document
stringlengths 6.38k
13.4k
| summary
stringlengths 179
3.85k
|
|---|---|
the seismic , myoheart and marvel trials have been designed to test the safety and efficacy of myocell in treating patients with severe , chronic damage to the heart . upon regulatory approval of myocell , we intend to generate revenue in the united states from the sale of myocell cell-culturing services for treatment of patients by qualified physicians . we received approval from the fda in july of 2009 to conduct a phase i safety study on 15 patients of a combined therapy ( myocell with sdf-1 ) , which we believe was the first approval of a study combining gene and cell therapies . we initially commenced work on this study , called the regen trial , during the first quarter of 2010. we suspended activity on the trial in 2010 while seeking additional funding necessary to conduct the trial . we are seeking to secure sufficient funds to reinitiate enrollment in the marvel and regen trials . if we successfully secure such funds , we intend to re-engage a contract research organization , or cro , investigators and certain suppliers to advance such trials . we have initiated and enrolled our first patient in the mirror trial in 2013. the trial is very similar to the marvel trial but focuses on sites outside the us . we will continue enrollment in the mirror trial once we have secured sufficient funds . we have completed the phase 1 angel trial for adipocell ( adipose derived stem cells ) . five patients were enrolled and treated in the second quarter of 2013. at the twelve ( 12 ) month time point , patients demonstrated a statistically significant average improvement in ejection fraction ( ef ) by echocardiogram . this trial was extended to 28 patients and the data has been published in a peer reviewed journal . we have also initiated several institutional review board studies in 2013 using adipose derived stem cells for various indications including dry macular degeneration , degenerative disc disease , erectile dysfunction and chronic obstructive pulmonary disease . we have published results of the degenerative disc trial . all other trials are not enrolling patients . we provide these therapies to patients through the clinic . myocath product candidate the myocath is a deflecting tip needle injection catheter that has a larger ( 25 gauge ) needle to allow for better flow rates and less leakage than systems that are 27 gauge . this larger needle allows for thicker compositions to be injected , which helps with cell retention in the heart . also , the myocath needle has more fluoroscopic brightness than the normally used nitinol needle , enabling superior visualization during the procedure . seeing the needle well during injections enables the physician who is operating the catheter to pinpoint targeted areas more precisely . the myocath is used to inject cells into cardiac tissue in therapeutic procedures to treat chronic heart ischemia and congestive heart failure . investigators in our marvel trial may use either our myocath catheters or biosense webster 's ( a johnson & johnson company ) noga® cardiac navigation system along with the myostar injection catheter for the delivery of myocell to patients enrolled in the trial . we are currently producing myocath catheters with a contract manufacturer on an as needed basis . 35 index we conduct operations in one business segment . we may organize our business into more discrete business units when and if we generate significant revenue from the sale of our product candidates . our revenue since inception has been generated inside and outside the united states , and the majority of our long-lived assets are located in the united states . general american capital partners on march 3 , 2017 , we entered into an asset sale and lease agreement ( sale/leaseback transaction ; “ asset sale and lease agreement ” ) , with gacp ( general american capital partners ) stem cell bank llc , a florida limited liability company ( “ gacp ) whereby we sold certain lab , medical and other equipment relating to the cell banking business for $ 400,000 and leased back the sold equipment over a three year term . the lease includes a base monthly rental payment of $ 20,000 , due the first day of each calendar month . in addition , we are required to pay 2.3 % , 22.5 % and 31.6 % of revenues collected on deposits arising from cell banking business for years 1 , 2 and 3 , respectively . at the expiration of the lease , we are required to return all leased equipment and along with any maintenance records , logs , etc . in our possession to the lessor with no right of repurchase . in addition , gacp has contractually agreed to invest an additional two and a half million dollars ( $ 2,500,000 ) to open ten ( 10 ) stem cell clinics in the united states within 3 years -- with a penalty provision to our benefit for shortfalls if less than 6 clinics are opened within 24 months . american stem cell centers of excellence are clinics derived from the investment group behind the asset purchase and leaseback agreement . american stem cell centers of excellence provide comprehensive stem cell treatments using innovative technologies and the latest research with the intent that after treatment , the body 's own healing potential naturally repairs and regenerates damaged tissue . with a new clinic in miami , florida and , as we intend , additional clinics opening soon around the country , management contends that american stem cell centers of excellence provides comprehensive stem cell treatments using the u.s. stem cell inc. innovative technologies and the latest regenerative medicine research . u.s. stem cell 's team of scientists have pioneered these in-clinic regenerative medicine protocols and , in our estimation , have helped thousands of patients through their partly-owned subsidiary u.s. stem cell clinic . story_separator_special_tag american stem cell centers of excellence would like to replicate this success and have partnered and , with the board of directors ' approval and continued oversight that this will not diminish their responsibilities to our company , have retained the professional services of both kristin comella and mike tomas as cso and ceo respectively to help with scientific and successful operational deployment of their clinics . the board of directors contends that the successful deployment of american stem cell centers of excellence will lead to the financial value and revenue growth of us stem cell , inc. through sales of our products and services at american stem cell center of excellence clinics . subsequent events on january 30 , 2018 , greg knutson , a director of the company ( “ knutson ” ) and the company agreed to open and operate a r egenerative medicine/cell therapy clinic providing cellular treatments for patients afflicted with neurological , autoimmune , orthopedic and degenerative diseases in florida . to that end , u.s. stem cell clinic of the villages llc ( the “ llc ” ) was formed january 30 , 2018. knutson provided the company with the sum of three hundred thousand dollars ( $ 300,000 ) ( the “ investment ” ) to be utilized for the formation and initial operation of the llc . currently , knutson holds a 51 % member interest in the llc and the company holds a 49 % member interest . the company will provide operating assistance as well as management services , the latter to be compensated at fee of five percent ( 5 % ) of the net revenues . from january to april 2018 , we issued an aggregate of 9,875,484shares of common stock for services rendered . in addition , from january through march 1 , 2018 , we sold an aggregate of 7,838,457 shares of its common stock for net proceeds of $ 183,000. on or about march 1 , 2018 , the u.s. securities and exchange commission ( “ commission ” ) , miami regional office ( “ commission staff ” ) , served a subpoena upon u.s. stem cell , inc. , which seeks production of certain documents and communications including , among other things , minutes and other documents relating to the company 's board and audit committee meetings , financial statements , and press releases . the commission staff is conducting a formal non-public , fact-finding inquiry of u.s. stem cell , inc. this investigation is neither an allegation of wrongdoing nor a finding that any violation of law has occurred . the company is cooperating with the commission staff and has provided , and will continue to provide , information and documents to the commission staff . at this juncture , the company is not able to predict the duration , scope , results , or consequences of the commission staff 's investigation . there can be no assurance that this inquiry will be resolved in a manner that is not adverse to the company . 36 index results of operations overview on january 30 , 2018 , greg knutson , a director of our company ( “ knutson ” ) and our company agreed to open and operate a r egenerative medicine/cell therapy clinic providing cellular treatments for patients afflicted with neurological , autoimmune , orthopedic and degenerative diseases in florida . to that end , u.s. stem cell clinic of the villages llc ( the “ llc ” ) was formed january 30 , 2018. currently , knutson holds a 51 % member interest in the llc and we hold a 49 % member interest . we will provide operating assistance as well as management services , the latter to be compensated at fee of five percent ( 5 % ) of the net revenues . the llc shall be controlled by the board of managers , specifically knudson and mike tomas and be governed by a standard operating agreement . revenues the company 's primary source of revenue is from the sale of test kits and equipment , training services , patient treatments and laboratory services , and cell banking . our revenue may vary substantially from quarter to quarter and from year to year . we believe that period-to-period comparisons of our results of operations are not meaningful and should not be relied upon as indicative of our future performance . we do not expect to generate substantial revenues until we obtain regulatory approval for and commercialize our product candidates , which we do not expect to occur before 2019. we recognized revenues of $ 5,520,537 in 2017 compared to revenues of $ 3,083,261 in 2016. our revenue in 2017 was generated from the sale of test kits and equipment , training services , patient treatments and laboratory services , and cell banking . our revenues for 2016 were generated from the sale , test kits and equipment , training services , patient treatments and laboratory services , and cell banking . our significant overall increase in 2017 as compared to 2016 was generated by a 170 % increase in our banking revenue . cost of sales cost of sales consists of the costs associated with the production of myocath and test kits , product costs , labor for production and training and lab and banking costs consistent with products and services provided . cost of sales was $ 1,885,371 in the year ended december 31 , 2017 compared to $ 972,009 in the year ended december 31 , 2016. the increase is primarily due higher revenue volume . the margins are lower in 2017 compared to 2016 due to equipment depreciation in 2017. research and development our research and development expenses consist of costs incurred in identifying , developing and testing our product candidates . these expenses consist primarily of costs related to our clinical trials , the acquisition of intellectual property licenses and preclinical studies . we expense research and development costs as incurred .
| marketing , general and administrative marketing , general and administrative expenses were $ 4,426,632 in 2017 , an increase of $ 1,230,275 from marketing , general and administrative expenses of $ 3,264,107 in 2016. the increase in marketing , general and administrative expenses is attributable , in part , to increases in stock based compensation , salaries and insurance and advertising expenses . ( loss ) gain on settlement of debt during the year ended december 31 , 2017 , we incurred a net loss of $ 126,457 primarily related to the settlement of accounts payable and debt restructured during the current period . in 2016 , we incurred a gain of $ 53,690 primarily due to the settlement of accounts payable and related party advances , net with refinancing of debt during the current period . gain on sale of equipment in march 2017 , we entered a sale/leaseback transaction whereby we sold our lab and other medical equipment and re-leased the equipment back for 36 months . in connection with the sale/leaseback , we realized a gain on sale of equipment of $ 386,536 which we will recognize to operations over the term of the lease ( 36 months ) . during the year ended december 31 , 2017 , we recognized $ 107,371 in current period operations . during the year ended december 31 , 2016 , we realized a gain of $ 500 for the sale of old equipment . 42 index ( loss ) gain on change in fair value of derivative liabilities . as of december 31 , 2016 and 2015 , we issued convertible notes and common stock purchase warrants with anti-dilutive provisions that had the possibility of exceeding our common shares authorized when considering the number of possible shares that may be issuable to satisfy settlement provisions of these agreements after consideration of all existing instruments that could be settled in shares . as such , we are required to determine the fair value of this derivative and mark to
|
because of the nature of the judgment and assumptions we make , actual results could differ from these judgments and estimates that could have a material impact on the carrying values of our assets and liabilities and our results of operations . management has reviewed and approved these critical accounting policies and has discussed these policies with the company 's audit committee . allowance for loan losses the allowance for loan loss is management 's estimate of credit losses inherent in the loan portfolio . the allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings . loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed . subsequent recoveries , if any , are credited to the allowance . the allowance for loan losses is evaluated on a regular basis by management and is based upon management 's periodic review of the collectability of the loans in light of historical experience , the nature and volume of the loan portfolio , adverse situations that may affect the borrower 's ability to repay , estimated value of any underlying collateral and prevailing economic conditions . this evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available . we have an established process to determine the adequacy of the allowance for loan losses that assesses the losses inherent in our portfolio . while we attribute portions of the allowance to specific portfolio segments , the entire allowance is available to absorb credit losses inherent in the total loan portfolio . our process involves procedures to appropriately consider the unique risk characteristics of our commercial and consumer loan portfolio segments . for each portfolio segment , impairment is measured individually for each impaired loan . our allowance levels are influenced by loan volume , loan grade or delinquency status , historic loss experience and other economic conditions . the allowance consists of general and specific components . commercial loans are assessed for estimated losses by grading each loan using various risk factors identified through periodic reviews . we apply historic grade-specific loss factors to each loan class . in the development of our statistically derived loan grade loss factors , we observe historical losses over 12 quarters for each loan grade . these loss estimates are adjusted as appropriate based on additional analysis of external loss data or other risks identified from current economic conditions and credit quality trends . for consumer loans , we determine the allowance on a collective basis utilizing historical losses over 12 quarters to represent our best estimate of inherent loss . we pool loans , generally by loan class with similar risk characteristics . included in the general component of the allowance for loan losses for both portfolio segments is a margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating general losses in the portfolio . uncertainties and subjective issues such as changes in the lending policies and procedures , changes in the local/national economy , changes in volume or type of credits , changes in volume/severity or problem loans , quality of loan review and board of director oversight , concentrations of credit , and peer group comparisons are factors considered . the specific component relates to loans that are classified as impaired . for loans that are classified as impaired , an allowance is established when the value of the impaired loan is lower than the carrying value of that loan . a loan is considered impaired when , based on current information and events , it is probable that the company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement . factors considered by management in determining impairment include payment status , collateral value , and the probability of collecting scheduled principal and interest payments when due . impairment is measured on a loan by loan basis for commercial and consumer loans by either the present value of expected future cash flows discounted at the loan 's effective interest rate , the loan 's obtainable market price , or the fair value of the collateral if the loan is collateral dependent . the specific component also includes an amount for the estimated impairment on commercial and consumer loans modified in a troubled debt restructuring ( tdr ) , whether on accrual or nonaccrual status . 36 while management uses available information to recognize losses on loans , future additions to the allowance may be necessary based on changes in local economic conditions . in addition , regulatory agencies , as an integral part of their examination process , periodically review our allowance for loan losses . such agencies may require us to recognize additions to the allowances based on their judgments about information available to them at the time of their examination . fair valuation of financial instruments we use fair value measurements to record fair value adjustments to certain financial instruments and to determine fair value disclosures . additionally , we may be required to record other assets at fair value on a nonrecurring basis . these nonrecurring fair value adjustments typically involve application of lower-of-cost-or-market accounting or write-downs of individual assets . further , we include in the notes to the consolidated financial statements information about the extent to which fair value is used to measure assets and liabilities , the valuation methodologies used , and the related impact to income . additionally , for financial instruments not recorded at fair value , we disclose the estimate of their fair value . fair value is defined as the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date . accounting standards establish a three-level hierarchy for disclosure of assets and liabilities recorded at fair value . story_separator_special_tag the classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for measurement are observable or unobservable . observable inputs reflect market-derived or market-based information obtained from independent sources , while unobservable inputs reflect our estimates about market data . the three levels of inputs that are used to classify fair value measurements are as follows : ● level 1 valuation is based upon quoted prices for identical instruments traded in active markets . level 1 instruments generally include securities traded on active exchange markets , such as the new york stock exchange , as well as securities that are traded by dealers or brokers in active over-the-counter markets . instruments we classify as level 1 are instruments that have been priced directly from dealer trading desks and represent actual prices at which such securities have traded within active markets . ● level 2 valuation is based upon quoted prices for similar instruments in active markets , quoted prices for identical or similar instruments in markets that are not active , and model-based valuation techniques , such as matrix pricing , for which all significant assumptions are observable in the market . instruments we classify as level 2 include securities that are valued based on pricing models that use relevant observable information generated by transactions that have occurred in the market place that involve similar securities . ● level 3 valuation is generated from model-based techniques that use significant assumptions not observable in the market . these unobservable assumptions reflect the company 's estimates of assumptions market participants would use in pricing the asset or liability . valuation techniques include use of option pricing models , discounted cash flow models , and similar techniques . we attempt to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements . when available , we use quoted market prices to measure fair value . specifically , we use independent pricing services to obtain fair values based on quoted prices . quoted prices are subject to our internal price verification procedures . if market prices are not available , fair value measurement is based upon models that use primarily market-based or independently-sourced market parameters . most of our financial instruments use either of the foregoing methodologies , collectively level 1 and level 2 measurements , to determine fair value adjustments recorded to our financial statements . however , in certain cases , when market observable inputs for model-based valuation techniques may not be readily available , we are required to make judgments about assumptions market participants would use in estimating the fair value of the financial instrument . the degree of management judgment involved in determining the fair value of an instrument is dependent upon the availability of quoted market prices or observable market parameters . for instruments that trade actively and have quoted market prices or observable market parameters , there is minimal subjectivity involved in measuring fair value . when observable ma rket prices and parameters are not fully available , management 's judgment is necessary to estimate fair value . in addition , changes in market conditions may reduce the availability of quoted prices or observable data . for example , reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable . when significant adjustments are required to available observable inputs , it may be appropriate to utilize an estimate based primarily on unobservable inputs . when an active market for a security does not exist , the use of management estimates that incorporate current market participant expectations of future cash flows , and include appropriate risk premiums , is acceptable . 37 significant judgment may be required to determine whether certain assets measured at fair value are included in level 2 or level 3. if fair value measurement is based upon recent observable market activity of such assets or comparable assets ( other than forced or distressed transactions ) that occur in sufficient volume and do not require significant adjustment using unobservable inputs , those assets are classified as level 2. if not , they are classified as level 3. making this assessment requires significant judgment . other-than-temporary impairment analysis our debt securities are classified as securities available for sale and reported at fair value . unrealized gains and losses , after applicable taxes , are reported in shareholders ' equity . we conduct other -than-t emporary impairment ( otti ) analysis on a quarterly basis or more often if a potential loss-triggering event occurs . the initial indicator of otti for debt securities is a decline in market value below the amount recorded for an investment and the severity and duration of the decline . for a debt security for which there has been a decline in the fair value below amortized cost basis , we recognize otti if we ( 1 ) have the intent to sell the security , ( 2 ) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis , or ( 3 ) we do not expect to recover the entire amortized cost basis of the security . other real estate owned real estate acquired through foreclosure is initially recorded at the lower of cost or estimated fair value . subsequent to the date of acquisition , it is carried at the lower of cost or fair value , adjusted for net selling costs . fair values of real estate owned are reviewed regularly and writedowns are recorded when it is determined that the carrying value of real estate exceeds the fair value less estimated costs to sell . costs relating to the development and improvement of such property are capitalized , whereas those costs relating to holding the property are expensed . income taxes the financial statements have been prepared on the accrual basis .
| the net charge-offs of $ 2.4 million and $ 4.4 million during 2013 and 2012 , respectively , represented 0.34 % and 0.71 % of the average outstanding loan portfolios for the respective years . noninterest income the following tables set forth information related to our noninterest income . replace_table_token_7_th noninterest income was $ 5.8 million for the year ended december 31 , 2014 , a $ 2.0 million increase over noninterest income of $ 3.8 million for the year ended december 31 , 2013. the increase in total noninterest income during 2014 resulted primarily from the following : ● loan and mortgage fee income increased $ 1.6 million , or 131.1 % , driven by a $ 1.6 million increase in mortgage origination fee income which totaled $ 2.7 million for the year . during 2014 , we continued the expansion our mortgage operations , adding five additional team members to assist with originating , underwriting , closing and funding residential mortgage loans . 41 ● service fees on deposit accounts increased 5.0 % , or $ 44,000 , primarily related to increased service charge fee income on our transaction accounts . during 2014 , our transaction accounts , which include checking , money market , and savings accounts , grew by $ 108.7 million , or 26.3 % . ● during the second quarter of 2014 , we sold a portion of our investment securities and recognized a gain on sale $ 230,000 . ● other income increased by $ 76,000 , or 7.4 % , due primarily to increased fee income on our atm and debit cards which is driven by an increase in transaction volume . noninterest income was $ 3.8 million for the year ended december 31 , 2013 , a $ 40,000 increase over noninterest income of for the year ended december 31 , 2012. the increase in total noninterest income during 2013 resulted primarily from the following : ● loan and mortgage fee income increased $ 191,000 or 18.3 % , driven by a
|
patients will be randomized on a 1:1 basis to receive 24 mg/kg of neod001 or placebo via intravenous infusion every 28 days , with both groups receiving concurrent standard of care therapy . the composite primary endpoint is event-based , with all-cause mortality or cardiac hospitalizations as qualifying events . secondary endpoints of the study include evaluation of the cardiac biomarker nt-probnp , renal biomarker proteinuria , six-minute walk test , and multiple quality of life evaluations including the short form-36 and the kansas city cardiomyopathy questionnaire . prothena designed the study with 90 % power to detect a 30 % change in the event rate between the treatment and placebo groups with a two-sided alpha of 0.05. the trial allows for an interim analysis to assess the primary endpoint for efficacy and futility . concurrent with the vital amyloidosis study , a phase 3 clinical trial , we are enrolling up to an additional 25 patients , with al amyloidosis and selected persistent organ dysfunction , in an open-label expansion portion of the phase 1/2 study . we plan to enroll 10 patients with cardiac dysfunction , 10 patients with renal dysfunction and five patients with peripheral neuropathy , all of whom will receive 24 mg/kg intravenously every 28 days . the expansion phase will continue to evaluate safety , tolerability , pharmacokinetics and immunogenicity of neod001 as well as the specific clinical activity against cardiac , renal and neuropathy endpoints . neod001 received fast track designation from the u.s. food and drug administration ( the `` fda '' ) in december 2014. the purpose of the fast track designation is to make important new drugs available to patients earlier . prx002 in april 2014 , together with roche , we initiated a phase 1 clinical trial of prx002 . results for this study are expected in march 2015. the study is a randomized , double-blind , placebo-controlled , single ascending dose study in healthy subjects designed to assess prx002 for safety , tolerability , pharmacokinetics and immunogenicity . we received a $ 15.0 million milestone payment from roche upon initiation of this study under the license agreement , as described below . in july 2014 , together with roche , we initiated a randomized , double-blind , placebo-controlled multiple ascending dose phase 1 clinical trial of prx002 in patients with parkinson 's disease . this multiple ascending dose study is designed to assess prx002 for safety , tolerability , pharmacokinetics and immunogenicity and builds upon the phase 1 single ascending dose study initiated in april 2014. collaboration with roche in december 2013 , we entered into a license , development , and commercialization agreement ( the “ license agreement ” ) with f. hoffmann-la roche ltd and hoffmann-la roche inc. ( collectively , “ roche ” ) to develop and commercialize certain antibodies that target alpha-synuclein , including prx002 , which are referred to collectively as “ licensed products. ” the license agreement became effective following the expiration of the applicable hart-scott-rodino waiting period on january 17 , 2014 , which triggered an upfront payment to us of $ 30.0 million from roche , which we received in february 2014. pursuant to the license agreement , we and roche are collaborating to research and develop antibody products targeting alpha-synuclein . roche is providing funding for a research collaboration between us and roche focused on optimizing early stage antibodies targeting alpha-synuclein , potentially including incorporation of roche 's proprietary brain shuttle technology to increase delivery of therapeutic antibodies to the brain . 43 we filed an investigational new drug application ( `` ind '' ) with the fda for prx002 and subsequently initiated a phase 1 study in april 2014. in may 2014 , we received a $ 15.0 million milestone payment from roche related to the initiation of the phase 1 study for prx002 in the clinic . following the phase 1 study , roche will be primarily responsible for developing , obtaining and maintaining regulatory approval for , and commercializing licensed products . roche will also become responsible for the clinical and commercial manufacture and supply of licensed products within a defined time period following the effective date of the license agreement . in addition to the $ 30.0 million upfront payment and the $ 15.0 million clinical milestone payment , roche is also obligated to pay to us the following : up to $ 380.0 million upon the achievement of development , regulatory and various first commercial sales milestones ; up to an additional $ 175.0 million in ex-u.s. commercial sales milestones ; and tiered , high single-digit to high double-digit royalties in the teens on ex-u.s. annual net sales , subject to certain adjustments . in the u.s. , the parties will share all development and commercialization costs , as well as profits , all of which will be allocated 70 % to roche and 30 % to us , for prx002 in the parkinson 's disease indication , as well as any other licensed products and or indications for which we opt in to co-develop and co-fund . we may opt out of the co-development and cost and profit sharing on any co-developed licensed products and instead receive u.s. commercial sales milestones totaling up to $ 155.0 million and tiered , single-digit to high double-digit royalties in the teens based on u.s. annual net sales , subject to certain adjustments , with respect to the applicable licensed product . in addition , we have an option under the license agreement to co-promote prx002 in the u.s. in the parkinson 's disease indication . if we exercise such option , we may also elect to co-promote additional licensed products in the u.s. approved for parkinson 's disease . outside the u.s. , roche will have responsibility for developing and commercializing the licensed products . story_separator_special_tag october 2013 offering in october 2013 , we completed an underwritten public offering of an aggregate of 6,796,500 of our ordinary shares at a public offering price of $ 22.00 per share , which consisted of 4,177,079 newly issued ordinary shares sold by us and 2,619,421 ordinary shares sold by janssen pharmaceutical , a wholly-owned subsidiary of johnson & johnson , as the selling shareholder . we received aggregate net proceeds of approximately $ 84.5 million , after deducting the underwriting discount and estimated offering costs . we did not receive any proceeds from the sale of 2,619,421 ordinary shares sold , which represented janssen pharmaceutical 's entire shareholding in prothena . during the year ended december 31 , 2013 we recorded underwriting discounts and offering costs of $ 7.4 million as an offset to the proceeds in additional paid in capital . february 2014 offering in february 2014 , elan science one limited ( `` esol '' ) , an indirect wholly owned subsidiary of perrigo , sold 3,182,253 ordinary shares of prothena . the ordinary shares were sold at a price to the public of $ 26.00 per ordinary share , before the underwriting discount . as a result , esol and perrigo no longer owned any ordinary shares of prothena as of such sale . we did not receive any of the proceeds from the offering . we paid the costs associated with the sale of these ordinary shares ( other than the underwriting discount , fees and disbursements of counsel for the selling shareholder ) pursuant to a subscription and registration rights agreement dated november 8 , 2012 by and among us , elan ( acquired by perrigo ) and esol . june 2014 offering in june 2014 , we completed an underwritten public offering of an aggregate of 4,750,000 of our ordinary shares at a public offering price of $ 22.50 per ordinary share . we received aggregate net proceeds of approximately $ 102.5 million , after deducting the underwriting discount and estimated offering costs . in july 2014 , the underwriters exercised their right to subscribe for and purchase an additional 712,500 ordinary shares , pursuant to which we received net proceeds of approximately $ 14.9 million , after deducting the underwriting discount . for the year ended december 31 , 2014 underwriting discount and offering expense of $ 5.5 million were classified as an offset to the proceeds and recorded in additional paid in capital on the balance sheet . 44 basis of presentation and preparation of the financial statements our business consists of a substantial portion of elan 's former drug discovery business platform , including neotope biosciences limited ( now named prothena biosciences limited ) and its wholly owned subsidiaries onclave therapeutics limited ( now named prothena therapeutics limited ) and prothena biosciences inc , and related tangible assets and liabilities . prior to december 21 , 2012 , the prothena business operated as part of elan and not as a separate stand-alone entity . our consolidated financial statements for the periods prior to december 21 , 2012 have been prepared on a “ carve-out ” basis from the consolidated financial statements of elan to represent our financial performance as if we had existed on a stand-alone basis during those periods . prior to the separation and distribution on december 20 , 2012 , centralized support costs were allocated to us for the purposes of preparing the consolidated financial statements based on our estimated usage of the resources . our estimated usage of the centralized support resources was determined by estimating our portion of the most appropriate driver for each category of centralized support costs such as headcount or labor hours , depending on the nature of the costs . we believe that such allocations were made on a reasonable basis , but may not necessarily be indicative of the costs that would have been incurred if we had operated on a standalone basis . for additional information regarding the basis of preparation , refer to note 2 of the “ notes to the consolidated financial statements ” included in item 8 of this report . critical accounting policies and estimates 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 the accounting principles generally accepted in the u.s. ( `` gaap '' ) . the preparation of these consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets , liabilities , revenues , expenses and related disclosures . we believe the following policies to be critical to the judgments and estimates used in the preparation of our financial statements . carve-out of the results of operations , financial condition and cash flows of the prothena business prior to december 21 , 2012 , the prothena business operated as part of elan and not as a separate stand-alone entity . our consolidated financial statements for the periods prior to december 21 , 2012 have been prepared on a “ carve-out ” basis from the consolidated financial statements of elan to represent the financial position and performance of prothena as if we had existed on a stand-alone basis during those periods , and as if financial accounting standards board ( `` fasb '' ) accounting standard codification ( `` asc '' ) topic 810 , “ consolidation ” ( `` asc 810 '' ) had been applied throughout . the consolidated financial statements have been prepared in conformity with gaap , by aggregating financial information from the components of prothena described in note 2 to the consolidated financial statements . the accompanying consolidated financial statements include allocations of direct costs and indirect costs attributable to our operations for the periods prior to december 21 , 2012. indirect costs relate to certain support functions that were provided on a centralized basis within elan .
| 48 operating expenses replace_table_token_4_th total operating expenses consist of research and development ( `` r & d '' ) expenses and general and administrative ( `` g & a '' ) expenses . our operating expenses for the years ended december 31 , 2014 , 2013 and 2012 were $ 57.5 million , $ 41.1 million and $ 44.1 million , respectively . our r & d expenses primarily consisted of personnel costs and related expenses , including share-based compensation , external costs associated with preclinical activities and drug development related to our drug programs , including neod001 , prx002 , prx003 and our discovery programs , and costs of providing research services to elan . pursuant to our license agreement with roche , in 2014 we began making payments to roche for our share of the development expenses incurred by roche related to prx002 program , which is included in our r & d expense . we recorded reimbursements from roche for development and supply services based on the relative percentages as an offset to r & d expense . our g & a expenses primarily consist of professional services expenses and personnel costs and related expenses , including share-based compensation and , for the year ended december 31 , 2012 , certain centralized support costs that had been allocated to us by elan based on our estimated usage of the resources . share-based compensation expense during the year ended december 31 , 2012 was also allocated to us by elan . additional information regarding the allocation of centralized g & a expenses is discussed above under the caption “ carve-out of the results of operations , financial condition and cash flows of the prothena business ” . research and development expenses our r & d expenses increased by $ 12.4 million , or 48 % , for the year ended december 31 , 2014 , compared to the prior year . the increase for the year ended december 31 , 2014 compared to the prior year was primarily due to an increase in external expenses related to product manufacturing primarily
|
the decrease was a result of fewer equipment sales during the year , offset by an increase in service revenue from repairs performed . cost of goods sold cost of goods sold decreased to approximately $ 113,000 for the year ended december 31 , 2014 from $ 188,000 for the year ended december 31 , 2013 , due to decreased sales of our equipment as described above . selling , general and administrative selling , general and administrative expenses increased to approximately $ 2,845,000 for the year ended december 31 , 2014 from approximately $ 2,819,000 for the year ended december 31 , 2013. the increase in selling , general and administrative expenses is principally due to an increase in employee expenses of approximately $ 180,000 ; an increase in office expenses of approximately $ 258,000 which includes commercial insurance , rent and other expenses incurred in the addition of the dr. pave office in california ; offset by a decrease in outside consulting fees of $ 181,000 , a decrease in advertising and promotion activities of approximately $ 166,000 , and a net reduction in legal fees , offering related costs and investor relations costs of approximately $ 65,000. research and development research and development decreased to approximately $ 190,000 for the year ended december 31 , 2014 from approximately $ 267,000 for the year ended december 31 , 2013. the principal reason for the decrease is a reduction in legal and other intellectual property consulting fees related to certain patent applications on technology and processes that may be patentable . we currently have five issued u.s. patents : four utility patents and one design patent . one additional u.s. patent has been allowed and will issue in april 2015. we have three pending u.s. patent applications and five foreign patent applications . three issued utility patents , us patent nos . 8,556,536 ; 8,562,247 and 8,714,871 were issued on oct. 15 , 2013 , oct. 24 , 2013 , and may 6 , 2014 , respectively and cover certain unique device and method of use aspects of our asphalt repair equipment . our design patent , us patent no . d700,633 , was issued on march 4 , 2014 and covers the ornamental design of our asphalt processor . u.s. patent no . 8,801,325 issued august 12 , 2014 and covers aspects of our computer-controlled asphalt heater . u.s. pat . appl . no . 14/456,285 will issue in april , 2015 and covers complementary features of our computer-controlled asphalt heater . we intend to develop other technologies for which we will seek patent protection . in addition , we have made and expect to continue to make certain international filings to attempt to protect our intellectual property rights in a limited number of countries outside of the united states . however , we do not have any assurance that our current pending patent applications will be granted or that we will be able to develop future patentable technologies . we do not believe our ability to operate our business is dependent on the patentability of our technology . loss on extinguishment of debt during the year ended december 31 , 2014 the company settled notes with a net carrying value of $ 1,684,778 with the issuance of 1,100,876 common shares and granted warrants to purchase 550,438 shares of common stock . the common shares and warrants had a total fair value of $ 2,506,872. the company recognized the difference between the fair value of the common shares and warrants and the net carrying amount of the extinguished debt as a loss of $ 822,205 on the extinguishment of unsecured notes payable during the year ended december 31 , 2014 . 22 impairment of goodwill as of january 1 , 2014 , dr. pave had net liabilities of $ 215,659 assumed by the company ; in addition to the consideration of 58,333 shares of common stock valued at $ 175,000. the total consideration paid in the acquisition of dr. pave resulted in goodwill in the amount of $ 390,659. the company determined that the goodwill was immediately impaired as of the acquisition date based on the lack of service revenue for the prior year . an impairment of goodwill from the acquisition in the amount of $ 390,659 , was recorded as an operating expense in the income statement for the year ended december 31 , 2014 income taxes we have incurred tax losses since we began operations . a tax benefit would have been recorded for losses incurred since march 29 , 2011 ; however , due to the uncertainty of realizing these assets , a valuation allowance was recognized which fully offset the deferred tax assets . liquidity and capital resources story_separator_special_tag flow requirements for the next twelve months . total contractual cash obligations a summary of our total contractual cash obligations as of december 31 , 2014 , is as follows : replace_table_token_1_th ( 1 ) amount relates to our warehouse and office lease agreement through july 2015 . ( 2 ) includes equipment utilized in our demonstration process and service work performed . ( 3 ) represents a revolving line of credit entered into by dr. pave at its inception in july 2013 . ( 4 ) amount represents outstanding unsecured notes payable under the company 's loan agreements . ( 5 ) amount represents outstanding balance on senior secured notes payable that mature on june 30 , 2015. off-balance sheet arrangements we do not engage in off-balance sheet financing activities . critical accounting policies and estimates the preparation of these financial statements in conformity with gaap requires management to make estimates , allocations and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . story_separator_special_tag on an ongoing basis , management evaluates its estimates , including those related to impairment of long-lived assets , accrued liabilities and certain expenses . we base our estimates about the carrying values of assets and liabilities that are not readily apparent from other sources on historical experience and on other assumptions believed to be reasonable under the circumstances . actual results may differ materially from these estimates under different assumptions or conditions . we believe the following critical accounting policies involve significant judgments and estimates used in the preparation of our financial statements . see note 2 of the accompanying notes to the financial statements included in item 8 of this form 10-k for additional information on these policies and estimates , as well as a discussion of additional accounting policies and estimates . 25 revenue recognition equipment sales revenue is recognized when equipment is shipped to our customer and collection is reasonably assured . we sell our equipment ( hwx-30 heater and hwx-ap-40 asphalt processor ) , as well as certain consumables , such as rxehab rejuvenation strips and polymer pellets , to third parties . equipment sales revenue is recognized when all of the following criteria are satisfied : ( a ) persuasive evidence of a sales arrangement exists ; ( b ) price is fixed and determinable ; ( c ) collectability is reasonably assured ; and ( d ) delivery has occurred . persuasive evidence of an arrangement and a fixed or determinable price exist once we receive an order or contract from a customer . we assess collectability at the time of the sale and if collectability is not reasonably assured , the sale is deferred and not recognized until collectability is probable or payment is received . typically , title and risk of ownership transfer when the equipment is shipped . research and development expenses research and development costs are expensed as incurred and consist of direct and overhead-related expenses . expenditures to acquire technologies , including licenses , which are utilized in research and development and that have no alternative future use are expensed when incurred . technology we develop for use in our products is expensed as incurred until technological feasibility has been established after which it is capitalized and depreciated . stock-based compensation we record equity instruments at their fair value on the measurement date by utilizing the black-scholes option-pricing model . stock compensation for all share-based payments , is recognized as an expense over the requisite service period . the significant assumptions utilized in determining the fair value of our stock options included the volatility rate , estimated term of the options , risk-free interest rate and forfeiture rate . in order to estimate the volatility rate at each issuance date , given that we have not established a historical volatility rate as it has minimal trading volume since we began trading in october 2013 , management reviewed volatility rates for a number of companies with similar manufacturing operations to arrive at an estimated volatility rate for each option grant . the term of the options was assumed to be five years , which is the contractual term of the options . the risk-free interest rate was determined utilizing the treasury rate with a maturity equal to the estimated term of the option grant . finally , management assumed a zero forfeiture rate as the options granted were either fully-vested upon the date of grant or had relatively short vesting periods . as such , management does not currently believe that any of the options granted will be forfeited . we will monitor actual forfeiture rates , if any , and make any appropriate adjustments necessary to our forfeiture rate in the future . non-employee share-based compensation charges generally are immediately vested and have no future performance requirements by the non-employee and the total share-based compensation charge is recorded in the period of the measurement date . impairment of long-lived assets we review long-lived assets for impairment on an annual basis , during the fourth quarter or on an interim basis if an event occurs that might reduce the fair value of such assets below their carrying values . an impairment loss would be recognized based on the difference between the carrying value of the asset and its estimated fair value , which would be determined based on either discounted future cash flows or other appropriate fair value methods . 26 recent accounting pronouncements the financial accounting standards board recently issued accounting standards update ( asu ) 2014-15 , presentation of financial statements - going concern ( subtopic 205-40 ) : disclosure of uncertainties about an entity 's ability to continue as a going concern . the amendments require management to assess an entity 's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in u.s. auditing standards . specifically , the amendments ( 1 ) provide a definition of the term substantial doubt , ( 2 ) require an evaluation every reporting period including interim periods , ( 3 ) provide principles for considering the mitigating effect of management 's plans , ( 4 ) require certain disclosures when substantial doubt is alleviated as a result of consideration of management 's plans , ( 5 ) require an express statement and other disclosures when substantial doubt is not alleviated , and ( 6 ) require an assessment for a period of one year after the date that the financial statements are issued ( or available to be issued ) . the amendments in this update are effective for the annual period ending after december 15 , 2016 , and for annual periods and interim periods thereafter . the financial accounting standards board recently issued asu 2014-10 , development stage entities ( topic 915 ) : elimination of certain financial reporting requirements , including an amendment to variable interest entities guidance in topic 810 , consolidation , which eliminates the financial
| during 2014 , the company issued 171,987 units sold at $ 3.00 per unit for gross proceeds of $ 515,963. the company paid share issuance costs in the amount of $ 6,000. each unit in this offering consists of one share of the company 's series d preferred stock and one-half warrant , with each whole warrant exercisable at $ 3.00 per share . the company issued warrants to purchase 85,993 shares of common stock outstanding . the warrants will be exercisable by the holders at any time on or after the issuance date of the warrants through october 1 , 2015 . 23 on january 6 , 2014 , we initiated a debt offering of up to $ 1,000,000 under the terms of a loan agreement . each loan is evidenced by an unsecured promissory note bearing interest at the rate of 12 % per annum and maturing on january 6 , 2016. interest will be paid in equal monthly installments on the first day of each month . as additional consideration for a lender to enter into the loan agreement , we agreed to issue to each lender one common stock purchase warrant for each $ 3.00 loaned to us , exercisable at $ 3.00 per share . the warrants expire three years following the date of issuance and may not be offered for sale , sold , transferred or assigned without our consent . on february 28 , 2014 , we completed our $ 1,000,000 debt financing through the sale of notes and warrants under the loan agreement . the notes were in the aggregate principal amount of $ 850,000 and were issued with an aggregate of 283,329 warrants to the investors . we allocated the fair value of the warrants in the amount of $ 248,129 as a discount on notes payable which will be amortized over the term of the notes to interest expense in the income statement . the company recognized amortization of discount on notes payable in interest expense of $ 100,999 for the year ended december 31 , 2014. on march 1 , 2014 , we commenced a similar non-public
|
although the adoption of sfas 157 has not materially impacted its financial condition , results of operations , or cash flow , the company is now required to provide additional disclosures as part of its financial statements . sfas 157 establishes a three-tier fair value hierarchy , which prioritizes the inputs used in measuring fair value . these tiers include : level 1 , defined as observable inputs such as quoted prices in active markets ; level 2 , defined as inputs other than quoted prices in active markets that are either directly or indirectly observable ; and level 3 , defined as unobservable inputs in which little or no market data exists , therefore requiring an entity to develop its own assumptions . as of december 31 , 2008 , the company held certain items that are required to be measured at fair value on a recurring basis . these included an interest rate cap contract and certain put warrants to purchase 17.5 % of fully diluted equity interest in the company . the fair value of interest rate cap contract is determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets . therefore , the company has categorized the cap contract as level 2. the company determines the value of the put warrants using a discounted cash flow model and weekly asset volatilities of comparable companies over the past three years . therefore , the company has categorized these put warrants as level 2. the fair value of the rate cap and the put warrants at december 31 , 2008 were approximately $ 26,000 and $ 1,537,000 , respectively . 24 revenues and promotional allowances casino revenues are recognized as the net win from gaming activities , which is the difference between gaming wins and losses . all other revenues are recognized as the service is provided . revenues include the retail value of food , beverage , rooms , entertainment , and merchandise provided on a complimentary basis to customers . such complimentary amounts are then deducted from revenues as promotional allowances on our consolidated statements of operations . the estimated departmental costs of providing such promotional allowances are included in casino costs and expenses . hotel and food and beverage revenues hotel revenue recognition criteria are generally met at the time of occupancy . food and beverage revenue recognition criteria are generally met at the time of service . deposits for future hotel occupancy or food and beverage services are recorded as deferred income until revenue recognition criteria are met . cancellation fees for hotel and food and beverage services are recognized upon cancellation by the customer as defined by a written contract entered into with the customer . players ' club program players ' club members earn points based on gaming activity , which can be redeemed for cash . opbiz accrues expense and a liability related to this program as the points are earned based on historical redemption percentages . casino revenues are reduced by points earned through the players ' club loyalty program . allowance for doubtful accounts our receivables balances relate primarily to our hotel and casino operations . we reserve an estimated amount for receivables that may not be collected . we estimate the allowance for doubtful accounts by applying standard reserve percentages to aged account balances under a specific dollar amount and specifically analyzing the collectability of each account with a balance over the specified dollar amount , based on the age of the account , the customers ' financial condition , collection history and any other known information . we maintain strict controls over the issuance of markers and aggressively pursue collection from those customers who fail to pay their markers timely . markers are generally legally enforceable instruments in the united states and at december 31 , 2008 and 2007 , all of our casino receivables were owed by customers in the united states . the following table summarizes our receivable balances ( in thousands ) : replace_table_token_2_th 25 self-insurance accruals we are self-insured , up to certain limits , for costs associated with employee medical coverage . we accrue for the estimated expense of known claims , as well as estimates for claims incurred but not yet reported . income taxes the consolidated financial statements include the operations of bh/re and its majority-owned subsidiaries : equityco , mezzco , opbiz , ph mezz ii , ph mezz i , ph fee owner and tsp owner . bh/re and equityco are limited liability companies and are taxed as partnerships for federal income tax purposes . however , mezzco has elected to be taxed as a corporation for federal income tax purposes . opbiz and ph mezz ii , wholly-owned subsidiaries of mezzco , will be treated as divisions of mezzco for federal income tax purposes , and accordingly , will also be subject to federal income taxes . additionally , ph mezz i , a wholly-owned subsidiary of ph mezz ii , ph fee owner , a wholly owned subsidiary of ph mezz i and tsp owner , a wholly owned subsidiary of ph fee owner will also be subject to federal income taxes . mezzco , opbiz , ph mezz ii , ph mezz i , ph fee owner and tsp owner account for income taxes in accordance with sfas no . 109 , `` accounting for income taxes `` . sfas 109 requires the recognition of deferred income tax assets , net of applicable reserves , related to net operating loss carryforwards and certain temporary differences . the standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not . otherwise , a valuation allowance is applied . membership interests as of december 31 , 2008 , our membership interests had not been unitized and our members do not presently intend to unitize these membership interests . accordingly , we have excluded earnings per membership unit data required pursuant to sfas no . story_separator_special_tag 128 , `` earnings per share , `` because we believe that such disclosures would not be meaningful to the financial statement presentation . the company has entered into various employment agreements , as amended , with several executives . the employment agreements have initial terms of two to five years . the employment agreements provide that the executives will receive a base salary with either mandatory increases or annual adjustments and annual bonus payments . in addition , depending on the terms of the employment agreements , these executives are entitled to options to purchase between 0.2 % and 3 % of the equity of mezzco . the options were granted with an exercise price equal to or greater than the fair value at the date of grant . sheraton hotel management contract opbiz and sheraton have entered into a management contract pursuant to which sheraton provides hotel management services to the hotel , assists opbiz in the management , operation and promotion of the hotel and permits opbiz to use the sheraton brand and trademarks in the promotion of the hotel . opbiz pays sheraton a monthly fee of 4 % of gross hotel revenue and certain food and beverage outlet revenues and 2 % of rental income from third-party leases in the hotel . the management contract has a 20-year term that commenced on the completion of the aladdin acquisition and is subject to certain termination provisions by either opbiz or sheraton . sheraton is a wholly owned subsidiary of starwood , which has an 11.39 % equity interest in equityco and has the right to appoint two members to the equityco board of managers . 26 recently issued accounting standards sfas no . 141 in december 2007 , the fasb issued sfas no . 141 ( revised 2007 ) , `` business combinations . '' sfas no . 141 ( revised ) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired , the liabilities assumed , and noncontrolling interest in the acquiree and the goodwill acquired . the revision is intended to simplify existing guidance and converge rulemaking under u.s. generally accepted accounting principles with international accounting rules . this statement applies prospectively to business combinations where the acquisition date is on or after the beginning of the first annual reporting period beginning on or after december 15 , 2008. the adoption of sfas no . 141 ( revised ) is not expected to have a material impact on the company 's financial position , results of operations or cash flows . sfas no . 160 in december 2007 , the fasb issued sfas no . 160 , `` noncontrolling interest in consolidated financial statements , an amendment of arb no . 51 . '' this statement establishes accounting and reporting standards for ownership interest in subsidiaries held by parties other than the parent and for the deconsolidation of a subsidiary . it also clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements . sfas no . 160 changes the way the consolidated statement of operations is presented by requiring consolidated net income to be reported at amounts that include the amount attributable to both the parent and the noncontrolling interests . the statement also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interest of the parent and those of the noncontrolling owners . this statement is effective for fiscal years beginning on or after december 15 , 2008. the adoption of sfas no . 160 is not expected to have a material impact on the company 's financial position , results of operations or cash flows . sfas no . 161 in march 2008 , the fasb issued sfas no . 161 , `` disclosures about derivative instruments and hedging activities , an amendment of sfas no . 133 . '' sfas no . 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity 's financial position , financial performance , and cash flows . this statement is effective for fiscal years beginning after november 15 , 2008. sfas no . 161 is not expected to have a material impact on the company 's financial position , results of operations or cash flows . sfas no . 162 in may 2008 , fasb issued statement no . 162 , `` the hierarchy of generally accepted accounting principles '' ( `` sfas 162 '' ) . sfas 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with gaap ( the gaap hierarchy ) . sfas 162 is effective 60 days following the sec 's approval of the public company accounting oversight board amendments to au section 411 , the meaning of present fairly in conformity with generally accepted accounting principles . the adoption of sfas 162 is not expected to have a material impact on the company 's financial position , results of operations or cash flows . 27 story_separator_special_tag declines contributing to the revenue increase year over year despite challenging market conditions in the fourth quarter of 2008. hotel expenses decreased 1.9 % to $ 40.7 million for the year ended december 31 , 2008 as compared to $ 41.5 million for the year ended december 31 , 2007. the hotel profit margin increased 2.4 percentage points over the same twelve-month period . the expense savings and profit margin increases were the direct result of savings initiatives put in place in response to the economic downturn and market declines .
| net revenues for the year ended december 31 , 2007 , declined over those of the year ended december 31 , 2006. the decline is mainly the result of declines in hotel revenue related to the renovation and food and beverage revenues which declined with the transition of outlets to third party operators . 28 the following table highlights the various sources of our revenues and expenses as compared to the prior years . replace_table_token_4_th casino casino revenue is derived primarily from patrons wagering on slot machines , table games and other gaming activities . table games generally include blackjack or twenty one , craps , baccarat and roulette . other gaming activities include the race and sports books , poker and keno . casino revenue is defined as the win from gaming activities , computed as the difference between gaming wins and losses . casino revenues vary from time-to-time due to general economic conditions , competition , popularity of entertainment offerings , table game hold , slot machine hold and occupancy percentages in the hotel . casino revenues also vary depending upon the amount of gaming activity , as well as variations in the odds for different games of chance . casino revenue is recognized at the end of each gaming day . 2008 compared with 2007 casino revenues increased 7.0 % to $ 122.2 million for the year ended december 31 , 2008 as compared to $ 114.2 million for the year ended december 31 , 2007. table games revenue for the year ended december 31 , 2008 , decreased approximately $ 0.5 million or 1.1 % as compared to the year ended december 31 , 2007. the decrease in table revenue was the result of a decrease in hold percentage . table drop for the year ended december 31 , 2008 was up 23.5 % when compared to the year ended december 31 , 2007 but overall win percentage for the year ended december 31 , 2008 was 16.6 % compared
|
$ 70.1 million , or 38.0 % , represented projects destined for deepwater locations compared to $ 224.5 million , or 62.6 % , at december 31 , 2013 . $ 5.3 million , or 2.9 % , represented projects destined for foreign locations compared to 28.7 million , or 8.0 % , at december 31 , 2013. projects for our three largest customers consisted of ( i ) jackets , piles , and topside for a deepwater gulf of mexico project for one customer , which commenced in the second and fourth quarters of 2013 , respectively ; ( ii ) five jackets and piles for a shallow water wind turbine project located off the coast of rhode island , that commenced in the fourth quarter of 2014 ; and ( iii ) three tow boats for an inland towing customer that commenced in the third quarter of 2014. the deepwater project is scheduled to be completed during the third quarter of 2015 ; two of the jackets , piles and deck projects are scheduled to be completed during the second quarter of 2015 and the last three jackets , piles and deck projects are scheduled to be completed during the third quarter of 2015 ; the first tow boat is expected to be completed during the third quarter of 2015 , the second tow boat is expected to be completed during the first quarter of 2016 , and the third tow boat is expected to be completed during the third quarter of 2016. depending on the size of the project , the termination , postponement , or reduction in scope of any one project could significantly reduce our backlog , and could have a material adverse effect on revenue , net income and cash flow . for additional information , see note 1 in the notes to consolidated financial statements assets held for sale and item 1a . risk factors our backlog is subject to change as a result of changes to management 's estimates , suspension or termination of projects currently in our backlog or our failure to secure additional projects . our revenue , net income and cash flow could be adversely affected as a result of changes to our backlog. as of december 31 , 2014 , we expected to recognize revenues from our backlog of approximately $ 176.7 million , or 95.7 % , during the calendar year 2015 , and $ 8.0 million , or 4.3 % , during calendar year 2016. the timing of our recognition of the revenue backlog as presented above is based on management estimates of the application of the direct labor hours during the current projected timelines to complete the projects in our backlog . certain factors and circumstances , as mentioned above , could cause changes in the period when the backlog is recognized as revenue . based on the activity of the major oil and gas companies and certain engineering companies , we expect bids for deepwater projects to be available in the second half of 2015 with a higher level of bidding activity in the fourth quarter of 2015. bidding activity for non-traditional gulf of mexico ( gom ) marine related projects , gom shallow water projects , and ancillary work associated with deepwater structures is expected to increase in the second half of 2015 . 26 workforce our workforce varies based on the level of ongoing fabrication activity at any particular time . as of december 31 , 2014 and 2013 , we had approximately 1,700 and 1,900 employees , respectively . additionally , we will use contract labor when required to meet customer demand . the number of contract laborers we used decreased to 247 in 2014 as compared to 467 in 2013. none of our employees are employed pursuant to a collective bargaining agreement , and we believe our relationship with our employees is good . in an effort to maintain our current workforce and attract new employees in period of high activity , we have enhanced several incentive programs and expanded our training facility . for additional information , see item 1a- risk factors we might be unable to employ a sufficient number of skilled workers. man-hours worked were 3.6 million , 4.1 million and 4.8 million for the years ending december 31 , 2014 , 2013 and 2012 respectively . the decrease in man-hours worked in 2014 relative to 2013 was primarily attributable to overall decreased levels of activity as a result of the completion of topsides for two large deepwater customers in 2013 , and a spar hull for a large deepwater customer in the first quarter of 2014. 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 that of our significant accounting policies ( see note 1 in the notes to consolidated financial statements ) , the following involves a higher degree of judgment and complexity : revenue recognition the majority of our revenue is recognized on a percentage-of-completion basis based on the ratio of direct labor hours actually performed to date compared to the total estimated direct labor hours required for completion . accordingly , contract price and cost estimates are reviewed monthly as the work progresses , and adjustments proportionate to the percentage of completion are reflected in revenue for the period when such estimates are revised . if these adjustments were to result in a reduction of previously reported profits , we would have to recognize a charge against current earnings , which may be significant depending on the size of the project or the adjustment . some contracts include a total or partial reimbursement to us of any costs associated with specific capital projects required by the fabrication process . if a particular capital project provides future benefits to us , the cost to build the capital project will be capitalized , and the revenue for the capital project will increase the estimated profit in the contract . story_separator_special_tag contract costs include all direct material , labor and subcontract costs and those indirect costs related to contract performance , such as indirect labor , supplies and tools . also included in contract costs are a portion of those indirect contract costs related to plant capacity , such as depreciation , insurance and repairs and maintenance . these indirect costs are allocated to jobs based on actual direct labor hours worked . profit incentives are included in revenue when their realization is probable . claims for extra work or changes in scope of work are included in revenue when the amount can be reliably estimated and collection is probable . changes in job performance , job conditions , and estimated profitability , including those arising from contract 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 . at december 31 , 2014 , we had no revenue related to unapproved change-orders on projects . at december 31 , 2013 , we recorded revenue totaling $ 0.1 million related to certain change-orders on two projects which were approved as to scope but not price . at december 31 , 2013 , we recorded revenue totaling $ 3.7 million related to re-measure units and quantities on a unit rate contract . at december 31 , 2012 , we recorded 27 revenue totaling $ 5.2 million related to certain change-orders on four projects which were approved as to scope but not price . at december 31 , 2012 , we also recorded revenue totaling $ 7.7 million related to re-measure units and quantities on a unit rate contract . all unapproved items as of december 31 , 2013 and 2012 , respectively , were subsequently approved in the normal course of business . provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined . we recognized contract losses of $ 6.6 million , $ 30.8 million , and $ 12.5 million for the years ended december 31 , 2014 , 2013 , and 2012 , respectively . contract losses for the year ended december 31 , 2014 were primarily related to two tank barge projects for a marine transportation company , platform supply vessels for an offshore marine company and a production platform jacket for a deepwater customer . contract losses in 2013 were primarily due to our inability to recover certain costs and the de-scoping of one of our major deepwater projects , as further discussed in the backlog section above . contract losses in 2012 were primarily related to increased man-hours driven by delays in delivery of specification and design changes by a deepwater customer causing out-of-sequence work schedules . allowance for doubtful accounts we routinely review individual contracts receivable balances and make provisions for probable doubtful accounts as we deem appropriate . among the factors considered during the review are the financial condition of our customers and their access to financing , underlying disputes on the account , age and amount of the account and overall economic conditions . accounts are written off only when all reasonable collection efforts are exhausted . our principal customers include major and large independent oil and gas companies and their contractors and marine vessel operators and their contractors . this concentration of customers may impact our overall exposure to credit risk , either positively or negatively , in that customers may be similarly affected by changes in economic or other conditions . receivables are generally not collateralized ; however , in certain instances we obtain collateral to reduce our credit exposure . in the normal course of business , we extend credit to our customers on a short-term basis . during the fourth quarter of 2014 , the company included an allowance for bad debt in the amount of $ 3.6 million in connection with negotiations of an outstanding contract receivable balance with a deepwater offshore customer related to a deepwater hull project that was completed during the first quarter of 2014. at december 31 , 2013 , the company included an allowance for bad debt in the amount of $ 0.9 million in connection with a vessel upgrade and outfitting project . the company collected $ 0.6 million of this balance in connection with a final settlement during the fourth quarter 2014. assets held for sale assets held for sale consist of a partially constructed topside , related valves , piling and equipment that we acquired from a customer following its default under a contract for a deepwater project in 2012. assets held for sale are required to be measured at the lower of their carrying amount or fair value less cost to sell . management determined fair value of these assets with the assistance of third party valuation specialists , assuming the sale of the underlying assets individually or in the aggregate to a willing market participant , including normal ownership risks assumed by the purchaser , and the sale of certain components at scrap value . we estimated fair value relying primarily on the cost approach and applied the market approach where comparable sales transaction information was readily available . the cost approach is based on current replacement or reproduction costs of the subject assets less depreciation attributable to physical , functional , and economic factors . the market approach involves gathering data on sales and offerings of similar assets in order to value the subject assets . this approach also includes an assumption for the measurement of the loss in value from physical , functional , and economic factors . the fair value of assets held for sale represent level 3 fair value measurements ( as defined by gaap ) , 28 based primarily on the limited availability of market pricing information for either identical or similar items .
| factors contributing to the overall increase in gross profit for the twelve-month period ended december 31 , 2014 compared to the twelve-month period ended december 31 , 2013 include : lower contract losses of $ 6.6 million during the twelve month period ended december 31 , 2014 compared to $ 30.8 million during the twelve-month period ended december 31 , 2013 as further explained in backlog above ; a return to traditional jacket and smaller topside shallow water projects during 2014 as compared to 2013 ; and a higher level of offshore commissioning and hook-up activity performed on a time and material basis . 29 both the offshore connection and hook-up work and execution of the 2014 shallow water projects garnered higher profit margins as compared to our mix of projects performed during 2013 , primarily due to ( i ) certain project improvement initiatives undertaken in 2014 , and ( ii ) the fact that we historically have been able to more effectively control costs associated with these projects as compared to larger , more complex deepwater projects . our general and administrative expenses were $ 20.6 million for the twelve-month period ended december 31 , 2014 compared to $ 11.6 million for the twelve-month period ended december 31 , 2013. factors that contributed to the increase in general and administrative expenses for the twelve months ended december 31 , 2014 include : an impairment charge of $ 3.2 million in 2014 related to assets held for sale ; a net increase of $ 2.7 million in bad debt expense ; increases in expenses related to the relocation of our corporate headquarters to houston , texas and hiring of additional corporate staff members to support operations ; the addition of three consultants to assist with the marketing efforts for assets held for sale and potential flng opportunities ; and increases in expenses associated with an increase in the numbers of directors serving on our board . bad debt expense for 2014 included a $ 3.6 million increase in the fourth quarter related to negotiations of an outstanding contract receivable balance with a customer for a deepwater hull project completed during the first quarter of 2014. at december 31 , 2013 , the
|
gross profit margin was 20.3 percent for 2020 compared to 20.9 percent for 2019. selling , general and administrative expenses selling , general and administrative ( `` sg & a '' ) expenses increased $ 8.6 million to $ 516.0 million for 2020 from $ 507.4 million for 2019. sg & a expenses were 11.4 percent of net sales for 2020 compared with 11.0 percent of net sales for 2019. restructuring charges restructuring charges were $ 38.7 million for 2020 compared with $ 26.1 million for 2019. the increase in restructuring charges was primarily due to increased strategic restructuring efforts within the rigid industrial packaging & services segment . see note 4 of the notes to consolidated financial statements included in item 8 of this form 10-k for additional information . acquisition and integration related costs acquisition and integration related costs were $ 17.0 million for 2020 compared with $ 29.7 million for 2019. the decrease was primarily due to fewer expenses incurred in connection with the caraustar acquisition and related integration activities . impairment charges there were no goodwill impairment charges for 2020 and 2019. non-cash asset impairment charges were $ 18.5 million for 2020 compared with $ 7.8 million for 2019. in 2020 , these charges were primarily related to plant closures . see note 7 of the notes to consolidated financial statements included in item 8 of this form 10-k for additional information . gain on disposal of properties , plants and equipment , net the gain on disposal of properties , plants , and equipment , net was $ 19.2 million and $ 13.9 million for 2020 and 2019 , respectively . loss on disposal of businesses , net the loss on disposal of business , net was $ 38.8 million for 2020 and $ 3.7 million for 2019. the current year disposal of business , net was primarily due to goodwill allocated to the divestiture of the cpg business . see note 2 of the notes to consolidated financial statements included in item 8 of this form 10-k for additional information . financial measures operating profit was $ 304.9 million for 2020 compared with $ 399.1 million for 2019. net income was $ 124.3 million for 2020 compared with $ 194.2 million for 2019. adjusted ebitda was $ 642.6 million for 2020 compared with $ 658.9 million for 2019. the respective reasons for the improvement or decline in adjusted ebitda , as the case may be , for each segment are described below in the `` segment review . '' 28 trends we anticipate demand growth in the industrial manufacturing businesses but continued lingering uncertainty in the global economy to continue in early 2021. raw material prices for old corrugated containers are expected to increase , while prices for steel , resin and recycled coated and uncoated paperboard are expected to remain relatively stable after the first quarter of 2021. additionally , we expect higher transportation and insurance costs due to tighter market conditions and higher incentive accruals to impact costs of goods sold and sg & a . story_separator_special_tag roman ' , sans-serif ; font-size:10pt ; font-weight:400 ; line-height:120 % ; padding-left:14.5pt '' > hbu property , meaning land that in its current state has a higher market value for uses other than growing and selling timber ; development property , meaning hbu land that , with additional investment , may have a significantly higher market value than its hbu market value ; and core timberland , meaning land that is best suited for growing and selling timber . 30 we report the sale of timberland property in `` timberland gains , '' the sale of hbu and surplus property in “ gain on disposal of properties , plants and equipment , net ” and the sale of timber and development property under “ net sales ” and “ cost of products sold '' in our consolidated statements of income . all hbu and development property , together with surplus property , is used to productively grow and sell timber until the property is sold . whether timberland has a higher value for uses other than growing and selling timber is a determination based upon several variables , such as proximity to population centers , anticipated population growth in the area , the topography of the land , aesthetic considerations , including access to lakes or rivers , the condition of the surrounding land , availability of utilities , markets for timber and economic considerations both nationally and locally . given these considerations , the characterization of land is not a static process , but requires an ongoing review and re-characterization as circumstances change . as of october 31 , 2020 , we estimated that there were 18,800 acres in the united states of special use property , which we expect will be available for sale in the next four to six years . net sales decreased to $ 26.3 million for 2020 compared with $ 26.9 million for 2019. operating profit decreased to $ 8.5 million for 2020 from $ 9.9 million for 2019. adjusted ebitda was $ 11.9 million and $ 12.1 million for 2020 and 2019 , respectively . depreciation , depletion and amortization expense was $ 4.5 million and $ 4.3 million for 2020 and 2019 , respectively . 31 u.s. and non-u.s. income before income tax expense see the following tables for details of the u.s. and non-u.s. income before income taxes and u.s. and non-u.s. income before income taxes after eliminating the impact of non-cash asset impairment charges , non-cash pension settlement income , restructuring charges , acquisition and integration related costs , debt extinguishment charges , and losses on sales of businesses ( collectively , `` adjustments '' ) . replace_table_token_7_th * income before income tax expense = i.b.i.t . income tax expense we had operations in over 40 countries during 2020. operations outside the united states are subject to additional risks that may not exist , or be as significant , within the united states . story_separator_special_tag because of our global operations in numerous countries we are required to address different and complex tax systems and issues which are constantly changing . 32 preparation of our financial statements requires the use of estimates and assumptions that affect the reported amounts of our assets and liabilities ; and revenues and expenses as of the balance sheet date . the numerous tax jurisdictions in which we operate , along with the variety and complexity of the various tax laws , creates a level of uncertainty , and requires judgment when addressing the impact of complex tax issues . our effective tax rate and the amount of tax expense are dependent upon various factors , including the following : the tax laws of the jurisdictions in which income is earned ; the ability to realize deferred tax assets ; negotiation and dispute resolution with taxing authorities in the u.s. and international jurisdictions ; and changes in tax laws . the provision for income taxes is computed using the asset and liability method . under this method , deferred tax assets and liabilities are recognized currently based on the anticipated future tax consequences of changes in the temporary differences between the book and tax bases of assets and liabilities . this method includes an estimate of the future realization of tax benefits associated with tax losses . deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those assets are expected to be realized or settled . income tax expense for 2020 was $ 63.3 million on $ 186.1 million of pretax income and for 2019 was $ 70.7 million on $ 262.0 million of pretax income . for 2020 , the mix of income and losses among various jurisdictions resulted in a net tax decrease of $ 17.0 million on $ 75.9 million less of pretax income , which was offset by additional tax expense of $ 7.5 million related to non-deductible goodwill allocated to the cpg divestiture . various other items resulted in a net tax increase of $ 2.1 million . included in the net tax decrease of $ 17.0 million noted in the previous paragraph was a $ 28.4 million net decrease in valuation allowances . this decrease was primarily due to the ability to utilize foreign tax credits for which a valuation allowance had previously been provided . the release of the valuation allowance related to foreign tax credits resulted in the reduction of the valuation allowance and a tax benefit of $ 21.5 million . other decreases in the valuation allowances related to foreign jurisdictions resulted in an additional decrease of $ 6.9 million . the valuation allowance activity resulted in an overall decrease in the valuation allowance account from 2019 to 2020 of $ 34.7 million . offsetting these amounts was tax expense of $ 31.0 million as a result of a one-time elimination related to an intra-company sale . this one-time activity was the primary driver that resulted in an overall net increase in permanent items for 2019 to 2020 of $ 28.3 million we analyze potential income tax liabilities related to uncertain tax positions in the united states and international jurisdictions . the analysis of potential income tax liabilities results in estimates of income tax liabilities recognized for uncertain tax positions following the guidance of asc 740 , “ income taxes. ” the estimation of potential tax liabilities related to uncertain tax positions involves significant judgment in evaluating the impact of uncertainties in the application of asc 740 and complex tax laws . we periodically analyze both potential income tax liabilities and existing liabilities for uncertain tax positions resulting in both new reserves and adjustments to existing reserves in light of changing facts and circumstances . this includes the release of existing liabilities for uncertain tax positions based on the expiration of statutes of limitation . during 2020 , lapses in the statute of limitations , which were partially offset by the recognition of new uncertain tax position liabilities recorded during the current year , resulted in an overall net decrease in our uncertain tax position liability . the ultimate resolution of potential income tax liabilities may result in a payment that is materially different from our current estimates . if our estimates recognized under asc 740 prove to be different than what is ultimately resolved , such resolution could have a material impact on our financial condition and results of operations . while predicting the final outcome or the timing of the resolution of any particular tax matter is subject to various risks and uncertainties , we believe that our tax accounts related to uncertain tax positions are appropriately stated . see note 9 of the notes to consolidated financial statements included in item 8 of this form 10-k for further information . net income attributable to noncontrolling interests net income attributable to noncontrolling interests represents the portion of earnings from the operations of our non-wholly owned , consolidated subsidiaries that belongs to the noncontrolling interests in those subsidiaries . net income attributable to noncontrolling interests was $ 15.5 million and $ 23.2 million for 2020 and 2019 , respectively . the decrease in net income attributable to noncontrolling interests was due primarily to decreased earnings of the joint venture ( `` flexible packaging jv '' ) formed in 2010 , with dabbagh group holdings company limited and one of its subsidiaries , originally national scientific company limited and now gulf refined packaging for industrial packaging company ltd. year 2019 compared to year 2018 results of year 2019 compared to year 2018 are included in our annual report on form 10-k for the year ended october 31 , 2019 , file no . 001-00566 ( see item 7 therein ) . other comprehensive income changes 33 other comprehensive loss , net of tax for 2020 and 2019 was $ 6.7 million and $ 55.9 million , respectively .
| paper packaging & services key factors influencing profitability in the paper packaging & services segment are : selling prices , product mix , customer demand and sales volumes ; raw material costs , primarily old corrugated containers ; energy and transportation costs ; benefits from executing the greif business system ; acquisition of businesses and facilities ; restructuring charges ; and divestiture of businesses and facilities . net sales were $ 1,916.9 million for 2020 compared with $ 1,780.0 million for 2019. the $ 136.9 million increase was primarily due to full year contribution from the acquired caraustar operations , partially offset by lower published containerboard and boxboard prices , decreased volumes , and the impact to net sales resulting from the cpg divestiture . 29 gross profit was $ 382.7 million for 2020 compared with $ 425.4 million for 2019. the decrease in gross profit was primarily due to the same factors that impacted net sales and higher old corrugated container input costs . gross profit margin decreased 20.0 percent in 2020 from 23.9 percent 2019. operating profit was $ 71.0 million for 2020 compared with $ 184.3 million for 2019. the decrease in operating profit was primarily due to the factors discussed above in gross profit , the loss on sale of the cpg divestiture and the segment receiving a greater portion of allocated corporate costs . adjusted ebitda was $ 306.4 million for 2020 compared with $ 348.3 million for 2019. the decrease was due primarily to the same factors that impacted gross profit and the segment receiving a greater portion of allocated corporate costs . depreciation and amortization expense was $ 153.5 million and $ 119.3 million for 2020 and 2019 , respectively . flexible products & services key factors influencing profitability in the flexible products & services segment are : selling prices , product mix , customer demand and sales volumes ; raw material costs , primarily resin ; energy and transportation costs ; benefits from executing the greif business system ; restructuring charges ; divestiture of businesses and facilities ; and impact of foreign currency translation . net sales were $ 272.9 million for 2020 compared
|
summary the emergence of the covid-19 global pandemic dominated the company 's activities and results in 2020. berkshire adjusted its business model to manage pandemic related impacts to its operations , its customers , and its operating profitability . the company 's markets became a national and global disease hotspot early in the pandemic , in the second quarter . government authorities shut down much societal and economic activity in march . conditions improved in the third quarter , but another wave of disease incidence slowed further improvement , and economic conditions remained stressed through year-end . during the year , unprecedented federal fiscal and monetary stimulus was deployed nationally . the federal reserve board of governors lowered short-term interest rates by approximately 1.50 % in the first quarter , and further actions by the federal reserve resulted in rates coming down across all maturities , resulting in a parallel downward rate shock of approximately 1.50 % . following an unprecedented economic contraction in the second quarter , the economy had partially recovered by the end of 2020. the rollout of vaccinations and further federal and monetary support were expected to gradually further normalize conditions in 2021. the bank initially closed its branches except for drive-through tellers , and most back-office staff moved to work from home status . the bank was able to resume most branch activities in the third quarter , while back-office staff continue to telecommute . business activities shifted during this period to provide expedited support for supporting stimulus programs and servicing the needs of customers and communities arising from the emergency conditions . numerous programs were developed to provide support and assistance to the bank 's staff and communities , including granting of loan payment modifications pursuant to government guidelines and the origination of commercial paycheck protection program ( “ ppp ” ) sba guaranteed loans to support employment during the shutdown . branch access restrictions were reintroduced in the fourth quarter and some government restrictions were resumed due to worsening public health . 48 changes in the company 's financial condition and results were primarily due to the pandemic and the related changes in financial market conditions and economic expectations . due to these downturns , the company recorded large non-cash charges for goodwill impairment and the current expected credit loss provision during the year . these charges resulted in losses for the first and second quarters , but did not materially affect most regulatory capital measures , cash flows , or liquidity . among the most significant financial impacts from the pandemic were the following : goodwill impairment : in the second quarter , the company recorded a $ 554 million noncash expense representing the full impairment and write-off of the carrying value of goodwill due to the impact of the covid-19 disease on economic and financial market conditions resulting in a lower fair value of the company 's equity . credit loss provision : a $ 65 million noncash credit loss provision expense was recorded in the first half of 2020 primarily representing projected pandemic related current expected credit losses in future periods under the new current expected credit losses ( “ cecl ” ) accounting standard . the full year provision was $ 76 million . reduced revenue : net revenue from continuing operations decreased year-over-year by 15 % due primarily to compression of the net interest margin resulting from the near zero interest rate policy implemented by the federal reserve board of governors , and reflecting the company 's asset sensitive interest rate risk profile . the margin change also reflected a change in asset mix from loans and into lower yielding short-term investments and investment securities . loan modifications : short-term loan payment deferrals were granted in accordance with terms established by bank regulators to lessen borrower hardship . initial payment deferrals totaled $ 1.6 billion . the balance of active and in-process deferrals declined to $ 350 million at year-end . balance sheet changes : a pandemic related deposit surge was primarily invested in short-term investment reserves held at the federal reserve bank of boston . the company originated $ 708 million in ppp loans to support employment , and these loans partially offset reductions in other loan categories due to reduced economic activity , liquidity from government stimulus , and accelerated prepayments . demand deposits increased as borrowers stored liquidity resulting from government stimulus and reduced economic activity . t otal equity decreased but most regulatory capital ratios improved , and measures of liquidity improved due to reduced usage of wholesale funding and due to higher short-term investment balances . reflecting the above activity , the company recorded a loss of $ 569 million , or $ 11.33 per share for the first six months of 2020. this loss was a result of noncash charges for goodwill impairment and the provision for current expected credit losses on loans . results returned to profitability in the second half of the year , with second half earnings totaling $ 36 million , or $ 0.73 per share . full year results were a loss of $ 533 million , or $ 10.60 per share . in conformance with the industry guidelines issued by the federal reserve at the outset of the pandemic , the company ceased repurchases of common stock in the first quarter , and let its outstanding repurchase authorization expire at the end of the first quarter . also , the company reduced its shareholder dividend by 50 % in the third quarter of 2020. this reduction was made to better align the dividend payout and dividend yield with the reduced level of operating earnings in the current environment . in october 2020 , the company announced the launch of best-in-class digital account opening technology . this platform provides benefits to the customer experience , to revenue generation , and to the company 's operating efficiency . the company also enhanced its customer experience by upgrading its call center and rolling out its e-signature platform . story_separator_special_tag these enhanced capabilities are significantly more valuable in today 's environment as a result of the customer needs and accelerated digital transformation resulting from the pandemic . 49 also in october 2020 , the company announced a strategic goal to pursue expense management initiatives , due in part to the long-term revenue impacts of the near zero interest rate environment . expense management also recognizes long-term changes in customer behaviors and the bank 's operating model based on the accelerated transition to the digital economy resulting from the pandemic . in december 2020 , as part of these initiatives , the company announced a branch optimization plan . the company announced that it had entered into an agreement for the sale of its 8 mid-atlantic branches , including the transfer of more than $ 600 million in deposits and $ 300 million in loans . additionally , the company announced a plan to consolidate 16 branches in its new england/new york footprint . both of these initiatives are targeted for completion in the first half of 2021. the company expects to recognize a net gain on the sale of the mid-atlantic branches , as well as charges in conjunction with the branch consolidations . in addition to reshaping the branch office network , the company is pursuing possibilities for identifying and releasing surplus corporate real estate , and making other operational adjustments to its business model . the company also plans to formalize cost save opportunities arising from work from home as well as changes in procurement processes in the current environment . the company 's goal is to streamline its business model in its core markets and leverage organic growth around that foundation . two critical enablers are the technology that the company has invested in and its personalized banking services program , mybanker . berkshire has been successfully deploying these mobile personal bankers for a number of years to bring service to customers where and when they need it and they remain integral to the distinctive customer experience that the bank is developing as a 21st century community bank . on august 10 , 2020 , the company announced that , pursuant to a separation agreement , richard m. marotta had stepped down from his position as president and chief executive officer of the company and ceo of the bank , as well as from his role as a director to pursue new opportunities . working within its leadership succession planning process , the board appointed sean a. gray , to serve as acting president and ceo for the company . the board initiated a ceo search process to consider a national search for candidates inside and outside of berkshire . the board established a working committee to oversee the search process and retained the firm of spencer stuart as its executive search consulting firm . on january 25 , 2021 the board announced the appointment of nitin j. mhatre as president and chief executive officer of the company and the bank effective january 29 , 2021. with the appointment of mr. mhatre , mr. gray resumed his ongoing duties as president and chief operating officer of berkshire bank and senior executive vice president of berkshire hills bancorp , inc. mr. mhatre is a senior banking executive with 25 years of community and global banking experience . most recently , as executive vice president , community banking at webster bank , mr. mhatre was a member of webster bank 's executive team and led its consumer and business banking businesses . in this role , he was responsible for profitable growth of the community banking segment at the $ 31 billion bank and led a diverse team of more than 1,500 employees . previously , he spent more than 13 years at citi group in various leadership roles across consumer-related businesses globally . mr. mhatre served on the board of the consumer bankers association headquartered in washington d.c. since 2014 and was chairman of the board from 2019 to 2020. he also serves on the board of junior achievement of southwest new england headquartered in hartford , ct. the board and management team are fully aligned on the company 's long-term strategic direction . that strategy focuses on improving core operating performance with a relationship banking model that serves berkshire 's communities and clients in its footprint . berkshire 's brand name and franchise in its markets , its differentiated customer service and culture , and its purpose-based values are all targeted to support meaningful improvement in shareholder returns . the company has five current key initiatives : optimizing berkshire 's branch footprint through the announced branch sales and consolidations rationalizing the balance sheet to maintain strong liquidity and capital metrics and support improved profitability and shareholder return further implementing digitization and automation to improve customer engagement and operational efficiencies focusing on core products and services to enhance customer relationships and the customer experience while exiting non-strategic products & business lines continuing proactive management of asset quality through the pandemic cycle 50 berkshire continues to pursue its ongoing transformation into an innovative 21 st century community bank , which has gained heightened relevance to stakeholders and the company 's long-term opportunity as a result of this year 's events . guided by its be first principles , the company continues to foster a more inclusive , innovative and supportive culture , which is positioning berkshire to deliver a differentiated and compelling community banking experience to everyone in its communities , including those who have been traditionally underbanked . following its principles , the company 's covid-19 response included : 51 comparison of financial condition at december 31 , 2020 and december 31 , 2019 summary : the major balance sheet changes were the result of the covid-19 pandemic and its impacts on the economy and federal fiscal and monetary policy . total loans decreased and demand deposits increased due to the slowdown in economic activity , resulting in less credit demand and the accumulation of customer liquidity – both of which benefited from federal stimulus .
| net interest income : net interest income from continuing operations increased by $ 9 million , or 3 % , in 2019 compared to 2018. this growth was due to a 9 % increase in average earning assets , which was partially offset by a decrease in the net interest margin . the increase in average earning assets included the impact of approximately $ 1.48 billion in earning assets acquired from si financial on may 17. this was offset by a net decline in other average earning assets due to the company 's strategic initiative to reduce less strategically important loans and investments in order to decrease expensive wholesale funding sources and related leverage . the net interest margin decreased year-over-year to 3.17 % from 3.40 % , and the contribution from purchase accounting accretion decreased to 0.12 % from 0.22 % . the margin decreased further to 3.11 % in the final quarter of the year , including a 0.17 % contribution from purchase accounting accretion . the benefit of purchase accounting accretion decreased primarily due to the seasoning of purchased credit impaired loans from prior bank acquisitions . purchase accounting accretion also benefited from accretion related to acquired si financial time deposits , which are contributing approximately 7 basis points per quarter accretion benefit which matured in the second quarter of 2020. non-interest income : non-interest income from continuing operations increased by $ 10 million , or 13 % , in 2019 compared to 2018 due primarily to an $ 8 million swing in unrealized securities gains/losses which the company views as non-operating in nature . fee income increased by $ 3 million , or 4 % , including the benefit of acquired operations . provision for loan losses . the provision increased year-over-year by $ 10 million , or 39 % , including the impact of one fraud related commercial loan loss in the third quarter . non-interest expense : non-interest expense from continuing operations increased year-over-year by $ 23 million , or 9 % , including acquired operations . merger related expense included the completion
|
for the years ended december 31 , 2020 and 2019 , we incurred expenses of $ 3.2 million and $ 5.2 million , respectively , related to our property management agreement with cbre , for property management fees , typically calculated as a percentage of the properties ' revenues , and salary and benefits reimbursements for property personnel , such as property managers , engineers and maintenance staff . as of december 31 , 2020 and 2019 , we had amounts payable pursuant to these services of $ 0.3 million and $ 0.6 million , respectively . in connection with repositioning our portfolio , we may sell additional properties , depending on market conditions . with the progress we have made executing dispositions , and the strength and liquidity of our balance sheet , we have shifted our primary focus to capital allocation . we may use our capital for acquisitions and or investments in new properties or businesses , repurchase shares or make distributions that further our long-term strategic goals . with respect to acquisitions and or investments , we are evaluating opportunities to invest capital in high-quality assets or businesses in favorable markets that offer a compelling risk-reward profile . the set of opportunities that we pursue may include acquisitions and or investments in a range of property types . we may be unable to identify suitable investment opportunities . if we do not redeploy capital , we will strive to achieve a sale , liquidation or otherwise exit our business in one or more transactions in a manner that optimizes shareholder value . we are unable to predict if or when we will make a determination to sell , liquidate or otherwise exit our business . 22 our business may be impacted by the evolving covid-19 outbreak . since first surfacing , the outbreak has spread throughout the world and has significantly impacted the united states . the pandemic has led to severe business disruptions , including a dramatic decline in economic activity generally . the duration of the business disruption is unknown at this time . the vast majority of our employees and our tenants ' employees are currently working at least in part remotely and may be subject to government-imposed restrictions . due to the uncertainty created by the pandemic , the company has experienced a significant reduction in leasing interest and activity when compared to pre-pandemic levels . for the three months ended december 31 , 2020 , in our comparable property portfolio , we collected 97 % of contractual rents , including 1 % from the application of security deposits and letters of credit . for january , to date , we have collected 96 % of contractual rents . we currently are not able to estimate the full impact of the covid-19 outbreak on our business . property operations leased occupancy data for 2020 and 2019 is as follows ( square feet in thousands ) : replace_table_token_3_th ( 1 ) based on properties owned continuously from january 1 , 2019 through december 31 , 2020 , and excludes properties sold . ( 2 ) percent leased is the percent of space subject to signed leases . percent leased is disclosed to quantify the ratio of leased square feet to rentable square feet and we believe provides useful information as to the proportion of rentable square feet subject to a lease . the weighted average lease term based on square feet for leases entered into during the year ended december 31 , 2020 was 7.3 years . commitments made for leasing expenditures and concessions , such as tenant improvements and leasing commissions , for leases entered into during the year ended december 31 , 2020 , excluding leasing activity for assets during the quarter in which the asset was sold or classified as held for sale , totaled $ 9.8 million , or $ 68.83 per square foot on average ( approximately $ 9.37 per square foot per year of the lease term ) . 23 as of december 31 , 2020 , approximately 8.4 % of our leased square feet and 7.4 % of our annualized rental revenue , determined as set forth below , are included in leases scheduled to expire through december 31 , 2021. renewal and new leases and rental rates at which available space may be relet in the future will depend on prevailing market conditions at the times these leases are negotiated . we believe that the in-place cash rents for leases expiring in 2021 , that have not been backfilled , are below market . lease expirations by year , as of december 31 , 2020 , are as follows ( square feet and dollars in thousands ) : replace_table_token_4_th ( 1 ) tenants with leases expiring in multiple years are counted in each year they expire . ( 2 ) leased square feet as of december 31 , 2020 includes space subject to leases that have commenced for revenue recognition purposes in accordance with gaap , space being fitted out for occupancy pursuant to existing leases , and space which is leased but is not occupied or is being offered for sublease by tenants . the leased square feet expiring corresponds to the latest-expiring signed lease for a given suite . thus , backfilled suites expire in the year stipulated by the new lease . ( 3 ) annualized rental revenue is annualized contractual rents from our tenants pursuant to leases which have commenced as of december 31 , 2020 , plus estimated recurring expense reimbursements ; excludes lease value amortization , straight-line rent adjustments , abated ( free ) rent periods and parking revenue . we calculate annualized rental revenue by aggregating the recurring billings outlined above for the most recent month during the quarter reported , adding abated rent , and multiplying the sum by 12 to provide an estimation of near-term potentially-recurring revenues . annualized rental revenue is a forward-looking non-gaap measure . story_separator_special_tag annualized rental revenue can not be reconciled to a comparable gaap measure without unreasonable efforts , primarily due to the fact that it is calculated from the billings of tenants in the most recent month at the most recent rental rates during the quarter reported , whereas historical gaap measures include billings from a potentially different group of tenants over multiple months at potentially different rental rates . 24 the principal source of funds for our operations is rents from tenants at our properties . rents are generally received from our tenants monthly in advance . as of december 31 , 2020 , tenants representing 2.5 % or more of our total annualized rental revenue were as follows ( square feet in thousands ) : replace_table_token_5_th ( 1 ) total leased square feet as of december 31 , 2020 includes space subject to leases that have commenced , space being fitted out for occupancy pursuant to existing leases , and space which is leased but is not occupied or is being offered for sublease by tenants . ( 2 ) annualized rental revenue is annualized contractual rents from our tenants pursuant to leases which have commenced as of december 31 , 2020 , plus estimated recurring expense reimbursements ; excludes lease value amortization , straight-line rent adjustments , abated ( free ) rent periods and parking revenue . we calculate annualized rental revenue by aggregating the recurring billings outlined above for the most recent month during the quarter reported , adding abated rent , and multiplying the sum by 12 to provide an estimation of near-term potentially-recurring revenues . annualized rental revenue is a forward-looking non-gaap measure . annualized rental revenue can not be reconciled to a comparable gaap measure without unreasonable efforts , primarily due to the fact that it is calculated from the billings of tenants in the most recent month at the most recent rental rates during the quarter reported , whereas historical gaap measures include billings from a potentially different group of tenants over multiple months at potentially different rental rates . ( 3 ) our lease with salesforce.com , inc. has partially commenced . approximately 44,000 square feet commenced as of december 31 , 2020 , and the remaining 21,000 square feet are expected to commence in the second half of 2021 . ( 4 ) approximately 10,000 square feet of international dairy foods association 's space expire in 2034. the remaining 13,000 square feet expire ( including the expiration dates for backfilling tenants ) in the following years : 5,900 square feet in 2021 , 3,100 square feet in 2022 , and 4,100 square feet in 2027. financing activities as of july 5 , 2020 , we repaid at par $ 25.1 million of mortgage debt at 206 east 9th street and recognized a gain on early extinguishment of debt of $ 0.1 million for the year ended december 31 , 2020 from the write off of an unamortized premium , net of prepayment fees and the write off of unamortized deferred financing fees . for more information regarding our financing sources and activities , please see the section captioned “ liquidity and capital resources—our investment and financing liquidity and resources ” below . 25 story_separator_special_tag notes due 2020. gain on sale of properties , net . gain on sale of properties , net increased $ 24.6 million , or 5.8 % , in the 2020 period , compared to the 2019 period . gain on sale of properties , net in the 2020 period primarily related to the following ( dollars in thousands ) : replace_table_token_7_th ( 1 ) there was consideration of $ 2.0 million being held in escrow related to the sale of this property in 2019. in june 2020 , these proceeds were released to the company , and we recorded an additional $ 2.0 million gain on the sale for year ended december 31 , 2020. gain on sale of properties , net in the 2019 period primarily related to the following ( dollars in thousands ) : asset gain on sale 1735 market street $ 192,985 600 108th avenue ne 149,009 research park 78,158 $ 420,152 income tax expense . income tax expense decreased $ 1.0 million , or 80.7 % , in the 2020 period , compared to the 2019 period , primarily due to a decrease in state and local taxes as a result of the sale of properties . net income attributable to noncontrolling interest . from 2017 through 2020 , we granted ltip units to certain of our trustees and employees . as these ltip units vest , they automatically convert to operating partnership units , or op units . the net income attributable to noncontrolling interest increased $ 0.6 million , or 329.6 % in the 2020 period , compared to the 2019 period , primarily due to the measurement of ltip units in the 2020 period . 27 liquidity and capital resources our operating liquidity and resources as of december 31 , 2020 , we had $ 3.0 billion of cash and cash equivalents . we expect to use our cash balances , cash flow from our operations and proceeds of any future property sales to fund our operations , make distributions , repurchase our common shares , make acquisitions and or investments in properties or businesses , fund tenant improvements and leasing costs and for other general business purposes . we believe our cash balances and the cash flow from our operations will be sufficient to fund our ordinary course activities . our future cash flows from operating activities will depend on our ability to collect rent from our current tenants under their leases . our ability to collect rent and generate parking revenue in the near term may continue to be adversely impacted by the market disruption caused by the covid-19 outbreak . we can not predict the ultimate impact of the pandemic on our results of operations .
| million in the 2020 period and $ 2.2 million in the 2019 period . other revenue . other revenue , which primarily includes parking revenue , decreased $ 6.8 million , or 62.3 % in the 2020 period , compared to the 2019 period , primarily due to the properties sold in 2020 and 2019. other revenue decreased $ 2.2 million , or 36.6 % , at the comparable properties in the 2020 period , compared to the 2019 period primarily due to decreased parking revenue during the 2020 period as a result of the covid-19 outbreak . operating expenses . operating expenses decreased $ 17.6 million , or 37.8 % , in the 2020 period , compared to the 2019 period , primarily due to the properties sold in 2020 and 2019. operating expenses at our comparable properties increased $ 0.5 million , or 1.9 % , primarily due to a $ 0.5 million increase in real estate tax expense , a $ 0.2 million increase in maintenance and repairs 26 expense , a $ 0.2 million increase in salaries and benefits expense and a $ 0.1 million increase in hvac expense , partially offset by a $ 0.5 million decrease in utilities expense and a $ 0.2 million decrease in parking expense . depreciation and amortization . depreciation and amortization decreased $ 8.8 million , or 31.3 % , in the 2020 period , compared to the 2019 period , primarily due to the properties sold in 2020 and 2019. general and administrative . general and administrative expenses decreased $ 5.2 million , or 13.6 % in the 2020 period , compared to the 2019 period , primarily due to a $ 3.2 million decrease in compensation expenses related to severance , a $ 1.6 million decrease in bonus expense , a $ 0.7 million decrease in payroll expenses as a result of a staffing reduction , a $ 0.4 million decrease in share-based compensation expense and a $ 0.3 million decrease in travel , meals and entertainment expense as
|
we continue to consider our 57 specialty products segment our core business over the long term , and we plan to seek appropriate ways to further invest in our specialty products segment . accordingly , we continue to evaluate opportunities to divest non-core businesses and assets in line with our strategy of preserving liquidity and streamlining our business to better focus on the advancement of our core business . in addition , we may also consider the disposition of certain core assets or businesses , to the extent such a transaction would improve our capital structure or otherwise be accretive to the company . there can be no assurance as to the timing or success of any such potential transaction , or any other transaction , or that we will be able to sell these assets or businesses on satisfactory terms , if at all . in addition , our acquisition program targets assets that management believes will be financially accretive , and we intend to focus on targeted strategic acquisitions of specialty products assets that leverage an existing core competency and that have an identifiable competitive advantage we can exploit as the new owner . key matters , claims and legal proceedings on october 31 , 2018 , the company received an indemnity claim notice ( the “ claim notice ” ) from husky superior refining holding corp. ( “ husky ” ) under the membership interest purchase agreement , dated august 11 , 2017 ( “ mipa ” ) , which was entered into in connection with the superior transaction . the claim notice relates to alleged losses husky incurred in connection with a fire at the husky superior refinery on april 26 , 2018 , over five months after calumet sold husky 100 % of the membership interests in the entity that owns the husky superior refinery . based on public reports , calumet understands the fire occurred during a turnaround of the husky superior refinery at a time when husky owned , operated , and supervised the refinery . calumet was not involved with the turnaround . the u.s. chemical safety and hazard investigation board ( “ csb ” ) is currently investigating the fire , but has not contacted calumet in connection with that investigation or suggested that calumet is responsible for the fire . husky 's claim notice alleges that husky “ has become aware of facts which may give rise to losses ” for which it reserved the right to seek indemnification at a later date . the claim notice further alleges breaches of certain representations , warranties , and covenants contained in the mipa . the information currently available about the fire and the csb investigation does not support husky 's threatened claims , and husky has not filed a lawsuit against calumet . if husky were to assert such claims , they would be subject to certain limits on indemnification liability under the mipa that may reduce or eliminate any potential indemnification liability . on may 4 , 2018 , the sec requested that the company and certain of its executives voluntarily produce certain communications and documents prepared or maintained from january 2017 to may 2018 and generally related to the company 's finance and accounting staff , financial reporting , public disclosures , accounting policies , disclosure controls and procedures and internal controls . beginning on july 11 , 2018 , the sec issued several subpoenas formally requesting the same documents previously subject to the voluntary production requests by the sec as well as additional , related documents and information . the sec has also interviewed and taken testimony from current and former company employees and may do so in the future with regard to other individuals . the company has , from the outset , cooperated with the sec 's requests and intends to continue to do so . currently , the company can not estimate the timing , or ultimate outcome , including financial impact , if any , resulting from the sec 's investigation . story_separator_special_tag membership interest purchase agreement ) receivable in other accounts receivable in the consolidated balance sheets for post-closing working capital adjustments . in 2018 , we received proceeds totaling $ 44.8 million from husky for the post-closing working capital adjustments related to this sale . 59 in november 2017 , we completed the sale to a subsidiary of q'max solutions inc. ( “ q'max ” ) of all of the issued and outstanding membership interests in anchor drilling fluids usa , llc ( “ anchor ” ) , for total consideration of approximately $ 89.6 million ( subject to further post-closing adjustments ) including a base price of $ 50.0 million , $ 14.2 million to be paid out at various times over the next year for net working capital and other items , and 10 % equity ownership in fluid holding corp. , the parent company of q'max ( the “ anchor transaction ” ) . effective in fourth quarter of 2017 , we classified its results of operations for all periods presented to reflect anchor as a discontinued operation and classified the assets and liabilities of anchor as discontinued operations . following the application of certain post-closing adjustments , the adjusted total consideration we received for the anchor transaction was $ 85.5 million as of december 31 , 2018 . we recognized a net loss on sale of $ 4.1 million and $ 62.6 million in net loss from discontinued operations in the consolidated financial statements of operations for the years ended december 31 , 2018 and 2017 , respectively . prior to being reported as discontinued operations , anchor was included as its own reportable segment as oilfield services . liquidity update as of december 31 , 2018 , we had total liquidity of $ 451.4 million comprised of $ 155.7 million of cash and availability under our revolving credit facility of $ 295.7 million . story_separator_special_tag as of december 31 , 2018 , we had a $ 330.8 million borrowing base , $ 35.1 million in outstanding standby letters of credit and no outstanding borrowings . we believe we will continue to have sufficient liquidity from cash on hand , cash flow from operations , borrowing capacity and other means by which to meet our financial commitments , debt service obligations , contingencies and anticipated capital expenditures . on a continuous basis , we will focus on various initiatives , including working capital initiatives , to further enhance our liquidity over time , given current market conditions . in march 2018 , we formed biosyn holdings , llc ( “ biosyn ” ) with the heritage group , a related party , for the purpose of investing in biosynthetic technologies , llc , a startup company which developed an intellectual property portfolio for the manufacture of renewable-based and biodegradable esters . we incurred approximately $ 4.0 million in related expenditures . in april 2018 , we redeemed all of the $ 400.0 million in aggregate principal amount of the 11.50 % senior secured notes due january 15 , 2021 ( “ 2021 secured notes ” ) . the holders received a redemption price of 100.0 % of the principal amount of the 2021 secured notes , plus accrued and unpaid interest thereon up to , but not including , april 9 , 2018 ( the “ redemption date ” ) , plus a make whole premium ( as defined in the indenture , dated april 20 , 2016 , governing the 2021 secured notes ) . in conjunction with the redemption , we incurred debt extinguishment costs of $ 58.2 million , including $ 11.6 million of non-cash charges . in may 2018 , pacific new investment limited ( “ pacnil ” ) ( an entity formed by us and the heritage group , a related party ) sold its investment in shandong hi-speed hainan development co. , ltd. ( “ hi-speed ” ) to the other owners . we received proceeds of $ 9.9 million for the sale . during 2018 , we received $ 44.8 million in proceeds related to the sale of the superior refinery , $ 41.0 million of which was recorded as a receivable as of december 31 , 2017. we also received $ 6.8 million in proceeds related to the sale of anchor during 2018. renewable fuel standard update we , along with the broader refining industry , remain subject to compliance costs under the rfs . under the regulation of the environmental protection agency ( “ epa ” ) , the rfs provides annual requirements for the total volume of renewable transportation fuels which are mandated to be blended into finished petroleum fuels . if a refiner does not meet its required annual renewable volume obligation ( “ rvo ” ) , the refiner can purchase blending credits in the open market , referred to as rins . for the year ended december 31 , 2018 , our rins gain was $ 31.4 million , as compared to a rins gain for the year ended december 31 , 2017 of approximately $ 41.2 million . our gross rins obligation , which includes rins that are required to be secured through either blending or through the purchase of rins in the open market , was approximately 79 million rins in 2018 . for the full-year 2019 , we anticipate our gross rins obligation will be approximately 85 million rins . during 2017 and 2018 , the epa granted our fuel product refineries a “ small refinery exemption ” under the rfs for the full-year 2016 and the full-year 2017 , respectively , as provided for under the federal clean air act , as amended ( “ caa ” ) . in granting those exemptions , the epa determined that for the full-year 2016 and full-year 2017 , compliance with the rfs would represent a “ disproportionate economic hardship ” for these refineries . we continue to anticipate that expenses related to rfs compliance have the potential to remain a significant expense for our fuel products segment , assuming current market prices for rins . estimated rins obligations remain subject to fluctuations in fuels production volumes during the full-year 2019 . key performance measures our sales and net income are principally affected by the price of crude oil , demand for specialty products and fuel products , prevailing crack spreads for fuel products , the price of natural gas used as fuel in our operations and our results from derivative instrument activities . 60 our primary raw materials are crude oil and other specialty feedstocks , and our primary outputs are specialty petroleum products and fuel products . the prices of crude oil , specialty products and fuel products are subject to fluctuations in response to changes in supply , demand , market uncertainties and a variety of additional factors beyond our control . we monitor these risks and enter into derivative instruments designed to help mitigate the impact of commodity price fluctuations on our business . the primary purpose of our commodity risk management activities is to economically hedge our cash flow exposure to commodity price risk so that we can meet our debt service and capital expenditure requirements despite fluctuations in crude oil and fuel products prices . we enter into derivative contracts for future periods in quantities that do not exceed our projected purchases of crude oil and natural gas and sales of fuel products . please read part ii , item 7a “ quantitative and qualitative disclosures about market risk — commodity price risk ” and note 11 — “ derivatives ” under part ii , item 8 “ financial statements and supplementary data — notes to consolidated financial statements. ” our management uses several financial and operational measurements to analyze our performance . these measurements include the following : sales volumes ; production yields ; segment gross profit ; segment adjusted ebitda ; and selling , general and administrative expenses . sales volumes .
| in the full-year 2018 , we processed 24,700 bpd of heavy canadian crude oil , versus 36,500 bpd in the full-year 2017 . the decline from 2017 to 2018 was primarily attributed to the sale of the superior refinery in november of 2017. in addition , we processed approximately 19,100 bpd of cost-advantaged wti midland crude oil in 2018 . 58 gross profit per barrel for our specialty products segment was $ 33.30 in 2018 , versus $ 33.93 in the prior year . specialty products segment adjusted ebitda was $ 160.2 million in 2018 compared to $ 186.5 million in the prior year . specialty products segment adjusted ebitda margin was 11.6 % in 2018 , compared to 14.3 % in 2017 . specialty products segment results for fiscal year 2018 were impacted by rising feedstock costs , decreased production and sales volume as a result of maintenance activities at our shreveport and princeton refineries , larger light louisiana sweet ( “ lls ” ) /wti crude price differentials and pricing weakness across the paraffinic base oil market , partially offset by strong performance of our solvents products . results were also impacted by a $ 3.4 million unfavorable lcm inventory adjustment in 2018 compared to a $ 10.9 million favorable lcm inventory adjustment in 2017 and a $ 2.7 million loss related to the liquidation of lifo inventory layers in 2018 compared to a $ 3.0 million loss in 2017 . specialty products represented approximately 26.3 % of total production in 2018 , compared to 21.0 % in 2017 . gross profit per barrel for our fuel products segment was $ 5.45 per barrel in 2018 , versus $ 4.61 per barrel in the prior year . fuel products segment adjusted ebitda was $ 103.7 million in 2018 compared to $ 127.8 million in 2017 . fuel products segment adjusted ebitda margin was 4.9 % in 2018 compared to 5.2 %
|
we expect cash provided by operations will approximate net income for fiscal 2014 and anticipate that share repurchase activity will be similar to 2013. the forward-looking statements in this current trends and outlook section are subject to significant risks and uncertainties , including changes in the economy and the housing market , the sensitivity of our business to weather conditions , our ability to maintain favorable relationships with suppliers and manufacturers , competition from other leisure product alternatives and mass merchants , and other risks detailed in item 1a of this form 10-k. 19 critical accounting estimates we prepare our consolidated financial statements in accordance with u.s. generally accepted accounting principles ( gaap ) , which requires management to make estimates and assumptions that affect reported amounts and related disclosures . management identifies critical accounting estimates as : those that require the use of assumptions about matters that are inherently and highly uncertain at the time the estimates are made ; and those for which changes in the estimate or assumptions , or the use of different estimates and assumptions , could have a material impact on our consolidated results of operations or financial condition . management has discussed the development , selection and disclosure of our critical accounting estimates with the audit committee of our board . we believe the following critical accounting estimates require us to make the most difficult , subjective or complex judgments . allowance for doubtful accounts we maintain an allowance for doubtful accounts based on an estimate of the losses we will incur if our customers do not make required payments . we perform periodic credit evaluations of our customers and typically do not require collateral . consistent with industry practices , we generally require payment from our north american customers within 30 days , except for sales under early buy programs for which we provide extended payment terms to qualified customers . the extended terms usually require payments in equal installments in april , may and june or may and june , depending on geographic location . credit losses have generally been within or better than our expectations . as our business is seasonal , our customers ' businesses are also seasonal . sales are lowest in the winter months and our past due accounts receivable balance as a percentage of total receivables generally increases during this time . we provide reserves for uncollectible accounts based on our accounts receivable aging . these reserves range from 0.1 % for amounts currently due up to 100 % for specific accounts more than 60 days past due . at the end of each quarter , we perform a reserve analysis of all accounts with balances greater than $ 20,000 and more than 60 days past due . additionally , we perform a separate reserve analysis on the balance of our accounts receivables with emphasis on past due accounts . as we review these past due accounts , we evaluate collectibility based on a combination of factors including : aging statistics and trends ; customer payment history ; independent credit reports ; and discussions with customers . during the year , we write off account balances when we have exhausted reasonable collection efforts and determined that the likelihood of collection is remote . these write-offs are charged against our allowance for doubtful accounts . in the past five years , write-offs have averaged approximately 0.2 % of net sales annually . write-offs as a percentage of net sales were 0.1 % in 2013 , 0.1 % in 2012 and 0.2 % in 2011 . the recent improvement in net write-offs reflects gradually improving external market trends and heightened collection efforts and creditworthiness evaluations . we expect that write-offs will be approximately 0.1 % of net sales in 2014 . at the end of each fiscal year , we prepare a hindsight analysis by comparing the prior year-end allowance for doubtful accounts balance to ( i ) current year write-offs and ( ii ) any significantly aged outstanding receivable balances . based on our hindsight analysis , we concluded that the prior year allowance was within a range of acceptable estimates and that our reserve methodology is appropriate . if the balance of the accounts receivable reserve increased or decreased by 20 % at december 31 , 2013 , pretax income would change by approximately $ 0.9 million and earnings per share would change by approximately $ 0.01 per diluted share ( based on the number of weighted average diluted shares outstanding for the year ended december 31 , 2013 ) . inventory obsolescence product inventories represent the largest asset on our balance sheet . our goal is to manage our inventory such that we minimize stock-outs to provide the highest level of service to our customers . to do this , we maintain at each sales center an adequate inventory of stock keeping units ( skus ) with the highest sales volumes . at the same time , we continuously strive to better manage our slower moving classes of inventory , which are not as critical to our customers and thus , inherently have lower velocity . sales centers classify products into 13 classes based on sales at that location over the past 12 months ( or 36 months for tile products ) . 20 all inventory is included in these classes , except for non-stock special order items and products with less than 12 months of usage . story_separator_special_tag the table below presents a description of these inventory classes : class 0 new products with less than 12 months usage ( or 36 months for tile products ) classes 1-4 highest sales value items , which represent approximately 80 % of net sales at the sales center classes 5-12 lower sales value items , which we keep in stock to provide a high level of customer service class 13 products with no sales for the past 12 months at the local sales center level , excluding special order products not yet delivered to the customer null class non-stock special order items there is little risk of obsolescence for products in classes 1-4 because products in these classes generally turn quickly . we establish our reserve for inventory obsolescence based on inventory classes 5-13 , which we believe represent some exposure to inventory obsolescence , with particular emphasis on skus with the least sales over the previous 12 months . the reserve is intended to reflect the value of inventory that we may not be able to sell at a profit . we provide a reserve of 5 % for inventory in classes 5-13 and non-stock inventory as determined at the sales center level . we also provide an additional 5 % reserve for excess inventory in classes 5-12 and an additional 45 % reserve for excess inventory in class 13. we determine excess inventory , which is defined as the amount of inventory on hand in excess of the previous 12 months ' usage , on a company-wide basis . we also evaluate whether the calculated reserve provides sufficient coverage of the total class 13 inventory . in evaluating the adequacy of our reserve for inventory obsolescence , we consider a combination of factors including : the level of inventory in relationship to historical sales by product , including inventory usage by class based on product sales at both the sales center and company levels ; changes in customer preferences or regulatory requirements ; seasonal fluctuations in inventory levels ; geographic location ; and new product offerings . we periodically adjust our reserve for inventory obsolescence as changes occur in the above-identified factors . at the end of each fiscal year , we prepare a hindsight analysis by comparing the prior year-end obsolescence reserve balance to ( i ) current year inventory write-offs and ( ii ) the value of products with no sales for the past 12 months that remain in inventory . based on our hindsight analysis , we concluded that our prior year reserve was within a range of acceptable estimates and that our reserve methodology is appropriate . if the balance of our inventory reserve increased or decreased by 20 % at december 31 , 2013 , pretax income would change by approximately $ 1.4 million and earnings per share would change by approximately $ 0.02 per diluted share ( based on the number of weighted average diluted shares outstanding for the year ended december 31 , 2013 ) . vendor incentives many of our vendor arrangements provide for us to receive incentives of specified amounts of consideration when we achieve any of a number of measures . these measures are generally related to the volume level of purchases from our vendors and may include negotiated pricing arrangements . we account for vendor incentives as a reduction of the prices of the vendor 's products and therefore a reduction of inventory until we sell the product , at which time such incentives are recognized as a reduction of cost of sales in our income statement . throughout the year , we estimate the amount of the incentive earned based on our estimate of total purchases for the fiscal year relative to the purchase levels that mark our progress toward earning the incentives . we accrue vendor incentives on a monthly basis using these estimates provided that we determine they are probable and reasonably estimable . our estimates for annual purchases , future inventory levels and sales of qualifying products are driven by our sales projections , which can be significantly impacted by a number of external factors including weather and changes in economic conditions . changes in our purchasing mix also impact our incentive estimates , as incentive rates can vary depending on our volume of purchases from specific vendors . 21 we continually revise these estimates throughout the year to reflect actual purchase levels and identifiable trends . as a result , our estimated quarterly vendor incentive accruals may include cumulative catch-up adjustments to reflect any changes in our estimates between reporting periods . these adjustments tend to have a greater impact on gross margin in the fourth quarter since it is our seasonally slowest quarter and because the majority of our vendor incentive arrangements are based on calendar year periods . our estimates for these arrangements are updated at year end to reflect actual annual purchase levels . in the first quarter of the subsequent year , we prepare a hindsight analysis by comparing actual vendor incentives received to the prior year vendor incentive balances . based on our hindsight analysis , we concluded that our vendor incentive estimates were within a range of acceptable estimates and that our estimation methodology is appropriate . if market conditions were to change , vendors may change the terms of some or all of these programs . although such changes would not affect the amounts we have recorded related to products already purchased , they may lower or raise our gross margins for products purchased and sold in future periods . income taxes we record deferred tax assets or liabilities based on differences between the financial reporting and tax basis of assets and liabilities using currently enacted rates and laws that will be in effect when we expect the differences to reverse . due to changing tax laws and state income tax rates , significant judgment is required to estimate the effective tax rate expected to apply to tax differences that are expected to reverse in the future .
| additionally , due to the later start to the 2013 season , we experienced higher sales growth rates in our lower margin , year-round markets than in our higher margin , seasonal markets , which negatively impacted gross margins . selling and administrative expenses ( operating expenses ) for 2013 in creased 2 % from 2012 . base business operating expenses increased 2 % year over year , as salary and other variable expense increases were partially offset by decreases in performance‑based compensation . in the third quarter of 2012 , we performed an interim goodwill impairment analysis for our united kingdom reporting unit and recorded a non-cash goodwill impairment charge equal to the total goodwill carrying amount of $ 6.9 million , which had a $ 0.14 negative impact on diluted eps for the year ended december 31 , 2012. operating income for the year improved 14 % over 2012 and increased 9 % compared to adjusted operating income for 2012 . operating income as a percentage of net sales ( operating margin ) increased to 8.0 % in 2013 compared to 7.4 % in 2012 . adjusted operating margin was 7.8 % in 2012 . net income increased 19 % compared to 2012 , while eps was up 20 % to a record $ 2.05 per diluted share . compared to adjusted net income for 2012 , net income increased 9 % , while diluted eps increased 11 % from adjusted diluted eps for 2012 . financial position and liquidity cash provided by operations of $ 105.1 million in 2013 was $ 7.8 million more than net income and , combined with $ 15.5 million in net proceeds from our revolving line of credit and receivables securitization facility and $ 21.4 million in proceeds from stock issued under share-based compensation plans , helped fund the following : quarterly cash dividend payments to shareholders , which totaled $ 33.8 million for the year ; share repurchases in the open market of $ 94.3 million ; net capital expenditures of $ 18.7 million ;
|
( in thousands ) replace_table_token_8_th net sales the following table represents net sales by segment for the years ended december 31 , 2009 and 2010 : ( in thousands ) replace_table_token_9_th in 2010 , net sales increased 5.5 % to $ 555.5 million as compared to net sales of $ 526.5 million in 2009. sales in the north american segment increased 4.0 % from $ 427.4 million in 2009 to $ 444.6 million in 2010 , which was 59.4 % of the total company 's overall increase . the north american segment accounted for 80.0 % of the company 's total sales in 2010 , a slight decrease from 81.2 % in 2009. the increase in net sales in north america resulted from an increase in sales volume as average prices were flat . in 2010 , sales increased throughout most of north america . the growth in the united states was strongest in the midwestern and northeastern regions , while sales in california and the western region declined slightly as compared to 2009. sales in canada increased significantly . sales to dealer distributors and lumber dealers increased , while sales to contractor distributors and home centers decreased over the same period . sales in the european segment increased 8.2 % from $ 93.6 million in 2009 to $ 101.3 million in 2010 , which was 26.6 % of the company 's overall increase . the european segment accounted for 18.2 % of the company 's total sales in 2010 , a slight increase from 17.8 % in 2009. the increase in net sales in europe resulted from an increase in sales volume as average prices were flat . sales in asia and australia , although relatively small , have increased as the company has recently expanded its presence in the region . sales increased across most of the company 's major product lines . 30 gross profit the following table represents gross profit by segment for the years ended december 31 , 2009 and 2010 : ( in thousands ) replace_table_token_10_th gross profit increased 32.0 % to $ 244.1 million in 2010 from $ 184.9 million in 2009. as a percentage of net sales , gross profit increased from 35.1 % in 2009 to 44.0 % in 2010. the increase in gross margins was primarily due to lower manufacturing costs , including lower costs of material , labor and overhead , and increased absorption of fixed overhead , as a result of higher production volumes . steel prices increased from their levels in mid-2010 , as steel mills raised prices as demand returned to steel markets . as a percentage of net sales , gross profit in the north american segment increased from 38.5 % in 2009 to 46.2 % in 2010 , in the european segment increased from 22.3 % in 2009 to 35.0 % in 2010 , and in the asia/pacific segment increased from a loss of 22.6 % in 2009 to a profit of 28.3 % in 2010. all segments benefited from the increased absorption of fixed overhead , as a result of higher production volumes and lower manufacturing costs , including lower costs of material , labor and overhead . research and development and other engineering expense research and development and engineering expense increased 12.6 % from $ 18.8 million in 2009 to $ 21.1 million in 2010 , primarily due to increases in personnel costs of $ 1.6 million and cash profit sharing of $ 1.5 million . these changes were mostly attributable to the north american segment . selling expense selling expense increased 7.7 % from $ 58.8 million in 2009 to $ 63.3 million in 2010 , primarily due to increases in cash profit sharing and commissions of $ 3.3 million , professional services of $ 1.0 million and personnel costs of $ 0.4 million . these changes were mostly attributable to the north american segment . general and administrative expense general and administrative expense increased 6.3 % from $ 75.1 million in 2009 to $ 79.8 million in 2010. the increase was due primarily to increases in cash profit sharing of $ 5.5 million resulting from higher operating profits , information technology expenses of $ 2.4 million , professional fees of $ 1.8 million and stock option expense of $ 1.6 million , partly offset by decreases in personnel costs , excluding stock option expense , of $ 2.0 million , bad debt expense of $ 1.4 million , intangible asset amortization expense of $ 1.1 million , depreciation expense of $ 0.9 million and various other items . these changes were mostly attributable to the north american segment . impairment of goodwill the impairment charge taken in 2010 , which resulted from the company 's annual impairment test in the fourth quarter , was associated with assets that were acquired in germany and ireland in 2008 and was allocated to the european anchor products reporting unit . the reporting unit 's carrying value exceeded the fair value , primarily due to reduced future expected net cash flows . the method to determine the fair value of the european anchor products reporting unit was a discounted cash flow model . this reporting unit was associated with the european segment . see critical accounting policies and estimates goodwill impairment testing . gain on sale of assets in 2010 , the company 's north american segment recorded gains on sale of assets of $ 4.8 million , primarily due to the sale of its real estate in brea , california . 31 provision for income taxes the effective tax rate was 42.6 % in 2010 , as compared to 55.1 % in 2009. this decrease was primarily due to improved operations in countries where valuation allowances were recorded against tax losses , partly offset by a goodwill impairment charge for which a tax benefit was not recognized . the change in the provision for income taxes was mostly attributable to the north american segment . story_separator_special_tag discontinued operations the company recorded a loss from discontinued operations , net of tax , of $ 16.2 million for 2010 , primarily as a result of a pre-tax impairment charge of $ 21.4 million recorded as a result of entering into an agreement to sell substantially all of the assets of simpson dura-vent . critical accounting policies and estimates the critical policies described below affect the company 's more significant judgments and estimates used in the preparation of the consolidated financial statements . if the company 's business conditions change or if it uses different assumptions or estimates in the application of these and other accounting policies , the company 's future results of operations could be adversely affected . inventory valuation inventories are stated at the lower of cost or net realizable value ( market ) . cost includes all costs incurred in bringing each product to its present location and condition , as follows : · raw materials and purchased finished goods principally valued at cost determined on a weighted average basis . · in-process products and finished goods cost of direct materials and labor plus attributable overhead based on a normal level of activity . the company writes the gross value of the inventory down to its net realizable value . the company estimates net realizable value based on estimated selling price less further costs to completion and disposal . the company impairs slow-moving products by comparing inventories on hand to projected demand . if on-hand supply of a product exceeds projected demand or if the company believes the product is no longer marketable , the product is considered obsolete inventory . the company revalues obsolete inventory to its net realizable value . the company has consistently applied this methodology . the company believes that this approach is prudent and makes suitable provisions for slow-moving and obsolete inventory . when provisions are established , a new cost basis of the inventory is created . unexpected change in market demand , building codes or buyer preferences could reduce the rate of inventory turnover and require the company to recognize more obsolete inventory . revenue recognition the company recognizes revenue when the earnings process is complete , net of applicable provision for discounts , returns and incentives , whether actual or estimated , based on the company 's experience . this generally occurs when products are shipped to the customer in accordance with the sales agreement or purchase order , ownership and risk of loss pass to the customer , collectability is reasonably assured and pricing is fixed or determinable . the company 's general shipping terms are f.o.b . shipping point , where title is transferred and revenue is recognized when the products are shipped to customers . when the company sells f.o.b . destination point , title is transferred and the company recognizes revenue on delivery or customer acceptance , depending on terms of the sales agreement . service sales , representing after-market repair and maintenance , engineering activities , software license sales and service and lease income , though significantly less than 1 % of net sales and not material to the consolidated financial statements , are recognized as the services are completed or the software products and services are delivered . if actual costs of sales returns , incentives and discounts were to significantly exceed the recorded estimated allowance , the company 's sales would be adversely affected . business combinations the company recognizes separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values . goodwill as of the acquisition date is measured as the excess of consideration transferred and the 32 net of the acquisition date fair values of the assets acquired and the liabilities assumed . while the company uses its best estimates and assumptions as a part of the purchase price allocation process to value assets acquired and liabilities assumed at the acquisition date , the company 's estimates are inherently uncertain and subject to refinement . as a result , during the measurement period , which may be up to one year from the acquisition date , the company records adjustments to the assets acquired and liabilities assumed , with the corresponding offset to goodwill . on the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed , whichever comes first , the company records any subsequent adjustments to its consolidated statements of operations . accounting for business combinations requires the company 's management to make significant estimates and assumptions , especially at the acquisition date with respect to intangible assets . although the company believes that the assumptions and estimates it has made in the past have been reasonable and appropriate , they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain . examples of critical estimates in valuing certain of the intangible assets that the company has acquired include : · future expected cash flows from customer relationships and acquired unpatented technologies and patents ; · the acquired company 's brand and competitive position and assumptions about the period of time the acquired brand will continue to be used in the combined company 's product portfolio ; and · discount rates . unanticipated events and circumstances may affect the accuracy or validity of such assumptions , estimates or actual results . for a given acquisition , the company may identify pre-acquisition contingencies as of the acquisition date and may extend its review and evaluation of these pre-acquisition contingencies throughout the measurement period ( up to one year from the acquisition date ) to obtain sufficient information to assess whether the company includes these contingencies as a part of the purchase price allocation and , if so , to determine their estimated amounts .
| sales in asia and australia , although relatively small , have increased as the company has recently expanded its presence in the region . the increase in admin and all other is due a full year of lease revenues on the building in vacaville , california . sales increased across most of the company 's major product lines . gross profit the following table represents gross profit by segment for the years ended december 31 , 2010 and 2011 : ( in thousands ) replace_table_token_7_th gross profit increased 10.9 % to $ 270.8 million in 2011 from $ 244.1 million in 2010. as a percentage of net sales , gross profit increased from 44.0 % in 2010 to 44.9 % in 2011. the increase in gross margins was primarily due to increased absorption of fixed overhead , as a result of higher production volumes . the company continues to face uncertainty in the cost and availability of steel . several factors are contributing to this uncertainty . steel prices increased from their levels in mid-2011 , as better then expected demand for steel has led to price increases . the company expects steel prices to increase in the first half of 2012. the steel market continues to be dynamic , however , with a high degree of uncertainty about future pricing trends . if steel prices increase and the company is not able to maintain its prices or increase them sufficiently , the company 's margins could deteriorate . as a percentage of net sales , gross profit in the north american segment increased from 46.2 % in 2010 to 48.8 % in 2011 , in the european segment decreased from 35.0 % in 2010 to 32.6 % in 2011 , and in the asia/pacific segment decreased from 28.3 % in 2010 to 7.0 % in 2011. all segments benefited from the increased absorption of fixed overhead , as a result of higher production volumes . research and development and other engineering expense research and development and other engineering expense increased 22.6 % from $ 21.1 million in 2010 to $ 25.9 million in 2011 , primarily due to increases
|
a & l has a network of manufacturing facilities across the eastern seaboard of australia , which we expect will deliver synergies through operational savings from the implementation of jem and by leveraging the benefits of our combined supply chain . a & l is part of our australasia segment . in february 2018 , we acquired domoferm , headquartered in gänserndorf , austria . domoferm is a leading european provider of steel doors , steel door frames , and fire doors for commercial and residential markets with four manufacturing sites in austria , germany , and the czech republic . domoferm is part of our europe segment . in august 2017 , we acquired the kolder group , headquartered in smithfield , australia . kolder is a leading australian provider of shower enclosures , closet systems , and related building products , with leading positions in both the commercial and residential markets . kolder is part of our australasia segment . the acquisition significantly enhances our existing australian capabilities in glass shower enclosures and built-in closet systems and supports our strategy to build leadership positions in attractive markets . in august 2017 , we acquired mmi door , headquartered in sterling heights , michigan . mmi door is a leading provider of doors and related value-added services in the midwest region of the u.s. and is part of our north america segment . the acquisition complements our north america door business and allows us to improve service offerings and lead times to our channel partners . in june 2017 , we acquired mattiovi , headquartered in finland . mattiovi is a leading manufacturer of interior doors and door frames in finland and is part of our europe segment . the acquisition enhances our market position in the nordic region , increases our product offering , and also provides us with additional door frame capacity to support growth in the region . 44 back to top we paid an aggregate of approximately $ 356.8 million in cash ( net of cash acquired ) for the 2017 , 2018 , and 2019 acquisitions . in addition , we assumed debt of approximately $ 70.6 million associated with our 2018 acquired companies . we assumed no debt in our 2017 or 2019 acquisitions . for additional information on our acquisition activity , see note 2 - acquisitions to our consolidated financial statements . factors and trends affecting our business components of net revenues the key components of our net revenues include core net revenues ( which we define to include the impact of pricing and volume/mix , as discussed further under the heading , “ product pricing and volume/mix ” below ) , contribution from acquisitions made within the prior twelve months , and the impact of foreign exchange . core net revenues reported in our financial statements are impacted by the fluctuating currency values in the geographies in which we operate , which we refer to as the impact of foreign exchange . throughout this “ management 's discussion and analysis of financial condition and results of operations ” , percentage changes in pricing are based on management schedules and are not derived directly from our accounting records . product demand general business , financial market , and economic conditions globally and in the regions where we operate influence overall demand in our end markets and for our products . in particular , the following factors may have a direct impact on demand for our products in the countries and regions where our products are marketed and sold : the strength of the economy ; employment rates and consumer confidence and spending rates ; the availability and cost of credit ; the amount and type of residential and non-residential construction ; housing sales and home values ; the age of existing home stock , home vacancy rates , and foreclosures ; interest rate fluctuations for our customers and consumers ; increases in the cost of raw materials or any shortage in supplies or labor ; the effects of governmental regulation and initiatives to manage economic conditions ; geographical shifts in population and other changes in demographics ; and changes in weather patterns . in addition , we seek to drive demand for our products through the implementation of various strategies and initiatives . we believe we can enhance demand for our new and existing products by : innovating and developing new products and technologies ; investing in branding and marketing strategies , including marketing campaigns in both print and social media , as well as our investments in new training centers and mobile training facilities ; and implementing channel initiatives to enhance our relationships with key channel partners and customers , including the true blu dealer management program in north america . product pricing and volume/mix the price and mix of products that we sell are important drivers of our net revenues and net income . under the heading “ results of operations , ” references to ( i ) “ pricing ” refer to the impact of price increases or decreases , as applicable , for particular products between periods and ( ii ) “ volume/mix ” refer to the combined impact of both the number of products we sell in a particular period and the types of products sold , in each case , on net revenues . while we operate in competitive markets , pricing discipline is an important element of our strategy to achieve profitable growth through improved margins . our strategies also include incentivizing our channel partners to sell our higher margin products , and we believe a renewed focus on innovation and the development of new technologies will increase our sales volumes and the overall profitability of our product mix . 45 back to top cost reduction initiatives prior to the ongoing operational transformation being executed by our senior executive team , our operations were managed in a decentralized manner with varying degrees of emphasis on cost efficiency and limited focus on continuous improvement or strategic sourcing . story_separator_special_tag our senior management team has a proven track record of implementing operational excellence programs at some of the world 's leading industrial manufacturing businesses , and we believe the same successes can be realized at jeld-wen . key areas of focus of our operational excellence and footprint rationalization programs include : reducing labor , overtime , and waste costs by reducing facility count while optimizing manufacturing capacity and improving planning and manufacturing processes ; reducing or minimizing increases in material costs through strategic global sourcing and value-added re-engineering of components , in part by leveraging our significant spend and the global nature of our purchases ; reducing warranty costs by improving quality ; and a jem-enabled facility rationalization and modernization initiative that will reduce overhead costs and complexity , while increasing our overall capacity and improving our service levels . we continue to implement our strategic initiatives under jem to develop the culture and processes of operational excellence and continuous improvement . these cost reduction initiatives , which include plant closures and consolidations , headcount reductions , and various initiatives aimed at lowering production and overhead costs , may not produce the intended results within the intended timeframe . raw material costs commodities such as vinyl extrusions , glass , aluminum , wood , steel , plastics , fiberglass , and other composites are major components in the production of our products . changes in the underlying prices of these commodities have a direct impact on the cost of products sold . while we attempt to pass on a substantial portion of such cost increases to our customers , we may not be successful in doing so . in addition , our results of operations for individual quarters may be negatively impacted by a delay between the time of raw material cost increases and a corresponding price increase . conversely , our results of operations for individual quarters may be positively impacted by a delay between the time of a raw material price decrease and a corresponding competitive pricing decrease . freight costs we incur substantial freight costs to third party logistics providers to transport raw materials and work-in-process inventory to our manufacturing facilities and to deliver finished goods to our customers . changes in freight rates and the availability of freight services can have a significant impact on our cost of goods sold . freight costs have risen significantly due to a number of factors that have affected the supply and demand of trucking services including increased regulation , such as data logging of miles , increases in general economic activity , and an aging workforce . we attempt to mitigate some of these cost increases through various internal initiatives and to pass a substantial portion of these increases to our customers ; however , we may not realize the intended results within the intended timeframe . working capital and seasonality working capital , which is defined as accounts receivable plus inventory less accounts payable , fluctuates throughout the year and is affected by seasonality of sales of our products and of customer payment patterns . the peak season for home construction and remodeling in our north america and europe segments , which represent the substantial majority of our revenues , generally corresponds with the second and third calendar quarters , and therefore our sales volume is usually higher during those quarters . typically , working capital increases at the end of the first quarter and beginning of the second quarter in conjunction with , and in preparation for , our peak season , and working capital decreases starting in the third quarter as inventory levels and accounts receivable decline . inventories fluctuate for some raw materials with long delivery lead times , such as steel , as we work through prior shipments and take delivery of new orders . foreign currency exchange rates we report our consolidated financial results in u.s. dollars . due to our international operations , the weakening or strengthening of foreign currencies against the u.s. dollar can affect our reported operating results and our cash flows as we translate our foreign subsidiaries ' financial statements from their reporting currencies into u.s. dollars . in the year ended december 31 , 2019 compared to the year ended december 31 , 2018 , the depreciation or appreciation of the u.s. dollar relative to the reporting currencies of our foreign subsidiaries resulted in higher or lower reported results in such foreign reporting entities . in particular , the exchange rates used to translate our foreign subsidiaries ' financial results for the year ended december 31 , 2019 compared to the year ended december 31 , 2018 reflected , on average , the u.s. dollar strengthened against the euro , australian dollar , and canadian dollar by 6 % , 8 % , and 3 % , respectively . see item 1a- risk factors - risks relating to our business and industry , item 1a- risk factors - exchange 46 back to top rate fluctuations may impact our business , financial condition , and results of operations , and item 7a- quantitative and qualitative disclosures about market risk- exchange rate risk . public company costs as a public company , we incur additional legal , accounting , board compensation , and other expenses that we did not previously incur , including costs associated with sec reporting and corporate governance requirements , and other requirements associated with operating as a public company . these requirements include compliance with the sarbanes-oxley act as well as other rules implemented by the sec and the national securities exchanges . our financial statements following our ipo reflect the impact of these expenses .
| excluding the impact of the litigation contingency accrual and sga associated with our acquisitions , sg & a would have been $ 589.7 million or 15.3 % of net revenues on a comparative basis to 2017. impairment and restructuring charges —impairment and restructuring charges increased $ 4.3 million , or 32.7 % , to $ 17.3 million in the year ended december 31 , 2018 from $ 13.1 million in the year ended december 31 , 2017 . the 2018 charges consisted primarily of personnel restructuring costs in our north america , europe and australasia segments as well as plant consolidations in our north america and australasia segments . the 2017 charges consisted primarily of a reduction in workforce in our north american segment as well as ongoing restructuring costs in our europe segment . 51 back to top interest expense , net —interest expense , net decreased $ 8.2 million , or 10.4 % , to an expense of $ 70.8 million in the year ended december 31 , 2018 from an expense of $ 79.0 million in the year ended december 31 , 2017 . the decrease was primarily due to additional interest expense incurred in 2017 resulting from the write-offs of a portion of the unamortized debt issuance costs and original issue discount totaling approximately $ 6.1 million in connection with the repayment of $ 375.0 million of outstanding term loans with proceeds from our ipo and higher pre-ipo debt levels . other ( income ) expense – other ( income ) expense increased $ 75.0 million , to income of $ 34.9 million in the year ended december 31 , 2018 from expense of $ 40.1 million in the year ended december 31 , 2017 . the other income in the year ended december 31 , 2018 was primarily due to a fair value adjustment of $ 20.8 million associated with our acquisition of the remaining shares outstanding of an equity investment , foreign currency gains of $ 11.3 million , and legal settlement income of $
|
we believe our investment in professional services , as well as partners building consulting practices around workday , will drive additional customer subscriptions and continued growth in revenues . due to our ability to leverage the expanding partner ecosystem , we expect that the rate of professional services revenue growth will decline over time and continue to be lower than subscription revenue growth . 29 components of results of operations revenues we primarily derive our revenues from subscription services and professional services . subscription services revenues primarily consist of fees that give our customers access to our cloud applications , which include related customer support . professional services fees include deployment services , optimization services , and training . subscription services revenues accounted for 85 % of our total revenues during fiscal 2019 and represented 96 % of our total unearned revenue as of january 31 , 2019 . subscription services revenues are driven primarily by the number of customers , the number of workers at each customer , the specific applications subscribed to by each customer , and the price of our applications . the mix of the applications to which a customer subscribes can affect our financial performance due to price differentials in our applications . pricing for our applications varies based on many factors , including the complexity and maturity of the application and its acceptance in the marketplace . new products or services offerings by competitors in the future could also impact the mix and pricing of our offerings . subscription services revenues are recognized over time as they are delivered and consumed concurrently over the contractual term , beginning on the date our service is made available to the customer . our subscription contracts typically have a term of three years or longer and are generally non-cancelable . we generally invoice our customers annually in advance . amounts that have been invoiced are initially recorded as unearned revenue . the majority of our consulting engagements are billed on a time and materials basis , and revenues are typically recognized over time as the services are performed . in some cases , we supplement our consulting teams by subcontracting resources from our service partners and deploying them on customer engagements . as our professional services organization and the workday-related consulting practices of our partner firms continue to develop , we expect the partners to increasingly contract directly with our subscription customers . as a result of this trend , and the increase of our subscription services revenues , we expect professional services revenues as a percentage of total revenues to decline over time . costs and expenses costs of subscription services revenues . costs of subscription services revenues consist primarily of employee-related expenses related to hosting our applications and providing customer support , the costs of data center capacity , and depreciation of computer equipment and software . costs of professional services revenues . costs of professional services revenues consist primarily of employee-related expenses associated with these services , the cost of subcontractors , and travel . product development . product development expenses consist primarily of employee-related costs . we continue to focus our product development efforts on adding new features and applications , increasing the functionality , and enhancing the ease of use of our cloud applications . sales and marketing . sales and marketing expenses consist primarily of employee-related costs , sales commissions , marketing programs , and travel . marketing programs consist of advertising , events , corporate communications , brand building , and product marketing activities . sales commissions are considered incremental costs of obtaining a contract with a customer and are deferred and amortized . sales commissions for initial contracts are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be five years . sales commissions for renewal contracts are deferred and then amortized on a straight-line basis over the related contractual renewal period . general and administrative . general and administrative expenses consist of employee-related costs for finance and accounting , legal , human resources , information systems personnel , professional fees , and other corporate expenses . 30 story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > 2018 , and 2017 , respectively . the increase in share-based compensation expenses was primarily due to assumed adaptive insights awards and grants of rsus to existing and new employees . ( 2 ) other operating expenses include employer payroll tax-related items on employee stock transactions of $ 32 million , $ 21 million , and $ 14 million for fiscal 2019 , 2018 , and 2017 , respectively . in addition , other operating expenses include amortization of acquisition-related intangible assets of $ 49 million , $ 19 million , and $ 13 million for fiscal 2019 , 2018 , and 2017 , respectively . ( 3 ) see “ non-gaap financial measures ” below for further information . * see note 1 of the notes to consolidated financial statements for further information . costs of subscription services gaap operating expenses in costs of subscription services were $ 380 million for fiscal 2019 , compared to $ 273 million for fiscal 2018 , an increase of $ 107 million , or 39 % . the increase was primarily due to increases of $ 33 million in employee-related costs driven by higher headcount , $ 24 million in amortization expense for our acquisition-related intangible assets , $ 22 million in third-party costs for hardware maintenance and data center capacity , and $ 19 million in depreciation expense related to our data centers . 32 gaap operating expenses in costs of subscription services were $ 273 million for fiscal 2018 , compared to $ 213 million for fiscal 2017 , an increase of $ 60 million , or 28 % . story_separator_special_tag the increase was primarily due to increases of $ 23 million in depreciation expense related to our data centers , $ 22 million in employee-related costs driven by higher headcount , and $ 10 million in facility and it-related expenses . non-gaap operating expenses in costs of subscription services were $ 312 million for fiscal 2019 , compared to $ 240 million for fiscal 2018 , an increase of $ 72 million , or 30 % . the increase was primarily due to increases of $ 22 million in employee-related costs driven by higher headcount , $ 22 million in third-party costs for hardware maintenance and data center capacity , and $ 19 million in depreciation expense related to our data centers . non-gaap operating expenses in costs of subscription services were $ 240 million for fiscal 2018 , compared to $ 192 million for fiscal 2017 , an increase of $ 48 million , or 25 % . the increase was primarily due to increases of $ 17 million in depreciation expense related to our data centers , $ 16 million in employee-related costs driven by higher headcount , and $ 10 million in facility and it-related expenses . we expect that gaap and non-gaap operating expenses in costs of subscription services will continue to increase in absolute dollars as we improve and expand our data center capacity and operations . costs of professional services gaap operating expenses in costs of professional services were $ 455 million for fiscal 2019 , compared to $ 356 million for fiscal 2018 , an increase of $ 99 million , or 28 % . the increase was primarily due to increases of $ 86 million to staff our deployment and integration engagements . gaap operating expenses in costs of professional services were $ 356 million for fiscal 2018 , compared to $ 270 million for fiscal 2017 , an increase of $ 86 million , or 32 % . the increase was primarily due to increases of $ 70 million to staff our deployment and integration engagements . non-gaap operating expenses in costs of professional services were $ 396 million for fiscal 2019 , compared to $ 316 million for fiscal 2018 , an increase of $ 80 million , or 25 % . the increase was primarily due to increases of $ 66 million to staff our deployment and integration engagements . non-gaap operating expenses in costs of professional services were $ 316 million for fiscal 2018 , compared to $ 242 million for fiscal 2017 , an increase of $ 74 million , or 31 % . the increase was primarily due to increases of $ 59 million to staff our deployment and integration engagements . going forward , we expect gaap and non-gaap costs of professional services as a percentage of total revenues to continue to decline as we continue to rely on our service partners to deploy our applications and as the number of our customers continues to grow . for fiscal 2020 , we anticipate gaap and non-gaap professional services margins to be lower than fiscal 2019 as we invest in programs to ensure ongoing customer success . product development gaap operating expenses in product development were $ 1.2 billion for fiscal 2019 , compared to $ 911 million for fiscal 2018 , an increase of $ 301 million , or 33 % . the increase was primarily due to increases of $ 267 million in employee-related costs due to higher headcount and $ 26 million in facility and it-related expenses . gaap operating expenses in product development were $ 911 million for fiscal 2018 , compared to $ 681 million for fiscal 2017 , an increase of $ 230 million , or 34 % . the increase was primarily due to increases of $ 180 million in employee-related costs due to higher headcount , $ 34 million in facility and it-related expenses , and $ 15 million in third-party costs for hardware maintenance and data center capacity . non-gaap operating expenses in product development were $ 870 million for fiscal 2019 , compared to $ 658 million for fiscal 2018 , an increase of $ 212 million , or 32 % . the increase was primarily due to increases of $ 170 million in employee-related costs due to higher headcount and $ 26 million in facility and it-related expenses . non-gaap operating expenses in product development were $ 658 million for fiscal 2018 , compared to $ 495 million for fiscal 2017 , an increase of $ 163 million , or 33 % . the increase was primarily due to increases of $ 113 million in employee-related costs due to higher headcount , $ 34 million in facility and it-related expenses , and $ 15 million in third-party costs for hardware maintenance and data center capacity . we expect that gaap and non-gaap product development expenses will continue to increase in absolute dollars as we improve and extend our applications and develop new technologies . 33 sales and marketing gaap operating expenses in sales and marketing were $ 891 million for fiscal 2019 , compared to $ 683 million for fiscal 2018 , an increase of $ 208 million , or 30 % . the increase was primarily due to increases of $ 147 million in employee-related costs due to higher headcount and higher commissionable sales volume , $ 20 million in advertising , marketing , and event costs , $ 13 million in travel , and $ 11 million in facility and it-related expenses . gaap operating expenses in sales and marketing were $ 683 million for fiscal 2018 , compared to $ 565 million for fiscal 2017 , an increase of $ 118 million , or 21 % . the increase was primarily due to increases of $ 87 million in employee-related costs due to higher headcount and higher commissionable sales volume , $ 14 million in advertising , marketing , and event costs , and $ 11 million in facility and it-related expenses .
| the increase in professional services revenues was due primarily to the addition of new customers and a greater number of customers requesting deployment and integration services . operating expenses gaap operating expenses were $ 3.3 billion for fiscal 2019 , compared to $ 2.4 billion for fiscal 2018 , an increase of $ 0.9 billion , or 34 % . the increase was primarily due to increases of $ 0.6 billion in employee-related costs driven by higher headcount and $ 0.1 billion in expenses related to facilities , it , depreciation , amortization , and service contracts to expand data center capacity . these increases are partially attributable to the acquisition of adaptive insights and include one-time transaction and integration-related costs . gaap operating expenses were $ 2.4 billion for fiscal 2018 , compared to $ 1.9 billion for fiscal 2017 , an increase of $ 0.5 billion , or 27 % . the increase was primarily due to increases of $ 0.4 billion in employee-related costs driven by higher headcount and $ 0.1 billion in expenses related to facilities , it , depreciation , amortization , and service contracts to expand data center capacity . we use the non-gaap financial measure of non-gaap operating expenses to understand and compare operating results across accounting periods , for internal budgeting and forecasting purposes , for short- and long-term operating plans , and to evaluate our financial performance . we believe that non-gaap operating expenses reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business , as they exclude expenses that are not reflective of ongoing operating results . we also believe that non-gaap operating expenses provide useful information to investors and others in understanding and evaluating our operating results and prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies . non-gaap operating expenses are calculated by excluding share-based compensation expenses , and certain other expenses , which
|
our financial results for fiscal year 2012 were adversely impacted by factors related to the planning , announcement and execution of the plan , including the undertaking of large restructuring efforts and the marketing for divestiture and actual sale of non-core products . these factors contributed to a very uncertain environment for our company , partners , customers and employees . in particular , since the second quarter of fiscal year 2012 , customer purchasing decisions were delayed , which caused deal slippage at a greater rate than usual . this was caused both by uncertainty surrounding the plan and generally deteriorating macroeconomic conditions , primarily in europe . investments to improve the core business were also initiated late during the second quarter of fiscal year 2012 , and require time to impact performance . until these investments are realized , our operating margins will be adversely impacted . in addition , the new business focus and new strategy has required us to restructure our organization and the way we go to market , how we think about and implement product roadmaps and how we operate and report our financial results , all of which caused additional disruption . the announcement and marketing for divestiture of the non-core product lines caused revenue from these product lines to drop significantly in fiscal year 2012. these declines have adversely impacted our fiscal year 2012 results and our operating performance will be adversely impacted in the future by temporarily higher expense levels as we transition away from the non-core portfolio . the u.s. and many foreign economies continue to experience uncertainty driven by varying macroeconomic conditions and recovery remains uneven . uncertainty in the macroeconomic environment and associated global economic conditions have resulted in extreme volatility in credit , equity , and foreign currency markets , including the european sovereign debt markets and volatility in various markets including the financial services sector . we have been adversely impacted by these conditions 16 as some customers have delayed software investments in response to this macroeconomic uncertainty . the continuation of this climate could cause our customers to further delay , forego or reduce the amount of their investments in our products or delay payments of amounts due to us . we expect these macroeconomic conditions to continue in fiscal year 2013 , most particularly in europe , the middle east and africa ( emea ) . we derive a significant portion of our revenue from international operations , which are primarily conducted in foreign currencies . as a result , changes in the value of these foreign currencies relative to the u.s. dollar have significantly impacted our results of operations and may impact our future results of operations . we believe that existing cash balances , together with funds generated from operations , amounts available under our revolving credit line and consideration received from the divestitures of non-core product lines will be sufficient to finance our operations and meet our foreseeable cash requirements , including our plans to repurchase shares of our common stock , through at least the next twelve months . story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; color : # 000000 ; text-decoration : none ; '' > 56 % of total revenue in fiscal year 2012 compared to 59 % of total revenue in fiscal year 2011 . total revenue generated in markets outside north america would have represented 58 % of total revenue if exchange rates had been constant in fiscal year 2012 as compared to the exchange rates in effect in fiscal year 2011 . cost of software licenses replace_table_token_10_th cost of software licenses consists primarily of costs of royalties , electronic software distribution costs , duplication and packaging . cost of software licenses increased $ 0.7 million in fiscal year 2012 as compared to fiscal year 2011 , and increased as a percentage of software license revenue from 4 % to 5 % . the dollar increase was primarily due to higher royalty expense for products and technologies licensed or resold from third parties . cost of software licenses as a percentage of software license revenue varies from period to period depending upon the relative product mix . 19 cost of maintenance and services replace_table_token_11_th cost of maintenance and services consists primarily of costs of providing customer support , education and consulting . cost of maintenance and services decreased $ 1.0 million in fiscal year 2012 as compared to fiscal year 2011 and remained flat as a percentage of maintenance and services revenue at 16 % . the total dollar amount of expense in fiscal year 2012 decreased as a result of lower maintenance and professional services revenue in fiscal year 2012 as compared with fiscal year 2011. amortization of acquired intangibles fiscal year ended ( in thousands ) november 30 , 2012 november 30 , 2011 percentage change amortization of acquired intangibles $ 1,259 $ 2,600 ( 52 ) % as a percentage of total revenue — % 1 % amortization of acquired intangibles included in costs of revenue primarily represents the amortization of the value assigned to intangible assets for technology obtained in business combinations . amortization of acquired intangibles decreased $ 1.3 million in fiscal year 2012 as compared to fiscal year 2011. the decrease was due to the completion of amortization of certain intangible assets acquired in prior years , and is offset by amortization of intangible asset acquired with the corticon acquisition , which was completed in the fourth quarter of fiscal year 2011. gross profit fiscal year ended ( in thousands ) november 30 , 2012 november 30 , 2011 percentage change gross profit $ 291,642 $ 315,436 ( 8 ) % as a percentage of total revenue 87 % 87 % our gross profit decreased $ 23.8 million in fiscal year 2012 as compared to fiscal year 2011 , and our gross profit as a percentage of total revenue remained at 87 % . story_separator_special_tag the dollar decrease in our gross profit was due to lower revenues , partially offset by lower costs of revenue from our cost saving measures and lower amortization expense of acquired intangibles , as described above . sales and marketing fiscal year ended ( in thousands ) november 30 , 2012 november 30 , 2011 percentage change sales and marketing $ 117,855 $ 102,618 15 % as a percentage of total revenue 35 % 28 % sales and marketing expenses increased $ 15.2 million in fiscal year 2012 as compared to fiscal year 2011 , and increased as a percentage of total revenue from 28 % to 35 % . the increase in sales and marketing expense was due to a $ 9.8 million increase in compensation-related expenses due to the focus on our core product lines and $ 1.7 million of incremental compensation- 20 related expenses due to the separation of two of our sales and marketing executives . the increase was partially offset by cost control measures initiated during the strategic planning process . product development fiscal year ended ( in thousands ) november 30 , 2012 november 30 , 2011 percentage change product development $ 53,017 $ 44,876 18 % as a percentage of total revenue 16 % 12 % product development expenses increased $ 8.1 million in fiscal year 2012 as compared to fiscal year 2011 , and increased as a percentage of revenue from 12 % to 16 % . the increase in product development expenses is primarily due to higher headcount from the corticon acquisition , which was completed in the fourth quarter of fiscal year 2011. the increases in product development expenses were partially offset by cost savings from our restructuring actions undertaken as part of the plan . general and administrative fiscal year ended ( in thousands ) november 30 , 2012 november 30 , 2011 percentage change general and administrative $ 62,053 $ 61,816 — % as a percentage of total revenue 19 % 17 % general and administrative expenses include the costs of our finance , human resources , legal , information systems and administrative departments . general and administrative expenses increased $ 0.2 million in fiscal year 2012 as compared to fiscal year 2011 , and increased as a percentage of revenue from 17 % to 19 % . the increase in fiscal year 2012 was primarily due to stock-based compensation costs associated with the hiring of a new chief executive officer in december 2011 , incremental compensation-related expenses due to the separation of our chief financial officer in april 2012 , a $ 0.9 million litigation settlement , proxy contest-related costs and costs associated with the plan . the increases were partially offset by cost savings from our restructuring actions and other cost control measures and increased compensation-related costs in fiscal year 2011 related to the severance agreement entered into with richard d. reidy , a former chief executive officer . amortization of acquired intangibles fiscal year ended ( in thousands ) november 30 , 2012 november 30 , 2011 percentage change amortization of acquired intangibles $ 962 $ 966 — % as a percentage of total revenue — % 1 % amortization of acquired intangibles included in operating expenses primarily represents the amortization of value assigned to intangible assets obtained in business combinations other than assets identified as purchased technology . amortization of these acquired intangibles remained flat in fiscal year 2012 as compared to fiscal year 2011. the amortization of certain intangible assets acquired in prior years was completed in fiscal year 2012 , but is offset by amortization of intangible asset acquired with the corticon acquisition , which was completed in the fourth quarter of fiscal year 2011. restructuring expenses fiscal year ended ( in thousands ) november 30 , 2012 november 30 , 2011 percentage change restructuring expenses $ 8,100 $ 3,383 * as a percentage of total revenue 2 % 1 % 21 we incurred restructuring expenses of $ 8.1 million in fiscal year 2012 as compared to $ 3.4 million in fiscal year 2011. restructuring expenses in fiscal year 2012 relate to the restructuring actions announced as part of the plan . see note 14 to the consolidated financial statements in item 8 of this annual report for additional details , including types of expenses incurred and the timing of future expenses and cash payments . see also the liquidity and capital resources section of this item 7 of this annual report . restructuring expenses in fiscal year 2011 included ongoing costs related to the decisions from our restructuring activities occurring in the third quarter of fiscal year 2010. acquisition-related expenses fiscal year ended ( in thousands ) november 30 , 2012 november 30 , 2011 percentage change acquisition-related expenses $ 215 $ 536 * as a percentage of total revenue — % — % acquisition-related expenses in fiscal years 2012 and 2011 are transaction-related costs , primarily professional services fees , employee severance and facility closing costs associated with the acquisition of corticon . income from operations fiscal year ended ( in thousands ) november 30 , 2012 november 30 , 2011 percentage change income from operations $ 49,440 $ 101,241 ( 51 ) % as a percentage of total revenue 15 % 28 % income from operations decreased $ 51.8 million in fiscal year 2012 as compared to fiscal year 2011 , and decreased as a percentage of total revenue from 28 % to 15 % . as discussed above , the decrease was primarily the result of lower revenues and higher operating expenses in fiscal year 2012 as compared to fiscal year 2011. income from operations by segment replace_table_token_12_th on a segment basis , income from operations of our core segment decreased $ 50.6 million in fiscal year 2012 as compared to fiscal year 2011 . the decrease is primarily the result of lower revenues in fiscal year 2012 and the impact of the fiscal year 2010 restructuring efforts to fiscal year 2011 operating expenses .
| excluding the impact of changes in exchange rates , the decrease in license revenue is due to the disruption caused by the announcement of our plan and was also due to a number of large non-recurring direct deals , particularly in emea , in the first half of fiscal year 2011 as compared to the same period in fiscal year 2012. maintenance and services revenue replace_table_token_7_th maintenance and services revenue decreased $ 12.8 million in fiscal year 2012 as compared to fiscal year 2011 . maintenance and services revenue would have decreased by 2 % if exchange rates had been constant in fiscal year 2012 as compared to exchange rates in effect in fiscal year 2011 . excluding the impact of changes in exchange rates , the decrease in maintenance and services revenue was primarily the result of lower license revenue due to the associated services that are attached to license sales . the decrease in professional services revenue was also impacted by the shift away from our rpm strategy . our maintenance renewal rate in fiscal year 2012 was approximately 90 % . 18 revenue by segment replace_table_token_8_th revenue from our core segment is representative of revenue from our continuing operations since the results of all non-core products lines are included in discontinued operations . see discussion of fluctuations in our core and continuing operations revenue in this results of operations section . for an understanding of how our internal measure of segment revenue is determined , see note 17 of the consolidated financial statements appearing in item 8 of this annual report . revenue by region replace_table_token_9_th total revenue generated in north america decreased $ 0.2 million , and total revenue generated outside north america decreased $ 25.3 million , in fiscal year 2012 as compared to fiscal year 2011 . the decrease in revenue in emea was primarily the result of deteriorating macroeconomic conditions in europe , as well as the announcement of our plan . total revenue generated in markets outside north america represented < font
|
further , as reflected in data from the iab , industry spending on internet advertising has generally declined sequentially in the first quarter of the calendar year from the fourth quarter . similar to the industry overall , some of our clients have lower advertising budgets during our first fiscal quarter ending march 31 ; however , we believe that the breadth of industries in which our clients operate provides us with some insulation from these fluctuations . in addition to variations in budgets from quarter to quarter , certain clients have budgets that start stronger at the beginning of quarterly or monthly periods , may reach limits during such periods and then may have needs to satisfy their performance objectives at the end of such periods . beyond these budgetary constraints and buying patterns of clients , other factors affecting our business may include macroeconomic conditions affecting the digital media industry and the various client verticals we serve . definitions , use and reconciliation of non-us gaap financial measures we report the following non-us gaap measures : media margin is defined as revenue minus cost of revenue ( exclusive of depreciation and amortization ) attributable to variable costs paid for media and related expenses . media margin is also presented as percentage of revenue . adjusted ebitda is defined as net ( loss ) income from continuing operations , excluding ( 1 ) income tax expense , ( 2 ) interest expense , net , ( 3 ) depreciation and amortization , ( 4 ) write-off of intangible assets , ( 5 ) share-based compensation expense , ( 6 ) acquisition-related costs , ( 7 ) restructuring and certain severance costs , ( 8 ) certain litigation and other related costs , and ( 9 ) one-time items . adjusted net income is defined as net ( loss ) income from continuing operations , excluding ( 1 ) write-off of intangible assets , ( 2 ) share-based compensation expense , ( 3 ) acquisition-related costs , ( 4 ) restructuring and certain severance costs , ( 5 ) certain litigation and other related costs , and ( 6 ) one-time items . adjusted net income is also presented on a per share ( basic and diluted ) basis . 24 below is a reconciliation of media margin from net ( loss ) income from continuing operations , which we believe is the most directly comparable us gaap measure : replace_table_token_4_th ( 1 ) represents the portion of cost of revenue ( exclusive of depreciation and amortization ) not attributable to variable costs paid for media and related expenses . below is a reconciliation of adjusted ebitda from net ( loss ) income from continuing operations , which we believe is the most directly comparable us gaap measure : replace_table_token_5_th 25 below is a reconciliation of adjusted net income and the related measure of adjusted net income per share from net ( loss ) income from continuing operations , which we believe is the most directly comparable us gaap measure : replace_table_token_6_th we present media margin , adjusted ebitda and adjusted net income as supplemental measures of our financial and operating performance because we believe they provide useful information to investors . more specifically : media margin , as defined above , is a measure of the efficiency of the company 's operating model . we use media margin and the related measure of media margin as a percentage of revenue as primary metrics to measure the financial return on our media and related costs , specifically to measure the degree by which the revenue generated from our digital marketing services exceeds the cost to attract the consumers to whom offers are made through our services . media margin is used extensively by our management to manage our operating performance , including evaluating operational performance against budgeted media margin and understanding the efficiency of our media and related expenditures . we also use media margin for performance evaluations and compensation decisions regarding certain personnel . adjusted ebitda , as defined above , is another primary metric by which we evaluate the operating performance of our business , on which certain operating expenditures and internal budgets are based and by which , in addition to media margin and other factors , our senior management is compensated . the first three adjustments represent the conventional definition of ebitda , and the remaining adjustments are items recognized and recorded under us gaap in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded . these adjustments include certain severance costs associated with department-specific reorganizations and certain litigation and other related costs associated with legal matters outside the ordinary course of business , including an accrual for a new york state sales and use tax dispute in the fourth quarter of 2019. items are considered one-time in nature if they are non-recurring , infrequent or unusual and have not occurred in the past two years or are not expected to recur in the next two years , in accordance with sec rules . adjusted ebitda for the year ended december 31 , 2019 excluded as one-time items $ 0.2 million of costs associated with the move of our corporate headquarters . there were no other material adjustments for one-time items in the periods presented . adjusted net income , as defined above , and the related measure of adjusted net income per share exclude certain items that are recognized and recorded under us gaap in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded . adjusted net income for the year ended december 31 , 2019 excluded as one-time items $ 0.2 million of costs associated with the move of our corporate headquarters . there were no other material adjustments for one-time items in the periods presented . story_separator_special_tag we believe adjusted net income affords investors a different view of the overall financial performance of the company than adjusted ebitda and the us gaap measure of net ( loss ) income from continuing operations . media margin , adjusted ebitda , adjusted net income and adjusted net income per share are not intended to be performance measures that should be regarded as an alternative to , or more meaningful than , net ( loss ) income from continuing operations as indicators of operating performance . none of these metrics are presented as measures of liquidity . the way we measure media margin , adjusted ebitda and adjusted net income may not be comparable to similarly titled measures presented by other companies and may not be identical to corresponding measures used in our various agreements . 26 story_separator_special_tag of 2019 , the company implemented two separate reductions in workforce that resulted in the termination of approximately forty-six employees in the aggregate . these reductions in workforce were implemented following management 's determination to reduce headcount and decrease the company 's costs to more effectively align resources to the core business operations . in connection with these reductions in workforce , the company incurred $ 1.4 million in exit-related restructuring costs , consisting primarily of one-time termination benefits and associated costs , to be settled in cash by june 30 , 2020. apart from these exit-related restructuring costs , these reductions in workforce are expected to result in corresponding reductions in future salary and benefit expenses primarily in product development and general and administrative expense . depreciation and amortization . depreciation and amortization expenses remained relatively flat year over year , at $ 13.9 million for the year ended december 31 , 2019 and $ 13.2 million for the year ended december 31 , 2018 . write-off of intangible assets . during the third and fourth quarter of 2019 and fourth quarter of 2018 , we recognized $ 0.4 million and $ 1.5 million , respectively , due to abandonment of certain internally developed software that had not yet been placed into service . spin-off transaction costs . during the first quarter of 2018 , in connection with the spin-off of red violet , we recognized $ 7.7 million in spin-off transaction costs , which included non-cash share-based compensation expense of $ 5.4 million as a result of the transaction grants ( as defined in note 13 , share-based compensation , in the notes to consolidated financial statements ) , and employee cash compensation of $ 2.3 million . there were no such costs in the year ended december 31 , 2019. interest expense , net . for the year ended december 31 , 2019 , interest expense , net , decreased $ 1.2 million , or 15 % , to $ 6.9 million , from $ 8.1 million for the year ended december 31 , 2018 . the decrease was primarily attributable to a lower average debt balance outstanding under our refinanced term loan , as described below under `` liquidity and capital resources '' . ( loss ) income before income taxes from continuing operations . for the year ended december 31 , 2019 , loss before income taxes from continuing operations was $ 1.7 million , compared to net income before income taxes from continuing operations of $ 3.2 million for the year ended december 31 , 2018 . this change was primarily due to increases in cost of revenue of $ 32.9 million , general and administrative expense of $ 12.1 million and product development expense of $ 2.8 million , partially offset by an increase in revenue of $ 31.4 million , the absence in 2019 of one-time spin-off transaction costs of $ 7.7 million ( including non-cash share-based compensation expenses of $ 5.4 million ) incurred during the first quarter of 2018 , and a decrease in sales and marketing expense of $ 2.1 million , as discussed above . 28 income tax expense . for the year ended december 31 , 2019 , the provision for income taxes was $ 0.1 million , with an effective tax rate of 4.4 % . as of december 31 , 2019 and 2018 , the company recorded full valuation allowances against its net deferred tax assets . the company intends to maintain full valuation allowances against the net deferred tax assets until there is sufficient evidence to support the release of all or some portion of such allowances . release of some or all of the valuation allowance would result in the recognition of certain deferred tax assets and an increase in deferred tax benefit for any period in which such a release may be recorded , however , the exact timing and amount of any valuation allowance release are subject to change , depending on the profitability that we are able to achieve and the net deferred tax assets available . net loss from discontinued operations . on march 26 , 2018 , we completed the spin-off of red violet and the results of red violet through this date are reflected as discontinued operations . for the year ended december 31 , 2018 , we incurred net losses from discontinued operations of $ 21.1 million . this amount consists primarily of the one-time loss on disposal of discontinued operations of $ 19.0 million , which was primarily comprised of non-cash items of $ 16.0 million , including share-based compensation expense and write-off of unamortized debt costs in connection with the spin-off , and cash items of $ 3.0 million , including spin-off related professional fees and employee compensation . for the year ended december 31 , 2019 , there were no comparable discontinued operations . net loss . for the years ended december 31 , 2019 and 2018 , net losses were $ 1.7 million and $ 17.9 million , respectively .
| our cost of revenue primarily consists of media and related costs associated with acquiring traffic from third-party publishers and digital media platforms , for our owned and operated websites and , historically , on behalf of third-party advertisers . 27 for the year ended december 31 , 2019 , cost of revenue as a percentage of revenue increased to 69.0 % , compared to 64.6 % for the year ended december 31 , 2018 , as we incurred relatively higher costs of media in order to satisfy incremental demand by clients for additional volume in the 2019 period . see “ trends affecting our business—development , acquisition and retention of high quality targeted media ” above . sales and marketing . for the year ended december 31 , 2019 , sales and marketing expenses decreased $ 2.1 million , or 16 % , to $ 11.5 million , from $ 13.7 million for the year ended december 31 , 2018 . for the years ended december 31 , 2019 and 2018 , the amounts consisted mainly of employee salaries and benefits of $ 8.4 million and $ 8.6 million , advertising costs of $ 1.4 million and $ 1.5 million , and non-cash share-based compensation expense of $ 1.0 million and $ 2.9 million , respectively . the decrease in sales and marketing expense was primarily the result of lower share-based compensation expense of $ 1.9 million . product development . for the year ended december 31 , 2019 , product development expenses increased $ 2.8 million , or 53 % , to $ 8.1 million , from $ 5.3 million for the year ended december 31 , 2018 . for the years ended december 31 , 2019 and 2018 , the amounts consisted primarily of employee salaries and benefits of $ 7.0 million and $ 4.1 million , respectively . the increase in product development costs was the result of increased workforce focused on development and innovation of our existing offerings to consumers and advertisers , and development of new
|
issuance of common stock on january 29 , 2010 , we received $ 30.0 million of proceeds from the issuance of 44,776 shares of common stock to certain shareholders of holding . dividend on july 26 , 2010 , we paid a dividend to our shareholders totaling $ 30.0 million , or $ 207.22 per share of common stock outstanding . general economic conditions the united states economy and financial markets have declined and experienced volatility due to uncertainties related to energy prices , availability of credit , inflation in food prices , difficulties in the banking and financial services sectors , the decline in the housing market , falling consumer confidence and high unemployment rates . as a result , consumers are more cautious , possibly leading to additional reductions in consumer spending , to consumers trading down to a less expensive mix of products , or to consumers trading down to discounts for grocery items , all of which may affect our financial condition and results of operations . furthermore , because of economic conditions , we may experience reductions in traffic in our supermarkets or limitations on the prices we can charge for our products , either of which may reduce our sales and profit margins and have a material adverse affect on our financial condition and results of operations . other economic factors such as inflation , energy costs , increased transportation costs , higher costs of labor , insurance and healthcare , and changes in laws and regulations may increase our costs of sales and our operating expenses , and otherwise adversely affect our financial condition and results of operations . in fiscal 2010 , fiscal 2009 and fiscal 2008 , we have experienced the effects of some of these economic factors . results of operations fiscal 2010 compared with fiscal 2009 executive summary the results of operations during fiscal 2010 when compared with fiscal 2009 were impacted primarily by the acquisition . fifty-five supermarkets acquired in the acquisition had been retained and operated through january 1 , 2011 . - 17 - net sales the following table includes a comparison of the components of our net sales for fiscal 2010 and fiscal 2009 . ( dollars in thousands ) replace_table_token_3_th inside sales increased 33.4 % in fiscal 2010 compared with fiscal 2009 , primarily due to net sales of $ 560.8 million related to new supermarkets , including the acquired penn traffic supermarkets . excluding the 53 rd week in fiscal 2009 , same store sales increased 0.1 % . net sales for the 24 acquired supermarkets which have been closed , sold or liquidated were $ 33.9 million during fiscal 2010. gasoline sales increased 29.1 % in fiscal 2010 compared with fiscal 2009 due to an 18.9 % increase in the retail price per gallon . the number of gallons sold increased 8.6 % , primarily due to the addition of four new fuel stations during fiscal 2010 , and a full-year of operation for three fuel stations added during fiscal 2009. gross profit the following table includes a comparison of cost of goods sold , distribution costs and gross profit for fiscal 2010 and fiscal 2009 . ( dollars in thousands ) replace_table_token_4_th as a percentage of net sales , cost of goods sold , distribution costs and gross profit remained consistent for fiscal 2010 compared with fiscal 2009. operating expenses the following table includes a comparison of operating expenses for fiscal 2010 and fiscal 2009 . ( dollars in thousands ) replace_table_token_5_th - 18 - wages , salaries and benefits as a percentage of net sales , the increase in wages , salaries and benefits for fiscal 2010 compared with fiscal 2009 is largely attributable to investments in labor during the rebannering and re-openings of the retained penn traffic supermarkets , as well as the lower average sales base of these supermarkets . as the inside sales related to these supermarkets is expected to continue on a positive trend , we expect a similar leveraging of labor expenses in the future as compared to our legacy supermarkets . the comparative percentage is also impacted by the fact that none of the acquired penn traffic supermarkets have fuel stations , for which gasoline sales require less labor expense than inside sales . furthermore , we have experienced a 10 % year-over-year increase in pension and health and welfare costs , as required by our collective bargaining agreements . we expect an additional 10 % , or $ 0.8 million , increase in pension costs , and relatively flat health and welfare costs , in 2011. selling and general expenses as a percentage of net sales , selling and general expenses increased for fiscal 2010 compared with fiscal 2009 due to $ 0.7 million of penn traffic integration costs included in selling and general expenses during fiscal 2010 , as well as an increase of $ 10.8 million in electricity costs due to the warmer temperatures in 2010 and higher commodity prices . administrative expenses the increase in administrative expenses for fiscal 2010 compared with fiscal 2009 was primarily attributable to a combined $ 22.4 million of penn traffic integration costs , one-time legal and professional fees related to the acquisition and non-recurring legal expenses associated with the ftc 's review of the acquired supermarkets . furthermore , we incurred additional labor expense of $ 12.8 million related to 2010 head count additions to accommodate increased corporate activities following the acquisition , combined with normal wage rate increases . rent expense rent expense reflects our rental expense for our supermarkets under operating lease arrangements , net of income we receive from various entities that rent space in our supermarkets under subleasing arrangements . story_separator_special_tag as a percentage of net sales , rent expense remained relatively consistent for fiscal 2010 compared with fiscal 2009. depreciation and amortization the increase in depreciation and amortization from fiscal 2010 compared with fiscal 2009 was largely attributable to $ 7.4 million associated with assets acquired from penn traffic , as well as incremental depreciation related to fiscal 2010 and fiscal 2009 capital expenditures . advertising the increase in advertising expenses for fiscal 2010 compared with fiscal 2009 was primarily attributable to $ 5.2 million in costs associated with the communication of the acquisition to our customers and the promotion of the re-bannered supermarkets . additionally , we incurred increased circular costs of $ 6.4 million due to enhancements made to our circulars , our increased store base and expanded geographic area , as well as duplicative costs of producing circulars under the p & c , quality markets and bi-lo banners subsequent to the acquisition . in early fiscal 2010 , we incurred costs of $ 1.7 million associated with our monopoly ® promotion . the increase is partially offset by a decrease in media production . bargain purchase the excess of $ 15.7 million of the estimated fair value of penn traffic net assets acquired over the purchase price has been recognized as a gain in the consolidated statement of operations for fiscal 2010. this bargain purchase was attributable to the distressed status of penn traffic due to historical operating results , which led to a november 2009 bankruptcy filing . loss on debt extinguishment on january 29 , 2010 , we entered into a $ 25.0 million bridge loan and an $ 11.0 million term loan and capitalized related financing costs . as both the bridge loan and term loan were repaid in full on february 12 , 2010 with the proceeds from the issuance of the additional $ 75.0 million of senior secured notes , unamortized costs of $ 0.7 and $ 0.3 million , respectively , were recorded as a loss on debt extinguishment in our consolidated statement of operations for fiscal 2010. in connection with prepayments of $ 20.0 million related to our previous first lien credit agreement during fiscal 2009 , $ 0.8 million of additional debt was forgiven . this amount , net of the write-off of $ 0.3 million of unamortized deferred financing costs , was recorded as a gain on debt extinguishment in our consolidated statement of operations for fiscal 2009. effective october 9 , 2009 , we issued $ 275.0 million of senior secured notes and simultaneously entered into the $ 70.0 million revolving abl facility . the proceeds from the senior secured notes and the abl facility were used , in part , to retire the outstanding balances related to our previous first lien credit agreement and warehouse mortgage . in connection with these retirements , we wrote off unamortized deferred financing costs of $ 7.0 million and incurred additional costs of $ 0.3 million , which were recorded as a loss on debt extinguishment in our consolidated statement of operations for fiscal 2009 . - 19 - interest expense , net the $ 13.2 million increase in interest expense during fiscal 2010 compared with fiscal 2009 reflects an $ 18.7 million increase in interest on our outstanding indebtedness as a result of our october 2009 and february 2010 financing activities , as well as an increase of $ 1.3 million attributable to deferred financing fees and bond discount amortization ( net of premium amortization ) . these factors were partially offset by a $ 6.6 million decrease in interest expense related to our interest rate swap that was settled in october 2009. income tax benefit ( expense ) the change from the income tax expense of $ 5.4 million in fiscal 2009 to the income tax benefit of $ 9.0 million in fiscal 2010 is primarily attributable to the higher pre-tax loss in fiscal 2010 , combined with the non-taxability of the bargain purchase related to the acquisition . additionally , we established a $ 13.9 million valuation allowance during fiscal 2009 related to our deferred tax assets , compared to an additional valuation allowance of $ 11.9 million during fiscal 2010. the resulting effective tax rate for fiscal 2010 was 25.0 % compared to an effective tax rate for fiscal 2009 of ( 26.5 ) % . deferred income tax assets or liabilities reflect temporary differences between amounts of assets and liabilities , including net operating loss ( nol ) carryforwards , for financial and tax reporting . such amounts are adjusted as appropriate to reflect changes in the tax rates expected to be in effect when the temporary differences reverse . a valuation allowance is established for any deferred income tax asset for which realization is uncertain . based on an assessment of the available positive and negative evidence , including our historical results for the preceding three years , we determined that there are uncertainties relating to our ability to utilize the net deferred tax assets . in recognition of these uncertainties , we have provided a valuation allowance of $ 13.9 million on the net deferred income tax assets as of january 2 , 2010 , representing a charge to income tax expense during fiscal 2009. during fiscal 2010 , we established an additional valuation allowance of $ 11.9 million , with an offsetting charge to income tax expense . if we were to determine that we could realize our deferred tax assets in the future in excess of their net recorded amount , we would make an adjustment to the valuation allowance . net loss the increase in net loss from $ 25.7 million in fiscal 2009 to $ 27.0 million in fiscal 2010 is attributable to the factors discussed above . fiscal 2009 compared with fiscal 2008 story_separator_special_tag for fiscal 2009. during fiscal 2008 , we recorded a $ 2.2 million loss on debt extinguishment related to the write-off of unamortized deferred financing costs associated with our previous second lien credit agreement , which was repaid in full .
| ( dollars in thousands ) replace_table_token_7_th cost of goods sold declined as a result of a $ 37.7 million , or 25.9 % , decrease in the cost of gasoline and a $ 6.7 million decrease in non-cash last-in , first-out ( lifo ) inventory valuation adjustments from $ 6.9 million in fiscal 2008 to $ 0.2 million in fiscal 2009 , partially offset by the impact of incremental inside sales . distribution costs as a percentage of net sales were consistent between fiscal 2009 and fiscal 2008. the increase in gross profit was primarily the result of the $ 6.7 million decrease in lifo adjustments . operating expenses the following table includes a comparison of operating expenses for fiscal 2009 and fiscal 2008 . ( dollars in thousands ) replace_table_token_8_th wages , salaries and benefits the increase in wages , salaries and benefits was primarily attributable to a $ 5.0 million increase in wages related to negotiated union labor rates and the additional week in fiscal 2009 , combined with a $ 3.2 million increase in health and welfare benefits due to rising healthcare costs and the 53 rd week of fiscal 2009. these factors were partially offset by a $ 6.3 million decrease in vacation expense due to a change in the vacation policy for union store employees . - 21 - selling and general expenses the decrease in selling and general expenses was primarily attributable to a $ 5.4 million decrease in utility costs due to lower commodity prices and increased conservation efforts in our stores , a $ 4.2 million decrease in legal fees , largely associated with a potential acquisition that was not consummated in fiscal 2008 , a $ 2.6 million decrease in general liability and workers ' compensation insurance expense and a $ 0.9 million decrease in supplies expense . these factors were partially offset by a $ 1.2 million decrease in gift card breakage income , as $ 1.3 million of initial income
|
million during the prior year . in addition , during 2018 we had a gain from discontinued operations , net of tax of $ 88.2 million , primarily attributable to our exit from australia compared to a gain of $ 2.5 million from discontinued operations , net of tax , during 2017 . 43 strategy we are focused on protecting our core mining and pelletizing segment business we are the market-leading iron ore producer in the u.s. , supplying differentiated iron ore pellets under long-term contracts to major north american blast furnace steel producers . we have the unique advantage of being a low-cost , high-quality , iron ore pellet producer with significant transportation and logistics advantages to serve the great lakes steel market effectively . the pricing structure and long-term nature of our existing contracts , along with our low-cost operating profile , position our mining and pelletizing segment as a strong cash flow generator in most commodity pricing environments . since instituting our strategy in 2014 of focusing on this core business , we have achieved significant accomplishments , including providing accelerating profitability growth each year since 2015 , maximizing commercial leverage in pricing and securing sales volume certainty by signing multiple new supply agreements with steelmakers throughout the great lakes region , improving operating reliability by making operational improvements , realizing more predictability in cash flows , embracing the global push toward environmental stewardship and developing new pellet products to meet ever-evolving market demands . we recognize the importance of our strong position in the north american blast furnace steel industry , and our top priority is to protect and enhance the market position of our mining and pelletizing business . this involves continuing to deliver high-quality , custom-made pellets that allow our customers to remain competitive in the quality , production efficiency , and environmental friendliness of their steel products . protecting the core business also involves continually evaluating opportunities to expand both our production capacity and ore reserve life . in 2017 , we achieved key accomplishments toward these goals by acquiring the remaining minority stake in our tilden and empire mines as well as additional real estate interests in minnesota . in 2018 , we began supplying pellets under two new customer supply agreements in the great lakes region . in addition , we executed the efficient exit of our asia pacific iron ore business , officially completing the divestiture of the company 's non-core assets . expanding our customer base while we hold a strong market position in supplying iron ore to great lakes blast furnaces , we can not ignore the ongoing shift of steelmaking share in the u.s. away from our core blast furnace customers to eaf steelmakers . over the past 25 years , the market share of eafs has nearly doubled . however , as eafs have moved to higher-value steel products , they require more high-quality iron ore-based metallics instead of lower-grade scrap as raw material feedstock . as a result of this trend , one of our top strategic priorities is to become a critical supplier of the eaf market by providing these specialized metallics . hbi is a specialized high-quality iron alternative to scrap and pig iron that , when used as a feedstock , allows the eaf to produce more valuable grades of steel . in june 2017 , we announced the planned construction of an hbi production plant in toledo , ohio . over the past 18 months , we have made significant progress on the construction of this plant . based on current market analysis , greater-than-expected customer demand and expansion opportunities identified during the construction process , we are increasing the expected productive capacity of the toledo hbi production plant from 1.6 million to 1.9 million metric tons per year . accordingly , we now estimate the construction cost to be approximately $ 830 million , exclusive of construction-related contingencies and capitalized interest , which increase partially relates to the expanded capacity . we expect that the hbi production plant , once operational , will consume approximately 2.8 million long tons of our dr-grade pellets per year . we expect our hbi to partially replace the over 3 million metric tons of ore-based metallics that are imported into the great lakes region every year from russia , ukraine , brazil and venezuela , as well as the nearly 20 million metric tons of scrap used in the great lakes area every year . the toledo site is in close proximity to over 20 eafs , giving us a natural competitive freight advantage over import competitors . not only does this production plant create another outlet for our high-margin pellets , but it also presents an attractive economic opportunity for us . as the only producer of dr-grade pellets in the great lakes region and with access to abundant , low-cost natural gas , we will be in a unique position to serve clients in the area and grow our customer base . maintaining discipline on costs and capital allocation we believe our ability to execute our strategy is dependent on maintaining our financial position , balance sheet strength and financial flexibility , which will enable us to manage through the inherent cyclical demand for our products and volatility in commodity prices . our streamlined organization and support functions are well-aligned with our strategic direction . our capital allocation plan is focused on strengthening and protecting our core mining and pelletizing segment operations and expanding our customer base through our metallics segment , as well as returning excess capital to shareholders while maintaining manageable leverage through volatile commodity cycles . as the implementation of our strategy has strengthened the business , we have put additional emphasis on the continued improvement of our balance sheet via continued reduction of long-term debt . story_separator_special_tag since 2015 , we have reduced 44 our annual interest expense by 46 % , or approximately $ 100 million , by using various liability management strategies consistent with our capital allocation priorities and our stated objective of improving the strength of our balance sheet and simplifying the capital structure . given the cyclical nature of our business , we will continue to be opportunistic in managing our balance sheet and capital structure , which should put us in an optimal position to manage through any commodity environment , and we continue to seek the best opportunities to accomplish this . competitive strengths resilient mining and pelletizing segment operations our mining and pelletizing segment is the primary contributor to our consolidated results , generating $ 2,332.4 million of consolidated revenue , $ 809.6 million of sales margin and $ 875.3 million of consolidated adjusted ebitda for the year ended december 31 , 2018. our mining and pelletizing segment produces differentiated iron ore pellets that are customized for use in customers ' blast furnaces as part of the steelmaking process . the grades of pellets currently delivered to each customer are based on that customer 's preferences , which depend in part on the characteristics of the customer 's blast furnace operations . we believe our long history of supplying customized pellets to the u.s. steel producers has resulted in a co-dependent relationship between us and our customers . this technical and operational co-dependency has enabled us to claim a substantial portion of the total mining and pelletizing segment market . based on our equity ownership in our u.s. mines , our share of the annual rated production capacity is 21.2 million long tons , representing 42 % of total u.s. annual pellet capacity . long-lived assets with an average mine life of approximately 30 years provide the opportunity to maintain our significant market position well into the future . we believe our mining and pelletizing segment is uniquely positioned in the global iron ore market due to its insulated position within the great lakes region and balanced exposure to market volatility due to contract pricing structures . most of our mining and pelletizing segment production is sold through long-term contracts that are structured with various formula-based pricing mechanisms that reference spot iron ore pricing , domestic steel prices , and atlantic basin pellet premiums , among other items , and mitigate the impact of any one factor 's price volatility on our business . we maintain a freight advantage compared to our competition as a result of our proximity to u.s. steelmaking operations . the great lakes market is largely isolated and expensive to enter from the seaborne market . our costs are lower as a result of inherent transportation advantages associated with our mine locations near the great lakes , which allows for transportation via railroads and loading ports . recent developments changes to our board of directors on january 28 , 2019 , we appointed m. ann harlan and janet l. miller to our board of directors . ms. harlan will join the audit committee and ms. miller will join the governance and nominating committee of our board . with the addition of ms. harlan and ms. miller , our board of directors is now comprised of eleven members , of which ten are independent directors . also , in order to re-balance responsibilities among its board members , we announced other changes to the committee assignments . susan green has been appointed to the strategy committee ; michael siegal has stepped down from the audit committee ; gabriel stoliar has stepped down from the governance and nominating committee ; and robert fisher , jr. has stepped down from the strategy committee . executive leadership promotion on december 11 , 2018 , our board of directors elected clifford t. smith , as our executive vice president , chief operating officer , effective january 1 , 2019. mr. smith most recently was the executive vice president , business development , a position he held since april 2015. he previously served as executive vice president , seaborne iron ore ( october 2014 - april 2015 ) and executive vice president , global operations ( july 2013 - january 2014 ) . share repurchase program on november 26 , 2018 , we announced that our board of directors authorized a program to repurchase outstanding common shares in the open market or in privately negotiated transactions , up to a maximum of $ 200 million . we are not obligated to make any purchases and the program may be suspended or discontinued at any time . during 2018 , we repurchased 5.4 million common shares at a cost of approximately $ 47.5 million in aggregate , including commissions and fees , or an average price of approximately $ 8.78 per share . as of december 31 , 2018 , there was approximately $ 152.7 million remaining under the authorization . the share repurchase program is effective until december 31 , 2019 . 45 business segments in alignment with our strategic goals , our company 's continuing operations are organized and managed in two business units according to our differentiated products . the former ' u.s . iron ore ' segment is now 'mining and pelletizing . ' our mining and pelletizing segment is a major supplier of iron ore pellets to the north american steel industry from our mines and pellet plants located in michigan and minnesota . in addition , the toledo hbi business will be categorized under the segment 'metallics . ' in our metallics segment , we are currently constructing an hbi production plant in toledo , ohio . we expect to complete construction and begin production in 2020. until the hbi plant is operational , expenses reported in the metallics segment will be limited to administrative costs .
| our full-year 2019 interest expense is expected to be approximately $ 100 million , compared to $ 119 million recorded in 2018. we expect approximately $ 20 million in cash interest related to the hbi project to be capitalized , compared to $ 6 million that was capitalized in 2018. our 2019 effective tax rate is expected to be approximately 10 % . however , due to our net operating loss position , our cash tax payments are expected to be zero . additionally , we also expect to receive approximately $ 117 million in cash tax refunds during the third quarter of 2019. consolidated full-year 2019 depreciation , depletion and amortization is expected to be approximately $ 85 million , incurred ratably throughout the year . 63 capital expenditures our 2019 capital spending expectations are : approximately $ 425 million toward the hbi project in toledo , oh ; approximately $ 70 million in sustaining capital ; approximately $ 40 million toward the completion of the upgrade at the northshore mine ; and approximately $ 20 million in capitalized interest . based on current market analysis , greater-than-expected customer demand and expansion opportunities explored during the hbi construction process , we are increasing the productive capacity of our toledo hbi facility from 1.6 million metric tons to 1.9 million metric tons per year . recently issued accounting pronouncements refer to note 2 - new accounting standards of the consolidated financial statements for a description of recent accounting pronouncements , including the respective dates of adoption and effects on results of operations and financial condition . critical accounting estimates management 's discussion and analysis of financial condition and results of operations is based on our consolidated financial statements , which have been prepared in accordance with gaap . preparation of financial statements requires management to make assumptions , estimates and judgments that affect the reported amounts of assets , liabilities , revenues , costs and expenses , and the related disclosures of contingencies . management bases its estimates on various assumptions
|
while the potential economic impact brought by , and the duration of , covid-19 may be difficult to assess or predict , a widespread pandemic could result in significant disruption of global financial markets , reducing our ability to access capital , which could in the future negatively affect our liquidity . in addition , a recession or market correction resulting from the spread of covid-19 could harm our business and the value of our common shares . the ultimate impact of the covid-19 pandemic or a similar health epidemic is highly uncertain and subject to change . we do not yet know the full extent of potential delays or impacts on our business , our clinical trials , healthcare systems or the global economy as a whole . however , these effects could harm our operations , and we will continue to monitor the covid-19 situation closely . for additional information about risks and uncertainties related to the covid-19 pandemic that may impact our business , financial condition and results of operations , see the section titled “ risk factors ” under part ii , item 1a in this annual report on form 10-k. financial operations overview revenue we have not generated any revenue from the sale of any products , and we do not expect to generate any revenue unless and until we obtain regulatory approval of and begin to commercialize one of our gene therapy product candidates in development . services agreements with roivant sciences , inc. and roivant sciences gmbh we and our wholly owned subsidiaries , axovant sciences inc. ( `` asi '' ) and axovant sciences gmbh ( `` asg '' ) , have entered into a services agreement with roivant sciences inc. ( `` rsi '' ) , a wholly owned subsidiary of our affiliate , roivant sciences ltd. ( `` rsl '' ) , and asg has entered into a services agreement with roivant sciences gmbh ( `` rsg '' ) , a wholly owned subsidiary of rsl , pursuant to which rsi provides us , and rsg provides asg , with services in relation to the identification of potential product candidates and project management of clinical trials , as well as other services related to our development , administrative and financial functions . under the terms of both services agreements , we are obligated to pay or reimburse rsi and rsg for the costs they , or third parties acting on their behalf , incur in providing services to us or asg , including administrative and support services as well as research and development services . in addition , we are obligated to pay to rsi and rsg at a predetermined mark-up on any general and administrative and research and development services incurred directly by rsi and rsg . for the years ended march 31 , 2020 and 2019 , we incurred expenses of $ 0.1 million and $ 5.1 million , respectively , under the services agreements , inclusive of the mark-up , which includes a portion of the expenses incurred by rsi and rsl on behalf of us that have been treated as capital contributions . we have recorded these charges as research and development expense and general and administrative expense in our consolidated statements of operations . going forward , the costs allocated to us under our services agreements with rsi and rsg are expected to continue to be insignificant . research and development expense since our inception , our operations have primarily been focused on organizing and staffing our company , raising capital , and acquiring , preparing for and advancing our product candidates into clinical development . our research and development expenses include program-specific costs as well as unallocated internal costs . program-specific costs include : direct third-party costs , which include expenses incurred under agreements with cros and contract manufacturing organizations , the cost of consultants who assist with the development of our product candidates on a program-specific basis , investigator grants , sponsored research , manufacturing costs in connection with producing materials for use in conducting nonclinical and clinical studies , and any other third-party expenses directly attributable to the development of our product candidates ; and 85 upfront payments for the purchase of in-process research and development and milestone payments , which include costs incurred under our agreements with oxford and umms , as well as costs incurred for our discontinued axo-aav-opmd , intepirdine and nelotanserin programs . unallocated internal costs include : share-based compensation expense for research and development personnel , including expense related to common share awards and option awards issued by rsl to its employees and employees of its wholly owned subsidiaries , rsi and rsg , as well as to certain of our employees ; personnel-related expenses , which include employee-related expenses , such as salaries , benefits and travel expenses , for research and development personnel ; costs allocated to us under our services agreements with rsi and rsg ; and other expenses , which includes the cost of consultants who assist with our research and development but are not allocated to a specific program . research and development activities will continue to be central to our business model , and will vary significantly based upon the success of our programs and the achievement of milestones requiring payments to our partners , oxford and umms . for the years ended march 31 , 2020 and march 31 , 2019 , the majority of our research and development expenses were associated with our gene therapy product candidates , including upfront nonrefundable payments made to our partners . we expect our research and development expenses to fluctuate over the near term depending on the progression of our gene therapy product candidates currently under development and as associated costs are incurred . 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 . story_separator_special_tag the duration , costs and timing of clinical trials of our products in development and any other product candidates will depend on a variety of factors that include , but are not limited to , the following : the number of trials required for approval ; the per patient trial costs ; the number of patients who participate in the trials ; the number of sites included in the trials ; the countries in which the trials are conducted ; the length of time required to enroll eligible patients ; the dose that patients receive ; the drop-out or discontinuation rates of patients ; the potential additional safety monitoring or other studies requested by regulatory agencies ; the duration of patient follow-up ; any delays in key trial activities and patient enrollment or diversion of healthcare resources as a result of the covid-19 pandemic ; production shortages or other supply interruptions in clinical trial materials resulting from the covid-19 pandemic ; the timing and receipt of regulatory approvals ; and the efficacy and safety profile of the product candidates . 86 in addition , the probability of success of our gene therapy products in development and any other product candidate will depend on numerous factors , including competition , manufacturing capability and commercial viability . we may never succeed in achieving regulatory approval of our gene therapy product candidates for any indication in any country . as a result of the uncertainties discussed above , we are unable to determine in advance the duration and completion costs of any clinical trial we conduct , or when and to what extent we will generate revenue from the commercialization and sale of our products in development or other product candidates , if at all . general and administrative expense general and administrative expenses consist primarily of share-based compensation , legal and accounting fees , consulting services , and employee-related expenses , such as salaries , benefits and travel expenses , for general and administrative personnel . general and administrative expenses also include fees for services received by asg under the services agreements with rsi and rsg . we anticipate that our general and administrative expenses will continue to decrease in the near term , primarily as the result of further reductions expected in overhead-related expenses . story_separator_special_tag operations , for the foreseeable future as we continue to develop our gene therapy product candidates and prepare for potential future regulatory approvals and commercialization of our products . we have not generated any revenue to date and do not expect to generate product revenue unless and until we successfully complete development and obtain regulatory approval for at least one of our gene therapy product candidates . our current cash and cash equivalents balance will also not be sufficient to complete all necessary development activities and commercially launch our products . we expect to spend substantial amounts to complete the development of , seek regulatory approvals for and commercialize our gene therapy product candidates . in addition , as part of our business development strategy , we generally structure our license agreements and collaboration agreements so that a significant portion of the total license cost is contingent upon the successful achievement of specified development , regulatory or commercial milestones . as a result , we will require cash to make payments upon achievement of these milestones under these agreements . based on our anticipated timeline for the achievement of development , regulatory and commercial milestones , we do not expect significant milestone payments under our license and collaboration agreements to come due during the fiscal year ending march 31 , 2021 . 88 because the length of time and activities associated with successful development of our gene therapy product candidates are highly uncertain , we are unable to estimate the actual funds we will require for development and any approved marketing and commercialization activities . we anticipate that our current cash and cash equivalents balance will be sufficient to fund our clinical milestones for our gene therapy programs during the current fiscal year . our future funding requirements , both near and long-term , will depend on many factors , including , but not limited to : the progress , timing , costs and results of our clinical trials of our gene therapy product candidates ; the effects of the covid-19 pandemic on our business and operations , the medical community and the global economy ; the outcome , timing and cost of meeting regulatory requirements established by the fda , the ema , or the pmda , and other comparable foreign regulatory authorities ; the achievement of certain development , regulatory and commercialization milestones that give rise to milestone and royalty payments to licensors ; the cost of filing , prosecuting , defending and enforcing our patent claims and other intellectual property rights ; the cost of obtaining necessary intellectual property and defending potential intellectual property disputes , including patent infringement actions brought by third parties against us or our gene therapy product candidates or any future gene therapy product candidates ; the effect of competing technological and market developments ; the cost and timing of completion of commercial-scale manufacturing activities ; the cost of establishing sales , marketing and distribution capabilities for our gene therapy product candidates in regions where we choose to commercialize our products on our own ; and the initiation , progress , timing and results of our commercialization of our gene therapy product candidates , if approved for commercial sale . as of march 31 , 2020 , our cash and cash equivalents totaled $ 80.8 million and our accumulated deficit was $ 758.6 million . for the years ended march 31 , 2020 and 2019 , we incurred net losses of $ 72.6 million and $ 129.1 million , respectively . as of march 31 , 2020 , we had aggregate gross interest-bearing indebtedness of $ 15.7 million due within one year , which was fully prepaid in april 2020. we also had $ 16.6 million of other non-interest-bearing current liabilities due within one year .
| million in costs allocated under our service agreements with rsi and rsg as a result of the decentralization of the services formerly provided to us . general and administrative expenses general and administrative expenses were $ 22.1 million for the year ended march 31 , 2020 and $ 39.5 million for the year ended march 31 , 2019 , with the $ 17.4 million decrease primarily related to reductions in ( i ) share-based compensation expense of $ 6.6 million and personnel costs of $ 2.3 million attributable to reduced headcount , ( ii ) legal fees of $ 4.5 million , and ( iii ) costs allocated under our services agreements with rsi and rsg of $ 2.6 million as a result of the decentralization of the services provided to us . interest expense interest expense was $ 4.4 million and $ 7.5 million for the years ended march 31 , 2020 and 2019 , respectively , which consisted of interest paid and the amortization of debt discount related to our loan and security agreement ( the `` loan agreement '' ) with hercules capital , inc. ( `` hercules ) , whereby we prepaid approximately $ 15.7 million of outstanding principal due without penalty in connection with the november 2019 amendment of the loan agreement . see `` —liquidity and capital resources—loan and security agreement with hercules capital , inc. '' other income other income was $ 1.4 million and $ 5.6 million for the years ended march 31 , 2020 and 2019 , respectively . other income for the year ended march 31 , 2020 included a foreign exchange gain of $ 0.6 million and interest income of $ 0.5 million . other income for the year ended march 31 , 2019 included income of $ 5.9 million associated with convertible preferred stock received from arvelle theraputics b.v. as compensation for services provided and certain intangible assets , partially offset by a foreign exchange loss of $ 0.8 million . liquidity and capital
|
in determining our profits and losses in accordance with this method , we are required to make significant assumptions regarding our future costs and revenues , as well as the estimated number of units to be manufactured under the contract and other variables . we continually review and update our assumptions based on market trends and our most recent experience . if we make material changes to our assumptions , such as a reduction in the estimated number of units to be produced under the contract ( which could be caused by emerging market trends or other factors ) , an increase in future production costs , or a change in the recoverability of increased design or production costs , we may experience negative cumulative catch-up adjustments related to revenues previously recognized . in some cases , we may recognize forward loss amounts . for a broader description of the various types of risks we face related to new and maturing programs , see “ risk factors. ” for discussion of the impacts of the adoption of accounting standards codification ( “ asc ” ) topic 606 on revenues and profit recognition , see note 2 to the consolidated financial statements , summary of significant accounting policies , under the sub-heading “ new accounting pronouncements. ” income taxes our effective tax rate is impacted by , among other things , changes in u.s. and non-u.s. tax laws in the countries in which we operate , and changes in the mix of our earnings among countries with differing statutory tax rates . on december 22 , 2017 , president trump signed into law legislation referred to as the tcja . substantially all of the provisions of the tcja are effective for taxable years beginning after december 31 , 2017. the tcja includes significant changes to the internal revenue code of 1986 , as amended ( the “ code ” ) , including amendments which significantly change the taxation of business entities . some of the more significant changes that impact our company included in the tcja are reductions in the corporate federal income tax rate from 35 % to 21 % , the elimination of the domestic manufacturing deduction , the ability to immediately expense certain property for specific tax years , the requirement for companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred , and new taxes on certain foreign sourced earnings as the u.s. transitions to a territorial tax system . the staff of the sec has recognized the complexity of reflecting the impacts of the tcja , and , on december 22 , 2017 , issued guidance in staff accounting bulletin 118 ( “ sab 118 ” ) . sab 118 clarifies accounting for income taxes under asc topic 740 , income taxes ( “ asc 740 ” ) , if information is not yet available or complete and provides for up to a one-year period in which to complete the required analyses and accounting ( the measurement period ) . sab 118 describes three scenarios ( or “ buckets ” ) associated with a company 's status of accounting for income tax reform : ( 1 ) a company is complete with its accounting for certain effects of tax reform , ( 2 ) a company is able to determine a reasonable estimate for certain effects of tax reform and records that estimate as a provisional amount , or ( 3 ) a company is not able to determine a reasonable estimate and therefore continues to apply asc 740 , based on the provisions of the tax laws that were in effect immediately prior to the tcja being enacted . at december 31 , 2017 , we have not completed our accounting for the tax effects of enactment of the tcja ; however , in certain cases , as described below , we have made a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax . in other cases , we have not been able to make a reasonable estimate and continue to account for those items based on our existing accounting under asc 740 and the provisions of the tax laws that were in effect immediately prior to enactment of the tcja . for the items for which we were able to determine a reasonable estimate , we recognized a provisional amount of $ 28.7 million , which is included as a component of income tax expense from continuing operations . 35 provisional amounts deferred tax assets and liabilities : we re-measured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future . however , we are still analyzing certain aspects of the tcja and refining our calculations , which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts . included within our net deferred tax assets and liabilities are state income tax credits , which are recorded net of federal tax expense . with a lower federal income tax rate of 21 % , the net value of these credits has increased . the provisional amount recorded related to the re-measurement of our net deferred tax asset balance was a tax benefit recorded as a component of income tax from continuing operations of $ 16.2 million . foreign tax effects : the one-time transition tax is based on our total post-1986 earnings and profits ( “ e & p ” ) that we previously deferred from u.s. income taxes . we recorded a provisional amount for our one-time transition tax liability for all of our foreign operating subsidiaries , resulting in an increase in income tax expense of $ 44.9 million , including the anticipated state income tax effect . for federal income tax purposes , we will elect to pay this over a period of eight years as provided for in the tcja . story_separator_special_tag we have analyzed and calculated a provisional estimate for the cumulative post-1986 e & p for these foreign operating subsidiaries , the impact of certain expense allocations , the potential impact of any recapture of an overall foreign loss balance and an assessment of potential foreign tax credits . further , the transition tax is based in part on the amount of those earnings held in cash and other specified assets . this amount may change when we finalize the calculation of post-1986 foreign e & p previously deferred from u.s. federal taxation and finalize the amounts held in cash or other specified assets . we continue to maintain that earnings of all foreign operating subsidiaries are indefinitely invested outside the u.s. on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings to fund working capital requirements , service existing obligations , and invest in efforts to secure future business . as a result , no additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax , or any additional outside basis difference inherent in these entities . we have completed analysis regarding potential withholding tax related to potential future dividends and anticipate that any associated withholding taxes would be immaterial based upon current law . determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities ( i.e. , basis difference in excess of that subject to the one-time transition tax ) is not practicable at this time . the tcja introduces a tax on global intangible low-taxed income ( “ gilti ” ) for years ending after december 31 , 2017. our analysis and accounting for the effects of the gilti provision is incomplete and an accounting policy on whether we will account for gilti as a period expense or record deferred taxes for anticipated gilti has not been made . income taxes are accounted for in accordance with fasb authoritative guidance on accounting for income taxes . deferred income tax assets and liabilities are recognized for the future income tax consequences attributable to differences between the financial statement carrying amounts for existing assets and liabilities and their respective tax bases . tax rate changes impacting these assets and liabilities are recognized in the period during which the rate change occurs . a valuation allowance , if needed , reduces deferred tax assets to the amount expected to be realized . when determining the amount of net deferred tax assets that are more likely than not to be realized , we assess all available positive and negative evidence . the weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified . we record an income tax expense or benefit based on the net income earned or net loss incurred in each tax jurisdiction and the tax rate applicable to that income or loss . in the ordinary course of business , there are transactions for which the ultimate tax outcome is uncertain . these uncertainties are accounted for in accordance with fasb authoritative guidance on accounting for the uncertainty in income taxes . the final tax outcome for these matters may be different than management 's original estimates made in determining the income tax provision . a change to these estimates could impact the effective tax rate and net income or loss in subsequent periods . we use the flow-through accounting method for tax credits . under this method , tax credits reduce income tax expense . story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; font-style : italic ; '' > net revenues . net revenues for the twelve months ended december 31 , 2017 were $ 6,983.0 million , an increase of $ 190.1 million , or 3 % , compared with net revenues of $ 6,792.9 million for the prior year . the increase was primarily due to higher production deliveries on the b737 , b787 , a320 , and a350 xwb programs , increased defense related activity , and higher revenues recognized on certain non-recurring boeing programs , partially offset by lower production deliveries on the b747 and b777 , decreased gcs & s activity , lower revenue recognized on the b787 program in accordance with pricing terms under the b787 agreement , and the absence of a one-time customer claim settlement recorded in the first half of 2016. approximately 95 % of spirit 's net revenues in 2017 came from our two largest customers , boeing and airbus . deliveries to boeing increased to 772 shipsets during 2017 , compared to 756 shipsets delivered in the prior year , driven by production increases on the b737 , b767 , and b787 programs , partially offset by decreases on the b747 and b777 programs . deliveries to airbus increased to 791 shipsets during 2017 , compared to 739 shipsets delivered in the prior year , primarily driven by higher production of the a320 and a350 xwb programs , partially offset by decreased production on the a380 program . 38 production deliveries of business/regional jet wing and wing components remained flat at 88 shipsets during both 2017 and 2016. in total , shipset deliveries increased 4 % to 1,651 shipsets in 2017 compared to 1,583 shipsets in 2016. gross profit . gross profit was $ 820.5 million for the twelve months ended december 31 , 2017 , as compared to $ 989.3 million for the same period in the prior year . the decrease in gross profit was primarily driven by net forward loss charges recognized for the b787 program in the second quarter of 2017 , partially offset by the absence of forward loss charges recognized on the a350 xwb fuselage program during 2016. sg & a and research and development .
| the net forward loss charges were primarily driven by the boeing pricing negotiations including the effect of executing the collective resolution memorandum of understanding with boeing ( the “ mou ” ) and extending the current b787 contract block in the second quarter . favorable cumulative catch-up adjustments for the periods prior to 2017 were primarily driven by productivity and efficiency improvements and favorable cost performance . during the twelve months ended december 31 , 2016 , we recognized total changes in estimates of ( $ 81.6 ) million , which includes net forward loss charges of ( $ 118.2 ) million and favorable cumulative catch-up adjustments related to periods prior to 2016 of $ 36.6 million . net forward loss charges were primarily driven by various disruption and production inefficiencies related to achieving production rate increases on the a350 xwb fuselage program . favorable cumulative catch-up adjustments for the periods prior to 2016 were primarily driven by productivity and efficiency improvements , favorable cost performance , mitigation of risk on maturing programs , and favorable pricing negotiations on a maturing program . during the twelve months ended december 31 , 2015 , we recognized total changes in estimates of $ 52.4 million , which includes favorable cumulative catch-up adjustments related to periods prior to 2015 of $ 41.6 million and favorable changes in estimates on loss programs of $ 10.8 million , which is net of forward loss charges of ( $ 6.9 ) million . favorable cumulative catch-up adjustments for the periods prior to 2015 and changes in estimates on loss programs were primarily driven by productivity and efficiency improvements , favorable cost performance , mitigation of risk , benefits from increased production rates related to the absorption of fixed costs , and favorable pricing negotiations on a maturing program . forward loss charges were due to a production rate decrease on a mature program . the company is currently working on several programs , primarily the b787 , a350 xwb , and br725 programs , that carry risks associated with design responsibility , development of production tooling , production inefficiencies during the early phases of production , hiring and
|
during the third quarter of 2016 , we initiated plans to sell the operations of our ahn biotechnologie gmbh subsidiary ( ahn ) , located in nordhausen , germany . ahn is a manufacturer of liquid handling products which had revenues of $ 2.1 million in 2016. we concluded the sale of ahn in the fourth quarter of 2016 , for gross cash proceeds of approximately $ 1.7 million . our strategy our vision is to be a world leading life science company that excels in meeting the needs of our customers by providing a wide breath of innovative products and solutions , while providing exemplary customer service . our business strategy is to grow our top-line and bottom-line , and build shareholder value through a commitment to : commercial excellence ; new product development ; strategic acquisitions ; and operational efficiencies . in the table below , we provide an overview of selected operating metrics . replace_table_token_7_th components of operating income revenues . we generate revenues by selling apparatus , instruments , devices and consumables through our distributors , direct sales force , websites and catalogs . our websites and catalogs serve as the primary sales tools for our cell and animal physiology product line . this product line includes both proprietary manufactured products and complementary products from various suppliers . our reputation as a leading producer in many of our manufactured products creates traffic to our website , enables cross-selling and facilitates the introduction of new products . we have field sales teams in the u.s. , canada , the united kingdom , germany , france , spain and china . in those regions where we do not have a direct sales team , we use distributors . revenues from direct sales to end users represented approximately 64 % , 63 % and 58 % of our revenues for the years ended december 31 , 2016 , 2015 and 2014 , respectively . 25 products in our molecular separation and analysis product line are generally sold by distributors , and are typically priced in the range of $ 5,000- $ 15,000. they are mainly scientific instruments like spectrophotometers and plate readers that analyze light to detect and quantify a wide range of molecular and cellular processes , or apparatus like gel electrophoresis units . we also use distributors for both our catalog products and our higher priced products , for sales in locations where we do not have subsidiaries or where we have existing distributors in place from acquired businesses . for the years ended december 31 , 2016 , 2015 and 2014 , approximately 36 % , 37 % and 42 % of our revenues , respectively , were derived from sales to distributors . for the years ended december 31 , 2016 , 2015 and 2014 , approximately 62 % , 62 % and 65 % of our revenues , respectively , were derived from products we manufacture , approximately 14 % , 13 % and 10 % , respectively , were derived from complementary products we distribute in order to provide the researcher with a single source for all equipment needed to conduct a particular experiment . approximately 24 % , 25 % and 25 % of our revenues , respectively , for the years ended december 31 , 2016 , 2015 , 2014 were derived from distributed products sold under our brand names . for the years ended december 31 , 2016 , 2015 and 2014 , approximately 38 % , 40 % and 41 % of our revenues , respectively , were derived from sales made by our non-united states operations . the decrease in international revenues was primarily due to the effects of currency fluctuation , and the impact of softness in the european funding environment . changes in the relative proportion of our revenue sources between catalog or website sales , direct sales and distribution sales are primarily the result of a different sales proportion of acquired companies and changes in geographic mix . cost of revenues . cost of revenues includes material , labor and manufacturing overhead costs , obsolescence charges , packaging costs , warranty costs , shipping costs and royalties . our cost of revenues may vary over time based on the mix of products sold . we sell products that we manufacture and products that we purchase from third parties . the products that we purchase from third parties typically have a higher cost of revenues as a percent of revenues because the profit is effectively shared with the original manufacturer . we anticipate that our manufactured products will continue to have a lower cost of revenues as a percentage of revenues as compared with the cost of non-manufactured products for the foreseeable future . additionally , our cost of revenues as a percent of revenues will vary based on mix of direct to end user sales and distributor sales , mix by product line and mix by geography . sales and marketing expenses . sales and marketing expense consists primarily of salaries and related expenses for personnel in sales , marketing and customer support functions . we also incur costs for travel , trade shows , demonstration equipment , public relations and marketing materials , consisting primarily of the printing and distribution of our catalogs , supplements and the maintenance of our websites . we may from time to time expand our marketing efforts by employing additional technical marketing specialists in an effort to increase sales of selected categories of products . we may also from time to time expand our direct sales organizations in an effort to concentrate on key accounts or promote certain product lines . general and administrative expenses . general and administrative expense consists primarily of salaries and other related costs for personnel in executive , finance , accounting , information technology and human resource functions . other costs include professional fees for legal and accounting services , facility costs , investor relations , insurance and provision for doubtful accounts . research and development expenses . story_separator_special_tag research and development expense consists primarily of salaries and related expenses for personnel and spending to develop and enhance our products . other research and development expense includes fees for consultants and outside service providers , and material costs for prototype and test units . we expense research and development costs as incurred . from time to time , we receive grants from governmental entities in relation to research projects . such grants received are accounted for as a reduction in research and development expense over the period of the project . we believe that investment in product development is a competitive necessity and plan to continue to make these investments in order to realize the potential of new technologies that we develop , license or acquire for existing markets . restructuring charges . restructuring charges consist of severance , other personnel-related charges and exit costs related to plans to create organizational efficiencies and reduce operating expenses . 26 stock-based compensation expenses . stock-based compensation expense for the years ended december 31 , 2016 , 2015 and 2014 was $ 3.5 million , $ 2.8 million and $ 2.2 million , respectively . the stock-based compensation expense related to stock options , restricted stock units , restricted stock units with a market condition and the employee stock purchase plan and was recorded as a component of cost of revenues , sales and marketing expenses , general and administrative expenses , research and development expenses and discontinued operations . currently , we intend to retain all of our earnings to finance the expansion and development of our business and do not anticipate paying any cash dividends to holders of our common stock in the near future . as a result , capital appreciation , if any , of our common stock will be a stockholder 's sole source of gain for the near future . story_separator_special_tag made redundant as a result of our site consolidations and a realignment of our commercial sales team . amortization of intangible assets amortization of intangible asset expenses was $ 2.7 million for the year ended december 31 , 2016 compared with $ 2.8 million for the year ended december 31 , 2015. impairment charges during the third quarter of 2016 , we initiated plans to sell the operations of ahn . as a result of initiating the plan to sell the operations of ahn , we evaluated the long-lived assets for impairment , pursuant to asc 360-10. based on the resulting impairment analysis , we recognized an impairment charge of $ 0.7 million for the year ended december 31 , 2016. loss on sale of ahn the loss on sale of ahn was $ 1.2 million for the year ended december 31 , 2016. during the fourth quarter of 2016 , we concluded the sale of ahn . upon the closing of the transaction , we recorded a loss on sale of $ 1.2 million for the year ended december 31 , 2016. other expense , net other expense , net , was $ 0.1 million and $ 1.9 million for the years ended december 31 , 2016 and 2015 , respectively . included in other expense , net for the year ended december 31 , 2016 was interest expense of $ 0.6 million . for the year ended december 31 , 2015 other expense , net included $ 0.9 million of interest expense and $ 1.2 million of acquisition related costs , including due diligence and deal investigative activities . the decrease in other expense , net was primarily due to the decrease in acquisition related costs and currency exchange rate fluctuations . currency exchange rate fluctuations included as a component of net ( loss ) income resulted in approximately $ 0.7 million in currency gains during the year ended december 31 , 2016 , compared to $ 0.2 million in currency gains during the year ended december 31 , 2015 . 28 income taxes income tax expense was approximately $ 1.2 million and $ 15.4 million for the years ended december 31 , 2016 and 2015 , respectively . the decrease in income tax expense year over year was primarily attributable to the recognition of a valuation allowance on u.s. deferred tax assets in 2015. during the year ended december 31 , 2015 , we determined that it was more likely than not that our u.s. deferred tax assets would not be realized and therefore recorded a net increase to the valuation allowance of $ 16.4 million to offset u.s. deferred tax assets net of deferred tax liabilities except for certain indefinite-lived intangible assets . this decision was based on all available evidence . year ended december 31 , 2015 compared to year ended december 31 , 2014 each reporting period , we face currency exposure that arises from translating the results of our worldwide operations to the united states dollar at exchange rates that fluctuate from the beginning of such period . we evaluate our results of operations on both a reported and a foreign currency-neutral basis , which excludes the impact of fluctuations in foreign currency exchange rates . we believe that disclosing this non-gaap financial information provides investors with an enhanced understanding of the underlying operations of the business . this non-gaap financial information approximates information used by our management to internally evaluate our operating results . the non-gaap financial information provided below should be considered in addition to , not as a substitute for , the financial information provided and presented in accordance with accounting principles generally accepted in the united states , or gaap . revenues revenues for the year ended december 31 , 2015 were $ 108.7 million , and flat compared to revenues for the year ended december 31 , 2014. revenues contributed by our mcs , tbsi and heka acquisitions were offset by the negative impact of currency translation and ge healthcare discontinuing the sale of its spectrophotometer products , which amounted to approximately $ 4.0 million and $ 2.1 million , respectively , in lower revenues during 2015. excluding the impact of currency translation , revenues increased approximately 3.7
| reconciliation of changes in revenues compared to the same period of the prior year for the year ended december 31 , 2016 decline -1.8 % foreign exchange effect -2.0 % net revenue decline -3.8 % cost of revenues cost of revenues were $ 56.1 million for the year ended december 31 , 2016 , a decrease of $ 3.8 million , or 6.4 % , compared with $ 59.9 million for the year ended december 31 , 2015. gross profit margin as a percentage of revenues increased to 46.3 % for the year ended december 31 , 2016 compared with 44.8 % for 2015. the increase in gross profit margin was due primarily due to the savings associated with the relocation and consolidation of certain facilities in 2015 . 27 sales and marketing expenses sales and marketing expenses decreased $ 0.1 million , or 0.4 % , to $ 20.5 million for the year ended december 31 , 2016 compared with $ 20.6 million for the year ended december 31 , 2015. the decrease was primarily due to favorable currency translation and the impact of our restructuring activities . general and administrative expenses general and administrative expenses were $ 21.0 million for the year ended december 31 , 2016 , an increase of $ 1.2 million , or 5.6 % , compared with $ 19.8 million for the year ended december 31 , 2015. the increase was primarily due to audit and forensic investigation costs , higher stock compensation expense , partially offset by favorable currency translation , and the impact of our restructuring activities . research and development expenses research and development expenses were $ 5.4 million for the year ended december 31 , 2016 , a decrease of $ 1.0 million , or 16.0 % , compared with $ 6.4 million for the year ended december 31 , 2015. the decrease was primarily due to the impact of our restructuring activities , favorable currency translation , and an increase in the amount of research grants earned . research grants earned are accounted for as a reduction in research and development expense . restructuring restructuring charges were immaterial for the year ended december 31 , 2016 compared with $
|
the hush puppies ® decline was due to strategic reductions in the u.s. department store channel , while the company believes the stride rite ® decline was impacted by lower retail store traffic and negative weather trends . these declines were partially offset by growth in the high teens for keds ® , driven by continued marketing investment in support of the brand . the lifestyle group 's operating profit decreased $ 38.0 million , or 22.6 % , in fiscal 2014 compared to fiscal 2013. the decrease was due primarily to the revenue decline and negative product mix for sperry top-sider ® and a lower gross margin for stride rite ® due to retail store close-out activities . partially offsetting these declines was a higher operating profit for keds ® due to higher revenues . the lifestyle group 's revenue increased $ 777.0 million , or 251.0 % , in fiscal 2013 compared to fiscal 2012. the revenue increase in fiscal 2013 was due to the full year inclusion of the sperry top-sider ® , stride rite ® and keds ® brands . the lifestyle group 's operating profit increased $ 123.6 million , or 277.1 % , in fiscal 2013 compared to fiscal 2012. hush puppies ® operating profit increased at a growth rate in the mid teens due primarily to a mid single-digit reduction in selling , general and administrative costs . 25 the remainder of the operating profit increase in fiscal 2013 was due to the full year inclusion of the sperry top-sider ® , stride rite ® and keds ® brands . performance group the performance group 's revenue increased $ 44.9 million , or 4.7 % , in fiscal 2014 compared to fiscal 2013. the positive growth rate was driven by high single-digit growth from saucony ® , low single-digit growth from merrell ® and growth in the mid twenties from chaco ® . saucony ® benefited from growth in its franchise products and the lifestyle-oriented originals product , merrell ® benefited from growth in its performance outdoor product category and chaco ® experienced increased demand for its core sandal product . the performance group 's operating profit increased $ 17.8 million , or 9.9 % , in fiscal 2014 compared to fiscal 2013. the operating profit increase was due primarily to the revenue increases for merrell ® , saucony ® and chaco ® and gross margin expansion from merrell ® and chaco ® due to a reduction in low margin close-out sales . the performance group 's revenue increased $ 271.2 million , or 40.2 % , in fiscal 2013 compared to fiscal 2012. the increase was due partially to the merrell ® brand 's mid single-digit revenue increase . the remainder of the increase was due to the full year inclusion of the saucony ® brand . the performance group 's operating profit increased $ 51.4 million , or 40.0 % , in fiscal 2013 compared to fiscal 2012. the merrell ® brand experienced operating income growth in the low single-digits . the remainder of the increase was due to the full year inclusion of the saucony ® brand . heritage group the heritage group 's revenue increased $ 39.6 million , or 7.0 % , in fiscal 2014 compared to fiscal 2013. the positive growth rate was driven by high single-digit growth from wolverine ® , high teen growth from cat ® and growth in the mid teens from harley-davidson ® . wolverine ® benefited from growth in its work , outdoor and heritage product collections . cat ® benefited from strong global demand and a higher mix of top-line international revenue . partially offsetting these increases was a revenue decline in the mid teens for sebago ® due to poor sell through of key product categories . the heritage group 's operating profit increased $ 9.7 million , or 11.3 % , in fiscal 2014 compared to fiscal 2013. the operating profit increase was due primarily to the revenue increases for wolverine ® , cat ® and harley-davidson ® . the heritage group 's revenue increased $ 3.5 million , or 0.6 % , in fiscal 2013 compared to fiscal 2012. the heritage group 's operating profit increased $ 2.2 million , or 2.6 % , in fiscal 2013 compared to fiscal 2012. corporate corporate expenses decreased $ 44.4 million in fiscal 2014 compared to fiscal 2013. corporate expenses were favorably impacted by lower acquisition-related integration costs associated with the integration of the plg business ( $ 26.3 million ) , lower pension expense ( $ 25.4 million ) and incentive compensation expenses ( $ 5.8 million ) , which were partially offset by incremental restructuring costs ( $ 18.7 million ) . corporate expenses increased $ 99.9 million in fiscal 2013 compared to fiscal 2012. the drivers of the increase include $ 48.1 million of corporate expenses related to the full year inclusion of the acquired plg business . the company also incurred an incremental $ 4.5 million of acquisition-related transaction and integration costs , $ 7.6 million of restructuring costs related to its manufacturing operations in the dominican republic , incremental incentive compensation expenses of $ 13.1 million and incremental pension expense of $ 9.4 million . the remainder of the increase was due to various incremental corporate expenses due to the larger size and complexity of the company . 26 liquidity and capital resources replace_table_token_7_th ( 1 ) amounts are net of both borrowings and outstanding standby letters of credit in accordance with the terms of the current revolving credit facility . story_separator_special_tag liquidity cash and cash equivalents of $ 223.8 million as of january 3 , 2015 were $ 9.6 million higher compared to december 28 , 2013. in addition , the company had $ 196.4 million available under a revolving credit agreement ( the “ revolving credit facility ” ) as of january 3 , 2015. at january 3 , 2015 , the company had $ 208.1 million of cash and cash equivalents located in foreign jurisdictions , in which the company intends to permanently reinvest these funds . the company had outstanding standby letters of credit under the revolving credit facility of approximately $ 3.6 million at january 3 , 2015. operating activities the principal source of the company 's operating cash flow is net earnings , including cash receipts from the sale of the company 's products , net of costs of goods sold . higher earnings performance during fiscal 2014 along with the sale of certain accounts receivable drove the increase in cash from operations compared to fiscal 2013. during fiscal 2014 , a decrease in net working capital represented a source of cash of $ 86.9 million . working capital balances were favorably impacted by a decrease in accounts receivable of $ 76.5 million due primarily to the cash inflow of $ 65.5 million related to the sales of certain accounts receivable described above , partially offset by an increase in other operating assets of $ 17.8 million . an increase in accounts payable and other operating liabilities represented a source of cash of $ 16.2 million and $ 9.1 million , respectively , in fiscal 2014. during fiscal 2013 , an increase in net working capital represented a use of cash of $ 2.5 million . working capital balances were negatively impacted by an increase in accounts receivable of $ 41.3 million , which was partially offset by a decrease in inventory and other operating assets of $ 35.1 million and $ 12.8 million , respectively . a decrease in accounts payable represented a use of cash of $ 26.5 million , which was partially offset by an increase of $ 17.4 million from other operating liabilities . investing activities the company made capital expenditures of $ 30.0 million in fiscal 2014 compared to $ 41.7 million in fiscal 2013. the decrease in capital expenditures during fiscal 2014 was primarily due to fewer new retail stores being opened . the majority of the company 's capital expenditures in both years were for retail store investments , information system enhancements and building improvements . the company made capital expenditures of $ 41.7 million in fiscal 2013 compared to $ 14.9 million in fiscal 2012. the increase in capital expenditures was due to the acquisition of plg in the fourth quarter of fiscal 2012 and the resulting larger scale and scope of the company . included in investing activities in fiscal 2013 were net cash proceeds of $ 2.8 million from the sale of a distribution facility acquired as part of the plg acquisition . the company leases machinery , equipment and certain warehouse , office and retail store space under operating lease agreements that expire at various dates through 2023. financing activities on october 9 , 2012 , the company entered into a credit agreement with a bank syndicate in connection with the plg acquisition . the credit agreement provided the company with two term loans ( a “ term loan a facility ” and a “ term loan b facility ” ) and the revolving credit facility . on october 10 , 2013 , the company amended the credit agreement ( the `` amendment '' ) and paid off the outstanding balance of the term loan b facility while increasing the principal balance of the term loan a facility to $ 775.0 million . the amendment provided for a lower effective interest rate on term loan debt and a one-year extension on both 27 the term loan a facility and revolving credit facility . in addition , the amendment provided for increased debt capacity limited to an aggregate debt amount ( including outstanding term loan principal and revolver commitment amounts in addition to permitted incremental debt ) not to exceed $ 1,350.0 million . the company incurred $ 1.3 million of debt extinguishment costs during the fourth quarter of fiscal 2014 due to accelerating the amortization of capitalized deferred financing fees in relation to debt repayments . the company incurred $ 13.1 million of debt extinguishment costs during the fourth quarter of fiscal 2013 in connection with the refinancing of the company 's debt . these costs represent a write-off of previously capitalized deferred financing fees . on october 9 , 2012 , the company issued $ 375.0 million of senior notes , which bear interest at a 6.125 % fixed rate and are due in 2020. during the third quarter of fiscal 2013 , the company exchanged the senior notes ( the `` public bonds '' ) . related interest payments are due semi-annually . the public bonds are guaranteed by substantially all of the company 's domestic subsidiaries . the company used the borrowings under the term loan facilities , together with the net proceeds from the senior notes and cash on hand , to finance the plg acquisition , repay any amounts outstanding under prior indebtedness , terminate its prior revolving credit facility and provide for the working capital needs of the company , including the payment of transaction expenses in connection with the acquisition . as of january 3 , 2015 , the company was in compliance with all covenants and performance ratios . the company 's debt at january 3 , 2015 was $ 900.8 million compared to $ 1,150.0 million at december 28 , 2013. the net decrease in debt was primarily a result of principal payments on the term loan a facility , including $ 200.0 million of voluntary debt payments during fiscal 2014. the decrease in debt during fiscal 2013 was primarily a result of principal payments , including $ 85.0 million of voluntary debt payments .
| for fiscal 2013 , the company 's gross margin was 39.6 % compared to 38.3 % in fiscal 2012. the increase was driven by favorable channel mix ( 150 basis points ) , higher selling prices ( 80 basis points ) and lower lifo expense ( 20 basis points ) , which were partially offset by higher product costs ( 70 basis points ) , restructuring costs ( 40 basis points ) and negative foreign exchange impact ( 20 basis points ) . operating expenses operating expenses decreased $ 15.8 million in fiscal 2014 , to $ 856.4 million . operating expenses were favorably impacted by lower acquisition-related integration costs associated with the integration of the plg business ( $ 26.3 million ) , lower pension expense ( $ 25.4 million ) and lower incentive compensation expenses ( $ 5.8 million ) . partially offsetting these declines were incremental restructuring costs ( $ 25.3 million ) , incremental selling expenses ( $ 6.5 million ) and incremental brand building expense ( $ 8.8 million ) . changes in foreign exchange rates had a $ 1.8 million favorable impact on reported operating expenses . operating expenses increased $ 357.7 million in fiscal 2013 to $ 872.2 million . approximately $ 9.0 million of the increase relates to higher acquisition-related integration costs associated with the integration of the plg business . incremental compensation expense ( $ 13.1 million ) , incremental amortization expense related to purchase price accounting for the plg acquisition ( $ 11.9 million ) , incremental pension expense ( $ 9.4 million ) and incremental brand building investments ( $ 6.0 million ) also contributed to the increase in operating expenses . changes in foreign exchange rates had a $ 0.7 million favorable impact on reported operating expenses . the remainder of the operating expense increase was due to the full-year inclusion of the plg business within the company 's results . interest , other and taxes net interest expense was $ 45.4 million in fiscal 2014 compared to $ 52.0 million in fiscal 2013. the decrease reflects the benefits of the amendment to the credit
|
” overview we are a unique pharmaceutical company focused on developing , acquiring , and commercializing innovative pharmaceutical products that fulfill an unmet patient need . since the formation of our company in 2017 , we have used our expertise in business development , regulatory , and product development to assemble a diversified portfolio of nine products . all nine products have now been submitted to the fda and three of them have been approved and commercially launched . we plan to continue growing our business through the acquisition of additional late-stage , high-value product candidates . story_separator_special_tag > replace_table_token_2_th 48 liquidity and capital resources as of december 31 , 2020 , we had total assets of $ 26.3 million , cash and cash equivalents of $ 21.3 million and working capital of $ 20.9 million . we had previously capitalized our operations from the june 2017 private placement of approximately $ 20.1 million of series a preferred stock which converted into shares of our common stock concurrent with our ipo in november 2018 and also the ipo which provided us with net proceeds of $ 22.0 million . in addition , we entered into a credit agreement with swk holdings in november 2019 whereby we drew a $ 5.0 million loan amount at closing and an additional $ 2.0 million in august 2020. in march and april 2020 , we received net proceeds of approximately $ 7.8 million from the sale of shares of its common stock , and in october 2020 , the company received net proceeds of approximately $ 21.0 million from a public offering for its shares at an offering price of $ 7.00 per share . we believe that our existing funding , revenues from our approved products and $ 9.5 million received in february 2021 from the sale of three pediatric neurology product candidates will be sufficient for at least the next twelve months of our operations . however , our projected estimates for our product development spending , administrative expenses and our working capital requirements could be inaccurate , or we may experience growth more quickly or on a larger scale than we expect , any of which could result in the depletion of capital resources more rapidly than anticipated and could require us to seek additional financing earlier than we expect to support our operations . cash flows the following table sets forth a summary of our cash flows for the years ended december 31 , 2020 , 2019 and 2018 ( amounts are in thousands ) : replace_table_token_3_th the increase in cash used in operating activities is primarily a result of higher operating losses due to our business expansion including additional personnel and increased product candidate development activity . investing activities consist primarily of licensing fees for biorphen and capital expenditures for setting up our laboratory facility and our headquarters office . the financing activity primarily consists of the november 2018 ipo , the november 2019 credit agreement borrowing from swk holdings and the october 2020 follow-on common stock offering . critical accounting policies our financial statements are prepared in accordance with gaap . the preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , costs and expenses in our financial statements . we base our estimates on historical experience , known trends and events and various other factors that we believe are 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 . we evaluate our estimates and assumptions on an ongoing basis . our actual results may differ from these estimates under different assumptions or conditions . while our significant accounting policies are described in more detail in note 3 to our financial statements included herein , we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements . revenue recognition we account for contracts with our customers in accordance with accounting standards codification ( “ asc ” ) 606 — revenue from contracts with customers . asc 606 applies to all contracts with customers , except for contracts that are within the scope of other standards . under asc 606 , an entity recognizes revenue when its customer obtains control of promised goods or services , in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services . to determine revenue recognition for arrangements that an entity determines are within the scope of asc 606 , the entity performs the following five steps : ( i ) identify the contract ( s ) with a customer ; ( ii ) identify the performance obligations in the contract ; ( iii ) determine the transaction price ; ( iv ) allocate the transaction price to the performance obligations in the contract ; and ( v ) recognize revenue when ( or as ) the entity satisfies a performance obligation . 49 at contract inception , once the contract is determined to be within the scope of asc 606 , we assess the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct . we then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when ( or as ) the performance obligation is satisfied . arrangements that include rights to additional goods or services that are exercisable at a customer 's discretion are generally considered options . story_separator_special_tag we assess whether these options provide a material right to the customer and , if so , they are considered performance obligations . the exercise of a material right is accounted for as a contract modification for accounting purposes . we recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when ( or as ) each performance obligation is satisfied at a point in time or over time , and if over time this is based on the use of an output or input method . any amounts received prior to revenue recognition will be recorded as deferred revenue . amounts expected to be recognized as revenue within the twelve months following the balance sheet date will be classified as current portion of deferred revenue in our balance sheets . amounts not expected to be recognized as revenue within the twelve months following the balance sheet date are classified as long-term deferred revenue , net of current portion . milestone payments – if a commercial contract arrangement includes development and regulatory milestone payments , we will evaluate whether the milestone conditions have been achieved and if it is probable that a significant revenue reversal would not occur before recognizing the associated revenue . milestone payments that are not within our control or the licensee 's control , such as regulatory approvals , are generally not considered probable of being achieved until those approvals are received . royalties – for arrangements that include sales-based royalties , including milestone payments based on a level of sales , which are the result of a customer-vendor relationship and for which the license is deemed to be the predominant item to which the royalties relate , we will recognize revenue at the later of ( i ) when the related sales occur , or ( ii ) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied . to date , we have not recognized any royalty revenue resulting from any of our licensing arrangements . significant financing component – in determining the transaction price , we will adjust consideration for the effects of the time value of money if the expected period between payment by the licensees and the transfer of the promised goods or services to the licensees will be more than one year . we sell biorphen in the u.s. to wholesale pharmaceutical distributors , who then sell the product to hospitals and other end-user customers . sales to wholesalers are made pursuant to purchase orders subject to the terms of a master agreement , and delivery of individual shipments of biorphen represent performance obligations under each purchase order . we use a third-party logistics ( “ 3pl ” ) vendor to process and fulfill orders and have concluded it is the principal in the sales to wholesalers because it controls access to the 3pl vendor services rendered and directs the 3pl vendor activities . we have no significant obligations to wholesalers to generate pull-through sales . in addition , we sell our alkindi sprinkle product to one pharmacy distributor customer which provides order fulfillment and inventory storage/distribution services . selling prices initially billed to wholesalers are subject to discounts for prompt payment and subsequent chargebacks when the wholesalers sell biorphen at negotiated discounted prices to members of certain group purchasing organizations ( “ gpos ” ) and government programs . in addition , we pay fees to wholesalers for their distribution services , inventory reporting and chargeback processing . we pay gpos fees for administrative services and for access to gpo members and concluded the benefits received in exchange for these fees are not distinct from our sales of biorphen , and accordingly we apply these amounts to reduce revenues . wholesalers also have rights to return unsold product nearing or past the expiration date . because of the shelf life of biorphen and our lengthy return period , there may be a significant period of time between when the product is shipped and when we issue credits on returned product . for our alkindi sprinkle product , we bill at the initial product list prices which are subject to offsets for patient co-pay assistance and potential state medicaid reimbursements which are recorded as a reduction of net revenues at the date of sale/shipment . we estimate the transaction price when we receive each purchase order , taking into account the expected reductions of the selling price initially billed to the wholesaler arising from all of the above factors . we have developed estimates for future returns and chargebacks of biorphen and the impact of the other discounts and fees we pay . our sales of alkindi sprinkle to our distributor are not subject to returns . when estimating these adjustments to the transaction price , we reduce it sufficiently to be able to assert that it is probable that there will be no significant reversal of revenue when the ultimate adjustment amounts are known . we recognize revenue from biorphen product sales and related cost of sales upon product delivery to the wholesaler location . at that time , the wholesalers take control of the product as they take title , bear the risk of loss of ownership , and have an enforceable obligation to pay us . they also have the ability to direct sales of product to their customers on terms and at prices they negotiate . although wholesalers have product return rights , we do not believe they have a significant incentive to return the product to us .
| general and administrative expenses g & a expenses consist primarily of employee compensation expenses , selling and adverting/promotional expenses , legal and professional fees , business insurance and travel expenses . we anticipate that our g & a expenses will increase to support our business growth – particularly with respect to sales and marketing for additional personnel and promotional expenses . research and development expenses set forth below is our r & d spending for our current product candidates . we currently have six employees that support our overall product development and we also have facility and operating costs for a laboratory to support product development . we do not track internal costs by product for our employees and laboratory expenses and they are listed as indirect expenses in the table below ( amounts are in thousands ) . 47 replace_table_token_1_th year ended december 31 , 2019 compared to year ended december 31 , 2018 for the years ended december 31 , 2019 and 2018 , we generated $ 1.0 million and $ 0 in revenue , respectively . the revenue realized in 2019 was from a licensing arrangement for our em-100 product which is pending additional fda review and the launch of our biorphen product in december 2019. for the years 2019 and 2018 , we incurred $ 11.6 million and $ 5.6 million of research and development ( “ r & d ” ) expenses , respectively , and $ 7.6 million and $ 4.7 million of general and administrative ( “ g & a ” ) expenses , respectively . the comparative period detail of our r & d expense is listed in the table below . the $ 2.9 million increase in g & a expenses was primarily due to additional expenses related to becoming a public company , sales and marketing for the launch of our biorphen product , and the impact of personnel additions in the second half of 2018 and first half of 2019. this was partially offset by lower stock-based consulting expenses . in addition , the change in the fair value of our warrant liability
|
as a result , we could experience increased requests for lease deferrals , a continuing decline in our collection rate and additional lease revenue that will not be recognized in future quarters because collection will not be reasonably assured for certain lessees . our lease utilization rate for the fourth quarter of 2020 was 99.8 % . the lease utilization rate is calculated based on the number of days each aircraft was subject to a lease or letter of intent during the period , weighted by the net book value of the aircraft . the severity and longevity of the covid-19 pandemic on our airline customers could result in a decline in our lease utilization rate if our lessees return aircraft to us before the return date in their lease agreement or experience insolvency or initiate bankruptcy or similar proceedings that result in aircraft being returned to us . if this occurs , we may not be able to reposition the aircraft with other airlines as quickly as we have historically been able to do and we may incur increased costs in repositioning such aircraft . a decline in our lease utilization rate would adversely impact our financial results , including our revenue and profitability . during the fourth quarter , our employees continued to work remotely . due to travel restrictions and business limitations and shutdowns , some transitions of our aircraft from one lessee to another lessee have been delayed and we expect continuing challenges when transitioning , acquiring or selling aircraft during the covid-19 pandemic . we have experienced aircraft delivery delays related to covid-19 . while the commitment table in `` item 2. properties '' of this annual report on form 10-k above and the discussion of `` our fleet '' below reflects our current delivery expectations , we are in ongoing discussions with boeing and airbus to determine the extent and duration of delivery delays . the delays could result in a cancellation of leases for those aircraft . as of december 31 , 2020 , we have canceled our orders for 20 737 max aircraft with boeing . while we have planned our capital expenditures for 2021 and beyond based on currently expected delivery schedules , given the current industry circumstances , our aircraft delivery schedule could continue to be subject to material changes . in any case , our capital expenditures will be significantly less than what we planned prior to the pandemic , which will slow our revenue growth , but will further improve our strong liquidity position . similar to 2020 , we anticipate reduced sales activity in 2021 compared to previous years due to aircraft delivery delays from boeing and airbus . we also anticipate that the market for aircraft sales will be weaker due to a reduction in the available aircraft financing in the market as a result of the pandemic . the decline in demand for used aircraft may also continue and ultimately could result in impairment charges to the aircraft in our fleet . covid-19 has caused disruption in the financial markets . we finance the purchase of aircraft and our business with available cash balances , internally generated funds , including through aircraft sales , and debt financings . as of december 31 , 2020 , we had an undrawn balance of $ 6.0 billion under our revolving credit facility ( as defined below ) . during the covid-19 pandemic , we have continued to access to the unsecured debt capital markets issuing approximately $ 3.8 billion in aggregate principal medium-term notes with a weighted average interest rate of 2.6 % . if we were to lose access , we could also seek to enter into secured debt financings , including financings supported through the export-import bank of the united states or other export credit agencies ( `` ecas '' ) to fund future aircraft deliveries from our orderbook . our liquidity is discussed below in more detail under `` liquidity and capital resources . '' we expect our business , results of operations and financial condition will continue to be negatively impacted in the near term , and the pandemic could have a larger impact on our results of operations in 2021 than has been reflected during 2020. in addition , given the dynamic nature of this situation , we can not reasonably estimate the continued 38 impacts of the covid-19 pandemic on our business , results of operations and financial condition for the foreseeable future . we believe , however , that the airline industry will eventually recover and aircraft travel will return to historical levels over the long term . see `` aircraft industry and sources of revenues '' below . further , we believe we are well positioned to offer solutions for airlines , because we can offer the ability to lease younger , more fuel-efficient aircraft at a time when airlines will be focused on reducing capital requirements and managing costs . 2020 overview during the year ended december 31 , 2020 , we purchased and took delivery of 26 aircraft from our new order pipeline , purchased 15 incremental aircraft in the secondary market , and sold eight aircraft , ending the period with a total of 332 aircraft in our operating lease portfolio with a net book value of $ 20.4 billion . the weighted average lease term remaining on our operating lease portfolio was 6.9 years and the weighted average age of our fleet was 4.1 years as of december 31 , 2020. the net book value of our fleet grew by 9.0 % , to $ 20.4 billion as of december 31 , 2020 compared to $ 18.7 billion as of december 31 , 2019. our managed fleet decreased slightly to 81 aircraft as compared to the prior year primarily due to aircraft sales from our managed fleet . we have a globally diversified customer base comprised of 112 airlines in 60 countries . our lease utilization rate for the fourth quarter of 2020 was 99.8 % . story_separator_special_tag as of december 31 , 2020 , we had commitments to purchase 361 aircraft from boeing and airbus for delivery through 2027 , with an estimated aggregate commitment of $ 23.9 billion . we ended 2020 with $ 26.8 billion in committed minimum future rental payments . we have placed approximately 92 % of our committed orderbook on long-term leases for aircraft delivering through the end of 2022 and 73 % through the end of 2023. we have $ 13.6 billion in contracted minimum rental payments on the aircraft in our existing fleet and $ 13.2 billion in minimum future rental payments related to aircraft which will deliver between 2021 through 2025. we finance the purchase of aircraft and our business with available cash balances , internally generated funds , including through aircraft sales , and debt financings . our debt financing strategy is focused on raising unsecured debt in the global bank and debt capital markets , with a limited utilization of government guaranteed export credit or other forms of secured financing . in 2020 , we issued approximately $ 4.5 billion in aggregate principal amount of senior unsecured notes with maturities ranging from 2025 to 2030 and a weighted average interest rate of 2.93 % . we ended 2020 with total debt outstanding , net of discounts and issuance costs , of $ 16.5 billion , of which 93.0 % was at a fixed rate and 98.2 % of which was unsecured . as of december 31 , 2020 , our composite cost of funds was 3.13 % . our total revenues for the year ended december 31 , 2020 decreased by 0.1 % to $ 2.0 billion as compared to 2019. despite the continued growth of our fleet , our revenues decreased due to a reduction in our aircraft sales , trading and other activity . additionally , we were not able to recognize $ 49.4 million of rental revenue because collection was not reasonably assured for certain of our leases . finally , we entered into lease restructurings , which typically included lease extensions , resulting in a decrease of approximately $ 49.2 million in revenue for the year ended december 31 , 2020. during the year ended december 31 , 2020 , our net income available to common stockholders was $ 500.9 million compared to $ 575.2 million for the year ended december 31 , 2019. our diluted earnings per share for the full year 2020 was $ 4.39 compared to $ 5.09 for the full year 2019. the decrease in net income available to common stockholders in 2020 as compared to 2019 was primarily due to the decrease in revenues as discussed above and an increase in depreciation and interest expense from the growth of our fleet and due to our increased liquidity position , partially offset by a decrease in selling , general and administrative expenses . our adjusted net income before income taxes excludes the effects of certain non-cash items , one-time or non-recurring items that are not expected to continue in the future and certain other items . our adjusted net income before income taxes for the year ended december 31 , 2020 was $ 692.0 million or $ 6.07 per diluted share , compared to $ 781.2 million , or $ 6.91 per diluted share for the year ended december 31 , 2019. as discussed above , the decrease in our adjusted net income before income taxes in 2020 as compared to 2019 was primarily due to the decrease in revenues and an increase in depreciation and interest expense , partially offset by a decrease in selling , general and administrative expenses . adjusted net income before income taxes and adjusted diluted earnings per share before income taxes are measures of financial and operational performance that are not defined by u.s. generally accepted accounting 39 principles ( “ gaap ” ) . see note 3 in “ item 6. selected financial data ” of this annual report on form 10-k for a discussion of adjusted net income before income taxes and adjusted diluted earnings per share before income taxes as non-gaap measures and a reconciliation of these measures to net income available to common stockholders . our fleet we have continued to build one of the world 's youngest operating lease portfolios , including some of the most fuel-efficient commercial jet aircraft . our fleet , based on net book value , increased by 9.0 % , to $ 20.4 billion as of december 31 , 2020 , compared to $ 18.7 billion as of december 31 , 2019. during the year ended december 31 , 2020 , we took delivery of 26 aircraft from our new order pipeline , purchased 15 incremental aircraft in the secondary market and sold eight aircraft , ending the year with a total of 332 aircraft in our operating lease portfolio . the weighted average fleet age and weighted average remaining lease term of our operating lease portfolio as of december 31 , 2020 were 4.1 years and 6.9 years , respectively . we also managed 81 aircraft as of december 31 , 2020. portfolio metrics of our fleet as of december 31 , 2020 and 2019 are as follows : replace_table_token_13_th ( 1 ) weighted-average fleet age and remaining lease term calculated based on net book value of our operating lease portfolio . ( 2 ) as of december 31 , 2020 , we did not have any aircraft classified as flight equipment held for sale . as of december 31 , 2019 , we had eight aircraft classified as flight equipment held for sale which are included in other assets on the consolidated balance sheets . all of these aircraft are excluded from the owned fleet count and included in our managed fleet count . ( 3 ) as of december 31 , 2020 , we had options to acquire up to 25 airbus a220 aircraft .
| management believes these measures are helpful in evaluating the operating performance of our ongoing operations and identifying trends in our performance , because they remove the effects of certain non-cash items , one-time or non-recurring items that are not expected to continue in the future and certain other items from our operating results . adjusted net income before income taxes , adjusted pre-tax profit margin , adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity , however , should not be considered in isolation or as a substitute for analysis of our operating results or cash flows as reported under gaap . adjusted net income before income taxes , adjusted pre-tax profit margin , adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity do not reflect our cash expenditures or changes in our cash requirements for our working capital needs . in addition , our calculation of adjusted net income before income taxes , adjusted pre-tax profit margin , adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity may differ from the adjusted net income before income taxes , adjusted pre-tax profit margin , adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity , or analogous calculations of other companies in our industry , limiting their usefulness as a comparative measure . the following tables show the reconciliation of net income available to common stockholders to adjusted net income before income taxes and adjusted pre-tax profit margin ( in thousands , except percentages ) : replace_table_token_20_th the following table shows the reconciliation of net income available to common stockholders to adjusted diluted earnings per share before income taxes ( in thousands , except share and per share amounts ) : replace_table_token_21_th 53 the following table shows the reconciliation of net income available to common stockholders to adjusted pre-tax return on common equity ( in thousands , except percentages ) : replace_table_token_22_th 2020 compared to 2019 rental revenue as of december 31 , 2020 , we owned 332 aircraft , with a net book value of $ 20.4 billion , and recorded $ 1.95 billion in rental revenue for the year
|
most major markets had year-over-year gains in both net absorption and office jobs , indicating a broad level of recovery . net absorption is expected to average 10 million square feet to 25 million square feet per page 24 index to financial statements quarter through 2017. the average quoted rental rates of the total office market saw a slight increase from $ 22.95 per square foot in the fourth quarter of 2011 to $ 23.12 per square foot in the fourth quarter of 2012. early 2013 economic indicators are suggesting another year of at least modest growth . transaction activity for the fourth quarter of 2012 was the highest seen in any quarter since the end of 2007 with a volume of $ 29.1 billion . sellers motivated to close deals prior to the rise in taxes contributed to the increase , but office prices increased over the quarter , and cap rates declined slightly indicating that buyers were perhaps even more motivated . the year-end surge in closings contributed to a 2012 total volume of $ 77.6 billion , a 19 % increase from 2011. a shift in momentum from trophy central business district towers to suburban properties and secondary markets began in 2012. non-major metros saw a volume increase of over 40 % , which is more than double the national average . additionally , cap rates in secondary markets have started to decline with a sharp decrease observed in q4 . overall , average cap rates decreased from 7.6 % in october to 7.4 % in november . despite elevated unemployment and below-average consumer confidence in the overall economy , office job growth is projected to range between 1 % and 3 % through 2017. with this projected job growth , future years should see solid office net absorption rates . with the expected decline in office vacancy rates nationally , rent growth is projected to expand to more markets in 2013 and more significantly in 2014. office market rents are expected to have more upside than other property types , with a cumulative increase of 30 % expected by 2017. due to low vacancy levels and little to no new product , many of the more supply-strained metros should see the strongest growth by 2017. these include new york , boston , denver , and orange county , california . tech-exposed markets should also have strong rent growth due to above-average demand prospects . examples of these markets include san jose and san francisco . impact of economic conditions on our portfolio we believe that the strength of our portfolio positions us favorably compared with many real estate owners during these challenging market conditions . as of december 31 , 2012 , our portfolio had a debt-to-real-estate-asset ratio of approximately 28.6 % , which is lower than average for our industry . we believe that low leverage , coupled with ample borrowing capacity under our unsecured revolving credit facility ( $ 460.0 million available as of february 15 , 2013 ) , provides considerable financial flexibility , which enables us to respond quickly to unanticipated funding needs and opportunities . further , the majority of our borrowings are in the form of effectively fixed-rate financings , which helps to insulate the portfolio from interest rate risk . diversifying our portfolio by tenant , tenant industry , geography , and lease expiration date also reduces our exposure to any one market determinant . as of december 31 , 2012 , our portfolio was 92.9 % leased in two countries , 19 states , plus washington , d.c. , and 26 metropolitan statistical areas . although we believe that our portfolio is well-positioned to weather current market conditions , we are not immune to the effects of another downturn in the economy , weak real estate fundamentals , or disruption in the credit markets . if these conditions return , they would likely affect the value of our portfolio , our results of operations , and our liquidity . liquidity and capital resources overview in 2011 and 2012 , we actively managed our real estate portfolio with an emphasis on leasing and re-leasing space , and pursuing and closing on strategic acquisitions and selective dispositions to concentrate our market focus . during this period , we also enhanced our capital structure by continuing to raise net equity proceeds through our drp , improving the composition , maturities and capacity of our debt portfolio while lowering our overall borrowing costs , accessing new sources of capital , and identifying additional sources of future capital . in determining how and when to allocate cash resources , we initially consider the source of the cash . we reserve a portion of operating cash flows to fund capital expenditures for our existing portfolio . the amount of distributions that we pay to our common stockholders is determined by our board of directors and is dependent upon a number of factors , including the funds available for distribution to common stockholders , our financial condition , our capital expenditure requirements , our expectations of future sources of liquidity , and the annual distribution requirements necessary to maintain our status as a reit under the code . when evaluating funds available for stockholder distributions , we consider net cash provided by operating activities , as presented in the accompanying gaap-basis consolidated statements of cash flows , adjusted to exclude certain costs that were incurred for the purpose of generating future earnings and appreciation in value over the long term , including acquisition fees and expenses . we use drp proceeds to fund share redemptions ( subject to the limitations of our share redemption program ) , and make residual drp proceeds available to fund capital improvements for our existing portfolio , additional real estate investments , and other cash needs . story_separator_special_tag short-term liquidity and capital resources during 2012 , we generated net cash flows from operating activities of $ 252.8 million , which consists primarily of receipts from tenants for rent and reimbursements , reduced by payments for operating costs , administrative expenses , and interest expense . during the same period , we paid total distributions to stockholders of $ 256.0 million , which includes $ 118.4 million reinvested page 25 index to financial statements in our common stock pursuant to our drp . we expect to use the majority of our future net cash flows from operating activities to fund capital expenditures and distributions to stockholders . in 2012 , we sold 11 properties for net proceeds of $ 304.3 million and used these proceeds to acquire the 333 market street building in san francisco , california , which entailed a cash payment of $ 188.8 million and an assumed mortgage note of $ 206.5 million , and to fund net debt repayments of $ 28.2 million . in 2012 , we also raised net equity proceeds of $ 118.4 million from the sale of our common stock under the drp and used those proceeds to fund share redemptions of $ 99.4 million . along with cash on hand , residual proceeds from the sale of properties and from the sale of common stock under our drp were used to fund capital expenditures incurred in connection with leasing and maintaining the properties in our portfolio . we believe that we have adequate liquidity and capital resources to meet our current obligations as they come due . as of february 15 , 2013 , we had access to the borrowing capacity under the jpmorgan chase credit facility of $ 460.0 million . long-term liquidity and capital resources over the long term , we expect that our primary sources of capital will include operating cash flows , proceeds from our drp , proceeds from secured or unsecured borrowings from third-party lenders , and , if and when deemed appropriate , proceeds from strategic property sales . we expect that our primary uses of capital will continue to include stockholder distributions ; redemptions of shares of our common stock under our share redemption program ; capital expenditures , such as building improvements , tenant improvements , and leasing costs ; repaying or refinancing debt ; and selective property acquisitions , either directly or through investments in joint ventures . over the next five years , we anticipate funding capital expenditures necessary for our properties , including building improvements , tenant improvements , and leasing commissions , of approximately $ 424.1 million . consistent with our financing objectives and operational strategy , we expect to continue to maintain low debt levels ( historically less than 40 % of the cost of our assets ) over the long term . this conservative leverage goal could reduce the amount of current income we can generate for our stockholders , but it also reduces their risk of loss . we believe that preserving investor capital while generating stable current income is in the best interest of our stockholders . as of december 31 , 2012 , our debt-to-real-estate-asset ratio ( calculated on a cost basis ) was approximately 28.6 % . for the first three quarters of 2012 , quarterly stockholder distributions were declared and paid at $ 0.125 per share , consistent with the rate paid throughout 2011. in the fourth quarter of 2012 , our board of directors elected to reduce the quarterly stockholder distribution rate to $ 0.095 per share . economic downturns in certain of our geographic markets and in certain industries in which our tenants operate have impacted our recent leasing activities and caused our current and future operating cash flows to experience some deterioration . in 2012 , we renewed leases for 9.2 % of our portfolio , based on square footage , which resulted in tenant concessions of $ 49.7 million . furthermore , in preparing for various liquidity options , our board has decided to adjust our distribution payment policy to reserve additional operating cash flow to fund capital expenditures for our existing portfolio and to provide additional financial flexibility as we begin to shape our portfolio through the strateg ic sale and redeployment of capital proceeds in furtherance of our investment objectives , which include concentrating our market focus . our board of directors elected to maintain the distribution rate of $ 0.095 for the first quarter of 2013. stockholder distr ibutions for the first quarter of 2013 will be paid in march to common stockholders of record as of march 15 , 2013. we are continuing to monitor our cash flows and market conditions and to assess their impact on our future earnings and future distribution decisions . page 26 index to financial statements debt covenants our portfolio debt instruments , the $ 450 million term loan , the jpmorgan chase credit facility , and the unsecured senior notes , contain certain covenants and restrictions that require us to meet certain financial ratios , including the following key financial covenants and respective covenant levels as of december 31 , 2012 : replace_table_token_10_th we were in compliance with all of our debt covenants as of december 31 , 2012 . currently , we expect to continue to meet the requirements of our debt covenants over the short- and long-term . contractual commitments and contingencies as of december 31 , 2012 , our contractual obligations will become payable in the following periods ( in thousands ) : replace_table_token_11_th ( 1 ) interest obligations on variable-rate debt are measured at the rate at which they are effectively fixed with interest rate swap agreements ( where applicable ) , a portion of which is reflected as loss on interest rate swaps in our consolidated statements of operations of the accompanying consolidated financial statements . interest obligations on all other debt are measured at the contractual rate . see item 7a , quantitative and qualitative disclosure about market risk , for more information regarding our interest rate swaps .
| hotel income , net of hotel operating costs , was $ 4.7 million for 2012 , which represents an increase from $ 3.2 million for 2011 , due to increased room rates and hotel occupancy , primarily in the second and third quarters of 2012. hotel income and hotel operating costs are primarily driven by the local economic conditions and , as a result , are expected to fluctuate in the future , primarily based on changes in the supply of , and demand for , hotel and banquet space in cleveland , ohio , similar to that offered by the key center marriott hotel . other property income was $ 6.5 million for 2012 , which represents a decrease from $ 10.9 million for 2011 , due to a decrease in lease cancellation activity . future other property income fluctuations are expected to relate primarily to future lease restructuring and termination activities . asset and property management fees were $ 37.2 million for 2012 , which represents a slight decrease from $ 37.4 million for 2011 due to contractual changes in the terms of the advisory agreements . monthly asset management fees were capped at $ 2.7 million ( or $ 32.5 million annualized ) from april 2011 until june 2012. from july 2012 through december 2012 , the cap on monthly asset management fees was reduced by $ 83,333 , to approximately $ 2.6 million per month . for january and february 2013 , asset management fees decreased by an additional $ 83,333 per month . effective february 28 , 2013 , the advisory agreement was terminated in connection with acquiring wreas ii . thus , going forward , no asset management fees will be incurred , as such services will be performed by employees of columbia property trust . ( see note 10 , related party transactions and agreements , of the accompanying consolidated financial statements for additional details . ) depreciation was $ 114.1 million for 2012 , which represents a slight increase from $ 110.7 million for 2011 , primarily due to
|
the estimated professional fees associated with these efforts are as follows : replace_table_token_5_th we currently estimate that we will incur and pay an additional $ 13.0 million of such excess fees during 2018. estimated payments for excess fees in 2018 will total $ 23.3 million , which includes $ 10.3 million related to prior periods . see the liquidity and capital resources section in this management 's discussion and analysis for further discussion . unless otherwise stated , this management 's discussion and analysis has been written to provide you with pertinent information regarding our performance during the periods encompassed by this report . accordingly , we have not provided information regarding our performance during subsequent periods . nevertheless , for certain information and events , which relate primarily to our indebtedness , capital structure and liquidity , we have provided disclosure regarding subsequent periods or have included further information in note u - subsequent events to our consolidated financial statements . additionally , we have referenced certain trends and events occurring subsequent to december 31 , 2017 as forward-looking items within this management 's discussion and analysis . non-gaap measures we refer to certain financial measures and statistics that are not prescribed under generally accepted accounting principles ( gaap ) as applied in the united states . we utilize these non-gaap measures in order to evaluate the underlying factors that affect our business performance and trends . these non-gaap measures should not be considered in isolation and should not be considered superior to , or as a substitute for , financial measures calculated in accordance with gaap . we have defined and provided a reconciliation of these non-gaap measures to their most comparable gaap measures . the non-gaap measures used in this management 's discussion and analysis are as follows : adjusted gross revenue and disallowed revenue - adjusted gross revenue reflects our gross billings after their adjustment to reflect estimated discounts established in our contracts with payors of health care claims . as discussed in reimbursement trends below , pursuant to our contracts with payors , a portion of our adjusted gross billings may be disallowed based on factors including physician documentation , patient eligibility , plan design , prior authorization , timeliness of filings or appeal , coding selection , failure by certain patients to pay their portion of claims , computational errors associated with sequestration and other factors . we refer to these and other amounts as being disallowed revenue. our net revenue reflects adjusted gross revenue after reduction for the estimated aggregate amount of disallowed revenue for the applicable period . to facilitate analysis of the comparability of our results , we provide these non-gaap measures due to the significant changes 37 that we have experienced in recent years in disallowed revenue which are further discussed below . in addition , we provide measures of material costs , personnel costs , other operating costs , general and administrative expenses , professional accounting and legal fees , depreciation and amortization and operating expenses as a percentage of adjusted gross revenue because we believe these percentages provide an investor with another meaningful measure to compare our results with prior periods . these measures are non-gaap and unaudited . same clinic revenue and same clinic revenue per day - same clinic revenue measures revenue from clinics that have been operating for a full calendar year or more . examples of clinics not included in the same center population are closures and acquisitions . same clinic revenue per day normalizes sales for the number of days a clinic was open in each comparable period . these measures are both non-gaap and unaudited . overview we are a leading national provider of products and services that assist in enhancing or restoring the physical capabilities of patients with disabilities or injuries . built on the legacy of james edward hanger , the first amputee of the american civil war , we and our predecessor companies have provided o & p services for over 150 years . we provide o & p services , distribute o & p devices and components , manage o & p networks and provide therapeutic solutions to patients and businesses in acute , post-acute and clinic settings . we operate through two segments - patient care and products & services . our patient care segment is primarily comprised of hanger clinic , which specializes in the design , fabrication and delivery of custom o & p devices through 682 patient care clinics and 112 satellite locations in 44 states and the district of columbia , as of december 31 , 2017. we also provide payor network contracting services to other o & p providers through this segment . our products & services segment is comprised of our distribution and our therapeutic solutions businesses . as a leading provider of o & p products in the united states , we coordinate through our distribution business the procurement and distribution of a broad catalog of o & p parts , componentry and devices to independent o & p providers nationwide . to facilitate speed and convenience , we deliver these products through our five distribution facilities that are located in nevada , georgia , illinois , pennsylvania and texas . the other business in our products & services segment is our therapeutic solutions business , which provides specialized rehabilitation technologies and evidence-based clinical programs for post-acute rehabilitation to patients at approximately 4,000 skilled nursing and post-acute providers nationwide . in each of 2017 , 2016 and 2015 , we incurred a material impairment of our goodwill . these non-cash charges were the most significant contributing factor to our reported loss from operations and net loss in each period . story_separator_special_tag we discuss the causes and manner of our determination of these impairment charges in note h - goodwill and other intangible assets to our consolidated financial statements in this annual report on form 10-k. see note r - segment and related information to our consolidated financial statements in this annual report on form 10-k for disclosure of financial information by operating segment for 2017 , 2016 and 2015. reimbursement trends in our patient care segment , we are reimbursed primarily through employer-based plans offered by commercial insurance carriers , medicare , medicaid and the va. the following is a summary of our payor mix , expressed as an approximate percentage of net revenues for the periods indicated : 38 replace_table_token_6_th patient care constitutes 81.9 % , 80.6 % and 82.0 % of our net revenue for 2017 , 2016 and 2015 , respectively . our remaining net revenue is produced in our products & services segment which derives its net revenue from commercial transactions with independent o & p providers , healthcare facilities and other customers . in contrast to net revenues from our patient care segment , payment for these products and services are not directly subject to third party reimbursement from health care payors . the amount of our reimbursement varies based on the nature of the o & p device we fabricate for our patients . given the particular physical weight and size characteristics , location of injury or amputation , capability for physical activity and mobility , cosmetic and other needs of each individual patient , each fabricated prostheses and orthoses is customized for each particular patient . the nature of this customization and the manner by which our claims submissions are reviewed by payors makes our reimbursement process administratively difficult . to receive reimbursement for our work , we must ensure that our clinical , administrative and billing personnel receive and verify certain medical and health plan information , record detailed documentation regarding the services we provide and accurately and timely perform a number of claims submission and related administrative tasks . traditionally , we have performed these tasks in a manual fashion and on a decentralized basis . in recent years , due to increases in payor pre-authorization processes , documentation requirements , pre-payment reviews and pre- and post-payment audits , our ability to successfully undertake these tasks using our traditional approach has become increasingly challenging . we believe these changes in industry trends have been brought about in part by increased nationwide efforts to reduce health care costs . a measure of our effectiveness in securing reimbursement for our services can be found in the degree to which payors ultimately disallow payment of our claims . payors can deny claims due to their determination that a physician who referred a patient to us did not sufficiently document that a device was medically necessary or clearly establish the ambulatory ( or activity ) level of a patient . claims can also be denied based on our failure to ensure that a patient was currently eligible under a payor 's health plan , that the plan provides full o & p benefits , that we received prior authorization , that we filed or appealed the payor 's determination timely , on the basis of our coding , failure by certain classes of patients to pay their portion of a claim and for various other reasons . if any portion of , or administrative factor within , our claim is found by the payor to be lacking , then the entirety of the claim amount may be denied reimbursement . due to the increasing demands of these processes , the level and capability of our staffing , as well as our material weaknesses and other considerations , our consolidated disallowed revenue and bad debt expense , and their relationship to consolidated adjusted gross revenue increased over historical levels to a peak level in 2014. in 2015 , 2016 and 2017 , through the initiatives discussed below , we achieved decreases in our disallowed revenue . disallowed revenue and bad debt expense over the past five years has been as follows : 39 replace_table_token_7_th adjusted gross revenue in the above chart reflects our gross billings after reduction for estimated contractual discounts . the percentage of our gross billings that have been disallowed increased to a high of 7.5 % in 2014 from 2.9 % in 2010. due to industry trends and our specific administrative factors , our collection experience degraded and disallowed revenue increased during that period of time . these adverse industry trends included an increased level of payor audits and more stringent requests by payors that referring physician documentation be provided in connection with claims . during that period of time , we utilized a decentralized billing and collections approach , where invoicing and collections were undertaken at individual patient care locations . our typical locations have an average of two office administrators who are required to handle patient administration , purchasing , and clinician support tasks . due to increasing payor documentation demands and budgetary limitations on staffing , administrative staff were increasingly unable to successfully address the growing levels of payor denials . in 2014 , our accounts receivable trends were further complicated due to issues encountered with our implementation of a new patient management and electronic health record system . due to system customizations that were subsequently determined to not be adequately tested , staffing deficiencies in cash application functions and other related procedural issues , billing and collections were further adversely affected due to this system implementation during that year as can be seen by the increase in the disallowed revenue rate and bad debt expense in that year . throughout this period , our processes were also impeded due to the subsequently identified underlying material control weakness in the administration of our contracts . as contracts were negotiated or amended with payors , our procedures did not provide adequate assurance of timely documented reconciliation of updated terms and conditions with those loaded into our remote billing systems .
| benefit for income taxes . the benefit for income taxes for the three months ended march 31 , 2017 was $ 6.0 million , or 25.3 % of loss from continuing operations before taxes , compared to a benefit of $ 8.4 million , or 32.4 % of loss from continuing operations before taxes for the three months ended march 31 , 2016. the effective tax rate consists principally of the 35 % federal statutory tax rate in addition to state income taxes , less permanent tax differences . the decreased benefit was largely driven by a decrease in the loss from continuing operations before taxes and a decrease in the estimated effective tax rate . the decrease in the estimated effective tax rate was driven by a decrease in the annual forecasted loss from continuing operations before taxes and an increase in non-deductible expenses . net loss . net loss for the three months ended march 31 , 2017 was $ 17.7 million compared to a net loss of $ 17.5 million for the three months ended march 31 , 2016. results of operations - three months ended june 30 , 2017 compared to three months ended june 30 , 2016 net revenue . net revenue for the three months ended june 30 , 2017 was $ 263.4 million , a decrease of $ 1.1 million , or 0.4 % from $ 264.5 million for the three months ended june 30 , 2016. net revenue by operating segment , after elimination of intersegment activity was as follows : replace_table_token_22_th patient care net revenue increased $ 2.0 million , or 0.9 % for the three months ended june 30 , 2017 compared to the same period in the prior year . excluding the favorable effect of $ 1.6 million in improved disallowances , same clinic revenue increased $ 1.3 million , or 0.6 % per day during the quarter . including the favorable effects of improvements in disallowed revenue , same clinic
|
first production is forecast to commence from an early production system in the second half of 2013. during the third quarter of 2012 , the corporation signed an exchange agreement with the partners of green canyon block 512 that contains the knotty head discovery and is in the same reservoir as the corporation 's pony discovery on the adjacent block 468. under this agreement , the corporation was appointed operator and has a 20 % working interest in the blocks , now collectively referred to as stampede . field development planning is progressing and the project is targeted for sanction in 2014. during the year , the corporation completed four successful exploration wells on the deepwater tano cape three points block , offshore ghana . in early 2013 , the corporation completed two additional successful wells , resulting in a total of seven consecutive successful exploration wells . based on the results of these wells , the corporation plans to submit an appraisal plan to the ghanaian government for approval on or before june 2 , 2013. in parallel , the corporation has begun pre-development studies on the block . marketing and refining results from m & r activities were earnings of $ 231 million in 2012 , a loss of $ 584 million in 2011 and a loss of $ 231 million in 2010. excluding items affecting comparability of earnings between periods , m & r earnings were $ 160 million in 2012 , a loss of $ 59 million in 2011 and earnings of $ 58 million in 2010. in january 2012 , hovensa shut down its refinery in st. croix , u.s. virgin islands . the corporation and its joint venture partner plan to pursue the sale of hovensa , while the complex is operated as an oil storage terminal . in january 2013 , the corporation announced its decision to cease refining operations in february at its port reading facility and pursue the sale of its terminal network . liquidity and capital and exploratory expenditures net cash provided by operating activities was $ 5,660 million in 2012 , $ 4,984 million in 2011 and $ 4,530 million in 2010. at december 31 , 2012 , cash and cash equivalents totaled $ 642 million , an increase from $ 351 million at december 31 , 2011. total debt was $ 8,111 million at december 31 , 2012 and $ 6,057 million at december 31 , 2011. the corporation 's debt to capitalization ratio at december 31 , 2012 was 27.7 % compared with 24.6 % at the end of 2011. capital and exploratory expenditures were as follows : replace_table_token_13_th the corporation anticipates investing $ 6.8 billion in capital and exploratory expenditures in 2013 , substantially all of which is targeted for e & p operations . 21 story_separator_special_tag norway , in january 2012 , downtime at the valhall field as noted above and natural decline at the beryl field in the united kingdom north sea . natural gas production was lower in 2011 compared with 2010 , primarily due to the sale in february 2011 of certain natural gas producing assets in the united kingdom north sea . 24 africa : crude oil production increased in 2012 compared with 2011 , mainly due to the resumption of production in libya , partly offset by lower production in equatorial guinea due to downtime and natural field decline . following the lifting of the economic sanctions imposed in response to civil unrest , the corporation 's production in libya resumed during the fourth quarter of 2011 after being shut-in from the first quarter of 2011. crude oil production decreased in 2011 compared with 2010 due to the suspension of production in libya , the exchange in september 2010 of the corporation 's interests in gabon for increased interests in norway , lower production entitlement in equatorial guinea and algeria as a result of higher selling prices and natural decline in equatorial guinea . asia and other : natural gas production in 2012 was higher than 2011 , primarily due to new wells at the pangkah field in indonesia and a full year 's contribution from the gajah baru complex at the natuna a field in indonesia , which commenced production in the fourth quarter of 2011. natural gas production in 2011 was higher than 2010 , primarily due to higher nominations at block pm301 in malaysia and first production from the gajah baru complex . sales volumes : higher sales volumes and other operating revenues increased revenue by approximately $ 1,225 million in 2012 compared with 2011 , and lower sales volumes and other operating revenues decreased revenue by approximately $ 1,100 million in 2011 compared with 2010. operating costs and depreciation , depletion and amortization : cash operating costs , consisting of production expenses and general and administrative expenses , increased by $ 401 million in 2012 compared with 2011 and increased by $ 460 million in 2011 compared with 2010. the increase in 2012 reflects higher production taxes as a result of increased production volumes at the bakken oil shale play and in russia , together with higher operating and maintenance costs at the valhall field in norway , the llano field in the united states and the bakken . the increase in costs in 2011 compared to 2010 was primarily due to higher production taxes as a result of higher selling prices , together with higher operating and maintenance expenses , mainly in norway and the bakken . depreciation , depletion and amortization charges increased by $ 548 million in 2012 and $ 83 million in 2011 , compared with the corresponding amounts in prior years . the increase in 2012 was primarily due to higher volumes and per barrel costs . the increase in 2011 was primarily due to higher per barrel costs , reflecting higher finding and development costs . story_separator_special_tag in addition , the higher per barrel rates in 2012 and 2011 were largely due to greater production contribution from unconventional assets . excluding items affecting comparability of earnings between periods , cash operating costs per barrel of oil equivalent were $ 20.63 in 2012 , $ 19.71 in 2011 and $ 14.45 in 2010. depreciation , depletion and amortization costs per barrel of oil equivalent were $ 19.20 in 2012 , $ 17.06 in 2011 and $ 14.56 in 2010. for 2013 , cash operating costs are estimated to be in the range of $ 21.00 to $ 22.00 per barrel and depreciation , depletion and amortization costs are estimated to be in the range of $ 19.00 to $ 20.00 per barrel , resulting in total unit costs of $ 40.00 to $ 42.00 per barrel of oil equivalent . exploration expenses : exploration expenses decreased in 2012 compared to 2011 , primarily due to lower dry hole expenses and lease amortization . dry hole expenses in 2012 included amounts associated with two exploration wells , ness deep in the gulf of mexico and ajek-1 , offshore indonesia . exploration expenses increased in 2011 from 2010 , mainly due to higher dry hole expenses , which included amounts relating to two exploration wells on the semai v block , offshore indonesia , and a well in the north red sea block 1 , offshore egypt . income taxes : excluding the impact of items affecting comparability of earnings between periods , the effective income tax rates for e & p operations were 45 % in 2012 , 38 % in 2011 and 44 % in 2010. the increase in the effective income tax rate in 2012 compared with 2011 was predominantly due to the resumption of libyan operations . the effective income tax rate for e & p operations in 2013 is estimated to be in the range of 46 % to 50 % . items affecting comparability of earnings between periods : reported e & p earnings include the following items affecting comparability of income ( expense ) before and after income taxes : replace_table_token_19_th 25 2012 : the corporation completed the sale of its interests in the schiehallion field ( hess 16 % ) , the bittern field ( hess 28 % ) and related assets , which are all located in the united kingdom north sea , and the snohvit field ( snohvit ) ( hess 3 % ) , offshore norway , for total cash proceeds of $ 843 million . these transactions resulted in pre-tax gains totaling $ 584 million ( $ 557 million after income taxes ) . these assets were producing at an aggregate net rate of approximately 15,000 boepd at the time of sale and had a total of 83 million boe of proved reserves . see also note 2 , dispositions in the notes to the consolidated financial statements . during 2012 , e & p recorded three asset impairment charges totaling $ 582 million ( $ 344 million after income taxes ) . as a result of a competitive bidding process , the corporation obtained additional information relating to the fair value of its interests in the cotulla area of the eagle ford shale in texas in february 2013. based on this information and management 's anticipated plan for the assets as of december 31 , 2012 , the corporation recorded an impairment charge of $ 315 million ( $ 192 million after income taxes ) . the corporation also recorded charges of $ 208 million ( $ 116 million after income taxes ) related to increases in estimated abandonment liabilities primarily for non-producing properties which resulted in the book value of the properties exceeding their fair value . in addition , the corporation recorded a charge of $ 59 million ( $ 36 million after income taxes ) in the second quarter related to the disposal of certain eagle ford properties as part of an asset exchange with its joint venture partner . during the third quarter of 2012 , the corporation decided to cease further development and appraisal activities in peru . as a result , the corporation recorded exploration expenses totaling $ 86 million ( $ 56 million after income taxes ) to write off its exploration assets in the country . in july 2012 , the government of the united kingdom changed the supplementary income tax rate applicable to deductions for dismantlement expenditures to 20 % from 32 % . as a result , the corporation recorded a one-time charge in the third quarter of 2012 of $ 115 million for deferred taxes related to asset retirement obligations in the united kingdom . in the fourth quarter of 2012 , the corporation recorded an income tax charge of $ 86 million for a disputed application of an international tax treaty . 2011 : the corporation completed the sale of its interests in certain natural gas producing assets in the united kingdom north sea , the snorre field ( hess 1 % ) , offshore norway , and the cook field ( hess 28 % ) in the united kingdom north sea for total cash proceeds of $ 490 million . these disposals resulted in pre-tax gains totaling $ 446 million ( $ 413 million after income taxes ) . these assets had an aggregate net productive capacity of approximately 17,500 boepd at the time of sale . in the third quarter of 2011 , the corporation recorded asset impairment charges of $ 358 million ( $ 140 million after income taxes ) related to increases in the corporation 's estimated abandonment liabilities primarily for non-producing properties in the united kingdom north sea which resulted in the book value of the properties exceeding their fair value .
| selling prices : lower average realized selling prices , primarily from crude oil and natural gas liquids , decreased e & p revenues by approximately $ 380 million in 2012 compared with the corresponding period in 2011. higher average selling prices increased e & p revenues by approximately $ 2,400 million in 2011 compared with 2010. the corporation 's average selling prices were as follows : replace_table_token_17_th in october 2008 , the corporation closed brent crude oil hedges covering 24,000 barrels per day from 2009 through 2012 by entering into offsetting contracts with the same counterparty . the deferred after-tax losses , as of the date the hedge positions were closed , were recorded in earnings as the contracts matured . the corporation also entered into brent crude oil hedges using fixed-price swap contracts to hedge 120,000 boepd of crude oil sales volumes for the full year of 2012 at an average price of $ 107.70 per barrel . crude oil hedges reduced e & p earnings by $ 431 million ( $ 688 million before income taxes ) in 2012 , $ 327 million ( $ 517 million before income taxes ) in 2011 and $ 338 million ( $ 533 million before income taxes ) in 2010. both of these hedge programs matured as of december 31 , 2012. in january and february 2013 , the corporation entered into brent crude oil hedges using fixed-price swap contracts to hedge 90,000 boepd of crude oil sales volumes for the remainder of the calendar year at an average price of approximately $ 109.70 per barrel . production and sales volumes : the corporation 's crude oil and natural gas production was 406,000 boepd in 2012 , 370,000 boepd in 2011 and 418,000 boepd in 2010. approximately 75 % in 2012 , 72 % in 2011 and 73 % in 2010 of the corporation 's production was from crude oil and natural gas liquids . the corporation currently expects total worldwide production to average between 375,000 boepd and 390,000 boepd in 2013. this forecast assumes russian operations remain in the portfolio for the full year . 23 the corporation 's net daily worldwide production was as follows : replace_table_token_18_th * reflects natural gas production converted on the basis of relative energy content ( six mcf equals one barrel ) . barrel of oil equivalence does not necessarily result in price equivalence as
|
during the year ended december 31 , 2015 , we made a payment of $ 25.9 million to the office of the chief scientist of the israeli ministry of economy ( “ ocs ” ) in connection with repayment obligations resulting from grants previously made by the ocs to opko biologics to support development of hgh-ctp and the outlicense of the technology outside of israel . interest income . interest income for the years ended december 31 , 2015 and 2014 , was not significant as our cash investment strategy emphasizes the security of the principal invested and fulfillment of liquidity needs . interest expense . interest expense for the years ended december 31 , 2015 and 2014 , was $ 8.4 million and $ 12.3 million , respectively . interest expense is principally related to interest incurred on the 2033 senior notes and the amortization of related deferred financing costs . the decrease in interest expense for the year ended december 31 , 2015 compared to 2014 is due to a decrease in the principal amount of 2033 senior notes outstanding from $ 87.6 million at december 31 , 2014 to $ 32.2 million as of december 31 , 2015 . this was partially offset by interest expense of $ 1.9 million from bio-reference due to outstanding debt under their credit facility . interest expense for the years ended december 31 , 2015 and 2014 also reflect non-cash write-offs of deferred financing costs of $ 1.0 million and $ 1.5 million as interest expense related to exchange or conversion of $ 55.4 million and $ 70.4 million principal of 2033 senior notes during the years ended december 31 , 2015 and 2014 , respectively . fair value changes of derivative instruments , net . fair value changes of derivative instruments , net for the years ended december 31 , 2015 and 2014 , were $ 39.1 million and $ 10.6 million of expense , respectively . fair value changes of derivative instruments , net principally related to non-cash expense related to the changes in the fair value of the embedded derivatives in the 2033 senior notes of $ 36.6 million and $ 12.2 million for the years ended december 31 , 2015 and 2014 , respectively . other income and ( expense ) , net . other income and ( expense ) , net for the years ended december 31 , 2015 and 2014 , were $ 7.7 million of income and $ ( 3.1 ) million of expense , respectively . the increase in other income and ( expense ) , net for the year ended december 31 , 2015 compared to 2014 is primarily due to a $ 15.9 million gain recognized on the deconsolidation of sti in the third quarter of 2015. this was partially offset by a $ 7.3 million other-than-temporary impairment charge to write our investment in rxi pharmaceuticals corporation down to its fair value of $ 0.9 million as of december 31 , 2015 compared to a $ 1.4 million other-than-temporary impairment charge to our investment in arno therapeutics in 2014. income tax benefit ( provision ) . our income tax benefit is due to a $ 93.4 million release of opko 's valuation allowance on our u.s. deferred tax assets as a result of the merger with bio-reference . this was partially offset by expense recognized on taxable income from the pfizer transaction during the year ended december 31 , 2015 . in addition , our income tax benefit ( provision ) reflects the projected income tax payable in the u.s. , ireland , israel , chile , spain , mexico , and luxembourg . loss from investments in investees . we have made investments in other early stage companies that we perceive to have valuable proprietary technology and significant potential to create value for us as a shareholder or member . we account for these investments under the equity method of accounting , resulting in the recording of our proportionate share of their losses until our share of their loss exceeds our investment . until the investees ' technologies are commercialized , if ever , we anticipate they will continue to report a net loss . loss from investments in investees was $ 7.1 million and $ 3.6 million for the years ended december 31 , 2015 and 2014 , respectively . in the third quarter of 2015 we deconsolidated sti , and account for our retained interest in sti as an equity method investment . for the years ended december 31 , 2014 and december 31 , 2013 revenues . revenues for the year ended december 31 , 2014 , were $ 91.1 million , compared to $ 96.5 million for the year ended december 31 , 2013. the decrease in revenue principally reflects non-recurring , non-cash revenue related to the transfer of technology under the rxi asset purchase agreement of $ 12.5 million in 2013 , which was partially offset by ( i ) a milestone payment of $ 5.0 million from tesaro during the year ended december 31 , 2014 , which we recognized in revenue from transfer of intellectual property and ( ii ) a 14 % increase in pharmaceutical product revenue principally from finetech of $ 6.2 58 million for the year ended december 31 , 2014. in addition , pharmaceutical product revenue from our european and mexican operations increased by $ 2.5 million and $ 1.6 million , respectively , during the year ended december 31 , 2014 , primarily due to increased sales by opko health europe and an increase in government tenders in mexico . revenue related to opko lab decreased $ 2.9 million during the year ended december 31 , 2014 , compared to the year ended december 31 , 2013 , primarily related to decreased reimbursement rates from government payors and decreased specimen volume , partially offset by revenue from the launch of our 4kscore test and a price increase to non-government payors initiated in june 2014. costs of revenue . story_separator_special_tag costs of revenue for the year ended december 31 , 2014 , were $ 48.0 million , compared to $ 48.9 million for the year ended december 31 , 2013. costs of revenue for the year ended december 31 , 2014 decreased principally due to decreased revenue at opko lab , which has a lower margin than pharmaceutical product sales . in addition , inventory obsolescence charges decreased $ 0.9 million for the year ended december 31 , 2014 compared to 2013. this was partially offset by increased cost of revenue due to increased pharmaceutical product sales . selling , general and administrative expenses . selling , general and administrative expenses for the year ended december 31 , 2014 were $ 57.9 million , compared to $ 55.3 million for the year ended december 31 , 2013. the increase in selling , general and administrative expenses for the year ended december 31 , 2014 was a result of increased personnel expenses including equity based compensation as well as sales and marketing activities related to the launch of our 4kscore test in the u.s. in march 2014 and europe in september 2014. these increases were partially offset by decreased professional fees as the 2013 period included expenses related to the acquisitions of opko renal and opko biologics . selling , general and administrative expenses during the years ended december 31 , 2014 and 2013 , include equity-based compensation expense of $ 9.7 million and $ 7.3 million , respectively . research and development expenses . research and development expenses for the year ended december 31 , 2014 were $ 83.6 million , compared to $ 53.9 million for the year ended december 31 , 2013. research and development costs include external and internal expenses , partially offset by third-party grants and funding arising from collaboration agreements . external expenses include clinical and non-clinical activities performed by contract research organizations , lab services , purchases of drug and diagnostic product materials and manufacturing development costs . we track external research and development expenses by individual program for phase 3 clinical trials for drug approval and pma 's ( pre-market approval ) for diagnostics tests , if any . internal expenses include employee-related expenses including salaries , benefits and stock-based compensation expense . other internal research and development expenses are incurred to support overall research and development activities and include expenses related to general overhead and facilities . the following table summarizes the components of our research and development expenses : replace_table_token_6_th the increase in research and development expenses during the year ended december 31 , 2014 , as compared to the year ended december 31 , 2013 , principally resulted from $ 38.6 million of costs related to opko biologics which we acquired in august 2013 and an increase related to research and development expenses incurred by opko renal related to the external costs of two pivotal phase 3 clinical trials for rayaldee which were completed in 2014 , and a third open-label phase 3 trial completed in 2015. opko biologics principally incurred development and clinical manufacturing costs ( “ cmc ” ) related to hgh-ctp , a long acting human growth hormone which was outlicensed to pfizer in 2015. research and development expenses for the years ended december 31 , 2014 and 2013 include equity-based compensation expense of $ 5.0 million and $ 3.6 million , respectively . research and development expenses for the year ended december 31 , 2013 , includes an offset to research and development expenses of $ 2.7 million related to the correction of an error related to equity awards granted to non-employees with performance based vesting . contingent consideration . contingent consideration expenses for the years ended december 31 , 2014 and 2013 , were $ 24.4 million and $ 6.9 million , respectively . the increase in contingent consideration expense was primarily attributable to an 59 increase in the fair value of our contingent obligations to the former stockholders of opko renal due to changes in assumptions regarding probabilities of successful achievement of future milestones driven by the two successful phase 3 trials of rayaldee in 2014. the contingent consideration liabilities at december 31 , 2014 relate to potential amounts payable to former stockholders of curna , opko diagnostics , opko health europe and opko renal pursuant to our acquisition agreements in january 2011 , october 2011 , august 2012 and march 2013 , respectively . amortization of intangible assets . amortization of intangible assets was $ 10.9 million and $ 11.1 million , respectively , for the years ended december 31 , 2014 and 2013. amortization expense reflects the amortization of acquired intangible assets with defined useful lives . the acquisitions of opko renal and opko biologics resulted in principally acquiring ipr & d assets which will not be amortized until the underlying development programs are completed . upon obtaining regulatory approval by the fda , the ipr & d asset will then be accounted for as a finite-lived intangible asset and amortized on a straight-line basis over its estimated useful life . in-process research and development . in may 2014 , we acquired inspiro , a privately held company that is developing the inspiromatic , a “ smart ” easy-to-use dry powder inhaler with several advantages over existing devices . we recorded the transaction as an asset acquisition and recorded the assets and liabilities at fair value . as the asset had no alternative future use , we recorded $ 10.1 million of acquired in-process research and development expense . in addition , pursuant to our agreement with merck , we were required to make a $ 2.0 million payment upon the achievement of a milestone for rolapitant which was achieved in the fourth quarter of 2014. the agreement was accounted for as an asset acquisition and the entire $ 2.0 million milestone payment was allocated to in-process research and development expense .
| cost of revenue for the years ended december 31 , 2015 and 2014 were as follows : replace_table_token_4_th the increase in cost of service revenue is attributable to the acquisition of bio-reference in august 2015. the increase in cost of product revenue principally reflects cost of revenue of $ 6.8 million from eirgen , which we acquired in may 2015 , which was partially offset by the impact of foreign exchange rates of approximately $ 5.2 million and the deconsolidation of sti in july 2015. selling , general and administrative expenses . selling , general and administrative expenses for the years ended december 31 , 2015 and 2014 were $ 196.6 million and $ 57.9 million , respectively . the increase in selling , general and administrative expenses for the year ended december 31 , 2015 was primarily due to the acquisitions of bio-reference and eirgen in 2015 , 56 which recognized $ 118.1 million and $ 1.8 million of selling , general and administrative expenses in 2015 , respectively , increased personnel expenses as we expand our sales , marketing and administrative staff and add infrastructure , and an increase in professional fees attributable to our acquisitions of bio-reference and eirgen . selling , general and administrative expenses during the years ended december 31 , 2015 and 2014 , include bad debt expense of $ 24.6 million and $ 0.7 million , respectively , and equity-based compensation expense of $ 17.4 million and $ 9.7 million , respectively . the increase in bad debt expense is due to the acquisition of bio-reference . the increase in equity-based compensation expense is due to additional options grants made in 2015 and fluctuations in the price of our common stock . research and development expenses . research and development expenses for the years ended december 31 , 2015 and 2014 were $ 99.5 million and $ 83.6 million , respectively . research and development costs include external and internal expenses , partially offset by third-party grants and funding arising
|
common stock offering - on june 20 , 2013 , we commenced a follow-on public offering of 11.0 million shares of our common stock at $ 12.00 per share for gross proceeds of $ 132.0 million . the aggregate proceeds , net of the 4.25 % underwriting discount and other expenses of $ 500,000 , were approximately $ 125.9 million . the offering settled on june 26 , 2013. we granted the underwriters a 30-day option to purchase up to an additional 1.65 million shares of our common stock . on july 24 , 2013 , the underwriters partially exercised their option and purchased an additional 1.25 million shares of our common stock at a price of $ 12.00 per share less the underwriting discount resulting in additional proceeds of approximately $ 14.2 million . $ 69.0 million pier house financing - on september 10 , 2013 , we completed the financing for a $ 69.0 million loan due september 2015 and secured by the pier house resort . the new financing has a two-year term and three , one-year extension options with no test requirements for the first two extensions . the loan provides for a floating interest rate of libor + 4.90 % , with no libor floor . the loan proceeds , net of typical closing costs and reserves , were added to our unrestricted cash balance . spin-off of an 8-hotel portfolio - on june 17 , 2013 , we announced that our board of directors had approved a plan to spin-off an 80 % ownership interest in an 8-hotel portfolio , totaling 3,146 rooms ( 2,912 net rooms excluding those attributable to our partners ) , to holders of our common stock in the form of a taxable special distribution . the distribution was comprised of common stock in ashford prime , a newly formed company . we contributed the portfolio interests into ashford prime op , ashford prime 's operating partnership . the distribution was made on november 19 , 2013 , on a pro rata basis to holders of our common stock as of november 8 , 2013 , with each of our shareholders receiving one share of ashford prime common stock for every five shares of our common stock held by such shareholder as of the close of business on november 8 , 2013. ashford prime is expected to qualify as a reit for federal income tax purposes , and is listed on the new york stock exchange , under the symbol “ ahp. ” the transaction also includes options for ashford prime to purchase the crystal gateway marriott in arlington , virginia and the pier house resort in key west , florida . ashford hospitality advisors llc , our subsidiary acts as external advisor to ashford prime . with respect to the eight hotel properties that are now owned by ashford prime , the operating results for the period from january 1 , 2013 through november 18 , 2013 and the years ended december 31 , 2012 and 2011 are included in our consolidated statements of operations for the respective years ended december 31 , 2013 , 2012 and 2011 , in accordance with the applicable accounting guidance . the crystal gateway marriott in arlington , virginia and the pier house resort in key west , florida are included in `` assets held and used '' and continuing operations as they do not meet the requirements to be classified as `` held for sale '' or `` discontinued operations '' in accordance with the applicable accounting guidance . the following table summarizes the operating results of the eight-hotel portfolio included in our results of operations ( in thousands ) : 38 replace_table_token_7_th the cash flows from operations generated by the 8-hotel portfolio were approximately $ 52.8 million for the period from january 1 , 2013 through november 18 , 2013 and $ 38.7 million and $ 25.0 million for the years ended december 31 , 2012 and 2011 , respectively . the absence of the cash flows from these eight hotel properties could have a significant impact on our liquidity . however , as a result of retaining a 20 % ownership interest in ashford prime op , ashford prime 's operating partnership , our portion of ashford prime op 's net income ( loss ) is reflected in our results of operations since november 19 , 2013. additionally , our subsidiary ashford hospitality advisors llc acts as the external advisor to ashford prime , and as a result , we receive advisory fees from ashford prime . ashford prime is required to pay ashford hospitality advisors llc a quarterly base fee equal to 0.70 % per annum of the total enterprise value of ashford prime , subject to a minimum quarterly base fee , as payment for managing the day-to-day operations of ashford prime and its subsidiaries in conformity with ashford prime 's investment guidelines . ashford prime is also required to pay ashford hospitality advisors llc an incentive fee that is based on ashford prime 's total return performance as compared to ashford prime 's peer group . the fees are included in our results of operations since november 19 , 2013 and could , over time , result in significant cash inflows , which could also have a material impact on our liquidity . $ 18.2 million loan financings - on december 20 , 2013 , we refinanced our $ 6.5 million loan due april 2034 , with a $ 10.8 million loan due january 2024. the new loan provides for a fixed interest rate of 5.49 % . the new loan continues to be secured by the residence inn jacksonville . additionally , we completed the financing for a $ 7.4 million loan due january 2024. the new loan provides for a fixed interest rate of 5.49 % and is secured by the residence inn manchester . we have an 85 % ownership interest in the property , with interstate hotels & resorts holding the remaining 15 % . story_separator_special_tag our share of the excess loan proceeds were added to our unrestricted cash balance . proposed spin-off of asset management business - on february 27 , 2014 , we announced that our board of directors has unanimously approved a plan to spin-off its asset management business into a separate publicly traded company in the form of a taxable distribution . the distribution is expected to be completed in the third quarter of 2014 , and we anticipate that the distribution will be comprised of common stock in ashford inc. , a newly formed or successor company of our current subsidiary ashford hospitality advisors llc . we also expect that ashford inc. will file an application to list its shares on the nyse or nyse mkt exchanges . in connection with the proposed spin-off , we expect that ashford inc. will enter into a 20-year advisory agreement to externally advise the company . ashford inc. will continue to externally advise ashford prime . this distribution is anticipated to be declared during the third quarter of 2014 ; however , it remains subject to the filing of the required registration statement with the sec , the review of the registration statement by the sec , the approval of the listing of shares by the applicable exchange , and other legal requirements . the company can not be certain this distribution will proceed or proceed in the manner as currently anticipated . sale of pier house resort - on march 1 , 2014 , we closed on the sale of the pier house resort to ashford prime . the sales price was $ 92.7 million . ashford prime assumed the $ 69 million mortgage and paid the balance of the purchase price in cash . liquidity and capital resources our cash position from operations is affected primarily by macro industry movements in occupancy and rate as well as our ability to control costs . further , interest rates can greatly affect the cost of our debt service as well as the value of any financial hedges we may put in place . we monitor industry fundamentals and interest rates very closely . capital expenditures above our reserves will affect cash flow as well . 39 certain of our loan agreements contain cash trap provisions that may get triggered if the performance of our hotels decline . when these provisions are triggered , substantially all of the profit generated by our hotels is deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of our various lenders . cash is distributed to us only after certain items are paid , including deposits into ground leasing and maintenance reserves and the payment of debt service , insurance , taxes , operating expenses , and extraordinary capital expenditures and ground leasing expenses . this could affect our liquidity and our ability to make distributions to our shareholders . also , we have entered into certain customary guaranty agreements pursuant to which we guaranty payment of any recourse liabilities of our subsidiaries or joint ventures that may result from non-recourse carve-outs , which include , but are not limited to fraud , misrepresentation , willful misconduct resulting in waste , misappropriations of rents following an event of default , voluntary bankruptcy filings , unpermitted transfers of collateral , and certain environmental liabilities . certain of these guarantees represent a guaranty of material amounts , and if we are required to make payments under those guarantees , our liquidity could be adversely affected . in connection with the ashford prime spin-off , we are still jointly and severally liable under certain carve-out guarantees and environmental indemnities associated with three loans . ashford prime has indemnified us in the case that any of these guarantees are ever called . in september 2010 , we entered into an atm program with an investment banking firm to offer for sale from time to time up to $ 50.0 million of our common stock at market prices . no shares have been sold under this atm program since its inception . the atm program will remain in effect until such time that either party elects to terminate or the $ 50.0 million cap is reached . in september 2011 , we entered into an at-the-market ( “ atm ” ) program with an investment banking firm , pursuant to which we may issue up to 700,000 shares of 8.55 % series a cumulative preferred stock and up to 700,000 shares of 8.45 % series d cumulative preferred stock at market prices up to $ 30.0 million in total proceeds . the atm program will remain in effect until such time that either party elects to terminate or the share or dollar thresholds are reached . on march 2 , 2012 , we commenced issuances of preferred stock and , during the first two quarters of the year ended december 31 , 2012 , we issued 169,306 shares of 8.55 % series a cumulative preferred stock for gross proceeds of $ 4.2 million and 501,909 shares of 8.45 % series d cumulative preferred stock for gross proceeds of $ 12.3 million . the aggregate proceeds , net of commissions and other expenses , were $ 16.0 million for the year ended december 31 , 2012. there were no issuances for the year ended december 31 , 2013. on february 21 , 2012 , we expanded our borrowing capacity under our $ 105.0 million senior credit facility to an aggregate $ 145.0 million and on september 24 , 2012 , we further expanded our borrowing capacity to an aggregate $ 165.0 million . we have an option , subject to lender approval , to further expand the facility to an aggregate size of $ 225.0 million . as part of these expansions two additional banks have been added to the participating banks in the senior credit facility . we may use up to $ 10.0 million for standby letters of credit .
| 42 the following table summarizes the changes in key line items from our consolidated statements of operations for the years ended december 31 , 2013 , 2012 and 2011 ( in thousands ) : replace_table_token_8_th comparison of year ended december 31 , 2013 with year ended december 31 , 2012 income from continuing operations represents the operating results of 87 legacy hotel properties and worldquest included in continuing operations for the years ended december 31 , 2013 and 2012 as well as the operating results from january 1 , 2012 through november 18 , 2013 of the eight hotel properties that were contributed to ashford prime op in connection with the previously discussed ashford prime spin-off . see the `` executive overview '' section of management 's discussion and analysis of financial condition and results of operations for a summary of the operating results of these properties . additionally , the operating results of the pier house resort are included since its acquisition in may 2013 . 43 the following table illustrates the key performance indicators of these hotels : replace_table_token_9_th revenue . rooms revenue for the year ended december 31 , 2013 ( “ 2013 ” ) increased $ 22.1 million , or 3.0 % , to $ 749.3 million from $ 727.1 million for the year ended december 31 , 2012 ( “ 2012 ” ) . the increase in rooms revenue was due to continued improvements in occupancy coupled with an increase in our adr . during 2013 , we experienced a 47 basis point increase in occupancy and a 3.4 % increase in room rates . we also experienced higher rooms revenue of $ 9.0 million as a result of the pier house resort acquisition and lower rooms revenue as a result of the ashford prime spin-off . food and beverage revenues experienced a decrease of $ 6.9 million , or 4.3 % , due to events at certain hotels during 2012 that did not reoccur in 2013 as well as the ashford
|
assets classified as held for sale , if any , would be recorded at the lower of their carrying amount or fair value less cost to sell . assets to be disposed of other than by sale , if any , would be classified as held and used until the assets are disposed or use has ceased . business combinations acquisitions are accounted for using the acquisition method of accounting for business combinations in accordance with generally accepted accounting principles in the united states of america . under this method , the total consideration transferred to consummate the acquisition is allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the closing date of the acquisition . the acquisition method of accounting requires extensive use of estimates and judgments to allocate the consideration transferred to the identifiable tangible and intangible assets , if any , acquired and liabilities assumed . goodwill the company has goodwill of approximately $ 1,355,000 recorded as part of its 1996 acquisition of mc , operating within the specialty chemicals segment , approximately $ 15,898,000 recorded as part of its 2012 acquisition of palmer and approximately $ 5,997,000 recorded as part of its 2014 acquisition of specialty , both operating within the metals segment . goodwill , which represents the excess of purchase price over fair value of net assets acquired , is tested for impairment at least on an annual basis . the initial step of the goodwill impairment test involves a comparison of the fair value of the reporting unit in which the goodwill is recorded , with its carrying amount . if the reporting unit 's fair value exceeds its carrying value , no impairment loss is recognized and the second step , which is a calculation of the impairment , is not performed . however , if the reporting unit 's carrying value exceeds its fair value , an impairment charge equal to the difference in the carrying value of the goodwill and the implied fair value of the goodwill is recorded . implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination . that is , the fair value of the reporting unit is allocated to the assets and liabilities of the reporting unit as if it had been acquired in a business combination . the excess of the fair value of the reporting unit over the amounts allocated to assets and liabilities is the implied fair value of goodwill . in making our determination of fair value of the reporting unit , we rely on the discounted cash flow method . this method uses projections of cash flows from the reporting unit . this approach requires significant judgments including the company 's projected net cash flows , the weighted average cost of capital ( `` wacc '' ) used to discount the cash flows and terminal value assumptions . we derive these assumptions used in the testing from several sources . many of these assumptions are derived from our internal budgets , which would include existing sales data based on current product lines and assumed production levels , manufacturing costs and product pricing . we believe that our internal forecasts are consistent with those that would be used by a potential buyer in valuing our reporting units . the wacc rate is based on an average of the capital structure , cost of capital and inherent business risk profiles of the company . the assumptions used in the valuation are interrelated . the continuing degree of interrelationship of these assumptions is , in and of itself , a significant assumption . because of the interrelationships among the assumptions , we do not believe it would be meaningful to provide a sensitivity analysis on any of the individual assumptions . however , one key assumption in our valuation model is the wacc . if the wacc , which is used to discount the projected cash flows , were higher , the measure of the fair value of the net assets of the reporting unit would decrease . conversely , if the wacc were lower , the measure of the fair value of the net assets of the reporting unit would increase . changes in any of the company 's other estimates could also have a material effect on the estimated future undiscounted cash flows expected to be generated by the reporting unit 's assets . based on the company 's goodwill impairment test in the fourth quarter of 2014 , each reporting unit 's fair value exceeded its carrying value , therefore no further testing was required and no impairment loss was recognized . liquidity and capital resources cash flows provided by continuing operating activities during 2014 and 2013 totaled $ 28,104,000 and $ 37,000 respectively , an improvement in cash flows of $ 28,067,000. cash flows in 2014 were generated from net income from continuing operations totaling $ 12,619,000 after depreciation and amortization expense of $ 5,191,000 and the one-time gain on the palmer earn-out liability of $ 3,476,000. since the company acquired specialty on november 21 , 2014 , cash flows resulting from changes in operating assets and liabilities can not be determined simply by subtracting 2014 balance sheet amounts from 2013 values . the net value of all assets and liabilities acquired are shown in the `` acquisition of specialty pipe & tube , inc. '' line in the investing activities section of the consolidated statements of cash flows . accordingly , these individual acquired balances represent 19 beginning balances for specialty for cash flow purposes . accounts payable favorably affected cash flows from continuing operations by $ 7,821,000 in 2014 as there were significant inventory purchases in the fourth quarter of 2014 in the metals segment which increased the 2014 year-end accounts payable balance combined with the company experiencing an expansion in the number of accounts payable days outstanding . story_separator_special_tag accrued expenses generated $ 3,996,000 cash from continuing operations resulting from increases in the management incentive bonus , uncertain tax positions and current portion of the pension liability related to the closing of bristol fab . these increases were partially offset by lower customer advances at the end of 2014 when compared to the end of 2013. cash flows provided by continuing operating activities during 2013 totaled $ 37,000 while cash flows used in continuing operating activities during 2012 totaled $ 776,000 , an increase in cash flows of $ 813,000. cash flows in 2013 were generated from net income from continuing operations totaling $ 2,898,000 after depreciation and amortization expense of $ 4,672,000 and the one-time bargain purchase gain on the purchase of cri tolling of $ 1,077,000 , net of deferred income taxes . since the company completed its acquisition of cri on august 26 , 2013 , cash flows resulting from changes in operating assets and liabilities can not be determined simply by subtracting 2013 balance sheet amounts from 2012 values . all acquired cri balances represent beginning balances for cash flow purposes . cash flows were adversely affected by a $ 2,490,000 increase in net inventories in 2013. substantially all of the increase occurred in the metals segment as special alloy inventory increased in support of the current special alloy backlog . operating cash flows were unfavorably affected by lower accrued expenses at the end of 2013 compared to the end of 2012 of $ 2,316,000 , as profit based incentives decreased $ 1,876,000 reflecting lower 2013 profits , the majority of the income and sales/use tax liability associated with the palmer acquisition was used in 2013 and accrued interest decreased as the line of credit was paid off during the fourth quarter of 2013. in 2014 , the company 's current assets from continuing operations , which excludes assets and liabilities held for sale , increased $ 14,252,000 and current liabilities increased $ 17,429,000 , from the year ended 2013 amounts , which caused working capital from continuing operations for 2014 to decrease by $ 3,177,000 to $ 64,580,000 from the 2013 total of $ 67,757,000. the current ratio for continuing operations for the year ended january 3 , 2015 , decreased to 2.6:1 from the 2013 year-end ratio of 3.9:1. on november 21 , 2014 , the company entered into a stock purchase agreement with davidson to purchase all of the issued and outstanding stock of specialty . established in 1964 with distribution centers in mineral ridge , ohio and houston , texas , specialty is a master distributor of seamless carbon pipe and tube , with a focus on heavy wall , large diameter products . the company views the specialty acquisition as an excellent complement to the product offerings of the metals segment with similar end markets and consistent profit margins . specialty 's results of operations since the acquisition date are reflected in the company 's consolidated statements of operations , and the specialty acquisition added approximately 30 employees at january 3 , 2015. the purchase price for the all-cash acquisition was approximately $ 31,500,000 , subject to working capital adjustments post-closing . davidson has the potential to receive earn-out payments up to a total of $ 5,000,000 if specialty achieves targeted sales revenue over a two-year period following closing . the financial results for specialty are reported as a part of the company 's metals segment . the company also used cash during 2014 for investing activities to fund capital expenditures of $ 8,066,000. included in this amount is approximately $ 3,953,000 for the planned cri expansion . financing activities during 2014 generated $ 5,310,000 as a result of the additional borrowings associated with the specialty acquisition partially offset by a fourth quarter 2014 dividend payment of $ 2,633,000. in connection with the palmer acquisition discussed in note 16 to the consolidated financial statements included in item 8 of this form 10-k , on august 21 , 2012 , the company modified its credit agreement with its regional bank to increase the limit of the credit facility by $ 5,000,000 to a maximum of $ 25,000,000 , and extended the maturity date to august 21 , 2015. on october 22 , 2012 , the company modified this agreement to increase the limit by an additional $ 5,000,000 to a maximum of $ 30,000,000. this increase was in effect for one year and the maximum line of credit reverted back to $ 25,000,000 on october 22 , 2013. none of the other provisions of the credit agreement were changed as a result of this modification . this credit agreement modification also provided for a ten-year term loan in the amount of $ 22,500,000 that requires equal monthly payments of $ 187,500 plus interest . in conjunction with this term loan , to mitigate the variability of the interest rate risk , the company entered into an interest rate swap contract ( the `` palmer swap '' ) on august 21 , 2012 with its current bank . the palmer swap is for an initial notional amount of $ 22,500,000 with a fixed interest rate of 3.74 percent , and runs for ten years , expiring on august 21 , 2022 , which equates to the date of the term loan . the notional amount of the palmer swap decreases as monthly principal payments are made . in connection with the cri acquisition discussed in note 16 to the consolidated financial statements included in item 8 of this form 10-k , on august 9 , 2013 , the company modified the credit agreement to fund this transaction . the credit agreement modification provided for a new ten-year term loan in the amount of $ 4,033,000 , with monthly principal payments customized to account for the 20 year amortization of the real estate assets combined with a 5-year amortization of the equipment assets purchased .
| consolidated selling , general and administrative expense from continuing operations for 2014 increased by $ 554,000 to $ 16,588,000 compared to $ 16,034,000 for 2013 , and was eight percent of sales for both 2014 and 2013. these costs increased $ 303,000 during the fourth quarter of 2014 compared to the same period of 2013 and was nine percent of sales for both of the fourth quarters of 2014 and 2013. the dollar increase for both the year and fourth quarter of 2014 when compared to the same periods of 2013 resulted primarily from higher incentive based bonuses and sales commissions partly offset by lower travel , professional fees and amortization expense . in addition , the company incurred $ 302,000 for one-time acquisition costs associated with the specialty acquisition in 2014 and $ 264,000 of one-time acquisition costs associated with the cri acquisition in 2013. these costs were $ 305,000 and $ 61,000 for the fourth quarters of 2014 and 2013 , respectively . all of these items will be discussed in greater detail in the respective sections below . comparison of 2013 to 2012 - consolidated for the fiscal year ending december 28 , 2013 , the company generated net earnings from continuing operations of $ 2,898,000 , or $ 0.42 per share , on sales from continuing operations of $ 196,751,000 , compared to net earnings from continuing operations of $ 3,983,000 , or $ 0.62 per share , on sales from continuing operations of $ 166,162,000 in the prior year . the company generated a net loss from continuing operations of $ 1,097,000 , or $ 0.13 loss per share , on sales from continuing operations of $ 46,402,000 in the fourth quarter of 2013 , compared to net earnings from continuing operations of $ 868,000 , or $ 0.14 per share , on sales from continuing operations of $ 45,791,000 in the fourth quarter of 2012. consolidated gross profit from continuing operations for 2013 was $ 19,798,000 compared to $ 19,733,000 in 2012 , and , as a percent of sales , decreased to ten percent of sales in 2013 compared to twelve percent of sales in 2012. for the fourth quarter of 2013 , consolidated gross profit from
|
we also could receive tiered , double-digit royalty payments on future global net sales with rates ranging up to 20 % if the product is successfully commercialized . we retained options to co-develop our jak1/jak2 inhibitors with lilly on a compound-by-compound and indication-by-indication basis . lilly will be responsible for all costs relating to the development and commercialization of the compounds unless we elect to co-develop any compounds or indications . if we elect to co-develop any compounds and or indications , we would be responsible for funding 30 % of the associated future global development costs from the initiation of a phase iib trial through regulatory approval . we would receive an incremental royalty rate increase across all tiers resulting in effective royalty rates ranging up to the high twenties on potential future global net sales for compounds and or indications that we elect to co-develop . we also retained an option to co-promote products in the united states . in july 2010 , we elected to co-develop baricitinib with lilly in rheumatoid arthritis and we are responsible for funding 30 % of the associated future global development costs for this indication from the initiation of the phase iib trial through regulatory approval . baricitinib is also being developed in psoriasis and diabetic nephropathy . we have decided not to exercise our co-development option for psoriasis . the lilly agreement will continue until lilly no longer has any royalty payment obligations or , if earlier , the termination of the agreement in accordance with its terms . royalties are payable by lilly on a product-by-product and country-by-country basis until the latest to occur of ( 1 ) the expiration of the last valid claim of the licensed patent rights covering the licensed product in the relevant country , ( 2 ) the expiration of regulatory exclusivity for the licensed product in such country and ( 3 ) a specified period from first commercial sale in such country of the licensed product by lilly or its affiliates or sublicensees . the agreement may be terminated by lilly for convenience , and may also be terminated under certain other circumstances , including material breach . pfizer in january 2006 , we entered into a collaborative research and license agreement with pfizer inc. for the pursuit of our ccr2 antagonist program . pfizer gained worldwide development and commercialization rights to our portfolio of ccr2 antagonist compounds . pfizer 's rights extend to the full scope of potential indications , with the exception of multiple sclerosis and autoimmune nephritides , where we retained worldwide rights , along with certain compounds . we do not have obligations to pfizer on pre-clinical development candidates we select for pursuit in these indications . the agreement will terminate upon the expiration of the last to expire of patent rights licensed under the agreement . prior to such expiration , either party can terminate the agreement for the uncured material breach of the agreement by the other party or for the insolvency of the other party . in addition , pfizer may terminate the agreement at any time upon 90 days ' notice . we received an upfront nonrefundable , non-creditable payment of $ 40.0 million in 52 january 2006 and are eligible to receive additional future development and milestone payments . we received a $ 3.0 million milestone payment from pfizer in 2010. critical accounting policies and significant estimates the preparation of financial statements requires us to make estimates , assumptions 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 our estimates . we base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances , the results of which form our 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 those estimates under different assumptions or conditions . we believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements : revenue recognition ; research and development costs ; stock compensation ; investments ; inventory ; and convertible debt accounting revenue recognition . revenues are recognized when ( 1 ) persuasive evidence of an arrangement exists , ( 2 ) delivery has occurred or services have been rendered , ( 3 ) the price is fixed or determinable and ( 4 ) collectability is reasonably assured . revenues are deferred for fees received before earned or until no further obligations exist . we exercise judgment in determining that collectability is reasonably assured or that services have been delivered in accordance with the arrangement . we assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment . we assess collectability based primarily on the customer 's payment history and on the creditworthiness of the customer . our product revenues consist of u.s. sales of jakafi and are recognized once we meet all four revenue recognition criteria described above . in november 2011 , we began shipping jakafi to our specialty pharmacy customers , which in turn dispense jakafi to patients in fulfillment of prescriptions . from november 2011 to june 2012 , as jakafi was a new and novel product , the first approved treatment for intermediate or high-risk myelofibrosis , and the first commercial product for incyte , we determined we could not reasonably assess potential product returns . as a result of our inability to initially estimate product returns , the price of jakafi was not deemed fixed or determinable , and we deferred the recognition of revenues on product shipments of jakafi until the product was shipped by our specialty pharmacy customers to patients . story_separator_special_tag based on our actual experience with product returns through the three months ended september 30 , 2012 , we had the ability to estimate product returns and the price of jakafi is now deemed fixed or determinable . as a result , during the three months ended september 30 , 2012 , we began to recognize revenue for product sales of jakafi at the time the product was received by our specialty pharmacy customers . we recognize revenues for product received by our specialty pharmacy customers net of allowances for customer credits , including estimated rebates , chargebacks , discounts , returns , distribution service fees , patient assistance programs , and medicare part d coverage gap reimbursements . product shipping and handling costs are included in cost of product revenues . 53 customer credits : our specialty pharmacy customers are offered various forms of consideration , including allowances , service fees and prompt payment discounts . we expect our specialty pharmacy customers will earn prompt payment discounts and , therefore , we deduct the full amount of these discounts from total product sales when revenues are recognized . service fees are also deducted from total product sales as they are earned . rebates : allowances for rebates include mandated discounts under the medicaid drug rebate program . rebate amounts are based upon contractual agreements or legal requirements with public sector ( e.g . medicaid ) benefit providers . rebates are amounts owed after the final dispensing of the product to a benefit plan participant and are based upon contractual agreements or legal requirements with public sector benefit providers . the accrual for rebates is based on statutory discount rates and expected utilization as well as historical data we have accumulated since product launch . our estimates for expected utilization of rebates are based on data received from our specialty pharmacy customers . rebates are generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter 's activity , plus an accrual balance for known prior quarters ' unpaid rebates . if actual future rebates vary from estimates , we may need to adjust prior period accruals , which would affect revenue in the period of adjustment . chargebacks : chargebacks are discounts that occur when contracted customers purchase directly from a specialty pharmacy , or an intermediary distributor . contracted customers , which currently consist primarily of public health service institutions , non-profit clinics , and federal government entities purchasing via the federal supply schedule , generally purchase the product at a discounted price . the specialty pharmacy or distributor , in turn , charges back to us the difference between the price initially paid by the specialty pharmacy or distributor and the discounted price paid to the specialty pharmacy or distributor by the customer . the accrual for chargebacks is based on the estimated contractual discounts on the inventory levels on hand in our distribution channel . if actual future chargebacks vary from estimates , we may need to adjust prior period accruals , which would affect revenue in the period of adjustment . medicare part d coverage gap : medicare part d prescription drug benefit mandates manufacturers to fund 50 % of the medicare part d insurance coverage gap for prescription drugs sold to eligible patients . our estimates for the expected medicare part d coverage gap are based on historical invoices received and in part from data received from our specialty pharmacy customers . funding of the coverage gap is generally invoiced and paid in arrears so that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter 's activity , plus an accrual balance for known prior quarters . if actual future funding varies from estimates , we may need to adjust prior period accruals , which would affect revenue in the period of adjustment . co-payment assistance : patients who have commercial insurance and meet certain eligibility requirements may receive co-payment assistance . we accrue a liability for co-payment assistance based on actual program participation and estimates of program redemption using data provided by third-party administrators . product royalty revenues royalty revenues on commercial sales for jakavi by novartis are estimated based on information provided by novartis . we exercise judgment in determining whether the information provided is sufficiently reliable for us to base our royalty revenue recognition thereon . if actual royalties vary from estimates , we may need to adjust prior period which would affect royalty revenue in the period of adjustment . 54 contract and license revenues under agreements involving multiple deliverables , services and or rights to use assets that we entered into prior to january 1 , 2011 , the multiple elements are divided into separate units of accounting when certain criteria are met , including whether the delivered items have stand-alone value to the customer and whether there is objective and reliable evidence of the fair value of the undelivered items . when separate units of accounting exist , consideration is allocated among the separate elements based on their respective fair values . the determination of fair value of each element is based on objective evidence from historical sales of the individual elements by us to other customers . if such evidence of fair value for each undelivered element of the arrangement does not exist , all revenue from the arrangement is deferred until such time that evidence of fair value for each undelivered element does exist or until all elements of the arrangement are delivered . when elements are specifically tied to a separate earnings process , revenue is recognized when the specific performance obligation tied to the element is completed . when revenues for an element are not specifically tied to a separate earnings process , they are recognized ratably over the term of the agreement . we assess whether a substantive milestone exists at the inception of our agreements .
| our net product royalty revenues for the years ended december 31 , 2013 and 2012 , were $ 28.3 million and $ 3.7 million , respectively . our contract revenues were $ 91.0 million and $ 156.9 million in 2013 and 2012 , respectively . for the years ended december 31 , 2013 and 2012 , contract revenues were derived from the straight line recognition of revenue associated with the novartis and lilly upfront fees over the estimated performance periods as well as milestone payments earned during the periods . the upfront fees related to the novartis agreement included a $ 150.0 million upfront payment received in 2009 , a $ 60.0 million immediate milestone payment received in 2010 and $ 10.9 million of reimbursable costs incurred prior to the effective date of the agreement . the upfront fees related to the lilly agreement consisted of a $ 90.0 million upfront payment received in 2010. the decrease from 2012 to 2013 primarily relates to recognition of $ 90.0 million in milestone payments from novartis and lilly in 2012 compared to the recognition of $ 25.0 million in milestone payments from novartis in 2013. cost of product revenues we began capitalizing inventory in mid-november 2011 once the fda approved jakafi as the related costs were expected to be recoverable through the commercialization of the product . costs incurred prior to fda approval of $ 9.6 million were recorded as research and development expenses in our statements of operations prior to commercialization of jakafi . at december 31 , 2013 , inventory with $ 4.3 million of product costs incurred prior to fda approval had not yet been sold . we expect to sell the pre-commercialization inventory over the next 36 months ; however , the time period over which this inventory is consumed will depend on a number of factors , including the amount of future jakafi sales , and the ability to utilize inventory prior to its expiration date . as a result , cost of product revenues for the 59 next 36 months will reflect a lower average per
|
the investor 's share of the income or losses from equity investments is reported as a component of other income / ( expense ) in the statements of operations . contributions paid to , and distributions received from , equity investees are recorded as additions or reductions , respectively , to the respective investment balance . 43 we review our investment in paradise on wings for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable in accordance with asc 323. the standard for determining whether an impairment must be recorded under asc 323 is whether an “ other-than-temporary ” decline in value of the investment has occurred . the evaluation and measurement of impairments under asc 323 involves quantitative and qualitative factors and circumstances surrounding the investment , such as recurring operating losses , credit defaults and subsequent rounds of financing . if an unrealized loss on the investment is considered to be other-than-temporary , the loss is recognized in the period the determination is made and the value of the investment is reduced by the amount of the loss . acquisition of seediv on december 19 , 2016 , we acquired all of the issued and outstanding membership interests of seediv . a description of our acquisition of seediv is set forth herein under note 5. acquisition of seediv in our financial statements . we determined that the acquisition of seediv constituted a business combination as defined by asc topic 805 , business combinations ( “ asc 805 ” ) . we also determined that the acquisition of seediv constituted a related-party transaction for the reasons set forth herein under note 5. acquisition of seediv . under asc 805 , the assets acquired and liabilities assumed from related parties are recorded at their acquisition date cost basis . the costs basis of the assets acquired and liabilities assumed were determined in accordance with the provisions of asc topic 820 , fair value measurements and disclosures . under asc 805 , the excess of the purchase price over the fair value of the assets acquired is typically recognized as goodwill . however , under asc 805 , the excess of the purchase price over the fair value of the assets acquired can not be recognized as goodwill in a related-party transaction . accordingly , we recognized such excess as seediv compensation expense in accordance with the provisions of asc 805 and included this amount under general and administrative expenses . pursuant to the provisions of asc 805 , acquisition-related transaction costs and acquisition-related restructuring charges were not included as components of consideration transferred but were accounted for as expenses in the period in which the costs were incurred . stock-based compensation we account for employee stock-based compensation in accordance with the fair value recognition provisions of asc topic 718 , compensation – stock compensation ( “ asc 718 ” ) , using the modified prospective transition method . under this method , compensation expense includes : ( a ) compensation expense for all stock-based payments granted , but not yet vested , as of january 1 , 2006 based on the grant-date fair value , and ( b ) compensation expense for all stock-based payments granted subsequent to january 1 , 2006 , based on the grant-date fair value . such amounts have been reduced to reflect our estimate of forfeitures of all unvested awards . we account for non-employee stock-based compensation in accordance with asc 718 and asc topic 505 , equity ( “ asc 505 ” ) . asc 718 and asc 505 require that we recognize compensation expense based on the estimated fair value of stock-based compensation granted to non-employees over the vesting period , which is generally the period during which services are rendered by the non-employees . 44 we use the black-scholes pricing model to determine the fair value of the stock-based compensation that we grant to employees and non-employees . the black-scholes pricing model takes into consideration such factors as the estimated term of the securities , the conversion or exercise price of the securities , the volatility of the price of our common stock , interest rates , and the probability that the securities will be converted or exercised to determine the fair value of the securities . the selection of these criteria requires management 's judgment and may impact our net income or loss . the computation of volatility is intended to produce a volatility value that is representative of our expectations about the future volatility of the price of our common stock over an expected term . we used our share price history to determine volatility and can not predict what the price of our shares of common stock will be in the future . as a result , the volatility value that we calculated may differ from the actual volatility of the price of our shares of common stock in the future . recent accounting pronouncements in may 2014 , the fasb issued accounting standards update ( “ asu ” ) 2014-09 , revenue with contracts from customers ( “ asu 2014-09 ” ) . asu 2014-09 supersedes the current revenue recognition guidance , including industry-specific guidance . asu 2014-09 introduces a five-step model to achieve its core principle of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services . asu 2014-09 is effective for interim and annual periods beginning after december 15 , 2016. early adoption is not permitted . we believe that the adoption of asu 2014-09 will not have a material impact on our financial statements . in august 2014 , the fasb issued asu 2014-15 , presentation of financial statements – going concern ( subtopic 205-40 ) : disclosure of uncertainties about an entity 's ability to continue as a going concern ( “ asu 2014-15 ” ) . story_separator_special_tag asu 2014-15 requires management to assess an entity 's ability to continue as a going concern by incorporating and expanding on certain principles that are currently in u.s. auditing standards . specifically , asu 2014-15 : ( i ) provides a definition of the term “ substantial doubt ” , ( ii ) requires an evaluation every reporting period including interim periods , ( iii ) provides principles for considering the mitigating effects of management 's plans , ( iv ) requires certain disclosures when substantial doubt is alleviated as a result of consideration of management 's plans , ( v ) requires an express statement and other disclosures when substantial doubt is not alleviated , and ( vi ) requires an assessment for a period of one year after the date that the financial statements are issued or available to be issued . asu 2014-15 is effective for fiscal years ending after december 15 , 2016 and for annual periods and interim periods thereafter . early adoption is permitted . the adoption of asu 2014-15 did not have a material impact on our financial statements . in february 2015 , the fasb issued asu 2015-02 , consolidation : amendments to the consolidation analysis ( “ asu 2015-02 ” ) . asu 2015-02 modifies the analysis that must be performed to determine whether a reporting entity should consolidate certain types of legal entities . asu 2015-02 is effective for interim and annual periods beginning after december 15 , 2015. early adoption is permitted . the adoption of asu 2015-02 did not have a material impact on our financial statements . 45 in july 2015 , the fasb issued asu 2015-11 , simplifying the measurement of inventory ( “ asu 2015-11 ” ) , which changes the subsequent measurement of inventory from lower of cost or market to lower of cost or net realizable value . asu 2015-11 is effective for fiscal years beginning after december 15 , 2016 and interim periods within fiscal years beginning after december 15 , 2017. early adoption is permitted , including adoption in an interim period . we are currently evaluating the impact that the adoption of asu 2015-11 will have on our financial statements . in february 2016 , the fasb issued asu 2016-02 , leases ( “ asu 2016-02 ” ) . asu 2016-02 requires that lease arrangements longer than 12 months result in the lessee recognizing a lease asset and liability . leases will be classified as either finance or operating , with classification affecting the pattern of expense recognition in the income statement . asu 2016-02 is effective for interim and annual periods beginning after december 15 , 2018. early adoption is permitted . we are currently evaluating the impact that the adoption of asu 2016-02 will have on our financial statements . in august 2016 , the fasb issued asu 2016-15 , statement of cash flows : classification of certain cash receipts and payments ( “ asu 2016-15 ” ) . asu 2016-15 provides guidance on eight specific cash flow issues with the objective of reducing diversity in practice . asu 2016-15 is effective for interim and annual periods beginning after december 15 , 2017. early adoption is permitted in any interim or annual period . we believe that the adoption of asu 2016-02 will not have a material impact on our financial statements . we have reviewed all other significant newly-issued accounting pronouncements and concluded that they either are not applicable to our operations or that no material effect is expected on our financial statements as a result of future adoption . comparison of the years ended december 31 , 2016 and 2015 revenue revenue consists primarily of proceeds from the sale of food and beverage products by our company-owned restaurants , and royalty payments , franchise fees and area development fees that we receive from our franchisees . revenue increased $ 308,517 to $ 1,275,448 for the year ended december 31 , 2016 from $ 966,931 for the year ended december 31 , 2015. the increase of $ 308,517 was due primarily to an increase of $ 130,861 for sales by our company-owned restaurants and $ 195,160 for royalties received from our franchisees . the increase in sales by our company-owned restaurants was attributable to the restaurants that we acquired through our acquisition of seediv . our royalties were positively impacted by increased sales by our franchisees at our existing restaurants , sales by franchisees at new restaurants that opened during the past 12 months , and operational improvements that we implemented at each of our franchisees ' restaurants . we expect our revenue to increase during the next 12 months as we generate sales through our company-owned restaurants , as we continue to improve the operations of our existing dick 's wings restaurants and open new dick 's wings restaurants , and as we acquire additional interests in other restaurant brands . operating expenses operating expenses consist of food , beverage and packaging costs , professional fees , employee compensation expense , general and administrative expenses , and loss on impairment of investment . 46 food , beverage and packaging costs . food , beverage and packaging costs consist of the costs and expenses that we incurred for chicken wings , beef , poultry , soda , liquor , paper goods , and other food , beverage and packaging items that were purchased by our company-owned restaurants . food , beverage and packaging costs were $ 28,082 for the year ended december 31 , 2016. we did not incur any food , beverage and packaging costs for the year ended december 31 , 2015. we acquired seediv on december 19 , 2016. accordingly , our food , beverage and packaging costs were incurred during a period of only 12 days during the year ended december 31 , 2016. we expect our food , beverage and packaging costs to increase during the next 12 months as we incur these costs for the entire fiscal periods covered by our future reports . professional fees .
| loss on impairment of investment consists of the loss that we recognized on the 50 % ownership interest in paradise on wings that we purchased on january 20 , 2014. we recognized a loss on impairment of investment of $ 348,143 during the year ended december 31 , 2016. we did not recognize any loss on impairment of investment during the year ended december 31 , 2015. a description of the reasons why we recognized the loss on impairment of investment is set forth herein under note 8. fair value measurements in our financial statements . we do not expect to recognize any additional losses on impairment of investment during the next 12 months . 47 loss from investment in paradise on wings loss from investment in paradise on wings consists of our share of the loss from our 50 % ownership interest in paradise on wings that we purchased on january 20 , 2014. loss from investment in paradise on wings decreased $ 25,032 to $ 222,685 for the year ended december 31 , 2016 from $ 247,717 for the year ended december 31 , 2015. the decrease of $ 25,032 was due primarily to a decrease in other expenses incurred by paradise on wings , partially offset by an increase in operating expenses incurred by paradise on wings . a description of our investment in paradise on wings is set forth herein under note 4. investment in paradise on wings in our financial statements . we expect to recognize additional income and losses from our investment in paradise on wings during the next 12 months . the amount of such income and losses will fluctuate based upon the financial results generated by paradise on wings and the mark to market gains and losses recognized by paradise on wings on its investments . gain / ( loss ) on settlement of litigation gain / ( loss ) on settlement of litigation consists of the gains and losses that we recognize on judgments in legal proceedings and settlements of legal proceedings . we recognized a gain on settlement of litigation of $ 82,642 for the year ended december 31 , 2016. we recognized losses on settlement of litigation of $ 221,323 for the year ended december 31 , 2015. the gain that we recognized during the year ended december 31 , 2016 related to a partial settlement of the damages sought by santander bank in connection
|
during 2019 , we entered the rapidly developing energy storage and monitoring markets with the acquisitions of pika energy and neurio technologies . we believe the electric power landscape will undergo significant changes in the decade ahead as a result of rising utility rates , grid instability and power utility quality issues , environmental concerns , and the continuing performance and cost improvements in renewable energy and batteries . on-site power generation from solar , wind , geothermal , and natural gas generators is projected to become more prevalent as will the need to manage , monitor and store this power – potentially developing into a significant market opportunity annually . the capabilities provided by pika and neurio have enabled us to bring an efficient and intelligent energy-savings solution to the energy storage and monitoring markets which we believe will position generac as a key participant going forward . although very different from the emergency backup power space we serve today , we believe this market will develop similarly as the home standby generator market has over the past two decades . our efforts to develop a cost-effective global supply chain , omni-channel distribution , targeted consumer-based marketing content , and proprietary in-home sales tools have played a critical role in creating the market for home standby generators , and we intend to leverage our expertise and capabilities in these areas as we work to grow the energy storage and monitoring markets . california market for backup power increasing . during 2019 , the largest utility in the state of california along with other utilities announced their intention and ultimately executed a number of public safety power shutoff ( psps ) events in large portions of their service areas . these events were pro-active measures to prevent their equipment from potentially causing catastrophic wildfires during the dry and windy season of the year . the occurrence of these events , along with the utilities warning these actions could continue in the future as they upgrade their transmission and distribution infrastructure , have resulted in significant awareness and increased demand for our generators in california , where penetration rates of home standby generators stand at approximately 1 % . we have a significant focus on expanding distribution in california and are working together with local regulators , inspectors , and gas utilities to increase their bandwidth and sense of urgency around approving and providing the infrastructure necessary for home standby and other backup power products . our efforts in this part of the country will also be helpful in developing the market for energy storage and monitoring where the installed base of solar and other renewable sources of electricity are some of the highest in the u.s. , and the regulatory environment is mandating renewable energy on new construction starting in 2020 . 25 impact of residential investment cycle . the market for residential generators and energy storage systems is also affected by the residential investment cycle and overall consumer confidence and sentiment . when homeowners are confident of their household income , the value of their home and overall net worth , they are more likely to invest in their home . these trends can have an impact on demand for residential generators and energy storage systems . trends in the new housing market highlighted by residential housing starts can also impact demand for these products . demand for outdoor power equipment is also impacted by several of these factors , as well as weather precipitation patterns . finally , the existence of renewable energy mandates and investment tax credits and other subsidies can also have an impact on the demand for energy storage systems . impact of business capital investment and other economic cycle s . the global market for our commercial and industrial products is affected by different capital investment cycles , which can vary across the numerous regions around the world in which we participate . these markets include non-residential building construction , durable goods and infrastructure spending , as well as investments in the exploration and production of oil & gas , as businesses or organizations either add new locations or make investments to upgrade existing locations or equipment . these trends can have a material impact on demand for these products . the capital investment cycle may differ for the various commercial and industrial end markets that we serve including light commercial , retail , office , telecommunications , industrial , data centers , healthcare , construction , oil & gas and municipal infrastructure , among others . the market for these products is also affected by general economic and geopolitical conditions as well as credit availability in the geographic regions that we serve . in addition , we believe demand for our mobile power products will continue to benefit from a secular shift towards renting versus buying this type of equipment . f actors affecting results of o perations we are subject to various factors that can affect our results of operations , which we attempt to mitigate through factors we can control , including continued product development , expanded distribution , pricing , cost control and hedging . certain operational and other factors that affect our business include the following : effect of commodity , currency and component price fluctuations . industry-wide price fluctuations of key commodities , such as steel , copper and aluminum , along with other components we use in our products , as well as changes in labor costs required to produce our products , can have a material impact on our results of operations . acquisitions in recent years have further expanded our commercial and operational presence outside of the united states . these international acquisitions , along with our existing global supply chain , expose us to fluctuations in foreign currency exchange rates and regulatory tariffs that can also have a material impact on our results of operations . we have historically attempted to mitigate the impact of any inflationary pressures through improved product design and sourcing , manufacturing efficiencies , price increases and select hedging transactions . story_separator_special_tag our results are also influenced by changes in fuel prices in the form of freight rates , which in some cases are accepted by our customers and in other cases are paid by us . seasonality . although there is demand for our products throughout the year , in each of the past five years , approximately 20 % to 24 % of our net sales occurred in the first quarter , 22 % to 25 % in the second quarter , 26 % to 28 % in the third quarter and 27 % to 29 % in the fourth quarter , with different seasonality depending on the occurrence , timing and severity of major power outage activity in each year . major outage activity is unpredictable by nature and , as a result , our sales levels and profitability may fluctuate from period to period . the seasonality experienced during a major power outage , and for the subsequent quarters following the event , will vary relative to other periods where no major outage events occurred . we maintain a flexible production and supply chain infrastructure in order to respond to outage-driven peak demand . factors influencing interest expense and cash interest expense . interest expense can be impacted by a variety of factors , including market fluctuations in libor , interest rate election periods , interest rate swap agreements , repayments or borrowings of indebtedness , and amendments to our credit agreements . in connection with our term loan amendment in december 2019 , language was added to the agreement to include a benchmark replacement rate , selected by the administrative agent and the borrower , as a replacement to libor that would take affect at the time libor ceases . we plan to work with our lenders in the future to amend other libor based debt agreements to add a replacement rate should the use of libor cease . interest expense increased slightly during 2019 compared to 2018 , primarily due to increased borrowings by our foreign subsidiaries . refer to note 12 , “ credit agreements , ” to the consolidated financial statements in item 8 of this annual report on form 10-k for further information . factors influencing provision for income taxes and cash income taxes paid . on december 22 , 2017 , the u.s. government enacted the tax act , which significantly changed how the u.s. taxes corporations . during 2018 , the u.s. treasury department ( treasury ) issued several new regulations and other guidance which we have incorporated into our final tax calculations . at december 31 , 2019 , we consider the tax expense recorded for the impact of tax reform to be complete . it is possible additional regulations or guidance could be issued by treasury or by a state which may create an additional tax expense or benefit . we will update our future tax provisions based on new regulations or guidance accordingly . 26 as a result of the tax act , we recognized a one-time , non-cash benefit of $ 28.4 million in the fourth quarter of 2017 primarily from the impact of the revaluation of our net deferred tax liabilities . this non-cash benefit resulted primarily from the federal rate reduction from 35 % to 21 % . as of december 31 , 2019 , we had approximately $ 225 million of tax-deductible goodwill and intangible asset amortization remaining from our acquisition by ccmp capital advisors , llc in 2006 that we expect to generate aggregate cash tax savings of approximately $ 57 million through 2021 , assuming continued profitability of our u.s. business and a combined federal and state tax rate of 25.3 % . the recognition of the tax benefit associated with these assets for tax purposes is expected to be $ 122 million in 2020 and $ 102 million in 2021 , which generates annual cash tax savings of $ 31 million in 2020 and $ 26 million in 2021. based on current business plans , we believe that our cash tax obligations through 2021 will be significantly reduced by these tax attributes , after which our cash tax obligation will increase . other domestic acquisitions have resulted in additional tax deductible goodwill and intangible assets that will generate tax savings , but are not material to our consolidated financial statements . components of net sales and e xpenses net s ales our net sales primarily consist of product sales to our customers . this includes sales of our power generation equipment , energy storage systems , and other power products to the residential , light commercial and industrial markets , as well as service parts to our dealer network . net sales also include shipping and handling charges billed to customers , with the related freight costs included in cost of goods sold . additionally , we offer other services , including extended warranties , remote monitoring , installation and maintenance services . however , these services accounted for less than three percent of our net sales for the year ended december 31 , 2019. refer to note 2 , “ significant accounting policies - revenue recognition , ” to the consolidated financial statements in item 8 of this annual report on form 10-k for further information on our revenue streams and related revenue recognition accounting policies . we are not dependent on any one channel or customer for our net sales , with no single customer representing more than 5 % of our sales , and our top ten customers representing less than 19 % of our net sales for the year ended december 31 , 2019. costs of goods s old the principal elements of costs of goods sold are component parts , raw materials , factory overhead and labor . component parts and raw materials comprised approximately 75 % of costs of goods sold for the year ended december 31 , 2019. the principal component parts are engines , alternators , and batteries .
| these items were partially offset by the impact of recent acquisitions and the realization of higher input costs , including regulatory tariffs , logistics costs , and labor rates . operating expenses . the increase in operating expenses was primarily driven by incremental variable operating expense on the strong sales growth , recurring operating expenses from recent acquisitions , an increase in employee headcount related to strategic initiatives , higher marketing and promotional spend , and higher intangible amortization expenses . other expense . the increase in other expense , net was primarily due to a $ 10.9 million pre-tax settlement charge related to the termination of the company 's domestic pension plan in the fourth quarter of 2019 , partially off-set by more favorable foreign currency adjustments compared to the prior year . provision for i ncome tax es . the effective income tax rates for the years ended december 31 , 2019 and 2018 were 21.1 % and 22.5 % , respectively . the decrease in the effective tax rate is primarily due to a reduction in the u.s. state income tax expense and lower foreign earnings , which are subject to higher jurisdictional tax rates . net income attributable to generac holdings inc. the increase in net income attributable to generac holdings inc. was primarily due to the factors outlined above . adjusted ebitda . adjusted ebitda margins for the domestic segment for the year ended december 31 , 2019 were 24.6 % of net sales as compared to 24.8 % of net sales for the year ended december 31 , 2018. adjusted ebitda margin in the current year benefited from favorable sales mix , pricing initiatives , and fixed operating cost leverage on the higher sales volumes . these favorable impacts were more than offset by higher input costs , including regulatory tariffs , increased employee headcount , higher marketing and promotional spend , and recurring operating expenses from recent acquisitions . 29 adjusted ebitda margins for the international segment , before deducting for non-controlling interests , for the year ended december 31 , 2019 were 5.5 % of net sales as compared
|
” we frequently engage our customer 's existing electrical contractor to provide installation and project management services . we also sell our hif lighting systems on a wholesale basis , principally to electrical contractors and value-added resellers to sell to their own customer bases . we have more recently introduced new products of our light emitting diode , or led , lighting and energy management systems . we believe that we have taken a responsible approach to this emerging technology . based upon recent improvements , including drastic reduction of chip prices , availability of name-brand drivers and the integration with our intelite controls offerings , we believe that led will become a larger part of our overall interior and exterior lighting strategy in the future . we believe that our new led product offerings also present new opportunities in the hospitality , health care , education , office and general retail markets , in addition to strengthening our position as an energy management leader in the commercial , industrial and food service markets . we have sold and installed more than 2.5 million of our hif lighting systems in more than 9,090 facilities from december 1 , 2001 through march 31 , 2013 . our top direct customers by revenue in fiscal 2013 included coca-cola enterprises inc. , pepsico inc. , u.s . foodservice , sysco corp. , quad graphics , inc. and wakefern food corporation . our fiscal year ends on march 31. we call our fiscal years which ended on march 31 , 2011 , 2012 and 2013 , “ fiscal 2011 , ” “ fiscal 2012 ” and “ fiscal 2013 , ” respectively . our fiscal first quarter 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. because of the recessed state of the global economy since 2009 , especially as it impacts capital equipment manufacturers , our results for fiscal 2013 continued to be impacted by lengthened customer sales cycles and sluggish customer capital spending . to address these difficult economic conditions , we implemented several cost reduction initiatives . during the second quarter of fiscal 2011 , we identified $ 1 million of annualized cost reductions related to decreased product costs , improved manufacturing efficiencies and reduced operating expenses . we realized these cost reductions beginning during the fiscal 2011 third quarter through reduction in general and administrative expenses and improved product margins for our hif lighting systems . during fiscal 2012 , in recognition of an improving economy compared to the previous year , we focused our efforts on activities to increase revenue . these investments included the creation of a telemarketing call center for the purpose of customer lead generation , the establishment of a sales office and hiring of personnel in houston , texas and headcount additions to our retail sales force and our engineered systems division . during fiscal 2013 , we implemented additional cost containment initiatives as described in the preceding section titled `` recent management change and strategic refocus '' . in response to the constraints on our customers ' capital spending budgets , we have more aggressively promoted the advantages to our customers of purchasing our energy management systems through our orion throughput agreement , or ota , financing program . our ota financing program provides for our customer 's purchase of our energy management systems without an up-front capital outlay . during fiscal 2012 , we entered into an arrangement with a national equipment finance company to provide immediate non-recourse and recourse funding of pre-credit approved ota finance contracts upon project completion and customer acceptance . the majority of these sales occur on a non-recourse basis . during fiscal 2013 , approximately 73.3 % of our total completed ota contracts were financed directly through third party equipment finance companies . in the future , we intend to continue to utilize third party finance companies to fund the majority of our ota contracts . additionally , during fiscal 2012 we completed a $ 5.0 million ota line-of-credit for the purpose of funding ota projects upon the project completion and customer acceptance , for which we chose to hold the contracts internally . in the future , we do not intend to fund ota contracts through debt borrowings . in future periods , the number of customers who choose to purchase our systems by using our ota financing program will be dependent upon our relationships with third party equipment finance companies , the extent to which customers ' choose to use their own capital budgets and the extent to which customers ' choose to enter into finance contracts . additionally , we have provided a financing program to our alternative renewable energy system customers called a solar power purchase agreement , or ppa , as an alternative to purchasing our systems for cash . the ppa is a supply side agreement for the generation of electricity and subsequent sale to the end user . we do not intend to use our own cash balances to fund future ppa opportunities and have been able to secure several external sources of funding for ppa 's on behalf of our customers . 29 in august 2009 , we created our engineered systems division , which has been offering our customers additional alternative renewable energy systems . during our fiscal 2011 second quarter , we received an $ 8.3 million cash order for a solar pv generating system for which we recognized revenue in fiscal 2012. during fiscal 2012 , we recorded $ 51.6 million in new contracted revenues across 20 contracts . during fiscal 2013 , we did not sign any significant new solar contracts . we attribute this to the december 2011 expiration of federal cash grants available for solar projects , declining solar prices for panels , an unstable supply environment , including bankruptcy filings from several solar panel suppliers , and a decline in the value of state and utility incentives . story_separator_special_tag due to the reduction in new solar contracts , during the back half of fiscal 2013 we redeployed some of our engineered systems personnel to focus on the sales and project management support of our hif lighting systems . we are currently focused on solar opportunities in markets where electricity costs are high and there are incentive markets that provide funding to support these projects . despite our fiscal 2013 first half performance , we remain optimistic about our near-term and long-term financial performance . our near-term optimism is based upon our return to profitability during our fiscal 2013 second half , our backlog of orders entering fiscal 2014 , our investments into our retail sales force and our intentions to continue to expand our retail sales force during fiscal 2014 , our cost containment initiatives and opportunities , the increasing volume of unit sales of our new products , specifically our exterior hif fixtures and the opportunities to increase sales through our new led products which will allow us to expand into new markets . our long-term optimism is based upon the considerable size of the existing market opportunity for lighting retrofits , the continued development of our new products and product enhancements , the opportunity for additional revenue from sales of renewable technologies through our orion engineered systems division and the opportunity to increase gross margins through the leverage of our under-utilized manufacturing capacity . revenue and expense components revenue . we sell our energy management products and services directly to commercial and industrial customers , and indirectly to end users through wholesale sales to electrical contractors and value-added resellers . we currently generate the substantial majority of our revenue from sales of hif lighting systems and related services to commercial and industrial customers . while our services include comprehensive site assessment , site field verification , utility incentive and government subsidy management , engineering design , project management , installation and recycling in connection with our retrofit installations , we separately recognize service revenue only for our installation and recycling services . our installation and recycling service revenues are recognized when services are complete and customer acceptance has been received . in fiscal 2011 and fiscal 2012 , we increased our efforts to expand our value-added reseller channels , including through developing a partner standard operating procedural kit , providing our partners with product marketing materials and providing training to channel partners on our sales methodologies . these wholesale channels accounted for approximately 54 % , 64 % and 59 % of our total revenue volume in fiscal 2011 , fiscal 2012 and fiscal 2013 , respectively , not taking into consideration our renewable technologies revenue generated through our engineered systems division . in fiscal 2012 , we focused our expansion efforts on our direct retail sales channel through the creation of a telemarketing call center for the purpose of customer lead generation , the establishment of a sales office and personnel in houston , texas and headcount additions to our retail sales force and our engineered systems division . during the fiscal 2013 second half , we reengineered our telemarketing call center for the purpose of improving the quality of leads and increasing sales closing ratios . we also continued the expansion of a direct in-market sales force and intend to continue increasing the number of direct sales personnel during fiscal 2014. additionally , we offer our ota sales-type financing program under which we finance the customer 's purchase of our energy management systems . the ota program was established to assist customers who are interested in purchasing our energy management systems but who have capital expenditure budget limitations . our ota contracts are capital leases under gaap and we record revenue at the present value of the future payments at the time customer acceptance of the installed and operating system is complete . our ota contracts under this sales-type financing are either structured with a fixed term , typically 60 months , and a bargain purchase option at the end of term , or are one year in duration and , at the completion of the initial one-year term , provide for ( i ) one to four automatic one-year renewals at agreed upon pricing ; ( ii ) an early buyout for cash ; or ( iii ) the return of the equipment at the customer 's expense . the revenue that we are entitled to receive from the sale of our lighting fixtures under our ota financing program is fixed and is based on the cost of the lighting fixtures and applicable profit margin . our revenue from agreements entered into under this program is not dependent upon our customers ' actual energy savings . we recognize revenue from ota contracts at the net present value of the future cash flows at the completion date of the installation of the energy management systems and the customers acknowledgment that the system is operating as specified . upon completion of the installation , we may choose to sell the future cash flows and residual rights to the equipment on a non-recourse basis to an unrelated third party finance company in exchange for cash and future payments . in fiscal 2011 , we recognized $ 10.7 million of revenue from 127 completed ota contracts . in fiscal 2012 , we recognized $ 10.2 million of revenue from 139 completed ota contracts . in fiscal 2013 , we recognized $ 6.7 million of revenue from 128 completed ota contracts . our ppa financing program provides for our customer 's purchase of electricity from our renewable energy generating assets without an upfront capital outlay . our ppa is a longer-term contract , typically in excess of 10 years , in which we receive monthly 30 payments over the life of the contract . this program creates an ongoing recurring revenue stream , but reduces near-term revenue as the payments are recognized as revenue on a monthly basis over the life of the contract versus upfront upon product shipment or project completion .
| cost of service revenue increased from $ 7.7 million for fiscal 2012 to $ 9.8 million for fiscal 2013 , an increase of $ 2.1 million , or 27.6 % . total gross margin increased from 29.9 % for fiscal 2012 to 31.1 % for fiscal 2013. for fiscal 2013 , our gross margin percentage increased due to improved project margins from sales of solar pv systems and to cost containment initiatives in our manufacturing operations during the back half of fiscal 2013. our gross margin on renewable revenues was 18.2 % during fiscal 2012 compared to 30.5 % during fiscal 2013. the increase in gross margin percentage was due to negotiated contract cost reductions and efficiencies in our project management and contracted expenses . gross margin from our hif integrated systems revenue for fiscal 2012 was 34.5 % compared to 31.2 % for fiscal 2013. the decrease in hif gross margin percentage was due to the decrease in hif revenue occurring during the fiscal 2013 first half and the impact of our fixed manufacturing costs . operating expenses 35 general and administrative . our general and administrative expenses increased from $ 11.4 million for fiscal 2012 to $ 13.9 million for fiscal 2013 , an increase of $ 2.5 million , or 22.3 % . the increase for fiscal 2013 was due to expenses of $ 1.9 million resulting from our reorganization initiatives , increased legal expenses related to unusual items of $ 1.1 million , increased compensation expenses of $ 0.4 million related to our second half of fiscal 2013 bonus plan and increased audit expenses of $ 0.2 million related to the re-audit of our fiscal 2011 financial statements . these increases in expenses were partially offset by headcount reductions and discretionary spending reductions that occurred during the second half of fiscal 2013. sales and marketing . our sales and marketing expenses increased from $ 15.6 million for fiscal 2012 to $ 17.1 million for fiscal 2013 , an increase of $ 1.5 million , or 9.8 % . the increase was due to the full year
|
in this regard , the most significant assumptions we make are the life expectancy of the insured and the discount rate . in determining the life expectancy estimate , we generally use actuarial medical reviews from independent medical underwriters . these medical underwriters summarize the health of the insured by reviewing historical and current medical records . the medical underwriters evaluate the health condition of the insured in order to produce an estimate of the insured 's mortality—a life expectancy report . in the case of a small face policy ( $ 500,000 face value or less ) , we may use one life expectancy report or estimate life expectancy based on a modified methodology . the life expectancy report represents a range of probabilities for the insured 's mortality against a group of cohorts with the same age , sex and smoking status . these mortality probabilities represent a mathematical curve known as a mortality curve , which is then used to generate a series of expected cash flows from the life insurance policy over the expected lifespan of the insured . a discount rate is used to calculate the net present value of the expected cash flows . the discount rate represents the internal rate of return we expect to earn on investments in a policy or in the portfolio as a whole . the discount rate used to calculate fair value of our portfolio incorporates the guidance provided by asc 820 , fair value measurements and disclosures . 29 the table below provides the discount rate used to estimate the fair value of the life insurance policies for the period ending : december 31 , 2012 december 31 , 2011 12.08 % 13.41 % the change in the discount rate incorporates current information about market interest rates , the credit exposure to the issuing insurance companies and our estimate of the risk premium an investor would require to receive the future cash flows derived from our portfolio of life insurance policies . we engaged a third party , model actuarial pricing systems ( maps ) , to prepare a third-party valuation of our life settlement portfolio . maps owns and maintains the portfolio pricing software used by the company . maps processed policy data , future premium data , life expectancy data , and other actuarial information supplied by the company to calculate a net present value for our portfolio using the specified discount rate of 12.08 % . maps independently calculated the net present value of our portfolio of 211 policies to be $ 164,317,000 , which is the same fair value estimate used by the company on the balance sheet as of december 31 , 2012 , and furnished us with a letter documenting its calculation . a copy of such letter is filed as exhibit 99.1 to this report . jobs act on april 5 , 2012 , the jumpstart our business startups act of 2012 , or jobs act , was enacted . section 107 of the jobs act provides that an “ emerging growth company ” can take advantage of the extended transition period provided in section 7 ( a ) ( 2 ) ( b ) of the securities act of 1933 for complying with new or revised accounting standards . this means that an “ emerging growth company ” can make an election to delay the adoption of certain accounting standards until those standards would apply to private companies . we have elected to delay such adoption of new or revised accounting standards and , as a result , we may not comply with new or revised accounting standards at the same time as other public reporting companies that are not “ emerging growth companies. ” this exemption will apply for a period of five years following our first sale of common equity securities under an effective registration statement or until we no longer qualify as an “ emerging growth company ” as defined under the jobs act , whichever is earlier . 30 deferred income taxes fasb asc 740 , income taxes , requires us to recognize deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases . a valuation allowance is established for any portion of deferred tax assets that is not considered more likely than not to be realized . a valuation allowance is required to be recognized to reduce deferred tax assets to an amount that is more likely than not to be realized . realization of deferred tax assets depends upon having sufficient past or future taxable income in periods to which the deductible temporary differences are expected to be recovered or within any applicable carryback or carryforward periods . we believe that it is more likely than not that we will be able to realize all deferred tax assets other than that which is expected to result in a capital loss . we have provided a valuation allowance against the deferred tax asset related to a note receivable because we believes that , when realized for tax purposes , it will result in a capital loss that will not be utilized because we have no expectation of generating a capital gain within the applicable carry-forward period . therefore , we do not believe that it is more likely than not that the deferred tax asset will be realized . deferred financing and issuance costs financing costs incurred to obtain financing under the revolving credit facility have been capitalized and are amortized using the straight-line method over the term of the revolving credit facility . the series i secured note obligations are reported net of issuance costs , sales commissions and other direct expenses , which are amortized using the interest method over the term of each respective borrowing . the renewable secured debentures are reported net of issuance costs , sales commissions and other direct expenses , which are amortized using the interest method over the term of each respective borrowing . story_separator_special_tag the series a preferred stock is reported net of issuance costs , sales commissions , including the fair value of warrants issued , and other direct expenses , which are amortized using the interest method as interest expense over the three year redemption period . certain matters discussed in this section of this report , and elsewhere in this report , are forward-looking statements . we have based these forward-looking statements on our current expectations and projections about future events . nevertheless , these forward-looking statements are subject to risks , uncertainties and assumptions about our operations and the investments we make , including , among other things , factors discussed in the “ risk factors ” section of this report and the following : ● changes in the secondary market for life insurance ; ● our limited operating history ; ● the valuation of assets reflected on our financial statements ; ● the reliability of assumptions underlying our actuarial models ; ● our reliance of debt financing ; ● risks relating to the validity and enforceability of the life insurance policies we purchase ; ● our reliance on information provided and obtained by third parties ; ● federal and state regulatory matters ; ● additional expenses , not reflected in our operating history , related to being a public reporting company ; ● competition in the secondary life insurance market ; ● the relative illiquidity of life insurance policies ; ● life insurance company credit exposure ; ● economic outlook ; ● performance of our investments in life insurance policies ; ● financing requirements ; ● litigation risks ; and ● restrictive covenants contained in borrowing agreements . forward-looking statements can generally be identified by the use of words like “ believes , ” “ could , ” “ possibly , ” “ probably , ” “ anticipates , ” “ estimates , ” “ projects , ” “ expects , ” “ may , ” “ will , ” “ should , ” “ seek , ” “ intend , ” “ plan , ” “ expect ” or “ consider , ” or the negative of these expressions or other variations , or by discussions of strategy that involve risks and uncertainties . all forward-looking statements involve known and unknown risks , uncertainties and other factors that may cause our actual transactions , results , performance or achievements to be materially different from any future transactions , results , performance or achievements expressed or implied by such forward-looking statements . we caution you that the forward-looking statements in this report are only estimates and predictions , or statements of current intent . actual results or outcomes , or actions that we ultimately undertake , could differ materially from those anticipated in the forward-looking statements due to risks , uncertainties or actual events differing from the assumptions underlying these statements . principal revenue and expense items we earn revenues from three primary sources as described below . policy benefits realized . we recognize the difference between the death benefits and carrying values of the policy when an insured event has occurred and the company determines that settlement and ultimate collection of the death benefits is realizable and reasonably assured . revenue from a transaction must meet both criteria in order to be recognized . we generally collect the face value of the life insurance policy from the insurance company within 45 days of the insured 's mortality . 31 sale of a life insurance policy or a portfolio of life insurance policies . in an event of a sale of a policy the company recognizes gain or loss as the difference between the sale price and the carrying value of the policy on the date of the receipt of payment on such sale . change in fair value of life insurance policies . we have elected to carry our investments in life insurance policies at fair value in accordance with asc 325-30 , investments in life insurance contracts . accordingly , we value our investments in life insurance policies each reporting period in accordance with the fair value principles discussed herein , which includes the expected payment of premiums for future periods . our main components of expense are summarized below . selling , general and administrative expenses . we recognize and record expenses incurred in the operations of the purchasing and servicing of life insurance policies . these expenses include professional fees , salaries , and sales and marketing expenditures . interest expense . we recognize and record interest expenses associated with the costs of financing our life insurance portfolio for the current period . these expenses include interest paid to our senior lender under our revolving credit facility , as well as all interest paid on our debentures and other outstanding indebtedness such as our subsidiary secured notes and dividends on convertible , redeemable preferred stock . when we issue long-term indebtedness , we amortize the issuance costs associated with such indebtedness over the outstanding term of the financing , and classify it as interest expense . results of operations — 2012 compared to 2011 the following is our analysis of the results of operations for the periods indicated below . this analysis should be read in conjunction with our consolidated financial statements and related notes . revenue . revenue recognized from the receipt of policy benefits was $ 6,283,000 in 2012. revenue recognized from the receipt of policy benefits was $ 2,810,000 in 2011. revenue recognized from the change in fair value of our life insurance policies , net of premiums and carrying costs , was $ 11,154,000 in 2012 and $ 14,994,000 in 2011. the change in fair value related to new policies acquired during 2012 and 2011 was $ 12,242,000 and $ 10,843,000 respectively .
| the amended and restated credit and security agreement extends the maturity date of borrowings made by the company 's subsidiary , gwg dlp funding ii , llc , to december 31 , 2014 , and removes certain gwg-related parties to the original credit and security agreement dated june 15 , 2008. in connection with the amended and restated credit and security agreement , gwg holdings and its subsidiaries entered into certain other agreements and amendments and restatement of earlier agreements entered into in connection with the original credit and security agreement . included among these other agreements was a reaffirmation and modification agreement that reaffirms the performance guaranty that gwg holdings earlier provided in connection with the original credit and security agreement to dz bank ag deutsche zentral-genossenschaftsbank , as agent . use of proceeds – renewable secured debentures our goal is to use a majority of the net proceeds from the sale of renewable secured debentures to purchase additional life insurance policies in the secondary market . the amount of proceeds we apply towards purchasing additional life insurance policies will depend , among other things , on how long the debentures are offered , the amount of net proceeds that we receive from the sale of debentures being offered , the existence and timing of opportunities to expand our portfolio of insurance policy assets , our cash needs for certain other expenditures we anticipate incurring in connection with this offering and in connection with our business , and the availability of other sources of cash ( e.g. , our revolving credit facility ) . we currently expect to allocate net offering proceeds ( assuming the maximum amount of commissions , fees and allowances of 8.00 % of the aggregate principal amount of renewable secured debentures sold ) as follows , based upon various assumed amounts of gross proceeds that we receive from the proceeds of the offering : replace_table_token_15_th 34 net offering proceeds not immediately applied to the uses summarized above will be invested short-term investments such as money market funds , commercial paper , u.s. treasury bills and similar securities investments pending their use . the actual use of proceeds from the sale of renewable secured debentures from january 31 , 2012 to december 31 , 2012 is as follows : replace_table_token_16_th cash flows the
|
disclosure controls and procedures we maintain disclosure controls and procedures , as defined in rule 13a-15 ( e ) promulgated under the securities exchange act of 1934 ( the `` exchange act `` ) , that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the exchange act is recorded , processed , summarized and reported within the time periods specified in the securities and exchange commission 's rules and forms and that such information is accumulated and communicated to our management , including our chief executive officer and chief financial officer , as appropriate to allow timely decisions regarding required disclosure . we carried out an evaluation , under the supervision and with the participation of our management , including our chief executive officer and chief financial officer , of the effectiveness of the design and operation of our disclosure controls and procedures as of december 31 , 2013. based on the evaluation of these disclosure controls and procedures , and in light of the material weaknesses found in our internal controls over financial reporting , our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective . management 's report on internal control over financial reporting management is responsible for establishing and maintaining adequate internal control over financial reporting , as defined in exchange act rule 13a-15 ( f ) . the 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 accounting principles generally accepted in the united states of america . 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 the chief executive officer and chief financial officer , the company conducted an evaluation of the effectiveness of the company 's internal control over financial reporting as of december 31 , 2013 , using the criteria established in internal control - integrated framework issued by the committee of sponsoring organizations of the treadway commission ( `` coso `` ) . a material weakness is a deficiency , or combination of deficiencies , in internal control over financial reporting , such that there is a reasonable possibility that a material misstatement of the company 's annual or interim financial statements will not be prevented or detected on a timely basis . in its assessment of the effectiveness of internal control over financial reporting as of december 31 , 2013 , the company determined that there were control deficiencies that constituted material weaknesses , as described below . 1. we do not have an independent audit committee the company does not have an audit committee financial expert ( as defined in item 407 of regulation s-k ) serving on its board of directors . all current members of the board of directors lack sufficient financial expertise for overseeing financial reporting responsibilities . the company has not yet employed an audit committee financial expert on its board due to the inability to attract such a person . 2. we did not maintain appropriate cash controls as of december 31 , 2013 , the company has not maintained sufficient internal controls over financial reporting for the cash process , including failure to segregate cash handling and accounting functions , and did not require dual signature on the company 's bank accounts . 3. we did not implement appropriate information technology controls as at december 31 , 2013 , the company retains copies of all financial data and material agreements ; however , there is no formal procedure or evidence of normal backup of the company 's data or off-site storage of the data in the event of theft , misplacement , or loss due to unmitigated factors . accordingly , the company concluded that these control deficiencies resulted in a possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected story_separator_special_tag this annual report on form 10-k contains forward-looking statements . these forward-looking statements are not historical facts but rather are based on current expectations , estimates and projections . we may use words such as anticipate , expect , intend , plan , believe , foresee , estimate and variations of these words and similar expressions to identify forward-looking statements . these statements are not guarantees of future performance and are subject to certain risks , uncertainties and other factors , some of which are beyond our control , are difficult to predict and could cause actual results to differ materially from those expressed or forecasted . you should read this report completely and with the understanding that actual future results may be materially different from what we expect . the forward-looking statements included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this report . we will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements , whether as a result of new information , future events or otherwise . liquidity and capital resources as of december 31 , 2013 , the company had cash of $ 888,704 and other current assets of $ 116,747. the company had current liabilities of $ 957,274. this represents a working capital surplus of $ 48,177. during 2014 to date , the company has received subscriptions of $ 3million story_separator_special_tag disclosure controls and procedures we maintain disclosure controls and procedures , as defined in rule 13a-15 ( e ) promulgated under the securities exchange act of 1934 ( the `` exchange act `` ) , that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the exchange act is recorded , processed , summarized and reported within the time periods specified in the securities and exchange commission 's rules and forms and that such information is accumulated and communicated to our management , including our chief executive officer and chief financial officer , as appropriate to allow timely decisions regarding required disclosure . we carried out an evaluation , under the supervision and with the participation of our management , including our chief executive officer and chief financial officer , of the effectiveness of the design and operation of our disclosure controls and procedures as of december 31 , 2013. based on the evaluation of these disclosure controls and procedures , and in light of the material weaknesses found in our internal controls over financial reporting , our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective . management 's report on internal control over financial reporting management is responsible for establishing and maintaining adequate internal control over financial reporting , as defined in exchange act rule 13a-15 ( f ) . the 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 accounting principles generally accepted in the united states of america . 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 the chief executive officer and chief financial officer , the company conducted an evaluation of the effectiveness of the company 's internal control over financial reporting as of december 31 , 2013 , using the criteria established in internal control - integrated framework issued by the committee of sponsoring organizations of the treadway commission ( `` coso `` ) . a material weakness is a deficiency , or combination of deficiencies , in internal control over financial reporting , such that there is a reasonable possibility that a material misstatement of the company 's annual or interim financial statements will not be prevented or detected on a timely basis . in its assessment of the effectiveness of internal control over financial reporting as of december 31 , 2013 , the company determined that there were control deficiencies that constituted material weaknesses , as described below . 1. we do not have an independent audit committee the company does not have an audit committee financial expert ( as defined in item 407 of regulation s-k ) serving on its board of directors . all current members of the board of directors lack sufficient financial expertise for overseeing financial reporting responsibilities . the company has not yet employed an audit committee financial expert on its board due to the inability to attract such a person . 2. we did not maintain appropriate cash controls as of december 31 , 2013 , the company has not maintained sufficient internal controls over financial reporting for the cash process , including failure to segregate cash handling and accounting functions , and did not require dual signature on the company 's bank accounts . 3. we did not implement appropriate information technology controls as at december 31 , 2013 , the company retains copies of all financial data and material agreements ; however , there is no formal procedure or evidence of normal backup of the company 's data or off-site storage of the data in the event of theft , misplacement , or loss due to unmitigated factors . accordingly , the company concluded that these control deficiencies resulted in a possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected story_separator_special_tag this annual report on form 10-k contains forward-looking statements . these forward-looking statements are not historical facts but rather are based on current expectations , estimates and projections . we may use words such as anticipate , expect , intend , plan , believe , foresee , estimate and variations of these words and similar expressions to identify forward-looking statements . these statements are not guarantees of future performance and are subject to certain risks , uncertainties and other factors , some of which are beyond our control , are difficult to predict and could cause actual results to differ materially from those expressed or forecasted . you should read this report completely and with the understanding that actual future results may be materially different from what we expect . the forward-looking statements included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this report . we will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements , whether as a result of new information , future events or otherwise . liquidity and capital resources as of december 31 , 2013 , the company had cash of $ 888,704 and other current assets of $ 116,747. the company had current liabilities of $ 957,274. this represents a working capital surplus of $ 48,177. during 2014 to date , the company has received subscriptions of $ 3million
| there were no grant funds that met these criteria in respect of the year ended december 31 , 2012. net loss for the year ended december 31 , 2013 , our net loss was $ 3,710,289 , a decrease of $ 372,761 or 9 % over the comparative period for the year ended december 31 , 2012. the change is a result of the changes described above . going concern we have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive activities . for these reasons , our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing . 24 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 stockholders . future financings we will continue to rely on equity sales of our common shares in order to continue to fund our business operations . issuances of additional shares will result in dilution to existing stockholders . there is no assurance that we will achieve any additional sales of equity securities or arrange for debt or other financing to fund our operations and other activities . critical accounting policies our financial statements and accompanying notes have been prepared in accordance with united states generally accepted accounting principles applied on a consistent basis . the preparation of financial statements in conformity with u.s. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities , the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods . we regularly evaluate the accounting policies and estimates that we use to prepare our financial statements . a complete summary of these policies is included in the
|
overview we are a rapidly growing and leading money remittance services company focused primarily on the united states to latin america and the caribbean ( “ lac ” ) corridor , which includes mexico , central and south america and the caribbean . in 2019 , we expanded our services to allow remittances to africa from the united states and also began offering sending services from canada to latin america and africa . we utilize our proprietary technology to deliver convenient , reliable and value-added services to our customers through a broad network of sending and paying agents . our remittance services , which include a comprehensive suite of ancillary financial processing solutions and payment services , are available in all 50 states in the u.s. , washington d.c. , puerto rico and 13 provinces in canada , where customers can send money to beneficiaries in 17 lac countries , seven countries in africa and two countries in asia . our services are accessible in person through over 100,000 independent sending and paying agents and 34 company-operated stores , as well as online and via internet-enabled mobile devices . additionally , we have expanded our product and service portfolio to include online payment options , pre-paid debit cards and direct deposit payroll cards , which may present different cost , demand , regulatory and risk profiles relative to our core remittance business . money remittance services to lac countries , primarily mexico and guatemala , are the primary source of our revenue . these services involve the movement of funds on behalf of an originating customer for receipt by a designated beneficiary at a designated receiving location . our remittances to lac countries are primarily generated in the united states by customers with roots in latin american and caribbean countries , many of whom do not have an existing relationship with a traditional full-service financial institution capable of providing the services we offer . we provide these customers with flexibility and convenience to help them meet their financial needs . we believe many of our customers who use our services may have access to traditional banking services , but prefer to use our services based on reliability , convenience and value . we generate money remittance revenue from fees paid by our customers ( i.e. , the senders of funds ) , which we share with our sending agents in the originating country and our paying agents in the destination country . remittances paid in local currencies that are not pegged to the u.s. dollar can also generate revenue through if we are successful in our daily management of currency exchange spreads . our money remittance services enable our customers to send funds through our broad network of locations in the united states and canada that are primarily operated by third-party businesses , as well as through our company-operated stores . transactions are processed and payment is collected by our agent ( “ sending agent ( s ) ” ) and those funds become available for pickup by the beneficiary at the designated destination , usually within minutes , at any intermex payer location ( “ paying agent ( s ) ” ) . we refer to our sending agents and our paying agents collectively as agents . in addition , our services are offered digitally through intermexonline.com and via internet-enabled mobile devices . during the three years ended december 31 , 2020 , we have grown our agent network by approximately 40 % and increased our remittance transactions volume by more than 33 % . in 2020 , we processed approximately 32 million remittances , representing over 12 % growth in transactions as compared to 2019. as a non-bank financial institution in the united states , we are regulated by the department of treasury , the internal revenue service , fincen , the consumer financial protection bureau ( “ cfpb ” ) , the department of banking and finance of the state of florida and additionally by the various regulatory institutions of those states in which we hold an operating license . we are duly registered as a money service business ( “ msb ” ) with fincen , the financial intelligence unit of the u.s. department of the treasury . we are also subject to a wide range of regulations in the united states and other countries , including anti-money laundering laws and regulations ; financial services regulations ; currency control regulations ; anti-bribery laws ; money transfer and payment instrument licensing laws ; escheatment laws ; privacy , data protection and information security laws , such as the graham-leach-bliley act ( “ glba ” ) ; and consumer disclosure and consumer protection laws , such as the california consumer privacy act ( “ ccpa ” ) . key factors and trends affecting our business various trends and other factors have affected and may continue to affect our business , financial condition and operating results , including , but not limited to : the covid-19 pandemic , responses thereto and the economic and market effects thereof , including unemployment levels and increased capital market volatility ; competition in the markets in which we operate ; volatility in foreign exchange rates that could affect the volume of consumer remittance activity and or affect our foreign exchange related gains and losses ; cyber-attacks or disruptions to our information technology , computer network systems and data centers ; our ability to maintain banking relationships necessary for us to conduct our business ; 27 index credit risks from our agents and the financial institutions with which we do business ; bank failures , sustained financial illiquidity , or illiquidity at our clearing , cash management or custodial financial institutions ; new technology or competitors that disrupt the current ecosystem by introducing digital platforms ; our ability to satisfy our debt obligations and remain in compliance with our credit facility requirements ; interest rate risk from elimination of libor as a benchmark interest rate ; our success in developing and introducing new products , services and infrastructure ; customer confidence in our brand and in consumer money story_separator_special_tag transfers generally ; our ability to maintain compliance with the regulatory requirements of the jurisdictions in which we operate or plan to operate ; international political factors or implementation of tariffs , border taxes or restrictions on remittances or transfers of money out of the united states and canada ; changes in u.s. tax laws ; political instability , currency restrictions and volatility in countries in which we operate or plan to operate ; consumer fraud and other risks relating to customer authentication ; weakness in u.s. or international economic conditions ; changes in immigration laws and their enforcement ; our ability to protect our brand and intellectual property rights ; and our ability to retain key personnel . throughout 2020 , latin american political and economic conditions have remained unstable , as evidenced by high unemployment rates in key markets , currency reserves , currency controls , restricted lending activity , weak currencies , low consumer confidence , some of which reflect the impact of the covid-19 pandemic , among other factors . specifically , continued political and economic unrest in parts of mexico and some countries in south america contributed to volatility . our business has generally been resilient during times of economic instability as money remittances are essential to many recipients , with the funds used by the receiving parties for their daily needs ; however , long-term sustained appreciation of the mexican peso or guatemalan quetzal as compared to the u.s. dollar could negatively affect our revenues and profitability . money remittance businesses have continued to be subject to strict legal and regulatory requirements , and we continue to focus on and regularly review our compliance programs . in connection with these reviews , and in light of regulatory complexity and heightened attention of governmental and regulatory authorities related to cybersecurity and compliance activities , we have made , and continue to make , enhancements to our processes and systems designed to detect and prevent cyber-attacks , consumer fraud , money laundering , terrorist financing and other illicit activities , along with enhancements to improve consumer protection , including the dodd-frank wall street reform and consumer protection act and similar regulations outside the united states . in coming periods , we expect these enhancements will continue to result in changes to certain of our business practices and may result in increased costs . we maintain a regulatory compliance department , under the direction of our chief compliance officer , whose responsibility is to monitor transactions , detect suspicious activity , maintain financial records and train our employees and agents . an independent third-party consulting firm periodically reviews our policies and procedures to ensure the efficacy of our anti-money laundering and regulatory compliance program . the market for money remittance services is very competitive . our competitors include a small number of large money remittance providers , financial institutions , banks and a large number of small niche money remittance service providers that serve select regions . we compete with larger companies , such as western union , moneygram and euronet , and a number of other smaller msb entities . we generally compete for money remittance agents on the basis of value , service , quality , technical and operational differences , commission structure and marketing efforts . as a philosophy , we sell credible solutions to our sending agents , not discounts or higher commissions , as is typical for the industry . we compete for money remittance customers on the basis of trust , convenience , service , efficiency of outlets , value , technology and brand recognition . 28 index we have encountered and continue to expect to encounter increasing competition as new electronic platforms emerge that enable customers to send and receive money through a variety of channels , but we do not expect adoption rates to be as significant in the near term for the customer segment we serve . regardless , we continue to innovate in the industry by differentiating our money remittance business through programs to foster loyalty among agents as well as customers and have expanded our channels through which our services are accessed to include online and mobile offerings which are experiencing customer adoption . we qualify as an “ emerging growth company ” pursuant to the provisions of the jumpstart our business startups act of 2012 ( the “ jobs act ” ) , enacted on april 5 , 2012. an “ emerging growth company ” can take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “ emerging growth companies. ” these provisions include : an exemption from the auditor attestation requirement of section 404 of the sarbanes-oxley act in the assessment of the emerging growth company 's internal control over financial reporting ; an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies ; and an exemption from compliance with any new requirements adopted by the public company accounting oversight board requiring mandatory audit firm rotation or communication of critical audit matters ( “ cams ” ) in the auditor 's report . a cam is defined as any matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit committee and that ( 1 ) relates to accounts or disclosures that are material to the financial statements ; and ( 2 ) involves especially challenging , subjective , or complex auditor judgment .
| salaries and benefits — salaries and benefits were $ 32.8 million for the year ended december 31 , 2020 , which represented an increase of $ 2.1 million from $ 30.7 million for the year ended december 31 , 2019. the increase of $ 2.1 million is primarily due to $ 1.9 million in increased wages , largely in management and other areas , to support the continued growth of our business and $ 0.6 million increase in share-based compensation . these increases are partially offset by a $ 0.4 million decrease in commission expense for our representatives primarily due to a lower than expected gross margin achieved compared to established goals . other selling , general and administrative expenses — other selling , general and administrative expenses of $ 22.1 million for the year ended december 31 , 2020 decreased by $ 5.0 million from $ 27.1 million for the year ended december 31 , 2019. the decrease was the result of : $ 3.7 million - nonrecurrence of settlement and legal fees associated with a telephone consumer protection act of 1991 ( “ tcpa ” ) class action lawsuit in 2019 ; $ 1.2 million - primarily lower legal and professional fees in connection with the 2020 secondary offering of the company 's common stock as compared to the 2019 fees , as well as the fees related to the warrants offer in 2019 ; $ 1.1 million - decrease in travel expenses due to reduced employee travel due to the covid-19 pandemic ; and $ 0.9 million - reduction in advertising and promotion expense due to a change in marketing strategy . these decreases were partially offset by : $ 1.0 million - higher it related expenses incurred to sustain our business expansion ; $ 0.4 million - higher rent and other operating expenses ; $ 0.3 million - loss incurred in the closure of a financial institution in mexico ; and $ 0.2 million - higher provision for bad debt as a result of higher account receivable balances due to the increase in volume . depreciation and amortization — depreciation and amortization of $ 10.8 million for the year ended december 31 , 2020 decreased by $ 1.9 million from $ 12.7 million for
|
leasehold improvements and deemed assets from landlord building construction are amortized on a straight-line basis over the shorter of the estimated useful life of the improvement or the associated remaining lease term . amortization amortization relates to finite-lived intangible assets recognized as expense using the straight-line method or using an accelerated method over their estimated useful lives , which range in term from 5 to 15 years . income tax provision income tax provision consists of federal , state and local taxes on income in multiple jurisdictions . our income tax is impacted by the pre-tax earnings in jurisdictions with varying tax rates and any related tax credits that may be available to us . our current and future provision for income taxes will vary from statutory rates due to the impact of valuation allowances in certain countries , income tax incentives , certain non-deductible expenses , and other discrete items . key performance metrics to evaluate the performance of our business , we utilize a variety of financial and performance metrics . these key measures include net new business awards and backlog . net new business awards and backlog new business awards represent the value of anticipated future net revenue that has been recognized in backlog during the period . this value is recognized upon the signing of a contract or receipt of a written pre-contract confirmation from a customer that confirms an agreement in principle on budget and scope . new business awards also include contract amendments , or changes in scope , where the customer has provided written authorization for changes in budget and scope or has approved us to perform additional work as of the measurement date . awards may not be recognized as backlog after consideration of a number of factors , including whether ( i ) the relevant net - 46 - revenue is expected only after a pending regulatory hurdle , which might result in cancellation of the study , ( ii ) the customer funding needed for commencement of the study is not believed to have been secured or ( iii ) study timelines are uncertain or not well defined . in addition , st udy a mounts that extend beyond three years from measurement date are not included in backlog . the number and amount of new business awards can vary significantly from period to period , and an award 's contractual duration can range from several months to several years based on customer and project specifications . cancellations arise in the normal course of business and are reflected when we receive written confirmation from the customer to cease work on a contractual agreement or when we believe the future revenue is unlikely to be realized . the majority of our customers can terminate our contracts without cause upon 30 days ' notice . similar to new business awards , the number and amount of cancellations can vary significantly period over period due to timing of customer correspondence and study-specific circumstances . net new business awards represent gross new business awards received in a period offset by total cancellations in that period . on an accounting standards codification topic 606 , revenue from contracts with customers ( “ asc 606 ” ) basis , net new business awards were $ 1,094.4 million and $ 899.4 million for the years ended december 31 , 2019 and 2018. on an accounting standards codification topic 605 , revenue recognition ( “ asc 605 ” ) basis , net new business awards were $ 581.0 million and $ 426.1 million for the years ended december 31 , 2018 and 2017 , respectively . backlog represents anticipated future net revenue from net new business awards that have commenced , but have not been completed . reported backlog will fluctuate based on new business awards , changes in scope to existing contracts , cancellations , net revenue recognition on existing contracts and foreign exchange adjustments from non-u.s. dollar denominated backlog . as of december 31 , 2019 , our backlog increased by $ 225.3 million , or 21.3 % , to $ 1,283.2 million compared to $ 1,057.9 million as of december 31 , 2018. included within backlog as of december 31 , 2019 was approximately $ 695 million to $ 715 million that we expect to convert to net revenue in 2020 , with the remainder expected to convert to net revenue in years after 2020 . on an asc 606 basis , the effect of foreign currency adjustments on backlog was as follows : unfavorable foreign currency adjustments of $ 6.6 million for the year ended december 31 , 2019 and unfavorable foreign currency adjustments of $ 2.3 million for the year ended december 31 , 2018. on an asc 605 basis , the effect of foreign currency adjustments on backlog resulted in unfavorable foreign currency adjustments of $ 1.1 million for the year ended december 31 , 2018 and favorable foreign currency adjustments of $ 3.2 million for the year ended december 31 , 2017. backlog and net new business award metrics may not be reliable indicators of our future period revenue as they are subject to a variety of factors that may cause material fluctuations from period to period . these factors include , but are not limited to , changes in the scope of projects , cancellations , and duration and timing of services provided . exchange rate fluctuations the majority of our contracts and operational transactions are u.s. dollar denominated . the euro represents the largest foreign currency denomination of our contractual and operational exposure . as a result , a portion of our revenue and expenses is subject to exchange rate fluctuations . story_separator_special_tag we have translated the euro into u.s. dollars using the following average exchange rates based on data obtained from www.xe.com : replace_table_token_4_th - 47 - story_separator_special_tag cash equivalents , none of which was restricted , was held by our foreign subsidiaries as of december 31 , 2019. on september 30 , 2019 , the company entered into the credit facility consisting of up to a $ 50.0 million revolving line of credit ( the “ line of credit ” ) . the credit facility replaced a senior secured term loan facility of $ 165.0 million ( the “ prior senior secured term loan facility ” ) and a senior secured revolving credit facility of $ 150.0 million ( the “ prior senior secured revolving credit facility ” and , together with the prior senior secured term loan facility , the “ prior senior secured credit facilities ” ) which were set to expire in december 2021. in relation to the termination of the prior senior secured credit facilities , we repaid all outstanding obligations . as a result , no amounts remain outstanding under the prior senior secured credit facilities . as of december 31 , 2019 , we had $ 49.8 million available for borrowing under the credit facility . our expected primary cash needs on both a short and long-term basis are for investment in operational growth , capital expenditures , share repurchases , selective strategic bolt-on acquisitions , other investments , and other general corporate needs . we have historically funded our operations and growth with cash flow from operations and borrowings under our credit facilities . we expect to continue expanding our operations through organic growth and potentially highly selective bolt-on acquisitions and investments . we expect these activities will be funded from existing cash , cash flow from operations and , if necessary , borrowings under our existing or future credit facilities or other debt . we have deemed that foreign earnings will be indefinitely reinvested and therefore we have not - 49 - provided taxes on these earnings . while we do not anticipate the need to repatriate these foreign earnings for liquidity purposes given our cash flows from operations and available borrowings under existing and future credit facilities , we would incur taxes on these earnings if the need for repatriation due to liquidity purposes arises . we believe that our sources of liquidity and capital will be sufficient to finance our cash needs for the next 12 months and on a longer-term basis . however , we can not assure you that our business will generate sufficient cash flow from operations , or that future borrowings will be available to us under our credit facility or otherwise , in an amount sufficient to fund our liquidity needs . replace_table_token_6_th cash flows from operating activities cash flows from operations are driven mainly by net income , stock based compensation expense , amortization of intangibles and net movement in advanced billings , accrued expenses , prepaid and other current assets , and accounts receivable and unbilled , net . accounts receivable and unbilled , net , and advanced billings fluctuate on a regular basis as we perform our services , bill our customers and ultimately collect on those receivables . we attempt to negotiate payment terms in order to provide for payments prior to or soon after the provision of services , but this timing of collection can vary significantly on a period by period comparative basis . net cash flows provided by operating activities were $ 201.9 million for the year ended december 31 , 2019 consisting of net income of $ 100.4 million . adjustments to reconcile net income to net cash provided by operating activities were $ 65.9 million , primarily related to amortization of intangibles of $ 14.8 million , depreciation of $ 8.4 million , stock based compensation expense of $ 20.7 million , deferred income tax provision of $ 10.1 million , and noncash lease expense of $ 9.9 million . changes in operating assets and liabilities provided $ 35.6 million in operating cash flows and were primarily driven by increased accrued expenses of $ 21.8 million and increased advanced billings of $ 44.6 million , offset by increased accounts receivable and unbilled , net of $ 21.3 million . net cash flows provided by operating activities were $ 156.6 million for the year ended december 31 , 2018 consisting of net income of $ 73.2 million . adjustments to reconcile net income to net cash provided by operating activities were $ 43.8 million , primarily related to amortization of intangibles of $ 29.6 million , depreciation of $ 9.2 million , stock based compensation expense of $ 6.5 million , and deferred income tax provision of $ 3.9 million , offset by $ 7.7 million of amortization and adjustment of deferred credit . changes in operating assets and liabilities provided $ 39.6 million in operating cash flows and were primarily driven by increased accrued expenses of $ 29.0 million and increased advanced billings of $ 35.6 million , offset by increased accounts receivable and unbilled , net of $ 27.0 million . net cash flows provided by operating activities were $ 97.4 million for the year ended december 31 , 2017 consisting of net income of $ 39.1 million . adjustments to reconcile net income to net cash provided by operating activities were $ 45.4 million , primarily related to amortization of intangibles of $ 37.9 million , depreciation of $ 8.6 million , stock based compensation expense of $ 4.5 million , and deferred income tax provision of $ 3.2 million , offset by $ 8.8 million of amortization and adjustment of deferred credit . changes in operating assets and liabilities provided $ 12.9 million in operating cash flows and were primarily driven by increased accounts payable of $ 4.8 million , increased advanced billings of $ 7.7 million , and increased pre-funded study costs of $ 5.3 million , offset by increased prepaid expenses and other current assets of $ 3.5 million .
| depreciation and amortization depreciation and amortization expense decreased by $ 15.6 million , to $ 23.2 million for the year ended december 31 , 2019 from $ 38.8 million for the year ended december 31 , 2018. the decrease in depreciation and amortization was primarily related to the amortization of our definite lived intangible assets , which are amortized on an accelerated basis . - 48 - miscellaneous ( expense ) income , net miscellaneous ( expense ) income , net decreased by $ 1.9 million to $ 0.9 million of expense for the year ended december 31 , 2019 from $ 1.1 million of income for the year ended december 31 , 2018. these changes were mainly attributable to foreign exchange gains or losses that arise in connection with the revaluation of short-term inter-company balances between our domestic and international subsidiaries , gains or losses from foreign currency transactions , such as those resulting from the settlement of third-party accounts receivables and payables denominated in a currency other than the local currency of the entity making the payment . interest expense , net interest expense , net decreased by $ 6.6 million to $ 1.6 million for the year ended december 31 , 2019 from $ 8.2 million for the year ended december 31 , 2018. the decrease in interest expense , net was related to a lower average outstanding balance in the year ended december 31 , 2019 under our prior senior secured revolving credit facility ( as defined below ) . income tax provision income tax provision increased by $ 3.6 million , to $ 24.4 million for the year ended december 31 , 2019 from $ 20.8 million for the year ended december 31 , 2018. the overall effective tax rates for the years ended december 31 , 2019 and 2018 were 19.5 % and 22.1 % , respectively . the decrease in the effective tax rate for year ended december 31 , 2019 was primarily attributable to a notable amount of excess tax benefits recognized from share-based compensation and tax benefits related to foreign derived intangible
|
wet weather in parts of the united states resulted in below-average application during the first half of 2019 leading to a summer-fill program that reduced domestic trio ® pricing by $ 35 to $ 50 per ton depending on product grade . this program erased the domestic pricing increases we achieved in 2018. two subsequent attempts to increase trio ® pricing , after the summer-fill window and again after the october-fill window , failed to gain traction with buyers and we continued to transact near summer-fill pricing levels in the fourth quarter of 2019. shortly after the winter-fill price announcement for potash in january 2020 , a competitor announced a new pricing program which reduced delivered pricing for langbeinite to the price offered during the october-fill window . this price was in effect for orders placed in january and delivered by the end of the first quarter of 2020. after the delivery window , our competitor 's list price increased by $ 10 per ton . we matched this pricing , effectively maintaining summer-fill pricing for tons delivered in the first quarter of 2020. we expect to achieve the increased price midway through the second quarter , but this could be affected by , among other things , weather , planting decisions , rail car availability , and the price and availability of other potassium products . overall average net realized sales price per ton for trio ® will continue be impacted by the percentage of international sales . internationally , competition from lower cost alternatives and freight costs continue to negatively impact our average net realized sales price per ton . we continued , and plan to continue , our efforts to implement a price-over-volume strategy by focusing on international markets where we obtain the highest average net realized sales price per ton and thus the highest margin . we experience seasonality in domestic trio ® demand , with more purchases coming in the first and second quarters in advance of the spring application season in the u.s. in turn , we generally have increased inventory levels in the third and fourth quarters in anticipation of expected demand for the following year . we continue to operate our facilities at production levels that approximate expected demand and allow us to manage inventory levels . water sales . water sales increased in 2019 to $ 25.7 million , compared to $ 19.8 million in 2018 , primarily due to the acquisition of intrepid south and associated water rights in may 2019. demand for water has been increasing due to increasing oil and gas activities in the permian basin near our facilities in new mexico . we have put in place a diverse set of arrangements aimed at generating a long-term recurring revenue stream from water sales . we have contracts with various water customers from which we expect revenue of between $ 32 million to $ 45 million in 2020. water rights in new mexico are subject to a stated purpose and place of use , and many of our water rights were originally issued for uses relating to our mining operations . to sell water under these rights for oil and gas development , we must apply for a permit from the new mexico office of the state engineer ( `` ose '' ) to change the purpose or place of use of the underlying water rights . the ose reviews and makes a determination as to the validity of the right and if it determines the requested change will not negatively impact other valid interests , the ose can issue a preliminary authorization for the change . the preliminary authorization allows for water sales to begin immediately , subject to repayment if the underlying water rights are ultimately found to be invalid . third parties may protest the preliminary authorization at minimal cost and frequently do so . once protested , the ose is required to hold a hearing to determine if the preliminary authorization was appropriate . a significant amount of our water sales are being made under preliminary authorizations issued by the ose . third parties have protested these preliminary authorizations . in february 2019 , certain protestants filed an expedited inter se proceeding in new mexico district court as the adjudication court for the pecos stream system challenging the validity of our water rights relating to the pecos river . in august 2019 , the parties stipulated to the jurisdiction of the adjudication court . to promote settlement , the adjudication court established a settlement schedule and ordered a trial date in august 2020 if the parties have not reached a settlement by that time . the ose has temporarily stayed the hearing process until the adjudication process is complete . we continue to operate under the preliminary authorizations until the adjudication and hearing processes are complete . we may face political and regulatory issues relating to the potential use of the maximum amount of our rights . however , we believe that our legal position with respect to the validity of our water rights is solid and that we will be able to meet our water commitments . you can find more information about the adjudication and hearing processes in note 15 to our consolidated financial statements . byproduct sales . byproduct sales increased to $ 26.5 million in 2019 compared to $ 19.3 million in 2018. this increase was primarily due to increased water and brine sales in support of well development and completion activities in the permian basin . we also increased sales of salt during 2019 , capitalizing on reduced availability in certain parts of the country . record wet weather in the summer of 2019 in wendover limited our production of magnesium chloride and is expected to limit product available for sale until the summer of 2020. while the market for magnesium chloride is 39 somewhat weather dependent , we believe the overall demand for this product remains strong and we expect to return to average production and sales rates in the second half of 2020. weather impact . story_separator_special_tag evaporation rates in 2019 were below average across our facilities which will reduce production in the spring of 2020 when compared to the prior year . above average rainfall at our wendover facility also decreased our magnesium chloride production in 2019 and we expect to have limited volumes of magnesium chloride available for sale until the evaporation season begins in 2020. diversification of products and services . we continued to diversify our products and services in 2019 , particularly with the acquisition of intrepid south in may 2019. in addition to water sales , intrepid south also generates revenue from right-of-way agreements , surface damages and easements , caliche sales , and a produced water royalty . these sales generated revenue of $ 3.7 million in 2019 and incur either minimal or no operating expense . we are in the process of adding a brine station at intrepid south and are currently developing a produced water facility with a partner near intrepid south . as we continue to diversify our portfolio , we may enter into new or complementary business that expand our product and service offerings beyond our existing assets or products through acquisition of companies or assets or otherwise . additionally , we may expand into oil and natural gas exploration and production or into new products or services in our current industry or other industries . 40 story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > ® pricing , and an increase in water sales , primarily due to oil and gas drilling activity near our facilities in new mexico . byproduct revenue increased $ 6.6 million as we continue to execute on our strategy to grow sales of our byproducts . cost of goods sold increased $ 4.0 million , or 3 % in 2018 , as compared to 2017 , primarily due to increased sales discussed above . our gross margin percentage increased to 18 % in 2018 compared to 7 % in 2017. the increase was driven the increase in average net realized sales prices for our products , coupled with an increase in sales of higher-margin products , such as fresh water and byproducts . we also recorded fewer lower of cost or nrv inventory adjustments in 2018 , as the average net realized sales price per ton for potash and trio ® improved . net income increased $ 34.4 million , or 152 % , in 2018 compared to 2017 , primarily driven by higher gross margins , as discussed above , and the decrease in interest expense in 2018 compared to 2017 , as discussed below . selling and administrative expense in 2018 , selling and administrative expenses increased $ 1.5 million or 8 % from 2017. the increase was primarily due to an increase in our share-based compensation expense in 2018 compared to 2017. the increase in share-based compensation was due to granting awards earlier in 2018 compared to 2017 , coupled with the 2018 grant vesting over a shorter time period as compared to the 2017 grant . other operating expense in 2018 , we recognized other operating expense of $ 0.1 million compared to $ 3.5 million in 2017. in 2017 , we recorded a loss on a sale of an asset of $ 1.7 million , recorded an additional $ 1.1 million increase in our stores inventory allowance , and recorded a one-time $ 0.6 million accrual related to land impact issues on or adjacent to our property in new mexico . interest expense interest expense decreased $ 7.8 million in 2018 compared to 2017. approximately $ 4.2 million of the decrease was due to our weighted-average interest rate on our senior notes declining to 4.32 % in 2018 from 7.65 % in 2017. additionally , write-offs of deferred financing fees and make-whole payments related to principal prepayments on our senior notes decreased approximately $ 3.3 million in 2018 compared to 2017 . 42 potash segment results replace_table_token_10_th 1 potash segment sales include byproduct sales which were $ 21.2 million , $ 16.6 million and $ 12.4 million for the years ended december 31 , 2019 , 2018 , and 2017 , respectively . 2 depreciation , depletion , and amortization incurred excludes depreciation , depletion , and amortization amounts absorbed in or ( relieved from ) inventory . 3 average net realized sales price per ton is a non-gaap measure . more information about this non-gaap measure is below under the heading `` non-gaap financial measure . '' potash segment results for the years ended december 31 , 2019 , and 2018 our total potash segment sales in 2019 were similar to the prior year , as an increase of $ 4.6 million in byproduct sales was mostly offset by a $ 4.1 million decrease in potash sales accounted for in the potash segment , as detailed below . potash sales accounted for in the potash segment decreased 4 % during 2019 , compared to 2018. the average net sales price per ton increased 11 % to $ 284 per potash ton sold during 2019 , compared to the same period in 2018 , due to higher pricing in the first half of 2019. this was offset by a 12 % decrease in potash tons sold as a delayed harvest and an expectation of flat or declining potash prices entering the 2020 spring season limited purchases in the fourth quarter of 2019. our second half 2019 potash average net realized sales price per ton was also negatively impacted by a summer fill program announced in june 2019 by our competitors . under the program , the potash list prices decreased by $ 45 per ton for orders placed before june 27 and scheduled for shipment during the third quarter and list prices were scheduled to increase $ 25 per ton after the order window closed . the increased list prices did not materialize and potash remained at the lower summer fill prices levels in the second half of 2019 , which contributed to the decrease in potash sales revenue .
| the decrease in potash tons sold was partially offset by an 11 % increase in the average net realized sales price per ton in 2019 , compared to 2018 , as potash prices benefited from price increases late in 2018 , that we captured during the first half of 2019. our total sales of byproducts derived from potash and trio ® production increased $ 7.2 million , or 38 % in 2019 , compared to 2018. the increase in byproducts sales was primarily driven by a $ 5.9 million increase in salt sales . in 2019 , we sold 40 % more tons of salt and the delivered price per ton was higher due to increased freight costs included in the delivered price . like our potash and trio ® sales , our salt sales revenue includes the freight costs to deliver the product to the customer . freight expense included in the delivered salt price increased in 2019 , compared to the same period in 2018 , as we expanded the geographic footprint of our salt customers . our byproduct water sales increased $ 2.5 million in 2019 , compared to 2018 , due to the ongoing oil and gas activities in the northern delaware basin near our facilities . the increases in salt and by product water sales were partially offset by a $ 1.9 million decrease in magnesium chloride sales . wet weather in wendover reduced our production volumes , which limited the amount of product that was available for us to sell . cost of goods sold increased $ 4.2 million , or 3 % in 2019 , as compared to 2018 , primarily due to third-party costs incurred to move water at intrepid south , costs associated with our high-speed potassium mixing service , additional depreciation expense for the intrepid south assets , and below-average evaporation at our potash facilities , which increased our per ton potash production costs . our gross margin percentage increased to 20 % in 2019 , compared to 18 % in 2018. the increase was driven an increase in sales of higher-margin products , such as water and byproducts during 2019 , compared to 2018. net income increased $ 1.8 million , or 16 % , in 2019 , compared to 2018 , primarily driven by an
|
we perform continuing credit evaluations of our customers ' financial condition , and although we generally do not require collateral , letters of credit may be required from customers in certain circumstances . management reviews accounts receivable to determine if any receivables will potentially be uncollectible . factors considered in the determination include , among other factors , number of days an invoice is past due , customer historical trends , available credit ratings information , other financial data and the overall economic environment . collection agencies may also be utilized if management so determines . we record an allowance for doubtful accounts based on specifically identified amounts that are believed to be uncollectible . we also may record as an additional allowance a certain percentage of aged accounts receivable , based on historical experience and our assessment of the general financial conditions affecting our customer base . if actual collection experience changes , revisions to the allowance may be required . we have a limited number of customers with individually large amounts due at any given consolidated balance sheet date . any unanticipated change in the creditworthiness of any of these customers could have a material effect on our results of operations in the period in which such changes or events occur . after all reasonable attempts to collect an account receivable have failed , the amount of the receivable is written off against the allowance . based on the information available , we believe that our allowance for doubtful accounts as of december 31 , 2015 was adequate . however , actual write-offs might exceed the recorded allowance . inventories inventories are valued at the lower of cost or market . cost is determined by the first-in , first-out method or the weighted average method . inventory , which includes materials , labor , and manufacturing overhead costs , is recorded net of an allowance for obsolete or unmarketable inventory . such allowance is based upon both historical experience and management 's understanding of market conditions and forecasts of future product demand . in addition , all items in inventory in excess of one year 's usage are considered for inclusion in the calculation of inventory obsolescence . if the actual amount of obsolete or unmarketable inventory significantly exceeds the estimated allowance , our cost of sales , gross profit and net earnings would be significantly affected . 13 goodwill and indefinite-lived intangible assets in accordance and compliance with authoritative guidance issued by the financial accounting standards board ( “ fasb ” ) , we test goodwill for impairment on an annual basis as of the last day in november or more frequently if we believe indicators of impairment might exist . goodwill is tested at a level of reporting referred to as `` the reporting unit . '' the company 's reporting units are hy-tech , florida pneumatic and nationwide . an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not ( that is , a likelihood of more than 50 % ) that the fair value of a reporting unit is less than its carrying amount . if , after assessing the totality of events or circumstances , an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount , then performing the two-step impairment test is unnecessary . the first step used to identify potential impairment compares the calculated fair value of a reporting unit with its carrying amount . if the carrying amount of the reporting unit is less than its fair value , no impairment exists and the second step is not performed . if the carrying amount of a reporting unit exceeds its fair value , the entity is required to perform the second step of the goodwill impairment test to measure the amount of the impairment loss , if any . the second step of the goodwill impairment test compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill . if the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill , an impairment loss is recognized for the excess . the company also tests indefinite-lived intangible assets , consisting of acquired trade names , for impairment at least annually as of the last day of november . the evaluation of goodwill and indefinite-lived intangible assets requires that management prepare estimates of future operating results for each of our operating units . these estimates are made with respect to future business conditions and estimated expected future cash flows to determine estimated fair value . however , if , in the future , key drivers in our assumptions or estimates such as ( i ) a material decline in general economic conditions ; ( ii ) competitive pressures on our revenue or our ability to maintain margins ; ( iii ) significant price increases from our vendors that can not be passed through to our customers ; and ( iv ) breakdowns in supply chain or other factors beyond our control occur , an impairment charge against our intangible assets may be required . impairment of long-lived assets the company reviews long-lived assets , including property , plant , and equipment and identifiable intangible assets , for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable . if the fair value is less than the carrying amount of the asset , a loss is recognized for the difference . factors which may cause an impairment of long-lived assets include significant changes in the manner of use of these assets , negative industry or market trends , a significant underperformance relative to historical or projected future operating results , or a likely sale or disposal of the asset before the end of its estimated useful life . story_separator_special_tag if any of these factors exist , the company is required to test the long-lived asset for recoverability and may be required to recognize an impairment charge for all or a portion of the asset 's carrying value . income taxes we account for income taxes using the asset and liability approach . this approach requires the recognition of current tax assets or liabilities for the amounts refundable or payable on tax returns for the current year , as well as the recognition of deferred tax assets or liabilities for the expected future tax consequences of temporary differences that can arise between ( a ) the amount of taxable income and pretax financial income for a year , such as from net operating loss carryforwards and other tax credits , and ( b ) the tax bases of assets or liabilities and their reported amounts in the consolidated financial statements . deferred tax assets and liabilities are measured using enacted tax rates . the impact on deferred tax assets and liabilities of changes in tax rates and laws , if any , is reflected in the consolidated financial statements in the period enacted . further , we evaluate the likelihood of realizing benefit from our deferred tax assets by estimating future sources of taxable income and the impact of tax planning strategies . 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 . we file a consolidated federal tax return . p & f and certain of its subsidiaries file combined tax returns in new york and texas . all subsidiaries , other than uat , file other state and local tax returns on a stand-alone basis . uat files an income tax return with the taxing authorities in the united kingdom . when tax returns are filed , it is highly certain that some positions taken would be sustained upon examination by the taxing authorities , while other positions are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained . the benefit of a tax position is recognized in the financial statements in the period during which , based on all available evidence , management believes it is more likely than not that the position will be sustained upon examination , including the resolution of appeals or litigation processes , if any . tax positions taken are not offset or aggregated with other positions . tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority . the portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination . interest and penalties associated with unrecognized tax benefits are classified as income taxes in the consolidated statements of income and comprehensive income . 14 story_separator_special_tag product line , as well as distributes a complementary line of sockets , which in the aggregate are referred to as ( “ atp ” ) . hy-tech machine products ( “ hy-tech machine ” ) are primarily marketed to the mining , construction and industrial manufacturing sectors . replace_table_token_7_th replace_table_token_8_th during the fourth quarter of 2015 hy-tech continued to be negatively impacted by weakness in the global oil and gas sector . we believe that the reduced levels of oil and gas exploration and extraction has , among other things , resulted in the decline in our sale of drilling motors and related parts and sockets during the fourth quarter . however , the decline in hy-tech 's atp revenue was partially offset by an increase in sales of atsco products this quarter compared to the fourth quarter of 2014. the hy-tech machine revenue declined this quarter compared to the same period a year ago , due primarily to lower than normal level of orders from its customers in the specialty manufacturing , mine safety and railroad markets . with respect to hy-tech 's major customer , we believe their decision to source internally , certain pneumatic impact wrenches from their facilities , has contributed in part to the decline in revenue . with respect to the full year 2015 , the increase in atp revenue , compared to the full year 2014 , is primarily attributable to atsco product sales , partially offset by declines in revenue of non-atsco tools and parts , drilling motors and parts , as well as sockets . as discussed earlier , we believe , among other factors , that the reduction in oil and gas exploration and extraction has , throughout 2015 , negatively impacted hy-tech 's overall revenue , most notably its atp product line . according to information issued by baker hughes , a leading oil field services company , the total number of rotary rigs operating in the united states is 698 , down from 1,811 , or a 61.5 % decline from one year ago . until such time when major exploration and related activity levels return to recent historic levels , it is difficult to predict when this sector of the atp category will improve . as such , hy-tech intends to continue to pursue alternate markets and customers with added focus on its atsco products and other pneumatic tool markets . in line with the aforementioned , its hy-tech machine 's 2015 revenue improved more than 21 % , when compared to full-year 2104. despite a weaker fourth quarter of 2015 , this product category improved its revenue this year compared to the prior year , due mainly to stronger demand from the markets and customers it serves .
| replace_table_token_5_th replace_table_token_6_th the net decline in florida pneumatic 's fourth quarter retail revenue compared to the same period in the prior year was due primarily to its previously mentioned decision not to sell certain promotional-type products to sears in 2015 , resulting in a decline in revenue , partially offset by an increase in shipments to the home depot ( “ thd ” ) . primary factors contributing to the net increase in florida pneumatic 's automotive revenue are new products , expanded domestic and international sales efforts and a slight increase in promotional revenue . partially offsetting the increase in its aircat products revenue , was a decline in uat 's revenue . it should be noted that a portion of uat 's revenue is derived from the sale of pneumatic air tools to customers that operate in the north sea oil and gas sector , and a result of the weakness in the global oil and gas exploration sector , revenue from this particular portion of uat 's customer base declined , when comparing the fourth quarter of 2015 to the same period a year ago . we continue to encounter weakness in t he industrial/catalog market , with the decline this quarter compared to the same period a year ago , occurring most notably in the aerospace and oil and gas exploration/production channels . we believe the weakness may continue into the latter portion of 2016. florida pneumatic 's other revenue declined when compared to the same period in 2014 , primarily due to weakness in the power generation and oil and gas sectors may continue into the latter part of 2016. when comparing the full-year 2015 to 2014 , the most significant factor contributing to florida pneumatic 's overall revenue increase is the result of its two acquisitions made during the third quarter of 2014. as such , its 2015 automotive revenue improved by nearly $ 6.3 million , when compared to the prior year . further , when comparing the third and fourth quarters of 2015 to the same period in 2014 , which are comparable
|
we spent approximately $ 2 million on the el salvador project in 2014 and expect to spend in excess of an additional $ 5 million to complete the project . we are also investing in smaller renovations that will add additional capacity in our belize and united states locations as well . we continue to receive a favorable response from the market for our services and we believe this sector will continue to grow significantly in 2015 and beyond . 13 operations net sales replace_table_token_2_th net sales net sales for the company increased 29.5 % from $ 151,496,000 in 2013 to $ 196,249,000 in 2014. the 29.5 % aggregate increase in net sales is split between growth in our uniforms and related products segment ( contributing 27.9 % ) and increases in net sales after intersegment eliminations from our remote staffing solutions segment ( contributing 1.6 % ) . intersegment eliminations reduce total net sales for sales of remote staffing solutions to the uniforms and related products segment by the remote staffing solutions segment . see note 18 to the consolidated financial statements for more information and a reconciliation of segment net sales to total net sales . uniforms and related products net sales increased 29.0 % in 2014. the largest reason for the increase in net sales was the inclusion of hpi 's operating results in the company 's results of operations for the full year ended december 31 , 2014 , whereas the company 's results of operations for the comparable 2013 period included hpi 's operating results for only six months . in the first six months of 2014 , hpi contributed net sales of $ 28,269,000 including approximately $ 5,000,000 for a new uniform program for one of its existing customers . the balance of the increase in net sales for the year ended december 31 , 2014 compared to 2013 , is attributed to continued market penetration and the rollout of a special promotional uniform program for one of our existing customers of approximately $ 2,500,000 in the second quarter of 2014. remote staffing solutions net sales increased 23.0 % before intersegment eliminations and 42.5 % after intersegment eliminations in 2014. these increases are attributed to continued market penetration in 2014 , both with respect to new and existing customers . cost of goods sold cost of goods sold consists primarily of direct costs of acquiring inventory , including cost of merchandise , inbound freight charges , purchasing costs , and inspection costs for our uniforms and related products segment . cost of goods sold for our remote staffing solutions segment includes salaries and payroll related benefits for agents . the company includes shipping and handling fees billed to customers in net sales . shipping and handling costs associated with out-bound freight are generally recorded in cost of goods sold . other shipping and handling costs are included in selling and administrative expenses . as a percentage of net sales , cost of goods sold for our uniforms and related products segment was 65.7 % in 2014 and 66.2 % in 2013. the percentage decrease in 2014 as compared to 2013 is primarily attributed to a reduction in overhead costs as a percentage of net sales as a result of higher volume in 2014 ( contributing 0.3 % ) as well as a decrease in direct product costs as a percentage of net sales during 2014 ( contributing 0.1 % ) . as a percentage of net sales , cost of goods sold for our remote staffing solutions segment was 43.2 % in 2014 , and 38.4 % in 2013. the percentage increase in 2014 as compared to 2013 is primarily attributed to taking on new startup accounts in the 2014 period . 14 selling and administrative expenses as a percentage of net sales , selling and administrative expenses for our uniforms and related products segment approximated 26.0 % in 2014 and 29.4 % in 2013. exclusive of hpi net sales and selling and administrative expenses , selling and administrative expenses as a percentage of net sales would have been 27.0 % for the year ended december 31 , 2014 and 29.7 % for the year ended december 31 , 2013. the decrease as a percentage of net sales , exclusive of hpi , is attributed primarily to the impact in 2014 of higher net sales to cover operating expenses ( contributing 1.2 % ) , lower pension and retirement plan expense primarily as a result of the freeze of our main defined benefit pension plan effective june 30 , 2013 ( contributing 0.5 % ) , lower professional and other fees related to the hpi acquisition in 2013 ( contributing 0.8 % ) and other minor net decreases ( contributing 0.5 % ) , partially offset by higher share based compensation expense ( contributing 0.5 % ) . hpi selling and administrative expenses as a percentage of hpi net sales was 23.8 % for the year ended december 31 , 2014 compared to 27.2 % for the six months ended december 31 , 2013 , which is the only period included in the company 's operating results for the year ended december 31 , 2013 that includes hpi 's operations . the significant decrease in hpi 's selling and administrative expenses as a percentage of net sales is attributed to the significant increase in hpi 's net sales . as a percentage of net sales , selling and administrative expenses for our remote staffing solutions segment approximated 35.3 % in 2014 and 37.0 % in 2013. the decrease as a percentage of sales is attributed primarily to a decrease in salaries , wages and benefits as a percentage of net sales ( contributing 0.6 % ) as the growth in net sales outpaced the increase in staffing expense required to support significant growth of this segment , and other miscellaneous decreases including higher net sales to cover fixed operating expenses ( contributing 1.1 % ) . story_separator_special_tag interest expense and tax interest expense increased to $ 484,000 for the year ended december 31 , 2014 from $ 195,000 for the year ended december 31 , 2013. this increase is attributed to higher average borrowings outstanding in the current period . the acquisition debt related to the hpi acquisition was only outstanding for the last six months of the year ended december 31 , 2013. the effective income tax rate in 2014 was 35.3 % and in 2013 was 31.1 % . the 4.2 % increase in the effective tax rate is attributed primarily to the following : a decrease in the benefit for income from foreign operations ( contributing 3.2 % ) , an increase in the net accrual for uncertain tax positions ( contributing 2.0 % ) , an increase in the federal rate for taxable earnings in excess of $ 10,000,000 ( contributing 0.5 % ) , partially offset by a decrease in non-deductible share based compensation as a percentage of taxable earnings ( contributing 0.7 % ) , and a net decrease in other items as a result of the significant increase in income in the current period ( contributing 0.8 % ) . during the year ended december 31 , 2014 and 2013 , the company did not recognize deferred income taxes on foreign income of $ 1,841,000 and $ 1,688,000 , respectively , due to the fact that these amounts are considered to be reinvested indefinitely in foreign subsidiaries . based upon our current expectations , we do not expect to recognize deferred income taxes on our 2015 foreign income as this income is expected to be reinvested indefinitely in foreign subsidiaries . liquidity and capital resources story_separator_special_tag roman , times , serif '' > capital expenditures the company has an on-going capital expenditure program designed to maintain and improve its facilities . capital expenditures , excluding the 2013 hpi acquisition , were approximately $ 4,936,000 and $ 1,631,000 in 2014 and 2013 , respectively . we are investing in a new call center building in el salvador expected to be completed near the end of 2015 that will essentially double our existing capacity there . we spent approximately $ 2 million on the el salvador project in 2014 and expect to spend in excess of an additional $ 5 million to complete the project . dividends and share repurchase program during the years ended december 31 , 2014 and 2013 , the company paid cash dividends of approximately $ 3,663,000 and $ 874,000 , respectively . on december 31 , 2012 , the company paid a special dividend of $ 0.27 per share representing a prepayment — and payment in lieu of — the company 's regular quarterly dividend for 2013 in order to take advantage of a tax efficient method to return capital to our shareholders prior to anticipated increases in tax rates associated with dividends . during 2013 , the company restarted its regular quarterly dividend of $ 0.068 per share one quarter early and paid this dividend during the fourth quarter of 2013. during 2014 , the company increased its regular quarterly dividend to $ .075 per quarter beginning with the third quarter dividend . total dividends paid in 2014 were $ 0.285 per share . on august 1 , 2008 , the company 's board of directors approved an increase to the outstanding authorization under its common stock repurchase program to allow for the repurchase of 1,000,000 additional shares of the company 's outstanding shares of common stock . under this program , the company reacquired and retired -0- shares and 13,211 shares of its common stock in the years ended december 31 , 2014 and 2013 , respectively , with approximate costs of -0- and $ 162,000 , respectively . at december 31 , 2014 , the company had 261,675 shares remaining for purchase under its common stock repurchase program . shares purchased under the common stock repurchase program are constructively retired and returned to unissued status . we consider several factors in determining when to make share repurchases , including among other things , our cost of equity , our after-tax cost of borrowing , our debt to total capitalization targets and our expected future cash needs . there is no expiration date or other restriction governing the period over which we can make our share repurchases under the program . the company anticipates that it will continue to pay dividends and that it will repurchase additional shares of its common stock in the future as financial conditions permit . 16 credit agreement effective july 1 , 2013 , the company entered into an amended and restated 5-year credit agreement with fifth third bank that made available to the company up to $ 15,000,000 on a revolving credit basis ( the “ initial credit facility ” ) in addition to a $ 30,000,000 term loan utilized to finance the acquisition of substantially all of the assets of hpi direct , inc. as discussed in note 15. interest is payable on the term loan at libor plus 0.95 % ( 1.1 % at december 31 , 2014 ) and on the revolving credit agreement at libor ( rounded up to the next 1/8 th of 1 % ) plus 0.95 % ( 1.2 % at december 31 , 2014 ) . both loans are based upon the one-month libor rate for u.s. dollar based borrowings . the company pays an annual commitment fee of 0.10 % on the average unused portion of the commitment under the initial credit facility . the available balance under the initial credit facility is reduced by outstanding letters of credit . as of december 31 , 2014 , there were no outstanding balances under letters of credit . effective october 22 , 2013 , the credit agreement was amended to , among other things , increase the amount of permitted investments in subsidiaries that are not parties to the credit agreement and related agreements , from $ 1 million to $ 5 million .
| other intangible assets decreased from $ 18,353,000 on december 31 , 2013 to $ 16,288,000 as of december 31 , 2014. this decrease is attributed to scheduled amortization of existing intangible assets . 15 accounts payable increased 16.1 % from $ 8,363,000 on december 31 , 2013 to $ 9,706,000 on december 31 , 2014. this increase is primarily due to the timing of inventory purchases and higher inventory levels required to meet higher net sales volumes . other current liabilities increased 15.8 % from $ 7,768,000 on december 31 , 2013 to $ 8,995,000 on december 31 , 2014. this increase is primarily due to an increase in income taxes payable of $ 675,000 , and an increase in accrued rebates payable to customers of $ 447,000. long-term pension liability increased 123.5 % from $ 3,617,000 on december 31 , 2013 to $ 8,084,000 on december 31 , 2014. this increase is primarily attributed to a reduction in the discount rates on the company 's plans from a range of 4.66 % to 4.82 % at december 31 , 2013 to a range of 3.74 % to 3.86 % at december 31 , 2014. as part of its acquisition of hpi in 2013 , the company recorded a liability for an acquisition related contingent liability . this amount will be earned by the former owners of hpi based upon the performance of hpi following the acquisition for each of the years from 2014 through 2017. the total amount of this liability expected to be paid is $ 7,200,000. this liability was discounted on our consolidated balance sheets to recognize the time value of the liability . the liability on our consolidated balance sheets will be increased each year to reflect the interest component of this liability . the increase is being recorded through other expense in selling and administrative expense in the consolidated statements of comprehensive income . at december 31 , 2014 , the working capital of the company was approximately $ 77,191,000 and the working capital ratio was 4.5 to 1. at december
|
on september 2 , 2016 , the company announced the planned merger of two of its 100 % owned subsidiaries , shouguanyuxin chemical co. , limited ( “ syci ” ) and shouguanrongyuan chemical co. , ltd ( “ scrc ” ) . on march 24 , 2017 , the legal process of the merger was completed and scrc was officially deregistered on march 28 , 2017. the results of these two subsidiaries were reported as syci in the fiscal year 2017. as disclosed in the company 's current report on form 8-k filed on september 8 , 2017 the company disclosed that on september 1 , 2017 , the company received letters from the yangkou county , shouguang city government addressed to each of its subsidiaries , schc and syci , which stated that in an effort to improve the safety and environmental protection management level of chemical enterprises , the plants are requested to immediately stop production and perform rectification and improvements in accordance with the country 's new safety and environmental protection requirements . in the company 's press release of august 11 , 2017 and on its conference call of august 14 , 2017 , the company addressed concerns that increased government enforcement of stringent environmental rules that were adopted in early 2017 to insure corporations bring their facilities up to necessary standards so that pollution and other negative environmental issues are limited and remediated , could have an impact on our business in both the short and long-term . the company also expressed that although it believed its facilities were fully compliant , the company did not know how its facilities would fare under the new rules and that the company expected to have a full understanding of the implications within the next two months . teams of inspectors from the government were sent to many provinces to inspect all mining and manufacturing facilities . the local government requested that facilities be closed , so that the facilities can undergo the inspection and analysis in the most efficient manner by inspectors ' team . as a result , our facilities were closed on september 1 , 2017. later on , the safety supervision and administration department and the environmental protection departments of the local government conducted inspections of every bromine production enterprise within its jurisdiction , in order to improve security , environmental protections , pollution , and safety . the company had been working closely with the county authorities to develop rectification plans for both its bromine and its chemical businesses . the company and the government had agreed on a rectification plan for schc , the company 's bromine and crude salt businesses which is currently under process . on november 24 , 2017 , gulf resources received a letter from the people 's government of yangkou county , shouguang city notifying the company that due to the new standards and regulations relating to safety production and environmental pollution , from certain local governmental departments , such as the municipal environmental protection department , the security supervision department and the fire department , have decided to relocate chemical enterprises to a new industrial park called bohai marine fine chemical industry park . chemical companies that are not being asked to move into the park will be permanently closed . although we are in compliance with regulations within the county , due to the proximity of our subsidiary , syci 's production plant to a residential area , we have been asked to relocate our chemical production plant to bohai marine fine chemical industry park . however , we must not commence activities until we have relocated the production plant and received inspection approval from related departments . the company expects to complete the rectification and improvements of the bromine and crude salt factories and be ready for the government inspection in the first half of 2018 , and will resume operations upon receipt of approval from the government . we expect the new chemical factory to be fully operational in the beginning of 2020 ( see note 1 ( b ) in notes to the consolidated financial statements ) . the company had been working with xinan shiyou daxue ( southwest petroleum university ) and found the way to solve the technical drilling problem of dchc and ordered custom equipment . the natural gas project may commence production gradually once such equipment arrives and are being installed . the company will strive for completion in the first half of 2018. as a result of our acquisitions of schc and syci , our historical consolidated financial statements and the information presented below reflects the accounts of schc , syci and dchc , the consolidated financial statements and the information presented below as of and for the year ended december 31 , 2017. the following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report . 22 story_separator_special_tag style= '' font : 10pt times new roman , times , serif ; margin : 0pt 0 ; text-align : justify '' > our utilization ratio increased by 6 % for the fiscal year 2017 as compared with the same period in 2016. the utilization ratio for year 2017 was annualized based on the 8 months actual production . this increase in utilization ratio was mainly due to the demolition factory no.6 in december 2016 , which reduced the total annual production capacity . in view of the trend of a decrease in the bromine concentration of brine water being extracted at our production facilities , and in order to reduce the leakage rate and attempt to recover the annual production capacity of bromine and crude salt to a higher level in the future , we intend to carry out enhancement works in our existing bromine extraction . the company expects to carry out enhancement projects for the extraction wells in 2018 , which will cost approximately $ 40 million . story_separator_special_tag we also expect to carry out enhancement projects for the transmission channels and ducts for rectification and improvement in order to meet the new environmental rules in china in 2018 , which will costs of approximately $ 8.5 million . bromine segment for the fiscal year 2017 , the cost of net revenue for our bromine segment was $ 20,991,198 , a decrease of $ 9,888,125 ( or 32 % ) compared to $ 30,879,323 for the fiscal year 2016. the major components of our cost of net revenue for the bromine segment were cost of raw materials and finished goods consumed of $ 5,081,097 ( or 24 % ) , depreciation and amortization of manufacturing plant and machinery of $ 9,966,196 ( or 47 % ) and electricity of $ 2,114,611 ( or 10 % ) for fiscal year 2017. the major components of our cost of net revenue for the bromine segment were cost of raw materials and finished goods consumed of $ 8,198,333 ( or 27 % ) , depreciation and amortization of manufacturing plant and machinery of $ 14,614,059 ( or 47 % ) and electricity of $ 2,566,285 ( or 8 % ) for fiscal year 2016 , a similar cost structure as compared with the same in 2017. the decrease in net cost of net revenue was mainly attributable to the closure of all of our plant and factories to perform rectification and improvement since september 1 , 2017. some of our local customers were also requested to stop production , which affected our customers ' industries and our sales volume . the table below represents the major production cost components of bromine per ton sold for the respective periods : replace_table_token_18_th 26 crude salt segment for the fiscal year 2017 , the cost of net revenue for our crude salt segment was $ 4,329,663 , representing a decrease of $ 3,857,628 , or 47 % , over the same period in 2016. the decrease in cost was mainly due to the decrease in volume of crude salt sold and unit production cost . the decrease in cost was mainly due to the decrease in depreciation and amortization of manufacturing plant and machinery mainly dueto ( i ) some plant and equipment related to the crude salt and bromine facilities were fully depreciated in june 2016 ; and ( ii ) the demolition factory no.6 in december 2016 for bromine and crude salt segment , which partially offset by the increase in depreciation and amortization of manufacturing plant and machinery due to the enhancement projects carried out for our extraction wells and transmission channels and ducts which commenced in august 2016 and completed in september 2016.the significant costs were depreciation and amortization of $ 1,801,050 ( or 42 % ) , resource tax calculated based on the crude salt sold of $ 971,819 ( or 22 % ) and electricity of $ 267,022 ( or 6 % ) for the fiscal year 2017. the significant costs were depreciation and amortization of $ 5,837,225 ( or 71 % ) , resource tax calculated based on the crude salt sold of $ 919,268 ( or 11 % ) and electricity of $ 437,453 ( or 5 % ) for the fiscal year 2016. the table below represents the major production cost components of crude salt per ton sold for the respective periods : replace_table_token_19_th chemical products segment for the fiscal year 2017 , the cost of net revenue for our chemical products segment was $ 37,836,229 , representing a decrease of $ 17,882,828 , or 32 % , over the same period in 2016. this decrease was primarily attributable to the closure of our chemical factories and being relocated since september 1 , 2017. some of our local customers were also requested to stop production , which affected our customers ' industries and our sales volume . gross profit . gross profit was $ 44,365,351 , or 41 % , of net revenue for fiscal year 2017 as compared to $ 54,489,331 , or 37 % , of net revenue for fiscal year 2016. replace_table_token_20_th 27 bromine segment for the fiscal year 2017 , the gross profit margin for our bromine segment was 50 % , as compared to 46 % for the fiscal year 2016. this 4 % increase is mainly due to the increased average selling price and the decrease in the purchase price of raw material and the decrease in depreciation and amortization of manufacturing plant and machinery mainly due to ( i ) some plant and equipment related to the crude salt and bromine facilities were fully depreciated in june 2016 ; and ( ii ) the demolition factory no.6 in december 2016 for bromine and crude salt segment , which partially offset by the increase in depreciation and amortization of manufacturing plant and machinery due to the enhancement projects carried out for our extraction wells and transmission channels and ducts which commenced in august 2016 and completed in september 2016 . crude salt segment for the fiscal year 2017 , the gross profit margin for our crude salt segment was 52 % as compared to 9 % for the same period in 2016. this 43 % increase is mainly due to the increase in crude salt price and decrease in depreciation and amortization of manufacturing plant and machinery as mentioned in cost of net revenue of crude salt . chemical products segment the gross profit margin for our chemical products segment for the fiscal year 2017 was 33 % as compared to 33 % for the same period in 2016. research and development costs the total research and development costs incurred for the fiscal years 2017 and 2016 were $ 195,195 and $ 261,931 , respectively , a decrease of 25 % . research and development costs for the fiscal year 2017 represented raw materials used by syci for testing the manufacturing routine . research and development costs for the fiscal year 2016 represented raw materials used by syci and scrc for testing the manufacturing routine .
| the major reason for the decrease in the sales volume of crude salt was mainly due to the closure of all of our plant and factories to perform rectification and improvement since september 1 , 2017. some of our local customers were also requested to stop production , which affected our customers ' industries and our sales volume . the table below shows the changes in the average selling price and changes in the sales volume of crude salt for the fiscal year 2017 from the same period in 2016. fiscal year increase in net revenue of crude salt as a result of : 2017 vs. 2016 increase in average selling price $ 1,273,055 decrease in sales volume $ ( 1,272,827 ) total effect on net revenue of crude salt $ 228 24 chemical products segment replace_table_token_15_th net revenue from our chemical products segment decreased from $ 83,477,420 for the fiscal year 2016 to $ 56,311,460 for the same period in 2017 , a decrease of approximately 33 % . this decrease was primarily attributable to the closure of our chemical factories and being relocated since september 1 , 2017. some of our local customers were also requested to stop production , which affected our customers ' industries and our sales volume . net revenue from our oil and gas exploration chemicals contributed $ 12,852,210 ( or 23 % ) and $ 19,914,575 ( or 24 % ) of our chemical segment revenue for the fiscal year 2017 and 2016 , respectively , with a decrease of $ 7,062,365 , or 35 % . net revenue from our paper manufacturing additives decreased from $ 3,456,932 for the fiscal year 2016 to $ 2,275,236 for the same period in 2017 , a decrease of approximately 34 % . net revenue from our pesticides manufacturing additives decreased from $ 11,194,214 for the fiscal year 2016 to $ 6,953,930 for the same period in 2017 , a decrease of approximately 38 % . net revenue from our
|
the u.s. commerce department estimates that the u.s. economy expanded at an annual rate of 4.0 % in q4 2020. as a result , gross domestic product ( gdp ) finished the year 2.5 % below year-end 2019 levels and when averaged over the entirety of 2020 , gdp contracted by 3.5 % relative to 2019. in contrast , china continues to exhibit strong recovery , with economic output ending the fourth quarter 6.5 % ahead of year-ago levels . global equity markets remained strong in 2020 , driven by the sharp decline in interest rates , significant increases in fiscal support , and the sense among market participants that the covid-19 pandemic reflects a temporary decline in the supply of certain experiences and services rather than an endogenous drop in consumer demand . over the past year , the s & p 500 rose by roughly 15 % , with much larger gains in tech-heavy indexes like the nasdaq whose constituents have tended to benefit from social distancing and remote work . the global equity markets saw a particularly strong surge from november 6 onwards after the overwhelmingly positive results of covid-19 vaccine trials were announced . from september 30 through december 31 , 2020 , the s & p 500 , msci acwi , eurostoxx 600 , and shanghai composite rose 11.7 % , 14.4 % , 10.5 % , and 7.9 % , respectively . much of this performance , particularly in the u.s. , was driven by a rebound in sectors where equity prices had been hardest hit by the pandemic , such as hospitality , financials , brick-and-mortar retail , and oil & gas . in the u.s. , analysts currently estimate fourth quarter earnings for companies in the s & p 500 declined 5 % year-over-year , with the largest contractions still concentrated in the energy and industrials ( including transportation ) sectors . while unexpected resilience in goods consumption , residential real estate markets , and business spending have led to better than expected 2020 global growth outcomes , and the recently enacted and proposed fiscal stimulus measures should help bolster household income , significant risks remain for 2021. in december 2020 , total u.s. employment declined for the first time since april after seven consecutive months of gains . the slower than anticipated global vaccination rollout , combined with uncertainties regarding new variants of the virus , will prolong the risk of continued disruption from the covid-19 pandemic deeper into the year . in europe , the ongoing re-imposition of broad-based lockdown measures could stymie growth in the near-term , while underlying labor market fragility and debt accumulation pose a potential risk to the longer-term growth outlook for the region . direct state aid programs have artificially suppressed unemployment rates to date and 5 % or more of the workforce is still supported by employment retention programs in some european economies . while many of these policies have been extended through 2021 , an eventual labor market shakeout remains a possibility . of particular note are risks to the outlook for the transportation industry where recovery in metrics such as discretionary air travel and public transit ridership lags other macro indicators , and the infrastructure sector , where the pandemic has materially altered revenue expectations and has led to severe projected budget shortfalls at the state and local level . the potential for a sustained period of severely depressed commercial air travel may have significant implications not only for the airlines , but also for the myriad aviation related companies such as aircraft suppliers , their vendors and airport services firms that depend on the aviation industry for a substantial portion of their revenues . the near-term outlook for oil and gas is expected to improve in 2021 as lockdowns are eased and fuel demand rebounds . the long-term outlook for oil and gas will be more dependent on the pace of the broader shift to alternative energy sources . for example , currently over 90 % of surface , air and marine transportation is powered by oil-based fuels . while growth in electric vehicle sales should cause this share to decline over time , electric vehicles account for less than 3 % of new auto sales , and less than 0.5 % of the cars on the road today are fully electric . additionally , ongoing concerns about climate change and carbon emissions may dampen investor interest in the oil and gas sector which could have a negative impact on our activities in the sector including raising capital , obtaining suitable or sufficient financing , exiting investments and achieving expected returns on new investments . 90 global geopolitical tensions , already strained pre-pandemic , have been exacerbated by the widespread economic disruption . u.s.-china relations , which had appeared to ease at the end of 2019 , soured during 2020 amid harsh rhetoric , sanctions , and export restrictions . while there is some optimism that tensions with china could ease under the new u.s. administration , the outlook remains highly uncertain . the imposition of a national security law on hong kong has prompted backlash from various global players , thereby increasing overall uncertainty about risks associated with international trade with hong kong , the potential for increased taxation on hong kong-related transactions , and new regulatory restrictions and data protection concerns for businesses operating in hong kong , including our hong kong operations . disputes over digital services taxes and import tariffs on luxury goods imports reignited u.s.-european union trade tensions , although early signals from the new u.s. administration suggest a desire to approach existing disagreements diplomatically . political instability and the potential for a broader pullback in global trade introduce risks to the economic growth of most economies , particularly those with significant export-dependence . domestically within the u.s. , heightened unemployment and deep-seated political divisiveness continue to cause significant uncertainty . bond markets , while stable , shifted modestly in the fourth quarter . story_separator_special_tag the 10-year u.s. treasury yield rose more than 25 basis points over the quarter to its highest level since march on expectations of increased government spending under the new administration and closely divided congress . high yield spreads tightened a further 150 basis points . futures markets continue to expect short-term rates to remain near zero through 2025 due to the federal reserve 's new policy framework , which appears to allow inflation to overshoot its 2 % target for “ some time. ” within corporate credit , businesses have taken advantage of low interest rates through massive debt issuance and restructurings , building large cash piles as liquidity buffers . our carry fund portfolio continued to build on the strong momentum started in the second half of the year , appreciating 8 % in the fourth quarter and 10 % for the year . within our global private equity segment , our corporate private equity funds appreciated by 11 % in the fourth quarter and 19 % over the last twelve months , reflecting strong performance across the portfolio and our real estate funds appreciated by 3 % during the fourth quarter and 8 % over the last twelve months . our natural resources funds appreciated by 3 % in the fourth quarter despite continued pressure , with depreciation of 16 % over the last twelve months . in our global credit segment , our carry funds ( which represent approximately 14 % of the total global credit remaining fair value ) appreciated by 7 % in the fourth quarter , as tightening spreads led to an increase in value for many of our positions , and depreciated 2 % over the last twelve months . investment solutions appreciation was 7 % in the fourth quarter and 10 % for the year , though the valuations of our primary and secondary funds of funds generally reflect investment fair values on a one-quarter lag . with continued positive impact from valuations across the portfolio , net accrued performance revenues on our balance sheet increased to a record $ 2.3 billion at december 31 , 2020 , up 36 % since last year . significant ipo activity in our portfolio during 2020 has increased the portion of our traditional carry funds attributable to publicly traded companies to 15 % of fair value in the fourth quarter , compared to 6 % at the end of 2019. while these ipos have performed well to date overall , this shift may result in an increasing correlation to public market performance and a significant concentration of investment gains in individual investments for certain funds . to the extent that there is volatility in public equity markets and or the prices of our publicly-traded portfolio companies , there may be elevated volatility in our performance revenue accrual in the coming quarters . generally , the investment period of our funds enables us to be patient in deploying capital only in investments that meet our return criteria and the strategic objectives of our funds . during the fourth quarter , our carry funds invested $ 8.7 billion in new or follow-on transactions and we invested $ 18.3 billion for the full year 2020. we anticipate that increased market activity and opportunities for large buyouts will facilitate strong deployment activity as we move further into 2021. we also expect volume to remain robust across both growth and buyout opportunities , particularly in the healthcare , technology , and consumer sectors . however , challenges in specific industries could lead to a longer-term slowdown in certain sectors , such as traditional energy . we generated $ 6.9 billion in realized proceeds from our carry funds in the fourth quarter and realized $ 21.0 billion in 2020. we expect near-term exit activity in early 2021 to depend on the trajectory of multiple and varied macro environment factors , in addition to valuation multiples and access to capital markets . however , we believe that our recent ipo activity and maturing portfolio position us well to deliver higher levels of both realized proceeds and realized performance revenue over the long term . for example , during the fourth quarter we realized significant performance revenue for a second straight quarter from our sixth u.s. buyout fund , which reflects the value creation and advancing maturity profile of that flagship fund . fundraising has remained generally resilient since the onset of the pandemic . though we were not fundraising any of our flagship funds in global private equity during 2020 , we raised $ 27.5 billion in new capital in 2020 , well exceeding our goal for the year , with particular fundraising strength in investment solutions and global credit . at the beginning of the pandemic , many observers conflated a return to the office with a return to business as usual . instead , business volumes and productivity rose to pre-pandemic levels well in advance of full office reopening . since the start 91 of the pandemic , our employees have proven what they can accomplish while they are working remotely , and they remain well connected and engaged with each other and our stakeholders through our suite of teleconferencing and virtual meeting solutions . while we have generally reopened our offices around the globe , most employees continue to work remotely and we continue to successfully operate our business and address the needs of our shareholders , fund investors and portfolio companies . we are closely evaluating the financial and other proposals put forth by the new administration and congress and their potential impacts on our business . while there may be changes to current tax and regulatory regimes , additional fiscal stimulus packages could be followed by longer-term spending increases on infrastructure , climate , health care and education . the potential for policy changes may create regulatory uncertainty for our portfolio companies and our investment strategies and adversely affect the profitability of our portfolio companies .
| fund management fees increased $ 9.8 million , or 1 % , for the year ended december 31 , 2020 as compared to 2019 , and increased $ 204.2 million , or 16 % , for the year ended december 31 , 2019 as compared to 2018 , primarily due to the following : year ended december 31 , 2020 2019 ( dollars in millions ) higher management fees from the commencement of the investment period for certain newly raised funds $ 132.1 $ 319.0 lower management fees resulting from the change in basis for earning management fees from commitments to invested capital for certain funds and from changes in invested capital in funds whose management fees are based on assets under management ( 100.5 ) ( 127.6 ) ( decrease ) increase in catch-up management fees from subsequent closes of funds that are in the fundraising period ( 18.3 ) 10.5 higher ( lower ) transaction and portfolio advisory fees 1.7 ( 1.4 ) all other changes ( 5.2 ) 3.7 total increase in fund management fees $ 9.8 $ 204.2 fund management fees include transaction and portfolio advisory fees , net of rebate offsets , of $ 50.8 million , $ 49.1 million , and $ 50.5 million for the years ended december 31 , 2020 , 2019 and 2018 , respectively . 104 investment income . investment income decreased $ 473.2 million for the year ended december 31 , 2020 as compared to 2019 , and increased $ 759.2 million for the year ended december 31 , 2019 as compared to 2018 , primarily due to the following : replace_table_token_14_th prior to the control transaction which closed on june 2 , 2020 , as described in note 5 to the consolidated financial statements , we accounted for our investment in fortitude re under the equity method of accounting by recognizing our pro rata share of fortitude holdings ' u.s. gaap earnings , which is included in principal investment income ( loss ) in the consolidated statements of operations . these amounts were inclusive of unrealized gains ( losses ) resulting from changes in the fair value of embedded derivatives related to certain reinsurance contracts included in fortitude re 's u.s. gaap financial statements . modified coinsurance is subject to the general accounting principles for hedging , specifically the guidance originally issued as derivatives implementation group issue no . b36 : embedded derivatives : modified coinsurance agreements and debt instruments that incorporate credit risk exposures that are unrelated or only partially related to the creditworthiness of
|
the class b share represents 60.92 % of the total voting power of our shares entitled to vote but no economic interest in apollo global management , llc . our managing partners ' economic interests are instead represented by their indirect beneficial ownership , through holdings , of 48.12 % of the limited partner interests in the apollo operating group . ( 3 ) through brh holdings , l.p. , our managing partners indirectly beneficially own through estate planning vehicles , limited partner interests in holdings . ( 4 ) holdings owns 54.07 % of the limited partner interests in each apollo operating group entity ( “ aog units ” ) . the aog units held by holdings are exchangeable for class a shares . our managing partners , through their interests in brh and holdings , beneficially own 48.12 % of the aog units . our contributing partners , through their ownership interests in holdings , beneficially own 5.95 % of the aog units . ( 5 ) brh holdings gp , ltd. is the sole member of agm management , llc , our manager . the management of apollo global management , llc is vested in our manager as provided in our operating agreement . ( 6 ) represents 45.93 % of the limited partner interests in each apollo operating group entity , held through intermediate holding companies . apollo global management , llc , also indirectly owns 100 % of the general partner interests in each apollo operating group entity . each of the apollo operating group partnerships holds interests in different businesses or entities organized in different jurisdictions . our structure is designed to accomplish a number of objectives , the most important of which are as follows : we are a holding company that is qualified as a partnership for u.s. federal income tax purposes . our intermediate holding companies enable us to maintain our partnership status and to meet the qualifying income exception . we have historically used multiple management companies to segregate operations for business , financial and other reasons . going forward , we may increase or decrease the number of our management companies or partnerships within the apollo operating group based on our views regarding the appropriate balance between ( a ) administrative convenience and ( b ) continued business , financial , tax and other optimization . business environment as a global investment manager , we are affected by numerous factors , including the condition of financial markets and the economy . price fluctuations within equity , credit , commodity , foreign exchange markets , as well as interest rates , which may be volatile and mixed across geographies , can significantly impact the valuation of our funds ' portfolio companies and related income we may recognize . in terms of equity markets , 2015 was a more challenging year compared to the mixed backdrop in 2014. in the u.s. , the s & p 500 index declined 0.7 % during 2015 following an increase of 11.4 % in 2014. outside the u.s. , global equity markets fell for the second consecutive year as measured by the msci all country world ex usa index , which declined 2.6 % during 2015 after falling 3.9 % in 2014. conditions in the credit markets also have a significant impact on our business , and in 2015 , many indices reversed course from the gains seen in 2014. the bofaml hy master ii index declined 4.6 % in 2015 following an increase of 2.5 % in 2014. in addition , the s & p/lsta leveraged loan index fell 0.7 % in 2015 following an increase of 1.6 % in 2014. benchmark interest rates finished the year slightly up following the first increase in the federal funds rate by the federal reserve in nearly a decade . as a result , the u.s. 10-year treasury yield rallied 23 basis points in the fourth quarter to finish the year up 10 basis points at 2.27 % . foreign exchange rates can materially impact the valuations of our funds ' investments that are denominated in currencies other than the u.s. dollar . for example , relative to the u.s. dollar , the euro depreciated 10.2 % in 2015 after depreciating 12.0 % in 2014 , while the british pound depreciated 5.4 % in 2015 after depreciating 5.9 % in 2014. commodities generally saw price declines in 2015 after a particularly weak fourth quarter that was driven by depreciation in oil . the price of crude oil declined 17.9 % during the fourth quarter and 30.5 % for the full year primarily due to oversupply dynamics . in terms of economic conditions in the u.s. , the bureau of economic analysis reported real gdp increased at an annual rate of 2.4 % , the same level growth observed in 2014. as of january 2016 , the international monetary fund estimated that the u.s. economy will expand by 2.6 % in 2016. additionally , the u.s. unemployment rate continued to decline and stood at 5.0 % as of december 31 , 2015 , compared to 5.1 % as of september 30 , 2015 , marking the lowest level since april 2008 . - 77 - despite a more challenging equity and credit market backdrop in 2015 versus 2014 , apollo continued to generate realizations for fund investors . apollo returned $ 1.9 billion and $ 8.5 billion of capital and realized gains to the investors in the funds it manages during the fourth quarter of 2015 and full year ended december 31 , 2015 , respectively . in general , institutional investors continue to allocate capital towards alternative investment managers for more attractive risk-adjusted returns in a low interest rate environment , and we believe the business environment remains generally accommodative to launch new products and pursue attractive strategic growth opportunities . as such , apollo had $ 12.3 billion and $ 23.7 billion of capital inflows during the fourth quarter of 2015 and full year ended december 31 , 2015 , respectively . story_separator_special_tag regardless of the market or economic environment at any given time , apollo relies on its contrarian , value-oriented approach to consistently invest capital on behalf of its fund investors by focusing on opportunities that management believes are often overlooked by other investors . apollo had $ 4.1 billion and $ 13.1 billion of dollars invested during the fourth quarter of 2015 and full year ended december 31 , 2015 , respectively . we believe apollo 's expertise in credit and its focus on nine core industry sectors , combined with 25 years of investment experience , has allowed apollo to respond quickly to changing environments . apollo 's core industry sectors include chemicals , natural resources , consumer and retail , distribution and transportation , financial and business services , manufacturing and industrial , media and cable and leisure , packaging and materials and the satellite and wireless industries . apollo believes that these attributes have contributed to the success of its private equity funds investing in buyouts and credit opportunities during both expansionary and recessionary economic periods . managing business performance we believe that the presentation of economic income ( loss ) ( previously referred to as economic net income ) , or “ ei ” , supplements a reader 's understanding of the economic operating performance of each of our segments . economic income ( loss ) ei has certain limitations in that it does not take into account certain items included under u.s. gaap . ei represents segment income ( loss ) before income tax provision excluding transaction-related charges arising from the 2007 private placement , and any acquisitions . transaction-related charges include equity-based compensation charges , the amortization of intangible assets , contingent consideration and certain other charges associated with acquisitions . in addition , segment data excludes non-cash revenue and expense related to equity awards granted by unconsolidated affiliates to employees of the company , as well as the assets , liabilities and operating results of the funds and vies that are included in the consolidated financial statements . we believe the exclusion of the non-cash charges related to the 2007 reorganization for equity-based compensation provides investors with a meaningful indication of our performance because these charges relate to the equity portion of our capital structure and not our core operating performance . economic net income ( loss ) ( previously referred to as eni after taxes ) , or “ eni ” , represents ei adjusted to reflect income tax provision on ei that has been calculated assuming that all income is allocated to apollo global management , llc , which would occur following an exchange of all aog units for class a shares of apollo global management , llc . the economic assumptions and methodologies that impact the implied income tax provision are similar to those methodologies and certain assumptions used in calculating the income tax provision for apollo 's consolidated statements of operations under u.s. gaap . we further evaluate ei based on what we refer to as our “ management business ” and “ incentive business ” . our management business is generally characterized by the predictability of its financial metrics , including revenues and expenses . the management business includes management fee revenues , advisory and transaction fee revenues , carried interest income from one of our opportunistic credit funds and expenses , each of which we believe are more stable in nature . the financial performance of our incentive business is partially dependent upon quarterly mark-to-market unrealized valuations in accordance with u.s. gaap guidance applicable to fair value measurements . the incentive business includes carried interest income , income from equity method investments and profit sharing expense that are associated with our general partner interests in the apollo funds , which are generally less predictable and more volatile in nature . we believe that ei is helpful for an understanding of our business and that investors should review the same supplemental financial measure that management uses to analyze our segment performance . this measure supplements and should be considered in addition to and not in lieu of the results of operations discussed below in “ —overview of results of operations ” that have been prepared in accordance with u.s. gaap . see note 18 to the consolidated financial statements for more details regarding management 's consideration of ei . ei may not be comparable to similarly titled measures used by other companies and is not a measure of performance calculated in accordance with u.s. gaap . we use ei as a measure of operating performance , not as a measure of liquidity . ei should not be considered in isolation or as a substitute for operating income , net income , operating cash flows , investing and - 78 - financing activities , or other income or cash flow statement data prepared in accordance with u.s. gaap . the use of ei without consideration of related u.s. gaap measures is not adequate due to the adjustments described above . management compensates for these limitations by using ei as a supplemental measure to u.s. gaap results , to provide a more complete understanding of our performance as management measures it . a reconciliation of ei to its most directly comparable u.s. gaap measure of income ( loss ) before income tax provision can be found in the notes to our financial statements . during the first quarter of 2015 , the company redefined ei to exclude transaction-related charges related to contingent consideration associated with acquisitions , resulting in the following impact to our credit segment for the years ended december 31 , 2014 and 2013 : replace_table_token_5_th ( 1 ) see note 18 to our consolidated financial statements for further detail regarding the impact of the revised definition on economic income ( loss ) . additionally , interest expense , net of interest income ( “ net interest expense ” ) was reallocated from the management business to the incentive business to align with the earnings from our investments which are principally funded by our outstanding debt .
| - 97 - management fees from affiliates increased by $ 79.8 million for the year ended december 31 , 2015 as compared to the year ended december 31 , 2014 . this change was primarily attributable to the adoption of new consolidation guidance which led to the deconsolidation of certain funds and clos as of january 1 , 2015 as described in notes 2 and 5 to the consolidated financial statements . as a result of the adoption of new consolidation guidance , eliminations of management fees of consolidated clos decreased by $ 59.2 million during the year ended december 31 , 2015 as compared to the year ended december 31 , 2014 . the change in management fees from affiliates was also driven by an increase in management fees in relation to the ahl awards of $ 7.0 million granted to the company 's employees , which are liability awards that are marked-to-market based on the valuation of athene ( see note 14 to the consolidated financial statements ) . carried interest income from affiliates decreased by $ 296.8 million for the year ended december 31 , 2015 as compared to the year ended december 31 , 2014 . this change was primarily attributable to decreases in carried interest income from the private equity and credit segments of $ 206.3 million and $ 107.0 million , respectively , offset by an increase in carried interest income from the real estate segment of $ 4.1 million during the year ended december 31 , 2015 as compared to the same period in 2014. for additional details regarding changes in carried interest income in each segment , see “ —segment analysis ” below . year ended december 31 , 2014 compared to year ended december 31 , 2013 advisory and transaction fees from affiliates , net , increased by $ 119.0 million for the year ended december 31 , 2014 as compared to the year ended december 31 , 2013. this change was attributable to an increase in the credit segment of $ 140.5 million offset by a decrease in the private equity segment
|
the extent to which covid-19 will impact our business will depend on future developments , which are highly uncertain and can not be predicted with confidence , such 22 as the ultimate severity and spread of the disease , the duration of the pandemic , travel restrictions and social distancing requirements in the united states and other countries , the pace and extent of the economic recovery , and any change in trends and practices in how people gather . given the speed and frequency of continuously evolving developments with respect to this pandemic , we can not reasonably estimate the magnitude of the impact to our business . in addition , we can be impacted by events like the u.s. administrative trade actions in 2018 or a number of other factors that are disclosed in `` item 1a . risk factors '' included in this form 10-k. the outlook and unique key growth drivers and challenges by our business units include : commercial business unit : in the near-term , our customers who rely on advertising revenues for out-of-home ( `` ooh '' ) advertising or who are reliant on customer foot-traffic to drive sales have been adversely impacted by stay-at-home or quarantine orders which started in march 2020 with varied or no published expiration . these customers are expected to delay their discretionary capital spending through the covid-19 economic recovery . business using our displays for self-promotion or on-premise advertising may have reduced budgets for the foreseeable future or choose to utilize displays as part of their recovery , both actions creating an impact to the commercial near-term outlook . we can not reasonably estimate the magnitude or length of time our commercial business will be adversely impacted . over the long-term , we believe growth in the commercial business unit will result from a number of factors , including : standard display product market growth due to market adoption and lower product costs , which drive marketplace expansion . standard display products are used to attract or communicate with customers and potential customers of retail , commercial , and other establishments . pricing and economic conditions are the principal factors that impact our success in this business unit . we utilize a reseller network to distribute our standard products . national accounts standard display market opportunities due to customers ' desire to communicate their message , advertising and content consistently across the country . increased demand is possible from national retailers , quick-serve restaurants , petroleum retailers , and other nationwide organizations . additional standard display offerings using micro-light emitting diode ( `` led '' ) designs . increasing use of led technologies replacing signage previously using liquid crystal display ( `` lcd '' ) technology by existing and new customers . increasing interest in spectaculars , which include very large and sometimes highly customized displays as part of entertainment venues such as casinos , shopping centers , cruise ships and times square type locations . dynamic messaging systems demand growth due to market adoption and expanded use of this technology . the use of architectural lighting products for commercial buildings , which real estate owners use to add accents or effects to an entire side or circumference of a building to communicate messages or to decorate the building . the continued deployment of digital billboards as ooh advertising companies continue developing new sites and replacing digital billboards reaching end of life . this is dependent on no adverse changes occurring in the digital billboard regulatory environment restricting future billboard deployments , as well as maintaining our current market share in a business that is concentrated in a few large ooh companies . replacement cycles within each of these areas . live events business unit : in the near-term , our customers who rely on advertising and event revenues are expected to delay spending on projects because of the covid-19 pandemic . changes to the way people gather may change the long-term usage of our systems . over the long-term , we believe growth in the live events business unit will result from a number of factors , including : facilities spending more on larger display systems to enhance the game-day and event experience for attendees . lower product costs , driving an expansion of the marketplace . our product and service offerings , including additional micro-led offerings which remain the most integrated and comprehensive offerings in the industry . the competitive nature of sports teams , which strive to out-perform their competitors with display systems . the desire for high-definition video displays , which typically drives larger displays or higher resolution displays , both of which increase the average transaction size . dynamic messaging system needs throughout a sports facility . increasing use of led technologies replacing signage previously using lcd technology in and surrounding live events facilities . replacement cycles within each of these areas . high school park and recreation business unit : in the near-term , our customers who rely on advertising revenue for sports installations or who may be impacted by governmental tax revenue availability may choose to delay spending on projects because of the covid-19 pandemic . over the long-term , we believe growth in the high school park and recreation business unit will result from a number of factors , including : 23 increased demand for video systems in high schools as school districts realize the revenue generating potential of these displays compared to traditional scoreboards and these systems ' ability to provide or enhance academic curriculum offerings for students . increased demand for different types of displays and dynamic messaging systems , such as message centers at schools to communicate to students , parents and the broader community . lower system costs driving the use of more sophisticated displays in school athletic facilities , such as large integrated video systems . expanding control system options tailored for the markets ' needs . story_separator_special_tag transportation business unit : in the near term , customers in the mass-transit and airport part of the market are expected to delay spending as a result of the limited use of this infrastructure during the covid-19 pandemic . in the long-term , roadway projects may be impacted due to reduced tax revenues . that impact will increase as the duration of the reduction in infrastructure usage continues . over the long-term , we believe growth in the transportation business unit will result from increasing applications and acceptance of electronic displays to manage transportation systems , including roadway , airport , parking , transit and other applications . effective use of the united states transportation infrastructure requires intelligent transportation systems . this growth is highly dependent on government spending , primarily by state and federal governments , along with the continuing acceptance of private/public partnerships as an alternative funding source . growth is also expected in dynamic messaging systems for advertising and wayfinding use in public transport and airport terminals due to expanded market usage and displays , with led technology replacing prior lcd installations and additional display offerings using micro-leds . international business unit : in the near-term , our customers who rely on advertising , retail , event revenues and governmental tax revenue availability are expected to delay spending on projects due to the covid-19 pandemic . changes to the ways people gather may change the long-term usage of our systems . over the long-term , we believe growth in the international business unit will result from achieving greater penetration in various geographies and building products more suited to individual markets . we continue to broaden our product offerings into the transportation segment in europe and the middle east . we also focus on sports facility , spectacular-type , ooh advertising products , and architectural lighting market opportunities and the factors listed in each of the other business units to the extent they apply outside of the united states and canada . additional opportunities exist with expanded market usage of led technology due to price considerations , usage of led technology replacing prior lcd installations and additional display offerings using micro-leds . critical accounting policies and estimates the following management 's discussion and analysis of financial condition and results of operations ( `` md & a '' ) are based upon our consolidated financial statements , which have been prepared in accordance with generally accepted accounting principles in the united states ( `` gaap '' ) . this discussion should be read in conjunction with the accompanying consolidated financial statements and notes to the consolidated financial statements included in this report . the preparation of these financial statements requires us to make estimates and judgments affecting the reported amounts of assets , liabilities , revenues and expenses and related disclosure of contingent assets and liabilities . although our significant accounting policies are described in `` note 1. nature of business and summary of significant accounting policies `` , the following discussion is intended to highlight and describe those accounting policies that are especially critical to the preparation of our consolidated financial statements . a critical accounting policy is defined as a policy that is both very important to the portrayal of a company 's financial condition and results and requires management 's most difficult , subjective or complex judgments . we regularly review our critical accounting policies and evaluate them based on these factors . we believe the estimation process for uniquely configured contracts and warranties are most material and critical . these areas contain estimates with a reasonable likelihood to change , and those changes could have a material impact on our financial condition and reported results of operations . the estimation processes for these areas are also difficult , subjective and use complex judgments . our critical accounting estimates are based on historical experience ; on our interpretation of gaap , current laws and regulations ; and on various other assumptions 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 not readily apparent from other sources . actual results may differ from these estimates . revenue recognition on uniquely configured contracts . revenue for uniquely configured ( custom ) or integrated systems is recognized over time using the cost incurred input method . over time revenue recognition is appropriate because we have no alternative use for the uniquely configured system and have an enforceable right to payment for work performed . the cost incurred input method measures cost incurred to date compared to estimated total costs for each contract . this method is the most faithful depiction of our performance because it measures the value of the contract transferred to the customer . costs to perform the contract include direct and indirect costs for contract design , production , integration , installation , and assurance-type warranty reserve . direct costs include material and components ; manufacturing , project management and engineering labor ; and subcontracting expenses . indirect costs include allocated 24 charges for such items as facilities and equipment depreciation and general overhead . provisions of estimated losses on uncompleted contracts are made in the period when such losses are capable of being estimated . we may have multiple performance obligations in these types of contracts ; however , a majority are treated as a combined single performance obligation . in our judgment , this accounting treatment is most appropriate because the substantial part of our promise to our customer is to provide significant integration services and incorporate individual goods and services into a combined output or system . often times the system is customized or significantly modified to the customer 's desired configurations and location , and the interrelated goods and services provide utility to the customer as a package .
| this was due to increases in orders placed during fiscal 2020 related to new releases of our product offerings , which were offset by a slow market in our account-based order placements due to covid-19 . as we look into fiscal year 2021 , the covid-19 impact to the economy and changes in the near-term buying habits of our customers add uncertainty and potential business contraction in all business areas making it difficult to predict orders and sales . commercial : the increase in net sales for fiscal 2020 compared to fiscal 2019 was primarily due to the timing of projects in the spectacular and ooh niches , which was partly offset by a decrease in net sales in the on-premise niche primarily due to lighter demand . the decrease in orders for fiscal 2020 compared to fiscal 2019 was primarily due to a decrease in large orders in the spectacular niche and a slow market in the ooh niche . we continue to see increased adoption of video solutions in our commercial business unit marketplace . depending on the duration of the current economic conditions , we see opportunities for orders and sales over the coming years in our ooh , on-premise , and spectacular focused niches due to replacement cycles , expansion of dynamic messaging systems usage , our releases of new solutions , additional distribution methods , and increased market size due to the decline of digital pricing over the years as well as the desire for higher resolution technology . due to a number of factors , such as the discretionary nature of customers committing to a system , economic dependencies , regulatory environments , competitive factors , and the uncertainty of the impacts of the covid-19 pandemic , it is difficult to predict orders and net sales for fiscal 2021 . we expect growth in the commercial business unit over the long-term , assuming favorable economic conditions and our success in counteracting competitive pressures . live events : the increase in net sales for fiscal 2020 compared to fiscal 2019 was primarily due to the timing of the demand for upgraded or new solutions for arenas
|
we spent $ 23,680 in cash investing activities during the year ended august 31 , 2013 , all of which was associated with the advance of funds to us by tropic spa prior to the closing of the share exchange , whereas we did not spend any cash on investing activities during the prior year . during the year ended august 31 , 2013 , we received $ 552,000 in cash from financing activities , compared to $ 457,500 in cash receipts from financing activities during the prior year . all of our cash receipts during those two years were in the form of proceeds from the issuance of tropic spa 's common shares . during the year ended august 31 , 2013 , our cash decreased by $ 76,918 due to a combination of our operating , investing and financing activities . plan of operations our plan of operations over the next 12 months is to carry out our three-phase marketing strategy and continue to develop our business , and we anticipate that we will require a minimum of $ 1,629,200 to pursue those plans , as follows : replace_table_token_1_th 20 we intend to allocate the bulk of our proposed marketing expenses to producing and airing a new infomercial , and we expect interest in our home mist tanning system to increase as a result . such an increase will likely be accompanied by an increase in sales , which will require us to manufacture additional units and incur substantial production costs . the other expenses we anticipate occurring over the next 12 months are reasonably consistent with those from prior periods , as adjusted to reflect the expected increase in our operations and the costs of maintaining our status as a public company . we do not currently have sufficient funds to carry out our entire plan of operations , so we intend to meet the balance of our cash requirements for the next 12 months through a combination of debt financing and equity financing through private placements . currently we are active in contacting broker/dealers in canada and elsewhere regarding possible financing arrangements ; however , we do not currently have any arrangements in place to complete any private placement financings and there is no assurance that we will be successful in completing any such financings . if we are unsuccessful in obtaining sufficient funds through our capital raising efforts , we may review other financing options , although we can not provide any assurance that any such options will be available to us or on terms reasonably acceptable to us . further , if we are unable to secure any additional financing then we plan to reduce the amount that we spend on our operations , including our management-related consulting fees and other general expenses , so as not to exceed the capital resources available to us . regardless , our current cash reserves and working capital may not be sufficient to enable us to sustain our business for the next 12 months , even if we do decide to scale back our operations . critical accounting policies inventory inventory is stated at the lower of cost , computed using the first-in , first-out method , or market . if the cost of inventory exceeds its market value , a provision is made currently for the difference between the cost and market value . our inventory consists of finished goods , components and supplies . equipment , net equipment is stated at cost , net of accumulated depreciation . equipment is depreciated over the estimated useful life of the asset . mould equipment is depreciated at 20 % on a declining-balance basis . the website is depreciated on a straight-line basis over five years . one-half of these rates are used in the year of acquisition . replacements and major improvements are capitalized , while maintenance and repairs are charged to expense as incurred . upon retirement or sale , the cost of assets disposed of and related accumulated depreciation are removed from the accounts , and any resulting gain or loss is credited or charged to operations . intangible assets the patent is recorded at the value attributed to the shares issued to the originating companies and shareholders of tgsi less accumulated amortization . the patent was issued on september 29 , 2009 and is effective until september 29 , 2026. upon expiration , the patent can be extended subject to certain changes required to secure the extension . although the effects of obsolescence , demand , competition and other economic factors ( such as stability of the industry , technological advances and legislative action that results in an uncertain or changing regulatory environment ) can have an adverse effect on the industry and the company 's product , management is not currently aware of any known adverse factors that will affect the company in the future . 21 we do not believe that there are any limits to how long our home mist tanning units can sell in the market place . while we expect to be able to secure an extension to the patent in 2026 , this can not be predicted with certainty at this time . accordingly , management has determined that the best estimate of the useful life of the patent is 17 years . at this time , we do not believe that the patent will have a residual value at the end of its useful life . definite-lived intangible assets are required to be amortized using a method that reflects the pattern in which the economic benefits of the patents are consumed or utilized . at this time , management is not able to determine with any amount of certainty the number of home mist tanning units that will be sold over the useful life of the patent . accordingly , the patent is being amortized on a straight-line basis over the period of its useful life . story_separator_special_tag we spent $ 23,680 in cash investing activities during the year ended august 31 , 2013 , all of which was associated with the advance of funds to us by tropic spa prior to the closing of the share exchange , whereas we did not spend any cash on investing activities during the prior year . during the year ended august 31 , 2013 , we received $ 552,000 in cash from financing activities , compared to $ 457,500 in cash receipts from financing activities during the prior year . all of our cash receipts during those two years were in the form of proceeds from the issuance of tropic spa 's common shares . during the year ended august 31 , 2013 , our cash decreased by $ 76,918 due to a combination of our operating , investing and financing activities . plan of operations our plan of operations over the next 12 months is to carry out our three-phase marketing strategy and continue to develop our business , and we anticipate that we will require a minimum of $ 1,629,200 to pursue those plans , as follows : replace_table_token_1_th 20 we intend to allocate the bulk of our proposed marketing expenses to producing and airing a new infomercial , and we expect interest in our home mist tanning system to increase as a result . such an increase will likely be accompanied by an increase in sales , which will require us to manufacture additional units and incur substantial production costs . the other expenses we anticipate occurring over the next 12 months are reasonably consistent with those from prior periods , as adjusted to reflect the expected increase in our operations and the costs of maintaining our status as a public company . we do not currently have sufficient funds to carry out our entire plan of operations , so we intend to meet the balance of our cash requirements for the next 12 months through a combination of debt financing and equity financing through private placements . currently we are active in contacting broker/dealers in canada and elsewhere regarding possible financing arrangements ; however , we do not currently have any arrangements in place to complete any private placement financings and there is no assurance that we will be successful in completing any such financings . if we are unsuccessful in obtaining sufficient funds through our capital raising efforts , we may review other financing options , although we can not provide any assurance that any such options will be available to us or on terms reasonably acceptable to us . further , if we are unable to secure any additional financing then we plan to reduce the amount that we spend on our operations , including our management-related consulting fees and other general expenses , so as not to exceed the capital resources available to us . regardless , our current cash reserves and working capital may not be sufficient to enable us to sustain our business for the next 12 months , even if we do decide to scale back our operations . critical accounting policies inventory inventory is stated at the lower of cost , computed using the first-in , first-out method , or market . if the cost of inventory exceeds its market value , a provision is made currently for the difference between the cost and market value . our inventory consists of finished goods , components and supplies . equipment , net equipment is stated at cost , net of accumulated depreciation . equipment is depreciated over the estimated useful life of the asset . mould equipment is depreciated at 20 % on a declining-balance basis . the website is depreciated on a straight-line basis over five years . one-half of these rates are used in the year of acquisition . replacements and major improvements are capitalized , while maintenance and repairs are charged to expense as incurred . upon retirement or sale , the cost of assets disposed of and related accumulated depreciation are removed from the accounts , and any resulting gain or loss is credited or charged to operations . intangible assets the patent is recorded at the value attributed to the shares issued to the originating companies and shareholders of tgsi less accumulated amortization . the patent was issued on september 29 , 2009 and is effective until september 29 , 2026. upon expiration , the patent can be extended subject to certain changes required to secure the extension . although the effects of obsolescence , demand , competition and other economic factors ( such as stability of the industry , technological advances and legislative action that results in an uncertain or changing regulatory environment ) can have an adverse effect on the industry and the company 's product , management is not currently aware of any known adverse factors that will affect the company in the future . 21 we do not believe that there are any limits to how long our home mist tanning units can sell in the market place . while we expect to be able to secure an extension to the patent in 2026 , this can not be predicted with certainty at this time . accordingly , management has determined that the best estimate of the useful life of the patent is 17 years . at this time , we do not believe that the patent will have a residual value at the end of its useful life . definite-lived intangible assets are required to be amortized using a method that reflects the pattern in which the economic benefits of the patents are consumed or utilized . at this time , management is not able to determine with any amount of certainty the number of home mist tanning units that will be sold over the useful life of the patent . accordingly , the patent is being amortized on a straight-line basis over the period of its useful life .
| the significant decrease in the cost of materials and supplies was primarily due to a decrease in our manufacturing commitments during the most recently completed fiscal year , which were entered into without regard to sales figures or other specific conditions . expenses during the year ended august 31 , 2013 , we incurred $ 405,358 in total expenses , compared to $ 483,287 in total expenses during the year ended august 31 , 2012. all the expenses incurred during both fiscal years were general and administrative in nature . our expenses during the year ended august 31 , 2013 , consisted of $ 235,597 in management-related consulting fees , $ 32,727 in marketing expenses , $ 67,014 in professional fees , $ 34,916 in office and miscellaneous expenses , $ 19,016 in travel and entertainment expenses , $ 13,200 in rent and $ 2,888 in depreciation . during the prior year , our expenses included $ 226,200 in management-related consulting fees , $ 123,790 in marketing expenses , $ 56,308 in professional fees , $ 50,319 in office and miscellaneous expenses , $ 14,295 in travel and entertainment expenses , $ 6,600 in rent and $ 5,775 in depreciation . apart from the $ 91,093 decrease in our marketing expenses between the two years , which was primarily attributable to our focus on transitioning from a private entity to a public company during the year ended august 31 , 2013 , our expenses were relatively consistent from year-to-year . the significant management-related consulting fees we incurred over both years were paid to several parties , including john marmora , our sole officer and director and sole officer and director of tropic spa , and a number of consultants who provided management-related services to tropic spa . during these periods they were responsible for and performed duties in several areas related to tropic spa 's development , including , among other things , organizing its affairs and resolving various corporate matters ; completing the test
|
thousand in 2018 to $ 84.8 thousand in 2019. this increase in premium values during 2019 was influenced by the mix of loans sold by the company along with the improving strength of market conditions for the purchase of guaranteed loans . compared to 2018 , guaranteed loan sale volume decreased $ 604.8 million , or 64.0 % , while net gains on sales of loans declined $ 46.2 million , or 61.4 % . investment securities available-for-sale increased $ 159.6 million , or 41.9 % , to enhance liquidity options while also improving asset-liability repricing mix and duration . combined net interest income and loan servicing revenue increased by $ 31.0 million , or 22.6 % , to $ 168.1 million in 2019. total nonperforming unguaranteed loans and leases as a percentage of total loans and leases held for investment decreased from 0.79 % at the end of 2018 to 0.68 % at the end of 2019. net charge-offs as a percentage of average held for investment loans and leases , for the years ended december 31 , 2019 and 2018 , were 0.17 % and 0.31 % , respectively . total deposits rose by 34.3 % to $ 4.23 billion at the end of 2019 following successful deposit gathering campaigns to support higher loan retention . income tax expense increased $ 10.8 million , this increase was largely the result of planned reductions in the solar panel leasing activity for 2019 which negatively impacted the annual effective tax rate . reported net income decreased by 64.9 % from 2018 to $ 18.0 million as discussed in the opening to the section titled results of operations . investment in growth continued with the hiring of 11 seasoned sba generalists along with ongoing diversification of lending activities , such as the entry into venture banking by providing financing and banking solutions to early and expansion stage venture-backed companies . business outlook below is a discussion of management 's current expectations regarding company performance over the near-term based on market conditions , the regulatory environment and business strategies as of the time the company filed this report . actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements . see “ important note regarding forward-looking statements ” in this report for more information on forward-looking statements . the company 's results for 2019 demonstrated a continuation of strong underlying financial performance and solid growth momentum . management continues to focus on building recurring revenue streams , promoting change within the financial technology industry , and building out selected existing verticals while adding new verticals to the company 's business model . management anticipates that the company 's held-for-sale and held-for-investment loan portfolios will continue to grow as a result of healthy origination volumes and higher levels of loan retention that are intended to promote long-term recurring revenue and profitability , including the continued pursuit of potential opportunities in conventional lending outside of sba or other government guarantee programs . 39 non-gaap financial measures statements included in this management 's discussion and analysis include non-gaap financial measures and should be read along with the accompanying tables , which provide a reconciliation of non-gaap financial measures to gaap financial measures . the reconciliation of non-gaap measures is presented at the conclusion of this item 7 section . management believes that non-gaap financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the company without regard to certain transactional activities . non-gaap financial measures should not be considered as an alternative to any measure of performance or financial condition as reported under gaap , and investors should consider the company 's performance and financial condition as reported under gaap and all other relevant information when assessing the performance or financial condition of the company . non-gaap financial measures have limitations as analytical tools , and investors should not consider them in isolation or as a substitute for analysis of the company 's results or financial condition as reported under gaap . results of operations years ended december 31 , 2019 vs. 2018 the company reported net income available to common shareholders totaling $ 18.0 million , or $ 0.44 per diluted share , for 2019 compared to $ 51.4 million , or $ 1.24 per diluted share , for 2018. this decrease in net income was primarily attributable to the following items : the strategic shift in the latter part of 2018 to hold substantially more of its eligible-for-sale production on balance sheet resulted in lower net income in the near-term by significantly decreasing net gains on sales of loans by $ 46.2 million , or 61.4 % . the volume of guaranteed loan sales in 2019 declined to $ 340.4 million compared to $ 945.2 million in 2018 ; the provision for loan and lease losses increased $ 6.5 million primarily due to significant portfolio growth combined with an increase in criticized and classified loans and leases ; increased salaries and employee benefits of $ 13.2 million , or 17.1 % largely due to a reversal of $ 4.5 million in accrued incentive compensation in the latter part of 2018 combined with ongoing investment in workforce to support growth and a variety of initiatives ; the flow-through loss from investments accounted for under the equity method totaled $ 7.9 million , largely due to the company 's ownership in apiture , llc , compared to $ 386 thousand for 2018 ; and income tax expense increased $ 10.8 million . this increase was largely the result of planned reductions in the solar panel leasing activity for 2019 which negatively impacted the annual effective tax rate . story_separator_special_tag other key factors partially offsetting the year-over-year decline in net income were composed of the following : increased net interest income of $ 32.0 million , or 29.7 % , predominately driven by significant growth in the combined held for sale and held for investment loan and lease portfolios along with higher investment security holdings ; and negative loan servicing revaluation decreased by $ 14.0 million , or 74.4 % , principally due to improving market conditions , such as increased premiums , for sold loans . years ended december 31 , 2018 vs. 2017 the company reported net income available to common shareholders totaling $ 51.4 million , or $ 1.24 per diluted share , for 2018 compared to $ 100.5 million , or $ 2.65 per diluted share , for 2017. this decrease in net income was primarily attributable to the following items : the decline in noninterest income due to the $ 68.0 million one-time pretax gain arising from the company 's equity method investment in apiture during the fourth quarter of 2017 ; 40 negative loan servicing revaluation increased by $ 5.6 million , or 42.5 % , due to the increased amortization speed of the serviced portfolio which was largely impacted by the rising rate environment and deterioration in premium markets for government guaranteed loans compared to 2017 ; and lower net gains on sales of loans of $ 3.4 million , or 4.4 % , principally driven by current year market conditions that reduced the average gain per million from $ 100.4 thousand in 2017 to $ 80.9 thousand in 2018. this decline in premium values during 2018 influenced the company 's strategic shift during the fourth quarter to hold substantially more production on the balance sheet . other key factors partially offsetting the year-over-year decline in net income were composed of the following : increased net interest income of $ 30.0 million , or 38.5 % , predominately driven by significant growth in the combined held for sale and held for investment loan and lease portfolios along with higher investment security holdings , reflecting the company 's ongoing initiative to grow recurring revenue sources ; increased loan servicing revenue of $ 4.5 million , or 18.4 % , as a result of continued growth in the servicing portfolio due to ongoing loan sales ; increased lease income of $ 6.1 million , or 329.2 % , due to business diversification and increased lease originations ; and decreased costs to retain and operate the title insurance business , net of income earned , that was exited in the third quarter of 2018. net interest income and margin net interest income represents the difference between the revenue that the company earns on interest-earning assets and the cost of interest-bearing liabilities . the company 's net interest income depends upon the volume of interest-earning assets and interest-bearing liabilities and the interest rates that the company earns or pays on them , respectively . net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities , referred to as “ volume changes. ” it is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing deposits and other borrowed funds , referred to as “ rate changes. ” as a bank without a branch network , the bank gathers deposits over the internet and in the community in which it is headquartered . due to the nature of a branchless bank and the relatively low overhead required for deposit gathering , the rates the bank offers are generally above the industry average . years ended december 31 , 2019 vs. 2018 for 2019 , net interest income increased $ 32.0 million , or 29.7 % , to $ 140.1 million compared to $ 108.0 million in 2018. this increase was principally due to the significant growth in the combined held for sale and held for investment loan and lease portfolios along with higher investment security holdings reflecting the company 's ongoing initiative to grow recurring revenue sources and fortify its liquidity profile . average interest earning assets rose by $ 853.7 million , or 28.6 % , to $ 3.83 billion for 2019 compared to $ 2.98 billion for 2018 , while the yield on average interest earning assets rose by 49 basis points to 5.95 % for 2019 versus 5.46 % for 2018. a substantial portion of the company 's loan portfolio are variable rate loans that adjust regularly in accordance with changes in designated benchmark indices . the cost of funds on interest bearing liabilities for 2019 increased 46 basis points to 2.38 % , and the average balance in interest bearing liabilities increased by $ 843.1 million , or 29.7 % during the same period . as indicated in the rate/volume table below , the increase in interest bearing liabilities and corresponding cost of funds was outpaced by the positive effects of the increased volume of interest earning assets , resulting in increased interest income of $ 65.3 million versus increased interest expense of $ 33.4 million for 2019. for 2019 compared to 2018 , net interest margin increased from 3.62 % to 3.65 % . this increase in margin for the year was largely impacted by the cumulative impact of federal reserve rate cuts in the latter part of 2019 that favorably impacted deposit rates combined with the delayed repricing timing of the company 's variable rate loans . 41 years ended december 31 , 2018 vs. 2017 for 2018 , net interest income increased $ 30.0 million , or 38.5 % , to $ 108.0 million compared to $ 78.0 million in 2017. this increase was principally due to the significant growth in average interest earning assets and , to a lesser extent , by higher yields on these assets which outpaced the growth and change in the cost of interest-bearing liabilities .
| the company began enhancing its investment securities position early in 2019 as part of its strategy to improve the returns of an enhanced liquidity profile and improve asset-liability repricing mix . at december 31 , 2019 , the investment portfolio was comprised of us treasury and government agency securities , mortgage-backed securities and municipal bonds . loans held for sale increased $ 279.1 million , or 40.6 % , during 2019 , from $ 687.4 million at december 31 , 2018 to $ 966.4 million at december 31 , 2019. this increase reflected the impact of a significantly lower volume of loan sales combined with strong origination activity during 2019. loans and leases held for investment increased $ 803.9 million , or 43.6 % , during 2019 , from $ 1.84 billion at december 31 , 2018 to $ 2.65 billion at december 31 , 2019. the increase was primarily the result of $ 2.00 billion in loan and lease origination activities during 2019 combined with the late 2018 strategic shift to retain higher levels of loans on the balance sheet . premises and equipment increased $ 16.6 million , or 6.3 % , during 2019 , from $ 262.5 million at december 31 , 2018 to $ 279.1 million at december 31 , 2019. this increase was primarily driven by construction of new facilities and infrastructure to accommodate company growth . foreclosed assets increased $ 4.5 million , or 413.0 % , during 2019 from $ 1.1 million at december 31 , 2018 to $ 5.6 million at december 31 , 2019. the increase in foreclosed assets arose primarily from four relationships . the underlying loans were subject to an sba guarantee and the total current estimated exposure to the company is considered negligible for these more recent foreclosures . 50 servicing assets decreased $ 12.3 million , or 25.8 % , during 201 9 from $ 47.6 million at december 31 , 201 8 to $ 35.4 million at december 31 , 201 9 due to the reduced
|
we offer our customers the ability to either create the secret numbers themselves or have us create the numbers on their behalf . when asked to create the numbers , we do so in a secure environment with limited physical access and store the numbers on a system that is not connected to any other network , including other onespan networks , and similarly , is not connected to the internet . 31 in the case of our cloud-based solutions , which involve the processing of customer information , we believe a cyber-incident could have a material impact on our business . while our revenue from cloud-based solutions comprises a minority of our revenue today , we believe that these solutions will provide substantial future growth . a cyber incident involving these solutions in the future could substantially impair our ability to grow the business and we could suffer significant monetary and other losses and significant reputational harm . to minimize the risk , we review our product security and procedures on a regular basis . our reviews include the processes and software code we are currently using as well as the hosting platforms and procedures that we employ . we mitigate the risk of cyber incidents through a series of reviews , tests , tools and training . certain insurance coverages may apply to certain cyber incidents . overall , we expect the cost of securing our networks will increase in future periods , whether through increased staff , systems or insurance coverage . while we did not experience any cyber incident in 2018 , 2017 , or 2016 that had a significant impact on our business , it is possible that we could experience an incident in 2019 or future years , which could result in unanticipated costs . currency fluctuations in 2018 , approximately 74 % of our revenue and approximately 79 % of our operating expenses were generated/incurred outside of the u.s. in 2017 , approximately 72 % of our revenue and approximately 76 % of our operating expenses were generated/incurred outside of the u.s. while the majority of our revenue is generated outside of the u.s. , the majority of our revenue is billed in u.s. dollars . in 2018 , approximately 61 % of our revenue was denominated in u.s. dollars , 34 % was denominated in euros and 5 % was denominated in other currencies . in 2017 , approximately 66 % of our revenue was denominated in u.s. dollars , 29 % was denominated in euros , and 5 % was denominated in other currencies . in general , to minimize the net impact of currency fluctuations on operating income , we attempt to denominate an amount of billings in a currency such that it would provide a hedge against the operating expenses being incurred in that currency . we expect that changes in currency rates may also impact our future results if we are unable to match amounts of revenue with our operating expenses in the same currency . if the amount of our revenue in europe denominated in euros continues as it is now or declines , we may not be able to balance fully the exposures of currency exchange rates on revenue and operating expenses . the financial position and the results of operations of our foreign subsidiaries , with the exception of our subsidiaries in switzerland , singapore and canada , are measured using the local currency as the functional currency . accordingly , assets and liabilities are translated into u.s. dollars using current exchange rates as of the balance sheet date . revenues and expenses are translated at average exchange rates prevailing during the year . translation adjustments arising from differences in exchange rates generated a comprehensive loss of $ 5.5 million in 2018 , comprehensive income of $ 4.0 million in 2017 and comprehensive loss of $ 2.5 million in 2016. these amounts are included as a separate component of stockholders ' equity . the functional currency of our subsidiaries in singapore , switzerland , and certain operations in canada are measured in u.s. dollars . gains and losses resulting from foreign currency transactions are included in the consolidated statements of operations as other non-operating income/expense . we reported foreign exchange transaction losses of $ 0.2 million and $ 0.5 million in 2018 and 2017 , respectively , and foreign exchange transaction gains of $ 0.1 million in 2016 . 32 components of operating results revenue we generate revenue from the sale of our hardware products , software licenses , subscriptions , and services . we believe comparison of revenues between periods is heavily influenced by the timing of orders and shipments reflecting the transactional nature of our business . · product and license revenue . product and license revenue includes hardware products and software licenses . · service and other revenue . service and other revenue includes software as a service ( “ saas ” ) solutions , maintenance and support , and professional services . cost of goods sold our total cost of goods sold consists of cost of product and license revenue and cost of service and other revenue . we expect our cost of goods sold to increase in absolute dollars as our business grows , although it may fluctuate as a percentage of total revenue from period to period . · cost of product and license revenue . cost of product and license revenue primarily consists of direct product costs . · cost of service and other revenue . cost of service and other revenue primarily consists of costs related to saas solutions , including personnel and equipment costs , and personnel costs of employees providing professional services and maintenance and support . gross profit gross profit as a percentage of total revenue , or gross margin , has been and will continue to be affected by a variety of factors , including our average selling price , manufacturing costs , the mix of products sold , and the mix of revenue among products , subscriptions and services . story_separator_special_tag we expect our gross margins to fluctuate over time depending on these factors . operating expenses our operating expenses are generally based on anticipated revenue levels and fixed over short periods of time . as a result , small variations in revenue may cause significant variations in the period-to-period comparisons of operating income or operating income as a percentage of revenue . generally , the most significant factor driving our operating expenses is headcount . direct compensation and benefit plan expenses generally represent between 55 % and 60 % of our operating expenses . in addition , a number of other expense categories are directly related to headcount . we attempt to manage our headcount within the context of the economic environments in which we operate and the investments we believe we need to make for our infrastructure to support future growth and for our products to remain competitive . in may 2018 , with the acquisition of dealflo , our headcount increased by 71. average headcount for the full-year 2018 , 2017 , and 2016 was 685 , 614 , and 595 , respectively . historically , operating expenses have been impacted by changes in foreign exchange rates . we estimate the change in currency rates in 2018 compared to 2017 resulted in an increase in operating expenses of approximately $ 0.3 million in 2018 . 33 the comparison of operating expenses can also be impacted significantly by costs related to our stock-based and long-term incentive plans . for full-year 2018 , 2017 , and 2016 , operating expenses included $ 6.1 million , $ 5.4 million , and $ 4.9 million , respectively , related to stock-based and long-term incentive plans . long-term incentive plan compensation expense includes both cash and stock-based incentives . · sales and marketing . sales and marketing expenses consist primarily of personnel costs , commissions and bonuses , trade shows , marketing programs and other marketing activities , travel , outside consulting costs , and long-term incentive compensation . we expect sales and marketing expenses to increase in absolute dollars as we continue to invest in sales resources in key focus areas , although our sales and marketing expenses may fluctuate as a percentage of total revenue . · research and development . research and development expenses consist primarily of personnel costs and long-term incentive compensation . we expect research and development expenses to increase in absolute dollars as we continue to invest in our future solutions , although our research and development expenses may fluctuate as a percentage of total revenue . · general and administrative . general and administrative expenses consist primarily of personnel costs , legal and other professional fees , and long-term incentive compensation . we expect general and administrative expenses to increase in absolute dollars although our general and administrative expenses may fluctuate as a percentage of total revenue . · amortization/impairment of intangible assets . acquired intangible assets are amortized over their respective amortization periods . as a result of the company rebranding , the value of certain intangible assets was written down during 2018 , and impairment charges of $ 0.5 million were recorded for the year ended december 31 , 2018. interest income , net interest income consists of income earned on our cash equivalents and short term investments . our cash equivalents and short term investments are invested in short-term instruments at current market rates . other income , net other income , net primarily includes exchange gains ( losses ) on transactions that are denominated in currencies other than our subsidiaries ' functional currencies , subsidies received from foreign governments in support of our research and development in those countries and other miscellaneous non-operational expenses . income taxes our effective tax rate reflects our global structure related to the ownership of our intellectual property ( “ ip ” ) . all our ip in our traditional authentication business is owned by two subsidiaries , one in the u.s. and one in switzerland . these two subsidiaries have entered into agreements with most of the other onespan entities under which those other entities provide services to our u.s. and swiss subsidiaries on either a percentage of revenue or on a cost plus basis or both . under this structure , the earnings of our service provider subsidiaries are relatively constant . these service provider companies tend to be in jurisdictions with higher effective tax rates . fluctuations in earnings tend to flow to the u.s. company and swiss company . in 2018 , earnings flowing to the u.s. company are expected to be taxed at a rate of 21 % to 25 % , while earnings flowing to the swiss company are expected to be taxed at a rate ranging from 11 % to 12 % . our canadian subsidiary currently sells and services global customers directly , as does a uk subsidiary . as the majority of our revenues are generated outside of the u.s. , our consolidated effective tax rate is strongly influenced by the effective tax rate of our foreign operations . changes in the effective rate related to foreign operations reflect changes in the geographic mix of earnings and the tax rates in each of the countries in which it is earned . the statutory tax rate for the primary foreign tax jurisdictions ranges from 11 % to 35 % . 34 the geographic mix of earnings of our foreign subsidiaries primarily depends on the level of pretax income of our service provider subsidiaries and the benefit realized in switzerland through the sales of product . the level of pretax income in our service provider subsidiaries is expected to vary based on : 1. the staff , programs and services offered on a yearly basis by the various subsidiaries as determined by management , or 2. the changes in exchange rates related to the currencies in the service provider subsidiaries , or 3. the amount of revenues that the service provider subsidiaries generate .
| revenue generated in the asia pacific region increased $ 6.6 million , or 14 % during the year ended december 31 , 2018. the increase in revenue was primarily due to an increase in software license revenue . cost of goods sold and gross margin replace_table_token_4_th 36 the cost of product and license revenue increased $ 2.4 million , or 5 % during the year ended december 31 , 2018 compared to the year ended december 31 , 2017. the increase in cost of product and license revenue was primarily driven by an increase in token costs . the cost of services and other revenue increased $ 3.7 million , or 35 % , during the year ended december 31 , 2018 compared to the year ended december 31 , 2017. the increase in cost of services and other revenue was primarily due to increased services and other revenues and increased saas hosting fees . increased software costs from dealflo contributed $ 1.0 million of the increase . gross profit increased $ 13.0 million , or 10 % , during the year ended december 31 , 2018 compared to the year ended december 31 , 2017. gross margin was 69 % for the year ended december 31 , 2018 and 70 % for the year ended december 31 , 2017. the decrease in profit margin was driven by lower services and other margins . the majority of our inventory purchases are denominated in u.s. dollars . our sales are denominated in various currencies including the euro . as the u.s. dollar strengthened against the euro for the year ended december 31 , 2018 compared to the same period of 2017 , revenue from sales made in euros decreased , as measured in us dollars , without a corresponding change in the cost of goods sold . the impact of changes in currency rates are estimated to have decreased revenue by approximately $ 4.1 million for the year ended december 31 , 2018. had currency rates in 2018
|
given that we own 100 % of brightcove kk , we will continue to consolidate brightcove kk for financial reporting purposes , however , commencing on january 8 , 2013 , we no longer record a non-controlling interest in the consolidated statements of operations . 27 on january 31 , 2014 , we acquired substantially all of the assets of unicorn media , inc. and certain of its subsidiaries , or unicorn , a provider of cloud video ad insertion technology , for total consideration of approximately $ 39.7 million , which was funded by cash on hand of $ 9.1 million and 2,850,547 shares of our common stock . the results of operations of unicorn have been consolidated with our results of operations beginning on january 31 , 2014 , the closing date of the transaction . key metrics we regularly review a number of metrics , including the following key metrics , to evaluate our business , measure our performance , identify trends affecting our business , formulate financial projections and make strategic decisions . number of customers . we define our number of customers at the end of a particular quarter as the number of customers generating subscription revenue at the end of the quarter . we believe the number of customers is a key indicator of our market penetration , the productivity of our sales organization and the value that our products bring to our customers . we classify our customers by including them in either premium or volume offerings . our premium offerings include our premium video cloud customers ( enterprise and pro editions ) , our once customers , our zencoder customers , our gallery customers , our perform customers and our video marketing suite customers who are on annual contracts . our volume offerings include our video cloud express customers and our zencoder customers on month-to-month and pay-as-you-go contracts . as of december 31 , 2014 , we had 5,770 customers , of which 3,907 used our volume offerings and 1,863 used our premium offerings . as of december 31 , 2013 , we had 6,318 customers , of which 4,556 used our volume offerings and 1,762 used our premium offerings . during 2013 , we shifted our go-to-market focus and growth strategy to growing our premium customer base , as we believe our premium customers represent a greater opportunity for our solutions . volume customers decreased during 2014 primarily due to our discontinuation of the promotional video cloud express offering . as a result , we experienced attrition of this base level offering without a corresponding addition of customers . we expect customers using our volume offerings to continue to decrease in 2015 as we continue to focus on the market for our premium solutions and adjust video cloud express price levels . average monthly streams . we define average monthly streams as the year-to-date average number of monthly stream starts on video cloud and other products . we believe the average number of monthly streams is an indicator of both the adoption of video cloud as an online video platform and the growth of video content across the internet , but we do not believe it continues to be a good measure of our performance and therefore will not be identified as a key metric in the future . during the year ended december 31 , 2014 , the average number of monthly streams was approximately 1.5 billion , an increase of 56 % from approximately 963 million during the year ended december 31 , 2013. recurring dollar retention rate . we assess our ability to retain customers using a metric we refer to as our recurring dollar retention rate . we calculate the recurring dollar retention rate by dividing the retained recurring value of subscription revenue for a period by the previous recurring value of subscription revenue for the same period . we define retained recurring value of subscription revenue as the committed subscription fees for all contracts that renew in a given period , including any increase or decrease in contract value . we define previous recurring value of subscription revenue as the recurring value from committed subscription fees for all contracts that expire in that same period . we typically calculate our recurring dollar retention rate on a monthly basis . recurring dollar retention rate provides visibility into our ongoing revenue . during the years ended december 31 , 2014 and 2013 , the recurring dollar retention rate was 93 % and 94 % , respectively . average annual subscription revenue per premium customer . we define average annual subscription revenue per premium customer as the total subscription revenue from premium customers for an annual period , excluding professional services revenue , divided by the average number of premium customers for that period . we believe that this metric is important in understanding subscription revenue for our premium offerings in addition to the relative size of premium customer arrangements . the following table includes our key metrics for the periods presented : replace_table_token_6_th 28 components of consolidated statements of operations revenue subscription and support revenue — we generate subscription and support revenue from the sale of our products . video cloud is offered in two product lines . the first product line is comprised of our premium product editions , pro and enterprise . all pro and enterprise editions include functionality to publish and distribute video to internet-connected devices . the enterprise edition provides additional features and functionality such as a multi-account environment with consolidated billing , ip address filtering , the ability to produce live events with dvr functionality and advanced upload acceleration of content . customer arrangements are typically one year contracts , which include a subscription to video cloud , basic support and a pre-determined amount of video streams , bandwidth , and managed content . we also offer gold support to our premium customers for an additional fee , which includes extended phone support . story_separator_special_tag the pricing for our premium editions is based on the number of users , accounts and usage , which is comprised of video streams , bandwidth and managed content . should a customer 's usage exceed the contractual entitlements , the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements . the second product line is comprised of our volume product edition , which we refer to as our express edition . our express edition targets small and medium-sized businesses , or smbs . the express edition provides customers with the same basic functionality that is offered in our premium product editions but has been designed for customers who have lower usage requirements and do not typically seek advanced features and functionality . we are discontinuing the lower level pricing options for the express edition and expect the total number of customers using the express edition to continue to decrease . customers who purchase the express edition generally enter into month-to-month agreements . express customers are generally billed on a monthly basis and pay via a credit card . zencoder is offered to customers on a subscription basis , with either committed contracts or pay-as-you-go contracts . the pricing is based on usage , which is comprised of minutes of video processed . the committed contracts include a fixed number of minutes of video processed . should a customer 's usage exceed the contractual entitlements , the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements . customers of zencoder on annual contracts are considered premium customers . customers on month-to-month contracts , pay-as-you-go contracts , or contracts for a period of less than one year , are considered volume customers . once is offered to customers on a subscription basis , with varying levels of functionality , usage entitlements and support based on the size and complexity of a customer 's needs . gallery is offered to customers of our premium video cloud editions on a subscription basis . a customer 's usage of gallery counts against the pre-determined amount of video streams , bandwidth and managed content included with their video cloud pro or enterprise contract . should a customer 's usage exceed the contractual entitlements , the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements . we also offer gold support to our gallery customers for an additional fee , which includes extended phone support . perform is offered to customers on a subscription basis . customer arrangements are typically one year contracts , which include a subscription to perform , basic support and a pre-determined amount of video streams . we also offer gold support to our perform customers for an additional fee , which includes extended phone support . the pricing for perform is based on the number of users , accounts and usage , which is comprised of video streams . should a customer 's usage exceed the contractual entitlements , the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements . video marketing suite is offered to customers on a subscription basis . customer arrangements are typically one year contracts , which include a subscription to video cloud , the video cloud live module , gallery , basic support and a pre-determined amount of video streams or plays , bandwidth and managed content . we also offer gold support to our video marketing suite customers for an additional fee , which includes extended phone support . the pricing for video marketing suite is based on the number of users , accounts and usage , which is comprised of video streams or plays , bandwidth and managed content . should a customer 's usage exceed the contractual entitlements , the contract will provide the rate at which the customer must pay for actual usage above the contractual entitlements . all once , gallery , perform and video marketing suite customers are considered premium customers . professional services and other revenue — professional services and other revenue consists of services such as implementation , software customizations and project management for customers who subscribe to our premium editions . these arrangements are priced either on a fixed fee basis with a portion due upon contract signing and the remainder due when the related services have been completed , or on a time and materials basis . our backlog consists of the total future value of our committed customer contracts , whether billed or unbilled . as of december 31 , 2014 , we had backlog of approximately $ 68 million compared to backlog of approximately $ 59 million as of december 31 , 2013. of the approximately $ 68 million in backlog as of december 31 , 2014 , between $ 61 million and $ 63 million is expected to be recognized as revenue during the year ended december 31 , 2015. because revenue for any period is a function of revenue recognized from backlog at the beginning of the period as well as from contract renewals and new customer contracts executed during the period , backlog at the beginning of any period is not necessarily indicative of future performance . our presentation of backlog may differ from that of other companies in our industry . 29 cost of revenue cost of subscription , support and professional services revenue primarily consists of costs related to supporting and hosting our product offerings and delivering our professional services . these costs include salaries , benefits , incentive compensation and stock-based compensation expense related to the management of our data centers , our customer support team and our professional services staff . in addition to these expenses , we incur third-party service provider costs such as data center and content delivery network , or cdn , expenses , allocated overhead , depreciation expense and amortization of capitalized internal-use software development costs and acquired intangible assets .
| loss from operations in 2013 included stock-based compensation expense , amortization of acquired intangible assets and merger-related expenses of $ 6.4 million , $ 1.7 million and $ 2.1 million , respectively . over time we expect to reduce our loss from operations increasing sales to both new and existing customers and from improved efficiencies throughout our organization as we continue to grow and scale our operations . as of december 31 , 2014 , we had $ 22.9 million of unrestricted cash and cash equivalents , a decrease of $ 10.1 million from $ 33.0 million at december 31 , 2013 , due primarily to $ 9.1 million of net cash paid as part of the unicorn acquisition , and $ 3.5 million in capital expenditures , which was offset in part by $ 3.1 million in maturities of investments . revenue replace_table_token_9_th 35 during 2014 , revenue increased by $ 15.1 million , or 14 % , compared to 2013 , primarily due to an increase in revenue from our premium offerings , which consist of subscription and support revenue , as well as professional services and other revenue , and a $ 6.5 million contribution of revenue from the acquisition of unicorn . the increase in premium revenue of $ 15.3 million , or 15 % , compared to 2013 , is partially the result of a 6 % increase in the number of premium customers from 1,762 at december 31 , 2013 to 1,863 at december 31 , 2014 , a 7 % increase in the average annual subscription revenue per premium customer during the year ended december 31 , 2014 and the contribution of revenue from the acquisition of unicorn . during 2014 , volume revenue decreased by $ 213,000 , or 2 % , compared to 2013 , due primarily to the discontinuation of entry-level video cloud express offerings . replace_table_token_10_th during 2014 , subscription and support revenue increased by $ 17.2 million , or 17 % , compared to 2013. the increase was primarily related to continued growth of our customer base for our premium offerings , including sales
|
all financial information presented after the spin-off represents the consolidated results of operations , financial position and cash flows of civeo . accordingly : ● our consolidated statements of operations , comprehensive income ( loss ) , cash flows and changes in shareholders ' equity / net investment for the years ended december 31 , 2016 and 2015 consist entirely of the consolidated results of civeo . ● our consolidated statements of operations , comprehensive income ( loss ) , cash flows and changes in shareholders ' equity / net investment for the year ended december 31 , 2014 consist of ( i ) the combined results of the oil states ' accommodations business for the five months ended may 30 , 2014 and ( ii ) the consolidated results of civeo for the seven months ended december 31 , 2014 . ● our consolidated balance sheets at december 31 , 2016 and december 31 , 2015 consist entirely of the consolidated balances of civeo . the assets and liabilities in our consolidated financial statements have been reflected on a historical basis , as immediately prior to the spin-off all of the assets and liabilities presented were wholly owned by oil states and were transferred within the oil states consolidated group . all intercompany transactions and accounts have been eliminated . all affiliate transactions between civeo and oil states have been included in these consolidated financial statements . the consolidated financial statements for periods prior to the spin-off included expense allocations for : ( 1 ) certain corporate functions historically provided by oil states , including , but not limited to finance , legal , risk management , tax , treasury , information technology , human resources , and certain other shared services , ( 2 ) certain employee benefits and incentives and ( 3 ) equity-based compensation . these expenses were allocated to us on the basis of direct usage when identifiable , with the remainder allocated based on estimated time spent by oil states personnel , a pro-rata basis of headcount or other relevant measures of oil states and its subsidiaries . we consider the basis on which the expenses were allocated to be a reasonable reflection of the utilization of services provided to or the benefit received by us during the periods presented . the allocations may not , however , reflect the expense we would have incurred as an independent , publicly traded company for the periods presented . actual costs that may have been incurred if we had been a stand-alone company would depend on a number of factors , including the chosen organizational structure , which functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure . following the spin-off , we perform these functions using our own resources or purchase external services . until february 28 , 2015 , however , some of these functions were provided by oil states under a transition services agreement . please see note 17 – related party transactions to the notes to consolidated financial statements in item 8 of this annual report . 54 macroeconomic environment we provide workforce accommodations to the natural resource industry in canada , australia and the u.s. demand for our services can be attributed to two phases of our customers ' projects : ( 1 ) the development or construction phase and ( 2 ) the operations or production phase . initial demand for our services is driven by our customers ' capital spending programs related to the construction and development of oil sands and coal mines and associated infrastructure as well as the exploration for oil and natural gas . long-term demand for our services is driven by continued development and expansion of natural resource production and operation of oil sands and mining facilities . industry capital spending programs are generally based on the outlook for commodity prices , economic growth and estimates of resource production . as a result , demand for our products and services is largely sensitive to expected commodity prices , principally related to crude oil , metallurgical ( met ) coal and natural gas . in canada , western canadian select ( wcs ) crude is the benchmark price for our oil sands accommodations customers . pricing for wcs is driven by several factors , including the underlying price for west texas intermediate ( wti ) crude and the availability of transportation infrastructure . historically , wcs has traded at a discount to wti , creating a “ wcs differential , ” due to transportation costs and limited capacity to move canadian heavy oil production to refineries , primarily in the u.s. gulf coast . the wcs differential has varied depending on the extent of transportation capacity availability . during the first quarter of 2016 , global oil prices dropped to their lowest level in over ten years due to concerns over global oil demand , global crude inventory levels , worldwide economic growth and price cutting by major oil producing countries , such as saudi arabia . increasing global supply , including increased u.s. shale oil production , also negatively impacted pricing . with falling brent crude and wti oil prices , wcs also fell . prices began to increase in march 2016 , and have continued to increase in the first quarter of 2017. wcs prices in the fourth quarter of 2016 averaged $ 34.34 per barrel compared to a low of $ 20.26 in the first quarter of 2016 and a high of $ 83.78 in the second quarter of 2014. the wcs differential increased from $ 13.25 per barrel at the end of the fourth quarter of 2015 to $ 16.10 per barrel at the end of the fourth quarter of 2016. as of february 20 , 2017 , the wti price was $ 53.40 and the wcs price was $ 39.78 , resulting in a wcs differential of $ 13.62. there remains a risk that prices for canadian oil sands crude oil related products could deteriorate or remain at current depressed levels for an extended story_separator_special_tag period of time , and the discount between wcs crude prices and wti crude prices could widen . the depressed price levels through the first quarter of 2016 negatively impacted exploration , development , maintenance and production spending and activity by canadian operators and , therefore , demand for our services in late 2014 , 2015 and 2016. our canadian oil sands customers could continue to delay maintenance spending and additional investments in their oil sands assets as well . in australia , approximately 80 % of our rooms are located in the bowen basin and primarily serve met coal mines in that region . met coal pricing and growth in production in the bowen basin region is predominantly influenced by the levels of global steel production , which increased by 0.7 % during 2016 compared to 2015. as of february 20 , 2017 , contract met coal prices were approximately $ 285 per metric tonne , significantly higher than the september 2016 contract price of $ 92.50 per metric tonne , due to supply side factors that have restricted met coal volumes . despite the increase , we have not yet seen a significant impact on customers ' willingness to increase activity . we expect that spot prices for met coal will need to be sustained at levels above $ 150 per metric tonne for at least nine to twelve months before we see an impact on customer activity levels , and therefore , the demand for accommodations . long-term demand for steel will be driven by increased steel consumption per capita in developing economies , such as china and india , whose current consumption per capita is a fraction of developed countries . our customers continue to actively implement cost , productivity and efficiency measures to drive down their cost base . natural gas and wti crude oil prices , discussed above , have an impact on the demand for our u.s. accommodations business . with limited export capabilities , u.s. natural gas prices are primarily influenced by domestic supply/demand dynamics and resultant inventory levels . u.s. natural gas production has continued to outpace demand , which has caused prices to continue to be weak relative to historical prices over the past decade . u.s. natural gas inventory levels at december 31 , 2016 were 3.31 tcf , 12 % lower than inventory levels from december 31 , 2015 and 1 % under seasonally comparable average inventory levels over the past five years . prices for natural gas in the u.s. averaged $ 2.55 per mcf in 2016 , a 3 % decrease from the average price in 2015. although the prices have increased slightly in the fourth quarter of 2016 and into 2017 , at these levels , it is uneconomic to increase development in several domestic , gas-focused basins . if natural gas production growth continues to surpass demand in the u.s. and or the supply of natural gas were to increase , whether the supply comes from conventional or unconventional production or associated natural gas production from oil wells , prices for natural gas could be constrained for an extended period and result in fewer rigs drilling for natural gas in the near-term . 55 recent wti crude , wcs crude , met coal and natural gas pricing trends are as follows : replace_table_token_9_th ( 1 ) source : wti crude and natural gas prices are from u.s. energy information administration ( eia ) , and wcs crude prices and seaborne hard coking coal contract prices are from bloomberg . overview as noted above , demand for our services is primarily tied to the outlook for crude oil and met coal prices . other factors that can affect our business and financial results include the general global economic environment and regulatory changes in canada , australia , the u.s. and other markets . our business is predominantly located in northern alberta , canada and queensland , australia , and we derive most of our business from resource companies who are developing and producing oil sands and met coal resources and , to a lesser extent , other hydrocarbon and mineral resources . more than three-fourths of our revenue is generated by our large-scale lodge and village facilities . where traditional accommodations and infrastructure are insufficient , inaccessible or cost ineffective , our lodge and village facilities provide comprehensive accommodations services similar to those found in an urban hotel . we typically contract our facilities to our customers on a fee per day basis that covers lodging and meals and that is based on the duration of their needs which can range from several weeks to several years . generally , our customers are making multi-billion dollar investments to develop their prospects , which have estimated reserve lives ranging from ten years to in excess of thirty years . consequently , these investments are dependent on those customers ' longer-term view of commodity demand and prices . in response to decreases in crude oil prices beginning in late 2014 , many of our customers in canada curtailed their operations and spending , and most major oil sands mining operators are continuing to seek to reduce their costs and limit capital spending , accordingly limiting the demand for accommodations like we provide . in australia , approximately 80 % of our rooms are located in the bowen basin and primarily serve met coal mines in that region where our customers continue to actively implement cost productivity and efficiency measures to drive down their cost base . 56 in recent months , however , several catalysts have emerged that we believe could have favorable intermediate to long-term implications for our core end markets .
| as further discussed below , net loss included the following items : ● a $ 202.7 million pre-tax loss ( $ 201.2 million after-tax , or $ 1.89 per diluted share ) from goodwill impairments , included in impairment expense below ; ● a $ 75.6 million pre-tax loss ( $ 50.9 million after-tax , or $ 0.48 per diluted share ) from fixed asset impairments , included in impairment expense below ; ● a $ 34.9 million tax expense ( $ 0.33 per diluted share ) from the establishment of a deferred tax liability related to a portion of our undistributed foreign earnings which we no longer intend to indefinitely reinvest and a valuation allowance related to deferred tax assets related to capital losses that are not expected to be realized , included in income tax provision below ; ● a $ 12.2 million pre-tax loss ( $ 8.4 million after-tax , or $ 0.08 per diluted share ) from intangible asset impairments , included in impairment expense below , ● a $ 7.8 million pre-tax loss ( $ 5.1 million after-tax , or $ 0.05 per diluted share ) from transition costs and debt extinguishment costs incurred in connection with the spin-off from oil states , included spin-off and formation costs and interest expense below ; ● a $ 4.1 million pre-tax loss ( $ 3.1 million after-tax , or $ 0.03 per diluted share ) from severance costs associated with the termination of an executive , included in sg & a expenses below ; and ● a $ 2.6 million pre-tax loss ( $ 1.7 million after-tax , or $ 0.02 per diluted share ) from costs associated with the proposed migration to canada , included in sg & a expenses below . revenues . consolidated revenues decreased $ 424.9 million , or 45 % , in 2015 compared to 2014. this decline was largely driven by decreases in canada and australia , due to lower occupancy , as well as weakening canadian and australian dollars . please see further description in the segment discussion below . cost of sales and services . our consolidated cost of sales decreased $ 217.3 million , or 40 % , in 2015 compared to 2014 primarily due to decreases in occupancy in both canada and australia , as well as the weakening canadian and australian dollars . please see further description in the segment discussion below . selling , general and administrative expenses . sg & a expense decreased $ 1.9 million , or 3 % , in 2015 compared to 2014. increased costs associated with being a publicly traded company for a full year and costs associated with the redomicile transaction
|
nevertheless , we are encouraged by the u.s. congress ' return to near regular order and the passing of the defense appropriations bill and approximately 75 % of other discretionary funding for fy19 with the remainder of appropriations placed under a short-term cr to avoid a full or partial government shutdown . the bipartisan , bicameral joint select committee on budget and appropriations process reform is currently looking for solutions to make the process more efficient . the president 's administration and congress will likely continue to debate the size and expected growth of the u.s. federal budget as well as the defense budget over the next few years and balance decisions regarding defense , homeland security , and other federal spending priorities in a constrained fiscal environment imposed by the budget control act ( bca ) and various bipartisan budget acts ( bba ) since 2011. budgetary considerations have put downward pressure on growth in the defense industry from 2011-2017 but under the bba of 2018 , defense budgets in 2018 and 2019 have shown significant increases from previous years . we believe that much of our business is well positioned in areas that the dod has indicated are areas of focus for future increased defense spending to help the dod meet its critical future capability requirements for protecting u.s. security and the security of our allies in the years to come . regarding international markets , global defense expenditures were again on the rise in 2018 reaching its highest level since the end of the cold war at approximately $ 1.67 trillion in 2018. defense spending increased by approximately 3.3 % in 2018 - the fastest rate of growth in a decade - driven by the largest year-on-year increase in u.s. defense spending since 2008. the increase in defense spending reflects improved economic conditions coupled with continuing instability in a number of key regions . in transportation , we continue to believe that our products and services are critical to our customers to ensure that they maximize revenue and efficiencies in a resource constrained environment . some customers have responded to the current market environment by seeking financing for their projects from the system supplier or from other sources . an example of this is our contract with the massachusetts bay transit authority ( mbta ) , which was awarded in early 2018 to develop , build , operate , and maintain a next-generation fare payment system in boston . under this contract , the mbta required that we and a financing partner , john laing , establish a public-private partnership ( p3 ) in order to finance the design and build phase of the payment system . mbta does not begin making payments until the ten-year operate and maintain phase of the contract , which will span from 2021 through 2031. while future defense plans , changes in defense spending levels and changes in spending for transportation projects could have a materially adverse effect on our consolidated financial position , we have and plan to continue to make strategic investments and acquisitions to align our businesses in growth areas of our respective markets that we believe are the most critical priorities and mission areas for our customers . 43 segment overview cubic transportation systems cts is a systems integrator of payment and information technology and services for intelligent travel solutions . we deliver integrated systems for transportation and traffic management , delivering tools for travelers to choose the smartest and easiest way to travel and pay for their journeys , and enabling transportation authorities and agencies to manage demand across the entire transportation network — all in real time . we offer fare collection and revenue management devices , software , systems and multiagency , multimodal integration technologies , as well as a full suite of operational services that help agencies and operators efficiently collect fares and revenue , manage operations , reduce revenue leakage and make transportation more convenient . through our nextbus and intelligent transport management solutions ( itms ) businesses , respectively , we also deliver real-time passenger information systems for tracking and predicting vehicle arrival times and we are a leading provider of urban and inter-urban intelligent transportation and enforcement solutions and technology and infrastructure maintenance services to the united kingdom and other international city , regional and national road and transportation agencies . the transportation markets we serve are undergoing a substantial change . pressure on transportation authorities to improve the customer experience while stretching their operating budgets is fueling a trend toward outsourced services and systems that enable innovation and lower operating cost . we believe we are positioned at the forefront of this change . we believe that we hold the leading market position in large-scale automated fare payment and revenue management systems and services for major metropolitan areas . we have implemented and , in many cases , operate , automated fare payment and revenue management systems for some of the world 's largest transportation systems ; examples include london ( oyster/contactless payment ) , the new york region ( metrocard ) , the chicago region ( ventra ) , the san francisco bay area ( clipper ) , the los angeles region ( tap ) , the washington d.c. region ( smartrip ) , the vancouver region ( compass ) , the sydney region ( opal card ) and the brisbane region ( go card ) . in fiscal 2018 , we were awarded a contract by the new york metropolitan transportation authority ( mta ) to replace the metrocard system with a new fare payment system ( nfps ) : a contract by the mbta to provide the charliecard system with a next-generation fare payment system ; a contract by the queensland department of transportation & main roads to provide a new fare system for the state of queensland , australia ; and a contract by the san francisco bay area 's metropolitan transportation commission ( mtc ) to deliver next-generation fare payment technology and operational services to the clipper smart card system serving the bay area . story_separator_special_tag in fiscal 2016 we were awarded a contract by the new hampshire state department of transportation to deploy our back-office system for the purposes of toll revenue collection . we provide a modern tolling alternative that uses best-in-breed tools that are flexible and modular compared to the proprietary , legacy systems that the industry views as their only option . through our nextbus and itms businesses we provide advanced transportation operational management capabilities and related services to over 95 customers including organizations such as transport for london , transport scotland , highways england , transport for greater manchester , los angeles metro , san francisco muni and the toronto transit commission . in august 2018 , we were awarded an intelligent congestion management platform contract by transport for new south wales to provide sydney , australia with one of the world 's most advanced transport management systems . the new system will enhance monitoring and management of the road network across new south wales , coordinate the public transport network across all modes , improve management of clearways , planning of major events and improve incident clearance times , while providing real-time information and advice to the public about disruptions . in addition to helping us secure similar projects in new markets , our comprehensive suite of new technologies and capabilities enables us to benefit from a recurring stream of revenues in established markets resulting from operations , innovative new services , technology refresh , equipment refurbishment and the introduction of new or adjacent applications . 44 in 2018 , revenues from services provided by cts were $ 382.6 million , or 57 % of cts sales , and revenues from product sales were $ 288.1 million , or 43 % of cts sales . we are currently designing and building major new systems in new york , boston , brisbane , and the bay area . profit margins during the design and build phase of major projects can be slightly lower than during the operate-and-maintain phase . this has in the past caused , and may in the future cause , swings in profitability from period to period . in addition , cash flows are often negative during portions of the design-and-build phase , until major milestones are reached and cash payments are received . cash payment terms offered by our transportation customers in a competitive environment are sometimes not favorable to us . the customers ' budget constraints often result in less funding available for the build of a new system , with more funds becoming available when the system becomes operational . this , coupled with the inherent risks in managing large infrastructure projects , can yield negative cash flows and lower and less predictable profit margins on contracts during the design and build phase . conversely , during the operate-and-maintain phase , revenues and costs are typically more predictable and profit margins tend to be higher . gross profit margins from services sales in cts were 25 % and 28 % for fiscal years 2018 and 2017 , respectively , and gross profit margin from product sales was 25 % and 29 % in 2018 and 2017 , respectively . the mix of product and services sales can produce fluctuations in margin from period-to-period and is generally caused by the mobilization or completion of project system delivery ; however , as system delivery projects complete they generally transition to recurring service sales which add to a recurring services sales base which will increase over time . most of our sales in cts for fiscal year 2018 were from fixed-price contracts . however , some of our service contracts provide for variable payments , in addition to the fixed payments , based on meeting certain service level requirements and , in some cases , based on system usage . service level requirements are generally contingent upon factors that are under our control , while system usage payments are contingent upon factors that are generally not under our control , other than basic system availability . development and system integration contracts in cts are usually accounted for on a percentage-of-completion basis using the cost-to-cost method to measure progress toward completion , which requires us to estimate our costs to complete these contracts on a regular basis . our actual results can vary significantly from these estimates and changes in estimates can result in significant swings in revenues and profitability from period to period . generally , we are at risk for increases in our costs , unless an increase results from customer-requested changes . at times , there can be disagreement with a customer over who is responsible for increases in costs . in these situations we must use judgment to determine if it is probable that we will recover our costs and any profit margin . revenue under contracts for services in cts is generally recognized either as services are performed or when a contractually required event has occurred , depending on the contract . revenue under such contracts is generally recognized on a straight-line basis over the period of contract performance , unless evidence suggests that the revenue is earned or the obligations are fulfilled in a different pattern . costs incurred under these services contracts are expensed as incurred , and may vary from period to period . incentive fees included in some of our cts service contracts are recognized when they become fixed and determinable based on the provisions of the contract . as described above , often these fees are based on meeting certain contractually required service levels or based on system usage levels . contractual terms can also result in variation of both revenues and expenses , resulting in fluctuations in earnings from period to period . for certain cts contracts for which we develop a system for a customer and subsequently operate and maintain the customer 's system , the contract specifies that we will not be paid during system development , but rather we will be paid over the period that we operate and maintain the system .
| cts operating income increased by 52 % to $ 60.4 million in 2018 compared to $ 39.8 million in 2017 , primarily due to increased volumes , disciplined execution , the transition of investments to contracts and cost improvements that were realized following prior year investments in cost reduction activities . cms had an operating 47 loss of $ 0.1 million in fiscal 2018 compared to an operating loss of $ 9.3 million in 2017 driven by higher volume including the t2c2 full rate production . cgd 's operating income decreased 41 % to $ 16.6 million in 2018 compared to $ 28.1 million in 2017. cgd 's 2017 results included a one-time positive impact for a request for equitable adjustment of $ 8.0 million . businesses acquired in 2018 and 2017 generated operating losses of $ 4.6 million in 2018 compared to $ 3.1 million in 2017. unallocated corporate and other costs were $ 52.5 million in 2018 compared to $ 56.0 million in 2017 , and included expenses related to strategic and it system resource planning as part of our one cubic initiative totaling $ 24.1 million in 2018 and $ 34.4 million in 2017. the average exchange rates between the prevailing currencies in our foreign operations and the u.s. dollar resulted in an increase in operating income of $ 2.1 million in 2018 compared to 2017. see the segment discussions below for further analysis of segment operating income ( loss ) . operating income increased to $ 2.6 million in 2017 compared to an operating loss of $ 11.6 million in 2016. cgd 's operating income increased 41 % to $ 28.1 million in 2017 compared to $ 19.9 million in 2016. cms had an operating loss of $ 9.3 million in 2017 and $ 37.0 million in 2016. the cms operating losses in 2017 and 2016 were primarily caused by the impact of purchase accounting on businesses acquired in this segment during fiscal 2017 and 2016. businesses acquired by
|
bad debt expense in 2012 was in line with our normal historical levels at approximately 0.2 % of net sales , while bad debts in 2011 were slightly higher than normal levels at 0.4 % of net sales but still within our tolerance in consideration of the recovering economy . our expenses consist primarily of the cost of products purchased for resale , labor , fleet , occupancy , and selling and administrative expenses . we compete for business and may respond to competitive pressures at times by lowering prices in order to maintain our market share . we opened 10 new branches in 2013 , four new branches in 2012 and three in 2011. while we slowed the pace of new branch openings following the economic downturn that began in 2007 , we began increasing our greenfield activity in 2013 which we expect to continue through 2014 as part of our continued growth strategy . typically , when we open a new branch , we transfer a certain level of existing business from an existing branch to the new branch . this allows the new branch to commence with a base business and also allows the existing branch to target other growth opportunities . 21 in managing our business , we consider all growth , including the opening of new branches , to be internal ( organic ) growth unless it results from an acquisition . when we refer to growth in existing markets or internal growth , we include growth from existing and newly opened branches but exclude growth from acquired branches until they have been under our ownership for at least four full fiscal quarters at the start of the fiscal reporting period . when we refer to regions , we are referring to our geographic regions . at september 30 , 2013 , we had a total of 236 branches in operation . our existing market calculations for 2013 include 196 branches and exclude 40 branches because they were acquired after the start of last year . acquired markets for 2013 include cassady pierce , structural materials , crs , mcclure-johnston , ford wholesale , construction materials supply , the roofing connection and fowler & peth ( see note 4 to the consolidated financial statements ) . when we refer to our net product costs , we are referring to our invoice cost less the impact of short-term buying programs ( also referred to as “ special buys ” given the manner in which they are offered ) . story_separator_special_tag income tax rate to average approximately 39.5 % to 40.5 % , excluding any discrete items . 24 2012 compared to 2011 the following table shows a summary of our results of operations for 2012 and 2011 , broken down by existing markets and acquired markets . replace_table_token_11_th net sales consolidated net sales increased $ 226.2 million , or 12.5 % , to $ 2,043.7 million in 2012 from $ 1,817.4 million in 2011. existing markets sales increased $ 113.0 million or 6.3 % ( 7.6 % based on the same number of business days ) . acquired markets sales increased $ 113.2 million due to a full year 's sales impact from the 2011 acquisitions and the partial year impact from our 2012 acquisitions . we attribute the existing markets sales increase primarily to the following factors : · better weather conditions in the first half of 2012 allowed for an increase in roofing activities , especially residential roofing ; · strong growth in the first half of 2012 in the markets affected by 2011 storms ; · strong growth in non-residential roofing activity in most of our regions through the second quarter of 2012 ; and · industry-wide price increases in our roofing product groups since the second quarter of 2011. partially offset by : · less roofing activity in the back half of 2012 in the markets affected by 2011 hail storms ; and · a slowdown in non-residential roofing activity during the back half of 2012. in 2012 , we acquired twenty-two branches , opened four new branches , and closed two branches . in 2012 , we have estimated the impact of inflation or deflation on our sales and gross profit by looking at changes in our average selling prices and gross margins ( discussed below ) . average selling prices were up overall 3-4 % in 2012 compared to 2011 , with price increases of non-residential products at 8-9 % . residential roofing product prices were up slightly at 1 % , while complementary product prices were up 3-4 % . the higher gross margins in 2012 are an indicator that the inflation in our net product costs was less than the impact from the increase in our average selling prices . existing markets net sales by geographical region increased ( decreased ) as follows : northeast 6.3 % ; mid-atlantic 10.9 % ; southeast 13.9 % ; southwest 10.3 % ; midwest ( 3.0 % ) ; west 2.8 % ; and canada 3.1 % . these variations were primarily caused by short-term factors such as local economic conditions , weather conditions and storm activity that influence the comparisons of a single geographical region . we had 251 business days in 2012 compared to 254 in 2011 . 25 the product group sales for our existing markets were as follows : for the fiscal years ended replace_table_token_12_th for 2012 , our acquired markets recognized sales of $ 100.1 , $ 23.9 and $ 14.2 million in residential roofing products , non-residential roofing products and complementary building products , respectively . the 2012 existing markets sales of $ 1,905.4 million plus the total sales from acquired markets of $ 138.2 million agrees ( rounded ) to our reported total 2012 sales of $ 2,043.7 million . for 2011 , our acquired markets recognized sales of $ 23.8 , $ 0.7 and $ 0.5 million in residential roofing products , non-residential roofing products and complementary building products , respectively . story_separator_special_tag the 2011 existing markets sales of $ 1,792.4 million plus the sales from acquired markets of $ 25.0 million agrees to our reported total 2011 sales of $ 1,817.4 million . prior year sales by product group are presented in a manner consistent with the current year 's product classifications . we believe the existing markets information is useful to investors because it helps explain organic growth or decline . gross profit replace_table_token_13_th our existing markets gross profit increased $ 50.9 million or 12.3 % in 2012 , while our acquired markets gross profit increased $ 30.9 million . our overall and existing markets gross margins increased to 24.5 % and 24.4 % in 2012 , respectively , from 23.1 % in 2011. the higher gross margins in 2012 were due primarily to improved gross margins in residential roofing product sales and an increase in our mix of those residential product sales , which generally have higher gross margins than our other products . direct sales ( products shipped by our vendors directly to our customers ) , which typically have substantially lower gross margins than our warehouse sales , represented 17.7 % and 20.4 % of our net sales in 2012 and 2011 , respectively . this decrease was primarily attributable to the lower mix of non-residential roofing product sales , which are more commonly facilitated by direct shipment . there were no material divisional impacts from changes in the direct sales mix of our geographical regions . operating expenses replace_table_token_14_th operating expenses in our existing markets increased $ 9.8 million or 3.1 % in 2012 to $ 321.1 million , compared to $ 311.3 million in 2011 , while our acquired markets expenses increased by $ 32.1 million to $ 36.7 million . the following factors were the leading causes of the higher operating expenses in our existing markets : · increased payroll and related costs of $ 12.3 million primarily due to higher incentive-based pay , overtime pay , certain benefits and payroll taxes ; 26 · increased selling expenses of $ 1.4 million from higher fuel and transportation costs and credit card fees ; and · increases in general and administrative costs of $ 3.6 million principally from higher professional fees , severance costs , general insurance costs and travel expenses ; partially offset by : · decreased depreciation and amortization expense of $ 4.3 million from lower amortization of intangibles and reduced depreciation from the impact of low capital expenditures in recent years ; and · decreased bad debts of $ 3.9 million due primarily to a lower percentage of past-due accounts as improvement in the roofing industry enabled more of our customers to stay current with their required payments . in 2012 and 2011 , we expensed a total of $ 9.4 million and $ 8.6 million , respectively , for the amortization of intangible assets recorded under purchase accounting , including the impact from acquired markets . our existing markets operating expenses as a percentage of the related net sales decreased to 16.8 % in 2012 from 17.4 % in 2011 due to the positive impact from the higher sales , partially offset by the impact from the above increases . interest expense , financing costs and other interest expense , financing costs and other were $ 17.2 million in 2012 compared to $ 13.4 million in 2011. the 2012 expense includes a charge of $ 2.6 million for the recognition of the fair value of certain interest rate derivatives and $ 1.2 million resulting from the refinancing of our debt . these negative factors on interest expense , financing costs and other in 2012 were partially offset by the benefit from lower outstanding total debt . interest expense , financing costs and other would have been $ 7.5 and $ 5.1 million lower in 2012 and 2011 , respectively , without the impact of our interest rate derivatives . income taxes income tax expense was $ 50.9 million in 2012 , an effective tax rate of 40.3 % , compared to $ 31.2 million in 2011 , which was an effective tax rate of 34.5 % . the 2011 income tax expense includes the beneficial impact of $ 5.1 million , $ 0.11 diluted earnings per share , from the reversal of the net deferred tax liability associated with a change in the tax status of our canadian operations as discussed below . without that benefit , our effective tax rate would have been approximately 40.1 % in 2011.we expect our future annual income tax rate to average approximately 39.5 % to 40.5 % , excluding any discrete items . seasonality and quarterly fluctuations in general , sales and net income are highest during our first , third and fourth fiscal quarters , which represent the peak months of construction and re-roofing , especially in our branches in the northern and mid-western u.s. and in canada . we have historically incurred low net income levels or net losses during the second quarter when our sales are substantially lower . we generally experience an increase in inventory , accounts receivable and accounts payable during the third and fourth quarters of the year as a result of the seasonality of our business . our peak cash usage generally occurs during the third quarter , primarily because accounts payable terms offered by our suppliers typically have due dates in april , may and june , while our peak accounts receivable collections typically occur from june through november . we generally experience a slowing of our accounts receivable collections during our second quarter , mainly due to the inability of some of our customers to conduct their businesses effectively in inclement weather in certain of our divisions . we continue to attempt to collect those receivables , which require payment under our standard terms . we do not provide material concessions to our customers during this quarter of the year .
| in 2013 , we have estimated the impact of inflation or deflation on our existing market sales and gross profit by looking at changes in our average selling prices and gross margins ( discussed below ) . average selling prices for residential and non-residential were flat overall ( each less than +/-1 % movement ) in 2013 compared to 2012 , while complementary product prices were up approximately 3 % . overall , blended price increases contributed an approximate $ 10 million of incremental sales in 2013 compared to 2012. additionally , we also benefited from 253 business days in 2013 compared to 251 in 2012 which contributed to an approximate $ 15 million of year over year existing market sales growth . we estimate the impact on existing market sales related to year over year changes in unit volume ( adjusted for the additional business days ) was a decline of approximately $ 3 million . existing market net sales by geographical region increased ( decreased ) as follows : northeast ( 3.7 ) % ; mid-atlantic ( 7.8 ) % ; southeast 21.4 % ; southwest 14.8 % ; midwest ( 7.8 % ) ; west ( 2.9 ) % ; and canada 4.8 % . these variations were primarily caused by short-term factors such as local economic conditions , weather conditions and storm activity that can influence the comparisons of a single geographical region . the product group sales for our existing markets were as follows : for the fiscal years ended replace_table_token_8_th for 2013 , our acquired markets recognized sales of $ 122.7 , $ 87.7 and $ 54.7 million in residential roofing products , non-residential roofing products and complementary building products , respectively . the 2013 existing market sales of $ 1,975.6 million plus the total sales from acquired markets of $ 265.1 million agrees ( rounded ) to our reported total 2013 sales of $ 2,240.7 million . for 2012 , our acquired markets recognized sales of $ 58.4 , $ 19.9 and $ 12.5 million in residential roofing products , non-residential roofing products and complementary building products ,
|
results on a foreign currency-neutral basis , as we present them , may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with u.s. gaap . 25 results of operations medical segment the following is a summary of medical revenues by organizational unit : replace_table_token_6_th ( a ) the presentation of prior-period amounts has been revised to conform with the presentation of current-period amounts , which does not separately present an immaterial adjustment for the amortization of a deferred revenue balance write-down relating to the carefusion acquisition . ( b ) `` nm '' denotes that the percentage is not meaningful . medical segment revenue growth in 2017 was driven by the medication and procedural solutions unit 's sales of infusion disposables products , particularly in international markets , and the pharmaceutical systems unit 's sales of self-injection systems . revenue growth in 2017 also reflected the diabetes care unit 's increased sales of pen needles in the united states and emerging markets . international growth in the diabetes care unit was impacted by weaker revenues in europe , primarily in the united kingdom , due to increasing pressure from government payers as part of austerity measures . medical segment revenues in 2017 were unfavorably impacted by the divestiture of the respiratory solutions business and the modification to dispensing equipment lease contracts with customers in the medication management solutions unit , which took place in april 2017. as a result of the lease modification , substantially all new lease contracts entered into beginning in april 2017 will be accounted for as operating leases with revenue recognized over the agreement term , rather than upon the placement of capital . in 2017 , revenues in the medication management solutions unit included $ 151 million of revenues relating to amended preexisting lease contracts . the medical segment 's growth in 2016 largely reflected the inclusion of carefusion 's sales for a full fiscal year in 2016 compared with half the fiscal year in 2015 , as previously discussed . medical segment revenue growth in 2016 additionally reflected the medication and procedural solutions unit 's international sales of safety-engineered products , the diabetes care unit 's sales of pen needles and the pharmaceutical systems unit 's sales of self-injection systems . fiscal year 2016 medical segment revenue growth was unfavorably impacted by the termination of a distribution contract in the respiratory solutions unit . 26 medical segment operating income was as follows : replace_table_token_7_th the medical segment 's operating income is driven by its performance with respect to gross profit margin and operating expenses . the medical segment 's gross profit margin in 2017 was higher as compared with 2016 primarily due to the divestiture of the respiratory solutions business , which had products with relatively lower gross profit margins . gross profit margin in 2017 also reflected lower manufacturing costs resulting from continuous improvement projects which enhanced the efficiency of our operations . the medical segment 's gross profit margin as a percentage of revenues was slightly higher in 2016 as compared with 2015 primarily due to lower manufacturing costs resulting from continuous operations improvement projects , partially offset by the recognition of a full year of amortization relating to intangible assets acquired in the carefusion transaction and by unfavorable foreign currency translation . selling and administrative expense as a percentage of revenues in 2017 was lower compared with 2016 , primarily due to the divestiture of the respiratory solutions business , as this business generally had a lower operating margin . selling and administrative expense as a percentage of revenues in 2016 was favorably impacted by the suspension of the medical device excise tax imposed under the u.s. patient protection affordable care act . research and development expense as a percentage of revenues in 2017 reflected ongoing investment in new products and platforms , but was lower compared with 2016 as expense in 2016 included a one-time payment relating to one of the segment 's ongoing projects . research and development expense as a percentage of revenues in 2016 increased from 2015 , which reflected increased investment in new products and platforms , including the one-time payment noted above . life sciences segment the following is a summary of life sciences revenues by organizational unit : replace_table_token_8_th the life sciences segment 's 2017 revenues reflected growth in global sales of the preanalytical systems unit 's safety-engineered products and growth in sales of the diagnostics systems unit 's microbiology and molecular platforms , particularly in emerging markets . the segment 's 2017 revenue growth was also driven by increased biosciences unit sales , particularly in developed markets . fiscal year 2016 revenues in the life sciences segment were driven by the preanalytical systems unit 's u.s. and international sales of safety-engineered products . segment revenue growth in 2016 also reflected the diagnostic systems unit 's sales of its core microbiology products , as well as placements of its bd kiestra tm 27 platform . fiscal year 2016 revenues in the life sciences segment additionally reflected the biosciences unit 's research instrument and reagent sales , primarily in the united states , which were partially offset by decreased sales of the biosciences unit 's hiv-related clinical products in africa . life sciences segment operating income was as follows : replace_table_token_9_th the life sciences segment 's operating income is driven by its performance with respect to gross profit margin and operating expenses . the life sciences segment 's gross profit margin as a percentage of revenues was lower in fiscal year 2017 primarily due to unfavorable foreign currency translation , higher raw material costs and unfavorable product mix , partially offset by lower manufacturing costs resulting from operations improvement projects . the life sciences segment 's gross profit margin as a percentage of revenues was lower in fiscal year 2016 compared with 2015 primarily due to unfavorable foreign currency translation , partially offset by lower manufacturing costs resulting from operations improvement projects . story_separator_special_tag selling and administrative expense as a percentage of life sciences revenues in 2017 was higher compared to 2016 primarily due to slightly higher administrative costs . selling and administrative expense as a percentage of life sciences revenues decreased in 2016 compared with 2015 , primarily due to the suspension of the medical device excise tax . research and development expense as a percentage of revenues in 2017 was relatively flat compared with 2016 , which increased compared to 2015 due to increased investment in new products and platforms . geographic revenues bd 's worldwide revenues by geography are provided below . replace_table_token_10_th u.s. revenues in 2017 were unfavorably impacted by the medical segment 's divestiture of the respiratory solutions business and the modification to dispensing equipment lease contracts with customers in the medical segment 's medication management solutions unit , as previously discussed . these impacts to u.s. revenues in 2017 were partially offset by growth in sales in the medical segment 's medication management solutions and diabetes care units , as well as in all of the life sciences segment 's units . u.s. revenue growth in 2016 primarily reflected the inclusion of carefusion 's u.s. sales for the full fiscal year . u.s. revenues also reflected growth in sales of the medical segment 's legacy products , particularly in the medication and procedural solutions and pharmaceutical systems units . u.s. revenue growth in 2016 was also driven by sales in the life science 's segment 's preanalytical systems and biosciences units . international revenues in 2017 were driven by sales in the medical segment 's medication and procedural solutions , medication management solutions and pharmaceutical systems units , as well as by sales in the life sciences segment 's preanalytical systems and diagnostic systems units . international revenue growth in 2017 was partially offset by the impact of the medical segment 's divestiture of the respiratory solutions business . 28 international revenue growth in 2016 primarily reflected the inclusion of carefusion 's sales for the full fiscal year , as well as growth attributable to the medical segment 's legacy products in the medication and procedural solutions unit . international revenue growth in 2016 also reflected the life sciences segment 's preanalytical systems unit 's sales , primarily in western europe and asia pacific . the life sciences segment 's international revenue growth in 2016 was negatively impacted by a decrease in certain sales in its biosciences unit in africa , as previously discussed . emerging market revenues were $ 1.95 billion , $ 1.9 billion and $ 1.8 billion in 2017 , 2016 and 2015 , respectively . emerging market revenues in 2016 related to divested businesses , primarily the respiratory solutions business , were approximately $ 105 million . unfavorable foreign currency translation impacted emerging market revenues in 2017 and 2016 by an estimated $ 29 million and $ 156 million , respectively . emerging market revenue growth in 2017 was driven by sales in greater asia , including china , and latin america . emerging market revenue growth in 2016 reflected the inclusion of carefusion 's sales for the full fiscal year , as well as growth in china and latin america , partially offset by declines in the middle east and africa . specified items reflected in the financial results for 2017 , 2016 and 2015 were the following specified items : replace_table_token_11_th ( a ) represents integration , restructuring and transaction costs , recorded in acquisitions and other restructurings , which are further discussed below . ( b ) the amount in 2017 represents financing costs incurred in connection with the agreement to acquire bard , including bridge financing commitment fees of $ 79 million , which were recorded in interest expense . the amount in 2015 represents financing costs incurred in connection with the carefusion acquisition , including bridge financing commitment fees . ( c ) primarily represents non-cash amortization expense associated with acquisition-related identifiable intangible assets . bd 's amortization expense is primarily recorded in cost of products sold . the adjustment in 2015 also included a fair value step-up adjustment of $ 293 million recorded relative to carefusion 's inventory on the acquisition date . ( d ) represents a non-cash charge , which was recorded in other operating expense , net resulting from a modification to our dispensing equipment lease contracts with customers , as further discussed below . ( e ) the amount in 2017 largely represents the reversal of certain reserves related to an appellate court decision recorded in other operating expense , net as further discussed below . ( f ) represents losses recognized in other ( expense ) income , net upon our extinguishment of certain long-term senior notes in the first and third quarters , as further discussed below . 29 gross profit margin the comparison of gross profit margins in 2017 and 2016 and the comparison of gross profit margins in 2016 and 2015 reflected the following impacts : replace_table_token_12_th the operating performance impacts in 2017 and 2016 primarily reflected lower manufacturing costs resulting from the continuous operations improvement projects discussed above . gross profit margin in 2017 was favorably impacted by businesses divestitures , primarily the divestiture of the respiratory solutions business which had products with relatively lower gross profit margins . gross profit margin in 2016 benefited from a favorable comparison to 2015 , which reflected the fair value step-up adjustment recorded relative to carefusion 's inventory on the acquisition date , as previously discussed , partially offset by the recognition in 2016 of a full year of amortization relating to carefusion 's intangible assets . operating expenses operating expenses in 2017 , 2016 and 2015 were as follows : replace_table_token_13_th selling and administrative selling and administrative expense as a percentage of revenues in 2017 was relatively flat compared with 2016 .
| our ability to sustain our long-term growth will depend on a number of factors , including our ability to expand our core business ( including geographical expansion ) , develop innovative new products , and continue to improve operating efficiency and organizational effectiveness . while the economic environment for the healthcare industry and healthcare utilization in the united states have generally stabilized , destabilization in the future could adversely impact our businesses . additionally , macroeconomic challenges in europe continue to constrain healthcare utilization , although we currently view the environment as stable . in emerging markets , the company 's growth is dependent primarily on government funding for healthcare systems . in addition , pricing pressure exists for certain geographies and could adversely impact our businesses . our financial position remains strong , with cash flows from operating activities totaling $ 2.550 billion in 2017 . at september 30 , 2017 , we had $ 14.2 billion in cash and equivalents and short-term investments , which included net proceeds raised through registered public offerings of equity securities and debt transactions during the third quarter of approximately $ 4.8 billion and $ 9.6 billion , respectively . we continued to return value to our shareholders in the form of dividends . during fiscal year 2017 , we paid cash dividends of $ 677 million . we also repurchased approximately $ 220 million of our common stock during 2017 . each reporting period , we face currency exposure that arises from translating the results of our worldwide operations to the u.s. dollar at exchange rates that fluctuate from the beginning of such period . the ongoing relative strength of the u.s. dollar resulted in an unfavorable foreign currency translation impact to our revenue and earnings growth during fiscal year 2017. we evaluate our results of operations on both a reported and a foreign currency-neutral basis , which excludes the impact of fluctuations in foreign currency exchange rates . as exchange rates are an important factor in understanding period-to-period comparisons , we believe the presentation of results on a foreign currency-neutral basis in addition to reported results helps improve investors ' ability to understand our operating results and
|
we believe this example of proven uninterrupted services during a time of disruption will motivate new and existing customers to migrate to the cloud in the long term . 31 in the first quarter of fiscal 2021 we have seen an impact to professional services revenue as our customers delay projects or elongate them by extending their planned go-live date . we have also received some customer requests for payment term changes . we expect a negative impact to professional services revenue and margins in the first quarter of fiscal 2021 and throughout the fiscal year . the impact of changes in payment terms or delayed payments is unknown at this time . february and march days sales outstanding ( dsos ) were consistent with historical trends . significant delays in payments from customers would impact our dsos and liquidity and may have an adverse impact on revenue . the extent of the impact of the covid-19 on our future liquidity and operational performance will depend on certain developments , including the duration and spread of the outbreak , the impact to our customers operations , the impact to our sales cycles ; and the effect on our suppliers . story_separator_special_tag serif ; font-size:10pt ; margin:0pt 7.5pt ; text-align : left ; '' > the following table presents subscription revenue by industry for fiscal 2020 , 2019 and 2018 : replace_table_token_10_th on a constant currency basis , subscription revenue was $ 91.9 million for fiscal 2019 , representing a $ 22.4 million , or 32 % , increase from $ 69.5 million for fiscal 2018. on a constant currency basis , subscription revenue increased across all regions during fiscal 2019 when compared to the prior year . in fiscal 2019 we closed 67 new cloud deals , including 41 new cloud customers and 26 conversions from existing customers who previously purchased on-premises licenses . this compared to fiscal 2018 when we closed 65 new cloud deals , including 37 new cloud customers and 28 conversions from existing customers who previously purchased on-premises licenses . we track our retention rate of subscription by calculating the annualized revenue of customer sites with contracts up for renewal at the beginning of the period compared to the annualized revenue associated with the customer sites that have canceled during the period . the percentage of revenue not canceled is our retention rate . conversions to the cloud are not considered cancellations for purposes of this calculation . our subscription customer retention rate is in excess of 90 % in each of the fiscal years 2020 , 2019 and 2018. we also track net dollar retention rate for our subscription revenue , which we calculate by comparing the revenue of our existing customers from a year ago to revenue of the same customers in the current year . net dollar retention rate of our subscription revenue was 108 % for fiscal 2020. the purpose of this metric is to calculate the additional subscription revenue generated from existing customers paying for additional users , functionality and price increases . license revenue . license revenue is derived from software license fees that customers pay for our core product , qad adaptive erp , and any add-on modules they purchase . our revenue mix has continued to shift from license to subscription revenue as a result of our business model transition . more new customers subscribe to our cloud-based offerings rather than purchasing traditional on-premises licenses . while we expect license revenue to decline over time , we do continue to experience quarterly fluctuations . we expect license revenue in fiscal 2021 will be negatively impacted by the covid-19 pandemic . on a constant currency basis , license revenue was $ 16.6 million for fiscal 2020 , representing an $ 8.4 million , or 34 % , decrease from $ 25.0 million for fiscal 2019. on a constant currency basis , license revenue decreased across all regions during fiscal 2020 when compared to the prior year . during fiscal 2020 , six customers placed license orders totaling more than $ 0.3 million , one of which exceeded $ 1.0 million . this compared to fiscal 2019 in which 14 customers placed license orders totaling more than $ 0.3 million , two of which exceeded $ 1.0 million . the majority of our license revenue is generated from our existing customers purchasing additional users and modules . on a constant currency basis , license revenue was $ 25.6 million for fiscal 2019 , representing a $ 0.3 million , or 1 % , decrease from $ 25.9 million for fiscal 2018. on a constant currency basis , license revenue decreased in our north america region and increased in our latin america , asia pacific and emea regions during fiscal 2019 when compared to fiscal 2018. during fiscal 2019 , 14 customers placed license orders totaling more than $ 0.3 million , two of which exceeded $ 1.0 million . this compared to fiscal 2018 in which 15 customers placed license orders totaling more than $ 0.3 million , two of which exceeded $ 1.0 million . maintenance revenue . we offer our on-premises customers maintenance which includes support services 24 hours a day , seven days a week in addition to providing software upgrades , which include additional or improved functionality , when and if available . on a constant currency basis , maintenance revenue was $ 117.9 million for fiscal 2020 , representing a $ 2.7 million , or 2 % , decrease from $ 120.6 million for fiscal 2019. on a constant currency basis , maintenance revenue decreased in our north america , emea , and asia pacific regions and increased in our latin america region during fiscal 2020 when compared to the prior year . the decrease in maintenance revenue period over period was primarily due to continued conversions of existing customers ' on-premises licenses to cloud subscription , in addition to our historical attrition rates . story_separator_special_tag when customers convert to the cloud they no longer pay for maintenance as those support services are included as a component of the subscription offering . though we continue to see renewal rates above 90 % , conversions from on-premises to cloud have resulted in decreases in maintenance revenue and we expect this trend to continue in the future . 34 on a constant currency basis , maintenance revenue was $ 122.9 million for fiscal 2019 , representing a $ 6.0 million , or 5 % , decrease from $ 128.9 million for fiscal 2018. on a constant currency basis , maintenance revenue decreased across all regions during fiscal 2019 when compared to the prior year . we track our retention rate of maintenance by calculating the annualized revenue of customer sites with contracts up for renewal at the beginning of the period compared to the annualized revenue associated with the customer sites that have canceled during the period . the percentage of revenue not canceled is our retention rate . over the last three years , our maintenance retention rate has remained in excess of 90 % . professional services revenue . our professional services business includes technical and application consulting in addition to training , implementations , migrations and upgrades related to our solutions . although our professional services are optional , our customers use these services when planning , implementing or upgrading our solutions whether in the cloud or on-premises . professional services revenue growth is contingent upon subscription and license revenue growth and customer upgrade cycles , which are influenced by the strength of general economic and business conditions . in the first quarter of fiscal 2021 , we have seen services projects delay or elongate due to the covid-19 pandemic . this has negatively impacted our services revenue and margins in the first quarter of fiscal 2021 and we expect it will negatively impact both services revenue and margins for the fiscal year . on a constant currency basis , professional services revenue was $ 69.1 million for fiscal 2020 , representing a $ 21.3 million , or 24 % , decrease from $ 90.4 million for fiscal 2019. on a constant currency basis , professional services revenue decreased across all regions during fiscal 2020 when compared to the prior year . the decrease primarily related to a reduction in professional services revenue following the completion of a large , multisite global implementation project . on a constant currency basis , professional services revenue was $ 92.7 million for fiscal 2019 , representing an $ 11.4 million , or 14 % , increase from $ 81.3 million for fiscal 2018. on a constant currency basis , professional services revenue increased in our north america , latin america and emea regions and remained relatively flat in our asia pacific region during fiscal 2019 when compared to the prior year . the increase in professional services revenue period over period can be attributed to personnel augmentation services we performed for one of our cloud customers , mainly through third-party contractors at low margins . for fiscal 2019 , personnel augmentation services revenue was $ 7.3 million , compared to $ 1.1 million for fiscal 2018. augmentation services consists of providing our employees or third-party contractors to assist the customer with the implementation tasks the customer needs to perform by supplementing their workforce . in addition , fiscal 2019 results reflected a higher amount of revenue per customer and a higher number of engagements compared to the prior year . total cost of revenue replace_table_token_11_th replace_table_token_12_th 35 total cost of revenue consists of cost of subscription , cost of license , cost of maintenance and cost of professional services . cost of subscription includes salaries , benefits , bonuses and other personnel expenses of our cloud operations employees , stock-based compensation for those employees , hosting and hardware costs , third-party contractor expense , royalties , professional fees , travel expense , and an allocation of information technology and facilities costs . cost of license includes license royalties and amortization of capitalized software costs . cost of maintenance includes salaries , benefits , bonuses and other personnel expenses of our support group , stock-based compensation for those employees , travel expense , royalties , professional fees and an allocation of information technology and facilities costs . cost of professional services includes salaries , benefits , bonuses and other personnel expenses of our services employees , stock-based compensation for those employees , third-party contractor expense , travel expense and an allocation of information technology and facilities costs . total cost of revenue . on a constant currency basis , total cost of revenue was $ 139.9 million and $ 153.4 million for fiscal 2020 and 2019 , respectively and as a percentage of total revenue was 45 % for fiscal 2020 and 47 % for fiscal 2019. the decrease in total cost of revenue as a percentage of total revenue was mainly due to the shift of our revenue mix from professional services to subscription . the non-currency related decrease in cost of revenue of $ 13.5 million , or 9 % , in fiscal 2020 compared to fiscal 2019 was primarily due to lower professional services third-party contractor costs , lower travel costs and lower salaries and related costs resulting from a decrease in headcount of 116 people associated with decreased professional services revenue , partially offset by higher hosting costs and salaries and related costs associated with the increase in subscription revenue . on a constant currency basis , total cost of revenue was $ 155.9 million and $ 149.1 million for fiscal 2019 and 2018 , respectively and as a percentage of total revenue was 47 % for fiscal 2019 and 49 % for fiscal 2018. the decrease in total cost of revenue as a percentage of total revenue was due to improved subscription and professional services margins .
| during fiscal 2019 , we performed a large implementation project with a customer which included consulting services the customer needed to help perform activities their employees were responsible for . without these services , the revenue from this customer would have been less than 10 % . our products are sold to manufacturing companies that operate mainly in the following six industries : automotive , consumer products , food and beverage , high technology , industrial products and life sciences . given the similarities between consumer products and food and beverage as well as between high technology and industrial products , we aggregate them for management review . the following table presents revenue by industry for fiscal 2020 , 2019 and 2018 : replace_table_token_8_th the decrease in percentage of revenue by industry for automotive in fiscal 2020 compared to fiscal 2019 was primarily related to a reduction in professional services revenue following the completion of a large , multisite global implementation project for a customer in the automotive industry that was substantially completed at the end of the fourth quarter of fiscal 2019. on a constant currency basis , total revenue was $ 333.0 million for fiscal 2019 , representing a $ 27.5 million , or 9 % , increase from $ 305.5 million for fiscal 2018. when comparing categories within total revenue at constant rates , our results for fiscal 2019 included increases in subscription and professional services revenue partially offset by a decrease in license and maintenance revenue . revenue outside the north america region as a percentage of total revenue was 52 % and 54 % for fiscal 2019 and 2018 , respectively . on a constant currency basis , total revenue increased across all regions during fiscal 2019 when compared to fiscal 2018. subscription revenue . subscription revenue consists of recurring fees from customers to access our products via the cloud and other subscription offerings . our cloud offerings typically include access to qad software , hosting , application support , maintenance support and product updates , if
|
the expense may not be reversed in future periods , even though higher oil , natural gas and ngl prices may subsequently increase the ceiling . we perform this ceiling test calculation each quarter . in accordance with the sec rules and regulations , we utilize sec pricing when performing the ceiling test . we also hold prices and costs constant over the life of the reserves , even though actual prices and costs of oil and natural gas are often volatile and may change from period to period . during 2020 and 2019 the company 's ceiling test computations resulted in a write down of $ 267.9 million and nil , respectively . at december 31 , 2020 , the company 's ceiling test computation was based on sec pricing of $ 39.47 per bbl of oil , $ 1.97 per mcf of natural gas and $ 9.89 per bbl of ngls . if the unweighted average first-day-of-the-month commodity price for crude oil or natural gas for the period beginning january 1 , 2020 and ending december 1 , 2020 used in the determination of the sec pricing was 10 % lower , resulting in $ 35.51 per bbl of oil , $ 1.76 per mcf of natural gas and $ 8.90 per bbl of ngls , while all other factors remained constant , our oil and natural gas properties would have been impaired by an additional $ 446.7 million . as part of our period end reserves estimation process for future periods , we expect changes in the key assumptions used , which could be significant , including updates to future pricing estimates and differentials , future production estimates to align with our anticipated five-year drilling plan and changes in our capital costs and operating expense assumptions , which we expect to decrease further as a result of sustained lower commodity prices . there is a significant degree of uncertainty with the assumptions used to estimate future undiscounted cash flows due to , but not limited to the risk factors referred to in part i , item 1a . risk factors . any decrease in pricing , negative change in price differentials , or increase in capital or operating costs could negatively impact the estimated undiscounted cash flows related to our proved oil and natural gas properties . 69 boem bonding requirements — in order to cover the various decommissioning obligations of lessees on the ocs , the boem generally requires that lessees post some form of acceptable financial assurances that such obligations will be met , such as surety bonds . the cost of such bonds or other financial assurance can be substantial , and we can provide no assurance that we can continue to obtain bonds or other surety in all cases . as many boem regulations are being reviewed by the agency , we may be subject to additional financial assurance requirements in the future . for example , in 2016 , the boem under the obama administration issued the 2016 ntl to clarify the procedures and guidelines that boem regional directors use to determine if and when additional financial assurances may be required for ocs leases , rows and rues . the 2016 ntl , which bolstered supplemental bonding requirements , became effective in september 2016 , but was not fully implemented as the boem under the trump administration first paused , and then in 2020 rescinded , the implementation of this ntl while the boem and bsee issued a jointly proposed rulemaking in october 2020 in which boem proposed amendments to its financial assurance program . the october 2020 rulemaking proposes to clarify and provide greater transparency to decommissioning and related financial assurance requirements imposed on oil and gas lessees ( record title owners ) , sublessees ( operating rights owners ) and rue and row grant holders conducting operations on the federal ocs . however , with president biden taking office in january 202 1 , it is possible that the new a dministration will reconsider regulatory actions undertaken by the former a dministration with respect to financial assurance requirements , including rescission of the 2016 ntl and publication of the october 2020 proposed rule , and may adopt and implement more stringent supplemental bonding requirements . the future cost of compliance with respect to supplemental bonding , including the obligations imposed on us , whether as current or predecessor lessee or grant holder , as a result of the 2016 ntl , to the extent re-implemented or the october 2020 proposed rule , to the extent finalized , as well as to the provisions of any new , more stringent ntls or final rules on supplemental bonding published by the boem under the biden administration , could materially and adversely affect our financial condition , cash flows and results of operations . moreover , the boem has the right to issue liability orders in the future , including if it determines there is a substantial risk of nonperformance of the interest holder 's decommissioning liabilities . deepwater operations — we have interests in deepwater fields in the u.s. gulf of mexico . operations in the deepwater can result in increased operational risks as has been demonstrated by the deepwater horizon disaster in 2010. despite technological advances since this disaster , liabilities for environmental losses , personal injury and loss of life and significant regulatory fines in the event of a disaster could be well in excess of insured amounts and result in significant current losses on our statements of operations as well as going concern issues . oil spill response plan — we maintain a regional oil spill response plan that defines our response requirements , procedures and remediation plans in the event we have an oil spill . oil spill response plans are generally approved by bsee bi-annually , except when changes are required , in which case revised plans are required to be submitted for approval at the time story_separator_special_tag the expense may not be reversed in future periods , even though higher oil , natural gas and ngl prices may subsequently increase the ceiling . we perform this ceiling test calculation each quarter . in accordance with the sec rules and regulations , we utilize sec pricing when performing the ceiling test . we also hold prices and costs constant over the life of the reserves , even though actual prices and costs of oil and natural gas are often volatile and may change from period to period . during 2020 and 2019 the company 's ceiling test computations resulted in a write down of $ 267.9 million and nil , respectively . at december 31 , 2020 , the company 's ceiling test computation was based on sec pricing of $ 39.47 per bbl of oil , $ 1.97 per mcf of natural gas and $ 9.89 per bbl of ngls . if the unweighted average first-day-of-the-month commodity price for crude oil or natural gas for the period beginning january 1 , 2020 and ending december 1 , 2020 used in the determination of the sec pricing was 10 % lower , resulting in $ 35.51 per bbl of oil , $ 1.76 per mcf of natural gas and $ 8.90 per bbl of ngls , while all other factors remained constant , our oil and natural gas properties would have been impaired by an additional $ 446.7 million . as part of our period end reserves estimation process for future periods , we expect changes in the key assumptions used , which could be significant , including updates to future pricing estimates and differentials , future production estimates to align with our anticipated five-year drilling plan and changes in our capital costs and operating expense assumptions , which we expect to decrease further as a result of sustained lower commodity prices . there is a significant degree of uncertainty with the assumptions used to estimate future undiscounted cash flows due to , but not limited to the risk factors referred to in part i , item 1a . risk factors . any decrease in pricing , negative change in price differentials , or increase in capital or operating costs could negatively impact the estimated undiscounted cash flows related to our proved oil and natural gas properties . 69 boem bonding requirements — in order to cover the various decommissioning obligations of lessees on the ocs , the boem generally requires that lessees post some form of acceptable financial assurances that such obligations will be met , such as surety bonds . the cost of such bonds or other financial assurance can be substantial , and we can provide no assurance that we can continue to obtain bonds or other surety in all cases . as many boem regulations are being reviewed by the agency , we may be subject to additional financial assurance requirements in the future . for example , in 2016 , the boem under the obama administration issued the 2016 ntl to clarify the procedures and guidelines that boem regional directors use to determine if and when additional financial assurances may be required for ocs leases , rows and rues . the 2016 ntl , which bolstered supplemental bonding requirements , became effective in september 2016 , but was not fully implemented as the boem under the trump administration first paused , and then in 2020 rescinded , the implementation of this ntl while the boem and bsee issued a jointly proposed rulemaking in october 2020 in which boem proposed amendments to its financial assurance program . the october 2020 rulemaking proposes to clarify and provide greater transparency to decommissioning and related financial assurance requirements imposed on oil and gas lessees ( record title owners ) , sublessees ( operating rights owners ) and rue and row grant holders conducting operations on the federal ocs . however , with president biden taking office in january 202 1 , it is possible that the new a dministration will reconsider regulatory actions undertaken by the former a dministration with respect to financial assurance requirements , including rescission of the 2016 ntl and publication of the october 2020 proposed rule , and may adopt and implement more stringent supplemental bonding requirements . the future cost of compliance with respect to supplemental bonding , including the obligations imposed on us , whether as current or predecessor lessee or grant holder , as a result of the 2016 ntl , to the extent re-implemented or the october 2020 proposed rule , to the extent finalized , as well as to the provisions of any new , more stringent ntls or final rules on supplemental bonding published by the boem under the biden administration , could materially and adversely affect our financial condition , cash flows and results of operations . moreover , the boem has the right to issue liability orders in the future , including if it determines there is a substantial risk of nonperformance of the interest holder 's decommissioning liabilities . deepwater operations — we have interests in deepwater fields in the u.s. gulf of mexico . operations in the deepwater can result in increased operational risks as has been demonstrated by the deepwater horizon disaster in 2010. despite technological advances since this disaster , liabilities for environmental losses , personal injury and loss of life and significant regulatory fines in the event of a disaster could be well in excess of insured amounts and result in significant current losses on our statements of operations as well as going concern issues . oil spill response plan — we maintain a regional oil spill response plan that defines our response requirements , procedures and remediation plans in the event we have an oil spill . oil spill response plans are generally approved by bsee bi-annually , except when changes are required , in which case revised plans are required to be submitted for approval at the time
| the information below provides the financial results and an analysis of significant variances in these results for the years ended december 31 , 2020 and 2019 ( in thousands , except per boe data ) : replace_table_token_19_th total lease operating expense for the year ended december 31 , 2020 increased by approximately $ 3.1 million , or 1 % . this increase was primarily related to $ 44.4 million of lease operating expense in connection with the ilx and castex acquisition and $ 3.8 million of lease operating expense in connection with the castex 2005 acquisition . the increase was partially offset by a $ 34.8 million reduction direct operating expenses , primarily due to shuttering certain shelf fields , cost cutting measures taken due to the current economic environment , reduction in costs attributable to economic shut-ins and an increase in pha reimbursements . while total lease operating expense increased , lease operating expense per boe decreased $ 0.51 per boe to $ 12.33 per boe . depreciation , depletion and amortization the following table highlights depreciation , depletion and amortization items in total and on a cost per boe production basis . the information below provides the financial results and an analysis of significant variances in these results for the years ended december 31 , 2020 and 2019 ( in thousands , except per boe data ) : replace_table_token_20_th depreciation , depletion and amortization expense for the year ended december 31 , 2020 increased by approximately $ 18.4 million , or 5 % . this was due to an increase in production of 2.7 mboepd as discussed above and offset slightly by a decrease in the depletion rate on our proved oil and natural gas properties of $ 0.02 per boe , during the year ended december 31 , 2020. general and administrative expense the following table highlights general and administrative expense items in total and on a cost per boe production basis . the information below provides the financial results and an analysis of significant variances in these results for the years ended december 31 , 2020 and 2019 ( in thousands , except per boe data ) : replace_table_token_21_th general and administrative expense for the year ended december 31 , 2020 ,
|
as a result , we recorded $ 5.5 million in pre-tax restructuring charges related to this program in the year ended december 31 , 2018 which primarily relates to severance and other expenses incurred in connection with the 2018 restructuring program . restructuring and other separation costs for the year ended december 31 , 2018 , also includes severance and other employment expenses for certain executives and employees who separated from the company . see note 21–restructuring programs and other separation costs to our consolidated financial statements included elsewhere in this annual report on form 10-k for further details . we make annual investments to support and improve our existing theme park facilities and attractions . maintaining and improving our theme parks , as well as opening new attractions , is critical to remain competitive , grow revenue , and increase our guests ' length of stay . for further discussion of our new attractions for 2019 , see “ capital improvements ” in the “ business ” section included elsewhere in this annual report on form 10-k. for other factors affecting our costs and expenses , see the “ risk factors ” section of this annual report on form 10-k , as such risk factors may be updated from time to time in our periodic filings with the sec . seasonality the theme park industry is seasonal in nature . historically , we generate the highest revenues in the second and third quarters of each year , in part because seven of our theme parks are only open for a portion of the year . approximately two-thirds of our attendance and revenues are generated in the second and third quarters of the year and we typically incur a net loss in the first and fourth quarters . the percent mix of revenues by quarter is relatively constant each year , but revenues can shift between the first and second quarters due to the timing of easter and spring break holidays and between the first and fourth quarters due to the timing of holiday breaks around christmas and new year . even for our five theme parks open year-round , attendance patterns have significant seasonality , driven by holidays , school vacations and weather conditions . regulatory developments see the discussion of relevant regulatory developments under “ recent regulatory developments ” in the “ business ” section included elsewhere in this annual report on form 10-k. for a discussion of certain risks associated with federal and state regulations governing the treatment of animals , see the “ risk factors ” section included elsewhere in this annual report on form 10-k , including “ risks related to our business and our industry—we are subject to complex federal and state regulations governing the treatment of animals , which can change , and to claims and lawsuits by activist groups before government regulators and in the courts . ” recent developments leadership changes on february 5 , 2019 , we announced that our board of directors ( the “ board ” ) appointed gustavo ( “ gus ” ) antorcha to serve as chief executive officer ( “ ceo ” ) of the company . in addition , the board increased the size of the board from eight to nine directors and elected mr. antorcha to serve as a director . mr. antorcha assumed his ceo role and director role , in each case , effective on february 18 , 2019. in connection with the appointment of mr. antorcha as ceo , the board appointed john t. reilly , who will step down from the position of interim ceo , to serve as chief operating officer ( “ coo ” ) of the company , effective at such time . additionally , we announced that yoshikazu maruyama would resume his role as non-executive chairman of the board , effective february 18 , 2019 . 40 on february 26 , 2018 , joel k. manby ( the “ former ceo ” ) stepped down from his position as president and chief executive officer of the company and resigned as a member of our board of directors . in connection with his departure , the former ceo received severance-related benefits in accordance with his employment agreement . certain other executives who separated from the company during 2018 also received severance-related benefits in accordance w ith the terms of their respective employment agreements or relevant company plan , as applicable . these expenses are included in restructuring and other separation costs for the year ended december 31 , 2018 in the accompanying consolidated statements of co mprehensive income ( loss ) included elsewhere in this annual report on form 10-k. additionally , certain equity awards were accelerated to vest in connection with the departure of specific executives as required by their respective employment agreements . as a result , we recorded incremental non-cash equity compensation expense related to these awards , which is included in selling , general and administrative expenses in the year ended december 31 , 2018 in the accompanying consolidated statements of comprehensive income ( loss ) . see note 21–restructuring programs and other separation costs and note 19–equity-based compensation in our notes to the consolidated financial statements included elsewhere in this annual report on form 10-k. u.s. tax cuts and jobs act the tax cuts and jobs act ( the “ tax act ” ) , was enacted on december 22 , 2017 , and contains a number of changes to u.s. federal tax laws . the tax act requires complex computations that were not previously provided for under u.s. tax law and significantly revised the u.s. tax code by , among other changes , lowering the corporate income tax rate from 35 % to 21 % effective january 1 , 2018 , and imposing limitations on the deductibility of interest . story_separator_special_tag as of december 31 , 2018 , the company has calculated the impact of the tax act in accordance with its current interpretation and available guidance , particularly as it relates to the future deductibility of executive compensation items and state conformity to the tax act . see discussion in note 14–income taxes in our notes to the consolidated financial statements included elsewhere in this annual report on form 10-k. story_separator_special_tag style= '' margin-top:12pt ; margin-bottom:0pt ; text-indent:4.54 % ; font-style : italic ; font-family : times new roman ; font-size:10pt ; font-weight : normal ; text-transform : none ; font-variant : normal ; '' > depreciation and amortization . depreciation and amortization expense for the year ended december 31 , 2018 decreased by $ 2.3 million , or 1.4 % to $ 161.0 million as compared to $ 163.3 million for the year ended december 31 , 2017. the decrease primarily relates to the impact of asset retirements and fully depreciated assets , partially offset by new asset additions . interest expense . interest expense for the year ended december 31 , 2018 increased $ 2.9 million , or 3.7 % to $ 80.9 million as compared to $ 78.0 million for the year ended december 31 , 2017. the increase primarily relates to increased libor rates and the impact of amendments no . 8 and no . 9 to our senior secured credit facilities entered into on march 31 , 2017 and october 31 , 2018 , respectively , partially offset by the impact of interest rate swap agreements . see note 12 –long-term debt to our consolidated financial statements included elsewhere in this annual report on form 10-k and the “ our indebtedness ” section which follows for further details . loss on early extinguishment of debt and write-off of discounts and debt issuance costs . loss on early extinguishment of debt and write-off of discounts and debt issuance costs of $ 8.2 million for the year ended december 31 , 2018 primarily relates to a write-off of discounts and debt issuance costs resulting from amendment no . 9 to our senior secured credit facilities entered into on october 31 , 2018. loss on early extinguishment of debt and write-off of discounts and debt issuance costs of $ 8.1 million for the year ended december 31 , 2017 primarily relates to a write-off of discounts and debt issuance costs resulting from amendment no . 8 to our senior secured credit facilities entered into on march 31 , 2017. see note 12–long-term debt to our consolidated financial statements included elsewhere in this annual report on form 10-k and the “ our indebtedness ” section which follows for further details . provision for ( benefit from ) income taxes . provision for income taxes for the year ended december 31 , 2018 was $ 17.9 million compared to a benefit from income taxes of $ 85.0 million in the year ended december 31 , 2017. the change primarily resulted from pretax income in 2018 compared to a pretax loss in 2017. our consolidated effective tax rate was 28.6 % for 2018 compared to 29.6 % for 2017. the decrease primarily results from a reduction in the corporate federal tax rate from 35 % to 21 % effective january 1 , 2018 due to the tax act mostly offset by the reduced tax benefit in 2017 related to nondeductible equity compensation and a goodwill impairment charge . see note 14–income taxes in our notes to the consolidated financial statements included elsewhere in this annual report on form 10-k for further details . 43 comparison of the years ended december 31 , 2017 and 2016 the following table presents key operating and financial information for the years ended december 31 , 2017 and 2016 : replace_table_token_6_th nd-not determinable nm-not meaningful admissions revenue . admissions revenue for the year ended december 31 , 2017 decreased $ 52.7 million , or 6.4 % , to $ 765.1 million as compared to $ 817.8 million for the year ended december 31 , 2016. the decrease in admissions revenue primarily relates to a decline in attendance of 1.2 million guests , or 5.5 % . attendance in 2017 was primarily impacted by a decline in u.s. domestic and international attendance , largely concentrated at our parks in orlando and san diego . in addition , seaworld san diego was further impacted by a decline in attendance from the southern california market . we believe the decline in u.s. domestic attendance , particularly in orlando , results primarily from the combined impact of reduced national advertising and competitive pressures . among other factors , we believe the decline in attendance at our seaworld san diego park partly results from public perception issues , which resurfaced since we reduced marketing spend on our national reputation campaign . admission per capita decreased by 1.0 % to $ 36.79 in 2017 from $ 37.17 in 2016. the decrease results primarily from the mix of guests , including a higher mix of season pass attendance and free promotional ticket offerings . these factors were partially offset by price increases in our admission products . food , merchandise and other revenue . food , merchandise and other revenue for the year ended december 31 , 2017 decreased $ 28.2 million , or 5.4 % to $ 498.3 million as compared to $ 526.5 million for the year ended december 31 , 2016 , primarily due to a decline in attendance . in-park per capita spending increased slightly by 0.1 % , to $ 23.96 in 2017 from $ 23.93 in 2016. costs of food , merchandise and other revenues . costs of food , merchandise and other revenues for the year ended december 31 , 2017 decreased $ 4.7 million , or 4.7 % , to $ 95.9 million as compared to $ 100.6 million for the year ended december 31 , 2016 , primarily due to a decline in related revenues .
| food , merchandise and other revenue for the year ended december 31 , 2018 increased $ 75.2 million , or 15.1 % to $ 573.5 million as compared to $ 498.3 million for the year ended december 31 , 2017. the increase results from improved attendance along with an increase in in-park per capita spending . in-park per capita spending increased by 6.0 % , to $ 25.40 in 2018 from $ 23.96 in 2017. in-park per capita spending improved primarily due to the increased sales of in-park products . costs of food , merchandise and other revenues . costs of food , merchandise and other revenues for the year ended december 31 , 2018 increased $ 10.7 million , or 11.1 % , to $ 106.6 million as compared to $ 95.9 million for the year ended december 31 , 2017 , primarily due to an increase in related revenues . these costs represent 18.6 % and 19.3 % of related revenue for the years ended december 31 , 2018 and 2017 , respectively . 42 operating expenses . operating expenses for the year ended december 31 , 2018 increased by $ 3.8 million , or 0.5 % to $ 706.0 million as compared to $ 702.1 million for the year ended december 31 , 2017. the increase primarily relates to an increase of $ 6.4 million in fixed asset disposals and $ 2.8 milli on of expenses incurred and fees associated with the termination of an agreement , partially offset by a decline in other expenses ( see note 8–property and equipment , net and note 15–commitments and contingencies in our notes to the consolidated financial s tatements included elsewhere in this annual report on form 10-k ) . operating expenses were 51.4 % of total revenues in 2018 compared to 55.6 % in 2017. the decrease as a percent of total revenue results primarily from a focus on cost efficiencies and the impa ct of cost savings initiatives . selling , general and administrative expenses . selling , general and
|
it is common in the life and accident and health insurance industry for a consulting actuary to give either ( a ) a liability certification where the liabilities are expressed as a range of numbers for each relevant liability ( the “ range estimate ” ) , or ( b ) a l iability certification where the liabilities are expressed as a single number for each relevant liability ( the “ single point estimate ” ) . where the range estimate method is used , the management of an insurance company makes its own choice to record an amount within the range . the company does not use the range estimate for any of its insurance products . instead , for all of its insurance products , the company uses the single point estimate . for the company 's group and individual dental insurance , the company 's financial personnel develop and make a single point estimate for the claim liabilities which work results in the company 's single point estimate for the end of each fiscal quarter and year end . the company 's independent consulting actuary develops and makes its separate single point estimate for such liabilities . the company 's financial personnel and independent consulting actuary compare their single point estimates , reconcile any differences and agree on a single point estimate for such liabilities . annually , the company 's independent consulting actuary gives a single point estimate liability certification to the company with the agreed amount and the company uses such certified amount without change . for the company 's group and individual life and annuity insurance , the company 's financial personnel make the single point estimate for each such claim liability . annually , the company 's consulting actuary independently reviews the single point estimates . if the independent consulting actuary agrees with the single point estimates , he gives a certification to the company . the company 's financial personnel have significant experience and knowledge in developing claim estimates for the company 's insurance products . however , the company 's financial personnel are not formally trained , certified or recognized as actuaries . the company continually engages independent consulting actuaries . the company makes extensive use of its independent consulting actuaries which includes the actuaries ' assistance in the development and creation of policy assumptions , the development and modification of reserve and claim liability methodologies and assumptions , estimations and calculations of reserves and claim liabilities , and the annual certification of the amount of the company 's liabilities for its products . while claim liabilities are estimated as an inherent part of the insurance industry , management of the company believes that it follows standard industry practices in estimating claim liabilities . the following discussions of claim liability methodology are separated by the company 's product types as indicated by the section headings . dental insurance – group and individual for the company 's group and individual dental insurance policies , the company and its independent consulting actuary use a completion factor approach ( sometimes referred to as the development method ) which provides best estimates of the factors to determine claim liabilities . 13 in implementing the completion factor approach , a review of payment history develops the completion factors . these completion factors relate what percentage of an ultimate claim is paid based upon its duration from date of service . such completion factors are monitored over time and have been relatively stable . the completion factors are used to estimate the liabilities for the months in which the claims are incurred where they are deemed to be credible . however , with respect to claims incurred in the most recent months , the completion factors may not be fully credible ( the payment history is not complete ) . so , as is common in the industry , a review is made of developing claims per insured by month and loss ratios by month for the most recent months . the company 's financial personnel and management and the company 's independent consulting actuary make a single point estimate based upon their determination of the loss ratios and claims per insured for the most recent months . of all the assumptions made by the company 's financial personnel and management and the company 's independent consulting actuary , the loss ratio and the claims per insured per month for the most recent months are the most sensitive ones for liability estimation . if the loss ratios and claims per insured per month increase , claim liabilities will likely increase by some amount . if the loss ratios and claims per insured per month decrease , claim liabilities will likely decrease by some amount . management reviews trends in loss ratios and claims per insured per month in determining its estimate for the most recent months . generally , while fluctuations do occur , the company 's loss ratio and claims per insured per month are stable . in estimating claim liabilities ( the policy claims payable on the company 's balance sheet ) , the company consistently uses the assumptions of loss ratio and claims per insured per month which are based on actual , historical data . see , the discussion in the section herein entitled “ trends in completion factors , loss ratio , and claims per insured per month ” . as to the consistency of the company 's estimation of its claim liabilities ( the policy claims payable on the company 's balance sheet ) , you may reference notes 7 and 11 to the company 's financial statements . notes 7 and 11 present data indicating the actual claims paid in a subsequent fiscal year for a prior fiscal year ; actual claims incurred in a subsequent year for a prior fiscal year ; and the claim liabilities for the prior fiscal year . story_separator_special_tag notes 7 and 11 are limited to the most recent fiscal year being reported , december 31 , 2007 , and the previous fiscal years of 2006 and 2005. life insurance – group and individual – and annuities the company reinsures a substantial portion of its life insurance and the associated risks and liabilities . see item 1 , business , reinsurance ; and note 8 , reinsurance , to the company 's financial statements . the company determines its life insurance claim liabilities by recording three items : ( 1 ) actual claims due and unpaid ; ( 2 ) the claims received during the 30 day period following year end ( this is done by taking an inventory of claims received during the thirty day period ) ; and ( 3 ) estimating a liability amount for claims which have been incurred but not yet reported by the end of the thirty day period . the company 's annuity policies are simple deferred annuities . the company does not explicitly establish a claim liability for its annuities since the liability is already held in the annuity deposit liability . trends in completion factors , loss ratio and claims per insured per month claim liabilities for the group dental line are the most significant part of the company 's claim liability . as stated above , the company uses the completion factor method for calculating the liability . two main assumptions are made in this approach . first , for months the claims are incurred where the completion factor is credible , the company uses that completion factor to calculate the liability associated with that month the claim occurred . second , for the most recent months before the company 's financial statement date where it is determined that the completion factors are not fully credible , the company reviews loss ratios and claims per insured per month to determine the liability for those months . the discussion in this paragraph relates to the months where the completion factors are deemed to be fully credible which are typically the months prior to november and december . the completion factors have been relatively stable in the recent past . in the future , there could be changes in the trend of completion factors . the company and its independent consulting actuary review the trends in the completion factors and when necessary make judgments as to the single point estimate value for these items . such estimates are based on observable trends and would also reflect any known major changes . professional judgments are made based on the experience of the actuary and company 's financial personnel and management . to observe the possible sensitivity of assuming 100 % reliance on completion factors for claims incurred during the months for which completion factors are believed to be fully credible , if the associated claim liabilities for those months had increased by 5 % , the year-end december 31 , 2007 , claim liabilities would have been increased by approximately $ 19,000 . 14 the discussion in this paragraph relates to the months where the completion factors are deemed to be not fully credible which are typically the months of november and december . the choice of the loss ratio assumption or claims per insured per month assumption for the most recent month of the claim was incurred may also have an impact on the liability estimate . these assumptions are monitored for trends . the company and its consulting actuary monitor the loss ratio and claims per insured month and override the completion factor approach for the most recent months before the company 's financial statement date where the completion factors are not fully credible , i.e . november and december . to observe the possible sensitivity of assuming 100 % reliance on loss ratio or claims per insured per month factors for claims incurred during the months for which completion are believed to be not fully credible ( typically november and december of a fiscal year ) , if the loss ratio or claims per insured per month had increased by 3 % for those months ( a multiple of 1.03 ) , the associated claim liabilities for those months and the year end december 31 , 2007 , claim liability would have been increased by approximately $ 127,000. the company believes that its recorded claim liabilities are reasonable and adequate to satisfy its ultimate claims liability . the company 's recorded claim liabilities are , in accordance with industry practice , estimates of such liabilities . the reader must recognize that the completion factors , loss ratios and claims per insured per month may , and probably will , be affected by events and conditions which are or will be unknown to the company 's financial personnel or management or the company 's consulting actuary . the reader must also recognize that any trending of the completion factors , loss ratios or claims per insured per month may not be indicative of changes in the company 's financial condition . while a presentation such as described above provides some mathematical and hypothetical numerical calculations , such calculations may or may not have any relevance to the company 's future financial condition , earnings or cash flow . deferred tax asset the valuation allowance against deferred taxes is a sensitive accounting estimate . the company follows statement of financial accounting standards ( sfas ) no . 109 , “ accounting for income taxes , ” which prescribes the liability method of accounting for deferred income taxes . under the liability method , companies establish a deferred tax liability or asset for the future tax effects of temporary differences between book and tax basis of assets and liabilities .
| the company received marketing fees of $ 198,843 in 2007 , $ 143,315 in 2006 and $ 115,233 in 2005. t he in crease in marketing fees in 2007 and 2006 was due to additional funds available at epsi from higher profits during the year . epsi has temporarily ceased paying the company marketing fees in the first quarter of 2008 due to the termination of one of its largest customers . bnlac markets group and individual vision insurance products that are underwritten by other insurance companies , on which bnlac does not have any exposure to underwriting ( claims ) losses . the company had vision insurance income of $ 1,979,359 , $ 1,603,767 and $ 1,051,720 in 2007 , 2006 and 2005 , respectively . the vision income increased by 23 % and 49 % in 2007 and 2006 , respectively , primarily due to the addition of group voluntary vision plans that require lower participation rates . the company had a realized gain on debt extinguishments of $ 10,803 in 2007 , $ 35,732 in 2006 and $ 102,067 in 2005 due to the purchase of debentures payable at less than par value . the company purchased fewer debentures in 2007 and 2006 than it did in 2005 , which resulted in less realized gain in debt extinguishments . realized capital gains and ( losses ) on investments were $ 11,128 in 2007 , $ 25,547 in 2006 and $ 37,816 in 2005. the realized gain in 2007 , 2006 and 2005 was primarily from the sale of equity securities . increases ( decreases ) in liability for future policy benefits were ( $ 213,867 ) , ( $ 123,066 ) and $ 308,563 in 2007 , 2006 and 2005 , respectively . the decrease in 2007 is primarily due to a decrease in additional contract reserves on individual dental policies and a decrease in life liabilities . the number of individual dental policies in force decreased in 2007 and the seasoned block of life business continued to decline . the decrease in future policy benefits in 2006 was primarily
|
we believe that supply , in general , caught up with market demand in the first fiscal quarter of 2019. the remainder of 2019 was significantly impacted by a substantial decrease in orders , particularly from distribution customers , as they reduced their inventory . this decrease has negatively impacted almost all key financial metrics , including net revenues . net revenues for the year ended december 31 , 2019 were $ 2.668 billion , compared to net revenues of $ 3.035 billion and $ 2.599 billion for the years ended december 31 , 2018 and 2017 , respectively . net earnings attributable to vishay stockholders for the year ended december 31 , 2019 were $ 163.9 million , or $ 1.13 per diluted share , compared to $ 345.8 million , or $ 2.24 per diluted share for the year ended december 31 , 2018 , and net loss attributable to vishay stockholders of $ ( 20.3 ) million , or $ ( 0.14 ) per share , for the year ended december 31 , 2017. we define adjusted net earnings as net earnings determined in accordance with gaap adjusted for various items that management believes are not indicative of the intrinsic operating performance of our business . we define free cash as the cash flows generated from continuing operations less capital expenditures plus net proceeds from the sale of property and equipment . the reconciliations below include certain financial measures which are not recognized in accordance with gaap , including adjusted net earnings , adjusted earnings per share , and free cash . these non-gaap measures should not be viewed as alternatives to gaap measures of performance or liquidity . non-gaap measures such as adjusted net earnings , adjusted earnings per share , and free cash do not have uniform definitions . these measures , as calculated by vishay , may not be comparable to similarly titled measures used by other companies . management believes that adjusted net earnings and adjusted earnings per share are meaningful because they provide insight with respect to our intrinsic operating results . management believes that free cash is a meaningful measure of our ability to fund acquisitions , repay debt , and otherwise enhance stockholder value through stock repurchases or dividends . 31 net earnings ( loss ) attributable to vishay stockholders for the years ended december 31 , 2019 , 2018 , and 2017 include items affecting comparability . the items affecting comparability are ( in thousands , except per share amounts ) : replace_table_token_5_th although the term `` free cash '' is not defined in gaap , each of the elements used to calculate free cash is presented as a line item on the face of our consolidated statements of cash flows prepared in accordance with gaap . replace_table_token_6_th our results for 2019 represent the effects of the normalization of demand that we began to experience in the fourth fiscal quarter of 2018 and accelerated through 2019 as supply , in general , caught up with demand , and customers , particularly distributors , significantly reduced their orders as they decreased their inventory . our percentage of euro-based sales approximates our percentage of euro-based expenses so the foreign currency impact on revenues was substantially offset by the impact on expenses . our pre-tax results were consistent with expectations based on our business model . our free cash results were significantly impacted by the payment of cash taxes related to the cash repatriated to the u.s. in 2019 and 2018 of $ 38.8 million and $ 156.8 million , respectively , and the installment payments of the u.s. transition tax of $ 14.8 million each in 2019 and 2018 . 32 financial metrics we utilize several financial metrics to evaluate the performance and assess the future direction of our business . these key financial measures and metrics include net revenues , gross profit margin , operating margin , segment operating income , end-of-period backlog , and the book-to-bill ratio . we also monitor changes in our inventory turnover and our or publicly available average selling prices ( “ asp ” ) . gross profit margin is computed as gross profit as a percentage of net revenues . gross profit is generally net revenues less costs of products sold , but also deducts certain other period costs , particularly losses on purchase commitments and inventory write-downs . losses on purchase commitments and inventory write-downs have the impact of reducing gross profit margin in the period of the charge , but result in improved gross profit margins in subsequent periods by reducing costs of products sold as inventory is used . gross profit margin is clearly a function of net revenues , but also reflects our cost management programs and our ability to contain fixed costs . operating margin is computed as gross profit less operating expenses as a percentage of net revenues . we evaluate business segment performance on segment operating margin . only dedicated , direct selling , general , and administrative expenses of the segments are included in the calculation of segment operating income . segment operating margin is computed as operating income less items such as restructuring and severance costs , asset write-downs , goodwill and indefinite-lived intangible asset impairments , inventory write-downs , gain or losses on purchase commitments , global operations , sales and marketing , information systems , finance and administrative groups , and other items , expressed as a percentage of net revenues . we believe that evaluating segment performance excluding such items is meaningful because it provides insight with respect to intrinsic operating results of the segment . operating margin is clearly a function of net revenues , but also reflects our cost management programs and our ability to contain fixed costs . end-of-period backlog is one indicator of future revenues . we include in our backlog only open orders that we expect to ship in the next twelve months . story_separator_special_tag if demand falls below customers ' forecasts , or if customers do not control their inventory effectively , they may cancel or reschedule the shipments that are included in our backlog , in many instances without the payment of any penalty . therefore , the backlog is not necessarily indicative of the results to be expected for future periods . an important indicator of demand in our industry is the book-to-bill ratio , which is the ratio of the amount of product ordered during a period as compared with the product that we ship during that period . a book-to-bill ratio that is greater than one indicates that our backlog is building and that we are likely to see increasing revenues in future periods . conversely , a book-to-bill ratio that is less than one is an indicator of declining demand and may foretell declining revenues . we focus on our inventory turnover as a measure of how well we are managing our inventory . we define inventory turnover for a financial reporting period as our costs of products sold for the four fiscal quarters ending on the last day of the reporting period divided by our average inventory ( computed using each fiscal quarter-end balance ) for this same period . a higher level of inventory turnover reflects more efficient use of our capital . pricing in our industry can be volatile . using our and publicly available data , we analyze trends and changes in average selling prices to evaluate likely future pricing . the erosion of average selling prices of established products is typical for semiconductor products . we attempt to offset this deterioration with ongoing cost reduction activities and new product introductions . our specialty passive components are more resistant to average selling price erosion . all pricing is subject to governing market conditions and is independently set by us . 33 the quarter-to-quarter trends in these financial metrics can also be an important indicator of the likely direction of our business . the following table shows net revenues , gross profit margin , operating margin , end-of-period backlog , book-to-bill ratio , inventory turnover , and changes in asp for our business as a whole during the five fiscal quarters beginning with the fourth fiscal quarter of 2018 through the fourth fiscal quarter of 2019 ( dollars in thousands ) : replace_table_token_7_th _ ( 1 ) operating margin for the third and fourth fiscal quarters of 2019 includes $ 7.3 million and $ 16.9 million , respectively , of restructuring and severance expenses ( see note 4 to our consolidated financial statements ) . see “ financial metrics by segment ” below for net revenues , book-to-bill ratio , and gross profit margin broken out by segment . revenues decreased versus the prior fiscal quarter and the fourth fiscal quarter of 2018. in periods where customers , particularly distributors , have high levels of inventory , backlog is less indicative of future revenues . distributors , particularly of semiconductor products in asia , began to normalize their backlogs in the third fiscal quarter of 2018 and we experienced a further normalization of demand throughout 2019. inventory in the supply chain remains at a relatively high level , which continues to negatively impact orders . average selling prices , particularly of commodity semiconductor products , have begun to decrease consistent with the decrease in demand . gross profit margin decreased versus the prior fiscal quarter and the fourth fiscal quarter of 2018. the decreases are primarily volume-driven , and include temporary manufacturing inefficiencies as we adapt manufacturing capacities . the book-to-bill ratio increased to 0.94 in the fourth fiscal quarter of 2019 from 0.72 in the third fiscal quarter of 2019. the book-to-bill ratios for distributors and original equipment manufacturers ( `` oem '' ) were 0.94 and 0.95 , respectively , versus ratios of 0.55 and 0.90 , respectively , during the third fiscal quarter of 2019 . 34 financial metrics by segment the following table shows net revenues , book-to-bill ratio , gross profit margin , and segment operating margin broken out by segment for the five fiscal quarters beginning with the fourth fiscal quarter of 2018 through the fourth fiscal quarter of 2019 ( dollars in thousands ) : replace_table_token_8_th _ 35 acquisition activity as part of our growth strategy , we seek to expand through targeted acquisitions of other manufacturers of electronic components that have established positions in major markets , reputations for product quality and reliability , and product lines with which we have substantial marketing and technical expertise . this includes exploring opportunities to acquire targets to gain market share , penetrate different geographic markets , enhance new product development , round out our existing product lines , or grow our high margin niche market businesses . acquisitions of passive components businesses would likely be made to strengthen and broaden our position as a specialty product supplier ; acquisitions of discrete semiconductor businesses would be made to increase market share and to generate synergies . to limit our financial exposure , we have implemented a policy not to pursue acquisitions if our post-acquisition debt would exceed 2.5x our pro forma earnings before interest , taxes , depreciation , and amortization ( “ ebitda ” ) . for these purposes , we calculate pro forma ebitda as the adjusted ebitda of vishay and the target for vishay 's four preceding fiscal quarters , with a pro forma adjustment for savings which management estimates would have been achieved had the target been acquired by vishay at the beginning of the four fiscal quarter period . on january 3 , 2019 , we acquired substantially all of the assets and liabilities of bi-metallix , inc. ( `` bi-metallix '' ) , a u.s.-based , privately-held provider of electron beam continuous strip welding services for $ 11.9 million . we were a major customer of bi-metallix , and the acquired business has been vertically integrated into our resistors segment .
| mosfets net revenues of the mosfets segment were as follows ( dollars in thousands ) : replace_table_token_13_th changes in mosfets segment net revenues were attributable to the following : replace_table_token_14_th gross profit margins for the mosfets segment were as follows : replace_table_token_15_th the mosfets segment experienced a significant decrease in 2019 net revenues versus the prior year . sales volume decreased with distribution customers in all regions and with end customers in asia . the decreases in our biggest market , asian distributors , were partially offset by increases in our integrated circuits products . the business with european and american end customers also increased significantly primarily due to dedicated products for the automotive end-market and the singularity of a last-time-buy business . declining selling prices and a weaker euro currency also contributed to the revenue decrease . the gross profit margin for 2019 decreased versus the prior year primarily due to lower sales volume and the returning pressure on our selling prices . measures taken to adjust the costs to the lower sales volume offset cost increases particularly from inflation . the reduced customer demand increased the pressure on pricing for our established mosfets products in 2019 but the decline was below our historical level . we experienced a moderate decrease in average selling prices versus the prior year . the price decline was partially offset by u.s. tariffs on imports from china which were partially passed-through to customers . we continue to invest to expand mid- and long-term manufacturing capacity for strategic product lines . 43 diodes net revenues of the diodes segment were as follows ( dollars in thousands ) : replace_table_token_16_th changes in diodes segment net revenues were attributable to the following : replace_table_token_17_th gross profit margins for the diodes segment were as follows : replace_table_token_18_th after two record years , net revenues of our diodes segment decreased significantly in 2019 versus the prior year . the sales volume decreased in all regions , and particularly for distributors . a decline in the selling prices and a weaker euro currency also contributed to the decrease . gross profit margin
|
the gain on cash surrender value of life insurance policies decreased substantially due to lower stock market gains compared to fiscal year 2018. the major components comprising the increase of “ other sg & a ” expenses were outside consulting fees , utilities and property taxes . selling , general and administrative expenses-frozen food products segment sg & a expenses in the frozen food products segment increased by $ 641 ( 4.5 % ) to $ 14,867 during fiscal year 2019 compared to the prior fiscal year . the overall increase in sg & a expenses was due to higher unit sales volume , profit-sharing accruals and product advertising . selling , general and administrative expenses-refrigerated and snack food products segment sg & a expenses in the snack food products segment increased by $ 2,267 ( 6.3 % ) to $ 37,970 during fiscal year 2019 compared to the prior fiscal year . most of the increase was due to higher unit sales volume in pounds and higher expenses related to wages and bonuses including an increase in sales commissions . gain on sale of property , plant and equipment on march 7 , 2018 , the company sold a parcel of land in chicago , illinois for approximately $ 5,977 and recognized a non-recurring pre-tax gain in fiscal year 2018. the cost basis of the land was insignificant . any gain or loss during fiscal year 2019 was due to ordinary gain or loss on disposal of assets . story_separator_special_tag 6pt ; border-bottom : black 1.5pt solid '' > 14 our stock repurchase program was approved by the board of directors in november 1999 and was expanded in june 2005. under the stock repurchase program , we were authorized , at the discretion of management and the board of directors , to purchase up to an aggregate of 2,000,000 shares of our common stock on the open market . as of the end of fiscal year 2019 , 120,113 shares remained authorized for repurchase under the program . however , our agreement with citigroup lapsed on its own ( by its terms ) on october 14 , 2019. we invested in otr ( over-the-road ) tractors during fiscal year 2012 financed by a capital lease obligation in the amount of $ 1,848. the total capital lease obligation was settled as of november 1 , 2019 with no remaining lease liability . we bought several of the tractors and converted to month-to-month arrangements on other tractors as needed . we plan to invest in new capital lease arrangements in fiscal 2020. we maintain a line of credit with wells fargo bank , n.a . that expires on march 1 , 2020. under the terms of this line of credit , we may borrow up to $ 7,500 at an interest rate equal to the bank 's prime rate or libor plus 1.5 % . the borrowing agreement contains various covenants , the more significant of which require us to maintain a minimum tangible net worth , a minimum quick ratio , a minimum net income after tax and total capital expenditures less than $ 7,500. the company was in violation of the capital expenditure covenant which was subsequently waived by letter dated december 16 , 2019. the company was in compliance with all other covenants as of november 1 , 2019. on december 26 , 2018 , we entered into a master collateral loan and security agreement with wells fargo bank , n.a for up to $ 15,000 in equipment financing . pursuant to the loan agreement , we made two borrowings of $ 7,500 each , to purchase specific equipment for our new chicago processing facility at a fixed rate of 4.13 % and 3.98 % , respectively , per annum . the loan terms are seven years and are secured by the purchased equipment . the first funding of $ 7,500 was received on december 28 , 2018. the second funding was received on april 23 , 2019. the master collateral loan and security agreement with wells fargo bank , n.a . contains various affirmative and negative covenants that limit the use of funds and define other provisions of the loan . the main financial covenants are listed below : ● total liabilities divided by tangible net worth ( as defined ) not greater than 2.5 to 1.0 at each fiscal quarter , ● quick ratio ( as defined ) not less than 1.0 to 1.0 at each fiscal quarter end , and ● net income after taxes not less than one dollar on a quarterly basis , determined as of each fiscal quarter end . the company was in compliance with all covenants under the master collateral loan and security agreement as of november 1 , 2019. impact of inflation our operating results are heavily dependent upon the prices paid for raw materials . the marketing of our value-added products does not lend itself to instantaneous changes in selling prices . changes in selling prices are relatively infrequent and do not compare with the volatility of commodity markets . while fluctuations in significant cost structure components , such as ingredient commodities and fuel prices , have had a significant impact on profitability over the last two fiscal years , the impact of general price inflation on our financial position and results of operations has not been significant . however , future volatility of general price inflation or deflation and raw material cost and availability could adversely affect our financial results . management is of the opinion that our strong financial position and our capital resources are sufficient to provide for our operating needs and capital expenditures for fiscal year 2020. off-balance sheet arrangements we do not currently have any off-balance sheet arrangements within the meaning of item 303 ( a ) ( 4 ) of regulation s-k. contractual obligations we had no other debt or other contractual obligations within the meaning of item 303 ( a ) story_separator_special_tag the gain on cash surrender value of life insurance policies decreased substantially due to lower stock market gains compared to fiscal year 2018. the major components comprising the increase of “ other sg & a ” expenses were outside consulting fees , utilities and property taxes . selling , general and administrative expenses-frozen food products segment sg & a expenses in the frozen food products segment increased by $ 641 ( 4.5 % ) to $ 14,867 during fiscal year 2019 compared to the prior fiscal year . the overall increase in sg & a expenses was due to higher unit sales volume , profit-sharing accruals and product advertising . selling , general and administrative expenses-refrigerated and snack food products segment sg & a expenses in the snack food products segment increased by $ 2,267 ( 6.3 % ) to $ 37,970 during fiscal year 2019 compared to the prior fiscal year . most of the increase was due to higher unit sales volume in pounds and higher expenses related to wages and bonuses including an increase in sales commissions . gain on sale of property , plant and equipment on march 7 , 2018 , the company sold a parcel of land in chicago , illinois for approximately $ 5,977 and recognized a non-recurring pre-tax gain in fiscal year 2018. the cost basis of the land was insignificant . any gain or loss during fiscal year 2019 was due to ordinary gain or loss on disposal of assets . story_separator_special_tag 6pt ; border-bottom : black 1.5pt solid '' > 14 our stock repurchase program was approved by the board of directors in november 1999 and was expanded in june 2005. under the stock repurchase program , we were authorized , at the discretion of management and the board of directors , to purchase up to an aggregate of 2,000,000 shares of our common stock on the open market . as of the end of fiscal year 2019 , 120,113 shares remained authorized for repurchase under the program . however , our agreement with citigroup lapsed on its own ( by its terms ) on october 14 , 2019. we invested in otr ( over-the-road ) tractors during fiscal year 2012 financed by a capital lease obligation in the amount of $ 1,848. the total capital lease obligation was settled as of november 1 , 2019 with no remaining lease liability . we bought several of the tractors and converted to month-to-month arrangements on other tractors as needed . we plan to invest in new capital lease arrangements in fiscal 2020. we maintain a line of credit with wells fargo bank , n.a . that expires on march 1 , 2020. under the terms of this line of credit , we may borrow up to $ 7,500 at an interest rate equal to the bank 's prime rate or libor plus 1.5 % . the borrowing agreement contains various covenants , the more significant of which require us to maintain a minimum tangible net worth , a minimum quick ratio , a minimum net income after tax and total capital expenditures less than $ 7,500. the company was in violation of the capital expenditure covenant which was subsequently waived by letter dated december 16 , 2019. the company was in compliance with all other covenants as of november 1 , 2019. on december 26 , 2018 , we entered into a master collateral loan and security agreement with wells fargo bank , n.a for up to $ 15,000 in equipment financing . pursuant to the loan agreement , we made two borrowings of $ 7,500 each , to purchase specific equipment for our new chicago processing facility at a fixed rate of 4.13 % and 3.98 % , respectively , per annum . the loan terms are seven years and are secured by the purchased equipment . the first funding of $ 7,500 was received on december 28 , 2018. the second funding was received on april 23 , 2019. the master collateral loan and security agreement with wells fargo bank , n.a . contains various affirmative and negative covenants that limit the use of funds and define other provisions of the loan . the main financial covenants are listed below : ● total liabilities divided by tangible net worth ( as defined ) not greater than 2.5 to 1.0 at each fiscal quarter , ● quick ratio ( as defined ) not less than 1.0 to 1.0 at each fiscal quarter end , and ● net income after taxes not less than one dollar on a quarterly basis , determined as of each fiscal quarter end . the company was in compliance with all covenants under the master collateral loan and security agreement as of november 1 , 2019. impact of inflation our operating results are heavily dependent upon the prices paid for raw materials . the marketing of our value-added products does not lend itself to instantaneous changes in selling prices . changes in selling prices are relatively infrequent and do not compare with the volatility of commodity markets . while fluctuations in significant cost structure components , such as ingredient commodities and fuel prices , have had a significant impact on profitability over the last two fiscal years , the impact of general price inflation on our financial position and results of operations has not been significant . however , future volatility of general price inflation or deflation and raw material cost and availability could adversely affect our financial results . management is of the opinion that our strong financial position and our capital resources are sufficient to provide for our operating needs and capital expenditures for fiscal year 2020. off-balance sheet arrangements we do not currently have any off-balance sheet arrangements within the meaning of item 303 ( a ) ( 4 ) of regulation s-k. contractual obligations we had no other debt or other contractual obligations within the meaning of item 303 ( a )
| cash flows from operating activities : replace_table_token_8_th 13 for the fifty-two weeks ended november 1 , 2019 , net cash provided by operating activities was $ 7,247 , a decrease of $ 1,018 compared to the fifty-two weeks ended november 1 , 2018. the net decrease in cash provided by operating activities primarily related to an increase in inventory of $ 2,954 , lower net income of $ 6,484 and deferred income taxes of $ 1,889 partially offset by an increase in the current portion of non-current liabilities of $ 1,643 and payments for estimated taxes of $ 697. during fiscal year 2019 , we funded $ 875 towards our defined benefit pension plan . plan funding strategies may be adjusted depending upon economic conditions , investment options , tax deductibility , or legislative changes in funding requirements . our cash conversion cycle ( defined as days of inventory and trade receivables less days of trade payables outstanding ) was equal to 67 days for the fifty-two weeks ended november 1 , 2019 and 64 days for the fifty-two weeks ended november 2 , 2018. significant customers increased the length of payment terms during fiscal year 2018 which increased the prior fiscal year 's cash conversion cycle . for the fifty-two weeks ended november 2 , 2018 , net cash provided by operating activities was $ 8,265. this result was primarily related to net income and a decrease in non-current liabilities . during fiscal year 2018 , we funded $ 3,150 towards our defined benefit pension plan . cash used in investing activities : replace_table_token_9_th expenditures for property , plant and equipment include the acquisition of equipment , upgrading of facilities to maintain operating efficiency and investments in cost effective technologies to lower costs . in general , we capitalize the cost of additions and improvements and expense the cost for repairs and maintenance . we may also capitalize costs related to improvements that extend the life , increase the capacity , or improve the efficiency of existing machinery and equipment . specifically , capitalization of upgrades of facilities to maintain operating efficiency include acquisitions of machinery and equipment used on packaging lines and refrigeration equipment used to process food products . the table below highlights the additions to property , plant and equipment for the fifty-two weeks ended : replace_table_token_10_th expenditures for additions to property , plant and equipment during the fifty-two weeks
|
the fca has requested comments on the proposals by may 6 , 2015. we are subject to ongoing examination and review by the fca . we are in frequent communication with the fca in an effort to demonstrate that we satisfy the expectations of the fca , and we have made significant modifications to many of our business practices to address the fca 's requirements . these modifications included adjustments to our affordability assessment practices and underwriting standards that govern who will qualify for a loan from us , reductions in certain maximum loan amounts , alterations to advertising practices and adjustments to collections processes ( including our practices related to continuous payment authority ) and debt forbearance processes ( or our practices regarding customers who have indicated they are experiencing financial difficulty ) . in addition , we previously have not had a physical presence in the united kingdom as business functions have been performed remotely from our facilities in the united states . in order to alleviate concerns in relation to our ability to presently demonstrate to the fca that we are capable of being effectively supervised , we have established an office as well as the management of our u.k. business in the united kingdom . 50 the fca has appointed an independent auditor , referred to as a skilled person under section 166 of the fsma , to undertake a review of certain of our practices , as well as our ability to be effectively supervised . if that review or other examination by the fca identifies activities that are deemed by the fca to have caused consumer detriment or are not in compliance with the fca 's requirements , the fca could require us to take remedial action ( which could result in additional changes to our business practices and or the payment of consumer redress ) , impose fines or penalties , refuse our full authorization application , withdraw our interim authorization or full authorization if granted , impose limitations or restrictions on our regulatory permission or take other actions . in connection with implementing the changes described above to our u.k. business , we experienced a significant year-over-year decrease in our u.k. loan volume , u.k. loan balances and u.k. revenue during the second half of 2014 as a result of adapting our u.k. business practices in response to the requirements of the fca . we expect these trends to continue for the first half of 2015. the implementation of stricter affordability assessments and underwriting standards resulted in a decrease in the number of consumer loans written , the average consumer loan amount and the total amount of consumer loans written to new and returning customers . additionally , we have experienced and will continue to experience an increase in compliance- and administrative-related costs for the united kingdom , but the overall expenses of our u.k. business ( including our cost of revenue ) decreased as our u.k. business contracted . the ultimate impact of the changes we have made to our u.k. operations will be dependent on a number of factors ( some of which may be unforeseen ) , including the effectiveness of our execution of the operational changes , the impact the fca 's requirements may have on our competitors that could result in a potential increase in our market share , and consumer reaction to the changes occurring to our services , among other things . the decline in revenue and loan balances in the united kingdom has been offset to an extent by improved performance of our u.k. consumer loan portfolio as a result of stricter affordability assessments and underwriting standards being implemented , which has resulted in lower consumer loan loss rates , and by continued strong demand for the online loan products we offer in the united states and other markets . we are continuing to assess the impact of the changes we have made to our u.k. operations and what additional changes we may elect to implement and what effect such changes may have on our business , but the impact of these changes is likely to be significant for the first half of 2015. the results for the year ended december 31 , 2014 do not include the full impact of the changes described above , and the results for the year ended december 31 , 2013 do not include any impact of the changes described above . the results for each of these periods are not indicative of our future results of operations and cash flows from our operations in the united kingdom . for recent developments related to the fca , including concerns that have been expressed by the fca regarding our compliance with u.k. legal and regulatory requirements , such as the requirement that our business be capable of being effectively supervised by the fca and compliance with fca rules and principles relating to affordability assessments and debt collection and forbearance processes , see “ risk factors—risks related to our business and industry— our primary regulators in the united kingdom have expressed and continue to express serious concerns about our compliance with applicable u.k. regulations , which has caused us to make significant changes to our u.k. business that have impacted and will continue to negatively impact our operations and results , and this impact has been and will continue to be significant , ” “ — due to restructuring of the consumer credit regulatory framework in the united kingdom , we are required to obtain full authorization from our u.k. regulators to continue providing consumer credit and perform related activities in the united kingdom , and there is no guarantee that we will receive full authorization to continue offering consumer loans in the united kingdom ” and “ — the united kingdom has imposed , and continues to impose , increased regulation of the short-term high-cost credit industry with the stated expectation that some firms will exit the market . story_separator_special_tag ” consumer financial protection bureau on november 20 , 2013 , cash america consented to the issuance of a consent order by the consumer financial protection bureau , or the cfpb , pursuant to which it agreed , without admitting or denying any of the facts or conclusions made by the cfpb from its 2012 review of cash america and us , to pay a civil money penalty of $ 5 million , of which we and cash america agreed to allocate $ 2.5 million of this penalty to us , or the regulatory penalty . the consent order also relates to issues self-disclosed to the cfpb during its 2012 examination of cash america and us , including the making of a limited number of loans to consumers who may have been active duty members of the military at the time of the loan at rates in excess of the annual percentage rate permitted by the federal military lending act due in part to system errors , and for which we have made refunds of approximately $ 33,500 ; and for certain failures to timely provide and preserve records and information in connection with the cfpb 's examination of us and cash america . in addition , as a result of the cfpb 's review , we have enhanced and continue to enhance our compliance management programs and have implemented additional procedures to address the issues identified by the cfpb . we are also required to provide periodic reports to the cfpb . we are subject to the restrictions and obligations of the consent order , including the cfpb 's order that we ensure compliance with federal consumer financial laws and develop more robust compliance policies and procedures . basis of presentation and critical accounting policies enova international , inc. was formed on september 7 , 2011 by cash america to hold the assets of cash america 's online lending business . on september 13 , 2011 , cash america contributed to enova international , inc. all of the stock of its wholly-owned subsidiary , enova online services , inc. , in exchange for 33 million shares of our common stock . as of december 31 , 2014 , enova offered or arranged consumer and small business loans ( collectively referred to as “ consumer loans ” throughout this management 's discussion and analysis of financial condition and results of operations ) through a number of its subsidiaries to customers in 35 states in the united states , united kingdom , australia , canada , brazil and china . 51 prior to the spin-off , we operated as a division of cash america and not as a stand-alone company . our historical consolidated financial statements include the assets , liabilities , revenue and expenses directly attributable to our operations carved out of cash america 's consolidated financial statements . in addition , the historical financial statements for periods prior to the spin-off include allocations of costs relating to certain functions historically provided by cash america , including corporate services such as executive oversight , insurance and risk management , government relations , internal audit , treasury , licensing , and to a limited extent finance , accounting , tax , legal , human resources , compensation and benefits , compliance and support for certain information systems related to financial reporting . the expense allocations have been determined on a basis that cash america and we consider to be reasonable reflections of the utilization of services provided by cash america . the amounts recorded for these transactions and allocations are not , however , necessarily representative of the amounts that would have been incurred had we been a separate , stand-alone entity that operated independently of cash america . as a separate stand-alone public company , our future results of operations will include costs and expenses for us to operate as a stand-alone company , and , consequently , these costs may be materially different than as reflected in our historical results of operations . accordingly , the financial statements for these years may not be indicative of our future results of operations , financial position and cash flows . upon our separation from cash america , we entered into a transition services agreement with cash america . the expiration date of the agreement varies by service provided but is generally no longer than 12 months from the separation date . under the agreement , cash america provides support for certain information systems related to financial reporting and payment processing to us for a period of time following the completion of the spin-off for which we will compensate cash america . in addition , we will reimburse cash america for all out-of-pocket costs and expenses it pays or incurs in connection with providing such services . see “ certain relationships and related transactions , and director independence—agreements between us and cash america ” in part iii , item 13 of this report for additional information regarding the spin-off and agreements entered into between us and cash america in connection with the spin-off . revenue recognition we recognize revenue based on the loan products and services we offer . “ revenue ” in the consolidated statements of income includes : interest income , finance charges , fees for services provided through the cso programs , or cso fees , service charges , draw fees , minimum fees , late fees , nonsufficient funds fees and any other fees or charges permitted by applicable laws and pursuant to the agreement with the borrower . for short-term loans that we offer , interest and finance charges are recognized on an effective yield basis over the term of the loan , and fees are recognized when assessed to the customer . cso fees are recognized on an effective yield basis over the term of the loan . for line of credit accounts , interest is recognized over the reporting period based upon the balance outstanding and the contractual interest rate , and fees are recognized when assessed to the customer .
| 55 overview the following tables reflect our results of operations for the periods indicated , both in dollars and as a percentage of total revenue ( dollars in thousands , except per share data ) : replace_table_token_4_th non-gaap disclosure in addition to the financial information prepared in conformity with generally accepted accounting principles , or gaap , we provide historical non-gaap financial information . management believes that presentation of non-gaap financial information is meaningful and useful in understanding the activities and business metrics of our operations . management believes that these non-gaap financial measures reflect an additional way of viewing aspects of our business that , when viewed with its gaap results , provide a more complete understanding of factors and trends affecting its business . management provides non-gaap financial information for informational purposes and to enhance understanding of our gaap consolidated financial statements . readers should consider the information in addition to , but not instead of or superior to , its financial statements prepared in accordance with gaap . this non-gaap financial information may be determined or calculated differently by other companies , limiting the usefulness of those measures for comparative purposes . 56 adjusted earnings measures in addition to reporting financial results in accordance with gaap , we have provided adjusted earnings and adjusted earnings per share , or , collectively , the adjusted earnings measures , which are non-gaap measures . management believes that the presentation of these measures provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures , compensation strategies , derivative instruments and amortization methods , which provides a more complete understanding of our financial performance , competitive position and prospects for the future . management also believes that investors regularly rely on non-gaap financial measures , such as the adjusted earnings measures , to assess operating performance and that such measures may highlight trends in the company 's business that may not otherwise be apparent when relying on financial measures calculated in accordance with gaap . in addition , management believes that the adjustments shown below are useful to investors in order to allow them to compare the company 's financial results during the periods shown without the effect of each of these expense items . the following table provides reconciliations
|
we currently have a long-term contract with the user of our crude oil storage capacity in cushing , oklahoma that has a remaining term of approximately 2.5 years as of december 31 , 2014. we believe the demand for crude oil storage capacity in our market area will remain strong because of rising inland united states and canadian production and the integral role that the cushing interchange plays in facilitating the transfer of crude oil to refiners on the gulf coast . seasonality the financial and operational results in our ngl distribution and sales segment are impacted by the seasonal nature of propane demand . the retail propane business is seasonal because of increased demand during the months of november through march primarily for the purpose of providing heating in residential and commercial buildings . as a result , the volume of propane we sell is at its highest during our first and fourth quarters and is directly affected by the severity of the winter . however , our cylinder exchange business sales volumes provide us increased operating profits during our second and third quarters , which reduces overall seasonal fluctuations in the financial and operational results in our cylinder exchange business and our ngl sales business . for the year ended december 31 , 2014 , we sold approximately 59 % of the propane volumes in our cylinder exchange and ngl sales businesses during the first and fourth quarters of the year . the butane blending operations at our refined products terminals are affected by seasonality because of federal regulations governing seasonal gasoline vapor pressure specifications . accordingly , we expect that the revenues we generate from butane blending will be highest in the winter months and lowest in the summer months . weather weather conditions have a significant impact on the demand for propane for both heating and agricultural purposes . accordingly , the volume of propane used by our customers for this purpose is affected by the severity of winter weather in the regions we serve and can vary substantially from year to year while general economic conditions in the united states and the wholesale price of propane can have a significant impact on the correlation between weather and customer demand . for the twelve months ended december 31 , 2014 , the weather in texas , oklahoma , new mexico , arizona , arkansas , kansas and missouri , the seven states in which our ngl sales business operates , was 4 % warmer than the average temperature of the prior year as measured by the number of heating degree days reported by the noaa . if these seven states were to experience a cooling trend , we could expect demand for propane to increase , which could lead to greater sales and income . commodity prices we are exposed to volatility in crude oil , refined products and ngl commodity prices . we manage such exposure through the structure of our sales and supply contracts and through a managed hedging program . our risk management policy permits the use of financial instruments to reduce the exposure to changes in commodity prices that occur in the normal course of business but prohibits the use of financial instruments for trading or to speculate on future changes in commodity prices . we do not have direct exposure to commodity price changes in our crude oil pipelines and storage segment . in our crude oil supply and logistics business , we purchase and take title to a portion of the crude oil that we sell , which exposes us to changes in the price of crude oil in our sales markets . we manage this commodity price risk by limiting our net open 48 positions and through the concurrent purchase and sale of like quantities of crude oil that are intended to lock in positive margins based on the timing , location or quality of the crude oil purchased and delivered . in our refined products terminals and storage segment , we sell excess volumes of refined products and our gross margin is impacted by changes in the market prices for these sales . we may execute forward sales contracts or financial swaps to reduce the risk of commodity price changes in this segment . in our ngl distribution and sales business , we are generally able to pass through the cost of products through sales prices to our customers . to the extent we enter into fixed price product sales contracts in this business , we generally hedge our supply costs using financial swaps . in our cylinder-exchange business , we sell approximately half of our volumes pursuant to contracts of generally two to three years in duration , which allow us to re-negotiate prices at the time of contract renewal , and we sell the remaining volumes on demand or under month-to-month contracts and generally adjust prices on these contracts on an annual basis . we hedge a large majority of the forecasted volumes under our long-term contracts using financial swaps , and we may also use financial swaps to manage commodity price risk on our month-to-month contracts . in our ngl transportation business , we do not take title to the products we transport and , therefore , have no direct commodity price exposure to the price of volumes transported . interest rates the credit markets experienced near-record low interest rates in recent years . as the overall economy strengthens , it is likely that monetary policy will tighten , resulting in higher interest rates to counter possible inflation . if this occurs , interest rates on floating rate credit facilities and future offerings in the debt capital markets could be higher than current levels , causing our current or prospective financing costs to increase accordingly . how we evaluate our operations our management uses a variety of financial and operational metrics to analyze our performance . we view these metrics as important factors in evaluating our profitability and review these measurements for consistency and trend analysis . story_separator_special_tag these metrics include volumes , revenues , cost of sales , excluding depreciation and amortization , operating expenses , adjusted ebitda and distributable cash flow . · volumes and revenues . · crude oil pipelines and storage . the amount of revenue we generate from our crude oil pipelines business depends primarily on throughput volumes . we generate a substantial majority of our crude oil pipeline revenues through long-term contracts containing acreage dedications or minimum volume commitments . throughput volumes on our pipeline system are affected primarily by the supply of crude oil in the market served by our assets . the volume of crude oil stored at our crude oil storage facility in cushing , oklahoma has no impact on the revenue generated by our crude oil storage business because we receive a fixed monthly fee per barrel of shell capacity that is not contingent on the usage of our storage tanks . · crude oil supply and logistics . the revenue generated from our crude oil supply and logistics business depends on the volume of crude oil we purchase from producers , aggregators and traders and then sell to producers , traders and refiners as well as the volumes of crude oil that we gather and transport . the volume of our crude oil supply and logistics activities and the volumes transported by our crude oil gathering and transportation trucks are affected by the supply of crude oil in the markets served directly or indirectly by our assets . accordingly , we actively monitor producer activity in the areas served by our crude oil supply and logistics business and other producing areas in the united states to compete for volumes from crude oil producers . revenues in this segment are also impacted by changes in the market price of commodities that we pass through to our customers . · refined products terminals and storage . the amount of revenue we generate from our refined products terminals depends primarily on the volume of refined products that we handle . these volumes are affected primarily by the supply of and demand for refined products in the markets served directly or indirectly by our refined products terminals , which we believe are strategically located to take advantage of infrastructure development opportunities resulting from growing markets . · ngl distribution and sales . the amount of revenue we generate from our ngl distribution and sales segment depends on the gallons of ngls we sell through our cylinder exchange and ngl sales businesses . in addition , our ngl transportation operations generate revenue based on the number of gallons of ngls we gather and the distance we transport those gallons for our customers . revenues in 49 this segment are also impacted by changes in the market price of commodities that we pass through to our customers . · cost of sales , excluding depreciation and amortization . our management attempts to minimize cost of sales , excluding depreciation and amortization , in order to enhance the profitability of our operations . cost of sales , excluding depreciation and amortization , includes the costs to purchase the product and any costs incurred to transport the product to the point of sale and to store the product until it is sold . we seek to minimize cost of sales , excluding depreciation and amortization , by attempting to acquire the products which we use in each of our segments at times and prices which are most optimal based on our knowledge of the industry and the regions in which we operate . · operating expenses . our management seeks to maximize the profitability of our operations in part by minimizing operating expenses . these expenses are comprised of payroll , wages and benefits , utility costs , fleet costs , repair and maintenance costs , rent , fuel , insurance premiums , taxes and other operating costs , some of which are independent of the volumes we handle . · adjusted ebitda and adjusted gross margin . our management uses adjusted ebitda and adjusted gross margin to analyze our performance . we define adjusted ebitda as net income ( loss ) plus ( minus ) interest expense ( income ) , income tax expense ( benefit ) , depreciation and amortization expense , asset impairments , ( gains ) losses on asset sales , certain non-cash charges such as non-cash equity compensation , non-cash vacation expense , non-cash ( gains ) losses on commodity derivative contracts ( total ( gain ) loss on commodity derivatives less net cash flow associated with commodity derivatives settled during the period ) and selected ( gains ) charges and transaction costs that are unusual or non-recurring . we define adjusted gross margin as total revenues minus cost of sales , excluding depreciation and amortization , and certain non-cash charges such as non-cash vacation expense and non-cash gains ( losses ) on derivative contracts ( total gain ( losses ) on commodity derivatives less net cash flow associated with commodity derivatives settled during the period ) . adjusted ebitda and adjusted gross margin are supplemental , non-gaap financial measures used by management and by external users of our financial statements , such as investors and commercial banks , to assess : · our operating performance as compared to those of other companies in the midstream sector , without regard to financing methods , historical cost basis or capital structure ; · the ability of our assets to generate sufficient cash flow to make distributions to our unitholders ; · our ability to incur and service debt and fund capital expenditures ; and · the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities . adjusted ebitda and adjusted gross margin are not financial measures presented in accordance with gaap . we believe that the presentation of these non-gaap financial measures provides information useful to investors in assessing our financial condition and results of operations .
| general and administrative expenses increased to $ 0.7 million for the year ended december 31 , 2014 from $ 0.1 million for the year ended december 31 , 2013. the increase was primarily due to the acquisition of wildcat permian in october 2013. crude oil supply and logistics replace_table_token_8_th ( 1 ) represents the average daily sales volume in our crude oil supply and logistics operations . ( 2 ) includes intersegment revenues of $ 49.8 million and $ 5.6 million in the years ended december 31 , 2014 and 2013 , respectively . the intersegment revenues were eliminated upon consolidation . ( 3 ) includes intersegment cost of sales , excluding depreciation and amortization of $ 1.2 million in the year ended december 31 , 2014. the intersegment cost of sales , excluding depreciation and amortization were eliminated upon consolidation . 57 ( 4 ) certain non-cash or non-recurring expenses have been excluded from cost of sales , excluding depreciation and amortization , operating expenses and general and administrative expenses for the purpose of calculating segment adjusted ebitda . volumes . crude oil sales volumes decreased to 45,643 barrels per day for the year ended december 31 , 2014 from 53,471 barrels per day for the year ended december 31 , 2013. the decrease was primarily due to an increase in available pipeline capacity in our area of operations , resulting in increased competition for our crude oil marketing activities . adjusted gross margin . adjusted gross margin decreased to $ 19.0 million for the year ended december 31 , 2014 from $ 26.3 million for the year ended december 31 , 2013. the significant increase in oil production growth in north america has generally created regional supply and demand imbalances , due to the lack of sufficient infrastructure to support the movement of such production , which increased certain crude oil location pricing differentials . the lack of existing pipeline takeaway capacity and associated logistical challenges created market conditions that provided us with more opportunities to capture above-baseline margins in 2013 compared to 2014. the
|
we are focused on diversifying our merchandise assortment both among our existing product categories as well as with potentially new product categories , including proprietary , exclusive and name brands , in an effort to increase revenues and to grow our new and active customer base . the following table shows our merchandise mix as a percentage of television shopping and online net merchandise sales for the years indicated by product category group . replace_table_token_7_th our product strategy is to continue to develop and expand new product offerings across multiple merchandise categories based on customer demand , as well as to offer competitive pricing and special values in order to drive new customers and maximize margin dollars per minute . our core video commerce customers — those who interact with our network and transact through television , online and mobile devices — are primarily women between the ages of 45 and 70. we also have a strong presence of male customers of similar age . we believe our customers make purchases based on our unique products , quality merchandise and value . company strategy as a multiplatform video commerce company , our strategy includes offering an exciting assortment of proprietary , exclusive ( i.e. , products that are not readily available elsewhere ) and name brand products using our commerce infrastructure , which includes television access to more than 87 million cable and satellite homes in the united states . we are also focused on growing our revenues , through social , mobile , online , and over-the-top platforms , as well as exploring online only and thoughtful bricks and mortar retailing partnerships . our merchandising plan is focused on delivering a balanced assortment of profitable proprietary , exclusive and name brand products presented in an engaging , entertaining , shopping-centric format . to enhance the shopping experience for our customers , we will continue to work hard to engage our customers more intelligently by leveraging the use of predictive analytics and interactive marketing to drive personalization and relevancy to each experience . in addition , we will continue to find new methods , territories , technologies and channels to distribute our video commerce programming beyond the television screen , including `` live on location '' entertainment and enhancing our social advertising . we believe these initiatives will position us as a multiplatform video commerce company that delivers a more engaging and enjoyable customer experience with sales and service that exceed customer expectations . our competition the video commerce retail business is highly competitive and we are in direct competition with numerous retailers , including online retailers , many of whom are larger , better financed and have a broader customer base than we do . in our television shopping and digital commerce operations , we compete for customers with other television shopping and e-commerce retailers , infomercial companies , other types of consumer retail businesses , including traditional `` brick and mortar '' department stores , discount stores , warehouse stores and specialty stores ; catalog and mail order retailers and other direct sellers . our direct competitors within the television shopping industry include qvc ( owned by liberty interactive corporation ) , and hsn , inc. ( in whom liberty interactive corporation also has a substantial interest , according to public filings ) , both of whom are substantially larger than we are in terms of annual revenues and customers , and whose programming is carried more broadly to u.s. households , including high definition bands and multi-channel carriage , than our programming . multimedia commerce group , inc. , which operates jewelry television , also competes with us for customers in the jewelry category . furthermore , in 2016 , amazon.com , inc. ( `` amazon '' ) launched a live television program , style code live , which features products that viewers can order online . this program , and any additional similar programs that amazon may offer in the future , may compete with us . in addition , there are a number of smaller niche players and startups in the television shopping arena who compete with us . we believe that our major competitors incur cable and satellite distribution fees representing a significantly lower percentage of their sales attributable to their television programming than we do , and that their fee arrangements are substantially on a commission 29 basis ( in some cases with minimum guarantees ) rather than on the predominantly fixed-cost basis that we currently have . at our current sales level , our distribution costs as a percentage of total consolidated net sales are higher than those of our competition . however , one of our strategies is to maintain our fixed distribution cost structure in order to leverage our profitability . we anticipate continued competition for viewers and customers , for experienced television shopping and e-commerce personnel , for distribution agreements with cable and satellite systems and for vendors and suppliers - not only from television shopping companies , but also from other companies that seek to enter the television shopping and online retail industries , including telecommunications and cable companies , television networks , and other established retailers . we believe that our ability to be successful in the video commerce industry will be dependent on a number of key factors , including continuing to expand our digital footprint to meet our customers ' needs , increasing the number of customers who purchase products from us and increasing the dollar value of sales per customer from our existing customer base . story_separator_special_tag level of shipments and a new call center facility to better serve our customers . the new sortation and warehouse management system were phased into production through fiscal 2016. total cost of the physical building expansion , new sortation equipment and call center facility was approximately $ 25 million and was financed with our expanded pnc revolving line of credit and a $ 15 million pnc term loan . story_separator_special_tag as a result of our distribution facility expansion , consolidation and technology upgrade initiative , we incurred approximately $ 677,000 in incremental expenses during fiscal 2016 related primarily to increased labor and training costs associated with our warehouse management system migration . for fiscal 2015 , we incurred approximately $ 1.3 million in incremental expenses related primarily to increased labor , inventory and other warehousing transportation costs , training costs and increased equipment rental costs associated with : the move into the new expanded warehouse building , the move out of previously leased warehouse space and the preparation of our expanded facility for the new high-speed parcel shipping and item sortation system and upgraded warehouse management system . 31 activist shareholder response costs in october of 2013 , we received a demand from an activist shareholder to call a special meeting of shareholders for the purpose , among other things , of voting on a new slate of directors and amending certain of our bylaws . we retained a team of advisers , including a financial adviser , proxy solicitor , investor relations firm and legal counsel , to assist in responding to the demand and the solicitation of proxies . in conjunction with such activities , we recorded charges to income in fiscal 2014 totaling $ 3.5 million , which includes $ 750,000 as reimbursement for a portion of the activist shareholder 's expenses . results of operations the following table sets forth , for the periods indicated , certain statement of operations data expressed as a percentage of net sales . replace_table_token_8_th key operating metrics replace_table_token_9_th ( a ) the company 's most recently completed fiscal year , fiscal 2016 , ended on january 28 , 2017 , and consisted of 52 weeks . fiscal 2015 ended on january 30 , 2016 and consisted of 52 weeks . fiscal 2014 ended on january 31 , 2015 and consisted of 52 weeks . ( b ) digital net sales percentage is calculated based on net sales that are generated from our evine.com website and mobile platforms , which are primarily ordered directly online . 32 program distribution our 24-hour television shopping networks , evine and evine too , which are distributed primarily on cable and satellite systems , reached more than 87 million homes , or full time equivalent subscribers , during fiscal 2016 , fiscal 2015 and fiscal 2014 . our television home shopping programming is also simulcast 24 hours a day , 7 days a week on our online website , evine.com , broadcast over-the-air in certain markets and is also available on all mobile channels and on various video streaming applications , such as roku and apple tv . this multiplatform distribution approach , complemented by our strong mobile and online efforts , will ensure that evine is available wherever and whenever our customers choose to shop . in addition to our total homes reached , we continue to increase the number of channels on existing distribution platforms , alternative distribution methods and part-time carriage in strategic markets . we believe that our distribution strategy of pursuing additional channels in productive homes we are already in is a more balanced approach to growing our business than merely adding new television homes in untested areas . we are also investing in high definition ( `` hd '' ) equipment and have made low-cost infrastructure investments that have enabled us to launch an up-converted version of our digital signal in a hd format and that improved the appearance of our primary network feed . we believe that having an hd feed of our service allows us to attract new viewers and customers . cable and satellite distribution agreements we have entered into distribution agreements with cable operators , direct-to-home satellite providers and telecommunications companies to distribute our television programming over their systems . the terms of the affiliation agreements typically range from one to five years . during the fiscal year , certain agreements with cable , satellite or other distributors may expire . under certain circumstances , the cable operators or we may cancel the agreements prior to their expiration . additionally , we may elect not to renew distribution agreements whose terms result in sub-standard or negative contribution margins . if the operator drops our service or if either we or the operator fails to reach mutually agreeable business terms concerning the distribution of our service so that the agreements are terminated , our business may be materially adversely affected . failure to maintain our distribution agreements covering a material portion of our existing households on acceptable financial and other terms could materially and adversely affect our future growth , sales revenues and earnings unless we are able to arrange for alternative means of broadly distributing our television programming . as of january 28 , 2017 , the direct ownership of nbcu ( which is indirectly owned by comcast ) in the company consisted of 7,141,849 shares of common stock . subsequent to fiscal 2016 , we repurchased 4,400,000 shares of our common stock from nbcu on january 31 , 2017. following the purchase , the direct equity ownership of nbcu in the company consisted of 2,741,849 shares of common stock . we have a significant cable distribution agreement with comcast and believe that the terms of this agreement are comparable to those with other cable system operators . net shipped units the number of net shipped units during fiscal 2016 increase d 4 % from fiscal 2015 to 10.3 million from 9.9 million . the number of net shipped units during fiscal 2015 increase d 9 % from fiscal 2014 to 9.9 million from 9.1 million . the increase in units shipped during fiscal 2016 reflects the continued broadening of our merchandise assortment , a decline in our average selling price ( as discussed below ) and strong performance in our fashion & accessories and beauty product categories .
| we received gross proceeds of $ 10.0 million and incurred approximately $ 852,000 of issuance costs . the warrants will expire on september 19 , 2021 and were not exercisable until march 19 , 2017 . the term of each option is six months and expire on march 19 , 2017 , provided , however , that an option may not be exercised for the first 30 days following issuance . each option may only be exercised once , in whole or in part , and the future potential investment offering will have a price equal to the five -day volume weighted average price per share of our common stock as of the day immediately prior to exercise . upon exercise of the options , two-thirds of the option securities will be issued in the form of common stock , and one-third will be issued in the form of warrants ( `` option warrants '' ) . these option warrants will have an exercise price at a 50 % premium to our closing stock price one-day prior to the option exercise and will expire five years after issuance . if all of the warrants , options and option warrants issued by us are all exercised , the total shares of common stock issued in connection with this offering will not be more than approximately 19.99 % of our total issued and outstanding shares following such exercises . during the fourth quarter of fiscal 2016 , three investors exercised their options . these exercises resulted in our issuance , in the aggregate , of ( a ) 1,646,350 shares of our common stock at a price ranging from $ 1.20 - $ 1.94 per share , resulting in aggregate proceeds of $ 2.5 million ; and ( b ) five-year warrants to purchase an additional 823,175 shares of our common stock at an exercise price ranging from $ 1.76 - $ 3.00 per share and expire between november 10 , 2021 and january 23 , 2022 . we incurred , in the aggregate , approximately $
|
vsoe of fair value is used to allocate a portion of the price to the undelivered elements and the residual method is used to allocate the remaining portion to the delivered elements . absent vsoe , 37 revenue is deferred until the earlier of the point at which vsoe of fair value exists for any undelivered element or until all elements of the arrangement have been delivered . however , if the only undelivered element is maintenance and support , the entire arrangement fee is recognized ratably over the performance period . changes in assumptions or judgments or changes to the elements in a software arrangement could cause a material increase or decrease in the amount of revenue that we report in a particular period . we determine vsoe for each element based on historical stand-alone sales to third parties or from the stated renewal rate for the elements contained in the initial arrangement . in determining vsoe , we require that a substantial majority of the selling prices for a product or service fall within a reasonably narrow pricing range . we have established vsoe for our software maintenance and support services , custom software development services , con sulting services and training , when such services are sold optionally with software licenses . for multiple-element arrangements containing our non-software services , we must : ( 1 ) determine whether and when each element has been delivered ; ( 2 ) determine the fair value of each element using the selling price hierarchy of vsoe of selling price , third-party evidence ( “ tpe ” ) of selling price or best-estimated selling price ( “ besp ” ) , as applicable ; and ( 3 ) allocate the total price among the various elements based on the relative selling price method . for multiple-element arrangements that contain both software and non-software elements , we allocate revenue to software or software-related elements as a group and any non-software elements separately based on the selling price hierarchy . we determine the selling price for each deliverable using vsoe of selling price , if it exists , or tpe of selling price . if neither vsoe nor tpe of selling price exist for a deliverable , we use besp . once revenue is allocated to software or software-related elements as a group , we recognize revenue in conformance with software revenue accounting guidance . revenue is recognized when revenue recognition criteria are met for each element . we are generally unable to establish vsoe or tpe for non-software elements and as such , we use besp . besp is generally used for offerings that are not typically sold on a stand-alone basis or for new or highly customized offerings . we determine besp for a product or service by considering multiple factors including , but not limited to , major product groupings , geographies , market conditions , competitive landscape , internal costs , gross margin objectives and pricing practices . pricing practices taken into consideration include historic contractually stated prices , volume discounts where applicable and our price lists . we must estimate certain royalty revenue amounts due to the timing of securing information from our customers . while we believe we can make reliable estimates regarding these matters , these estimates are inherently subjective . accordingly , our assumptions and judgments regarding future products and services as well as our estimates of royalty revenue could differ from actual events , thus materially impacting our financial position and results of operations . product revenue is recognized when the above criteria are met . we reduce the revenue recognized for estimated future returns , rebates and price protection at the time the related revenue is recorded . in determining our estimate for returns and in accordance with our internal policy regarding global channel inventory which is used to determine the level of product held by our distributors on which we have recognized revenue , we rely upon historical data , the estimated amount of product inventory in our distribution channel , the rate at which our product sells through to the end user , product plans and other factors . our estimated provisions for returns can vary from what actually occurs . product returns may be more or less than what was estimated . the amount of inventory in the channel could be different than what is estimated . our estimate of the rate of sell-through for product in the channel could be different than what actually occurs . these factors and unanticipated changes in the economic and industry environment could make our return estimates differ from actual returns , thus impacting our financial position and results of operations . in the future , actual returns and price protection may exceed our estimates as unsold products in the distribution channels are exposed to rapid changes in consumer preferences , market conditions or technological obsolescence due to new platforms , product updates or competing products . while we believe we can make reliable estimates regarding these matters , these estimates are inherently subjective . accordingly , if our estimates change , our returns and price protection reserves would change , which would impact the total net revenue we report . we recognize revenue for hosted services that are priced based on a committed number of transactions ratably beginning on the date the services associated with the committed transactions are first made available to the customer and continuing through the end of the contractual service term . over-usage fees , and fees billed based on the actual number of transactions from which we capture data , are billed in accordance with contract terms as these fees are incurred . we record amounts that have been invoiced in accounts receivable and in deferred revenue or revenue , depending on whether the revenue recognition criteria have been met . story_separator_special_tag our consulting revenue is recognized on a time and materials basis and is measured monthly based on input measures , such as on hours incurred to date compared to total estimated hours to complete , with consideration given to output measures , such as contract milestones , when applicable . 38 business combinations we allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed , assumed equity awards , as well as to in-process research and development based upon their estimated fair values at the acquisition date . the purchase price allocation process requires management to make significant estimates and assumptions , especially at the acquisition date with respect to intangible assets , deferred revenue obligations and equity assumed . although we believe the assumptions and estimates we have made are reasonable , they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain . examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to : future expected cash flows from software license sales , subscriptions , support agreements , consulting contracts and acquired developed technologies and patents ; expected costs to develop the in-process research and development into commercially viable products and estimated cash flows from the projects when completed ; the acquired company 's trade name and trademarks as well as assumptions about the period of time the acquired trade name and trademarks will continue to be used in the combined company 's product portfolio ; and discount rates . in connection with the purchase price allocations for our acquisitions , we estimate the fair value of the deferred revenue obligations assumed . the estimated fair value of the support obligations is determined utilizing a cost build-up approach . the cost build-up approach determines fair value by estimating the costs related to fulfilling the obligations plus a normal profit margin . the estimated costs to fulfill the obligations are based on the historical costs related to fulfilling the obligations . in connection with the purchase price allocations for our acquisitions , we estimate the fair value of the equity awards assumed . the estimated fair value is determined utilizing a modified binomial option pricing model which assumes employees exercise their stock options when the share price exceeds the strike price by a certain dollar threshold . if the acquired company has significant historical data on their employee 's exercise behavior , then this threshold is determined based upon the acquired company 's history . otherwise , our historical exercise experience is used to determine the exercise threshold . zero coupon yields implied by u.s. treasury issuances , implied volatility for our common stock and our historical forfeiture rate are other inputs to the binomial model . unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions , estimates or actual results . goodwill impairment we complete our goodwill impairment test on an annual basis , during the second quarter of our fiscal year , or more frequently , if changes in facts and circumstances indicate that an impairment in the value of goodwill recorded on our balance sheet may exist . as part of our annual goodwill impairment test , we first evaluate goodwill to determine if it is more likely than not that the occurrence of an event or change in circumstances has reduced the fair value of a reporting segment below its carrying value . this qualitative assessment requires that we consider events or circumstances that may include macroeconomic conditions , industry and market considerations , cost factors , overall financial performance , changes in management or key personnel , changes in strategy and changes in customers . if the qualitative assessment indicates that the two-step quantitative analysis should be performed , we exercise judgment at various steps , including the identification of reporting segments , assignment of goodwill to reporting segments , and determination of the fair value of each reporting segment . in order to estimate the fair value of goodwill , we typically estimate future revenue , consider market factors and estimate our future cash flows . based on these key assumptions , judgments and estimates , we determine whether we need to record an impairment charge to reduce the value of the asset carried on our balance sheet to its estimated fair value . assumptions , judgments and estimates about future values are complex and often subjective . they can be affected by a variety of factors , including external factors such as industry and economic trends , and internal factors such as changes in our business strategy or our internal forecasts . although we believe the ass umptions , judgme nts and estimates we have made in the past have been reasonable and appropriate , different assumptions , judgments and estimates could materially affect our reported financial results . 39 we completed our annual impairment test in the second quarter of fiscal 2016 and determined there was no impairment . the results of our annual impairment test indicate that the fair values of our reporting units are significantly in excess of their carrying values . accounting for income taxes we use the asset and liability method of accounting for income taxes . under this method , income tax expense is recognized for the amount of taxes payable or refundable for the current year . in addition , deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities , and for operating losses and tax credit carryforwards . management must make assumptions , judgments and estimates to determine our current provision for income taxes and also our deferred tax assets and liabilities and any valuation allowance to be recorded against a deferred tax asset .
| during fiscal 2015 , we repurchased approximately 8.1 million shares at an average price of $ 77.38 through structured repurchase agreements entered into during fiscal 2015 and fiscal 2014 . during fiscal 2014 , we repurchased approximately 10.9 million shares at an average price per share of $ 63.48 through structured repurchase agreements entered into during fiscal 2014 and fiscal 2013. for fiscal 2016 , 2015 and 2014 , the prepayments were classified as treasury stock on our consolidated balance sheets at the payment date , though only shares physically delivered to us by december 2 , 2016 , november 27 , 2015 and november 28 , 2014 were excluded from the computation of earnings per share . as of december 2 , 2016 , $ 100.1 million of prepayments remained under the agreement . subsequent to december 2 , 2016 , as part of our current $ 2 billion stock repurchase program , we entered into a structured stock repurchase agreement with a large financial institution whereupon we provided them with a prepayment of $ 200 million . this amount will be classified as treasury stock on our consolidated balance sheets . upon completion of the $ 200 million stock repurchase agreement , $ 300 million remains under our current authority . 55 subsequent to december 2 , 2016 , the board of directors approved a new stock repurchase program granting us authority to repurchase up to $ 2.5 billion in common stock through the end of fiscal 2019. the new stock repurchase program approved by our board of directors is similar to our previous stock repurchase programs . see item 5 , market for registrant 's common equity , related stockholder matters and issuer purchases of equity securities for share repurchases during the quarter ended december 2 , 2016. summary of stock repurchases for fiscal 2016 , 2015 and 2014 ( in thousands , except average amounts )
|
52 part iv item 15. exhibits , financial statement schedules ( a ) the following documents are filed as part of this report : ( 1 ) financial statements ( 2 ) financial statements schedule all financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required , or the required information is presented in the financial statements and notes thereto in is item 15 of part iv below . ( 3 ) exhibits we hereby file as part of this report the exhibits listed in the attached exhibit index . exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the sec , 100 f street , n.e . , room 1580 , washington , d.c. 20549. copies of such material can also be obtained from the public reference section of the sec , 100 f street , n.e . , washington , d.c. 20549 , at prescribed rates or on the sec website at www.sec.gov . item 16. form 10-k summary not applicable . 53 exhibit index replace_table_token_4_th * filed herewith . * * furnished herewith ( 1 ) incorporated by reference to exhibits to the company 's current report on form 8-k filed on august 22 , 2017 ( 2 ) incorporated by reference to exhibits to the company 's registration statement on form s-1filed on july 12 , 2017 ( 3 ) incorporated by reference to exhibits to amendment no . 2 to the company 's registration statement on form s-1filed on august 14 , 2017 ( 4 ) incorporated by reference to exhibits to amendment no . 1 to the company 's registration statement on form s-1filed on july 31 , 2017 ( 5 ) incorporated by reference to exhibits to the company 's current report on form 8-k filed on may 9 , 2018 ( 6 ) incorporated by reference to exhibits to the company 's current report on form 8-k filed on june 28 , 2018 54 signatures pursuant to the requirements of section 13 or 15 ( d ) of the securities act of 1934 , the registrant has duly caused this report to be signed on its behalf by the undersigned , thereunto duly authorized . july 24 , 2018 i-am capital acquisition company by : f. jacob cherian name : f. jacob cherian title : chief executive officer ( principal executive officer ) pursuant to the requirements of the securities exchange act of 1934 , this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated . name position date f. jacob cherian chief executive officer and director july 24 , 2018 f. jacob cherian ( principal executive officer ) suhel kanuga chief financial officer and director july 24 , 2018 suhel kanuga ( principal financial and accounting officer ) donald r. caldwell chairman july 24 , 2018 donald r. caldwell roman franklin director july 24 , 2018 roman franklin max hooper director july 24 , 2018 max hooper frank leavy director july 24 , 2018 frank leavy edward lenoard jaroski director july 24 , 2018 edward lenoard jaroski william h. herrmann director july 24 , 2018 william h. herrmann 55 i-am capital acquisition company index to story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report . certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties . overview we are a blank check company incorporated on april 17 , 2017 in delaware and formed for the purpose of effecting a merger , share exchange , asset acquisition , share purchase , reorganization or similar business combination with one or more businesses . we intend to effectuate our business combination using cash from the proceeds of our ipo and the private placement , our securities , debt or a combination of cash , securities and debt . the issuance of additional shares of common stock or preferred stock : ● may significantly dilute the equity interest of our investors ; ● may subordinate the rights of holders of common stock if we issue preferred shares with rights senior to those afforded to our common stock ; ● could cause a change in control if a substantial number of our shares of common stock are issued , which may affect , among other things , our ability to use our net operating loss carry forwards , if any , and could result in the resignation or removal of our present officers and directors ; ● may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us ; and ● may adversely affect prevailing market prices for our securities . similarly , if we issue debt securities , it could result in : ● default and foreclosure on our assets if our operating revenues after our business combination are insufficient to pay our debt obligations ; ● acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant ; ● our immediate payment of all principal and accrued interest , if any , if the debt security is payable on demand ; ● our inability to obtain additional financing if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding ; ● our inability to pay dividends on our common stock ; ● using a substantial portion of our cash flow to pay principal and interest on our debt , which will story_separator_special_tag 52 part iv item 15. exhibits , financial statement schedules ( a ) the following documents are filed as part of this report : ( 1 ) financial statements ( 2 ) financial statements schedule all financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required , or the required information is presented in the financial statements and notes thereto in is item 15 of part iv below . ( 3 ) exhibits we hereby file as part of this report the exhibits listed in the attached exhibit index . exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the sec , 100 f street , n.e . , room 1580 , washington , d.c. 20549. copies of such material can also be obtained from the public reference section of the sec , 100 f street , n.e . , washington , d.c. 20549 , at prescribed rates or on the sec website at www.sec.gov . item 16. form 10-k summary not applicable . 53 exhibit index replace_table_token_4_th * filed herewith . * * furnished herewith ( 1 ) incorporated by reference to exhibits to the company 's current report on form 8-k filed on august 22 , 2017 ( 2 ) incorporated by reference to exhibits to the company 's registration statement on form s-1filed on july 12 , 2017 ( 3 ) incorporated by reference to exhibits to amendment no . 2 to the company 's registration statement on form s-1filed on august 14 , 2017 ( 4 ) incorporated by reference to exhibits to amendment no . 1 to the company 's registration statement on form s-1filed on july 31 , 2017 ( 5 ) incorporated by reference to exhibits to the company 's current report on form 8-k filed on may 9 , 2018 ( 6 ) incorporated by reference to exhibits to the company 's current report on form 8-k filed on june 28 , 2018 54 signatures pursuant to the requirements of section 13 or 15 ( d ) of the securities act of 1934 , the registrant has duly caused this report to be signed on its behalf by the undersigned , thereunto duly authorized . july 24 , 2018 i-am capital acquisition company by : f. jacob cherian name : f. jacob cherian title : chief executive officer ( principal executive officer ) pursuant to the requirements of the securities exchange act of 1934 , this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated . name position date f. jacob cherian chief executive officer and director july 24 , 2018 f. jacob cherian ( principal executive officer ) suhel kanuga chief financial officer and director july 24 , 2018 suhel kanuga ( principal financial and accounting officer ) donald r. caldwell chairman july 24 , 2018 donald r. caldwell roman franklin director july 24 , 2018 roman franklin max hooper director july 24 , 2018 max hooper frank leavy director july 24 , 2018 frank leavy edward lenoard jaroski director july 24 , 2018 edward lenoard jaroski william h. herrmann director july 24 , 2018 william h. herrmann 55 i-am capital acquisition company index to story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report . certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties . overview we are a blank check company incorporated on april 17 , 2017 in delaware and formed for the purpose of effecting a merger , share exchange , asset acquisition , share purchase , reorganization or similar business combination with one or more businesses . we intend to effectuate our business combination using cash from the proceeds of our ipo and the private placement , our securities , debt or a combination of cash , securities and debt . the issuance of additional shares of common stock or preferred stock : ● may significantly dilute the equity interest of our investors ; ● may subordinate the rights of holders of common stock if we issue preferred shares with rights senior to those afforded to our common stock ; ● could cause a change in control if a substantial number of our shares of common stock are issued , which may affect , among other things , our ability to use our net operating loss carry forwards , if any , and could result in the resignation or removal of our present officers and directors ; ● may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us ; and ● may adversely affect prevailing market prices for our securities . similarly , if we issue debt securities , it could result in : ● default and foreclosure on our assets if our operating revenues after our business combination are insufficient to pay our debt obligations ; ● acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant ; ● our immediate payment of all principal and accrued interest , if any , if the debt security is payable on demand ; ● our inability to obtain additional financing if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding ; ● our inability to pay dividends on our common stock ; ● using a substantial portion of our cash flow to pay principal and interest on our debt , which will
| as of may 31 , 2018 , we had cash and marketable securities held in the trust account of $ 53,353,715 , substantially all of which is invested in u.s. treasury bills with a maturity of 180 days or less . interest income earned on the balance in the trust account may be available to us to pay taxes . since inception , we have withdrawn $ 406,050 of interest income from the trust account . as of may 31 , 2018 , we had cash of $ 458,063 held outside the trust account , which is available for use by us to cover the costs associated with identifying a target business including smaaash , negotiating a business combination , due diligence procedures and other general corporate uses . in addition , as of may 31 , 2018 , we had accrued expenses of $ 63,579. for the year ended may 31 , 2018 , cash used in operating activities amounted to $ 470,153 , mainly resulting from net loss of $ 8,862 , offset by interest earned on marketable securities held in the trust account of $ 521,702. changes in our operating assets and liabilities generated cash of $ 60,411. we intend to use substantially all of the funds held in the trust account , including any amounts representing interest earned on the trust account ( which interest shall be net of taxes payable and up to a maximum of $ 600,000 of working capital released to us and excluding deferred underwriting commissions ) to complete our initial business combination . we may withdraw interest to pay taxes and up to $ 600,000 for working capital expenses , if any . to the extent that our capital stock or debt is used , in whole or in part , as consideration to complete our initial business combination , the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses , make other acquisitions and pursue our growth strategies . we intend to use the funds held outside the trust
|
on november 4 , 2016 , we acquired baha , through an affiliate wholly-owned by dr. hosseinion , as nominee shareholder on our behalf . baha was managed by us under long-term msa since february 17 , 2015 and the results were consolidated in our financial statements as under vie accounting . as of the date of acquisition , we obtained a controlling interest in baha . on january 18 , 2017 , cms announced that apaaaco has been approved to participate in the new ngaco model . through the ngaco model , cms has partnered with apaaco and other acos experienced in coordinating care for populations of patients and whose provider groups are willing to assume higher levels of financial risk and reward under the ngaco model . the ngaco program began on january 1 , 2017. to position ourselves to participate in the ngaco model , we have devoted , and intend to continue to devote , significant effort and resources , financial and otherwise , to the ngaco model , and refocused away from certain other parts of our historic business and revenue streams , which will receive less emphasis in the future and could result in reduced revenue from these activities . we currently anticipate that revenue from the ngaco model will be a significant source of revenue for us in fiscal 2018 and future periods , although no assurance of that can be given at this time . during fiscal 2017 , we raised an aggregate $ 10.39 million , which consists of a $ 5.0 million loan received from nmm , a $ 4.99 million loan received from alliance and a $ 0.4 million loan received from an individual , the last mentioned of which was repaid in accordance with its terms . proposed merger on december 21 , 2016 , we entered into the merger agreement , pursuant to which nmm will merge into a wholly-owned subsidiary of ours . nmm is one of the largest healthcare msos in the united states , delivering comprehensive healthcare management services to a client base consisting of health plans , ipas , hospitals , physicians and other health care networks . nmm currently is responsible for coordinating the care for over 600,000 covered patients in southern , central and northern california through a network of ten ipas with over 2,000 contracted physicians . on a pro forma basis , the combined organization , would provide medical management for over 700,000 patients through a network of over 3,000 healthcare professionals and over 400 employees . the combination of apollomed and nmm brings together two complementary healthcare organizations to form one of the nation 's largest integrated population health management companies , which we believe will be well positioned for the ongoing transition of u.s. healthcare to value-based reimbursements . the transaction , which is expected to close in the second half of calendar year 2017 , is subject to antitrust regulatory clearance and other closing conditions , as well as approval by apollomed and nmm stockholders . for all purposes of this report , unless expressly indicated otherwise , we have discussed our present and intended operations , opportunities and challenges without consideration of the merger or the effect of the merger , if and should it be consummated . 55 story_separator_special_tag text-align : right '' > loss on extinguishment of debt , net for the year ended march 31 , 2016 , we incurred a loss on debt extinguishment of $ 0.3 million in connection with the repayment of nna debt and conversion of our then outstanding debt to nna into shares of our common stock . other income for the year ended march 31 , 2017 , the net other income decreased by $ 0.2 million to $ 14,701 as a result of the reduction in provider incentives from the health plan . benefit from income taxes for the year ended march 31 , 2017 , income tax benefit of approximately $ 0.1 million remained consistent with the prior year . net income attributable to noncontrolling interests for the year ended march 31 , 2017 , net income attributable to noncontrolling interest decreased by $ 0.9 million from $ 1.2 million to $ 0.3 million , primarily due to the deconsolidation of lalc and hendel during the fourth quarter of fiscal 2017 and acquisition of the noncontrolling interest in baha in november 2016 , the results of baha are since considered as controlling interest . net loss as a result of the foregoing factors , we incurred a net loss for the year ended march 31 , 2017 of approximately 8.7 million compared to a net loss of approximately $ 8.2 million for the year ended march 31 , 2016 , an increase in net loss of approximately $ 0.5 million or 6 % . net loss per share was $ 1.49 for the year ended march 31 , 2017 compared to a net loss per share of $ 1.79 for the year ended march 31 , 2016 , a decrease in net loss per share of $ 0.30. liquidity and capital resources we have a history of operating losses . we had net loss of approximately $ 8.7 million and approximately $ 8.2 million for the years ended march 31 , 2017 and 2016 , respectively . we had negative cash flow from operations of approximately $ 8.1 million and approximately $ 1.8 million for the years ended march 31 , 2017 and 2016 , respectively . cash flows used in investing activities were approximately $ 1.4 million and approximately $ 0.2 million for the years ended march 31 , 2017 and 2016 , respectively . cash flows provided by financing activities were approximately $ 8.9 million for the year ended march 31 , 2017 , compared to cash flows provided by financing activities of approximately $ 6.3 million for the year ended march 31 , 2016. we expect to have positive cash flow from operations for our 2018 fiscal year . as of march 31 , 2017 , we have an accumulated deficit of approximately $ 37.7 million . story_separator_special_tag at march 31 , 2017 , we had cash equivalents of approximately $ 8.7 million compared to cash and cash equivalents of approximately $ 9.3 million at march 31 , 2016. at march 31 , 2017 , we had net borrowings from notes and lines of credit totaling approximately $ 9.9 million compared to net borrowings at march 31 , 2016 of approximately $ 0.2 million and availability under lines of credit of approximately $ 0.2 million . these factors among others raise substantial doubt about our ability to continue as a going concern . our long-term ability to continue as a going concern is dependent upon our ability to increase revenue , reduce costs , achieve a satisfactory level of profitable operations , and obtain additional sources of suitable and adequate financing . the consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets , or the amounts and classification of liabilities that might be necessary in the event that we can not continue as a going concern . our ability to continue as a going concern is also dependent our ability to further develop our business . we may also have to reduce certain overhead costs through the reduction of salaries and other means , and settle liabilities through negotiation . there can be no assurance that management 's attempts at any or all of these endeavors will be successful . to date , we have funded our operations from a combination of internally generated cash flow and external sources , including the proceeds from the issuance of equity and or debt securities . we expect to continue to fund our working capital requirements , capital expenditures and payments of principal and interest on outstanding indebtedness , with cash on hand , cash flows from operations , available borrowings under our lines of credit and , if available , additional financings of equity and or debt . management does not believe that we have sufficient liquidity to meet our obligations for at least the next twelve months without some additional funds , such as funds available from raising capital . however , no assurance can be given that any such funds will be available at all or available on favorable terms . we are substantially dependent upon the consummation of the merger to meet our liquidity requirements . see “ the proposed merger and january 2017 loan ” below . for the year ended march 31 , 2017 , cash used in operating activities was approximately $ 8.1 million . this was the result of net loss of $ 8.7 million offset by add-backs of non-cash items of $ 0.4 million and the change in working capital of $ 0.1 million . non-cash expenses primarily include provision for doubtful accounts , net of recoveries , depreciation and amortization expense , impairment on intangible assets , gain on deconsolidation of vie , stock-based compensation expense , deferred taxes , amortization of deferred financing costs and the change in the fair value of the warrant liabilities . cash provided by changes in working capital was primarily due to the $ 3.7 million increase in accounts payable and accrued liabilities , offset by a decrease in medical liabilities of $ 0.9 million and increase of $ 2.8 million in accounts receivables . 58 on march 1 , 2016 , we sold substantially all the assets of acc to an unrelated third party . in connection with the sale , we received cash of $ 10,000 and the purchaser issued a non-interest bearing promissory note to us in the amount of $ 51,000 , of which $ 5,000 was repaid prior to year-end of fiscal year 2016. we recognized a loss on disposal in the amount of $ 476,745 related to this transaction , which consisted of the write-off of the remaining goodwill and intangible assets of acc in the amount of $ 461,500 and $ 27,427 , respectively , offset by the gain on the sale of net tangible assets in the amount of $ 12,182. in addition , during the year ended march 31 , 2016 , we determined that the remaining goodwill and intangible assets of akm in the amount of $ 83,943 and $ 123,342 , respectively , were not recoverable . accordingly , we recorded an impairment charge in the aggregate amount of $ 207,285 for the year ended march 31 , 2016. for the year ended march 31 , 2017 , cash used in investing activities was approximately $ 1.4 million . this was the result of $ 0.3 million used for the purchase of fixed assets , $ 0.2 million for the change in restricted cash and $ 0.9 million for the divesture of noncontrolling interest related to the deconsolidation of vie . for the year ended march 31 , 2017 , net cash provided by financing activities was $ 8.9 million which included proceeds of $ 5 million received from the nmm financing , $ 4.99 million received from issuance of promissory note , $ 0.4 million from a loan payable , and $ 0.1 million from our line of credit , and $ 0.2 million in proceeds from the exercise of warrants , offset by the aggregate of $ 0.6 million in principal payments , and $ 1.2 million distribution to a noncontrolling interest physician practice . deconsolidation of vie on january 1 , 2017 , pccm and vmm amended the msas entered into with lalc and hendel respectively . based on the company 's evaluation of current accounting guidance , it was determined that the company no longer holds an explicit or implicit variable interest in these entities .
| cost of services cost of services for the year ended march 31 , 2017 increased by approximately $ 14.7 million , from $ 34.0 million to $ 48.7 million , or 43 % , as compared to the same period of 2016. the increase was primarily due to a $ 14.4 million increase in amh and baha cost of services that was primarily related to the new hospitalist contracts that started in 2016 and use of contract labor , a $ 2.8 million increase in mmg due to increases in the pcp capitation and spc capitation due to increase in membership , increase in claims offset by increases in claims recovery due to high claims eligible for stop loss . such increases were partially offset by the decrease of $ 1.0 million from bchc and hchha due to lower patient census , a $ 0.6 million decrease in schc as a result of favorable margins in the current year as compared to the same period of the prior year , decrease of $ 0.6 million in acc due to the sale of substantially all its assets during the 2016 fiscal year and related cessation in operations , decrease of $ 0.3 million in lalc and hendel due to deconsolidation during the fourth quarter of fiscal 2017. general and administrative general and administrative costs for the year ended march 31 , 2017 increased by approximately $ 1.6 million , from $ 17.0 million to $ 18.6 million , or 10 % , as compared to the same period of 2016. there was an approximate $ 2.7 million increase relating to amm from the increase in overheads to manage 30 % increase in revenue and merger related cost incurred in fiscal 2017 , a $ 1.1 million increase from schc due to increase in operating costs , a $ 0.9 million increase from amh and baha from the increase in overheads to manage $ 12.2 million increase in revenue compared to same period in fiscal 2016 , $ 0.4 million increase from apollo care connect due to new operations , which is attributable to the increase in revenues in the current year . the increases were partially offset by a decrease of $ 1.9 million from mmg as a result of a decrease in payroll and related expenses and management fees , $ 0.5 million from acc as a result of a cessation in operations , a decrease of $ 0.4 million from bchc and hchha due to operational restructure and decreases in revenue , a decrease of $ 0.3 million from
|
espey mfg . & electronics corp. david o'neil david o'neil interim president and interim chief executive officer david o'neil interim president david o'neil ( interim chief executive officer ) september 17 , 2014 katrina sparano assistant treasurer katrina sparano ( interim principal financial officer ) september 17 , 2014 howard pinsley chairman of the board howard pinsley september 17 , 2014 barry pinsley director barry pinsley september 17 , 2014 michael w. wool director michael w. wool september 17 , 2014 paul j. corr director paul j. corr september 17 , 2014 alvin o. sabo director alvin o. sabo september 17 , 2014 carl helmetag director carl helmetag september 17 , 2014 30 story_separator_special_tag business outlook management expects revenues in fiscal 2015 to be less than fiscal year 2014 revenues . expectations are for product mix and margins to remain favorable for fiscal year 2015. during fiscal 2014 new orders received by the company were approximately $ 21 million . the total backlog at june 30 , 3014 was approximately $ 35.7 million . it is presently anticipated that a minimum of $ 18 million of orders comprising the june 30 , 2014 backlog will be filled during the fiscal year ending june 30 , 2015. the minimum of $ 18 million does not include any shipments , which may be made against orders subsequently received during the fiscal year ending june 30 , 2015. see discussions below for further detail on the customer mix included in the backlog . in addition to the backlog , the company currently has outstanding opportunities representing in excess of $ 21 million in the aggregate for both repeat and new programs . the outstanding quotations encompass various new and previously manufactured power supplies , transformers , and subassemblies . however , there can be no assurance that the company will acquire any of the anticipated orders described above , many of which are subject to allocations of the united states defense spending and factors affecting the defense industry and military procurement generally . revenues , backlog and outstanding opportunities have declined and we believe may continue to trend down in the foreseeable future due to several ongoing factors discussed in detail in the sales backlog and marketing and competition sections contained in item 1 above . management continues to evaluate our sales strategy including the professional and technical resources necessary to keep pace with the changing market conditions and needs of our customers . the company has added to and re-aligned current sales and engineering resources , in order to focus on penetrating opportunities with new and existing customers . the company continues quoting new customers for programs of varying sizes . three significant customers represented 59 % and 63 % of the company 's total sales in fiscal 2014 and 2013 , respectively . these sales are in connection with multiyear programs in which the company is a significant subcontractor . the june 30 , 2014 backlog of $ 35.7 million includes orders from two customers that represent 50 % and 16 % of the total backlog . this high concentration level with two customers presents significant risk . a loss of one of these customers or programs related to these customers could significantly impact the company . historically , a small number of customers have accounted for a large percentage of the company 's total sales in any given fiscal year . management continues to pursue opportunities with current and new customers with an overall objective of lowering the concentration of sales , mitigating excessive reliance upon a single major product of a particular program and minimizing the impact of the loss of a single significant customer . management continues to evaluate its business development functions and potential revised courses of action in order to diversify its customer base . management , along with the board of directors , continues to evaluate the need and use of the company 's working capital . capital expenditures are expected to be approximately $ 200,000 for fiscal 2015. expectations are that the working capital will be required to fund orders , dividend payments , and general operations of the business . from time to time , management along with the mergers and acquisitions committee of the board of directors examine opportunities involving acquisitions or other strategic options , including buying certain products or product lines . the criteria for consideration are synergies with the company 's existing product base and accretion to earnings . story_separator_special_tag margin-bottom : 12pt '' > critical accounting policies and estimates our significant accounting policies are described in note 2 to the financial statements . we believe our most critical accounting policies include revenue recognition and cost estimation on our contracts . revenue recognition and estimates a significant portion of our business is comprised of development and production contracts . generally revenues on long-term fixed-price contracts are recorded on a percentage of completion basis using units of delivery as the measurement basis for progress toward completion . percentage of completion accounting requires judgment relative to expected sales , estimating costs and making assumptions related to technical issues and delivery schedules . contract costs include material , subcontract costs , labor and an allocation of overhead costs . the estimation of cost at completion of a contract is subject to numerous variables involving contract costs and estimates as to the length of time to complete the contract . given the significance of the estimation processes and judgments described above , it is possible that materially different amounts of expected sales and contract costs could be recorded if different assumptions were used , based on changes in circumstances , in the estimation process . when a change in expected sales value or estimated cost is determined , changes are reflected in current period earnings . story_separator_special_tag espey mfg . & electronics corp. david o'neil david o'neil interim president and interim chief executive officer david o'neil interim president david o'neil ( interim chief executive officer ) september 17 , 2014 katrina sparano assistant treasurer katrina sparano ( interim principal financial officer ) september 17 , 2014 howard pinsley chairman of the board howard pinsley september 17 , 2014 barry pinsley director barry pinsley september 17 , 2014 michael w. wool director michael w. wool september 17 , 2014 paul j. corr director paul j. corr september 17 , 2014 alvin o. sabo director alvin o. sabo september 17 , 2014 carl helmetag director carl helmetag september 17 , 2014 30 story_separator_special_tag business outlook management expects revenues in fiscal 2015 to be less than fiscal year 2014 revenues . expectations are for product mix and margins to remain favorable for fiscal year 2015. during fiscal 2014 new orders received by the company were approximately $ 21 million . the total backlog at june 30 , 3014 was approximately $ 35.7 million . it is presently anticipated that a minimum of $ 18 million of orders comprising the june 30 , 2014 backlog will be filled during the fiscal year ending june 30 , 2015. the minimum of $ 18 million does not include any shipments , which may be made against orders subsequently received during the fiscal year ending june 30 , 2015. see discussions below for further detail on the customer mix included in the backlog . in addition to the backlog , the company currently has outstanding opportunities representing in excess of $ 21 million in the aggregate for both repeat and new programs . the outstanding quotations encompass various new and previously manufactured power supplies , transformers , and subassemblies . however , there can be no assurance that the company will acquire any of the anticipated orders described above , many of which are subject to allocations of the united states defense spending and factors affecting the defense industry and military procurement generally . revenues , backlog and outstanding opportunities have declined and we believe may continue to trend down in the foreseeable future due to several ongoing factors discussed in detail in the sales backlog and marketing and competition sections contained in item 1 above . management continues to evaluate our sales strategy including the professional and technical resources necessary to keep pace with the changing market conditions and needs of our customers . the company has added to and re-aligned current sales and engineering resources , in order to focus on penetrating opportunities with new and existing customers . the company continues quoting new customers for programs of varying sizes . three significant customers represented 59 % and 63 % of the company 's total sales in fiscal 2014 and 2013 , respectively . these sales are in connection with multiyear programs in which the company is a significant subcontractor . the june 30 , 2014 backlog of $ 35.7 million includes orders from two customers that represent 50 % and 16 % of the total backlog . this high concentration level with two customers presents significant risk . a loss of one of these customers or programs related to these customers could significantly impact the company . historically , a small number of customers have accounted for a large percentage of the company 's total sales in any given fiscal year . management continues to pursue opportunities with current and new customers with an overall objective of lowering the concentration of sales , mitigating excessive reliance upon a single major product of a particular program and minimizing the impact of the loss of a single significant customer . management continues to evaluate its business development functions and potential revised courses of action in order to diversify its customer base . management , along with the board of directors , continues to evaluate the need and use of the company 's working capital . capital expenditures are expected to be approximately $ 200,000 for fiscal 2015. expectations are that the working capital will be required to fund orders , dividend payments , and general operations of the business . from time to time , management along with the mergers and acquisitions committee of the board of directors examine opportunities involving acquisitions or other strategic options , including buying certain products or product lines . the criteria for consideration are synergies with the company 's existing product base and accretion to earnings . story_separator_special_tag margin-bottom : 12pt '' > critical accounting policies and estimates our significant accounting policies are described in note 2 to the financial statements . we believe our most critical accounting policies include revenue recognition and cost estimation on our contracts . revenue recognition and estimates a significant portion of our business is comprised of development and production contracts . generally revenues on long-term fixed-price contracts are recorded on a percentage of completion basis using units of delivery as the measurement basis for progress toward completion . percentage of completion accounting requires judgment relative to expected sales , estimating costs and making assumptions related to technical issues and delivery schedules . contract costs include material , subcontract costs , labor and an allocation of overhead costs . the estimation of cost at completion of a contract is subject to numerous variables involving contract costs and estimates as to the length of time to complete the contract . given the significance of the estimation processes and judgments described above , it is possible that materially different amounts of expected sales and contract costs could be recorded if different assumptions were used , based on changes in circumstances , in the estimation process . when a change in expected sales value or estimated cost is determined , changes are reflected in current period earnings .
| the impact of the program cancellation on total gross profit for fiscal 2014 was a decrease by $ 263,000. in a separate program , we encountered engineering problems in the final stages of a significant contract for three separate parts for a military ground combat vehicle . the program required complex electrical designs , and we were unsuccessful in delivering all required compliant prototypes to the customer by the agreed upon contract dates . our customer would not give us any more time to complete these units as they were required to close out the prime contract by the u.s. government . the program itself posed increased risk related to follow-on production orders as it was announced during fiscal 2014 that production funding for this vehicle was cut by the department of defense with no certainty as to whether the program would be revived and funded at a future date . the impact of the program cancellation on gross profit for fiscal 2014 was a decrease of $ 3.6 million . losses affecting gross profit were favorably offset by the reduction of a contract audit reserve of $ 319,000. selling , general and administrative expenses were $ 3,214,050 for the fiscal year ended june 30 , 2014 , an increase of $ 296,910 , or 10 % as compared to the prior year . the increase for fiscal 2014 relates primarily to severance costs incurred for terminated employees and an increase in salary expense associated with new personnel hired during fiscal 2014. employment of full time equivalents at june 30 , 2014 was 150 people compared with 170 people at june 30 , 2013. other income for the fiscal years ended june 30 , 2014 and 2013 was $ 148,753 and $ 83,758 , respectively . the increase in other income is due an increase in interest income , scrap and miscellaneous income . the effective income tax rate was 20.3 % in fiscal 2014 and 29.3 % in fiscal
|
general and administrative - general and administrative expenses represent administrative costs necessary to run kennedy wilson 's businesses and include things such as occupancy and equipment expenses , professional fees , public company costs , travel and related expenses , and communications and information services . depreciation and amortization - depreciation and amortization is comprised of depreciation expense which is recognized ratably over the useful life of an asset and amortization expense which primarily consist of the amortization of assets allocated to the value of in-place leases upon acquisition of a consolidated real estate asset . income from unconsolidated investments - income from unconsolidated investments consists of the company 's share of income or loss earned on investments in which the company can exercise significant influence but does not have control . income from unconsolidated investments includes income from ordinary course operations of the underlying investment , gains on sale , fair value gains and losses and performance-based fees . acquisition-related gains - acquisition-related gains consist of non-cash gains recognized by the company upon a gaap required fair value remeasurement due to a business combination . these gains are typically recognized with the change of control of an existing investment . the gain amount is based upon the fair value of the company 's equity in the investment in excess of the carrying amount of the equity directly preceding the change of control or the separately determined fair value of an investment being an excess of cash paid . these gains also arise when kennedy wilson converts a loan into consolidated real estate owned and the fair value of the underlying real estate exceeds the basis in the previously held loan . with the adoption of asu 2017-01 we will no longer record acquisition-related gains when acquiring controlling interests in real estate investments that are deemed asset acquisitions . acquisition-related expenses - acquisition-related expenses consists of the costs incurred to acquire assets . generally , the majority of these expenses relate to stamp duty taxes on foreign transactions . acquisition-related expenses may also include any professional fees associated with closing the transactions and the write off of any costs associated with acquisitions which did not materialize . after the adoption of asu 2017-01 and january 1 , 2018 , acquisition-related costs on successful acquisitions are now capitalized . gain on sale of real estate , net - gain on sale of real estate , net relates to the amount received over the carrying value of assets sold that met the definition of a business under us gaap . interest expense - interest expense represents interest costs associated with our senior notes payable , revolving credit facility , mortgages on our consolidated real estate , and unsecured debt held by kwe . other income ( expense ) - other income ( expense ) includes the realized foreign currency exchange income or loss relating to the settlement of foreign transactions during the year which arise due to changes in currency exchange rates , realized gains or losses related to the settlement of derivative instruments , the gain or loss on the sale of marketable securities , and interest income on bank deposits . income taxes - the company 's services business operates globally as corporate entities subject to federal , state , and local income taxes and the investment business operates through various partnership structures to acquire wholly-owned or jointly-owned investments in multifamily , commercial , residential and development properties . the company 's distributive share of income from its partnership investments will be subject to federal , state , and local taxes at the entity level and the related tax provision attributable to the company 's share of the income tax is reflected in the consolidated financial statements . noncontrolling interests - noncontrolling interests represents income or loss attributable to equity partners for their ownership in investments which the company controls . income or loss is attributed to noncontrolling interest partners based on their respective ownership interest in an investment . accumulated other comprehensive income - accumulated other comprehensive income represents the company 's share of foreign currency movement on translating kennedy wilson 's foreign subsidiaries from their functional currency into the company 's reporting currency . these amounts are offset by kennedy wilson 's effective portion of currency related hedge instruments . unrealized changes in fair value on the company 's investment in marketable securities are also included in this account . foreign currency 29 as of december 31 , 2018 , approximately 49 % of our investment account is invested through our foreign platforms in their local currencies . investment level debt is generally incurred in local currencies and therefore we consider the carrying value of our equity investment as the appropriate exposure to evaluate for hedging purposes . fluctuations in foreign exchanges rates may have a significant impact on the results of our operations . in order to manage the effect of these fluctuations , we generally hedge our book equity exposure to foreign currencies through currency forward contracts and options . please see the section titled `` qualitative and quantitative disclosures about market risk - currency risk - foreign currencies '' for a detailed discussion with respect to foreign currency . certain significant transactions and events kennedy wilson europe real estate plc on october 20 , 2017 , the company purchased the remaining 76 % of shares in kennedy wilson europe real estate plc ( `` kwe '' ) we did not previously own for $ 1.4 billion , which represented a discount of approximately $ 260 million to the original value of the shares when issued . as part of the acquisition consideration , the company issued 37.2 million shares of common stock valued at $ 722.2 million . before and after such transaction , kwe 's results is consolidated in our financial results with amounts not owned by us being allocated to noncontrolling interests . story_separator_special_tag prior to the acquisition , kennedy wilson owned 24 % of the share capital of kwe and all results presented below are based on this ownership amount up through the closing of the transaction . during march 2018 , kennedy wilson elected to treat kwe as a partnership for u.s. tax purposes retroactive to december 29 , 2017. due to unrealized foreign exchange losses not yet deductible for tax purposes and the consideration paid to acquire the non-controlling interests in kwe exceeding the book carrying value of the non-controlling interests in kwe , the company 's tax basis in kwe exceeded its book carrying value at december 29 , 2017 and december 31 , 2018. prior to the election to treat kwe as a partnership , kwe was taxed as a controlled foreign corporation . due to the conversion of kwe to a partnership for u.s. tax purposes , the company was required to record a deferred tax asset of $ 98.3 million related to its excess tax basis over book carrying value for its investment in kwe . as a significant portion of the excess tax basis would only reverse upon a strengthening of foreign currencies or upon a disposition of kwe , the company determined that a valuation allowance of $ 98.3 million was required for the tax basis that was in excess of the company 's carrying value for its investment in kwe . axa joint venture during the second quarter in 2018 , the company and axa investment managers - real assets ( `` axa '' ) entered into a joint venture agreement targeting multifamily assets in ireland . the axa joint venture commenced with axa investing in a 50 % ownership stake in 1,173 multifamily units across three assets in dublin , ireland previously held by the company and a different equity partner ( held in 50/50 joint ventures ) and was initially consolidated in the company 's financial statements . the company continues to hold a 50 % ownership interest in these assets through its ownership in this new joint venture with axa . as the company does not control the joint venture with axa , the assets are no longer consolidated and its investment with axa is accounted for under the equity method . going forward the investments will be fair value unconsolidated investments with operating activity included within income from unconsolidated investments . during the three months ended september 30 , 2018 , the company sold an additional 411 multifamily units across two assets in dublin , ireland and one in cork , ireland into the joint venture with axa that were both previously wholly owned by the company . the joint venture has also made investments in 274 units in dublin and acquired two development sites on which it expects to build an estimated 684 additional units . the table below summarizes the impact the transactions had on our financial statements during the year ended december 31 , 2018 : replace_table_token_8_th ( 1 ) includes $ 9.4 million of performance fees for the year ended december 31 , 2018 and $ 0.7 million and $ 1.5 million on acquisition and disposition fees for the year ended december 31 , 2018 . see results of operations section for more detail on adjusted fees . meyers research sale in december 2018 , we sold meyers research for $ 48.0 million and recognized a gain on sale of business of $ 40.4 million . we used part of the proceeds from such sale to reinvest $ 15.0 million for an 11 % ownership interest in a new partnership between meyers research and another premiere residential real estate construction service company . we no longer control meyers and will treat the new investment as an unconsolidated investment . 30 tax cuts and jobs act the tax cuts and jobs act ( the “ tcja ” ) , was signed into law on december 22 , 2017. the tcja amends a range of u.s. federal tax rules applicable to individuals , businesses and international taxation with most provisions having taken effect beginning january 1 , 2018. these changes include lowering the federal corporate income tax rate from a top marginal rate of 35 % to a flat rate of to 21 % and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries . due to the nature of our business operations , a majority of our foreign income is taxed currently in the u.s. for those foreign subsidiaries where there is no current u.s. tax inclusion , we have estimated that no repatriation tax is due as those foreign subsidiaries do not have aggregate positive unrepatriated foreign earnings . during the fourth quarter of 2017 , we adjusted our net u.s. deferred tax liability down to the new federal tax rate and recorded a $ 44.8 million tax benefit . as of december 31 , 2018 , we have completed our analysis and recorded an insignificant adjustment in the 2018 financial statement with respect to the federal rate change . the new legislation is unclear in many respects and could be subject to potential amendments and technical corrections , as well as interpretations and implementing regulations by the u.s. treasury department and internal revenue service ( “ irs ” ) , any of which could lessen or increase certain adverse impacts of the legislation . in addition , it is still unclear how many of the new u.s. federal income tax changes will affect state and local taxation , which often uses federal taxable income as a starting point for computing state and local tax liabilities . should the irs , treasury regulations or state taxing authorities issue further guidance or interpretation of relevant aspects of the new tax law , we may record additional adjustments .
| for same property multifamily units , total revenues increased 5 % , net operating income increased 6 % and occupancy remained at 94 % from 2017 . for same property commercial real estate , 34 total revenues decreased 3.7 % , net operating income decreased 2.2 % and occupancy decreased 0.1 % to 97.2 % from the same period in 2017 . see section titled `` same property analysis `` for more detail . a significant portion of our investments are in foreign currencies . we typically do not hedge future operations or cash flows so changes in foreign currency rates will have an impact on our results of operations . we have included the table below to illustrate the impact these fluctuations have had on our revenues , net income and adjusted ebitda by applying the relevant exchange rates for the prior period . please refer to the section titled `` currency risk - foreign currencies '' in item 3 for a discussion of risks relating to foreign currency and our hedging strategy and the `` other comprehensive income `` section below for a discussion of the balance sheet impact of foreign currency movements on our results of operations . replace_table_token_12_th revenues investments segment revenues rental income was $ 514.6 million for the year ended december 31 , 2018 as compared to $ 504.7 million for 2017 . the $ 9.9 million increase is primarily due to improved operating performance in our multifamily portfolio and acquisitions that were complete subsequent to the third quarter of 2017 , which were offset by the deconsolidation of multifamily assets into the joint venture with axa and consolidated asset sales . hotel income was $ 155.7 million for the year ended december 31 , 2018 as compared to $ 127.5 million for 2017 . the $ 28.2 million increase is primarily due to us taking control of six park inns hotels located in the united kingdom at the beginning of 2018 in which we previously held a senior debt position . we subsequently sold such six park inns hotels in december 2018. in the
|
we anticipate that our expenses will increase substantially , particularly due to the numerous risks and uncertainties associated with developing product candidates , including the uncertainty of : the scope , rate of progress , and expenses of our ongoing research activities as well as any preclinical studies , clinical trials and other research and development activities ; 104 establishing an appropriate safety profile ; successful enrollment in and completion of clinical trials ; whether our product candidates show safety and efficacy in our clinical trials ; receipt of marketing approvals from applicable regulatory authorities ; establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers ; obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates ; commercializing product candidates , if and when approved , whether alone or in collaboration with others ; and continued acceptable safety profile of products following any regulatory approval . any changes in the outcome of any of these variables with respect to the development of our product candidates in preclinical and clinical development could mean a significant change in the costs and timing associated with the development of these product candidates . we may never succeed in achieving regulatory approval for any of our product candidates . we may obtain unexpected results from our clinical trials . we may elect to discontinue , delay , or modify clinical trials of some product candidates or focus on other product candidates . for example , if the u.s. food and drug administration , or the fda , the european medicines agency , or ema , or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our ongoing and planned clinical trials , we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate . general and administrative expenses general and administrative expense consists primarily of employee related costs , including salaries , bonuses , benefits , share-based compensation , and other related costs , as well as expenses for outside professional services , including legal , accounting and audit services and other consulting fees , rent expense , directors and officers insurance expenses , investor and public relations expenses and other general administrative expenses . we anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates . we also anticipate that we will incur significantly increased accounting , audit , legal , regulatory , compliance and directors and officers insurance costs as well as investor and public relations expenses associated with operating as a public company . other income ( expense ) , net other income ( expense ) , net consists primarily of changes in the fair value of convertible notes and series a preferred share tranche obligations , as well as realized and unrealized gains and losses on foreign exchange , interest income earned on cash in current bank accounts and other expenses such as interest and bank charges . changes in the fair value of the series a preferred share tranche obligation consisted of gains and losses on the re-measurement at fair value at each reporting date of the tranche obligation , arising from the obligation and right to make future issuances of series a preferred shares . as of september 2019 , in connection with the issuance and sale of series b preferred shares , the final series a preferred tranche obligation was extinguished and recognized as additional paid-in-capital . realized and unrealized gains and losses on foreign exchange consist of realized and unrealized gains and losses from holding cash and restricted cash in foreign currency and foreign currency denominated research and development tax credits receivable , other receivables , accounts payable , accrued expenses and other current liabilities as well as operating lease liabilities . 105 story_separator_special_tag additional capital to pursue in-licenses or acquisitions of other product candidates . because of the numerous risks and uncertainties associated with research , development , and commercialization of our product candidates , we are unable to estimate the exact amount of our working capital requirements . our future capital requirements will depend on many factors , including : the initiation , timing , costs , progress and results of our ongoing phase 1/2 clinical trial of rp-3500 and our planned phase 1 clinical trial of rp-6306 ; the progress of preclinical development and possible clinical trials of our current earlier-stage programs ; the scope , progress , results and costs of our research programs and preclinical development of any additional product candidates that we may pursue ; the development requirements of other product candidates that we may pursue ; our headcount growth and associated costs as we expand our research and development and establish a commercial infrastructure ; the timing and amount of milestone and royalty payments that we are required to make or eligible to receive under our current or future collaboration agreements ; the outcome , timing and cost of meeting regulatory requirements established by the fda , ema and other regulatory authorities ; the costs and timing of future commercialization activities , including product manufacturing , marketing , sales and distribution , for any of our product candidates for which we receive marketing approval ; the cost of expanding , maintaining and enforcing our intellectual property portfolio , including filing , prosecuting , defending and enforcing our patent claims and other intellectual property rights ; the cost of defending potential intellectual property disputes , including patent infringement actions brought by third parties against us or any of our product candidates ; the effect of competing technological and market developments ; the cost and timing of completion of commercial-scale manufacturing activities ; the extent to story_separator_special_tag we anticipate that our expenses will increase substantially , particularly due to the numerous risks and uncertainties associated with developing product candidates , including the uncertainty of : the scope , rate of progress , and expenses of our ongoing research activities as well as any preclinical studies , clinical trials and other research and development activities ; 104 establishing an appropriate safety profile ; successful enrollment in and completion of clinical trials ; whether our product candidates show safety and efficacy in our clinical trials ; receipt of marketing approvals from applicable regulatory authorities ; establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers ; obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates ; commercializing product candidates , if and when approved , whether alone or in collaboration with others ; and continued acceptable safety profile of products following any regulatory approval . any changes in the outcome of any of these variables with respect to the development of our product candidates in preclinical and clinical development could mean a significant change in the costs and timing associated with the development of these product candidates . we may never succeed in achieving regulatory approval for any of our product candidates . we may obtain unexpected results from our clinical trials . we may elect to discontinue , delay , or modify clinical trials of some product candidates or focus on other product candidates . for example , if the u.s. food and drug administration , or the fda , the european medicines agency , or ema , or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our ongoing and planned clinical trials , we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate . general and administrative expenses general and administrative expense consists primarily of employee related costs , including salaries , bonuses , benefits , share-based compensation , and other related costs , as well as expenses for outside professional services , including legal , accounting and audit services and other consulting fees , rent expense , directors and officers insurance expenses , investor and public relations expenses and other general administrative expenses . we anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates . we also anticipate that we will incur significantly increased accounting , audit , legal , regulatory , compliance and directors and officers insurance costs as well as investor and public relations expenses associated with operating as a public company . other income ( expense ) , net other income ( expense ) , net consists primarily of changes in the fair value of convertible notes and series a preferred share tranche obligations , as well as realized and unrealized gains and losses on foreign exchange , interest income earned on cash in current bank accounts and other expenses such as interest and bank charges . changes in the fair value of the series a preferred share tranche obligation consisted of gains and losses on the re-measurement at fair value at each reporting date of the tranche obligation , arising from the obligation and right to make future issuances of series a preferred shares . as of september 2019 , in connection with the issuance and sale of series b preferred shares , the final series a preferred tranche obligation was extinguished and recognized as additional paid-in-capital . realized and unrealized gains and losses on foreign exchange consist of realized and unrealized gains and losses from holding cash and restricted cash in foreign currency and foreign currency denominated research and development tax credits receivable , other receivables , accounts payable , accrued expenses and other current liabilities as well as operating lease liabilities . 105 story_separator_special_tag additional capital to pursue in-licenses or acquisitions of other product candidates . because of the numerous risks and uncertainties associated with research , development , and commercialization of our product candidates , we are unable to estimate the exact amount of our working capital requirements . our future capital requirements will depend on many factors , including : the initiation , timing , costs , progress and results of our ongoing phase 1/2 clinical trial of rp-3500 and our planned phase 1 clinical trial of rp-6306 ; the progress of preclinical development and possible clinical trials of our current earlier-stage programs ; the scope , progress , results and costs of our research programs and preclinical development of any additional product candidates that we may pursue ; the development requirements of other product candidates that we may pursue ; our headcount growth and associated costs as we expand our research and development and establish a commercial infrastructure ; the timing and amount of milestone and royalty payments that we are required to make or eligible to receive under our current or future collaboration agreements ; the outcome , timing and cost of meeting regulatory requirements established by the fda , ema and other regulatory authorities ; the costs and timing of future commercialization activities , including product manufacturing , marketing , sales and distribution , for any of our product candidates for which we receive marketing approval ; the cost of expanding , maintaining and enforcing our intellectual property portfolio , including filing , prosecuting , defending and enforcing our patent claims and other intellectual property rights ; the cost of defending potential intellectual property disputes , including patent infringement actions brought by third parties against us or any of our product candidates ; the effect of competing technological and market developments ; the cost and timing of completion of commercial-scale manufacturing activities ; the extent to
| general and administrative expenses general and administrative expenses were $ 14.3 million for the year ended december 31 , 2020 , compared to $ 5.4 million for the year ended december 31 , 2019. the increase of $ 8.9 million consisted of ( i ) a $ 2.3 million increase 106 in payroll and personnel related costs , as well as ( ii ) a $ 2.0 million increase in legal and professional fees , ( iii ) a $ 3.7 million increase in d & o insurance costs and ( iv ) a $ 1 . 7 million increase in other general and administrative expenses , related to costs associated with operating activities and the preparations for becoming and now operating as a public company , partially offset by a decrease of $ 0 . 8 million in travel related expenses as a result of covid-related travel restrictions . other expense , net other expense , net was $ 0.4 million for the year ended december 31 , 2010 , compared to $ 0.6 million for the year ended december 31 , 2019. the decrease of $ 0.2 million in other expenses is primarily attributable to ( i ) a $ 1.4 million decrease in changes in the fair value of the series a preferred share tranche obligation and ( ii ) a $ 0.2 million increase in interest income related to cash balances in our current bank accounts , partially offset by an increase of $ 1.4 million in realized and unrealized losses on foreign exchange as a result of fluctuations in foreign exchange rates . from december 31 , 2019 to december 31 , 2020 , the relative value of the u.s. dollar to the canadian dollar decreased by approximately 2 % . our net financial position exposure to canadian dollar-denominated cash and cash equivalents as well as restricted cash balances , research and development tax credits receivable , other receivables , accounts payable , accrued expenses and other current liabilities as well as operating lease liabilities amounted to ca $ 0.9 million as at december 31 , 2020. income tax expense income tax benefit was $ 1.3 million for the year ended december 31 , 2020 , primarily reflecting u.s. federal and state research and development tax credits carryforwards now available to us , partially offset by taxable income in our u.s. subsidiary . during the year ended december 31 , 2020 , we further utilized operating loss carryforwards to offset taxable income in canada , arising primarily from the upfront payment received
|
an unrealized loss exists when the current fair value of an individual security is less than its amortized cost-basis . the primary factors atlantic capital considers in determining whether impairment is other-than-temporary are long term expectations and recent experience regarding principal and interest payments , and atlantic capital 's ability and intent to hold the security until the amortized cost basis is recovered . atlantic capital uses derivatives primarily to manage interest rate risk . the fair values of derivative financial instruments are determined based on quoted market prices , dealer quotes and pricing models that are primarily sensitive to market observable data . income taxes . atlantic capital recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities . deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled . in assessing the realizability of deferred tax assets , management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized . the realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible . management considers the scheduled reversal of deferred tax liabilities , projected future taxable income , and tax planning strategies by jurisdiction and entity in making this assessment . regulatory risk-based capital rules limit the amount of deferred tax assets that a bank or bank holding company can include in tier 1 capital . generally , deferred tax assets that arise from net operating loss and tax credit carryforwards , net of any related valuation allowances and net of deferred tax liabilities , are excluded from cet1 and tier 1 capital . deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks , net of related valuation allowances and net of deferred tax liabilities , that exceed certain thresholds are excluded from cet1 and tier 1 capital . results of operations net interest income and net interest margin net interest income for 2015 totaled $ 44.0 million , a $ 10.9 million , or 33 % , increase from 2014. this increase was primarily driven by a $ 12.4 million , or 34.0 % , increase in interest income . the interest income increase primarily resulted from the following : an $ 11.8 million , or 36.0 % , increase to $ 44.6 million in interest income on loans , resulting from a $ 273.1 million , or 29.7 % higher average balance , due primarily to the addition of the first security loan portfolio as well as organic loan growth ; a $ 353,000 , increase to $ 664,000 in interest income on other short-term investments , resulting from a $ 13.5 million , or 36.6 % higher average balance , as well as a 48 basis point increase in the yield earned ; and 32 net accretion income on acquired loans totaling $ 625,000. further contributing to the overall increase in interest income was a $ 192,000 increase in interest income on investment securities . the increase resulted from a $ 22.1 million increase in the average balance of securities offset by a 17 basis point decline in the yield . interest expense for the twelve months ended december 31 , 2015 totaled $ 4.9 million , a $ 1.5 million or 42.7 % increase from the same period of 2014. the rate paid on interest bearing liabilities increased 5 basis points from 2014 to 2015 , driven by an increase in the balance of long-term debt , which was zero in 2014. in addition , premium amortization on acquired time deposits totaled $ 181,000. net interest margin increased to 2.98 % from 2.85 % for the year ended december 31 , 2015 compared to the year ended december 31 , 2014. net interest margin increased to 2.85 % compared to 2.75 % for the twelve months ended december 31 , 2014 compared to the same period in 2013. the primary reasons for the increase in net interest margin for 2015 compared to 2014 , were the increase in loan volume and the higher yield earned on the first security loan portfolio . net accretion income on acquired loans also contributed to the increase . overall funding costs remained relatively stable from 2014 to 2015 , although the long-term debt issued in september of 2015 added a relatively high cost funding source to the balance sheet . net interest income increased $ 4.2 million , or 14 % from $ 28.9 million in 2013 to $ 33.1 million in 2014. net interest margin was 2.85 % in 2014 compared to 2.75 % in 2013 , due to higher loan balances and slightly lower deposit costs . the following table presents information regarding average balances for assets and liabilities , the total dollar amounts of interest income and dividends from average interest-earning assets , the total dollar amounts of interest expense on average interest-bearing liabilities , and the resulting average yields and costs . the yields and costs for the periods indicated are derived by dividing the income or expense by the average balances for assets or liabilities , respectively , for the periods presented . loan fees are included in interest income on loans . story_separator_special_tag 33 table 1 - average balance sheets and net interest analysis ( dollars in thousands ) twelve months ended december 31 , 2015 2014 2013 average balance interest income/expense yield/rate average balance interest income/expense yield/rate average balance interest income/expense yield/rate assets deposits in other banks $ 63,785 $ 251 0.39 % $ 56,328 $ 214 0.38 % $ 76,192 $ 276 0.36 % other short-term investments 50,322 664 1.32 % 36,828 311 0.84 % 33,239 — 0.89 % investment securities : taxable investment securities 161,597 3,179 1.97 % 141,627 3,035 2.14 % 145,768 3 1.96 % non-taxable investment securities 4,199 122 2.91 % 2,100 74 3.54 % 1,555 — 3.47 % total investment securities 165,796 3,301 1.99 % 143,727 3,109 2.16 % 147,323 3 1.98 % total loans 1,192,103 44,561 3.74 % 918,959 32,762 3.57 % 793,505 28,971 3.65 % fhlb stock 4,338 189 4.36 % 3,917 146 3.74 % 3,082 77 2.49 % total interest-earning assets 1,476,344 48,966 3.32 % 1,159,759 36,542 3.15 % 1,053,341 32,537 3.09 % non-earning assets 105,343 67,471 65,186 total assets $ 1,581,687 $ 1,227,230 $ 1,118,527 liabilities interest bearing deposits : now , money market , and savings 745,777 2,839 0.38 % 605,014 2,376 0.39 % 645,689 2,675 0.41 % time deposits 58,133 150 0.26 % 16,322 69 0.42 % 18,214 90 0.50 % internet and brokered deposits 140,416 628 0.45 % 107,575 444 0.41 % 77,219 351 0.45 % total interest-bearing deposits 944,326 3,617 0.38 % 728,911 2,889 0.40 % 741,122 3,116 0.42 % total borrowings 84,196 447 0.53 % 100,326 560 0.56 % 46,144 499 1.08 % total long-term debt 12,805 858 6.70 % — — — % — — — % total interest-bearing liabilities 1,041,327 4,922 0.47 % 829,237 3,449 0.42 % 787,266 4 0.46 % demand deposits 352,437 254,861 194,347 other liabilities 17,248 7,445 7,061 shareholders ' equity 170,675 135,687 129,853 total liabilities and shareholders ' equity $ 1,581,687 $ 1,227,230 $ 1,118,527 net interest spread 2.85 % 2.73 % 2.63 % net interest income and net interest margin ( 1 ) $ 44,044 2.98 % $ 33,093 2.85 % $ 28,922 2.75 % ( 1 ) net interest income divided by total interest-earning assets using the appropriate day count convention based on the type of interest-earning asset . 34 the following table shows the relative effect on net interest income for changes in the average outstanding amounts ( volume ) of interest-earning assets and interest-bearing liabilities and the rates earned and paid on such assets and liabilities ( rate ) . variances resulting from a combination of changes in rate and volume are allocated in proportion to the absolute dollar amounts of the change in each category . replace_table_token_4_th provision for loan losses management considers a number of factors in determining the required level of the allowance for loan losses and the provision required to achieve what is believed to be appropriate reserve level , including historical loss experience , loan growth , credit risk rating trends , nonperforming loan levels , delinquencies , loan portfolio concentrations and economic and market trends . the provision for loan losses represents management 's determination of the amount necessary to be charged against the current period 's earnings to maintain the allowance for loan losses at a level that it considered adequate in relation to the estimated losses inherent in the loan portfolio . the provision for credit losses was $ 8.0 million in 2015 , compared with $ 488,000 in 2014 , and $ 246,000 in 2013. in accordance with the accounting guidance for business combinations , there was no allowance for loan losses brought forward on loans acquired from first security on october 31 , 2015. at december 31 , 2015 , atlantic capital included the performing non-impaired loans acquired from first security in its general allowance calculation in order to reflect the necessary allowance for incurred losses , which accounted for a majority of the increase in the provision expense . at december 31 , 2015 , nonperforming loans totaled $ 8.5 million compared to no nonperforming loans as of december 31 , 2014. the increase was attributable to the addition of first security 's nonperforming loans , which totaled $ 777,000 , as well as the addition of two legacy atlantic capital loan relationships totaling approximately $ 7.7 million . net loan charge-offs were 0.05 % , ( 0.01 ) % and 0.02 % , respectively , of average loans ( annualized ) for the twelve months ended december 31 , 2015 , 2014 , and 2013 , respectively . the allowance for loan losses to total loans at december 31 , 2015 was 1.06 % , compared to 1.10 % at december 31 , 2014 . 35 noninterest income noninterest income was $ 9.4 million in 2015 , compared with $ 5.3 million in 2014 , and $ 3.9 million in 2013. the following table presents the components of noninterest income . replace_table_token_5_th service charges of $ 2.6 million were up $ 1.4 million from 2014. the increase was primarily due to the addition of first security deposits as well as an increase in foreign exchange income of $ 276,000. mortgage income and trust income were up from 2014 due to these new lines of business acquired from first security . bank owned life insurance of $ 2.2 million was up $ 1.2 million from the twelve months ended december 31 , 2015 to 2014 , due to a $ 1.4 million non-recurring gain . in addition , sba lending activities increased $ 646,000 , or 28.5 % , compared to 2014 , due to a higher level of loan sales . during the 2015 and 2014 , guaranteed portions of 42 and 19 sba loans with principal balances of $ 52.3 million and $ 39.0 million , respectively , were sold in the secondary market . for 2014 , noninterest income totaled $ 5.3 million , compared to $ 3.9 million for 2013 , a $ 1.4 million , or 37.9 % , increase . the most significant components of the increase were a $ 2.2
| net interest income was $ 44.0 million for the year ended december 31 , 2015 , compared to $ 33.1 million for 2014. net interest margin increased from 2.85 % for the twelve months ended december 31 , 2014 to 2.98 % for the same period in 2015. the increase in the margin was primarily due to the addition of the first security loan portfolio . net interest income increased $ 4.2 million , or 14.4 % , from $ 28.9 million in 2013 to $ 33.1 million in 2014. the yield on interest-earning assets increased by six basis points from 3.09 % in 2013 to 3.15 % in 2014. the higher net interest margin in 2014 was primarily due to higher loan balances and slightly lower deposit costs . provision for loan losses for the twelve months ended december 31 , 2015 totaled $ 8.0 million , an increase of $ 7.5 million from the twelve months ended december 31 , 2014. the increase in the provision was primarily due to loan growth , both organic and through the acquisition of first security . provision expense increased by $ 242,000 from $ 246,000 in 2013 to $ 488,000 in 2014. the net charge-off ratio improved from .02 % in 2013 to ( .01 ) % ( net recovery ) in 2014 representing a $ 285,000 decline in net charge-offs . noninterest income increased $ 4.1 million , or 74.9 % , to $ 9.4 million from the twelve months ended december 31 , 2014. the increase was primarily due a $ 1.4 million increase in service charges due to the addition of first security well as a $ 1.1 million non-recurring boli gain . two new lines of business resulting from the merger - mortgage banking and trust - contributed $ 163,000 and $ 192,000 , respectively , during 2015. noninterest income increased by $ 1.4 million from $ 3.9 million in 2013 to $ 5.3 million in 2014. the most significant components of the increase were a $ 2.2 million increase in sba lending activities partially offset by a $ 500,000 decrease in gains on sales of other assets . for the year ended december 31 , 2015 ,
|
as a result , we expect to incur substantial operating losses for at least the next several years , due primarily to the advancement of our research and development programs , the cost of preclinical studies and clinical trials , spending for outside services , costs related to maintaining our intellectual property portfolio , costs due to manufacturing activities , costs related to our facilities , and possible advancement toward commercialization activities . critical accounting policies and estimates the preparation and presentation of financial statements in accordance with accounting principles generally accepted in the united states requires that management make a number of assumptions and estimates that affect the reported amounts of assets , liabilities , revenues and expenses in our financial statements and accompanying notes . management bases its estimates on historical information and assumptions believed to be reasonable . although these estimates are based on management 's best knowledge of current events and circumstances that may impact us in the future , they are inherently uncertain and actual results may differ materially from these estimates . our critical accounting policies are those that affect our financial statements materially and involve a significant level of judgment by management . our critical accounting policies regarding revenue recognition are in the following areas : license and royalty agreements , manufacturing contracts , and grant revenues . our critical accounting policies also include recognition of research and development expenses and the valuation of long-lived and intangible assets . revenue recognition revenue is recognized when the four basic criteria of revenue recognition are met : ( 1 ) persuasive evidence of an arrangement exists ; ( 2 ) delivery has occurred or services rendered ; ( 3 ) the fee is fixed or determinable ; and ( 4 ) collectability is reasonably assured . certain of the our revenue is generated through manufacturing contracts and stand-alone license agreements . we have entered into multiple-element arrangements . in order to account for the multiple-element arrangements , we identify the deliverables included within the agreement and evaluates which deliverables represent separate units of accounting . analyzing the arrangement to identify deliverables requires the use of judgment , and each deliverable may be an obligation to deliver services , a right or license to use an asset , or another performance obligation . multiple-element arrangements prior to january 1 , 2011 prior to adopting the revised multiple element guidance on january 1 , 2011 , we analyzed our multiple element arrangements to determine whether the identified deliverables could be accounted for individually as separate units of accounting . the delivered item ( s ) were considered a separate unit of accounting if all of the following criteria were met : ( 1 ) the delivered item ( s ) has value to the customer on a standalone basis ; ( 2 ) there is objective and reliable evidence of the fair value of the undelivered item ( s ) ; and ( 3 ) if the arrangement includes a general right of return relative to the delivered item , delivery or performance of the undelivered item ( s ) is considered probable and substantially in our control . if these criteria were not met , the deliverable was combined with other deliverables in the arrangement and accounted for as a combined unit of accounting . 45 multiple-element arrangements after january 1 , 2011 effective january 1 , 2011 , we followed the provisions of asu no . 2009-13 for all multiple element agreements , including contract manufacturing , contract services and license agreements . under the revised guidance , the delivered item ( s ) has value to the customer on a standalone basis and , if the arrangement includes a general right of return relative to the delivered item , delivery or performance of the undelivered item ( s ) is considered probable and substantially in our control . a delivered item is considered a separate unit of accounting when the delivered item has value to the partner on a standalone basis based on the consideration of the relevant facts and circumstances for each arrangement . factors considered in this determination include the research capabilities of the partner and the availability of research expertise in this field in the general marketplace . arrangement consideration is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price . the relative selling price for each deliverable is determined using vendor specific objective evidence , or vsoe , of selling price or third-party evidence of selling price if vsoe does not exist . if neither vsoe nor third-party evidence of selling price exists , we use our best estimate of the selling price for the deliverable . the amount of allocable arrangement consideration is limited to amounts that are fixed or determinable . the consideration received is allocated among the separate units of accounting , and the applicable revenue recognition criteria are applied to each of the separate units . changes in the allocation of the sales price between delivered and undelivered elements can impact revenue recognition but do not change the total revenue recognized under any agreement . if facts and circumstances dictate that the license has standalone value from the undelivered items , which generally include research and development services and the manufacture of drug products , the license is identified as a separate unit of accounting and the amounts allocated to the license are recognized upon the delivery of the license , assuming the other revenue recognition criteria have been met . however , if the amounts allocated to the license through the relative selling price allocation exceed the upfront license fee , the amount recognized upon the delivery of the license is limited to the upfront fee received . story_separator_special_tag if facts and circumstances dictate that the license does not have standalone value , the transaction price , including any upfront license fee payments received , are allocated to the identified separate units of accounting and recognized as those items are delivered . the terms of our partnership agreements provide for milestone payments upon achievement of certain regulatory and commercial events . effective january 1 , 2011 , we adopted on a prospective basis the milestone method of accounting under asu 2010-17. under the milestone method , we recognize consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety . a milestone is considered substantive when it meets all of the following three criteria : 1 ) the consideration is commensurate with either the entity 's performance to achieve the milestone or the enhancement of the value of the delivered item ( s ) as a result of a specific outcome resulting from the entity 's performance to achieve the milestone , 2 ) the consideration relates solely to past performance , and 3 ) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement . a milestone is defined as an event ( i ) that can only be achieved based in whole or in part on either the entity 's performance or on the occurrence of a specific outcome resulting from the entity 's performance , ( ii ) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved and ( iii ) that would result in additional payments being due to us . contract services , grant and royalty revenue we recognize revenue from contract services and federal government research grants during the period in which the related expenditures are incurred and related payments for those services are received or collection is reasonably assured . royalties to be received based on sales of licensed products by our partners incorporating our licensed technology are recognized when received . 46 accruals for potential disallowed costs on government contracts we have contracts with u.s. government agencies under which we bill for direct and indirect costs incurred . these billed costs are subject to audit by government agencies . we have established accruals of approximately $ 49,000 and $ 0.2 million at december 31 , 2011 and 2010 , respectively , to provide for potential disallowed costs . in the event that the final costs allowed are different from what we have estimated , we may need to make a change in our estimated accrual , which could also affect our results of operations and cash flow . research and development expenses research and development expenses consist of expenses incurred in performing research and development activities including salaries and benefits , facilities and other overhead expenses , clinical trials , contract services and other outside expenses . research and development expenses are charged to operations as they are incurred . we assess our obligations to make milestone payments that may become due for licensed or acquired technology to determine whether the payments should be expensed or capitalized . we charge milestone payments to research and development expense when : the technology is in the early stage of development and has no alternative uses ; there is substantial uncertainty of the technology or product being successful ; there will be difficulty in completing the remaining development ; and there is substantial cost to complete the work . capitalization and valuation of long-lived and intangible assets intangible assets with finite useful lives consist of capitalized legal costs incurred in connection with patents , patent applications pending and technology license agreements . payments to acquire a license to use a proprietary technology are capitalized if the technology is expected to have alternative future use in multiple research and development projects . we amortize costs of approved patents , patent applications pending and license agreements over their estimated useful lives , or terms of the agreements , whichever are shorter . for patents pending , we amortize the costs over the shorter of a period of twenty years from the date of filing the application or , if licensed , the term of the license agreement . we re-assess the useful lives of patents when they are issued , or whenever events or changes in circumstances indicate the useful lives may have changed . for patents and patent applications pending that we abandon , we charge the remaining unamortized accumulated costs to research and development expense . intangible assets and long-lived assets are evaluated for impairment at least annually or whenever events or changes in circumstances indicate that their carrying value may not be recoverable . if the review indicates that intangible assets or long-lived assets are not recoverable , their carrying amount would be reduced to fair value . factors we consider important that could trigger an impairment review include the following : a significant change in the manner of our use of the acquired asset or the strategy for our overall business ; and or a significant negative industry or economic trend . in the event we determine that the carrying value of intangible assets or long-lived assets is not recoverable based upon the existence of one or more of the above indicators of impairment , we may be required to record impairment charges for these assets . as of december 31 , 2011 , our largest group of intangible assets with finite lives includes patents and patents pending for our dna delivery technology , consisting of intangible assets with a net carrying value of approximately $ 2.8 million .
| general and administrative expenses increased $ 0.8 million , or 9.1 % , to $ 9.6 million for 2011 from $ 8.8 million for 2010. this increase was primarily the result of higher overall wages and higher consulting costs during the year ended december 31 , 2011. investment and other income . investment and other income decreased $ 0.3 million , or 35.1 % , to $ 0.5 million for 2011 from $ 0.8 million for 2010. this decrease was primarily the result of our receipt of $ 0.5 million in income related to the qualifying therapeutic discovery project tax credit during the year ended december 31 , 2010. year ended december 31 , 2010 , compared to year ended december 31 , 2009 total revenues . total revenues decreased $ 4.0 million , or 31.3 % , to $ 8.7 million in 2010 from $ 12.7 million in 2009. our license and royalty revenue decreased by $ 6.5 million which was primarily the result of a $ 4.7 million decrease in the recognition of revenue related to our allovectin ® license agreement with anges and a $ 1.5 million milestone payment received from merck during the year ended december 31 , 2009 , related to its phase 1 clinical-stage development of an investigational plasmid dna cancer vaccine . our contract and grant revenue increased by $ 2.6 million which was primarily the result of the recognition of revenue related to the delivery of an hiv vaccine to the ippox foundation and the delivery of an h1n1 vaccine to the u.s. navy . research and development expenses . research and development expenses decreased $ 3.8 million , or 16.0 % , to $ 19.7 million for 2010 from $ 23.5 million for 2009. this decrease was primarily the result of lower allovectin ® clinical trial related costs . 48 manufacturing and production expenses . manufacturing and production expenses increased $ 1.1 million , or 10.5 % , to $ 11.4 million for
|
this has been done to increase the yield on our loan portfolio , reduce our exposure to interest rate risk , and shorten the maturity of the loan portfolio . adding new deposit capabilities . historically , we have offered traditional consumer and business deposit products . over the past several years , we have added remote deposit capture , consumer and business on-line banking and consumer mobile banking capabilities . at our new branch locations in silverdale and 65 bellingham , washington , we have implemented interactive teller machines , allowing our customers to conduct business with a teller through the video monitor . the board and management remain committed to maintaining competitive deposit products and services . enhancing our infrastructure . over the past several years , we have focused on upgrading our infrastructure , both in terms of equipment and personnel , in order to support our changing lending and deposit capabilities and position ourselves for growth . our objective is to develop first federal into an independent , high performing bank focused on meeting the needs of individuals , small businesses and community organizations throughout the north olympic peninsula and puget sound region with our exceptional service and competitive products . we intend to implement these strategies to achieve our objective : increasing our portfolio of higher yielding commercial loans . through increased loan originations and purchases , we intend to increase our loan to deposit ratio and the percentage of our loan portfolio consisting of higher-yielding commercial real estate and commercial business loans . these loan categories offer higher risk-adjusted returns , shorter maturities and more sensitivity to interest rate fluctuations than traditional fixed-rate , one- to four-family residential loans . our commercial real estate , commercial business and multi-family real estate loans have increased from $ 109.4 million , or 26.7 % of total loans , at june 30 , 2012 , to $ 224.2 million , or 35.8 % of total loans , at june 30 , 2016 . the increase resulted in part from developing relationships with new loan referral sources , including our board of directors and loan brokers , pursuing loan purchase and participation opportunities , competing successfully in new and existing markets , and benefiting from the improvement of the economy in northwestern washington . we have also increased our lending for construction and land loans , consisting primarily of commercial real estate and multi-family construction . our construction and land loans have increased to $ 50.4 million at june 30 , 2016 compared to $ 22.7 million at june 30 , 2012 . maintaining our focus on asset quality . we believe that strong asset quality is a key to our long-term financial success . we are focused on monitoring existing performing loans , resolving nonperforming loans and selling foreclosed assets . nonperforming assets have decreased from $ 13.0 million at june 30 , 2012 , to $ 3.3 million at june 30 , 2016 . the level of our nonperforming assets has been reduced through write-downs , collections , modifications and sales of real estate owned and repossessed assets . we have taken proactive steps to resolve our nonperforming loans , including negotiating repayment plans , forbearances , loan modifications and loan extensions with our borrowers when appropriate . we have also accepted short payoffs on delinquent loans , particularly when such payoffs result in a smaller loss to us than foreclosure . we also retain the services of independent firms to periodically review segments of our loan portfolio and provide comments regarding our loan policies and procedures . attracting core deposits and other deposit products . our strategy is to emphasize relationship banking with our customers to obtain a greater share of their deposits , with specific emphasis on their core transaction accounts . we believe this emphasis will help to increase our level of core deposits and locally-based retail certificates of deposit . in addition to our retail branches , we maintain state-of-the-art technology-based products , such as on-line personal financial management , business online banking , business remote deposit products , mobile remote deposit services through smartphones and tablets , account-to-account transfer services between first federal and other banks , and person to person funds transfer through smartphones and tablets that enable us to compete effectively with banks of all sizes . we recently enhanced our integrated mobile banking platform by introducing applications for both smartphones and tablets and we have begun implementing a new branching structure that includes extended banking hours through the use of interactive teller machines . expanding our market presence and capturing business opportunities resulting from changes in the competitive environment . by delivering high quality , customer-focused products and services , we believe we can attract additional borrowers and depositors and thus increase our market share and revenue generation in our primary market area . we intend to continue our franchise growth by opening two additional full-service branches , including our second branch in bellingham , washington , and a home lending center in seattle , washington over the next two years . we also expect that community bank consolidation will continue to take place and we may consider acquiring individual branches or other banks . we do not , however , currently have any understandings or agreements regarding any specific acquisitions and will be disciplined when evaluating and deciding on future acquisitions , recognizing that there may also be opportunity for increasing our market share as a result of customer dissatisfaction from other transactions or changes in strategy of market competitors . our primary focus for expansion will be in the northwest washington markets we know and understand , although we may consider opportunities that arise in other parts of western washington . 66 hiring experienced employees with a customer sales and service focus . our goal is to compete by relying on the strength of our customer service and relationship building . story_separator_special_tag we believe that our ability to continue to attract and retain banking professionals who have a significant knowledge of existing and new market areas , possess strong business banking sales and service skills , and maintain a focus on community relationships will enhance our success . we intend to hire additional lenders and business development officers who are established in their communities to enhance our market position and add profitable growth opportunities . critical accounting policies we have certain accounting policies that are important to the assessment of our financial condition , since they require management to make difficult , complex or subjective judgments , some of which may relate to matters that are inherently uncertain . estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances . facts and circumstances which could affect these judgments include , but are not limited to , changes in interest rates , changes in the performance of the economy and changes in the financial condition of borrowers . our accounting policies are discussed in detail in note 1 of the notes to consolidated financial statements included in `` item 8. financial statements and supplementary data . '' the following represent our critical accounting policies : allowance for loan losses . the allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio as of balance sheet date . the allowance is established through the provision for loan losses , which is charged to income . determining the amount of the allowance for loan losses necessarily involves a high degree of judgment . among the material estimates required to establish the allowance are : the likelihood of default ; the loss exposure at default ; the amount and timing of future cash flows on impaired loans ; the value of collateral ; and the determination of loss factors to be applied to the various elements of the portfolio . all of these estimates are susceptible to significant change . management reviews , and the board of directors approves , at least quarterly , the level of the allowance and the provision for loan losses based on past loss experience , current economic conditions and other factors related to the collectability of the loan portfolio . although we believe that we use the best information available to establish the allowance for loan losses , future adjustments to the allowance may be necessary if economic or other conditions differ substantially from the assumptions used in making the evaluation . in addition , the fdic and the dfi , as an integral part of their examination process , periodically review our allowance for loan losses and may require us to recognize adjustments to the allowance based on their judgment about information available at the time of their examination . a large loss could deplete the allowance and require increased provisions for loan losses to replenish the allowance , which would adversely affect earnings . see note 3 of the notes to consolidated financial statements contained in `` item 8. financial statements and supplementary data . '' mortgage servicing rights . we record mortgage servicing rights on loans originated and subsequently sold into the secondary market . we stratify our capitalized mortgage servicing rights based on the type , term and interest rates of the underlying loans . mortgage servicing rights are initially recognized at fair value . the value is determined through a discounted cash flow analysis , which uses interest rates , prepayment speeds and delinquency rate assumptions as inputs . all of these assumptions require a significant degree of management judgment . if our assumptions prove to be incorrect , the value of our mortgage servicing rights could be negatively affected . see notes 1 and 6 to the notes to consolidated financial statements included in `` item 8. financial statements and supplementary data . '' income taxes . management makes estimates and judgments to calculate certain tax liabilities and to determine the recoverability of certain deferred tax assets , which arise from temporary differences between the tax and financial statement recognition of revenues and expenses . we also estimate a valuation allowance for deferred tax assets if , based on the available evidence , it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods . these estimates and judgments are inherently subjective . in evaluating the recoverability of deferred tax assets , management considers all available positive and negative evidence , including past operating results , recent cumulative losses - both capital and operating - and the forecast of future taxable income , both capital gains and operating . in determining future taxable income , management makes assumptions for the amount of taxable income , the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies . these assumptions require judgments about future taxable income and are consistent with the plans and estimates to manage our business . any reduction in estimated future taxable income may require us to record a valuation allowance against deferred tax assets . an increase in the valuation allowance would result in additional income tax expense in the period and could have a significant impact on future earnings . 67 real estate owned and repossessed assets . real estate owned and repossessed assets include real estate and personal property acquired through foreclosure or repossession , and may include in-substance foreclosed properties . in-substance foreclosed properties are those properties for which the institution has taken physical possession , regardless of whether formal foreclosure proceedings have taken place . at the time of foreclosure , foreclosed real estate is recorded at the fair value less estimated costs to sell , which becomes the property 's new cost basis . any write-downs based on the asset 's fair value at date of acquisition are charged to the allowance for loan losses .
| the cost of average interest-bearing liabilities decreased four basis points to 0.70 % for the year ended june 30 , 2015 , compared to 0.74 % for the prior fiscal year , due primarily to the decreased cost of fhlb borrowings and a decline in the average balance of certificates of deposit . interest income . total interest income increased $ 928,000 , or 3.5 % , to $ 27.5 million for the year ended june 30 , 2015 from $ 26.6 million for the comparable period in 2014. interest income increased primarily due to increases in the average balance and in the yield on investment and mortgage-backed securities as additional cash flows were deployed into the investment securities and mortgage-backed securities portfolios . during the year ended june 30 , 2015 , average loan yields decreased 23 basis points compared to the year ended june 30 , 2014 , as higher yielding loans continued to pay off and were replaced with loans at lower interest rates . this resulted in interest income on loans receivable decreasing $ 320,000 , to $ 22.0 million for the year ended june 30 , 2015 from $ 22.4 million for the year ended june 30 , 2014 , despite an increase in the average balance of loans receivable of $ 17.3 million during fiscal year 2015 . 78 interest income on investment securities increased $ 701,000 to $ 1.9 million for the year ended june 30 , 2015 compared to $ 1.1 million for the year ended june 30 , 2014. the average balance of investment securities increased $ 27.1 million to $ 88.8 million for the year ended june 30 , 2015 compared to $ 61.6 million for the year ended june 30 , 2014. the yield on investment securities for the year ended june 30 , 2015 increased twenty-two basis points . interest income on mortgage backed securities increased $ 473,000 primarily due to an increase of 25 basis points in average yields to 1.91 % for the year ended june 30 , 2015 from 1.66 % for the year ended june 30 , 2014 and an increase in the average balance of $ 1.0 million compared to the prior year . the following
|
under a sublicense agreement with novartis , we are entitled to royalty revenue of 8-10 % of net sales of fanapt ® ( iloperidone ) , an atypical antipsychotic compound being marketed in the u.s. by novartis for the 22 treatment of schizophrenia , based on a licensed u.s. patent that expires in october 2016 ( excluding the potential of a six month pediatric extension ) . we have entered into several agreements with deerfield , a healthcare investment fund , which entitle deerfield to most of the future royalty revenues related to fanapt in exchange for cash and debt considerations , the proceeds from which we have been using to advance the development of probuphine and for general corporate purposes . we have retained a portion of the royalty revenue from the net sales of fanapt in excess of specified annual threshold levels ; however , based on sales levels to date , it is unlikely that we will receive any revenue from fanapt in the next several years , if ever . critical accounting policies and the use of estimates the preparation of our financial statements in conformity with accounting principles generally accepted in the united states requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes . actual results could differ materially from those estimates . we believe the following accounting policies for the years ended december 31 , 2012 and 2011 to be applicable : revenue recognition we generate revenue principally from royalty payments , collaborative research and development arrangements , technology licenses , and government grants . consideration received for revenue arrangements with multiple components is allocated among the separate units of accounting based on their respective selling prices . the selling price for each unit is based on vendor-specific objective evidence , or vsoe , if available , third party evidence if vsoe is not available , or estimated selling price if neither vsoe nor third party evidence is available . the applicable revenue recognition criteria are then applied to each of the units . revenue is recognized when the four basic criteria of revenue recognition are met : ( 1 ) a contractual agreement exists ; ( 2 ) transfer of technology has been completed or services have been rendered ; ( 3 ) the fee is fixed or determinable ; and ( 4 ) collectibility is reasonably assured . for each source of revenue , we comply with the above revenue recognition criteria in the following manner : royalties earned are based on third-party sales of licensed products and are recorded in accordance with contract terms when third-party results are reliably measurable and collectibility is reasonably assured . pursuant to certain license agreements , we earn royalties on the sale of fanapt by novartis in the u.s. as described in note 8 , royalty liability , we are obligated to pay royalties on such sales to sanofi-aventis and deerfield . as we have no performance obligations under the license agreements , we have recorded the royalties earned , net of royalties we are obligated to pay , as revenue in our consolidated statement of operations . collaborative arrangements typically consist of non-refundable and or exclusive technology access fees , cost reimbursements for specific research and development spending , and various milestone and future product royalty payments . if the delivered technology does not have stand-alone value or if we do not have objective or reliable evidence of the fair value of the undelivered component , the amount of revenue allocable to the delivered technology is deferred . non-refundable upfront fees with stand-alone value that are not dependent on future performance under these agreements are recognized as revenue when received , and are deferred if we have continuing performance obligations and have no evidence of fair value of those obligations . cost reimbursements for research and development spending are recognized when the related costs are incurred and when collections are reasonably expected . payments received related to substantive , performance-based at-risk milestones are recognized as revenue upon achievement of the clinical success or regulatory event specified in the underlying contracts , which represent the culmination of the earnings process . amounts received in advance are recorded as deferred revenue until the technology is transferred , costs are incurred , or a milestone is reached . 23 technology license agreements typically consist of non-refundable upfront license fees , annual minimum access fees or royalty payments . non-refundable upfront license fees and annual minimum payments received with separable stand-alone values are recognized when the technology is transferred or accessed , provided that the technology transferred or accessed is not dependent on the outcome of our continuing research and development efforts . government grants , which support our research efforts in specific projects , generally provide for reimbursement of approved costs as defined in the notices of grants . grant revenue is recognized when associated project costs are incurred . share-based payments we recognize compensation expense for all share-based awards made to employees and directors . the fair value of share-based awards is estimated at the grant date based on the fair value of the award and is recognized as expense , net of estimated pre-vesting forfeitures , ratably over the vesting period of the award . we use the black-scholes option pricing model to estimate the fair value method of our awards . calculating stock-based compensation expense requires the input of highly subjective assumptions , including the expected term of the share-based awards , stock price volatility , and pre-vesting forfeitures . we estimate the expected term of stock options granted for the years ended december 31 , 2012 , 2011 and 2010 based on the historical experience of similar awards , giving consideration to the contractual terms of the share-based awards , vesting schedules and the expectations of future employee behavior . we estimate the volatility of our common stock at the date of grant based on the historical volatility of our common stock . story_separator_special_tag the assumptions used in calculating the fair value of stock-based awards represent our best estimates , but these estimates involve inherent uncertainties and the application of management judgment . as a result , if factors change and we use different assumptions , our stock-based compensation expense could be materially different in the future . in addition , we are required to estimate the expected pre-vesting forfeiture rate and only recognize expense for those shares expected to vest . we estimate the pre-vesting forfeiture rate based on historical experience . if our actual forfeiture rate is materially different from our estimate , our stock-based compensation expense could be significantly different from what we have recorded in the current period . income taxes we make certain estimates and judgments in determining income tax expense for financial statement purposes . these estimates and judgments occur in the calculation of certain tax assets and liabilities , which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes . as part of the process of preparing our consolidated financial statements , we are required to estimate our income taxes in each of the jurisdictions in which we operate . this process involves us estimating our current tax exposure under the most recent tax laws and assessing temporary differences resulting from differing treatment of items for tax and accounting purposes . we assess the likelihood that we will be able to recover our deferred tax assets . we consider all available evidence , both positive and negative , expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance . if it is not more likely than not that we will recover our deferred tax assets , we will increase our provision for taxes by recording a valuation allowance against the deferred tax assets that we estimate will not ultimately be recoverable . clinical trial accrual we also record accruals for estimated ongoing clinical trial costs . clinical trial costs represent costs incurred by clinical research organizations , ( cros ) , and clinical sites . these costs are recorded as a component of research and development expenses . under our agreements , progress payments are typically made to 24 investigators , clinical sites and cros . we analyze the progress of the clinical trials , including levels of patient enrollment , invoices received and contracted costs when evaluating the adequacy of accrued liabilities . significant judgments and estimates must be made and used in determining the accrued balance in any accounting period . actual results could differ from those estimates under different assumptions . revisions are charged to expense in the period in which the facts that give rise to the revision become known . the actual clinical trial costs for the probuphine studies conducted in the past three years have not differed materially from the estimated projection of expenses . warrants issued in connection with equity financing we generally account for warrants issued in connection with equity financings as a component of equity , unless there is a deemed possibility that we may have to settle warrants in cash . for warrants issued with deemed possibility of cash settlement , we record the fair value of the issued warrants as a liability at each reporting period and record changes in the estimated fair value as a non-cash gain or loss in the condensed consolidated statements of operations and comprehensive loss . liquidity and capital resources replace_table_token_2_th we have funded our operations since inception primarily through sales of our debt and equity securities , as well as with proceeds from warrant and option exercises , corporate licensing and collaborative agreements , and government-sponsored research . at december 31 , 2012 , we had approximately $ 18.1 million of cash compared to approximately $ 5.4 million at december 31 , 2011. our operating activities provided approximately $ 1.8 million during the year ended december 31 , 2012. this consisted primarily of the net loss for the period of approximately $ 15.2 million , approximately $ 0.3 million related to the non-cash interest expense on our royalty liability and approximately $ 1.4 million related to net changes in operating assets and liabilities . this was offset in part by approximately $ 14.4 million related to deferred revenue in connection with the license agreement with braeburn , approximately $ 1.8 million related to net non-cash losses on changes in the fair value of warrants , non-cash charges of approximately $ 17,000 related to depreciation , and approximately $ 2.6 million related to stock-based compensation expenses . uses of cash in operating activities were primarily to fund product development programs and administrative expenses . the license agreement with sanofi-aventis require us to pay royalties on future product sales . in addition , in order to maintain license and other rights while products are under development , we must comply with customary licensee obligations , including the payment of patent-related costs , annual minimum license fees , meeting project-funding milestones and diligent efforts in product development . the aggregate commitments we have under these agreements , including minimum license payments , for the next 12 months is approximately $ 3,000. see item 1. businesslicense agreements. net cash used in investing activities of approximately $ 1.2 million during the year ended december 31 , 2012 primarily related to purchases of equipment . 25 net cash provided by financing activities of approximately $ 12.0 million during the year ended december 31 , 2012 consisted of approximately $ 7.5 million of net proceeds from the sale of common stock and warrants , net of issuance costs and $ 4.9 million of net proceeds from the exercise of warrants to purchase common stock . this was offset in part by payments of approximately $ 0.4 million related to payments on our long-term debt .
| the decrease in research and development costs was primarily associated with a decrease in external research and development expenses related to the phase 3 clinical trials of our probuphine product which were completed in 2011. this was offset by expenses related to the preparation and submission of an nda for a probuphine product with the fda in october 2012. external research and development expenses include direct expenses such as clinical research organization charges , investigator and review board fees , patient expense reimbursements and contract manufacturing expenses . during 2012 , our external research and development expenses relating to our probuphine product development program were approximately $ 5.4 million compared to approximately $ 7.7 million for 2011. other research and development expenses include internal operating costs such as clinical research and development personnel-related expenses , clinical trials-related travel expenses , and allocation of facility and corporate costs . as a result of the risks and uncertainties inherently associated with pharmaceutical research and development activities described elsewhere in this report , we are unable to estimate the specific timing and future costs of our clinical development programs or the timing of material cash inflows , if any , from our products or product candidates . general and administrative expenses for 2012 were approximately $ 4.9 million , compared to approximately $ 3.4 million in 2011 , an increase of approximately $ 1.5 million , or 44 % . the increase in general and administrative expenses was primarily related to increases in non-cash stock compensation costs of approximately $ 0.8 million , employee-related costs of approximately $ 0.3 million , consulting and professional fees of approximately $ 0.3 million , fees paid to members of our board of directors of approximately $ 0.1 million and facilities-related costs of approximately $ 0.1 million . this was offset in part by decreases in travel-related costs of approximately $ 0.1 million . net other expense for 2012 was approximately $ 6.8 million , compared to approximately $ 4.7 million in 2011. the increase in net other
|
we anticipate that our expenses will increase substantially as we : · complete the ongoing clinical trials of our product candidates ; · maintain , expand and protect our intellectual property portfolio ; · seek to obtain regulatory approvals for our product candidates ; · continue our research and development efforts ; · add operational , financial and management information systems and personnel , including personnel to support our product development and commercialization efforts ; and · operate as a public company . 2017 developments · on december 7 , 2017 , we received written responses from the fda following a granted type c meeting regarding the planned registrational hs-110 clinical trial design for the treatment of nsclc . the discussion focused on elements of proposed clinical trial designs , both single-arm and controlled , which the fda agreed would be appropriate to support a registrational trial of hs-110 . clinical endpoints and post-marketing commitments were also discussed in the context of accelerated approval . · on october 30 , 2017 , pelican received the second tranche in the amount of $ 6.5 million of its $ 15.2 million cprit grant award . the cprit award supports the pre-clinical development , manufacturing and clinical development of a 70-patient phase 1 clinical trial for ptx-35 . · on september 27 , 2017 , we announced a manufacturing agreement with kbi biopharma , inc. a global biopharmaceutical contract development and manufacturing organization , for cgmp product of pelican ' s ptx-35 antibody and ptx-15 fusion protein . under the agreement , kbi biopharma will offer comprehensive development and manufacturing services , which is expected to offer advantages such as speed , productivity , stability and flexibility over traditional approaches to cell line development . · on june 28 , 2017 , pelican reported that it was on track to meet product development milestones and received the first tranche in the amount of approximately $ 1.8 million of its $ 15.2 million cprit grant award . · on may 1 , 2017 , we announced the completion of the acquisition of an 80 percent controlling interest in pelican . · on march 21 , 2017 , we reported promising interim results for the phase 1b portion of the trial evaluating hs-110 in combination with bristol-myers squibb ' s checkpoint inhibitor , nivolumab ( opdivo ® ) , for the treatment of advanced nsclc . funding/liquidity we commenced active operations in june 2008. our operations to date have been primarily limited to organizing and staffing our company , business planning , raising capital , acquiring and developing our technology , identifying potential product candidates and undertaking preclinical and clinical studies of our most advanced product candidates . to date , we have primarily financed our operations with net proceeds from the private placement of our preferred stock , our july 2013 initial public offering in which we received net proceeds of $ 24.3 million , our march 2015 public offering in which we received net proceeds of $ 11.1 million , our march 2016 public offering in which we received net proceeds of $ 6.1 million , an additional $ 3.9 million from the exercise of 386,343 warrants , our march 2017 public offering in which we received net proceeds of approximately $ 4.1 million , and our november 2017 public offering in which we received net proceeds of approximately $ 2.4 million . in addition , we received $ 7.5 million from our debt facility , which has subsequently been paid back in full as of december 30 , 2016 and have received an aggregate of $ 9.3 million of net proceeds from sales of shares of our common stock through the at market issuance sales agreement ( the fbr sales agreement ) with fbr capital markets & co. through december 31 , 2017. as of december 31 , 2017 , we have received $ 8.3 million in grant funding from the cprit grant through pelican . on january 18 , 2018 , we entered into the h.c. wainwright sales agreement which replaced the fbr sales agreement . to date , we received net proceeds of approximately $ 1.4 million from the sale of shares of our common stock through the h.c. wainwright sales agreement . our consolidated financial statements for the years ended december 31 , 2017 and 2016 have been prepared on a going concern basis . as of december 31 , 2017 , we had an accumulated deficit of $ 68.8 million . we had net losses of $ 12.4 million and $ 13.0 million for the years ended december 31 , 2017 and 2016 , respectively . 42 we expect to incur significant expenses and continued losses from operations for the foreseeable future . we expect our expenses to increase in connection with our ongoing activities , particularly as we continue the research and development and advance our clinical trials of , and seek marketing approval for , our product candidates and as we continue to fund the pelican matching funds required in order to access the cprit grant . in addition , if we obtain marketing approval for any of our product candidates , we expect to incur significant commercialization expenses related to product sales , marketing , manufacturing and distribution . accordingly , we will need to obtain substantial additional funding in connection with our continuing operations . adequate additional financing may not be available to us on acceptable terms , or at all . if we are unable to raise capital when needed or on attractive terms , we would be forced to delay , reduce or eliminate our research and development programs or any future commercialization efforts . accordingly , there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital . story_separator_special_tag to meet our capital needs , we are considering multiple alternatives , including , but not limited to , additional equity financings , which include sales of our common stock under the h.c. wainwright sales agreement if available , debt financings , partnerships , collaborations and other funding transactions . this is based on our current estimates , and we could use our available capital resources sooner than we currently expect . we are continually evaluating various cost-saving measures in light of our cash requirements in order to focus our resources on our product candidates . we may take additional action to reduce our immediate cash expenditures , including re-visiting our headcount , offering vendors equity in lieu of the cash due to them and otherwise limiting our other research expenses , in order to focus our resources on our product candidates . we will need to generate significant revenues to achieve profitability , and we may never do so . critical accounting policies and significant judgments and estimates we believe that several accounting policies are important to understanding our historical and future performance . we refer to these policies as `` critical '' because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate , and different estimateswhich also would have been reasonablecould have been used , which would have resulted in different financial results . our management 's discussion and analysis of financial condition and results of operations is based on our consolidated financial statements , which have been prepared in accordance with u.s. gaap . the preparation of our 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 based on historical experience and make various assumptions , which management believes to be reasonable under the circumstances , which form the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . the notes to our audited consolidated financial statements contain a summary of our significant accounting policies . we consider the following accounting policies critical to the understanding of the results of our operations : · revenue ; · deferred revenue ; · in-process r & d · goodwill impairment ; · income tax ; · contingent consideration ; · stock-based compensation ; · research and development costs , including clinical and regulatory cost ; and · recent accounting pronouncements . revenue our revenue generally consists of research funding from our cprit grant and a research funding agreement with shattuck that terminated on january 31 , 2017. grant revenue is recognized when qualifying costs are incurred and there is reasonable assurance that the conditions of the award have been met for collection . proceeds received prior to the costs being incurred or the conditions of the award being met are recognized as deferred revenue until the services are performed and the conditions of the award are met . 43 deferred revenue deferred revenue is comprised of proceeds of $ 6.8 million received from cprit for which the costs have not been incurred or the conditions of the award have not been met and grant funds received from an economic development grant agreement with the city of san antonio ( economic development grant ) that we entered into on november 1 , 2017. under the economic development grant , we received $ 0.2 million in state enterprise fund grants for the purpose of defraying costs toward the purchase of laboratory equipment . as part of the agreement , we will provide the city of san antonio with a purchase money security interest in the equipment to secure the repayment of grant funds should we fail to perform under the terms and conditions of the agreement . our obligations under the agreement include meeting certain employment levels for a period of not less than seven years commencing on or before december 31 , 2017 and establishing pelican 's corporate headquarters in san antonio . the economic development grant funds will be recognized into revenue upon the achievement of the performance criteria and determination that the cash is no longer refundable to the state of texas . in-process r & d in-process research and development ( ipr & d ) assets represent the fair value assigned to technologies that were acquired , which at the time of acquisition have not reached technological feasibility and have no alternative future use . ipr & d assets are considered to be indefinite-lived until the completion or abandonment of the associated research and development projects . during the period that the ipr & d assets are considered indefinite-lived , they are tested for impairment on an annual basis , or more frequently if the company becomes aware of any events occurring or changes in circumstances that indicate that the fair value of the ipr & d assets are less than their carrying amounts . if and when development is complete , which generally occurs upon regulatory approval , and the company is able to commercialize products associated with the ipr & d assets , these assets are then deemed definite-lived and are amortized based on their estimated useful lives at that point in time . if development is terminated or abandoned , the company may have a full or partial impairment charge related to the ipr & d assets , calculated as the excess of carrying value of the ipr & d assets over fair value . the ipr & d assets were acquired on april 28 , 2017. goodwill and impairment goodwill is tested for impairment annually or more frequently if changes in circumstances or the occurrence of events suggest that impairment may exist . the company uses widely accepted valuation techniques to determine the fair value of its reporting units used in its annual goodwill impairment analysis .
| we also recognized research funding revenue of approximately $ 0.02 million for research and development services , which included labor and supplies , provided to shattuck labs , inc. ( shattuck ) which research funding agreement ended january 31 , 2017. we recognized $ 0.3 million of research funding revenue for research and development services , provided to shattuck for year ended december 31 , 2016. we continue our efforts to secure future non-dilutive grant funding to subsidize ongoing research and development costs . 46 operating expenses total operating expenses for the year ended december 31 , 2017 increased 10.4 % to $ 14.9 million compared to $ 13.5 million for the year ended december 31 , 2016. for the year ended december 31 , 2017 operating expenses are primarily comprised of research and development , and general and administrative expenses , as well as change in the fair value of contingent consideration due to the company 's acquisition of an 80 % controlling interest in pelican during the year . research and development expenses were $ 8.3 million , general and administrative expenses were $ 6.4 million and the change in fair value of contingent consideration was $ 0.2 million for the year ended december 31 , 2017 as compared to research and development expenses of $ 9.3 million and general and administrative expenses of approximately $ 4.1 million for the year ended december 31 , 2016. there was no contingent consideration in 2016. for the year ended december 31 , 2017 , research and development expenses represented approximately 56 % of operating expenses , general and administrative expenses represented approximately 43 % and change in fair value of contingent consideration 1 % of operating expenses . for the year ended december 31 , 2016 , research and development expenses represented approximately 69 % of operating expenses and general and administrative expenses represented approximately 31 % of operating expenses . research and development expense research and development expenses decreased by 10.8 % to $ 8.3 million for the year ended december 31 , 2017 compared to $ 9.3 million for the year ended december 31 , 2016 as we have focused our
|
depreciation and amortization expense in 2010 was $ 89 million , down slightly from 2009. the provision for doubtful accounts was $ 11 million in 2010 , down 61 % from $ 28 million in 2009. the decrease in bad debt expense reflects a much improved collections environment in 2010 relative to the prior year . total share-based compensation expense for the years ended december 31 , 2011 , 2010 and 2009 was $ 7.5 million , $ 7.0 million , and $ 8.6 million , respectively . refer to note 5 of the consolidated financial statements for further information regarding share-based compensation . 18 non-operating expenses and income non-operating expenses consist primarily of interest . interest expense was $ 27 million in 2011 and $ 28 million in 2010 and 2009. the $ 1 million decrease in interest expense relative to 2010 and 2009 is the result of an improved interest rate on certain long-term debt , effective november 2011. in other , interest income net of noncontrolling interests has increased in each of the last two years due primarily to our improved cash position and the elimination of certain noncontrolling interests in 2009. income before income taxes income before income taxes was $ 891 million in 2011 , an increase of 17 % from $ 762 million in 2010. as a percentage of net sales , income before income taxes was 7.1 % in 2011 , reflecting an increase from 6.8 % in 2010. in 2010 , income before income taxes of $ 762 million was up 18 % from $ 644 million in 2009 and as a percentage of net sales was 6.8 % , an increase from 6.4 % in 2009. automotive group automotive income before income taxes as a percentage of net sales , which we refer to as operating margin , increased to 7.7 % in 2011 from 7.5 % in 2010. the improvement in operating margin for 2011 is attributed to the benefit of greater expense leverage associated with automotive 's 8 % sales increase for the year . automotive 's initiatives to grow sales and control costs are intended to further improve its operating margin in the years ahead . automotive 's operating margin increased to 7.5 % in 2010 from 7.4 % in 2009. the improvement in operating margin for 2010 is attributed to the benefit of greater expense leverage associated with automotive 's 7 % sales increase for the year . industrial group industrial 's operating margin increased to 8.1 % in 2011 from 7.3 % in 2010. the increase in operating margin in 2011 is due to the combination of greater expense leverage associated with a 19 % sales increase , industrial 's second straight year of strong double-digit sales growth , the ongoing benefits of recent cost savings and increased volume incentives . industrial will continue to focus on its sales initiatives and cost controls to further improve its operating margin in the years ahead . industrial 's operating margin increased to 7.3 % in 2010 from 5.6 % in 2009. the increase in operating margin in 2010 was due to the combination of greater expense leverage associated with a 22 % sales increase , cost savings and increased volume incentives . office group office 's operating margin decreased slightly to 7.9 % in 2011 from 8.0 % in 2010. the decrease in operating margin in 2011 primarily reflects the continued pressures on gross margin in this industry , due to the slower pace of the economic recovery and office employment . these pressures were partially offset by the positive impact of office 's cost savings initiatives . office 's operating margin increased to 8.0 % in 2010 from 7.7 % in 2009 and reflects the positive impact of our cost savings initiatives combined with the benefit of higher volume incentives from suppliers . the increase in incentives was due to our fourth quarter sales growth and related increase in purchase volumes , which allowed us to achieve higher program growth tiers with suppliers . electrical group electrical 's operating margin increased to 7.3 % in 2011 from 6.9 % in 2010. the increase in operating margin in 2011 is due to the combination of greater expense leverage associated with a 24 % sales increase , its second straight year of strong double-digit sales growth , and the ongoing benefits of effective cost controls . the improvement from these areas was partially offset by the increase in copper prices during the year . electrical will continue to focus on its sales initiatives and cost controls to further improve its operating margin in the years ahead . 19 electrical 's operating margin decreased to 6.9 % in 2010 from 7.3 % in 2009. the decrease in operating margin was mainly due to escalating copper prices during the year , which generally do not affect profit dollars , but negatively impact margins as copper is generally billed to customers at cost . the margin pressures associated with this industry standard pricing practice for copper more than offset the benefits of a stronger manufacturing sector in 2010 and greater expense leverage associated with a 30 % sales increase . income taxes the effective income tax rate of 36.6 % in 2011 was down from 37.6 % in 2010. the decrease from 2010 is primarily attributable to a favorable adjustment recorded in the first quarter of 2011 associated with the expiration of the statute of limitations related to certain international taxes . the income tax rate decreased to 37.6 % in 2010 from 38.0 % in 2009. the decrease from 2009 is attributable to favorable foreign income taxes for the year . net income net income was $ 565 million in 2011 , an increase of 19 % from $ 476 million in 2010. on a per share diluted basis , net income was $ 3.58 story_separator_special_tag in 2011 compared to $ 3.00 in 2010 , up 19 % . net income in 2011 was 4.5 % of net sales compared to 4.2 % of net sales in 2010. net income was $ 476 million in 2010 , an increase of 19 % from $ 400 million in 2009. on a per share diluted basis , net income was $ 3.00 in 2010 compared to $ 2.50 in 2009 , up 20 % . net income in 2010 was 4.2 % of net sales compared to 4.0 % of net sales in 2009. financial condition our cash balance of $ 525 million at december 31 , 2011 was relatively consistent with our cash balance at december 31 , 2010 , supported by the increase in net income in 2011 and ongoing working capital management . the company 's accounts receivable balance at december 31 , 2011 increased by approximately 7 % from the prior year , which reflects the company 's 7 % sales increase for the fourth quarter of 2011. inventory at december 31 , 2011 was up by less than 2 % from december 31 , 2010 , which is well below the company 's increase in sales and primarily attributable to acquisitions . accounts payable increased $ 66 million or approximately 5 % from december 31 , 2010 due primarily to increased inventory purchases related to the company 's sales increase . goodwill and other intangible assets increased by $ 70 million or 34 % from december 31 , 2010 due to the company 's acquisitions during the year . the change in our december 31 , 2011 balances for deferred taxes , up $ 94 million or 59 % , as well as pension and other post-retirement benefits liabilities , up $ 235 million or approximately 91 % from december 31 , 2010 , is primarily due to a change in funded status of the company 's pension and other post-retirement plans in 2011 , net of $ 58 million in pension contributions during the year . liquidity and capital resources the company 's sources of capital consist primarily of cash flows from operations , supplemented as necessary by private issuances of debt and bank borrowings . we have $ 500 million of total debt outstanding at december 31 , 2011 , of which $ 250 million matures in november 2013 and $ 250 million matures in november 2016. in addition , the company has available a $ 350 million unsecured revolving line of credit . no amounts were outstanding under the line of credit at december 31 , 2011 and 2010. the capital and credit markets were volatile over the last few years , although these conditions did not materially impact our access to these markets . currently , we believe that our cash on hand and available short-term and long-term sources of capital are sufficient to fund the company 's operations , including working capital requirements , scheduled debt payments , interest payments , capital expenditures , benefit plan contributions , income tax obligations , dividends , share repurchases and contemplated acquisitions . the ratio of current assets to current liabilities was 2.5 to 1 at december 31 , 2011 , and this compares to 2.2 to 1 at december 31 , 2010. before consideration of current debt outstanding at december 21 , 2010 , the ratio of current assets to current liabilities was 2.6 to 1. our liquidity position remains solid . the company 's $ 500 million in total debt outstanding at december 31 , 2011 is unchanged from 2010 . 20 sources and uses of net cash a summary of the company 's consolidated statements of cash flows is as follows : replace_table_token_7_th net cash provided by operating activities : the company continues to generate cash and net cash provided by operating activities totaled $ 625 million in 2011. this reflects an 8 % decrease from 2010 , as , collectively , trade accounts receivable , merchandise inventories and trade accounts payable represented a $ 19 million use of cash in 2011 compared to a $ 185 million source of cash in 2010. this was partially offset by a $ 90 million increase in net income . net cash provided by operating activities of $ 679 million in 2010 represents a 20 % decrease from 2009 , as , collectively , trade accounts receivable , merchandise inventories and trade accounts payable as a source of cash was $ 129 million less in 2010 relative to 2009 and pension contributions in 2010 increased by $ 35 million from 2009. these items were partially offset by a $ 76 million increase in net income . net cash used in investing activities : net cash flow used in investing activities was $ 231 million in 2011 compared to $ 172 million in 2010 , an increase of 34 % . cash used for acquisitions of businesses and other investing activities in 2011 were $ 46 million greater than in 2010 , and capital expenditures increased by $ 18 million . net cash flow used in investing activities was $ 172 million in 2010 compared to $ 264 million in 2009 , a decrease of 35 % . cash used for acquisitions of businesses in 2010 was $ 44 million less than in 2009 , while capital expenditures increased by $ 16 million for the year .
| automotive group net sales for the automotive group ( automotive ) were $ 6.1 billion in 2011 , an increase of 8 % from 2010. sales improved in 2011 due to the successful execution of our sales initiatives and the ongoing solid fundamentals in the automotive aftermarket , including the overall aging of the vehicle populations . the positive fundamentals serve to drive increased demand for automotive aftermarket maintenance and supply items . automotive revenues were up 9 % in the first , second and third quarters , and were up 6 % in the fourth quarter . other factors impacting our automotive sales for the year include the effect of currency associated with our canadian and mexican businesses , which positively impacted sales by approximately 1 % . 16 net sales for automotive were $ 5.6 billion in 2010 , an increase of 7 % from 2009. sales improved in 2010 due to the successful execution of our sales initiatives and the stronger economy , which drove increased demand for automotive maintenance and supply items . automotive revenues were up 6 % in the first quarter , followed by 7 % increases in the second and third quarters , and a 9 % increase in the fourth quarter . other factors impacting our automotive sales for the year include the effect of currency , which positively impacted sales by approximately 2 % . industrial group net sales for motion industries , our industrial group ( industrial ) , were $ 4.2 billion in 2011 , an increase of 19 % compared to 2010. several factors contributed to the sales increase for this group , including the positive impact of their internal sales initiatives and the continued strength in the manufacturing sector of the economy served by industrial . this was evidenced by the reported growth in the manufacturing industrial production and capacity utilization indices , which this group tends to track . also in 2011 , sales were positively impacted by acquisitions , which accounted for approximately 3 % of industrial 's sales growth for the year , and the effect of
|
the dss acquisition was consummated pursuant to an agreement and plan of merger ( the merger agreement ) dated november 6 , 2014. aggregate consideration was approximately $ 1.246 billion payable through a combination of incremental borrowings under our asset based lending facility ( abl facility ) of $ 180.0 million , the issuance of $ 625.0 million of our 6.75 % senior notes due january 1 , 2020 ( 2020 notes ) , the assumption of existing $ 350.0 million senior notes due 2021 originally issued by dss ( dss notes ) , and the issuance of series a convertible first preferred shares ( the convertible preferred shares ) having an aggregate value of approximately $ 116.1 million and series b non-convertible first preferred shares ( the non-convertible preferred shares , and together with the convertible preferred shares , the preferred shares ) having an aggregate value of approximately $ 32.7 million . in connection with the dss acquisition , we amended the abl facility on december 12 , 2014 to , among other things , provide an increase in the lenders ' commitments under the abl facility to $ 400.0 million , an increase to the accordion feature , which permits us to increase the lenders ' commitments under the abl facility to $ 450.0 million , subject to certain conditions , and an extension of the maturity date to the earliest of ( i ) december 12 , 2019 , ( ii ) june 12 , 2019 , if we have not redeemed , repurchased or refinanced the 2020 notes by may 28 , 2019 , or ( iii ) any earlier date on which the commitments under the abl facility are reduced to zero or otherwise terminated . we also issued $ 625.0 million of the 2020 notes to qualified purchasers in a private placement under rule 144a and regulation s under the securities act of 1933 , as amended ( securities act ) and used the proceeds from the issuance to partially finance the dss acquisition . upon closing of the dss acquisition , we issued the convertible preferred shares and non-convertible preferred shares to the former dss group security holders pursuant to the merger agreement and in reliance on the exemption from registration contained in section 4 ( a ) ( 2 ) of the securities act and the rules and regulations thereunder . at any time following the third anniversary of their issuance , at the option of the holders , the convertible preferred shares will be convertible into common shares of the company at an initial conversion price of approximately $ 6.28 per common share per $ 1,000 face value of convertible preferred shares . dividends on both series of preferred shares began to accrue and are cumulative from the issue date . dividends on the convertible preferred shares are 9.0 % per year , increasing by 1.0 % on each of the first five anniversaries of the issue date . dividends on the non-convertible preferred shares are 10.0 % per year , increasing by 1.0 % on each of the first five anniversaries of the issue date . the convertible preferred shares have certain voting rights beginning on june 13 , 2016 and unrestricted voting rights beginning on december 13 , 2017. the non-convertible preferred shares do not have voting rights and may not be converted into common shares of the company . in june 2014 , we issued $ 525.0 million of our 5.375 % senior notes due 2022 ( the 2022 notes ) to qualified purchasers in a private placement under rule 144a and regulation s under the securities act . we used the proceeds to redeem $ 375.0 million aggregate principal amount of our 8.125 % senior notes due 2018 ( the 2018 notes ) and provide additional funding for company operations . in may 2014 , our u.k. reporting segment acquired 100 % of the share capital of aimia foods holdings limited ( the aimia acquisition ) , which includes its operating subsidiary company , aimia foods limited ( together referred to as aimia ) . aimia produces and distributes hot chocolate , coffee and powdered beverages primarily through food service , vending and retail channels , and produces hot and cold cereal products on a contract manufacturing basis . the aggregate purchase price for the aimia acquisition was £52.1 million ( $ 87.6 million ) payable in cash , which included a payment for estimated closing balance sheet working capital , £19.9 million ( $ 33.5 million ) in deferred consideration paid on september 15 , 2014 , and aggregate contingent consideration of up to £16.0 million ( $ 26.9 million ) , which is payable upon the achievement of certain measures related to aimia 's performance during the twelve months ending july 1 , 2016. the closing payment was funded from abl borrowings and available cash . in november 2013 , we redeemed $ 200.0 million aggregate principal amount of our 8.375 % senior notes due 2017 ( the 2017 notes ) primarily through the use of available cash and borrowings under the abl facility . in february 2014 , we redeemed the remaining $ 15.0 million aggregate principal amount of the 2017 notes at 104.118 % of par via borrowings under the abl facility . in june 2013 , our u.k. reporting segment acquired 100 % of the share capital of cooke bros holdings limited ( the calypso soft drinks acquisition ) , which includes the subsidiary companies calypso soft drinks limited and mr. freeze ( europe ) limited ( together , calypso soft drinks ) . calypso soft drinks produces fruit juices , juice drinks , soft drinks , and freezable products in the united kingdom . story_separator_special_tag the aggregate purchase price for the calypso soft drinks acquisition was $ 12.1 million , which included approximately $ 7.0 million paid at closing , deferred payments of approximately $ 2.3 million paid on the first anniversary of the closing date , and approximately $ 3.0 million to be paid on the second anniversary of the closing date . the closing payment was funded from available cash . 35 summary financial results our net income in 2014 was $ 10.0 million or $ 0.10 per diluted common share , compared with net income of $ 17.0 million or $ 0.18 per diluted share in 2013. the following items of significance affected our 2014 financial results : our revenue increased $ 8.8 million , or 0.4 % , in 2014 compared to 2013 due primarily to the addition of the aimia and dss businesses in 2014 , the calypso business in 2013 , as well as the inclusion of a 53 rd week , partially offset by the competitive pricing environment and a product mix shift into contract manufacturing . excluding the impact of foreign exchange , revenue decreased $ 10.3 million , or 0.5 % , from the comparable prior year period ; our gross profit as a percentage of revenue remained flat at 13.2 % in 2014 compared to 2013 due primarily to the addition of the calypso , aimia and dss businesses , offset by a competitive pricing environment , additional freight and startup costs associated with the growth and launch of our contract manufacturing business in north america , and increased freight and transportation in our u.k. operations as we ended the year holding more inventory with third parties as we implement a new warehouse management system ; our selling , general and administrative ( sg & a ) expenses increased to $ 255.0 million from $ 183.4 million due primarily to acquisition and integration related expenses as well as increased sg & a expenses associated with the addition of the calypso , aimia and dss businesses , lower employee-related incentive costs and the reversal of certain long term incentive accruals in the prior year , and the inclusion of a 53 rd week . sg & a expenses were also impacted by the reclassification of $ 22.6 million in amortization related to customer list intangible assets from cost of goods sold to sg & a expenses ( this reclassification has been made for all periods presented , and it was $ 22.7 million and $ 22.8 million for 2013 and 2012 , respectively ) ; our loss on disposal of property , plant and equipment was related to the disposal of $ 1.7 million of equipment that was either replaced or no longer being used in our operating segments ; our other expense , net increased by $ 8.2 million , or 64.1 % , due primarily to costs associated with the redemption of $ 375.0 million aggregate principal amount of our 2018 notes , partially offset by a favorable legal settlement ; our interest expense decreased by $ 11.9 million , or 23.1 % , due primarily to the redemption of the remaining $ 15.0 million aggregate principal amount of our 2017 notes , the refinancing of $ 375.0 million aggregate principal amount of our 2018 notes with our 2022 notes and a prior year amendment to our abl facility to more favorable terms , partially offset by interest expense incurred on new debt issued and assumed with the dss acquisition ; our income tax benefit was $ 61.4 million in 2014 compared to income tax expense of $ 1.8 million in 2013 due primarily to the release of our u.s. federal valuation allowance and the expected future benefit of pre-tax losses ; our ebitda decreased to $ 105.4 million from $ 176.0 million ; our adjusted ebitda decreased to $ 180.2 million from $ 197.9 million ; and our adjusted net income and adjusted earnings per diluted share were $ 57.1 million and $ 0.60 , respectively , compared to $ 38.0 million and $ 0.40 in the prior year , respectively . the following items of significance affected our 2013 financial results : our revenue decreased 7.0 % in 2013 compared to 2012 due primarily to lower global volumes partially offset by an increase in net selling price per servings . excluding the impact of foreign exchange , revenue decreased 6.5 % from the comparable prior year period ; our gross profit as a percentage of revenue decreased to 13.2 % in 2013 from 13.9 % in 2012 due primarily to lower global volumes that resulted in unfavorable fixed cost absorption ; our sg & a expenses decreased to $ 183.4 million from $ 200.8 million due primarily to lower employee-related expenses , lower information technology costs and a reduction in professional fees and similar costs ; 36 our loss on disposal of property , plant and equipment was related to the disposal of $ 1.8 million of equipment that was either replaced or no longer being used in our operating segments ; our other expense , net in 2013 was $ 12.8 million due primarily to costs associated with the redemption of $ 200.0 million aggregate principal amount of our 2017 notes , compared to other income in 2012 of $ 2.0 million as a result of insurance recoveries in excess of the loss incurred on a facility in the united states in the amount of $ 1.9 million and recording a bargain purchase of $ 0.9 million in the united kingdom offset partially by foreign exchange losses of $ 0.8 million ; our interest expense decreased by $ 2.6 million , or 4.8 % , due primarily to the redemption of $ 200.0 million aggregate principal amount of our 2017 notes and to an amendment to our abl facility to more favorable terms ; our income tax expense decreased to $ 1.8 million in 2013 compared to an income tax expense of $ 4.6 million in 2012 due primarily to a reduction in pretax income ; our ebitda decreased to $ 176.0 million
| the dilutive effect of the convertible preferred shares has been eliminated , as the convertible preferred shares are not convertible until the third anniversary of their issuance . the following table summarizes our free cash flow and adjusted free cash flow for the three months and year ended january 3 , 2015 and december 28 , 2013 , respectively : replace_table_token_15_th 46 replace_table_token_16_th 1. in connection with the dss acquisition , $ 29.4 million was required to cash collateralize certain dss self-insurance programs . the $ 29.4 million was funded with borrowings against our abl facility , and the cash collateral is included within prepaid and other current assets on our consolidated balance sheet at january 3 , 2015. subsequent to january 3 , 2015 additional letters of credit were issued from our available abl facility capacity , and the cash collateral was returned to the company , which was used to repay a portion of our outstanding abl facility . 2. includes $ 5.6 million of dss 's free cash flow from the acquisition date . the following table summarizes our adjusted sg & a expenses for the three months and year ended january 3 , 2015 and december 28 , 2013 , respectively : replace_table_token_17_th 47 the following unaudited financial information for the three months and year ended january 3 , 2015 and december 28 , 2013 , respectively , represents the activity of calypso and aimia for such periods . calypso and aimia were combined with our u.k. operations as of their respective dates of acquisition : replace_table_token_18_th replace_table_token_19_th the following unaudited financial information for the three months and year ended january 3 , 2015 and december 28 , 2013 , respectively , represents the activity of dss for such periods . dss was combined with our consolidated operations as of its date of acquisition : for the three months ended ( in millions of u.s. dollars ) january 3 , 2015 december 28 , 2013 revenue cott corporation $ 543.5 $ 481.6 less : dss ( 28.7 ) cott corporation excluding dss $ 514.8 $ 481.6 for the year ended ( in millions of u.s. dollars )
|
the results of pelikan artline are included in the company 's consolidated financial statements from may 2 , 2016 forward , and are reported in the acco brands international segment . pelikan artline is a premier distributor of recognized consumer brands used in businesses , schools , and homes in australia and new zealand . for further information on the acquisitions , see `` note 3. acquisitions `` to the consolidated financial statements contained in item 8. of this report . for information on the financings of the acquisitions , see `` note 4. long-term debt and short-term borrowings `` to the consolidated financial statements contained in item 8. of this report . reportable business segments the company has three reportable business segments each of which is comprised of different geographic regions . the company 's three reportable business segments are as follows : reportable business segment geographic regions primary brands acco brands north america united states and canada at-a-glance ® , five star ® , gbc ® , hilroy ® , kensington ® , mead ® , quartet ® , and swingline ® acco brands emea europe , middle east and africa derwent ® , esselte ® , gbc ® , kensington ® , leitz ® , nobo ® , rapid ® , and rexel ® acco brands international australia/n.z. , latin america and asia-pacific artline ® , barrilito ® , gbc ® , kensington ® , marbig ® , quartet ® , rexel ® , tilibra ® , and wilson jones ® each of the company 's three reportable business segments designs , markets , sources , manufactures and sells recognized consumer and other end-user demanded brands used in businesses , schools and homes . product designs are tailored based on end-user preferences in each geographic region . our product categories include school products ; storage and organization ; laminating , binding and shredding machines and related consumable supplies ; calendars ; stapling and punching ; whiteboards ; computer accessories ; and do-it-yourself tools , among others . our portfolio of consumer and other end-user demanded brands includes both globally and regionally recognized brands . acco brands markets and sells its strong multi-product offering broadly and is not dependent on any one channel . our products are sold through all relevant channels , namely retailers , including : mass retailers ; e-tailers ; discount , drug/grocery and variety chains ; warehouse clubs ; hardware and specialty stores ; independent office product dealers ; office superstores ; wholesalers ; and contract stationers . we also sell directly to commercial and consumer end-users through our e-commerce platform and our direct sales organization . story_separator_special_tag ( primarily related to the esselte acquisition ) and transaction costs ( related to the goba acquisition ) . the prior-year period included $ 16.4 million in integration and transaction costs primarily related to the esselte and pelikan artline acquisitions . underlying sg & a , excluding acquisitions , transaction and integration costs , and foreign currency translation , decreased due to a $ 19.8 million reduction in management incentive compensation expenses resulting from our below target performance for 2018 and cost and synergy savings . for similar reasons , sg & a as a percentage of net sales decreased to 20.2 % from 21.3 % . restructuring charges restructuring charges of $ 11.7 million decreased $ 10.0 million , or 46.1 % , from $ 21.7 million in the prior-year period . the current-year period charges primarily related to changes in the operating structure of the north america segment and the continued integration of esselte within the emea segment . the prior-year period charges of $ 21.7 million primarily related to esselte and pelikan artline integration activities . operating income operating income of $ 187.0 million , including $ 5.2 million from the addition of esselte for the month of january and $ 2.3 million attributable to goba , increased $ 2.5 million , or 1.4 % , from $ 184.5 million in the prior-year period . foreign currency translation reduced operating income by $ 4.1 million , or 2.2 % , in the current-year period . underlying operating income , excluding acquisitions , restructuring , transaction and integration costs , and foreign currency translation , decreased primarily due to lower gross profit , primarily in the north america segment , substantially offset by a $ 20.8 million reduction in management incentive compensation expenses and cost and synergy savings . other expense ( income ) , net other expense ( income ) , net was an expense of $ 1.6 million compared to income of $ 0.4 million in the prior-year period . the increase in expense was due to foreign exchange losses in the current-year period . income taxes for the current-year period , income tax expense was $ 51.2 million on income before taxes of $ 157.9 million , an effective tax rate of 32.4 % . for the prior-year period , income tax expense was $ 26.4 million on income before taxes of $ 158.1 million , an effective tax rate of 16.7 % . the low effective tax rate in the prior-year period was primarily due to a one-time net tax benefit of $ 25.7 million related to the u.s. tax act . this benefit was driven by the reduction of net deferred tax liabilities , partially offset by the transition toll tax . also contributing to the low effective rate in 2017 was $ 5.6 million of tax benefit from the settlement of stock-based compensation . 30 net income/diluted income per share net income of $ 106.7 million decreased $ 25.0 million , or 19 % , from $ 131.7 million in the prior-year period . foreign currency translation reduced net income by $ 5.9 million , or 4.5 % , in the current-year period . diluted income per share was $ 1.00 , down $ 0.19 , or 16 % from $ 1.19 per diluted share in the prior-year period . the decrease in net income was primarily driven by the higher effective tax rate . story_separator_special_tag segment net sales and operating income for the years ended december 31 , 2018 and 2017 replace_table_token_9_th ( 1 ) segment operating income excludes corporate costs . see `` item 8. note 17. information on business segments `` for a reconciliation of total `` segment operating income `` to `` income before income tax . '' acco brands north america acco brands north america net sales of $ 940.7 million decreased $ 58.3 million , or 5.8 % , from $ 999.0 million in the prior-year period , including $ 0.9 million from the addition of esselte for the month of january . comparable net sales , excluding esselte and foreign currency translation , decreased 5.9 % . both declines were primarily due to lower net sales to u.s. wholesalers , which accounted for approximately 4.0 % of the sales reduction , with the remaining decline primarily driven by lower net sales due to lost share of calendar products . we anticipate there could be further net sales declines in our u.s. business in 2019 due to ongoing disruption in the traditional commercial reseller channel ( including office superstores and wholesalers ) . acco brands north america operating income of $ 116.6 million decreased $ 35.8 million , or 23.5 % , from $ 152.4 million in the prior-year period , and operating income margin decreased to 12.4 % from 15.3 % . operating income decreased primarily as a result of lower net sales , which contributed lower gross profit . operating income margin declined due to unfavorable customer and product mix and rising input costs , including tariffs . this was partially offset by cost savings , lower management incentive compensation expenses of $ 11.1 million , and an october sales price increase . acco brands emea acco brands emea net sales of $ 605.2 million increased $ 62.4 million , or 11.5 % , from $ 542.8 million in the prior-year period , due to the contribution of $ 42.7 million from the addition of esselte for the month of january and favorable foreign currency translation of $ 10.8 million , or 2.0 % . comparable net sales , excluding esselte and foreign currency translation , increased 1.6 % due to increased volume resulting from expanding distribution of legacy acco brands ' products to the acquired esselte customer base , as well as double-digit growth in shredders and computer products , which were partially offset by lower sales of commodity products . acco brands emea operating income of $ 59.4 million , including $ 5.4 million from the addition of esselte for the month of january , increased $ 27.4 million , or 85.6 % , from $ 32.0 million in the prior-year period , and operating margin increased to 9.8 % from 5.9 % . foreign currency translation increased operating income by $ 0.3 million , or 0.9 % , in the current-year period . underlying 31 operating income , excluding esselte and foreign currency translation , increased due to $ 9.5 million in lower restructuring charges and integration costs , and higher gross profit and gross profit margin from both favorable mix and synergy savings . acco brands international acco brands international net sales of $ 395.3 million decreased $ 11.7 million , or 2.9 % , from $ 407.0 million in the prior-year period as growth from acquisitions ( $ 19.7 million attributable to goba and $ 0.6 million from the addition of esselte for the month of january ) was offset by foreign currency translation , which reduced net sales by $ 22.0 million , or 5.4 % . comparable net sales , excluding acquisitions and foreign currency translation , decreased 2.5 % primarily driven by reduced customer purchases as certain customers lowered their inventory levels in australia and mexico , as well as lower net sales from lost share of commodity products in australia . these declines were only partially offset by net sales growth in brazil . acco brands international operating income of $ 49.2 million , including $ 2.3 million attributable to goba , decreased $ 1.7 million , or 3.3 % , from $ 50.9 million in the prior-year period . operating income margin was flat at 12.4 % . foreign currency translation reduced operating income by $ 4.3 million , or 8.4 % , in the current-year period . underlying operating income , excluding acquisitions and foreign currency translation , decreased due to lower net sales resulting in lower gross profit , partially offset by $ 4.7 million in lower restructuring charges and integration costs as well as cost savings . consolidated results of operations for the years ended december 31 , 2017 and 2016 replace_table_token_10_th ( 1 ) the company acquired esselte on january 31 , 2017 ; esselte 's results are included in 2017 results from february 1 , 2017 forward . ( 2 ) the company acquired pelikan artline on may 2 , 2016 ; pelikan artline 's results are included in 2016 results from that date forward . net sales net sales of $ 1,948.8 million , including $ 438.8 million attributable to the esselte and pa acquisitions , increased $ 391.7 million , or 25.2 % , from $ 1,557.1 million in the prior-year period . foreign currency translation increased sales by $ 12.4 million , or 0.8 % . comparable net sales , excluding the acquisitions and foreign currency translation , decreased primarily due to declines at certain office superstore customers and lost product placements . 32 cost of products sold cost of products sold of $ 1,291.5 million increased $ 249.3 million , or 23.9 % , from $ 1,042.2 million in the prior-year period . foreign currency translation reduced cost of products sold by $ 8.4 million , or 0.8 % . underlying cost of products sold , excluding foreign currency translation , increased due to the inclusion of the acquisitions , partially offset by lower comparable sales and cost savings and productivity improvements .
| these cost increases adversely impacted our cost of products sold and gross profit margin during the second half of 2018. we implemented price increases in the u.s. in october 2018 and january 2019 which , together with cost reduction initiatives , are expected to fully offset current inflation in 2019. it is currently anticipated that tariffs on purchased finished goods we source from china will increase again as early as march 1 , 2019. we may need to increase prices again to offset the cost of any further inflationary increases , including increased tariffs , in the coming quarters , which may result in a decrease in sales volume . further increases in input costs , including tariffs , could adversely impact our sales , cost of products sold and gross margin . acquisitions benefited our 2018 net sales by $ 63.9 million , including the additional month of esselte and six months of contribution from goba . foreign currency translation negatively impacted our net sales and operating income . the negative foreign currency translation in the international segment was partially offset by favorable foreign currency translation in the emea segment . the year-to-date average foreign exchange rates have moved as follows for our major currencies relative to the u.s. dollar : replace_table_token_7_th 28 consolidated results of operations for the years ended december 31 , 2018 and 2017 replace_table_token_8_th ( 1 ) the company acquired goba on july 2 , 2018 ; goba 's results are included in 2018 results from july 2 , 2018 forward . ( 2 ) the company acquired esselte on january 31 , 2017 ; esselte 's results are included in 2017 results from february 1 , 2017 forward . net sales net sales of $ 1,941.2 million decreased $ 7.6 million , or 0.4 % , from $ 1,948.8 million in the prior-year period , as growth from acquisitions ( $ 44.2 million from the addition of esselte for the month of january and $ 19.7 million from goba ) was
|
52 during july 2008 , penn octane approved the loan of approximately $ 700,000 to rio vista which amount is included in due to penn octane corporation in the accompanying consolidated balance sheet for the specific purpose of funding rio vista 's june 2008 quarterly distribution . rio vista made the following distributions during the years ended december 31 , 2007 and 2008 : replace_table_token_23_th the amount of the distributions paid through the june 2008 quarterly distribution represents the minimum quarterly distribution required to be made by rio vista pursuant to the partnership agreement . rio vista has not declared a distribution for the quarters ended september 30 , 2008 and december 31 , 2008. debt obligations rzb note in connection with the acquisition of regional during july 2007 , rio vista funded a portion of the acquisition through a loan of $ 5.0 million ( rzb note ) from rzb finance llc ( rzb ) dated july 26 , 2007. the rzb note was due on demand and if no demand , with a one-year maturity . the rzb note carries a variable annual rate of interest equal to the higher of ( a ) the rate of interest established from time to time by jpmorgan chase bank , n.a . as its base rate or its prime rate , ( 7.25 % at december 31 , 2007 ) , or ( b ) the weighted average overnight funds rate of the federal reserve system plus 0.50 % , in each case plus a margin of 4.75 % ( base rate margin ) . on july 27 , 2008 , the rzb note was amended whereby the maturity date was extended until august 29 , 2008. the rzb note was not paid on august 29 , 2008. during december 2008 , rio vista entered into a third amendment to the rzb note ( third amendment ) . under the terms of the third amendment , the maturity date of the rzb note was extended to february 27 , 2009. in addition , the interest rate calculation was modified to include a cost of funds rate definition in determining the base rate and the base rate margin was increased to 7.0 % . under the terms of the third amendment , the net worth of penn octane , as defined , is required to be in excess of $ 3.3 million . in addition , the third amendment required rio vista to repay $ 1.0 million of the rzb note . effective january 1 , 2009 , penn octane agreed to loan rio vista the $ 1.0 million of cash collateral held by rzb for purpose of making the required payment described above . during february 2009 , rio vista entered into a fourth amendment to the rzb note which extended the maturity date of the rzb note through march 31 , 2009. during march 2009 , rio vista entered into a fifth amendment to the rzb note which extends the maturity date of the rzb note through april 30 , 2009. rio vista and rzb are currently negotiating an additional extension of the rzb note ( extended rzb note ) . rio vista expects that the extended rzb note will have a three year maturity , with monthly amortization , and will provide regional with the ability to make minimum monthly payments to rio vista to cover a portion of rio vista 's corporate overhead subject to regional meeting required debt service covenants . in addition , rio vista will be required to subordinate repayment of its intercompany loan with regional and regional will be required to enter into a control agreement with its banks which will provide rzb with the ability to access regional 's cash in the event of a default . the extended rzb note has not been executed and is subject to due diligence , final loan documents and approval of both parties . in connection with the rzb note , regional granted to rzb a security interest in all of regional 's assets , including a deed of trust on real property owned by regional , and rio vista delivered to rzb a pledge of the outstanding capital stock of regional . on july 26 , 2007 , as a further condition of the loan agreement , penn octane also entered into a guaranty & agreement ( guaranty ) with rzb . pursuant to the guaranty , penn octane agreed to guaranty all of the indebtedness , liabilities and obligations of rio vista to rzb under the loan agreement and otherwise . the rzb note is also guaranteed by regional and rvop . 53 tcw credit facility the tcw credit facility is a $ 30.0 million senior secured credit facility available to rio vista penny llc with a maturity date of august 29 , 2010. the amount of the initial draw under the facility was $ 21.7 million , consisting of $ 16.8 million in assumption of the existing indebtedness in the principal amount of $ 16.5 million plus accrued but unpaid interest in the amount of $ 250,000 owed by gm oil to tcw , $ 2.0 million in consideration for tcw to enter into the tcw credit facility with rio vista penny and for rio vista penny to purchase an overriding royalty interest ( orri ) held by an affiliate of tcw , and $ 3.0 million to fund the acquisition of the membership interests of go by rio vista go . tcw had also approved a plan of development ( apod ) for the oklahoma assets totaling approximately $ 2.0 million , which was funded during december 2007. the tcw credit facility is secured by a first lien on all of the oklahoma assets and associated production proceeds pursuant to the note purchase agreement , security agreement and related agreements , including mortgages of the oklahoma assets in favor of tcw . the interest rate is 10.5 % , increasing an additional 2 % if there is an event of default ( see below ) . story_separator_special_tag payments under the tcw credit facility were interest-only until december 29 , 2008. the tcw credit facility carries no prepayment penalty . rio vista eco llc ( an indirect , wholly-owned subsidiary of rio vista and the direct parent of rio vista penny and rio vista go ) , rio vista go , go and mv have each agreed to guarantee payment of the notes payable to the lenders under the tcw credit facility . under the terms of the note purchase agreement , at any time during the period from may 19 , 2008 through november 19 , 2009 , tcw has the right to demand payment of $ 2.2 million of debt ( demand loan ) . beginning may 19 , 2008 , tcw also has the right to convert the outstanding principal amount of the demand loan into common units of rio vista at a price equal to the lesser of $ 13.33 per unit or 90 % of the 20-day average trading price of such units preceding the election to convert . beginning november 19 , 2008 , tcw has the right to convert the balance of the debt under the tcw credit facility into common units of rio vista at a price equal to 90 % of the 20-day average trading price of such units preceding the election to convert . the conversion rights of tcw as described above were formalized through the issuance of a warrant by rio vista ( tcw warrant ) . rio vista has agreed to file with the sec a registration statement on form s-3 covering the common units issued pursuant to the tcw warrant within 90 days following the first exercise of the tcw warrant . rio vista penny and rio vista go , which hold the oklahoma assets , are prohibited from making upstream distributions to rio vista unless certain conditions are met which currently are not expected to be met in the future . in addition , the tcw credit facility requires semi-annual reserve reports by an independent engineer which is used in determining the allowable borrowing base . 54 on september 29 , 2009 , rio vista penny entered into a first amendment to the note purchase agreement ( first tcw amendment ) with tcw . under the terms of the first tcw amendment , tcw agreed to fund rio vista penny an additional $ 1.0 million under the tcw credit facility for certain apod costs as described in the first tcw amendment . in addition , under the terms of the first tcw amendment , the interest rate under the tcw credit facility increased from 10.5 % per annum to 12.5 % per annum beginning july 1 , 2008. under the terms of the first tcw amendment , tcw agreed to change the period for which a notice to demand repayment from rio vista penny of up to $ 2.2 million of indebtedness under the tcw credit facility from may 19 , 2008 to january 1 , 2009 and rio vista penny also agreed to extend the demand repayment option on the $ 2.2 million through the date of maturity of the tcw credit facility . in addition , under the terms of the first tcw amendment , tcw has agreed to waive other defaults identified in the first tcw amendment which either occurred and or were existing prior to the date of the first tcw amendment . in addition , on september 29 , 2008 , in connection with the tcw credit facility , rio vista penny , rio vista , operating and tcw entered into an amended and restated management services agreement ( amended msa ) . under the terms of the amended msa , operating was named as manager of the oklahoma properties , replacing northport production company , an oklahoma corporation , which was previously named as manager under the original management services agreement . rio vista penny and tcw have entered into several letter agreements whereby tcw agreed to extend the payment obligations under the tcw credit facility ( including the december 2008 principal payment and interest payment due ) and other requirements pursuant to the tcw credit facility until april 13 , 2009 ( tcw waiver ) . in connection with one of the extensions , tcw agreed to provide rio vista with 62 days advance written notice to exercise the tcw warrant , except for up to 400,000 common units of rio vista . rio vista 's management is in discussions with tcw to restructure the tcw credit facility . however , if rio vista 's management is unable to restructure the tcw credit facility or obtain additional extensions or waivers of its requirements of payment terms and covenants contained in the tcw credit facility , then rio vista penny will be in default under the terms of the tcw credit facility . tcw has the right to foreclose against rio vista penny under the terms of the tcw credit facility . tcw has no recourse against rio vista , except that tcw holds the tcw warrant , granting it the right , but not the obligation , to convert a portion or all of the value of the debt owing under the tcw credit facility , including accrued interest and penalties , into rio vista common units at the exercise price defined in the tcw warrant ( approximately 90 % of the market value of the common units on the 20 trading days preceding the conversion date ) . if tcw converts any amounts owing under the tcw credit facility into rio vista common units then the current rio vista common unit holders will be significantly diluted . as of december 31 , 2008 , the net book value oklahoma assets were approximately $ 36.1 million . as a result of a foreclosure , based on december 31 , 2008 balances , rio vista would record a loss related to the oklahoma assets which could approximate $ 7.8 million .
| revenues for the year ended december 31 , 2008 were $ 13.8 million and includes the results of regional and the oklahoma assets for the twelve months during 2008. revenues during the year ended december 31 , 2007 were $ 5.9 million and includes the results of regional for the period july 28 , 2007 to december 31 , 2007 , the results of the oklahoma assets for the period november 19 , 2007 to december 31 , 2007 and the results of the lpg transportation for the full twelve months . the results for the two periods are not comparative since each period contains different business operations for different periods of time . during the year ended december 31 , 2006 , there were only revenues from august 22 , 2006 , the date that the lpg transportation business commenced , through december 31 , 2006. all revenues prior to august 22 , 2006 were derived from rio vista 's lpg sales business and were reclassified as discontinued operations . cost of goods sold . cost of goods sold for the year ended december 31 , 2008 was $ 10.8 million and includes the results of regional and the oklahoma assets for the twelve months during 2008. cost of goods sold during the year ended december 31 , 2007 were $ 4.8 million and includes the costs of goods sold of regional for the period july 28 , 2007 to december 31 , 2007 , the cost of goods sold of the oklahoma assets for the period november 19 , 2007 to december 31 , 2007 and the cost of goods sold of the lpg transportation for the full twelve months . the results for the two periods are not comparative since each period contains different business operations for different periods of time . during the year ended december 31 , 2006 , cost of goods sold consisted of those costs associated with operation of the us mexico pipelines and matamoros terminal facility . all costs associated with rio vista 's lpg sales business prior to its sale , except for costs associated with the us mexico pipelines and matamoros terminal facility , which were used for rio vista 's lpg transportation business , were reclassified as discontinued operations . selling , general and administrative expenses . selling , general and administrative expenses were $ 5.3
|
on november 20 , 2013 , we sold 3,078,336 shares of fiesta 's common stock in an underwritten public offering at a price of $ 46.00 per share ( excluding underwriting discounts and commissions ) pursuant to a registration statement on form s-3 33 ( registration no . 333-192254 ) . the aggregate net proceeds to us from the offering were approximately $ 135.3 million , reflecting gross proceeds of $ 141.6 million , net of underwriting fees of approximately $ 5.7 million and other offering costs of approximately $ 0.7 million . on december 11 , 2013 , we irrevocably called for redemption the remaining $ 77.3 million principal amount of notes that were not validly tendered and accepted for payment in the tender offer . in accordance with the terms of the indenture governing the notes , the redemption price was equal to 100 % of the principal amount of the notes , plus the applicable premium ( as defined in the indenture governing the notes ) as of , and accrued and unpaid interest , if any , to , but not including , december 16 , 2013 , the date of redemption . on december 11 , 2013 , we terminated our former senior secured revolving credit facility , which we refer to as our “ former senior credit facility ” , and entered into a new senior credit facility . the new senior credit facility provides for aggregate revolving credit borrowings of up to $ 150 million ( including $ 15 million available for letters of credit ) and matures on december 11 , 2018. the new senior credit facility also provides for potential incremental increases of up to $ 50 million to the revolving credit borrowings available under the new senior credit facility . on december 29 , 2013 , there was $ 71.0 million in outstanding borrowings under our new senior credit facility . we recognized a loss on extinguishment of debt of $ 16.4 million in the fourth quarter of 2013 related to the repurchase and redemption of the notes . the loss on extinguishment of debt includes the write-off of $ 3.9 million in deferred financing costs related to the notes and $ 12.5 million of debt redemption premiums , consent payments , additional interest and other fees related to the redemption of the notes . interest expense will decrease significantly in 2014 as a result of the refinancing , repurchase and redemption of our notes . lease financing obligations for certain of our sale-leaseback transactions , carrols restaurant group has guaranteed the lease payments on an unsecured basis or is the primary lessee on the leases . prior to the spin-off , accounting standards codification 840-40 “ sale-leaseback transactions ” required us to classify these leases as lease financing transactions because the guarantee from a related party constituted continuing involvement and caused the sale to not qualify for sale-leaseback accounting . under the financing method , the assets remained on our consolidated balance sheet and continued to be depreciated , and the net proceeds received by us from these transactions were recorded as a lease financing liability . payments under these leases were applied as payments of imputed interest and deemed principal on the underlying financing obligations rather than as rent expense . such leases qualified for sale-leaseback accounting upon the spin-off due to the cure or elimination of certain provisions that previously precluded sale-leaseback accounting ( and the treatment of such leases as operating leases ) in our consolidated financial statements , primarily the guarantees from carrols restaurant group . as a result of the qualification for sale-leaseback accounting during the second quarter of 2012 due to the spin-off , such leases were treated as operating leases and we removed the associated lease financing obligations , property and equipment , and deferred financing costs from our balance sheet , and recognized deferred gains on sale-leaseback transactions related to the qualification of $ 32.1 million that is being amortized as a reduction of rent expense over the individual remaining lease terms . this resulted in a decrease in lease financing obligations of $ 114.2 million , a decrease in assets under lease financing obligations of $ 80.4 million , and a decrease of $ 1.6 million in deferred financing fees . additionally in the second quarter of 2012 , we exercised purchase options associated with the leases for five restaurant properties previously accounted for as lease financing obligations and purchased these properties from the lessor . as a result , we reduced our lease financing obligations by $ 6.0 million during the second quarter of 2012. subsequently , four of the five properties have been sold in qualifying sale-leaseback transactions . as a result of the qualification of these leases discussed above and purchase of the five properties mentioned above , restaurant rent expense was $ 2.8 million higher , depreciation expense was $ 0.7 million lower and interest expense was $ 3.9 million lower in 2013 compared to the same period in 2012 , and restaurant rent expense was $ 4.4 million higher , depreciation expense was $ 1.4 million lower and interest expense was $ 7.1 million lower in 2012 compared to 2011. executive summary-consolidated operating performance for the year ended december 29 , 2013 our fiscal year 2013 results and highlights include the following : net income increased $ 1.0 million to $ 9.3 million in 2013 , or $ 0.39 per diluted share , compared to net income of $ 8.3 million , or $ 0.35 per diluted share , primarily due to the net impact of the growth in revenues , impairment charges recognized in 2012 related to the closure of five pollo tropical restaurants in new jersey , the positive impact of the qualification for sale treatment of sale-leaseback transactions upon the consummation of the spin-off , and reduced interest expense as a result of the repurchase of the notes , offset by the loss on extinguishment of debt in the fourth quarter of 2013 . story_separator_special_tag 34 total revenues increased 8.2 % in 2013 to $ 551.3 million from $ 509.7 million in 2012 , driven primarily by an increase in the number of company-owned restaurants and an increase in comparable restaurant sales of 5.9 % for the pollo tropical restaurants and 0.5 % for the taco cabana restaurants . the growth in comparable restaurant sales resulted primarily from an increase in average check of 3.2 % at pollo tropical and 1.6 % at taco cabana and an increase in transactions at pollo tropical of 2.7 % , offset by a decrease in transactions at taco cabana of 1.1 % . during 2013 , we opened twelve new company-owned pollo tropical restaurants and six new company-owned taco cabana restaurants and permanently closed one company-owned pollo tropical restaurant and one company-owned taco cabana restaurant . story_separator_special_tag style= '' line-height:120 % ; font-size:8pt ; '' > the following table presents the primary drivers of the changes in the components of restaurant operating margins for pollo tropical and taco cabana . all percentages are stated as a percentage of applicable segment restaurant sales . replace_table_token_11_th 37 replace_table_token_12_th consolidated restaurant rent expense . restaurant rent expense includes base rent and contingent rent on our leases characterized as operating leases , reduced by amortization of gains on sale-leaseback transactions . restaurant rent expense , as a percentage of total restaurant sales , increased to 4.9 % in 2013 from 4.3 % in 2012 due primarily to the qualification for sale treatment of the sale-leaseback transactions discussed above which increased rent expense in 2013 by $ 2.8 million . restaurant rent expense , as a percentage of total restaurant sales , increased to 4.3 % in 2012 from 3.6 % in 2011 also due primarily to the qualification for sale treatment of the sale-leaseback transactions discussed above which increased rent expense in 2012 by $ 4.4 million . this was partially offset by the effect of higher restaurant sales volumes at both pollo tropical and taco cabana on fixed rental costs . consolidated general and administrative expenses . general and administrative expenses are comprised primarily of ( 1 ) salaries and expenses associated with the development and support of our company and brands and the management oversight of the operation of our restaurants ; ( 2 ) legal , auditing and other professional fees and stock-based compensation expense ; and ( 3 ) subsequent to the spin-off , costs incurred under the tsa for administrative support services . general and administrative expenses increased to $ 48.5 million in 2013 from $ 43.9 million in 2012 and , as a percentage of total revenues , increased to 8.8 % compared to 8.6 % in 2012. the increase is due primarily to fiesta management additions and related costs and other costs related to the transition from carrols restaurant group to a separate infrastructure . in addition , general and administrative expenses in 2013 includes $ 0.4 million of expenses associated with the underwritten secondary public equity offering completed in march 2013. general and administrative expenses increased to $ 43.9 million in 2012 from $ 37.5 million in 2011 and , as a percentage of total restaurant sales , increased to 8.6 % compared to 7.9 % in 2011 , due to the hiring of certain fiesta executive management and administrative staff as well as legal and other costs of $ 0.8 million incurred in connection with the spin-off . general and administrative expense also includes stock-based compensation expense and other costs of $ 1.1 million in the first quarter of 2012 38 related to the conversion of carrols restaurant group outstanding stock options into either shares of carrols restaurant group common stock or restricted stock in connection with the spin-off and the acceleration of vesting of restricted stock awards of our former chairman upon his departure from our board of directors . in addition , general and administrative costs during 2012 included $ 0.6 million associated with retirement agreements entered into during the third quarter . adjusted ebitda . adjusted ebitda , which is one of the measures of segment profit or loss used by our chief operating decision maker for purposes of allocating resources to our segments and assessing their performance , is defined as earnings attributable to the applicable segment before interest , loss on extinguishment of debt , income taxes , depreciation and amortization , impairment and other lease charges , stock-based compensation expense and other income and expense . adjusted ebitda may not be necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation . adjusted ebitda for each of our segments includes an allocation of general and administrative expenses associated with administrative support for executive management , information systems and certain accounting , legal and other administrative functions . adjusted ebitda is a non-gaap financial measure of performance . for a discussion of our use of adjusted ebitda and a reconciliation to net income , see the heading entitled `` management 's use of non-gaap financial measures '' . adjusted ebitda for our pollo tropical restaurants increased to $ 43.7 million in 2013 from $ 38.6 million in 2012 due primarily to the net impact of the increase in revenue , partially offset by an increase in rent expense , insurance costs and pre-opening costs and an increase in general and administrative expense . adjusted ebitda for our taco cabana restaurants increased to $ 26.1 million in 2013 from $ 25.6 million in 2012 also primarily due to the net impact of the increase in revenues , partially offset by the increase in rent expense and the increase in general and administrative expense . adjusted ebitda for pollo tropical and taco cabana was negatively impacted by an increase in rent expense of $ 1.1 million and $ 1.8 million , respectively , in 2013 compared to 2012 due to the qualification for sale treatment of sale-leaseback transactions , as discussed above .
| for pollo tropical , menu price increases drove an increase in restaurant sales of 2.2 % in 2013 as compared to 2012 , and 2.6 % in 2012 as compared to 2011. for taco cabana , menu price increases drove an increase in restaurant sales of 1.7 % in 2013 as compared to 2012 , and 2.7 % in 2012 as compared to 2011. franchise revenues were $ 2.4 million in 2013 and 2012. franchise revenues in 2012 increased $ 0.7 million from $ 1.7 million in 2011 due primarily to the number of new franchised locations opened during the year and an increase in sales at the franchised locations . operating costs and expenses . operating costs and expenses include cost of sales , restaurant wages and related expenses , other restaurant expenses and advertising expenses . cost of sales consists of food , paper and beverage costs including packaging costs , less purchase discounts . cost of sales is generally influenced by changes in commodity costs , the sales mix of items sold and the effectiveness of our restaurant-level controls to manage food and paper costs . key commodities , including chicken and beef , are generally purchased under contracts for future periods of up to one year . restaurant wages and related expenses include all restaurant management and hourly productive labor costs , employer payroll taxes , restaurant-level bonuses and related benefits . payroll and related taxes and benefits are subject to inflation , including minimum wage increases and increased costs for health insurance , workers ' compensation insurance and state unemployment insurance . other restaurant operating expenses include all other restaurant-level operating costs , the major components of which are utilities , repairs and maintenance , real estate taxes and credit card fees . advertising expense includes all promotional expenses including television , radio , billboards and other sponsorships and promotional activities . pre-opening costs include costs incurred prior to opening a restaurant , including restaurant employee wages and related expenses , travel expenditures , recruiting ,
|
while the company supports its tax positions by unambiguous tax law , prior experience with the taxing authority , and analysis that considers all relevant facts , circumstances and regulations , management must still rely on assumptions and estimates to determine the overall likelihood of success and proper quantification of a given tax position . credit quality the company 's delinquency and net charge-off ratios reflect , among other factors , changes in the mix of loans in the portfolio , the quality of receivables , the success of collection efforts , bankruptcy trends and general economic conditions . delinquency is computed on the basis of the date of the last full contractual payment on a loan ( known as the recency method ) and on the basis of the amount past due in accordance with original payment terms of a loan ( known as the contractual method ) . management closely monitors portfolio delinquency using both methods to measure the quality of the company 's loan portfolio and the probability of credit losses . 23 the following table classifies the gross loans receivable of the company that were delinquent on a recency and contractual basis for at least 61 days at march 31 , 2011 , 2010 , and 2009 : replace_table_token_9_th loans are charged off at the earlier of when such loans are deemed to be uncollectible or when six months have elapsed since the date of the last full contractual payment . the company 's charge-off policy has been consistently applied and no significant changes have been made to the policy during the periods reported . management considers the charge-off policy when evaluating the appropriateness of the allowance for loan losses . charge-offs as a percent of average net loans decreased from 15.5 % in fiscal 2010 to 14.3 % in fiscal 2011. in fiscal 2011 , approximately 84.3 % of the company 's loans were generated through refinancings of outstanding loans and the origination of new loans to previous customers . a refinancing represents a new loan transaction with a present customer in which a portion of the new loan proceeds is used to repay the balance of an existing loan and the remaining portion is advanced to the customer . for fiscal 2011 , 2010 , and 2009 , the percentages of the company 's loan originations that were refinancings of existing loans were 75.9 % , 76.4 % and 75.0 % , respectively . the company 's refinancing policies , while limited by state regulations , in all cases consider the customer 's payment history and require that the customer has made multiple payments on the loan being considered for refinancing . a refinancing is considered a current refinancing if the customer is no more than 45 days delinquent on a contractual basis . delinquent refinancings may be extended to customers who are more than 45 days past due on a contractual basis if the customer completes a new application and the manager believes that the customer 's ability and intent to repay has improved . it is the company 's policy to not refinance delinquent loans in amounts greater than the original amounts financed . in all cases , a customer must complete a new application every two years . during fiscal 2011 , delinquent refinancings represented 1.6 % of the company 's total loan volume compared to 2.0 % in fiscal 2010. charge-offs , as a percentage of loans made by category , are greatest on loans made to new borrowers and less on loans made to former borrowers and refinancings . this is as expected due to the payment history experience available on repeat borrowers . however , as a percentage of total loans charged off , refinancings represent the greatest percentage due to the volume of loans made in this category . the following table depicts the charge-offs as a percent of loans made by category and as a percent of total charge-offs during fiscal 2011 : 24 replace_table_token_10_th the company maintains an allowance for loan losses in an amount that , in management 's opinion , is adequate to cover losses inherent in the existing loan portfolio . the company charges against current earnings , as a provision for loan losses , amounts added to the allowance to maintain it at levels expected to cover probable losses of principal . when establishing the allowance for loan losses , the company takes into consideration the growth of the loan portfolio , the mix of the loan portfolio , current levels of charge-offs , current levels of delinquencies , and current economic factors . in accordance with fasb asc topic 450 , the company accrues an estimated loss if it is probable and can be reasonably estimated . it is probable that there are losses in the existing portfolio . to estimate the losses , the company uses historical information for net charge-offs and average loan life . this method is based on the fact that many customers refinance their loans prior to the contractual maturity . average contractual loan terms are approximately eleven months and the average loan life is approximately four months . based on this method , the company had an allowance for loan losses that approximated six months of average net charge-offs at march 31 , 2011 , 2010 , and 2009. therefore , at each year end the company had an allowance for loan losses that covered estimated losses for its existing loans based on historical charge-offs and average lives . in addition , the entire loan portfolio turns over approximately three times during a typical twelve-month period . story_separator_special_tag therefore , a large percentage of loans that are charged off during any fiscal year are not on the company 's books at the beginning of the fiscal year . the company believes that it is not appropriate to provide for losses on loans that have not been originated , that twelve months of net charge-offs are not needed in the allowance , and that the method employed is in accordance with generally accepted accounting principles . 25 the following is a summary of the changes in the allowance for loan losses for the years ended march 31 , 2011 , 2010 , and 2009 : replace_table_token_11_th ( 1 ) average loans receivable have been determined by averaging month-end gross loans receivable less unearned interest and deferred fees over the indicated period . quarterly information and seasonality the company 's loan volume and corresponding loans receivable follow seasonal trends . the company 's highest loan demand typically occurs from october through december , its third fiscal quarter . loan demand has generally been the lowest and loan repayment highest from january to march , its fourth fiscal quarter . loan volume and average balances typically remain relatively level during the remainder of the year . this seasonal trend affects quarterly operating performance through corresponding fluctuations in interest and fee income and insurance commissions earned and the provision for loan losses recorded , as well as fluctuations in the company 's cash needs . consequently , operating results for the company 's third fiscal quarter generally are significantly lower than in other quarters and operating results for its fourth fiscal quarter are significantly higher than in other quarters . 26 the following table sets forth , on a quarterly basis , certain items included in the company 's unaudited consolidated financial statements and shows the number of offices open during fiscal years 2011 and 2010. replace_table_token_12_th recently issued accounting pronouncements see “ item 8. financial statements and supplementary data . note 1. summary of significant accounting policies , ” of the consolidated financial statements for the impact of new accounting pronouncements . liquidity and capital resources the company has financed and continues to finance its operations , acquisitions and office expansion through a combination of cash flows from operations and borrowings from its institutional lenders . the company has generally applied its cash flows from operations to fund its increasing loan volume , fund acquisitions , repay long-term indebtedness , and repurchase its common stock . as the company 's gross loans receivable increased from $ 416.3 million at march 31 , 2006 to $ 875.0 million at march 31 , 2011 , net cash provided by operating activities for fiscal years 2011 , 2010 and 2009 was $ 199.8 million , $ 183.6 million and $ 153.9 million , respectively . the company 's primary ongoing cash requirements relate to the funding of new offices and acquisitions , the overall growth of loans outstanding , the repayment or repurchase of long-term indebtedness and the repurchase of its common stock . as of march 31 , 2011 , approximately 7.8 million shares have been repurchased since 2000 for an aggregate purchase price of approximately $ 204.5 million . during fiscal 2011 the company repurchased 1.3 million shares for $ 53.3 million . in august 2010 , the board of directors authorized the company to repurchase up to $ 20 million of common stock . in addition , as previously announced , subsequent to the end of fiscal 2011 , on may 23 , 2011 and april 26 , 2011 , the board of directors authorized the company to repurchase up to $ 50 million of additional common stock . through june 3 , 2011 ( including pending repurchase orders subject to settlement ) , the company repurchased shares of its common stock for approximately $ 34.2 million . see note 20 – subsequent events to the consolidated financial statements . the company believes stock repurchases to be a viable component of the company 's long-term financial strategy and an excellent use of excess cash when the opportunity arises . in addition , the company plans to open approximately 63 branches in the united states , 10 branches in mexico , and evaluate acquisition opportunities in fiscal 2012. expenditures by the company to open and furnish new offices generally averaged approximately $ 25,000 per office during fiscal 2011. new offices have also required from $ 100,000 to $ 400,000 to fund outstanding loans receivable originated during their first 12 months of operation . the company acquired six offices and fourteen loan portfolios from competitors in eight states in eleven separate transactions during fiscal 2011. gross loans receivable purchased in these transactions were approximately $ 3.9 million in the aggregate at the dates of purchase . the company believes that attractive opportunities to acquire new offices or receivables from its competitors or to acquire offices in communities not currently served by the company will continue to become available as conditions in local economies and the financial circumstances of owners change . 27 the company has a $ 225.0 million base credit facility with a syndicate of banks . the credit facility will expire on august 31 , 2012. funds borrowed under the revolving credit facility bear interest , at the company 's option , at either the agent bank 's prime rate per annum or the libor rate plus 3.0 % per annum with a minimum 4.0 % interest rate . during fiscal 2011 , the effective interest rate on borrowings under the revolving credit facility , including the impact of interest swap , was 4.4 % . the company pays a commitment fee equal to 0.375 % per annum of the daily unused portion of the revolving credit facility . amounts outstanding under the revolving credit facility may not exceed specified percentages of eligible loans receivable . on march 31 , 2011 , $ 82.3 million was outstanding under this facility ,
| the company prepared approximately 48,000 , 62,000 and 61,000 returns in each of the fiscal years 2011 , 2010 and 2009 , respectively . revenues from our tax preparation business decreased by $ 3.0 million or 29.3 % during fiscal 2011 due to a 24 % decline in the number of returns prepared . this decrease resulted , primarily , from an increase in compensation from tax preparers who continued to offer an instant loan on tax refunds , which the company was unable to offer this year . next year , it is expected that the refund anticipation loans will not be available for any tax preparer , so the company should not have this competitive disadvantage going forward . the following table sets forth certain information derived from the company 's consolidated statements of operations and balance sheets , as well as operating data and ratios , for the periods indicated : replace_table_token_8_th ( 1 ) average gross loans receivable have been determined by averaging month-end gross loans receivable over the indicated period . ( 2 ) average net loans receivable have been determined by averaging month-end gross loans receivable less unearned interest and deferred fees over the indicated period . ( 3 ) operating margin is computed as total revenues less provision for loan losses and general and administrative expenses as a percentage of total revenues . comparison of fiscal 2011 versus fiscal 2010 net income was $ 91.2 million during fiscal 2011 , a 23.9 % increase over the $ 73.7 million earned during fiscal 2010. this increase resulted primarily from an increase in operating income ( revenues less provision for loan losses and general and administrative expenses ) of $ 24.7 million , or 18.5 % , offset by a $ 0.9 million increase in interest expense , and a $ 6.2 million increase in income tax expense . total revenues increased to $ 491.4 million in fiscal 2011 , a $ 50.8 million , or 11.5 % , increase over the $ 440.6 million in fiscal 2010. revenues from the 937 offices open throughout both fiscal years increased
|
these technologies , methods , and processes are applied by ibio cdmo to a variety of tasks performed for clients , collaborators , and for ibio itself , including product and process development , analytical , and manufacturing services . ibio cdmo is promoting commercial collaborations with third parties on the basis of these technology advantages and plans to work with customers to achieve laboratory scale technical milestones that can form the basis of longer-term manufacturing business arrangements . in addition to the generation of revenue from services through ibio cdmo , a second goal of our new business model is through partnering and out-licensing of our new technologies , to create opportunities for ibio to share in the successful development and commercialization of selected product candidates by our collaborators and licensees as well as advance our own product candidates . we expect to accomplish this objective through both investments we make to acquire or develop our own proprietary product candidates and also by participating with select customers and collaborators in the value created through the development , with our technologies , and manufacture of their product candidates . ibio itself is a client of ibio cdmo for further ind advancement of its proprietary products beginning with ibio-cfb03 for the treatment of a range of fibrotic diseases . ibio will work with ibio cdmo on the production of ibio-cfb03 for clinical trials and , with clinical success , for commercial launch . the third element of our new business model is the use of ibio technologies to create and operate manufacturing facilities at substantially lower capital and operating costs . due to the lower capital and operating cost requirements for biopharmaceutical ( both vaccines and therapeutics ) production via ibio technologies versus legacy methods , certain corporations and governments that have not already established manufacturing capacity for biologic products are client prospects for both development and for commercial technology transfer services to enable autonomous manufacturing in the market being served . in some cases , we have additional opportunities to increase the value of these uses of our technologies by offering custom facility design services . ibio cdmo , llc on december 16 , 2015 , we formed ibio cdmo llc as a delaware limited liability company , to develop and manufacture plant-made pharmaceuticals . effective july 1 , 2017 , ibio cdmo changed its name from ibio cmo llc . as of december 31 , 2015 , we owned 100 % of ibio cdmo . on january 13 , 2016 , we entered into a contract manufacturing joint venture with an affiliate of eastern capital limited ( “ eastern ” ) , a stockholder of the company ( the “ eastern affiliate ” ) . the eastern affiliate contributed $ 15 million in cash for a 30 % interest in ibio cdmo . we retained a 70 % interest in ibio cdmo and granted ibio cdmo a non-exclusive license to use our proprietary technologies for research purposes and an exclusive u.s. license for manufacturing purposes . we retained the exclusive right to grant product licenses to those who wish to sell or distribute products made using our technology . on february 23 , 2017 , the company entered into an exchange agreement with the eastern affiliate , pursuant to which the company acquired substantially all of the interest held by the eastern affiliate in ibio cdmo and issued one share of the company 's ibio cmo preferred tracking stock , par value $ 0.001 per share . after giving effect to the transaction , the company owns 99.99 % of ibio cdmo . see note 10 in the consolidated financial statements for a further discussion . ibio cdmo 's operations take place in bryan , texas in a facility controlled by another affiliate of eastern ( the “ second eastern affiliate ” ) as sublandlord . the facility is a class a life sciences building on the campus of texas a & m university , designed and equipped for plant-made manufacture of biopharmaceuticals . the second affiliate granted ibio cdmo a 34-year capital lease for the facility . commercial activities commenced in january 2016. ibio cdmo expects to operate on the basis of three parallel lines of business : ( 1 ) services focused on the development and manufacturing of third-party products ; ( 2 ) development and production of ibio 's proprietary product ( s ) for treatment of fibrotic diseases and or other proprietary ibio products ; and ( 3 ) commercial technology transfer services including facility design , as needed . 31 proprietary ibio technologies have been used to advance development of certain products that have been commercially infeasible to develop with conventional technologies such as chinese hamster ovary cell systems and microbial fermentation methods . ibio technologies can be used to create and operate manufacturing facilities at substantially lower capital and operating costs . these include development and manufacture of both vaccine and therapeutic product candidates . ibio cdmo is promoting commercial collaborations with third parties on the basis of these technology advantages and plans to work with customers to achieve laboratory scale technical milestones that can form the basis of longer-term manufacturing business arrangements . ibio itself is a client of ibio cdmo for further ind advancement of its proprietary products beginning with ibio-cfb03 for the treatment of a range of fibrotic diseases . ibio will work with ibio cdmo on the production of ibio-cfb03 for clinical trials and , with clinical success , for commercial launch . due to the lower capital and operating cost requirements for pharmaceutical production via ibio technologies versus legacy methods , certain corporations and governments that have not already established manufacturing capacity for biologic products are client prospects for both development and for commercial technology transfer services to enable autonomous manufacturing in the market being served . for example , in brazil , ibio has been collaborating with the oswaldo cruz foundation ( fiocruz ) to develop a recombinant yellow fever vaccine based on ibio technology . story_separator_special_tag ibio 's contract with fiocruz provides for commercial technology transfer services as the product candidates enter human clinical trials . over time , ibio expects to work closely with ibio cdmo to provide such technology transfer services for a variety of both commercial and government clients . story_separator_special_tag discussion below ) pursuant to the common stock purchase agreement entered into on july 24 , 2017 , and through proceeds realized in connection with license and collaboration arrangements and the operation of our subsidiary , ibio cdmo . we can not be certain that such funding will be available on favorable terms or available at all . to the extent that the company raises additional funds by issuing equity securities , its stockholders may experience significant dilution . if the company is unable to raise funds when required or on favorable terms , this assumption may no longer be operative , and the company may have to : a ) significantly delay , scale back , or discontinue the product application and or commercialization of its proprietary technologies ; b ) seek collaborators for its technology and product candidates on terms that are less favorable than might otherwise be available ; c ) relinquish or otherwise dispose of rights to technologies , product candidates , or products that it would otherwise seek to develop or commercialize ; or d ) possibly cease operations . 33 on july 24 , 2017 , we entered into the lincoln park purchase agreement pursuant to which lincoln park has agreed to purchase from us up to an aggregate of $ 16,000,000 of our common stock ( subject to certain limitations ) from time to time over the 36-month term of the agreement . as a result , on july 24 , 2017 , 1,200,000 shares of our common stock were issued to lincoln park as consideration for lincoln park 's commitment to purchase shares of our common stock under the agreement , and 2,500,000 shares of common stock were sold to lincoln park in an initial purchase for an aggregate gross purchase price of $ 1,000,000. despite any further proceeds we may receive pursuant to the lincoln park purchase agreement , we may still need additional capital to fully implement our business , operating and development plans for periods beyond september 15 , 2018. the extent to which we utilize the purchase agreement with lincoln park as a source of funding will depend on a number of factors , including the prevailing market price of our common stock , the volume of trading in our common stock and the extent to which we are able to secure funds from other sources . the number of shares that we may sell to lincoln park under the purchase agreement on any given day and during the term of the agreement is limited . additionally , we and lincoln park may not effect any sales of shares of our common stock under the purchase agreement during the continuance of an event of default under the purchase agreement . even if we are able to access the full $ 16.0 million under the purchase agreement , we may still need additional capital to fully implement our business , operating and development plans . on november 20 , 2014 , we filed with the securities and exchange commission a registration statement on form s-3 under the securities act , which was declared effective by the securities and exchange commission on december 2 , 2014. this registration statement allows us , from time to time , to offer and sell shares of common stock , shares of preferred stock , debt securities , units comprised of shares of common stock , preferred stock , debt securities and warrants in any combination , and warrants to purchase common stock , preferred stock , debt securities and or units , up to a maximum aggregate amount of $ 100 million of such securities . we currently have no firm agreements with any third parties for the sale of our securities pursuant to this registration statement . we can not be certain that funding will be available on favorable terms or available at all . to the extent that we raise additional funds by issuing equity securities , our stockholders may experience significant dilution . if we are unable to raise funds when required or on favorable terms , we may have to : a ) significantly delay , scale back , or discontinue the product application and or commercialization of our proprietary technologies ; b ) seek collaborators for our technology and product candidates on terms that are less favorable than might otherwise be available ; c ) relinquish or otherwise dispose of rights to technologies , product candidates , or products that we would otherwise seek to develop or commercialize ; or d ) possibly cease operations . on january 13 , 2016 , the company entered into a contract manufacturing joint venture with the eastern affiliate whereby the eastern affiliate contributed $ 15 million in cash for a 30 % interest in the company 's subsidiary ibio cdmo . the company retained a 70 % interest in ibio cdmo . on february 23 , 2017 , the company entered into an exchange agreement with the eastern affiliate pursuant to which the company acquired substantially all of the interest in ibio cdmo held by the eastern affiliate in exchange for one share of the company 's ibio cmo preferred tracking stock . after giving effect to the transaction , the company owns 99.99 % of ibio cdmo . on january 13 , 2016 , the company also entered into share purchase agreements with eastern pursuant to which eastern agreed to purchase 10 million shares of the company 's common stock at $ 0.622 per share .
| the increase was due to an increase in the expenses related to ibio cdmo operations which commenced in december 2015 of approximately $ 3,180,000 net of a reduction of expenses incurred by ibio , inc. other income ( expense ) other income ( expense ) for 2017 and 2016 was approximately ( $ 1,865,000 ) and ( $ 764,000 ) , respectively , an increase of $ 1,101,000 , primarily related to interest expense incurred under the capital lease . as discussed above , ibio cdmo 's operations take place in a facility in bryan , texas under a 34-year capital lease with the second eastern affiliate . such sublease is treated as a capital lease . in fiscal 2017 , other income ( expense ) included interest expense of $ 1,929,000 incurred under the capital lease and interest and royalty income of $ 64,000. other income ( expense ) in fiscal 2016 included interest expense of $ 807,000 incurred under the capital lease and interest and royalty income of $ 43,000. net loss attributable to noncontrolling interest this represents the share of the loss in ibio cdmo for the eastern affiliate for the years ended june 30 , 2017 and 2016. liquidity and capital resources as of june 30 , 2017 , we had cash of $ 8.1 million as compared to $ 23.0 million as of june 30 , 2016. cash at june 30 , 2016 included the remaining proceeds received from stock purchase agreements from eastern and the contribution for the formation of ibio cdmo of $ 15 million . net cash used in operating activities operating activities used $ 13.2 million in cash in 2017 to fund the loss for the period . net cash used in investing activities in fiscal 2017 , net cash used in investing activities was approximately $ 1,593,000. cash used in investing activities was attributable to additions to intangible assets of $ 270,000 and fixed assets primarily for ibio cdmo of $ 1,323,000. net cash provided by financing activities in fiscal 2017 , net cash used in
|
provision ( benefit ) for income taxes replace_table_token_21_th in both 2020 and 2019 , the tax benefits were the result of a large pretax loss from the impairments in the second quarter of 2020 and the fourth quarter of 2019. when a provision for income taxes is expected for the year , federal and oklahoma excess percentage depletion decreases the effective tax rate , while the effect is to increase the effective tax rate when a benefit for income taxes is recorded . 34 l iquidity and c apital r esources at september 30 , 2020 , the company had positive working capital of $ 13,335,880 , as compared to positive working capital of $ 11,378,829 at september 30 , 2019. the slight increase in working capital was primarily driven by increased cash as a result of proceeds from the 2020 equity issuance and increased refundable income taxes , partially offset by decreased derivative contract receivables and increased derivative contract liabilities , decreased sales receivables and short-term debt in 2020. liquidity the company has sufficient liquidity to manage the financial impact of the covid-19 pandemic . however , the company can provide no assurance that this will continue to be the case if the impact of covid-19 is prolonged for an extended period of time or if there is an extended impact on commodity prices or the economy in general . cash and cash equivalents were $ 10,690,395 as of september 30 , 2020 , compared to $ 6,160,691 at september 30 , 2019 , an increase of $ 4,529,704. cash flows for the 12 months ended september 30 are summarized as follows : replace_table_token_22_th operating activities : net cash provided by operating activities decreased $ 9,899,389 during 2020 , as compared to 2019 , primarily the result of the following : receipts of natural gas , oil and ngl sales ( net of production taxes and gathering , transportation and marketing costs ) and other decreased $ 15,194,689 ; increased income tax receipts of $ 1,445,554 ; increased net receipts on derivative contracts of $ 3,912,225 ; decreased payments for interest expense of $ 724,795 ; increased payments for g & a and other expense of $ 1,210,291 , which included severance to former ceo ; decreased field operating expenses of $ 1,286,718 ; and decreased lease bonus receipts of $ 863,701. investing activities : net cash used in investing activities increased $ 16,787,729 during 2020 , as compared to 2019 , primarily as the result of the following : lower drilling and completion activity during 2020 decreased our capital expenditures by $ 3,122,871 ; higher acquisition activity increased our expenditures by $ 4,625,381 ; and lower proceeds received from the sale of assets of $ 15,286,867 . 35 financing activities : net cash used in financing activities decreased $ 25,588,633 during 2020 , as compared to 2019 , primarily as a result of the following : increased net proceeds from equity issuance of $ 8,220,726 during 2020 ; decreased stock repurchases by the company of $ 7,446,365 during 2020 ; and decreased net payments on debt of $ 8,900,000. capital resources capital expenditures to drill and complete wells decreased $ 3,122,871 or 89 % in 2020 , compared to 2019 , as a result of the company 's strategy to cease participating in any new wells with a working interest at the end of fiscal 2019. the company currently has no remaining commitments that would require significant capital to drill and complete wells . since the company has decided to cease any further participation in wells with a working interest on its mineral and leasehold acreage , we anticipate that capital expenditures for working interest properties will be minimal going forward , as the expenditures will be limited to capital workovers to enhance existing wells . on november 14 , 2019 , the company closed on the sale of 530 net mineral acres in eddy county , new mexico , for $ 3.4 million . at the time of sale , the assets were mostly amortized and therefore had minimal net book value . almost all of the value received was a gain on the sale of assets of $ 3.3 million in the first quarter of 2020. the company utilized a like-kind exchange under internal revenue code section 1031 to defer income tax on all of the gain by offsetting it with the stack/scoop mineral acreage acquisition that was purchased during the quarter using qualified exchange accommodation agreements . on december 18 , 2019 , the company closed on the purchase of 700 net mineral acres in kingfisher , canadian and garvin counties , oklahoma , for a purchase price of $ 9.3 million ( after customary closing adjustments ) . this purchase was mostly funded with cash from our like-kind exchange sales . on july 28 2020 , the company closed on the sale of 5,925 non-producing mineral acres in northwestern oklahoma for $ 0.8 million and a gain of $ 0.7 million , with the proceeds applied toward debt reduction . on september 1 , 2020 , the company closed on an underwritten public offering of 5,750,000 common shares ( inclusive of overallotment option ) with net proceeds of $ 8.2 million to phx . on october 8 , 2020 , the company closed on the purchase of 297 net royalty acres in grady county , oklahoma , and 257 net mineral acres and 12 net royalty acres in harrison , panola and nacogdoches counties , texas , for a purchase price of $ 5.5 million and 153,375 shares of phx common stock , subject to customary closing adjustments . this purchase was mostly funded with cash from the common stock offering discussed above . story_separator_special_tag on november 12 , 2020 , the company closed on the purchase of 134 net mineral acres in san augustine county , texas for a purchase price of $ 750,000. on december 4 , 2020 , the company signed a purchase and sale agreement to purchase an additional 87 net mineral acres in san augustine county , texas for a purchase price of $ 1 million , subject to customary closing adjustments . the company expects this acquisition to close in the first fiscal quarter of 2021 the company received lease bonus payments during fiscal 2020 totaling approximately $ 0.7 million . looking forward , the cash flow from bonus payments associated with the leasing of drilling rights on the company 's mineral acreage is difficult to project as the current economic downturn has decreased demand for new leasing by operators . however , management plans to continue to actively pursue leasing opportunities . with continued natural gas and oil price volatility , management continues to evaluate opportunities for product price protection through additional hedging of the company 's future natural gas and oil production . see note 12 to the financial statements included in item 8 – “ financial statements and supplementary data ” for a complete list of the company 's outstanding derivative contracts . 36 the use of the company 's cash provided by operating activities and resultant change to cash is summarized in the table below : replace_table_token_23_th outstanding borrowings on our credit facility at september 30 , 2020 , were $ 28,750,000 , of which $ 1,750,000 is classified as current debt . as of december 1 , 2020 , outstanding borrowings were $ 27,250,000. looking forward , the company expects to fund overhead costs and dividend payments from cash provided by operating activities , cash on hand and borrowings utilizing our credit facility . the company intends to use any excess cash to strengthen the company 's balance sheets . the company had availability of $ 2,250,000 at september 30 , 2020 , under its credit facility and was in compliance with its debt covenants ( current ratio , debt to trailing 12-month ebitda , as defined by the credit facility , and restricted payments limited by leverage ratio ) . the debt covenants limit the maximum ratio of the company 's debt to ebitda to no more than 4:1. the borrowing base under the credit facility was redetermined on june 24 , 2020 , and reduced from $ 45 million to $ 32 million . this amendment included a quarterly commitment reduction , whereby the borrowing base is reduced by $ 1 million each april 15 , july 15 , october 15 and january 15 , commencing on july 15 , 2020. the decrease in the borrowing base was primarily due to the continued decline in natural gas and oil futures prices . despite the reduction in the borrowing base , we do not expect it will impact the liquidity needed to maintain our normal operating strategies . the borrowing base under the credit facility after quarterly commitment reductions was reaffirmed on december 4 , 2020 at $ 30 million . this amendment reduced the quarterly commitment reductions from $ 1,000,000 to $ 600,000 , reduced the consolidated cash balance in the anti-cash hoarding provision from $ 2,000,000 to $ 1,000,000 , and changed the debt to ebitda ratio from 4.0:1.00 to 3.50:1.00. based on the company 's expected capital expenditure levels , anticipated cash provided by operating activities for 2021 , combined with availability under its credit facility and shelf registration , the company has sufficient liquidity to fund its ongoing operations . contractual obligations and commitments the company has a credit facility with a group of banks headed by bank of oklahoma ( bok ) consisting of a revolving loan of $ 200,000,000 , which is subject to a semi-annual borrowing base determination . the borrowing base at september 30 , 2020 , was $ 31,000,000 and is secured by all of the company 's producing gas and oil properties . the revolving loan matures on november 30 , 2022. borrowings under the revolving loan are due at maturity . the revolving loan bears interest at the bok prime rate plus a range of 1.00 % to 1.75 % , or 30-day libor plus a range of 2.50 % to 3.25 % . the election of bok prime or libor is at the company 's discretion . the interest rate spread from libor or the prime rate increases as the ratio of the loan balance to the borrowing base increases . at september 30 , 2020 , the effective rate was 4.25 % . determinations of the borrowing base are made semi-annually ( usually june and december ) or whenever the banks , in their discretion , believe that there has been a material change in the value of the natural gas and oil properties . on june 24 , 2020 , the company entered into the seventh amendment to its credit facility . the amendment reduced the borrowing base from $ 45,000,000 to $ 32,000,000 and included a quarterly commitment reduction , whereby the borrowing base is reduced by $ 1,000,000 each april 15 , july 15 , october 15 and january 15 , commencing on july 15 , 2020. the credit facility contains customary covenants which , among other things , require periodic financial and reserve reporting and place certain limits on the company 's incurrence of 37 indebtedness , liens , payment of dividends and acquisitions of stock . in addition , the company is required to maintain certain financial ratios , a current ratio ( as defined in the credit facility ) of no less than 1.0 to 1.0 and a funded debt to ebitda ( as defined in the credit facility ) of no more than 4.0 to 1.0 based on the trailing twelve months .
| these decreases were slightly offset by a ten-well drilling program in the bakken that came online in november 2019 and mineral acquisitions of bakken and stack producing properties in late 2019. decreased natural gas and ngl production was primarily due to naturally declining production in the arkoma stack and stack and , to a lesser extent , the fayetteville , as well as production downtime in high-interest wells in the arkoma stack . given the company 's strategic decision to cease participating with working interests , we plan to offset the natural decline of our existing production base by the development of our current inventory of mineral acreage and through acquisitions of additional mineral interests going forward . gains ( losses ) on derivative contracts replace_table_token_15_th the change in net gain on derivative contracts was principally due to the natural gas and oil collars and fixed price swaps being more beneficial in 2019 in relation to their respective contracted volumes and prices . during the 2020 period , we received $ 4,109,210 on settled derivative contracts as compared to $ 196,985 received in the 2019 period . the change from a net asset position at september 30 , 2019 to a net liability position at september 30 , 2020 resulted in an unrealized loss on derivative contracts in the 2020 period of $ 3,201,791. the company 's natural gas and oil costless collar contracts and fixed price swaps in place at september 30 , 2020 , had expiration dates of october 2020 through february 2022. the company utilizes derivative contracts for the purpose of protecting its cash flow and return on investments . 32 gains on asset sales in 2020 , the company recorded gain on asset sales of $ 3,997,436 as compared to $ 18,973,426 in 2019. during the first quarter of 2020 , the company sold producing mineral acreage in eddy county , new mexico , for a gain of $ 3,272,499. the company utilized a like-kind exchange under internal revenue code section 1031 to defer income tax on all of the gain by offsetting it with the stack/scoop mineral acreage acquisition that was purchased during the quarter using qualified exchange accommodation agreements . during the fourth quarter of 2020 , the company sold 5,925 non-producing mineral acres in northwestern oklahoma for a gain of $ 717,640. the remaining gain on asset sales in 2020 was due to
|
we have reduced the number of active transmitters by 2.0 % to 4,159 active transmitters at december 31 , 2016 from 4,243 active transmitters at december 31 , 2015 . 25 telecommunication expenses are incurred to interconnect our paging networks and to provide telephone numbers for customer use , points of contact for customer service , and connectivity among our offices . these expenses are dependent on the number of units in service , the number of customers we support and the number of office and network locations that we maintain . however , the number or duration of telephone calls to call centers may vary from period to period based on factors other than the number of units in service or customers , which could cause telecommunication expenses to vary . statements of income comparison of statement of income elements for the years ended december 31 , 2016 , 2015 and 2014 replace_table_token_6_th revenue — wireless the table below details total wireless revenue for the periods stated : replace_table_token_7_th the decrease in wireless revenue during 2016 compared to both 2015 and 2014 , respectively , reflects the decrease in demand for our wireless services . paging revenue consists primarily of recurring fees associated with the provision of messaging services and fees for paging devices and is net of a provision for service credits . product and other revenue reflects system sales , the sale of devices and charges for paging devices that are not returned and are net of anticipated credits . the demand for one-way and two-way messaging declined at each specified date and we believe demand will continue to decline for the foreseeable future . demand for our services has also been impacted by the shift from narrow band wireless service offerings to broad band technology services by our competition . as demand for one-way and two-way messaging has declined , we have developed or added service offerings such as encrypted paging and spok mobile with a pager number in order to increase our revenue potential and mitigate the decline in our wireless revenue . we will continue to explore ways to innovate and provide customers the highest value possible . software revenue is anticipated to increase , while the wireless revenue is expected to continue to decrease reflecting the changing technology expectations of our customer base . 26 wireless revenue is generally based upon the number of units in service and the monthly charge per unit . the number of units in service changes based on subscribers added , referred to as gross placements , less subscriber cancellations , or disconnects . the net of gross placements and disconnects is commonly referred to as net gains or losses of units in service or the net disconnect rate . the absolute number of gross placements as well as the number of gross placements relative to average units in service in a period , referred to as the gross placement rate , is monitored on a monthly basis . disconnects are also monitored on a monthly basis . the ratio of units disconnected in a period to average units in service for the same period , called the disconnect rate , is an indicator of our success at retaining subscribers , which is important in order to maintain recurring revenue and to control operating expenses . the following table sets forth information on our units in service by account size at specified dates : replace_table_token_8_th ( 1 ) all figures presented include both direct and indirect units in service . the following table sets forth information on the net disconnect rate by account size for our customers for the periods stated : replace_table_token_9_th ( 1 ) all figures presented include both direct and indirect units in service . the following table sets forth information on average revenue per unit ( `` arpu '' ) by account size for the periods stated : replace_table_token_10_th ( 1 ) all figures presented include both direct and indirect units in service . while arpu for similar services and distribution channels is indicative of changes in monthly charges and the revenue rate applicable to new subscribers , this measurement on a consolidated basis is affected by several factors , including the mix of units in service and the pricing of the various components of our services . we expect future annual revenue to decline in line with recent trends . the decrease in consolidated arpu for the year ended december 31 , 2016 compared to the year ended december 31 , 2015 and for the year ended december 31 , 2015 compared to the year ended december 31 , 2014 was due to the change in composition of our customer base as the percentage of units in service attributable to larger customers continues to increase . these larger customers benefit from lower pricing associated with their larger number of units-in-service . we believe that without further price adjustments , arpu will trend lower in 2017 . arpu may further be affected by lower prices for broad band wireless services offered by our competitors . any price increases could mitigate , but not completely offset , the expected declines in both arpu and revenue . 27 the following reflects the impact of subscribers and arpu on the change in wireless revenue : replace_table_token_11_th replace_table_token_12_th as previously discussed , demand for messaging services has declined over the past several years and we anticipate that it will continue to decline for the foreseeable future , which would result in reductions in wireless revenue due to the decreased number of subscribers and related units in service . story_separator_special_tag revenue — software the table below details total revenue for software operations for the periods stated : replace_table_token_13_th the decrease in software operations revenue during 2016 when compared to 2015 primarily reflects a decrease in the number and size of projects completed during 2016 as compared to the same period in 2015. starting in late 2015 , we began a reorganization of the sales staff and related sales territories , which realigned territories and replaced lower performing sales employees with new staff . the decrease in operational bookings during 2015 and 2016 also factored into the decrease in operational revenue for the same period . the decrease in operations revenue during 2015 when compared to 2014 primarily reflects lower sales of software to new customers which was reflected in the decrease in license revenue . the continued increase in maintenance revenue for each of the periods stated reflects our continuing success in renewals of our maintenance support for existing software solutions and in maintenance support for sales of new solutions . the maintenance renewal rates for the year ended december 31 , 2016 , 2015 and 2014 were in excess of 99 % . we achieve very high maintenance renewal rates compared to many companies that have software offerings , and we may experience a downward trend in maintenance renewal as communications technology and services continue to advance , and customers have more choices and opportunities to shift to newer solutions for their communication and work flow needs . our software revenue is dependent on the conversion of our software bookings into revenues . on a regular basis , we enter into contractual arrangements with our customers to provide software licenses , professional services , and equipment sales . in addition , we enter into contractual arrangements for maintenance with our customers on new solutions or renewals of existing solutions . these contractual arrangements are reported as bookings and represent future revenue . 28 the following table summarizes total bookings for the periods stated : replace_table_token_14_th the decrease in bookings during 2016 when compared to 2015 primarily reflects a decrease in the number of new operations orders and new maintenance orders from fewer new installations , partially offset by the continued success of maintenance and subscription renewals . starting in late 2015 , the company undertook a reorganization of the sales staff and related sales territories . as part of that reorganization , the company has replaced lower performing sales employees with new staff . the company is unable to predict the impact of this reorganization on the level and timing of future software operations bookings . the company is also migrating its sales focus from individual software solutions to its integrated solution portfolio . the change in sales focus has impacted bookings as the focus on the integrated solution portfolio requires a longer sales cycle to achieve completion . the maintenance bookings continue to reflect a strong renewal rate in excess of 99 % . operations and new orders in 2014 reflect $ 6.7 million of one-time bookings for a u.s. government entity which is the primary reason for the decrease in bookings during 2015 when compared to 2014. excluding the one-time booking , operations and new maintenance orders remained relatively flat while maintenance and subscription renewals continued to reflect a strong renewal rate in excess of 99 % . the following table summarizes backlog for the periods stated : replace_table_token_15_th ( 1 ) other reflects cancellations and adjustments to backlog . we reported a software backlog of $ 38.3 million at december 31 , 2016 which represented all orders received from customers not yet recognized as revenue . we continually review our backlog and adjust the balance to reflect the expected amount and timing of customer implementations . refer to the discussion on revenue and bookings for explanations of the changes in backlog for the periods ending december 31 , 2016 , 2015 and 2014 . 29 operating expenses replace_table_token_16_th cost of revenue . cost of revenue consisted primarily of the following items : replace_table_token_17_th as illustrated in the table above , cost of revenue expense decreased $ 3.2 million for the year ended december 31 , 2016 compared to the year ended december 31 , 2015 and increased $ 1.3 million for the year ended december 31 , 2015 compared to the year ended december 31 , 2014 primarily due to the following significant components and variances : payroll and related — payroll and related expenses were incurred largely for maintenance , support and service personnel . while there was a decrease of 10 ftes for the year ended december 31 , 2016 compared to the same period in 2015 , payroll and related expenses increased by $ 1.0 million due primarily to the timing of hiring and departures and an increase in the average cost per employee . the increase of $ 1.4 million in payroll and related expenses for the year ended december 31 , 2015 compare to the same period in 2014 was due primarily to an increase of 12 ftes and by an increase in the average cost per employee . cost of sales — cost of sales consisted primarily of third party software , use of third party resources for software implementation related work , inventory and maintenance of third party products . for the year ended december 31 , 2016 compared to the same period in 2015 cost of sales decreased by $ 3.2 million due primarily to a decrease in the sale of third party software , less use of third party resources for software implementation related work , a reduction in billable travel costs and a one-time charge of $ 0.8 million related to adjustments made to our inventory balances in 2015. the increase of $ 0.4 million in cost of sales for the year ended december 31 , 2015 compared to the same period in 2014 was due primarily to charges related to missing or obsolete inventory in the second quarter of 2015 , which was partially off-set by lower third-party professional services related to the implementation of
| replace_table_token_5_th ( 1 ) other includes hospitality , resort , indirect and billable travel revenue . 2016 highlights net sales declined by 5.3 % or $ 10.1 million during 2016 compared to 2015 , driven primarily by a continued and expected decline in wireless revenue while software revenue decreased slightly for the same period . our operating expenses declined by 4.3 % or $ 7.1 million during 2016 compared to 2015 , driven primarily by reduction in all functional categories partially offset by an increase in research and development expenses attributable to our continued investment in the development of spok care connect . we are committed to increasing our research and development spend throughout 2017 as we look to continue developing new products and services as well as enhancements for our current suite of solutions . we returned approximately $ 22.0 million of capital to our stockholders in the form of cash dividends and share repurchases which includes the special dividend declared in december 2016 but was paid in january 2017 . 2015 highlights net sales declined by 5.3 % or $ 10.6 million during 2015 compared to 2014 , driven primarily by a continued and expected decline in wireless revenue partially offset by solid growth in software maintenance revenue . year-over-year paging unit erosion improved to a low of 6.6 % during 2015 which was a decrease of 2.1 % compared to 2014. operating expenses declined by 4.4 % or $ 7.6 million during 2015 compared to 2014 , driven primarily by a reduction in general and administrative as well as lower depreciation , amortization and accretion costs . we reduced our deferred income tax asset valuation allowance by $ 64.2 million based on our analysis and expectation that these assets would now be realized in the future prior to expiration . we returned approximately $ 29.0 million of capital to our stockholders in the form of cash dividends and share repurchases . wireless revenue our core offering includes subscriptions to one-way or two-way messaging services
|
we focus on retaining customers by offering competitively-priced routine maintenance and through our marketing efforts . on a same store basis , service , body and parts revenue increased 3.6 % during 2018 , primarily driven by increases in customer pay and warranty revenues of 5.6 % and 2.4 % , respectively . performance in parts wholesale and body shop was similar to the same period of 2017. same store service , body and parts gross profit increased 5.5 % during 2018 compared to 2017 and 5.5 % during 2017 compared to 2016. this performance was also driven by increases in customer pay and warranty work . our gross margins continue to increase as our mix has shifted towards customer pay , which has higher margins than other service work . segments certain financial information by segment is as follows : replace_table_token_8_th 27 replace_table_token_9_th * segment income for each reportable segment is defined as income before income taxes , depreciation and amortization , other interest expense and other ( expense ) income , net . nm - not meaningful replace_table_token_10_th domestic a summary of financial information for our domestic segment follows : replace_table_token_11_th revenues in our domestic segment increased in all major business lines in 2018 compared to 2017 , primarily related to acquiring five stores and opening one store during 2018 . new vehicle unit sales increased 4.4 % overall , but declined 5.2 % on a same store basis . additionally , our domestic stores increased their used vehicle unit sales 9.4 % , improved finance and insurance income per retail unit 3.0 % to $ 1,539 per unit and experienced strong growth in service , body and parts revenues . the acquisition of five stores 28 in 2017 and strong performance on a same store basis in used vehicles , finance and insurance and service , body and parts contributed to the 13.7 % increase in revenue over 2016. our domestic segment income decreased 7.2 % in 2018 compared to 2017 due to gross profit growth of 9.7 % being more than offset by an 11.2 % increase in sg & a and a 40.9 % increase in floor plan interest expense . the increase in floor plan interest was primarily driven by increasing rates , compounded by increased volume related to acquisitions . the decrease in our domestic operating results in 2017 compared to 2016 was primarily a result of increased floor plan interest expense and sg & a expenses , which offset an increase in gross profits . the increase in sg & a during 2017 was primarily driven by increased variable costs associated with increased sales volume and the acquisition of eight stores . import a summary of financial information for our import segment follows : replace_table_token_12_th the increase in our import segment revenue in 2018 compared to 2017 resulted from increases in all major business lines and primarily related to acquiring six stores during 2018 . new vehicle unit sales in our import segment increased 8.3 % , but decreased 4.3 % on a same store basis primarily related to decreases in honda and toyota , offset by increasing unit sales with subaru . additionally , import revenues benefited from improved used vehicle sales due to a 17.0 % increase in volume , increases in finance and insurance revenues as a result of increased volume combined with a 5.7 % increase in finance and insurance income per retail unit sold to $ 1,245 per unit , and improved service , body and parts revenues . our segment income decreased 1.4 % in 2018 compared to 2017 mainly due to increases in sg & a and floor plan interest expenses that outpaced the increase in gross profit . gross profit for our import segment increased 13.6 % in 2018 compared to 2017 , in line with our revenues . our import segment experienced a 15.4 % increase in sg & a , primarily driven by increases in personnel , rent , and other miscellaneous costs . floor plan interest expense increased 43.2 % during 2018 and was a significant contributor to lower segment income growth compared to 2017 . this increase was driven by a combination of increased volume due to the acquisition of six stores during 2018 and increasing interest rates . improvements in our import operating results in 2017 compared to 2016 were primarily a result of increased revenues in all major business lines and a slight increase in gross margins , offset by increases in sg & a and floor plan expenses . 29 luxury a summary of financial information for our luxury segment follows : replace_table_token_13_th our luxury segment revenue increased in 2018 compared to 2017 primarily due to our acquisition of six stores and improvements in finance and insurance and service , body and parts revenues . overall , new vehicle unit sales increased 37.3 % but declined 2.9 % on a same store basis mainly related to our bmw and audi franchises . our luxury segment revenues also benefited from a 38.4 % increase in used vehicle unit sales , a 10.2 % increase in finance and insurance revenues per retail unit to $ 1,212 per unit and growth in service , body and parts during 2018 compared to 2017. our luxury segment income increased 18.6 % in 2018 compared to 2017 . this increase was due to gross profit growth of 42.2 % , offset by an increase in sg & a of 44.9 % , primarily related to acquisition activity , as well as increases in personnel expense , rent and facility expenses and other miscellaneous expense and an increase in floor plan interest expense of 62.6 % . as a percentage of gross profit , sg & a increased 150 basis points in 2018 compared to 2017 . the 62.6 % increase in floor plan interest expense during 2018 compared to 2017 was due to a combination of increased volume from acquisitions and rising interest rates . story_separator_special_tag our luxury segment revenue increased in 2017 compared to 2016 primarily due to our acquisition of four stores and improvements in finance and insurance and service body and parts revenues . new vehicle unit sales declined on a same store basis mainly related to our bmw and mercedes franchises . our luxury segment income increased in 2017 compared to 2016 primarily due to gross profits growth of 17.6 % that outpaced an increase in sg & a of 16.0 % . corporate and other revenue attributable to corporate and other includes the results of operations of our stand-alone collision centers , offset by certain unallocated reserve and elimination adjustments . replace_table_token_14_th nm - not meaningful the increase in corporate and other revenues in 2018 compared to 2017 was primarily related to the addition of two stand-alone body shops , changes in certain reserves that are not specifically identified with our domestic , import or luxury segment revenue , such as our reserve for revenue reversals associated with unwound vehicle sales , and elimination of revenues associated with internal corporate vehicle purchases and leases with our stores . corporate and other revenues were affected in 2017 by an increase in internal corporate vehicle purchases and leases with our stores resulting in negative revenues compared to 2016 . these internal corporate expense allocations are also used to increase comparability of our dealerships and reflect the capital burden a stand-alone dealership would experience . examples of these internal allocations include internal rent expense , internal 30 floor plan financing charges , and internal fees charged to offset employees within our corporate headquarters who perform certain dealership functions . the increase in corporate and other segment income in 2018 compared to 2017 is primarily due to gains on the divestiture of stores of $ 15.1 million and the addition of 17 stores , offset by changes to certain insurance and auto loan related reserves . in addition , 2018 included $ 4.3 million of acquisition expense compared to $ 6.0 million during 2017 . the increase in corporate and other segment income in 2017 compared to 2016 was primarily related to increased internal corporate expense allocations and increased store count . see note 18 of notes to consolidated financial statements included in part ii , item 8 of this form 10-k for additional information . asset impairment charges asset impairments recorded as a component of operations consist of the following ( in millions ) : replace_table_token_15_th during 2018 , we recorded an asset impairment of $ 1.3 million associated with certain real properties . the long-lived assets were tested for recoverability and were determined to have a carrying value exceeding their fair value . additionally , we recorded an asset impairment in 2016 associated with our equity-method investment in a limited liability company that participated in the nmtc program . we evaluated this equity-method investment at the end of each reporting period and identified indications of loss resulting from other than temporary declines in value . we exited this equity-method investment in december 2016. see notes 1 , 4 , 12 and 17 of notes to consolidated financial statements included in part ii , item 8 of this annual report . selling , general and administrative expense ( “ sg & a ” ) sg & a includes salaries and related personnel expenses , advertising ( net of manufacturer cooperative advertising credits ) , rent , facility costs , and other general corporate expenses . replace_table_token_16_th 31 replace_table_token_17_th sg & a increased 19.4 % , or $ 203.9 million in 2018 compared to 2017 . overall increases in sg & a were primarily due to growth through acquisitions , acquisition expenses and increased allowance losses associated with auto loan receivables , offset by decreases in losses related to storm insurance reserve charges and acquisition expenses and an increase in gains on the disposal of stores . other expenses in 2018 included acquisition expenses of $ 4.3 million , compared to $ 6.0 million in 2017 ; $ 3.2 million of storm related insurance charges , compared to $ 5.6 million in 2017 ; and auto loan allowance losses of $ 4.2 million compared to $ 1.2 million in 2017 . gains on the sale of stores were $ 15.1 million and $ 5.1 million in 2018 and 2017 , respectively . on a same store basis and excluding non-core charges , sg & a as a percent of gross profit was 70.6 % in 2018 compared to 68.4 % in 2017 . increases included auto loan allowance losses , data processing , rent , legal and professional fees and miscellaneous expense . increases in data processing and professional fees include initiatives focusing on innovation and cyber security measures . sg & a increased $ 149.8 million in 2017 compared to 2016 , primarily due to growth through acquisitions , as well as the various reserve charges mentioned above . sg & a in 2016 included a $ 3.9 million legal reserve adjustment , offset by a $ 1.1 million gain from the disposal of one of our stores . sg & a adjusted for non-core charges was as follows ( in millions ) : replace_table_token_18_th replace_table_token_19_th see “ non-gaap reconciliations ” for more details . 32 depreciation and amortization depreciation and amortization is comprised of depreciation expense related to buildings , significant remodels or improvements , furniture , tools , equipment and signage and amortization related to tradenames . replace_table_token_20_th acquisition activity contributed to the increases in depreciation and amortization in 2018 compared to 2017 and in 2017 compared to 2016 . during 2018 , we purchased approximately $ 108 million in depreciable property as part of our acquisitions of day auto group and prestige auto group . during 2017 , we purchased approximately $ 105 million in depreciable property as a part of our acquisitions of baierl auto group and downtown la auto group . capital expenditures totaled $ 158.0 million and $ 105.4 million , respectively , in 2018 and 2017 . these investments increase the amount of depreciable assets .
| acquisitions during 2018 included six stores each in our import and luxury segments where we have experienced larger increases in gross profit per unit on a same store basis , including increases of 21.8 % for subaru , 11.0 % for mercedes and 1.5 % for toyota , offset by a decrease of 4.2 % for lexus compared to 2017 . the same store new vehicle sales increase in 2017 over 2016 of 1.2 % included an increase of 1.5 % in average selling prices , partially offset by a 0.3 % decrease in volume . under our business strategy , we believe that our new vehicle sales create incremental profit opportunities through certain manufacturer incentive programs , provides used vehicle inventory through trade-ins , arranging of third party financing , vehicle service and insurance contracts , future resale of used vehicles acquired through trade-in and parts and service work . used vehicles used vehicle retail sales are a strategic focus for organic growth . we offer three categories of used vehicles : manufacturer certified pre-owned ( `` cpo '' ) vehicles ; core vehicles , or late-model vehicles with lower mileage ; and value autos , or vehicles with over 80,000 miles . we have established a company-wide target of achieving a per store average of 85 used retail units per month . strategies to achieve this target include reducing wholesale sales and selling the full spectrum of used units , from late model cpo models to vehicles over ten years old . during 2018 , our stores sold an average of 69 used vehicles per store per month . this compares to 67 used vehicles per store per month in 2017 and 66 in 2016 . used vehicle revenues increased 21.0 % during 2018 compared to 2017 and 14.3 % in 2017 compared to 2016 . these increases are due to a combination of increased volume from acquisitions and organic growth in our core and value auto categories at our seasoned stores . excluding the impact of acquisitions , on a same store
|
the overall economic condition in the geographies in which we operate can impact our ability to attract new customers and grow our business in all customer channels . growth in our residential customer base can be influenced by the overall state of the housing market . growth in our commercial and multi-site customer base can be influenced by the rate at which new businesses begin operating or existing businesses grow . the demand for our products and solutions is also impacted by the perceived threat of crime , as well as the quality of the service of our competitors . the monthly fees that we generate from any individual customer depend primarily on the customer 's level of service . we offer a wide range of services at various price points from basic burglar alarm monitoring to our full suite of interactive services . our ability to increase monthly fees at the individual customer level depends on a number of factors , including our ability to effectively introduce and market additional features and services that increase the value of our offerings to customers , which we believe drives customers to purchase higher levels of service and supports our ability to make periodic adjustments to pricing . attrition has a direct impact on the number of customers we monitor and service , as well as our financial results , including revenues , operating income , and cash flows . a portion of our customer base can be expected to cancel its service every year . customers may choose not to renew or may terminate their contracts for a variety of reasons , including , but not limited to , relocation , cost , loss to competition , or service issues . hurricanes during the year ended december 31 , 2017 , there were three hurricanes impacting certain areas in which we operate that resulted in power outages and service disruptions to certain of our customers . the financial impact from these hurricanes to the year ended december 31 , 2017 results was not material . we will continue to evaluate any potential financial and business impacts these hurricanes may have on future periods . public company costs as a result of our ipo , we will incur additional legal , accounting , board compensation , and other expenses that we did not previously incur , including costs associated with sec reporting and corporate governance requirements . these requirements include compliance with the sarbanes-oxley act of 2002 , as amended , as well as other rules implemented by the sec and the national securities exchanges . our financial statements following our ipo will reflect the impact of these expenses . significant events the comparability of our results of operations has been significantly impacted by the following : on july 1 , 2015 , we consummated the formation transactions . the formation transactions were funded by a combination of equity invested by our sponsor and the predecessor 's management of $ 755 million , as well as borrowings under ( i ) the first lien credit facilities , which included a $ 1,095 million term loan facility and a $ 95 million revolving credit facility , and ( ii ) a $ 260 million second lien term loan facility . on may 2 , 2016 , we consummated the adt acquisition which significantly increased our market share in the security industry , making us the largest monitored security company in the united states and canada . total consideration in connection with the adt acquisition was $ 12,114 million , which included the assumption of the adt corporation 's outstanding debt ( inclusive of capital lease obligations ) at a fair value of $ 3,551 million on the acquisition date , and cash of approximately $ 54 million . we funded the adt acquisition , as well as related transaction costs , using the net proceeds from a combination of the following : ( i ) equity proceeds of $ 3,571 million , net of issuance costs , which resulted from equity issuances by the company and ultimate parent to our sponsor and certain other investors ; ( ii ) incremental first lien term loan borrowings of $ 1,555 million and the issuance of $ 3,140 million of the prime notes ; and 39 ( iii ) issuance by adt inc. of 750,000 shares of the koch preferred securities and issuance by ultimate parent of the warrants to the koch investor for an aggregate amount of $ 750 million . we allocated $ 659 million to the koch preferred securities , which is reflected net of issuance costs of $ 27 million as a liability in our consolidated balance sheets . we allocated the remaining $ 91 million in proceeds to the warrants , which was contributed by ultimate parent in the form of common equity to the company , net of $ 4 million in issuance costs . refer to the notes to consolidated financial statements for further discussion . key performance indicators in evaluating our financial results , we review the following key performance indicators . recurring monthly revenue ( “ rmr ” ) . rmr is generated by contractual monthly recurring fees for monitoring and other recurring services provided to our customers , including contracts monitored but not owned . our computation of rmr may not be comparable to other similarly titled measures reported by other companies . we believe the presentation of rmr is useful because it measures the volume of revenue under contract at a given point in time . management monitors rmr , among other things , to evaluate our ongoing performance . gross customer revenue attrition . gross customer revenue attrition is defined as the recurring revenue lost as a result of customer attrition , net of dealer charge-backs and reinstated customers , excluding contracts monitored but not owned . customer sites are considered canceled when all services are terminated . dealer charge-backs represent customer cancellations charged back to the dealers because the customer canceled service during the charge-back period , generally twelve to fifteen months . story_separator_special_tag gross customer revenue attrition is calculated on a trailing twelve-month basis , the numerator of which is the annualized recurring revenue lost during the period due to attrition , net of dealer charge-backs and reinstated customers , and the denominator of which is total annualized recurring revenue based on an average of recurring revenue under contract at the beginning of each month during the period . recurring revenue is generated by contractual monthly recurring fees for monitoring and other recurring services provided to our customers . adjusted ebitda . adjusted ebitda is a non-gaap measure that we believe is useful to investors to measure the operational strength and performance of our business . our definition of adjusted ebitda , a reconciliation of adjusted ebitda to net income ( loss ) ( the most comparable gaap measure ) , and additional information , including a description of the limitations relating to the use of adjusted ebitda , are provided under “ —non-gaap measures. ” free cash flow . free cash flow is a non-gaap measure that our management employs to measure cash that is available to repay debt , make other investments , and pay dividends . our definition of free cash flow , a reconciliation of free cash flow to net cash provided by operating activities ( the most comparable gaap measure ) , and additional information , including a description of the limitations relating to the use of free cash flow , are provided under “ —non-gaap measures. ” 40 results of operations the following table sets forth our consolidated results of operations , summary cash flow data , and key performance indicators for the periods presented . replace_table_token_2_th _ n/a- not applicable , or not meaningful in certain cases where combined presentation would be calculated on a different basis ( 1 ) refer to the “ —key performance indicators ” section for the definitions of these key performance indicators . ( 2 ) gross customer revenue attrition ( percent ) is presented on a pro forma basis for the adt corporation business and asg , as applicable . ( 3 ) adjusted ebitda and free cash flow are non-gaap measures . refer to the “ —non-gaap measures ” section for the definitions of these terms and reconciliations to the most comparable gaap measures . year ended december 31 , 2017 compared to year ended december 31 , 2016 total revenue monitoring and related services revenue increase d by $ 1,281 million for the year ended december 31 , 2017 as compared to 2016 . this increase was largely attributable to incremental revenue in 2017 of approximately $ 1,168 million associated with the adt corporation business , which we acquired on may 2 , 2016 , and the amortization of deferred revenue as a result of the application of purchase accounting in connection with the adt acquisition that reduced revenue by $ 63 million during the year ended december 31 , 2016 . the remainder of the increase in monitoring and related services revenue was primarily driven by an increase in contractual monthly recurring fees for monitoring and other recurring services , which was favorably impacted by an improvement in average pricing , partially offset by lower customer volume . the improvement in average pricing was driven by the addition of new 41 customers at higher rates , largely due to an increase in interactive service customers as compared to total customer additions , as well as price escalations on our existing customer base . these factors also were the primary driver for an increase in rmr , which increased to $ 335 million as of december 31 , 2017 from $ 328 million as of december 31 , 2016 . the lower customer volume resulted from negative net customer additions , which reflects improvements in gross customer revenue attrition of 1.1 percentage points . both the negative net customer additions as well as the improvements in gross customer revenue attrition resulted from our enhanced focus on high quality customer additions through our disciplined customer selection process . installation and other revenue increase d by $ 85 million for the year ended december 31 , 2017 as compared to 2016 . this increase primarily resulted from $ 49 million related to revenue from security equipment sold outright to customers in 2017 , which includes approximately $ 10 million of incremental revenue associated with the operations of the adt corporation in 2017. additionally , the increase in installation and other revenue resulted from $ 36 million of revenue related to the amortization of deferred installation revenue , which includes approximately $ 11 million of incremental deferred installation revenue associated with the operations of the adt corporation in 2017. cost of revenue cost of revenue increase d by $ 202 million for the year ended december 31 , 2017 as compared to 2016 . the increase in cost of revenue was primarily attributable to ( i ) an increase in field and maintenance service expenses of $ 89 million primarily associated with the operations of the adt corporation , including expenses incurred for service calls for customers who have maintenance contracts , and ( ii ) an increase in customer care expenses of $ 75 million . the increase in customer care expenses was primarily attributable to costs associated with the operations of the adt corporation , as well as investments associated with enhanced customer revenue attrition improvement initiatives , which was partially offset by reduced software license expenses related to a newly-adopted cloud computing standard . the remainder of the increase in cost of revenue was due to increased installation costs of approximately $ 38 million associated with a higher volume of sales where security related equipment is sold outright to customers . selling , general and administrative expenses selling , general and administrative expenses increase d by $ 350 million for the year ended december 31 , 2017 as compared to 2016 . the increase in selling , general and administrative expenses was primarily attributable to incremental expenses associated with the adt corporation business of approximately $ 324 million .
| the improvement in average pricing was driven by price escalations on our existing customer base , as well as the addition of new customers at higher rates , largely due to an increase in interactive service customers as compared to total customer additions . these factors also were the primary driver for an increase in rmr , which increased from $ 328 million as of december 31 , 2016 to $ 335 million as of december 31 , 2017 . the lower customer volume resulted from negative net customer additions , which reflects improvements in gross customer revenue attrition of 1.1 percentage points , both of which resulted from our enhanced focus on high quality customer additions through our disciplined customer selection process . the increase in installation and other revenue was due to ( i ) approximately $ 38 million related to revenue from security equipment sold outright to customers and ( ii ) approximately $ 36 million of additional revenue generated from new customer additions associated with the amortization of deferred installation revenue during the year ended december 31 , 2017 as compared to the supplemental pro forma year ended december 31 , 2016 . 57 cost of revenue cost of revenue increased $ 26 million for the year ended december 31 , 2017 as compared to the supplemental pro forma year ended december 31 , 2016 . the increase in cost of revenue was attributable to increased costs of approximately $ 25 million related to installation costs associated with a higher volume of sales where security related equipment is sold outright to customers and approximately $ 23 million in field and maintenance service expenses incurred to enhance service levels and lower customer backlog . these were partially offset by decreased customer care expenses of approximately $ 22 million , which consisted of reduced software license expenses related to a newly-adopted cloud computing accounting standard , partially offset by investments in customer care associated with enhanced customer revenue attrition improvement initiatives . selling , general and administrative expenses selling , general and administrative expenses decreased $ 30 million for the year ended december 31 , 2017 as compared to the supplemental pro forma year
|
we believe these strategies and enablers will allow us to continue to deliver high quality , affordable education , resulting in continued growth over the long-term . we will continue to invest in these enablers to strengthen the foundation and future of our business . we also believe our enhanced scale and capabilities allow us to continue to focus on innovative cost and revenue synergies , while improving the value provided to our students . critical accounting policies and estimates “ management 's discussion and analysis of financial condition and results of operations ” discusses our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america . the preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and the related disclosures of contingent assets and liabilities . on an ongoing basis , management evaluates its estimates and judgments related to its allowance for doubtful accounts ; income tax provisions ; the useful lives of property and equipment and intangible assets ; redemption rates for scholarship programs and valuation of contract liabilities ; fair value of future contractual operating lease obligations for facilities that have been closed ; incremental borrowing rates ; valuation of deferred tax assets , goodwill , and intangible assets ; forfeiture rates and achievability of performance targets for stock-based compensation plans ; and accrued expenses . management bases its estimates and judgments on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments regarding the carrying values of assets and liabilities that are not readily apparent from other sources . management regularly reviews its estimates and judgments for reasonableness and may modify them in the future . actual results may differ from these estimates under different assumptions or conditions . management believes that the following critical accounting policies are its more significant judgments and estimates used in the preparation of its consolidated financial statements . revenue recognition — like many traditional institutions , strayer university and capella university offer educational programs primarily on a quarter system having four academic terms , which generally coincide with our quarterly financial reporting periods . approximately 96 % of our revenues during the year ended december 31 , 2019 consisted of tuition revenue . capella university offers monthly start options for new students , who then transition to a quarterly schedule . capella university also offers its flexpath program , which allows students to determine their 12-week billing session schedule after they complete their first course . tuition revenue for all students is recognized ratably over the course of instruction as the universities and the schools offering non-degree programs provide academic services , whether delivered in person at a physical campus or online . tuition revenue is shown net of any refunds , withdrawals , corporate discounts , scholarships , and employee tuition discounts . the universities also derive revenue from other sources such as textbook-related income , certificate revenue , certain academic fees , licensing revenue , and other income , which are all recognized when earned . in accordance with asc 606 , materials provided to students in connection with their enrollment in a course are recognized as revenue when control of those materials transfers to the student . at the start of each academic term or program , a contract liability is recorded for academic services to be provided , and a tuition receivable is recorded for the portion of the tuition not paid in advance . any cash received prior to the start of an academic term or program is recorded as a contract liability . 53 students of the universities finance their education in a variety of ways , and historically about three quarters of our students have participated in one or more financial aid programs provided through title iv of the higher education act . in addition , many of our working adult students finance their own education or receive full or partial tuition reimbursement from their employers . those students who are veterans or active duty military personnel have access to various additional government-funded educational benefit programs . a typical class is offered in weekly increments over a six- to twelve-week period , depending on the university and course type , and is followed by an exam . students who withdraw from a course may be eligible for a refund of tuition charges based on the timing of the withdrawal . we use the student 's last date of attendance for this purpose . student attendance is based on physical presence in class for on-ground classes . for online classes , attendance consists of logging into one 's course shell and performing an academically-related activity ( e.g. , engaging in a discussion post or taking a quiz ) . if a student withdraws from a course prior to completion , a portion of the tuition may be refundable depending on when the withdrawal occurs . our specific refund policies vary across universities and non-degree programs . for students attending strayer university , our refund policy typically permits students who complete less than half of a course to receive a partial refund of tuition for that course . for learners attending capella university , our refund policy varies based on course format . guidedpath learners are allowed a 100 % refund through the first five days of the course , a 75 % refund from six to twelve days , and 0 % refund for the remainder of the period . flexpath learners receive a 100 % refund through the 12th calendar day of the course for their first billing session only and a 0 % refund after that date and for all subsequent billing sessions . refunds reduce the tuition revenue that otherwise would have been recognized for that student . story_separator_special_tag since the universities ' academic terms coincide with our financial reporting periods for most programs , nearly all refunds are processed and recorded in the same quarter as the corresponding revenue . for certain programs where courses may overlap a quarter-end date , the company estimates a refund rate and does not recognize the related revenue until the uncertainty related to the refund is resolved . the portion of tuition revenue refundable to students may vary based on the student 's state of residence . for students who withdraw from all their courses during the quarter of instruction , we reassess collectibility of tuition and fees for revenue recognition purposes . in addition , we cease revenue recognition when a student fully withdraws from all of his or her courses in the academic term . tuition charges billed in accordance with our billing schedule may be greater than the pro rata revenue amount , but the additional amounts are not recognized as revenue unless they are collected in cash and the term is complete . for students who receive funding under title iv and withdraw , funds are subject to return provisions as defined by the department of education . the university is responsible for returning title iv funds to the department and then may seek payment from the withdrawn student of prorated tuition or other amounts charged to him or her . loss of financial aid eligibility during an academic term is rare and would normally coincide with the student 's withdrawal from the institution . as discussed above , we cease revenue recognition upon a student 's withdrawal from all of his or her classes in an academic term until cash is received and the term is complete . new students at strayer university registering in credit-bearing courses in any undergraduate program for the summer 2013 term ( fiscal third quarter ) and subsequent terms qualify for the graduation fund , whereby qualifying students earn tuition credits that are redeemable in the final year of a student 's course of study if he or she successfully remains in the program . students must meet all of the university 's admission requirements and not be eligible for any previously offered scholarship program . our employees and their dependents are not eligible for the program . to maintain eligibility , students must be enrolled in a bachelor 's degree program . students who have more than one consecutive term of non-attendance lose any graduation fund credits earned to date , but may earn and accumulate new credits if the student is reinstated or readmitted by the university in the future . in their final academic year , qualifying students will receive one free course for every three courses that were successfully completed in prior years . the performance obligation associated with free courses that may be redeemed in the future is valued based on a systematic and rational allocation of the cost of honoring the benefit earned to each of the underlying revenue transactions that result in progress by the student toward earning the benefit . the estimated value of awards under the graduation fund that will be recognized in the future is based on historical experience of students ' persistence in completing their course of study and earning a degree and the tuition rate in effect at the time it was associated with the transaction . estimated redemption rates of eligible students vary based on their term of enrollment . as of december 31 , 2019 , we had deferred $ 49.6 million for estimated redemptions earned under the graduation fund , as compared to $ 43.3 million at december 31 , 2018 . each quarter , we assess our methodologies and assumptions underlying our estimates for persistence and estimated redemptions based on actual experience . to date , any adjustments to our estimates have not been material . however , if actual persistence or redemption rates change , adjustments to the reserve may be necessary and could be material . tuition receivable — we record estimates for our allowance for doubtful accounts for tuition receivable from students primarily based on our historical collection rates by age of receivable , net of recoveries , and consideration of other relevant factors . our experience is that payment of outstanding balances is influenced by whether the student returns to the institution , 54 as we require students to make payment arrangements for their outstanding balances prior to enrollment . therefore , we monitor outstanding tuition receivable balances through subsequent terms , increasing the reserve on such balances over time as the likelihood of returning to the institution diminishes and our historical experience indicates collection is less likely . we periodically assess our methodologies for estimating bad debts in consideration of actual experience . if the financial condition of our students were to deteriorate , resulting in evidence of impairment of their ability to make required payments for tuition payable to us , additional allowances or write-offs may be required . during 2018 and 2019 , our bad debt expense was 5.9 % and 4.9 % of revenue , respectively . a change in our allowance for doubtful accounts of 1 % of gross tuition receivable as of december 31 , 2019 would have changed our income from operations by approximately $ 0.8 million . goodwill and intangible assets — goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed . indefinite-lived intangible assets , which include trade names , are recorded at fair market value on their acquisition date . at the time of acquisition , goodwill and indefinite-lived intangible assets are allocated to reporting units . management identifies its reporting units by assessing whether the components of its operating segments constitute businesses for which discrete financial information is available and management regularly reviews the operating results of those components . through our acquisition of cec in 2018 , we had significant additions to goodwill and tradename intangible assets .
| these measures , which are considered “ non-gaap financial measures ” under sec rules , are defined by us to exclude the following : a purchase accounting adjustment to record capella university contract liabilities at fair value as a result of the company 's merger with capella education company , amortization and depreciation expense related to intangible assets and software assets acquired through the company 's merger with capella education company , transaction and integration costs associated with the company 's merger with capella education company , fair value adjustments to the value of contingent consideration , impairment charges for intangible assets related to the company 's acquisition of the new york code and design academy , and adjustments to reserves for leases on facilities no longer in use , income from partnership and other investments that are not part of our core operations , and discrete tax adjustments related to stock-based compensation and other adjustments . when considered together with gaap financial results , we believe these measures provide management and investors with an additional understanding of our business and operating results , including underlying trends associated with the company 's ongoing operations . non-gaap financial measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies . non-gaap financial measures may be considered in addition to , but not as a substitute for or superior to , gaap results . a reconciliation of these measures to the most directly comparable gaap measures is provided below . adjusted income from operations was $ 194.1 million in 2019 compared to $ 97.4 million in 2018 . adjusted net income was $ 147.3 million in 2019 compared to $ 75.1 million in 2018 , and adjusted diluted earnings per share was $ 6.67 in 2019 compared to $ 4.75 in 2018 . reconciliation of reported to adjusted results of operations for the year ended december 31 , 2019 replace_table_token_8_th 56 reconciliation of reported to adjusted results of operations for the year ended december 31 , 2018 replace_table_token_9_th reconciliation of reported to adjusted results of operations for the year ended december 31 , 2017 replace_table_token_10_th _ ( 1 ) reflects a purchase accounting adjustment to record
|
the contracts were completed and accepted in the second and fourth quarters of 2014 and the profit from these contracts was recognized in 2014. we also enter into arrangements in which a customer purchases a combination of software licenses , engineering services and post-contract customer support and or maintenance ( “ pcs ” ) . as a result , contract interpretation is sometimes required to determine the appropriate accounting , including how the price should be allocated among the deliverable elements if there are multiple elements . pcs may include rights to upgrades , when and if available , telephone support , updates and enhancements . when vendor specific objective evidence ( “ vsoe ” ) of fair value exists for all elements in a multiple element arrangement , revenue is allocated to each element based on the relative fair value of each of the elements . vsoe of fair value is established by the price charged when the same element is sold separately . accordingly , the judgments involved in assessing the fair values of various elements of an agreement can impact the recognition of revenue in each period . changes in the allocation of the sales price between deliverables might impact the timing of revenue recognition , but would not change the total revenue recognized on the contract . when elements such as software and engineering services are contained in a single arrangement , or in related arrangements with the same customer , we allocate revenue to each element based on its relative fair value , provided that such element meets the criteria for treatment as a separate unit of accounting . in the absence of fair value for a delivered element , revenue is first allocated to the fair value of the undelivered elements and then allocated to the residual delivered elements . in the absence of fair value for an undelivered element , the arrangement is accounted for as a single unit of accounting , resulting in a delay of revenue recognition for the delivered elements until the undelivered elements are fulfilled . when engineering services and royalties are contained in a single arrangement , we recognize revenue from engineering services as earned in accordance with the criteria above even though the effective rate per hour may be lower than typical because the customer is contractually obligated to pay royalties on their device shipments . we recognize royalty revenue , classified as software revenue , when the royalty report from the customer is received or when such royalties are contractually guaranteed and the other revenue recognition criteria are met , particularly that collectability is reasonably assured . there are two items involving revenue recognition that require us to make more difficult and subjective judgments : the determination of vsoe of fair value in multiple element arrangements and the estimation of percentage of completion on fixed-price service contracts . historically , we have entered into very few multiple-element arrangements other than those involving the sale of pcs related to our testquest automated testing tools . we establish vsoe of fair value for testquest pcs based on the price when pcs is sold separately . vsoe of testquest pcs has been well established in the past as these products have been sold on a stand-alone basis for a number of years even prior to our acquisition of testquest assets in november 2008. we measure our estimate of completion on fixed-price contracts , which in turn determines the amount of revenue we recognize , based primarily on actual hours incurred to date and our estimate of remaining hours necessary to complete the contract . the process of estimating the remaining hours on a contract involves detailed estimates of remaining hours by the engineers and project managers involved with the project , factoring in such variables as the remaining tasks , the complexity of the tasks , the contracted quality of the software to be provided , the customer 's estimated delivery date , integration of third-party software and quality thereof and other factors . every fixed-price contract requires various approvals within our company , including our chief executive officer if significant . this approval process takes into consideration a number of factors including the complexity of engineering . historically , our estimation processes related to fixed-price contracts have been accurate based on the information known at the time of the reporting of our results . however , percentage-of-completion estimates require significant judgment . as of december 31 , 2014 , we were delivering engineering services under seven fixed-price service contracts . the percentage of completion calculations on these contracts represents management 's best estimates based on the facts and circumstances as of the filing of this report . if there are changes to the underlying facts and circumstances , revisions to the percentage-of-completion calculations will be recorded in the period the changes are noted . for illustrative purposes only , if we were 10 % under in our estimates of completion on every fixed-bid contract active on december 31 , 2014 , our revenue would have been over-stated by approximately $ 358,000 for 2014. intangible assets and goodwill we evaluate our intangible assets for indications of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable . our intangible assets were acquired through business acquisitions . our intangible assets consist of customer relationships . factors that could trigger an impairment analysis include significant under-performance relative to historical or projected future operating results , significant changes in the manner of our use of the acquired assets or the strategy for our overall business or significant negative industry or economic trends . if this evaluation indicates that the value of the intangible asset may be impaired , we make an assessment of the recoverability of the net carrying value of the asset over its remaining useful life . story_separator_special_tag if this assessment indicates that the intangible asset is not recoverable , based on the estimated undiscounted future cash flows of the technology over the remaining useful life , we reduce the net carrying value of the related intangible asset to fair value . any such impairment charge could be significant and could have a material adverse effect on our reported financial results . we evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate that the carrying value may not be recoverable . our annual testing date is december 31. we test goodwill for impairment by 21 performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than the carrying amount . if it is more likely than not that the fair value of the reporting unit is greater than the carrying amount , further testing of impairment is not performed . if it is more likely than not that the fair value of the reporting unit is less than the carrying amount , we perform a quantitative two-step impairment test . stock-based compensation our stock-based compensation expense for stock options is estimated at the grant date based on the stock award 's fair value as calculated by the black-scholes-merton ( “ bsm ” ) option-pricing model and is recognized as expense over the requisite service period . the bsm model requires various highly judgmental assumptions including expected volatility and option life . if any of the assumptions used in the bsm model change significantly , stock-based compensation expense may differ materially in the future from that recorded in the current period . restricted stock units ( “ rsus ” ) and restricted stock awards ( “ rsas ” ) are measured based on the fair market values of the underlying stock on the dates of grant as determined based on the number of shares granted and the quoted price of our common stock on the date of grant . in addition , we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest . we estimate the forfeiture rate based on historical experience and expected future activity . to the extent our actual forfeiture rate is different from our estimates , stock-based compensation expense is adjusted accordingly . incentive compensation we make certain estimates , judgments and assumptions regarding the likelihood of attainment , and the level thereof , of bonuses payable under our annual incentive compensation programs . we accrue bonuses and recognize the resulting expense when the bonus is judged to be reasonably likely to be earned as of year-end and is estimable . the amount accrued , and expense recognized , is the estimated portion of the bonus earned on a year-to-date basis less any amounts previously accrued . these estimates , judgments and assumptions are made quarterly based on available information and take into consideration our year-to-date actual results and expected results for the remainder of the year . because we consider estimated future results in assessing the likelihood of attainment , significant judgment is required . if actual results differ materially from our estimates , the amount of bonus expense recorded in a particular quarter could be significantly over or under estimated . taxes as part of the process of preparing our consolidated financial statements , we are required to estimate income taxes in each of the countries and other jurisdictions in which we operate . this process involves estimating our current tax expense together with assessing temporary differences resulting from the differing treatment of items for tax and accounting purposes . these differences result in deferred tax assets and liabilities . net operating losses and tax credits , to the extent not already utilized to offset taxable income or income taxes , also give rise to deferred tax assets . we must then assess the likelihood that any deferred tax assets will be realized from future taxable income , and , to the extent we believe that recovery is not likely , we must establish a valuation allowance . significant judgment is required in determining our provision for income taxes , deferred tax assets and liabilities and any valuation allowance recorded against our deferred tax assets . we estimate the valuation allowance related to our deferred tax assets on a quarterly basis . our sales may be subject to other taxes , particularly withholding taxes , due to our sales to customers in countries other than the united states . the tax regulations governing withholding taxes are complex , causing us to have to make assumptions about the appropriate tax treatment . further , we make sales in many jurisdictions across the united states , where tax regulations are varied and complex . we must therefore continue to analyze our state tax exposure and determine what the appropriate tax treatments are , and make estimates for sales , franchise , income and other state taxes . 22 story_separator_special_tag and re-billable expenses , related facilities and depreciation costs , and amortization of certain intangible assets related to acquisitions . gross profit on the sale of third-party software products is also positively impacted by rebate credits we receive from microsoft for embedded software sales earned through the achievement of defined objectives . prior to the third quarter of 2013 , the earned rebate amount was treated as a reduction in software cost of sales in the quarter earned . beginning in the third quarter of 2013 , as a result of program modifications , we began treating a portion of the rebate as marketing development funds which are accounted for as a reduction in marketing expense if and when qualified program expenditures are made . under this rebate program , we recognized $ 298,000 of rebate credits in 2014 and $ 744,000 in 2013 , which were treated as reductions in cost of sales .
| software revenue for 2014 and 2013 was as follows ( dollars in thousands ) : replace_table_token_7_th the vast majority of our third-party software revenue is comprised of sales of microsoft embedded software and windows mobile operating systems . third-party software revenue increased $ 3.0 million , or 4 % , in 2014 compared to the prior year . the 23 increase in third-party software revenue was driven primarily by an increase in microsoft windows embedded software sales as well two significant sales of our new mobilev products totaling $ 1.0 million , partially offset by decreases in windows mobile sales as well as sales of adobe flash which had a significant sale in q4 2013. proprietary software revenue decreased $ 0.2 million , or 8 % , in 2014 compared to 2013. this was driven by the continued decline in sales of legacy products . service revenue service revenue for 2014 and 2013 was as follows ( dollars in thousands ) : replace_table_token_8_th service revenue increased $ 1.0 million , or 5 % , in 2014 compared to the prior year . this increase was due to increases in service revenue generated in both asia and emea offset partially by a decline in north america service revenue . the increase in asia was driven by the completion of two large handheld programs . both programs were accounted for under the zero profit percentage of completion accounting method in which we recognized revenue during the project equal to our cost and recognize the remaining revenue , equal to the gross profit on the program , at completion . one of the programs was completed during the three months ended june 30 , 2014 while the other was completed during the three months ended december 31 , 2014. the decrease in north america service revenue was driven largely by a $ 1.7 million decrease associated with the myford touch program offset partially by increases from our existing customer base and the acquisition of new customers . microsoft became our largest engineering services customer during the first quarter of 2012 , replacing ford motor company ( “ ford ” ) , as microsoft replaced ford as the
|
the spot price averaged $ 363 per ounce during 2003. our cash balance at the end of 2003 was $ 90.0 million , an increase of $ 70.0 million from $ 20.0 million at the end of 2002. improvements in gold prices and gold production levels combined to provide $ 29.1 million of cash flow from operations , an increase of $ 24.2 million as compared to 2002 , and equity offerings provided a net $ 102.9 million during the year . we ended 2003 with $ 0.8 million of debt versus $ 5.3 million at the end of 2002. in addition several other significant milestones were achieved during 2003 : in july we completed a feasibility study and established mineral reserves at our wassa development property and immediately initiated construction of a cil processing plant . we now expect gold production from this property early in 2004 ; we acquired two new exploration land packages totaling 125 square kilometers extending north of bogoso/prestea along the ashanti trend which include 162,000 ounces of new mineral reserves at the mampon deposit ; we acquired a used 4,500 tonne per day cil processing plant which we plan to relocate and reassemble 6 kilometers south of the town of prestea , to facilitate a significant expansion of gold production at bogoso/prestea by 2005 ; we completed public equity offerings which provided a net $ 102.9 million of cash ; we initiated an underground exploration drilling program in the prestea underground and we continued engineering and geologic studies of the economic potential of the property ; we purchased the gold production royalties encumbering bogoso/prestea and wassa for approximately $ 12.0 million and $ 11.5 million , respectively ; 44 we continued to pursue new growth opportunities for the company ; and we added 900,000 ounces of new reserves at bogoso/prestea and 665,000 ounces of new reserves at wassa . trends affecting our operations during 2003 gold prices have now trended generally upward for nearly three years from a low of $ 256 in early april 2001 to $ 411 per ounce at january 28 , 2004 , an average annual increase of 16 % . the higher average gold price added approximately $ 9.2 million to our revenues during 2003 over what we would have realized had gold prices remained at 2002 levels . mining costs were higher in 2003 compared to 2002 , mainly due to increases in haulage costs and fuel costs , the plant north pit being farther from the bogoso processing plant than were the ore sources mined during 2002. waste stripping costs were higher due to increased tonnages moved in 2004. processing costs were also higher . the metallurgical characteristics of plant north ore required more reagents , especially cyanide , and longer retention times during the recovery process . royalties were also significantly higher as compared to 2002 because of the increase in sales revenues . while mining and processing costs per tonne were higher , the higher grades of the plant north ore and better gold recovery rates more than compensated , yielding a much improved net income and decreases in unit costs per ounce compared to 2002. as mining proceeds deeper into the plant north pit in 2004 we expect to encounter increasing amounts of harder transition and sulfide ores which are not optimally suited for processing in the bogoso processing plant as currently configured and thus we are expecting lower gold recovery rates and higher processing costs than experienced with the oxide ore milled in 2003. to maximize gold recoveries on transition and sulfide ores , the existing flotation circuit at the bogoso processing plant has been refurbished and will be recommissioned during 2004 at a cost of approximately $ 2 million . once the refurbished flotation circuit is operational , we expect to successfully treat the transition ores from the plant north pit and other areas . while we expect that gold recovery and processing costs would be at acceptable levels following the flotation circuit refurbishment , we can not provide assurance that gold recovery will be as high as experienced during 2002 and 2003 and that operating costs will be as low as those in 2003. the market for gold company equities generally strengthened during 2003. our common share price began the year at $ 1.89 and ended the year at $ 6.97. the increased interest in investing in gold and gold mining companies during the past two years has made expansion and development capital more readily available . as a result , we successfully raised a net $ 113.4 million of new equity funds during 2003 including option and warrant exercises . we used portions of the cash to pay debt , acquire new exploration properties and reserves in ghana and elsewhere in west africa , to buy back royalties on future bogoso/prestea and wassa gold production and to fund exploration and development activities including the work to date on the wassa and prestea underground projects . in 2004 we anticipate using our cash to complete wassa , to proceed with the planned expansion project at bogoso/prestea , to continue our evaluation of the prestea underground , to fund other exploration and development activities and for other general corporate purposes . story_separator_special_tag geological mapping of underground workings and geological compilations were completed for several levels . extensive sampling of underground workings has resulted in the creation of a three-dimensional computer model of the underground workings and main zones of mineralization . for the first time in prestea 's 100 year plus history , data from widely different sources and formats have now been 47 standardized and grouped into a single computer database , making interpretation and inferences from modeling much easier . while awaiting preparation of access to the less developed and less explored lower levels of the prestea underground workings , we initiated in mid 2003 a series of drill holes at shallow levels where access had already been established . a total of 28 holes were drilled averaging 97 meters in length . story_separator_special_tag these holes were in areas that had received extensive mining and development in the past . no significant new mineralized zones were discovered . by the end of the year we had obtained access to new areas deeper in the mine , where we expect to concentrate our efforts in 2004. spending at the prestea underground project totaled $ 3.7 million during 2003 , including facility maintenance , engineering , drilling , geologic activities and equipment purchases . support crews continue to maintain the underground and surface facilities in good working order and assist our underground drilling teams . the prestea underground exploration programs for 2004 will involve drilling from underground and surface sites . drilling of targets below the extent of the existing mining will be conducted from a series of hanging wall cross cuts on the lower levels of the mine . the underground drilling will test the down dip extension of the high-grade ore zones which were previously exploited . bogoso/prestea expansion the known mineral reserves at bogoso/prestea can be grouped into three general categories based on the metallurgy of the ore. they are referred to as : ( a ) oxide ore which is non-refractory and has been successfully processed in the existing bogoso cil and gravity circuits ; ( b ) non-refractory transition and sulfide ores which we expect to successfully process at the bogoso processing plant following the reactivation of the processing plant 's flotation circuit in early 2004 ; and ( c ) refractory transition and sulfide ores which would require some form of oxidation process prior to gold recovery . the oxide ores are found at surface , down to the general level of the water table , while sulfide ores are located at depth . between these two distinct ore types lies the transition ore , of varying thickness , a zone of partially oxidized ore. our bogoso/prestea reserves at the end of 2003 are comprised of approximately 13 % oxide ore , 15 % transition ores , and 72 % sulfide ores on a gold content basis . the existing bogoso processing plant is configured to process primarily oxide ores . in recent years additions to the processing plant 's equipment made it possible to treat certain transition ores but not all of the transition ores known to exist at bogoso/prestea . gold recovery from oxide ores is typically around 80 % to 85 % but when processing transition ores the recovery rate drops substantially below this . in 2001 when processing large tonnages of transition ores from the old bogoso pits , the gold recovery rate dropped below 50 % . to facilitate efficient processing of the sulfide and transition ores and to expand the productive capacity of bogoso/prestea we plan to make major modification to the existing bogoso processing plant during 2004 and 2005 and at the same time add a second processing plant on the prestea property , which will be designed to process oxide ores and other non-refractory ores . in july 2003 we purchased a used 4,500 tonne per day conventional cil processing plant , associated stores inventory , and a six-megawatt powerhouse from an inactive mine site in ghana . this facility was dismantled in the third and fourth quarters of the year and will be moved to prestea in early 2004. during 2004 we plan to reassemble this processing plant at a site approximately 6 kilometers south of the town of prestea . with the appropriate modifications it should be able to process oxide ores and some of the transition ores found at bogoso/prestea . this new processing plant is now referred to as the bondaye processing plant . we expect the bondaye processing plant to be operational in the fourth quarter of 2004 if the required approvals and permits are obtained as expected . also during 2004 and into mid 2005 , we plan to modify the existing bogoso processing plant , via the addition of a bio-oxidation ( biox ) circuit , to process sulfide ore. the modifications would be done in a manner that will allow the bogoso processing plant to continue processing oxide and transition ores during 2004 until the biox modifications are completed . we expect the bogoso processing plant upgrades to be competed in 2005 and at that point begin to process only refractory transition and sulfide ores . once the bondaye processing plant construction and the bogoso processing plant upgrades are completed , we anticipate being able to process all of the known ore types existing at bogoso/prestea and in the surrounding area . 48 we currently estimate the cost to move , reassemble and modify the bondaye processing plant , to add the biox upgrade to the existing bogoso processing plant , and to expand the mining fleet at bogoso/prestea as required to feed the expanded processing plant complex , to total about $ 70 million , not including the $ 4.3 million initial purchase cost of the bondaye processing plant . the biox process is designed to treat refractory gold ores prior to cyanidization by utilizing naturally occurring bacteria capable of oxidizing gold-bearing sulfide concentrates under controlled conditions . prior to the biox process , the ore will be crushed and ground utilizing existing equipment at the bogoso processing plant . a combination of flotation and gravity circuits , including circuits already at the bogoso processing plant , will then separate a sulfide concentrate from the ore slurry with the gold locked in the matrix of the sulfide minerals . the bacteria used in the biox process oxidize the sulfide minerals in the concentrate thereby liberating the gold particles which are then recovered by cyanidation . the bacteria used in the biox process are non-pathogenic and pose no health risks . the biox process has been successfully employed since the mid 1980s with five operations now using the process worldwide including ashanti goldfields company limited 's obuasi gold mine located 100 kilometers north of bogoso .
| replace_table_token_17_th during 2003 , bogoso/prestea processed an average of 5,736 tonnes per day of plant north ore at an average grade of 3.29 grams per tonne . this compares to 6,223 tonnes per day at 2.31 grams per tonne in 2002. the lower processing plant through-put was related to increased amounts of transition ores versus 2002. mechanical difficulties with a long lead-time component of the processing plant conveyor system during the second quarter of 2003 and other processing plant maintenance projects during the year also contributed to the reduced processing plant through-put . recoveries rose to 81 % , up from 74 % in 2002. the improved grade and better recoveries combined to yield a 40 % increase in gold production versus 2002. bogoso/prestea sold 174,315 ounces of gold in 2003 , up from 124,400 ounces in 2002. cash operating costs of $ 166 per ounce were 14 % better than the $ 193 per ounce costs during 2002. similarly , total cash costs fell from $ 215 per ounce in 2002 to $ 184 per ounce in the current year . 2002 compared to 2001 during 2002 we generated net income of $ 4.9 million or $ 0.070 per share , compared to a loss of $ 20.6 million or $ 0.488 per share during the twelve months ended december 31 , 2001. the major factors contributing to the improved earnings were higher gold production primarily from prestea ore bodies , improved gold prices , and the absence of write-offs of deferred exploration costs . during much of 2001 the bogoso processing plant was fed with transition ores mined from the bogoso pits . the metallurgical properties of the transition ores render them unsuitable for effective processing in the bogoso processing plant , and a low gold recovery rate of 49.6 % was experienced during 2001 as a result . during 2002 the entire bogoso processing plant feed was comprised of oxide ores from various pits on the northern
|
23 discussion of the apartment properties securing the partnership bond holdings and mf properties as of december 31 , 2011 the following discussion describes the operations and financial results of the individual apartment properties financed by the tax-exempt mortgage revenue bonds held by the partnership and the mf properties in which it holds an ownership . the discussion also outlines the bond holdings of the partnership , discusses the significant terms of the bonds and identifies those ownership entities which are consolidated vies of the company . replace_table_token_6_th ( 1 ) economic occupancy is presented for the twelve months ended december 31 , 2011 and 2010 , and is defined as the net rental income received divided by the maximum amount of rental income to be derived from each property . this statistic is reflective of rental concessions , delinquent rents and non-revenue units such as model units and employee units . actual occupancy is a point in time measure while economic occupancy is a measurement over the period presented , therefore , economic occupancy for a period may exceed the actual occupancy at any point in time . ( 2 ) this property is still under construction as of december 31 , 2011 , and therefore has no occupancy data . ( 3 ) previous period occupancy numbers are not available , as this is a new investment . ( 4 ) construction on these properties has been completed and the properties are in a lease up and stabilization period . 24 non-consolidated properties the owners of the following properties do not meet the definition of a vie and or the partnership has evaluated and determined it is not the primary beneficiary of the vie , as a result , the company does not report the assets , liabilities and results of operations of these properties on a consolidated basis . ashley square - ashley square apartments is located in des moines , iowa and contains 144 units . the tax-exempt mortgage revenue bond owned by the partnership is a traditional “ 80/20 ” bond issued prior to the tax reform act of 1986. this bond requires that 20 % of the rental units be set aside for tenants whose income does not exceed 80 % of the area median income , without adjustment for household size . the bond has an outstanding principal amount of $ 5.3 million and has a base interest rate of 6.25 % per annum . the bond also provides for contingent interest payable from excess cash flow generated by the underlying property through the potential payment of contingent interest . the bond accrues contingent interest at a rate of 3.0 % annually and such contingent interest is payable only if the underlying property generates excess operating cash flows or realizes excess cash through capital appreciation and a related sale or refinancing of the property . to date , the property has not paid any contingent interest and the partnership has not recognized any contingent interest income related to this bond . ashley square 's operations resulted in net operating income of $ 663,000 and $ 430,000 before payment of bond debt service on net revenue of approximately $ 1.38 million and $ 1.21 million in 2011 and 2010 , respectively . the improvement in net operating income from 2010 is primarily the result of an increase in economic occupancy . the property is current on the payment of principal and base interest on the partnership 's bond as of december 31 , 2011. autumn pines - autumn pines is located in humble , texas and contains 250 units . the tax-exempt mortgage revenue bond owned by the partnership is a private activity housing bond issued in conjunction with the syndication of lihtcs . the bond has an outstanding principal amount of $ 13.3 million and has a base interest rate of 5.8 % per annum . the bond does not provide for contingent interest . the bond was purchased in november 2010 for approximately $ 12.3 million providing an approximate effective yield to maturity of 7.0 % . autumn pines ' operations resulted in net operating income of $ 1.2 million and $ 1.1 million before payment of bond debt service on net revenue of approximately $ 2.38 million and $ 2.32 millionin 2011 and 2010 , respectively . the improvement in net operating income from 2010 is primarily the result of an increase in economic occupancy . the property is current on principal and interest payments on the partnership 's bond as of december 31 , 2011 . bella vista - bella vista apartments is located in gainesville , texas and contains 144 units . the tax-exempt mortgage revenue bond owned by the partnership is a private activity housing bond issued in conjunction with the syndication of lihtcs . the bond has an outstanding principal amount of $ 6.7 million and has a base interest rate of 6.15 % per annum . the bond does not provide for contingent interest . bella vista 's operations resulted in net operating income of $ 583,000 and $ 521,000 before payment of debt service on net revenue of approximately $ 1.12 million and $ 1.06 million in 2011 and 2010 , respectively . the increase in net operating income is due to an increase in economic occupancy . the property is current on principal and interest payments on the partnership 's bond as of december 31 , 2011 . bridle ridge - bridle ridge apartments is located in greer , south carolina and contains 152 units . the tax-exempt mortgage revenue bond owned by the partnership is a private activity housing bond issued in conjunction with the syndication of lihtcs . the bond has an outstanding principal amount of $ 7.8 million and a base interest rate of 6.0 % per annum . the bond does not provide for contingent interest . story_separator_special_tag bridle ridge 's operations resulted in net operating income of approximately $ 702,000 and $ 560,000 before payment of bond debt service on net revenue of approximately $ 1.06 million and $ 972,000 in 2011 and 2010 , respectively . the increase in net operating income is due to an increase in economic occupancy . the property is current on principal and interest payments on the partnership 's bond as of december 31 , 2011 . brookstone - brookstone apartments is located in waukegan , illinois and contains 168 units . the tax-exempt mortgage revenue bond owned by the partnership is a private activity housing bond issued in conjunction with the syndication of lihtcs . the bond has an outstanding principal amount of $ 9.5 million and a base interest rate of 5.45 % per annum . the bond does not provide for contingent interest . these bonds were purchased in october 2009 for approximately $ 7.3 million providing an approximate yield to maturity of 7.5 % . brookstone 's operations resulted in net operating income of $ 905,000 and $ 888,000 before payment of bond debt service on net revenue of approximately $ 1.33 million and $ 1.30 million in 2011 and 2010 , respectively . the increase in net operating income is due to a decrease in utilities and advertising expenses . the property is current on principal and interest payments on the partnership 's bond as of december 31 , 2011 . 25 cross creek - cross creek apartments is located in beaufort , south carolina and contains 144 units . the tax-exempt mortgage revenue bond owned by the partnership is a private activity housing bond issued in conjunction with the syndication of lihtcs . the bond has an outstanding principal amount of $ 8.6 million and has a base interest rate of 6.15 % per annum . the bond does not provide for contingent interest . these bonds were purchased in april 2009 for approximately $ 5.9 million providing an approximate yield to maturity of 7.4 % . cross creek 's operations resulted in net operating income of $ 411,000 and $ 375,000 before payment of bond debt service on net revenue of approximately $ 1.17 million and $ 1.13 million in 2011 and 2010 , respectively . this increase in net operating income is due to a slight increase in economic occupancy . the property is current on the payment of principal and base interest on the partnership 's bond as of december 31 , 2011. gmf-madison tower - madison tower apartments is located in memphis , tennessee and contains 147 units . the tax-exempt mortgage revenue bond owned by the partnership was issued by the 501 ( c ) 3 not-for-profit owner of madison towers . the bond has an outstanding principal amount of $ 3.8 million and has a base interest rate of 6.75 % per annum . the bond does not provide for contingent interest . the bond was purchased at par in june 2011. madison tower 's operations resulted in net operating income of $ 263,000 before payment of bond debt service on net revenue of approximately $ 511,000 in 2011. the property is current on principal and interest payments on the partnership 's bond as of december 31 , 2011. gmf-warren/tulane - warren/tulane apartments is located in memphis , tennessee and contains 448 units . the tax-exempt mortgage revenue bond owned by the partnership was issued by the 501 ( c ) 3 not-for-profit owner of warren/tulane . the bond has an outstanding principal amount of $ 11.8 million and has a base interest rate of 6.75 % per annum . the bond does not provide for contingent interest . the bond was purchased at par in june 2011. warren/tulane 's operations resulted in net operating income of $ 818,000 before payment of bond debt service on net revenue of approximately $ 1.72 million in 2011. the property is current on principal and interest payments on the partnership 's bond as of december 31 , 2011. iona lakes - iona lakes apartments is located in fort myers , florida and contains 350 units . the tax-exempt mortgage revenue bond owned by the partnership is a traditional “ 80/20 ” bond issued prior to the tax reform act of 1986. the bond has an outstanding principal amount of $ 15.7 million and has a base interest rate of 6.9 % per annum . the bond also provides for contingent interest payable from excess cash flow generated by the underlying property through the potential payment of contingent interest . the bond accrues contingent interest at a rate of 2.6 % annually and such contingent interest is payable only if the underlying property generates excess operating cash flows or realizes excess cash through capital appreciation and a related sale or refinancing of the property . to date , the partnership has realized $ 8,000 contingent interest income related to this bond . iona lake 's operations resulted in net operating income of $ 1.08 million and $ 931,000 before payment of bond debt service on net revenue of approximately $ 2.67 million and $ 2.51 million in 2011 and 2010 , respectively . the increase in net operating income was a result of an increase in economic occupancy as well as decreased real estate taxes . the property is current on the payment of principal and base interest on the partnership 's bond as of december 31 , 2011 . runnymede apartments - runnymede apartments is located in austin , texas and contains 252 units . the tax-exempt mortgage revenue bond owned by the partnership is a private activity housing bond issued in conjunction with the syndication of lihtcs . the bond has an outstanding principal amount of $ 10.7 million and has a base interest rate of 6.00 % . the bond does not provide for contingent interest .
| to facilitate its investment strategy of acquiring additional tax-exempt mortgage revenue bonds secured by multifamily apartment properties , the partnership may acquire ownership positions in mf properties , in order to ultimately restructure the property ownership through a sale of the mf properties . the partnership expects each of these mf properties to eventually be sold to a not-for-profit entity or in connection with a syndication of low income housing tax credits ( “ lihtcs ” ) under section 42 of the internal revenue code of 1986 , as amended ( the “ internal revenue code ” ) . the partnership expects to acquire tax-exempt mortgage revenue bonds issued to provide debt financing for these properties at the time the property ownership is restructured . the partnership expects to provide the tax-exempt mortgage revenue bonds to the new property owners as part of the restructuring . as of december 31 , 2011 , the partnership 's wholly-owned subsidiaries held interests in five entities that own mf properties containing a total of 602 rental units together with the three ohio properties containing 362 rental units which are subject to a sales agreement ( see note 2 and note 6 to the consolidated financial statements ) . in addition , the partnership 's subsidiaries own 100 % of four mf properties , arboretum , decordova , eagle village and weatherford . arboretum , eagle village and decordova contain a total of 732 rental units and once fully constructed weatherford will contain 76 rental units . as of december 31 , 2010 , the partnership 's wholly-owned subsidiaries held limited partnership interests in five entities that own mf properties containing a total of 602 rental units together with the three ohio properties containing 362 rental units which are subject to a sales agreement . the mf properties ' operating goal is similar to that of the properties underlying the partnership 's tax-exempt mortgage revenue bonds . 22 tob . in july 2011 , the company closed a $ 10.0 million financing utilizing a tob structure with db . the first tob was structured as a securitization of
|
our network security platform also includes our fortiguard security subscription services , which end-customers can subscribe to in order to obtain access to dynamic updates to application control , anti-virus , intrusion prevention , web filtering , and anti-spam functionality . end-customers may also purchase fortimanager and fortianalyzer products in conjunction with a fortigate deployment to provide enterprise-class centralized management , analysis and reporting capabilities . fortisiem provides organizations with a solution for analyzing and managing network security , performance and compliance standards across our and other vendors ' products . finally , end-customers may purchase forticare technical support services for our products and forticare professional services to assist in the design , implementation and maintenance of their networks . we complement our core fortigate product line with other appliances and software licenses that offer additional protection from security threats to other critical areas of the enterprise . these products include our fortimail email security , fortisandbox atp , fortiweb web application firewall , fortiddos , and fortidb database security appliances , as well as our forticlient endpoint security software , fortiap secure wireless access points and fortiswitch secure switch connectivity products . sales of complementary products and software licenses have outpaced our overall growth in recent quarters . our strong technology advantages also position us to effectively deliver security to the cloud and for the cloud . sales of our cloud related products and services across public , private and hybrid cloud environments continue to grow faster than other part of our business . 38 story_separator_special_tag with gaap , is provided below : replace_table_token_7_th free cash flow ( non-gaap ) . we define free cash flow as net cash provided by operating activities minus capital expenditures such as purchases of real estate and other property and equipment . we consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that , after capital expenditures , can be used for strategic opportunities , including investing in our business , making strategic 40 acquisitions , repurchasing outstanding common stock and strengthening the balance sheet . analysis of free cash flow facilitates management 's comparison of our operating results to those of our peer companies . a limitation of using free cash flow rather than the gaap measure of net cash provided by operating activities as a means for evaluating liquidity is that free cash flow does not represent the total increase or decrease in the cash , cash equivalents and investments balance for the period because it excludes cash provided by or used for other investing and financing activities . management accounts for this limitation by providing information about our capital expenditures and other investing and financing activities on the face of the cash flow statement and under “ —liquidity and capital resources. ” a reconciliation of free cash flow to net cash provided by operating activities , the most directly comparable financial measure calculated and presented in accordance with gaap , is provided below : replace_table_token_8_th components of operating results revenue we generate the majority of our revenue from sales of our products , software licenses and amortization of amounts included in deferred revenue related to previous sales of fortiguard security subscription and forticare technical support services . revenue is recognized when persuasive evidence of an arrangement exists , delivery has occurred or services have been rendered , the sales price is fixed or determinable and collectability is reasonably assured . our total revenue is comprised of the following : product revenue . product revenue is primarily generated from sales of our appliances . the substantial majority of our product revenue has been generated by our fortigate line of appliances , and we do not expect this to change in the foreseeable future . product revenue also includes revenue derived from sales of software . as a percentage of total revenue , we expect that our product revenue may vary from quarter-to-quarter based on seasonal and cyclical factors , as discussed below under “ —quarterly results of operations ” , and we expect the trend to continue in 2017. service revenue . service revenue is generated primarily from fortiguard security subscription services related to application control , antivirus , intrusion prevention , web filtering , anti-spam , atp and vulnerability management updates , and from forticare technical support services for software updates , maintenance releases and patches , internet access to technical content , telephone and internet access to technical support personnel and hardware support . we recognize revenue from fortiguard security subscription and forticare technical support services over the contractual service period . our typical contractual support and subscription term is one to three years . we also generate a small portion of our revenue from professional services and training services , for which we recognize revenue as the services are provided , and cloud-based services , for which we recognize revenue as the subscription service is delivered over the term , which is typically one year , or on a monthly usage basis . we are also starting to see a shift from product revenues to higher-margin , recurring service revenues , which reflects our ongoing success in driving sales of low-end and high-end service bundles , as well as increases in certain software sales and time based service models . our service revenue growth rate depends significantly on the growth of our customer base , the expansion of our service bundle offerings , the expansion and introduction of new service offerings and the renewal of service contracts by our existing customers . our total cost of revenue is comprised of the following : cost of product revenue . a substantial majority of the cost of product revenue consists of third-party contract manufacturers ' costs , as well as other costs of materials used in production . story_separator_special_tag our cost of product revenue also includes supplies , shipping costs , personnel costs associated with logistics and quality control , facility-related 41 costs , excess and obsolete inventory costs , warranty costs , and amortization and impairment of intangible assets , if applicable . personnel costs include salaries , benefits and bonuses , as well as stock-based compensation . cost of service revenue . cost of service revenue is primarily comprised of salaries , benefits and bonuses , as well as stock-based compensation . cost of service revenue also includes supplies and facility-related costs . gross margin . gross profit as a percentage of revenue , or gross margin , has been and will continue to be affected by a variety of factors , including the average sales price of our products , any excess inventory write-offs , product costs , the mix of products sold and the mix of revenue between products , software licenses and services . service revenue and software licenses have had a positive effect on our total gross margin given the higher gross margins compared to product gross margins . during 2016 , product gross margin was positively impacted by higher sales of software products , as well as inventory management and warehouse efficiencies . service gross margins remained relatively comparable in 2016 compared to 2015. we believe our overall gross margin will remain at a relatively comparable level in 2017. operating expenses . our operating expenses consist of research and development , sales and marketing , general and administrative expenses , and restructuring charges . personnel costs are the most significant component of operating expenses and consist primarily of salaries , benefits , bonuses , stock-based compensation , and sales commissions , as applicable . we expect personnel costs to continue to increase in absolute dollars as we expand our workforce . research and development . research and development expense consists primarily of personnel costs . additional research and development expenses include asic and system prototypes and certification-related expenses , depreciation of capital equipment and facility-related expenses . the majority of our research and development is focused on both software development and the ongoing development of our hardware platform . we record all research and development expenses as incurred . our research and development teams are primarily located in canada and the u.s. sales and marketing . sales and marketing expense is the largest component of our operating expenses and primarily consists of personnel costs . additional sales and marketing expenses include promotional lead generation and other marketing expenses , travel , depreciation of capital equipment and facility-related expenses . we intend to hire additional personnel focused on sales and marketing and expand our sales and marketing efforts worldwide in order to capture additional market share in the high-return enterprise market , where customers tend to provide a higher lifetime value . general and administrative . general and administrative expense consists of personnel costs , as well as professional fees , depreciation of capital equipment and software , facility-related expenses , expenses associated with the erp system implementation and business acquisition costs . general and administrative personnel include our executive , finance , human resources , information technology and legal organizations . our professional fees principally consist of outside legal , auditing , accounting , tax , information technology and other consulting costs . restructuring charges . restructuring charges relate to alignment activities performed in connection with the meru and accelops acquisitions to reduce our cost structure and improve operational efficiencies , resulting in workforce reductions , contract terminations and other charges . interest income . interest income consists of income earned on our cash , cash equivalents and investments . we have historically invested our cash in corporate debt securities , commercial paper , u.s. government and agency securities , municipal bonds , money market funds and certificates of deposit . other expense — net . other expense—net consists primarily of foreign exchange gains and losses relate to foreign currency exchange remeasurement . provision for income taxes . we are subject to tax in the u.s. , as well as other tax jurisdictions or countries in which we conduct business . earnings from our non-u.s. activities are subject to income taxes in the local country which are generally lower than u.s. tax rates , and may be subject to u.s. income taxes . our effective tax rate differs from the u.s. statutory rate primarily due to foreign income subject to different tax rates than the u.s. , research and development tax credits , withholding taxes and nondeductible stock-based compensation expense . 42 the income tax provision for 2016 was comprised of domestic income taxes , foreign income taxes and foreign withholding taxes . our effective tax rate approximates the u.s. federal statutory tax rates plus the impact of state taxes , excess tax benefits related to stock-based compensation expense , research and development tax credits , foreign withholding tax , nondeductible stock-based compensation expense , and foreign income subject to lower tax rates than income earned in the u.s. critical accounting policies and estimates our discussion and analysis of our financial condition and results of operations are based upon our financial statements , which have been prepared in accordance with gaap . these principles require us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenue , cost of revenue and expenses , and related disclosures . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances . to the extent that there are material differences between these estimates and our actual results , our future financial statements will be affected . we believe that , of the significant accounting policies described in note 1 to our consolidated financial statements included in part ii , item 8 of this annual report on form 10-k , the following accounting policies involve a greater degree of judgment and complexity .
| the percentage of our fortigate related billings from mid-range products increased from 25 % in 2015 to 28 % in 2016 and the entry-level products remained at 34 % in 2016 , consistent with billings in 2015. the percentage of our fortigate related billings from high-end products decreased from 41 % in 2015 to 38 % in 2016. the sale of non-fortigate products also grew significantly , such as growth in our fortisandbox atp products . we also saw more deals that included multiple fortinet products in physical , virtual and cloud environments . in 2016 , operating expenses increased by $ 187.0 million , or 26 % , as compared to 2015 . the increase was primarily driven by our investments made to expand our sales coverage , grow our marketing capabilities , develop new products and scale our customer support . we also continue to invest in research and development to strengthen our technology leadership position . we believe that continued product innovation has strengthened our technology and resulted in market share gains . in addition , we incurred expenses from business design and reengineering related to the implementation of a new erp system . headcount increased by 16 % to 4,665 employees and contractors as of december 31 , 2016 , up from 4,018 as of december 31 , 2015. business model our sales strategy is based on a distribution model whereby we primarily sell our products , software licenses and services directly to distributors which sell to resellers and service providers , which , in turn , sell to our end-customers . in certain cases , we sell directly to government-focused resellers , large service providers and major systems integrators , which have significant purchasing power and unique customer deployment requirements . we also offer our products through amazon web services and microsoft azure . while the revenue from such sales are still relatively insignificant , they are rapidly increasing and are aligned with the networking trends of our customers and the industry as a whole . typically , fortiguard security subscription services and forticare technical support services are purchased along with our physical products and software licenses , most frequently as part of a bundle offering that includes hardware and services functionality . we generally invoice at the time of our sale for the total price of the products
|
our operating income from our thermal solutions products for fiscal year 2012 increased $ 1.1 million , or 2,840.5 % , from fiscal year 2011. the increase in operating income resulted from improved gross profits due to lower material costs and lower levels of inventory obsolescence expense . 19 index to financial statements fiscal year 2011 compared to fiscal year 2010 net sales . sales of our thermal solutions products for fiscal year 2011 increased $ 0.6 million , or 4.4 % , from fiscal year 2010. approximately $ 0.3 million of this increase resulted from growing sales to our canadian customers . we consider the remaining increase to be somewhat normal due to recurring fluctuations in product sales volume and not associated with any long-term trend . operating income . our operating income from our thermal solutions products for fiscal year 2011 decreased $ 0.4 million , or 109.3 % , from fiscal year 2010. the decline in profitability resulted from ( i ) lower margins on product sales due to higher material costs for our film products , ( ii ) additional charges for inventory obsolescence expense due to the aging of certain inventories , and ( iii ) increased incentive compensation expenses relative to the improvement in our consolidated financial results . incentive compensation program we adopted an incentive compensation program for fiscal year 2012 whereby most employees will be eligible to begin earning incentive compensation if the company reaches a five percent pretax return on stockholders ' equity , determined as of september 30 , 2011. to be eligible to participate in this incentive compensation program , employees must participate in our core values program . based on our experience in prior years , we expect one hundred percent of our eligible employees to participate in the core values program . the incentive compensation program does not apply to the employees of our subsidiary in the russian federation since such employees participate in a locally administered bonus program . certain non-executive employees are required to achieve specific goals to earn a significant portion of their total incentive compensation award . any bonus awards earned under this program in fiscal year 2012 will be paid out to eligible employees after the end of the fiscal year . upon reaching the five percent threshold under this proposed program , an incentive compensation accrual will be established equal to 15.3 percent of the amount of any consolidated pretax profits above the five percent pretax return threshold . the maximum aggregate bonus available under the program for fiscal year 2012 was originally $ 4.8 million ; however , our board of directors subsequently increased the maximum bonus pool to $ 5.7 million based on the record earnings of the company in fiscal year 2012. under this program as modified , for the fiscal years ended september 30 , 2012 and 2011 , we had accrued $ 5.7 million and $ 4.2 million , respectively , of incentive compensation expense . liquidity and capital resources at september 30 , 2012 , we had $ 50.8 million in cash and cash equivalents . in addition , we had $ 20.0 million of short-term investments at september 30 , 2012. for fiscal year 2012 , we generated approximately $ 43.2 million of cash from operating activities . the primary sources of cash generated in our operating activities resulted from net income of $ 35.1 million . additional sources of cash included net non-cash charges of $ 13.3 million for deferred income tax expense , depreciation , amortization , stock-based compensation , inventory obsolescence and bad debts . other sources of cash from operating activities included ( i ) a $ 12.2 million increase in accounts payable due to increased purchases of raw materials , ( ii ) a $ 7.9 million increase in deferred revenue resulting from an increase in the amount of advanced payments received from our customers , ( iii ) a $ 3.8 million decrease in trade accounts and notes receivable primarily resulting from improved cash receipts from customers during fiscal year 2012 , and ( iv ) a $ 0.6 million increase in accrued expenses and other , including a $ 1.6 million increase in incentive compensation expenses due to increased consolidated pretax earnings . these sources of cash were offset by ( i ) a $ 15.6 million increase in inventories due to increasing levels of work-in-process resulting from known and anticipated product orders , rental equipment demands and the 20 index to financial statements production of a permanent seabed acquisition for shell brasil petróleo ltda , ( ii ) a $ 10.0 million adjustment to transfer gross profits from rental equipment sales to investing activities since such transactions involve the sale of long-lived assets , and ( iii ) a $ 4.5 million increase in prepaid income taxes related to intercompany sales . for fiscal year 2012 , we used approximately $ 26.3 million of cash in investing activities . the uses of cash primarily resulted from ( i ) our investment of $ 31.7 million for rental equipment , ( ii ) $ 4.0 million of capital expenditures for property and equipment , and ( iii ) a $ 14.8 million net increase in our short-term investments . in addition , we transferred $ 2.0 million of inventories to our rental equipment during fiscal year 2011 which had a non-cash impact . the uses of cash outlined above were partially offset by $ 24.2 million of proceeds from the sale of used rental equipment . due to strong customer demand for our wireless rental equipment in north america and the recent establishment of a branch office in bogota , colombia , we estimate that our capital expenditures for rental equipment in fiscal year 2013 could be approximately $ 40.0 million or more , including non-cash transfers from our inventory account . story_separator_special_tag in addition , we estimate that other capital expenditures for property and equipment could be approximately $ 14.0 million , in part resulting from the need to expand our production capacity due to the recently received statoil order . similar to fiscal year 2012 , in fiscal year 2013 we expect to sell a significant amount of our rental equipment to customers and , therefore , we expect to generate sales proceeds to partially or fully offset our investment in rental equipment . beyond this we expect to finance our capital expenditures in rental equipment and other property and equipment from our cash on hand , internal cash flow and or from borrowings under our credit agreement . for fiscal year 2012 , we generated approximately $ 2.5 million of cash in the financing activities from the exercise of stock options and related tax benefits . at september 30 , 2011 , we had $ 31.4 million in cash and cash equivalents . for fiscal year 2011 , we generated approximately $ 1.1 million of cash in operating activities . sources of cash generated in our operating activities resulted from net income of $ 29.7 million . additional sources of cash included net non-cash charges of $ 11.8 million for deferred income tax benefit , depreciation , amortization , stock-based compensation , inventory obsolescence and bad debts . other sources of cash included ( i ) a $ 2.0 million decrease in trade accounts and notes receivable primarily resulting from improved cash receipts from customers during fiscal year 2011 , ( ii ) a $ 1.8 million increase in accrued expenses and other primarily resulting from an increase of $ 0.8 million for incentive compensation expenses due to increased consolidated pretax earnings , and a $ 0.7 million increase in warranty accruals due to increased potential warranty exposure resulting from increased product sales , and ( iii ) a $ 1.2 million increase in accounts payable due to increased purchases of raw materials . these sources of cash were offset by ( i ) a $ 29.5 million increase in inventories due to the replenishment of low levels of our wireless data acquisition system inventories , and increasing levels of work-in-process resulting from product orders and anticipated demand for wireless data acquisition system sales and rentals , ( ii ) a $ 11.2 million adjustment to transfer gross profits from rental equipment sales to investing activities since such transactions involve the sale of long-lived assets , ( iii ) a $ 2.5 million increase in other current assets resulting from the advanced payment of income taxes in certain tax jurisdictions , ( iv ) a $ 1.7 million decrease in income tax payable resulting from the payment of income taxes owed on our pretax profits and ( v ) a $ 0.6 million decrease in deferred revenue resulting from a reduction in the amount of advanced payments received from our customers . for fiscal year 2011 , we used approximately $ 5.2 million of cash in investing activities . the uses of cash primarily resulted from ( i ) our investment of $ 15.4 million for rental equipment , ( ii ) $ 4.7 million of capital expenditures for property and equipment , and ( iii ) a $ 4.9 million investment in short-term investments . in addition , we transferred $ 0.2 million of inventories to our rental equipment during fiscal year 2011 which had a non-cash impact . the uses of cash outlined above were partially offset by $ 19.9 million of proceeds from the sale of used rental equipment . for fiscal year 2011 , we generated approximately $ 2.0 million of cash in the financing activities of our operations . during fiscal year 2011 , we generated $ 9.7 million of proceeds from the exercise of stock options and related tax benefits . partially offsetting these proceeds was a $ 7.7 million cash payment to pay off a mortgage loan obligation . 21 index to financial statements at september 30 , 2010 , we had $ 33.5 million in cash and cash equivalents . for fiscal year 2010 , we generated approximately $ 28.8 million of cash from our operating activities . sources of cash generated in our operating activities include net income of $ 14.1 million . additional sources of cash include net non-cash charges of $ 6.6 million for deferred income tax expense , depreciation , amortization , stock-based compensation , inventory obsolescence and bad debts . other sources of cash included ( i ) a $ 6.7 million decrease in inventories due to improved management activities , ( ii ) a $ 5.0 million increase in accrued expenses primarily resulting from higher incentive compensation costs resulting from higher levels of pretax income and ( iii ) a $ 1.9 million increase in income taxes payable primarily resulting from the increase in taxable income . these sources of cash were offset by ( i ) a $ 2.7 million increase in accounts and notes receivable resulting from higher levels of sales , ( ii ) a $ 0.9 million decrease in accounts payable due to increases in purchases of raw materials and ( iii ) a $ 0.9 million decrease in prepaid expenses and other resulting from the timing of funding our payrolls . for fiscal year 2010 , we used approximately $ 4.9 million of cash in investing activities primarily resulting from our capital expenditures for rental equipment . in addition , we transferred $ 0.3 million of inventories to our rental equipment during fiscal year 2010 which had a non-cash impact . for fiscal year 2010 , we generated approximately $ 1.3 million of cash in the financing activities of our operations . sources of cash included $ 3.3 million of proceeds from the exercise of stock options and related tax benefits . these sources of cash were offset by $ 1.8 million of principal payments under mortgage loans and a $ 0.1 million payment as a penalty for early extinguishment of debt .
| the increased demand for our seismic products is being driven by strong oil and gas exploration activities throughout the world . consolidated gross profits for fiscal year 2012 increased by $ 7.9 million , or 10.7 % , from fiscal year 2011. the increase in gross profits resulted from increased sales and rentals of our seismic products . consolidated operating expenses for fiscal year 2012 increased $ 1.5 million , or 5.0 % , from fiscal year 2011. the increase in operating expenses resulted from expanded activities associated with our sales growth , and from increased incentive compensation expenses . the u.s. statutory tax rate applicable to us for fiscal years 2012 and 2011 was 35.0 % ; however , our effective tax rate was 32.3 % and 33.4 % for fiscal years 2012 and 2011 , respectively . the lower effective tax rate for both fiscal years resulted from ( i ) the impact of the manufacturers'/producers ' deduction available in the united states , ( ii ) lower tax rates applicable to income earned in foreign tax jurisdictions and ( iii ) research and experimentation tax credits . fiscal year 2011 compared to fiscal year 2010 consolidated net sales for fiscal year 2011 increased $ 44.4 million , or 34.6 % , from fiscal year 2010. the higher level of sales resulted from increased customer demand for our seismic products and particularly robust demand for sales and rentals of our land-based wireless ( or nodal ) data acquisition systems . the increased demand for our seismic products is being driven by strong oil and gas exploration activities throughout the world . 17 index to financial statements consolidated gross profits for fiscal year 2011 increased by $ 26.8 million , or 56.5 % , from fiscal year 2010. the increase in gross profits resulted from ( i ) increased sales and rentals of seismic products , ( ii ) a more favorable product mix , and ( iii ) improved manufacturing productivity due to higher production output . consolidated operating expenses for fiscal year 2011 increased $ 3.6 million , or 14.0 % ,
|
at the 12-month time point for assessment of durability , 23 patients remained in cr of a total of 41 patients , eight had experienced recurrence of disease and ten patients were unable to be evaluated . durability of response was estimated to be 81.8 % at 12 months by kaplan-meier analysis . the median duration of response was not reached . the most commonly reported adverse events ( ≥ 20 % ) were ureteric obstruction , flank pain , urinary tract infection , hematuria , abdominal pain , fatigue , renal dysfunction , nausea , dysuria and vomiting . most adverse events were mild to moderate and manageable using well established treatments . no treatment-related deaths occurred . the fda evaluated jelmyto under priority review , which is reserved for medicines that may represent significant improvements in safety or efficacy in treating serious conditions . jelmyto was also granted breakthrough therapy designation by the fda , which was created to expedite the development and review of drugs developed for serious or life-threatening conditions with high unmet need . in june 2020 , we initiated our commercial launch of jelmyto in the united states . we have staffed , trained and prepared a commercial team comprising a field force of approximately 48 representatives with deep experience in both urology and oncology . the sales representatives are led by seven regional business managers . each region is supported by a clinical nurse educator to provide education and training around instillation , as well as a field reimbursement manager to help ensure access and reimbursement for appropriate patients . in addition , we have a team of seven medical science liaisons who appropriately engage with physicians interested in learning more about urogen , jelmyto and our technology , including through virtual meetings . we are committed to helping patients access jelmyto . our market access teams have laid the foundation for coverage and reimbursement , meeting multiple times with payers . the majority of large commercial plans have policies in place , covering over 150 million lives . in addition to reimbursement and access , we have also been focused on ensuring seamless integration into physician practices . we have implemented processes to help make jelmyto preparation and administration safe and seamless for practitioners and patients , including entering into an agreement with a major national pharmacy under which the pharmacy , following receipt of a patient prescription , prepares and dispenses the jelmyto admixture on our behalf . in october 2020 , a medicare c-code was issued for jelmyto . centers for medicare & medicaid services established a permanent and product-specific j-code for jelmyto that took effect on january 1 , 2021 and replaced the c-code . ugn-102 we are evaluating the safety and efficacy of ugn-102 , our novel sustained-release high dose formulation of mitomycin , for the treatment of low-grade intermediate risk nmibc . we have shared final topline data from the phase 2b optima ii trial for our lead product candidate , ugn-102 , in patients with low-grade intermediate risk nmibc , defined as those with one or two of the following criteria : multifocal disease , large tumors and rapid rates of recurrence . the single-arm , open label trial completed enrollment of 63 patients at clinical sites across the united states and israel in september 2019. patients were treated with six weekly instillations of ugn-102 and underwent assessment of complete response , or cr ( the primary endpoint ) four to six weeks following the last instillation . the interim data were also published as a supplement to the april 2020 issue of the journal of urology , and we anticipate publishing the final data in a peer-reviewed journal in 2021. in november 2020 , we reported final topline data consistent with our previous reports showing that 65 % , or 41 out of 63 patients , treated with ugn-102 achieved a complete response three months after the start of therapy . in this subset of patients , duration of response at nine months ( 12-months from initiation of therapy ) was estimated by kaplan-meier ( km ) analysis to be 72.5 % . median duration of response was not reached . the most common adverse events , greater than 10 % , were most often reported as mild to moderate in severity and include dysuria , hematuria , urinary frequency , fatigue , urgency and urinary tract infection . 76 we believe that ugn-102 has the potential to be a new therapeutic option for the treatment of low-grade intermediate risk nmibc patients . we initiated the phase 3 atlas trial in december 2020 and are currently enrolling patients in this trial assessing ugn-102 with or without trans-urethral resection of bladder tumor ( turbt ) compared to standard of care , turbt . urothelial cancer , which is comprised of bladder cancer and utuc , affects a large , and what we believe to be , an underserved patient population . annual expenditures for medicare alone in the united states for the treatment of urothelial cancer were projected to be at least $ 5.0 billion in 2020. the majority of the expenditures are spent on tumor resection surgeries such as transurethral resection of bladder tumor , or turbt . in 2017 , the estimated prevalence of urothelial cancer in the united states was 748,000 and in 2020 the annual incidence of urothelial cancer was approximately 85,000. the prevalence in 2017 of low-grade intermediate risk nmibc was approximately 340,000. we estimate based upon a review of peer-reviewed literature and publicly available data that there are approximately 80,000 low-grade intermediate risk nmibc patients in the u.s. annually . ugn-102 is administered locally using the standard practice of intravesical instillation directly into the bladder via a catheter . the instillation into the bladder is expected to take place in a physician 's office as a same-day treatment , in comparison with turbt or similar surgical procedures , which are operations conducted under general anesthesia and may require an overnight stay . story_separator_special_tag surgical tumor removal often has limited success due to the inability to properly identify , reach and resect all tumors . we believe that an effective chemoablation agent can potentially provide better eradication of tumors irrespective of the detectability and location of the tumors . in addition , by removing the need for surgery , patients may avoid potential complications associated with surgery . ugn-302 our immuno-uro-oncology pipeline includes ugn-302 , the sequential use of ugn-201 , a tlr 7/8 agonist and ugn-301 , an anti-ctla-4 antibody , being studied as an investigational treatment for high-grade non-muscle invasive bladder cancer ( high-grade nmibc ) . urogen 's approach involves the local delivery of these potent immunomodulators . ugn-301 , an immune checkpoint inhibitor , is delivered using urogen 's proprietary rtgel platform to increase dwell time , which has been shown to significantly improve the effectiveness of intravesical therapy . ugn-201 is a proprietary novel , liquid formulation of imiquimod , a generic toll-like receptor 7/8 , or tlr 7/8 agonist , which has been evaluated for the treatment of high-grade nmibc , which may include carcinoma in situ , or cis . toll-like receptor agonists play a key role in initiating the innate immune response system . we believe that the combination of ugn-201 with ugn-301 could represent a valid alternative to the current standard of care for the post-turbt adjuvant treatment of high-grade nmibc . in november 2019 , we entered into a worldwide license agreement with agenus inc. to develop and commercialize zalifrelimab , an anti-ctla-4 antibody , via intravesical delivery in combination with ugn-201 ( together referred to as ugn-302 ) for the treatment of urinary tract cancers , initially in high-grade nmibc . we believe that the combination treatment makes local therapy a potentially more effective treatment option while minimizing systemic exposure and potential side effects . our research and development and license agreements allergan/abbvie agreement in october 2016 , we entered into the allergan/abbvie agreement and granted allergan an exclusive worldwide license to research , develop , manufacture and commercialize pharmaceutical products that contain rtgel and clostridial toxins including botox . the license grants the exclusivity for the rtgel and clostridial toxins including botox alone or in combination with certain other active ingredients , referred to as the licensed products , which are approved for the treatment of adults with overactive bladder who can not use or do not adequately respond to anticholinergics . additionally , we granted allergan a non-exclusive , worldwide license to use certain of our trademarks as required for allergan to practice its exclusive license with respect to the licensed products . under the allergan/abbvie agreement , allergan is solely responsible , at its expense , for developing , obtaining regulatory approvals for and commercializing , on a worldwide basis , pharmaceutical products that contain rtgel and clostridial toxins ( including botox ) , alone or in combination with certain other active ingredients , collectively , the licensed products . allergan is obligated to pay us a tiered royalty in the low single digits based on worldwide annual net sales of licensed products , subject to certain reductions for the market entry of competing products and or loss of our patent coverage of licensed products . we are responsible for payments to any third party for certain rtgel -related third-party intellectual properties . in august 2017 , we announced that allergan had submitted an ind to the fda in order to be able to commence clinical trials in the united states using an rtgel formulation in combination with botox . in october 2017 , allergan commenced a phase 2 clinical trial of botox/ rtgel for the treatment of oab , with the potential to evolve from multiple injections of botox into the bladder to a single instillation of the novel formulation . 77 in august 2020 , we announced that the phase 2 apollo trial did not meet the primary endpoint , it is believed to be the result of botox not effectively permeating the urothelium . we are continuing to explore the potential use of rtgel in combination with other products in abbvie 's portfolio . agenus agreement in november 2019 , we entered into a license agreement with agenus inc. ( “ agenus ” ) . pursuant to the agreement , agenus granted us an exclusive , worldwide license ( not including argentina , brazil , chile , colombia , peru , venezuela and their respective territories and possessions ) , royalty-bearing , sublicensable license under agenus 's intellectual property rights to develop , make , use , sell , import and otherwise commercialize products incorporating a proprietary antibody of agenus known as agen1884 for the treatment of cancers of the urinary tract via intravesical delivery . agen1884 is an anti-ctla-4 antagonist that is currently being evaluated by agenus as a monotherapy in pd-1 refractory patients and in combination with agenus ' anti-pd-1 antibody ( agen2034 ) in solid tumors . ugn-301 is a formulation of rtgel and zalifrelimab that is in early stage development for high-grade nmibc . md anderson agreement based on nonclinical studies conducted by us , ugn-201 in combination with anti-ctla-4 antagonists have shown encouraging results for the potential treatment of high-grade nmibc . in january 2021 , we announced that we entered into a three-year strategic research collaboration agreement with md anderson focusing on ugn-302 as an investigational treatment for high-grade nmibc . under the agreement , md anderson and urogen will collaborate on the design and conduct of non-clinical and clinical studies with oversight from a joint steering committee . urogen will provide funding , developmental candidates , and other support . for additional information regarding our research and development and license agreements , see note 11 to our financial statements appearing elsewhere in this annual report . impact of covid-19 pandemic in the event of a prolonged disruption related to covid-19 , there could be detrimental impact to our ongoing and future clinical trials , our ongoing commercial launch and future commercialization activities for jelmyto , and our ability to access capital markets .
| the increase of $ 8.0 million resulted primarily from a one-time payment of $ 6.6 million to unwind the company 's obligation to the israeli innovation authority during the first quarter of 2020 and increased expenses related to the ugn-102 clinical trial and ugn-201 studies , partially offset by the completion of the phase 3 clinical trial and regulatory activity for jelmyto . 81 selling and marketing expenses selling and marketing expenses were $ 46.5 million and $ 17.9 million for the years ended december 31 , 2020 and 2019 , respectively . the increase in selling and marketing expenses of $ 28.6 million resulted primarily from increased costs and activities related to the commercial launch of jelmyto in june 2020 , including headcount and related costs associated with our sales force . general and administrative expenses general and administrative expenses were $ 43.7 million and $ 42.3 million for the years ended december 31 , 2020 and 2019 , respectively . general and administrative expenses were comprised most significantly of personnel related costs , followed by external professional services and facility costs the increase in general and administrative expenses of $ 1.4 million resulted primarily from increased costs and activities related to the commercial launch of jelmyto in june 2020 , including headcount and related administrative costs . interest and other income ( expenses ) , net interest and other income ( expenses ) , net was income of $ 1.6 million and income of $ 4.3 million for the years ended december 31 , 2020 and 2019 , respectively . the decrease of $ 2.7 million was primarily due to a decrease in our cash and cash equivalents and marketable securities . liquidity and capital resources as of december 31 , 2020 , we had $ 103.9 million in cash and cash equivalents and marketable securities . cash in excess of immediate requirements is invested in accordance with our investment policy , primarily with a view to liquidity and capital preservation , and is held primarily in u.s. dollars . based on our cash flow projections , we believe that our existing cash and cash equivalents and marketable securities are sufficient to fund our planned operations for at least the next 12 months .
|
exclusive of the operations acquired in our june 2012 merger with high sierra , revenues from wholesale sales of other natural gas liquids increased approximately $ 43.4 million during the year ended march 31 , 2013 , as compared to $ 251.6 million during the year ended march 31 , 2012. this resulted from an increase in volume sold of approximately 50.2 million gallons as compared to 135.0 million gallons in the prior year , partially offset by a decrease in the average selling price of $ 0.27 per gallon , as compared to $ 1.86 per gallon in the prior year . during the year ended march 31 , 2013 , the operations of high sierra contributed revenues of $ 563.2 million from sales of other natural gas liquids ( primarily butane ) . these operations sold 447.4 million gallons of other natural gas liquids at an average price of $ 1.26 per gallon . exclusive of the operations acquired in our june 2012 merger with high sierra , the increase in volume sold is due primarily to the november 2011 semstream acquisition , which expanded the markets we are able to serve . we believe the decline in average selling prices is due primarily to a greater than normal supply in the marketplace , due in part to low demand as a result of mild weather . 61 transportation and other revenues for the year ended march 31 , 2013 relate primarily to fees charged for transporting customer-owned product by rail car . cost of sales . exclusive of the operations acquired in our june 2012 merger with high sierra , costs of wholesale propane sales decreased approximately $ 212.2 million during the year ended march 31 , 2013 , as compared to $ 904.1 million during the year ended march 31 , 2012. this resulted from a decrease in the average cost of $ 0.47 per gallon , as compared to an average cost per gallon of $ 1.37 in the prior year . this decrease in cost was partially offset by an increase in volume sold of approximately 112.1 million gallons , as compared to 659.9 million gallons sold in the prior year . cost of propane sales were reduced by $ 14.8 million during the year ended march 31 , 2013 due to $ 11.6 million of realized gains and $ 3.2 million of unrealized gains on derivatives . these derivatives consisted primarily of propane swaps that we entered into as economic hedges against the potential decline in the market value of our propane inventories . excluding gains on derivatives , our average cost of propane sold during the year ended march 31 , 2013 was $ 0.92 cents per gallon . during the year ended march 31 , 2013 , the cost of propane sales of the high sierra operations were $ 109.9 million . these operations sold 140.6 million gallons of propane at an average price of $ 0.78 per gallon . exclusive of the operations acquired in our june 2012 merger with high sierra , cost of wholesale sales of other natural gas liquids increased approximately $ 43.2 million during the year ended march 31 , 2013 , as compared to $ 247.0 million during the year ended march 31 , 2012. this resulted from an increase in volume sold of approximately 50.2 million gallons as compared to 135.0 million gallons in the prior year , partially offset by a decrease in the average cost of $ 0.26 per gallon , as compared to $ 1.83 per gallon in the prior year . cost of other natural gas liquids sales during the year ended march 31 , 2013 was reduced by approximately $ 0.2 million due to realized gains on derivatives . during the year ended march 31 , 2013 , the cost of other natural gas liquids sales of the high sierra operations was $ 546.6 million . these operations sold 447.4 million gallons of other natural gas liquids ( primarily butane ) at an average price of $ 1.22 per gallon . costs of sales of other natural gas liquids during the year ended march 31 , 2013 were increased by $ 7.5 million of unrealized losses and $ 0.3 million of realized losses on derivatives . other cost of sales for the year ended march 31 , 2013 relate primarily to the cost of leasing rail cars used in the transportation of customer-owned product . operating expenses . exclusive of the operations acquired in our june 2012 merger with high sierra , operating expenses of our natural gas liquids logistics segment increased approximately $ 4.4 million during the year ended march 31 , 2013 as compared to operating expenses of $ 8.1 million during the year ended march 31 , 2012. the increase in operating expenses is due primarily to increased compensation and terminal operating expenses resulting from our semstream combination . during the year ended march 31 , 2013 , our natural gas liquids logistics segment incurred $ 15.1 million of operating expenses related to the operations of high sierra . general and administrative expenses . exclusive of the operations acquired in our june 2012 merger with high sierra , general and administrative expenses of our natural gas liquids logistics segment increased approximately $ 0.8 million during the year ended march 31 , 2013 as compared to general and administrative expenses of $ 2.7 million during the year ended march 31 , 2012. this increase is due primarily to increased compensation and related expenses resulting from our semstream combination . during the year ended march 31 , 2013 , our natural gas liquids logistics segment incurred $ 1.7 million of general and administrative expenses related to the operations of high sierra . depreciation and amortization expense . exclusive of the operations acquired in our june 2012 merger with high sierra , depreciation and amortization expense of our natural gas liquids logistics segment increased approximately $ 4.3 million during story_separator_special_tag exclusive of the operations acquired in our june 2012 merger with high sierra , revenues from wholesale sales of other natural gas liquids increased approximately $ 43.4 million during the year ended march 31 , 2013 , as compared to $ 251.6 million during the year ended march 31 , 2012. this resulted from an increase in volume sold of approximately 50.2 million gallons as compared to 135.0 million gallons in the prior year , partially offset by a decrease in the average selling price of $ 0.27 per gallon , as compared to $ 1.86 per gallon in the prior year . during the year ended march 31 , 2013 , the operations of high sierra contributed revenues of $ 563.2 million from sales of other natural gas liquids ( primarily butane ) . these operations sold 447.4 million gallons of other natural gas liquids at an average price of $ 1.26 per gallon . exclusive of the operations acquired in our june 2012 merger with high sierra , the increase in volume sold is due primarily to the november 2011 semstream acquisition , which expanded the markets we are able to serve . we believe the decline in average selling prices is due primarily to a greater than normal supply in the marketplace , due in part to low demand as a result of mild weather . 61 transportation and other revenues for the year ended march 31 , 2013 relate primarily to fees charged for transporting customer-owned product by rail car . cost of sales . exclusive of the operations acquired in our june 2012 merger with high sierra , costs of wholesale propane sales decreased approximately $ 212.2 million during the year ended march 31 , 2013 , as compared to $ 904.1 million during the year ended march 31 , 2012. this resulted from a decrease in the average cost of $ 0.47 per gallon , as compared to an average cost per gallon of $ 1.37 in the prior year . this decrease in cost was partially offset by an increase in volume sold of approximately 112.1 million gallons , as compared to 659.9 million gallons sold in the prior year . cost of propane sales were reduced by $ 14.8 million during the year ended march 31 , 2013 due to $ 11.6 million of realized gains and $ 3.2 million of unrealized gains on derivatives . these derivatives consisted primarily of propane swaps that we entered into as economic hedges against the potential decline in the market value of our propane inventories . excluding gains on derivatives , our average cost of propane sold during the year ended march 31 , 2013 was $ 0.92 cents per gallon . during the year ended march 31 , 2013 , the cost of propane sales of the high sierra operations were $ 109.9 million . these operations sold 140.6 million gallons of propane at an average price of $ 0.78 per gallon . exclusive of the operations acquired in our june 2012 merger with high sierra , cost of wholesale sales of other natural gas liquids increased approximately $ 43.2 million during the year ended march 31 , 2013 , as compared to $ 247.0 million during the year ended march 31 , 2012. this resulted from an increase in volume sold of approximately 50.2 million gallons as compared to 135.0 million gallons in the prior year , partially offset by a decrease in the average cost of $ 0.26 per gallon , as compared to $ 1.83 per gallon in the prior year . cost of other natural gas liquids sales during the year ended march 31 , 2013 was reduced by approximately $ 0.2 million due to realized gains on derivatives . during the year ended march 31 , 2013 , the cost of other natural gas liquids sales of the high sierra operations was $ 546.6 million . these operations sold 447.4 million gallons of other natural gas liquids ( primarily butane ) at an average price of $ 1.22 per gallon . costs of sales of other natural gas liquids during the year ended march 31 , 2013 were increased by $ 7.5 million of unrealized losses and $ 0.3 million of realized losses on derivatives . other cost of sales for the year ended march 31 , 2013 relate primarily to the cost of leasing rail cars used in the transportation of customer-owned product . operating expenses . exclusive of the operations acquired in our june 2012 merger with high sierra , operating expenses of our natural gas liquids logistics segment increased approximately $ 4.4 million during the year ended march 31 , 2013 as compared to operating expenses of $ 8.1 million during the year ended march 31 , 2012. the increase in operating expenses is due primarily to increased compensation and terminal operating expenses resulting from our semstream combination . during the year ended march 31 , 2013 , our natural gas liquids logistics segment incurred $ 15.1 million of operating expenses related to the operations of high sierra . general and administrative expenses . exclusive of the operations acquired in our june 2012 merger with high sierra , general and administrative expenses of our natural gas liquids logistics segment increased approximately $ 0.8 million during the year ended march 31 , 2013 as compared to general and administrative expenses of $ 2.7 million during the year ended march 31 , 2012. this increase is due primarily to increased compensation and related expenses resulting from our semstream combination . during the year ended march 31 , 2013 , our natural gas liquids logistics segment incurred $ 1.7 million of general and administrative expenses related to the operations of high sierra . depreciation and amortization expense . exclusive of the operations acquired in our june 2012 merger with high sierra , depreciation and amortization expense of our natural gas liquids logistics segment increased approximately $ 4.3 million during
| on june 19 , 2012 , we retired our revolving credit facility and replaced it with a new facility . upon retirement of the old facility , we wrote off the portion of the debt issuance cost asset that had not yet been amortized . this expense is reported as loss on early extinguishment of debt in our consolidated statement of operations for the year ended march 31 , 2013. the increased levels of debt outstanding during the periods from fiscal 2011 through fiscal 2013 are due primarily to borrowings to finance the acquisitions of businesses . interest and other income our non-operating other income consists of the following : replace_table_token_11_th income tax provision we believe that we qualify as a partnership for income tax purposes . as such , we generally do not pay u.s. federal income tax . rather , each owner reports his or her share of our income or loss on his or her individual tax return . 55 we have two taxable corporate subsidiaries in the united states and three taxable corporate subsidiaries in canada . the income tax provision reported in our consolidated statements of operations relates primarily to these subsidiaries . prior to september 30 , 2010 , ngl supply was a taxable entity . ngl supply 's income tax benefit of $ 1.4 million for the six months ended september 30 , 2010 consisted primarily of u.s. federal deferred income taxes . this provision approximated the u.s. federal statutory rate of 35 % . see note 9 to our consolidated financial statements included elsewhere in this annual report for additional description of income tax provisions . noncontrolling interests as of march 31 , 2013 , we have three consolidated subsidiaries in which outside parties own interests . our ownership interests in these subsidiaries range from 60 % to 80 % . one of these subsidiaries was formed in march 2012 , and the other two were acquired in june 2012 and october 2012 , respectively . the noncontrolling interest
|
we strive to improve the operating results of our facilities by providing high-quality services , expanding referral networks and marketing initiatives while meeting the increased demand for behavioral healthcare services through expansion of our current locations as well as developing new services within existing locations . at december 31 , 2018 , we operated 583 behavioral healthcare facilities with approximately 18,100 beds in 40 states , the u.k. and puerto rico . during the year ended december 31 , 2018 , we added 651 beds , including 499 added to existing facilities and 152 added through the opening of two de novo facilities . for the year ending december 31 , 2019 , we expect to add approximately 700 total beds exclusive of acquisitions . we are the leading publicly traded pure-play provider of behavioral healthcare services , with operations in the u.s. and the u.k. management believes that we are positioned as a leading platform in a highly fragmented industry under the direction of an 46 exp erienced management team that has significant industry expertise . management expects to take advantage of several strategies that are more accessible as a result of our increased size and geographic scale , including continuing a national marketing strategy to attract new patients and referral sources , increasing our volume of out-of-state referrals , providing a broader range of services to new and existing patients and clients and selectively pursuing opportunities to expand our facility and bed count in th e u.s. and u.k. through acquisitions , joint ventures and bed additions in existing facilities . acquisitions 2019 acquisitions on february 15 , 2019 , we completed the acquisition of whittier , an inpatient psychiatric facility with 71 beds located in haverhill , massachusetts , for cash consideration of approximately $ 17.9 million . also on february 15 , 2019 , we completed the acquisition of mission treatment for cash consideration of approximately $ 22.5 million and a working capital settlement . mission treatment operates nine comprehensive treatment centers in california , nevada , arizona and oklahoma . 2017 acquisition on november 13 , 2017 , we completed the acquisition of aspire , an education facility with 36 beds located in scotland , for cash consideration of approximately $ 21.3 million . 2016 u.s. acquisitions on june 1 , 2016 , we completed the acquisition of pocono mountain , an inpatient psychiatric facility with 108 beds located in henryville , pennsylvania , for cash consideration of approximately $ 25.4 million . on may 1 , 2016 , we completed the acquisition of trustpoint , an inpatient psychiatric facility with 100 beds located in murfreesboro , tennessee , for cash consideration of approximately $ 62.7 million . on april 1 , 2016 , we completed the acquisition of serenity knolls , an inpatient psychiatric facility with 30 beds located in forest knolls , california , for cash consideration of approximately $ 10.0 million . priory on february 16 , 2016 , we completed the acquisition of priory for a total purchase price of approximately $ 2.2 billion , including cash consideration of approximately $ 1.9 billion and the issuance of 4,033,561 shares of our common stock to shareholders of priory . priory was the leading independent provider of behavioral healthcare services in the u.k. operating 324 facilities with approximately 7,100 beds at the acquisition date . the competition and markets authority ( the “ cma ” ) in the u.k. reviewed our acquisition of priory . on july 14 , 2016 , the cma announced that our acquisition of priory was referred for a phase 2 investigation unless we offered acceptable undertakings to address the cma 's competition concerns relating to the provision of behavioral healthcare services in certain markets . on july 28 , 2016 , the cma announced that we had offered undertakings to address the cma 's concerns and that , in lieu of a phase 2 investigation , the cma would consider our undertakings . on october 18 , 2016 , we signed a definitive agreement with bc partners for the sale of 21 existing u.k. behavioral health facilities and one de novo behavioral health facility with an aggregate of approximately 1,000 beds . on november 10 , 2016 , the cma accepted our undertakings to sell the u.k. disposal group to bc partners and confirmed that the divestiture satisfied the cma 's concerns about the impact of our acquisition of priory on competition for the provision of behavioral healthcare services in certain markets in the u.k. as a result of the cma 's acceptance of our undertakings , our acquisition of priory was not referred for a phase 2 investigation . on november 30 , 2016 , we completed the sale of the u.k. disposal group to bc partners for £320 million cash . 47 story_separator_special_tag revenue , for the year ended december 31 , 2018 , compared to $ 1.5 billion , or 53.3 % of revenue , for the year ended december 31 , 2017. same facility swb expense was 49 $ 1.5 billion for the year ended december 31 , 2018 , or 51.6 % of revenue compared to $ 1.4 billion for the year ended december 31 , 2017 , or 51.1 % of revenue . professional fees . professional fees were $ 227.4 million for the year ended december 31 , 2018 , or 7.5 % of revenue , compared to $ 196.2 million for the year ended december 31 , 2017 , or 6.9 % of revenue . the $ 31.2 million increase was primarily attributable to higher contract labor costs in our u.k. facilities . contract labor costs in our u.k. facilities were higher primarily due to the ongoing nursing and clinical labor shortage and our dependence on higher cost agency labor . same facility professional fees were $ 196.7 million for the year ended december 31 , 2018 , or 6.8 % of revenue , compared to $ 169.4 million , for the year ended december 31 , 2017 , or 6.2 % of revenue . supplies . story_separator_special_tag supplies expense was $ 119.3 million for the year ended december 31 , 2018 , or 4.0 % of revenue , compared to $ 114.4 million for the year ended december 31 , 2017 , or 4.0 % of revenue . same facility supplies expense was $ 111.1 million for the year ended december 31 , 2018 , or 3.9 % of revenue , compared to $ 107.7 million for the year ended december 31 , 2017 , or 3.9 % of revenue . rents and leases . rents and leases were $ 80.3 million for the year ended december 31 , 2018 , or 2.7 % of revenue , compared to $ 76.8 million for the year ended december 31 , 2017 , or 2.7 % of revenue . same facility rents and leases were $ 64.5 million for the year ended december 31 , 2018 , or 2.2 % of revenue , compared to $ 62.7 million for the year ended december 31 , 2017 , or 2.3 % of revenue . other operating expenses . other operating expenses consisted primarily of purchased services , utilities , insurance , travel and repairs and maintenance expenses . other operating expenses were $ 354.5 million for the year ended december 31 , 2018 , or 11.8 % of revenue , compared to $ 331.8 million for the year ended december 31 , 2017 , or 11.7 % of revenue . same facility other operating expenses were $ 329.1 million for the year ended december 31 , 2018 , or 11.5 % of revenue , compared to $ 314.8 million for the year ended december 31 , 2017 , or 11.5 % of revenue . depreciation and amortization . depreciation and amortization expense was $ 158.8 million for the year ended december 31 , 2018 , or 5.3 % of revenue , compared to $ 143.0 million for the year ended december 31 , 2017 , or 5.0 % of revenue . the increase in depreciation and amortization was attributable to depreciation associated with capital expenditures and real estate acquisitions during 2017 and 2018. interest expense . interest expense was $ 185.4 million for the year ended december 31 , 2018 compared to $ 176.0 million for the year ended december 31 , 2017. the increase in interest expense was primarily a result of higher interest rates applicable to our variable-rate debt slightly offset by the lower interest rates as a result of the repricing facilities amendments to the amended and restated credit agreement . debt extinguishment costs . debt extinguishment costs for the year ended december 31 , 2018 represented $ 0.6 million of cash charges and $ 0.3 million of non-cash charges recorded in connection with the repricing facilities amendments to the amended and restated credit agreement and $ 0.9 million of cash charges in connection with the redemption of the 9.0 % and 9.5 % revenue bonds . debt extinguishment costs for the year ended december 30 , 2017 represent $ 0.5 million of charges and $ 0.3 of non-cash charges recorded in connection with the third repricing amendment to the amended and restated senior credit facility . legal settlements expense . legal settlement costs of $ 22.1 million for the year ended december 31 , 2018 represent $ 19.0 million related to the government investigation of the company 's billing for lab services in west virginia and $ 3.1 million related to the resolution of the shareholder class action lawsuit filed in 2011 in connection with our merger with phc , inc. d/b/a pioneer behavioral health ( “ phc ” ) . loss on impairment . loss on impairment of $ 337.9 million for the year ended december 31 , 2018 represents a non-cash goodwill impairment charge of $ 325.9 million and a non-cash long-lived asset impairment charge of $ 12.0 million related to our u.k. facilities . transaction-related expenses . transaction-related expenses were $ 34.5 million for the year ended december 31 , 2018 compared to $ 24.3 million for the year ended december 31 , 2017. transaction-related expenses represent costs incurred in the respective periods primarily related to our acquisitions and related integrated efforts and , for 2018 , to the ceo transition . in december 2018 , mr. joey a. jacobs was removed from his positions as the ceo and chairman of the board of directors ( the “ board ” ) of the company . also in december 2018 , ms. debra k. osteen was elected by the board to serve as the company 's ceo . in connection with this ceo transition , the company recorded a charge of $ 14.0 million , which was comprised of cash payments to 50 mr. jacobs of $ 8.1 million , the accelerated ve sting of mr. jacobs ' restricted stock awards of $ 5.0 million , a cash payment to ms. osteen of $ 0.4 million and other costs of $ 0.5 million . ceo transition costs of $ 14.0 million were recorded in transaction-related expenses in the consolidated statements o f operations . transaction-related expenses are as summarized below ( in thousands ) : replace_table_token_7_th provision for income taxes . for the year ended december 31 , 2018 , the provision for income taxes was $ 6.5 million , reflecting an effective tax rate of ( 3.9 ) % , compared to $ 37.2 million , reflecting an effective tax rate of 15.7 % , for 2017. the change in the effective tax rate for the year ended december 31 , 2018 was primarily attributable to the disparity in the accounting treatment and the tax treatment of the loss on impairment recorded in 2018. year ended december 31 , 2017 compared to the year ended december 31 , 2016 revenue before provision for doubtful accounts .
| the following table sets forth percent changes in same facility operating data for our u.k. facilities for the years ended december 31 , 2018 and 2017 compared to the same periods in the previous years : replace_table_token_6_th ( a ) results for the periods presented include facilities we have operated more than one year and exclude the elderly care division and certain closed services . ( b ) average length of stay is defined as patient days divided by admissions . ( c ) revenue and revenue per patient day for the previous year is adjusted to reflect the foreign currency exchange rate for the comparable period of the current year in order to eliminate the effect of changes in the exchange rate . ( d ) see definition of segment ebitda in u.s. same facility results table above . ( e ) u.k. ebitda margin for the years ended december 31 , 2018 and 2017 was affected by lower census and higher operating expenses including contract labor in particular . our census did not reach a sufficient level to absorb the higher wages and operating costs , which adversely affected our margins . year ended december 31 , 2018 compared to the year ended december 31 , 2017 revenue . revenue increased $ 176.1 million , or 6.2 % , to $ 3.0 billion for the year ended december 31 , 2018 from $ 2.8 billion for the year ended december 31 , 2017 resulting from same facility revenue growth of 5.2 % and the increase in the exchange rate between usd and gbp of $ 36.2 million . during the year ended december 31 , 2018 , we generated $ 1.9 billion of revenue , or 63.2 % of our total revenue , from our u.s. facilities and $ 1.1 billion of revenue , or 36.8 % of our total revenue , from our u.k. facilities . during the year ended december 31 , 2017 , we generated $ 1.8 billion of revenue , or 63.8 % of our total revenue , from our u.s. facilities and
|
we believe that we successfully compete in our market due to our deep domain expertise , reputation for innovation and the quality , breadth and integration of our solutions and common platform . we have made significant investments , and intend to increase investments , in technology innovation and software development as we enhance our solutions and platform and increase or expand the number of solutions that we offer to rcfis and their account holders . we believe that delivery of consistent , high-quality customer support is a significant driver of rcfi purchasing and renewal decisions . to develop and maintain a reputation for high-quality service , we seek to build deep relationships with our customers through our customer service organization , which we staff with personnel who are motivated by our common mission of using technology to help rcfis succeed and who are knowledgeable with respect to the regulated and complex nature of the financial services industry . as we grow our business , we must continue to invest in and grow our services organization to support our customers ' needs and maintain our reputation . on march 4 , 2015 , we completed a follow-on offering of 5,890,705 shares of our common stock at a price of $ 19.75 per share , before underwriting discounts and commissions , including 768,352 shares of our common stock resulting from the underwriters ' exercise of their over-allotment option . we sold 1,757,290 of such shares and existing stockholders sold an aggregate of 4,133,415 of such shares . the march follow-on offering generated net proceeds to us of approximately $ 32.3 million , after deducting $ 2.4 million in underwriting discounts and commissions and offering costs , which have been recorded against the proceeds received from the follow-on . we did not receive any proceeds from the sale of shares by the selling stockholders in the march follow-on offering . on july 31 , 2015 , we completed the acquisition of centrix solutions , inc. , or centrix , a privately-held company that provides financial institutions with products that detect fraud , manage risk and simplify compliance , for total consideration of $ 21.0 million in cash , which includes a customary post-closing working capital adjustment of $ 1.0 million paid in the fourth quarter of 2015. the former shareholders of centrix also have the right to receive in the aggregate up to an additional $ 9.0 million based upon the achievement of certain milestones and the continued employment of certain former shareholders of centrix . we have accounted for the acquisition using the purchase method of accounting . accordingly , the financial results of the acquisition are included in our consolidated financial results from the acquisition date . on september 30 , 2015 , we completed a follow-on offering of 3,798,996 shares of our common stock at a price of $ 25.50 per share , before underwriting discounts and commissions , and on october 15 , 2015 we completed the sale of an additional 569,850 shares of our common stock , at the price of $ 25.50 per share , before underwriting discounts and commissions , as a result of the underwriters ' exercise of their over-allotment option to purchase additional shares . we sold 853,409 of such shares and existing stockholders sold an aggregate of 3,515,437 of such shares . the september follow-on offering generated net proceeds to us of approximately $ 20.3 million , after deducting $ 1.5 million in underwriting discounts and commissions and offering costs , which have been recorded against the proceeds received from the follow-on . we did not receive any proceeds from the sale of shares by the selling stockholders in the september follow-on offering or as a result of the underwriters exercising their over-allotment option in the september follow-on offering . key operating measures in addition to the united states generally accepted accounting principals , or gaap , measures described below in `` management 's discussion and analysis of financial condition and results of operations—components of operating results , '' we monitor the following operating measures to evaluate growth trends , plan investments and measure the effectiveness of our sales and marketing efforts : 42 installed customers we define installed customers as the number of customers on the q2 platform from which we are currently recognizing revenues . the average size of our installed customers , measured in both registered users per installed customer and revenues per installed customer , has increased over time as our existing installed customers continue to add registered users and buy more solutions from us , and as we add larger rcfis to our installed customer base . the rate at which we add installed customers varies based on our implementation capacity , the size and unique needs of our customers and the readiness of our customers to implement our solutions . we had 369 , 361 and 334 installed customers as of december 31 , 2015 , 2014 and 2013 , respectively . registered users we define a registered user as an individual related to an account holder of an installed customer on the q2 platform who has registered to use one or more of our solutions and has current access to use those solutions as of the last day of the reporting period presented . we price our solutions based on the number of registered users , so as the number of registered users of our solutions increases , our revenues grow . our average number of registered users per installed customer grows as our existing customers add more registered users and as we add larger rcfis to our installed customer base . we anticipate that the number of registered users will grow at a faster rate than our number of installed customers . the rate at which our customers add registered users and the incremental revenues we recognize from new registered users vary significantly period-to-period based on the timing of our implementations of new customers and the timing of registration of new users . story_separator_special_tag our installed customers had approximately 6.3 million , 4.3 million and 3.1 million registered users as of december 31 , 2015 , 2014 and 2013 , respectively . revenue retention rate we believe that our ability to retain our installed customers and expand their use of our products and services over time is an indicator of the stability of our revenue base and the long-term value of our customer relationships . we assess our performance in this area using a metric we refer to as our revenue retention rate . we calculate our revenue retention rate as the total revenues in a calendar year from customers who were installed customers as of december 31 of the prior year , expressed as a percentage of the total revenues during the prior year from those installed customers . our revenue retention rate provides insight into the impact on current year revenues of the number of new customers implemented on the q2 platform during the prior year , the timing of our implementation of those new customers in the prior year , growth in the number of registered users and changes in their usage of our solutions , sales of new products and services to our existing installed customers during the current year and installed customer attrition . the most significant drivers of changes in our revenue retention rate each year have historically been the number of new customers in the prior year and the timing of our implementation of those new customers . the timing of our implementation of new customers in the prior year is significant because we do not start recognizing revenues from new customers until they become installed customers . if implementations are weighted more heavily in the first or second half of the prior year , our revenue retention rate will be lower or higher , respectively . our use of revenue retention rate has limitations as an analytical tool , and investors should not consider it in isolation . other companies in our industry may calculate revenue retention rate differently , which reduces its usefulness as a comparative measure . our revenue retention rate was 122 % , 122 % and 128 % for the years ended december 31 , 2015 , 2014 and 2013 , respectively . churn we utilize churn to monitor the satisfaction of our clients and evaluate the effectiveness of our business strategies . we define churn as the amount of any monthly recurring revenue losses due to installed customer cancellations and downgrades , net of upgrades and additions of new solutions , during a year , divided by our monthly recurring revenue at the beginning of the year . cancellations refer to installed customers that have either stopped using our services completely or remained a customer but terminated a particular service . downgrades are a result of customers taking less of a particular service or renewing their contract for identical services at a lower price . our annual churn has ranged from 5.4 % to 3.5 % over the last four years , and we had annual churn of 3.5 % , 4.8 % and 3.5 % for the years ended december 31 , 2015 , 2014 and 2013 , respectively . our use of churn has limitations as an analytical tool , and investors should not consider it in isolation . other companies in our industry may calculate churn differently , which reduces its usefulness as a comparative measure . 43 adjusted ebitda we define adjusted ebitda as net loss before depreciation , amortization , loss from discontinued operations , stock-based compensation , certain costs related to our recent acquisitions , provision for income taxes , total other expense , net , unoccupied lease charges and disposal of long-lived assets . we believe that adjusted ebitda provides useful information to investors and others in understanding and evaluating our operating results for the following reasons : adjusted ebitda is widely used by investors and securities analysts to measure a company 's operating performance without regard to items that can vary substantially from company to company depending upon their financing , capital structures and the method by which assets were acquired ; our management uses adjusted ebitda in conjunction with gaap financial measures for planning purposes , in the preparation of our annual operating budget , as a measure of our operating performance , to assess the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance ; adjusted ebitda provides more consistency and comparability with our past financial performance , facilitates period-to-period comparisons of our operations and also facilitates comparisons with other companies , many of which use similar non-gaap financial measures to supplement their gaap results ; and our investor and analyst presentations include adjusted ebitda as a supplemental measure of our overall operating performance . adjusted ebitda should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with gaap . the use of adjusted ebitda as an analytical tool has limitations such as : depreciation and amortization are non-cash charges , and the assets being depreciated or amortized will often have to be replaced in the future and adjusted ebitda does not reflect cash requirements for such replacements ; adjusted ebitda may not reflect changes in , or cash requirements for , our working capital needs or contractual commitments ; adjusted ebitda does not reflect the potentially dilutive impact of stock-based compensation ; adjusted ebitda does not reflect interest or tax payments that could reduce cash available for use ; and other companies , including companies in our industry , might calculate adjusted ebitda or similarly titled measures differently , which reduces their usefulness as comparative measures . because of these and other limitations , you should consider adjusted ebitda together with our gaap financial measures including cash flow from operations and net loss .
| comparison of year ended december 31 , 2015 and 2014 , and the year ended december 31 , 2014 and 2013 revenues the following table presents our revenues for each of the periods indicated ( dollars in thousands ) : replace_table_token_14_th year ended december 31 , 2015 compared to the year ended december 31 , 2014 . revenues increased by $ 29.7 million , or 37.6 % , from $ 79.1 million for the year ended december 31 , 2014 to $ 108.9 million for the year ended december 31 , 2015 . this increase was primarily attributable to a $ 26.3 million increase from the growth in new registered users from a combination of strong client retention , growth from existing customers and the addition of registered users from new installed customers . the remaining $ 3.4 million increase was generated from increases in the number of transactions processed using our solutions . in particular , the number of registered users on our solutions increased from 4.3 million at december 31 , 2014 to 6.3 million at december 31 , 2015 . year ended december 31 , 2014 compared to the year ended december 31 , 2013 . revenues increased by $ 22.3 million , or 39.1 % , from $ 56.9 million for the year ended december 31 , 2013 to $ 79.1 million for the year ended december 31 , 2014 . this increase was primarily attributable to an $ 18.2 million increase from the growth in new registered users from a combination of strong client retention , growth from existing customers and the addition of registered users from new installed customers . the remaining $ 4.1 million increase was generated from increases in the number of transactions processed using our solutions . in particular , the number of registered users on our solutions increased from 3.1 million at december 31 , 2013 to 4.3 million at december 31 , 2014 . 53 cost of revenues the following table presents our cost of revenues for each of the periods indicated ( dollars in thousands ) : replace_table_token_15_th year ended december 31 , 2015 compared to the year ended december 31 , 2014
|
when a celsignia test detects abnormal signaling activity , a more accurate diagnosis of the patient 's cancer driver is obtained . second , molecular diagnostics can only estimate the probability of a patient 's potential drug response based on a statistical analysis of the drug 's clinical trial results . instead of this indirect estimate of drug response , celsignia tests directly measure the effectiveness of a targeted therapy in a patient 's living tumor cells . this enables physicians to confirm that the therapeutic matching the patient 's cancer driver is functional in the patient 's tumor cells before prescribing it , which significantly increases the likelihood of a positive clinical outcome . our first analytically validated and commercially ready test using our celsignia platform , the celsignia her2 pathway activity test for breast cancer , diagnoses two new sub-types of her2-negative breast cancer that traditional molecular diagnostics can not detect . our internal studies show that approximately 15-20 % of her2-negative breast cancer patients have abnormal her2 signaling activity similar to levels found in her2-positive breast cancer cells . as a result , these her2-negative patients have undiagnosed her2-driven breast cancer and would be likely to respond to the same anti-her2 targeted therapies only her2-positive patients receive today . we have three interventional clinical trials underway to evaluate the efficacy of her2 targeted therapies in breast cancer patients selected with our celsignia her2 pathway activity test . our second celsignia test for breast cancer evaluates independent c-met signaling activity and its involvement with her family signaling in her2-negative breast cancer tumor cells . our internal studies show that approximately 20 % -25 % of her2-negative breast cancer patients have abnormal c-met signaling activity that is co-activated with abnormal her family signaling . these studies suggest that this sub-group of her2-negative breast cancer patients may best respond to treatment with a combination of her family and c-met inhibitors . our third celsignia test for breast cancer evaluates pi3k signaling in her2-negative breast cancer tumor cells . our internal studies demonstrate how measurement of pi3k-involved signaling may provide a more sensitive and specific method of identifying patients most likely to benefit from pi3k inhibitors than current genetic tests that measure pi3k mutations . we intend to combine these three tests to create the celsignia multi-pathway activity test , or celsignia mp test . with this next generation celsignia test , we plan to provide an analysis of egfr/her1 , her2 , her3 , c-met , and pi3k-node involved signaling activity for each patient tumor specimen received . we completed development of our first celsignia test for ovarian cancer in 2020. this test identifies a new sub-group of ovarian cancer patients with tumors that have abnormal c-met and her2 signaling activity . these findings suggest that a significant sub-group of ovarian cancer patients may respond to treatment with a combination of erbb and c-met inhibitors . nearly 15,000 women a year die from ovarian cancer , a disease that has less than a 50 % five-year survival rate and a limited range of targeted therapy options . there is thus a significant unmet need for additional therapeutic options for ovarian cancer patients . as a companion diagnostic , our celsignia test for ovarian cancer will be intended to help pharmaceutical companies obtain new drug indications and expand treatment options for this challenging tumor type . we initiated discussions with pharmaceutical companies about collaborating on clinical trials in late 2020 . 38 we also made significant progress in 2020 developing a new celsignia test intended to diagnose cancers driven by dysregulated ras signaling . dysregulation of ras signaling , which includes the raf/mek/erk and pi3k/akt/mtor pathways , is estimated to drive 30 % -40 % of all cancers . pharmaceutical companies have developed numerous drugs that target ras-involved pathways . however , the number of interactions amongst ras-regulated pathways has made it extremely difficult to use molecular tests to identify patients with dysregulated ras signaling tumors . the challenge of diagnosing a cancer driven by a dysregulated ras signaling network is magnified because two or more different pathways are typically involved . recent research has also found that ras mutations play a much less important role in dysregulated ras signaling than previously thought . our celsignia platform is uniquely suited to untangle the complexity of dysregulated ras signaling tumors and identify the targeted therapy combination capable of treating it . once development of the new ras test is completed , we intend to add it to our current celsignia multi-pathway activity test for breast and ovarian cancer . this next generation celsignia test would provide an analysis of egfr/her1 , her2 , her3 , c-met , pi3k , and ras-involved signaling activity for each patient tumor specimen received . our current celsignia test has the potential to diagnose oncogenic signaling activity undetectable by molecular tests in up to one in three her2-negative breast cancer patients . if our efforts to develop a ras dynamic signaling test are successful , the percentage of cancer patients who could benefit from a celsignia test would further increase . in addition to our celsignia tests for her2-negative breast cancer and ovarian cancer , we expect to develop celsignia tests to diagnose eight new potential cancer sub-types we have discovered in lung , ovarian , kidney , and bladder cancers . approved or investigational drugs are currently available to treat these new potential cancer sub-types . we expect to launch these additional tests on a staggered basis over the next few years while continuing our research to identify additional new cancer sub-types . our overall commercialization strategy is to develop diagnostics that expand the patient population eligible for targeted therapies . story_separator_special_tag we have four collaborations underway that rely on the celsignia test for breast cancer to select breast cancer patients for treatment with her2 or a combination of pan-her and c-met targeted therapies . for the first one of these collaborations , we are fielding a prospective clinical trial with genentech and nsabp ( fact-1 ) to evaluate the efficacy of genentech 's her2 targeted therapies in patients with abnormal her2 signaling . for the second of these collaborations , we are fielding a prospective clinical trial with puma and west cancer center ( fact-2 ) to evaluate the efficacy and safety of puma 's drug , nerlynx , and chemotherapy , in breast cancer patients selected with our celsignia test . for our third collaboration , we are fielding a prospective open-label phase ii clinical trial with puma massachusetts general hospital , the ucla jonsson comprehensive cancer center and the vanderbilt-ingram cancer center to evaluate the efficacy of puma 's drug , nerlynx , and faslodex , an astrazeneca drug , in previously treated metastatic hr-positive , her2-negative breast cancer patients selected with our celsignia her2 pathway activity test . for our fourth collaboration , we are fielding a prospective open-label phase ii clinical trial with pfizer inc. and sarah cannon research institute to evaluate the efficacy of two pfizer targeted therapies , vizimpro , a pan-her inhibitor , and xalkori , a c-met inhibitor , in previously treated metastatic her2-negative breast cancer patients selected with our celsignia multi-pathway activity test . an additional collaboration to evaluate tissue samples from a phase ii study evaluating puma 's pan-her inhibitor , nerlynx , genentech 's her2 antibody , herceptin , and bristol-myers squibb 's egfr inhibitor , erbitux , in metastatic colorectal cancer patients is expected to be completed in late 2022. unlike the four clinical trial collaborations , our celsignia test will be used solely to evaluate tissue samples after they have been enrolled in this trial . we will not receive payment for the testing we perform . we expect our celsignia test will provide critical insight after the trial is completed about the patient characteristics most correlative to drug response . in conjunction with the development of our celsignia tests , we will seek collaborations with pharmaceutical companies to field clinical trials to advance the clinical development of their targeted therapies with the eventual goal of obtaining u.s. food and drug administration ( “ fda ” ) approval of a new drug indication . collaborations are expected to involve initially phase i or phase ii interventional clinical trials to evaluate the efficacy of our collaboration partners ' targeted therapies patients selected with one of our celsignia tests . we are currently evaluating , or expect to evaluate , a variety of targeted therapies in combination with other targeted therapies , hormonal therapies , or chemotherapies , including : i ) pan-her and c-met inhibitors ; ii ) pan-her inhibitors and endocrine therapy ; iii ) pan-her inhibitors and chemotherapies ; and iv ) pi3k inhibitors and endocrine therapy . the fda has approved three c-met inhibitors , six her-family inhibitors , and four pi3k inhibitors for cancer treatment . additional c-met , her-family , and pi3k inhibitors are being evaluated in on-going clinical trials . we have not generated any revenue from sales to date , and we continue to incur significant research and development and other expenses related to our ongoing operations . as a result , we are not and have never been profitable and have incurred losses in each period since we began operations in 2012. for the years ended december 31 , 2020 and 2019 , we reported a net loss of approximately $ 9.5 million and $ 7.4 million , respectively . as of december 31 , 2020 , we had a combined accumulated deficit of approximately $ 12.6 million under celcuity llc and $ 26.3 million under celcuity inc. as of december 31 , 2020 , we had cash and cash equivalents of approximately $ 11.6 million . 39 impact of covid-19 on our business a novel strain of coronavirus ( covid-19 ) was first identified in wuhan , china in december 2019 , and subsequently declared a pandemic by the world health organization . the impact of the covid-19 pandemic on our business is discussed in further detail below : health and safety to help protect the health and safety of our employees , suppliers and collaborators , we took proactive , aggressive action from the earliest signs of the outbreak . we enacted rigorous safety measures in our laboratory and administrative offices , including implementing social distancing protocols , allowing working from home for those employees that do not need to be physically present in a lab to perform their work , suspending travel , implementing temperature checks at the entrances to our facilities , extensively and frequently disinfecting our workspaces and providing masks to those employees who must be physically present . we expect to continue with these measures until the covid-19 pandemic is contained and we may take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees , suppliers , and collaborators . clinical trials and collaborations as a result of the covid-19 pandemic , governmental authorities have implemented and are continuing to implement numerous and constantly evolving measures to try to contain the virus , such as travel bans and restrictions , limits on gatherings , quarantines , shelter-in-place orders , and business shutdowns .
| other general and administrative expenses include professional fees for auditing , tax , and legal services associated with being a public company , director and officer insurance and travel expenses for our general and administrative personnel . sales and marketing sales and marketing expenses consist primarily of professional and consulting fees related to these functions . to date , we have incurred immaterial sales and marketing expenses as we continue to focus primarily on the development of our celsignia platform and corresponding celsignia tests . we expect to begin to incur increased selling and marketing expenses in anticipation of the commercialization of our first celsignia tests . these increased expenses are expected to include payroll-related costs as we add employees in the commercial departments , costs related to the initiation and operation of our sales and distribution network and marketing related costs . interest expense interest expense is the result of finance lease obligations . interest income interest income consists of interest income earned on our cash and cash equivalents . 41 results of operations comparison of the years ended december 31 , 2020 and 2019 replace_table_token_3_th research and development for the year ended december 31 , 2020 , our total research and development expenses increased approximately $ 1.41 million , or 23 % , to approximately $ 7.68 million from $ 6.27 million for the prior year . the increase primarily resulted from a $ 1.15 million increase in compensation related expenses , including approximately $ 0.49 million in non-cash stock-based compensation to support development of our celsignia platform . in addition , other research and development expenses increased $ 0.26 million due to clinical validation and laboratory studies , and operational and business development activities . conducting a significant amount of research and development is central to our business model . we plan to increase our research and development expenses for the foreseeable future as we seek to discover new cancer sub-types and to develop and validate additional celsignia tests to diagnose such sub-types . we also expect to incur increased expenses to support companion diagnostic business
|
on february 9 , 2021 , we completed our ipo and sold 11,302,219 shares of our common stock , including 1,474,202 shares sold pursuant to the exercise of the underwriters ' over-allotment option , at a public offering price of $ 18.00 per share . we received net proceeds of approximately $ 186.3 million from the ipo , after deducting underwriters ' discounts and commissions and other offering expenses paid by us . business impact of the covid-19 pandemic the global covid-19 pandemic continues to rapidly evolve , and we will continue to monitor the covid-19 situation closely . to date our financial condition and operations have not been significantly impacted by the covid-19 pandemic . however , we can not , at this time , predict the specific extent , duration or full impact that the covid-19 pandemic will have on our financial condition and operations , including our ongoing and planned preclinical and clinical trials . the extent of the impact of the covid-19 on our business , operations and clinical development timelines and plans remains uncertain and will depend on certain developments , including the duration and spread of the outbreak and its impact on our clinical trial enrollment , trial sites , contract research organizations ( “ cros ” ) , third-party manufacturers , and other third parties with whom we do business , as well as its impact on regulatory authorities and our key scientific and management personnel . to the extent possible , we are conducting business as usual , with necessary or advisable modifications to employee travel as many of our employees are working remotely . we will continue to actively monitor the rapidly evolving situation related to covid-19 and may take further actions that alter our operations , including those that may be required by federal , state or local authorities , or that we determine are in the best interests of our employees and other third parties with whom we do business . the development of our product candidates could be disrupted and materially adversely affected in the future by the covid-19 pandemic . our planned clinical trials also could be delayed due to government orders and site policies on account of the pandemic , and some patients may be unwilling or unable to travel to study sites , enroll in our trials or be unable to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services , which would delay our ability to conduct clinical trials or release clinical trial results and could delay our ability to obtain regulatory approval and commercialize our product candidates . furthermore , covid-19 could affect our employees or the employees of research sites and service providers on whom we rely , including cros , as well as those of companies with which we do business , including our suppliers and contract manufacturing organizations ( “ cmos ” ) , thereby disrupting our business operations . quarantines and travel 132 restrictions imposed by governments in the jurisdictions in which we and the companies with which we do business operate could materially impact the ability of employees to access preclinical and clinical sites , laboratories , manufacturing site and office . these and other events resulting from the covid-19 pandemic could disrupt , delay , or otherwise adversely impact our business . financial operations overview revenue we have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future , if at all . if our development efforts for vor33 , vcar33 , the vor33/vcar33 treatment system or any other product candidates are successful and result in marketing approval , or if we enter into collaboration or license agreements with third parties , we may generate revenue in the future from a combination of product sales or payments from such agreements . expenses research and development expenses research and development expenses consist primarily of external and internal costs incurred in connection with our research and development activities , including our drug discovery efforts and the development of vor33 and vcar33 . external expenses include : external research and development expenses incurred under agreements with cros and other scientific development services ; costs of other outside consultants , including their fees and related travel expenses ; costs related to compliance with quality and regulatory requirements ; costs of laboratory supplies and acquiring and developing preclinical and clinical trial materials , including expenses associated with our cmos ; and payments made under third party licensing agreements . internal expenses include : personnel-related expenses , including salaries , bonuses , benefits and stock-based compensation expenses , for individuals involved in research and development activities ; and facilities , depreciation and other allocated expenses , which include direct and allocated expenses for rent , insurance and other internal operating costs . we expense research and development costs as incurred . we recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors . payments for these activities are based on the terms of the individual agreements , which may differ from the pattern of costs incurred , and are reflected in our consolidated financial statements as prepaid expenses or accrued research and development expenses . nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized , even when there is no alternative future use for the research and development . the capitalized amounts are expensed as the related goods are delivered or the services are performed . a significant portion of our research and development costs have been external costs , which we track by stage of development , preclinical or clinical . however , we do not track our internal research and development 133 expenses on a program specific basis because these costs are deployed across multiple projects and , as such , are not separately classified . story_separator_special_tag research and development activities are central to our business model . we expect that our research and development expenses will increase significantly for the foreseeable future as we continue to identify and develop product candidates , particularly as more of our product candidates move into clinical development and later stages of clinical development . the successful development of vor33 , vcar33 , the vor33/vcar33 treatment system and any product candidates we may develop in the future is highly uncertain . therefore , we can not reasonably estimate or know the nature , timing and estimated costs of the efforts that will be necessary to complete the development and commercialization of any of our product candidates . we are also unable to predict when , if ever , material net cash inflows will commence from the sale of vor33 , vcar33 , the vor33/vcar33 treatment system or potential future product candidates , if approved . this is due to the numerous risks and uncertainties associated with developing product candidates , many of which are outside of our control , including the uncertainty of : the timing and progress of preclinical and clinical development activities ; the number and scope of preclinical and clinical programs we decide to pursue ; our ability to maintain our current research and development programs and to establish new ones ; establishing an appropriate safety profile with ind-enabling studies ; the number of sites and patients included in the clinical trials ; the countries in which the clinical trials are conducted ; per patient trial costs ; successful patient enrollment in , and the initiation of , clinical trials , as well as drop out or discontinuation rates , particularly in light of the current covid-19 pandemic environment ; the successful completion of clinical trials with safety , tolerability and efficacy profiles that are satisfactory to the fda or any comparable foreign regulatory authority ; the number of trials required for regulatory approval ; the timing , receipt and terms of any regulatory approvals from applicable regulatory authorities ; our ability to establish new licensing or collaboration arrangements ; the performance of our future collaborators , if any ; establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers ; significant and changing government regulation and regulatory guidance ; the impact of any business interruptions to our operations or to those of the third parties with whom we work , particularly in light of the current covid-19 pandemic environment ; obtaining , maintaining , defending and enforcing patent claims and other intellectual property rights ; launching commercial sales of our product candidates , if approved , whether alone or in collaboration with others ; and maintaining a continued acceptable safety profile of the product candidates following approval . any changes in the outcome of any of these variables could mean a significant change in the costs and timing associated with the development of our product candidates . for example , if the fda or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the 134 completion of clinical development of a product candidate , or if we experience significant delays in our clinical trials due to patient enrollment or other reasons , we would be required to expend significant additional financial resources and time on the completion of clinical development . we may never obtain regulatory approval for any of our product candidates . general and administrative expenses general and administrative expenses consist primarily of personnel-related costs , including salaries , bonuses , benefits and stock-based compensation expenses for individuals involved in our executive , finance , corporate , business development and administrative functions , as well as expenses for outside professional services , including legal , audit , accounting and tax-related services and other consulting fees , facility-related expenses , which include depreciation costs and other allocated expenses for rent and maintenance of facilities , insurance costs , recruiting costs , travel expenses and other general administrative expenses . we expect that our general and administrative expenses will increase significantly for the foreseeable future as our business expands and we hire additional personnel to support our continued research and development activities , including our future clinical programs . we also anticipate increased expenses associated with being a public company , including costs for legal , audit , accounting , investor and public relations , regulatory and tax-related services related to compliance with the rules and regulations of the securities and exchange commission ( the “ sec ” ) , listing standards applicable to companies listed on a national securities exchange , director and officer insurance premiums and investor relations costs . other income ( expense ) interest income interest income consists of interest income earned on our cash and cash equivalents held in financial institutions . interest expense related to convertible notes interest expense relates to interest incurred on the convertible notes we issued between october 2016 and december 2018 ( the “ convertible notes ” ) , as well as amortization of the related note discount which converted to shares of series a-2 preferred stock in february 2019 ( see note 6 to our audited consolidated financial statements included elsewhere in this in this annual report for additional information ) . change in fair value of derivative liabilities change in fair value of derivative liabilities relates to the bifurcated embedded derivative liabilities identified associated with the convertible notes . 135 results of operations comparison of years ended december 31 , 2020 and 2019 the following table summarizes our results of operations for the years ended december 31 , 2020 and 2019 ( in thousands ) : replace_table_token_1_th research and development expenses the following table summarizes our research and development expenses for the years ended december 31 , 2020 and 2019 ( in thousands ) : replace_table_token_2_th ( 1 ) in future periods when clinical trial expenses are incurred , we expect that external costs will be broken out between our clinical programs and our preclinical programs .
| we are developing our lead ehsc product candidate , vor33 , and our companion therapeutic , vcar33 , which together , we believe , have the potential to transform the treatment paradigm for acute myeloid leukemia ( “ aml ” ) and other hematological malignancies . we use genome engineering technology to remove cd33 surface targets from hscs to create vor33 . our investigational new drug ( “ ind ” ) application for vor33 in patients with aml was accepted by the u.s. food and drug administration ( “ fda ” ) in january 2021 , and we intend to initiate a first-in-human phase 1/2a trial of vor33 in aml patients in combination with mylotarg by enrolling the first patient in the second quarter of 2021. we expect initial data from this trial to be reported in late 2021 or in the first half of 2022. if successful , this trial will provide important validating evidence of the potential of vor33 and our broader ehsc approach , which we believe has significant potential to improve clinical outcomes for hematological malignancies beyond aml and change the standard of care . we are developing vor33 as an ehsc product candidate to replace the standard of care in transplant settings . once the vor33 cells have engrafted , we believe patients can be treated with anti-cd33 therapies , such as mylotarg or vcar33 , with limited on-target toxicity , leading to durable anti-tumor activity and potential cures . in preclinical studies , we have observed that the removal of cd33 provided robust protection of these healthy donor hscs from the cytotoxic effects of cd33-directed companion therapeutics yet had no deleterious effects on the differentiation or function of hematopoietic cells . vcar33 is a cd33-directed chimeric antigen receptor ( “ car ” ) -t therapy candidate designed to target cd33 , a clinically-validated target for aml . we licensed vcar33 from the national institutes of health ( “ nih ” ) and intend to initially develop vcar33 as a bridge-to-transplant monotherapy for relapsed/refractory aml , where patients have failed prior lines of therapy and need further treatment to achieve morphologic remission and , if possible , subsequent hsct . this setting typically sources t cells from the patient ( autologous cells ) and
|
in the near term , we anticipate that our expenses will increase as we : manufacture registration batches of lpcn 1021 ; complete our pivotal phase 3 trial and other pharmacokinetic studies of lpcn 1021 and , if these trials are successful , prepare and file our nda for lpcn 1021 ; conduct further clinical development of our other product candidates , including lpcn 1111 and lpcn 1107 ; continue our research efforts ; maintain , expand and protect our intellectual property portfolio ; and provide general and administrative support for our operations . to fund future long-term operations we will need to raise additional capital . the amount and timing of future funding requirements will depend on many factors , including capital market conditions , the timing and results of our ongoing development efforts , the potential expansion of our current development programs , potential new development programs and related general and administrative support . we anticipate that we will seek to fund our operations through public or private equity or debt financings or other sources , such as potential license and collaboration agreements . we can not be certain that anticipated additional financing will be available to us on favorable terms , or at all . although we have previously been successful in obtaining financing through our license and collaboration agreements and public and private equity securities offerings , there can be no assurance that we will be able to do so in the future . our product candidates our current portfolio of proprietary product candidates consists of our lead product candidate lpcn 1021 , an oral trt , a next generation oral trt , lpcn 1111 , and an oral therapy for the prevention of recurrent preterm birth , lpcn 1107 . 42 lpcn 1021 : an oral product candidate for testosterone replacement therapy our lead product , lpcn 1021 , is an oral formulation of the chemical testosterone undecanoate ( `` tu '' ) , an eleven carbon side chain attached to testosterone . tu is an ester prodrug of testosterone , which is an inactive form of testosterone . upon the cleavage , or breaking , of the ester bond , the pharmacologically active drug , testosterone is formed . an ester is a chemical between an acid and alcohol . tu has been approved for use outside the united states for many years for delivery via intra-muscular injection and in oral dosage form and tu recently received approval in the united states for delivery via intra-muscular injection . however , the oral dosage form which is approved outside the united states provides sub-therapeutic serum testosterone levels at the approved dose . we are using our lip'ral technology to facilitate steady gastrointestinal solubilization and absorption of tu for convenient twice daily dosing of tu . proof of concept was initially established in 2006 , and subsequently lpcn 1021 was licensed to solvay pharmaceuticals , inc. ( `` solvay '' ) which was then acquired by abbott products , inc. ( `` abbott '' ) in 2009. following a portfolio review associated with the spin-off of abbvie by abbott in 2011 , the rights to lpcn 1021 were reacquired by us . all obligations under the prior license agreement have been completed except that lipocine will owe abbott a perpetual 1.5 % royalty on net sales should lipocine decide to use certain solvay/abbott formulations or a perpetual 1 % royalty on net sales should lipocine use data generated during the term of the solvay/abbott agreement in any regulatory filings for a product . such royalties are limited to $ 1 million in the first two calendar years following product launch , after which period there is not a cap on royalties and no maximum aggregate amount . if generic versions of any such product are introduced , then royalties are reduced by 50 % . we have received top-line efficacy results from our ongoing study of oral androgen replacement ( `` soar '' ) pivotal phase 3 clinical study evaluating efficacy and safety of lpcn 1021. soar is a randomized , open-label , parallel-group , active-controlled , phase 3 clinical study of oral trt in hypogonadal males with low testosterone ( < 300 ng/dl ) . in total , 315 subjects at 40 active sites were assigned , such that 210 were randomized to lpcn 1021 and 105 were randomized to the active control , for 52 weeks of treatment . the active control is included for safety assessment . lpcn 1021 subjects were started at 225 mg tu ( equivalent to ~ 142 mg of t ) twice daily ( “ bid ” ) with a standard meal and then dose titrated , if needed , up to 300 mg tu bid or down to 150 mg tu bid based on serum testosterone measured during weeks 3 and 7. the mean age of the subjects in the trial is ~53 yrs with ~91 % of the patients < 65 yrs of age . top line results from soar primary statistical analysis was conducted using the efficacy population set ( `` eps '' ) . the eps is defined as subjects randomized into the study with at least one pk profile and no significant protocol deviations and includes imputed missing data by last observation carried forward , n=152 . further analysis was performed using the full analysis set ( `` fas '' ) ( any subject randomized into the study with at least one post-baseline efficacy variable response , n=192 ) and the safety set ( “ ss ” ) ( any subject that was randomized into the study and took at least one dose , n=210 ) . efficacy the primary efficacy end point is the percentage of subjects with an average 24 hour serum testosterone concentration ( “ cavg ” ) within the normal range , which is defined as 300-1140 ng/dl , after 13 weeks of treatment . story_separator_special_tag the fda guidelines for primary efficacy success is that at least 75 % of the subjects on active treatment achieve a testosterone cavg within the normal range ; and the lower bound of the 95 % confidence interval ( “ ci ” ) must be greater than 65 % . lpcn 1021 successfully met the fda primary efficacy guideline . in the eps analysis , 88 % of the subjects on active treatment achieved testosterone cavg within the normal range with lower bound ci of 82 % . additionally , sensitivity analysis using the fas and ss reaffirmed the finding that lpcn 1021 successfully met the fda primary efficacy guideline as 88 % and 80 % , respectively , of the subjects on active treatment achieved testosterone cavg within the normal range with lower bound ci of 82 % and 74 % , respectively . other highlights from the efficacy results include : · mean cavg was 447 ng/dl with coefficient of variance of 37 % ; · less than 12 % of the subjects were outside the tesosterone cavg normal range at final dose ; · 85 % of subjects arrived at final dose with no more than one titration ; and 43 · 51 % of subjects were on final dose of 225 mg bid which was also the starting dose . safety although the safety component of the soar trial is on-going , lpcn 1021 treatment has been well tolerated to date . lpcn 1021 safety highlights through week 13 of treatment include : · 3 % of the subjects reported a serious adverse events ( `` sae '' ) , with none of the sae 's being drug related ; · all the drug related adverse events were either mild or moderate in intensity ( none were severe ) ; and · hematocrit ( “ hct ” ) and prostate specific antigen ( “ psa ” ) increases were noted and consistent with other trt products with one subject discontinued for elevated hct exceeding pre-specified limits and one subject discontinued for elevated psa exceeding pre-specified limits . in the eps analysis , cmax ≤1500 ng/dl was 83 % , cmax between 1800 and 2500 ng/dl was 4.6 % and cmax > 2500 ng/dl was 2 % . three patients had a cmax > 2500 ng/dl which were transient , isolated and sporadic . moreover , none of these subjects reported any ae 's . results were generally consistent with those of approved trt products . the safety extension phase of the soar trial is on-going . the safety extension phase is designed to assess safety information such as metabolites , biomarkers , laboratory values , saes and aes , with subjects on their stable dose regimen in both the treatment arm and the active control arm . in december 2014 we received confirmation from the fda that the design of our soar trial is currently acceptable for filing an nda for the class trt labeling . the fda reiterated the primary efficacy endpoint required for approval being 75 % of subjects with a cavg for serum testosterone in the normal range with the lower bound of the two-sided 95 % confidence interval being > 65 % . additionally , the fda did not identify any additional clinical studies that would be required for nda filing , but did state that should any safety signal become apparent during analysis of our soar trial results or during the course of their review , it is possible that additional data may be required . based on the response received , we do not anticipate the need to conduct additional studies above those previously agreed to with the fda for nda filing . we expect to have a pre-nda meeting with the fda on march 19 , 2015. additionally we expect the last patient last visit in the safety extension phase of the soar trial to be in april 2015 with top-line safety results in the second quarter of 2015 and an nda filing to occur during the second half of 2015 assuming successful safety results . lpcn 1111 : a next-generation oral product candidate for trt lpcn 1111 is a next-generation , novel ester prodrug of testosterone which uses the lip'ral technology to enhance solubility and improve systemic absorption . in october 2014 , we successfully completed a phase 2a proof-of-concept study in hypogonadal men . the phase 2a open-label , dose-escalating single and multiple dose study enrolled 12 males . these subjects had serum total testosterone < 300 ng/dl based on two blood draws on two separate days . subjects received doses of lpcn 1111 as a single dose of 330 mg , 550 mg , 770 mg , followed by once daily administration of 550 mg for 28 days in 10 subjects , and once daily administration of 770 mg for 28 days in eight subjects . results from the phase 2a clinical study demonstrated the feasibility of a once daily dosing with lpcn 1111in hypogonadal men and a good dose response . additionally , the study confirmed that steady state is achieved by day 14 with consistent inter-day performance observed on day 14 , 21 and 28. no subjects exceeded cmax of 1500 ng/dl at any time during the 28 day dosing period on multi-dose exposure . overall , lpcn 1111 was well tolerated with no serious adverse events . we expect to initiate a phase 2b dose finding study in hypogonadal men in the third quarter of 2015 subject to clarity from the fda on the trt `` class '' label and financial resources . 44 lpcn 1107 : an oral product candidate for the prevention of preterm birth we believe lpcn 1107 has the potential to become the first oral hydroxyprogesterone caproate ( “ hpc ” ) product indicated for the prevention of preterm birth in women with a prior history of at least one preterm birth .
| allocation of overhead expenses based on a higher allocation of direct labor hours for general and administrative personnel relative to research and development personnel . 47 reverse merger costs reverse merger costs incurred during the year ended december 31 , 2013 relate to the merger with marathon bar which closed on july 24 , 2013 , and is comprised of $ 340,000 for the cost of the marathon bar shell , $ 527,000 in legal services , $ 98,000 in accounting services , $ 38,000 in printer fees and $ 9,000 in other miscellaneous expenses . settlement for termination of certain rights in stock purchase agreement settlement for termination of certain rights in stock purchase agreement incurred during the year ended december 31 , 2013 relates to 152,241 shares of common stock issued to an existing shareholder on july 24 , 2013 for the termination of certain rights included in a stock purchase agreement , including an anti-dilution provision . other income , net the increase in other income , net , primarily reflects increased interest earned on a larger balance in cash and cash equivalents in 2014 as a result of our offerings of common stock in july 2013 and november 2013. income tax benefit ( expense ) the increase in income tax expense relates to a reversal of accrued income taxes payable in 2013 due to the reversal of an uncertain tax position which was not repeated in 2014. liquidity and capital resources since our inception , our operations have been primarily financed through sales of our equity and payments received under our license and collaboration arrangements . we have devoted our resources to funding research and development programs , including discovery research , preclinical and clinical development activities . we have incurred operating losses in most years since our inception and we expect to continue to incur operating losses into the foreseeable future as we advance the ongoing
|
corresponding historical periods and with the operational performance of other companies in our industry because it does not 63 give effect to potential differences caused by items we do not consider reflective of underlying operating performance . adjusted ebitda for the current quarter as well as the previous four quarters is presented below . replace_table_token_13_th ( 1 ) quarterly amounts relate to ongoing operations , excluding the transitional group and assets held for sale ( 2 ) legal settlement amounts are net of insurance recoveries ( 3 ) unused space charges include initial charge and subsequent accretion ( 4 ) quarterly amounts relate to the transitional group and discontinued operations adjusted ebitda for ongoing operations , which excludes the transitional group and discontinued operations , improved $ 5.4 million or 53.3 % for the fourth quarter of 2014 as compared to the same quarter last year as revenue declines of $ 18.0 million were more than offset by reduced operating expenses . adjusted ebitda was $ 15.6 million or $ 0.23 per diluted share for the fourth quarter of 2014 as compared to $ 10.2 million or $ 0.15 per diluted share for the fourth quarter of 2013. this favorability was a result of continued efforts to align current cost structure with total student enrollment and improved profitability from the university 64 group . we expect that our ongoing operations will be adjusted ebitda positive for the full year 2015 ; although not necessarily for each quarter as advertising investments are typically heavier in the first and third quarters of each year as reflected above in the table . the primary drivers of our plans to be adjusted ebitda positive for 2015 include : improved ebitda from our ctu segment ; positive adjusted ebitda for our aiu segment , driven primarily by an improved cost structure ; benefit from the $ 40.0 million of expense reductions we took in the latter half of 2014 , a portion of which will drive the ctu and aiu improvement ; and continued focus on stemming our losses in career colleges . however , these improvements will be substantially offset with management allocations that will be absorbed by our continuing operations which were previously allocated to our culinary arts campuses that are now reported within discontinued operations . therefore , our expected adjusted ebitda growth for 2015 is expected to be minimal as compared to 2014. adjusted ebitda for the transitional group and discontinued operations was - $ 13.0 million or - $ 0.19 per diluted share for the fourth quarter of 2014 as compared to - $ 33.1 million or - $ 0.50 per diluted share for the fourth quarter of 2013. this favorability was a result of the completion of teach-out operations at campuses that have now closed and continued focus on exiting and reducing real estate lease obligations once a teach-out is complete . such lease obligations are a large component of our cost structure and cash usage . in addition to real estate leases associated with our ongoing operations , campuses that have completed the teach-out process more often than not have ongoing lease obligations that continue for some time . during the past twelve months we have entered into sublease agreements and early lease termination agreements which will result in cash savings of $ 39 million , net of cash payments over the remaining life of the leases . see contractual obligations under liquidity , financial position and capital resources below for further information regarding our remaining lease obligations . we intend to continue to be proactive in our efforts to lower our real estate exposure , including termination agreements , sublease agreements and space consolidation but we anticipate that the level and volume of transactions in 2015 may be less than those negotiated in 2014. we anticipate adjusted ebitda for the transitional group and discontinued operations to continue to decrease through 2015 and we expect adjusted ebitda to be approximately negative $ 62.0 for the full year 2015 based on the current composition of our transitional group and discontinued operations . within the transitional group , we closed twenty campuses during 2014 , as well as divested one campus in the second quarter of 2014 , bringing the remaining number of transitional campuses to 12 , four of which are expected to close in 2015. as we continue to complete the teach-outs within the transitional group , we expect the operating loss and cash consumption associated with these campuses to further decline . we will continue to analyze the student outcomes and financial performance of each of our programs and campuses to make the necessary decisions that are in the best interest of our students , as well as for long-term success and value creation for the organization . as an organization , our focus continues to be to enroll , educate and place our students into a better position to succeed professionally and to close the gap between students and employers . in doing so , we seek to create a winning formula for our students , for employers that employ our graduates and for our shareholders . we have successfully executed against our strategic goals for 2014 and we remain committed to execute on our goals in 2015. we continue to believe that we are well-positioned to complete our turnaround strategy and generate long-term profitability . 2015 outlook an update on our expectations for performance and general business outlook for full year 2015 include : modest growth in total student enrollments for the year within our university group , with online being the primary contributor positive adjusted ebitda for full year 2015 from ongoing operations , which excludes the transitional group and campuses held for sale reduced operating expenses of $ 40 million based on actions that were taken in 2014 65 continued progress on reductions of real estate obligations end fiscal year 2015 with over $ 190 million in total cash , cash equivalents , story_separator_special_tag corresponding historical periods and with the operational performance of other companies in our industry because it does not 63 give effect to potential differences caused by items we do not consider reflective of underlying operating performance . adjusted ebitda for the current quarter as well as the previous four quarters is presented below . replace_table_token_13_th ( 1 ) quarterly amounts relate to ongoing operations , excluding the transitional group and assets held for sale ( 2 ) legal settlement amounts are net of insurance recoveries ( 3 ) unused space charges include initial charge and subsequent accretion ( 4 ) quarterly amounts relate to the transitional group and discontinued operations adjusted ebitda for ongoing operations , which excludes the transitional group and discontinued operations , improved $ 5.4 million or 53.3 % for the fourth quarter of 2014 as compared to the same quarter last year as revenue declines of $ 18.0 million were more than offset by reduced operating expenses . adjusted ebitda was $ 15.6 million or $ 0.23 per diluted share for the fourth quarter of 2014 as compared to $ 10.2 million or $ 0.15 per diluted share for the fourth quarter of 2013. this favorability was a result of continued efforts to align current cost structure with total student enrollment and improved profitability from the university 64 group . we expect that our ongoing operations will be adjusted ebitda positive for the full year 2015 ; although not necessarily for each quarter as advertising investments are typically heavier in the first and third quarters of each year as reflected above in the table . the primary drivers of our plans to be adjusted ebitda positive for 2015 include : improved ebitda from our ctu segment ; positive adjusted ebitda for our aiu segment , driven primarily by an improved cost structure ; benefit from the $ 40.0 million of expense reductions we took in the latter half of 2014 , a portion of which will drive the ctu and aiu improvement ; and continued focus on stemming our losses in career colleges . however , these improvements will be substantially offset with management allocations that will be absorbed by our continuing operations which were previously allocated to our culinary arts campuses that are now reported within discontinued operations . therefore , our expected adjusted ebitda growth for 2015 is expected to be minimal as compared to 2014. adjusted ebitda for the transitional group and discontinued operations was - $ 13.0 million or - $ 0.19 per diluted share for the fourth quarter of 2014 as compared to - $ 33.1 million or - $ 0.50 per diluted share for the fourth quarter of 2013. this favorability was a result of the completion of teach-out operations at campuses that have now closed and continued focus on exiting and reducing real estate lease obligations once a teach-out is complete . such lease obligations are a large component of our cost structure and cash usage . in addition to real estate leases associated with our ongoing operations , campuses that have completed the teach-out process more often than not have ongoing lease obligations that continue for some time . during the past twelve months we have entered into sublease agreements and early lease termination agreements which will result in cash savings of $ 39 million , net of cash payments over the remaining life of the leases . see contractual obligations under liquidity , financial position and capital resources below for further information regarding our remaining lease obligations . we intend to continue to be proactive in our efforts to lower our real estate exposure , including termination agreements , sublease agreements and space consolidation but we anticipate that the level and volume of transactions in 2015 may be less than those negotiated in 2014. we anticipate adjusted ebitda for the transitional group and discontinued operations to continue to decrease through 2015 and we expect adjusted ebitda to be approximately negative $ 62.0 for the full year 2015 based on the current composition of our transitional group and discontinued operations . within the transitional group , we closed twenty campuses during 2014 , as well as divested one campus in the second quarter of 2014 , bringing the remaining number of transitional campuses to 12 , four of which are expected to close in 2015. as we continue to complete the teach-outs within the transitional group , we expect the operating loss and cash consumption associated with these campuses to further decline . we will continue to analyze the student outcomes and financial performance of each of our programs and campuses to make the necessary decisions that are in the best interest of our students , as well as for long-term success and value creation for the organization . as an organization , our focus continues to be to enroll , educate and place our students into a better position to succeed professionally and to close the gap between students and employers . in doing so , we seek to create a winning formula for our students , for employers that employ our graduates and for our shareholders . we have successfully executed against our strategic goals for 2014 and we remain committed to execute on our goals in 2015. we continue to believe that we are well-positioned to complete our turnaround strategy and generate long-term profitability . 2015 outlook an update on our expectations for performance and general business outlook for full year 2015 include : modest growth in total student enrollments for the year within our university group , with online being the primary contributor positive adjusted ebitda for full year 2015 from ongoing operations , which excludes the transitional group and campuses held for sale reduced operating expenses of $ 40 million based on actions that were taken in 2014 65 continued progress on reductions of real estate obligations end fiscal year 2015 with over $ 190 million in total cash , cash equivalents ,
| the rate of decline in revenue as compared to the prior year has been steadily decreasing as we continued the execution of our turnaround strategy . revenue for aiu and ctu declined while total student enrollments remained relatively flat as of december 31 , 2014 , in part due to the time lag of revenue earnings for new students as they progress through their program . additionally , application volume within career colleges was impacted earlier in the year by market disruption related to the brand consolidation under our sanford-brown name , which resulted in a decrease in new student enrollments during 2014 as compared to the prior year , contributing to the decrease in revenue . lastly , revenue was negatively impacted by approximately $ 9.4 million due to an adjustment related to revenue recognition for students who withdraw from one of our institutions prior to completion of their program . this decline in revenue was partially offset with a $ 7.5 million decrease in bad debt expense for the amount we previously had deemed uncollectable related to the revenue earnings for these students . this cumulative adjustment was recorded during the fourth quarter of 2014. educational services and facilities expense ( dollars in thousands ) replace_table_token_15_th the decrease in educational services and facilities expense as compared to the prior year was driven by lower academic costs , most notably faculty and bookstore costs and lower occupancy costs . the decrease in faculty and bookstore costs was driven primarily by lower total student enrollments across most of our institutions as well as increased operational efficiencies . the decrease in occupancy expenses was a result of our continued focus on optimizing real estate space across all of our locations . efforts to consolidate space within closely-situated institutions as well as our corporate offices resulted in a decrease in overall fixed costs , which were partially offset in the current year with upfront expenses recorded at the onset of termination agreements . general and administrative expense ( dollars in thousands ) replace_table_token_16_th general
|
on november 3 , 2016 , subsequent to the end of fiscal 2016 , fgl , anbang , ab infinity , and merger sub amended the fgl merger agreement to extend the outside termination date for the completion of the fgl merger from november 7 , 2016 to february 8 , 2017. during fiscal 2016 , front street was provided information on a recapture notice of a reinsurance agreement between third parties and as a result , front street 's funds withheld receivables and insurance reserves decreased by approximately $ 83.0 million during fiscal 2016 . during the first quarter of fiscal 2016 , compass production partners ( “ compass ” ) completed the sale of its holly , waskom , and danville assets ( the “ compass asset sale ” ) for a total cash consideration of $ 153.4 million . proceeds were primarily used to reduce compass ' borrowings under its credit facility ( the “ compass credit agreement ” ) . during the fourth quarter of fiscal 2016 , hgi energy completed the sale of its equity interests in compass to a third party for a cash purchase price of $ 145.0 million ( the “ compass sale ” ) . the proceeds received by hgi energy from the compass sale were reduced by the outstanding balance of compass ' existing credit facility of $ 125.2 million . following the completion of the compass sale , the company no longer owns , directly or indirectly , any oil and gas properties and accordingly , the results of compass were presented as discontinued operations in the accompanying consolidated statements of operations . the results hgi energy are presented within the corporate and other segment . all historical results have been recast to reflect this change . during fiscal 2016 , salus and front street received a partial recovery on the loan to a significant salus borrower , radioshack , of $ 45.4 million , excluding $ 22.7 million repayment on fgl 's participation on the loan . as a result of the aforementioned partial recovery , we also reversed $ 18.0 million of previously recorded allowance for bad debt , excluding $ 9.0 million reversal of realized losses by fgl included in “ ( loss ) income from discontinued operations , net of tax ” in the accompanying consolidated statements of operations . during fiscal 2016 , salus determined to focus its efforts primarily on monitoring , servicing and collecting its existing loans and winding down its business . salus may , however , pursue other opportunities that it may consider strategically advantageous or complimentary to its efforts to collect its existing loans . during the third quarter of fiscal 2016 , coramerica amended its investment management agreement with a counterparty that resulted in a decrease to coramerica 's projected future revenues , which triggered a goodwill impairment test . the test resulted in an impairment of $ 10.7 million to goodwill . during the fourth quarter of fiscal 2016 , we sold our 51.0 % interest in coramerica for $ 0.5 million . during fiscal 2016 , we also wound-down the operations of energy & infrastructure capital , llc ( “ eic ” ) , our other asset manager . the operations of salus , coramerica and eic were historically presented in a separate reportable segment . as a result of the diminished operations in that segment , starting in fiscal 2016 , we are presenting the operations of salus , coramerica and eic within the corporate and other segment . all historical results have been recast to reflect this change . key financial highlights basic and diluted net loss attributable to common and participating preferred stockholders decreased $ 358.0 million to $ 198.8 million , or $ 1.00 and $ 0.99 per basic and diluted common share attributable to controlling interest , respectively , in fiscal 2016 , compared to basic and diluted net loss attributable to common and participating preferred stockholders of $ 556.8 million , or $ 2.81 per basic and diluted common share attributable to controlling interest in fiscal 2015 . we ended the year with corporate cash and investments at hrg of approximately $ 172.0 million . our consumer products segment 's operating income for fiscal 2016 increased $ 182.2 million , or 38.4 % , to $ 656.3 million from $ 474.1 million for fiscal 2015 . our consumer products segment 's adjusted earnings before interest , taxes , depreciation 81 and amortization ( “ adjusted ebitda - consumer products ” ) increased by $ 152.2 million , or 19.0 % , to $ 952.8 million versus fiscal 2015 driven by the performance of armored autogroup parent inc. ( “ aag ” ) , which was acquired during fiscal 2015 , coupled with higher organic sales and margins in all other product lines . adjusted ebitda margin represented 18.9 % of sales as compared to 17.1 % in fiscal 2015 . our insurance segment 's operating loss for fiscal 2016 was $ 12.4 million compared to $ 68.7 million for fiscal 2015 . the decrease in operating loss was primarily due to credit impairment losses on intercompany investments of $ 11.3 million and $ 73.4 million in fiscal 2016 and fiscal 2015 , respectively . during fiscal 2016 , we received cash dividends of approximately $ 63.5 million from our subsidiaries , including $ 50.9 million , $ 12.2 million and $ 0.4 million from spectrum brands , fgl and coramerica , respectively , which does not give effect to the net impact from interest payments made by hrg with respect to the intercompany notes issued by hgi energy . story_separator_special_tag 82 results of operations fiscal 2016 compared to fiscal 2015 , and fiscal 2015 compared to fiscal 2014 presented below is a table that summarizes our results of operations and compares the amount of the change between the fiscal periods ( in millions ) : replace_table_token_11_th ( a ) the intersegment eliminations primarily represent the reversal and reclassification of impairments recorded in our insurance segment on affiliated investments , as well as usual intercompany transactions for the period . for fiscal 2015 , the insurance segment eliminations include the reversal of intercompany asset impairments of $ 57.1 million . ( b ) for its stand-alone reporting purposes , front street elected , since inception , to apply the fair value option to account for its funds withheld receivables , non-funds withheld assets and future policyholder benefits reserves related to its assumed reinsurance . for our consolidated reporting , the results from front street 's assumed reinsurance business with fgl is reported on fgl 's historical basis . accordingly , in order to align our consolidated reporting , we have recorded a net intersegment adjustment to operating income ( loss ) of $ 59.7 million , $ ( 115.4 ) million and $ 45.1 million for fiscal 2016 , 2015 and 2014 , respectively . upon completion of the fgl merger , our consolidated results will reflect all reinsurance business on the fair value option . revenues . revenues for fiscal 2016 increased $ 505.7 million , or 10.7 % , to $ 5,215.4 million from $ 4,709.7 million for fiscal 2015 . the increase was primarily due to growth from acquisitions and organic net sales from our consumer products segment , coupled with an increase in fair value of the underlying fixed maturity debt securities included in the funds withheld receivables in the insurance segment due to lower interest rates and tighter credit spreads . these increases were partially offset by negative impact of foreign exchange in the consumer products segment ; lower sales revenue associated with foh that was deconsolidated in fiscal 2015 ; and lower investment income as a result of the decrease in the asset-based loan portfolio of salus . revenues for fiscal 2015 increased $ 75.0 million , or 1.6 % , to $ 4,709.7 million from $ 4,634.7 million for fiscal 2014 . the increase was primarily due to sales growth driven by acquisitions in the consumer products segment . this was offset by the 83 negative impact of foreign exchange in the consumer products segment and a decrease in the fair value of the underlying fixed maturity debt securities included in the funds withheld receivables during fiscal 2015 , coupled with realized losses related to credit impairment losses related to intercompany investments and asset-based loan participations that were recorded in fiscal 2015. consolidated operating income . consolidated operating income for fiscal 2016 increased $ 582.2 million , or 1,271.2 % , to $ 628.0 million from an operating income of $ 45.8 million for fiscal 2015 . the $ 582.2 million increase in operating income was mainly due to increased profitability in our consumer products segment , lower impairments in our insurance and corporate and other segments , lower selling , acquisition , operating and general expenses in the corporate and other segment and an increase in the fair value of the underlying fixed maturity debt securities included in the funds withheld receivables during fiscal 2016 due to market conditions with decreasing risk-free rates and tightening credit spreads resulting in generally higher valuations of fixed maturity debt securities . operating income for fiscal 2015 decreased $ 381.6 million , or 89.3 % , to $ 45.8 million from $ 427.4 million for fiscal 2014 . the decrease was primarily due to impairments in our insurance and corporate and other segments ; an increase in the fixed index annuities ( “ fia ” ) present value of future credits in our insurance segment ; increased costs and lower revenues in our corporate and other segment ; and the severance payments associated with the departure of philip falcone , the company 's former chief executive officer , in december 2014 ( the “ 2014 ceo departure ” ) . interest expense . interest expense decreased $ 4.5 million to $ 397.1 million for fiscal 2016 from $ 401.6 million for fiscal 2015 . the decrease was primarily due to $ 58.8 million of one-time costs incurred in fiscal 2015 related to the financing of spectrum brands ' acquisition of aag ( the “ aag acquisition ” ) , the refinancing of certain of spectrum brands ' term loans ( the “ term loans refinancing ” ) and the refinancing of spectrum brands ' revolver facility ( the “ revolver facility refinancing ” ) and redemption of sbi 's 6.75 % senior unsecured notes ( the “ 6.75 % notes ” ) . expenses related to the financing of the aag acquisition included $ 14.1 million of costs related to bridge financing commitments and $ 4.5 million of costs related to interest on the acquired aag senior notes from the date of the acquisition through the time of payoff . expenses related to the term loan refinancing , revolver facility refinancing and redemption of the 6.75 % notes included : ( i ) $ 16.9 million of cash costs related to the call premium and pre-paid interest on the 6.75 % notes ; ( ii ) $ 10.4 million of cash costs related to fees associated with the refinancing of the term loan ; ( iii ) $ 8.8 million of non-cash costs for the write-off of unamortized deferred financing fees and original issue discount ; and ( iv ) $ 4.1 million of non-cash costs for the write off of unamortized deferred financing fees on the 6.75 % notes .
| 97 the $ 170.1 million increase in cash provided by operating activities in the consumer products segment was primarily due to the ( i ) incremental cash generated from the segment operations of $ 166.7 million due to growth in net sales , acquisitions and cost management initiatives , including cash contributed through working capital primarily from decreases of receivables and inventory through working capital management initiatives ; ( ii ) a decrease in cash paid for interest of $ 12.0 million , excluding a non-recurring tender premium of $ 15.6 million for the redemption of 6.375 % note , from a decrease in annualized interest costs ; ( iii ) a decrease in cash paid for income taxes , which was partially offset by ( a ) an increase in cash paid towards restructuring and acquisition and integration related activities of $ 7.1 million towards integration of previously acquired businesses ; and ( b ) increased payments towards corporate expenditures of $ 3.9 million for increased compensation costs and investment in shared services . the $ 38.9 million decrease in cash used by the insurance segment was primarily due to lower payments made for net reinsurance settlements related to the funds withheld accounts in fiscal 2016 as compared to fiscal 2015 . the reduction in net payments for net reinsurance settlements to ceding companies in fiscal 2016 was as a result of lower impairments within the associated funds withheld accounts . cash provided by operating activities totaled $ 300.3 million for fiscal 2015 compared to $ 476.9 million for fiscal 2014 . the $ 176.6 million decline was the result of ( i ) $ 140.5 million increase in cash used in our insurance segment ( consisting primarily off a $ 73.3 million decrease in cash provided for net withdrawals from contractholder accounts related to the cession between front street and fgl , which is reflected in operating cash for the insurance segment ; and an $ 89.7 million increase in cash used for reinsurance settlements with third parties and discontinued operations , partially offset by a $ 22.5 million decrease in income taxes paid ) ; ( ii ) a $ 30.0 million decrease in dividends received from businesses classified as discontinued operations ; and ( iii ) a $ 15.4 million increase in cash used by the corporate and other segment ; offset by a $ 12.2 million increase in cash provided by the consumer products segment . investing activities cash provided by investing activities was $ 145.9 million for fiscal 2016 and was primarily related to ( i ) net repayment of asset-based loans of $ 177.2 million , as salus continues to wind down its loan portfolio ;
|
as a matter of policy , we do not make any loans if the loan-to value ratio exceeds 70 % . in the case of construction loans , the loan-to-value ratio is based on the post-construction value of the property . under the terms of the webster facility ( described below ) , mortgage loans exceeding $ 250,000 require a third-party to complete an appraisal of the collateral . failure to obtain such an appraisal would render the loan ineligible for inclusion in the borrowing base . in the case of smaller loans , we rely on readily available market data , including tax assessment rolls , recent sales transactions and brokers to evaluate the strength of the collateral . finally , we have adopted a policy that limits the maximum amount of any loan we fund to a single borrower or a group of affiliated borrowers to 10 % of the aggregate amount of our loan portfolio after taking into account the loan under consideration . 34 our revenue consists primarily of interest earned on our loan portfolio and our net income is the spread between the interest we earn and our cost of funds . our capital structure is more heavily weighted to equity rather than debt ( approximately 66 % vs. 34 % of our total capitalization at december 31 , 2018 ) . at december 31 , 2018 , the interest rate on the webster facility was 6.50 % per annum and the annual yield on our loan portfolio was 12.85 % per annum . the yield has remained steady over the past few years as older loans come due and are either repaid or refinanced at similar rates . the yield reflected above does not include other amounts collected from borrowers such as origination fees , default rates of interest and late payment fees . we expect our borrowing costs to continue to increase in 2019 as interest rates continue to increase . to date , we have not raised rates on our loans to match the recent increases in our borrowing rate . after considering the benefits and risks of increasing our rates , considering our relatively low level of debt and cost of funds , we believe the better strategy is to focus on building market share rather than short-term profits and cash flow , although this strategy could adversely impact our profits and cash flow in the short-term . in addition , we seek to mitigate some of the risk associated with rising rates by limiting the term of new loans to one year , whenever possible . if , at the end of the term , the loan is not in default and meets our other underwriting criteria , we will consider an extension or renewal of the loan at our then prevailing interest rate . however , if interest rates continue to increase , we may find it necessary to change our strategy and try to increase the rates on our mortgage loans as well . if we are successful , this may undermine our strategy to increase market share . if we are not successful , the “ spread ” between our borrowing costs and the yield on our portfolio will be squeezed and would adversely impact our net income . we can not assure you that we will be able to increase our rates at any time in the future and we can not assure you that we can continue to increase our market share . as a real estate finance company , we deal with a variety of default situations , including breaches of covenants , such as the obligation of the borrower to maintain adequate liability insurance on the mortgaged property , to pay the taxes on the property and to make timely payments to us . as such , we may not be aware that a default occurred . as a result , we are unable to quantify the number of loans that may have , at one time or another , been in default . since december 2010 , when scp commenced operations , through december 31 , 2018 , we have made an aggregate of 885 mortgage loans having an aggregate original principal amount of approximately $ 165.1 million . at december 31 , 2018 , of the 403 mortgage loans in our portfolio , 13 were designated by us as “ non-performing , ” typically because the borrower is more than 90 days in arrears on its interest payment obligations or because the borrower has failed to make timely payments of real estate taxes or insurance premiums . the aggregate outstanding principal balance of these non-performing loans and the accrued but unpaid interest as of december 31 , 2018 was approximately $ 5.1 million , representing approximately 6.5 % of our aggregate mortgage loan portfolio . the non-performing loans have all been referred to counsel to commence foreclosure proceedings or to negotiate settlement terms . in the case of each non-performing loan , we have determined the value of the collateral exceeds the outstanding balance on the loan . the key factors contributing to our growth to date have been our ability to access working capital and the strong demand for our products and services , which was driven principally by a robust connecticut real estate market . as detailed below , in 2017 we raised $ 30 million in equity capital in two public offerings . in addition , during 2017 and 2018 , we refinanced our working capital credit facility on three occasions increasing the size of the facility from $ 5 million to $ 35 million . these factors coincided with the overall growth in the u.s. economy . nevertheless , in the fourth quarter of 2018 , we had to curtail our lending operations due to a shortage of working capital . this had an adverse impact on our revenues and net income for the fourth quarter . we addressed this issue in the first quarter of 2019 by selling common shares in the atm offering . story_separator_special_tag in addition , we are also in the early stages of exploring alternative financing arrangements that would provide us with additional working capital . other than with respect to the atm offering , we have not entered into any definitive agreements for a financing transaction and we can not assure you that that we will be able to consummate a financing transaction in the foreseeable future . in addition , beginning in the second half of 2018 , we started noticing subtle changes in the business environment . for example , traditional lending institutions , such as banks , appeared to be tightening their credit requirements . normally , that would be a positive development for our business . however , at the same time , we noticed that property values in connecticut were either stagnant or declining and the length of time between initial listing and sale was expanding . it is unclear whether these developments are merely temporary phenomena or represent long-term trends . in the meantime , the demand for our products and services continues to be robust . we believe that our best strategy to deal with adverse changes in the marketplace is to adhere to our basic underwriting guidelines . 35 financing strategy overview to continue to grow our business , we must increase the size of our loan portfolio , which requires that we raise additional capital either by selling shares of our capital stock or by incurring additional indebtedness . we do not have a policy limiting the amount of indebtedness that we may incur . thus , our operating income in the future will depend on how much debt we incur and the spread between our cost of funds and the yield on our loan portfolio . rising interest rates could have an adverse impact on our business if we can not increase the rates on our loans to offset the increase in our cost of funds and to satisfy investor demand for yield . in addition , rapidly rising interest rates could have an unsettling effect on real estate values , which could compromise some of our collateral . we do not have any formal policy limiting the amount of indebtedness we may incur . however , under the terms of the webster facility , unless otherwise explicitly permitted by the credit and security agreement , we may not incur any additional indebtedness without wbcc 's consent . the most significant exception to this covenant is one that permits us to separately finance the mortgage loans in our portfolio that secure “ commercial ” properties . depending on various factors we may , in the future , decide to take on additional debt to expand our mortgage loan origination activities to increase the potential returns to our shareholders . although we have no pre-set guidelines in terms of leverage ratio , the amount of leverage we will deploy will depend on our assessment of a variety of factors , which may include the liquidity of the real estate market in which most of our collateral is located , employment rates , general economic conditions , the cost of funds relative to the yield curve , the potential for losses and extension risk in our portfolio , the gap between the duration of our assets and liabilities , our opinion regarding the creditworthiness of our borrowers , the value of the collateral underlying our portfolio , and our outlook for interest rates and property values . at december 31 , 2018 , debt proceeds represented approximately 34.3 % of our total capital . however , to grow the business and satisfy the requirement to pay out 90 % of net profits , we expect to increase our level of debt over time to approximately 50 % of our total capital . we intend to use leverage for the sole purpose of financing our portfolio and not for speculating on changes in interest rates . we consummated our ipo in february 2017 , offering and selling 2,600,000 common shares at a price of $ 5.00 per share . the net proceeds , after payment of underwriting discounts and commissions and transaction fees were approximately $ 11.1 million , which we initially used to pay down the entire outstanding balance on the bankwell credit facility . in november 2017 , we completed a second public offering in which we sold an aggregate of 4,312,500 common shares at a public offering price of $ 4.00 per share . the gross proceeds from this offering were $ 17.25 million and the net proceeds were approximately $ 15.3 million , which were also used to reduce the outstanding balance on the bankwell credit facility . the bankwell credit facility was a $ 20 million revolving credit facility that we used to fund the loans we originated . the bankwell credit facility was secured by a first priority lien on all our assets , including our mortgage loan portfolio . it was also jointly and severally guaranteed by jjv , jeffrey c. villano and john l. villano , cpa , our co-chief executive officers . the liability of each guarantor was capped at $ 1 million . on may 11 , 2018 ( the “ closing date ” ) , we entered into a credit and security agreement with webster business credit corporation ( “ wbcc ” ) , bankwell bank and berkshire bank ( collectively , the “ lenders ” ) under which the lenders agreed to provide us with a $ 35 million revolving credit facility ( the “ webster facility ” ) to replace the bankwell credit facility , which was repaid in full and terminated . the webster facility is secured by a first priority lien on substantially all our assets , including our mortgage loan portfolio . amounts outstanding under the webster facility bear interest at a floating rate equal to the 30-day libor rate plus 4.00 % per annum and will be due and payable on may 11 , 2022. at december 31 , 2018 , the outstanding balance on the webster facility was accruing interest at the rate of 6.50
| interest expense and amortization of deferred financing costs in 2018 was approximately $ 1.7 million compared to approximately $ 664,000 in 2017 , an increase of approximately $ 1.0 million , or 151 % , reflecting the increase in the amount outstanding under the webster facility as well as increased borrowing costs . similarly , as a result of our various financing activities in 2018 , we experienced significant increases in professional fees , approximately $ 417,000 in 2018 compared to approximately $ 300,000 in 2017. compensation costs increased from approximately $ 698,000 in 2017 to approximately $ 1.25 million in 2018 to support our lending platform , and finally general and administrative expenses increased from approximately $ 222,000 in 2017 to approximately $ 437,000 in 2018 . 39 net income net income for 2018 was approximately $ 7.8 million compared to approximately $ 4.9 million for 2017 due to the increase in our lending activities , partially offset by the increase in operating costs and expenses . liquidity and capital resources total assets at december 31 , 2018 were approximately $ 86.0 million compared to approximately $ 67.5 million at december 31 , 2017 , an increase of approximately $ 18.5 million , or 27.4 % . the increase was due primarily to the growth in our mortgage loan portfolio , approximately $ 78.9 million compared to approximately $ 63.3 million , an increase in interest and fees receivable , approximately $ 1.4 million compared to approximately $ 645,000 , an increase in property and equipment , approximately $ 1.2 million compared to approximately $ 502,000 , an increase in real estate owned , approximately $ 2.9 million compared to approximately $ 1.2 million and an increase in deferred financing costs , approximately $ 554,000 compared to $ 96,000. the increases in interest and fees receivable and due from borrowers is due , in part , to the overall increase in our loan portfolio , the accrual of interest and fees on loans in foreclosure where we believe the interest is collectible and the collateral is
|
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.