision story_separator_special_tag the following discussion of our financial condition and results of operations contains forward-looking statements within the meaning of the federal securities laws that involve material risks and uncertainties . this discussion should be read in conjunction with “ a warning about forward-looking statements ” on page 2 and “ risk factors ” under item 1a of this annual report . in addition , our discussion of the financial condition and results of operations of quidel corporation in this item 7 should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report . overview and executive summary we have a leadership position in the development , manufacturing and marketing of diagnostic testing solutions . these diagnostic testing solutions primarily include applications in infectious diseases , women 's health and gastrointestinal diseases . we sell our products directly to end users and distributors , in each case , for professional use in physician offices , hospitals , clinical laboratories , reference laboratories , leading universities , retail clinics , pharmacies and wellness screening centers . we market our products in the u.s. through a network of national and regional distributors and a direct sales force . internationally , we sell primarily through distributor arrangements . for the year ended december 31 , 2015 , total revenue increased 7 % to $ 196.1 million as compared to the year ended december 31 , 2014 . a majority of our total revenues relate to three product families : influenza , strep a and pregnancy tests . for the years ended december 31 , 2015 , 2014 and 2013 , we derived approximately 69 % , 68 % and 67 % , respectively , of our total revenues from sales of our influenza , group a strep and pregnancy tests . additionally , a significant portion of our total revenue is from a relatively small number of distributors . approximately 48 % , 48 % and 43 % of our total revenue for the years ended december 31 , 2015 , 2014 and 2013 , respectively , were related to sales through our three largest distributors . our primary objective is to increase shareholder value by building a broader-based diagnostic company capable of delivering revenue growth and more consistent operating results . our strategy is to identify potential market segments that provide , or are expected to provide , significant total market opportunities , and in which we can be successful by applying our significant expertise and know-how to develop differentiated technologies and products . our diagnostic testing solutions are designed to provide specialized results that serve a broad range of customers , by addressing the market requirements of ease of use , reduced cost , increased test accuracy and reduced time to result . our current approach to address this diagnostic continuum relative to our strategy is comprised of three parts : rapid point of care immunoassay tests for use in physician offices , hospital laboratories and emergency departments , retail clinics , pharmacies and other urgent care or alternative site settings ; direct fluorescent assays ( “ dfa ” ) and culture-based tests for the clinical virology laboratory ; and molecular diagnostic tests across a number of laboratory and other segments . our current focus to accomplish our primary objective includes the following : leveraging our current infrastructure to develop and launch new rapid immunoassays such as additional assays for our fda approved sofia ® and next generation analyzers ; developing a molecular diagnostics franchise that incorporates three distinct testing platforms , amplivue ® , savanna and solana ® and that leverages our molecular assay development competencies ; and strengthening our position with distribution partners and our end-user customers to gain more emphasis on our products in the u.s. and abroad . our current initiatives to execute this strategy include the following : continue to focus our research and development efforts on three areas : new proprietary product platform development ; the creation of improved products and new products for existing markets and unmet clinical needs ; and pursuit of collaborations with , or acquisitions of , other companies for new and existing products and markets that advance our differentiated strategy . provide clinicians with validated studies that encompass the clinical efficacy and economic efficiency of our diagnostic tests for the professional market ; 29 strengthen our market and brand leadership in infectious diseases , women 's health and gastrointestinal diseases by acquiring and or developing and introducing clinically superior diagnostic solutions ; strengthen our direct sales force to enhance relationships with integrated delivery networks , laboratories and hospitals , with a goal of driving growth through improved physician and laboratorian satisfaction ; leverage our wireless connectivity and data management systems , including cloud-based tools ; support payer evaluation of diagnostic tests and establishment of favorable reimbursement rates ; continue to create strong global alliances to support our efforts to achieve leadership in key markets and expand our presence in emerging markets ; and further refine our manufacturing efficiencies and productivity improvements to improve profit , with continued focus on profitable products and markets and our effort to create a core competency in new product development . product development activities are inherently uncertain , and there can be no assurance that we will be able to obtain regulatory body clearance to market any of our products , or if we obtain clearances , that we will successfully commercialize any of our products . in addition , we may terminate our development efforts with respect to one or more of our products under development at any time , including before or during clinical trials . story_separator_special_tag million and release of tax reserves and related interest of approximately $ 1.0 million related to the expiration of the statute of limitations on assessment for certain state matters . during 2013 , we were notified by the internal revenue service that the congressional joint 34 committee of taxation had completed its review of and proposed no changes to our tax returns filed for the tax periods 2008 through 2010. as a result , we released tax reserves and related interest of approximately $ 3.5 million in 2013. on january 3 , 2013 , the american taxpayer relief act of 2012 was signed into law reinstating the federal research and development credit for the 2012 and 2013 years . accordingly , we recorded the benefit related to the 2012 federal research and development credit of approximately $ 0.5 million during the year ended december 31 , 2013. liquidity and capital resources as of december 31 , 2015 and 2014 , our principal sources of liquidity consisted of the following ( in thousands ) : replace_table_token_9_th as of december 31 , 2015 , we had $ 191.5 million in cash and cash equivalents , a $ 9.4 million decrease from the prior year . our cash requirements fluctuate as a result of numerous factors , such as the extent to which we generate cash from operations , progress in research and development projects , competition and technological developments and the time and expenditures required to obtain governmental approval of our products . in addition , we intend to continue to evaluate candidates for new product line , company or technology acquisitions or technology licensing . if we decide to proceed with any such transactions , we may need to incur additional debt , or issue additional equity , to successfully complete the transactions . in 2015 , our primary source of liquidity , other than our holdings of cash and cash equivalents , has been cash flows from operations . our ability to generate cash from operations provides us with the financial flexibility we need to meet operating , investing , and financing needs . we anticipate that our current cash and cash equivalents , together with cash provided by operating activities will be sufficient to fund our near term capital and operating needs for at least the next 12 months . operating needs include the planned costs to operate our business , including amounts required to fund working capital and capital expenditures . our primary short-term needs for capital , which are subject to change , include expenditures related to : support of commercialization efforts related to our current and future products , including expansion of our direct sales force and field support resources both in the united states and abroad ; acquisitions of equipment and other fixed assets for use in our current and future manufacturing and research and development facilities ; repurchases of our outstanding common stock ; the continued advancement of research and development efforts ; potential strategic acquisitions and investments ; and repayments of our lease obligation . in december 2014 , we issued convertible senior notes in the aggregate principle amount of $ 172.5 million . the convertible senior notes have a coupon rate of 3.25 % and are due 2020. the convertible senior notes were not convertible as of december 31 , 2015 . for detailed information of the terms of the convertible senior notes , see note 2 of the notes to consolidated financial statements in part ii , item 8 of this annual report under the heading “ 3.25 % convertible senior notes due 2020 , ” which is incorporated by reference herein . on august 10 , 2012 , we entered into an amended and restated $ 140.0 million senior credit facility that matures on august 10 , 2017. as of december 31 , 2015 and december 31 , 2014 , we had no borrowings outstanding under the senior credit facility . as of december 31 , 2015 , we were in compliance with all financial covenants . for detailed information of the terms of the senior credit facility see note 2 of the notes to consolidated financial statements in part ii , item 8 of this annual report under the heading “ line of credit , ” which is incorporated by reference herein . as of december 31 , 2015 , we have $ 5.5 million in fair value of contingent considerations associated with prior acquisitions to be settled in future periods . 35 in january 2016 , our board of directors authorized an amendment to replenish the amount available up to an aggregate of $ 50.0 million in shares of common stock or senior convertible notes under our share repurchase program . during 2015 , we used $ 30.4 million to repurchase our outstanding shares under the share repurchase program . we received $ 2.4 million and $ 10.6 million during the years ended december 31 , 2015 and 2014 , respectively , pursuant to the bill and melinda gates foundation grant agreement , which was restricted as to use until expenditures contemplated in the grant were incurred or committed . we recorded this restricted cash as a current asset as we anticipate making expenditures under the grant within one year . as of december 31 , 2015 , restricted cash was $ 0.1 million . we expect our revenue and the resulting operating income , as well as the status of each of our new product development programs , will significantly impact our cash management decisions . our future capital requirements and the adequacy of our available funds will depend on many factors , including : our ability to successfully commercialize and further develop our technologies and create innovative products in our markets ; scientific progress in our research and development programs and the magnitude of those programs ; competing technological and market developments ; and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement our product and service offerings .
| results of operations comparison of years ended december 31 , 2015 and 2014 total revenues the following table compares total revenues for the years ended december 31 , 2015 and 2014 ( in thousands , except percentages ) : replace_table_token_5_th for the year ended december 31 , 2015 , total revenue increased 7 % to $ 196.1 million . the increase in total revenues was primarily due to an increase in sales of influenza , strep a , and rsv driven by continued share gains made on the sofia platform . gains in the women 's health segment were driven by growth in our thyretain , autoimmune disease and pregnancy product lines . other revenues declined $ 0.6 million due primarily to reduced demand for our animal health products . the revenue from our royalty , license fees and grant revenue category decreased due to timing of grant revenues associated with the amended bill and melinda gates foundation grant agreement . cost of sales cost of sales decreased to 37 % of total revenues , for the year ended december 31 , 2015 compared to 40 % of total revenues , for the year ended december 31 , 2014 . the absolute dollar decrease in cost of sales of $ 2.5 million is primarily driven by the expiration of the amortization of the alere settlement and improved manufacturing efficiencies . this was partially offset by the increased costs associated with greater revenues and increased depreciation expense on our instrument installed base .
| 7,973 |
our actual results may differ materially from those contained in or implied by the forward-looking statements . you should read the following discussion together with the sections entitled `` risk factors , '' `` selected historical financial data , '' `` liquidity and capital resources '' and the consolidated financial statements and the related notes thereto included elsewhere in this annual report on form 10-k. except as otherwise indicated or unless the context otherwise requires , all references to `` black knight , '' the `` company , '' `` we , '' `` us '' or `` our '' ( 1 ) prior to the distribution ( as defined in note 1 to the notes to consolidated financial statements ) , are to black knight financial services , inc. , a delaware corporation , and its subsidiaries ( `` bkfs '' ) and ( 2 ) after the distribution , are to black knight , inc. , a delaware corporation , and its subsidiaries ( `` bki '' ) . overview we are a leading provider of integrated software , data and analytics solutions to the mortgage and consumer loan , real estate and capital markets verticals . our solutions facilitate and automate many of the mission-critical business processes across the homeownership lifecycle . we are committed to being a premier business partner that clients rely on to achieve their strategic goals , realize greater success and better serve their customers by delivering best-in-class software , services and insights with a relentless commitment to excellence , innovation , integrity and leadership . we have market-leading software solutions combined with comprehensive real estate data and extensive analytic capabilities . our solutions are utilized by u.s. mortgage loan originators and servicers , as well as other financial institutions , investors and real estate professionals , to support mortgage lending and servicing operations , analyze portfolios and properties , operate more efficiently , meet regulatory compliance requirements and mitigate risk . we believe the breadth and depth of our comprehensive end-to-end , integrated solutions and the insight we provide to our clients differentiate us from other software providers and position us particularly well for evolving opportunities . we have served the mortgage loan and real estate industries for over 55 years and utilize this experience to design and develop solutions that fit our clients ' ever-evolving needs . our proprietary software solutions and data and analytics capabilities reduce manual processes , improve compliance and quality , mitigate risk and deliver significant cost savings to our clients . our scale allows us to continually and cost-effectively invest in our business in order to meet industry requirements and maintain our position as an industry-standard platform for mortgage loan market participants . 26 the table below summarizes the number of active first and second lien mortgage loans on our mortgage loan servicing software solution and the related market data , reflecting our leadership in the mortgage loan servicing software solutions market ( in millions ) : replace_table_token_8_th _ ( 1 ) according to the black knight mortgage monitor reports as of december 31 , 2019 and 2018 for u.s. first lien mortgage loans . ( 2 ) according to the december 2019 and october 2018 equifax national consumer credit trends reports as of september 30 , 2019 and 2018 , respectively , for u.s. second lien mortgage loans . our business is organized into two segments : software solutions - offers software and hosting solutions that support loan servicing , loan origination and settlement services . data and analytics - offers data and analytics solutions to the mortgage loan , real estate and capital markets verticals . these solutions include property ownership data , lien data , servicing data , automated valuation models , collateral risk scores , behavioral models , a multiple listing service solution and other data solutions . we offer our solutions to a wide range of clients across the mortgage and consumer loan , real estate and capital markets verticals . the quality and breadth of our solutions contribute to the long-standing nature of our relationships with our clients , the majority of whom enter into long-term contracts across multiple products that are embedded in their mission critical workflow and decision processes , particularly in the software solutions segment . given the contractual nature of our revenues and stickiness of our client relationships , our revenues are highly visible and recurring in nature . due to our integrated suite of solutions and our scale , we are able to drive significant operating leverage , which we believe enables our clients to operate more efficiently while allowing us to generate strong margins and cash flows . recent developments investments in unconsolidated affiliates on february 8 , 2019 , we completed our investment in d & b of $ 375.0 million through our investment in star parent , the indirect parent of d & b ( the `` february 2019 d & b investment '' ) for an economic ownership interest of approximately 18.1 % . this investment was funded by a borrowing on our revolving credit facility . on july 1 , 2019 , we invested an additional $ 17.6 million in star parent ( together with the february 2019 d & b investment , collectively , the “ d & b investment ” ) in exchange for our pro-rata share of additional limited partner interests issued by star parent related to d & b 's acquisition of lattice engines , inc. our net earnings for the year ended december 31 , 2019 include our equity in losses of star parent for the period from february 8 , 2019 to december 31 , 2019 . the audited consolidated financial statements of star parent and its subsidiaries are expected to be filed as an amendment to this annual report on form 10-k within 90 days after december 31 , 2019. refer to note 4 to the notes to consolidated financial statements for additional information related to our d & b investment . story_separator_special_tag 28 regulatory requirements there continues to be a high level of legislative and regulatory focus on consumer protection practices . as a result , federal and state governments have enacted various new laws , rules and regulations . this has led banks and other lenders to seek software solutions that assist them in satisfying their regulatory compliance obligations in the face of a changing regulatory environment . we have developed solutions that target this need , which has resulted in additional revenues . the cfpb has issued guidance that applies to `` supervised service providers , '' which the cfpb has defined to include service providers , like us , to cfpb-supervised banks and non-banks . in addition , the dodd-frank wall street reform and consumer protection act of 2010 ( the `` dodd-frank act '' ) contains the mortgage reform and anti-predatory lending act that imposes additional requirements on lenders and servicers of residential mortgage loans . future legislative or regulatory changes are difficult to predict , and new laws or regulations that may be implemented by the cfpb or other regulatory bodies may require us to change our business practices or incur increased costs to comply . critical accounting policies and estimates our discussion and analysis of our financial condition and results of operations is based upon audited consolidated financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles ( `` gaap '' ) . the preparation of these consolidated financial statements requires management to make estimates , judgments and assumptions that affect the reported amounts of assets and liabilities and disclosures with respect to contingent liabilities and assets at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods . certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates . by their nature , these judgments are subject to an inherent degree of uncertainty . on an ongoing basis , we evaluate our estimates including those related to revenue recognition , goodwill and other intangible assets and computer software . these judgments are based on our historical experience , terms of our existing contracts , our evaluation of trends in the industry , information provided by our clients and information available from outside sources as appropriate . our actual results may differ from those estimates . see note 2 to the notes to consolidated financial statements for additional description of the significant accounting policies that have been followed in preparing our consolidated financial statements . the accounting policies described below are those we consider to be the most critical to an understanding of our financial condition and results of operations and that require the most complex and subjective management judgment . revenue recognition we recognize revenues in accordance with financial accounting standards board ( `` fasb '' ) accounting standards codification ( `` asc '' ) topic 606 , revenue from contracts with customers ( `` asc 606 '' ) . at times , revenue recognition requires significant judgment , especially for our complex arrangements that include multiple performance obligations , or deliverables , such as arrangements that include the implementation of several software solutions over a period of time as well as post-implementation subscription fees and support for those solutions . the amount of revenues we recognize in a particular period depends on the value we allocate to the products and services delivered during that period . changes to these estimates could materially affect the amount of revenues reflected in our consolidated results of operations . our critical accounting estimates for revenue recognition relate to ( i ) identifying performance obligations within the arrangement , including whether those obligations are distinct or should be combined ; ( ii ) determining the standalone selling price ( `` ssp '' ) for each performance obligation ; and ( iii ) determining the effect of contract modifications . delivery of our primary software solutions is often considered a distinct performance obligation ; however , certain agreements that include complex , proprietary implementation-related professional services require judgment to determine if the software solution and related implementation professional services should be combined into one performance obligation . the ssp for many of our solutions and services is based on observable selling prices . however , when observable selling prices are not available , judgment and analysis is required to establish an estimated ssp through consideration of all reasonably available information , including market conditions , demands , trends , our specific factors and information about the client or class of client . the adjusted market approach is generally used when observable inputs are not available or limited . contract modifications require judgment to determine if the modification should be accounted for as ( i ) a separate contract , ( ii ) the termination of the original contract and creation of a new contract or ( iii ) a cumulative catch-up adjustment to the original contract . when evaluating contract modifications , we must identify the performance obligations of the modified contract and determine both the allocation of revenues to the remaining performance obligations and the period of recognition for each identified performance obligation . computer software computer software includes the fair value of software acquired in business combinations , purchased software and capitalized software development costs . as of december 31 , 2019 , computer software , net of accumulated amortization , was $ 406.0 million . 29 software acquired in business combinations is recorded at fair value and amortized using the straight-line method over the estimated useful life . purchased software is recorded at cost and amortized using the straight-line method over its estimated useful life . internal development costs are accounted for in accordance with either asc topic 985 , software , subtopic 20 , costs of software to be sold , leased , or marketed or asc 350 , subtopic 40 , internal-use software .
| segment financial results revenues the following table sets forth revenues by segment for the periods presented ( in millions ) : replace_table_token_15_th _ ( 1 ) revenues for corporate and other represent deferred revenue purchase accounting adjustments recorded in accordance with gaap . software solutions revenues were $ 962.0 million in 2018 compared to $ 904.5 million in 2017 , an increase of $ 57.5 million , or 6 % . our servicing software solutions revenues increased 7 % , or $ 52.5 million , primarily driven by loan growth on msp ® from new and existing 35 clients , which increased 4.3 % to 34.4 million average loans , an increase in our average revenue per loan and cross-sales to existing clients . our origination software solutions revenues increased 3 % , or $ 5.0 million , primarily driven by growth in our loan origination system solutions and a software license fee in our lending solutions business , partially offset by the effect of lower volumes on our exchange and elending platforms primarily as a result of the 26 % decline in refinancing originations as reported by the mortgage bankers association . data and analytics revenues were $ 154.5 million in 2018 compared to $ 151.6 million in 2017 , an increase of $ 2.9 million , or 2 % . the increase was primarily driven by growth in our property data and multiple listing service businesses , partially offset by upfront revenues from long-term strategic license deals in 2017. ebitda and ebitda margin the following tables set forth ebitda ( in millions ) and ebitda margin by segment for the periods presented : replace_table_token_16_th replace_table_token_17_th software solutions ebitda was $ 567.2 million in 2018 compared to $ 516.5 million in 2017 , an increase of $ 50.7 million , or 10 % , with an ebitda margin of 59.0 % , an increase of 190 basis points from the prior year .
| 7,974 |
the impact of the errors to the previous statements of operations , balance sheets and statements of cash flows has been detailed in the tables below . a description of the nature of the errors follows . 85 index to financial statements magnachip semiconductor corporation and subsidiaries notes to consolidated financial statements ( continued ) ( tabular dollars in thousands , except share data ) revenue recognition sales through distributors the largest portion story_separator_special_tag the following discussion and analysis should be read in conjunction with the audited consolidated financial statements and unaudited consolidated interim financial statements , together in each case with the related notes , included elsewhere in this report . this discussion and analysis contains , in addition to historical information , forward-looking statements that include risks and uncertainties . our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors , including those set forth under the heading risk factors and elsewhere in this report . see part i special note regarding forward looking statements elsewhere in this report . restatement of consolidated financial statements as discussed below and in item 8. financial statements and supplementary data notes to consolidated financial statements note 2. restatement of consolidated financial statements , we have restated our previously issued audited consolidated financial statements for the fiscal years ended december 31 , 2012 and 2011. the financial information that has been previously filed or otherwise reported for these periods is superseded by the information in this report , and the financial statements and related financial information contained in previously filed reports , including the related opinions of our independent registered public accounting firm , press releases , communications and statements by management related thereto , should no longer be relied upon . accordingly , the management 's discussion and analysis of financial condition and results of operations set forth below reflects the effects of the restatement . as part of the audit of the financial statements for inclusion in our 2013 form 10-k , it was determined that revenue on certain transactions was incorrectly recognized in our consolidated financial statements for the years ended december 31 , 2012 and 2011. we filed a current report on form 8-k with the sec on march 11 , 2014 disclosing our audit committee 's conclusion that certain of our previously issued annual audited and interim unaudited financial statements contained in our historical annual reports on form 10-k and quarterly reports on form 10-q should no longer be relied upon and should be restated . the impact of the restatement on our consolidated financial statements is detailed in item 8. financial statements and supplementary data notes to consolidated financial statements note 2. restatement of consolidated financial statements in this report . as a result of the errors identified during the restatement , management identified material weaknesses in our internal control over financial reporting and concluded that our disclosure controls and procedures were not effective as of december 31 , 2013. these weaknesses , an evaluation of the effectiveness of our disclosure controls and procedures and our remediation plans related thereto are more fully described in item 9a . controls and procedures in part ii of this report . overview we are a korea-based designer and manufacturer of analog and mixed-signal semiconductor products for high-volume consumer , computer and communication applications . we believe we have one of the broadest and deepest analog and mixed-signal semiconductor technology platforms in the industry , supported by our 30-year operating history , large portfolio of approximately 3,167 registered novel patents and 134 pending novel patent applications and extensive engineering and manufacturing process expertise . our business is comprised of three key business lines : display solutions , power solutions and semiconductor manufacturing services . our display solutions products include display drivers that cover a wide range of flat panel displays and multimedia devices . our power solutions products include discrete and integrated circuit solutions for power management in high-volume consumer , computer , communication and industrial applications . our semiconductor manufacturing services provide specialty analog and mixed-signal foundry services for fabless semiconductor companies that serve the consumer , computing and wireless end markets . our wide variety of analog and mixed-signal semiconductor products and manufacturing services combined with our deep technology platform allow us to address multiple high-growth end markets and to rapidly develop and introduce new products and services in response to market demands . our design center and substantial manufacturing operations in korea place us at the core of the global consumer electronics supply chain . we believe this enables us to quickly and efficiently respond to our customers ' needs and allows us to better serve and capture additional demand from existing and new customers . to maintain and increase our profitability , we must accurately forecast trends in demand for consumer electronics products that incorporate semiconductor products we produce . we must understand our customers ' needs as well as the likely end market trends and demand in the markets they serve . we must balance the likely manufacturing utilization demand of our product businesses and foundry business to optimize our capacity utilization . we must also invest in relevant research and development activities and manufacturing capacity and purchase necessary materials on a timely basis to meet our customers ' demand while maintaining our target margins and cash flow . the semiconductor markets in which we participate are highly competitive . the prices of our products tend to decrease regularly over their useful lives , and such price decreases can be significant as new generations of products are introduced by us or our competitors . we strive to offset the impact of declining selling prices for existing products through cost reductions and the introduction of new products that command selling prices above the average selling price of our existing products . in addition , we seek to manage our inventories and manufacturing capacity so as to mitigate the risk of losses from product obsolescence . story_separator_special_tag of the 9,500,000 shares , 950,000 shares were newly issued by us and 8,550,000 shares were sold by selling stockholders . all outstanding depositary shares were automatically cancelled on april 24 , 2011 and the underlying shares of common stock were issued to the holders of such cancelled depositary shares . we received $ 12.4 million of proceeds from the issuance of the new shares of common stock after deducting underwriters ' discounts and commissions , and we did not receive any proceeds from the sale of shares of common stock offered by the selling stockholders . we incurred $ 10.8 million of magnachip ipo expenses that were recorded as decrease of additional paid-in capital in our consolidated balance sheets . prior to the magnachip ipo , magnachip semiconductor llc , a delaware limited liability company , was converted to magnachip semiconductor corporation , a delaware corporation . in connection with the corporate conversion , outstanding common units of magnachip semiconductor 46 index to financial statements llc were automatically converted into shares of common stock of magnachip semiconductor corporation , outstanding options to purchase common units of magnachip semiconductor llc were automatically converted into options to purchase shares of common stock of magnachip semiconductor corporation and outstanding warrants to purchase common units of magnachip semiconductor llc were automatically converted into warrants to purchase shares of common stock of magnachip semiconductor corporation , all at a ratio of one share of common stock for eight common units . on may 16 , 2011 , two of our wholly owned subsidiaries , magnachip semiconductor s.a. and magnachip semiconductor finance company , repurchased $ 35.0 million out of $ 250.0 million aggregate principal amount of our senior notes then outstanding at a price of 109.0 % from avenue . in connection with the may 2011 repurchase of the senior notes , the company recognized $ 4.1 million of loss on early extinguishment of senior notes , which consisted of $ 3.2 million from repurchase premium , $ 0.4 million from write-off of discounts , $ 0.2 million from write-off of debt issuance costs and $ 0.3 million from incurrence of direct legal and advisory service fees . on september 19 , 2011 , two of our wholly owned subsidiaries , magnachip semiconductor s.a. and magnachip semiconductor finance company , repurchased $ 11.3 million out of $ 215 million aggregate principal amount of our senior notes then outstanding at a price of 107.5 % . in connection with the september 2011 repurchase of the senior notes , we recognized $ 1.4 million of loss on early extinguishment of senior notes , which consisted of $ 0.9 million from repurchase premium , $ 0.1 million from write-off of discounts , $ 0.4 million from write-off of debt issuance costs . on october 7 , 2011 , our board adopted a stock repurchase program whereby we may , subject to prevailing market conditions and other factors , repurchase up to $ 35.0 million of our outstanding common stock . our board extended and increased the program by an additional $ 25.0 million in august 2012 , for a maximum aggregate repurchase amount under the original program of up to $ 60.0 million . on july 30 , 2013 , we announced that the board approved a new stock repurchase program under which we are authorized to repurchase up to $ 100.0 million of our common stock . the new stock repurchase program was effective august 5 , 2013 through december 15 , 2014 , and replaced the original stock repurchase program . the stock repurchase program did not require that we purchase a minimum amount of shares of our common stock and may be commenced , suspended , resumed or terminated at any time without notice . the timing and extent of any repurchases were dependent upon prevailing market conditions , the trading price of the company 's common stock and other factors , and subject to contractual restrictions and restrictions under applicable law and regulations . as of december 31 , 2013 , we had repurchased 6,578,765 shares of our common stock in the open market under these programs at an aggregate cost of $ 90.9 million . in march 2014 , the board suspended the stock repurchase program indefinitely pending the completion of the independent investigation , and the stock repurchase program expired by its terms on december 15 , 2014. subsequent to december 31 , 2013 , we did not repurchase any shares under the stock repurchase program . on may 1 , 2012 , we closed an underwritten registered public offering of 7,000,000 shares of our common stock owned by certain of our stockholders at a price per share of $ 11.40. we did not receive any proceeds from the sale of our common stock by the selling stockholders but paid certain expenses in connection with such secondary offering . on february 8 , 2013 , we closed an underwritten registered public offering of 5,750,000 shares of our common stock owned by certain of our stockholders at a price per share of $ 14.50. we did not receive any proceeds from the sale of our common stock by the selling stockholders but paid certain expenses in connection with such secondary offering . on july 18 , 2013 , we issued the 2021 notes , at a price of 99.5 % . interest on the 2021 notes accrues at a rate of 6.625 % per annum , payable semi-annually on january 15 and july 15 of each year , beginning on january 15 , 2014. we used net proceeds of the 2021 notes , together with cash on hand , to repay all of our then outstanding 10.5 % senior notes due april 15 , 2018 ( the 2018 notes ) , including applicable premium and accrued interest , and to pay related fees and expenses of the 2021 notes offering .
| results of operations the following table sets forth , for the periods indicated , certain information related to our operations , expressed in u.s. dollars and as a percentage of our net sales : replace_table_token_17_th 55 index to financial statements results of operationscomparison of years ended december 31 , 2013 and 2012 the following table sets forth consolidated results of operations for the years ended december 31 , 2013 and 2012 : replace_table_token_18_th net sales were $ 734.2 million for the year ended december 31 , 2013 , a $ 73.2 million , or 9.1 % , decrease compared to $ 807.3 million for the year ended december 31 , 2012. net sales declined in 2013 compared to fiscal year 2012 primarily as a result of significant decrease in revenue related to our display solutions line , which was offset by an increase in revenue related to our power solutions line as described below . display solutions . net sales from our display solutions line were $ 203.0 million for the year ended december 31 , 2013 , a $ 83.0 million , or 29.0 % , decrease compared to $ 285.9 million for the year ended december 31 , 2012. the decline in sales volume of our products , mainly related to large displays , contributed to a 44 % decline in revenue , partially offset by positive contribution of 14 % from the increase in average selling prices . the increase in sales of mobile display chips positively affected both sales volume and average selling prices . power solutions .
| 7,975 |
forward-looking statements include our expectations regarding product , services , and customer support revenue ; our expectations associated with evolving systems india and evolving systems u.k. , and short- and long-term cash needs . in some cases , words such as anticipates , expects , intends , plans , believes , estimates , variations of these words , and similar expressions are intended to identify forward-looking statements . the following discussion should be read in conjunction with , and is qualified in its entirety by , the consolidated financial statements and the notes thereto included elsewhere in this annual report on form 10-k. our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors , including those set forth in this section and in item 1a - risk factors. 17 overview evolving systems , inc. is a leading provider of software solutions and services to the wireless , wireline and cable markets . we maintain long-standing relationships with many of the largest wireline , wireless and cable companies worldwide . our customers rely on us to develop , deploy , enhance , maintain and integrate complex , reliable software solutions for a range of operations support systems ( oss ) . our activation solution is the leading packaged solution for activation in the wireless industry . we recognize revenue in accordance with the prescribed accounting standards for software revenue recognition under generally accepted accounting principles . as a result , our license fees and services revenue fluctuate from period to period as a result of the timing of revenue recognition on existing projects . recent developments we reported net income of $ 5.6 million , $ 32.3 million and $ 5.4 million for the years ended december 31 , 2012 , 2011 and 2010 , respectively . our ending backlog at december 31 , 2012 was $ 11.1 million , consisting of $ 6.7 million of license and services and $ 4.4 million of customer support compared to total backlog of $ 12.6 million at december 31 , 2011. during 2012 we sold our investments in marketable debt securities for approximately $ 17.8 million and we realized a gain on sale of approximately $ 0.9 million . we declared and paid a special cash dividend in the second and fourth quarters of 2012 , of $ 1.70 per share and $ 0.15 per share , respectively . during each of the first , third and fourth quarters of 2012 , we declared and paid a cash dividend of $ 0.05 per share . we have operations in foreign countries where the local currency is used to prepare the financial statements which are translated into our reporting currency , u.s. dollars . changes in the exchange rates between these currencies and our reporting currency are partially responsible for some of the changes from period to period in our financial statement amounts . the majority of the changes in 2012 and 2011 are a result of the u.s. dollar strengthening on average versus the british pound sterling . the chart below summarizes what the effects on our revenue and expenses would be on a constant currency basis . the constant currency basis assumes that the exchange rate was constant for the periods presented ( in thousands ) . replace_table_token_4_th the net effect of our foreign currency translations for the year ended december 31 , 2012 was a $ 0.5 million decrease in revenue and a $ 0.5 million decrease in operating expenses versus the year ended december 31 , 2011. the net effect of our foreign currency translations for the year ended december 31 , 2011 was a $ 0.6 million increase in revenue and a $ 0.5 million increase in operating expenses versus the year ended december 31 , 2010 . 18 story_separator_special_tag style= '' font-size:10.0pt ; '' > product development expenses remained at $ 2.5 million for the years ended december 31 , 2011 and the year ended december 31 , 2010. as a percentage of total revenue , product development expenses increased to 13 % in 2011 from 11 % in 2010. the increase as a percentage of total revenue is due to lower revenue during the period . depreciation depreciation expense consists of depreciation of long-lived property and equipment . depreciation expenses were approximately $ 0.3 million for the years ended december 31 , 2012 and 2011. as a percentage of revenue , depreciation expense decreased to 1 % for the year ended december 31 , 2012 from 2 % for the year ended december 31 , 2011. the decrease as a percentage of total revenue is primarily due to increased revenue during the period . depreciation expenses were approximately $ 0.3 million for the years ended december 31 , 2011 and 2010. as a percentage of revenue , depreciation expense remained at 2 % for the years ended december 31 , 2011 and 2010. amortization amortization expense consists of amortization of identifiable intangibles related to our acquisition of evolving systems u.k. amortization expense decreased 29 % , to $ 0.4 million for the year ended december 31 , 2012 from $ 0.6 million for the year ended december 31 , 2011. the decrease in amortization expense was due to certain intangible assets becoming fully amortized during 2011. as a percentage of revenue , amortization expense decreased to 2 % for the year ended december 31 , 2012 from 3 % for the year ended december 31 , 2011. the decrease of amortization expense as a percentage of total revenue is due to increased revenues during the period and the aforementioned decrease of expense . story_separator_special_tag the deferred tax benefit was related primarily to the partial release of our valuation allowance on our domestic deferred tax assets during the second quarter of 2011 as a result of the anticipated gain on numbering solutions business which closed in the third quarter of 2011. we also had a deferred tax benefit related to the release of our valuation allowance on our tax asset from our indian operations as we began to utilize mat payments made during our tax holiday . these mat payments can be applied toward future taxes payable since the tax holiday expired on march 31 , 2011. in addition , we had a tax benefit related to intangible assets from our u.k.-based operations . the income tax benefit of $ 0.4 during the year ended december 31 , 2010 consisted of current tax expense of $ 0.3 million offset by a deferred tax benefit of $ 0.7 million . the current tax expense consists of income tax from our u.k.-based operations , unrecoverable foreign withholding tax in the u.s. and mat from our indian operations . the deferred tax benefit was related to intangible assets from our u.k.-based operations and losses from continuing operations in the u.s. in conjunction with the acquisition of evolving systems u.k. , we recorded certain identifiable intangible assets . since the amortization of these identifiable intangibles is not deductible for income tax purposes , we established a long-term deferred tax liability of $ 4.6 million at the acquisition date for the expected difference between what would be expensed for financial reporting purposes and what would be deductible for income tax purposes . as of december 31 , 2012 and 2011 , this deferred tax liability was $ 39,000 and $ 0.1 million , respectively . the deferred tax liability relates to evolving systems u.k. and has no impact on our ability to recover the u.s. based deferred tax assets . this deferred tax liability will be recognized as the identifiable intangibles are amortized . we use a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return . for those benefits to be recognized , a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities . as of december 31 , 2012 and 2011 , we had no liability for unrecognized tax benefits . we do not believe there will be any material changes to our unrecognized tax positions over the next twelve months . discontinued operations on july 1 , 2011 , we completed the sale of our numbering solutions business for $ 39.4 million . during the third quarter of 2011 , we recorded a $ 30.5 million gain on the asset disposition , net of taxes . the results of continuing operations were reduced by the revenue and costs associated with the business which are included in the income from discontinued operations , net of tax , in our consolidated statements of operations . 24 financial condition our working capital position of $ 13.7 million at december 31 , 2012 reflects an increase of $ 2.0 million from our working capital position of $ 11.7 million at december 31 , 2011. our working capital position increased at december 31 , 2012 despite $ 22.6 million of cash dividends partly paid from cash and partly from the proceeds from the sale of $ 16.5 million of long-term investments not accrued as of december 31 , 2011. the increase is primarily related to an increase in our contract receivables and unbilled work-in-progress balances and a reduction in our deferred revenue balance . liquidity and capital resources we have historically financed operations through cash flows from operations as well as debt and equity transactions . at december 31 , 2012 , our principal sources of liquidity were $ 8.8 million in cash and cash equivalents , $ 4.8 million in contract receivables , net of allowances and $ 5.0 million of unused availability under our revolving credit facility . net cash provided by ( used in ) operating activities for the year ended december 31 , 2012 , 2011 and 2010 was ( $ 0.2 ) million , $ 4.9 million and $ 5.8 million , respectively . the decrease in cash provided by operating activities for the year ended december 31 , 2012 was due to an increase in unbilled work-in-progress , a decrease in unearned revenue partially offset by a decrease in prepaid and other assets . net cash provided by ( used in ) continuing operating activities was ( $ 0.2 ) million , ( $ 1.4 ) million and $ 14,000 for the years ended december 31 , 2012 , 2011 and 2010 , respectively . the decrease in net cash used by continuing operating activities for the year ended december 31 , 2012 was primarily due to an increase in net income coupled by a decrease in accounts payable , accrued liabilities and prepaid and other assets , partially offset by an increase in contract receivables , unbilled work-in-progress and a decrease in unearned revenue . the decrease in cash provided by operating activities for the year ended december 31 , 2011 compared to 2010 was due to a decrease in accounts payable and accrued liabilities and an increase in prepaid and other assets , partially offset by an increase in contract receivables . net cash provided by ( used in ) investing activities was $ 17.8 million , $ 20.1 million and ( $ 0.4 ) million for the years ended december 31 , 2012 , 2011 and 2010 , respectively . the decrease in cash provided by investing activities for the year ended december 31 , 2012 was related to the sale of long term marketable securities compared to the asset sale , partially offset by the purchase of investments in 2011. during 2012 , 2011 and 2010 , we purchased $ 79,000 , $ 90,000 and $ 0.3 million in property and equipment to support operations , respectively .
| results of operations the following table presents our consolidated statements of operations in comparative format . replace_table_token_5_th 19 the following table presents our consolidated statements of operations reflected as a percentage of total revenue . replace_table_token_6_th 20 revenue revenue is comprised of license fees and services and customer support . license fees and services revenue represent the fees we receive from the licensing of our software products and those services directly related to the delivery of the licensed product as well as integration services and time and materials work . customer support revenue includes annual support fees , recurring maintenance fees , minor product upgrades and warranty fees . warranty fees are typically bundled with a license sale and the related revenue , based on vendor specific objective evidence ( vsoe ) , is deferred and recognized ratably over the warranty period . license fees and services license fees and services revenue increased 80 % , or $ 7.8 million to $ 17.6 million for the year ended december 31 , 2012 compared to $ 9.8 million for the year ended december 31 , 2011. the increase in license fee and services revenue is due to growth in dynamic sim allocation ( dsa ) and tertio service activation ( tsa ) revenues of $ 5.3 million and $ 2.5 million , respectively . license fees and services revenue decreased 33 % , or $ 4.8 million to $ 9.8 million for the year ended december 31 , 2011 compared to $ 14.6 million for the year ended december 31 , 2010. the decrease is due to declines in dsa and tsa revenues of $ 2.7 million and $ 2.1 million , respectively .
| 7,976 |
74 under all of these valuation techniques , we estimate operating results of the companies in which we invest , including earnings before interest expense , income tax expense , depreciation and amortization ( ebitda ) and free cash flow . these estimates utilize unobservable inputs such as historical operating results , which may be unaudited , and projected operating results , which will be based on operating assumptions for such company . investment performance data utilized will be the most recently available as of the measurement date which in many cases may reflect up to a one quarter lag in information . these estimates will be sensitive to changes in assumptions specific to such company as well as general assumptions for the industry . other unobservable inputs utilized in the valuation techniques outlined above include : discounts for lack of marketability , selection of publicly traded companies , selection of similar precedent transactions , selected ranges for valuation multiples and expected required rates of return ( discount rates ) . revenue recognition we record interest income on an accrual basis to the extent that we expect to collect such amounts . for loans and debt securities with contractual pik interest , which represents contractual interest accrued and added to the principal balance , we generally will not accrue pik interest for accounting purposes if the portfolio company valuation indicates that such pik interest is not collectible . we do not accrue as a receivable interest on loans and debt securities for accounting purposes if we have reason to doubt our ability to collect such interest . oids , market discounts or premiums are accreted or amortized using the effective interest method as interest income . we record prepayment premiums on loans and debt securities as interest income . net realized gains or losses and net change in unrealized appreciation or depreciation we will measure net realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment , without regard to unrealized appreciation or depreciation previously recognized . net change in unrealized appreciation or depreciation will reflect the change in portfolio investment values during the reporting period , including any reversal of previously recorded unrealized appreciation or depreciation , when gains or losses are realized . other income other income may include income such as consent , waiver , amendment , unused , syndication and prepayment fees associated with our investment activities as well as any fees for managerial assistance services rendered by us to the portfolio companies . such fees are recognized as income when earned or the services are rendered . we may receive fees for guaranteeing the outstanding debt of a portfolio company . such fees are amortized into other income over the life of the guarantee . pik interest we may have investments in our portfolio that contain a pik interest provision . any pik interest will be added to the principal balance of such investments and is recorded as income , if the portfolio company valuation indicates that such pik interest is collectible . in order to maintain our status as a ric , substantially all of this income must be included in the amounts paid out by us to stockholders in the form of dividends , even if we have not collected any cash . organization and offering expenses in general , we may not deduct organizational expenses , and an election may be made by us to amortize organizational expenses over at least a 180-month period for tax purposes . for gaap purposes , offering costs are amortized over a twelve-month period beginning with the commencement of operations . 75 u.s. federal income taxes we intend to elect to be taxed as a ric under subchapter m of the code . as a ric , we generally will not have to pay corporate-level federal income taxes on any net ordinary income or net capital gains that we distribute to our stockholders from our tax earnings and profits . to obtain and maintain our ric tax treatment , we must meet certain source-of-income and asset diversification requirements as well as distribute at least the sum of 90 % of our investment company taxable income in respect of each taxable year , and 90 % of our net tax-exempt interest income , if any , to the holders of our shares . see item 1. businessmaterial u.s. federal income tax considerations . contractual obligations as of december 31 , 2020 , we were not a party to any contractual obligations as we had not yet begun operations . see recent developments for discussion of our lsa and credit agreement that we entered into subsequent to december 31 , 2020. related party transactions the following were entered into following our formation transactions . investment advisory agreement . on february 5 , 2021 , we entered into the investment advisory agreement with our advisor . our advisor will agree to serve as our investment advisor in accordance with the terms of our investment advisory agreement . payments under our investment advisory agreement in each reporting period will consist of the base management fee equal to a percentage of the fair market value of investments , including , in each case , assets purchased with borrowed funds or other forms of leverage , but excluding cash , u.s. government securities and commercial paper instruments maturing within one year of purchase as well as an incentive fee based on our performance . for services rendered under the investment advisory agreement , we will pay a base management fee quarterly in arrears to our advisor based on the of the fair market value of our investments including , in each case , assets purchased with borrowed funds or other forms of leverage , but excluding cash , u.s. government securities and commercial paper instruments maturing within one year of purchase . we will story_separator_special_tag 74 under all of these valuation techniques , we estimate operating results of the companies in which we invest , including earnings before interest expense , income tax expense , depreciation and amortization ( ebitda ) and free cash flow . these estimates utilize unobservable inputs such as historical operating results , which may be unaudited , and projected operating results , which will be based on operating assumptions for such company . investment performance data utilized will be the most recently available as of the measurement date which in many cases may reflect up to a one quarter lag in information . these estimates will be sensitive to changes in assumptions specific to such company as well as general assumptions for the industry . other unobservable inputs utilized in the valuation techniques outlined above include : discounts for lack of marketability , selection of publicly traded companies , selection of similar precedent transactions , selected ranges for valuation multiples and expected required rates of return ( discount rates ) . revenue recognition we record interest income on an accrual basis to the extent that we expect to collect such amounts . for loans and debt securities with contractual pik interest , which represents contractual interest accrued and added to the principal balance , we generally will not accrue pik interest for accounting purposes if the portfolio company valuation indicates that such pik interest is not collectible . we do not accrue as a receivable interest on loans and debt securities for accounting purposes if we have reason to doubt our ability to collect such interest . oids , market discounts or premiums are accreted or amortized using the effective interest method as interest income . we record prepayment premiums on loans and debt securities as interest income . net realized gains or losses and net change in unrealized appreciation or depreciation we will measure net realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment , without regard to unrealized appreciation or depreciation previously recognized . net change in unrealized appreciation or depreciation will reflect the change in portfolio investment values during the reporting period , including any reversal of previously recorded unrealized appreciation or depreciation , when gains or losses are realized . other income other income may include income such as consent , waiver , amendment , unused , syndication and prepayment fees associated with our investment activities as well as any fees for managerial assistance services rendered by us to the portfolio companies . such fees are recognized as income when earned or the services are rendered . we may receive fees for guaranteeing the outstanding debt of a portfolio company . such fees are amortized into other income over the life of the guarantee . pik interest we may have investments in our portfolio that contain a pik interest provision . any pik interest will be added to the principal balance of such investments and is recorded as income , if the portfolio company valuation indicates that such pik interest is collectible . in order to maintain our status as a ric , substantially all of this income must be included in the amounts paid out by us to stockholders in the form of dividends , even if we have not collected any cash . organization and offering expenses in general , we may not deduct organizational expenses , and an election may be made by us to amortize organizational expenses over at least a 180-month period for tax purposes . for gaap purposes , offering costs are amortized over a twelve-month period beginning with the commencement of operations . 75 u.s. federal income taxes we intend to elect to be taxed as a ric under subchapter m of the code . as a ric , we generally will not have to pay corporate-level federal income taxes on any net ordinary income or net capital gains that we distribute to our stockholders from our tax earnings and profits . to obtain and maintain our ric tax treatment , we must meet certain source-of-income and asset diversification requirements as well as distribute at least the sum of 90 % of our investment company taxable income in respect of each taxable year , and 90 % of our net tax-exempt interest income , if any , to the holders of our shares . see item 1. businessmaterial u.s. federal income tax considerations . contractual obligations as of december 31 , 2020 , we were not a party to any contractual obligations as we had not yet begun operations . see recent developments for discussion of our lsa and credit agreement that we entered into subsequent to december 31 , 2020. related party transactions the following were entered into following our formation transactions . investment advisory agreement . on february 5 , 2021 , we entered into the investment advisory agreement with our advisor . our advisor will agree to serve as our investment advisor in accordance with the terms of our investment advisory agreement . payments under our investment advisory agreement in each reporting period will consist of the base management fee equal to a percentage of the fair market value of investments , including , in each case , assets purchased with borrowed funds or other forms of leverage , but excluding cash , u.s. government securities and commercial paper instruments maturing within one year of purchase as well as an incentive fee based on our performance . for services rendered under the investment advisory agreement , we will pay a base management fee quarterly in arrears to our advisor based on the of the fair market value of our investments including , in each case , assets purchased with borrowed funds or other forms of leverage , but excluding cash , u.s. government securities and commercial paper instruments maturing within one year of purchase . we will
| overview kayne anderson bdc , llc was formed in may 2018 as a delaware limited liability company . we were formed to make investments in middle-market companies and commenced operations on february 5 , 2021. on this same date , prior to our election to be regulated as a bdc under the 1940 act , we completed a conversion from a delaware limited liability company into a delaware corporation and kayne anderson bdc , inc. succeeded to the business of kayne anderson bdc , llc . we are an externally managed , closed-end , non-diversified management investment company that elected to be regulated as a bdc under the 1940 act . in addition , for u.s. federal income tax purposes , we intend to elect to be treated as a ric under subchapter m of the code . our investment objective is to generate current income and , to a lesser extent , capital appreciation primarily through debt investments in middle-market companies . we define middle-market companies as u.s.-based companies that , in general , generate between $ 10 million and $ 150 million of annual earnings before interest , taxes , depreciation and amortization , or ebitda . we refer to companies that generate between $ 10 million and $ 50 million of annual ebitda as core middle-market companies and companies that generate between $ 50 million and $ 150 million of annual ebitda as upper middle-market companies. we intend to achieve our investment objective by investing primarily in first lien senior secured , unitranche and split-lien loans to privately held middle-market companies . depending on market conditions , we expect that between 80 % and 90 % of our portfolio ( including investments purchased with proceeds from borrowings ) will be invested in first lien senior secured , unitranche and split-lien term loans . we expect that most of these investments will be in core middle market companies , with the remainder in upper middle market companies .
| 7,977 |
you should read the following discussion and analysis of our financial condition and results of operations together with the section entitled “ selected financial data ” and our audited financial statements and related notes included elsewhere in this report . this discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties , such as our plans , objectives , expectations , intentions and beliefs . our actual results could differ materially from those discussed in these forward-looking statements . factors that could cause or contribute to such differences include , but are not limited to , those identified below and those discussed in the section entitled “ risk factors ” included elsewhere in this report . overview we are a biotechnology company engaged in researching and developing therapeutics to extend healthspan by slowing , halting or reversing diseases of aging . our initial focus is on creating senolytic medicines to selectively eliminate senescent cells and thereby treat age-related diseases , such as musculoskeletal , ophthalmologic and pulmonary diseases . in june 2019 , we reported top-line results from our phase 1 clinical study of ubx0101 , our lead product candidate , in patients with moderate-to-severe osteoarthritis , or oa , of the knee . the study demonstrated that ubx0101 was well-tolerated . dose-dependent improvement in several clinical measures , including pain and function , as well as modulation of multiple senescence-associated secretory phenotype ( sasp ) factors and disease-related biomarkers , was observed after a single dose of ubx0101 . in the fourth quarter of 2019 , we initiated a phase 2 study of ubx0101 in patients with painful , moderate-to-severe oa of the knee . as of mid-february 2020 , this study was fully enrolled and we expect top-line results for 12- and 24-week endpoints in the second half of 2020. the study is randomized , double-blind , and placebo-controlled and will evaluate three doses ( 0.5 mg , 2.0 mg and 4.0 mg ) of ubx0101 administered via a single intra-articular injection . the primary measure is an assessment of pain at 12 weeks using the womac-a instrument . secondary measures will include safety and tolerability , pain ( by nrs ) and function ( by womac-c ) at 12 weeks , as well as these same measures at 24 weeks . in the first quarter of 2020 , we initiated a phase 1b study of ubx0101 in patients with painful , moderate-to-severe oa of the knee to evaluate the safety , tolerability and initial effectiveness of both a higher dose and repeat doses . we intend to enroll approximately 36 patients and expect top-line results for 12- and 24-week endpoints from the second half of 2020 and the first half of 2021 , respectively . this phase 1b study is randomized , double-blind , and placebo-controlled and will evaluate an 8.0 mg dose of ubx0101 administered via a single intra-articular injection as well as two 4.0 mg doses of ubx0101 administered via intra-articular injection one month apart . the primary measures will be safety and tolerability . secondary measures will include pain ( using the womac-a and nrs instruments ) and function ( by womac-c ) at 12 weeks , as well as similar measures at 24 weeks . our lead ophthalmology candidates , ubx1325 and ubx1967 , are currently in the final phases of investigational new drug , or ind , -enabling non-clinical toxicology studies . both senolytic molecules are inhibitors of particular members of the bcl-2 family of apoptosis regulatory proteins which have shown distinct pharmacokinetic profiles in preclinical studies . we intend to complete ind-enabling studies for both molecules prior to selecting the first molecule to advance to a first-in-human study to explore safety and tolerability of this novel mechanism of action for age-related eye diseases . we expect to initiate a phase 1 safety study for this program in the second half of 2020 and receive initial results from this study in 2021. the overall clinical program is directed at multiple age-related diseases of the eye , such as age-related macular degeneration , diabetic retinopathy and diabetic macular edema . since the commencement of our operations , we have invested a significant portion of our efforts and financial resources in research and development activities , and we have incurred net losses each year since inception . our net losses were $ 82.2 million and $ 76.4 million for the years ended december 31 , 2019 and 2018 , respectively . we do not have any products approved for sale , and we have never generated any revenue from contracts with customers . as of december 31 , 2019 , we had an accumulated deficit of $ 245.5 million , and we do not 90 expect positive cash flows from operations in the foreseeable future . we expect to continue to incur net operating losses for at least the next several years as we continue our research and development efforts , advance our drug candidates through preclinical and clinical development , seek regulatory approval , prepare for and , if approved , proceed to commercialization . we entered into a lease agreement in february 2019 for our new corporate headquarters , office and laboratory space in south san francisco , california . the lease agreement , which has an initial term of ten years , commenced in may 2019. pursuant to the lease agreement , the landlord provided us with a tenant improvement allowance of up to $ 7.8 million and will finance up to $ 2.9 million for additional tenant improvements subject to repayment provisions as described in the lease agreement . story_separator_special_tag fair value of contingent consideration certain of our license agreements include contingent consideration in the form of additional issuances of our common stock based on the achievement of certain milestones . for asset acquisitions , we assess whether such contingent consideration obligation meets the definition of a derivative and or can be equity classified , until such time that the contingency or equity classification criteria is met or expires . as of december 31 , 2019 , we have recorded a liability related to contingent consideration as the net settlement criteria of the definition of a derivative had been met and equity classification criteria had not been met . the derivative related to this contingent 92 consideration is measured at fair value as of each balance sheet date with the related change in fair value being reflected in operating results . gains or losses on contingent consideration expense is driven by changes in the estimated fair value of the liability , which is determined using a probability-weighted valuation approach model that reflects the probability and timing of future issuances of our common shares . interest income interest income is primarily related to interest earned on our marketable securities for the years ended december 31 , 2019 , 2018 and 2017. other income ( expense ) we hold an equity investment in a hong-kong-based clinical-stage biopharmaceutical company called ascentage pharma group international , or ascentage international . in october 2019 , ascentage international completed an initial public offering of shares of its common stock on the hong kong stock exchange . following the initial public offering , the underlying nature of our investment in ascentage international changed and met the definition of an investment in an equity security with a readily determinable fair value to be measured at fair value on a recurring basis , based on quoted stock price available on the hong kong stock exchange . other income/ ( expense ) includes changes in fair value of the investment in this equity security . story_separator_special_tag with partners , receiving research contributions , grants or other sources of financing to fund our operations . there can be no assurance that sufficient funds will be available to us on attractive terms or at all . if we are unable to obtain additional funding from these or other sources , it may be necessary to significantly reduce our rate of spending through reductions in staff and delaying , scaling back , or stopping certain research and development programs . insufficient liquidity may also require us to relinquish rights to drug candidates at an earlier stage of development or on less favorable terms than we would otherwise choose . since our inception , we have incurred significant losses and negative cash flows from operations . we have an accumulated deficit of $ 245.5 million through december 31 , 2019. we expect to incur substantial additional losses in the future as we conduct and expand our research and development activities . we believe that our existing cash , cash equivalents and marketable securities will be sufficient to enable us to fund our projected operations through at least the next 12 months . based on our current operating plans , we expect our existing capital resources will fund our planned operating expenses into the second half of 2021 , including through clinical data readouts from the phase 2 clinical study of ubx0101 we initiated in the fourth quarter of 2019 and , the higher dose and repeat dose phase 1b study of ubx0101 we initiated in the first quarter of 2020 , as well as initial data from phase 1 clinical study of one of our lead molecules in age-related eye disease . we have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect . because of the numerous risks and uncertainties associated with research , development and commercialization of biotechnology products , we are unable to estimate the exact amount of our operating capital requirements . our future funding requirements will depend on many factors , including , but not limited to : the scope , progress , results and costs of researching and developing ubx0101 , ubx132 , ubx1967 , or any other drug candidates , and conducting preclinical studies and clinical studies , including our ongoing phase 2 clinical study of ubx0101 , which we initiated in the fourth quarter of 2019 , the phase 96 1b clinical study of ubx0101 , which we initiate d in the first quarter of 2020 , and our planned initial clinical studies in our ophthalmolog y program ; the timing of , and the costs involved in , obtaining regulatory approvals for our lead drug candidates or any future drug candidates ; the number and characteristics of any additional drug candidates we develop or acquire ; the timing and amount of any milestone payments we are required to make pursuant to our license agreements ; the cost of manufacturing our lead drug candidates or any future drug candidates and any products we successfully commercialize ; the cost of building a sales force in anticipation of product commercialization ; the cost of commercialization activities if our lead drug candidates or any future drug candidates are approved for sale , including marketing , sales and distribution costs ; our ability to establish and maintain strategic collaborations , licensing or other arrangements and the financial terms of any such agreements , including the timing and amount of any future milestone , royalty or other payments due under any such agreement ; any product liability or other lawsuits related to our products ; the expenses needed to attract , hire and retain skilled personnel ; the costs associated with being a public company ; the costs involved in preparing , filing , prosecuting , maintaining , defending and enforcing our intellectual property portfolio ; and the timing , receipt and amount of sales of any future approved or cleared products , if any .
| results of operations comparison of the years ended december 31 , 2019 and 2018 the following table sets forth the significant components of our results of operations ( in thousands ) : replace_table_token_6_th research and development research and development expenses increased by $ 12.1 million , to $ 71.0 million for the year ended december 31 , 2019 from $ 58.9 million for the year ended december 31 , 2018. the increase was primarily due to increases of $ 2.3 million for personnel-related expenses , which was partially offset by a decrease of $ 1.1 million related to non-cash stock compensation expense , $ 6.7 million for outside research and development activities and $ 3.1 million in lab and facilities-related costs . general and administrative general and administrative expenses increased by $ 4.0 million , to $ 20.0 million for the year ended december 31 , 2019 from $ 16.0 million for the year ended december 31 , 2018. the increase was primarily due to increases of $ 3.4 million for personnel-related expenses , of which $ 2.5 million was related to non-cash stock 93 compensation expense , and $ 0 . 6 million in insurance -related expense partially offset by $ 0.5 million decrease in professional fees . change in fair value of contingent consideration change in fair value of contingent consideration reflects a decrease in the contingent consideration liability of $ 1.4 million for the year ended december 31 , 2019. the decrease in the fair value of contingent consideration was primarily due to changes in our stock price .
| 7,978 |
under the terms of the purchase and sale agreement , the company is not required to reimburse or otherwise compensate novo a/s through any means other than the agreed royalty entitlement . in addition , the company does not , under the terms of the purchase and sale agreement , have the right or obligation to prepay novo a/s in connection with a change of control of the company or otherwise . the proceeds from the first financing tranche under the purchase and sale agreement were recorded as a liability on the company 's balance sheet as of december 31 , 2013 , in accordance with asc 730. because there is a significant related party relationship between the company and novo a/s , the company is treating its obligation to make royalty payments under the purchase and sale agreement as an implicit obligation to repay the funds advanced by novo a/s . as the company makes royalty payments in 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 112 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 biopharmaceutical company specializing in the development of novel therapeutics to treat diseases of the back of the eye , with a focus on developing therapeutics for age-related macular degeneration , or amd . our most advanced product candidate is fovista , which is in phase 3 clinical development for use in combination with anti-vegf drugs that represent the current standard of care for the treatment of wet amd . we have completed one phase 1 and one phase 2b clinical trial of fovista administered in combination with the anti-vegf drug lucentis . we are also developing our product candidate zimura , with an initial focus on the treatment of patients with geographic atrophy , a severe form of dry amd . we have initiated a pivotal phase 3 clinical program for fovista , which consists of three separate phase 3 clinical trials to evaluate the safety and efficacy of fovista administered in combination with anti-vegf drugs for the treatment of wet amd compared to anti-vegf monotherapy . two of these trials are evaluating fovista in combination with lucentis and the other will evaluate fovista in combination with each of eylea or avastin . we plan to enroll a total of 1,866 patients at more than 225 centers internationally across the three trials . we have initiated enrollment in the two trials evaluating fovista administered in combination with lucentis . we expect to activate initial trial sites in the third trial in this phase 3 clinical program in the united states by the end of the first quarter of 2014. based on our estimates regarding patient enrollment , we expect to have initial , top-line data from our phase 3 clinical program for fovista available in 2016. if the results of this phase 3 clinical program are favorable , we plan to submit applications for marketing approval for fovista in both the united states and the european union before the end of 2016. we are planning to initiate additional phase 2 clinical trials further evaluating the potential benefit of fovista in wet amd , when administered in combination with anti-vegf drugs . we are also planning additional clinical trials to assess the potential therapeutic benefit of fovista in other ophthalmic conditions . we have retained the worldwide commercialization rights to fovista . we plan to initiate a phase 2/3 clinical trial to evaluate the safety and efficacy of zimura monotherapy in patients with geographic atrophy in late 2014 or early 2015. we are also developing zimura and fovista to be administered in combination with anti-vegf drugs for the treatment of a subpopulation of wet amd patients who do not respond adequately to treatment with anti-vegf monotherapy or for whom anti-vegf monotherapy fails and who are believed to have complement mediated inflammation . we plan to initiate a phase 2 clinical trial of zimura and fovista administered in combination with an anti-vegf drug in this second indication in 2015. we were incorporated and commenced active operations in early 2007. our operations to date have been limited to organizing and staffing our company , acquiring rights to product candidates , business planning , raising capital and developing fovista , zimura and our other product candidates . we acquired our rights to fovista from ( osi ) eyetech , inc. , or eyetech , in july 2007. the acquisition included an assignment of license rights and obligations under an agreement with archemix corp. we have licensed rights to our product candidate zimura from archemix corp. since inception , we have incurred significant operating losses . our net loss was $ 51.1 million for the year ended december 31 , 2013 , $ 14.6 million for the year ended december 31 , 2012 , and $ 18.6 million for the year ended december 31 , 2011. as of december 31 , 2013 , we had a deficit accumulated during the development stage of $ 183.1 million . story_separator_special_tag administered in combination with anti-vegf drugs , and in other ophthalmic diseases and conditions with unmet need , an additional planned clinical trial evaluating zimura for the treatment of geographic atrophy and an additional planned clinical trial evaluating zimura and fovista administered in combination with an anti-vegf drug for the treatment of anti-vegf resistant wet amd patients who are believed to have complement mediated inflammation , and for general corporate purposes and working capital . costs related to our clinical programs could exceed our expectations if we experience delays in our clinical trials , including because of the timing of our patient enrollment , the availability of drug supply for our clinical trials or for other reasons . our costs will also increase if we increase investigator fees for our clinical trials or decide to expand the scope of our clinical trials and programs , including , for example , by expanding the geographic mix of sites at which patients are enrolled , or to increase other corporate or licensing activities , or staffing . these costs will also increase if we decide to expand the scope of our clinical programs or increase other corporate or licensing activities or staffing . our current phase 3 clinical program for fovista is expected to continue through at least 2017 , and substantial expenditures to complete the phase 3 clinical program will be required after the receipt of initial , top-line data . moreover , we are at the early stages of formulating our clinical development plan for zimura . we expect the clinical development of zimura will continue for at least the next several 115 years . at this time , we can not reasonably estimate the remaining costs necessary to complete the clinical development of either fovista or zimura , complete process development and manufacturing scale-up activities associated with fovista and zimura and seek marketing approval for fovista or zimura , or the nature , timing or costs of the efforts necessary to complete the development of any other product candidate we may develop . the successful development of our product candidates is highly uncertain . this is due to the numerous risks and uncertainties associated with developing drugs , including the uncertainty of : the scope , rate of progress and expense of our research and development activities ; the potential benefits of our product candidates over other therapies ; our ability to market , commercialize and achieve market acceptance for any of our product candidates ; clinical trial results ; the terms and timing of regulatory approvals ; and the expense of filing , prosecuting , defending and enforcing patent claims and other intellectual property rights . a change in the outcome of any of these variables with respect to the development of fovista , zimura or any other product candidate could mean a significant change in the costs and timing associated with the development of that product candidate . for example , if regulatory authorities were to require us to conduct clinical trials beyond those which we currently anticipate will be required for the completion of clinical development of fovista or any other product candidate or if we experience significant delays in enrollment in any clinical trials , we could be required to expend significant additional financial resources and time on the completion of the clinical development . general and administrative expenses general and administrative expenses consist primarily of salaries and related costs for personnel , including share-based compensation expense , in our executive , finance and business development functions . other general and administrative expenses include facility costs and professional fees for legal , patent , consulting and accounting services . we anticipate that our general and administrative expenses will increase in future periods to support increases in our research and development and commercialization activities and as a result of increased headcount , including management personnel to support our clinical and manufacturing activities , expanded infrastructure , increased legal , compliance , accounting and investor and public relations expenses associated with being a public company and increased insurance premiums , among other factors . change in fair value of warrant liability in connection with our series a preferred stock financing and our venture debt financing , we issued warrants for the purchase of shares of our series a preferred stock and series b preferred stock . we determined that these warrants were financial instruments that could have required a transfer of assets because of the redemption features of the underlying preferred stock . we classified these warrants as liabilities that were re-measured to fair value at each balance sheet date , and we recorded the changes in the fair value of the warrant liability as other loss . upon completion of our initial public offering , or ipo , the underlying preferred stock was converted to common stock and the preferred stock warrants became exercisable for common stock . we re-measured the fair value of the warrant liability immediately prior to the completion of our ipo , and the fair value of the warrant liability at 116 that time was reclassified to additional paid-in capital . based on the initial public offering price of $ 22.00 per share , the fair value of the warrant liability that was reclassified to additional paid-in capital was $ 2.2 million . we recorded a related charge of approximately $ 1.2 million and $ 0.3 million as other loss in our results of operations for the years ended december 31 , 2013 and 2012 , respectively . the warrants were reclassified to stockholders ' equity upon the closing of our ipo . interest income our cash and cash equivalents are invested primarily in money market accounts , which generate a small amount of interest income . we expect to continue that investment philosophy as we obtain more financing proceeds . critical accounting policies and significant judgments and estimates our management 's discussion and analysis of our financial condition and results of operations is based on our financial statements , which we have prepared in accordance with u.s.
| results of operations comparison of years ended december 31 , 2013 and 2012 replace_table_token_11_th revenue we did not recognize any revenue for the year ended december 31 , 2013 or for the year ended december 31 , 2012. research and development expenses our research and development expenses were $ 33.2 million for the year ended december 31 , 2013 , an increase of $ 26.4 million compared to $ 6.8 million for the year ended december 31 , 2012. the increase was primarily due to milestone payments , manufacturing activity and clinical trial startup costs as we commenced our phase 3 clinical program for fovista in august 2013. general and administrative expenses our general and administrative expenses for the year ended december 31 , 2013 were $ 14.2 million , an increase of $ 7.3 million compared to $ 6.9 million for the year ended december 31 , 2012. the increase was primarily due to an increase in intellectual property related expenses , 122 professional services and consulting fees and personnel costs , including additional management and corporate staffing to support our public company infrastructure . interest expense interest expense for the year ended december 31 , 2013 was $ 1.5 million compared to $ 0.5 million for the year ended december 31 , 2012. the amounts in both 2013 and 2012 were related to interest associated with our venture debt facility that we entered into in june 2012 and paid off in may 2013. the related interest expense for the year ended december 31 , 2013 included a payment of $ 0.8 million that was required upon the earlier of the maturity date or the date of repayment of the venture debt facility . loss on extinguishment of debt in may 2013 , we repaid the outstanding balance on our venture debt facility .
| 7,979 |
recently issued accounting pronouncements in september 2009 , the financial accounting standards board ( fasb ) ratified the final consensus reached by the emerging issues 54 ncr corporation notes to consolidated financial statements— ( continued ) task force ( eitf ) that revised the authoritative guidance for revenue arrangements with multiple deliverables . the guidance addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and how the arrangement consideration should be allocated among the separate units of accounting . ncr adopted this guidance effective january 1 , 2011 and began applying it prospectively for new or materially story_separator_special_tag business overview ncr corporation is a leading global technology company that provides innovative products and services that enable businesses to connect , interact and transact with their customers and enhance their customer relationships by addressing consumer demand for convenience , value and individual service . our portfolio of self-service and assisted-service solutions serve customers in the financial services , retail , hospitality , travel and gaming and entertainment industries and include automated teller machines ( atms ) , self service kiosks and point of sale devices , as well as software applications that can be used by consumers to enable them to interact with businesses from their computer or mobile device . we also complement these product solutions by offering a complete portfolio of services to help customers design , deploy and support our technology tools . we also resell third-party networking products and provide related service offerings in the telecommunications and technology sectors . starting january 1 , 2011 , we began management of our business on a line of business basis , changing from the previous model of geographic business segments , and during 2011 , we had five operating segments : financial services , retail solutions , hospitality and specialty retail , entertainment and emerging industries . this change to our management system , and the resulting changes to our segment reporting for fiscal year 2011 and future periods , is further described in note 1 , “ description of business and significant accounting policies , ” of the notes to consolidated financial statements in item 8 of part ii of this report . each of our lines of business derives its revenues by selling products and services in each of the sales theaters in which ncr operates , except for entertainment , which currently operates primarily in the north america theater . our solutions are based on a foundation of long-established industry knowledge and consulting expertise , value-added software , hardware technology , global customer support services , and a complete line of business consumables and specialty media products . ncr 's reputation has been built upon over 127 years of providing quality products , services and solutions to our customers . at the heart of our customer and other business relationships is a commitment to acting responsibly , ethically and with the highest level of integrity . this commitment is reflected in ncr 's code of conduct , which is available on the corporate governance page of our website . 2011 overview as more fully discussed in later sections of this md & a , the following were significant themes and events for 2011 : revenue growth of approximately 13 % compared to full year 2010 23 gross margin improvement of approximately 90 basis points compared to full year 2010 continued realization of the benefits of our cost reduction initiatives continued growth of higher margin software and services offerings and improvements in revenue mix delivered differentiating solutions , such as our scalable deposit module and our aptra suite of software solutions acquired radiant systems , inc. during the third quarter of 2011 for a purchase price of approximately $ 1.2 billion created a strategic alliance with scopus tecnologia ltda . for atm manufacturing in brazil overview of strategic iniatives in 2011 , we continued to pursue our core strategic initiatives to provide maximum value to our stakeholders and we remain focused on these initiatives for 2012. during 2011 , we have streamlined our strategic focus through the acquisition of radiant , our alliance with scopus in brazil , the disposition of our healthcare assets as well as through the pending disposition of the entertainment business announced on february 6 , 2012. embedded in our core initiatives , we have an underlying set of strategic imperatives that align with our financial objectives for 2012 and beyond . these imperatives are to deliver disruptive innovation ; to emphasize the migration of our revenue to higher margin software and services revenue ; and to more fully enable our sales force with a consultative selling model which better leverages the innovation we are bringing to the market . these initiatives are summarized in more detail below : gain profitable share— we seek to optimize our investments in demand creation to increase ncr 's market share in areas with the greatest potential for profitable growth , which include opportunities in self-service technologies with our core financial services , retail and hospitality customers as well as the shift of the business model to focus on growth of higher margin software and services . we also seek to expand and strengthen our geographic presence and sales coverage in addition to penetrating adjacent single and multi-channel self-service solution segments . expand into emerging growth industry segments— we are focused on broadening the scope of our self-service solutions from our existing customers to expand these solution offerings to customers in newer industry-vertical markets including telecommunications and technology as well as travel and gaming . we expect to grow our business in these industries through integrated service offerings in addition to targeted acquisitions and strategic partnerships . build the lowest cost structure in our industry— we strive to increase the efficiency and effectiveness of our core functions and the productivity of our employees through our continuous improvement initiatives . enhance our global service capability— we continue to identify and execute various initiatives to enhance our global service capability . story_separator_special_tag after considering these items , selling , general , and administrative expenses slightly increased as a percentage of revenue to 12.7 % in 2010 from 12.5 % in 2009 . research and development expenses research and development expenses increased $ 15 million to $ 177 million in 2011 from $ 162 million in 2010 . as a percentage of revenue , these costs were 3.3 % in 2011 and 3.4 % in 2010 . pension costs included in research and development expenses were $ 24 million in 2011 as compared to $ 25 million in 2010 . after considering this item , research and development expenses remained consistent at 2.8 % as a percentage of revenue and are in line with management expectations as we continue to invest in broadening our self-service solutions . research and development expenses increased $ 21 million to $ 162 million in 2010 from $ 141 million in 2009. in 2010 and 2009 , research and development costs included $ 25 million and $ 17 million , respectively , of pension costs . after considering this item , research and development costs increased slightly as a percentage of revenue to 2.8 % in 2010 from 2.7 % in 2009 . impairment charge the impairment change of $ 88 million in 2011 relates to the impairment of long-lived and other assets of our entertainment business . see note 1 , `` description of business and significant accounting policies , '' and note 4 , `` goodwill and other long-lived assets , '' of the notes to consolidated financial statements included in item 8 of part ii of this report for a more detailed description of the impairment charge . interest and other expense items interest expense was $ 13 million in 2011 compared to $ 2 million in 2010 and $ 10 million in 2009 . for the year ended december 31 , 2011 , interest expense is primarily related to borrowings under the company 's secured credit facility . for the year ended december 31 , 2009 , interest expense is primarily related to the senior unsecured notes which were repaid in june 2009. other expense , net was $ 3 million in 2011 compared to $ 11 million in 2010 and $ 31 million in 2009 . other expense ( income ) , net includes items such as gains or losses on equity investments , interest income , among others . interest income was $ 5 million in 2011 , $ 5 million in 2010 , and $ 6 million in 2009 . in 2011 , other expense , net included $ 7 million related to loss from foreign currency fluctuations partially offset by income from the sale of certain patents and a benefit of $ 3 million from final settlement of a litigation matter . in 2010 , other expense , net included $ 14 million related to the impairment of an investment . in 2009 , other expense , net included $ 24 million related to the impairment of equity investments and related assets . income taxes the effective tax rate was 0 % in 2011 , ( 28 ) % in 2010 , and ( 5 ) % in 2009 . during 2011 , we favorably settled examinations with the canada revenue agency ( cra ) for the tax years of 1997 through 2001 that resulted in a $ 12 million tax benefit . in addition , the 2011 tax rate was favorably impacted by the mix of taxable profits and losses by country . the 2010 tax rate was favorably impacted by the release of a $ 40 million valuation allowance in the third quarter of 2010 that was no longer required on specific deferred tax assets in ncr 's subsidiary in japan and by the mix of taxable profits and losses by country . the 2009 tax rate was favorably impacted by the mix of taxable profits and losses by country . we anticipate that our effective tax rate will be approximately 27 % in 2012. however , changes in profit mix or other events , such as tax audit settlements or changes in our valuation allowances , could impact this anticipated rate . during 2011 , the internal revenue service commenced examinations of our 2009 and 2010 income tax returns and radiant 's 2009 income tax return , which are ongoing . while we are subject to numerous federal , state and foreign tax audits , we believe that the appropriate reserves exist for issues that might arise from these audits . should these audits be settled , the resulting tax effect could 28 impact the tax provision and cash flows in future periods . during 2012 , the company expects to resolve certain canadian tax matters related to 2003. this resolution could have a material impact on the effective tax rate in 2012. income ( loss ) from discontinued operations for the year ended december 31 , 2011 , income from discontinued operations was $ 3 million , net of tax , which includes an accrual for litigation fees related to the kalamazoo environmental matter , an accrual for anticipated future disposal costs related to an environmental matter in japan , the impact of the closure of ncr 's eft payment processing business in canada , the impact of the divestiture of our healthcare solutions business , offset by the favorable impact of changes in estimates related to the fox river reserve and favorable changes in uncertain tax benefits attributable to teradata .
| results discussion revenue revenue increased 5 % in 2010 from 2009 due to improvement across all lines of business . the effects of foreign currency fluctuations had a 1 % favorable impact on revenue . for the year ended december 31 , 2010 , our product revenue increased 8 % and services revenue increased 2 % compared to the year ended december 31 , 2009 . the increase in our product revenue was due to growth of the entertainment business coupled with increases in sales volumes in the financial services , retail and hospitality industries in the europe theater and the financial services industry in the cla theater . the increase in our services revenue was primarily attributable to increases in professional and installation services and maintenance services in the retail industry in the north america and europe theaters . gross margin gross margin as a percentage of revenue was 20.0 % in 2010 compared to 19.1 % in 2009 . product gross margin increased to 19.9 % in 2010 compared to 18.9 % in 2009 . during 2009 , product gross margin was adversely affected by approximately $ 22 million for 26 the write-off of assets related to an equity investment . after considering this item , the product gross margin remained consistent as compared to the prior year due to increases from the improved sales mix offset by losses in the entertainment business . services gross margin increased to 20.2 % in 2010 compared to 19.4 % in 2009 . in 2010 , services gross margin was negatively impacted by $ 23 million in higher pension expense , or 0.9 % as a percentage of services revenue . after considering this item , the services gross margin improvement is primarily due to lower labor and service delivery costs and continued focus on overall cost containment .
| 7,980 |
auditors and the audit committee of the registrant 's board of directors ( or persons performing the equivalent function ) : a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant 's ability to record , process , summarize and report financial data and have identified for the registrant 's auditors any material weaknesses in internal controls ; and b. any fraud , whether or not material , that involves management or other employees who have a significant role in the registrant 's internal controls ; and 6. the registrant 's other certifying officers and i have indicated in this annual report whether or story_separator_special_tag in general proxymed is an electronic healthcare transaction processing services company providing connectivity services and related value-added products to physician offices , payers , medical laboratories , pharmacies , and other healthcare providers . our electronic transaction processing services support a broad range of both financial and clinical transactions . to facilitate these services , we operate proxynet , our secure , proprietary national electronic information network , which provides physicians and other healthcare providers with direct connectivity to one of the industry 's largest group of payers , the largest group of clinical laboratories , and the largest group of chain and independent pharmacies . our products and services are currently provided from our operating facilities located in fort lauderdale , florida ; new albany , indiana ; santa ana , california ; norcross , georgia ; and sioux falls , south dakota . we also operate our clinical network and portions of our financial and real-time production computer networks from a secure co-location site in atlanta , georgia . we remain committed to our strategy , which is focused on leveraging our leading position as an independent back-end connectivity provider to small physician offices . through strategic relationships and partnerships with front-end solutions providers , our goal is to drive more healthcare transactions through proxynet while remaining neutral in the battle for the physician 's desktop . additionally , since we have an existing customer base of physicians and other healthcare providers , we expect that there will be opportunities to increase revenues by cross-selling our existing products and services to these current customers , as well as revenue opportunities from the development of new services from our development efforts , including internet-based transaction services , and from opportunities afforded by hipaa as it relates to privacy , security and education . we remain committed to developing additional capabilities and value-added products and services , and to expanding our back-end connectivity network . 2001 was a turnaround year for us as we were able to increase our growth through internal and external means , raise $ 7,248,000 ( net of expenses ) in a private placement of common stock , simplify our capital structure , and generate our first year of positive cash flow from operations . in 2002 , we continued to improve our financial results and reported our first quarter and full year of positive net income , raised an additional $ 24,886,000 ( net of expenses ) in another private placement of our common stock , and completed the acquisitions of three businesses . while the private placement from general atlantic partners ( see below ) was critical in the execution of our plans during 2002 , the year culminated in our acquisition of medunite , inc. on december 31 , 2002 ( see below ) . we believe that the organization created by the acquisition of medunite now positions us as the second largest physician claims clearinghouse in the country , creating the primary open and neutral alternative to the current market leader ; provides us the opportunity to leverage the industry 's leading real-time transaction network ; creates synergies in our operations leading to cost savings and increased margins ; and brings to us preferred relationships backed by an incentive plan to grow the business . we enter 2003 with an organization touching almost 140,000 physicians and other healthcare providers , processing over 200 million transactions , and generating over $ 70 million in annual revenues . on august 21 , 2001 , our board of directors effected a 1-for-15 reverse stock split of the company 's common stock , par value $ .001 per share . all share and per share amounts have been restated to reflect this transaction . in april 2002 , we sold 1,569,366 shares of unregistered common stock at $ 15.93 per share in a private placement to four entities affiliated with general atlantic partners , llc ( gap ) , a private equity investment fund , resulting in net proceeds to us of $ 24,886,000. no placement agent was used in this transaction . in addition , we also agreed to issue a two-year warrant for the purchase of 549,279 shares of 22 common stock at $ 15.93 per share . all shares sold are subject to a one-year lock-up agreement from the date of closing . we have agreed to grant gap certain demand and piggy back registration rights starting one year from closing . additionally , in connection with the transaction , our board of directors appointed a managing member of gap to fill a vacancy on our board . in may 2001 , we acquired substantially all of the assets and the business of mdp corporation ( mdp ) , a privately-owned electronic claims clearinghouse and patient statement processor based in atlanta , georgia , for $ 10,000,000. we paid $ 3,000,000 at closing and executed a $ 7,000,000 promissory note payable in may 2002. interest on this note was payable monthly at 7 % simple interest . in january 2002 , we paid this note in full . story_separator_special_tag story_separator_special_tag incurred total deemed dividend and other charges of $ 12,262,000 primarily as a result of non-cash accounting charges from the anti-dilution reset in number and price of certain warrants issued to our series b preferred shareholders in february 2001 , non-cash accounting charges from the exchange of 271,700 warrants into 218,828 shares of common stock by our series b preferred shareholders in april 2001 , non-cash accounting charges from the exchange of 1,412,033 warrants into 1,050,691 shares of common stock by our series c preferred shareholders in august 2001 , non-cash accounting charges related to the conversion of our series c preferred into 1,296,126 shares of common stock pursuant to our conversion offer through december 31 , 2001 , non-cash charges from the anti-dilution reset in number and price of certain warrants issued to our remaining series b preferred warrant holder in december 2001 as a result of the reduced conversion price pursuant to our conversion offer to series c preferred stockholders and dividends paid to the holder of our series b preferred stock ( which was fully converted in october 2001 ) and dividends paid to our series c preferred shareholders through the issuance of shares of common stock . net income ( loss ) applicable to common shareholders . as a result of the foregoing , we reported net income applicable to common shareholders of $ 1,338,000 for 2002 compared to a net loss applicable to common shareholders of $ 19,060,000 for 2001 . 27 year ended december 31 , 2001 compared to year ended december 31 , 2000 net revenues . consolidated net revenues for 2001 increased by $ 9,789,000 , or 29 % , to $ 43,230,000 from consolidated net revenues of $ 33,441,000 for 2000. net revenues classified by our reportable segments are as follows : replace_table_token_9_th electronic healthcare transaction processing segment net revenues increased by 68 % primarily due to a 48 % increase in the number of electronic clinical and financial healthcare transactions processed through proxynet from 59.2 million transactions for 2000 to 87.9 million transactions for 2001. core transaction growth was up 85 % from prior year ( including 13.5 million patient statement and electronic claims transactions from our acquisition of mdp ) . a summary of the number of transactions we processed for the periods presented is as follows : replace_table_token_10_th for 2001 , approximately 39 % of our revenues came from our electronic healthcare transaction processing segment , compared to only 30 % from this segment for 2000. laboratory communication solutions segment net revenues increased by 13 % primarily as a result of increased sales in communication device units and contract manufacturing offset by decreases in other laboratory services such as communication device leases and field service events . cost of sales . consolidated cost of sales increased from 37 % in 2000 to 48 % in 2001. cost of sales classified by our reportable segments is as follows : replace_table_token_11_th cost of sales in the electronic healthcare transaction processing segment consists of transaction fees , services and license fees , third-party electronic transaction processing costs , certain telecommunication and co-location center costs , revenue sharing arrangements with our business partners , third-party database licenses , and certain labor and travel expenses . cost of sales as a percentage of revenues increased from 19 % for 2000 to 39 % for 2001 primarily due to an increase in patient statement processing services ( which have a higher direct cost compared to the traditional financial transactions that we offer ) as a result of our mdp acquisition in may 2001. cost of sales in the laboratory communication solutions segment includes hardware , third-party software , and consumable materials . cost of sales as a percentage of revenues increased to 53 % for 2001 compared to 44 % for 2000 primarily due to a shift in the revenue mix from lower cost leases to higher cost communication device units and contract manufacturing . 28 selling , general and administrative expenses . consolidated sg & a decreased for 2001 by $ 5,830,000 , or 22 % , to $ 21,267,000 from consolidated sg & a of $ 27,097,000 for 2000. consolidated sg & a expenses as a percentage of consolidated revenues decreased to 49 % for 2001 compared to 81 % for 2001. sg & a expenses classified by our reportable segments are as follows : replace_table_token_12_th electronic healthcare transaction processing segment sg & a expenses for 2001 decreased by 19 % compared to 2000 primarily due to decreases in net payroll , outside labor and related expenses due to the effect of our restructuring plan which commenced in may 2000 and additional personnel reductions enacted at the end of 2000 and in the first quarter of 2001. segment sg & a expenses as a percentage of segment net revenues decreased to 58 % for 2001 compared to 121 % for 2000 as operational leverage continues to be recognized . laboratory communication solutions segment sg & a expenses for 2001 decreased by 3 % compared to 2000. corporate sg & a expenses decreased 50 % for 2001 compared to 2000 primarily due to decreases in net payroll , other selling , general and administrative expenses due to the effect of our restructuring plan and the non-cash compensatory warrants to outside consultants as fees related to our financial advisory agreement with commonwealth associates which ceased to be amortized after april 2001. depreciation and amortization . consolidated depreciation and amortization decreased by $ 5,199,000 to $ 8,176,000 for 2001 from $ 13,375,000 for 2000. this net decrease was primarily from a reduction in amortization expense due to the conclusion of amortization of certain intangible assets in 2001 related to prior acquisitions in our electronic healthcare transaction processing segment . depreciation and amortization classified by our reportable segments is as follows : replace_table_token_13_th operating income ( loss ) .
| results of operations year ended december 31 , 2002 compared to year ended december 31 , 2001. net revenues . consolidated net revenues for 2002 increased by $ 6,952,000 or 16 % , to $ 50,182,000 from consolidated net revenues of $ 43,230,000 for 2001. net revenues classified by our reportable segments are as follows : replace_table_token_3_th net revenues in our electronic healthcare transaction processing segment increased by 32 % primarily due to a 30 % increase in the number of electronic clinical and financial healthcare transactions processed through proxynet . total transactions grew from 87.9 million transactions in the 2001 period to 114.2 million transactions in 2002. core transaction growth is up 47 % from the 2001 period . the increase in transaction volume was primarily attributable to internal growth in both claims and statements processed . additionally , we continued to make progress in our cross-selling efforts to our existing customers resulting in an increased of transaction services utilized per directly contracted provider from an 1.3 ( estimated ) in 2001 to 2.5 in 2002. a summary of the number of transactions we processed for the periods presented is as follows : replace_table_token_4_th 24 core transactions represent all transactions except for encounters . encounters are an administrative reporting transaction for payers but do not generate revenue for the provider who must submit them . accordingly , rather than submitting on a routine basis , most providers choose to periodically catch up on their submissions , creating monthly and quarterly swings in both the number of encounters we process and what percentage of our transaction mix they represent . since encounters are at a significantly lower price point than claims , these swings make it difficult to easily analyze our quarter-over-quarter growth in our core business . in addition , we do not expect our encounter volume to grow on an annual basis , as payers are not expanding the capitated service model that is the foundation of encounters .
| 7,981 |
additional guidance was issued subsequently as follows : december 2016 , the fasb issued asu 2016-20 , “ technical corrections and improvements to topic 606 , revenue from contracts with customers ” ( “ asu 2016-20 ” ) ; may 2016 , the fasb issued asu 2016-12 , “ revenue from contracts with customers ( topic 606 ) : narrow-scope improvements and practical expedients ” ( “ asu 2016-12 ” ) ; may 2016 , the fasb issued asu 2016-11 , “ revenue recognition ( topic 605 ) story_separator_special_tag overview ducommun incorporated ( “ ducommun , ” “ the company , ” “ we , ” “ us ” or “ our ” ) is a leading global provider of engineering and manufacturing services for high-performance products and high-cost-of failure applications used primarily in the aerospace , defense , industrial , natural resources , medical and other industries . we differentiate ourselves as a full-service solution-based provider , offering a wide range of value-added products and services in our primary businesses of electronics , structures and integrated solutions . we operate through two primary business segments : electronic systems and structural systems , each of which is a reportable segment . recap of the year ended december 31 , 2017 : net revenues of $ 558.2 million net income of $ 20.1 million , or $ 1.74 per diluted share , which includes $ 12.5 million of income tax benefit primarily due to the adoption of the tax cuts and jobs act adjusted ebitda of $ 53.5 million backlog of $ 726.5 million completed the acquisition of lightning diversion systems , llc non-gaap financial measures adjusted earnings before interest , taxes , depreciation and amortization , and restructuring charges ( “ adjusted ebitda ” ) was $ 53.5 million and $ 54.8 million for years ended december 31 , 2017 and december 31 , 2016 , respectively . when viewed with our financial results prepared in accordance with accounting principles generally accepted in the united states of america ( “ gaap ” ) and accompanying reconciliations , we believe adjusted ebitda provides additional useful information to clarify and enhance the understanding of the factors and trends affecting our past performance and future prospects . we define these measures , explain how they are calculated and provide reconciliations of these measures to the most comparable gaap measure in the table below . adjusted ebitda and the related financial ratios , as presented in this annual report on form 10-k ( “ form 10-k ” ) , are supplemental measures of our performance that are not required by , or presented in accordance with , gaap . they are not a measurement of our financial performance under gaap and should not be considered as alternatives to net income or any other performance measures derived in accordance with gaap , or as an alternative to net cash provided by operating activities as measures of our liquidity . the presentation of these measures should not be interpreted to mean that our future results will be unaffected by unusual or nonrecurring items . we use adjusted ebitda non-gaap operating performance measures internally as complementary financial measures to evaluate the performance and trends of our businesses . we present adjusted ebitda and the related financial ratios , as applicable , because we believe that measures such as these provide useful information with respect to our ability to meet our operating commitments . adjusted ebitda has limitations as an analytical tool , and you should not consider it in isolation or as substitutes for analysis of our results as reported under gaap . some of these limitations are : they do not reflect our cash expenditures , future requirements for capital expenditures or contractual commitments ; they do not reflect changes in , or cash requirements for , our working capital needs ; they do not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our debt ; although depreciation and amortization are non-cash charges , the assets being depreciated and amortized will often have to be replaced in the future , and adjusted ebitda does not reflect any cash requirements for such replacements ; they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows ; they do not reflect the impact on earnings of charges resulting from matters unrelated to our ongoing operations ; and 23 other companies in our industry may calculate adjusted ebitda differently from us , limiting their usefulness as comparative measures . because of these limitations , adjusted ebitda and the related financial ratios should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as a measure of cash that will be available to us to meet our obligations . you should compensate for these limitations by relying primarily on our gaap results and using adjusted ebitda only as supplemental information . see our consolidated financial statements contained in this form 10-k. however , in spite of the above limitations , we believe that adjusted ebitda is useful to an investor in evaluating our results of operations because these measures : are widely used by investors to measure a company 's operating performance without regard to items excluded from the calculation of such terms , which can vary substantially from company to company depending upon accounting methods and book value of assets , capital structure and the method by which assets were acquired , among other factors ; help investors to evaluate and compare the results of our operations from period to period by removing the effect of our capital structure from our operating performance ; and are used by our management team for various other purposes in presentations to our board of directors as a basis for strategic planning and forecasting . story_separator_special_tag well as program delays and budget changes , which impacted our fixed-wing and helicopter platforms and pushed out scheduled deliveries of these products to customers ; partially offset by $ 7.3 million higher revenues in our commercial aerospace end-use markets mainly due to added content with existing customers . net revenues by major customers a significant portion of our net revenues are from our top ten customers as follows : replace_table_token_12_th ( 1 ) includes boeing , raytheon , spirit , and united technologies for 2016 and 2015 and lockheed martin for 2016. the revenues from boeing , lockheed martin , raytheon , spirit , and united technologies are diversified over a number of commercial , military and space programs and were made by both operating segments . 33 gross profit gross profit consists of net revenues less cost of sales . cost of sales includes the cost of production of finished products and other expenses related to inventory management , manufacturing quality , and order fulfillment . gross profit margin increased to 19.3 % in 2016 compared to 15.1 % in 2015 primarily due to the following : 2015 included a forward loss reserve charge related to a regional jet program of $ 12.2 million ; and total material costs as a percentage of revenues decreased 1.8 % compared to the prior year as a result of our on-going supply chain initiatives and improved operating performance . selling , general and administrative expenses sg & a expenses decreased $ 6.4 million in 2016 compared to 2015 primarily due to the decrease of $ 9.4 million related to the divestitures of our pittsburgh and miltec operations and closures of facilities . interest expense interest expense decreased in 2016 compared to 2015 primarily due to a lower outstanding debt balance as a result of net voluntary principal prepayments on our new credit facilities and a lower average interest rate as a result of completing the refinancing of our debt in july 2015. see note 10 to our consolidated financial statements included in part iv , item 15 ( a ) of this annual report on form 10-k for further information on our long-term debt . income tax expense ( benefit ) we recorded income tax expense of $ 12.9 million ( an effective tax rate of 33.7 % ) in 2016 , compared to an income tax benefit of $ 31.7 million ( an effective tax benefit rate of 29.7 % ) in 2015. the increase in the effective tax rate for 2016 compared to 2015 was primarily due to pre-tax income in 2016 , which included a gain on divestitures , net of our pittsburgh and miltec operations of $ 17.6 million compared to a pre-tax loss in the prior year . the $ 17.6 million gain on divestitures , net resulted in an increase in our state tax liability in 2016. the increase was partially offset by the u.s. federal research and development tax credit that was permanently extended in 2015 and the deduction for qualified domestic production activities . our unrecognized tax benefits were $ 3.0 million in both 2016 and 2015. we record interest and penalty charge , if any , related to uncertain tax positions as a component of tax expense and unrecognized tax benefits . the amounts accrued for interest and penalty charge as of december 31 , 2016 and 2015 were not significant . if recognized , $ 2.0 million would affect the effective tax rate . we do not reasonably expect significant increases or decreases to our unrecognized tax benefits in the next twelve months . we file u.s. federal and state income tax returns . federal income tax returns after 2012 , california franchise ( income ) tax returns after 2011 and other state income tax returns after 2011 are subject to examination . we are no longer subject to examination prior to those periods , although carryforwards generated prior to those periods may still be adjusted upon examination by the internal revenue service ( “ irs ” ) or state taxing authority if they either have been or will be used in a subsequent period . during 2016 , the irs commenced an audit of our 2014 and 2015 tax years . although the outcome of tax examinations can not be predicted with certainty , we believe we have adequately accrued for tax deficiencies or reductions in tax benefits , if any , that could result from the examination and all open audit years . 34 net income ( loss ) and earnings ( loss ) per diluted share net income and income per diluted share for 2016 were $ 25.3 million , or $ 2.24 per diluted share , compared to a net loss and loss per share for 2015 were $ ( 74.9 ) million , or $ ( 6.78 ) . the increase in net income in 2016 compared to 2015 was primarily due to the following : prior year included a non-cash pre-tax goodwill impairment charge of $ 57.2 million ; prior year included a non-cash pre-tax charge related to the impairment of an indefinite-lived trade name of $ 32.9 million ; prior year included a loss on extinguishment of debt of $ 14.7 million related to completing a new credit facility to replace the existing credit facilities along with the redemption of the $ 200.0 million senior unsecured notes ; prior year included a forward loss reserve charge related to a regional jet program of $ 12.2 million ; a pre-tax gain on divestitures , net of our pittsburgh and miltec operations of $ 17.6 million ; lower interest expense of $ 10.4 million ; lower sg & a expenses related to the divestitures of our pittsburgh and miltec operations and closures of facilities in aggregate totaling $ 9.4 million ; and improved operating performance ; partially offset by higher income tax expense of $ 44.6 million . 35 business segment performance we report our financial performance based upon the two reportable operating segments ; structural systems and electronic systems .
| results of operations 2017 compared to 2016 the following table sets forth net revenues , selected financial data , the effective ( benefit ) tax rate and diluted earnings per share : replace_table_token_5_th nm = not meaningful net revenues by end-use market and operating segment net revenues by end-use market and operating segment during 2017 and 2016 , respectively , were as follows : replace_table_token_6_th 26 net revenues for 2017 were $ 558.2 million compared to $ 550.6 million for 2016. the year-over-year increase was primarily due to the following : $ 30.6 million higher revenues in our military and space end-use markets mainly due to increased demand , which favorably impacted our helicopter , missile , and fixed-wing platforms that was partially offset by the divestiture of our miltec operations in march 2016 ; partially offset by $ 15.9 million lower revenues in our commercial aerospace end-use markets mainly due to the winding down of a regional jet program and continued softness in demand within the regional and business jet end-use markets ; and $ 7.2 million lower revenues in our industrial end-use markets . net revenues by major customers a significant portion of our net revenues are from our top ten customers as follows : replace_table_token_7_th ( 1 ) includes the boeing company ( “ boeing ” ) , lockheed martin corporation ( “ lockheed martin ” ) , raytheon company ( “ raytheon ” ) , spirit aerosystems holdings , inc. ( “ spirit ” ) , and united technologies corporation ( “ united technologies ” ) . the revenues from boeing , lockheed martin , raytheon , spirit , and united technologies are diversified over a number of commercial , military and space programs and were made by both operating segments . gross profit gross profit consists of net revenues less cost of sales . cost of sales includes the cost of production of finished products and other expenses related to inventory management , manufacturing quality , and order fulfillment .
| 7,982 |
as of december 31 , 2018 and 2017 , there was no triggering event and the company did not record an impairment of its long-lived assets . in the first quarter of 2016 , the company reviewed the remaining useful life of the national geographic endeavour , which was replaced by the national geographic endeavour ii in the fourth quarter of 2016. the evaluation of the national geographic endeavour 's useful life as of december story_separator_special_tag the information contained in this section should be read in conjunction with our consolidated financial statements and related notes and the information contained elsewhere in this form 10-k under the headings “ risk factors , ” “ selected financial data , ” and “ business. ” overview we provide expedition cruising and adventure travel experiences that include itineraries featuring up-close encounters with wildlife and nature , history and culture and promote guest empowerment and interactivity . our mission is offering life-changing adventures around the world and pioneering innovative ways to allow our guests to connect with exotic and remote places . we currently operate a fleet of eight owned expedition ships and five seasonal charter vessels under the lindblad brand . we have a strategic business alliance with national geographic founded on a shared interest in exploration , research , technology and conservation . this relationship includes a co-selling , co-marketing and branding arrangement whereby our owned vessels carry the national geographic name and national geographic sells our expeditions through its internal travel division . we collaborate with national geographic on voyage planning to enhance the guest experience by having national geographic experts , including photographers , writers , marine biologists , naturalists , field researchers and film crews , join our expeditions . guests have the ability to interface with these experts through lectures , excursions , dining and other experiences throughout their voyage . we deploy chartered vessels for various seasonal offerings and continually seek to optimize our charter fleet to balance our inventory with demand and maximized yields . we use our charter inventory as a mechanism to both increase travel options of our existing and prospective guests and also to test demand for certain areas and seasons to understand the potential for longer term deployments and additional vessel needs . due to the specific geographies in which we operate and the cost of providing access to fuel in our remote destinations , we have historically not experienced significant fluctuations in fuel costs with changes in world fuel commodity prices . fuel costs represented 3.7 % , 3.4 % and 4.3 % of our lindblad segment tour revenues for the years ended december 31 , 2018 , 2017 and 2016 , respectively . management considers new ship investments to be an important step to meet increasing demand for our expedition cruise offerings . the national geographic quest launched in the third quarter of 2017 and operated in alaska and british columbia during the summer of 2017 before voyaging to costa rica and panama to provide expeditions for the northern hemisphere winter season . the national geographic venture launched in the fourth quarter of 2018 and will operate primarily in the channel islands , sea of cortez and baja california during the northern hemisphere winter seasons and alaska and british columbia during the summer . in november 2017 , we executed a contract to build a polar ice class vessel , the national geographic endurance , targeted to be completed in january 2020 , with a total purchase price of $ 134.6 million , including hedging costs . the first twenty percent of the purchase price was paid shortly after execution of the agreement with the remaining eighty percent due upon delivery and acceptance of the vessel . in february 2019 , we entered into an agreement to construct a second polar ice class vessel , a sister ship of the national geographic endurance , with a total purchase price of 1,291.0 million norwegian kroner ( nok ) . the purchase price is subject to potential adjustments from contract specifications for variations in speed , deadweight , fuel consumption and delivery date . the purchase price is due in installments , with the first 20 % to be paid shortly after execution of the agreement , 50 % to be paid over the duration of the build and the final 30 % due upon delivery and acceptance of the vessel . the vessel is targeted to be delivered in september 2021. the new build process exposes us to certain risks typically associated with new ship construction , which we manage through detailed planning and close monitoring by our internal marine team . the discussion and analysis of our results of operations and financial condition are organized as follows : ● a description of certain line items and operational and financial metrics we utilize to assist us in managing our business ; ● a comparable discussion of our consolidated and segment results of operations for the years ended december 31 , 2018 , 2017 and 2016 ; ● a discussion of our liquidity and capital resources , including future capital and contractual commitments and potential funding sources ; and ● a review of our critical accounting policies . 29 financial presentation description of certain line items tour revenues tour revenues consist of the following : ● guest ticket revenues recognized from the sale of guest tickets ; and ● other tour revenues from the sale of pre- or post-expedition excursions , hotel accommodations and land-based expeditions ; air transportation to and from the ships , goods and services rendered onboard that are not included in guest ticket prices , trip insurance and cancellation fees . story_separator_special_tag the seasonality of our operating results increases due to our vessels being taken out of service for scheduled maintenance or drydocking , which is typically during non-peak demand periods , in the second and fourth quarters . our drydock schedules are subject to cost and timing differences from year-to-year due to the availability of shipyards for certain work , drydock locations based on ship itineraries , operating conditions experienced especially in the polar regions , and the applicable regulations of class societies in the maritime industry , which require more extensive reviews periodically . drydocking impacts operating results by reducing tour revenues and increasing cost of tours . natural habitat is a seasonal business , with the majority of its tour revenue earned in the third and fourth quarters from its summer season departures and polar bear tours . 31 results of operations – consolidated we reported consolidated tour revenues , cost of tours , operating expenses , operating income and net income for the years ended december 31 , 2018 , 2017 and 2016 as shown in the following table : replace_table_token_5_th comparison of years ended december 31 , 2018 and december 31 , 2017 - consolidated tour revenue tour revenues for the year ended december 31 , 2018 increased $ 43.2 million , or 16 % , to $ 309.7 million compared to $ 266.5 million for the year ended december 31 , 2017. at the lindblad segment , tour revenues increased by $ 29.5 million driven by higher guest ticket revenue . at the natural habitat segment , tour revenues increased $ 13.7 million over the prior year period primarily due to additional departures and an increase in pricing . cost of tours total cost of tours for the year ended december 31 , 2018 increased $ 18.2 million , or 13 % , to $ 153.7 million compared to $ 135.5 million for the year ended december 31 , 2017. at the lindblad segment , cost of tours increased $ 9.8 million primarily due to costs related to the national geographic quest and the national geographic venture , the impact of cancelled voyages in the first quarter of 2017 and higher fuel costs . at the natural habitat segment , cost of tours increased $ 8.4 million due to additional departures . story_separator_special_tag selected information for our segments is below . the presentation of non-gaap financial information should not be considered in isolation or as a substitute for , or superior to , the financial information prepared and presented in accordance with gaap . replace_table_token_6_th ( a ) the 2016 natural habitat segment results represent activity from acquisition date of may 2016 through december 31 , 2016. results of operations – lindblad segment comparison of years ended december 31 , 2018 to december 31 , 2017 tour revenues tour revenues for the year ended december 31 , 2018 increased $ 29.5 million , or 14 % , to $ 246.3 million compared to $ 216.8 million for the year ended december 31 , 2017. the increase was driven by higher guest ticket revenue primarily from an increase in available guest nights due to the additions to our fleet of the national geographic quest in the third quarter of 2017 and the national geographic venture in the fourth quarter of 2018 . in addition , net yield for the year ended december 31 , 2018 increased to $ 1,044 compared to $ 985 for the year ended december 31 , 2017 , primarily driven by price increases and changes in itineraries . occupancy rates also increased for the year ended december 31 , 2018 to 91 % compared to 87 % for the year ended december 31 , 2017 , reflecting higher demand across the fleet . 2017 results also included the impact of the cancellation of four highly booked voyages of the national geographic orion and two highly booked voyages of the national geographic sea lion . 34 operating income operating income increased $ 12.5 million to $ 19.8 million for the year ended december 31 , 2018 compared to $ 7.3 million for the year ended december 31 , 2017. the increase was driven by higher tour revenues , partially offset by higher operating costs , primarily related to the full year of operations of the national geographic quest and the addition of the national geographic venture to the fleet in the fourth quarter 2018 , as well as the impact of the cancelled voyages in 2017. operating income for 2018 also benefited from lower stock compensation expense and executive severance costs . comparison of years ended december 31 , 2017 to december 31 , 2016 tour revenues tour revenues increased $ 9.0 million , or 4 % , to $ 216.8 million in 2017 compared to $ 207.8 million in 2016 primarily due to additional guest ticket revenue associated with the launch of the national geographic quest and the national geographic endeavour ii , as well as from additional charter expeditions and higher yields . net yield in 2017 increased to $ 985 compared to $ 976 in 2016 , primarily driven by price increases and changes in itineraries . this increase was partially offset by the impact of the cancellation of four highly booked voyages of the national geographic orion and two highly booked voyages of the national geographic sea lion . operating income operating income decreased $ 4.5 million , or 38 % , to $ 7.3 million in 2017 compared to $ 11.8 million in 2016 primarily related to the voyage cancellations on the national geographic orion and national geographic sea lion during the first quarter of 2017. the operating income also reflects higher tour revenues and lower drydock costs , partially offset by the costs associated with operating the national geographic quest following the july 2017 launch and higher charter costs . in addition , higher general and administrative expenses of $ 4.5 million were due primarily to higher stock-based compensation associated with the ceo share allocation plan , as well as executive severance costs .
| general and administrative expenses general and administrative expenses for the year ended december 31 , 2018 increased $ 2.4 million , or 4 % , to $ 62.9 million compared to $ 60.5 million for the year ended december 31 , 2017. at the lindblad segment , general and administrative expenses were flat to the prior year primarily as a result of lower stock compensation expense , as the 2016 ceo allocation grant and option grants were fully expensed in 2017 , and the executive severance costs incurred in 2017. these were offset by increased personnel costs , debt refinancing costs , credit card fees and increased professional fees . at the natural habitat segment , general and administrative expenses increased $ 2.4 million primarily due to an increase in personnel . selling and marketing expenses selling and marketing expenses increased $ 4.6 million , or 11 % , to $ 47.0 million for the year ended december 31 , 2018 compared to $ 42.4 million for the year ended december 31 , 2017 , primarily due to a $ 3.9 million increase at the lindblad segment , primarily as the result of increased commission and royalty expense associated with the higher tour revenues . at the natural habitat segment , selling and marketing expenses increased $ 0.7 million primarily driven by an increase in advertising expenditures . depreciation and amortization expenses depreciation and amortization expenses increased $ 3.4 million , or 20 % , to $ 20.8 million for the year ended december 31 , 2018 compared to $ 17.4 million for the year ended december 31 , 2017 , primarily related to a full year of depreciation on the national geographic quest .
| 7,983 |
because the terms of the company 's facilities lease agreements for its original los gatos , california story_separator_special_tag overview and results of operations the following represents our consolidated performance highlights : replace_table_token_6_th consolidated revenues for the year ended december 31 , 2016 increased as compared to the year ended december 31 , 2015 due to growth in the average number of paid streaming memberships globally , the majority of which was growth in our international memberships reflecting our expansion and focus on netflix as a global internet tv network . the impact from membership growth was coupled with an increase in global streaming average monthly revenue per paying membership resulting from price changes and plan mix partially offset by unfavorable foreign currency fluctuations impacting our international streaming segment . the increase in operating income and net income is due primarily to increased revenues partially offset by increased content expenses as we continue to acquire , license and produce content , including more netflix originals , as well as increased marketing and headcount costs to support our international expansion . net income was further impacted by the increase in interest expense associated with our debt issuances as well as to an increase in our effective tax rate , slightly offset by gains on foreign currency denominated transactions . we intend to focus on growing our global operating margin in 2017. we offer three types of streaming membership plans . in the u.s. our `` basic '' plan is priced at $ 7.99 per month and includes access to standard definition quality streaming on a single screen at a time . our `` standard '' plan is our most popular streaming plan and is priced at $ 9.99 per month and includes access to high definition quality streaming on two screens concurrently . our `` premium '' plan is priced at $ 11.99 per month and includes access to high definition and ultra-high definition quality content on four screens concurrently . internationally , the membership plans are structured similarly to the u.s. and range in price from the u.s. dollar equivalent of approximately $ 5.00 to $ 18.00 per month . we expect that from time to time the prices of our membership plans in each country may change . for instance , in may 2014 , in the u.s. , we increased the price of our standard plan from $ 7.99 per month to $ 8.99 per month with existing memberships grandfathered for a two year period . in october 2015 , in the u.s. , we increased the price of this same standard plan from $ 8.99 per month to $ 9.99 per month with existing memberships grandfathered for a one year period . in 2016 , we phased out grandfathered pricing , giving members the option of electing the basic streaming plan at $ 7.99 per month , continuing on the standard streaming plan at the higher price of $ 9.99 per month , or electing the premium plan at $ 11.99 per month . the following represents the key elements to our segment results of operations : we define contribution profit ( loss ) as revenues less cost of revenues and marketing expenses incurred by the segment . we believe this is an important measure of our operating segment performance as it represents each segment 's performance before global corporate costs . for the domestic and international streaming segments , content expenses , which include the amortization of the streaming content assets and other expenses associated with the licensing and acquisition of streaming content , represent the vast majority of cost of revenues . streaming content rights were generally obtained for our current geographic regions . as we expanded internationally , we obtained additional rights for the new geographies . with our global expansion , we now aspire to obtain global rights for our content . we allocate this content between the domestic and international segments based on estimated fair market value . other cost of revenues such as streaming delivery expenses , customer service and payment processing fees , including those we pay to our integrated payment partners , tend to be lower as a percentage of total cost of revenues . we have built our own global content delivery network ( `` open connect '' ) to help us efficiently stream a high volume of content to our members over the internet . streaming 18 delivery expenses , therefore , include equipment costs related to open connect and all third-party costs , such as cloud computing costs , associated with delivering streaming content over the internet . cost of revenues in the domestic dvd segment consist primarily of delivery expenses , content expenses , including amortization of dvd content assets and revenue sharing expenses , and other expenses associated with our dvd processing and customer service centers . delivery expenses for the domestic dvd segment consist of the postage costs to mail dvds to and from our members and the packaging and label costs for the mailers . for the domestic and international streaming segments , marketing expenses consist primarily of advertising expenses and payments made to our partners including device partners , mvpd 's , mobile platforms and isp 's . advertising expenses include promotional activities such as digital and television advertising . payments to our partners include fixed fee and /or revenue sharing payments . marketing expenses are incurred by our domestic and international streaming segments given our focus on building consumer awareness of the streaming offerings , and in particular our original content . marketing expenses incurred by our international streaming segment have been significant and fluctuate dependent upon the number of international territories in which our streaming service is offered and the timing of the launch of new territories . we have demonstrated our ability to grow domestic streaming contribution margin as evidenced by the increase in contribution margin from 17 % in 2012 to 36 % in 2016 . story_separator_special_tag in the year ended december 31 , 2016 , the foreign exchange gain of $ 22.8 million was primarily driven by the remeasurement of significant content liabilities denominated in currencies other than functional currencies . year ended december 31 , 2015 as compared to the year ended december 31 , 2014 interest and other income ( expense ) decreased primarily due to foreign exchange . in the year ended december 31 , 2015 , the foreign exchange loss of $ 37.3 million was primarily driven by the remeasurement of significant content liabilities denominated in currencies other than functional currencies in our european entities coupled with the strengthening of the u.s. dollar . 24 provision for income taxes replace_table_token_14_th year ended december 31 , 2016 as compared to the year ended december 31 , 2015 the increase in our effective tax rate is mainly due to a $ 13.4 million release of tax reserves in 2015 and an increase in foreign taxes . in 2016 , the difference between our 28 % effective tax rate and the federal statutory rate of 35 % was $ 17.3 million primarily due to the 2016 federal and california research and development ( “ r & d ” ) credits partially offset by state income taxes , foreign taxes , and nondeductible expenses . year ended december 31 , 2015 as compared to the year ended december 31 , 2014 the decrease in our effective tax rate is mainly due to an increase in r & d credits and a decrease in state and local income taxes . in 2015 , the difference between our 14 % effective tax rate and the federal statutory rate of 35 % was $ 30.4 million primarily due to a $ 13.4 million release of tax reserves on previously unrecognized tax benefits as a result of an irs audit settlement leading to the reassessment of our reserves for all open years , $ 16.5 million related to the retroactive reinstatement of the 2015 federal r & d credit , as well as the california r & d credit ; partially offset by state income taxes , foreign taxes and nondeductible expenses . on december 18 , 2015 , the protecting americans from tax hikes act of 2015 ( h.r . 2029 ) was signed into law which retroactively and permanently extended the federal r & d credit from january 1 , 2015. as a result , we recognized the retroactive benefit of the 2015 r & d credit as a discrete item in the fourth quarter of 2015 , the period in which the legislation was enacted . liquidity and capital resources cash , cash equivalents and short-term investments decreased $ 576.9 million from $ 2,310.7 million as of december 31 , 2015 to $ 1,733.8 million as of december 31 , 2016 . in october 2016 , we issued $ 1,000.0 million of long-term debt . the decrease in cash , cash equivalents and short-term investments in the year ended december 31 , 2016 was primarily driven by an increase in cash used in operations , partially offset by cash received from the issuance of debt . long-term debt , net of debt issuance costs , was $ 3,364.3 million and $ 2,371.4 million as of december 31 , 2016 and 2015 , respectively . see note 4 to the consolidated financial statements for additional information . our primary uses of cash include the acquisition , licensing and production of content , streaming delivery , marketing programs and personnel-related costs . investments in original content , and in particular content that we produce and own , require more cash upfront relative to licensed content . we expect to significantly increase our investments in global streaming content , particularly in original content , which will impact our liquidity and may result in future negative free cash flows even after we achieve material global profitability . we currently anticipate that cash flows from operations , together with available funds and access to financing sources , will continue to be sufficient to meet our cash needs for at least the next twelve months . our ability to obtain any additional financing that we may choose to , or need to , obtain will depend on , among other things , our development efforts , business plans , operating performance , financial condition and the condition of the capital markets at the time we seek financing . we may not be able to obtain such financing on terms acceptable to us or at all . if we raise additional funds through the issuance of equity , equity-linked or debt securities , those securities may have rights , preferences or privileges senior to the rights of our common stock , and our stockholders may experience dilution . as of december 31 , 2016 , cash and cash equivalents held by our foreign subsidiaries amounted to $ 278.5 million . if these funds are needed for our operations in the u.s. , we would be required to accrue and pay u.s. income taxes and foreign withholding taxes on the portion associated with undistributed earnings for certain foreign subsidiaries . free cash flow we define free cash flow as cash provided by ( used in ) operating and investing activities excluding the non-operational cash flows from purchases , maturities and sales of short-term investments . we believe free cash flow is an important liquidity metric because it measures , during a given period , the amount of cash generated that is available to repay debt obligations , make investments in content and for certain other activities or the amount of cash used in operations , including investments in global streaming content . free cash flow is considered a non-gaap financial measure and should not be considered in isolation 25 of , or as a substitute for , net income , operating income , cash flow ( used in ) provided by operating activities , or any other measure of financial performance or liquidity presented in accordance with gaap .
| segment results domestic streaming segment replace_table_token_7_th year ended december 31 , 2016 as compared to the year ended december 31 , 2015 in the domestic streaming segment , we derive revenues from monthly membership fees for services consisting solely of streaming content to our members in the united states . the increase in our domestic streaming revenues was due to a 12 % growth in the average number of paid memberships and an 8 % increase in average monthly revenue per paying membership . the average monthly revenue per paying membership for the fourth quarter of 2016 increased by 15 % compared to the same quarter in prior year . these increases in average monthly revenue per paying membership resulted from our price changes and plan mix . in 2016 , we phased out grandfathered pricing and cancellations by members whose grandfathered pricing expired were not material . our standard plan continues to be the most popular plan choice for new memberships . the increase in domestic streaming cost of revenues was primarily due to a $ 335.4 million increase in content expenses relating to our existing and new streaming content , including more exclusive and original programming . in addition , we had a $ 33.2 million increase in other costs , such as payment processing fees and customer service call centers , due to our growing member base . domestic marketing expenses increased primarily due to an increase in advertising and public relations spending as well as increased payments to our partners . our domestic streaming segment had a contribution margin of 36 % for the year ended december 31 , 2016 , which increased as compared to the contribution margin of 33 % for the year ended december 31 , 2015 due to growth in paid memberships and revenue , which continued to outpace content and marketing spending .
| 7,984 |
while the company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed , these estimates are inherently uncertain and subject to refinement . the authoritative guidance allows a measurement period of up to one year from the date of acquisition to make story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this annual report on form 10-k. in addition to historical financial information , the following discussion contains forward-looking statements that are based upon current plans , expectations and beliefs 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 part i , item 1a , “ risk factors ” in this annual report on form 10-k. our fiscal year ends on december 31. overview we are the leader in the cloud communications platform category . we enable developers to build , scale and operate real‑time customer engagement within their software applications via our simple‑to‑use application programming interfaces ( “ apis ” ) . the power , flexibility , and reliability offered by our software building blocks empowers companies of virtually every shape and size to build world‑class engagement into their customer experience . we offer a customer engagement platform with software designed to address specific use cases like account security and contact centers and a set of apis that handles the higher level communication logic needed for nearly every type of customer engagement . these apis are focused on the business challenges that a developer is looking to address , allowing our customers to more quickly and easily build better ways to engage with their customers throughout their journey . we also offer a set of apis that enables developers to embed voice , messaging , video and email capabilities into their applications and are designed to support almost all the fundamental ways humans communicate , unlocking innovators to address just about any communication market . the super network is our software layer that allows our customers ' software to communicate with connected devices globally . it interconnects with communications networks and inbox service providers around the world and continually analyzes data to optimize the quality and cost of communications that flow through our platform . the super network also contains a set of apis that gives our customers access to more foundational components of our platform , like phone numbers . our customers ' applications are able to reach users via voice , messaging , video and email in nearly every country in the world by utilizing our platform . we support our global business through over 25 cloud data centers across more than seven regions around the world and have developed contractual relationships with network service providers globally . 61 our business model is primarily focused on reaching and serving the needs of software developers , who we believe are becoming increasingly influential in technology decisions in a wide variety of companies . we call this approach our business model for innovators , which empowers developers by reducing friction and upfront costs , encouraging experimentation , and enabling developers to grow as customers as their ideas succeed . we established and maintain our leadership position by engaging directly with , and cultivating , our developer community , which has led to the rapid adoption of our platform . we reach developers through community events and conferences , including our signal customer and developer conference , to demonstrate how every developer can create differentiated applications incorporating communications using our products . once developers are introduced to our platform , we provide them with a low friction trial experience . by accessing our easy‑to‑adopt apis , extensive self‑service documentation and customer support team , developers build our products into their applications and then test such applications through free trial periods that we provide . once they have decided to use our products beyond the initial free trial period , customers provide their credit card information and only pay for the actual usage of our products . historically , we have acquired the substantial majority of our customers through this self‑service model . as customers expand their usage of our platform , our relationships with them often evolve to include business leaders within their organizations . once our customers reach a certain spending level with us , we support them with account executives or customer success advocates within our sales organization to ensure their satisfaction and expand their usage of our products . we also supplement our self‑service model with a sales effort aimed at engaging larger potential customers , strategic leads and existing customers through a direct sales approach . to help increase awareness of our products in the enterprise , we have expanded our marketing efforts through programs like our twilio engage roadshow where we seek to bring business leaders and developers together to discuss the future of customer engagement . we have developed products to support this effort as well , like the twilio enterprise plan , which provides capabilities for advanced security , access management and granular administration . our sales organization targets technical leaders and business leaders who are seeking to leverage software to drive competitive differentiation . as we educate these leaders on the benefits of developing applications incorporating our products to differentiate their business , they often consult with their developers regarding implementation . we believe that developers are often advocates for our products as a result of our developer‑focused approach . our sales organization includes sales development , inside sales , field sales and sales engineering personnel . story_separator_special_tag we also assumed all of the outstanding stock options and restricted stock units of sendgrid as converted into our stock options and restricted stock units , respectively , based on the conversion ratio provided in the agreement and plan of merger and reorganization , as amended . public equity offerings in february 2021 , august 2020 and june 2019 we completed public equity offerings in which we sold 4,312,500 shares , 5,819,838 shares and 8,064,515 shares , respectively , of our class a common stock at public offering prices of $ 409.60 per share , $ 247.00 per share and $ 124.00 per share , respectively . we received aggregate proceeds of $ 1.8 billion , $ 1.4 billion and $ 979.0 million , respectively , after deducting underwriting discounts and offering expenses paid and payable by us . covid-19 update a novel coronavirus disease ( “ covid-19 ” ) was declared a global pandemic during the first quarter of 2020 and has resulted in the imposition of numerous , unprecedented , national and international measures to try to contain the virus , including travel bans and restrictions , shutdowns , quarantines , shelter-in-place and social distancing orders . to prioritize the health and safety of our employees , customers and our community at large , we have either cancelled or shifted other planned events to virtual-only experiences and may determine to alter , postpone or cancel additional customer , employee or industry events in the future . since mid-march 2020 , we have also taken several precautionary measures to protect our employees and contingent workers and help minimize the spread of the virus , including temporarily closing our worldwide offices , requiring all employees and contingent workers to work from home and suspending all business travel worldwide for our employees for the time being . the broader implications of covid-19 on our results of operations and overall financial performance remain uncertain . the covid-19 pandemic and its adverse effects have become more prevalent in the locations where we , our customers , suppliers or third-party business partners conduct business . in the three months ended december 31 , 2020 , we experienced a modest rebound in usage levels from customers in the travel and hospitality industry , while the ridesharing industry remained below pre-covid-19 levels . we also continued to experience increased usage in other areas , including healthcare , education , consumer on-demand , and retail . we acknowledge that there may be additional impacts to the economy and our business as a result of covid-19 . we expect that there may be some volatility in customer demand and buying habits as the pandemic continues , and we may experience constrained supply or curtailed customer demand that could materially and adversely impact our business , results of operations and financial performance in future periods . specifically , we may experience impact from delayed sales cycles , including customers and prospective customers delaying contract signing or contract renewals , or reducing 63 budgets or minimum commitments related to the products and services that we offer and changes to consumer behavior that may affect customers who use our products and service for confirmations , notifications , and other use cases . while we are continuing our recruiting efforts , it is possible that the pace of our hiring may slow during the covid-19 pandemic . see the risk factor titled `` the global covid-19 pandemic may adversely impact our business , results of operations and financial performance '' in part i , item 1a , “ risk factors ” of this annual report on form 10-k for further discussion of the possible impact of the covid-19 pandemic on our business , financial condition and results of operations . key business metrics year ended december 31 , 2020 2019 2018 number of active customer accounts ( as of end date of period ) ( 1 ) 221,000 179,000 64,286 total revenue ( in thousands ) ( 1 ) $ 1,761,776 $ 1,134,468 $ 650,067 total revenue growth rate ( 1 ) 55 % 75 % 63 % dollar-based net expansion rate ( 2 ) 137 % 135 % 143 % ( 1 ) includes the contributions from our twilio segment business , acquired november 2 , 2020 , and twilio sendgrid business , acquired february 1 , 2019 , from the dates of their respective acquisitions . effective december 31 , 2019 , we round down the number of active customer accounts to the nearest thousand . ( 2 ) as previously announced in our annual report on form 10-k filed with the sec on march 2 , 2020 , commencing with the three-month period ended march 31 , 2020 , we calculate our dollar-based net expansion rate by comparing total revenue from a cohort of active customer accounts in a period to the same period in the prior year ( the `` new dbne definition '' ) . to facilitate comparison between the periods presented , dollar-based net expansion rate as presented in the table above has been calculated as if the new dbne definition had been in effect during that period . as a result of the new dbne definition , unless specifically identified as being calculated using total revenue , any dollar-based net expansion rates disclosed by us in our sec filings , press releases and presentations prior to the date of our press release for the three months ended march 31 , 2020 , will not be directly comparable to our dollar-based net expansion rates going forward . revenue from twilio segment will not impact this calculation until the one-year anniversary of the acquisition . number of active customer accounts . we believe that the number of active customer accounts is an important indicator of the growth of our business , the market acceptance of our platform and future revenue trends .
| quarterly results of operations the following tables set forth our unaudited quarterly statements of operations data for each of the eight quarters within the two years ended december 31 , 2020 , as well as the percentage that each line item represents of our revenue for each quarter presented . the information for each quarter has been prepared on a basis consistent with our audited consolidated financial statements included elsewhere in this annual report on form 10-k , and reflect , in the opinion of management , all adjustments of a normal , recurring nature that are necessary for a fair presentation of the financial information contained in those statements . for the three months ended december 31 , 2020 , our revenue also includes the contribution from our twilio segment business since the date of our acquisition of this business on november 2 , 2020. for the three months ended march 31 , 2019 and all subsequent periods thereafter , our revenue also includes the contribution from our twilio sendgrid business since the date of our acquisition of this business on february 1 , 2019. our historical results are not necessarily indicative of the results that may be expected in the future . the following quarterly financial data should be read in conjunction with our audited consolidated financial statements included elsewhere in this annual report on form 10-k. consolidated statements of operations : replace_table_token_17_th ( 1 ) includes stock-based compensation expense as follows : replace_table_token_18_th ( 2 ) includes amortization of acquired intangibles as follows : replace_table_token_19_th 72 consolidated statement of operations , as a percentage of revenue * * replace_table_token_20_th * less than 0.5 % of revenue . * * columns may not add up to 100 % due to rounding .
| 7,985 |
10-k , as well as the risk factors discussed above in item 1a . as previously noted , the discussion set forth below , as well as other portions of this form 10-k , contain statements concerning potential future events . readers can identify these forward-looking statements by their use of such verbs as “ expects , ” “ anticipates , ” “ believes ” or similar verbs or conjugations of such verbs . if any of our assumptions on which the statements are based prove incorrect or should unanticipated circumstances arise , our actual results could materially differ from those anticipated by such forward-looking statements . the differences could be caused by a number of factors or combination of factors including , but not limited to , those discussed above in item 1a . readers are strongly encouraged to consider those factors when evaluating any such forward-looking statement . except as may be required by law , we do not undertake to update any forward-looking statements in this form 10-k. garmin 's fiscal year is a 52-53 week period ending on the last saturday of the calendar year . fiscal years 2018 and 2017 contained 52 weeks compared to 53 weeks for 2016. unless otherwise stated , all years and dates refer to the company 's fiscal year and fiscal periods . unless the context otherwise requires , references in this document to “ we , ” “ us , ” “ our ” and similar terms refer to garmin ltd. and its subsidiaries . unless otherwise indicated , dollar amounts set forth in the tables are in thousands , except per share data . overview we are a leading worldwide provider of navigation , communications and information devices , most of which are enabled by global positioning system , or gps , technology . we operate in five business segments , which serve the marine , outdoor , fitness , auto , and aviation markets . our segments offer products through our network of subsidiary distributors and independent dealers and distributors . however , the nature of products and types of customers for the five segments can vary significantly . as such , the segments are managed separately . since our first products were delivered in 1991 , we have generated positive income from operations each year and have funded our growth from these profits . critical accounting policies and estimates general garmin 's discussion and analysis of its financial condition and results of operations are based upon garmin 's consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . the presentation of these financial statements requires garmin to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . on an on-going basis , garmin evaluates its estimates , including those related to customer sales programs and incentives , product returns , bad debts , inventories , investments , intangible assets , income taxes , warranty obligations , and contingencies and litigation . garmin bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . 42 for information on each of the following critical accounting policies and or estimates , refer to the discussion in the notes to the consolidated financial statements as indicated in the table below : intangible assets note 2 - summary of significant accounting policies revenue recognition note 2 - summary of significant accounting policies & note 13 - revenue product warranty note 2 - summary of significant accounting policies legal and other contingencies note 2 - summary of significant accounting policies & note 4 - commitments and contingencies income taxes note 2 - summary of significant accounting policies & note 6 - income taxes accounting terms and characteristics net sales our net sales are primarily generated through sales to our retail partners , dealer and distributor network and to original equipment manufacturers . refer to the revenue recognition discussion in note 2 to the consolidated financial statements . we aim to achieve a quick turnaround on orders we receive , and we typically ship most orders within 72 hours . therefore , we believe that backlog information is not material to the understanding of our business . net sales are subject to seasonal fluctuation . typically , sales of our consumer products are highest in the fourth quarter , due to increased demand during the holiday buying season , and in the second quarter , due to increased demand during the spring and summer season . our aviation and auto oem products do not experience much seasonal variation , but are more influenced by the timing of aircraft certifications and the release of new products when the initial demand is typically the strongest . cost of sales/gross profit raw material costs are our most significant component of cost of goods sold . our existing practice of performing the design and manufacture of our products in-house has enabled us to source components from different suppliers and , where possible , to redesign our products to leverage lower cost components . we believe that our flexible production model allows our xizhi , jhongli , and linkou manufacturing plants in taiwan ; yangzhou manufacturing plant in china ; and our olathe , kansas , and salem , oregon manufacturing plants in the u.s. to experience relatively low costs of manufacturing . in general , products manufactured in taiwan have been our highest volume products . our manufacturing labor costs historically have been lower in taiwan and china than in olathe and salem . sales price variability has had and can be expected to have an effect on our gross profit . story_separator_special_tag comparison of 52-weeks ended december 30 , 2017 and 53-weeks ended december 31 , 2016 net sales replace_table_token_13_th net sales increased 2 % in 2017 when compared to the year-ago period . outdoor , marine , and aviation segments had an increase in revenue , while fitness and auto segments had a decrease in revenue . auto revenue represented the largest portion of our revenue mix in 2017 at 25 % , which was a decline from 30 % in 2016. total unit sales decreased 8 % to 15.4 million units in the 52-weeks ended 2017 from 16.8 million units in the 53-weeks ended 2016. outdoor , marine , and aviation revenues increased 28 % , 13 % , and 14 % , respectively when compared to the year-ago period . growth in outdoor was driven by growth in our wearables and subscriptions categories . our marine segment revenue increased primarily due to growth in chartplotters , fishfinders , and entertainment systems , and the newly acquired navionics . aviation revenues increased due to growth in both oem and aftermarket sales . fitness segment revenue decreased 7 % from the year-ago period , primary driven by the general decline of the basic activity tracker market . auto segment revenue decreased 14 % from the year-ago period , primarily due to the ongoing pnd market contraction . 49 cost of goods sold replace_table_token_14_th cost of goods sold decreased 2 % in absolute dollars for the 52-weeks ended december 30 , 2017 when compared to the 53-weeks ended december 31 , 2016. in the outdoor , fitness , and marine segments , the decrease in cost of goods sold as a percent of revenues was a result of a shift in product mix toward higher margin products . the aviation segment increase in cost of goods sold was generally consistent with the segment revenue increase . the auto segment cost of goods decline was largely consistent with the segment revenue decline . gross profit replace_table_token_15_th gross profit dollars in the 52-weeks ended december 30 , 2017 increased 6 % while gross profit margin increased 220 basis points compared to the 53-weeks ended december 31 , 2016. growth in sales of higher margin segments contributed to the increase in gross profit dollars and gross margin percentage . outdoor , fitness , and marine segment increases to gross profit margin were primarily due to product mix within those segments . auto and aviation segment gross margin rates were relatively consistent between fiscal periods . advertising expenses replace_table_token_16_th advertising expense decreased 7 % in absolute dollars and was relatively flat as a percent of revenues in the 52-weeks ended december 30 , 2017 compared to the 53-weeks ended december 31 , 2016. the decrease in absolute dollars is primarily attributable to decreases in spend on media advertising . 50 selling , general and administrative expenses replace_table_token_17_th selling , general and administrative expense increased 7 % in absolute dollars and was relatively flat as a percent of revenues in the 52-weeks ended december 30 , 2017 compared to the 53-weeks ended december 31 , 2016. the absolute dollar increase is primarily attributable to legal-related costs and information technology costs . as a percent of revenues , selling , general , and administrative expenses in all segments except marine were relatively consistent on a year over year basis . the increase in the marine segment , as a percent of revenue , was primarily related to a litigation settlement . research and development expense replace_table_token_18_th research and development expense increased 9 % due to ongoing development activities for new products and the addition of engineering personnel throughout the 52-weeks ended december 30 , 2017. in absolute dollars , research and development costs increased $ 43.7 million when compared with the 53-weeks ended december 31 , 2016 , and increased 100 basis points as a percent of revenue . our research and development spending is focused on product development , improving existing software capabilities , and exploring new categories . operating income replace_table_token_19_th as a result of the above , operating income increased 8 % in absolute dollars and 110 basis points as a percent of revenue when compared to the 53-weeks ended december 31 , 2016. the growth in operating income , both in absolute dollars and as a percent of revenue , was primarily due to an increase in revenue growth and increase in gross margin percentage , which were partially offset by increased operating expenses , as discussed above . 51 other income ( expense ) replace_table_token_20_th the average returns on cash and investments , including interest and capital gain/loss returns , during the 52-weeks ended december 30 , 2017 and the 53- weeks ended december 31 , 2016 were 1.5 % for both periods . interest income increased in fiscal 2017 primarily due to slightly higher yields on fixed-income securities , while other income decreased in fiscal 2017 primarily due to higher net capital gains realized in fiscal 2016. foreign currency gains and losses for the company are typically driven by movements in the taiwan dollar , euro , and british pound sterling in relation to the u.s. dollar . the taiwan dollar is the functional currency of garmin corporation , the u.s. dollar is the functional currency of garmin ( europe ) ltd. , and the euro is the functional currency of most of our other european subsidiaries , although some transactions and balances are denominated in british pounds . the majority of the company 's consolidated foreign currency gain or loss is typically driven by the significant cash and marketable securities , receivables , and payables held in a currency other than the functional currency at a given legal entity . due to the relative size of the entities using a functional currency other than the taiwan dollar , euro , and british pound sterling , currency fluctuations related to these entities are not expected to have a material impact on the company 's financial statements .
| results of operations the following table sets forth our results of operations as a percentage of net sales during the periods shown ( the table may not foot due to rounding ) : replace_table_token_3_th 44 the following table sets forth our results of operations through operating income for each of our five segments during the period shown . the company 's codm uses operating income as the measure of profit or loss to assess segment performance and allocate resources . operating income represents net sales less costs of goods sold and operating expenses . net sales are directly attributed to each segment . most costs of goods sold and the majority of operating expenses are also directly attributed to each segment , while certain other costs of goods sold and operating expenses are allocated to the segments in a manner appropriate to the specific facts and circumstances of the expenses being allocated . for each line item in the table , the total of the segments ' amounts equals the amount in the consolidated statements of income data included in item 6. replace_table_token_4_th comparison of 52-weeks ended december 29 , 2018 and december 30 , 2017 net sales replace_table_token_5_th 45 net sales increased 7 % in 2018 when compared to the year-ago period . all segments had an increase in revenue except for auto . fitness revenue represented the largest portion of our revenue mix in 2018 at 26 % , and auto revenue represented the largest portion of our revenue mix in 2017 at 25 % . total unit sales decreased 3 % to 14.9 million units in 2018 from 15.4 million units in 2017. outdoor , fitness , marine , and aviation revenues increased 16 % , 13 % , 18 % , and 20 % , respectively when compared to the year-ago period . the outdoor and fitness segment revenue increases were primarily driven by growth in wearables .
| 7,986 |
for this purpose , any statement , that is not a statement of historical fact may be deemed to be a forward-looking statement . these forward-looking statements may include statements regarding profitability , liquidity , allowance for loan losses , interest rate sensitivity , market risk , growth strategy and financial and other goals . forward-looking statements often use words such as “ believes , ” “ expects , ” “ plans , ” “ may , ” “ will , ” “ should , ” “ projects , ” “ contemplates , ” “ anticipates , ” “ forecasts , ” “ intends ” or other words of similar meaning . you can also identify them by the fact that they do not relate strictly to historical or current facts . forward-looking statements are subject to numerous assumptions , risks and uncertainties , and actual results could differ materially from historical results or those anticipated by such statements . there are many factors that could have a material adverse effect on the operations and future prospects of the company including , but not limited to : · changes in assumptions underlying the establishment of allowances for loan losses , and other estimates ; · the risks of changes in interest rates on levels , composition and costs of deposits , loan demand , and the values and liquidity of loan collateral , securities , and interest sensitive assets and liabilities ; · the effects of future economic , business and market conditions ; · legislative and regulatory changes , including the dodd-frank act and other changes in banking , securities , and tax laws and regulations and their application by our regulators , and changes in scope and cost of fdic insurance and other coverages ; · our inability to maintain our regulatory capital position ; · the company 's computer systems and infrastructure may be vulnerable to attacks by hackers or breached due to employee error , malfeasance , or other disruptions despite security measures implemented by the company ; · changes in market conditions , specifically declines in the residential and commercial real estate market , volatility and disruption of the capital and credit markets , soundness of other financial institutions we do business with ; · risks inherent in making loans such as repayment risks and fluctuating collateral values ; · changes in operations of the mortgage company as a result of the activity in the residential real estate market ; · exposure to repurchase loans sold to investors for which borrowers failed to provide full and accurate information on or related to their loan application or for which appraisals have not been acceptable or when the loan was not underwritten in accordance with the loan program specified by the loan investor ; · governmental monetary and fiscal policies ; · changes in accounting policies , rules and practices ; · reliance on our management team , including our ability to attract and retain key personnel ; · competition with other banks and financial institutions , and companies outside of the banking industry , including those companies that have substantially greater access to capital and other resources ; · demand , development and acceptance of new products and services ; · problems with technology utilized by us ; 29 · changing trends in customer profiles and behavior ; and · other factors described from time to time in our reports filed with the sec . for additional information on factors that could materially influence the forward-looking statements included in this report , see the risk factors in item 1a – “ risk factors ” in this report . these risks and uncertainties should be considered in evaluating the forward-looking statements contained herein , and readers are cautioned not to place undue reliance on such statements . any forward-looking statement speaks only as of the date on which it is made , and the company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made . in addition , past results of operations are not necessarily indicative of future results . general the company 's primary source of earnings is net interest income , and its principal market risk exposure is interest rate risk . the company is not able to predict market interest rate fluctuations and its asset/liability management strategy may not prevent interest rate changes from having a material adverse effect on the company 's results of operations and financial condition . although we endeavor to minimize the credit risk inherent in the company 's loan portfolio , we must necessarily make various assumptions and judgments about the collectability of the loan portfolio based on our experience and evaluation of economic conditions . if such assumptions or judgments prove to be incorrect , the current allowance for loan losses may not be sufficient to cover loan losses and additions to the allowance may be necessary , which would have a negative impact on net income . results of operations the following presents management 's discussion and analysis of the financial condition of the company at december 31 , 2019 and 2018 , and results of operations for the company for the years ended december 31 , 2019 and 2018. this discussion should be read in conjunction with the company 's audited consolidated financial statements and the notes thereto appearing elsewhere in this annual report . story_separator_special_tag for more financial data and other information about the provision for loan losses refer to section , “ balance sheet analysis ” under this item 7 – “ management 's discussion and analysis of financial condition and results of operations ” , and note 4 “ allowance for loan losses ” in the “ notes to consolidated financial statements ” contained in item 8 of this form 10-k. noninterest income noninterest income includes service charges and fees on deposit accounts , fee income related to loan origination , gains and losses on sale of mortgage loans and securities held for sale . story_separator_special_tag for more financial data and other information about loans refer to note 1 “ summary of significant accounting policies ” and note 4 “ allowance for loan losses ” in the “ notes to consolidated financial statements ” contained in item 8 of this form 10-k. asset quality the following table summarizes asset quality information at the dates indicated ( dollars in thousands ) . replace_table_token_7_th ( 1 ) all loans 90 days past due and still accruing are rehabilitated student loans which have a 98 % guarantee by the doe . ( 2 ) loans are net of unearned income and deferred cost . the following table presents an analysis of the changes in nonperforming assets for 2019 ( in thousands ) . replace_table_token_8_th nonperforming restructured loans are included in nonaccrual loans . until a nonperforming restructured loan has performed in accordance with its restructured terms for a minimum of six months , it will remain on nonaccrual status . 37 interest is accrued on outstanding loan principal balances , unless the company considers collection to be doubtful . commercial and unsecured consumer loans are designated as nonaccrual when the company considers collection of expected principal and interest doubtful . mortgage loans and most other types of consumer loans past due 90 days or more may remain on accrual status if management determines that concern over our ability to collect principal and interest is not significant . when loans are placed in nonaccrual status , previously accrued and unpaid interest is reversed against interest income in the current period and interest is subsequently recognized only to the extent cash is received . interest accruals are resumed on such loans only when in the judgment of management , the loans are estimated to be fully collectible as to both principal and interest . of the total nonaccrual loans of $ 1,868,000 at december 31 , 2019 that were considered impaired , one loan totaling $ 135,000 had a specific allowance for loan loss totaling $ 135,000. the company established a reserve against this loan at december 31 , 2019 because of stale financial data ; however , the borrower has made significant payments on the outstanding balance to support the establishment of a reserve versus a charge-off . the company will charge-off the portion considered a loss when it becomes apparent a loss is likely . this compares to $ 2,259,000 in nonaccrual loans at december 31 , 2018 of which three loans totaling $ 17,000 had specific allowances for loan losses of $ 17,000. cumulative interest income that would have been recorded had nonaccrual loans been performing would have been $ 136,000 and $ 240,000 , for 2019 and 2018 , respectively . student loans totaling $ 2,567,000 and $ 5,573,000 at december 31 , 2019 and 2018 , respectively , were past due 90 days or more and interest was still being accrued as principal and interest on such loans have a 98 % guarantee by the doe . the 2 % not covered by the doe guarantee is provided for in the allowance for loan losses . deposits the following table gives the composition of our deposits at the dates indicated ( dollars in thousands ) . replace_table_token_9_th total deposits increased by $ 4,161,000 , or 0.95 % , from $ 439,047,000 at december 31 , 2018 to $ 443,208,000 at december 31 , 2019. variances of note are as follows : · noninterest bearing demand account balances increased $ 11,911,000 , or 9.98 % from december 31 , 2018 , and represented 29.61 % of total deposits at december 31 , 2019 compared to 27.18 % as of december 31 , 2018 . · low cost relationship deposit account ( i.e . interest bearing checking , money market , and savings ) balances increased $ 10,602,000 , or 6.46 % from december 31 , 2018 , and represented 39.43 % of total deposits at december 31 , 2019 compared to 37.39 % as of december 31 , 2018 . · time deposit balances decreased $ 18,352,000 , or 11.80 % from december 31 , 2018 , and represented 30.96 % of total deposits at december 31 , 2019 compared to 35.43 % as of december 31 , 2018 . 38 the variety of deposit accounts that we offer has allowed us to be competitive in obtaining funds and has allowed us to respond with flexibility to , although not to eliminate , the threat of disintermediation ( the flow of funds away from depository institutions such as banking institutions into direct investment vehicles such as government and corporate securities ) . our ability to attract and retain deposits , and our cost of funds , has been , and is expected to continue to be , significantly affected by money market conditions . borrowings we utilize borrowings to supplement deposits to address funding or liability duration needs . for more financial data and other information about borrowings refer to note 8 “ borrowings ” in the “ notes to consolidated financial statements ” contained in item 8 of this form 10-k. off-balance sheet arrangements the company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates . for more financial data and other information about loans refer to note 12 “ commitments and contingencies ” in the “ notes to consolidated financial statements ” contained in item 8 of this form 10-k. capital resources shareholders ' equity at december 31 , 2019 was $ 42,914,000 , compared to $ 37,133,000 at december 31 , 2018. the $ 5,781,000 increase in shareholders ' equity during 2019 is primarily due to net income for the year of $ 4,477,000. the following table presents the composition of regulatory capital and the capital ratios for the bank at the dates indicated ( dollars in thousands ) .
| summary the company recorded net income and net income available to common shareholders of $ 4,477,000 or $ 3.10 per fully diluted share in 2019 , compared to a net income of $ 3,037,000 and net income available to common shareholders of $ 2,924,000 , or $ 2.04 per fully diluted share in 2018. net interest income net interest income , which represents the difference between interest earned on interest-earning assets and interest incurred on interest-bearing liabilities , is the company 's primary source of earnings . net interest income can be affected by changes in market interest rates as well as the level and composition of assets , liabilities and shareholders ' equity . net interest spread is the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities . the net yield on interest-earning assets ( “ net interest margin ” ) is calculated by dividing tax equivalent net interest income by average interest-earning assets . generally , the net interest margin will exceed the net interest spread because a portion of interest-earning assets are funded by various noninterest-bearing sources , principally noninterest-bearing deposits and shareholders ' equity . 30 replace_table_token_1_th the increase in net interest income of $ 997,000 for the year ended december 31 , 2019 was a result of positive movements in interest income . interest income increased $ 2,419,000 with interest income on loans held for investment increasing $ 1,944,000 and interest income on investments increasing by $ 55,000. the increase in interest income on loans held for investment was attributable to an increase in average loans outstanding of $ 21,140,000 and an increase in the yield of 22 basis points . the increase in interest income on securities was due to an increase in the yield of 23 basis points .
| 7,987 |
these forward-looking statements can be identified by words such as “ may , ” “ will , ” “ would , ” “ should , ” “ could , ” “ expect , ” “ anticipate , ” “ believe , ” “ estimate , ” “ intend , ” “ strategy , ” “ future , ” “ opportunity , ” “ plan , ” “ project , ” “ forecast , ” and other similar expressions . these forward-looking statements involve risks and uncertainties that could cause our actual results and financial condition to differ materially from those expressed or implied in our forward-looking statements . such risks and uncertainties include , among others , those discussed in “ item 1a . risk factors ” of this form 10-k , as well as in our consolidated financial statements , related notes , and the other information appearing in this report and our other filings with the securities and exchange commission ( “ sec ” ) . we do not intend , and undertake no obligation except as required by law , to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances . given these risks and uncertainties , readers are cautioned not to place undue reliance on such forward-looking statements . you should read the following “ management 's discussion and analysis of financial condition and results of operations ” in conjunction with the audited consolidated financial statements and the related notes that appear in this report . unless otherwise expressly stated or the context otherwise requires , references to “ we , ” “ our , ” “ us , ” “ the company , ” and “ paypal ” refer to paypal holdings , inc. and its consolidated subsidiaries . this management 's discussion and analysis of financial condition and results of operations focuses on discussion of 2020 results as compared to 2019 results . for discussion of 2019 results as compared to 2018 results , see “ item 7. management 's discussion and analysis of financial condition and results of operations ” within our form 10-k for the year ended december 31 , 2019 filed with the sec on february 6 , 2020. business environment the company we are a leading technology platform and digital payments company that enables digital and mobile payments on behalf of merchants and consumers worldwide . paypal is committed to democratizing financial services to improve the financial health of individuals and to increase economic opportunity for entrepreneurs and businesses of all sizes around the world . our goal is to enable our merchants and consumers to manage and move their money anywhere in the world , anytime , on any platform , and using any device when sending payments or getting paid . we also facilitate person-to-person ( “ p2p ” ) payments through our paypal , venmo , and xoom products and services and simplify and personalize shopping experiences for our consumers through our honey platform . our combined payment solutions , including our core paypal , paypal credit , braintree , venmo , xoom , izettle , and hyperwallet products and services , comprise our proprietary payments platform . regulatory environment we operate globally and in a rapidly evolving regulatory environment characterized by a heightened focus by regulators globally on all aspects of the payments industry , including countering terrorist financing , anti-money laundering , privacy , cybersecurity , and consumer protection . the laws and regulations applicable to us , including those enacted prior to the advent of digital and mobile payments , are continuing to evolve through legislative and regulatory action and judicial interpretation . new or changing laws and regulations , including the changes to their interpretation and implementation , as well as increased penalties and enforcement actions related to non-compliance , could have a material adverse impact on our business , results of operations , and financial condition . we monitor these areas closely and are focused on designing compliant solutions for our customers . 31 information security information security risks for global payments and technology companies like us have increased significantly in recent years . although we have developed systems and processes designed to protect the data we manage , prevent data loss and other security incidents , and effectively respond to known and potential risks , and expect to continue to expend significant resources to bolster these protections , we remain subject to these risks and there can be no assurance that our security measures will provide sufficient security or prevent breaches or attacks . for additional information regarding our information security risks , see “ item 1a . risk factors— cyberattacks and security vulnerabilities could result in serious harm to our reputation , business , and financial condition . ” covid-19 in march 2020 , the world health organization declared the outbreak of the novel coronavirus ( “ covid-19 ” ) as a pandemic . the outbreak has resulted in government authorities and businesses throughout the world implementing numerous measures intended to contain and limit the spread of covid-19 , including travel restrictions , border closures , quarantines , shelter-in-place and lock-down orders , mask and social distancing requirements , and business limitations and shutdowns . these measures have negatively impacted consumer and business spending and payments activity generally , and have significantly contributed to deteriorating macroeconomic conditions and higher unemployment in some countries , including those in which we have significant operations . the spread of covid-19 has caused us to make significant modifications to our business practices , including enabling most of our workforce to work from home , establishing strict health and safety protocols for our offices , restricting physical participation in meetings , events , and conferences , and imposing restrictions on employee travel . story_separator_special_tag , transactions where the merchant and consumer are in different countries ) , to facilitate the instant transfer of funds for our customers from their paypal or venmo account to their debit card or bank account , and other miscellaneous fees . revenues from other value added services : net revenues derived primarily from revenue earned through partnerships , referral fees , subscription fees , gateway fees , and other services we provide to our merchants and consumers . we also earn revenues from interest and fees earned primarily on our portfolio of loans receivable , and interest earned on certain assets underlying customer balances . our revenues can be significantly impacted by the following : the mix of merchants , products , and services ; the mix between domestic and cross-border transactions ; the geographic region or country in which a transaction occurs ; and the amount of our loans receivable outstanding with merchants and consumers . active accounts , number of payment transactions , number of payment transactions per active account , and tpv are key non-financial performance metrics ( “ key metrics ” ) that management uses to measure the performance of our business , and are defined as follows : an active account is an account registered directly with paypal or a platform access partner that has completed a transaction on our payments platform or through our honey platform , not including gateway-exclusive transactions , within the past 12 months . a platform access partner is a third party whose customers are provided access to paypal 's payments platform through such third party 's login credentials . the number of active accounts provides management with additional perspective on the growth of accounts across our payments and honey platforms as well as the overall scale of our platforms . number of payment transactions are the total number of payments , net of payment reversals , successfully completed on our payments platform or enabled by paypal via a partner payment solution , not including gateway-exclusive transactions . number of payment transactions per active account reflects the total number of payment transactions within the previous 12-month period , divided by active accounts at the end of the period . the number of payment transactions per active account provides management with insight into the number of times a customer is engaged in payments activity on our payments platform in a given period . tpv is the value of payments , net of payment reversals , successfully completed on our payments platform , or enabled by paypal via a partner payment solution , not including gateway-exclusive transactions . as our transaction revenue is typically correlated with tpv growth and the number of payment transactions completed on our payments platform , management uses these metrics to gain insights into the scale and strength of our payments platform , the engagement level of our customers , and underlying activity and trends which are indicators of current and future performance . we present these key metrics to enhance investors ' evaluation of the performance of our business and operating results . 35 net revenue analysis the components of our net revenue for the years ended december 31 , 2020 , 2019 and 2018 were as follows ( in millions ) : transaction revenues transaction revenues increased by $ 3.8 billion , or 24 % , in 2020 compared to 2019 and were mainly attributable to our core paypal products and services due primarily to strong growth in tpv and the number of payment transactions , both of which resulted primarily from an increase in our active accounts , and to a lesser extent , an increase in revenue from currency conversion fees . the current macroeconomic environment as a result of the covid-19 pandemic has adversely impacted general consumer and merchant spending with a more pronounced impact on travel and events verticals . however , we have experienced strong growth in online retail , gaming , and food volume , offsetting this decline . the graphs below present the respective key metrics ( in millions ) for the years ended december 31 , 2020 , 2019 , and 2018 : * reflects active accounts at the end of the applicable period . active accounts as of december 31 , 2020 includes 10.2 million active accounts contributed by honey on the date of acquisition in january 2020. the following table provides a summary of related metrics : replace_table_token_5_th * * not meaningful 36 transaction revenues grew more slowly than tpv , which grew 31 % , and the number of payment transactions , which grew 25 % , in 2020 compared to 2019 due primarily to a higher proportion of p2p transactions ( primarily from our venmo products ) from which we earn lower fees , a decline in hedging gains , and a higher portion of tpv generated by platform partners and large merchants who generally pay lower rates with higher transaction volumes . changes in prices charged to our customers did not significantly impact transaction revenue growth in 2020. revenues from other value added services revenues from other value added services decreased by $ 137 million , or 8 % , in 2020 compared to 2019 due primarily to a decline in interest earned on certain assets underlying customer account balances resulting from lower interest rates and a decrease in interest and fee income on our loans and advances receivable due to an increase in the allowance for expected credit losses against interest and fees receivable , a decline in originations , and payment holidays that we provided during the year to our customers as a part of our covid-19 payment relief initiatives .
| overview of results of operations the following table provides a summary of our consolidated financial results for the years ended december 31 , 2020 , 2019 , and 2018 : replace_table_token_3_th all amounts in tables are rounded to the nearest million , except as otherwise noted . as a result , certain amounts may not recalculate using the rounded amounts provided . * * not meaningful ( 1 ) prior period amounts have been revised to conform to the current period presentation . refer to “ note 1—overview and summary of significant accounting policies ” to our consolidated financial statements included in this form 10-k for additional information . net revenues increased $ 3.7 billion , or 21 % , in 2020 as compared to 2019 driven primarily by growth in total payment volume ( “ tpv ” , as defined below under “ net revenues ” ) of 31 % . our acquisition of honey science corporation ( “ honey ” ) contributed approximately one percentage point to the growth rate in 2020. total operating expenses increased $ 3.1 billion , or 21 % , in 2020 as compared to 2019 due primarily to an increase in transaction expense , and to a lesser extent , increases in technology and development expenses , sales and marketing expenses , transaction and credit losses , and general and administrative expenses . our acquisitions of honey and a 70 % equity interest in guofubao information technology co. ( gopay ) , ltd. ( “ gopay ” ) collectively contributed approximately five percentage points to the growth rate in total operating expenses in 2020. operating income increased $ 570 million , or 21 % , in 2020 as compared to 2019 due to growth in net revenues , partially offset by an increase in operating expenses . our operating margin was 15 % in both 2020 and 2019. our acquisitions of honey and gopay collectively had a negative impact of approximately three percentage points to our operating margin , which was offset by operating efficiencies .
| 7,988 |
the company has reviewed transactions through which it believes it may have indirect exposure to the selected european countries story_separator_special_tag the following discussion and analysis of the company 's financial condition and results of operations should be read in conjunction with the company 's consolidated financial statements and accompanying notes which appear elsewhere in this form 10-k. it contains forward looking statements that involve risks and uncertainties . please see “ forward looking statements ” for more information . the company 's 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 form 10-k , particularly under the headings “ risk factors ” and “ forward looking statements. ” introduction the company provides credit protection products in the united states ( “ u.s. ” ) and international public finance ( including infrastructure ) and structured finance markets . the company applies its credit underwriting judgment , risk management skills and capital markets experience to offer insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments , including scheduled interest and principal payments . the securities insured by the company include taxable and tax-exempt obligations issued by u.s. state or municipal governmental authorities , utility districts or facilities ; notes or bonds issued to finance international infrastructure projects ; and asset-backed securities issued by special purpose entities . the company markets its credit protection products directly to issuers and underwriters of public finance , infrastructure and structured finance securities as well as to investors in such obligations . the company guarantees obligations issued in many countries , although its principal focus is on the u.s. , as well as europe and australia . executive summary this executive summary of management 's discussion and analysis highlights selected information and may not contain all of the information that is important to readers of this annual report . for a more detailed description of events , trends and uncertainties , as well as the capital , liquidity , credit , operational and market risks and the critical accounting policies and estimates affecting the company , this annual report should be read in its entirety . economic environment the company continued to be the most active provider of financial guaranty insurance in 2012 as a result of its financial strength and its ability to maintain strong investment-grade financial strength ratings . all of the company 's former financial guaranty competitors have had their financial strength ratings downgraded by rating agencies to below investment grade levels or are no longer rated , severely impacting their ability to underwrite new business . only two other industry participants have investment grade financial strength ratings today : national public finance guarantee corporation , which has been involved in litigation challenging its separation from mbia insurance corporation and appears not to have financial strength ratings adequate to issue new financial guaranty policies on public finance obligations , and build america mutual assurance company , which is a new entrant to the industry that commenced operations during 2012 and is gradually increasing its business . business conditions have been difficult for the entire financial guaranty insurance industry since mid-2007 , and the company continues to face challenges in maintaining its market penetration today . the presence of a new financial guaranty insurer may lead to higher overall insurance penetration of the u.s. municipal bond market or such new insurer may displace the company in certain insured transactions . the overall economic environment in the u.s. has improved over the last few years and indicators such as lower delinquency rates and more stable housing prices point toward improvement in the housing market . however , unemployment rates remain too high for a robust general economic recovery to have taken hold and concerns over the fiscal cliff may have hampered the recovery towards the end of 2012. municipal credits have experienced budgetary stress since the recent credit crisis and the ensuing recession , compounded in many cases by significant unfunded pension and retiree health care liabilities . while revenues at the state level have been rebounding in general , many local governments have continued to face structural deficits as a result of the decline in property taxes . although the vast majority of municipalities have been taking steps to address their fiscal challenges , a small number have sought bankruptcy protection . this is an area of law that has not been tested due to the relatively low frequency of such cases . the company has been active with respect to the municipal bankruptcy cases involving jefferson county , alabama and the city of stockton , california . it has also been closely monitoring legal proceedings in other municipal bankruptcy cases 71 in various states . in addition , the company has been involved with efforts of the city receiver for the city of harrisburg , pennsylvania to develop and implement a fiscal recovery plan for the city . the publicity surrounding high-profile defaults , especially those few where bond insurers are paying claims , provides evidence of the value of bond insurance and may stimulate demand , especially at the retail level . new issuance volume in the u.s. public finance market increased in 2012 as interest rates fell to historic lows . tight credit spreads and low interest rates tend to suppress demand for bond insurance as the potential savings for issuers are diminished and some investors prefer to forgo insurance in favor of greater yield . in the international arena , troubled eurozone countries continue to be a source of stress in global equity and debt markets . following the 2011 restructuring of the sovereign debt of greece , debt costs in portugal , spain and italy remain elevated , although they have declined substantially since the announcement on august 2 , 2012 by the european central bank that it would undertake outright monetary transactions ( `` omt '' ) in support of eurozone sovereign bonds . story_separator_special_tag adjusted book value per share decreased due to 11.8 million additional shares outstanding in 2012. in june 2012 , 73 the company issued 13.4 million common shares which were partially offset by the repurchase of 2.1 million common shares in 2012. see note 19 , shareholders ' equity , of the financial statements and supplementary data . see `` –non-gaap financial measures '' for a description of these non-gaap financial measures . key business strategies the company has been focused on various strategies to create value : loss mitigation , including the pursuit of recoveries for breaches of r & w , servicing improvements and the purchase of insured obligations ; new business development and reinsurance commutations ; and other rating agency capital improvement strategies . on may 31 , 2012 , the company acquired municipal and infrastructure assurance corporation , which it has renamed mac , from radian . mac is licensed to provide financial guaranty insurance and reinsurance in 38 u.s. jurisdictions including the district of columbia . in january 2013 , the company announced its intention to launch mac as a new financial guaranty insurer that provides insurance only on debt obligations in the u.s. public finance markets , in order to increase the company 's insurance penetration in such market . loss mitigation the company continued its risk remediation strategies in 2012 , which lowered losses and improved rating agency capital . the following are examples of the strategies employed by the company . pursuit of r & w breaches in an effort to recover u.s. rmbs losses the company experienced in its insured u.s. rmbs portfolio resulting from breaches of r & w , the company has pursued r & w providers by enforcing r & w provisions in contracts , negotiating agreements with r & w providers relating to those provisions and , where indicated , initiating litigation against r & w providers . the two largest settlement agreements resulting from these efforts were with bank of america in 2011 and deutsche bank in 2012. see `` losses in the insured portfolio `` and note 6 , expected loss to be paid , of the financial statements and supplementary data , for a discussion of each of these agreements . in the proceeding agm brought against flagstar bank in new york federal court , the court granted judgment in favor of agm in february 2013 on its claims for breach of contract in the amount of approximately $ 90 million plus contractual interest and attorneys ' fees and costs to be determined . flagstar bank has indicated it intends to appeal the decision . all together these efforts have resulted in the company causing r & w providers to pay or agree to pay $ 2.9 billion in respect of r & w . the company believes these results , including settlement agreements and trial decisions , are significant and will help it as it continues to pursue r & w providers for u.s. rmbs transactions it has insured . the company continues to enforce contractual provisions and pursue litigation and is in discussions with other r & w providers regarding potential agreements . see “ recovery litigation ” in note 6 , expected loss to be paid , of the financial statements and supplementary data , for a discussion of the litigation proceedings the company has initiated against other r & w providers . purchase of below investment grade insured obligations in order to mitigate losses , the company is continuing to purchase attractively priced big obligations that it insured . these purchases resulted in a reduction to net expected loss to be paid of $ 586 million as of december 31 , 2012 . as of december 31 , 2012 , the fair value of assets purchased or obtained for loss mitigation purposes ( excluding the value of the company 's insurance ) was $ 650 million , with a par of $ 1,855 million ( including bonds related to fg vies of $ 94 million in fair value and $ 695 million in par ) . rmbs servicing intervention the quality of servicing of the mortgage loans underlying an rmbs transaction influences collateral performance and ultimately the amount ( if any ) of the company 's insured losses . the company has established a group to mitigate rmbs losses by influencing mortgage servicing , including , if possible , causing the transfer of servicing or establishing special servicing arrangements . “ special servicing ” is an industry term referencing more intense servicing applied to delinquent loans aimed at 74 mitigating losses . special servicing arrangements provide incentives to a servicer to achieve better performance on the mortgage loans it services . as a result of the company 's efforts , at february 28 , 2013 the servicing of approximately $ 3.0 billion of mortgage loans had been transferred to a new servicer and another $ 1.7 billion of mortgage loans were subject to special servicing arrangements . the december 31 , 2012 net insured par of the transactions subject to a servicing transfer was $ 2.7 billion and the net insured par of the transactions subject to a special servicing arrangement was $ 0.9 billion . new business development and commutations management believes that the company is able to provide value not only by insuring the timely payment of scheduled interest and principal amounts when due , but also through its underwriting , surveillance and loss mitigation capabilities . few individual or even institutional investors have the analytic resources to cover the tens of thousands of municipal credits in the market . for those exposures that the company guarantees , it undertakes the tasks of credit selection , analysis , negotiation of terms , surveillance and , if necessary , loss mitigation . management believes this allows retail investors to participate more widely , institutional investors to operate more efficiently , and smaller , less well-known issuers to gain market access on a more cost-effective basis .
| consolidated cash flow summary replace_table_token_59_th operating cash flows include cash flows from fg vies . claims paid on consolidated fg vies are presented in the consolidated cash flow statements as a component of paydowns on fg vie liabilities in financing activities as opposed to operating activities . excluding consolidated fg vies , cash outflows from operating activities for 2012 were mainly due to claim payments net of r & w recoveries from settlement agreements , offset in part by cash received on two commutations of $ 190 million . losses paid in 2012 include claims related to greek sovereign exposures . cash inflows from operating activities in 2011 were due mainly to cash proceeds received from the bank of america agreement . operating cash inflows in 2010 was due primarily to premium on financial guaranty and credit derivatives , offset in part by outflows for net paid losses , interest , other expenses and taxes . investing activities were primarily net sales ( purchases ) of fixed maturity and short-term investment securities . investing cash flows in 2012 , 2011 and 2010 include inflows of $ 545 million , $ 760 million and $ 424 million for fg vies , respectively . in addition , in 2012 , the company paid $ 91 million to acquire mac and received $ 56 million from a payment of a note receivable . financing activities consisted primarily of paydowns of fg vie liabilities . financing cash flows in 2012 , 2011 and 2010 include outflows of $ 724 million , $ 1,053 million and $ 651 million for fg vies , respectively . on january 18 , 2013 , the company 's board of directors authorized a $ 200 million share repurchase program . this latest repurchase program replaces the november 14 , 2011 authorization to repurchase up to 5.0 million common shares . in 2012 , the company paid $ 24 million to repurchase 2.1 million common shares .
| 7,989 |
following the completion of our ipo , all outstanding principal and accrued story_separator_special_tag you should read the following discussion and analysis of financial condition and results of operations together with item 6. selected financial data and our financial statements and related notes included elsewhere in this annual report on form 10-k. this discussion and other parts of this annual report on form 10-k. contain forward-looking statements that involve risk and uncertainties , such as statements of our plans , objectives , expectations and intentions . our actual results could differ materially from those discussed in these forward-looking statements . factors that could cause or contribute to such differences include , but are not limited to , those discussed in item 1a . risk factors of this annual report on form 10-k. overview chemocentryx is a biopharmaceutical company focused on discovering , developing and commercializing orally-administered therapeutics to treat autoimmune diseases , inflammatory disorders and cancer . we currently have four drug candidates in clinical development , and expect to advance at least one additional drug candidate into clinical development in 2012. our drug candidates include : traficet-en ( ccx282 , gsk'786 or recent usan accepted name vercirnon ) , our most advanced drug candidate , currently in four pivotal phase iii clinical trials being conducted by our partner glaxo group limited , or gsk , an affiliate of glaxosmithkline , for the treatment of patients with moderate-to-severe crohn 's disease ; ccx140 , our lead independent drug candidate , which successfully completed a phase ii clinical trial in type 2 diabetics and is currently in two phase ii clinical trials in patients with diabetic nephropathy , a form of kidney disease ; ccx354 , which successfully completed a phase ii proof-of-concept clinical trial for the treatment of rheumatoid arthritis , or ra ; ccx168 , currently in a phase ii proof-of-concept clinical trial for the treatment of anti-neutrophil cytoplasmic antibody , or anca-associated vasculitis , or aav , ccx872 , our independent next generation ccr2 drug candidate for the treatment of metabolic diseases , currently expected to enter a phase i clinical trial in the second half of 2012 ; ccx507 , our independent next generation drug candidate for the treatment of inflammatory bowel disease ; and ccx662 , our independent drug candidate for the treatment of glioblastoma multiforme , or gbm , and other cancers , which is expected to enter a phase i clinical trial in the first half of 2013. ccx140 , ccx872 , ccx507 and ccx662 are wholly owned and are being developed independently by us , while traficet-en , ccx354 and ccx168 are subject to our collaboration agreement with gsk . in december 2009 and november 2011 , gsk exercised its options to obtain exclusive licenses for the further development and commercialization of traficet-en and ccx354 , respectively . upon exercise of these options , gsk assumed sole responsibility for the further development and commercialization of these drug candidates and each of their two respective back-up compounds . we are also advancing several additional independent drug candidates through preclinical development . in addition , our strategy has been to identify next generation compounds related to our drug candidates . all of our drug candidates , including those under our collaboration agreement with gsk , have been internally discovered . in august 2006 , we entered into our strategic alliance with gsk . we have received over $ 250 million from gsk , of which approximately $ 82 million was in the form of equity investments , and the balance from up-front and milestone payments , research funding and option exercise fees . under the terms of our agreement with gsk , we are responsible for the discovery and development of small molecule antagonists targeting four defined chemokine and chemo-attractant receptor targets ( ccr9 , ccr1 , c5ar and chemr23 ) and for advancing them through clinical proof-of-concept . if we demonstrate successful clinical proof-of-concept , gsk is entitled to options to exclusively license drug candidates that are subject to the collaboration and two defined back-up compounds for each drug candidate for further development and commercialization on a worldwide basis . upon exercising any of its options to drug candidates under the collaboration , gsk is solely responsible for all further clinical development and commercialization expenditures worldwide with respect to that drug candidate and its two designated back-up compounds . in exchange for the rights granted to gsk upon the exercise of its options , we are also entitled to receive regulatory and commercial milestone payments , as earned under the terms of our agreement , and royalties on the net sales of licensed drugs . the agreement contemplated up to six drug options , each of which covers a drug candidate against the four defined targets , including traficet-en ( ccr9 ) , ccx354 ( ccr1 ) , ccx168 ( c5ar ) and ccx832 ( chemr23 ) , and their associated back-up compounds . the other two 67 drug options were for second generation drug candidates and their associated back-up compounds . however , we and gsk chose not to nominate second generation drug candidates against any of the four defined targets during the agreement 's research term , which has expired . in addition , based on unblinded data from a recently completed phase i clinical trial of ccx832 , in february 2012 we and gsk determined not to further advance the development of ccx832 or its two designated back-up compounds . gsk has already exercised its options to traficet-en and ccx354 and each of their two respective defined back-up compounds . thus , gsk 's only remaining option is to ccx168 and its associated back-up compounds . if gsk does not exercise its option to ccx168 , we will evaluate our alternatives for further development of this drug candidate , which may entail internally developing it or identifying other collaboration partners for its development . story_separator_special_tag milestone payments are recorded as revenue upon achievement if there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved and the achievement of the milestone is based on our performance . clinical trial accruals and related expenses we accrue and expense costs for clinical trial activities performed by third parties , including clinical research organizations , or cros , and clinical investigators , based upon estimates made as of the reporting date of the work completed over the life of the individual study in accordance with agreements established with cros and clinical trial sites . some cros invoice us on a monthly basis , while others invoice upon milestones achieved and the expense is recorded as services are rendered . we determine the estimates of clinical activities incurred at the end of each reporting period through discussion with internal personnel and outside service providers as to the progress or stage of completion of trials or services , as of the end of each reporting period , pursuant to contracts with numerous clinical trial centers and cros and the agreed upon fee to be paid for such services . the significant factors considered in estimating accruals include the number of patients enrolled and the percentage of work completed to date . costs of setting up clinical trial sites for participation in the trials that are paid for in advance are expensed over the estimated set-up period . while the set-up periods vary from one arrangement to another , such set-up periods generally take from two to six months . such set-up activities include clinical site identification , local ethics committee submissions , regulatory submissions , clinical investigator kick-off meetings and pre-study site visits . clinical trial site costs related to patient enrollments are accrued as patients are entered into the trial . 69 to date , we have not experienced significant changes in our estimates of clinical trial accruals after a reporting period . however , due to the nature of estimates , we can not assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials . stock-based compensation stock-based compensation cost is measured at the grant date , based on the fair value of the award , and is recognized as an expense over the employee 's requisite service period on a straight line basis . we recorded non-cash stock-based compensation expense of $ 2.6 million , $ 2.3 million and $ 1.7 million for the years ended december 31 , 2011 , 2010 and 2009 , respectively . at december 31 , 2011 and 2010 , we had $ 4.4 million and $ 5.2 million , respectively , of total unrecognized stock-based compensation expense , net of estimated forfeitures , related to stock option plans that will be recognized over a weighted-average period of 2.36 years and 2.76 years , respectively . we expect to continue to grant stock options in the future , and to the extent that we do , our actual stock-based compensation expense recognized in future periods will likely increase . prior to our ipo , our board of directors , with the assistance of management and independent consultants , performed fair value analyses for the valuation of our common stock . for grants made on dates for which there was no contemporaneous valuation to utilize in setting the exercise price of our common stock , and given the absence of an active market for our common stock prior to our ipo in february 2012 , our board of directors determined the fair value of our common stock on the date of grant based on several factors , including : important developments in our operations , most significantly related to the clinical development of our lead drug candidates , traficet-en and ccx140 ; equity market conditions affecting comparable public companies ; the likelihood of achieving a liquidity event for the shares of common stock , such as an initial public offering or an acquisition of us , given prevailing market conditions ; and that the grants involved illiquid securities in a private company . for the options granted subsequent to our february 2012 ipo , the exercise price of stock options is equal to the closing market price of the underlying common stock on the grant date . net operating loss carryforwards as of december 31 , 2011 , we had net operating loss and research and development tax credit carryforwards for federal income tax purposes of approximately $ 73.7 million and $ 5.1 million , respectively . the federal net operating loss and tax credit carryforwards will expire at various dates beginning in 2019 if not utilized . we also had net operating loss and research and development tax credit carryforwards for state income tax purposes of approximately $ 73.1 million and $ 2.6 million respectively . the state net operating loss carryforwards will expire at various dates beginning in 2014 if not utilized . the state research and development tax credits can be carried forward indefinitely . utilization of the net operating losses and credits may be subject to a substantial annual limitation due to ownership change limitations provided by the internal revenue code of 1986 as amended . the annual limitation may result in the expiration of our net operating losses and credits before they can be used . we have recorded a valuation allowance for the full amount of the portion of the deferred tax asset related to our net operating loss and research and development tax credit carryforwards . 70 story_separator_special_tag administrative expenses consist primarily of salaries and related benefits , including stock-based compensation and travel expenses , in executive , finance , business and corporate development and other administrative functions .
| results of operations revenue we have not generated any revenue from product sales . for the three years ended december 31 , 2011 , our revenue has been derived primarily from contract revenue , up-front payments and development milestone payments from gsk . total revenues , as compared to the prior year , were as follows ( in thousands ) : replace_table_token_3_th the decrease in revenues from 2010 to 2011 was primarily due to lower funding of non-clinical support from gsk for ccx168 and the chemr23 research program in 2011. the decrease in revenue from 2009 to 2010 was primarily due to higher milestone revenues recognized in 2009. in december 2009 , gsk exercised its option to obtain an exclusive license for further development and worldwide commercialization of traficet-en . the associated option exercise fee of $ 35.0 million was recognized as revenue in full in the year ended december 31 , 2009. we recorded additional milestone revenues of $ 25.0 million for both 2011 and 2010 relating to activities under the gsk agreement . research and development expenses research and development expenses represent costs incurred to conduct basic research , such as the discovery and development of our understanding of the chemokine system ; the discovery and development of novel small molecule therapeutics , such as traficet-en and ccx140 ; the development of our suite of proprietary drug discovery technologies , known collectively as enabalink , which includes our proprietary reverse activation of migration , or ram , screening technology and preclinical studies and clinical trials of our drug candidates . we expense all research and development expenses as they are incurred . these expenses consist primarily of salaries and related benefits , including stock-based compensation , third-party contract costs relating to research , formulation , manufacturing , preclinical study and clinical trial activities , laboratory consumables , and allocated facility costs .
| 7,990 |
gross margin percentage decreased to 23.1 % as multi-family projects , which generally have a lower gross margin than single-family projects , were a higher proportion of our total volume during the year ended september 30 , 2017 , compared with the year ended september 30 , 2016. selling , general and administrative expenses . our residential segment experienced a $ 6.1 million , or 16.2 % , increase in selling , general and administrative expenses during the year ended september 30 , 2017 , compared to the year ended september 30 , 2016 , primarily related to higher personnel costs , including profit sharing incentives , in support of growth . selling , general and administrative expenses as a percentage of revenues in the residential segment decreased from 16.6 % to 16.0 % during the year ended september 30 , 2017 , as we benefited from the increased scale of our operations . 34 interest and other expense , net replace_table_token_15_th interest expense during the year ended september 30 , 2018 , we incurred interest expense of $ 1.9 million primarily comprised of interest expense from our term loan 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 $ 63.2 million . this compares to interest expense of $ 1.7 million for the year ended september 30 , 2017 , primarily comprised of interest expense from our term loan 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 . the increase in interest expense for the year ended september 30 , 2018 , as compared with the year ended september 30 , 2017 , is primarily a result of the increase in the variable interest rate . for the year ended september 30 , 2016 , we incurred interest expense of $ 1.3 million on a debt balance primarily comprised of our term loan facility with wells fargo , an average letter of credit balance of $ 6.9 million under our revolving credit facility , and an average unused line of credit balance of $ 40.6 million . provision for income taxes 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 associated with the reversal of a reserve previously established for an uncertain tax position . 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 ( tax reform legislation ) 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 associated with the reversal of a reserve previously established for an uncertain tax position . for the year ended september 30 , 2016 , we recorded a benefit from income tax of $ 97.1 million . this benefit included $ 109.0 million attributable to the release of our valuation allowance on certain of our net operating loss carryforwards and other deferred tax assets during the year ended september 30 , 2016. this benefit was the result of our assessment at september 30 , 2016 , that it was more likely than not that we will generate sufficient taxable income to utilize these net operating loss carryforwards and other deferred tax assets . working capital during the year ended september 30 , 2018 , working capital exclusive of cash increased by $ 19.2 million from september 30 , 2017 , reflecting a $ 33.0 million increase in current assets excluding cash , partly offset by a $ 13.8 million increase in current liabilities during the period . 35 during the year ended september 30 , 2018 , our current assets exclusive of cash increased to $ 236.4 million , as compared to $ 203.5 million as of september 30 , 2017. the increase primarily relates to an $ 18.1 million increase in costs and estimated earnings in excess of billings , largely driven by our communications , commercial & industrial and infrastructure solutions segments . additionally , accounts receivable increased by $ 8.6 million , primarily driven by higher levels of activity . days sales outstanding decreased to 62 at september 30 , 2018 , from 66 at september 30 , 2017. 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 , 2018 , our total current liabilities increased by $ 13.8 million to $ 164.4 million , compared to $ 150.6 million as of september 30 , 2017 , primarily related to an increase in accounts payable and accrued liabilities , driven by higher levels of activity . 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 story_separator_special_tag gross margin percentage decreased to 23.1 % as multi-family projects , which generally have a lower gross margin than single-family projects , were a higher proportion of our total volume during the year ended september 30 , 2017 , compared with the year ended september 30 , 2016. selling , general and administrative expenses . our residential segment experienced a $ 6.1 million , or 16.2 % , increase in selling , general and administrative expenses during the year ended september 30 , 2017 , compared to the year ended september 30 , 2016 , primarily related to higher personnel costs , including profit sharing incentives , in support of growth . selling , general and administrative expenses as a percentage of revenues in the residential segment decreased from 16.6 % to 16.0 % during the year ended september 30 , 2017 , as we benefited from the increased scale of our operations . 34 interest and other expense , net replace_table_token_15_th interest expense during the year ended september 30 , 2018 , we incurred interest expense of $ 1.9 million primarily comprised of interest expense from our term loan 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 $ 63.2 million . this compares to interest expense of $ 1.7 million for the year ended september 30 , 2017 , primarily comprised of interest expense from our term loan 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 . the increase in interest expense for the year ended september 30 , 2018 , as compared with the year ended september 30 , 2017 , is primarily a result of the increase in the variable interest rate . for the year ended september 30 , 2016 , we incurred interest expense of $ 1.3 million on a debt balance primarily comprised of our term loan facility with wells fargo , an average letter of credit balance of $ 6.9 million under our revolving credit facility , and an average unused line of credit balance of $ 40.6 million . provision for income taxes 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 associated with the reversal of a reserve previously established for an uncertain tax position . 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 ( tax reform legislation ) 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 associated with the reversal of a reserve previously established for an uncertain tax position . for the year ended september 30 , 2016 , we recorded a benefit from income tax of $ 97.1 million . this benefit included $ 109.0 million attributable to the release of our valuation allowance on certain of our net operating loss carryforwards and other deferred tax assets during the year ended september 30 , 2016. this benefit was the result of our assessment at september 30 , 2016 , that it was more likely than not that we will generate sufficient taxable income to utilize these net operating loss carryforwards and other deferred tax assets . working capital during the year ended september 30 , 2018 , working capital exclusive of cash increased by $ 19.2 million from september 30 , 2017 , reflecting a $ 33.0 million increase in current assets excluding cash , partly offset by a $ 13.8 million increase in current liabilities during the period . 35 during the year ended september 30 , 2018 , our current assets exclusive of cash increased to $ 236.4 million , as compared to $ 203.5 million as of september 30 , 2017. the increase primarily relates to an $ 18.1 million increase in costs and estimated earnings in excess of billings , largely driven by our communications , commercial & industrial and infrastructure solutions segments . additionally , accounts receivable increased by $ 8.6 million , primarily driven by higher levels of activity . days sales outstanding decreased to 62 at september 30 , 2018 , from 66 at september 30 , 2017. 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 , 2018 , our total current liabilities increased by $ 13.8 million to $ 164.4 million , compared to $ 150.6 million as of september 30 , 2017 , primarily related to an increase in accounts payable and accrued liabilities , driven by higher levels of activity . 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
| 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_5_th ( 1 ) 2018 includes a charge of $ 31.3 million to re-measure our net deferred tax assets in connection with the tax cuts and jobs act . consolidated revenues for the year ended september 30 , 2018 , were $ 66.1 million higher than for the year ended september 30 , 2017 , an increase of 8.2 % . revenues increased within our commercial & industrial , infrastructure solutions , and residential segments driven by an increase in demand for their service offerings combined with continued improvement of conditions in the markets in which they operate . businesses acquired in fiscal 2017 and 2018 contributed $ 61.0 million of the revenue increase year over year , partially offset by a $ 23.7 million decrease in revenue at the denver and roanoke branches of our commercial & industrial segment , where the wind-down of operations that occurred over the last 18 months is substantially complete . 27 our overall gross profit percentage decreased slightly to 17.1 % during the year ended september 30 , 2018 , as compared to the year ended september 30 , 2017. businesses acquired in fiscal 2017 and 2018 contributed an additional $ 6.6 million of gross profits for the year ended september 30 , 2018 , as compared with the year ended september 30 , 2017. gross profit as a percentage of revenue increased at our commercial & industrial and communications segments and decreased at our infrastructure solutions and residential 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 .
| 7,991 |
we developed the first unhydrogenated styrenic block copolymers ( “ usbc ” ) in 1964 and the first hydrogenated styrenic block copolymers ( “ hsbc ” ) in the late 1960s . our sbcs enhance the performance of numerous products by imparting greater flexibility , resilience , strength , durability , and processability , and are used in a wide range of applications , including adhesives , coatings , consumer and personal care products , sealants , lubricants , medical , packaging , automotive , paving , roofing , and footwear products . we also sell isoprene rubber ( “ ir ” ) and isoprene rubber latex ( “ irl ” ) , which are non-sbc products primarily used in applications such as medical products , personal care , adhesives , tackifiers , paints , and coatings . our polymers are typically formulated or compounded with other products to achieve improved , customer-specific performance characteristics in a variety of applications . we seek to maximize the value of our product portfolio by emphasizing complex or specialized polymers and innovations that yield higher margins than more commoditized products . we sometimes refer to these complex or specialized polymers or innovations as being more “ differentiated. ” our products are found in many everyday applications , including personal care products , such as disposable diapers , and in the rubberized grips of toothbrushes , razor blades , and power tools . our products are also used to impart tack and shear properties in a wide variety of adhesive products and to impart characteristics such as flexibility and durability in sealants and corrosion resistance in coatings . our paving and roofing applications provide durability , extending road and roof life . we also produce cariflex tm isoprene rubber and isoprene rubber latex . our cariflex products are based on synthetic polyisoprene polymer and do not contain natural rubber latex or other natural rubber products making them an ideal substitute for natural rubber latex , particularly in applications with high purity requirements such as medical , healthcare , personal care , and food contact . we believe the versatility of cariflex provides opportunities for new , differentiated applications . chemical segment effective january 1 , 2018 , results for our roads and construction product line have been consolidated into our adhesives and performance chemicals product lines to better align customer portfolio and end usage . we have adjusted the presentations for the years ended december 31 , 2017 and 2016 to conform to the respective 2018 presentations . we manufacture and sell high value products primarily derived from pine wood pulping co-products . we refine and further upgrade two primary feedstocks , crude tall oil ( “ cto ” ) and crude sulfate turpentine ( “ cst ” ) , both of which are co-products of the wood pulping process , into value-added specialty chemicals . we refine cto through a distillation process into four primary constituent fractions : tall oil fatty acids ( “ tofa ” ) ; tall oil rosin ( “ tor ” ) ; distilled tall oil ( “ dto ” ) ; and tall oil pitch . we further upgrade tofa , tor , and dto into derivatives such as dimer acids , polyamide resins , rosin resins , dispersions , and disproportionated resins . we refine cst into terpene fractions , which can be further upgraded into terpene resins . the various fractions and derivatives resulting from our cto and cst refining process provide for distinct functionalities and properties , determining their respective applications and end markets . we focus our resources on three product groups : adhesives , performance chemicals , and tires . within our product groups , our products are sold into a diverse range of submarkets , including packaging , tapes and labels , pavement marking , high performance tires , fuel additives , oilfield and mining , coatings , metalworking fluids and lubricants , inks , and flavor and fragrances , among others . while this business is based predominantly on the refining and upgrading of cto and cst , we have the capacity to use both hydrocarbon-based raw materials , such as alpha-methyl-styrene , rosins , and gum rosins where appropriate and , accordingly , are able to offer tailored solutions for our customers . 32 recent developments and known trends our business is subject to a number of known risks and uncertainties , some of which are a result of recent developments . tariffs . effective september 24 , 2018 , the office of the u.s. trade representative enacted a 10 percent tariff on certain goods imported from china under section 301 of the trade expansion act of 1974 , which may increase to 25 percent in 2019. we expect that these tariffs and further trade actions will continue to add uncertainty to pricing and supply conditions . hurricane michael . in october 2018 , our panama city , florida , facility was damaged by hurricane michael . in november 2018 , restoration of operations for the crude tall oil refinery were complete . the company 's crude sulfate turpentine ( cst ) refinery was restored to approximately 65.0 % of capacity in december 2018 , and as of the filing date , we have restored full operational capacity . we are actively working to minimize the impact on our customers , through inventories on hand , and where possible , production from our other plant sites . during the three months ended december 31 , 2018 , we incurred $ 12.3 million of direct costs , which are included in our costs of good sold , and that had not been reimbursed from our insurance carrier . with respect to lost sales , we estimate the associated margin to be $ 8.9 million . during the fourth quarter we recognized $ 8.9 million of cash proceeds as reimbursement under our business interruption policy , which is included in operating income . we currently estimate the replacement cost associated with damaged equipment to be in a range of $ 5.0 million to $ 7.0 million . story_separator_special_tag the increase was primarily driven by higher average raw material costs and sales volumes , partially offset by the $ 24.7 million of higher costs of goods sold in 2016 related to the fair value adjustment in purchase accounting for inventory . selling , general , and administrative expenses were $ 161.3 million for the year ended december 31 , 2017 compared to $ 177.4 million for the year ended december 31 , 2016. the $ 16.1 million decrease is primarily attributable to lower transaction , acquisition , and restructuring costs , partially offset by higher employee related costs . 36 depreciation and amortization was $ 137.2 million for the year ended december 31 , 2017 compared to $ 125.7 million for the year ended december 31 , 2016. the increase of $ 11.5 million was primarily attributable to the start up of our manufacturing joint venture in mailiao , taiwan . disposition and exit of business activities was a gain of $ 28.4 million for the year ended december 31 , 2016 , which resulted from the sale of certain compounding assets and the dissolution of our joint venture in paulinia , brazil , partially offset by the exit from our nexar tm and solutions resinates product lines . in march 2017 , we completed the issuance of $ 400.0 million 7.0 % senior notes , and in august 2017 , we closed on a 260.0 million term loan . we used the net proceeds from both transactions , along with available cash , to repay approximately $ 758.0 million of existing u.s. term loan indebtedness . the repayment was considered an extinguishment of indebtedness an a loss on extinguishment of debt was recorded in 2017 , represented by the write off of previously capitalized deferred financing costs and original issue discount . income tax provision was a benefit of $ 57.9 million and $ 92.0 million for the year ended december 31 , 2017 and 2016 , respectively . our effective tax rate for the year ended december 31 , 2017 was a benefit of 166.5 % , primarily driven by the impact of recent u.s. tax reform . given the level of our pre-tax book income for the year ended december 31 , 2016 and the release of a significant portion of our valuation allowance ( as further discussed below ) , our effective tax rate for the year ended december 31 , 2016 is not meaningful . our effective tax rates differ from the u.s. corporate statutory tax rate of 35.0 % primarily due to the mix of our pretax income or loss generated in foreign jurisdictions , permanent items , uncertain tax positions , changes in our valuation allowances , and the effects of tax reform . for the year ended december 31 , 2017 and 2016 , our pretax earnings in the netherlands , sweden , and finland decreased our effective tax rate due to the local statutory rates of 25 % , 22 % , and 20 % , respectively . as of december 31 , 2017 and december 31 , 2016 , a valuation allowance of $ 51.3 million and $ 44.7 million , respectively , has been provided for net operating loss carryforwards and other deferred tax assets . we increased our valuation allowance by $ 6.6 million during the year ended december 31 , 2017 , which includes a $ 4.9 million increase related to changes in other comprehensive income ( loss ) and $ 1.7 million primarily related to current period net operating losses in the u.s. as of december 31 , 2017 , $ 35.9 million and $ 8.8 million of the $ 51.3 million valuation allowance relates to net deferred tax assets in france and united kingdom , respectively . during the year ended december 31 , 2016 , we released $ 55.5 million of the valuation allowances , of which $ 87.0 million primarily related to our u.s. net operating loss carryforwards and other deferred tax assets , partially offset by $ 31.3 million of new valuation allowances assumed in connection with the arizona chemical acquisition . as of december 31 , 2016 , $ 30.5 million and $ 8.5 million of the $ 44.7 million valuation allowance relates to net deferred tax assets in france and united kingdom , respectively . we consider the reversal of deferred tax liabilities within the net operating loss carryforward period , projected future taxable income and tax planning strategies in making this assessment . excluding the change in our valuation allowance and impact of u.s. tax reform , our effective tax rates would have been a benefit of 31.3 % and 38.9 % for the years ended december 31 , 2017 and 2016 , respectively . the tax act was enacted on december 22 , 2017 and introduces significant changes to u.s. income tax law . due to the timing of the enactment and the complexity involved in applying the provisions of the tax act , provisional amounts for the income tax effects of the tax act have been recorded as of december 31 , 2017 and are subject to change during 2018. we recorded a provisional amount for our one-time transitional tax liability and income tax expense of $ 46.3 million . additionally , the impact of the tax act to our deferred taxes was a benefit of $ 95.0 million , of which $ 68.9 million relates to the reduction of the u.s. statutory tax rate from 35.0 % to 21.0 % for years after 2017 and the remaining relates to changes in our investments in foreign subsidiaries .
| consolidated results year ended december 31 , 2018 compared to year ended december 31 , 2017 revenue was $ 2,011.7 million for the year ended december 31 , 2018 compared to $ 1,960.4 million for the year ended december 31 , 2017 , an increase of $ 51.3 million , or 2.6 % . revenue for the polymer segment increase d $ 21.9 million and revenue for the chemical segment increase d $ 29.4 million . for additional information regarding the changes in revenue , see our segment disclosures below . cost of goods sold was $ 1,431.1 million for the year ended december 31 , 2018 compared to $ 1,415.7 million for the year ended december 31 , 2017 , an increase of $ 15.4 million , or 1.1 % . the increase was primarily driven by higher average raw material costs , partially offset by lower sales volumes . selling , general , and administrative expenses were $ 153.9 million for the year ended december 31 , 2018 compared to $ 161.3 million for the year ended december 31 , 2017 . the $ 7.4 million decrease is primarily attributable to lower transaction , acquisition , and restructuring costs , and employee related costs , partially offset by foreign exchange rates . depreciation and amortization was $ 141.4 million for the year ended december 31 , 2018 compared to $ 137.2 million for the year ended december 31 , 2017 . the increase of $ 4.2 million was primarily attributable to the start up of our manufacturing joint venture in mailiao , taiwan , and foreign exchange rates .
| 7,992 |
43 index to financial statements exhibit no . document 12.1 * * computation of ratio of earnings to fixed charges 14.1 * code of business conduct and ethics for mueller water products , inc. incorporated by reference to exhibit 14.1 to mueller water products , inc. form 10-q ( file no . 00132892 ) filed on february 7 , 2014 . 21.1 * * subsidiaries of mueller water products , inc. 23.1 * * consent story_separator_special_tag the following discussion should be read in conjunction with the consolidated financial statements and notes thereto that appear elsewhere in this annual report . overview organization on october 3 , 2005 , walter energy acquired all outstanding shares of capital stock representing the mueller co. and anvil businesses and contributed them to its u.s. pipe business to form the company . in june 2006 , we completed an initial public offering of 28,750,000 shares of series a common stock and in december 2006 , walter energy distributed to its shareholders all of its equity interests in the company , consisting of all of the company 's outstanding shares of series b common stock . on january 28 , 2009 , each share of series b common stock was converted into one share of series a common stock and the series a designation was discontinued . on april 1 , 2012 , we sold the businesses comprising our former u.s. pipe segment . u.s. pipe 's results of operations have been reclassified as discontinued operations for all periods presented . unless the context indicates otherwise , whenever we refer to a particular year , we mean our fiscal year ended or ending september 30 in that particular calendar year . we manage our businesses and report operations through two business segments , mueller co. and anvil , based largely on the products sold and the customers served . business we estimate that approximately 75 % of our mueller co. 2014 net sales were for infrastructure upgrade , repair and replacement directly linked to municipal spending and residential construction activity in the united states . development of raw land for residential construction is a key driver of demand for our mueller co. products . according to recent surveys by ivy zelman and associates , growth in land development activity during the quarter ended september 30 , 2014 , reached record highs for the central region of the country . we expect that some of this activity will drive demand for our products in 2015. blue chip consensus for growth in housing starts in calendar 2015 is about 18 % and ivy zelman and ihs are forecasting 15 % and 20 % , respectively . on the municipal front , state and local seasonally adjusted tax receipts continue to increase and municipalities overall appear to be in better financial shape than they have been over the last several years . we generated strong growth in our municipal business in 2014 and , based on discussions with our customers and distributors , we expect that demand for repair and replacement of water infrastructure at the municipal level will continue to grow in 2015. the bureau of labor statistics ' consumer price index for water and sewerage maintenance increased approximately 4 % for the year ended september 30 , 2014 when compared to the prior year . rising water rates are a significant source of funds for municipalities to drive capital projects . water rate increases have outpaced those of other utilities over the last several years . for mueller co. , based on the current outlook for housing and municipal spending , we expect net sales growth in 2015 will be in a range comparable to the 7.4 % growth for mueller co. in 2014 . we also expect to realize continued benefits of lean manufacturing and other productivity improvements , and we do not expect any significant changes in our average raw material and purchased parts costs for 2015 compared to 2014. most of anvil 's net sales are driven by commercial construction . the architectural billings index was above 50 for most of 2014 , which could drive an increase in construction spending in 2015. we expect anvil to increase shipment volumes slightly in 2015 since most economic forecasts call for year-over-year growth in non-residential construction spending . in 2015 , we expect anvil 's net sales to grow in the low- to mid-single digit range and operating income to grow at a greater rate . 24 index to financial statements story_separator_special_tag to $ 70.7 million in 2014 from $ 71.8 million in the prior year period . sg & a decreased to 17.6 % of net sales for 2014 from 18.3 % of net sales 2013 . sg & a in 2014 included a gain from the sale of its remaining bloomington , minnesota assets of $ 2.5 million . corporate sg & a increased to $ 39.5 million in 2014 from $ 34.3 million in the prior year period primarily due to higher stock-based compensation and professional fees . year ended september 30 , 2013 compared to year ended september 30 , 2012 replace_table_token_7_th 27 index to financial statements consolidated analysis net sales for 2013 increased to $ 1,120.8 million from $ 1,023.9 million in the prior year period . net sales increased primarily due to $ 68.5 million of higher shipment volumes at mueller co. gross profit for 2013 increased to $ 313.2 million from $ 271.1 million in the prior year period . gross margin increased 140 basis points to 27.9 % in 2013 from 26.5 % in the prior year period . gross profit and gross margin benefited primarily from increased shipment volumes and higher sales pricing . sg & a for 2013 increased to $ 214.4 million from $ 204.2 million in the prior year period . sg & a increased primarily due to higher expenses associated with higher shipment volumes and higher stock-based compensation expense . story_separator_special_tag 29 index to financial statements liquidity and capital resources as discussed in item 9b . other information , we refinanced our debt on november 25 , 2014 . we repaid all of our senior subordinated notes and senior unsecured notes and entered into a $ 500.0 million term loan which matures november 25 , 2021. we expect to realize annualized interest expense savings of approximately $ 22 million and total 2015 interest expense of approximately $ 27 million , assuming that libor remains at or below the floor and before the effect of interest rate risk management activities , if any . this excludes the loss on early extinguishment of debt we expect to record in the quarter ending december 31 , 2014 , which we expect will be approximately $ 31.3 million . to complete the refinancing , we consumed liquidity of approximately $ 50 million , which included net principal reduction and payment of premiums , fees and interest accrued at november 25 , 2014 . we had cash and cash equivalents of $ 161.1 million at september 30 , 2014 and $ 158.3 million of additional borrowing capacity under our abl agreement based on september 30 , 2014 data . undistributed earnings from our subsidiaries in canada and china are considered to be permanently invested outside of the united states . at september 30 , 2014 , cash and cash equivalents included $ 28.9 million and $ 5.7 million in canada and china , respectively . in 2014 , we redeemed $ 55.0 million of our 7.375 % senior subordinated notes at a redemption price of 101.229 % on august 29 , 2014. we recorded a loss on early extinguishment of debt of $ 1.0 million on the redemption date . in 2014 , we used $ 10.0 million to acquire certain assets of lined valve company inc. , which was reduced by a purchase price adjustment of $ 0.3 million that we received in 2015. cash flows from operating activities are categorized below . replace_table_token_10_th collections from customers were higher during 2014 compared to 2013 due primarily to higher net sales in 2014 . increased disbursements , other than interest and income taxes , during 2014 reflect higher purchasing activity associated with higher net sales and timing differences of disbursements for other than interest and income taxes . capital expenditures were $ 36.9 million during 2014 compared to $ 36.5 million during 2013 . we estimate 2015 capital expenditures to be $ 40 million to $ 42 million . we were not required to make , and we did not make , any contributions to our u.s. pension plan in 2014 . the proportion of the assets held by our u.s. pension plan invested in fixed income securities , instead of equity securities , has increased over historical levels . because of this shift in the strategic asset allocation , the estimated rate of return on these assets has decreased , which could ultimately cause our pension expense and our required contributions to this plan to increase . we exhausted substantially all of our remaining net operating loss carryforwards for u.s. federal income tax purposes at september 30 , 2014. we expect our federal income tax payments to increase compared to the past several years . our state net operating loss carryforwards will continue to be available in future years . we anticipate that our existing cash , cash equivalents and borrowing capacity combined with our expected operating cash flows will be sufficient to meet our anticipated operating expenses , capital expenditures and debt service obligations as they become due through september 30 , 2015 . however , our ability to make these payments will depend partly upon our future operating performance , which will be affected by general economic , financial , competitive , legislative , regulatory , business and other factors beyond our control . 30 index to financial statements abl agreement at september 30 , 2014 , the abl agreement consisted of a revolving credit facility for up to $ 225 million of revolving credit borrowings , swing line loans and letters of credit . the abl agreement permits us to increase the size of the credit facility by an additional $ 150 million in certain circumstances subject to adequate borrowing base availability . we may borrow up to $ 25 million through swing line loans and may have up to $ 60 million of letters of credit outstanding . borrowings under the abl agreement bear interest at a floating rate equal to libor plus a margin ranging from 175 to 225 basis points , or a base rate , as defined in the abl agreement , plus a margin ranging from 75 to 125 basis points . at september 30 , 2014 , the applicable libor-based margin was 175 basis points . the abl agreement terminates on december 18 , 2017 . we pay a commitment fee for any unused borrowing capacity under the abl agreement of either 37.5 basis points per annum or 25 basis points per annum , based on daily average availability during the previous calendar quarter . at september 30 , 2014 , our commitment fee was 37.5 basis points . as measured using september 30 , 2014 data , excess availability as reduced by outstanding letters of credit and accrued fees and expenses of $ 29.1 million was $ 158.3 million . the abl agreement is subject to mandatory prepayments if total outstanding borrowings under the abl agreement are greater than the aggregate commitments under the revolving credit facility or if we dispose of overdue accounts receivable in certain circumstances . the borrowing base under the abl agreement is equal to the sum of ( a ) 85 % of the value of eligible accounts receivable and ( b ) the lesser of ( i ) 65 % of the value of eligible inventory or ( ii ) 85 % of the net orderly liquidation value of the value of eligible inventory , less certain reserves .
| results of operations year ended september 30 , 2014 compared to year ended september 30 , 2013 replace_table_token_4_th consolidated analysis net sales for 2014 increased to $ 1,184.7 million from $ 1,120.8 million in the prior year period . net sales increased due to $ 48.9 million of increased shipment volumes and $ 19.4 million of higher pricing , both of which were primarily at mueller co. gross profit for 2014 increased to $ 347.9 million from $ 313.2 million in the prior year period . gross margin increased 150 basis points to 29.4 % in 2014 from 27.9 % in the prior year period . gross profit and gross margin benefited primarily from increased shipment volumes , including the related improvement in utilization of manufacturing capacity , and higher sales pricing . selling , general and administrative expenses ( `` sg & a '' ) for 2014 increased to $ 220.7 million from $ 214.4 million in the prior year period . sg & a increased primarily due to higher expenses associated with higher shipment volumes , higher stock-based compensation expense and u.s. pipe-related expenses being reported in sg & a in the current year and in discontinued operations in the prior year . sg & a as a percentage of net sales decreased to 18.6 % in 2014 compared to 19.1 % in the prior year period . 25 index to financial statements restructuring increased in the 2014 compared to the prior year due to an impairment of production equipment at mueller co. and the withdrawal from a multi-employer pension plan at anvil . mueller co. changed its approach to the production of certain sizes of iron gate valves and recorded a charge of $ 1.5 million . anvil sold the production equipment and certain inventory at its bloomington , minnesota location and recorded an accrual for its pension plan withdrawal liability of $ 0.9 million .
| 7,993 |
the classification of inventory is determined by the stage at which the ore is in the production process . to the extent there is work in process inventories at the endeavor story_separator_special_tag the following discussion provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of coeur and its subsidiaries for the three years ended december 31 , 2012 . it consists of the following subsections : “ overview ” which provides a brief summary of the company 's financial position and the primary factors affecting those results . “ critical accounting policies ” which provides a discussion of the accounting policies coeur considers critical because of their effect on the reported amounts of assets , liabilities , income and or expenses in the company 's consolidated financial statements and or because they require different objectives or complex judgments by management . “ operating statistics and ore reserve estimates ” which provides a summary of the consolidated production results for the three years ended december 31 , 2012 and discussion of coeur 's reported ore reserves . “ results of operations ” which sets forth an analysis of the operating results for the last three years . “ liquidity and capital resources ” which contains a discussion of the company 's cash flows and liquidity , investing activities and financing activities , contractual obligations and environmental compliance expenditures . “ recently issued accounting pronouncements , ” which summarizes recently published authoritative accounting guidance , how it might apply to coeur , and how it might affect the company 's future results . overview the company is a large primary silver producer with growing gold production and has assets located in the united states , mexico , bolivia , argentina and australia . the palmarejo mine , san bartolomé mine , kensington mine and rochester mine , each of which is operated by the company , the martha mine , which ceased active mining operations in september 2012 , and the endeavor mine , which is operated by a non-affiliated party , constituted the company 's principal sources of mining revenues during 2012 . coeur is an idaho corporation incorporated in 1928. the company 's business strategy is to discover , acquire , develop and operate low-cost silver and gold operations that will produce long-term cash flow , provide opportunities for growth through continued exploration , and generate superior and sustainable returns for shareholders . the company 's management focuses on maximizing cash flow from its existing operations , the main elements of which are silver and gold prices , cash costs of production and capital expenditures . the company also focuses on reducing its non-operating costs in order to maximize cashflow . the results of the company 's operations are significantly affected by fluctuation in prices of silver and gold , which may fluctuate widely and are affected by numerous factors beyond its control , including interest rates , expectations regarding inflation , currency values , governmental decisions regarding the disposal of precious metals stockpiles , global and regional political and economic conditions and other factors . in addition , the company faces challenges including raising capital , increasing production and managing social , political and environmental issues . operating costs at the company 's mines are subject to variation due to a number of factors such as changing commodity prices , ore grades , metallurgy , revisions to mine plans and changes in accounting principles . at foreign locations , operating costs are also influenced by currency fluctuations that may affect its u.s. dollar costs . 40 highlights during 2012 : silver and gold prices averaged $ 31.16 per ounce and $ 1,669 per ounce in 2012 , respectively . silver reached a high of $ 36.88 per ounce on february 28 , 2012 and a low of $ 26.39 per ounce on june 28 , 2012. gold reached a high of $ 1,792 per ounce on october 4 , 2012 and a low of $ 1,540 per ounce on may 30 , 2012. the company produced a total of 18.0 million ounces of silver during 2012 , which was a 5.5 % decrease from 2011 . the company produced 226,486 ounces of gold during 2012 , which was a 2.8 % increase over 2011 . cash operating costs were $ 7.57 per silver ounce in 2012 compared with $ 6.31 per silver ounce in 2011. the company experienced a 12.3 % decrease in metal sales to $ 895.5 million compared to $ 1,021.2 million in 2011. net cash provided by operating activities in 2012 was $ 271.6 million , compared to $ 416.2 million in 2011 . the company spent $ 115.6 million in capital expenditures , which represents a 3.6 % decrease from 2011 . critical accounting policies and estimates the information provided in this form 10-k is based on the company 's consolidated financial statements , which have been prepared in accordance with u.s. gaap . the preparation of these statements requires that the company make estimates and assumptions that affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities at the date of its financial statements , and the reported amounts of revenue and expenses during the reporting period . the company bases these estimates on historical experience and on assumptions that it considers reasonable under the circumstances ; however , reported results could differ from those based on the current estimates under different assumptions or conditions . management considers the policies discussed below to be most critical in understanding the judgments that are involved in preparing the company 's consolidated financial statements and the uncertainties that could affect its results of operations , financial condition , and cash flows . the effects and associated risks of these policies on its business operations are discussed throughout this discussion and analysis . story_separator_special_tag an impairment is considered to exist if total estimated future cash flows or probability-weighted cash flows on an undiscounted basis are less than the carrying amount of the assets , including property , plant and equipment , mineral property , development property , and any deferred costs . the accounting estimates related to impairment are critical accounting estimates because the future cash flows used to determine whether an impairment exists is dependent on reserve estimates and other assumptions , including silver and gold prices , production levels , and capital and reclamation costs , all of which are based on detailed engineering life-of-mine plans . depreciation and amortization . the company depreciates its property , plant and equipment , mining properties and mine development using the units-of-production method over the estimated life of the ore body based on its proven and probable recoverable reserves or on a straight-line basis over the useful life , whichever is shorter . the accounting estimates related to depreciation and amortization are critical accounting estimates because 1 ) the determination of reserves involves uncertainties with respect to the ultimate geology of its reserves and the assumptions used in determining the economic feasibility of mining those reserves and 2 ) changes in estimated proven and probable reserves and useful asset lives can have a material impact on net income . ore on leach pad . the heap leach process is a process of extracting silver and gold by placing ore on an impermeable pad and applying a diluted cyanide solution that dissolves a portion of the contained silver and gold , which are then recovered in metallurgical processes . the company uses several integrated steps to scientifically measure the metal content of ore placed on the leach pads . as the ore body is drilled in preparation for the blasting process , samples are taken of the drill residue which were assayed to determine estimated quantities of contained metal . the company estimates the quantity of ore by utilizing global positioning satellite survey techniques . the company then processes the ore through crushing facilities where the output is again weighed and sampled for assaying . a metallurgical reconciliation with the data collected from the mining operation is completed with appropriate adjustments made to previous estimates . the crushed ore is then transported to the leach pad for application of the leaching solution . as the leach solution is collected from the leach pads , it is continuously sampled for assaying . the quantity of leach solution is measured by flow meters throughout the leaching and precipitation process . after precipitation , the product is converted to doré , which is the final product produced by the mine . the inventory is stated at lower of cost or market , with cost being determined using a weighted average cost method . the company reported ore on leach pad of $ 44.3 million as of december 31 , 2012 . of this amount , $ 23.0 million is reported as a current asset and $ 21.3 million is reported as a non-current asset . the distinction between current and non-current is based upon the expected length of time necessary for the leaching process to remove the metals from the broken ore. the historical cost of the metal that is expected to be extracted within twelve months is classified as current and the historical cost of metals contained within the broken ore that will be extracted beyond twelve months is classified as non-current . inventories of ore on leach pad are valued based on actual production costs incurred to produce and place ore on the leach pad , adjusted for effects on monthly production of costs of abnormal production levels , less costs allocated to minerals recovered through the leach process . the costs consist of those production activities occurring at the mine site and include the costs , including depreciation , associated with mining , crushing and precipitation circuits . in addition , refining is provided by a third-party refiner to place the metal extracted from the leach pad in a saleable form . these additional costs are considered in the valuation of inventory . the estimate of both the ultimate recovery expected over time and the quantity of metal that may be extracted relative to the time the leach process occurs requires the use of estimates which are inherently inaccurate since they rely upon laboratory 42 testwork . testwork consists of 60 day leach columns from which the company projects metal recoveries up to five years in the future . the quantities of metal contained in the ore are estimated based upon actual weights and assay analysis . the rate at which the leach process extracts gold and silver from the crushed ore is based upon laboratory column tests and actual experience occurring over more than twenty years of leach pad operations at the rochester mine . the assumptions used by the company to measure metal content during each stage of the inventory conversion process includes estimated recovery rates based on laboratory testing and assaying . the company periodically reviews its estimates compared to actual experience and revises its estimates when appropriate . the company believes its current residual heap leach activities are expected to continue through 2015. the ultimate recovery will not be known until leaching operations cease . the company estimated the number of ounces that are recoverable from the stage iv leach pad at december 31 , 2012 . if its estimate of ultimate recovery requires adjustment , the impact upon its valuation and upon its income statement would be as follows : replace_table_token_30_th inventories of ore on leach pads are valued based upon actual production costs incurred to produce and place such ore on the leach pad during the current period , adjusted for the effects on monthly production of costs of abnormal production levels , less costs allocated to minerals recovered through the leach process . reclamation and remediation costs . the company recognizes obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs .
| results of operations year ended december 31 , 2012 compared to year ended december 31 , 2011 revenues sales of metal from continuing operations in the year ended december 31 , 2012 decreased by $ 125.7 million , or 12.3 % , from the year ended december 31 , 2011 to $ 895.5 million . the decrease was primarily due to a decrease in the quantity of silver and gold ounces sold and a lower realized price per ounce for silver in 2012 . the decreased sale of silver ounces was primarily due to decreases in silver production at the palmarejo and san bartolomé mines . in 2012 , the company sold 18.0 million ounces of silver and 213,185 ounces of gold , compared to sales of 19.1 million ounces of silver and 238,551 ounces of gold in 2011 from continuing operations . in the year ended december 31 , 2012 , the company realized average silver and gold prices of $ 30.92 per ounce and $ 1,665 per ounce , respectively , compared with realized average prices of $ 35.15 per ounce and $ 1,558 per ounce , respectively , in the prior year . silver contributed 61.4 % of sales as compared to 38.6 % from gold . included in revenues is by-product metal sales derived from the sale of gold by the company 's silver producing properties . in 2012 , by-product revenues totaled $ 234.8 million compared to $ 207.4 million in 2011. the company believes that presentation of these revenue streams as by-products from its current operations will continue to be appropriate in the future .
| 7,994 |
56 indefinite lived intangible assets are evaluated for impairment at least annually on the first day of orion 's fiscal fourth quarter , or when indications of potential impairment exist . this annual impairment review may begin with a qualitative test to determine whether it is more likely than not that an indefinite lived intangible story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read together with our audited consolidated financial statements and related notes included in this annual report on form 10-k for the fiscal year ended march 31 , 2017. see also “ forward-looking statements ” and item 1a “ risk factors ” . overview we are a leading designer and manufacturer of high-performance , energy-efficient led and other lighting platforms . we research , develop , design , manufacture , market , sell and implement energy management systems consisting primarily of high-performance , energy-efficient commercial and industrial interior and exterior lighting systems and related services . our products are targeted for applications in three primary market segments : commercial office and retail , area lighting and industrial applications , although we do sell and install products into other markets . virtually all of our sales occur within north america . our lighting products consist primarily of light emitting diode ( `` led '' ) lighting fixtures . our principal customers include national accounts , electrical distributors , energy service companies ( `` escos '' ) and electrical contractors . currently , substantially all of our products are manufactured at our leased production facility location in manitowoc , wisconsin , although we are increasingly sourcing products and components from third parties as the led market continues to evolve and in order to provide versatility in our product development . although we continue to sell some lighting products using our legacy high intensity fluorescent ( `` hif '' ) technology , we believe the market for lighting products has shifted to led lighting systems , and that the customer base for our legacy hif products will continue to decline . compared to our legacy lighting systems , we believe that led lighting technology allows for better optical performance , significantly reduced maintenance costs due to performance longevity and reduced energy consumption . due to their size and flexibility in application , we also believe that led lighting systems can address opportunities for retrofit applications that can not be satisfied by fluorescent or other legacy technologies . our led lighting technologies have become the primary component of our revenue as we continue to strive to be a leader in the led market . based on a july 2015 united states department of energy report , we estimate the potential north american led retrofit market within our key product categories to be approximately 1.1 billion lighting fixtures . we plan to continue to primarily focus on developing and selling innovative led products . we do not have long-term contracts with our customers that provide us with recurring revenue from period to period and we typically generate substantially all of our revenue from sales of lighting systems and related services to governmental , commercial and industrial customers on a project-by-project basis . we typically sell our lighting systems in replacement of our customers ' existing fixtures . we call this replacement process a “ retrofit. ” we frequently engage our customer 's existing electrical contractor to provide installation and project management services . we also sell our lighting systems on a wholesale basis , principally to electrical contractors , electrical distributors , and escos to sell to their own customer bases . our ability to achieve our desired revenue growth and profitability goals depends on our ability to effectively engage distribution and sales agents , develop recurring revenue streams , implement our cost reduction initiatives , and improve our marketing , new product development , project management , margin enhancement and operating expense management , as well as other factors . in addition , the gross margins of our products can vary significantly depending upon the types of products we sell , with margins ranging from 15 % to 50 % . as a result , a change in the total mix of our sales toward higher or lower margin products can cause our profitability to fluctuate from period to period . our fiscal year ends on march 31. we refer to our prior fiscal year which ended on march 31 , 2015 , as “ fiscal 2015 ” , the year ended march 31 , 2016 as `` fiscal 2016 '' , and our current fiscal year , which ends on march 31 , 2017 , as “ fiscal 2017. ” our fiscal first quarter of each fiscal year ends on june 30 , our fiscal second quarter ends on september 30 , our fiscal third quarter ends on december 31 and our fiscal fourth quarter ends on march 31. reportable segments are components of an entity that have separate financial data that the entity 's chief operating decision maker ( `` codm '' ) regularly reviews when allocating resources and assessing performance . our codm is our chief executive officer . orion has three reportable segments : orion u.s. markets division ( `` usm '' ) , orion engineered systems division ( `` oes '' ) , and orion distribution services division ( `` ods '' ) . market shift to light emitting diode products the rapid market shift in the lighting industry from legacy lighting products to led lighting products has caused us to adopt new strategies , approaches and processes in order to respond proactively to this industry transition . these changing underlying business fundamentals in this transition include : rapidly declining led component costs and led product end user customer pricing pressure . 24 improving led product performance and customer return on investment payback periods driving increasing customer preferences for led lighting products compared to legacy lighting products . increasing led lighting product customer sales compared to decreasing hif product sales . story_separator_special_tag our long-term optimism is based upon the considerable size of the existing market opportunity for lighting retrofits , including the market opportunities in commercial office , manufacturing , healthcare , government and retail markets , the continued development of our new higher margin products and product enhancements , including our new led product offerings , our efforts to expand our channels of distribution and our cost reduction initiatives . as we continue to adapt to the rapidly evolving lighting market , we have implemented significant changes to our manufacturing operations to increase our flexibility , lower our cost structure and remain competitive . our outlook for 2018 is positive since other factors lead us to believe that the following factors will directly or indirectly drive spending : led adoption continues to grow in all sectors ; commercial and industrial sentiment is strengthening ; utility incentives continue to be available and are increasing as a percent of project costs in many areas ; prospects of tax regulatory reform are encouraging ; capital spending is increasing ; business profits are increasing ; and consumer spending remains strong . beyond the benefits of our lighting fixtures , there is also an opportunity to utilize our system platform as a “ digital ” or “ connected ceiling ” , or rather a framework or network that can support the installation and integration of other business solutions on our digital platform . this exciting , cutting edge growth opportunity is also known as the “ industrial internet of things ” or iiot , and is still early in its development , however , we have already participated in a few compelling applications that deliver cost savings and efficiency in areas outside of lighting . we expect that , based on the above circumstances , our revenues and gross margins will increase during fiscal 2018 , when compared to fiscal 2017 , as we continue to recognize the benefits of higher purchase volumes of led components at lower costs , increasing sales volumes of our newly introduced and higher-margin led high bay products and increased utilization of our manufacturing facility . we also expect that our selling and marketing expenditures will increase slightly in fiscal 2018 primarily to support more robust customer lead generation and to further enhance our brand awareness with our agents to support their efforts to sell our products . 26 results of operations : fiscal 2017 versus fiscal 2016 the following table sets forth the line items of our consolidated statements of operations and as a relative percentage of our total revenue for each applicable period , together with the relative percentage change in such line item between applicable comparable periods ( in thousands , except percentages ) : replace_table_token_4_th * nm = not meaningful revenue . product revenue increased 2.0 % , or $ 1,327,000. the increase in product revenue in fiscal 2017 was primarily a result of strengthening sales volume of led fixtures and sales of new products introduced during the year . our increase in product revenue was partially offset by negative impacts resulting from the transition of our distribution sales channel to an agent driven model , that did not gain traction until late in the second quarter of fiscal 2017. led lighting revenue increased by 16.3 % to $ 53,110,000 in fiscal 2017 as compared to $ 45,678,000 in fiscal 2016. service revenue increased 45.2 % , or $ 1,242,000 , primarily due to more installation project revenue in fiscal 2017 when compared to fiscal 2016. total revenue increased by 3.8 % , or $ 2,569,000 , primarily due to the items discussed above . cost of revenue and gross margin . our cost of product revenue remained the same although fiscal 2017 had higher sales and better absorption . our fiscal year 2017 gross margin includes the adverse impact of $ 2,209,000 of charges to increase the inventory reserve by $ 1,671,000 and an adjustment to write off supplies inventory of $ 538,000. the increase to the reserve reflects a growing customer preference for higher performing led lighting technologies and the related slowdown in demand for lower priced earlier generation solutions . our cost of service revenue increased 61.0 % , or $ 1,229,000 in fiscal 2017 versus fiscal 2016 primarily due to additional costs associated with our increased service revenue in fiscal 2017. gross margin increased from 23.6 % of revenue in fiscal 2016 to 24.7 % in fiscal 2017. lighting gross margin was positively impacted by a favorable mix of higher-priced and higher-margin led high bay fixtures , better absorption due to higher volumes , negotiated price decreases for lighting components , and the benefits of our cost containment initiatives . operating expenses general and administrative . our general and administrative expenses decreased 12.5 % , or $ 2,107,000 , in fiscal 2017 primarily due to a reduction in legal costs , depreciation and amortization expense , offset by increases in employee costs , stock compensation , auditing and consulting expenses . 27 impairment of assets . we performed an impairment test as of march 31 , 2017 due to a triggering event for our indefinite-lived intangible asset . as a result of this impairment test , we determined that $ 250,000 of our intangible asset for the harris trade name was impaired . in 2016 , we performed our annual goodwill impairment test in the fourth quarter and we determined that the entire amount of our recorded goodwill of $ 4,409,000 was impaired . also in fiscal 2016 , our long-lived assets related to the pending sale and leaseback of our manufacturing facility were impaired by $ 1,614,000 to properly represent the fair value of the property being sold . sales and marketing . our sales and marketing expenses increased 13.1 % , or $ 1,490,000 , in fiscal 2017 compared to fiscal 2016. the increase was primarily due to increased commissions related to our agency channel and rebranding costs , offset by a reduction in bad debt expense incurred in fiscal 2017 when compared to fiscal 2016. research and development .
| overview we had $ 17,307,000 in cash and cash equivalents as of march 31 , 2017 , compared to $ 15,542,000 at march 31 , 2016. our cash position as of march 31 , 2017 benefited from improvements in working capital , the gross proceeds of our $ 2,600,000 sale and leaseback of our manufacturing facility on june 30 , 2016 and recent borrowings under our revolving credit facility . in february 2015 , we entered into a credit and security agreement ( `` credit agreement '' ) with wells fargo bank , national association . in fiscal 2017 , we amended the credit agreement to extend the maturity date to february 6 , 2019 and eliminate a $ 5,000,000 excess availability reserve that had limited the amount available to be drawn under the credit agreement by such amount . the credit agreement provides for a revolving credit facility ( `` credit facility '' ) subject to a borrowing base requirement based on eligible receivables and inventory . as of march 31 , 2017 , our borrowing base was approximately $ 6,832,000. borrowings under the credit agreement outstanding as of march 31 , 2017 , amounted to approximately $ 6,629,000. as a result , we estimate that as of march 31 , 2017 , we were eligible to only borrow an additional $ 203,000 under the credit facility based upon current levels of eligible inventory and accounts receivable . the credit facility includes a $ 2,000,000 sublimit for the issuance of letters of credit . our future liquidity needs are dependent upon many factors , including our relative revenue , gross margins , cash management practices , cost reduction initiatives , capital expenditures , pending or future litigation results , cost containment measures and future potential acquisition transactions . in addition , we tend to experience high working capital costs when we increase sales from existing levels .
| 7,995 |
on july 22 , 2005 , the company purchased the crowne plaza jacksonville in jacksonville , florida from bit holdings seventeen , inc. , an affiliate of the afl-cio building investment trust ( the trust ) , for an aggregate price of $ 22.0 million . the trust , for which mercantile safe deposit and trust company ( mercantile ) acts as trustee , financed a portion of the purchase price by extending an $ 18.0 million mortgage loan ( the loan ) to the purchaser . the loan , which is secured by a lien against all the assets , rents and profits of the hotel as well as the real story_separator_special_tag overview we are a self-advised reit incorporated in maryland in august 2004 to pursue current and future opportunities in the full-service , upper upscale , upscale and mid-scale segments of the hotel industry . we commenced operations in december 2004 when we completed our initial public offering and sold 6,000,000 shares of common stock , resulting in net proceeds ( after deducting underwriting discounts and offering expenses ) of approximately $ 54.8 million . in conjunction with the initial public offering , we sold an additional 700,000 shares of common stock as a result of the exercise of the underwriters ' over-allotment option in january 2005 , resulting in additional proceeds of approximately $ 6.5 million . concurrent with the completion of the initial public offering , we acquired six hotel properties . on july 22 , 2005 , we acquired the crowne plaza jacksonville ( formerly , the hilton jacksonville riverfront ) . on august 10 , 2006 , we sold the holiday inn downtown williamsburg . on september 20 , 2006 , we acquired the louisville ramada riverfront inn , which is under renovation and which we anticipate will re-open in early 2008 as the sheraton riverside louisville . our hotel portfolio currently consists of seven full-service , upper upscale and mid-scale hotels . we own a 100 % interest in all of our hotels . we also have a leasehold interest in a resort condominium facility . as of december 31 , 2006 , we owned the following hotel properties : replace_table_token_8_th ( 1 ) the property previously operated as the louisville ramada riverfront inn is currently undergoing extensive renovations and is expected to re-open in early 2008 as the sheraton louisville riverside . we conduct substantially all our business through our operating partnership , mhi hospitality , l.p. we are the sole general partner of our operating partnership and we own an approximate 64.4 % interest in our operating partnership , with the remaining interest being held by limited partners who were contributors hotel properties and related assets . to qualify as a reit , we can not operate hotels . therefore , our operating partnership leases our hotel properties to our trs lessee . our trs lessee has engaged mhi hotels services to manage our hotels . our trs lessee and its parent , mhi hospitality trs holding , inc. , are consolidated into our financial statements for accounting purposes . the earnings of mhi hospitality trs holding , inc. are subject to taxation similar to other c corporations . key operating metrics in the hotel industry , most categories of operating costs , with the exception of franchise , management , and credit card fees and the costs of the food and beverages served , do not vary directly with revenues . this aspect of our operating costs creates operating leverage , whereby changes in sales volume disproportionately impact operating results . room revenue is the most important category of revenue and drives other revenue categories such as food and beverage and telephone . there are three key performance indicators used in the hotel industry to measure room revenues : occupancy , or the number of rooms sold , usually expressed as a percentage of total rooms available ; 37 average daily rate or adr , which is total room revenue divided by the number of rooms sold ; and revenue per available room or revpar , which is the room revenue divided by the total number of available room nights . story_separator_special_tag face= '' times new roman '' size= '' 2 '' > 39 net income . net income for the year ended december 31 , 2006 increased approximately $ 0.7 million or 28.2 % to approximately $ 3.2 million compared to approximately $ 2.5 million for the year ended december 31 , 2005 as a result of the operating results discussed above . comparison of year ended december 31 , 2005 to year ended december 31 , 2004 the following table illustrates the key operating metrics for the years ended december 31 , 2005 and 2004 for the six operational properties that are in our current portfolio . accordingly , it does not reflect the performance of the holiday inn downtown williamsburg or the property previously operated as the louisville ramada riverfront inn . mhi hotels services has managed all the properties during the time period with the exception of the holiday inn laurel west ( formerly the best western maryland inn ) which it has operated only since we purchased the property in december 2004. replace_table_token_10_th ( 1 ) the statistics presented for the current portfolio reflect the full-year metrics for the six operating hotels in our portfolio at the end of 2006. the consolidated and combined financial information presented herein includes all the accounts of the company beginning with its commencement of operations on december 21 , 2004. prior to that time , the information relates to mhi hotels services group , the predecessor to mhi hospitality corporation for accounting purposes . securities and exchange commission regulations require inclusion of predecessor financial information for the periods prior to mhi hospitality corporation 's commencement of operations . the following table reflects key line items from our consolidated and combined statements of operations for the years ended december 31 , 2005 and 2004. replace_table_token_11_th 40 revenue . story_separator_special_tag upon formation of the company , start-up costs were recognized as well as costs associated with the amendment and restructuring of the management agreements . in addition , the company recognized expense in 2004 for non-recurring ancillary legal and accounting costs not directly related to the offering . net operating income . operating income for the year ended december 31 , 2005 increased approximately $ 6.8 million compared to combined operating income in 2004 as a result of the operating results discussed above . interest expense . interest expense for the year ended december 31 , 2005 increased approximately $ 0.7 million or 32.5 % to approximately $ 2.8 million compared to combined interest expense in 2004 , primarily due to interest attributable to the mortgage on the crowne plaza jacksonville acquired in july 2005. income tax benefit . income tax benefit for the year ended december 31 , 2005 increased approximately $ 0.1 million or 42.6 % compared to the combined income tax benefit in 2004. income tax benefits result from taxable operating losses incurred by our trs lessee . the taxable operating loss incurred by our trs lessee for the year ended december 31 , 2005 was greater than the loss incurred in the period from december 21 , 2004 to december 31 , 2004. the entities that owned the hotels in the accounting predecessor were limited liability companies and a limited liability partnership and , no income tax benefit or provision for income tax is included in the financial statements for such entities . discontinued operations . net loss from the operations of the holiday inn downtown williamsburg ( net of minority interest and income tax benefit ) improved by approximately $ 0.2 million or 63.1 % to approximately $ 0.1 million compared to a loss of approximately $ 0.3 million in 2004. an increase in operating losses was offset by an elimination of interest expense as the mortgage on the property was paid off upon formation of the company . in addition , we recognized an income tax benefit to our trs lessee attributable to the hotel 's operations in 2005 whereas in 2004 the accounting predecessor , for reasons previously discussed , accounted for no income tax benefit . net income ( loss ) . net income for the year ended december 31 , 2005 increased approximately $ 4.0 million to approximately $ 2.5 million from a loss of approximately $ 1.5 million in 2004 as a result of the operating results discussed above . sources and uses of cash operating activities . our principal source of cash to meet our operating requirements , including distributions to unit holders and stockholders as well as repayments of indebtedness , is the operations of our hotels . cash flow provided by operating activities for the year ended december 31 , 2006 was approximately $ 10.8 million . we expect that the net cash provided by operations will be adequate to fund the company 's operating requirements , debt service and the payment of dividends in accordance with federal income tax laws which require us make annual distributions to our stockholders of at least 90 % of our reit taxable income , excluding net capital gain . we declared dividends of $ 0.17 per share ( unit ) paid on january 11 , 2006 , april 11 , 2006 , july 11 , 2006 , and october 11 , 2006 , which we funded out of working capital . 42 investing activities . we substantially completed renovations at three of our initial six hotels in fiscal year 2005. we renovated the crowne plaza jacksonville in fiscal year 2006. during the year ended december 31 , 2006 , approximately $ 7.0 million was spent on renovations and capital improvements . of that amount , approximately $ 1.9 million was funded from our capital improvement reserve . on august 10 , 2006 , we sold the holiday inn downtown williamsburg for $ 4.75 million . we took back three promissory notes totaling $ 4.33 million from the purchaser and received the remainder of the purchase price in cash . the purchaser refinanced promissory notes in the amount of $ 2.63 million and $ 1.4 million in the first quarter 2007. we currently hold a 20-year promissory note bearing interest at 8.0 % with interest-only payments due monthly for the first four years and payments under a 20-year amortization schedule thereafter . the note is secured by the hotel and personal guarantees of affiliates of the purchaser . the sale yielded cash proceeds before refinance of the promissory notes of approximately $ 0.1 million . on september 20 , 2006 , we purchased the 186-room louisville ramada riverfront inn in jeffersonville , indiana for approximately $ 7.7 million including transaction costs . we structured the purchase to meet the requirements of a sec . 1031 like-kind exchange , enabling us to defer tax on all capital gains on the sale in august 2006 of the williamsburg property . to facilitate the closing of the acquisition , we accessed approximately $ 7.6 million from the credit facility , and approximately $ 0.1 million in cash proceeds from the sale of the williamsburg property . these activities represent our cash flow used in investing activities for the year ended december 31 , 2006 of approximately $ 12.7 million . financing activities . for the year ended december 31 , 2006 , net cash provided by financing activities was approximately $ 2.8 million . during the course of the year we borrowed approximately $ 11.7 million to fund the purchase of the louisville ramada riverfront inn in jeffersonville , indiana , the costs of renovations at the crowne plaza jacksonville that have not yet been reimbursed from the capital improvements reserve , and additional working capital . we incurred costs of approximately $ 0.6 million associated with the refinancing of our four-year revolving credit facility and made principal payments of approximately $ 1.1 million as required under various mortgage loan agreements .
| results of operations comparison of year ended december 31 , 2006 to year ended december 31 , 2005 the following table illustrates the key operating metrics for the years ended december 31 , 2006 and 2005 for the six operational properties that are in our current portfolio . accordingly , it does not reflect the performance of the holiday inn downtown williamsburg or the property previously operated as the louisville ramada riverfront inn . replace_table_token_9_th ( 1 ) the statistics presented for the current portfolio reflect the full-year metrics for all of the six operational hotels in our portfolio at the end of 2006. revenue . total revenue for the year ended december 31 , 2006 was approximately $ 67.2 million , an increase of approximately $ 12.0 million or 21.9 % from total revenue for the year ended december 31 , 2005 of approximately $ 55.2 million . approximately $ 6.1 million of the increase was attributable to the operating results of the crowne plaza jacksonville , which was acquired in july 2005. strong growth in all revenue categories contributed to the remainder of the increase . room revenues at our properties for the year ended december 31 , 2006 increased approximately $ 7.8 million or 21.5 % to approximately $ 43.9 million compared to room revenues for the year ended december 31 , 2005. approximately $ 3.9 million of the increase was attributable to operating results of the crowne plaza jacksonville . our other five operational hotels experienced an average 12.0 % increase in revpar through a combined increase in occupancy of 2.5 % and average adr growth of 9.3 % . a new mix of business , a strong market , and the completion of room renovations caused a significant increase in adr at our philadelphia property . our efforts to re-position our property in laurel , maryland coupled with the completion of renovations also contributed to the significant increases in adr at that property .
| 7,996 |
we provide logistics services for legacy systems and equipment and professional and technical services to the united states government ( the `` government '' ) , including the united states postal service ( `` usps '' ) , the united states department of defense ( `` dod '' ) , federal civilian agencies , commercial customers , and to other customers . our largest customers are the usps and dod . our operations include supply chain management solutions and parts supply for vehicle fleets ; maintenance , repair , and overhaul ( `` mro '' ) services and parts supply for aviation clients ; vehicle and equipment maintenance and refurbishment ; logistics ; engineering ; energy and environmental services ; it and health care it solutions ; and consulting services . see item 1 `` business – revenues and contracts '' on page 6 for revenues by customer . acquisitions in january 2015 , we acquired four related businesses that provide mro services and parts supply for general aviation jet aircraft engines and engine accessories . the acquired businesses include air parts & supply co. , kansas aviation of independence , l.l.c. , prime turbines llc ( including both u.s. and german based operations ) , and ct aerospace llc . these four businesses currently operate as a combined group , our aviation group , managed by our wholly owned subsidiary vse aviation , inc. , which retained certain key management members of the former ownership group . on december 31 , 2015 , we acquired ultra seating company , a company that manufactures and distributes seating for heavy duty and light duty commercial trucks , fork lifts , and service vehicles for truck fleets and original equipment manufacturers . ultra seating company will operate under our wheeler bros. , inc. subsidiary . organization and segments our operations are conducted within four reportable segments aligned with our management groups : 1 ) supply chain management ; 2 ) aviation ; 3 ) federal services ; and 4 ) it , energy and management consulting . supply chain management group – our supply chain management group provides sourcing , acquisition , scheduling , transportation , shipping , logistics , data management , and other services to assist our clients with supply chain management efforts . this group consists of our wholly owned subsidiary wheeler bros. , inc. ( `` wbi '' ) . the primary revenue source for this group is wbi 's usps managed inventory program ( `` mip '' ) that supplies vehicle parts and mission critical supply chain support for the usps truck fleet . other current work efforts include managed inventory services and parts sales to support commercial client truck fleets , parts sales to dod , and other projects to support the usps . aviation group – our aviation group provides mro services , parts supply and distribution , and supply chain solutions for general aviation jet aircraft engines and engine accessories . this group consists of our four aviation businesses acquired in january 2015 ( the `` aviation acquisition '' ) . these businesses have a diversified client base serving corporate and private aircraft owners , regional airlines , aviation manufacturers , other aviation mro providers , cargo transporters , and agricultural clients . federal services group - our federal services group provides foreign military sales services , refurbishment services to extend and enhance the life of existing vehicles and equipment , fleet-wide ship and aircraft support , aircraft sustainment and maintenance , and other technical , management , engineering , logistics , maintenance , configuration management , prototyping , technology , and field support services to the u.s. navy and marine corps , u.s. army and army reserve , u.s. air force , and other customers . significant work efforts for this group include assistance to the u.s. navy in executing its foreign military sales ( `` fms '' ) program for surface ships sold , leased or granted to foreign countries , our u. s. army reserve vehicle refurbishment program , various vehicle and equipment maintenance and sustainment programs for u. s. army commands , various task orders under the u.s. air force contract field teams ( `` cft '' ) program , and , beginning in august 2015 , our ft. benning logistics support services program supporting base operations and logistics at fort benning , georgia . -18- it , energy and management consulting group – our it , energy and management consulting group provides technical and consulting services primarily to various dod and federal civilian agencies , including the united states departments of energy , homeland security , commerce , treasury , and interior ; the social security administration ; the national institutes of health ; customers in the military health system ; and other government agencies and commercial clients . this group consists of our wholly owned subsidiaries energetics incorporated ( `` energetics '' ) and akimeka , llc ( `` akimeka '' ) . energetics provides technical , policy , business , and management support in areas of energy modernization , clean and efficient energy , climate change mitigation , infrastructure protection , and measurement technology . akimeka offers solutions in fields that include medical logistics , medical command and control , e-health , information assurance , public safety , enterprise architecture development , business continuity , program and portfolio management , network it services , cloud managed services , systems design and integration , quality assurance services , and product and process improvement services . concentration of revenues replace_table_token_6_th management outlook we finished 2015 showing a marked improvement in our operating results over the prior year . strong performance from our supply chain operations and the addition of our aviation mro , parts supply and distribution businesses were the primary drivers behind this growth . additionally , financial performance of our contracted services businesses to our traditional markets showed steady improvement as the year progressed . story_separator_special_tag the asu will become effective for us in january 2017. early adoption of the asu is permitted . we currently are assessing the impact , if any that this standard will have on our consolidated financial statements . in september 2015 , the fasb issued asu no . 2015-16 , business combinations ( topic 805 ) : simplifying the accounting for measurement-period adjustments , which eliminates the requirement to account for measurement-period adjustments retrospectively . the asu instead requires an acquirer to recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment . we adopted the standard on january 1 , 2015 and will prospectively apply the standard to business combination adjustments identified after the date of adoption . -20- in april 2015 , the fasb issued asu no . 2015-03 , simplifying the presentation of debt issuance costs . under the new standard , debt issuance costs related to a recognized debt liability are required to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability , consistent with debt discounts . the guidance in asu 2015-03 is effective for the fiscal year , and interim periods within that fiscal year , beginning after december 15 , 2015. we currently are assessing the impact that this standard will have on our consolidated financial statements . in may 2014 , the fasb issued asu no . 2014-09 , revenue from contracts with customers , which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance , including industry-specific guidance . the asu is based on the principle that an entity should recognize revenue 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 fulfill a contract . the effective date of the asu was recently deferred for one year to the interim and annual periods beginning on or after december 15 , 2017. early adoption is permitted as of the original effective date – interim and annual periods beginning on or after december 15 , 2016. we currently are assessing the impact that this standard will have on our consolidated financial statements . critical accounting policies our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the united states , which require us to make estimates and assumptions . we believe the following critical accounting policies affect the more significant accounts , particularly those that involve judgments , estimates and assumptions used in the preparation of our consolidated financial statements . revenue recognition revenue is recognized when persuasive evidence of an arrangement exists , delivery has occurred or services have been rendered , the fee is fixed or determinable , and collectability is probable . substantially all of our supply chain management group revenues result from the sale of vehicle parts to clients . we recognize revenue from the sale of vehicle parts when the customer takes ownership of the parts . our aviation group revenues are recognized upon the shipment or delivery of products to customers based on when title or risk of loss transfers to the customer . sales returns and allowances are not significant . substantially all of our federal services and it , energy and management consulting work is performed for our customers on a contract basis . the three primary types of contracts used are time and materials , cost-type , and fixed-price . revenues result from work performed on these contracts by our employees and our subcontractors and from costs for materials and other work related costs allowed under our contracts . revenue recognition methods on fixed-price contracts will vary depending on the nature of the work and the contract terms . revenues on fixed-price service contracts are recorded as work is performed , typically ratably over the service period . revenues on fixed-price contracts that require delivery of specific items are recorded based on a price per unit as units are delivered . revenues on cost-type contracts are recorded as contract allowable costs are incurred and fees are earned . our fms program contract is a cost plus award fee contract . this contract has terms that specify award fee payments that are determined by performance and level of contract activity . award fees are made during the year through a contract modification authorizing the award fee that is issued subsequent to the period in which the work is performed . we recognize award fee income on the fms program contract when the fees are fixed or determinable . due to such timing , and to fluctuations in the level of revenues , profits as a percentage of revenues on this contract will fluctuate from period to period . -21- revenues for time and materials contracts are recorded on the basis of contract allowable labor hours worked multiplied by the contract defined billing rates , plus the direct costs and indirect cost burdens associated with materials and subcontract work used in performance on the contract . generally , profits on time and materials contracts result from the difference between the cost of services performed and the contract defined billing rates for these services . a summary of revenues for our operating groups , including a summary by contract type for our federal services and it , energy and management consulting groups , for the years ended december 31 is presented below ( in thousands ) . replace_table_token_8_th we will occasionally perform work at risk , which is work performed prior to formalizing contract funding for such work . revenue related to work performed at risk is not recognized until it can be reliably estimated and its realization is probable .
| results of operations replace_table_token_9_th our revenues increased by approximately $ 110 million or 26 % for the year ended december 31 , 2015 as compared to the prior year . the change in revenues for this period resulted from an increase of approximately $ 120 million due to the inclusion our aviation group in our operating results in 2015 , an increase in our supply chain management group of approximately $ 24 million , a decrease in our federal services group of approximately $ 24 million , and a decrease in our it , energy , and management consulting group of approximately $ 10 million . our revenues decreased by approximately $ 48 million or 10 % for the year ended december 31 , 2014 as compared to the prior year . the change in revenues for this period resulted from a decrease in our federal services group of approximately $ 52 million , a decrease in our it , energy , and management consulting group of approximately $ 14 million , and an increase in our supply chain management group of approximately $ 18 million . replace_table_token_10_th contract costs consist primarily of direct costs including inventory , labor , material , and supplies used in the delivery of our products and performance of our work , and indirect costs associated with these direct costs . these costs will generally increase or decrease in conjunction with products sold or the level of work associated with our revenues .
| 7,997 |
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 leading student-first connected learning platform . our goal is to help students transition from high school to college to career , with a view to improving student outcomes . we help students study more effectively for college admission exams , find the right college to accomplish their goals , get better grades and test scores while in school and find internships that allow them to gain valuable skills to help them enter the workforce after college . we strive to improve the overall return on investment in education . we match domestic and international students with colleges , universities and other academic institutions ( collectively referred to as colleges ) in the united states . students get help finding the best fit school for them and colleges are able to reach the best candidates at a fraction of the cost of traditional marketing . once in college , we provide a range of products and services to help students save time , save money and get smarter . we offer an extensive print textbook library for rent and sale both on our own and through our strategic partnership with ingram , which we discuss in more detail below . we also offer etextbooks for rent and sale . students can subscribe to our digital services , such as chegg study , which provides step-by-step textbook solutions and expert answers , helping students with their course work . we also have live tutors available to students online , anytime , anywhere through our chegg tutors service . finally , we provide access to internships to help students gain skills that are critical to securing their first job . to deliver services to students , we partner with a variety of third parties . we work with colleges to help shape their incoming classes . 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 demographic . during the years ended december 31 , 2015 , 2014 and 2013 , we generated net revenues of $ 301.4 million , $ 304.8 million and $ 255.6 million , respectively , and in the same periods had net losses of $ 59.2 million , $ 64.8 million and $ 55.9 million , respectively . we plan to continue to invest in our long-term growth , particularly further investment in the technology that powers our connected learning platform , the development of additional products and services that serve students , and expanding our strategic partnership with ingram . our strategy for achieving and maintaining profitability is centered upon our ability to utilize chegg services to increase student engagement with our connected learning platform . we plan to continue to invest in the expansion of chegg services to provide a more compelling and personalized solution and deepen engagement with students . we believe this expanded and deeper penetration of the student demographic will allow us to drive further growth in our enrollment and brand marketing 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 for the long-term . our ability to accomplish 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 item 1a , “ risk factors. ” we have presented revenues for our two product lines , required materials and chegg services , based on how students view us and the utilization of our products by them . required materials includes all products that are essential for students to meet the requirements of their coursework and chegg services includes all other products we provide to supplement the requirements and help students with their coursework . chegg services also includes our marketing services which help to complete our offering of services to students . more detail on our two product lines is discussed in the next two sections titled `` required materials '' and `` chegg services . '' 40 required materials our required materials product line includes the rental and sale of print textbooks and etextbooks as well as the commission we receive from ingram . our web-based , multiplatform etextbook reader , etextbooks and supplemental course materials are available from approximately 120 publishers as of december 31 , 2015 , which we offer as a rental-equivalent solution and for free to students awaiting the arrival of their print textbook rental . story_separator_special_tag as we transition to a fully digital company , we will continue to buy used books on ingram 's behalf including books through our buyback program and invoice ingram at cost . we will also continue to provide ingram with extended payment terms in 2016 as we procure print textbooks on behalf of ingram , before moving to normal payment terms in 2017. seasonality of our business a substantial majority of our revenues are recognized ratably over the term the student rents our print textbooks and etextbooks or has access to our chegg services . historically , this has generally resulted in our highest revenues in the fourth quarter as it reflects more days of the academic year and our lowest revenues in the second quarter as colleges conclude their academic year for summer and there are fewer days of rentals . the recognition of revenues from our etextbooks and chegg services will continue to follow this trend . as a result of our strategic partnership with ingram , revenues from ingram owned print textbook rental transactions will now be higher in the first and third quarters as we recognize a commission on the transaction rather than recognizing the revenues ratably over the term the student rents our textbooks . the variable expenses associated with our shipments of textbooks and marketing activities are highest in the first and third quarters as shipping and other fulfillment costs and marketing expenses are expensed when incurred , generally at the beginning of academic terms . we expect these variable expenses to decrease for 2016 as we have completely transitioned the shipping and fulfillment activities related to textbooks to ingram . as a result of these factors , the most concentrated periods for our revenues and expenses do not necessarily coincide and comparisons of our quarterly operating results on a sequential basis may not provide meaningful insight into our overall financial performance . we expect our strategic partnership with ingram to shift peak revenues in the periods that a student rents a textbook as a result of our revenue sharing agreement such that our revenues will more closely track the academic calendar as our expenses associated with the textbook rental business decrease . components of results of operations net revenues we derive our revenues from the rental or sale of print textbooks and etextbooks , and from commissions earned from ingram from the rental of their textbooks and from chegg services , net of allowances for refunds or charge backs from our payment processors , who process payments from credit cards , debit cards and paypal . we generate 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 own is recognized ratably over the term of the rental period , generally two to five months . commissions earned on rental textbooks owned by ingram are recognized immediately when a student places an order . revenues from selling textbooks on a just-in-time basis is recognized upon shipment and has comprised approximately 10 % of our consolidated revenues on average over the three years ended december 31 , 2015 . 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 . net revenues from the rental or sale of print textbooks represented 54 % , 70 % and 79 % of our net revenues in the years ended december 31 , 2015 , 2014 and 2013 , respectively , reflecting increasing growth in our chegg services . similar to the revenue recognition from print textbooks rentals , revenues from etextbooks is recognized ratably over the contractual period , generally two to five months or at time of the sale , 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 , we recognize less revenues from the rental of print textbooks and our required materials , and services revenues includes a commission on the total revenues that we earn from ingram upon their fulfillment of a rental transaction using books for which ingram has title and risk of loss . 42 we also generate revenues from chegg services that include our chegg study service , which we offer to students , online tutoring , college admissions , scholarship services , and internship services . we also offer enrollment marketing services to colleges and advertising services that we offer to brands . chegg services are offered to students through weekly , monthly or annual subscriptions , and we recognize revenues ratably over the respective subscription period . we primarily offer subscriptions to our chegg study service and tutoring services . 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 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 an operating cost . 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 the rental of their textbooks , we recognize revenues on a net basis based on our role in the transaction as an agent . marketing services include enrollment marketing services and brand advertising , which we offer either on a subscription or on an a la carte basis . enrollment marketing services connect colleges with students seeking admission or scholarship opportunities at these institutions . brand advertising offers brands unique ways to connect with students .
| results of operations the following table summarizes our historical consolidated statements of operations ( in thousands , except percentage of revenues ) : replace_table_token_4_th 45 year ended december 31 , 2015 , 2014 and 2013 net revenues net revenues in the year ended december 31 , 2015 decreased $ 3.5 million , or 1 % , compared to the same period in 2014 . rental revenues decreased $ 61.2 million or 34 % , while services revenues increased $ 44.5 million , or 51 % , and sales revenues increased $ 13.2 million , or 37 % . net revenues in the year ended december 31 , 2014 increased $ 49.3 million , or 19 % , compared to the same period in 2013. rental revenues decreased $ 7.4 million or 4 % , while services revenues increased $ 35.5 million , or 68 % , and sales revenues increased $ 21.2 million , or 145 % . the decrease in rental revenues during the years ended december 31 , 2015 and 2014 was due to our strategic partnership with ingram , which commenced in july 2014. as a result of our strategic partnership , our rental revenues are increasingly classified as services revenues to represent the commission on the total revenues 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 rental revenues from transactions using our print textbooks . the increase in services and sales revenues during the years ended december 31 , 2015 and 2014 was driven primarily from growth across our other offerings for students which included increased revenues from chegg study , etextbooks , and our various acquisitions in 2014 as well as an increase in the commissions earned from ingram .
| 7,998 |
2010-27 december 2010 other expenses ( topic 720 ) : fees paid to the federal government by pharmaceutical manufacturers ( a consensus of the fasb emerging issues task force ) asu no . 2010-28 december 2010 intangibles—goodwill and other ( topic 350 ) : when to perform step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts ( a consensus of the fasb emerging issues task force ) asu no . 2010-29 december 2010 business combinations ( topic 805 ) : disclosure of supplementary pro forma information for business combinations ( a consensus of the fasb emerging issues task force ) asu no . 2011-01 january 2011 receivables ( topic 310 ) : deferral of the effective date of disclosures about troubled debt restructurings in update no . 2010-20 asu no . 2011-02 april 2011 receivables ( topic 310 ) : a creditor 's determination of whether a restructuring is a troubled debt restructuring asu no . 2011-03 april 2011 transfers and servicing ( topic 860 ) : reconsideration of effective control for repurchase agreements asu no . 2011-04 may 2011 fair value measurement ( topic 820 ) : amendments to achieve common fair value measurement and disclosure requirements in u.s. gaap and international financial reporting standards ( “ ifrs ” ) asu no . 2011-05 june 2011 comprehensive income ( topic 220 ) : presentation of comprehensive income to the extent appropriate , the guidance in the above accounting standards codification updates is already reflected in our consolidated financial statements and management does not anticipate that these accounting pronouncements will have any material effect on our consolidated financial statements . in june 2011 , the fasb issued asu 2011-05 , an amendment to asc topic 220 , “ comprehensive income ” , which provides the entity has the option to present the total comprehensive income , the components of net income , and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements . this update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders ' equity . this topic will be effective retrospectively for fiscal years , and interim periods within those years , beginning after december 15 , 2011 for public entities , early adoption is permitted but the company does not believe that the adoption of the amendments to asc 220 will have a material effect on its financial statements . f-21 in may 2011 , the fasb issued asu 2011-04 , an amendment to asc topic 820 “ fair value measurement ” , which the amendments in this update result in common fair value measurement and disclosure requirements in u.s. gaap and ifrs . consequently , the amendments change the wording used to describe many of the requirements in u.s. gaap for measuring fair value and for disclosing information about fair value measurements . some of the amendments clarify fasb 's intent about the application of existing fair value measurement requirement , including ( 1 ) specifying that the concepts of highest and best use and valuation premise in a fair value measurement are relevant only when measuring the fair value of nonfinancial assets and are not relevant when measuring the fair value of financial assets or of liabilities ; ( 2 ) requirements specific to measuring the fair value of instrument classified in a reporting entity 's shareholders equity , such as equity interest issued as consideration in a business combination ; and ( 3 ) clarifying that a reporting entity should disclose quantitative information about the unobservable inputs used in a fair value measurement that is categorized within level 3 of the fair value hierarchy . other amendments change particular principles or requirements for measuring fair value or for disclosing information about fair value measurements , including ( 1 ) permitting an exception to the requirements in topic 820 for measuring fair value when a reporting entity manages its financial instruments on the basis of its net exposure , rather than its gross exposure , to those risks ; ( 2 ) clarifying that the application of premiums and discount in a fair value measurement is related to the unit of account for the asset or liability being measured at fair value ; and ( 3 ) requiring additional disclosures about fair value measurements . this topic will be effective for periods beginning after december 15 , 2011 , early adoption is not permitted . the company does not believe that the adoption of the amendments to asc 820 will have a material effect on its financial statements . in december 2010 , the fasb issued asu 2010-29 , an amendment to asc topic 805 , “ business combinations ” , which provides clarification that if a public entity presents comparative financial statements , it should disclose revenue and earnings of the combined entity as though the business combinations that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only . the amendments in this update also expand the supplemental pro forma disclosure to include a description of the nature and amount of material , nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings . story_separator_special_tag the primary reason that we generated cash from our operating activities while suffering an operating loss was that impairment losses of approximately $ 7,000,000 , associated with our investment in excalibur , and impairment of $ 5,000,000 associated with our investment in ctx , were included in our operating loss . during this period , we also recorded approximately $ 11,300,000 of unearned revenue for cash that was received in the current period , but such revenue can only be recognized when goods are delivered to affiliates in future periods . during the year ended march 31 , 2010 , we recorded a loss of $ 14,178,943 , yet generated $ 4,912,068 from our operating activities . the primary reason that we generated cash from our operating activities while suffering an operating loss was that losses of approximately $ 15,000,000 , associated with our investment in excalibur and depreciation of $ 2,300,000 , which did not require the use of cash , were included in our operating loss . during the year ended march 31 , 2009 , we had net income of $ 810,763 , yet our operating activities used $ 11,024,088 in cash . the primary reason that our operating activities used cash , despite having net income , was that during the year inventories and prepaid expenses increased , and we paid outstanding liabilities . all of the foregoing required the use of cash but were not expensed in our statement of operations . during this period , we also recorded revenue which was previously recorded as unearned , with the result that a portion of our revenues were attributable to cash that was received in prior periods . material changes in our balance sheet items between march 31 , 2011 and march 31 , 2010 are discussed below : increase ( i ) or category decrease ( d ) reason cash and cash equivalents d we used some of our excess cash to invest in securities available for sale during the year ended march 31 , 2011. we also reclassified $ 8,949,324 as securities available for sale that were reported as cash and cash equivalents at march 31 , 2010. securities available for sale i we used some of our excess cash to invest in securities available for sale during the year ended march 31 , 2011. inventories d increase in product sales orders by year end . property and equipment d on august 8 , 2010 , oceanlala , the ship owned by excalibur , was damaged when sailing in the taiwan strait . as a result of the damage , we estimated that the net book value of the ship exceeded its market value , and as a result , an impairment loss of $ 5.4 million has been provided . 21 held-to-maturity securities d we sold all our corporate notes in november 2010 as the issuers of some securities experienced significant deteriorations in their creditworthiness . loans to related parties d we recorded an impairment loss of $ 1,567,000 during the period , as we determined that the related party to whom we made the loan would not be able to repay the loan . accounts payable i marketing expenses accrued during the year have not been fully paid to the public relation company by year end . unearned revenue i temporary delay in deliveries of product to affiliates resulted in higher unearned revenues . non-controlling interest d this item represents the interests in excalibur and digital development partners , inc. owned by others . between january and august 2008 , we sold 14,890,040 units to non-u.s. residents at a price of $ 3.80 per unit . the units were sold pursuant to the exemption provided by regulation s of the securities act of 1933. each unit consisted of one share of our common stock and one warrant . each warrant allowed the holder to purchase one share of the company 's common stock at a price of $ 3.80 per share at any time prior to november 30 , 2010. on september 2 , 2010 , the company extended the expiration date of the warrants to november 30 , 2011. the company has the right , but not the obligation , to redeem the outstanding warrants , on a pro rata basis , at a purchase price of $ 0.00001 per warrant within 30 days from the tenth consecutive trading day that the closing sales price , or the average of the closing bid and asked price , of the company 's common stock trades on the otc or any public securities market within the usa , for at least $ 11 per share . we used $ 19,193,000 from the sale of the units to purchase our 48.81 % interest in excalibur international marine corporation . yeuh-chi liu , a supplier of our spray bottles , borrowed $ 1,567,000 from us in july 2008. the loan is non-interest bearing and is payable upon demand . the loan was used by yeuh-chi liu to acquire a 3.97 % ownership of excalibur international marine corporation and is secured by that interest . the company provided a full allowance for impairment in the amount of $ 1,567,000 against the demand loan during the year . we have not yet enforced our interest in the collateral . since july 2008 , we have made loans to excalibur international marine corporation . the loans were primarily used by excalibur to acquire its ship , the oceanlala , and to fund operating costs . as of march 31 , 2011 we had the following outstanding loans to excalibur . because we consolidate excalibur , these loans are not included in our consolidated financial statements .
| results of operations material changes in our statement of operations for the periods presented are discussed below : year ended march 31 , 2011 increase ( i ) or item decrease ( d ) reason sales revenue , net d sales are recorded net of commissions we pay the affiliates who are responsible for the sales , and the commission is paid to affiliates upon receipt of sales orders which is even before revenue can be recognized . in march 2011 , $ 15 million of sales orders and payments were received . out of the $ 15 million , only $ 3.5 million was recognized as revenue in accordance with our revenue recognition policy , but full commission expenses of $ 10 million related to these orders have been credited to the affiliates ' accounts and were recorded as a reduction of revenue in this year , which resulted in a decrease in net revenue . undelivered orders at year end , which is recorded as unearned revenue , will be recognized as revenue once they are delivered . shipping charges d decrease in sales and we do not collect shipping fees for the sales made through our reverse auction program since products sold under this program are shipped directly by the manufacturer of the product . 18 gross profit as a % of total revenue d gross profit , as a % of total revenue , was 26 % during fiscal 2011 compared with 56 % during the year ended march 31 , 2010. the main reasons for the decrease in gross profit were a decrease in sales , while having a significant increase in commission expense incurred for the significant increase in unearned revenue for the year and shipping costs .
| 7,999 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.