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in april 2020 , the company received distributions of the cares act prf of approximately $ 17 million targeted to offset lost revenue and expenditures incurred in connection with the covid-19 pandemic . the prf payments are subject to certain restrictions and are subject to recoupment if not used for designated purposes . as a condition to receiving distributions , providers must agree to certain terms and conditions , including , among other things , that the funds are being used for lost revenues and unreimbursed covid-19 related expenses as defined by the u.s. department of health and human services ( hhs ) . all recipients of prf payments are required to comply with the reporting requirements described in the terms and conditions and as determined by hhs . the company recognizes grant payments as income when there is reasonable assurance that it has complied with the conditions associated with the grant . grant income recognized by the company is presented in grant income in the accompanying consolidated statements of operations . during the year ended december 31 , 2020 , the company recognized grant income of $ 14.3 million related to the prf payments received . the company has deferred $ 2.7 million of the prf payments , which is included in other current liabilities in the accompanying consolidated balance sheets at december 31 , 2020. as previously noted , hhs guidance related to prf grant funds is still evolving and subject to change . during september and october 2020 , hhs issued updated reporting requirements significantly changing the previous guidance regarding utilization of the funds granted from the prf under the cares act , and in january 2021 hhs issued further guidance updating the reporting requirements relating to prf grant funds . as a result of the updated guidance from hhs , the company could be required to reverse the recognition of the grant income recorded and return a portion of the funds recognized , which could be material to the company . the company is continuing to monitor the reporting requirements as they evolve . hhs has indicated that the cares act prf funds are subject to ongoing reporting and changes to the terms and conditions . to the extent that reporting requirements and terms and conditions are modified in the future , it may affect the company 's ability to comply and may require the return of funds . furthermore , hhs has indicated that it will be closely monitoring and , along with the office of inspector general ( united states ) ( oig ) , auditing providers to ensure that recipients comply with the terms and conditions of relief programs and to prevent fraud and abuse . all providers will be subject to civil and criminal penalties for any deliberate omissions , misrepresentations or falsifications of any information given to hhs . medicare accelerated payment program . in certain circumstances , when a healthcare provider is experiencing financial difficulty due to delays in receiving payment for the medicare services it provided , it may be eligible for an 79 adapthealth corp. and subsidiaries notes to consolidated financial statements december 31 , 2020 and 2019 accelerated or advance payment pursuant to the medicare accelerated payment program . the cares act revised the medicare accelerated payment program in an attempt to disburse payments to healthcare providers more quickly . in april 2020 , the company received recoupable advance payments of approximately $ 46 million made available by cms under the cares act . the recoupment of such amount by cms will begin in april 2021 and will be applied to services provided and revenue recognized during the period in which the recoupment occurs . the total of the recoupable advance payments is included in other current liabilities in the accompanying consolidated balance sheets as of december 31 , 2020. deferral of employment tax payments . as permitted under the cares act , the company has elected to defer certain portions of employer-paid fica taxes otherwise payable from march 27 , 2020 to january 1 , 2021 , which will be paid in two equal installments on december 31 , 2021 and december 31 , 2022. during the year ended december 31 , 2020 , the company deferred a total of $ 8.6 million pursuant to this provision , of which $ 4.3 million is included in other current liabilities and $ 4.3 million is included in other long-term liabilities in the accompanying consolidated balance sheets as of december 31 , 2020. the full extent of the impact of the covid-19 pandemic on the company 's business , results of operations , and financial condition is highly uncertain and will depend on future developments and numerous evolving factors that it may not be able to accurately predict , and could be material to the company 's consolidated financial statements in future reporting periods . ( g ) fair value accounting financial accounting standards board ( fasb ) accounting standards codification ( asc ) topic 820 , fair value measurements and disclosures ( asc 820 ) , creates a single definition of fair value , establishes a framework for measuring fair value in u.s. gaap and expands disclosures about fair value measurements . asc 820 emphasizes that fair value is a market-based measurement , not an entity specific measurement , and states that a fair value measurement is to estimate the price at which an orderly transaction to sell an asset or to transfer the liability would take place between market participants at the measurement date under current market conditions . assets and liabilities adjusted to fair value in the balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair value . story_separator_special_tag other income , net for the year ended december 31 , 2019 consisted of $ 0.2 million of net reductions in the fair value of contingent consideration liabilities related to acquisitions and $ 0.1 million of equity income related to an equity method investment . income tax ( benefit ) expense . income tax benefit for the year ended december 31 , 2020 was $ 12.0 million compared to income tax expense of $ 0.7 million for the year ended december 31 , 2019. the change in income tax benefit/expense was primarily related to decreased pre-tax income associated with the tax paying entities . ebitda , adjusted ebitda and adjusted ebitda less patient equipment capex adapthealth uses ebitda , adjusted ebitda and adjusted ebitda less patient equipment capex , which are financial measures that are not prepared in accordance with generally accepted accounting principles in the united states , or u.s. gaap , to analyze its financial results and believes that they are useful to investors , as a supplement to u.s. gaap measures . in addition , adapthealth 's ability to incur additional indebtedness and make investments under its existing credit agreement is governed , in part , by its ability to satisfy tests based on a variation of adjusted ebitda less patient equipment capex . adapthealth defines ebitda as net income ( loss ) attributable to adapthealth corp. , plus net income ( loss ) attributable to noncontrolling interests , interest expense ( income ) , income tax expense ( benefit ) , and depreciation and amortization . adapthealth defines adjusted ebitda as ebitda ( as defined above ) , plus loss on extinguishment of debt , equity‑based compensation expense , transaction costs , severance , change in fair value of contingent consideration common shares liability , and non-recurring items of expense ( income ) . adapthealth defines adjusted ebitda less patient equipment capex as adjusted ebitda ( as defined above ) less patient equipment acquired during the period without regard to whether the equipment was purchased or financed through lease transactions . 54 adapthealth believes adjusted ebitda less patient equipment capex is useful to investors in evaluating adapthealth 's financial performance . adapthealth 's business requires significant investment in equipment purchases to maintain its patient equipment inventory . some equipment title transfers to patients ' ownership after a prescribed number of fixed monthly payments . equipment that does not transfer wears out or oftentimes is not recovered after a patient 's use of the equipment terminates . adapthealth uses this metric as the profitability measure in its incentive compensation plans that have a profitability component and to evaluate acquisition opportunities , where it is most often used for purposes of contingent consideration arrangements . in addition , adapthealth 's debt agreements contain covenants that use a variation of adjusted ebitda less patient equipment capex for purposes of determining debt covenant compliance . for purposes of this metric , patient equipment capital expenditure is measured as the value of the patient equipment received during the accounting period without regard to whether the equipment is purchased or financed through lease transactions . ebitda , adjusted ebitda and adjusted ebitda less patient equipment capex should not be considered as measures of financial performance under u.s. gaap , and the items excluded from ebitda , adjusted ebitda and adjusted ebitda less patient equipment capex are significant components in understanding and assessing financial performance . accordingly , these key business metrics have limitations as an analytical tool . they should not be considered as an alternative to net income or any other performance measures derived in accordance with u.s. gaap or as an alternative to cash flows from operating activities as a measure of adapthealth 's liquidity . the following unaudited table presents the reconciliation of net income ( loss ) attributable to adapthealth , to ebitda , adjusted ebitda and adjusted ebitda less patient equipment capex for the years ended december 31 , 2020 and 2019 : replace_table_token_7_th ( a ) represents write offs of deferred financing costs related to refinancing of debt . ( b ) represents equity-based compensation expense for awards granted to employees and non-employee directors . the higher expense in 2020 is due to a full year of expense for awards granted in late 2019 , and overall increased equity-compensation grant activity in 2020. the 2019 period includes expense resulting from accelerated vesting and modification of certain awards in that period . ( c ) represents transaction costs related to acquisitions . the 2019 period also includes costs associated with the 2019 recapitalization and the business combination . 55 ( d ) represents severance costs related to acquisition integration and internal adapthealth restructuring and workforce reduction activities . ( e ) represents a non-cash charge for the change in the estimated fair value of contingent consideration common shares issuable as part of the business combination . refer to note 11 , stockholders ' equity – contingent consideration common shares , included in the accompanying notes to the consolidated financial statements for the year ended december 31 , 2020 for additional discussion of such non-cash charge . ( f ) the 2020 period includes $ 4.2 million of net reductions in the fair value of contingent consideration liabilities related to acquisitions , a $ 0.6 million gain in connection with the sale of a cost method investment , offset by a $ 1.5 million expense associated with the pcs transition services agreement and $ 0.8 million of other non-recurring expenses . ( g ) represents the value of patient equipment obtained during the respective period without regard to whether the equipment is purchased or financed through lease transactions . liquidity and capital resources adapthealth 's principal sources of liquidity are its operating cash flows , borrowings under its credit agreements and other debt arrangements , and proceeds from equity issuances . adapthealth has used these funds to meet its capital requirements , which primarily consist
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net cash provided by financing activities for the year ended december 31 , 2019 was primarily related to the 2019 recapitalization and the business combination , and consisted of $ 360.5 million of borrowings from long-term debt and lines of credit , $ 20.0 million of proceeds from the sale of members ' interests , net proceeds of $ 148.9 million from the transactions completed in connection with the business combination , and proceeds of $ 100.0 million from a preferred debt issuance , offset by total repayments of $ 274.9 million on long-term debt and capital lease obligations , payments of $ 9.0 million for financing costs , payments of $ 0.8 million for equity issuance costs , payment of $ 3.7 million for the redemption of members ' interests , payment of $ 13.0 million for earnout liabilities in connection with the verus acquisition and the hmei acquisition , distributions to members of $ 250.0 million , distributions to noncontrolling interests of $ 1.3 million , and net payments of $ 0.6 million relating to tax withholdings associated with equity-based compensation activity . critical accounting policies and significant estimates the discussion and analysis of the company 's financial condition and results of operations is based upon the company 's consolidated financial statements , which have been prepared in accordance with u.s. gaap . the preparation of the company 's consolidated financial statements requires its management to make estimates and judgments that affect the reported amounts of assets , liabilities , revenue and expenses and related disclosures of contingent assets and liabilities . the company 's management bases its estimates , assumptions and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . different assumptions and judgments would change the estimates used in the preparation of the company 's consolidated financial statements which , in turn , could change the results from those reported . in addition , actual results may differ from these estimates and such differences could be material to the company 's financial position and results of operations . critical accounting policies and significant estimates are those that the company 's management considers the most important to the portrayal of the company 's financial condition and results of operations because they require management 's most difficult , subjective or complex judgments , often as a result of the
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Liquidity
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( dollars in thousands ) replace_table_token_12_th cash used in investing activities increased from $ 30,767,000 in 2010 to $ 51,367,000 in 2011 , a net increase of $ 20,600,000. this increase was primarily attributable to a net increase in the purchases of marketable securities and an increase in capital expenditures . in 2011 , we purchased a net $ 47,124,000 of marketable securities . such purchases totaled $ 3,139,000 in 2010. such purchases were made to increase the expected returns on our cash holdings . the increase in capital expenditures is largely the result of us undertaking certain capital projects on behalf of certain customers , a large portion of which was reimbursed by such customers and through federal and local government grants . these reimbursements are summarized in the table above . these increases in cash used in investing activities were partially offset by a reduction in our restricted cash balances of $ 21,086,000 in 2011. this reduction resulted from our short sale position in u.s. treasuries being closed in 2011. when this happened , the cash which was previously held in a restricted margin account was returned to us . financing activities cash used in financing activities increased from $ 374,000 in 2011 to $ 63,283,000 in 2012. this increase was primarily due to an increase in dividends paid in 2012 compared to 2011 and a decrease in proceeds from the issuance of stock in 2012 compared to 2011. in 2011 we paid $ 16,254,000 in dividends on our common stock . dividend payments in 2012 included a special dividend payment of $ 1.20 per common share and totaled $ 66,538,000. additionally , in 2011 we generated $ 15,872,000 in net proceeds from the issuance of common shares as part of our at-the-market offering . in 2012 , such net proceeds totaled $ 1,074,000. cash provided by ( used in ) financing activities decreased from $ 38,473,000 in 2010 to $ ( 374,000 ) in 2011. this decrease was primarily attributable to reduced proceeds from the issuance of our common stock in 2011 compared to 2010 , which was partially offset by a reduction in dividend payments in 2011. in 2010 , $ 70,736,000 in net proceeds were received from the issuance of our common stock . such proceeds were primarily the result of the exercise of warrants to purchase our common shares . all such warrants that were not exercised expired in 2010. as a result , no warrants were exercised in 2011. we did , however , generate $ 15,872,000 in 2011 in net proceeds from the issuance of common shares as part of our at-the-market offering under which we issued 1,313,985 shares of our common stock and as a result of the exercise of stock options . cash dividends decreased from $ 31,053,000 in 2010 to $ 16,254,000 in 2011 , partially offsetting the 2011 reduction in proceeds from the issuance of shares of our common stock . capital expenditure commitments we had no material capital projects as of december 31 , 2012 . 34 historically , we finance capital requirements for our business with cash flows from operations and have not had the need to incur bank indebtedness to finance any of our operations during the periods discussed herein . credit facility we entered into a $ 50 million credit agreement with a commercial bank in march 2007. the loan is a revolving facility the proceeds of which may be used for our working capital , capital expenditures , and general corporate purposes . the facility terminates on june 30 , 2013. advances are made pursuant to a borrowing base . advances are secured by a perfected first priority security interest in our accounts receivable and inventory . the interest rate floats at certain margins over libor or base rate based upon the leverage ratio from time to time . there is an unused commitment fee . the ratio of total funded debt to ebitda may not be less than 3:1. we had no borrowings under this credit facility at december 31 , 2012 , 2011 , or 2010. we intend to fund future capital requirements for our businesses from cash flow generated by us as well as from existing cash , cash investments , and , if the need should arise , borrowings under our credit facility . we do not believe there will be a need to issue any securities to fund such capital requirements . department of energy grant we entered into a contract with a customer to design , construct , and operate a commercial-scale plant to produce intermediate anode powder as a component of high-performance graphite anode materials for lithium-ion batteries . in connection with this contract , we applied for a financial assistance award under the electric drive vehicle battery and component manufacturing initiative administered by the department of energy national energy technology laboratory on behalf of the office of energy efficiency and renewable energy . an award was granted to us in the amount of $ 12,600,000 , which we accepted on july 27 , 2010. the funds were to be used to modify existing idle assets and to acquire and construct new assets to be used for the production of specialized materials for lithium-ion batteries for electric cars and other applications . we receive grant monies on a cost share basis as we incur construction-related expenditures . the amounts received under this arrangement are recorded as deferred revenue and are amortized into earnings over the anticipated life of the customer relationship . such amortization began once construction was completed and the plant was placed into service . this occurred in the third quarter of 2011. through december 31 , 2011 , we collected 97 % of this award . the grant was closed in 2012 and no additional amounts were received in 2012. dividends in 2012 , we declared a special cash dividend aggregating $ 1.20 per share on our common stock , with a record date and payment date previously discussed . story_separator_special_tag the special cash dividend amounted to $ 49,978,000. we also paid regular cash dividends aggregating $ 0.40 per share on our common stock , with record dates and payment dates as set forth above . the regular cash dividends amounted to $ 16,560,000 , for total dividends paid by us in 2012 of $ 66,538,000. in 2011 , we declared a special cash dividend aggregating $ 0.10 per share on our common stock , with a record date and payment date as previously discussed . the special cash dividend amounted to $ 3,998,000. we also declared regular cash dividends aggregating $ 0.30 per share on our common stock , with record dates and payment dates as set forth above . the regular cash dividends amounted to $ 12,256,000 , for total dividends paid by us in 2011 of $ 16,254,000. in 2010 , we declared special cash dividends aggregating $ 0.80 per share on our common stock , with record dates and payment dates as previously discussed . the special cash dividends amounted to $ 31,053,000. capital management as a result of our initial equity offering , our subsequent positive operating results , the exercise of warrants , and the issuance of shares in our at-the-market offering , we accumulated excess working capital . some of this excess working capital was paid out in 2010 , 2011 , and 2012 as a special cash dividend and in 2011 and 2012 as regular cash dividends . regular cash dividends will also be paid in 2013 as previously discussed . we intend to retain the remaining cash to fund infrastructure and capacity expansion at our batesville plant . third parties have not placed significant restrictions on our working capital management decisions . 35 a significant portion of these funds were held in cash or cash equivalents at multiple financial institutions . in 2012 and 2011 , we also had investments in certain preferred stock , trust preferred securities , and other equity instruments . we classify these investments as current assets in the accompanying consolidated balance sheets and designate them as being “ available-for-sale ” . accordingly , they are recorded at fair value , with the unrealized gains and losses , net of taxes , reported as a component of stockholders ' equity . the fair value of these preferred stock , trust preferred securities , and other equity instruments , including accrued dividends and interest , totaled $ 86,618,000 and $ 56,294,000 at december 31 , 2012 and 2011 , respectively . we also maintained a position in auction rate securities at december 31 , 2012. we have selectively made investments in certain auction rate securities that we believed offered sufficient yield along with sufficient liquidity . to date , all the auction rate securities in which we have invested have maintained a mechanism for liquidity , meaning that the respective auctions have not failed , the issuers have called the instruments , or a secondary market exists for liquidation of the securities . we have classified these instruments as current assets in the accompanying consolidated balance sheet and carried them at their estimated fair market value . the fair value of these instruments approximated their par value and , including accrued interest , totaled $ 1,150,000 at december 31 , 2012. auction rate securities are typically long term bonds issued by an entity for which there is a series of auctions over the life of the bond that serve to reset the interest rate on the bonds to a market rate . these auctions also serve as a mechanism to provide liquidity to the bond holders ; as long as there are sufficient purchasers of the auction rate securities , the then owners of the auction rate securities are able to liquidate their investment through a sale to the new purchasers . in the event of an auction failure , a situation when there are more sellers than buyers of a particular issue , the current owners of an auction rate security issue may not be able to liquidate their investment . as a result of an auction failure , a holder may be forced to hold the particular security either until maturity or until a willing buyer is found . even if a willing buyer is found , however , there is no guarantee that this willing buyer will purchase the security for its carrying value , which would result in a loss being realized on the sale . lastly , we maintain depository accounts such as checking accounts , money market accounts , and other similar accounts at selected financial institutions . story_separator_special_tag in excess of 35 million gallons of biodiesel per year . debottlenecking has increased the annual capacity to in excess of 45 million gallons per year . projects are currently in progress to further debottleneck and optimize the plant to run at higher rates . there currently is uncertainty as to whether we will produce biodiesel in the future . this uncertainty results from : ( i ) changes in feedstock prices relative to biodiesel prices ; and ( ii ) the permanency of government mandates and tax credits . see “ risk factors ” above . while biodiesel is the principal component of the biofuels segment , we also generate revenue from the sale of petrodiesel both in blends with our biodiesel and , from time to time , with no biodiesel added . petrodiesel and biodiesel blends are available to customers at our leased storage facility in north little rock , arkansas and at our batesville plant . in addition , we deliver blended product to a small group of customers within our region . we also sell refined petroleum products from time-to-time on common carrier pipelines in part to maintain our status as a shipper on the pipeline . the majority of our expenses are cost of goods sold .
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we continue to work collaboratively with our customer to assess their future demand , which may continue to decline . the financial impact of any such decline is not known at this time . 36 we ( and our predecessor at our batesville plant ) have been the primary manufacturer of a proprietary herbicide and certain intermediates for a customer ( and its predecessors ) since approximately 1993. however , in recent years , these products have faced generic competition , from other suppliers to our customer , from others who compete with our customer for the sale of herbicides , and from other agricultural chemicals present in the market place . in response to its perceptions of this competition , in 2011 the customer initiated discussions with us to reduce volume and alter other terms of the contracts . sales of these products , as will be discussed below , declined . being of the opinion that the current contracts do not adequately provide a framework to support our mutual efforts , we exercised our rights to terminate these contracts , effective september 1 , 2013 for the proprietary herbicide and october 1 , 2013 for the intermediates . we anticipate that we will continue to do business with our customer after those dates provided we can reach mutually acceptable terms . in 2008 , we entered into a contract with a new customer for the toll manufacture of an industrial intermediate utilized in the antimicrobial industry . we invested approximately $ 10 million in capital expenditures to modify and expand our plant to produce this industrial intermediate . the customer reimbursed these expenditures , which reimbursements have been classified as deferred revenue on our balance sheet and will be earned into income over the expected life of the product . the contract stipulates a price curve based on volumes sold and has an inflationary pricing provision whereby we pass along most inflationary changes in production costs to the customer . pricing for the other custom manufacturing products is negotiated directly with the
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ROO
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our business genius brands international , inc. is a global content and brand management company dedicated to providing entertaining and enriching “ content and products with a purpose ” for toddlers to tweens . led by industry veterans andrew heyward ( chief executive officer ) and amy moynihan heyward ( president ) , the company produces original content and licenses the rights to that content to a variety of partners . our licensees include ( i ) companies to which the audio-visual rights are licensed for exhibition in various formats such as pay television , free or broadcast television , video-on-demand ( “ vod ” ) , subscription on demand ( “ svod ” ) , dvds/cds and more and ( ii ) companies that develop and distribute products based on our content within different product categories such as toys , electronics , publishing , home goods , stationary , gifts , and more . 14 the company owns a portfolio of original children 's entertainment that is targeted at toddlers to teens including the award-winning baby genius , warren buffett 's secret millionaires club , thomas edison 's secret lab and stan lee 's mighty 7 , the first project from stan lee comics , llc , a joint venture with legendary stan lee 's pow ! entertainment . in addition to the company 's wholly-owned brands , it also acts as licensing agent for certain brands , leveraging its existing licensing infrastructure to expand these brands into new product categories , new retailers , and new territories . these include the best-selling children 's book series , llama llama ; psycho bunny , a luxury apparel line ; from frank , a humor greeting card and product line ; celessence technologies , the world 's leading microencapsulation company . strategic initiatives during 2014 and 2015 , the company began a series of strategic initiatives to restructure certain areas of business in an effort to operate more profitably in the long run . this included product sales , content distribution , production , and product development : 1 ) during the second quarter of 2014 , the company began phasing out the direct production and sale of physical products including dvds and cds and shifted to a licensing model whereby these functions were outsourced to industry experts and category leaders in their respective industries . on july 14 , 2014 , the company employed stone newman in the newly created position of president – global consumer products to manage all consumer products , licensing and merchandising sales for the company 's brands . 2 ) prior to the third quarter of 2014 , the company utilized an agency to license its content to international television broadcasters , home video , and digital distribution outlets . to exert greater control over the distribution of its expanding portfolio of content , during the second quarter of 2014 , the company formed a new global distribution division and appointed andrew berman to the newly created position of senior vice president - international sales to oversee the division and the appointment of regional agents to represent the company locally in key regions . 3 ) during the third and fourth quarter of 2014 , the company partnered with various pre-production , production , and animation companies to provide services to the company for the production of thomas edison 's secret lab in exchange for a certain percentage of the series ' forthcoming adjusted net revenues and the ability to distribute the series in certain languages in certain territories . this model helps to better manage the company 's cash flows while enabling it to exploit territories that would otherwise be challenging to manage and monetize . the company intends to replicate the model for future productions . 4 ) the infrastructure the company has put in place enables it to efficiently exploit a growing portfolio of brands . the company is actively developing a number of new brands , like space pop , to add to its growing portfolio and consistently looks for existing brands to acquire oract aslicensing agent , as with the best-selling line of books , llama llama which the company recently signed . thecompanyremains focused on brands that lend themselves to interactive exploitation in multiple areas and are consistentwith thecompany 's primary point of differentiation : providing multi-media “ content and products with apurpose ” that entertain and enrich kids . 5 ) consistent with the company 's strategy of securing widespread distribution for its content in a variety of formats and building awareness and engagement for its brands that in turn drives its consumer products business , the company has expanded its successful relationship with comcast beyond the already popular baby genius on-demand offering . the company has announced it launched a new kid genius channel in the fourth quarter of2015 , offering 24-hours of video on-demand content that will be consistent with the company 's `` content and products with a purpose '' mission . the new video on-demand channel will include the company 's own content , in addition to other content the company will curate , to offer a robust line-up for kids . the company 's senior vice president-international sales , andrew berman , will oversee the channel . recent events d istribution agreement with sony pictures home entertainment inc. on february 18 , 2016 , we entered into a distribution agreement with sony pictures home entertainment inc. ( “ sony ” ) , pursuant to which the company agreed to grant sony certain rights for the marketing and distribution of the company 's animated feature-length motion pictures and animated television series in the united states and in canada , and potentially additional countries . story_separator_special_tag in consideration for such rights , and subject to certain conditions , sony has paid the company an advance in the amount of $ 2.0 million , against future royalties . private placement on october 29 , 2015 , we conducted a private placement with certain accredited investors pursuant to which we sold an aggregate of 4,330,000 shares of its common stock , par value $ 0.001 per and warrants to purchase up to an aggregate of 4,330,000 shares of common stock for a purchase price of $ 1.00 per share and gross proceeds to us of $ 4,330,000 ( the “ 2015 private placement ” ) . the closing of the 2015 private placement was subject to certain customary closing conditions and closed on november 3 , 2015. stock offering costs were $ 502,218 . 15 the warrants are exercisable into shares of common stock for a period of five ( 5 ) years from issuance at an initial exercise price of $ 1.10 per share , subject to adjustment in the event of stock splits , dividends and recapitalizations . the company is prohibited from effecting an exercise of the warrants to the extent that as a result of such exercise , the holder would beneficially own more than 4.99 % ( subject to increase up to 9.99 % upon 61 days ' notice ) in the aggregate of the issued and outstanding shares of common stock , calculated immediately after giving effect to the issuance of shares of common stock upon exercise of the warrant . pursuant to the terms of the purchase agreements , beginning on the closing date of the 2015 private placement and ending sixty ( 60 ) days after the effective date ( as defined in the purchase agreements ) , the company shall not issue any securities , subject to certain exceptions . additionally , until the later of ( i ) such time as the investors in the 2015 private placement , in the aggregate , hold less than 50 % of the common stock originally purchased by them in the private placement and the average daily trading volume of the common stock for a period of ten ( 10 ) consecutive trading days is greater than $ 75,000 and ( ii ) the one year anniversary of the closing of the 2015 private placement , the company has agreed to not sell any securities , subject to certain exceptions , at an effective per share price of common stock less than the purchase price of the common stock sold in the 2015 private placement then in effect . the company has agreed to file a “ resale ” registration statement with the securities and exchange commission ( the “ sec ” ) covering all shares of common stock and shares of common stock underlying the warrants issued or issuable in the 2015 private placement within 45 days of the closing of the 2015 private placement and to maintain the effectiveness of the registration statement until all securities have been sold or are otherwise able to be sold pursuant to rule 144. the company has agreed to use its reasonable best efforts to have the registration statement declared effective within 90 days of the closing of the 2015 private placement ( or 120 days after such closing if the registration statement is subject to review by the sec . the company is obligated to pay to investors a fee of 1 % per month in cash for every thirty day period up to a maximum of six ( 6 % ) percent , ( i ) that the registration statement has not been filed after the required filing date , ( ii ) following the required effectiveness date that the registration statement has not been declared effective ; and ( iii ) as otherwise set forth in the registration rights agreement . chardan capital markets llc acted as sole placement agent in the 2015 private placement in consideration for which chardan received a cash fee of $ 300,000 and a five-year warrant to purchase up to 425,000 shares of common stock ( the “ placement agent warrant ” ) at an initial exercise price of $ 1.20 per share . the terms of the placement agent warrant are identical to the warrants issued in the 2015 private placement except with respect to the exercise price thereof . story_separator_special_tag justify '' > liquidity comparison of cash flows for the twelve months ended december 31 , 2015 and 2014 cash totaled $ 5,187,620 and $ 4,301,099 at december 31 , 2015 and 2014 , respectively . the change in cash is as follows : replace_table_token_5_th during the twelve months ended december 31 , 2015 , our primary source of cash was financing activity , specifically the collection of the second payment related to a long-term , exclusive supply chain services agreement and the receipt of funds related to the issuance of common stock . during the comparable period in 2014 , our primary source of cash was financing activity including the collection of the first payment related to a long-term , exclusive supply chain services contract and the receipt of funds related to the issuance of preferred stock . during both periods , these funds were primarily used to fund operations as well as investments in fixed assets , intangible assets , and capitalized product development . operating activities cash used in operating activities in the twelve months ended december 31 , 2015 was $ 3,396,581 as compared to cash used of $ 2,481,988 during the prior period , representing an increase in cash used in operating activities of $ 914,593 based on the operating results discussed above as well as increases in film and television costs related to the development and production of episodes of thomas edison 's secret lab and the development of space pop ( working title ) .
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during the twelve months ended december 31 , 2015 , television & home entertainment revenue increased $ 283,006 compared to the twelve months ended december 31 , 2014 , representing expanded distribution of our content given the strategic restructuring of the company in 2014 in addition to the commencement of deliveries of thomas edison 's secret lab . product sales represent physical products including dvds and cds in which the company holds intellectual property rights such as trademarks and copyrights to the characters and which are manufactured and sold by the company either directly at wholesale to retail stores or online retailers . during the twelve months ended december 31 , 2015 , product sales decreased by $ 482,100 compared to the twelve months ended december 31 , 2014 due to the change in business strategy whereby the company has transitioned from the direct production and sale of physical products to a licensing model in which these functions were outsourced to industry experts and category leaders . cost of sales and operating costs . replace_table_token_3_th cost of sales decreased $ 427,133 during the twelve months ended december , 2015 compared to the same period of 2014. the decrease was a result of the decrease in product sales discussed above as well as the elimination of the overhead associated with handling sales directly , replaced by a new model whereby these costs will be borne by our licensees . general and administrative expenses consist primarily of salaries , employee benefits , as well as other expenses associated with finance , legal , facilities , marketing , rent , and other professional services . general and administrative costs for the twelve months ended december , 2015 increased $ 235,699 compared to the same period in 2014. the aggregate increase for the category results primarily from increases in salaries and related expense of $ 411,512 related to the addition of several critical hires in sales functions and digital initiatives offset by decreases in professional fees of $ 273,295 and bad debt expense of $ 56,550. marketing and sales expenses increased $ 81,801 for the twelve months ended december 31 , 2015 compared to the twelve months
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| 13,517
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and infrastructure , including from failure or malicious attacks ; the fact that the prices at which shares of our class a common stock are sold in one or more of our controlled equity offerings or in other offerings or other transactions may vary significantly , and purchasers of shares in such offerings or transactions , as well as existing stockholders , may suffer significant dilution if the price they paid for their shares is higher than the price paid by other purchasers in such offerings or transactions ; our ability to meet expectations with respect to payments of dividends and distributions and repurchases of shares of our class a common stock and purchases of limited partnership interests of bgc holdings , l.p. , which we refer to as bgc holdings , or other equity interests in our subsidiaries , including from cantor , our executive officers , other employees , partners , and others , and the net proceeds to be realized by us from offerings of our shares of class a common stock ; and the effect on the market for and trading price of our class a common stock of various offerings and other transactions , including our controlled equity and other offerings of our class a common stock and convertible or exchangeable debt securities , our repurchases of shares of our class a common stock and purchases of bgc holdings limited partnership interests or other equity interests in our subsidiaries , our payment of dividends on our class a common stock and distributions on bgc holdings limited partnership interests , convertible arbitrage , hedging , and other transactions engaged in by holders of our 4.50 % convertible notes and counterparties to our capped call transactions , and resales of shares of our class a common stock acquired from us or cantor , including pursuant to our employee benefit plans , conversion of our convertible notes , conversion or exchange of our convertible or exchangeable debt securities , and distributions from cantor pursuant to cantor 's 81 distribution rights obligations and other distributions to cantor partners including deferred distribution rights shares . this discussion summarizes the significant factors affecting our results of operations and financial condition during the years ended december 31 , 2012 and 2011. this discussion is provided to increase the understanding of , and should be read in conjunction with , our consolidated financial statements and the notes thereto included elsewhere in this report . overview and business environment we are a leading global brokerage company primarily servicing the wholesale financial and real estate markets through our two segments , financial services and real estate services . our financial services segment specializes in the brokering of a broad range of products , including fixed income securities , interest rate swaps , foreign exchange , equities , equity derivatives , credit derivatives , commodities , futures and structured products . our financial services segment also provides a full range of services , including trade execution , broker-dealer services , clearing , processing , information , and other back-office services to a broad range of financial and non-financial institutions . our integrated platform is designed to provide flexibility to customers with regard to price discovery , execution and processing of transactions , and enables them to use voice , hybrid , or in many markets , fully electronic brokerage services in connection with transactions executed either otc or through an exchange . through our espeed , bgc trader and bgc market data brands , we offer financial technology solutions , market data , and analytics related to select financial instruments and markets . we entered into the commercial real estate business in october 2011 with the acquisition of all of the outstanding shares of newmark & company real estate , inc. , a leading u.s. commercial real estate brokerage and advisory firm primarily serving corporate and institutional clients . newmark was founded in 1929 in new york city . in 2000 , newmark embarked upon a national expansion and in 2006 entered into an agreement with london-based knight frank to operate jointly in the americas as newmark knight frank. in the second quarter of 2012 , we completed the acquisition of substantially all of the assets of grubb & ellis company and its direct and indirect subsidiaries , which we refer to as grubb & ellis. grubb & ellis was formed in 1958 and built a full-service national commercial real estate platform of property management , facilities management and brokerage services . we have largely completed the integration of grubb & ellis with newmark knight frank to form the resulting business , newmark grubb knight frank ( or ngkf ) . ngkf is a full-service commercial real estate platform that comprises our real estate services segment , offering commercial real estate tenants , owners , investors and developers a wide range of services , including leasing ; capital markets services including investment sales , debt placement , appraisal , and valuation services ; as well as consulting , project and development management , leasing and corporate advisory services and property and corporate facilities management services . in connection with our acquisition of substantially all of the assets of grubb & ellis , we began , with the second quarter of 2012 , reporting two reportable segments , financial services and real estate services , as reflected in our quarterly report on form 10-q for such quarter filed on august 8 , 2012. prior to the second quarter of 2012 , we had only one reportable segment . on august 8 , 2012 , we filed a current report on form 8-k to update our financial statements and certain other information contained in our annual report on form 10-k for the year ended december 31 , 2011 and our quarterly report on form 10-q for the quarter ended march 31 , 2012 to reflect such change in our reportable segments . story_separator_special_tag these two segments continue to be reported in this annual report on form 10-k. our customers include many of the world 's largest banks , broker-dealers , investment banks , trading firms , hedge funds , governments , corporations , property owners , real estate developers and investment firms . we have offices in dozens of major markets , including new york and london , as well as in atlanta , beijing , boston , chicago , copenhagen , dallas , dubai , hong kong , houston , istanbul , johannesburg , los angeles , mexico city , miami , moscow , nyon , paris , rio de janeiro , são paulo , seoul , singapore , sydney , tokyo , toronto , washington , d.c. and zurich . 82 we remain confident in our future growth prospects as we continue to increase the scale and depth of our real estate platform and continue to seek market driven opportunities to expand our business in numerous financial asset classes . financial services : the financial intermediary sector has been a competitive area that has had strong revenue growth over the past decade due to several factors . one factor is the increasing use of derivatives to manage risk or to take advantage of the anticipated direction of a market by allowing users to protect gains and or guard against losses in the price of underlying assets without having to buy or sell the underlying assets . derivatives are often used to mitigate the risks associated with interest rates , equity ownership , changes in the value of foreign currency , credit defaults by corporate and sovereign debtors and changes in the prices of commodity products . over the past decade , demand from financial institutions , financial services intermediaries and large corporations has increased volumes in the wholesale derivatives market , thereby increasing the business opportunity for financial intermediaries . another key factor in the growth of the financial intermediary sector over the past decade has been the increase in the number of new products . as market participants and their customers strive to mitigate risk , new types of equity and fixed income securities , futures , options and other financial instruments have been developed . these new securities and derivatives are not immediately ready for more liquid and standardized electronic markets , and generally increase the need for trading and require broker-assisted execution . the past twelve months have been challenging as lower activity and volatility have contributed to declines in market volumes across the asset classes in our financial services segment . growth drivers as a wholesale intermediary , our business is driven by several key drivers in addition to those listed above . these include : overall industry volumes in the markets in which we broker , the size and productivity of our front-office headcount ( including salespeople , brokers and other front-office professionals ) , regulatory issues and the percentage of our revenues related to fully electronic brokerage . below is a brief analysis of the market and industry volumes for some of our financial services products including our overall hybrid and fully electronic trading activities . overall market volumes and volatility volume is driven by a number of items , including the level of issuance for financial instruments , the price volatility of financial instruments , overall macro-economic conditions , the creation and adoption of new products , the regulatory environment , and the introduction and adoption of new trading technologies . in general , increased price volatility increases the demand for hedging instruments , including many of the cash and derivative products which we broker . for example , hedge funds are increasingly making use of derivatives to protect positions and preserve the capital of their more cautious institutional clients , which now account for almost two-thirds of assets managed by the industry , according to a report from j.p. morgan . during the year ended december 31 , 2012 , industry volumes generally declined year-over-year for many of the otc and listed products we broker in rates , credit , foreign exchange and equities . this was due in large part to volatility being lower than the 10-year average in these asset classes during the year . for example , a broader measure of volatility across rates , credit , foreign exchange ( fx ) , equities , and other markets is bank of america merrill lynch 's global financial stress index ( gfsi ) . it averaged approximately 0.67 over the last five years , and had been as high as 3.01 during the height of the global financial crises in the second half of 2008 , but averaged only 0.23 during the fourth quarter of 2012. market stress measures such as the gfsi are generally good proxies for overall volatility and volumes across our four asset class categories . below is a discussion of the volume and growth drivers of our various financial services brokerage product categories . 83 rates volumes and volatility our rates business is particularly influenced by the level of sovereign debt issuance globally , and over the past year this issuance has generally continued to grow , although quantitative easing has muted the public issuance of many sovereign issues . for example , according to the securities industry and financial markets association ( sifma ) , issuance by the u.s. treasury of interest-bearing debt increased by approximately 42 % for the fourth quarter of 2012 versus the same period last year , and was up by approximately 10 % for all of 2012. rates volumes are also influenced by market volatility , and such volatility has been dampened for the past year due to continued quantitative easing undertaken by the u.s. federal reserve and other major central banks . quantitative easing entails the central banks buying government securities or other securities in the open marketparticularly longer-dated instrumentsin an effort to promote increased lending and liquidity and bring down long-term interest rates .
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the decrease in rates revenues of $ 46.0 million was primarily driven by lower volumes as activity remained muted due to quantitative easing undertaken by major central banks . credit brokerage revenues decreased $ 30.4 million . global credit market volume has declined as banks adjust to new capital requirements for credit transactions under basel iii and due to uncertainty surrounding the rules for clearing credit derivatives in the u.s. foreign exchange revenues decreased by $ 10.3 million . global fx volumes were lower in 2012 , largely as certain major central banks intervened to keep their currencies from appreciating and low interest rates in most major economies minimized the utilization of carry-trade strategies . revenues from equities and other asset classes decreased by $ 58.4 million . global equity markets continued to be difficult in 2012 as equity derivative volumes were down between 9 % and 41 % according to the occ , eurex , deutsche bourse , and the cme . real estate management services real estate management services revenues were $ 122.7 million for the year ended december 31 , 2012. the revenues associated with property and facilities management fees are earned as a consequence of the acquisitions of newmark knight frank and grubb & ellis in the fourth quarter of 2011 and the second quarter of 2012 , respectively . fees from related parties fees from related parties decreased by $ 9.1 million , or 14.6 % , for the year ended december 31 , 2012 as compared to the year ended december 31 , 2011. the decrease was primarily due to lower revenues related to elx and a reduced level of support fees for services provided to cantor . 96 market data market data revenues decreased by $ 0.5 million , or 2.6 % , for the year ended december 31 , 2012 as compared to the year ended december 31 , 2011. software solutions software solutions revenues increased by $ 0.8 million , or 8.4 % , for the year ended december 31 , 2012 as compared to the year ended december
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| 13,924
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although the forward-looking statements in this report reflect the good faith judgment of our management , such statements can only be based on facts and factors currently known by them . consequently , and because forward-looking statements are inherently subject to risks and uncertainties , the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements . you are urged to carefully review and consider the various disclosures made by us in this report as we attempt to advise interested parties of the risks and factors that may affect our business , financial condition , and results of operations and prospects . overview code chain new continent limited ( formerly known as tmsr holding company limited and jm global holding company , the “ company ” or “ ccnc ” ) , through its subsidiaries and controlled entities , focuses its business in two segments : ( 1 ) coal wholesales and sales of coke , steels , construction materials , mechanical equipment and steel scrap ; and ( 2 ) the research , development and application of internet of things ( iot ) and electronic tokens . the company 's coal and coke wholesale business is carried out by jiangsu rong hai electric power fuel co. , ltd. ( “ rong hai ” ) , an entity contractually controlled by the company . the company 's iot business is carried out wuge network games co. , ltd. ( “ wuge ” ) , an entity contractually controlled by the company . on june 30 , 2020 , the company entered into a share purchase agreement with jiazhen li , former ceo of the company ( the “ buyer ” ) , long liao and chunyong zheng , who are former shareholders of wuhan host , to sell all the equity interest the company held in china sunlong . shengrong wfoe and wuhan host are indirect subsidiaries of china sunlong . as a result , as of june 30 , 2020 , operations of shengrong wfoe and wuhan host have been designated as discontinued operations . 44 key factors that affect operating results our operating subsidiaries are incorporated , and our operations and assets are primarily located , in china . accordingly , our results of operations , financial condition and prospects are affected by china 's economic and regulation conditions in the following factors : ( a ) an economic downturn in china or any regional market in china ; ( b ) economic policies and initiatives undertaken by the chinese government ; ( c ) changes in the chinese or regional business or regulatory environment affecting our customers ; and ( e ) changes in the chinese government policy on industrial solid waste . unfavorable changes could affect demand for services that we provide and could materially and adversely affect the results of operations . although the company has generally benefited from china 's economic growth and the policies to encourage the improvement of reducing of solid waste discharge , the company is also affected by the complexity , uncertainties and changes in the chinese economic conditions and regulations governing the mining industry . our fuel materials , mainly coal , operations are largely affected by the following aspects . first , the prc 's macroeconomic growth is not as fast as expected ; the slowdown of economic growth will affect the demand of the market , and the reduction of coal consumption by enterprises will affect the sales of coal and directly affect our earnings . second , the coal market price fluctuation will also affect our sales revenue ; because jiangsu rong hai has long-term and stable customers , the price fluctuations will affect the cost of purchasing coal and thus affect our revenue . third , the risk of price fluctuation in the shipping industry . the fluctuation of shipping price will also directly affect the fluctuation of coal market price , thus affecting our income . fourth , we have long-term and stable customers and continues to rely on a small number of customers from 2009 to 2019. losing our major customers will have a significant impact on our results of operations . in addition , the payment situation of these customers will be affected by abnormal market changes , which will have a negative impact on our business recovery accounts and cash flow . as a result of the novel coronavirus ( covid-19 ) outbreak , we have seen a slowdown in revenue growth in first quarter 2020 as our businesses have been negatively impacted by the covid-19 . these impacts of covid-19 on our business , financial condition , and results of operations include , but are not limited to , the following : ● we temporally closed our offices and production facilities to adhere to the policy beginning in february 2020 , as required by relevant prc regulatory authorities . our offices are slowly reopening pursuant to local guidelines . ● our customers could potentially be negatively impacted by the outbreak , which may reduce the demand of our products . as a result , our revenue and income may be negatively impacted in 2020 . ● the situation may worsen if the covid-19 outbreak continues . we will continue to closely monitor our collections throughout 2020. because of the significant uncertainties surrounding the covid-19 outbreak , the extent of the continued business disruption and the related financial impact can not be reasonably estimated at this time . 45 results of operations year ended december 31 , 2020 as compared to the year ended december 31 , 2019 replace_table_token_2_th revenues the company 's revenue consists of fuel materials revenue and others revenue . story_separator_special_tag agent arrangements , where the entity simply arranges but does not control the goods or services being transferred to the customer , will result in the recognition of the net amount the entity is entitled to retain in the exchange . revenue from equipment and systems , revenue from coating and fuel materials , and revenue from trading and others are recognized at the date of goods delivered and title passed to customers , when a formal arrangement exists , the price is fixed or determinable , the company has no other significant obligations and collectability is reasonably assured . such revenues are recognized at a point in time after all performance obligations are satisfied under the new five-step model . in addition , training service revenues are recognized when the services are rendered and the company has no other obligations , and collectability is reasonably assured . these revenues are recognized at a point in time . prior to january 1 , 2018 , the company allowed its customers to retain 5 % to 10 % of the contract price as retainage during the warranty period of 12 months to guarantee product quality . retainage is considered as a payment term included as a part of the contract price , and was recognized as revenue upon the shipment of products . due to nature of the retainage , the company 's policy is to record revenue the full value of the contract without vat , including any retainage , since the company has experienced insignificant warranty claims historically . due to the infrequent and insignificant amount of warranty claims , the ability to collect retainage was reasonably assured and was recognized at the time of shipment . on january 1 , 2018 , upon the adoption of asu 2014-09 ( asc 606 ) , revenues from product warranty are recognized over the warranty period over 12 months . payments received before all of the relevant criteria for revenue recognition are recorded as customer deposits . gross versus net revenue reporting starting from july 2016 , in the normal course of the company 's trading of industrial waste materials business , the company directly purchases the processed industrial waste materials from the company 's suppliers under the company 's specifications and drop ships the materials directly to the company 's customers . the company would inspect the materials at its customers ' site , during which inspection it temporarily assumes legal title to the materials , and after which inspection legal title is transferred to its customers . in these situations , the company generally collects the sales proceed directly from the company 's customers and pay for the inventory purchases to the company 's suppliers separately . the determination of whether revenues should be reported on a gross or net basis is based on the company 's assessment of whether it is the principal or an agent in the transaction . in determining whether the company is the principal or an agent , the company follows the new accounting guidance for principal-agent considerations . since the company is the primary obligor and is responsible for ( i ) fulfilling the processed industrial waste materials delivery , ( ii ) controlling the inventory by temporarily assume legal title to the materials after inspecting the products from our vendors before passing the materials to our customers , and ( iii ) bearing the back-end risk of inventory loss with respect to any product return from the company 's customers , the company has concluded that it is the principal in these arrangements , and therefore report revenues and cost of revenues on a gross basis . 50 recently issue accounting pronouncements in february 2018 , the fasb issued asu 2018-02 , income statement - reporting comprehensive income ( topic 220 ) : reclassification of certain tax effects from accumulated other comprehensive income . the amendments in this update affect any entity that is required to apply the provisions of topic 220 , income statement – reporting comprehensive income , and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by gaap . the amendments in this update are effective for all entities for fiscal years beginning after december 15 , 2018 , and interim periods within those fiscal years . early adoption of the amendments in this update is permitted , including adoption in any interim period , ( 1 ) for public business entities for reporting periods for which financial statements have not yet been issued and ( 2 ) for all other entities for reporting periods for which financial statements have not yet been made available for issuance . the amendments in this update should be applied either in the period of adoption or retrospectively to each period ( or periods ) in which the effect of the change in the u.s. federal corporate income tax rate in the tax cuts and jobs act is recognized . we do not believe the adoption of this asu would have a material effect on our consolidated financial statements . we do not believe other recently issued but not yet effective accounting standards , if currently adopted , would have a material effect on our consolidated balance sheets , statements of income and comprehensive income and statements of cash flows . story_separator_special_tag needs . liquidity risk is controlled by the application of financial position analysis and monitoring procedures . when necessary , the company will turn to other financial institutions and the owners to obtain short-term funding to meet the liquidity shortage . inflation risk the company is also exposed to inflation risk inflationary factors , such as increases in raw material and overhead costs , could impair our operating results . although we do not believe that inflation has had a material impact on our financial position or results of operations to date , a high rate of inflation in
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liquidity and capital resources the company has funded working capital and other capital requirements primarily by equity contributions , loans from shareholders , cash flow from operations , short term bank loans , loans from third parties and cash received from jm global holding company through the reverse capitalization . cash is required to repay debts and pay salaries , office expenses , income taxes and other operating expenses . as of december 31 , 2020 , our net working capital deficit was approximately $ 8.8 million , over 15 % of the company 's current liabilities was from other payables – related parties due to major shareholders . removing these liabilities , the company had net working capital of $ 9.3 million and is expected to continuing generate cash flow from operations in the twelve months period . we believe that current levels of cash and cash flows from operations will be sufficient to meet its anticipated cash needs for at least the next twelve months from the date the consolidated financial statements to be issued . however , it may need additional cash resources in the future if it experiences changed business conditions or other developments , and may also need additional cash resources in the future if it wishes to pursue opportunities for investment , acquisition , strategic cooperation or other similar actions . if it is determined that the cash requirements exceed the company 's amounts of cash and cash equivalents on hand , the company may seek to issue debt or equity securities or obtain additional credit facility .
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Liquidity
| 2,547
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505 , equity , whereby the fair value of such options is determined using the black-scholes option pricing model at the earlier of the date at which the non-employee 's performance is complete or a performance commitment is reached . ( o ) earnings per common share eps is calculated pursuant to the two-class method as defined in asc topic no . 260 , earnings per share ( “ asc 260 ” ) , which specifies that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends or dividend equivalents are considered participating securities and should be included in the computation of eps pursuant to the two-class method . basic eps is calculated by dividing net distributed and undistributed earnings allocated to common shareholders , excluding participating securities , by the weighted-average number of common shares outstanding . the company 's participating securities consist of its unvested share-based payment awards that contain rights to nonforfeitable dividends or dividend equivalents . diluted eps includes the determinants of basic eps and , in addition , reflects the impact of other potentially dilutive shares outstanding during the period . the dilutive effect of participating securities is calculated under the more dilutive of either the treasury method or the two-class method . ( p ) research , development and engineering research , development and engineering costs are expensed as incurred . costs for software development incurred subsequent to establishing technological feasibility , in the form of a working model , are capitalized and amortized over their estimated useful lives . to date , software development costs incurred after technological feasibility has been established have not been material . ( q ) segment reporting fasb asc topic no . 280 , segment reporting ( “ asc 280 ” ) , establishes standards for the way that public business enterprises report information about operating segments in annual consolidated financial statements and requires that those enterprises report selected information about operating segments in interim financial reports . asc 280 also establishes standards for related disclosures about products and services , geographic areas and major customers . the company operates in one reportable segment : cloud services for business . ( r ) advertising costs advertising costs are expensed as incurred . advertising costs for the year ended december 31 , 2011 , 2010 and 2009 was $ 45.4 million , $ 36.3 million and $ 28.3 million , respectively . ( s ) sales taxes the company may collect sales taxes from certain customers which are remitted to governmental authorities as required and are excluded from revenues . - 40 - ( t ) recent accounting pronouncements in may 2011 , the fasb issued asu no . 2011-04 , fair value measurement ( topic 820 ) : amendments to achieve common fair value measurement and disclosure requirements in u.s. gaap and ifrss . this guidance was issued to achieve common fair value measurement and disclosure requirements between gaap and international financial reporting standards . this new guidance amends current fair value measurement and disclosure guidance to include increased transparency around valuation inputs and investment categorization . this asu is effective for interim and annual periods beginning after december 15 , 2011. the adoption of this new guidance is not expected to have a significant impact on the company 's fair value measurements , financial condition , results of operations or cash flows . in june 2011 , the fasb issued asu no . 2011-05 , comprehensive income ( topic 220 ) : presentation of comprehensive income . this guidance is effective for interim and annual periods beginning december 15 , 2011 and will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements . it eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders ' equity . the standard does not change the items which must be reported in other comprehensive income , how such items are measured or when they must be reclassified to net income . in addition , in december 2011 , the fasb issued an amendment which defers the requirement to present components of reclassifications of other comprehensive income on the face of the income statement . because this guidance impacts presentation only , it will have no effect on the company 's consolidated financial statements . in september 2011 , the fasb issued asu no . 2011-08 , intangibles – goodwill and other ( topic 350 ) , which simplifies how entities test goodwill for impairment and permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test . this asu is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after december 15 , 2011 ( early adoption is permitted ) . the company decided to early adopt this guidance which did not have a significant impact on the company 's consolidated financial position or results of operations . reclassifications certain prior year reported amounts have been reclassified to conform to the 2011 presentation . 3. business acquisitions in july 2011 , the company purchased for cash data haven limited , an ireland-based provider of online data backup services for businesses , and certain assets of the virtual pbx business of buzz networks limited , a uk-based provider of voice services . in october 2011 , the company purchased for cash c infinity , an ireland-based provider of online data backup and hosting services for businesses ( see note 18 – subsequent events for information on the three acquisitions closed thus far in 2012 ) . the financial impact to j2 global for these transactions is immaterial as of the date of the acquisition . story_separator_special_tag during the fourth quarter of 2009 , we determined based upon our current and future business needs that the rights to certain external administrative software would not provide any future benefit . accordingly , we recorded a disposal in the amount of $ 2.4 million to the consolidated statement of operations representing the capitalized cost as of december 31 , 2009. total disposals of long-lived assets for the year ended december 31 , 2011 , 2010 and 2009 were approximately $ 0.3 million , $ 0.2 million and $ 2.5 million , respectively . share-based compensation the following table represents the share-based compensation expense included in cost of revenues and operating expenses in the accompanying consolidated statements of operations for the years ended december 31 , 2011 , 2010 and 2009 ( in thousands ) : replace_table_token_14_th - 27 - non-operating income and expenses interest and other income . our interest and other income is generated primarily from interest earned on cash , cash equivalents and short- and long-term investments , gain on sale of investments and gains from foreign currency transactions . interest and other income amounted to $ 1.3 million , $ 6.8 million and $ 3.1 million for the years ended december 31 , 2011 , 2010 and 2009 , respectively . the decrease in interest and other income from 2010 to 2011 was primarily due to the gain on the sale of investments in the amount of approximately $ 4.4 million recognized in 2010 and reduced interest income in 2011 due to lower cash and investment balances following an acquisition in the fourth quarter 2010. the increase in interest and other income from 2009 to 2010 was primarily due to gain on the sale of investments in the amount of approximately $ 4.4 million in 2010. interest and other expense . our interest and other expense amounted to $ 0.1 million , $ 0.1 million and $ 0.4 million for the years ended december 31 , 2011 , 2010 and 2009 , respectively . interest and other expense were primarily related to interest expense . other-than-temporary impairment losses . an other-than-temporary impairment occurred in connection with our securities for the year ended december 31 , 2009. during the second quarter of 2009 , we recorded an impairment of $ 9.2 million within the consolidated statement of operations . during the fourth quarter of 2009 , we determined that one auction rate security was other-than-temporarily impaired and recorded an impairment loss of $ 0.2 million to the consolidated statement of operations . no other-than-temporary impairments were recorded for fiscal years 2011 and 2010. income taxes . our effective income tax rate is based on pre-tax income , statutory tax rates , tax regulations ( including those related to transfer pricing ) and different tax rates in the various jurisdictions in which we operate . the tax bases of our assets and liabilities reflect our best estimate of the tax benefits and costs we expect to realize . when necessary , we establish valuation allowances to reduce our deferred tax assets to an amount that will more likely than not be realized . as of december 31 , 2011 , we had utilizable federal and state ( california ) net operating loss carryforwards ( “ nols ” ) of $ 6.7 million and $ 6.7 million , respectively , after considering substantial restrictions on the utilization of these nols due to “ ownership changes ” , as defined in the internal revenue code of 1986 , as amended . we currently estimate that all of the above-mentioned federal and state nols will be available for use before their expiration . these nols expire through the year 2028 for the federal and 2017 for the state . in addition , as of december 31 , 2011 and 2010 , we had available unrecognized state research and development tax credits of $ 0.2 million and $ 0.8 million , which last indefinitely . in 2008 , the governor of california signed into law legislation that suspended the use of nols for tax years beginning on or after january 1 , 2008 and 2009. in 2010 , the suspension was extended an additional two years through the end of 2011. as a result , the company will not be permitted to utilize its california nols generated in prior years to offset taxable income in 2008 through 2011 for purposes of determining the applicable california income tax due . current law reinstates use of nols in tax years beginning on or after january 1 , 2012 absent extension of the suspension . income tax expense amounted to $ 22.4 million , $ 27.6 million and $ 31.0 million for the years ended december 31 , 2011 , 2010 and 2009 , respectively . our effective tax rates for 2011 , 2010 and 2009 were 16 % , 25 % and 32 % , respectively . the decrease in our effective income tax rate from 2010 to 2011 was primarily attributable to the following : 1. a reversal during the first quarter 2011 of approximately $ 14.1 million and the third quarter 2011 of approximately $ 1.1 million of uncertain income tax positions as a result of expiring statutes of limitations , offset by return to provision adjustments in the third quarter of 2011 ; 2. an increase during 2011 in foreign tax credits and our ability to offset such credits against subpart f income ; 3. an increase during 2011 in the portion of our income being taxed in foreign jurisdictions and subject to lower tax rates than in the u.s. ; 4. a decrease during 2011 in state income taxes , net of the federal income tax benefits , partially offset by : 5. a 2010 book but not tax gain on the sale of an impaired auction rate security , resulting in a significant portion of the valuation allowance being reversed ; 6. an increase during 2011 in return to
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the increase in our net cash provided by operating activities in 2011 compared to 2010 was primarily attributable to cash received from our subscribers and the tax benefit from the exercise of stock options during the year . certain tax payments are prepaid during the year and included within prepaid expenses and other current assets on the consolidated balance sheet . our prepaid tax payments were $ 11.0 million and $ 7.5 million at december 31 , 2011 and 2010 , respectively . more than two-thirds of our subscribers pay us via credit cards and therefore our receivables from subscribers generally settle quickly . our cash and cash equivalents and short-term investments were $ 177.9 million , $ 78.8 million and $ 228.8 million at december 31 , 2011 , 2010 and 2009 , respectively . net cash used in investing activities was $ ( 76.2 ) million , $ ( 231.1 ) million and $ ( 61.4 ) million for the years ended december 31 , 2011 , 2010 and 2009 , respectively . net cash used in investing activities in 2011 was primarily attributable to the purchase of available-for-sale investments . net cash used in investing activities in 2010 was primarily attributable to cash acquisition of businesses and purchase of available-for-sale investments . net cash used in investing activities in 2009 was primarily attributable to purchase of available-for-sale investments , certificates of deposit and cash acquisition of businesses . net cash provided by financing activities was $ 0.3 million , $ 2.7 million and $ 5.4 million for the years ended 2011 , 2010 and 2009 , respectively . net cash provided by financing activities in 2011 was primarily attributable from the exercise of stock options and excess tax benefit from share-based compensation , partially offset by dividends paid . net cash provided by financing activities in 2010 was primarily attributable from the exercise of stock options and excess tax benefit from share-based compensation , partially offset by the repurchase of our common stock . net cash provided by financing activities in 2009 was primarily attributable to proceeds from the exercise of stock options and excess tax benefit from share-based compensation . stock repurchase program in may 2010 , our board of directors approved a program authorizing the repurchase of up to ten million shares of our common stock through the end of april 30 , 2012 ( the “ 2010 program ” ) . during the year ended december 31 , 2011 , we did not repurchase any shares under the 2010 program . effective february 15 , 2012 , our board of directors terminated and replaced
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Liquidity
| 6,301
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share-based compensation the company measures all share-based compensation awards at fair value on the date they are granted to employees and directors , and recognizes compensation cost , net of forfeitures , over the requisite service period for awards with only a service condition , and over a graded vesting period for awards with service and performance or market conditions . the fair value of share-based compensation awards with market conditions is measured using a lattice model and in accordance with accounting standards codification ( `` asc `` ) 718 , is not adjusted based on actual achievement of the performance goals . the black-scholes option pricing model is used to measure the fair value of options . the following sections address the assumptions used related to the black-scholes option pricing model . expected life the expected term of stock options represents the period the stock options are expected to remain outstanding and is based on the simplified method , which is the weighted average vesting term plus the original contractual term divided by two . the company uses the simplified method due to a lack of sufficient historical share option exercise experience upon which to estimate an expected term . expected volatility expected volatility measures the amount that a stock price has fluctuated or is expected to fluctuate during a period and is estimated based on a weighted average of the company 's historical stock price . dividend yield the company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future . therefore , a zero expected dividend yield was used in the valuation model . risk-free interest rate the risk-free interest rate is based on united states treasury zero-coupon issues with remaining terms similar to the expected term on the options . forfeitures the company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates . the company uses historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest . if the company 's actual forfeiture rate is materially different from its estimate , the stock-based compensation expense could be different from what the company has recorded in the current period . historically , estimated forfeitures have been in line with actual forfeitures . income taxes the company follows the liability method of accounting for income taxes . under this method , deferred income tax assets and liabilities are determined based upon temporary differences between the carrying amounts and tax bases of the company 's assets and liabilities at the balance sheet date , and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse . the effect on deferred tax assets and liabilities of a change in the tax rates is recognized in income in the period in which the change occurs . the company records a valuation reserve in each reporting period when management believes that it is more likely than not that any deferred tax asset created will not be realized . accounting guidance for income taxes requires that the company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit . if a tax position meets the `` more likely than not `` recognition criteria , accounting guidance requires the tax position be measured at the largest amount of benefit greater than 50 % likely of being realized upon ultimate settlement . earnings per share 64 forum energy technologies , inc. and subsidiaries notes to consolidated financial statements ( continued ) basic earnings per share for all periods presented equals net income divided by the weighted average number of the shares of the company 's common stock outstanding during the period . diluted earnings per share is computed by dividing net income by the weighted average number of shares of the company 's common stock outstanding during the period as adjusted for the dilutive effect of the company 's stock options , restricted share plans and warrants . the exercise price of each option is based on the company 's stock price at the date of grant . the diluted earnings per share calculation excludes approximately 0.3 million stock options and warrants , 1.0 million stock options and warrants and 0.4 million stock options and warrants for the years ended december 31 , 2013 , 2012 and 2011 , respectively , because they were anti-dilutive as the option exercise price was greater than the average market price of the common stock . the following is a reconciliation of the number of shares used for the basic and diluted earnings per share computations ( shares in thousands ) : replace_table_token_19_th non-u.s. local currency translation the company operates globally and its primary functional currency is the u.s. dollar ( $ ) . the majority of the company 's non-u.s. operations have designated the local currency as their functional currency . financial statements of these non-u.s. operations are translated into u.s. dollars using the current rate method whereby assets and liabilities are translated at the balance sheet rate and income and expenses are translated into u.s. dollars at the average exchange rates in effect during the period . the resultant translation adjustments are reported as a component of accumulated other comprehensive income within stockholders ' equity . noncontrolling interest noncontrolling interests are classified as equity in the consolidated balance sheets . net earnings include the net earnings for both controlling and noncontrolling interests , with disclosure of both amounts on the consolidated statements of earnings . fair value the carrying amounts for financial instruments classified as current assets and current liabilities approximate fair value , due to the short maturity of such instruments . story_separator_special_tag the flow equipment product line due to the deterioration in this market which reduced demand for our products significantly starting in the second quarter 2012. the pressure pumping service providers , our customers , experienced excess capacity of new capital equipment and supplies during the year and these companies began to destock inventory they purchased during prior periods . offsetting the lower margins in the flow equipment product line were modest price increases on certain valve products . also positively impacting our operating margins were lower selling , general and administrative costs as a percent of revenue , which was attributable to tighter controls . corporate — selling , general and administrative expenses for corporate increased slightly by $ 0.4 million , or 1.9 % , for the year ended december 31 , 2012 compared to the year ended december 31 , 2011. corporate costs included , among other items , payroll related costs for general management and management of finance and administration , legal , and human resources ; professional fees for legal , accounting and related services ; and marketing costs . 43 other items several items are not included in segment operating income , but are included in total operating income . these items include : contingent consideration , impairment of intangible assets , transaction expenses and gains/losses from the sale of assets . the contingent consideration we incurred was related to two acquisitions in 2011 in the flow equipment product line in which part of the purchase price was payable in cash and or shares of our common stock based on the earnings of the acquired entities . the change in the amount of the accrual is recorded as part of operating income . lower projected earnings of the acquired entities resulted in an increase to operating income of $ 4.6 million for the year ended december 31 , 2012 due to lower contingent consideration , whereas higher projected earnings of the acquired entities resulted in a decrease to operating income of $ 12.1 million for the year ended december 31 , 2011. during the second quarter 2012 , an impairment loss of $ 1.2 million was recorded on certain intangible assets as a result of a lack of orders for a specific service line within the production & infrastructure segment . transaction expenses relate to legal and other advisory costs incurred in acquiring businesses and are not considered to be part of segment operating income . these costs were $ 1.8 million and $ 3.6 million for the years ended december 31 , 2012 and 2011 , respectively . interest expense we incurred $ 16.4 million of interest expense during the year ended december 31 , 2012 , a decrease of $ 3.2 million from the year ended december 31 , 2011. the decrease in interest expense was attributable to a lower debt level as we repaid a portion of our debt from the net proceeds of the ipo and concurrent private placement during the second quarter 2012 , partially offset by an increase in debt levels incurred to finance the four acquisitions in the fourth quarter 2012. taxes tax expense includes current income taxes expected to be due based on taxable income to be reported during the periods in the various jurisdictions in which we conduct business , and deferred income taxes based on changes in the tax effect of temporary differences between the bases of assets and liabilities for financial reporting and tax purposes at the beginning and end of the respective periods . the effective tax rate , calculated by dividing total tax expense by income before income taxes , was 32.0 % and 33.5 % for the years ended december 31 , 2012 and 2011 , respectively . the effective tax rate for the year ended december 31 , 2012 is lower than the comparable period in 2011 primarily due to a reduction in the tax provision from the finalization of certain prior year tax returns . liquidity and capital resources sources and uses of liquidity our internal sources of liquidity are cash on hand and cash flows from operations , while our primary external sources have included our credit facility described below , trade credit , the issuance of our senior notes described below and sales of our common stock . our primary uses of capital have been for acquisitions , ongoing maintenance and growth capital expenditures , inventories and sales on credit to our customers . we continually monitor potential capital sources , including equity and debt financing , to meet our investment and target liquidity requirements . our future success and growth will be highly dependent on our ability to continue to access outside sources of capital . at december 31 , 2013 , we had cash and cash equivalents of $ 39.6 million and total debt of $ 513.1 million . during the year ended december 31 , 2013 , we used the net proceeds from the issuance of $ 400.0 million of 6.25 % senior notes to repay a portion of the outstanding borrowings under our credit facility . see “ —senior notes due 2021 . ” we believe that cash on hand , cash generated from operations and amounts available under the credit facility will be sufficient to fund operations , working capital needs , capital expenditure requirements and financing obligations for the foreseeable future . our total 2014 capital expenditure budget is approximately $ 60.0 million , which consists of , among other items , investments in constructing or expanding certain manufacturing facilities , purchasing machinery and equipment , expanding our rental fleet of subsea equipment , and general maintenance capital expenditures of approximately $ 25.0 million . this budget does not include expenditures for potential business acquisitions . the amount of capital expenditures incurred in 2013 was $ 60.3 million . these expenditures were funded from borrowings under our credit facility , the issuance of our senior notes and internally generated funds .
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cash flows provided by ( used in ) financing activities net cash provided by financing activities was $ 77.1 million for the year ended december 31 , 2013 and consisted primarily of net proceeds from our issuance of the senior notes and other borrowings under the revolving portion of our credit facility , net of long-term debt repayment , contingent consideration payment and deferred financing costs . the net proceeds from the senior notes issuance were used to repay amounts outstanding under our credit facility . net cash provided by financing activities was $ 65.8 million for the year ended december 31 , 2012 , and consisted primarily of net proceeds from our ipo and concurrent private placement which were used to pay down a portion of the outstanding borrowings under the revolving portion of the credit facility , and payment of contingent consideration with respect to acquisitions . net cash provided by financing activities was $ 510.1 million for the year ended december 31 , 2011 , primarily from net draws on the credit facility of $ 458.4 million and proceeds from stock issuances of $ 57.0 million . senior notes due 2021 in october 2013 , we issued $ 300.0 million of 6.25 % senior unsecured notes due 2021 at par , and in november 2013 we issued an additional $ 100.0 million aggregate principal amount of the notes at 103.25 % of par , plus accrued interest from october 2 , 2013 ( the `` senior notes '' ) . the senior notes bear interest at a rate of 6.25 % per annum , payable on april 1 and october 1 of each year , and mature on october 1 , 2021. net proceeds from the issuances of approximately $ 394.0 million , after deducting initial purchasers ' discounts and offering expenses and excluding accrued interest paid by the purchasers , were used for the repayment of the then-outstanding term loan balance and a portion of the revolving credit facility balance . the terms of the senior notes are governed by the indenture , dated october 2 , 2013 ( the “ indenture ” ) , by and among us , the guarantors named therein and wells fargo bank , national association , as trustee ( the “ trustee ” ) . the senior notes are senior unsecured obligations , are guaranteed on a senior unsecured basis by our subsidiaries that guarantee the credit facility and rank junior to , among other indebtedness , the credit facility to the extent of the value of the collateral securing the credit facility . the senior notes contain customary covenants
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Liquidity
| 15,636
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professional services engagements typically result from sales of new licenses ; revenue is recognized over the term of the engagement . our expectation is that professional services revenue will trend flat-to-down over time due to our strategy to expand margins by migrating more services engagements to our partners and delivering products that require less consulting and training services , and in the near-term will trend down due to the effects of the covid-19 pandemic . professional services revenue declined in fy'20 due to challenges with project scoping and implementation activities and performance due to social distancing measures and facility closures implemented to address the covid-19 pandemic . additionally , there was an increase in the estimated costs to complete a large fixed price professional services contract , which led to a corresponding decrease in the estimated percent complete and a related reversal of revenue . revenue by product group replace_table_token_3_th replace_table_token_4_th core product software revenue growth in fy'20 compared to fy'19 was driven by subscription revenue growth of 68 % ( 69 % constant currency ) , offset by expected declines in perpetual license and perpetual support revenue due to the end of sales of perpetual licenses at the end of q1'19 and conversions of support contracts to subscriptions . total revenue growth was lower than software revenue growth due to a decline in professional services revenue . in fy'20 , professional services revenue declined 26 % ( actual and constant currency ) compared to the year-ago period due in part to the impact of the covid-19 pandemic and the impact of the professional services contract described above . arr increased 14 % ( 11 % constant currency ) for fy'20 compared to fy'19 , reflecting solid arr growth for both plm and cad . 20 growth p roduct s oftware revenue growth in fy'20 was driven by subscription revenue growth of 49 % ( 50 % constant currency ) compared to the year-ago period , offset by an expected decline in perpetual license revenue due to the end of sales of perpetual licenses at the end of q1'19 . the revenue growth rate has been impacted by a decrease in the proportion of license revenue recognized upfront as we have released additional cloud functionality ( for which revenue is recognized ratably ) into our iot products . growth product arr increased 34 % ( 32 % constant currency ) for fy'20 compared to fy'19 , including growth from sales of our products through our strategic alliance with rockwell automation and reflecting strong growth in all three product lines . fsg product software revenue declined in fy'20 compared to fy'19 , primarily driven by a 13 % ( actual and constant currency ) decrease in perpetual support revenue due to conversions of support contracts to subscriptions . this decline was partially offset by a 12 % ( 13 % constant currency ) increase in subscription revenue in fy'20 compared to the year-ago period . the total revenue decrease in fy'20 was higher than the decline in software revenue due to a decrease in professional services revenue , which declined 21 % ( 20 % constant currency ) in fy'20 compared to fy'19 due in part to the impact of the covid-19 pandemic on our ability to execute professional services projects . fsg product arr decreased 2 % ( 4 % constant currency ) for fy'20 compared to fy'19 , largely due to the impact of covid-19 on fsg markets , primarily due to the non-renewal of a government contract which did not receive renewed funding . software revenue by geographic region a significant portion of our software revenue is generated outside the u.s. in both fy'19 and fy'20 , approximately 45 % of software revenue was generated in the americas , 35 % in europe , and 20 % in asia pacific . replace_table_token_5_th americas software revenue growth in fy'20 was driven by growth in subscription revenue of 44 % ( actual and constant currency ) as compared to fy'19 , partially offset by a decline of 16 % ( 15 % constant currency ) in perpetual support revenue , resulting in recurring revenue growth of 24 % ( 25 % constant currency ) . europe software revenue growth in fy'20 was driven by growth in subscription revenue of 67 % ( 69 % constant currency ) as compared to fy'19 , partially offset by a decline in perpetual support revenue , resulting in recurring revenue growth of 28 % ( 30 % constant currency ) . asia pacific software revenue growth in fy'20 was driven by growth in subscription revenue of 70 % ( actual and constant currency ) as compared to fy'19 , partially offset by declines of 86 % ( actual and constant currency ) and 20 % ( actual and constant currency ) in perpetual license and support revenue , respectively . recurring revenue growth was 26 % ( actual and constant currency ) . 21 gross margin replace_table_token_6_th ( 1 ) non-gaap financial measures are reconciled to gaap results under non-gaap financial measures below . license gross margin increased in fy'20 compared to fy'19 due to revenue increasing significantly as a result of asc 606 and the discontinuation of the cancellation clause , while cost of license expenses increased only slightly . license revenue growth was driven by an 88 % ( 89 % constant currency ) increase in subscription license revenue year over year , partially offset by a 54 % ( 53 % constant currency ) decrease in perpetual license revenue . support and cloud services gross margin decreased in fy'20 compared to fy'19 due to a decrease in perpetual support revenue and increases in costs associated with our cloud services business due to increased demand for those services , royalty expenses , and outside service costs . this was partially offset by increases in subscription support and cloud services revenue . story_separator_special_tag these rule makers and or regulators may promulgate interpretations , guidance or regulations that may result in changes to our accounting policies , which could have a material impact on our financial position and results of operations . 28 revenue recognition effective october 1 , 2018 , we record revenues in accordance with the guidance provided by asc 606 , revenue from contracts with customers . for a full description of our revenue accounting policy , please refer to note 2. summary of significant accounting policies , included in the notes to consolidated financial statements in this annual report . our sources of revenue include : ( 1 ) subscription , ( 2 ) perpetual license , ( 3 ) support for perpetual licenses and ( 4 ) professional services . subscriptions include term-based on-premises licenses , software-as-a-service ( saas ) , and hosting services . revenue is derived from the licensing of computer software products and from related support and or professional services contracts . judgments and estimates determination of performance obligations . our subscriptions are frequently sold as a bundle of products and services , typically pairing on-premises term software licenses with support and or cloud services over the same term . on-premises software is typically determined to be a distinct performance obligation , and is thus recognized separately from the support and or cloud components . on-premises software revenue is generally recognized at the point in time that the software is made available to the customer , while the support and cloud revenue components are recognized over the term of the contract . in cases where subscriptions include cloud functionality and on-premises software , an assessment has been performed to determine whether the cloud services are distinct from the on-premises software . in the substantial majority of instances , cloud services provide incremental functionality to customers and have been considered distinct and recognized separately from the on-premises software . this assessment could have a significant impact on the timing of revenue recognition and may change as our product offerings evolve . allocation of transaction price . we estimate the standalone selling price of each identified performance obligation and use that estimate to allocate the transaction price among said performance obligations . the estimated standalone selling price is determined using all information reasonably available to us , including market conditions and other observable inputs . significant judgment is used in determining the standalone selling prices of the on-premises license , support , and cloud components of our subscription products . these estimates are subject to change as our product offerings change and could have a significant impact due to the difference in the timing of revenue recognition for on-premises licenses and support and or cloud . right to exchange . our multi-year , non-cancellable on-premises subscription contracts provide customers with an annual right to exchange software within the original subscription with other software . we account for this right as a refund liability . for most contracts , we use the expected value method to determine the refund liability associated with this right across a portfolio of contracts . where contracts are outside of the standard portfolio of contracts due to contract size , longer contract duration , or other unique contractual terms , we use the most likely amount method to determine the refund liability for each individual contract . in both circumstances , the transaction price is constrained based on our estimates , which impacts the amount of revenue recognized . changes in these estimates could significantly impact revenue for any given period . accounting for income taxes as part of the process of preparing our consolidated financial statements , we are required to calculate our income tax expense based on taxable income by jurisdiction . there are many transactions and calculations about which the ultimate tax outcome is uncertain ; as a result , our calculations involve estimates by management . some of these uncertainties arise as a consequence of revenue-sharing , cost-reimbursement and transfer pricing arrangements among related entities and the differing tax treatment of revenue and cost items across various jurisdictions . if we were compelled to revise or to account differently for our arrangements , that revision could affect our recorded tax liabilities . the income tax accounting process also involves estimating our actual current tax liability , together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes . these differences result in deferred tax assets and liabilities , which are included within our 29 consolidated balance sheets . we must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and , to the extent we believe that it is more likely than not that all or a portion of our deferred tax assets will not be realized , we must establish a valuation allowance as a charge to income tax expense . as of september 30 , 2020 , we have a valuation allowance of $ 171.3 million against net deferred tax assets in the u.s. and a valuation allowance of $ 34.1 million against net deferred tax assets in certain foreign jurisdictions . we have concluded , based on the weight of available evidence , that a full valuation allowance continues to be required against our u.s. net deferred tax assets as they are not more likely than not to be realized in the future . we will continue to reassess our valuation allowance requirements each financial reporting period . the valuation allowance recorded against net deferred tax assets of certain foreign jurisdictions is established primarily for our capital loss carryforwards , the majority of which do not expire . however , there are limitations imposed on the utilization of such capital losses that could further restrict the recognition of any tax benefits . prior to the passage of the u.s. tax act , the company asserted that substantially all of the undistributed earnings of its foreign
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liquidity and capital resources replace_table_token_14_th cash , cash equivalents and restricted cash we invest our cash with highly rated financial institutions and in diversified domestic and international money market mutual funds . cash and cash equivalents include highly liquid investments with original maturities of three months or less . in addition , we hold investments in marketable securities totaling approximately $ 59 million with an average maturity of 12 months . at september 30 , 2020 , cash and cash equivalents totaled $ 275 million , compared to $ 270 million at september 30 , 2019. a significant portion of our cash is generated and held outside the u.s. as of september 30 , 2020 , we had cash and cash equivalents of $ 39 million in the u.s. , $ 108 million in europe , $ 99 million in asia pacific ( including india ) and $ 29 million in other non-u.s. countries . all our marketable securities are held in the u.s. we have substantial cash requirements in the u.s. , but we believe that the combination of our existing u.s. cash and cash equivalents , marketable securities , our ability to repatriate cash to the u.s. more cost effectively with the recent u.s. tax law changes , future u.s. operating cash flows and cash available under our credit facility will be sufficient to meet our ongoing u.s. operating expenses and known capital requirements . 31 cash provided by operating activities cash provided by operating activities was $ 234 million in fy'20 compared to $ 285 million in fy'19 .
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Liquidity
| 8,443
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for the years ended december 31 , 2014 , 2013 and 2012 , the holdco administrative services expense totaled $ 1.7 million , $ 1.4 million and $ 1.3 million , respectively . non-compete agreement . on july 19 , 2006 , in connection with our initial public offering , we entered into a non-compete agreement with nustar energy ( the non-compete agreement ) . under the non-compete agreement , we will have a right of first refusal with respect to the potential acquisition of general partner and other equity interests in publicly traded partnerships under common ownership with the general partner interest . nustar energy has a right of first refusal with respect to the potential acquisition of assets that relate to the transportation , storage or terminalling of crude oil , feedstocks or refined petroleum products ( including petrochemicals ) in the united states and internationally . with respect to any other business opportunities , neither we nor nustar energy are prohibited from engaging in any business , even if we and nustar energy would have a conflict of interest with respect to such other business opportunity . the non-compete agreement remains in effect for so long as we or any of our affiliates own 20 % or more of nustar gp , llc or riverwalk logistics , l.p. axeon as a result of the 2014 asphalt sale , we ceased reporting transactions between us and axeon as related party transactions in our consolidated financial statements on february 26 , 2014. axeon services agreement . nustar gp , llc and axeon were a party to a services agreement , which provided that nustar gp , llc furnish certain administrative and other operating services necessary to conduct the business of axeon for an annual fee totaling $ 10.0 million , subject to adjustment ( the axeon services agreement ) . the axeon services agreement terminated on june 30 , 2014 . the aggregate amount charged under the axeon services agreement was $ 3.1 million , $ 7.9 million and $ 2.6 million for the years ended december 31 , 2014 , 2013 and 2012 , respectively . axeon employee services agreement . in addition , nustar gp , llc entered into an employee services agreement with axeon , effective september 28 , 2012 ( the axeon employee services agreement ) . the axeon employee services agreement provided that certain of nustar gp , llc employees would provide employee-services to axeon . in exchange , axeon would reimburse us for the compensation expense of those employees at the same rates that were in effect at the effective date of the axeon employee services agreement . the axeon employee services agreement terminated on december 31 , 2012 , and effective january 1 , 2013 , those employees became employees of axeon . 6. distributions from nustar energy nustar energy 's partnership agreement , as amended , determines the amount and priority of cash distributions that nustar energy 's common unitholders and general partner may receive . we , as nustar energy 's general partner , are entitled to incentive distributions if the amount nustar energy distributes with respect to any quarter exceeds $ 0.60 per unit , with the maximum percentage of 23 % of the amount of any quarterly distribution in excess of $ 0.66 per unit . we also receive a 2 % distribution with respect to our general partner interest . 50 nustar gp holdings , llc notes to consolidated financial statements – ( continued ) the following table reflects the allocation of nustar energy 's cash distributions earned for the periods indicated among its general and limited partners : replace_table_token_24_th the following table summarizes information related to nustar energy 's quarterly cash distributions : replace_table_token_25_th ( a ) the distribution was announced on january 30 , 2015 . 7. accrued compensation expense and long-term liabilities accrued compensation expense and long-term liabilities consisted of the following : replace_table_token_26_th 51 nustar gp holdings , llc notes to consolidated financial statements – ( continued ) 8. fair value measurements we segregate the inputs used in measuring fair value into three levels : level 1 , defined as observable inputs such as quoted prices for identical assets or liabilities in active markets ; level 2 , defined as inputs other than quoted prices in active markets that are either directly or indirectly observable , such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets that are not active ; and level 3 , defined as unobservable inputs in which little or no market data exists . the following liabilities are measured at fair value on a recurring basis : replace_table_token_27_th replace_table_token_28_th fair value of financial instruments we recognize cash equivalents , receivables , payables and short-term debt in our consolidated balance sheets at their carrying amount . the fair values of these financial instruments approximate their carrying amounts . the fair value of our short-term debt would fall in level 2 of the fair value hierarchy . 9. statements of cash flows changes in current assets and current liabilities were as follows : replace_table_token_29_th 52 nustar gp holdings , llc notes to consolidated financial statements – ( continued ) cash flows related to interest and income tax were as follows : replace_table_token_30_th non-cash investing and financing activities for the years ended december 31 , 2014 , 2013 and 2012 mainly consisted of : adjustments to our investment in nustar energy and accumulated other comprehensive ( loss ) income through recognition of our proportionate share of nustar energy 's accumulated other comprehensive loss ; and pension funding adjustments recognized in accumulated other comprehensive ( loss ) income . story_separator_special_tag as of december 31 , 2014 , we had the following long-term incentive plans : the fourth amended and restated 2000 long-term incentive plan , under which nustar gp , llc may award up to 3,250,000 nustar energy ( ns ) common units ; the 2006 long-term incentive plan , under which nustar gp holdings may award up to 2,000,000 nustar gp holdings ( nsh ) units . please refer to notes 14 and 15 of the notes to consolidated financial statements in item 8 . “ financial statements and supplementary data ” for a more detailed discussion of employee benefit plans and unit-based compensation . nustar energy reimburses nustar gp , llc for expenses incurred related to employee benefit plans at cost , and for long-term incentive plan compensation expenses resulting from ns and nsh awards to employees and directors of nustar gp , llc . expenses resulting from nustar gp holdings awards to our non-employee directors are included in “ general and administrative expenses ” on our consolidated statements of comprehensive income ( loss ) . our current liabilities related to the long-term incentive plans and employee benefits are included in “ accrued compensation expense ” and our noncurrent liabilities for employee benefits are included in “ long-term liabilities ” on our consolidated balance sheets . services agreements with axeon nustar gp , llc and axeon were a party to a service agreement , which provided that nustar gp , llc furnish certain administrative and other operating services necessary to conduct the business of axeon for an annual fee totaling $ 10.0 million , subject to adjustment ( the axeon services agreement ) . the axeon services agreement terminated on june 30 , 2014. in addition , nustar gp , llc entered into an employee services agreement with axeon , effective september 28 , 2012 ( the axeon employee services agreement ) . the axeon employee services agreement provided that certain of nustar gp , llc employees would provide employee-services to axeon . in exchange , axeon would reimburse us for the compensation expense of those employees at the same rates that were in effect at the effective date of the axeon employee services agreement . the axeon employee services agreement terminated on december 31 , 2012 , and effective january 1 , 2013 , those employees became employees of axeon . 35 the following table summarizes information pertaining to related party transactions : replace_table_token_13_th critical accounting policies the preparation of financial statements in accordance with u.s. generally accepted accounting principles requires management to select accounting policies and to make estimates and assumptions related thereto that affect the amounts reported in the consolidated financial statements and accompanying notes . actual results could differ from those estimates . the accounting policies below are considered critical due to judgments made by management and the sensitivity of these estimates to deviations of actual results from management 's assumptions . the critical accounting policies should be read in conjunction with note 2 of the notes to the consolidated financial statements in item 8 . “ financial statements and supplementary data , ” which summarizes our significant accounting policies . investment in nustar energy we evaluate our investment in nustar energy for impairment if and when there is evidence that we may not be able to recover the carrying amount of our investment or that nustar energy is unable to sustain an earnings capacity that justifies the carrying amount . a loss in the value of our investment that is other than a temporary decline is recognized currently in earnings based on the difference between the estimated current fair value of the investment and our carrying amount . in order to determine fair value , our management must make certain estimates and assumptions regarding nustar energy 's operations , including , among other things , an assessment of market conditions , projected cash flows , interest rates and growth rates that could significantly impact the fair value of our investment . due to the significant subjectivity of the assumptions used to determine fair value , changes in market conditions and or changes in assumptions could result in significant impairment charges in the future , thus affecting our earnings . we believe that the carrying amount of our investment in nustar energy as of december 31 , 2014 is recoverable . unit-based compensation we account for awards of ns unit options , performance awards and restricted units to employees and directors of nustar gp , llc at fair value , whereby a liability for the award is initially recorded and subsequent changes in the fair value are included in the determination of net income . the fair value of ns unit options is determined using the black-scholes model at each reporting date . the fair value of ns restricted units and performance awards equals the market price of ns common units at each reporting date . however , ns performance awards are earned only upon nustar energy 's achievement of an objective performance measure . we record compensation expense each reporting period such that the cumulative compensation expense equals the portion of the award 's current fair value that has vested . we record compensation expense related to ns unit options until such options are exercised , and we record compensation expense for ns restricted units and performance awards until the date of vesting . we account for awards of nsh restricted units and unit options granted to employees of nustar gp , llc and our directors based on the fair value of the awards at the grant date . the fair value of nsh unit options is determined using the black-scholes model at the grant date , and the fair value of the nsh restricted units equals the market price of nsh common units at the grant date . compensation expense for nsh restricted units and unit options is recognized ratably over the vesting period based on the initial fair value determination .
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year ended december 31 , 2014 compared to year ended december 31 , 2013 financial highlights ( thousands of dollars , except unit and per unit data ) replace_table_token_5_th the following table summarizes nustar energy 's statement of income ( loss ) data : replace_table_token_6_th 28 nustar energy 's segment operating income increased $ 371.0 million for the year ended december 31 , 2014 , compared to the year ended december 31 , 2013 , mainly due to an operating loss of $ 127.5 million in nustar energy 's storage segment in 2013 , which included a goodwill impairment charge of $ 304.5 million . nustar energy 's segment operating income in the pipeline segment increased $ 36.9 million for the year ended december 31 , 2014 compared to the prior year , mainly due to increased throughputs on pipelines that serve eagle ford shale production in south texas . nustar energy 's fuels marketing segment operating income increased by $ 24.9 million for the year ended december 31 , 2014 , compared to the prior year , mainly due to improved product margins and lower operating expense in their bunker fuel operations . additionally , nustar energy recorded equity in earnings of joint ventures of $ 4.8 million for the year ended december 31 , 2014 , compared to a loss in equity of joint ventures of $ 40.0 million for the year ended december 31 , 2013 , primarily due to losses from nustar energy 's investment in axeon in 2013. nustar energy 's loss from discontinued operations decreased $ 95.4 million for the year ended december 31 , 2014 , compared to the prior year , mainly due to an asset impairment charge of $ 102.5 million in 2013 associated with certain storage assets . therefore , nustar energy reported net income of $ 210.4 million for the year ended december 31 , 2014 , compared to a loss of $ 284.7 million for the year ended december 31 , 2013 . equity in earnings ( loss ) of nustar energy the following table summarizes our equity in earnings ( loss ) of nustar energy : replace_table_token_7_th for the year ended december 31 , 2014 , nustar energy reported net income per unit applicable to limited partners of $ 2.10 , compared to a net loss of $ 4.00 per unit for the year ended december 31 , 2013 .
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Liquidity
| 14,838
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as of january 27 , 2017 , our bit solution and bit technology is one of 53 of the epa 's “ registered antimicrobial products effective against clostridium difficile spores ” , as published on the epa 's k list . during 2017 , we continued to build brand awareness through marketing and advertising initiatives , as well as the overall performance of our product . we also increased efforts in our research and development of various testing and studies with a concentration in the hospital-healthcare market . we currently have placed significant resources into a study that focuses on quicker hospital room terminal cleans . in february 2017 , we established a scientific advisory board comprised currently of two experts in biosafety and infection prevention . the scientific advisory board will assist management in developing strategies , scientific research and development and monitoring technological and regulatory trends . 17 we have recently been featured in many publications including some that are listed below . one of the articles was a peer review paper that provided the review of tomi 's efficacy data and the first for showing efficacy by combining equipment and solution in the treatment for control of multidrug resistant organisms ( mdro 's ) . – in april 2017 , we were featured in a article published in the international journal of food microbiology by the usda and public health dept . of harvard university which stated cold plasma activated hydrogen peroxide aerosol ( steramist product ) rendered samples of escherichia coli 0157 : h7 , salmonella typhimurium , and listeria innocua inactive , while also maintaining the quality of the produce tested . – in july 2017 , one of our custom built in systems that was designed and installed into a vivarium facility at the dana farber cancer institute was featured in a publication , alnmag ( animal laboratory magazine ) . – in january of 2018 , we were included in the article “ review of necessary practices for epa submission of a hospital disinfectant using good laboratory practice ( glp ) disinfectant study summaries of tomi 's steramist bit disinfection system ” in the journal of the association for biosafety and biosecurity ( absa ) international 2017 , vol . 22 ( 4 ) 172-180 – in february of 2018 , we were featured in an article that discusses how a hospital in delaware is managing to control the spread of the flu virus . delaware online , part of the usa today network , shared news of record high flu cases in the state and how st. francis healthcare , located in wilmington , de , is managing to address the need to control this highly infectious and aggressive flu strain through the use of our steramist bit technology . in march and may 2017 , we raised through a private placement transaction gross proceeds of $ 6,000,000. we issued senior callable convertible promissory notes ( “ the notes ” ) in two tranches of $ 5,300,000 and $ 700,000 , respectively , which originally were scheduled to mature on august 31 , 2018 and november 8 , 2018 , respectively , unless earlier redeemed , repurchased or converted . in february and march 2018 , we and the holders of the notes extended the maturity date of the $ 5,300,000 principal amount of notes to april 1 , 2019 and the $ 700,000 principal amount of notes to june 8 , 2019. the notes are convertible at any time by the holder into common stock at a conversion price of $ 0.54 per share . we may redeem the notes at any time prior to maturity at a price equal to 100 % of the outstanding principal amount of the notes to be redeemed , plus accrued and unpaid interest as of the redemption date . interest on the notes is payable semi-annually in cash on february 28 and august 31 of each year at a rate of 4 percent per annum . in addition , we issued three-year warrants to purchase up to an aggregate of 999,998 shares of common stock at an exercise price of $ 0.69 per share . currently , we are using the proceeds from the private placement for research and development , international product registration , expansion of our internal sales force , marketing , public relations , expansions of our epa label and for working capital and general corporate purposes . in 2016 , we filed a lawsuit against astro pak corporation ( “ astro pak ” ) and its wholly-owned subsidiary , sixlog corporation ( “ sixlog ” ) , in california federal court for infringing our united states patent nos . 6,969,487 and 7,008,592 and violating our intellectual property rights by , among other things , indicating that our technology and patents were proprietary to sixlog and marketing our patented equipment with sixlog labels . in july 2017 , we settled the above-mentioned litigation , pursuant to which astro pak and sixlog acknowledged that we are the sole owner of ionized hydrogen peroxide decontamination and sterilization technology , patents , and products , which we market under the brands binary ionization technology® ( bit ) and steramist . astro pak and sixlog agreed to cease their prior conduct and pay us a cash settlement . astro pak also agreed to assign its ihp mark to us , complementing our existing trademark and trade name protection . finally , astro pak and sixlog agreed to remove from their website ( s ) or take steps to remove any assertions or suggestions that they own or developed ionized hydrogen peroxide technology or patents , or that they provide any ionized hydrogen peroxide products or services . in august 2017 , we announced the hiring of a new sales director to assist in the development of our business in the life science markets and added 26 additional sales representatives to our life sciences division . story_separator_special_tag in january 2017 , the fasb issued asu no . 2017-04 , simplifying the test for goodwill impairment , to simplify the test for goodwill impairment by removing step 2. an entity will , therefore , perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount , recognizing an impairment charge for the amount by which the carrying amount exceeds the fair value , not to exceed the total amount of goodwill allocated to the reporting unit . an entity still has the option to perform a qualitative assessment to determine if the quantitative impairment test is necessary . the asu is effective for interim and annual periods beginning after december 15 , 2019 , with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after january 1 , 2017. adoption of the asu is prospective . we have not yet selected an adoption date , and the asu will have a currently undetermined impact on the consolidated financial statements . in may 2017 , the fasb issued asu no . 2017-09 , scope of modification accounting , to provide guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting . the asu is effective for interim and annual periods beginning after december 15 , 2017 , with early adoption permitted . adoption of the asu is prospective . we will adopt the asu on january 1 , 2018 , which will have no impact on the consolidated financial statements upon adoption . financial operations overview our financial position as of december 31 , 2017 and 2016 , respectively , was as follows : replace_table_token_2_th 22 during the year ended december 31 , 2017 , our debt and liquidity positions were affected by the following : ● gross proceeds from the issuance of the notes of $ 6,000,000 ; and ● net cash used in operations of approximately $ 2,432,000. results of operations for the year ended december 31 , 2017 compared to the year ended december 31 , 2016 replace_table_token_3_th ( 1 ) includes approximately $ 649,000 and $ 615,000 in non-cash equity compensation expense for the years ended december 31 , 2017 and 2016 , respectively . sales during the years ended december 31 , 2017 and 2016 , we had net revenue of approximately $ 4,994,000 and $ 6,343,000 , respectively , representing a decrease in revenue of approximately 1,349,000 or 21 % . the decrease in revenue during the year ended december 31 , 2017 is attributable primarily to the fact that a distributor placed a large order in the first quarter of 2016 , with no such corresponding transaction during the same period in 2017. net revenue product and service revenue replace_table_token_4_th revenue by geographic region replace_table_token_5_th cost of sales during the years ended december 31 , 2017 and 2016 , our cost of sales were approximately $ 1,928,000 and $ 2,611,000 , respectively , representing a decrease of approximately $ 683,000 or 26 % . the primary reason for the decrease in cost of sales is lower sales during the year ended december 31 , 2017 as compared to the prior year . our gross profit margins as a percentage of sales for the year ended december 31 , 2017 increased as compared to the prior period as a result of the customer and product mix in sales . 23 professional fees professional fees for the year ended december 31 , 2017 were approximately $ 877,000 , as compared to $ 517,000 for the prior year , representing an increase of approximately $ 360,000 , or 70 % . the increase is attributable to increased efforts to protect and strengthen our intellectual property and the lawsuit with astro pak , which we settled in july 2017. professional fees are comprised primarily of legal , accounting and financial consulting fees . depreciation and amortization depreciation and amortization was approximately $ 607,000 and $ 586,000 for the years ended december 31 , 2017 and 2016 , respectively , representing an increase of $ 21,000 , or 4 % . the increase in depreciation expense is attributable to additional fixed assets acquired in 2017 and 2016. selling expenses selling expenses for the year ended december 31 , 2017 were approximately $ 1,256,000 , as compared to $ 1,513,000 for the year ended december 31 , 2016 , representing a decrease of approximately $ 257,000 or 17 % . the decrease in selling expenses is attributable to lower sales volume for the year ended december 31 , 2017 and a reduced number of employees as compared to the prior year . selling expenses represent selling salaries and wages , trade show fees , commissions and marketing expenses . research and development research and development expenses for the year ended december 31 , 2017 were approximately $ 454,000 , as compared to $ 184,000 for the year ended december 31 , 2016 , representing an increase of approximately $ 270,000 , or 147 % . the primary reason for the increase was attributable to current and ongoing studies and testing in connection with our product related to quicker hospital terminal cleans . research and development expenses mainly include costs incurred in generating and supporting research on improving , extending and applying our patents in the field of mechanical cleaning and decontamination . consulting fees consulting fees for the year ended december 31 , 2017 were approximately $ 211,000 , as compared to $ 307,000 for the year ended december 31 , 2016 , representing a decrease of approximately $ 96,000 , or 31 % . the decrease in consulting fees is primarily due to significant charge incurred during the year ended december 31 , 2016 with no such charge in 2017. equity compensation expen se equity compensation expense for the year ended december 31 , 2017 was approximately $ 649,000 , as compared to $
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liquidity and capital resources as of december 31 , 2017 , we had cash and cash equivalents of approximately $ 4,550,000 and working capital of $ 9,073,000. our principal capital requirements are to fund operations , invest in research and development and capital equipment , and the continued costs of public company filing requirements . we have historically funded our operations through debt and equity financings . in september 2016 , our common stock was uplisted to the otcqx best market . we intend to apply to further uplist our common stock to a national securities exchange in the future . due to the applicable qualitative and quantitative standards required to successfully list on a national securities exchange , we may need to raise additional capital in order to meet such benchmarks . if we fail to satisfy the applicable listing standards of a national securities exchange , we may be unable to successfully list our common stock on such an exchange . in march and may 2017 , we raised gross proceeds of $ 6,000,000 through a private placement of the notes . we issued the notes in two tranches of $ 5,300,000 and $ 700,000 , respectively , which originally were scheduled to mature on august 31 , 2018 and november 8 , 2018 , respectively , unless earlier redeemed , repurchased or converted .
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Liquidity
| 14,341
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the increase was partially offset by naturally declining production in the fayetteville shale and to a much lesser extent , declining production from the anadarko basin granite wash and the marginal/uneconomic property sales in northwestern oklahoma and kearny county , kansas . ( 38 ) production by quarter for 2018 and 2017 was as follows ( mcfe ) : replace_table_token_14_th lease bonus and rentals lease bonuses and rentals decreased $ 3,568,300 in 2018 . the decrease was mainly due to the company leasing less valuable acreage in 2018 versus 2017. in 2018 , the company leased 1,754 net mineral acres in oklahoma ( mainly in major , ellis , and roger mills counties ) , 415 net mineral acres in texas ( mainly in dawson county ) and 135 net mineral acres in new mexico ( mainly in lea and eddy counties ) . in 2017 , the company leased 2,067 net mineral acres in oklahoma ( mainly in dewey , canadian , mcclain and grady counties ) , 272 net mineral acres in texas ( mainly in andrews and dawson counties ) and 125 net mineral acres in new mexico ( mainly in lea and eddy counties ) . gains ( losses ) on derivative contracts the fair value of derivative contracts was a net liability of $ 3,414,016 as of september 30 , 2018 , and a net asset of $ 516,159 as of september 30 , 2017. we had a net loss on derivative contracts of $ 4,932,068 in 2018 as compared to a net gain of $ 1,249,840 in 2017. the change is principally due to the oil collars and fixed price swaps being less beneficial in 2018 , as nymex oil futures experienced increases in price in relation to the collars and the fixed prices of the swaps . net cash paid related to derivative contracts settled during 2018 was $ 1,001,893 compared to net cash received of $ 305,410 in 2017. as of september 30 , 2018 , the company 's natural gas and oil costless collar contracts and fixed price swaps have expiration dates of december 2018 through june 2020. the company utilizes derivative contracts for the purpose of protecting its return on investments . lease operating expenses ( loe ) loe increased $ 777,309 or 6 % in 2018. loe costs per mcfe of production decreased from $ 1.14 in 2017 to $ 1.10 in 2018. loe related to field operating costs increased $ 225,954 or 3 % in 2018 , compared to 2017. field operating costs were $ 0.55 per mcfe in 2018 , compared to $ 0.58 per mcfe in 2017. this decrease in rate was principally the result of significant new low-cost production coming on line in late 2017 and the company selling some high operating cost wells in late 2017 and early 2018. the increase in loe related to field operating costs was coupled with an increase in handling fees ( primarily gathering , transportation and marketing costs ) of $ 551,355 in 2018 , primarily due to increased production in 2018. on a per mcfe basis , these handling fees were $ 0.55 in 2018 as compared to $ 0.56 in 2017. natural gas sales bear the large majority of the ( 39 ) handling fees . handling fees are charged either as a percent of sales or based on production volumes . production taxes production taxes increased $ 540,651 or 35 % in 2018 , as compared to 2017. the increase in amount was primarily the result of increased oil , ngl and natural gas sales of $ 8,449,423 during 2018. production taxes as a percentage of oil , ngl and natural gas sales increased from 3.9 % in 2017 to 4.3 % in 2018. the increase in tax rate was mainly due to a change in the oklahoma production tax laws that took effect july 1 , 2018. the discounted tax rate was increased from 2.2 % to 5.2 % for the first three years of production on horizontally drilled wells . there was no change in the ultimate rate of 7.2 % after the discounted period expires . the low overall production tax rate in both years was due to a large proportion of the company 's oil and natural gas revenues coming from horizontally drilled wells , which are eligible for reduced oklahoma and arkansas production tax rates in the first few years of production . depreciation , depletion and amortization ( dd & a ) dd & a decreased $ 2,508 in 2018. dd & a per mcfe was $ 1.50 in 2018 , compared to $ 1.66 in 2017. dd & a decreased $ 1,941,354 as the result of a $ 0.16 decrease in the dd & a rate per mcfe . this was mostly offset by an increase of $ 1,938,846 due to oil , ngl and natural gas production volumes increasing 11 % collectively in 2018 , compared to 2017. the rate decrease was principally due to higher oil and ngl prices utilized in the reserve calculations during 2018 , as compared to 2017 , lengthening the economic life of wells thus resulting in higher projected remaining reserves on a significant number of wells . the company had new high-volume wells with low finding costs begin producing in the later part 2017 and early 2018 , which also contributed to the rate decrease . provision for impairment provision for impairment decreased $ 662,990 in 2018 , as compared to 2017. no impairment was recorded during 2018. during 2017 , impairment of $ 46,279 was recorded on five fields , primarily in oklahoma and texas . story_separator_special_tag in addition , the company is required to maintain certain financial ratios , a current ratio ( as defined by the bank agreement – current assets includes availability under outstanding credit facility ) of no less than 1.0 to 1.0 and a funded debt to ebitda ( trailing 12 months as defined by bank agreement – traditional ebitda with the unrealized gain or loss on derivative contracts also removed from earnings ) of no more than 4.0 to 1.0. at september 30 , 2018 , the company was in compliance with the covenants of the loan agreement and had $ 29,000,000 of availability under its outstanding credit facility . ( 48 ) the table below summarizes the company 's contractual obligations and commitments as of september 30 , 2018 : replace_table_token_18_th the company 's building lease is accounted for as an operating lease and therefore the leased asset and associated liabilities of future rent payments are not included on the company 's balance sheets . at september 30 , 2018 , the company 's derivative contracts were in a net liability position of $ 3,414,016. the ultimate settlement amounts of the derivative contracts are unknown because they are subject to continuing market risk . please read item 7a – “ quantitative and qualitative disclosures about market risk ” and note 1 to the financial statements included in item 8 – “ financial statements and supplementary data ” for additional information regarding the derivative contracts . as of september 30 , 2018 , the company 's estimate for asset retirement obligations was $ 2,809,378. asset retirement obligations represent the company 's share of the future expenditures to plug and abandon the wells in which the company owns a working interest at the end of their economic lives . these amounts were not included in the schedule above due to the uncertainty of timing of the obligations . please read note 1 to the financial statements included in item 8 – “ financial statements and supplementary data ” for additional information regarding the company 's asset retirement obligations . critical accounting policies preparation of financial statements in conformity with accounting principles generally accepted in the united states requires management to make estimates , judgments and assumptions that affect the reported amounts of assets , liabilities , revenues and expenses , and the disclosure of contingent assets and liabilities . however , the accounting principles used by the company generally do not change the company 's reported cash flows or liquidity . existing rules must be interpreted and judgments made on how the specifics of a given rule apply to the company . the more significant reporting areas impacted by management 's judgments and estimates include : crude oil , ngl and natural gas reserve estimation ; derivative contracts ; impairment of assets ; oil , ngl and natural gas sales revenue accruals and provision for income taxes . management 's judgments and estimates in these areas are based on information available from both internal and external sources , including engineers , geologists , consultants and historical experience in similar matters . actual results could differ from the estimates as additional information becomes known . the oil , ngl and natural gas sales revenue accrual is particularly subject to estimate inaccuracies due to the company 's status as a non-operator on all of its properties . as such , production and price information obtained from well operators is ( 49 ) substantially delayed . this causes the estimation of recent production and prices used in the oil , ngl and natural gas r evenue accrual to be subject to future change . oil , ngl and natural gas reserves management considers the estimation of the company 's crude oil , ngl and natural gas reserves to be the most significant of its judgments and estimates . these estimates affect the unaudited standardized measure disclosures included in note 11 to the financial statements in item 8 – “ financial statements and supplementary data , ” as well as dd & a and impairment calculations . changes in crude oil , ngl and natural gas reserve estimates affect the company 's calculation of dd & a , asset retirement obligations and assessment of the need for asset impairments . the company 's independent consulting petroleum engineer , with assistance from company staff , prepares estimates of crude oil , ngl and natural gas reserves on an annual basis , with a semi-annual update . these estimates are based on available geologic and seismic data , reservoir pressure data , core analysis reports , well logs , analogous reservoir performance history , production data and other available sources of engineering , geological and geophysical information . between periods in which reserves would normally be calculated , the company updates the reserve calculations utilizing prices which are updated through the current period . in accordance with the sec rules , the reserve estimates were based on average individual product prices during the 12-month period prior to september 30 determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period , unless prices were defined by contractual arrangements , excluding escalations based upon future conditions . based on the company 's 2018 dd & a , a 10 % change in the dd & a rate per mcfe would result in a corresponding $ 1,839,504 annual change in dd & a expense . crude oil , ngl and natural gas prices are volatile and largely affected by worldwide production and consumption and are outside the control of management . however , projected future crude oil , ngl and natural gas pricing assumptions are used by management to prepare estimates of crude oil , ngl and natural gas reserves and future net cash flows used in asset impairment assessments and in formulating management 's overall operating decisions . successful efforts method of accounting the company has elected to utilize the successful efforts method of
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liquidity and capital resources at september 30 , 2018 , the company had positive working capital of $ 2,509,050 , as compared to positive working capital of $ 6,451,356 at september 30 , 2017. liquidity cash and cash equivalents were $ 532,502 as of september 30 , 2018 , compared to $ 557,791 at september 30 , 2017 , a decrease of $ 25,289. cash flows for the 12 months ended september 30 are summarized as follows : replace_table_token_16_th ( 44 ) operating activities : net cash provided by operating activities increased $ 6,185,702 during 2018 , as compared to 2017 , mainly the result of the following : receipts of oil , ngl and natural gas sales ( net of production taxes and gathering , transportation and marketing costs ) and other increased $ 10,734,247. decreased lease bonus receipts of $ 3,630,065. decreased income tax payments of $ 952,854. decreased net receipts on derivative contracts of $ 1,307,303. increased payments for interest expense of $ 517,583. investing activities : net cash used in investing activities decreased $ 3,278,745 during 2018 , as compared to 2017 , due to : lower drilling and completion activity during 2018 decreased capital expenditures by $ 14,217,762. higher acquisition activity increased expenditures by $ 11,327,371. higher proceeds from sale of assets of $ 361,437. financing activities : net cash used by financing activities increased $ 9,576,314 during 2018 , as compared to 2017 , the result of the following : net borrowings decreased $ 1,222,000 during 2018. net borrowings increased $ 7,722,000 during 2017. capital resources capital expenditures to drill and complete wells decreased $ 14,217,762 ( 55 % ) in 2018 , as compared to 2017. the company received 98 well proposals in fiscal 2018
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Liquidity
| 5,821
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in addition , we have continued to develop and promote cash management services including sweep accounts and remote deposit capture in order to increase the level of commercial deposit accounts . we believe that the development and promotion of these products has made us more competitive in attracting commercial deposits during recent periods . the following table sets forth the balances of our deposit accounts at the dates indicated . replace_table_token_11_th 40 the following table indicates the amount of jumbo certificates of deposit by time remaining until maturity as of september 30 , 2019. jumbo certificates of deposit require minimum deposits of $ 100,000 . ( in thousands ) amount three months or less $ 9,818 over three through six months 6,383 over six through twelve months 16,439 over twelve months 30,113 total $ 62,753 borrowings . we use borrowings from the fhlb consisting of advances and borrowings under a line of credit arrangement to supplement our supply of funds for loans and investments . we also utilize retail repurchase agreements as a source of borrowings . the following table sets forth certain information regarding the bank 's use of fhlb borrowings . replace_table_token_12_th the outstanding balance of borrowings from the fhlb increased $ 132.5 million , from $ 90.0 million at september 30 , 2018 to $ 222.5 million at september 30 , 2019. fhlb borrowings are primarily used to fund loan demand and to purchase available for sale securities . the following table sets forth certain information regarding the bank 's use of borrowings under retail repurchase agreements . replace_table_token_13_th on september 20 , 2018 , the company entered into a subordinated note purchase agreement in the principal amount of $ 20 million . the subordinated note initially bears a fixed interest rate of 6.02 % per year through september 30 , 2023 , and thereafter a floating rate , reset quarterly , equal to the three-month libor rate plus 310 basis points . all interest is payable quarterly and the subordinated note is scheduled to mature on september 30 , 2028. the subordinated note is an unsecured subordinated obligation of the company and may be repaid in whole or in part , without penalty , on or after september 30 , 2023. the subordinated note is intended to qualify as tier 2 capital for the company under regulatory guidelines . the subordinated note had a carrying value of $ 19.7 million , net of unamortized debt issuance costs of 271,000 , at september 30 , 2019 on the balance sheet of the consolidated financial statements . the bank has entered into federal funds purchased line of credit facilities with two other financial institutions that established lines of credit not to exceed the lesser of $ 20 million or 25 % of the bank 's equity capital , excluding reserves , and $ 15 million , respectively . at september 30 , 2019 , the bank had $ 4.0 million outstanding in federal funds purchased under one of the lines of credit . stockholders ' equity . stockholders ' equity increased $ 22.3 million , from $ 98.8 million at september 30 , 2018 to $ 121.1 million at september 30 , 2019. the increase is due to retained net income of $ 14.7 million during the year ended september 30 , 2019 and a $ 6.9 million increase in accumulated other comprehensive income due to an increase in the market value of available-for-sale securities . 41 results of operations for the years ended september 30 , 2019 , 2018 and 2017 story_separator_special_tag text-align : justify ; text-indent : 0.5in '' > 43 average balances and yields . the following tables present information regarding average balances of 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 annualized average yields and costs . the yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities , respectively , for the periods presented . nonaccrual loans are included in average balances only . loan fees are included in interest income on loans and are not material . tax exempt income on loans and investment securities for the 2019 , 2018 and 2017 periods has been adjusted to a tax equivalent basis using a federal marginal tax rate of 21.0 % , 24.5 % and 34.0 % , respectively . replace_table_token_14_th 44 rate/volume analysis . the following table sets forth the effects of changing rates and volumes on our net interest income . the rate column shows the effects attributable to changes in rate ( changes in rate multiplied by prior volume ) . the volume column shows the effects attributable to changes in volume ( changes in volume multiplied by prior rate ) . the net column represents the sum of the prior columns . changes attributable to changes in both rate and volume have been allocated proportionally based on the absolute dollar amounts of change in each . replace_table_token_15_th provision for loan losses . the provision for loan losses increased $ 110,000 , or 8.1 % , from $ 1.4 million for the year ended september 30 , 2018 to $ 1.5 million for the year ended september 30 , 2019 due primarily to an increase in total loans of $ 106.7 million . net charge-offs in 2019 were $ 746,000 compared to $ 122,000 for 2018 and nonperforming loans increased $ 907,000 to $ 5.2 million at september 30 , 2019. in 2018 , the provision for loan losses increased $ 52,000 , or 4.0 % , from $ 1.3 million for the year ended september 30 , 2017 to $ 1.4 million for the year ended september 30 , 2018 due primarily to an increase in total loans of $ 84.5 million ( excluding loans acquired in the fnbo merger ) . story_separator_special_tag in addition , we have continued to develop and promote cash management services including sweep accounts and remote deposit capture in order to increase the level of commercial deposit accounts . we believe that the development and promotion of these products has made us more competitive in attracting commercial deposits during recent periods . the following table sets forth the balances of our deposit accounts at the dates indicated . replace_table_token_11_th 40 the following table indicates the amount of jumbo certificates of deposit by time remaining until maturity as of september 30 , 2019. jumbo certificates of deposit require minimum deposits of $ 100,000 . ( in thousands ) amount three months or less $ 9,818 over three through six months 6,383 over six through twelve months 16,439 over twelve months 30,113 total $ 62,753 borrowings . we use borrowings from the fhlb consisting of advances and borrowings under a line of credit arrangement to supplement our supply of funds for loans and investments . we also utilize retail repurchase agreements as a source of borrowings . the following table sets forth certain information regarding the bank 's use of fhlb borrowings . replace_table_token_12_th the outstanding balance of borrowings from the fhlb increased $ 132.5 million , from $ 90.0 million at september 30 , 2018 to $ 222.5 million at september 30 , 2019. fhlb borrowings are primarily used to fund loan demand and to purchase available for sale securities . the following table sets forth certain information regarding the bank 's use of borrowings under retail repurchase agreements . replace_table_token_13_th on september 20 , 2018 , the company entered into a subordinated note purchase agreement in the principal amount of $ 20 million . the subordinated note initially bears a fixed interest rate of 6.02 % per year through september 30 , 2023 , and thereafter a floating rate , reset quarterly , equal to the three-month libor rate plus 310 basis points . all interest is payable quarterly and the subordinated note is scheduled to mature on september 30 , 2028. the subordinated note is an unsecured subordinated obligation of the company and may be repaid in whole or in part , without penalty , on or after september 30 , 2023. the subordinated note is intended to qualify as tier 2 capital for the company under regulatory guidelines . the subordinated note had a carrying value of $ 19.7 million , net of unamortized debt issuance costs of 271,000 , at september 30 , 2019 on the balance sheet of the consolidated financial statements . the bank has entered into federal funds purchased line of credit facilities with two other financial institutions that established lines of credit not to exceed the lesser of $ 20 million or 25 % of the bank 's equity capital , excluding reserves , and $ 15 million , respectively . at september 30 , 2019 , the bank had $ 4.0 million outstanding in federal funds purchased under one of the lines of credit . stockholders ' equity . stockholders ' equity increased $ 22.3 million , from $ 98.8 million at september 30 , 2018 to $ 121.1 million at september 30 , 2019. the increase is due to retained net income of $ 14.7 million during the year ended september 30 , 2019 and a $ 6.9 million increase in accumulated other comprehensive income due to an increase in the market value of available-for-sale securities . 41 results of operations for the years ended september 30 , 2019 , 2018 and 2017 story_separator_special_tag text-align : justify ; text-indent : 0.5in '' > 43 average balances and yields . the following tables present information regarding average balances of 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 annualized average yields and costs . the yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities , respectively , for the periods presented . nonaccrual loans are included in average balances only . loan fees are included in interest income on loans and are not material . tax exempt income on loans and investment securities for the 2019 , 2018 and 2017 periods has been adjusted to a tax equivalent basis using a federal marginal tax rate of 21.0 % , 24.5 % and 34.0 % , respectively . replace_table_token_14_th 44 rate/volume analysis . the following table sets forth the effects of changing rates and volumes on our net interest income . the rate column shows the effects attributable to changes in rate ( changes in rate multiplied by prior volume ) . the volume column shows the effects attributable to changes in volume ( changes in volume multiplied by prior rate ) . the net column represents the sum of the prior columns . changes attributable to changes in both rate and volume have been allocated proportionally based on the absolute dollar amounts of change in each . replace_table_token_15_th provision for loan losses . the provision for loan losses increased $ 110,000 , or 8.1 % , from $ 1.4 million for the year ended september 30 , 2018 to $ 1.5 million for the year ended september 30 , 2019 due primarily to an increase in total loans of $ 106.7 million . net charge-offs in 2019 were $ 746,000 compared to $ 122,000 for 2018 and nonperforming loans increased $ 907,000 to $ 5.2 million at september 30 , 2019. in 2018 , the provision for loan losses increased $ 52,000 , or 4.0 % , from $ 1.3 million for the year ended september 30 , 2017 to $ 1.4 million for the year ended september 30 , 2018 due primarily to an increase in total loans of $ 84.5 million ( excluding loans acquired in the fnbo merger ) .
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overview . the company reported net income of $ 16.2 million ( $ 6.82 per common share diluted ) for the year ended september 30 , 2019 , compared to net income of $ 10.9 million ( $ 4.60 per common share diluted ) for the year ended september 30 , 2018. the increase in net income was due to increases in net interest income of $ 4.3 million and noninterest income of $ 30.6 million , partially offset by an increase in noninterest expense of $ 29.4 million . net income was $ 10.9 million ( $ 4.60 per common share diluted ) for the year ended september 30 , 2018 compared to net income of $ 9.3 million ( $ 3.97 per common share diluted ) for the year ended september 30 , 2017. the increase in net income for 2018 compared to 2017 was due to increases in net interest income and noninterest income of $ 6.4 million and $ 4.7 million , respectively , partially offset by an increase in noninterest expense of $ 8.1 million . net interest income . for the year ended september 30 , 2019 , net interest income increased $ 4.3 million or 11.9 % , as compared to 2018 , primarily as the result of an increase in the average balance of interest earning assets .
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ROO
| 8,209
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the income from operations decreased in 2014 from 2013 primarily due to lower sales , the impairment charge and the 2013 income recorded from the settlement of the lawsuit against a third party . in both 2014 and 2013 , the company decreased the interest it had accrued related to its tax reporting of the unauthorized transactions by $ 73,725 and $ 145,488 , respectively . the company reversed accrued interest related to the tax returns as they were filed and based upon the expiration of the statute of limitations for certain returns . these impacts are described further in note 13 of the notes to the consolidated financial statements . the effective income tax rate in 2014 was 44.2 % which is comprised of the u.s. federal statutory rate of 34 % , the effect of state income taxes , the decrease in unrecognized tax benefits and the recognition of some federal income tax credits during the year . it is anticipated that the effective income tax rate will be approximately 37 % in 2015 . liquidity and capital resources cash flows the following table summarizes our cash flows from operating , investing and financing activities for each of the past two fiscal years : replace_table_token_5_th operating activities during 2014 , cash provided by operations stayed approximately the same as the prior year with favorable changes to operating assets and liabilities offsetting the decrease in net income . accounts receivable decreased by $ 9,024,275 as of june 30 , 2014 compared to june 30 , 2013. the proceeds of $ 8,500,000 from the lawsuit settlement , received in july 2013 , were in accounts receivable at june 30 , 2013. in addition , there was a decrease in accounts receivable from customers caused by lower sales late in fiscal year 2014 compared to the same period in fiscal year 2013. the contingent legal fees , related to the lawsuit settlement , were $ 2,120,000 and were recorded in accrued liabilities as of june 30 , 2013 . 12 investing activities cash used in investing activities was lower for 2014 as the company decreased spending on tooling and equipment compared to 2013. in 2015 , the company has budgeted $ 600,000 for tooling and leasehold improvements . the company expects to generate sufficient funds through operations to fund these expenditures . financing activities net cash used in financing activities were similar in 2014 because the company paid the same amount in dividends as it did in 2013 . at the board of directors meeting in may 2014 , the company determined that based on the financial results , the company would not declare a quarterly dividend for the quarter ending june 30 , 2014 . the company will determine whether to declare and the amount of any future dividends based upon its assessment of the company 's financial condition and liquidity , improvement in sales as a whole and in particular in the export markets , an increased generation of cash from operations , and the company 's earnings . dividends declared to stockholders decreased in 2014 but dividends paid stayed the same at $ 1,771,849 or $ 0.18 per share in 2014 . as of june 30 , 2014 , the company had no outstanding borrowings on its bank line of credit facility . on july 31 , 2014 , the company had no outstanding borrowings on its bank line of credit facility and availability of approximately $ 5,000,000 under the credit agreement as amended on july 23 , 2014. there were no purchases of common stock in 2014 or 2013 under the stock repurchase program . no stock options were exercised in 2014 or 2013 . story_separator_special_tag compensation , income taxes and other contingencies . we base our estimates on historical experience and assumptions that we believe to be reasonable under the circumstances . actual results may differ from these estimates . revenue recognition the company recognizes revenue when all of the following criteria are met : persuasive evidence of an arrangement exists ; shipment and delivery has occurred ; the seller 's price to the buyer is fixed and determinable ; and collectibility is reasonably assured . when these criteria are generally satisfied , the company recognizes revenue . the company also offers certain customers the right to return products that do not meet the standards agreed with the customer . the company continuously monitors such product returns and can not guarantee that they will continue to experience the same return rates that they have experienced in the past . any significant increase in product quality failure rates and the resulting credit returns could have a material adverse impact on the company 's operating results for the period or periods in which such returns materialize . the company provides for certain sales incentives . the company records a provision for estimated incentives based upon the incentives offered to customers on product related sales in the same period as the related revenues are recorded . the provision is recorded as a reduction of sales . the company also records a provision for estimated sales returns and allowances on product related sales in the same period as the related revenues are recorded . these estimates are based on historical sales returns , analysis of credit memo data and other known factors . if the historical data the company uses to calculate these estimates does not properly reflect future returns , adjustments may be required in future periods . accounts receivable the company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer 's current credit worthiness , as determined by the review of the customer 's current credit information . story_separator_special_tag disclosure controls and procedures ( as defined in rules 13a-15 ( e ) and 15d-15 ( e ) ) of the securities exchange act of 1934 , as amended ( the “ exchange act ” ) are designed to ensure that ( 1 ) information required to be disclosed in reports filed or submitted under the exchange act is recorded , processed , summarized and reported within the time periods specified in sec rules and forms ; and ( 2 ) that such information is accumulated and communicated to management , including the principal executive officer and principal financial officer , to allow timely decisions regarding required disclosures . there are inherent limitations to the effectiveness of any system of disclosure controls and procedures , including the possibility of human error and the circumvention or overriding of controls and procedures . accordingly , even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives . the company 's management , including the company 's chief executive officer and chief financial officer , evaluated the effectiveness of the design and operation of the company 's disclosure controls and procedures as of june 30 , 2014 . the company 's management has concluded that the company 's disclosure controls and procedures as of june 30 , 2014 were effective . management 's annual report on internal controls over financial reporting . the company 's management , including its chief executive officer and chief financial officer , is responsible for establishing and maintaining adequate internal control over financial reporting ( as defined in exchange act rules 13a-15 ( f ) and 15d-15 ( f ) ) and designing such internal controls to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the united states of america . there are inherent limitations to the effectiveness of any system of internal control over financial reporting , including the possibility of human error or the circumvention or overriding of controls and procedures . accordingly , even effective internal control over financial reporting can only provide reasonable assurance of achieving its control objectives . management conducted its evaluation of the effectiveness of its internal control over financial reporting based on the framework in the “ 1992 internal control-integrated framework ” and the 2006 `` internal control over financial reporting - guidance for smaller public companies , `` both issued by the committee of sponsoring organizations of the treadway commission ( “ coso ” ) . in connection with this evaluation , there were no changes in the company 's internal control over financial reporting ( as such term is defined in rule 13a-15 ( e ) and 15d-15 ( e ) of the exchange act ) during the quarter ended june 30 , 2014 that have materially affected , or are reasonably likely to materially affect , the company 's internal control over financial reporting . based on this evaluation , management has concluded that the company 's internal control over financial reporting as of june 30 , 2014 was effective . the company plans to adopt `` the 2013 coso framework & sox compliance , `` also issued by coso , on or before the required conversion date in december 2014 . 16 part iii item 10. directors , executive officers and corporate governance . this information is incorporated by reference to the sections entitled `` information as to the nominees , `` `` executive officers , `` `` section 16 ( a ) beneficial reporting compliance , `` `` code of ethics `` and `` board committees - audit committee `` from koss corporation 's proxy statement for its 2014 annual meeting of stockholders filed with the commission under regulation 14a within 120 days of the end of the fiscal year covered by this form 10-k. the company adopted a code of ethics , which is a `` code of ethics `` as defined by applicable rules of the sec , which is applicable to its directors , officers and employees . the code of ethics is publicly available on the company 's website at www.koss.com/en/about/history . if the company makes any substantive amendments to the code of ethics or grants any waiver , including any implicit waiver , from a provision of the code to its principal executive officer , principal financial officer , principal accounting officer or controller or persons performing similar functions , the company will disclose the nature of the amendment or waiver on that website or in a report on form 8-k. item 11. executive compensation . this information is incorporated by reference to the sections entitled `` summary compensation table , `` `` outstanding equity awards at fiscal year end , `` `` director compensation , `` and `` board committees - compensation committee `` from koss corporation 's proxy statement for its 2014 annual meeting of stockholders filed with the commission under regulation 14a within 120 days of the end of the fiscal year covered by this form 10-k. item 12. security ownership of certain beneficial owners and management and related stockholder matters . this information is incorporated by reference to the sections entitled `` beneficial ownership of company securities `` and `` equity compensation plan information `` from koss corporation 's proxy statement for its 2014 annual meeting of stockholders filed with the commission under regulation 14a within 120 days of the end of the fiscal year covered by this form 10-k. item 13. certain relationships and related transactions , and director independence . this information is incorporated by reference to the sections entitled `` independence of the board , `` `` board committees `` and `` related party transactions `` from koss corporation 's proxy statement for its 2014 annual meeting of stockholders filed with the commission under regulation 14a within 120 days of the end of the fiscal year covered by this form
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as of june 30 , 2014 , the board of directors has authorized the repurchase by the company of up to $ 2,139,753 in company common stock at the discretion of the chief executive officer of the company . future stock purchases under this program are dependent on management 's assessment of value versus market price . 13 off-balance sheet arrangements the company has no off-balance sheet arrangements other than the lease for the facility in milwaukee , wisconsin . the company leases the facility from koss holdings , llc , which is wholly-owned by the company 's chairman . on may 15 , 2012 , the lease was renewed for a period of five years , ending june 30 , 2018 , and is being accounted for as an operating lease . the lease extension maintained the rent at a fixed rate of $ 380,000 per year . the company is responsible for all property maintenance , insurance , taxes and other normal expenses related to ownership . the facility is in good repair and , in the opinion of management , is suitable and adequate for the company 's business purposes . critical accounting policies our discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . the preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . we continually evaluate our estimates and judgments , including those related to doubtful accounts , product returns , excess inventories , warranties , impairment of long-lived assets , deferred
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Liquidity
| 15,153
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as of december 31 , 2020 , we had six properties under active redevelopment and others in various stages of feasibility planning for potential recapture from our net lease portfolio , including four properties for which we have signed new leases and which will be transferred to redevelopment when the appropriate entitlements , permits and approvals have been secured . asset impairment we perform an impairment analysis for the carrying amounts of our properties in accordance with gaap when indicators of impairment exist . we reduced the carrying amounts to fair value , and recorded impairment charges aggregating $ 4.3 million and $ 4.0 million for the years ended december 31 , 2020 and 2019 , respectively , where the carrying amounts of the properties exceed the estimated undiscounted cash flows expected to be received during the assumed holding period which includes the estimated sales value expected to be received at disposition . the impairment charges were attributable to the effect of adding asset retirement costs to certain properties due to changes in estimates associated with our environmental liabilities , which increased the carrying values of these properties in excess of their fair values , reductions in estimated undiscounted cash flows expected to be received during the assumed holding period for certain of our properties , and reductions in estimated sales prices from third-party offers based on signed 31 contracts , letters of intent or indicative bids for certain of our properties . the evaluation and estimates of anticipated cash flows used to conduct our impairment analysis are highly subjective and actual results could vary significantly from our estimates . for a discussion of the risks associated with asset impairments , see “ item 1a . risk factors – our assets may be subject to impairment charges . ” supplemental non-gaap measures we manage our business to enhance the value of our real estate portfolio and , as a reit , place particular emphasis on minimizing risk , to the extent feasible , and generating cash sufficient to make required distributions to stockholders of at least 90 % of our ordinary taxable income each year . in addition to measurements defined by gaap , we also focus on funds from operations ( “ ffo ” ) and adjusted funds from operations ( “ affo ” ) to measure our performance . ffo and affo are generally considered by analysts and investors to be appropriate supplemental non-gaap measures of the performance of reits . ffo and affo are not in accordance with , or a substitute for , measures prepared in accordance with gaap . in addition , ffo and affo are not based on any comprehensive set of accounting rules or principles . neither ffo nor affo represent cash generated from operating activities calculated in accordance with gaap and therefore these measures should not be considered an alternative for gaap net earnings or as a measure of liquidity . these measures should only be used to evaluate our performance in conjunction with corresponding gaap measures . ffo is defined by the national association of real estate investment trusts ( “ nareit ” ) as gaap net earnings before depreciation and amortization of real estate assets , gains or losses on dispositions of real estate , impairment charges and the cumulative effect of accounting changes . our definition of affo is defined as ffo less ( i ) certain revenue recognition adjustments ( defined below ) , ( ii ) changes in environmental estimates , ( iii ) accretion expense , ( iv ) environmental litigation accruals , ( v ) insurance reimbursements , ( vi ) legal settlements and judgments , ( vii ) acquisition costs expensed and ( viii ) other unusual items that are not reflective of our core operating performance . other reits may use definitions of ffo and or affo that are different from ours and , accordingly , may not be comparable . we believe that ffo and affo are helpful to analysts and investors in measuring our performance because both ffo and affo exclude various items included in gaap net earnings that do not relate to , or are not indicative of , our core operating performance . specifically , ffo excludes items such as depreciation and amortization of real estate assets , gains or losses on dispositions of real estate , and impairment charges . however , gaap net earnings and ffo typically include certain other items that the we exclude from affo , including the impact of revenue recognition adjustments comprised of deferred rental revenue ( straight-line rental revenue ) , the net amortization of above-market and below-market leases , adjustments recorded for the recognition of rental income from direct financing leases and the amortization of deferred lease incentives ( collectively , “ revenue recognition adjustments ” ) that do not impact our recurring cash flow and which are not indicative of our core operating performance . deferred rental revenue results primarily from fixed rental increases scheduled under certain leases with our tenants . in accordance with gaap , the aggregate minimum rent due over the current term of these leases is recognized on a straight-line basis rather than when payment is contractually due . the present value of the difference between the fair market rent and the contractual rent for in-place leases at the time properties are acquired is amortized into revenues from rental properties over the remaining lives of the in-place leases . income from direct financing leases is recognized over the lease terms using the effective interest method , which produces a constant periodic rate of return on the net investments in the leased properties . the amortization of deferred lease incentives represents our funding commitment in certain leases , which deferred expense is recognized on a straight-line basis as a reduction of rental revenue . story_separator_special_tag on december 14 , 2020 , we used a portion of the net proceeds from the series i notes , series j notes and series k notes ( each as described below ) to repay $ 75.0 million of borrowings outstanding under our restated credit agreement . senior unsecured notes on december 4 , 2020 , we entered into a fifth amended and restated note purchase and guarantee agreement ( the “ fifth amended and restated prudential agreement ” ) with prudential and certain of its affiliates amending and restating our existing fourth amended and restated note purchase agreement . pursuant to the fifth amended and restated prudential agreement , we agreed that our ( a ) 6.0 % series a guaranteed senior notes due february 25 , 2021 , in the original aggregate principal amount of $ 100.0 million ( the “ series a notes ” ) , ( b ) 5.35 % series b guaranteed senior notes due june 2 , 2023 , in the original aggregate principal amount of $ 75.0 million ( the “ series b notes ” ) , ( c ) 4.75 % series c guaranteed senior notes due february 25 , 2025 , in the aggregate principal amount of $ 50.0 million ( the “ series c notes ” ) and ( d ) 5.47 % series d guaranteed senior notes due june 21 , 2028 , in the aggregate principal amount of $ 50.0 million ( the “ series d notes ” ) and ( e ) 3.52 % series f guaranteed senior notes due september 12 , 2029 , in the aggregate principal amount of $ 50.0 million ( the “ series f notes ” ) that were outstanding under the existing fourth restated prudential note purchase agreement would continue to remain outstanding under the fifth amended and restated prudential agreement and we authorized and issued our 3.43 % series i guaranteed senior notes due november 25 , 2030 , in the aggregate principal amount of $ 100.0 million ( the “ series i notes ” and , together with the series a notes , series b notes , series c notes , series d notes and series f notes , the “ notes ” ) to prudential . on december 4 , 2020 , we completed the early redemption of our 6.0 % series a notes due february 25 , 2021 , in the original aggregate principal amount of $ 100.0 million . as a result of the early redemption , we recognized a $ 1.2 million loss on extinguishment of debt on our consolidated statement of operations for the year ended december 31 , 2020. the fifth amended and restated prudential agreement does not provide for scheduled reductions in the principal balance of the series i notes , or any of our previously issued series b notes , series c notes , series d notes , or series f notes prior to their respective maturities . on june 21 , 2018 , we entered into a note purchase and guarantee agreement ( the “ metlife note purchase agreement ” ) with metlife and certain of its affiliates . pursuant to the metlife note purchase agreement , we authorized and issued our 5.47 % series e guaranteed senior notes due june 21 , 2028 , in the aggregate principal amount of $ 50.0 million ( the “ series e notes ” ) . the metlife note purchase agreement does not provide for scheduled reductions in the principal balance of the series e notes prior to their maturity . on december 4 , 2020 , we entered into a first amendment to note purchase and guarantee agreement ( the “ first amended and restated aig agreement ” ) with american general life insurance company amending and restating our existing note purchase and guarantee agreement . pursuant to the first amended and restated aig agreement , we agreed that our 3.52 % series g guaranteed senior notes due september 12 , 2029 , in the aggregate principal amount of $ 50.0 million ( the “ series g notes ” ) that were outstanding under the existing note purchase and guarantee agreement would continue to remain outstanding under the first amended and restated aig agreement and we authorized and issued our $ 50.0 million of 3.43 % series j guaranteed senior notes due november 25 , 2030 ( the “ series j notes ” ) to aig . the first amended and restated aig agreement does not provide for scheduled reductions in the principal balance of the series j notes or any of our previously issued series g notes prior to their respective maturities . on december 4 , 2020 , we entered into a first amended and restated note purchase and guarantee agreement ( the “ first amended and restated massmutual agreement ” ) amending and restating our existing note purchase and guarantee agreement . pursuant to the first amended and restated massmutual agreement , we agreed that our 3.52 % series h guaranteed senior notes due september 12 , 2029 , in the aggregate principal amount of $ 25.0 million ( the “ series h notes ” ) that were outstanding under the existing note purchase and guarantee agreement would continue to remain outstanding under the first amended and restated massmutual agreement and we authorized and issued our $ 25.0 million of 3.43 % series k guaranteed senior notes due november 25 , 2030 ( the “ series k notes ” ) to massmutual . the first amended and restated massmutual agreement does not provide for scheduled reductions in the principal balance of the series k or any of our previously issued series h notes prior to their respective maturities . we used the net proceeds from the issuance of the series i notes , series j notes and series k notes to prepay in full our series a notes due february 25 , 2021 , and repay $ 75.0 million
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because we generally lease our properties on a triple-net basis , we have not historically incurred significant capital expenditures other than those related to investments in real estate and our redevelopment activities . net cash flow used in investing activities increased by $ 44.8 million for the year ended december 31 , 2020 , to a use of $ 127.4 million , as compared to a use of $ 82.6 million for the year ended december 31 , 2019. the increase in net cash flow from investing activities for the year ended december 31 , 2020 , was primarily due to an increase of $ 62.8 million of property acquisitions a $ 2.4 million increase in issuance of notes receivable and a $ 1.9 million increase in deposits for property acquisitions , partially offset by an increase of $ 18.6 million in collections of notes and mortgages receivable and an increase of $ 3.8 million in proceeds from dispositions of real estate . financing activities net cash flow provided by financing activities increased by $ 97.3 million for the year ended december 31 , 2020 , to $ 78.0 million , as compared to a use of $ 19.3 million for the year ended december 31 , 2019. the increase in net cash flow from financing activities for the year ended december 31 , 2020 , was primarily due to an increase in net borrowings of $ 54.0 million and an increase in net proceeds from issuances of common stock of $ 49.0 million , partially offset by an increase in dividends paid of $ 5.7 million . credit agreement on june 2 , 2015 , we entered into a $ 225.0 million senior unsecured credit agreement ( the “ credit agreement ” ) with a group of banks led by bank of america , n.a .
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Liquidity
| 5,637
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by integrating a wide range of investment solutions and services , our web-based platform provides financial advisors with the flexibility to address their clients ' needs . envestnet empowers financial advisors to deliver fee-based advice to their clients . we work with both independent advisors ( rias ) , as well as advisors associated with financial institutions ( broker dealers , banks ) . the services we offer and market to financial advisors address advisors ' ability to grow their practice as well as operate more efficiently the envestnet platform spans from the initial meeting an advisor has with a prospective client to the ongoing day-to-day operations of managing an advisory practice . our centrally-hosted technology platform , which we refer to as having open architecture because of its flexibility , provides financial advisors with access to a series of integrated services to help them better serve their clients . these services include risk assessment and selection of investment strategies and solutions , asset allocation models , research and due diligence , portfolio construction , proposal generation and paperwork preparation , model management and account rebalancing , account monitoring , customized fee billing , overlay services covering asset allocation , tax management and socially responsible investing , aggregated multi-custodian performance reporting and communication tools , as well as access to a wide range of leading third-party asset custodians . we offer these solutions principally through the following product and services suites : envestnet 's wealth management software empowers advisors to better manage client outcomes and strengthen their practice . our software unifies the applications and services advisors use to manage their practice and advise their clients , including financial planning ; capital markets assumptions ; asset allocation guidance ; research and due diligence on investment managers and funds ; portfolio management , trading and rebalancing ; multi-custodial , aggregated performance reporting ; and billing calculation and administration . our portfolio management consultants group ( envestnet | pmc ® ) primarily engages in consulting services aimed at providing financial advisors with additional support in addressing their clients ' needs , as well as the creation of proprietary investment solutions and products . envestnet | pmc 's investment solutions and products include managed account and multi-manager portfolios , mutual fund portfolios and etf portfolios . envestnet | pmc also offers prima premium research , comprising institutional-quality research and due diligence on investment managers , mutual funds , etfs and liquid alternatives funds . envestnet | tamarac provides leading portfolio accounting , rebalancing , trading , performance reporting and client relationship management software , principally to high-end rias . envestnet reporting solutions software aggregates and manages investment data , provides performance reporting and benchmarking , giving advisors an in-depth view of clients ' various investments , empowering advisors to give holistic , personalized advice . we believe that our business model results in a high degree of recurring and predictable financial results . revenues overview we earn revenues primarily under two pricing models . first , a majority of our revenues is derived from fees charged as a percentage of the assets that are managed or administered on our technology platform by 36 financial advisors . these revenues are recorded under revenues from assets under management ( aum ) or administration ( aua ) or collectively ( aum/a ) . our asset-based fees vary based on the types of investment solutions and services that financial advisors utilize . asset-based fees accounted for approximately 81 % , 81 % and 77 % of our total revenues for the years ended december 31 , 2012 , 2011 and 2010 , respectively . in future periods , the percentage of our total revenues attributable to asset-based fees is expected to vary based on fluctuations in securities markets , whether we enter into significant license agreements , the mix of aum or aua , and other factors . as of december 31 , 2012 , approximately $ 98 billion of investment assets subject to asset-based fees were managed or administered utilizing our technology platform by approximately 16,100 financial advisors through approximately 450,000 investor accounts . we also generate revenues from recurring , contractual licensing fees for providing access to our technology platform . these revenues are recorded under revenues from licensing and professional services . licensing fees are generally fixed in nature for the contract term and are based on the level of investment solutions and services provided , rather than on the amount of client assets on our technology platform . licensing fees accounted for 15 % , 16 % and 20 % of our total revenues for the years ended december 31 , 2012 , 2011 and 2010 , respectively . fees received in connection with professional services accounted for the remainder of our total revenues . as of december 31 , 2012 , approximately $ 270 billion of investment assets for which we receive licensing fees for utilizing our technology platform were serviced by approximately 6,900 financial advisors through approximately 1,228,000 investor accounts . the following table provides information regarding the amount of assets utilizing our platform , financial advisors and investor accounts in the periods indicated . replace_table_token_5_th revenues from assets under management or administration we generally charge our customers fees based on a higher percentage of the market value of aum than the fees we charge on the market value of aua , because we provide fiduciary oversight and or act as the investment advisor in connection with assets we categorize as aum . the level of fees varies based on the nature of the investment solutions and services we provide , as well as the specific investment manager , fund and or custodian chosen by the financial advisor . a portion of our revenues from assets under management or administration include costs paid by us to third parties for sub-advisory , clearing , custody and brokerage services . these expenses are recorded under cost of revenues . we do not have fiduciary responsibility in connection with aua and , therefore , charge lower fees on these assets . story_separator_special_tag furniture and equipment is depreciated using the straight-line method based on the estimated useful lives of the depreciable assets . leasehold improvements are amortized using the straight-line method over their estimated economic useful lives or the remaining lease term , whichever is shorter . improvements are capitalized , while repairs and maintenance costs are recorded as expenses in the period they are incurred . assets are tested for recoverability whenever events or circumstances indicate that the carrying value of the assets may not be recoverable . internally developed software is amortized on a straight-line basis over its estimated useful life . we evaluate the useful lives of these assets on an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets . intangible assets are depreciated using an accelerated basis over their estimated economic useful lives and are reviewed for possible impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets . recent developments 2013 developments wealth management solutions on april 11 , 2013 , we entered into a definitive agreement to acquire substantially all of the assets of the wealth management solutions ( wms ) division of prudential investments for $ 10,000 in cash upon closing , subject to certain post-closing adjustments , plus contingent consideration of up to a total of $ 23,000 in cash , based upon meeting certain performance targets , to be paid over three years . wms is a provider of technology solutions that enables financial services firms to develop and enhance their wealth management offerings . we anticipate the acquisition will be completed in the third quarter of 2013 . 2012 developments prima capital holding , inc. agreement on april 5 , 2012 , we completed the acquisition of prima . in accordance with the stock purchase agreement , we acquired all of the outstanding shares of prima for consideration of $ 13,925. prima , now part of envestnet | pmc , provides investment management due diligence , research applications , asset allocation modeling and multi-manager portfolios to the wealth management and retirement industries . prima 's clientele includes banks , independent rias , regional broker-dealers , family offices and trust companies . tamarac , inc. agreement on may 1 , 2012 , we completed the acquisition of tamarac . in accordance with the merger agreement , a newly formed subsidiary of envestnet merged with and into tamarac , and tamarac became a wholly-owned subsidiary of envestnet . under the terms of the merger agreement , net consideration was $ 48,427 for all of the outstanding stock of tamarac . tamarac provides leading portfolio accounting , rebalancing , trading , performance reporting and client relationship management software , principally to high-end rias . 40 in accordance with the terms of the merger agreement between envestnet and tamarac , tamarac senior management were required to apply at least 50 % ( up to 100 % ) of the aggregate proceeds of the tamarac change of control payment totaling $ 2,759 to purchase registered shares of envestnet common stock ( 232,150 shares ) in an amount equal to 95 % multiplied by the envestnet closing market price on the day before the merger closed ( see notes 3 and 12 to the notes to consolidated financial statements ) . in addition , we adopted the envestnet , inc. management incentive plan for envestnet | tamarac management employees ( the 2012 plan ) . the 2012 plan provides for the grant of up to 559,551 shares of unvested common stock . the unvested common stock vests based upon tamarac meeting certain performance conditions and then a subsequent two-year service condition . we also granted to certain tamarac employees 232,150 stock options to acquire envestnet common stock at an exercise price of $ 12.51. these stock options vest on the second anniversary of the grant date ( see notes 3 and 13 to the notes to consolidated financial statements ) . 2011 developments fundquest agreement on december 13 , 2011 , we acquired all of the outstanding shares of fundquest for total consideration of $ 27,796. fundquest , operating as envestnet portfolio solutions , inc. , provides managed account programs , overlay portfolio management , mutual funds , institutional asset management and investment consulting to registered investment advisors , independent advisors , broker-dealers , banks and trust organizations . upon closing of the transaction , the existing platform services agreement between us and fundquest was terminated ( see note 3 to the notes to consolidated financial statements ) and approximately $ 5.8 billion of fundquest 's assets were reclassified to assets under management from assets under administration . in addition , one of fundquest 's clients with $ 1.5 billion in assets transitioned to licensing from assets under administration . fidelity agreement for the years ended december 31 , 2012 , 2011 and 2010 , revenues associated with our relationship with our single largest client , fidelity , accounted for 22 % , 31 % and 31 % , respectively , of our total revenues . as of december 31 , 2011 , we renegotiated a five-year license agreement with fidelity which resulted in a reduction in 2012 license fee revenues . in addition , as a part of the renegotiated agreement , we will continue to receive ongoing platform services fees through the fidelity relationship based upon asset-based fees . critical accounting policies our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the united states , or ( u.s . gaap ) . the accounting policies described below require management to apply significant judgment in connection with the preparation of our consolidated financial statements . in particular , judgment is applied to determine the appropriate assumptions to be used in calculating estimates that affect certain reported amounts in our consolidated financial statements . these estimates and assumptions are based on historical experience and on various other factors that we believe to be reasonable under the circumstances .
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results of operations year ended december 31 , 2012 compared to year ended december 31 , 2011 replace_table_token_11_th 48 revenues total revenues increased 28 % from $ 123,213 in 2011 to $ 157,266 in 2012. the increase was primarily due to an increase in revenues from assets under management or administration of $ 27,977. revenues from assets under management or administration comprised 81 % of total revenues in both 2012 and 2011. assets under management or administration revenues earned from assets under management or administration increased 28 % from $ 99,236 in 2011 to $ 127,213 in 2012. this increase was primarily due to an increase in asset values applicable to our quarterly billing cycles in 2012 , relative to those used in 2011. our 2012 revenues were positively affected by new account growth and positive net flows of aum and aua during 2011 and through september 2012 , as well as an increase in revenues related to fundquest . the number of financial advisors with aum or aua on our technology platform increased from 13,887 as of december 31 , 2011 to 16,085 as of december 31 , 2012 and the number of aum or aua client accounts increased from approximately 341,000 as of december 31 , 2011 to approximately 450,000 as of december 31 , 2012. licensing and professional services licensing and professional services revenues increased 26 % from $ 23,942 in 2011 to $ 30,053 in 2012. this increase was primarily due to an increase in licensing revenue of $ 3,787 and an increase in professional services revenue of $ 2,327. the increase in licensing revenue was primarily a result of the acquisitions of prima and tamarac , partially offset by the renegotiated license agreement with fidelity . cost of revenues cost of revenues increased 31 % from $ 42,831 in 2011 to $ 56,119 in 2012 , primarily due to the corresponding increase in revenues from aum or aua .
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59 management 's discussion and analysis cost of revenue and gross margin cpaas cost of revenue consists primarily of fees paid to other network service providers from whom we buy services such as minutes of use , phone numbers , messages , porting of customer numbers and network circuits . cost of revenue also contains costs related to support of our ip voice network , web services , cloud infrastructure , capacity planning and management , rent for network facilities , software licenses , hardware and software maintenance fees and network engineering services . personnel costs ( including non-cash stock-based compensation expenses ) associated with personnel who are responsible for the delivery of services , operation and maintenance of our communications network , and customer support as well as , third-party support agreements and depreciation of network equipment , amortization of internally developed software and gain ( loss ) on disposal of property and equipment are also included in cost of revenue . other cost of revenue consists of costs supporting non-cpaas services including leased circuit costs paid to third party providers , internet connectivity expenses , minutes of use , direct operations , contractors , regulatory fees , surcharges and other pass-through costs and software and hardware maintenance fees . gross margin is calculated by subtracting cost of revenue from revenue , divided by total revenue , expressed as a percentage . our cost of revenue and gross margin have been , and will continue to be , affected by several factors , including the timing and extent of our investments in our network , our ability to manage off-network minutes of use and messaging costs , the product mix of revenue , the timing of amortization of capitalized software development costs and the extent to which we periodically choose to pass on any cost savings to our customers in the form of lower usage prices . operating expenses the most significant components of operating expenses are personnel costs , which consist of salaries , benefits , bonuses , and stock-based compensation expenses . we also incur other non-personnel costs related to our general overhead expenses , including facility expenses , software licenses , web services , depreciation and amortization of assets unrelated to delivery of our services . we expect that our operating expenses will increase in absolute dollars . research and development r & d consist primarily of personnel costs ( including non-cash stock-based compensation expenses ) , outsourced software development and engineering service and cloud infrastructure fees for staging and development of outsourced engineering services . we capitalize the portion of our software development costs in instances where we invest resources to develop software for internal use . we plan to continue to invest in r & d to enhance current product offerings and develop new services . sales and marketing sales and marketing expenses consist primarily of personnel costs , including commissions for our sales employees and non-cash stock-based compensation expenses . sales and marketing expenses also include expenditures related to advertising , marketing , our brand awareness activities , sales support and professional services fees . 60 management 's discussion and analysis we focus our sales and marketing efforts on creating sales leads and establishing and promoting our brand . we plan to continue to invest in sales and marketing in order to expand our cpaas customer base by growing headcount , driving our go-to-market strategies , building brand awareness , advertising and sponsoring additional marketing events . general and administrative general and administrative expenses consist primarily of personnel costs , including stock-based compensation , for our accounting , finance , legal , human resources and administrative support personnel and executives . general and administrative expenses also include costs related to product management and reporting , customer billing and collection functions , information services , professional services fees , credit card processing fees , rent associated with our headquarters in raleigh , north carolina and our other offices , and depreciation and amortization . we expect that we will incur increased costs associated with supporting the growth of our business and to meet the increased compliance requirements associated with our transition to , and operation as , a public company . income taxes for the years ended december 31 , 2015 , 2016 and 2017 , our effective tax rate was 5.5 % , ( 77.4 ) % and 53.7 % , respectively . the increase in our effective tax rate is due to the release of our valuation allowance against deferred tax assets in the fourth quarter of 2016 and the enactment of the tax cuts and jobs act ( the “ act ” ) in the fourth quarter of 2017 . 61 management 's discussion and analysis results of operations consolidated results of operations the following table sets forth the consolidated statements of operations for the periods indicated . replace_table_token_9_th 62 management 's discussion and analysis the following table sets forth our results of operations as a percentage of our total revenue for the periods presented . * replace_table_token_10_th ( * ) columns may not foot due to rounding . 63 management 's discussion and analysis comparison of the years ended december 31 , 2016 and 2017 revenue replace_table_token_11_th in 2017 , total revenue increased by $ 10.8 million , or 7 % , compared to 2016 , and cpaas revenue increased by $ 14.5 million , or 12 % . as a percentage of total revenue , cpaas revenue increased from 77 % to 81 % from 2016 to 2017 . the increase in cpaas revenue was primarily attributable to an increase in the usage of all our service offerings , particularly our voice and messaging usage , which accounted for $ 21.4 million of the increase in cpaas revenue , and our phone number services and 911-enabled phone number services , which accounted for $ 4.1 million of the increase in cpaas revenue . story_separator_special_tag the effective tax rate for 2016 was ( 77.4 ) % compared to 5.5 % for 2015. loss from discontinued operations , net of income tax in 2016 , loss from discontinued operations decreased by $ 10.6 million compared to 2015 due to the republic wireless spin-off in december 2016. quarterly results of operations the following tables set forth our unaudited quarterly statements of operations data for each of the eight quarters ended december 31 , 2017 . the information for each quarter has been prepared on a basis consistent with our audited consolidated financial statements included in this annual report on form 10-k , and reflect , in the opinion of management , all adjustments of a normal , recurring nature that are necessary for a fair presentation of the financial information contained in those statements . our historical results are not necessarily indicative of the results that may be expected in the future . the following quarterly financial data should be read in conjunction with our audited consolidated financial statements included in this annual report on form 10-k. 68 management 's discussion and analysis replace_table_token_17_th 69 management 's discussion and analysis liquidity and capital resources to date , our principal sources of liquidity have been the proceeds of $ 74.4 million , net of underwriting discounts and commissions , from our initial public offering in november 2017 , in addition to free cash flow driven by payments received from customers using our services , as well as borrowings under our senior secured credit facility . we believe that our cash and cash equivalents balances , our credit facility and the cash flows generated by our operations will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditures for at least the next 12 months . statement of cash flows the following table summarizes our cash flows from continuing operations for the periods indicated : replace_table_token_18_th story_separator_special_tag font style= `` font-family : inherit ; font-size:12pt ; `` > december 31 , 2017 . the availability under the credit and security agreement was $ 25.0 million as of december 31 , 2017 . contractual obligations and other commitments the following table summarizes our noncancellable contractual obligations as of december 31 , 2017 : replace_table_token_19_th ( 1 ) operating leases represent total future minimum rent payments under non-cancellable operating lease agreements . ( 2 ) purchase obligations represent total future minimum payments under contracts to various service providers . purchase obligations exclude agreements that are cancellable without penalty . off-balance sheet arrangements we have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities . critical accounting policies and significant judgments and estimates our consolidated financial statements are prepared in accordance with gaap . the preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenue , costs , and expenses and related disclosures . our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material . we believe the accounting policies discussed below are critical to the process of making significant judgments and estimates in the preparation of our financial statements , and to understanding our historical and future performance . revenue recognition and deferred revenue we generate revenue primarily from the sale of communication services to enterprise customers . we recognize revenue when all of the following criteria are met ( i ) persuasive evidence of an arrangement exists ; ( ii ) delivery has occurred ; ( iii ) the fee is fixed or determinable ; and ( iv ) collection is reasonably assured . if collection is not reasonably assured , we defer revenue recognition until collectability becomes reasonably assured . our arrangements do not contain general rights of return . we generally enter into arrangements with customers that are typically 2 to 3 years in length . incremental direct costs incurred related to the acquisition of a customer contract are expensed as incurred . 72 management 's discussion and analysis stock-based compensation stock options awarded to employees , directors and non-employee third parties are measured at fair value on each grant date . options subject to service-based vesting generally vest annually over a four-year period . the determination of the fair value of stock-based compensation arrangements on the grant date requires judgment . we recognize stock-based compensation expense using the black-scholes option-pricing model , net of estimated forfeitures , in order to determine the fair value of stock options , the output of which is affected by a number of variables . these variables include the fair value of our common stock , expected term of the options , expected stock price volatility , risk-free interest rate and expected dividends , which are estimated as follows : fair value of our common stock . the fair value of the shares of our common stock underlying stock options had historically been established by our board of directors with the assistance of an independent third-party valuation firm . because there had been no public market for our common stock , our board of directors had relied on this independent valuation and other factors to establish the fair value of our common stock at the time of grant of the option . the determination of the fair value of our common stock is discussed further below . expected term . the expected term was estimated using the simplified method allowed under sec guidance as we do not have sufficient historical data to use any other method to estimate the expected term . expected volatility . the
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in 2015 , cash provided by operating activities from continuing operations was $ 18.7 million due to net loss of $ 6.7 million that includes $ 13.7 million net loss by discontinued operations , depreciation and amortization of $ 7.1 million , $ 3.5 million of stock-based compensation expenses , loss on disposal of property and equipment of $ 0.4 million , deferred taxes of $ 0.3 million and an increase in working capital of $ 0.4 million . working capital consisted of a decrease in deferred costs of $ 2.9 million , an increase in accounts payable of $ 1.0 million and a decrease in accrued expenses and other liabilities of $ 2.5 million , and increases in prepaid expenses of $ 0.6 million and accounts receivable of $ 0.5 million . 70 management 's discussion and analysis as of december 31 , 2017 , we had an ongoing dispute and litigation with mci communications services , inc. d/b/a verizon business and verizon select services , inc. ( collectively , “ verizon ” ) , which is a carrier access billing ( “ cabs ” ) customer . billings to verizon were approximately $ 10.3 million and $ 9.6 million for the years ended december 31 , 2016 and 2017 , respectively . we recognize revenue for this customer only to the extent to which payments have been made . these outstanding amounts represent disputed and unpaid billings and were fully reserved within our allowance for doubtful accounts . we had not recognized revenue related to the outstanding and disputed balances . only if and when we reached an agreement with verizon to settle the outstanding and disputed billings which resulted in a payment for any or all amounts outstanding , would we recognize any revenue . recognition of revenue as a result of a settlement of disputed balances would result in an increase in cash flows from operating activities for the relevant period .
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in an effort to protect the health and safety of our employees , the company enacted numerous proactive , aggressive actions at its facilities globally in the first quarter of 2020 , and implemented a number of safety procedures including hygiene and disinfection protocols , social distancing and wearing ppe . the company expects these actions will continue for the foreseeable future . during 2020 , governments around the world enacted various measures in an effort to contain covid-19 and slow its spread . these measures included orders to close all businesses not deemed “ essential ” , isolate residents to their homes or places of residence , and practice social distancing when engaging in essential activities , which disrupted certain of our operating locations in around the world in the first half of 2020. during the second half of 2020 , all of our manufacturing facilities were operational and were generally running at normal capacity levels . the company continues to work with customers to meet production requirements for their products , many of which are considered essential , including healthcare and medical devices , transportation , communication and energy infrastructure . the company anticipates that the global health crisis caused by covid-19 may continue to negatively impact its business activity for the foreseeable future . it is currently difficult to estimate the magnitude of the covid-19 disruption , if future disruptions will occur due to a resurgence in covid-19 cases and its impact on our employees , customers , suppliers and 21 vendors . the company will continue to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees , customers , partners , suppliers , and other stakeholders , or as required by federal , state , or local authorities . it is not clear what the potential effects any such alterations or modifications may have on our business and operations , including the effects on our customers , employees , and prospects , or on our financial results for the fiscal year 2021. outlook vision and strategy the company closely collaborates with its customers to design and manufacture innovative and reliable solutions for a safer , connected , and more sustainable world in virtually every market that uses electrical energy ; for example , transportation applications like passenger and commercial vehicles , including emobility , industrial applications like renewables and energy storage , hvac and industrial automation and safety , motor drives and power conversion , and electronics applications like data centers and telecommunications , medical devices , home and building automation , appliances , and mobile and consumer electronics . built upon that framework , the secular growth themes of a safer , connected , and more sustainable world , drive increased product content opportunities . the company 's strategic plan is focused on increasing shareholder value by driving profitable sales growth , earnings per share growth , strong cash flow generation , and deploying capital to drive value creation . the company pursues the following major strategic initiatives , which are summarized below , along with more specific areas of focus . strategic objectives priorities double digit sales growth ● grow through increased product content with existing customers and increased market share ● expand portfolio into new and underpenetrated geographies and end markets ● increase innovation capabilities and investments ● expand presence in products and applications that are converging across business segments ● targeted mergers and acquisitions eps growth ● focus on higher profitability growth opportunities ● improve operating margins through operational excellence ● disciplined approach to balancing costs with long-term strategic investments cash flow and liquidity ● disciplined management of working capital ● deployment of capital consistent with capital allocation priorities ● mergers and acquisitions that align with strategy and financial metrics ● grow dividend in line with earnings ● opportunistic share repurchases the company 's strategy is to generate profitable sales growth . in order to accomplish this , the company is focusing on accelerating organic growth by increasing its content and share gains , enhancing technology efforts to drive innovation , capitalizing on cross segment opportunities , and gaining traction in underpenetrated geographies and markets . the company will continue to make targeted strategic acquisitions that align to its strategy and financial metrics to support new business , products , markets , and technologies while leveraging existing customers and targeting new customers . management believes that profitable growth through a combination of organic growth and strategic acquisitions is critical to the company 's competitiveness , while enhancing value the company delivers to all of its stakeholders . in addition , the company continues to implement initiatives across all platforms to enhance productivity while managing its cost structure to align with business conditions , including integration of operations and streamlining administrative and support activities to drive improved operating margins . the company seeks to deploy its capital consistent with capital allocation priorities . priorities for capital deployment , over time , include investments to drive increased organic growth , targeted acquisitions that align to the company 's strategic and financial metrics and returning capital to shareholders through dividends and opportunistic share repurchases . 22 the company has entered the last year of its current five-year growth strategy which is defined below . as such , the company will host a virtual investor and analyst event on february 23 , 2021 to share the specific details of its new five-year strategic plan , which reinforces the company 's continued commitment to profitable growth building on its achievements from its previous five-year plans . the company uses several key indicators to gauge progress toward achieving these objectives . these indicators include organic sales growth , operating margins , cash flow from operations and capital expenditures . story_separator_special_tag through cycles , the company targets double-digit long-term sales growth , split between 5-7 % average annual accelerated organic sales growth and 5-7 % average annual accelerated growth from strategic acquisitions , while targeting operating margins between 17 % and 19 % and double-digit earnings per share growth . cash flow from operations less capital expenditures is targeted to approximate or exceed net income but in any given year can be significantly impacted by the timing of non-recurring or infrequent expenditures . significant accounting policies and critical estimates critical accounting policies and estimates the preparation of financial statements in conformity with gaap requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities , 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 period . the company 's most critical accounting policies are those that are most important to the portrayal of its financial condition and results of operations , and which require the company to make its most difficult and subjective judgments , often as a result of the need to make estimates of matters that are inherently uncertain . the company has identified the following as its most critical accounting policies and judgments . although management believes that its estimates and assumptions are reasonable , they are based upon information available when they are made , and therefore , actual results may differ from these estimates under different assumptions or conditions . the company has reviewed these critical accounting policies and related disclosures with the audit committee of its board of directors . significant accounting policies are more fully described in the notes to consolidated financial statements included elsewhere in this annual report . revenue recognition on december 31 , 2017 , the company adopted new guidance on revenue from contracts with customers using the modified retrospective method . the adoption did not have a significant impact on the company 's consolidated financial statements . revenue disaggregation the following table disaggregates the company 's revenue by primary business units for the fiscal years ended december 26 , 2020 and december 28 , 2019 : replace_table_token_5_th 23 replace_table_token_6_th during the fourth quarter of 2020 , the company transferred a business previously reported within the electronics-semiconductor reporting unit to the electronics-passive products and sensors reporting units . this transfer aligns with how this business will be managed and is complimentary with existing electronics passive products and sensors and markets into which they sell . the 2019 disaggregated revenue table has been reclassified to reflect this change . this transfer had no impact to the electronics segment results . see note 16 , segment information , for net sales by segment and countries . revenue recognition the company recognizes revenue on product sales in the period in which the company satisfies its performance obligation and control of the product is transferred to the customer . the company 's sales arrangements with customers are predominately short term in nature and generally provide for transfer of control at the time of shipment as this is the point at which title and risk of loss of the product transfers to the customer . at the end of each period , for those shipments where title to the products and the risk of loss and rewards of ownership do not transfer until the product has been received by the customer , the company adjusts revenues and cost of sales for the delay between the time that the products are shipped and when they are received by the customer . the amount of revenue recorded reflects the consideration to which the company expects to be entitled in exchange for goods and may include adjustments for customer allowance , rebates and price adjustments . the company 's sales channels are primarily through direct sales and independent third-party distributors . the company has elected the practical expedient under accounting standards codification ( `` asc '' ) 340-40-25-4 to expense commissions when incurred as the amortization period of the commission asset the company would have otherwise recognized is less than one year . revenue and billing the company generally accepts orders from customers through receipt of purchase orders or electronic data interchange based on written sales agreements and purchasing contracts . contract pricing and selling agreement terms are based on market factors , costs , and competition . pricing is often negotiated as an adjustment ( premium or discount ) from the company 's published price lists . the customer is invoiced when the company 's products are shipped to them in accordance with the terms of the sales agreement . as the company 's standard payment terms are less than one year , the company has elected the practical expedient under asc 606-10-32-18 to not assess whether a contract has a significant financing component . the company also elected the practical expedient provided in asc 606-10-25-18b to treat all product shipping and handling activities as fulfillment activities , and therefore recognize the gross revenue associated with the contract , inclusive of any shipping and handling revenue . ship and debit program some of the terms of the company 's sales agreements and normal business conditions provide customers ( distributors ) the ability to receive price adjustments on products previously shipped and invoiced . this practice is common in the industry and is referred to as a “ ship and debit ” program . this program allows the distributor to debit the company for the difference between the distributors ' contracted price and a lower price for specific transactions . under certain circumstances ( usually in a competitive situation or large volume opportunity ) , a distributor will request authorization for pricing allowances to reduce its price . when the company approves such a reduction , the distributor is authorized to “ debit ” its account for the difference between the contracted price and the lower approved price .
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million repaid in full on april 3 , 2020 through a new borrowing of $ 140.0 million under the recently amended revolving credit facility . the company made payments of $ 110.0 million on the amended revolving credit facility during the fiscal year 2020. the balance under the facility was $ 130.0 million as of december 26 , 2020. for the fiscal year 2020 and 2019 , the company repurchased 175,110 and 579,916 shares of its common stock totaling $ 22.9 million and $ 95.0 million , respectively , but made payments of $ 99.4 million related to settled share repurchases during the fiscal year 2019. additionally , dividends paid increased $ 2.2 million from $ 44.7 million for the fiscal year 2019 to $ 46.8 million for the fiscal year 2020. the following describes the company 's cash flows for the twelve months ended december 28 , 2019 and december 29 , 2018 : replace_table_token_14_th cash flow from operating activities 38 net cash provided by operating activities was $ 245.3 million for 2019 , compared to $ 331.8 million during 2018. the decrease in net cash provided by operating activities was primarily driven by lower earnings and higher working capital levels primarily due to the timing of supplier payments , payroll year-end cut off and higher annual incentive compensation payments in 2019. cash flow from investing activities net cash used in investing activities was $ 56.4 million for 2019 , compared to $ 382.3 million during 2019. net cash used for the acquisition of ixys was $ 306.5 million and $ 9.0 million for the acquisition of the remaining 38 % outstanding common stock of monolith in 2018. capital expenditures were $ 61.9 million , representing a decrease of $ 12.9 million compared to 2018. the company also received proceeds of $ 6.2 million in 2019 primarily as a result of the sale of a property within the industrial segment .
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| 4,186
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unallocated internal research and development costs consist primarily of : o personnel costs , which include salaries , benefits and stock-based compensation expense ; o allocated facilities and other expenses , which include expenses for rent and maintenance of facilities and depreciation expense ; and o regulatory expenses and technology license fees related to development activities . the largest component of our operating expenses has historically been the investment in clinical trials , including contract manufacturing arrangements , clinical trial material related costs and other research and development activities . however , we do not allocate internal research and development costs , such as salaries , benefits , stock-based compensation expense and indirect costs to product candidates on a program-specific basis . the following table shows our research and development expenses for the years ended december 31 , 2020 , 2019 and 2018 ( in thousands ) : replace_table_token_1_th 76 we expect research and development expenses will continue to be significant and may increase in the future as we advance our product candidates into and through later stage clinical trials and pursue regulatory approvals , which will require a significant investment in regulatory support and contract manufacturing and clinical trial material related costs . in addition , we continue to evaluate opportunities to acquire or in-license other product candidates and technologies , which may result in higher research and development expenses due to license fees and or milestone payments . the process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming . we may never succeed in timely developing and achieving regulatory approval for our product candidates . the probability of success of our product candidates may be affected by numerous factors , including clinical data , competition , intellectual property rights , manufacturing capability and commercial viability . as a result , we are unable to determine the duration and completion costs of our development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates . the covid-19 pandemic presents additional risks and uncertainties associated with developing drugs , including : delays in trial activities and patient enrollment or diversion of healthcare resources as a result of the evolving effects of the covid-19 pandemic or otherwise ; production shortages or other supply interruptions in clinical trial materials resulting from the evolving effects of the covid-19 pandemic or otherwise ; our ability to hire and retain key research and development personnel ; the scope , rate of progress , results and expense of our ongoing , as well as any additional , clinical trials and other research and development activities ; and the timing and receipt of any regulatory approvals . general and administrative expenses general and administrative expenses consist of personnel costs , allocated expenses and expenses for outside professional services , including legal , audit , accounting services , insurance costs and costs associated with being a public company . personnel costs consist of salaries , benefits and stock-based compensation . allocated expenses consist of facilities and other expenses , which include direct and allocated expenses for rent and maintenance of facilities , depreciation expense and other supplies . our expenses include costs related to compliance with the rules and regulations of the sec and nasdaq , insurance , investor relations , banking fees and other administrative expenses and professional services . we expect our general and administrative expenses to increase in the future due to sales and marketing activities from the commercialization of zokinvy . interest expense interest expense consists of interest and amortization of the debt discount related to the oxford loan . interest income interest income consists of interest earned on our investments in debt securities and cash equivalents . critical accounting policies and estimates 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 generally accepted accounting principles in the united states . the preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities and expenses . on an ongoing basis , we evaluate these estimates and judgments . we base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances . these estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not 77 readily apparent from other sources . actual results may differ materially from these estimates . we believe that the accounting policies discussed below are critical to understanding our historical and future performance , as these policies relate to the more significant areas involving management 's judgments and estimates . accrued research and development costs we record accrued expenses for estimated costs of research and development activities conducted by external service providers , which include the conduct of clinical research and contract formulation and manufacturing activities . we record the estimated costs of development activities based upon the estimated amount of services provided but not yet invoiced and include these costs in accrued liabilities in the consolidated balance sheets and within research and development expenses in the consolidated statements of operations . we record accrued expenses for these costs based on the estimated amount of work completed and in accordance with agreements established with these external service providers . we estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services . we make judgments and estimates in determining the accrued balance in each reporting period . as actual costs become known , we adjust our accrued estimates . story_separator_special_tag million in net proceeds , after deducting commissions . on december 18 , 2020 , we filed a new shelf registration statement on form s-3 ( file no . 333-251497 ) with the securities and exchange commission , which permits the offering , issuance and sale by us up to a maximum aggregate offering price of $ 200.0 million of our common stock , preferred stock , debt securities and warrants . up to a maximum of $ 50.0 million of the maximum aggregate offering price of $ 200.0 million may be issued and sold pursuant to a new atm financing facility under a sales agreement with jefferies . we have not issued any shares under this facility . we believe that the currently available resources will be sufficient to fund our planned operations for at least the next 12 months following the issuance date of these consolidated financial statements . however , if our anticipated operating results are not achieved in future periods , we believe that planned expenditures may need to be reduced or we would be required to raise funding in order to fund our operations . additionally , our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to , and volatility in , the credit and financial markets in the united states and worldwide resulting from the ongoing covid-19 pandemic . our primary uses of cash are to fund operating expenses , including research and development expenditures and general and administrative expenditures . cash used to fund operating expenses is impacted by the timing of when we pay these expenses , as reflected in the change in outstanding accounts payable and accrued expenses . future funding requirements we have not generated any revenue from product sales . we expect to generate revenues from product sales of zokinvy beginning in 2021. at the same time , we expect our expenses to increase in connection with our ongoing development and manufacturing activities , particularly as we continue the research , development , manufacture and clinical trials of , and seek regulatory approval for our product candidates . our primary uses of capital are , and we expect will continue to be , funding research efforts and the development of our product candidates , sales and marketing costs for commercialization of zokinvy and other product candidates , compensation and related expenses , hiring additional staff , including clinical , scientific , operational , financial , and management personnel , and costs associated with operating as a public company . we expect to incur substantial expenditures in the foreseeable future for the development and potential commercialization of our product candidates . we plan to continue to fund losses from operations and capital funding needs through future equity and or debt financings , as well as potential additional collaborations or strategic partnerships with other companies . as a result of economic conditions , general global economic uncertainty , political change and other factors , including the ongoing covid-19 pandemic , we do not know whether additional capital will be available when needed , or that , if available , we will be able to obtain additional capital on reasonable terms . if we are unable to raise additional capital due to the volatile global financial markets , general economic uncertainty or other factors , we may need to curtail planned development or commercialization activities . the sale of additional equity or convertible debt could result in additional dilution to our stockholders . the incurrence of indebtedness would result in debt service obligations and could result in operating and financing covenants that would restrict our operations . we can provide no assurance that financing will be available in the amounts we need or on terms acceptable to us , if at all . if we are not able to secure adequate additional funding we may be forced to delay , make reductions in spending , extend payment terms with suppliers , liquidate assets where possible , and or suspend or curtail planned programs . any of these actions could materially harm our business . 80 cash flows the following table summarizes our cash flows for the periods indicated ( in thousands ) : replace_table_token_3_th story_separator_special_tag style= `` margin-top:6pt ; margin-bottom:0pt ; text-indent:0 % ; font-family : times new roman ; font-size:10pt ; font-weight : normal ; font-style : normal ; text-transform : none ; font-variant : normal ; `` > the amended oxford loan bears interest at a floating rate per annum equal to the greater of either the 30-day u.s. dollar libor reported in the wall street journal plus 6.64 % or 9.15 % . the amended oxford loan has an interest only period until april 1 , 2021 , followed by 36 equal monthly payments of principal and interest . upon the receipt of amended tranche b , the interest only period for borrowed funds will be extended by one year until april 1 , 2022 , followed by 24 equal monthly payments of principal plus accrued interest . at the time of final payment , we are required to pay an exit fee of 7.5 % of the original principal balance of borrowed funds , or $ 2.3 million . in addition , we are required to pay an additional exit fee of $ 1.0 million . on february 23 , 2021 , we entered into the fifth amendment to the oxford loan . the amendment extended the interest only period by 17 months until september 1 , 2022 , followed by 19 equal monthly payments of principal and interest . upon the receipt of amended tranche b , the interest only period for borrowed funds will be extended by six months until march 1 , 2023 , followed by 13 equal monthly payments of principal plus accrued interest . in addition , we paid the amendment fees of $ 0.2 million to the lenders on the effective
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cash flows from investing activities cash used in investing activities was $ 44.8 million for the year ended december 31 , 2020 , primarily consisting of $ 128.3 million of purchases of debt securities , partially offset by $ 83.8 million of proceeds from maturities of debt securities . cash used in investing activities for the year ended december 31 , 2019 was $ 16.5 million . the net cash decrease was primarily due to $ 96.3 million purchases of debt securities and $ 0.5 million purchases of property and equipment , which was partially offset by $ 80.3 million proceeds from maturities of debt securities . cash flows from financing activities cash provided by financing activities for the year ended december 31 , 2020 was $ 97.5 million and primarily consisted of $ 96.8 million of net proceeds from the issuance of common stock under our atm facilities and $ 0.7 million of proceeds from the issuance of common stock upon stock option exercises and espp purchase . cash provided by financing activities for the year ended december 31 , 2019 was $ 58.2 million and primarily consisted of $ 53.2 million of net proceeds from the issuance of common stock upon public offering , $ 4.0 million of proceeds from borrowings , net of repayments , in connection with the oxford loan , and $ 0.8 million of proceeds from the issuance of common stock upon stock option exercises . contractual obligations and other commitments leases and term loan refer to notes 7 and 12 to our consolidated financial statements included within item 8 of this annual report on form 10-k for a description of our contractual obligations at december 31 , 2020 . 81 asset and license agreements we are obligated to make future payments to third parties under asset purchase and license agreements , including royalties and payments that become due and payable on the achievement of certain development and commercialization milestones .
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Liquidity
| 13,105
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the preparation of these financial statements requires us to make estimates , judgments and assumptions that affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of expenses during the reporting periods . in accordance with u.s gaap , we evaluate our estimates and judgments on an ongoing basis . significant estimates include assumptions used in the determination of share-based compensation and some of our research and development expenses . we base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . we define our critical accounting policies , in accordance with u.s. gaap , as those that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations , as well as the specific manner in which we apply those principles . while our significant accounting policies are more fully 60 described in note 2 to our financial statements appearing elsewhere in this annual report , we believe the following are the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments . revenue recognition on january 1 , 2018 , we adopted accounting standards update , or asu , 2014-09 , revenue from contracts with customers ( topic 606 ) , or asc 606 , as amended by asu 2016-08 , 2016-10 , 2016-12 and 2016-20 using the modified retrospective method . under asc 606 , we recognize revenue in an amount that reflects the consideration to which we expect to be entitled in exchange for the transfer of promised goods or services to customers . to determine revenue recognition for contracts with customers that are within the scope of asc 606 , we perform the following steps : ( 1 ) identify the contract with the customer , ( 2 ) identify the performance obligations in the contract , ( 3 ) determine the transaction price , ( 4 ) allocate the transaction price to the performance obligations in the contract , and ( 5 ) recognize revenue when ( or as ) the entity satisfies a performance obligation . we only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services transferred to the customer . as part of the accounting for our revenue arrangements , we develop assumptions that require judgment such as the estimate of the stand-alone selling price for each performance obligation identified in the contract . licenses of intellectual property : if the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement , we recognize revenue allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license . for licenses that are bundled with other promised goods or services , we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and , if over time , the appropriate method of measuring progress for purposes of recognizing revenue . we evaluate the measure of progress each reporting period and , if necessary , adjust the measure of performance and related revenue recognition . milestone payments : at the inception of each arrangement that includes development , commercialization , and regulatory milestone payments , we evaluate whether the achievement of the milestones is considered probable and estimate the amount to be included in the transaction price using the most likely amount method . performance milestone payments represent a form of variable consideration . if it is probable that a significant revenue reversal would not occur , the associated milestone value is included in the transaction price . achievement of milestones that are not within our or our licensee 's control , such as regulatory approvals , are not considered probable until the approvals are achieved . the transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis and we recognize revenue as or when the performance obligations under the contract are satisfied . at the end of each subsequent reporting period , we re-evaluate the probability of achieving such milestones and any related constraint , and if necessary , adjust our estimate of the overall transaction price . any such adjustments are recorded on a cumulative catch-up basis , which would affect revenues and earnings in the period of adjustment . manufacturing supply services : arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the customer 's discretion are generally considered options . we assess if these options provide a material right to the licensee and if so , they are accounted for as separate performance obligations at the outset of the arrangement . royalties : for arrangements that include sales-based royalties , including milestone payments based on the level of sales , and the license is deemed to be the predominant item to which the royalties relate , we recognize revenue at the later of ( 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 received any royalty revenue resulting from any of our licensing arrangements . accrued expenses as part of the process of preparing our financial statements , we are required to estimate accrued expenses . story_separator_special_tag this process involves reviewing open contracts and purchase orders , communicating with applicable vendor personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost . we make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us . we periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary . examples of estimated accrued expenses include fees paid to cros and investigative sites in connection with clinical trials . we accrue our expenses related to clinical trials based on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and cros that conduct research activities or manage clinical trials on our behalf . the 61 financial terms of these agreements are subject to negotiation , vary from contract to contract and may result in uneven payment flows . payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones . in accruing service fees , we estimate the time period over which services will be performed and the level of effort to be expended in each period . if the level of effort varies from our estimate , we will adjust the accrual accordingly . if we underestimate or overestimate the level of services performed or the costs of these services , our actual expenses could differ from our estimates . although we do not currently anticipate the future settlement of existing accruals to differ materially from our estimates , our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or too low for any period . share-based compensation compensation cost related to share-based awards granted to employees is measured based on the estimated fair value of the award at the grant date . we estimate the fair value of stock options using a black-scholes option pricing model . compensation expense for options granted to non-employees is determined as the fair value of consideration received or the fair value of the equity instruments issued , whichever is more reliably measured . share-based compensation costs are expensed on a straight-line basis over the relevant vesting period . the fair value of restricted stock units , or rsus , granted is measured based on the market value of our common stock on the date of grant and is recognized ratably over the requisite service period , which is generally the vesting period of the awards . all share-based compensation costs are recorded in general and administrative or research and development costs in the statements of operations based upon the underlying employees ' roles . significant factors , assumptions and methodologies used in determining fair value determining the appropriate fair value measurement of share-based awards requires the use of subjective assumptions . the determination of the fair value measurement of options using the black-scholes option pricing model is affected by our estimated common stock fair values as well as assumptions regarding a number of other subjective variables . these other variables include the expected term of the options , our expected stock price volatility over the expected term of the options , stock option exercise and cancellation behaviors , risk-free interest rates and expected dividends . we estimate the fair value of stock options at the grant date using black-scholes option pricing model with the following assumptions : fair value of our common stock . we estimate the fair value of our common stock by reference to the closing price of our common stock on the nasdaq global market on the date of grant . volatility . we calculate expected volatility based on the historical volatility of our common stock . expected term . we use the simplified method as prescribed by the sec staff accounting bulletin no . 107 , share-based payment , as we do not have sufficient historical exercise and post-vesting termination data to provide a reasonable basis upon which to estimate the expected term of stock options granted to employees . risk-free rate . the risk-free interest rate is based on the yields of u.s. treasury securities with maturities similar to the expected time to liquidity . forfeitures . forfeitures are accounted for as they occur . dividend yield . we have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future . we have an employee stock purchase plan that is considered a compensatory plan . the fair value of the discount and the look-back period of the employee stock purchase plan are estimated using the black-scholes option pricing model and expense is recognized over the six-month withholding period prior to the purchase date . share-based compensation expense related to stock options , the employee stock purchase plan and rsus aggregated $ 3.6 million , $ 4.6 million and $ 4.8 million for the years ended december 31 , 2020 , 2019 and 2018 , respectively . tax valuation allowance we recorded aggregate deferred tax assets of $ 63.4 million , primarily related to our net operating losses , as of december 31 , 2020 , which have been fully offset by a valuation allowance due to uncertainties surrounding our ability to realize these tax benefits . we record a valuation allowance if it is more likely than not that a deferred tax asset will not be realized . we provided a full valuation 62 allowance on our deferred tax assets that primarily consist of cumulative net operating losses , or nols for the period from our inception through december 31 , 20 20 . we incurred a net loss for tax purposes of $ 12.3 million for the year ended december 31 , 20 20 .
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in addition , there are expenses related to clinical trials and similar activities for each program , including costs associated with cros . clinical costs are recognized based on the terms of underlying agreements , as well as an evaluation of the progress to completion of specific tasks using data such as patient enrollment , clinical site activations and additional information provided to us by our vendors about their actual costs occurred . expenses related to activities that support more than one development program or activity , such as salaries , share-based compensation and depreciation , are not classified as direct preclinical costs or clinical costs and are separately classified as unallocated . the following table shows our research and development expenses by type of activity for the years ended december 31 , 2020 , 2019 and 2018. replace_table_token_0_th our expenses related to clinical trials are based on estimates of patient enrollment and related expenses at clinical investigator sites as well as estimates for the services received and efforts expended under contracts with research institutions , consultants and cros that conduct and manage clinical trials on our behalf . we generally accrue expenses related to clinical trials based on contracted amounts applied to the level of patient enrollment and activity according to the protocol . if future timelines or contracts are modified based upon changes in the clinical trial protocol or scope of work to be performed , we would modify our estimates of accrued expenses accordingly on a prospective basis . research and development activities are central to our business model . product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development , primarily due to the increased size and duration of later-stage clinical trials . however , it is difficult to determine with certainty the duration and completion costs of our current or future preclinical programs and clinical trials of our product candidates , or if , when
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ROO
| 1,038
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this is attributable to the difference between hep 's contributed capital and its allocated equity at formation of the slc pipeline . this difference is being amortized as an adjustment to hep 's pro-rata share of earnings . additionally , we have a 50 % ownership interest in sabine biofuels , a biofuels production facility . this equity method investment had a carrying balance of $ 8.5 million at december 31 , 2014 . revenue recognition : refined product sales and related cost of sales are recognized when products are shipped and title has passed to customers . hep recognizes pipeline transportation revenues as products are shipped through its pipelines . all revenues are reported inclusive of shipping and handling costs billed and exclusive of any taxes billed to customers . shipping and handling costs incurred are reported in cost of products sold . depreciation : depreciation is provided by the straight-line method over the estimated useful lives of the assets , primarily 20 to 25 years for refining , pipeline and terminal facilities , 10 to 40 years for buildings and improvements , 5 to 30 years for other fixed assets and 5 years for vehicles . 61 hollyfrontier corporation notes to consolidated financial statements continued cost classifications : costs of products sold include the cost of crude oil , other feedstocks , blendstocks and purchased finished products , inclusive of transportation costs . we purchase crude oil that at times exceeds the supply needs of our refineries . quantities in excess of our needs are sold at market prices to purchasers of crude oil that are recorded on a gross basis with the sales price recorded as revenues and the corresponding acquisition cost as cost of products sold . additionally , we enter into buy/sell exchanges of crude oil with certain parties to facilitate the delivery of quantities to certain locations that are netted at cost . operating expenses include direct costs of labor , maintenance materials and services , utilities , marketing expense and other direct operating costs . general and administrative expenses include compensation , professional services and other support costs . deferred maintenance costs : our refinery units require regular major maintenance and repairs which are commonly referred to as “ turnarounds . ” catalysts used in certain refinery processes also require regular “ change-outs . ” the required frequency of the maintenance varies by unit and by catalyst , but generally is every two to five years . turnaround costs are deferred and amortized over the period until the next scheduled turnaround . other repairs and maintenance costs are expensed when incurred . deferred turnaround and catalyst amortization expense was $ 96.9 million , $ 84.8 million and $ 54.4 million for the years ended december 31 , 2014 , 2013 and 2012 , respectively . environmental costs : environmental costs are charged to operating expenses if they relate to an existing condition caused by past operations and do not contribute to current or future revenue generation . liabilities are recorded when site restoration and environmental remediation , cleanup and other obligations are either known or considered probable and can be reasonably estimated . such estimates are undiscounted and require judgment with respect to costs , time frame and extent of required remedial and clean-up activities and are subject to periodic adjustments based on currently available information . recoveries of environmental costs through insurance , indemnification arrangements or other sources are included in other assets to the extent such recoveries are considered probable . contingencies : we are subject to proceedings , lawsuits and other claims related to environmental , labor , product and other matters . we are required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses . a determination of the amount of reserves required , if any , for these contingencies is made after careful analysis of each individual issue . the required reserves may change in the future due to new developments in each matter or changes in approach such as a change in settlement strategy in dealing with these matters . income taxes : provisions for income taxes include deferred taxes resulting from temporary differences in income for financial and tax purposes , using the liability method of accounting for income taxes . the liability method requires the effect of tax rate changes on current and accumulated deferred income taxes to be reflected in the period in which the rate change was enacted . the liability method also requires that deferred tax assets be reduced by a valuation allowance unless it is more likely than not that the assets will be realized . potential interest and penalties related to income tax matters are recognized in income tax expense . we believe we have appropriate support for the income tax positions taken and to be taken on our income tax returns and that our accruals for tax liabilities are adequate for all open years based on an assessment of many factors , including past experience and interpretations of tax law applied to the facts of each matter . new accounting pronouncements revenue recognition in may 2014 , an accounting standard update ( asu 2014-09 , “ revenue from contracts with customers ” ) was issued requiring revenue to be recognized when promised goods or services are transferred to customers in an amount that reflects the expected consideration for these goods or services . this standard is effective january 1 , 2017 , and we are evaluating the impact of this standard . story_separator_special_tag additionally , when faced with new emissions or fuels standards , we seek to execute projects that facilitate compliance and also improve the operating costs and / or yields of associated refining processes . el dorado refinery capital projects at the el dorado refinery include naphtha fractionation and an additional hydrogen plant . they also include the installation of an fcc gasoline hydrotreater in order to meet tier 3 gasoline requirements . continuing project work is planned to include upgrades to the crude unit desalter and a new tail gas treatment unit to reduce air emissions in compliance with the el dorado refinery 's existing epa consent decree . tulsa refineries capital spending for the tulsa refineries in 2015 includes previously approved capital appropriations for numerous infrastructure upgrades , including a project to improve fcc yields . spending on maintenance capital items and general improvements continues at an elevated level at the tulsa refineries due to lower maintenance capital expenditures made prior to hollyfrontier 's purchase of the facilities . navajo refinery the navajo refinery capital spending in 2015 will be principally directed towards previously approved capital appropriations as well as maintenance capital spending . included among previously approved capital projects is a $ 25.0 million upgrade to the navajo refinery 's waste water treatment system . cheyenne refinery we are continuing with our previously approved plan to install a new hydrogen plant at the cheyenne refinery . the hydrogen plant , along with a now-completed naphtha fractionation project , is anticipated to allow us to reduce benzene content in cheyenne gasoline production , while at the same time improving the refinery 's overall liquid yields and light oils production . previously appropriated projects still underway at cheyenne include wastewater treatment plant improvements , a flue gas scrubber for the fcc unit to reduce air emissions and a redundant tail gas unit associated with the sulfur recovery process . woods cross refinery engineering and construction continue on our previously announced expansion project to increase planned processing capacity to 45,000 bpsd , at a cost currently expected to range between $ 350.0 million and $ 400.0 million . on november 18 , 2013 , the utah division of air quality issued a revised air quality permit ( the “ approval order ” ) authorizing the expansion . on december 18 , 2013 , two local environmental groups filed an administrative appeal challenging the issuance of the approval order and seeking a stay of the approval order . on march 25 , 2014 , the administrative law judge ( “ alj ” ) issued a recommendation to the executive director of the utah department of environmental quality ( the “ deq ” ) recommending that the motion to stay the approval order be denied . on may 8 , 2014 , the executive director of the deq issued an order approving the alj 's recommendation and denying the motion to stay the approval order . the environmental groups did not file an appeal of this denial . the merits briefing and oral argument were completed in september 2014. on october 1 , 2014 , holly refining & marketing company - woods cross llc , our wholly-owned subsidiary , and the state of utah jointly submitted proposed findings of fact and conclusions of law to the alj . the expansion is expected to be completed in the fourth quarter of 2015. this project work includes a new rail loading rack for intermediates and finished products associated with refining waxy crude oil . the expansion , and expected completion timeline and cost , are subject to the woods cross refinery successfully obtaining the approval order . regulatory compliance items or other presently existing or future environmental regulations / consent decrees could cause us to make additional capital investments beyond those described above and incur additional operating costs to meet applicable requirements , including those related to recently promulgated federal tier 3 gasoline standards . hep each year the holly logistic services , l.l.c . board of directors approves hep 's annual capital budget , which specifies capital projects that hep management is authorized to undertake . additionally , at times when conditions warrant or as new opportunities arise , special projects may be approved . the funds allocated for a particular capital project may be expended over a period of several years , depending on the time required to complete the project . therefore , hep 's planned capital expenditures for a given year consist of expenditures approved for capital projects included in its current year capital budget as well as , in certain cases , expenditures approved for capital projects in capital budgets for prior years . the 2015 hep capital budget is comprised of $ 10.0 million for maintenance capital expenditures and $ 73.0 million for expansion capital expenditures . 41 table of content cash flows – financing activities year ended december 31 , 2014 compared to year ended december 31 , 2013 net cash flows used for financing activities were $ 838.4 million for the year ended december 31 , 2014 compared to $ 1,160.0 million for the year ended december 31 , 2013 , a decrease of $ 321.6 million . during the year ended december 31 , 2014 , we purchased $ 158.8 million in common stock , paid $ 647.2 million in dividends and recognized $ 2.0 million excess tax benefits on our equity-based compensation . also during this period , hep received $ 642.3 million and repaid $ 434.3 million under the hep credit agreement , paid $ 156.2 million upon the redemption of hep 's 8.25 % senior notes and paid distributions of $ 78.2 million to noncontrolling interests . during the year ended december 31 , 2013 , we received $ 73.4 million from the sale of hep common units , purchased $ 225.0 million in common stock , paid $ 645.9 million in dividends , paid $ 301.0 million upon the redemption of our
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million and $ 7.8 million from the sale of assets during the years ended december 31 , 2014 and 2013 , respectively . for the year ended december 31 , 2013 , we acquired trucking operations for $ 11.3 million . also for the years ended december 31 , 2014 and 2013 , we invested $ 1,025.6 million and $ 935.5 million , respectively , in marketable securities and received proceeds of $ 1,276.4 million and $ 846.1 million , respectively , from the sale or maturity of marketable securities . year ended december 31 , 2013 compared to year ended december 31 , 2012 net cash flows used for investing activities were $ 526.7 million for the year ended december 31 , 2013 compared to $ 711.1 million for the year ended december 31 , 2012 , a decrease of $ 184.4 million . cash expenditures for properties , plants and equipment for 2013 increased to $ 425.1 million from $ 335.3 million for the same period in 2012. these include hep capital expenditures of $ 51.9 million and $ 44.9 million for the years ended december 31 , 2013 and 2012 , respectively . in addition , for the year ended december 31 , 2013 , we received proceeds of $ 7.8 million from the sale of property and equipment and acquired trucking operations for $ 11.3 million . also for the years ended december 31 , 2013 and 2012 , we invested $ 935.5 million and $ 671.6 million , respectively , in marketable securities and received proceeds of $ 846.1 million and $ 297.7 million , respectively , from the sale or maturity of marketable securities . planned capital expenditures hollyfrontier corporation each year our board of directors approves our annual capital budget which includes specific projects that management is authorized to undertake . additionally , when conditions warrant or as new opportunities arise , additional projects may be approved . the funds appropriated for a particular capital project may be expended over a period of several years , depending on the time required to complete the project . therefore , our planned capital expenditures for a given year consist of expenditures appropriated in that year 's capital budget plus expenditures for projects appropriated in prior years which have not yet been completed . our appropriated capital budget for 2015 is $ 137.0 million including both sustaining capital and major capital projects . we expect to
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Liquidity
| 11,747
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the recall was expanded on january 20 , 2014 to include additional lots of affected cartridges used with the t : slim . we incurred approximately $ 1.6 million in direct costs associated with the recall . we recorded a cost of sales charge of approximately $ 1.3 million in the fourth quarter of 2013 and expect to record a cost of sales charge for the remainder in the first quarter of 2014. we do not currently expect any further direct financial impact of the recall beyond these costs . the total cost of the recall consisted of approximately $ 0.6 million associated with the return and replacement of affected cartridges in the field and approximately $ 1.0 million for the write-off of affected cartridges within our internal inventory . components of results of operations sales we commenced commercial sales of t : slim in the united states in the third quarter of 2012. the t : slim insulin delivery system is comprised of the t : slim pump and pump-related supplies that include disposable cartridges and infusion sets . we also offer accessories including protective cases , belt clips , and power adapters . sales of accessories since commercial launch have not been material . we primarily sell our products through national and regional distributors on a non-exclusive basis . these distributors are generally providers of medical equipment and supplies to individuals with diabetes . our primary end customers are people with insulin-dependent diabetes . similar to other durable medical equipment , the primary payor is generally a third-party insurance carrier and the customer is usually responsible for any medical insurance plan copay or co-insurance requirements . 63 we anticipate our sales will increase as we expand our sales and marketing infrastructure , increase awareness of our products and broaden third party reimbursement for our products . we also expect that our sales will fluctuate on a quarterly basis in the future due to a variety of factors , including seasonality and the impact of the buying patterns of our distributors and other customers . we believe that our sales are subject to seasonal fluctuation due to the impact of annual deductible and coinsurance requirements associated with most medical insurance plans utilized by our individual customers and the individual customers of our distributors . our sales may also be influenced by the summer vacation period . accordingly , we expect sequential growth of sales from the third quarter to the fourth quarter to be relatively higher than for other quarter-to-quarter growth , and we also expect sequential growth of sales from the fourth quarter to the first quarter to be relatively lower than for other quarter-to-quarter growth . it is also possible that we may see a decline in sales from the fourth quarter to the first quarter due to these seasonal fluctuations . cost of sales we manufacture the t : slim pump and its disposable cartridge at our manufacturing facility in san diego , california . infusion sets and t : slim accessories are manufactured by third-party suppliers . cost of sales includes raw materials , labor costs , manufacturing overhead expenses , product training cost and reserves for expected warranty costs , scrap and inventory obsolescence . due to our relatively low production volumes , compared to our potential capacity for our products , the majority of our per unit costs are currently manufacturing overhead expenses . these expenses include quality assurance , manufacturing engineering , material procurement , inventory control , facilities , equipment and information technology and operations supervision and management . we expect our overall gross margin , which is calculated as sales less cost of sales for a given period divided by sales , to fluctuate in future periods as a result of the changing percentage of products sold to distributors versus directly to individual customers , varying levels of reimbursement among third-party payors , changing mix of products sold with different gross margins , changes in our manufacturing processes or costs and increased manufacturing output . manufacturing inefficiencies will also impact our gross margins , which we may experience as we attempt to manufacture our products on a larger scale , change our manufacturing capacity or output , and adjust to expanding our manufacturing facilities . any new products that we sell in the future may change our future gross margins . selling , general and administrative we expect our selling , general and administrative , or sg & a , expenses to increase as our business expands . our sg & a expenses primarily consist of salary , fringe benefits and stock-based compensation for our executive , financial , marketing , sales , business development , regulatory affairs and administrative functions . other significant expenses include product demonstration samples , trade show expenses , outside legal counsel , independent auditors and other outside consultants , insurance , facilities and information technology expenses . research and development we expect our research and development , or r & d , expenses to increase as we initiate and advance our development projects . our r & d activities primarily consist of engineering and research programs associated with our products under development , as well as r & d activities associated with our core technologies and processes . r & d expenses are primarily related to employee compensation , including salary , fringe benefits , stock-based compensation and temporary employee expenses . we also incur significant expenses for supplies , development prototypes , outside design and testing services and milestone payments under our development and commercialization agreements with dexcom and other collaborators . 64 other income and expense our other income and expense primarily consist of the change in the fair value of outstanding common and preferred stock warrants , as well as interest expense and amortization of debt discount associated with term loan agreements and convertible notes payable . at december 31 , 2013 , there was $ 30 million outstanding principal under our term loan with capital royalty partners , which accrues interest at a rate of 14 % per annum . story_separator_special_tag story_separator_special_tag technology expense related to the sg & a functions increased $ 1.3 million . additionally , we expensed $ 1.8 million relating to the acquisition of patent rights for non-commercialized products . research and development expenses . r & d expenses increased 9 % to $ 9.0 million for 2012 from $ 8.3 million for 2011. the increase in r & d expenses for 2012 was primarily due to a $ 1.0 million milestone payment under a collaboration agreement . other income ( expense ) . other income ( expense ) increased to $ 33,000 for 2012 from ( $ 1.3 ) million for 2011. interest and other expense for 2012 was primarily related to interest associated with convertible notes payable to certain stockholders at a rate of 8 % per annum that were converted to series d preferred stock in august 2012 , and interest paid on a $ 5 million loan from silicon valley bank entered into in march 2012 at a rate ranging from 7.5 % to 10 % per annum . interest and other expense for 2011 was primarily related to interest associated with the convertible notes issued in august 2011 , which were subsequently converted to series d preferred stock in august 2012. the decrease in fair value of the stock warrants was $ 2.6 million for 2012 compared to an increase of $ 0.8 million for 2011. the change was due to the revaluation of the fair value of the common and preferred stock warrants . liquidity and capital resources at december 31 , 2013 , we had $ 129.5 million in cash and cash equivalents and short-term investments . we believe that our cash on hand , cash available under our term loan agreement and proceeds from the exercise of options and warrants will be sufficient to satisfy our liquidity requirements for at least the next 18 months . we expect that our sales performance and the resulting operating income or loss , as well as the status of each of our new product development programs , will significantly impact our cash management decisions . we have utilized , and may continue to utilize , debt arrangements with debt providers and financial institutions to finance our operations . factors such as interest rates and available cash will impact our decision to continue to utilize debt arrangements as a source of cash . historically , our sources of cash have included private placements and a public offering of equity securities , debt arrangements , and cash generated from operations . our historical cash outflows have primarily been associated with cash used for operating activities such as the purchase of inventory , expansion of our sales and marketing infrastructure , increase in our r & d activities , the acquisition of intellectual property , expenditures related to equipment and improvements used to increase our manufacturing capacity and improve our manufacturing efficiency , overall facility expansion and other working capital needs . 67 the following table shows a summary of our cash flows for the years ended december 31 , 2013 , 2012 , and 2011 : replace_table_token_5_th operating activities . net cash used in operating activities was $ 47.8 million for the year ended december 31 , 2013 , compared to $ 33.5 million and $ 21.5 million for the same periods in 2012 and 2011 , respectively . the increase in net cash used in operating activities for the 2012 and 2013 periods presented was primarily associated with increased costs related to the initiation of commercial operations in august 2012 and continued expansion during 2013. our employee headcount , employee-related expenses and working capital needs , including accounts receivable and inventory , increased significantly as a result of our initiation of commercial operations . investing activities . net cash used in investing activities was $ 11.1 million for the year ended december 31 , 2013 , compared to net cash used of $ 5.5 million in 2012 and net cash generated of $ 5.9 million in 2011. the increase in net cash used in investing activities for the 2012 and 2013 periods was primarily related to the purchase of short-term investments , the acquisition of patents , and the purchase of capital equipment . the net cash provided in 2011 was primarily related to the sale of securities to fund our operating activities . financing activities . net cash provided by financing activities was approximately $ 166.1 million for the year ended december 31 , 2013 , compared to $ 47.5 million and $ 13.2 million for the same periods in 2012 and 2011 , respectively . the net cash provided in 2013 is a result of net proceeds from our initial public offering of approximately $ 125.0 million in november 2013 , net proceeds from issuance of preferred stock of $ 28.9 million , net proceeds from issuance of notes payable of $ 16.0 million and proceeds from warrant and stock option exercises of $ 2.6 million , offset by principal payments on notes payable of $ 4.4 million and $ 2.0 million used in restricted cash . the net cash provided by 2012 financing activities not reoccurring in 2013 included proceeds from issuance of preferred stock of $ 30.9 million and proceeds from issuance of notes payable and convertible notes payable of $ 17.2 million while 2011 net cash proceeds from financing activities was driven by the issuance of convertible notes payable . our liquidity position and capital requirements are subject to fluctuation based on a number of factors . for example , our cash inflow and outflow may be impacted by the following : fluctuations in gross margins and operating margins ; our ability to generate sales ; and fluctuations in working capital .
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we have experienced , and may continue to experience , unanticipated decreases in productivity and other losses due to inefficiencies relating to the production of our products , scale-up of manufacturing capacity and reliance on outside suppliers for key components in the manufacture of our products . this could continue to result in lower than expected manufacturing output and higher than expected product costs . 65 as we are in the early stages of commercialization , and since we have not yet been able to meaningfully take advantage of economies of scale in our manufacturing , our gross margins reflect the absorption of overhead as the largest component of our manufacturing costs . our gross margin on the t : slim pump was higher than our gross margin on pump-related supplies for the year ended december 31 , 2013 and is expected to remain higher in the future . our future gross margins will be impacted by numerous factors including , percentage of products sold to distributors versus directly to individual customers , varying levels of reimbursement among third-party payors , changing mix of products sold with different gross margins , changes in our manufacturing processes or costs and increased manufacturing output . manufacturing inefficiencies will also impact our gross margins , which we may experience as we attempt to manufacture our products on a larger scale , change our manufacturing capacity or output , and adjust to expanding our manufacturing facilities . any new products that we sell in the future may change our future gross margins . selling , general and administrative expenses . sg & a expenses increased 96 % to $ 44.5 million for 2013 from $ 22.7 million in 2012. the increase in sg & a expenses was primarily associated with increased costs as we began selling our products in the third quarter of 2012 and the continued expansion of our commercial operations during 2013. at december 31 , 2013 , our headcount for sales , general and administrative functions more than doubled compared to december 31 , 2012. this includes an
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ROO
| 234
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we currently have $ 4.1 billion of debt obligations outstanding , none of which are maturing in the next twelve months . for a summary of principal debt balances and their maturity dates and principal terms refer to note 9 - debt , in the notes to our consolidated financial statements . we anticipate closing the acquisition of greektown in mid-2019 , and we expect to fund the purchase with approximately $ 350.0 million of cash on hand ( which represents a portion of the proceeds that we raised in our november 2018 equity offering ) and $ 350.0 million of debt , either through additional long-term debt financing or under our revolving credit facility . we anticipate funding future transactions with a mix of debt , equity and available cash . we believe that we have sufficient liquidity to meet our liquidity and capital resource requirements primarily through currently available cash and cash equivalents , restricted cash , short term investments , cash received under our lease agreements , borrowings from banks , including undrawn capacity under our revolving credit facility , and proceeds from the issuance of debt and equity securities . all of the lease agreements call for an initial term of fifteen years with four , five-year renewal options ( except for harrah 's philadelphia ) and are designed to provide us with a reliable and predictable revenue stream . however , our cash flows from operations and our ability to access capital resources could be adversely affected due to uncertain economic factors and volatility in the financial and credit markets . in particular , we can provide no assurances that our tenants will not default on their leases or fail to make full rental payments if their businesses become challenged due to , among other things , adverse economic conditions . our ability to raise funds through the issuance of debt and equity securities and access to other third-party sources of capital in the future will be dependent on , among other things , general economic conditions , general market conditions for reits , market perceptions and the trading price of our stock . we will continue to analyze which sources of capital are most advantageous to us at any particular point in time , but the capital markets may not be consistently available on terms we deem attractive , or at all . cash flow analysis the table below summarizes our cash flows for the year ended december 31 , 2018 and the period from october 6 , 2017 to december 31 , 2017 : replace_table_token_8_th cash flows from operating activities net cash provided by operating activities increased $ 374.6 million for the year ended december 31 , 2018 compared with the period from october 6 , 2017 to december 31 , 2017. the increase is primarily driven by a full year of operations in 2018 , compared to only three months of operations in 2017 . 52 cash flows from investing activities net cash used in investing activities increased $ 4.6 million for the year ended december 31 , 2018 compared with the period from october 6 , 2017 to december 31 , 2017. during 2018 , the primary use of cash from investing activities was our investment in direct financing leases of $ 771.5 million related to the purchase of octavius tower and harrah 's philadelphia and net investments in short-term investments of $ 520.9 million . during the period from october 6 , 2017 to december 31 , 2017 , our investment in deferred financing leases of $ 1,136.2 million related to the acquisition of harrah 's las vegas was the primary use of cash from investing activities . cash flows from financing activities net cash provided by financing activities decreased $ 110.6 million for the year ended december 31 , 2018 compared with the period from october 6 , 2017 to december 31 , 2017. during the year ended december 31 , 2018 the primary sources and uses of cash from financing activities include : net proceeds from our initial public offering of $ 1,307.1 million of our common stock ; net proceeds from our primary follow-on equity offering of $ 694.4 million of our common stock ; repayment of $ 300.0 million on our revolving credit facility ; repayment of $ 100.0 million on our term loan b facility ; redemption of $ 290.1 million in aggregate principal amount of our second lien notes ; dividend payments of $ 262.7 million during the period from october 6 , 2017 to december 31 , 2017 the primary sources and uses of cash from financing activities include : proceeds from the issuance of $ 2,200.0 million of our term loan b facility ; proceeds from the $ 300.0 million draw from our revolving credit facility ; proceeds from the private placement issuance of $ 1,000.0 million of our common stock ; the sale of approximately 18.4 acres of undeveloped land located behind the linq hotel & casino and harrah 's las vegas to caesars for $ 73.6 million ; repayment of our $ 1,638.4 million senior secured first lien prior term loan ; repayment of our $ 311.7 million first-priority senior secured prior first lien notes ; the purchase by vici propco of the entirety of the outstanding cplv mezzanine debt in the aggregate principal amount of $ 400.0 million ; costs of $ 36.2 million related to our common stock private placement and premium and fees related to the purchase of the mezzanine debt of $ 38.4 million ; and debt issuance costs of $ 31.5 million related to our term loan b facility and revolving credit facility . story_separator_special_tag 53 debt the following table summarizes our debt related transactions from the formation date to december 31 , 2018 : replace_table_token_9_th impact of initial public offering on february 5 , 2018 , we completed an initial public offering of 69,575,000 shares of common stock ( which included 9,075,000 shares of common stock related to the overallotment option exercised by the underwriters in full ) at an offering price of $ 20.00 per share for gross proceeds of $ 1.4 billion , resulting in net proceeds of $ 1.3 billion after commissions and expenses . we utilized a portion of the net proceeds from the stock offering to : ( a ) pay down $ 300.0 million of indebtedness outstanding under the revolving credit facility ; ( b ) redeem $ 268.4 million in aggregate principal amount of the second lien notes at a redemption price of 108 % plus accrued and unpaid interest to the date of the redemption ; and ( c ) repay $ 100.0 million of the term loan b facility . covenants on december 22 , 2017 , vici propco entered into a credit agreement ( the “ credit agreement ” ) governing the term loan b facility and the revolving credit facility . the credit agreement contains customary covenants that , among other things , limit the ability of vici propco and its restricted subsidiaries to : ( i ) incur additional indebtedness ; ( ii ) merge with a third party or engage in other fundamental changes ; ( iii ) make restricted payments ; ( iv ) enter into , create , incur or assume any liens ; ( v ) make certain sales and other dispositions of assets ; ( vi ) enter into certain transactions with affiliates ; ( vii ) make certain payments on certain other indebtedness ; ( viii ) make certain investments ; and ( ix ) incur restrictions on the ability of restricted subsidiaries to make certain distributions , loans or transfers of assets to vici propco or any restricted subsidiary . these covenants are subject to a number of exceptions and qualifications , including the ability to make unlimited restricted payments to maintain our reit status and to avoid the payment of federal or state income or excise tax , the ability to make restricted payments in an amount not to exceed 95 % of our funds from operations ( as defined in the credit agreement ) subject to no event of default under the credit agreement and pro forma compliance with the financial covenant pursuant to the credit agreement , and the ability to make additional restricted payments in an aggregate amount not to exceed the greater of 0.6 % of adjusted total assets ( as defined in the credit agreement ) or $ 30,000,000. commencing with the first full fiscal quarter ended after december 22 , 2017 , if the outstanding amount of the revolving credit facility plus any drawings under letters of credit issued pursuant to the credit agreement that have not been reimbursed as of the end of any fiscal quarter exceeds 30 % of the aggregate amount of the revolving credit facility , vici propco and its restricted subsidiaries on a consolidated basis would be required to maintain a maximum total net debt to adjusted total assets ratio , as defined in the credit agreement , as of the last day of any applicable fiscal quarter . 54 the cplv cmbs debt was incurred in october 2017 pursuant to a loan agreement containing certain covenants limiting cplv property owner llc 's ability to among other things : ( i ) incur additional debt ; ( ii ) enter into certain transactions with its affiliates ; ( iii ) consolidate , merge , sell or otherwise dispose of its assets ; and ( iv ) allow transfers of its direct or indirect equity interests . the second lien notes were issued on october 6 , 2017 , pursuant to an indenture ( the “ indenture ” ) by and among vici propco and its wholly owned subsidiary , vici fc inc. ( together , the “ issuers ” ) , the subsidiary guarantors party thereto , and umb bank national association , as trustee . the indenture contains covenants that limit the issuers ' and their restricted subsidiaries ' ability to , among other things : ( i ) incur additional debt ; ( ii ) pay dividends on or make other distributions in respect of their capital stock or make other restricted payments ; ( iii ) make certain investments ; ( iv ) sell certain assets ; ( v ) create or permit to exist dividend and or payment restrictions affecting their restricted subsidiaries ; ( vi ) create liens on certain assets to secure debt ; ( vii ) consolidate , merge , sell or otherwise dispose of all or substantially all of their assets ; ( viii ) enter into certain transactions with their affiliates ; and ( ix ) designate their subsidiaries as unrestricted subsidiaries . these covenants are subject to a number of exceptions and qualifications , including the ability to declare or pay any cash dividend or make any cash distribution to vici to the extent necessary for vici to distribute cash dividends of 100 % of our “ real estate investment trust taxable income ” within the meaning of section 857 ( b ) ( 2 ) of the internal revenue code of 1986 , as amended , certain restricted payments not to exceed the amount of our cumulative earnings ( calculated pursuant to the indenture as $ 30,000,000 plus 95 % of our cumulative adjusted funds from operations ( as defined in the indenture ) less cumulative distributions , with certain other adjustments ) , and the ability to make restricted payments in an amount equal to the greater of 0.6 % of adjusted total assets ( as defined in the indenture )
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discussion of operating results replace_table_token_4_th _ * represents the period from october 6 , 2017 , the date of the company 's formation , through december 31 , 2017 revenue for the year ended december 31 , 2018 and the period from october 6 , 2017 to december 31 , 2017 , our revenue was $ 898.0 million and $ 187.6 million , respectively , and was comprised as follows : replace_table_token_5_th real property business revenue real property business revenue is generated from rent from our lease agreements and reimbursements of property taxes , and increased $ 689.5 million during the year ended december 31 , 2018 compared to the period from october 6 , 2017 to december 31 , 2017. the increase was primarily driven by a full year of operations in 2018 , compared to only three months of operations in 2017. additionally , we added octavius tower and harrah 's philadelphia to our real estate portfolio in 2018 . 48 the following table details the components of our income from direct financing and operating leases : replace_table_token_6_th ( 1 ) amounts represent the non-cash adjustment to income from direct financing leases in order to recognize income on an effective interest basis at a constant rate of return over the term of the leases .
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| 10,514
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as of may 31 , 2020 , we have funded 781 ppp loans for a total of $ 116.2 million , with an average loan amount of $ 150,000. another $ 12,000 in ppp loans have been approved and are in the application pipeline process as of may 31 , 2020. in addition to the 1 % interest earned on these loans , the sba pays us fees for processing ppp loans in the following amounts : ( i ) five percent for loans of not more than $ 350,000 ; ( ii ) three percent for loans of more than $ 350,000 and less than $ 2,000,000 ; and one percent for loans of at least $ 2,000,000. we may not collect any fees from the loan applicants . we may utilize the frb 's paycheck protection program liquidity facility ( “ ppplf ” ) , pursuant to which the company will pledge its ppp loans at face value as collateral to obtain frb non-recourse borrowings . the company will also assist our customers with accessing other borrowing options as they become available such as other government sponsored lending programs , as appropriate . allowance for loan losses and loan modifications – the company recorded a provision for loan losses of $ 1.3 million for the fiscal year 2020 , compared to $ 50,000 in fiscal 2019 due primarily to deterioration in economic conditions related to covid-19 . as of may 31 , 2020 , the bank 's loan portfolio exposures to industries most affected by the covid-19 pandemic were as follows ( dollars in thousands ) : replace_table_token_23_th 50 we have received , and continue to receive , inquiries and requests from borrowers for some type of payment relief due to the covid-19 pandemic although the number of new requests have recently slowed . these modifications were not classified as tdrs in accordance with the guidance of the cares act and subsequent bank regulatory guidance . the company has made available the following short-term relief option to all borrowers affected by covid-19 : interest only payments for up to 90 days ; full payment deferrals for up to 90 days upon request with an extension for another 90 days upon submission of specified documentation and recovery plans ; loan re-amortization , especially in cases where significant prepayments of principal have occurred and to provide for continuing payment reduction at the end of the 180-day deferment period ; covenant waivers and resets ; and extension of up to six months on loans maturing prior to december 31 , 2020. all loans modified due to covid-19 will be separately monitored and any request for continuation of relief beyond the initial modification will be reassessed at that time to determine if a further modification should be granted and if a downgrade in risk rating is appropriate . as of march 31 , 2020 , the company had approved payment deferrals for ten commercial loans that were impacted by the covid-19 pandemic totaling $ 36.2 million which consisted of deferral of regularly scheduled principal and interest payments . as of march 31 , 2020 , the bank had not received any requests for payment deferrals for consumer loans . as of may 31 , 2020 , the bank had approved payment deferrals for 91 commercial loans that were impacted by the covid-19 pandemic totaling $ 145.8 million . in general , the payment deferral period for these loans was 90 days . depending on economic conditions , extensions to the initial payment deferral periods may be necessary . the bank has received an additional 13 commercial loan modification requests totaling $ 25.3 million that are in the process of being completed . in addition , as of may 31 , 2020 , 42 consumer and mortgage loans totaling $ 10.1 million were approved for payment deferrals . furthermore , 20 mortgage loans serviced for fhlmc totaling $ 3.4 million were approved for payment deferrals . the primary method of relief granted by the company has been to allow the borrower to defer their loan payments for up to 90 days . after the deferral period , normal loan payments will continue , however , payments will be applied first to interest until the deferred interest is repaid and thereafter applied to both principal and interest with any deficiency in amortized principal payments added to the balloon payment due at maturity . we believe the steps we are taking are necessary to effectively manage our portfolio and assist our customers through the ongoing uncertainty surrounding the duration , impact and government response to the covid-19 pandemic . branch operations and additional customer support – we have taken various steps to ensure the safety of our customers and our personnel . many of our employees are working remotely or have flexible work schedules , and we have established measures within our offices to help ensure the safety of those employees who must work on-site . the family first coronavirus response act also provides additional flexibility to our employees to help navigate their individual challenges . the covid-19 pandemic has caused significant disruptions to our branch operations resulting in the implementation of various social distancing measures at the company to address client and community needs , including branch lobby closures . to ensure the safety of our customers and employees , services are offered through drive up facilities , atms , online banking , our call center operations and or by appointment . critical accounting policies the company has established various accounting policies that govern the application of gaap in the preparation of the company 's consolidated financial statements . the company has identified policies that due to judgments , estimates and assumptions inherent in those policies are critical to an understanding of the company 's consolidated financial statements . story_separator_special_tag the allocation of corporate value approach applies the aggregate market value of the company and divides it among the reporting units . a key assumption in this approach is the control premium applied to the aggregate market value . a control premium is utilized as the value of a company from the perspective of a controlling interest is generally higher than the widely quoted market price per share . the company used an expected control premium of 30 % , which was based on comparable transactional history . the income approach uses a reporting unit 's projection of estimated operating results and cash flows that are discounted using a rate that reflects current market conditions . the projection uses management 's best estimates of economic and market conditions over the projected period including growth rates in loans and deposits , estimates of future expected changes in net interest margins and cash expenditures . assumptions used by the company in its discounted cash flow model ( income approach ) included an annual revenue growth rate that approximated 5.3 % , a net interest margin that approximated 4.0 % and a return on assets that ranged from 1.24 % to 1.34 % ( average of 1.29 % ) . in addition to utilizing the above projections of estimated operating results , key assumptions used to determine the fair value estimate under the income approach were the discount rate of 15.54 % utilized for our cash flow estimates and a terminal value estimated at 1.43 times the ending book value of the reporting unit . the company used a build-up approach in developing the discount rate that included : an assessment of the risk free interest rate , the rate of return expected from publicly traded stocks , the industry the company operates in and the size of the company . the market approach estimates fair value by applying tangible book value multiples to the reporting unit 's operating performance . the multiples are derived from comparable publicly traded companies with similar operating and investment characteristics of the reporting unit . in applying the market approach method , the company selected four publicly traded comparable institutions . after selecting comparable institutions , the company derived the fair value of the reporting unit by completing a comparative analysis of the relationship between their financial metrics listed above and their market values utilizing a market multiple of 1.1 times tangible book value . the company calculated a fair value of its reporting unit of $ 217.0 million using the corporate value approach , $ 170.0 million using the income approach and $ 253.0 million using the market approach , with a final concluded value of $ 216.0 million , with equal weight given to the corporate value approach and market approach and slightly less weight given to the income approach . the results of the company 's step one test indicated that the reporting unit 's fair value was greater than its carrying value and therefore no impairment of goodwill exists . 55 even though the company determined that there was no goodwill impairment , a sustained decline in the value of its stock price as well as values of other financial institutions , declines in revenue for the company beyond our current forecasts , significant adverse changes in the operating environment for the financial industry or an increase in the value of our assets without an increase in the value of the reporting unit may result in a future impairment charge . it is possible that changes in circumstances existing at the measurement date or at other times in the future , or in the numerous estimates associated with management 's judgments , assumptions and estimates made in assessing the fair value of our goodwill , could result in an impairment charge of a portion or all of our goodwill . if the company recorded an impairment charge , its financial position and results of operations would be adversely affected ; however , such an impairment charge would have no impact on our liquidity , operations or regulatory capital . as a result of the effects of the covid-19 pandemic and its impacts on the financial markets and economy , the company completed a qualitative assessment of goodwill and concluded that it is more likely than not that the fair value of the bank ( the reporting unit ) , exceeds its carrying value at march 31 , 2020. if adverse economic conditions or the recent decrease in the company 's common stock price and market capitalization as a result of the covid-19 pandemic were sustained in the future rather than temporary , it may significantly affect the fair value of the reporting unit and may trigger future goodwill impairment charges . any impairment charge could have a material adverse effect on our results of operations and financial condition . however , such an impairment would not impact the company 's liquidity , operations or regulatory capital . estimated fair value of level 3 assets the company determines the estimated fair value of certain assets that are classified as level 3 under the fair value hierarchy established under gaap . these level 3 assets are valued using significant unobservable inputs that are supported by little or no market activity and that are significant to the estimated fair value of the assets . these level 3 assets are certain loans measured for impairment for which there is neither an active market for identical assets from which to determine fair value , nor is there sufficient , current market information about similar assets to use as observable , corroborated data for all significant inputs in a valuation model . under these circumstances , the estimated fair values of these assets are determined using pricing models , discounted cash flow methodologies , appraisals , and other valuation methods in accordance with accounting standards , for which the determination of fair value requires significant management judgment or estimation
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liquidity and capital resources liquidity is essential to our business . the objective of the bank 's liquidity management is to maintain ample cash flows to meet obligations for depositor withdrawals , to fund the borrowing needs of loan customers , and to fund ongoing operations . core relationship deposits are the primary source of the bank 's liquidity . as such , the bank focuses on deposit relationships with local consumer and business clients who maintain multiple accounts and services at the bank . liquidity management is both a short and long-term responsibility of the company 's management . the company adjusts its investments in liquid assets based upon management 's assessment of ( i ) expected loan demand , ( ii ) projected loan sales , ( iii ) expected deposit flows , ( iv ) yields available on interest-bearing deposits and ( v ) its asset/liability management program objectives . excess liquidity is invested generally in interest-bearing overnight deposits and other short-term government and agency obligations . if the company requires funds beyond its ability to generate them internally , it has additional diversified and reliable sources of funds with the fhlb , the frb and other wholesale facilities . these sources of funds may be used on a long or short-term basis to compensate for a reduction in other sources of funds or on a long-term basis to support lending activities . the company 's primary sources of funds are customer deposits , proceeds from principal and interest payments on loans , proceeds from the sale of loans , maturing securities , fhlb advances and frb borrowings . while maturities and scheduled amortization of loans and securities are a predictable source of funds , deposit flows and prepayment of mortgage loans and mortgage-backed securities are greatly influenced by general interest rates , economic conditions and competition . management believes that its focus on core relationship deposits coupled with access to borrowing through reliable counterparties provides reasonable and prudent assurance that ample liquidity is available . however , depositor or counterparty behavior could change in response to competition , economic or market situations or other unforeseen circumstances , which could have liquidity implications that may require different strategic or operational actions .
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Liquidity
| 15,066
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our strategy includes acquiring ownership stakes in well-managed businesses with strong reputations in the industry . we engaged in a number of acquisition and disposal transactions during the 2009 to 2011 period , which affected revenues , expenses , operating income and net income . additional information regarding material acquisitions is provided in note 4 acquisitions and information on dispositions is provided in note 10 discontinued operations in the notes to the consolidated financial statements . foreign exchange fluctuations . our financial results and competitive position are affected by fluctuations in the exchange rate between the us dollar and non-us dollars , primarily the canadian dollar . see also quantitative and qualitative disclosures about market risk foreign exchange. seasonality . historically , with some exceptions , we generate the highest quarterly revenues during the fourth quarter in each year . the fourth quarter has historically been the period in the year in which the highest volumes of media placements and retail related consumer marketing occur . story_separator_special_tag text-align : left ; font-family : serif ; font-size : 10pt ; line-height : 12pt ; font-style : italic ; font-variant : normal ; font-weight : bold ; text-transform : none ; padding-top : 5pt ; padding-right : 0pt ; padding-left : 4px ; padding-bottom : 3pt ; margin-top : 0pt ; margin-right : 0pt ; margin-left : 0pt ; margin-bottom : 0pt '' > new financing on october 23 , 2009 , the company completed a $ 300 million refinancing of its existing debt arrangements . the company issued $ 225 million of 11 % notes and obtained a new $ 75 million revolving wf credit agreement . the proceeds were used to pay off the existing fortress facility , consisting of the $ 130 million term loan , and the c $ 45 million convertible debentures . the proceeds were also used for the early payment of $ 46.0 million of deferred acquisition consideration relating to kirshenbaum bond senecal & partners llc ( kbsp ) and crispin porter & bogusky llc ( cpb ) . in connection with the repayment of its prior indebtedness , the company incurred termination fees and expenses of $ 2.0 million and wrote off deferred financing costs of $ 2.5 million . 20 effective october 5 , 2009 , mdc acquired the remaining 6 % equity interest in cpb from the minority holder . in accordance with the terms of the underlying limited liability company agreement , the estimated contingent purchase price of $ 8.5 million will be paid in future periods beginning in april 2011. following the closing of this transaction , mdc 's ownership in cpb is 100 % . results of operations for the years ended december 31 , 2011 , 2010 and 2009 : replace_table_token_5_th 21 replace_table_token_6_th 22 replace_table_token_7_th year ended december 31 , 2011 compared to year ended december 31 , 2010 revenue was $ 943.3 million for the year ended 2011 , representing an increase of $ 254.2 million , or 36.9 % , compared to revenue of $ 689.1 million for the year ended 2010. this increase relates primarily to acquisition growth of $ 132.1 million and an increase in organic revenue of $ 117.3 million . in addition , a weakening of the us dollar , primarily versus the canadian dollar during the year ended december 31 , 2011 , resulted in an increase of $ 4.8 million . operating profit for the year ended 2011 was $ 9.3 million , compared to $ 30.3 million in 2010. operating profit decreased by $ 19.6 million in the strategic marketing services , and was offset by an increase of $ 12.2 million within the performance marketing services segment . corporate operating expenses increased by $ 13.6 million in 2011. loss from continuing operations was a loss of $ 75.6 million in 2011 , compared to a loss of $ 1.4 million in 2010. this increase in loss of $ 74.2 million was primarily attributable to the decrease in operating profit of $ 21.0 million , an increase in tax expense of $ 41.9 million and an increase in net interest expense equal to $ 8.6 million . this increase in net interest expense was primarily due to the company 's outstanding 11 % notes . these amounts were impacted by an increase in foreign exchange losses from a gain of $ 0.1 million in 2010 to a loss of $ 1.7 million in 2011 , and a decrease in other income , net of $ 0.3 million and a decrease in equity in earnings of non-consolidated affiliates of $ 0.7 million . 23 marketing communications group revenues attributable to the marketing communications group , which consists of two reportable segments strategic marketing services and performance marketing services , were $ 943.3 million in the aggregate in 2011 , compared to $ 689.1 million in 2010 , representing a year-over-year increase of 36.9 % . the components of the revenue for 2011 are shown in the following table : replace_table_token_8_th the geographic mix in revenues was relatively consistent between 2011 and 2010 and is demonstrated in the following table : replace_table_token_9_th the operating profit of the marketing communications group decreased by approximately 14.0 % to $ 45.6 million in 2011 , from $ 53.0 million in 2010. the decrease in operating profit of $ 7.4 million was primarily due to an increase in acquisition related costs and estimated deferred acquisition consideration adjustments of $ 12.4 million , and increased depreciation and amortization of $ 5.6 million , due to acquisitions . these amounts were offset by $ 10.2 million of increased operating profits related to the increase in revenue and a $ 0.4 million decrease in non-cash stock based compensation , despite the company 's strategic investments in talent , new office locations , and other growth investments . story_separator_special_tag operating margins decreased to 4.8 % for 2011 compared to 7.7 % for 2010. this decrease in operating margin was primarily related to an increase in reimbursed client related direct costs ( excluding staff costs ) as a percentage of revenues from 20.3 % of revenue in 2010 to 24.3 % of revenue in 2011. this increase in reimbursed client related direct costs is due to the requirement that certain costs be included in both revenue and direct costs due to the company acting as principle versus agent for certain client contracts . in addition , margins were negatively impacted by an increase in office and general expenses as a percentage of revenue from 18.7 % in 2010 to 19.5 % in 2011 primarily due to acquisition related costs and estimated deferred acquisition consideration adjustments as a percentage of revenue of 1.5 % in 2011 compared to 0.3 % in 2010. offsetting these increases was a reduction in total staff costs as a percentage of revenues from 55.5 % in 2010 , to 53.9 % in 2011. in addition , depreciation and amortization expenses decreased as a percentage of revenue from 4.9 % in 2010 , to 4.2 % in 2011 , due to the increase in revenue in 2011. marketing communications businesses strategic marketing services revenues attributable to strategic marketing services in 2011 were $ 608.1 million , compared to $ 438.9 million in 2010. the year-over-year increase of $ 169.2 million , or 38.5 % , was attributable primarily to organic growth of $ 81.5 million or 18.6 % ; acquisition growth of $ 84.7 million or 19.3 % ; and a foreign exchange translation of $ 2.9 million due to the weakening of the us dollar compared to the canadian dollar . this organic revenue growth was driven by net new business wins . the operating profit of strategic marketing services decreased by $ 19.7 million to $ 21.3 million in 2011 from $ 41.0 million in 2010. operating margins decreased to 3.5 % in 2011 from 9.3 % in 2010. the decrease in operating profit was primarily due to an increase in acquisition related costs and estimated deferred acquisition consideration adjustments of $ 21.7 million , increased depreciation and amortization of $ 4.5 million , due to acquisitions , offset by $ 4.4 million of increased operating profits related to increased 24 revenue , and a decrease in non-cash stock based compensation of $ 2.1 million . the decrease in operating margin was primarily related to an increase in direct costs ( excluding staff costs ) as a percentage of revenues from 16.8 % of revenue in 2010 , to 22.1 % of revenue in 2011. in addition , margins were negatively impacted by an increase in office and general expenses as a percentage of revenue from 20.6 % in 2010 to 22.7 % in 2011 due to the increased acquisition related costs and estimated deferred acquisition consideration adjustments of 4.0 % in 2011 compared to 0.6 % in 2010 offset in part from the increase in revenue . offsetting these increases , total staff costs as a percentage of revenue decreased from 55.8 % in 2010 to 54.2 % in 2011 , despite the company 's investment in talent . depreciation and amortization decreased as a percentage of revenue from 4.1 % during 2010 to 3.7 % during 2011 , due to the increase in revenues . performance marketing services performance marketing services generated revenues of $ 335.2 million for 2011 , an increase of $ 85.0 million , or 34 % , compared to revenues of $ 250.2 million in 2010. the year-over-year increase was attributable primarily to acquisition growth of $ 47.4 million , organic revenue growth of $ 35.8 million , and a foreign translation increase of $ 1.8 million . this organic revenue growth was driven by net new business wins . the operating profit of performance marketing services increased by $ 12.2 million to $ 24.2 million in 2011 , from an operating profit of $ 12.0 million in 2010. operating margins improved from 4.8 % in 2010 compared to 7.2 % in 2011. the increase in operating profit was primarily due to a decrease in acquisition related costs and estimated deferred acquisition consideration adjustments of $ 9.3 million and $ 5.8 million relating to increased revenue . these increases were offset in part from increased depreciation and amortization of $ 1.2 million , due to acquisitions and increased non-cash stock based compensation of $ 1.7 million . the increase in operating margin in 2011 was due primarily to a decrease in total staff costs as a percentage of revenue from 55.0 % in 2010 to 53.2 % in 2011. office and general expenses as a percentage of revenue decreased from 15.3 % in 2010 to 13.6 % in 2011 due to a decrease in acquisition related costs and estimated deferred acquisition consideration adjustments as a percentage of revenue of a positive net adjustment of 0.3 % in 2010 to a larger positive net adjustment of 3.0 % in 2011. this decrease was offset by an increase in non-cash stock based compensation expense of $ 1.7 million . in addition , depreciation and amortization expense decreased as a percentage of revenue from 6.3 % in 2010 to 5.1 % in 2011 , due to the increased revenue . offsetting these decreases was an increase in direct costs ( excluding staff costs ) as a percentage of revenue from 26.4 % in 2010 to 28.2 % in 2011. corporate operating costs related to the company 's corporate operations increased by $ 13.6 million to $ 36.3 million in 2011 , compared to $ 22.7 million in 2010. this increase was primarily related to increased compensation and related costs of $ 9.0 million ( $ 7.6 million of which consisted of non-cash stock based compensation ) .
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summary of key transactions year ended december 31 , 2011 the company completed several key acquisitions in 2011. these acquisitions included the acquisition of a 70 % interest in concentric partners , llc ( concentric ) , a 65 % interest in laird + partners , new york llc ( laird ) , a 100 % interest in rj palmer partners llc ( rj palmer ) , a 75 % interest in trade x partners llc ( trade x ) and a 60 % interest in anomaly partners , llc ( anomaly ) . the total aggregate purchase price for these 2011 transactions was $ 76.8 million , which included closing cash payments equal to $ 40 million plus additional estimated contingent purchase payments in future years of approximately $ 36.8 million . see note 4 of the notes to the consolidated financial statements included herein for additional information on these and other acquisitions . on april 19 , 2011 , the company and its wholly-owned subsidiaries , as guarantors , issued and sold an additional $ 55 million aggregate principal amount of 11 % notes due 2016. the additional notes were issued under the indenture governing the 11 % notes and treated as a single series with the original 11 % notes . the additional notes were sold in a private placement in reliance on exceptions from registration under the securities act of 1933 , as amended . the company received net proceeds before expenses of $ 59.6 million , which included an original issue premium of $ 6.1 million , and underwriter fees of $ 1.5 million . the company used the net proceeds of the offering to repay the outstanding balance under the company 's wf credit agreement described elsewhere herein , and for general corporate purposes . year ended december 31 , 2010 the company completed several key acquisitions in 2010. these acquisitions included the acquisition of 60 % of the equity interests in the arsenal llc ( team ) ; 75 % of the equity interests in integrated media solutions , llc ; 51 % of the
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ROO
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compared to 2013 , in 2014 we are forecasting an increase in all of our oilfield operating business segments , including : rovs on greater service demand to support drilling and vessel-based projects ; subsea products on higher demand for all our major product lines ; subsea projects on a growth in deepwater service activity ; and asset integrity on increased demand for our services . we use our rovs to provide drilling support , vessel-based inspection , maintenance and repair , subsea hardware installation , construction , and pipeline inspection services to customers in the oil and gas industry . the largest percentage of our rovs has historically been used to provide drill support services . therefore , the number of floating drilling rigs on hire is a leading market indicator for this business . the following table shows average floating rigs under contract and our rov utilization . replace_table_token_11_th demand for floating rigs is our primary driver of future growth prospects . according to industry data published by ihs petrodata , at the end of 2013 , there were 314 floating drilling rigs in the world , with 282 of the rigs under contract . of the 282 rigs under contract , 213 are contracted through 2014 . one hundred two additional floating rigs were on order , and 60 of these 102 have been contracted long-term . we estimate approximately 29 floating rigs will be placed in service during 2014 , and we have rov contracts on 16 of those . competitors have the rov contracts on three rigs , leaving 10 contract opportunities . in addition to floating rig demand , subsea tree completions are another leading indicator of the strength of the deepwater market and the primary demand driver for our subsea products lines . according to industry data published by quest offshore resources , inc. , the global market for subsea tree orders is expected to increase approximately 65 % in the 2013-2017 time period compared to the previous five years . additionally , quest projects that subsea tree installations during the same time period will increase approximately 50 % compared to the previous five-year period , and the installed subsea completion base will have a net increase of approximately 1,400 trees , or 35 % . critical accounting policies and estimates we have based the following discussion and analysis of our financial condition and results of operations on our consolidated financial statements , which we have prepared in conformity with accounting principles generally accepted in the united states . these principles require us to make various estimates , judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the periods we present . we base our estimates on historical experience , available information and other assumptions we believe to be reasonable under the circumstances . on an ongoing basis , we evaluate our estimates ; however , our actual results may differ from these estimates under different assumptions or conditions . the following discussion summarizes the accounting policies we believe ( 1 ) require our management 's most difficult , subjective or complex judgments and ( 2 ) are the most critical to our reporting of results of operations and financial position . 23 revenue recognition . we recognize our revenue according to the type of contract involved . on a daily basis , we recognize revenue under contracts that provide for specific time , material and equipment charges , which we bill periodically , ranging from weekly to monthly . we account for significant fixed-price contracts , which we enter into mainly in our subsea products segment , and occasionally in our subsea projects and advanced technologies segments , using the percentage-of-completion method . in 2013 , we accounted for 12 % of our revenue using the percentage-of-completion method . in determining whether a contract should be accounted for using the percentage-of-completion method , we consider whether : the customer provides specifications for the construction of facilities or production of goods or for the provision of related services ; we can reasonably estimate our progress towards completion and our costs ; the contract includes provisions as to the enforceable rights regarding the goods or services to be provided , consideration to be received and the manner and terms of payment ; the customer can be expected to satisfy its obligations under the contract ; and we can be expected to perform our contractual obligations . under the percentage-of-completion method , we recognize estimated contract revenue based on costs incurred to date as a percentage of total estimated costs . changes in the expected cost of materials and labor , productivity , scheduling and other factors affect the total estimated costs . additionally , external factors , including weather or other factors outside of our control , may also affect the progress and estimated cost of a project 's completion and , therefore , the timing of income and revenue recognition . we routinely review estimates related to our contracts and reflect revisions to profitability in earnings immediately . if a current estimate of total contract cost indicates an ultimate loss on a contract , we recognize the projected loss in full when we determine it . in prior years , we have recorded adjustments to earnings as a result of revisions to contract estimates . although we are continually striving to accurately estimate our contract costs and profitability , adjustments to overall contract costs could be significant in future periods . story_separator_special_tag we expect our 2014 subsea projects operating margin to improve slightly over 2013. our asset integrity segment revenue and operating income were higher in 2013 over 2012 due to high demand in most of our geographic areas , particularly africa and australia . our asset integrity segment revenue and operating income were higher in 2012 as compared to 2011 on higher service sales in most of the geographic areas we serve , and particularly in norway due to our acquisition in december 2011. we anticipate our 2014 operating income for asset integrity to be higher than in 2013 on increased service sales and a slight improvement in operating margin . advanced technologies . the table that follows sets out revenue and profitability for this segment . replace_table_token_13_th 29 our advanced technologies operating income in 2013 was higher than that of 2012 due to increases in work and operational efficiency on theme park projects and an increase in vessel maintenance and repair work for the u.s. navy . our advanced technologies operating income in 2012 was higher than that of 2011 on higher engineering and vessel maintenance work for the u.s. navy and higher levels of theme park projects . we anticipate our advanced technologies 2014 operating income to approximate that of 2013 . unallocated expenses . our unallocated expenses , i.e . , those not associated with a specific business segment , within gross margin consist of expenses related to our incentive and deferred compensation plans , including restricted stock and bonuses , as well as other general expenses . our unallocated expenses within operating income consist of those within gross margin plus general and administrative expenses related to corporate functions . the table that follows sets out our unallocated expenses . replace_table_token_14_th our unallocated gross margin and operating expenses increased in each of 2013 and 2012 , primarily due to higher compensation related to incentive plans . other . the table that follows sets forth our significant financial statement items below the operating income line . replace_table_token_15_th interest expense decreased in 2013 compared to 2012 on decreasing debt levels as we paid down our debt to zero during 2013. interest expense increased in 2012 compared to 2011 from higher debt levels after we increased our borrowings to fund an acquisition in december 2011. we did not capitalize any interest in 2013 , 2012 or 2011 . we record results from our 50 % investment in medusa spar llc using the equity method . medusa spar llc owns 75 % of a production spar in the u.s. gulf of mexico and earns its revenue from fees charged on production processed through the facility . throughput declined in each of 2013 and 2012 from the immediately preceding year due to normal well production decline . we expect medusa spar llc revenue and our equity share of its earnings will decline in 2014 due to normal well production decline . medusa spar llc 's revenue could be increased if the operator of the producing wells receives regulatory approval to start producing from other zones in the existing wells , which are anticipated to have higher flow rates than the currently-producing zones , or is able to connect more wells to the spar . included in other income ( expenses ) , net are foreign currency transaction gains/ ( losses ) of $ 0.1 million , $ ( 5.4 ) million and $ ( 0.4 ) million for 2013 , 2012 and 2011 , respectively . our effective tax rate , including foreign , state and local taxes , was 31.5 % , 31.5 % , and 30.3 % for 2013 , 2012 and 2011 , respectively , which included a combination of expiring statutes of limitations and the resolution of uncertain tax positions of $ 0.7 million , $ 3.0 million and $ 0.9 million , respectively , related to certain liabilities for uncertain tax positions we recorded in prior years . the primary difference between our 2012 and 2011 effective tax rates and the u.s. federal statutory rate of 35 % reflects our intent to indefinitely reinvest in certain of our international operations . therefore , we are no longer providing for u.s. taxes on a portion of our foreign earnings . the effective tax rate of 30.3 % in our financial statements for 2011 is a result of our effective rate of 31.5 % adjusted by $ 4.9 million of additional tax benefits , primarily attributable to amending prior years ' u.s. federal income tax returns to reflect a broader interpretation of our pre-tax income eligible for certain deductions 30 allowable for oil and gas construction activities , and tax effecting the $ 19.6 million gain on the sale of the ocean legend at the u.s. federal statutory rate of 35 % . we anticipate our effective tax rate in 2014 will be approximately 31.3 % . off-balance sheet arrangements we do not have any off-balance sheet arrangements , as defined by sec rules . contractual obligations at december 31 , 2013 , we had payments due under contractual obligations as follows : replace_table_token_16_th at december 31 , 2013 , we had outstanding purchase order commitments totaling $ 479 million , including approximately $ 100 million for the construction of a new subsea support vessel scheduled for delivery in 2016 , $ 49 million for rov launch and recovery system equipment and $ 29 million for specialized steel tubes to be used in our manufacturing of steel tube umbilicals . we have ordered the specialized steel tubes in advance to meet expected sales commitments . the winches have been ordered for new rovs and for anticipated replacements due to normal wear and tear . should we decide not to accept delivery of the steel tubes , we would incur cancellation charges of at least 10 % of the amount canceled . in 2001 , we entered into an agreement with our chairman of the board of directors ( the ``
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this estimate includes $ 225 million in our rov segment for the addition of new vehicles and vehicle upgrades , $ 120 million for enhancing our subsea products capabilities , and $ 65 million in our subsea projects segment , primarily for construction progress payments on a new subsea support vessel scheduled for delivery in 2016. our capital expenditures during 2013 , 2012 and 2011 included $ 226 million , $ 198 million and $ 136 million , respectively , in our rov segment , principally for additions and upgrades to our rov fleet to expand the fleet and replace units we retired and for facilities infrastructure to support our growing rov fleet size . we plan to continue adding rovs at levels we determine appropriate to meet market opportunities as they arise . we added 26 , 37 and 24 rovs to our fleet and retired 10 , 15 and 16 units during 2013 , 2012 and 2011 , respectively , and transferred one to our advanced technologies segment in each of 2013 and 2011 , resulting in a total of 304 work-class systems in the fleet at december 31 , 2013 . in 2012 , we rechartered a deepwater vessel , the ocean intervention iii , for two years , with extension options for up to three additional years , and which we have extended to january 2015. we have also chartered an additional larger deepwater vessel , the olympic intervention iv , for an initial term of five years , which began in the third quarter of 2008 , and which we have extended to july 2016. we outfitted each of these larger deepwater vessels with two of our high-specification work-class rovs , and we have utilized these vessels to perform subsea hardware installation and inspection , maintenance and repair projects , and to conduct well intervention services in the ultra-deep waters of the u.s. gulf of mexico . in 2012 , we moved the ocean intervention iii to angola and chartered the bourbon oceanteam 101 to work on a three-year field support contract . the customer for this contract has the option for us to provide a third vessel and has options to extend the contract for two additional one-year periods . in march 2013 , we commenced a five-year charter for a jones act-compliant multi-service support vessel , which we have been renamed the ocean alliance , that we are using in the u.s. gulf of mexico . we have outfitted the vessel with two of our high-specification work-class rovs . in december 2013 , we commenced a three-year charter for the normand flower , a multi-service subsea marine support vessel . we have made modifications to the vessel , including reconfiguration to accommodate two of our high-specification work-class rovs . we anticipate we will use the vessel in the u.s. gulf of mexico to perform inspection , maintenance
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overview we are a leader and an innovator in providing technology-enabled services platforms that empower consumers to make healthcare saving and spending decisions . consumers and employers use our platforms to manage tax-advantaged hsas and other cdbs offered by employers , including fsas and hras , cobra administration , commuter and other benefits , compare treatment options and pricing , evaluate and pay healthcare bills , receive personalized benefit information , access remote and telemedicine benefits , earn wellness incentives , and receive investment advice to grow their tax-advantaged healthcare savings . the core of our offerings is the hsa , a financial account through which consumers spend and save long-term for healthcare expenses on a tax-advantaged basis . as of january 31 , 2021 , we administered 5.8 million hsas , with balances totaling $ 14.3 billion , which we call hsa assets . during the fiscal years ended january 31 , 2021 and 2020 , we added approximately 0.7 million and 1.5 million new hsas , respectively , which reflects in 2019 the wageworks acquisition . also , as of january 31 , 2021 , we administered 7.0 million complementary cdbs . we refer to the aggregate number of hsas and other cdbs on our platforms as total accounts , of which we had 12.8 million as of january 31 , 2021. we reach consumers primarily through relationships with their employers , which we call clients . we reach clients primarily through a sales force that calls on clients directly , relationships with benefits brokers and advisors , and integrated partnerships with a network of health plans , benefits administrators , benefits brokers and consultants , and retirement plan recordkeepers , which we call network partners . as of january 31 , 2021 , our platforms were integrated with 174 network partners , and we serve approximately 100,000 clients . we have increased our share of the growing hsa market from 4 % in calendar year 2010 to 16 % in 2020 , measured by hsa assets . according to devenir , today we are the largest hsa provider by accounts and second largest by assets . in addition , we believe we are the largest provider of other cdbs . we seek to differentiate ourselves through our proprietary technology , product breadth , ecosystem connectivity , and service-driven culture . our proprietary technology is designed to help consumers optimize the value of their hsas and other cdbs and gain confidence and skills in managing their healthcare costs as part of their financial security . our ability to engage consumers is enhanced by our platforms ' capacity to securely share data in both directions with others in the health , benefits , and retirement ecosystems . our commuter benefits offering also leverages connectivity to an ecosystem of mass transit , ride hailing , and parking providers . these strengths reflect our “ deep purple ” culture of remarkable service to customers and teammates , achieved by driving excellence , ethics , and process into everything we do . we earn revenue primarily from three sources : service , custodial , and interchange . we earn service revenue mainly from fees paid by clients on a recurring per-account per-month basis . we earn custodial revenue mainly from hsa assets held at our members ' direction in federally insured cash deposits , insurance contracts or mutual funds , and from investment of client-held funds . we earn interchange revenue mainly from fees paid by merchants on payments that our members make using our physical payment cards and virtual platforms . see “ key components of our results of operations ” for additional information on our sources of revenue , including the adverse impacts caused by the ongoing covid-19 pandemic . -33- wageworks acquisition on august 30 , 2019 , we completed the wageworks acquisition and paid approximately $ 2.0 billion in cash to wageworks stockholders , financed through net borrowings of approximately $ 1.22 billion under a new term loan facility and approximately $ 816.9 million of cash on hand . as a result of the wageworks acquisition , wageworks inc. became a wholly owned subsidiary of healthequity , inc. the key strategy of the wageworks acquisition was to enable us to increase the number of our employer sales opportunities , the conversion of these opportunities to clients , and the value of clients in generating members , hsa assets and complementary cdbs . wageworks ' historic strength of selling to employers directly and through health benefits brokers and advisors complemented our distribution through network partners . with wageworks ' cdb capabilities , we provide employers with a single partner for both hsas and other cdbs , which is preferred by the vast majority of employers according to research conducted for us by aite group . for clients that partner with us in this way , we believe we can produce more value by encouraging both cdb participants to contribute to hsas and hsa-only members to take advantage of tax savings available through other cdbs . accordingly , we believe that there are significant opportunities to expand the scope of services that we provide to our clients . the wageworks acquisition has significantly increased the number of our total accounts , hsa assets , client-held funds , adjusted ebitda , total revenue , total cost of revenue , operating expenses , and other financial results . these increases impact the comparability of the period-over-period results described in this report . key factors affecting our performance we believe that our future performance will be driven by a number of factors , including those identified below . each of these factors presents both significant opportunities and significant risks to our future performance . see also `` results of operations - revenue '' for information relating to the ongoing covid-19 pandemic and also the section entitled “ risk factors ” included in part 1 , item 1a of this annual report on form 10-k and our other reports filed with the sec . wageworks integration on august 30 , 2019 , we completed the wageworks acquisition . story_separator_special_tag we earn a material portion of our total revenue from interest paid to us by these partners . the lengths of our agreements with depository partners typically range from three to five years and may have fixed or variable interest rate terms . the terms of new and renewing agreements may be impacted by the then-prevailing interest rate environment , which in turn is driven by macroeconomic factors and government policies over which we have no control . such factors , and the response of our competitors to them , also determine the amount of interest retained by our members . we believe that diversification of depository partners , varied contract terms and other factors reduce our exposure to short-term fluctuations in prevailing interest rates and mitigate the short-term impact of sustained increases or declines in prevailing interest rates on our custodial revenue . over longer periods , sustained shifts in prevailing interest rates affect the amount of custodial revenue we can realize on custodial assets and the interest retained by our members . we expect our custodial revenue to continue to be adversely affected by the interest rate cuts by the federal reserve associated with the ongoing covid-19 pandemic and other market conditions that have caused interest rates to decline significantly . -35- interest on our long-term debt changes frequently due to variable interest rate terms , and as a result , our interest expense is expected to fluctuate based on changes in prevailing interest rates . our competition and industry our direct competitors are hsa custodians and other cdb providers . many of these are state or federally chartered banks and other financial institutions for which we believe technology-based healthcare services are not a core business . some of our direct competitors ( including healthcare service companies such as united health group 's optum , webster bank , and well-known retail investment companies , such as fidelity investments ) are in a position to devote more resources to the development , sale , and support of their products and services than we have at our disposal . in addition , numerous indirect competitors , including benefits administration technology and service providers , partner with banks and other hsa custodians to compete with us . our network partners may also choose to offer competitive services directly , as some health plans have done . our success depends on our ability to predict and react quickly to these and other industry and competitive dynamics . as a result of the covid-19 pandemic , we have seen an adverse impact on sales opportunities , with some opportunities delayed and most now being held virtually . as an increasing number of companies go out of business , the number of our clients and potential clients is adversely affected . increased unemployment may mean that fewer of our members contribute to hsas , fsas or other cdbs and reduce overall demand for our products . we have seen a significant decline in the use of commuter benefits due to many of our members working from home during the outbreak or other impacts from the outbreak , which has negatively impacted both our interchange revenue and service revenue , and this `` work from home '' trend may continue after the pandemic . we have also seen a decline in interchange revenue across all other products . the extent to which the covid-19 pandemic will negatively impact our business is highly uncertain and can not be accurately predicted . regulatory environment federal law and regulations , including the affordable care act , the internal revenue code , the employee retirement income security act and department of labor regulations , and public health regulations that govern the provision of health insurance and provide the tax advantages associated with our products , play a pivotal role in determining our market opportunity . privacy and data security-related laws such as the health insurance portability and accountability act , or hipaa , and the gramm-leach-bliley act , laws governing the provision of investment advice to consumers , such as the investment advisers act of 1940 , or the advisers act , the usa patriot act , anti-money laundering laws , and the federal deposit insurance act , all play a similar role in determining our competitive landscape . in addition , state-level regulations also have significant implications for our business in some cases . for example , our subsidiary healthequity trust company is regulated by the wyoming division of banking , and several states are considering , or have already passed , new privacy regulations that can affect our business . various states also have laws and regulations that impose additional restrictions on our collection , storage , and use of personally identifiable information . privacy regulation in particular has become a priority issue in many states , including california , which in 2018 enacted the california consumer privacy act broadly regulating california residents ' personal information and providing california residents with various rights to access and control their data , and the new california privacy rights act . we have also seen an increase in regulatory changes related to our products due to government responses to the covid-19 pandemic and may continue to see additional regulatory changes . our ability to predict and react quickly to relevant legal and regulatory trends and to correctly interpret their market and competitive implications is important to our success . our acquisition strategy we have a successful history of acquiring hsa portfolios and businesses that strengthen our platform . we seek to continue this growth strategy and are regularly engaged in evaluating different opportunities . we have developed an internal capability to source , evaluate , and integrate acquired hsa portfolios . we intend to continue to thoughtfully pursue acquisitions of complementary assets and businesses that we believe will strengthen our platform .
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results of operations impact of wageworks acquisition the comparability of our operating results is impacted by the wageworks acquisition on august 30 , 2019. as the wageworks acquisition closed on august 30 , 2019 , wageworks ' results of operations are included in our consolidated results of operations for the entire fiscal year ended january 31 , 2021 , but are only included in our consolidated results of operations for approximately five months during the fiscal year ended january 31 , 2020. revenue and expense attributable to wageworks generally is not separately identifiable due to the integration of wageworks into our existing operations . for a discussion related to the results of operations and liquidity and capital resources for fiscal year 2020 compared to fiscal year 2019 , refer to part ii , item 7. management 's discussion and analysis of financial condition and results of operations in our fiscal year 2020 form 10-k , filed with the sec on march 31 , 2020. revenue the following table sets forth our revenue for the periods indicated : replace_table_token_6_th service revenue . the $ 168.1 million , or 64 % , increase in service revenue was primarily due to the inclusion for the full period of service revenue associated with the cdbs added through the wageworks acquisition , partially offset by the negative impact of the covid-19 pandemic on service revenues related to commuter benefits and other cdbs . custodial revenue . the $ 9.0 million , or 5 % , increase in custodial revenue was primarily due to an increase in the average daily balance of hsa cash with yield of $ 1.7 billion , or 24 % .
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ROO
| 2,887
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changes to internal control over financial reporting there were no changes in our internal controls over financial reporting that occurred during the period covered by this report that have materially affected , or are reasonably likely to materially affect , our internal controls over financial reporting . item 9b . other information . none . 38 part iii item 10. directors , executive officers and corporate governance . the information required by item 10 is incorporated by reference to the sections entitled “ questions and answers about the 2018 annual meeting and voting , ” “ election of directors , ” “ section 16 ( a ) beneficial ownership reporting compliance , ” “ corporate governance , ” and “ executive officers ” in our definitive proxy statement relating to our 2018 annual meeting of stockholders . item 11. executive compensation . the information required by item 11 is incorporated by reference to the section s entitled “ executive compensation ” and “ director compensation ” in our definitive proxy statement relating to our 2018 annual meeting of stockholders . item 12. security ownership of certain beneficial owners and management and related stockholder matters . the information required by item 12 is incorporated by reference to the section s entitled “ security ownership of principal stockholders , ” “ security ownership of directors and management ” and “ equity compensation plan information ” in our definitive proxy statement relating to our 2018 annual meeting of stockholders . item 13. certain relationships and related transactions , and director independence . the information required by item 13 is incorporated by reference to the sections entitled “ corporate governance ” and “ certain transactions and business relationships ” in our definitive proxy statement relating to our 2018 annual meeting of stockholders . item 14. principal accounting fees and services the information required by item 14 is incorporated by reference to the section entitled “ independent registered public account ant firm ” in our definitive proxy statement relating to our 2018 annual meeting of stockholders . 39 part iv item 15. exhibits , financial statement schedules . ( a ) documents filed as part of this report . ( 1 ) financial statements . the following financial statements are included in part ii , item 8 of this annual report on form 10-k : report of eide bailly , llp on con solidated financial statements as of november 30 , 2017 and 2016 consolidated balance sheets as of november 30 , 2017 and 2016 consolidated statements of operations for each of the two years in the period ended november 30 , 2017 and 2016 consol idated statements of comprehensive income for each of the two years in the period ended november 30 , 2017 and 2016 consolidated statements of stockholders ' equity for each of the two years in the period ended november 30 , 2017 and 2016 consolidated statements of cash flows for each of the two years in the period ended november 30 , 2017 and 2016 notes to consolidated financial statements ( 2 ) financial statement schedules . not applicable . ( 3 ) exhibits . exhibit no . description 3.1 certificate of incorporation of art 's-way manufacturing co. , inc.– incorporated by reference to exhibit 3.1 to the company 's quarterly report on form 10-q for the quarter year ended may 31 , 2012 . 3.2 certificate of amendment to the certificate of incorporation of art 's-way manufacturing co. , inc. – incorporated by reference to exhibit 3.2 to the company 's quarterly report on form 10-k for the quarter ended may 31 , 2012 . 3.3 bylaws of art 's-way manufacturing co. , inc.– incorporated by reference to exhibit 3.2 to the company 's annual report on form 10-k for the fiscal year ended november 30 , 2008 . 3.4 amendments to bylaws of art 's-way manufacturing co. , inc. – incorporated by reference to exhibit 3.1 to the company 's quarterly report on form 10-qsb for the quarter ended may 31 , 2004 . 10.1 * art 's-way manufacturing co. , inc. 2007 non-employee directors stock option plan – incorporated by reference to exhibit 10.1 of the company 's quarterly report on form 10-qsb for the quarter ended february 28 , 2007 . 10.2 * art 's-way manufacturing co. , inc. 2007 employee stock option plan – incorporated by reference to exhibit 10.3 of the company 's annual report on form 10-k for the fiscal year ended november 30 , 2009 . 10.3 * form of non-qualified option agreement under 2007 non-employee directors ' stock option plan and 2007 employee stock option plan – incorporated by reference to exhibit 10.8 of the company 's quarterly report on form 10-q for the quarter ended may 31 , 2009 . 40 10.4 * director compensation policy – incorporated by reference to exhibit 10.1 to the company 's quarterly report on form 10-q for the quarter ended february 29 , 2016 . 10.5 * art 's-way manufacturing co. , inc. 2011 equity incentive plan – incorporated by reference to exhibit 10.1 to the company 's current report on form 8-k filed may 3 , 2011 . 10.6 * form of incentive stock option agreement under the art 's-way manufacturing co. , inc. 2011 equity incentive plan – incorporated by reference to exhibit 10.2 to the company 's current report on form 8-k filed may 3 , 2011 . 10.7 story_separator_special_tag . this report contains forward-looking statements that involve significant risks and uncertainties . the following discussion , which focuses on our results of operations , contains forward-looking information and statements . story_separator_special_tag at the transfer of title , all risks of ownership have passed to the buyer , and the buyer agrees to maintain insurance on the manufactured items that have not yet been shipped . we have operated using bill and hold agreements with certain customers for many years , with consistent satisfactory results for both buyer and seller . the credit terms on this agreement are consistent with the credit terms on all other sales . all risks of loss are shouldered by the buyer , and there are no exceptions to the buyer 's commitment to accept and pay for these manufactured goods . revenues recognized at the completion of production in the 2017 and 2016 fiscal years were approximately $ 184,000 and $ 424,000 , respectively . 13 our modular buildings segment is in the construction industry and , as such , accounts for long-term contracts on the percentage-of-completion method . revenue and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at completion . contract losses are recognized when current estimates of total contract revenue and contract cost indicate a loss . estimated contract costs include any and all costs appropriately allocable to the contract . the provision for these contract losses will be the excess of estimated contract costs over estimated contract revenues . costs and profit in excess of amounts billed are classified as current assets and billings in excess of cost and profit are cl assified as current liabilities . story_separator_special_tag style= '' margin : 0pt ; text-align : justify ; font-family : times new roman , times , serif ; font-size : 10pt ; '' > during the third quarter of the 2016 fiscal year , we made the decision to exit the pressure vessels industry and are currently working to liquidate the assets . our pressurized vessels segment 's net sales for the 2017 fiscal year were $ 0 compared to $ 1,598,000 for the 2016 fiscal year . we continued to incur expenses during 2017 due to holding the facility in dubuque , iowa . in january 2018 , we accepted an offer on the remaining assets for $ 1,500,000. we anticipate closing on the disposition of these assets in the second quarter of fiscal 2018. based on this offer , we have recorded an impairment to our assets of $ 289,000 in the 2017 fiscal year . our pretax loss in 2017 was $ ( 401,000 ) compared to $ ( 617,000 ) in 2016 , a decrease of $ 216,000 , or 35.0 % . trends and uncertainties we are subject to a number of trends and uncertainties that may affect our short-term or long-term liquidity , sales revenues , and operations . similar to other farm equipment manufacturers , we are affected by items unique to the farm industry , including fluctuations in farm income resulting from the change in commodity prices , crop damage caused by weather and insects , government farm programs , interest rate fluctuations , and other unpredictable variables . other uncertainties include our oem customers and the decisions they make regarding their current supply chain structure , inventory levels , and overall business conditions . management believes that our business is dependent on the farming industry for the bulk of our sales revenues . as such , our business tends to reap the benefits of increases in farm net income , as farmers tend to purchase equipment in lucrative times and forgo purchases in less profitable years . direct government payments are declining and costs of agricultural production are increasing ; therefore , we anticipate that further increases in the value of production will benefit our business , while any future decreases in the value of production will decrease farm net income and may harm our financial results . as with other farm equipment manufacturers , we depend on our network of dealers to influence customers ' decisions , and dealer influence is often more persuasive than a manufacturer 's reputation or the price of the product . seasonality sales of our agricultural products are seasonal ; however , we have tried to decrease the impact of this seasonality through the development of beet harvesting machinery coupled with private labeled products , as the peak periods for these different products occur at different times . we believe that our tool sales are not seasonal . our modular building sales are somewhat seasonal , and we believe that this is due to the budgeting and funding cycles of the universities that commonly purchase our modular buildings . we believe that this cycle can be offset by building backlogs of inventory and by increasing sales to other public and private sectors . liquidity and capital resources our main source of funds during the 2017 fiscal year was cash generated by operating activities , which was primarily due to inventory reductions , and amounts available under our revolving line of credit . we used $ 514,000 of cash to update facilities and equipment . 15 on september 28 , 2017 , w e entered into a new credit facility with bank midwest , which superseded and replaced in its entirety our previous credit facility with u.s. bank national association ( “ u.s . bank ” ) . the bank midwest credit facility consists of a $ 5,000,000 revolving line of credit , pursuant to which we had borrowed $ 2,462,530 as of november 30 , 2017 , with $ 2,537,470 remaining available , and two term loans , which had outstanding principal balances of $ 2,595,000 , and $ 600,000 as of november 30 , 2017. proceeds of the new line of credit and two term loans were used to refinance all of the indebtedness outstanding under the u.s. bank credit facility in the amount of approximately $ 6,562,030 , which consisted of $ 6,528,223 in unpaid principal and approximately $ 33,807 in accrued and
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results of operations – continuing operations fiscal year ended november 30 , 201 7 compared to fiscal year ended november 30 , 201 6 our consolidated net sales for continuing operations totaled $ 20,715,000 for the 2017 fiscal year , which represents a 3.9 % decrease from our consolidated net sales of $ 21,558,000 for the 2016 fiscal year . the decrease in revenue is due to decreased sales in our modular buildings and agricultural products segments . we are experiencing decreased demand of nearly all our agricultural products , including modular buildings geared towards agricultural production . our consolidated gross profit decreased as a percentage of net sales to 19.7 % in 2017 from 24.7 % of net sales in 2016. measures taken during the year to control our costs did not completely offset the impact of declining revenues as compared to relatively stable fixed costs . we also experienced decreased efficiencies in our production process due to the introduction of several new products . our consolidated operating expenses increased by 0.9 % , from $ 5,751,000 in 2016 to $ 5,804,000 in 2017. because the majority of our corporate general and administrative expenses are borne by our agricultural products segment , that segment represented $ 4,173,000 of our total consolidated operating expenses , while our modular buildings segment represented $ 806,000 and our tools segment represented $ 825,000. our consolidated operating loss from continuing operations for the 2017 fiscal year was $ ( 1,722,000 ) compared to an operating loss of $ ( 431,000 ) for the 2016 fiscal year . our agricultural products segment had an operating loss of $ ( 1,381,000 ) , our modular buildings segment had an operating loss of $ ( 313,000 ) , and our tools segment had an operating loss of $ ( 28,000 ) .
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ROO
| 12,844
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mortgage servicing rights are recorded at fair value upon sale of the loan , and are amortized in proportion to and over the period of estimated net servicing income . loans loans are recorded at their current unpaid principal balance , net of unearned income and unamortized loan fees and expenses , which are amortized under the effective interest method over the estimated lives of the loans . interest income on loans is accrued based on the principal amount outstanding . for all loan classes within the company 's loan portfolio , loans are placed on nonaccrual status when timely collection of principal and or interest in accordance with contractual terms is in doubt . loans are transferred to nonaccrual status generally when principal or interest payments become ninety days delinquent , unless the loan is well secured and in the process of collection or sooner when management concludes circumstances indicate that borrowers may be unable to meet contractual principal or interest payments . when a loan is transferred to a nonaccrual status , all interest previously accrued in the current period but not collected is reversed against interest income in that period . interest accrued in a prior period and not collected is charged-off against the allowance for credit losses . if ultimate repayment of a nonaccrual loan is expected , any payments received are applied in accordance with contractual terms . if ultimate repayment of principal is not expected , any payment received on a nonaccrual loan is applied to principal until ultimate repayment becomes expected . for all loan classes within the company 's loan portfolio , nonaccrual loans are returned to accrual status when they become current as to principal and interest and demonstrate a period of performance under the contractual terms and , in the opinion of management , are fully collectible as to principal and interest . for loans in all portfolios , the principal amount is charged off in full or in part as soon as management determines , based on available facts , that the collection of principal in full or in part is improbable . for commercial loans , management considers specific facts and circumstances relative to individual credits in making such a determination . for consumer and residential real estate loan classes , management uses specific guidance and thresholds from the federal financial institutions examination council 's uniform retail credit classification and account management policy . a loan is considered to be a troubled debt restructuring ( “ tdr ” ) when the company grants a concession to the borrower because of the borrower 's financial condition that the company would not otherwise consider . such concessions generally include one or a combination of the following : an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk ; a temporary reduction in the interest rate ; or a change in scheduled payment amount . tdr loans are nonaccrual loans ; however , they can be returned to accrual status after a period of performance , generally evidenced by six months of compliance with their modified terms . section 4013 of the coronavirus aid , relief and economic security act ( “ cares act ” ) , which was enacted on march 27 , 2020 , provides that a qualified loan modification is exempt by law from classification as a troubled debt restructuring as defined by gaap . to be eligible , each loan modification must be ( 1 ) related to the coronavirus ( “ covid-19 ” ) pandemic ; ( 2 ) executed on a loan that was not more than 30 days past due as of december 31 , 2019 ; and ( 3 ) executed between march 1 , 2020 , and the earlier of ( a ) 60 days after the date of termination of the national emergency or ( b ) december 31 , 2020. on august 3 , 2020 , the federal financial institutions examination council ( “ ffiec ” ) issued a joint statement on additional loan accommodations related to covid-19 . the joint statement clarifies that for loan modifications in which section 4013 is being applied , subsequent modifications could also be eligible under section 4013. accordingly , the company is offering modifications made in response to covid-19 to borrowers who were current and otherwise not past due in accordance with the criteria stated in section 4013. these include short-term , 180 days or less , modifications in the form of payment deferrals , fee waivers , extensions of repayment terms , or other delays in payment . accordingly , the company did not account for such loan modifications as tdrs . as of december 31 , 2020 , there were $ 110.8 million in loans in modification programs related to covid-19 . on december 27 , 2020 , the consolidated appropriations act amended section 2014 of the cares act extending the exemption of qualified loan modifications from classification as a troubled debt restructuring as defined by gaap to the earlier of january 1 , 2022 , or 60 days after the national emergency concerning covid-19 ends . allowance for credit losses - loans the cecl approach requires an estimate of the credit losses expected over the life of a loan ( or pool of loans ) . it replaces the incurred loss approach 's threshold that required the recognition of a credit loss when it was probable a loss event was incurred . the allowance for credit losses is a valuation account that is deducted from , or added to , the loans ' amortized cost basis to present the net , lifetime amount expected to be collected on the loans . loan losses are charged off against the allowance when management believes a loan balance is confirmed to be uncollectible . story_separator_special_tag interest income for tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory federal income tax rate of 21 % for 2020 , 2019 and 2018 . 35 average balances and net interest income replace_table_token_9_th ( 1 ) securities are shown at average amortized cost . ( 2 ) for purposes of these computations , nonaccrual loans and loans held for sale are included in the average loan balances outstanding . ( 3 ) interest income for tax-exempt securities and loans have been adjusted to a fte basis using the statutory federal income tax rate of 21 % . 36 2020 operating results as compared to 2019 operating results net interest income net interest income for the year ended 2020 was $ 315.7 million , up $ 4.1 million , or 1.3 % , from 2019. fte net interest margin of 3.31 % for the year ended december 31 , 2020 , was down from 3.58 % for the year ended december 31 , 2019. interest income decreased $ 19.3 million , or 5.2 % , as the yield on average interest-earning assets decreased 57 basis points ( “ bps ” ) from 2019 to 3.65 % , while average interest-earning assets increased $ 823.5 million primarily due to excess liquidity and an increase in average loans due to ppp loan originations . interest expense was down $ 23.4 million , or 41.8 % , for the year ended december 31 , 2020 as compared to the year ended december 31 , 2019 as the cost of interest-bearing liabilities decreased 41 bps . the federal reserve lowered its target fed funds rate by 150 basis points in the first quarter of 2020. analysis of changes in fte net interest income replace_table_token_10_th loans and corresponding interest and fees on loans the average balance of loans increased by approximately $ 489.4 million , or 7.0 % , from 2019 to 2020. the yield on average loans decreased from 4.62 % in 2019 to 4.13 % in 2020 , as loans re-priced downward due to the interest rate environment in 2020. fte interest income from loans decreased 4.3 % , from $ 321.8 million in 2019 to $ 308.1 million in 2020. this decrease was due to the decreases in yields . net interest income in 2020 included $ 14.2 million of interest and fees on ppp loans . total loans increased $ 362.8 million , or 5.1 % , from december 31 , 2019 to december 31 , 2020. total ppp loans as of december 31 , 2020 were $ 431 million ( net of unamortized fees ) , with $ 548 million originated at an average loan size of $ 184 thousand and an average annual fee of 3.2 % . excluding ppp loans , period end loans decreased $ 68.0 million from december 31 , 2019. commercial and industrial loans decreased $ 34.5 million to $ 1.3 billion ; commercial real estate loans increased $ 238.3 million to $ 2.4 billion ; and total consumer loans decreased $ 271.8 million to $ 3.4 billion . total loans represent approximately 68.6 % of assets as of december 31 , 2020 , as compared to 73.4 % as of december 31 , 2019. the following table reflects the loan portfolio by major categories ( 1 ) for the years indicated : composition of loan portfolio replace_table_token_11_th ( 1 ) loans are summarized by business line which do not align to how the company assesses credit risk in the estimate for credit losses under cecl . 37 residential real estate loans consist primarily of loans secured by a first or second mortgage on primary residences . we originate adjustable-rate and fixed-rate , one-to-four-family residential real estate loans for the construction , purchase or refinancing of a mortgage . these loans are generally collateralized by properties located in the company 's market area . subprime mortgage lending , which has been the riskiest sector of the residential housing market , is not a market that the company has ever actively pursued . the market does not apply a uniform definition of what constitutes “ subprime ” lending . our reference to subprime lending relies upon the “ statement on subprime mortgage lending ” issued by the ots and the other federal bank regulatory agencies ( the “ agencies ” ) , on june 29 , 2007 , which further referenced the “ expanded guidance for subprime lending programs , ” or the expanded guidance , issued by the agencies by press release dated january 31 , 2001. loans in the commercial and commercial real estate , consist primarily of loans made to small and medium-sized entities . the company offers a variety of loan options to meet the specific needs of our commercial customers including term loans , time notes and lines of credit . such loans are made available to businesses for working capital needs such as inventory and receivables , business expansion , equipment purchases , livestock purchases and seasonal crop expenses . these loans typically are usually collateralized by business assets such as equipment , accounts receivable and perishable agricultural products , which are exposed to industry price volatility . the company offers commercial real estate ( “ cre ” ) loans to finance real estate purchases , refinancings , expansions and improvements to commercial and agricultural properties . cre loans are loans secured by liens on real estate , which may include both owner occupied and non-owner-occupied properties , such as apartments , commercial structures , health care facilities and other facilities . the company offers a variety of consumer loan products including indirect auto , specialty lending , home equity and other consumer loans . indirect auto loans include indirect installment loans to individuals , which are primarily secured by automobiles . although automobile loans have generally been originated through dealers , all applications submitted through dealers are subject to the company 's normal underwriting
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investment decisions and deposit pricing strategies are impacted by the liquidity position . the company considered its basic surplus position to be strong . however , certain events may adversely impact the company 's liquidity position in 2021. the large inflow of deposits experienced in the second quarter of 2020 could reverse itself and flow out . in the current economic environment , draws against lines of credit could drive asset growth higher . disruptions in wholesale funding markets could spark increased competition for deposits . these scenarios could lead to a decrease in the company 's basic surplus measure below the minimum policy level of 5 % . significant monetary and fiscal policy actions taken by the federal government have helped to mitigate these risks . enhanced liquidity monitoring was put in place to quickly respond to the changing environment during the covid-19 pandemic including increasing the frequency of monitoring and adding additional sources of liquidity . at december 31 , 2020 , a portion of the company 's loans and securities were pledged as collateral on borrowings . therefore , once on-balance-sheet liquidity is depleted , future growth of earning assets will depend upon the company 's ability to obtain additional funding , through growth of core deposits and collateral management and may require further use of brokered time deposits or other higher cost borrowing arrangements . net cash flows provided by operating activities totaled $ 142.4 million and $ 153.5 million in 2020 and 2019 , respectively . the critical elements of net operating cash flows include net income , adjusted for non-cash income and expense items such as the provision for loan losses , deferred income tax expense , depreciation and amortization and cash flows generated through changes in other assets and liabilities . net cash flows used in investing activities totaled $ 709.7 million and $ 64.3 million in 2020 and 2019 , respectively . critical elements of investing activities are loan and investment securities transactions . net cash flows provided by financing activities totaled $ 1.0 billion in 2020 and net cash flows used in financing activities totaled $ 53.2 million in 2019. the critical elements of financing activities are proceeds from deposits , borrowings and stock issuance . in addition , financing activities are impacted by dividends and treasury stock transactions . contractual obligations in connection with its financing and operating activities , the company has entered into certain contractual obligations . the company 's future minimum cash payments , excluding interest , associated with its contractual obligations pursuant to its borrowing agreements , leases and other obligations at december 31 ,
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Liquidity
| 11,299
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rsus subject to pro rata vesting ) ( incorporated by reference from the registrant 's form 10-k filed february 28 , 2017 ) 10.41 form of global restricted stock unit agreement under the 2016 bunge limited equity incentive plan ( for rsus subject to cliff vesting ) ( incorporated by reference from the registrant 's form 10-k filed february 28 , 2017 ) 10.42 form of global performance unit agreement under the 2016 bunge limited equity incentive plan ( incorporated by reference from the registrant 's form 10-k filed february 28 , 2017 ) 10.43 bunge limited 2017 non-employee directors equity incentive plan ( incorporated by reference from the registrant 's definitive proxy statement filed april 13 , 2017 ) 10.44 form of restricted stock unit award agreement under the bunge limited 2017 non-employee directors equity incentive plan ( incorporated by reference from the registrant 's form 10-k filed february 23 , 2018 10.45 bunge excess benefit plan ( amended and restated as of january 1 , 2009 ) ( incorporated by reference from the registrant 's story_separator_special_tag the following should be read in conjunction with `` cautionary statement regarding forward looking statements '' and our combined consolidated financial statements and notes thereto included in item 15 of this annual report on form 10-k. non-u.s. gaap financial measures total segment earnings before interest and taxes ( `` ebit '' ) is an operating performance measure used by bunge 's management to evaluate segment operating activities . bunge 's management believes total segment ebit is a useful measure of operating profitability , since the measure allows for an evaluation of the performance of its segments without regard to its financing methods or capital structure . in addition , ebit is a financial measure that is widely used by analysts and investors in bunge 's industries . total segment ebit is a non-u.s. gaap financial measure and is not intended to replace net income attributable to bunge , the most directly comparable u.s. gaap financial measure . operating results factors affecting operating results bunge limited , a bermuda company , together with its subsidiaries , is a leading global agribusiness and food company with integrated operations that stretch from the farm to consumer foods . the commodity nature of the company 's principal products , as well as regional and global supply and demand variations that occur as an inherent part of the business , make volumes an important operating measure . accordingly , information is included in `` segment results `` that summarizes certain items in our consolidated statements of income and volumes by reportable segment . the common unit of measure for all reported volumes is metric tons . a description of reported volumes for each reportable segment has also been included in the discussion of key factors affecting results of operations in each of our business segments as discussed below . agribusiness in the agribusiness segment , we purchase , store , transport , process and sell agricultural commodities and commodity products . profitability in this segment is affected by the availability and market prices of agricultural commodities and processed commodity products and the availability and costs of energy , transportation and logistics services . profitability in our oilseed processing operations is also impacted by volumes procured , processed and sold and by capacity utilization rates . availability of agricultural commodities is affected by many factors , including weather , farmer planting and selling decisions , plant diseases , governmental policies , and agricultural sector economic conditions . reported volumes in this segment primarily reflect ( i ) grains and oilseeds originated from farmers , cooperatives or other aggregators and from which `` origination margins '' are earned ; ( ii ) oilseeds processed in our oilseed processing facilities and from which `` crushing margins '' are earned , representing the margin from the industrial separation of the oilseed into its protein meal and vegetable oil components , both of which are separate commodity products ; and ( iii ) third party sales of grains , oilseeds and related commodity products merchandised through our distribution businesses and from which `` distribution margins '' are earned . the foregoing subsegment volumes may overlap as they produce separate margin capture opportunities . for example , oilseeds procured in our south american grain origination activities may be processed in our oilseed processing facilities in asia-pacific and will be reflected at both points within the segment . as such , these reported volumes do not represent solely volumes of net sales to third-parties , but rather where margin is earned , appropriately reflecting their contribution to our global network 's capacity utilization and profitability . demand for our purchased and processed agribusiness products is affected by many factors , including global and regional economic conditions , changes in per capita income , the financial condition of customers and customer access to credit , worldwide consumption of food products , particularly pork and poultry , population growth rates , relative prices of substitute agricultural products , outbreaks of disease associated with livestock and poultry , and demand for renewable fuels produced from agricultural commodities and commodity products . we expect that the factors described above will continue to affect global supply and demand for our agribusiness products for the foreseeable future . we also expect that , from time to time , imbalances will likely exist between oilseed processing capacity and demand for oilseed products in certain regions , which impacts our decisions regarding whether , when and where to purchase , store , transport , process or sell these commodities , including whether to change the location of or adjust our own oilseed processing capacity . additionally , price fluctuations and availability of commodities may cause fluctuations in our working capital , such as inventories , accounts receivable and borrowings over the course of a given year . for example , increased availability of commodities at harvest times often causes fluctuations in our inventories and borrowings . story_separator_special_tag these amounts are remeasured into their respective functional currencies at exchange rates as of the balance sheet date , with the resulting gains or losses included in the entity 's statement of income and , therefore , in our consolidated statements of income as foreign exchange gains ( losses ) . we primarily use a combination of equity and intercompany loans to finance our subsidiaries . intercompany loans that are of a long-term investment nature with no intention of repayment in the foreseeable future are considered permanently invested and as such are treated as analogous to equity for accounting purposes . as a result , any foreign currency translation gains or losses on such permanently invested intercompany loans are reported in accumulated other comprehensive income ( loss ) in our consolidated balance sheets . in contrast , foreign currency translation gains or losses on intercompany loans that are not of a permanent nature are recorded in our consolidated statements of income as foreign exchange gains ( losses ) . income taxes as a bermuda exempted company , we are not subject to income taxes on income in our jurisdiction of incorporation . however , our subsidiaries , which operate in multiple tax jurisdictions , are subject to income taxes at various statutory rates ranging from 0 % to 35 % . the jurisdictions that significantly impact our effective tax rate are brazil , the united states , argentina and bermuda . determination of taxable income requires the interpretation of related and often complex tax laws and regulations in each jurisdiction where we operate and the use of estimates and assumptions regarding future events . results of operations 2018 overview for the year ended december 31 , 2018 , net income attributable to bunge increased by $ 107 million to $ 267 million from $ 160 million in 2017 . this increase resulted primarily from higher total segment ebit of $ 301 million , particularly in agribusiness , as described below , and was partially offset by higher interest and income tax expenses . income tax expense was $ 179 million in 2018 , compared to income tax expense of $ 56 million in 2017. the effective tax rate for 2018 was 39 % compared to 24 % in 2017. the higher effective tax rate for 2018 was primarily due to unfavorable earnings mix , coupled with an income tax charge of $ 48 million for valuation allowances established in brazil and china . total segment ebit of $ 737 million in 2018 increased from $ 436 million in 2017 . ebit for 2018 included $ 51 million of severance , employee benefit and other program costs related to our global competitiveness program ( “ gcp ” ) , $ 9 million of severance and other employee benefit costs related to other industrial initiatives , $ 10 million of restructuring charges in our industrial sugar operations in brazil , and $ 10 million of indirect tax credits in brazil . in addition , ebit included $ 10 million of asset impairment charges in europe relating to port assets . ebit also included $ 29 million of losses on the disposition of equity interests in brazil and asia , $ 19 million of acquisition fees , and a $ 24 million loss on the extinguishment of debt . ebit for 2017 included $ 55 million of severance , employee benefit and other program costs related to our gcp , $ 35 million of severance and other employee benefit costs related to other industrial initiatives , $ 22 million of restructuring charges in our industrial sugar operations in brazil , and $ 16 million of indirect tax credits in our industrial sugar operations in brazil . in addition , ebit included $ 20 million of asset impairment charges in asia and europe relating to feedmill and port assets , $ 17 million of impairment charges related to our palm oil affiliate in indonesia and our renewable oils affiliate in brazil , and impairment charges of $ 7 million of intangible assets . ebit also included $ 9 million of gains on the disposition of equity interests in brazil and $ 9 million of acquisition fees . agribusiness segment ebit increased in 2018 by $ 389 million to $ 645 million , primarily due to higher soy crush margins in all regions driven by favorable market dynamics and reduced soybean production in argentina due to a drought . additionally , better results in our ocean freight activities contributed to the improved results . edible oil products segment ebit decreased $ 4 million to $ 122 million in 2018 from $ 126 million in 2017 . increases to gross profit from the acquisition of loders and higher gross profit in europe from higher volumes and improved margins for margarine were more than offset by weaker margins in brazil from our packaged oil business as continued high availability of oils from the strong crushing environment pressured retail sales as well as higher sg & a resulting from recent acquisitions . milling products segment ebit increased by $ 27 million to $ 90 million in 2018 driven primarily by higher volumes and margins in mexico , the acquisition of minsa usa , and lower costs in brazil . 29 sugar and bioenergy segment ebit decreased by $ 123 million . the lower results were primarily in our sugarcane milling operations , driven by lower international sugar prices from higher global supply and weaker demand , as well as lower volumes and higher costs due to the impact of severe weather in brazil . results in our trading and merchandising business were also lower as we exited this business during the year . fertilizer segment ebit increased $ 36 million , primarily due to stronger margins in argentina resulting from the recovery of international fertilizer prices .
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. results for 2018 were primarily driven by the impact of the devaluation of the argentine peso on u.s. dollar denominated debt in argentina to fund operations . other income ( expenses ) - net was income of $ 79 million in 2018 , compared to income of $ 56 million in 2017 . the increase was primarily due to improved results from equity method investments in asia and income earned from financial services . segment ebit increased by $ 389 million in 2018 to $ 645 million , from $ 256 million in 2017 . the increase was mainly due to higher soy crush margins , partially offset by foreign exchange losses . 33 edible oil products segment — edible oil products segment net sales increased by 14 % in 2018 to $ 9.1 billion , compared to $ 8.0 billion in 2017 , resulting primarily from a 17 % increase in volumes , driven by our acquisition of loders in march 2018 and the full year impact of production facilities in europe acquired in 2017. this was partially offset by lower prices in brazil due to high stocks of soybean oil in the domestic market resulting from the strong soy crushing environment . cost of goods sold in 2018 increased 14 % compared to 2017 , which is in line with the increase in net sales noted above , and primarily driven by the impact of the recent acquisitions . gross profit in 2018 increased to $ 554 million compared to $ 499 million in 2017 . the increase was primarily due to the contribution to results by loders and higher volumes and improved margins for margarine in europe , which was partially offset by lower margins in our brazilian packaged oil business .
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ROO
| 9,872
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if a loan is impaired , a portion of the allowance is allocated so that the loan is reported net at the present value of estimated future cash flows using the loan 's existing rate or at the fair value of collateral if repayment is expected solely from the sale of the collateral . troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan 's effective rate at inception . if a troubled debt restructuring is considered to be a collateral dependent loan , the loan is reported , net , at the fair value of the collateral . for troubled debt restructurings that subsequently default , we determine the amount of reserve in accordance with the accounting policy for the allowance for loan losses . the general component of the allowance for loan losses covers non-impaired loans and is based on historical loss experience adjusted for current factors . the historical loss experience is determined by portfolio and class and is based on the actual loss history experienced by us . this actual loss experience is then adjusted by comparing current conditions to the conditions that existed during the loss history . we consider the changes related to ( i ) lending policies , ( ii ) economic conditions , ( iii ) nature and volume of the loan portfolio and class , ( iv ) lending staff , ( v ) volume and severity of past due , non-accrual , and risk graded loans , ( vi ) loan review system , ( vii ) value of underlying collateral for collateral dependent loans , ( viii ) concentration levels and ( ix ) effects of other external factors . goodwill : goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets . core deposit intangibles : core deposit intangibles are acquired customer relationships arising from whole bank and branch acquisitions . core deposit intangibles are initially measured at fair value and then are amortized over their estimated useful lives using an accelerated method . the useful lives of the core deposits are estimated to generally be between seven and ten years . goodwill and core deposit intangibles are assessed at least annually for impairment and any such impairment is recognized and expensed in the period identified . we have selected december 31 as the date to perform our annual goodwill impairment test . goodwill is the only intangible asset with an indefinite useful life . emerging growth company : pursuant to the jobs act , an emerging growth company is provided the option to adopt new or revised accounting standards that may be issued by the financial accounting standards board ( “ fasb ” ) or the sec either ( i ) within the same periods as those otherwise applicable to non-emerging growth companies or ( ii ) within the same time periods as private companies . we have irrevocably elected to adopt new accounting standards within the public company adoption period . 56 we may take advantage of some of the reduced regulatory and reporting requirements that are available to us so long as the company qualifies as an emerging growth company , including , but not limited to , not being required to comply with the auditor attestation requirements of section 404 ( b ) of the sarbanes-oxley act , reduced disclosure obligations regarding executive compensation , and exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute payments . results of operations we generate most of our revenue from interest income and fees on loans , interest and dividends on investment securities and non-interest income , such as service charges and fees , debit card income and mortgage banking income . we incur interest expense on deposits and other borrowed funds and non-interest expense , such as salaries and employee benefits and occupancy expenses . changes in interest rates earned on interest-earning assets or incurred on interest-bearing liabilities , as well as the volume and types of interest-earning assets , interest-bearing and non-interest-bearing liabilities and stockholders ' equity , are usually the largest drivers of periodic change in net interest income . fluctuations in interest rates are driven by many factors , including governmental monetary policies , inflation , deflation , macroeconomic developments , changes in unemployment , the money supply , political and international circumstances and domestic and foreign financial markets . periodic changes in the volume and types of loans in our loan portfolio are affected by , among other factors , economic and competitive conditions in arkansas , kansas , missouri and oklahoma , as well as developments affecting the consumer , commercial and real estate sectors within these markets . net income year ended december 31 , 2017 compared with year ended december 31 , 2016 net income for the year ended december 31 , 2017 was $ 20.6 million compared to $ 9.4 million for year ended december 31 , 2016. net income allocable to common stockholders was $ 20.6 million for the year ended december 31 , 2017 , compared to $ 9.4 million for the year ended december 31 , 2016 , an increase of $ 11.3 million , or 120.3 % . during the year ended december 31 , 2017 , increases in net interest income of $ 33.4 million and non-interest income of $ 5.0 million were partially offset by $ 20.4 million in higher non-interest expenses and an increase of $ 834 thousand in the provision for loan loss when compared to the year ended december 31 , 2016. the changes in the components of net income are discussed in more detail in the following sections of “ results of operations. story_separator_special_tag ” year ended december 31 , 2016 compared with year ended december 31 , 2015 net income for the year ended december 31 , 2016 was $ 9.4 million compared to $ 10.3 million for year ended december 31 , 2015. net income allocable to common stockholders was $ 9.4 million for the year ended december 31 , 2016 , compared to $ 10.1 million for the year ended december 31 , 2015 , a decrease of $ 750 thousand , or 7.4 % . during the year ended december 31 , 2016 , increases in net interest income of $ 6.3 million , non-interest income of $ 664 thousand and a reduction of $ 928 thousand in the provision for loan loss were offset by $ 8.5 million in higher non-interest expenses when compared to the year ended december 31 , 2015. the changes in the components of net income are discussed in more detail in the following sections of “ results of operations. ” net interest income and net interest margin analysis net interest income is the difference between interest income on interest-earning assets , including loans and securities , and interest expense incurred on interest-bearing liabilities , including deposits and other borrowed funds . to evaluate net interest income , management measures and monitors ( 1 ) yields on loans and other interest-earning assets , ( 2 ) the costs of deposits and other funding sources , ( 3 ) the net interest spread and ( 4 ) net interest margin . net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities . net interest margin is calculated as net interest income divided by average interest-earning assets . because non-interest-bearing sources of funds , such as non-interest-bearing deposits and stockholders ' equity also fund interest-earning assets , net interest margin includes the benefit of these non-interest-bearing sources of funds . net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities , referred to as a “ volume change , ” and 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 a “ yield/rate change. ” 57 the following table shows the average balance of each principal category of assets , liabilities , and stockholders ' equity and the average yields on interest-earning assets and average rates on interest-bearing liabilities for the years ended december 31 , 2017 , 2016 and 2015. the yields and rates are calculated by dividing income or expense by the average daily balances of the associated assets or liabilities . average balance sheets and net interest analysis replace_table_token_6_th ( 1 ) average loan balances include nonaccrual loans , hedge fair value adjustments and merger fair value adjustments . ( 2 ) net interest margin is calculated by dividing net interest income by average interest-earning assets for the period . ( 3 ) tax exempt income is not included in the above table on a tax equivalent basis . ( 4 ) actual unrounded values are used to calculate the reported yield or rate disclosed . accordingly , recalculations using the amounts in thousands as disclosed in this report may not produce the same amounts . 58 increases and decreases in interest income and interest expense result from changes in average balances ( volume ) of interest-earning assets and interest-bearing liabilities , as well as changes in average interest yields/rates . the following table analyzes the change in volume variances and yield/rate variances for the year ended december 31 , 2017 as compared to the year ended december 31 , 2016 , and the year ended december 31 , 2016 as compared to the year ended december 31 , 2015. analysis of changes in net interest income replace_table_token_7_th ( 1 ) the effect of changes in volume is determined by multiplying the change in volume by the previous year 's average rate . similarly , the effect of rate changes is calculated by multiplying the change in average rate by the prior year 's volume . the changes attributable to both volume and rate , which can not be segregated , have been allocated to the volume variance and the rate variance in proportion to the relationship of the absolute dollar amount of the change in each . year ended december 31 , 2017 compared with year ended december 31 , 2016 net interest income before the provision for loan losses for the year ended december 31 , 2017 was $ 86.0 million compared with $ 52.6 million for the year ended december 31 , 2016 , an increase of $ 33.4 million , or 63.5 % . the increase in net interest income is primarily due to the increase in the volume of interest-earnings assets and to a lesser extent an increase in yields on interest-earning assets . the increase in average volume of interest-earning assets was primarily due to increases in loans and investment securities partially offset by a decrease in federal funds sold and other . interest expense for the year ended december 31 , 2017 was $ 16.7 million , an increase of $ 7.5 million , or 81.4 % , from the interest expense of $ 9.2 million for the year ended december 31 , 2016. the increase in interest expense was primarily due to an increase in the average volume and rates of interest bearing liabilities incurred to fund the increased volume of interest-earning assets . interest income was $ 102.7 million for the year ended december 31 , 2017 and $ 61.8 million for the year ended december 31 , 2016 , an increase of $ 40.9 million , or 66.2 % .
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as of december 31 , 2017 , we had , on a consolidated basis , total assets of $ 3.17 billion , total deposits of $ 2.38 billion , total loans held for investment of $ 2.09 billion ( net of allowances ) and total stockholders ' equity of $ 374.1 million . net income for the year ended december 31 , 2017 was $ 20.6 million compared to $ 9.4 million for the prior year ended december 31 , 2016 , an increase of $ 11.3 million , or 120.3 % . history and background since 2003 , we have completed a series of thirteen acquisitions and two charter consolidations . we have sought to integrate the banks we acquire into our existing operational platform and enhance stockholder value through the creation of efficiencies within the combined operations . in conjunction with our strategic acquisition growth , we strive to reposition and improve the loan portfolio and deposit mix of the banks we acquire . following our acquisitions , we focus on identifying and disposing of problematic loans and replacing them with higher quality loans generated organically . in addition , we have focused on growth in our commercial loan portfolio , which we believe generally offers higher return opportunities than our consumer loan portfolio , primarily by hiring additional talented bankers , particularly in our metropolitan markets , and incentivizing our bankers to expand their commercial banking relationships . we also seek to increase our most attractive deposit accounts primarily by growing deposits in our community markets and cross-selling our depository products to our loan customers . our principal objective is to continue to increase stockholder value and generate consistent earnings growth by expanding our commercial banking franchise both organically and through strategic acquisitions . we believe our strategy of selectively acquiring and integrating community banks has provided us with economies of scale and improved our overall franchise efficiency . we expect to continue to pursue strategic acquisitions and believe our targeted market areas present us with many and varied acquisition opportunities . we are also focused on continuing to grow organically and believe the markets in which we operate currently
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ROO
| 10,629
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these levels from highest to lowest priority are as follows : level 1 : quoted prices ( unadjusted ) in active markets that are accessible at the measurement date for identical assets or liabilities ; level 2 : quoted prices in active markets for similar assets or liabilities or observable prices that are based on inputs not quoted on active markets , but corroborated by market data ; and level 3 : unobservable inputs or valuation techniques that are used when little or no market data is available . the determination of fair value and the assessment of a measurement 's placement within the hierarchy requires judgment . level 3 valuations often involve a higher degree of judgment and complexity . level 3 valuations may require the use of various cost , market , or income valuation methodologies applied to unobservable management estimates and assumptions . management 's assumptions could vary depending on the asset or liability valued and the valuation method used . such assumptions could include : estimates of prices , earnings , costs , actions of market participants , market factors , or the weighting of various valuation methods . the company may also engage external advisors to assist in determining fair value , as appropriate . although the company believes that the recorded fair value of its financial instruments is appropriate , these fair values may not be indicative of net realizable value or reflective of future fair values . deferred preservation costs deferred preservation costs includes costs of cardiac and vascular tissues available for shipment , tissues currently in active processing , and tissues held in quarantine pending release to implantable status . by federal law , human tissues can not be bought or sold , therefore , the tissues the company preserves are not held as inventory . the costs the company incurs to procure and process cardiac and vascular tissues are instead accumulated and deferred . deferred preservation costs are stated at the lower of cost or market value on a first-in , first-out basis and are deferred until revenue is recognized . upon shipment of tissue to an implanting facility , revenue is recognized and the related deferred preservation costs are expensed as cost of preservation services . cost of preservation services also includes , as applicable , lower of cost or market write-downs and impairments for tissues not deemed to be recoverable , and includes , as incurred , idle facility expense , excessive spoilage , extra freight , and rehandling costs . the calculation of deferred preservation costs involves judgment and complexity and uses the same principles as inventory costing . donated human tissue is procured from deceased human donors by organ and tissue procurement organizations ( otpos ) , which consign the tissue to the company for processing , preservation , and distribution . deferred preservation costs consist primarily of the procurement fees charged by the otpos , direct labor and materials ( including salary and fringe benefits , laboratory supplies and expenses , and freight-in charges ) , and indirect costs ( including allocations of costs from support departments and facility allocations ) . fixed production overhead costs are allocated based on actual tissue processing levels , to the extent that they are within the range of the facility 's normal capacity . these costs are then allocated among the tissues processed during the period based on cost drivers , such as the number of donors or number of tissues processed . the company applies a yield estimate to all tissues in process and in quarantine to estimate the portion of tissues that will ultimately become implantable . management estimates quarantine yields based on its experience and reevaluates these estimates periodically . actual yields could differ significantly from the company 's estimates , which could result in a change in tissues available for shipment , and could increase or decrease the balance of deferred preservation costs . these changes could result in additional cost of preservation services expense or could increase per tissue preservation costs , which would impact gross margins on tissue preservation services in future periods . the company regularly evaluates its deferred preservation costs to determine if the costs are appropriately recorded at the lower of cost or market value . the company also evaluates its deferred preservation costs for costs not deemed to be recoverable , including tissues not expected to ship prior to the expiration date of their packaging . lower of cost or market value write-downs are recorded if the tissue processing costs incurred exceed the estimated market value of the tissue services , based on recent average service fees at the time of the evaluation . impairment write-downs are recorded based on the book value of tissues deemed to be impaired . actual results may differ from these estimates . write-downs of deferred 40 preservation costs are expensed as cost of preservation services , and these write-downs are permanent impairments that create a new cost basis , which can not be restored to its previous levels if the company 's estimates change . the company recorded write-downs to its deferred preservation costs totaling $ 540,000 , $ 448,000 , and $ 195,000 for the years ended december 31 , 2014 , 2013 , and 2012 , respectively . deferred income taxes deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and tax return purposes . the company periodically assesses the recoverability of its deferred tax assets , as necessary , when the company experiences changes that could materially affect its determination of the recoverability of its deferred tax assets . management provides a valuation allowance against its deferred tax assets when , as a result of this analysis , management believes it is more likely than not that some portion or all of its deferred tax assets will not be realized . story_separator_special_tag 44 revenues during these three and twelve month periods were largely for sales in certain international markets , as perclot topical was only recently approved for domestic distribution , as discussed below . the increase in revenues for the three and twelve months ended december 31 , 2014 was primarily due to increased sales in the company 's markets in europe , asia pacific , and latin america , partially due to growth in both new geographies and new surgical indications . the company expects that overall perclot revenues will increase in 2015 as compared to 2014 ; however , revenues may show some variability from quarter to quarter . in april 2014 cryolife received 510 ( k ) clearance for perclot topical from the fda , which allowed cryolife to begin commercialization of perclot topical in the u.s. the company began shipping perclot topical in august 2014 and is currently in the early stages of this product launch . in december 2014 cryolife received approval of the supplement to its investigational device exemption ( ide ) for perclot from the fda that addressed several study design considerations previously raised by the fda . this approval allows the company to begin its pivotal clinical trial to gain approval to commercialize perclot for surgical indications in the u.s. the company plans to begin enrollment in the trial in the first half of 2015 and currently expects to receive pma from the fda during 2017. cardiogenesis cardiac laser therapy revenues from the company 's cardiogenesis cardiac laser therapy product line consist primarily of sales of handpieces and , in certain periods , revenues from the sale of laser consoles . revenues from cardiac laser therapy increased 1 % for the three months ended december 31 , 2014 as compared to the three months ended december 31 , 2013. revenues from the sale of laser consoles were $ 240,000 and $ 470,000 for the three months ended december 31 , 2014 and 2013 , respectively . revenues from the sale of handpieces increased 17 % for the three months ended december 31 , 2014 as compared to the three months ended december 31 , 2013 , primarily due to a 19 % increase in unit shipments of handpieces . revenues from cardiac laser therapy decreased 8 % for the twelve months ended december 31 , 2014 as compared to the twelve months ended december 31 , 2013. revenues from the sale of laser consoles were $ 384,000 and $ 932,000 for the twelve months ended december 31 , 2014 and 2013 , respectively . revenues from the sale of handpieces decreased 3 % for the twelve months ended december 31 , 2014 as compared to the twelve months ended december 31 , 2013. this decrease was primarily due to a 4 % decrease in unit shipments of handpieces , which decreased revenues by 5 % , partially offset by an increase in average sales prices , which increased revenues by 2 % . revenues from laser console sales decreased for both the three and twelve months ended december 31 , 2014 due to both fewer laser console sales and a reduction in the average price paid per laser console as hospitals are increasingly reluctant to make large capital equipment purchases . in june 2013 the fda approved the company 's new handpiece design , and the company made the decision to exclusively distribute the new handpiece beginning late in the second quarter of 2013. the company 's handpiece revenues were negatively impacted in the second half of 2013 and the first half of 2014 , due to the slower than anticipated adoption of the new handpiece design . the decrease in handpiece revenues for the twelve months ended december 31 , 2014 is a result of a decrease in revenues in the first half of 2014 as compared to the first half of 2013. the company expects that overall cardiac laser therapy revenues will increase slightly in 2015 as compared to 2014 ; however , revenues from laser console sales can vary significantly from quarter to quarter due to the long lead time required to generate sales of capital equipment . hero graft revenues from hero grafts include revenues related to the sale of vascular grafts , venous outflow components , and accessories , which are generally sold together as a kit . hero grafts are primarily distributed in domestic markets as a solution for esrd in certain hemodialysis patients . hero graft revenues increased 10 % for the three months ended december 31 , 2014 as compared to the three months ended december 31 , 2013. hero grafts revenues increased 24 % for the twelve months ended december 31 , 2014 as compared to the twelve months ended december 31 , 2013. the increase in sales of hero grafts for the three months ended december 31 , 2014 was primarily due to an increase in shipments in direct markets in europe . the increase in sales of hero grafts for the twelve months ended december 31 , 2014 was primarily due to an increase in shipments in domestic markets , as a result of increased procedure volume and an 45 increase in the number of implanting physicians , and to a lesser extent , due to shipments to direct markets in europe . sales of the hero graft have increased significantly in europe since the company launched the product in september 2013. the company expects that hero graft revenues will increase in 2015 as compared to 2014. although hero graft revenues are subject to variability quarter to quarter due to the timing of surgical cases , the company believes that this variability will continue to decrease as the company broadens its base of implanting physicians . preservation services revenues from preservation services decreased 4 % and 3 % for the three and twelve months ended december 31 , 2014 , respectively , as compared to the three and twelve months ended december
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the company received an initial payment of approximately $ 15.4 million in the fourth quarter of 2013 for its shares of medafor common stock due to bard 's acquisition of medafor , and received an additional payment of $ 530,000 in the fourth quarter of 2014 related to the release of funds in escrow . based on information provided by medafor as part of its september 24 , 2013 proxy statement , the company could receive additional payments totaling up to an additional $ 7.9 million upon the final release of funds held in escrow and the satisfaction of certain contingent milestones , measurable through june 2015. subsequent payments will be recorded as an additional gain if , and when , received by the company . as discussed in part i , item 3 , legal proceedings , of this form 10-k , the company is engaged in litigation with bard and certain of its subsidiaries . management expects that this litigation will be protracted and will result in significant costs during 2015. in april 2014 cryolife received 510 ( k ) clearance for perclot topical from the fda , which allowed cryolife to begin commercialization of perclot topical in the u.s. the company began shipping perclot topical in august 2014 and is 58 currently in the early stages of this product launch . as a result of this recent approval and clearance , cryolife paid $ 1.0 million to smi in the second quarter of 2014 pursuant to the terms of the agreements between cryolife and smi . in december 2014 cryolife received approval of the supplement to its ide for perclot from the fda that addressed several study design considerations previously raised by the fda .
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Liquidity
| 10,173
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in september 2015 , the financial accounting standards board ( `` fasb `` ) issued asu no . 2015-16 , business combinations ( topic 805 ) . the amendments in this asu require that an acquiring company recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined . additionally , this asu requires an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date . to simplify the accounting for adjustments made to provisional amounts recognized in a business combination , the amendments in this asu eliminates the requirement to retrospectively account for those adjustments . this asu is effective prospectively for fiscal years beginning after december 15 , 2015 , including interim periods within those fiscal years . the company does not expect the guidance in this asu to have a material impact on our consolidated financial statements and related disclosures . in july 2015 , the fasb issued asu no . 2015-11 , inventory ( topic 330 ) , which requires entities to measure most inventory at the lower of cost and net realizable value . this measure simplifies the current guidance , which requires entities to measure inventory at the lower of cost or market , where market is defined as one of three different measures , including net realizable value . the asu does not apply to inventories measured by using either the last-in , first-out method or the retail inventory method . the asu is effective prospectively for interim and annual periods beginning after december 15 , 2016 , and early adoption is permitted . we are in the process of evaluating the impact of the standard . in april 2015 , the fasb issued asu no . 2015-03 , simplifying the presentation of debt issuance costs , which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability , consistent with debt discounts . the amendments in this update are effective for fiscal years beginning after december 15 , 2015 and interim periods within those fiscal years . we do not expect the guidance to have a material impact on the company . 48 energy focus , inc. notes to consolidated financial statements in april 2015 , the fasb issued asu no . 2015-05 , customer 's accounting for fees paid in a cloud computing arrangement , which provides guidance to customers about whether a cloud computing arrangement includes a software license . if a cloud computing arrangement includes a software license , the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses . if a cloud computing arrangement does not include a software license , the customer should account for the arrangement as a service contract . the guidance will not change u.s. gaap for a customer 's accounting for service contracts . the amendments in the update are effective for interim and annual periods beginning after december 15 , 2015. we do not expect the guidance to have a material impact on the company . in january 2015 , the fasb issued asu no . 2015-01 , income statement-extraordinary and unusual items ( subtopic 225-20 ) : simplifying income statement presentation by eliminating the concept of extraordinary items , which provides guidance on simplifying income statement presentation by eliminating the concept of extraordinary items from u.s. gaap . the amendments in this update are effective for fiscal years , and interim periods within those fiscal years , beginning after december 15 , 2015. a reporting entity may apply the amendments prospectively and retrospectively to all periods presented in the financial statements . early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption . we have evaluated the accounting guidance and determined that there is no impact of this update to our consolidated financial statements . in may 2014 , the fasb issued asu no . 2014-9 , revenue recognition - revenue from contracts with customers , which is a comprehensive revenue recognition standard that will supersede nearly all of the existing revenue recognition guidance under u.s. gaap . the standard is effective for interim and annual periods beginning after december 15 , 2016 , and either full retrospective adoption or modified retrospective adoption is permitted . in august 2015 , the fasb issued asu 2015-14 , revenue from contracts with customer ( topic 606 ) : deferral of the effective date . this asu defers the effective date of asu 2014-09 , revenue from contracts with customer ( topic 606 ) for all entities by one year . as a result , all entities will be required to apply the provisions of asu 2014-09 to annual reporting periods beginning after december 15 , 2017 , including interim reporting periods within that reporting period . early adoption is permitted only as of annual reporting periods beginning after december 15 , 2016 , including interim reporting periods within that reporting period . the company is currently assessing the adoption date and impact the guidance in this asu will have , if any , on our consolidated results of operations , cash flows , or financial position . in april 2014 , the fasb issued asu no . 2014-08 , reporting discontinued operations and disclosures of disposals of components of an entity , which changes the criteria for reporting discontinued operations while enhancing disclosures in this area . under the new guidance , only disposals representing a strategic shift in operations should be presented as discontinued operations . story_separator_special_tag when assets are sold or otherwise disposed of , the cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statement of operations . refer to note 5 , `` property and equipment , `` included in item 8 for additional information . long-lived assets are reviewed for impairment whenever events or circumstances indicate the carrying amount may not be recoverable . events or circumstances that would result in an impairment review primarily include operations reporting losses , a significant change in the use of an asset , or the planned disposal or sale of the asset . the asset would be considered impaired when the future net undiscounted cash flows generated by the asset are less than its carrying value . an impairment loss would be recognized based on the amount by which the carrying value of the asset exceeds its fair value , as determined by quoted market prices ( if available ) or the present value of expected future cash flows . on december 31 , 2013 , we recorded an impairment charge of $ 608 thousand for assets that were held for sale at december 31 , 2013. these assets were subsequently sold in the first quarter of 2014 for $ 130 thousand , which was the carrying value after the impairment charge . valuation of inventories we state inventories at the lower of standard cost ( which approximates actual cost determined using the first-in-first-out method ) or market . we establish provisions for excess and obsolete inventories after evaluation of historical sales , current economic trends , forecasted sales , product lifecycles , and current inventory levels . during 2015 , 2014 , and 2013 , we charged $ 1.5 million , $ 194 thousand , and $ 146 thousand , respectively , to cost of sales from continuing operations for excess and obsolete inventories . adjustments to our estimates , such as forecasted sales and expected product lifecycles , could harm our operating results and financial position . accounting for income taxes 31 as part of the process of preparing the consolidated financial statements , we are required to estimate our income tax liability in each of the jurisdictions in which we do business . this process involves estimating our actual current tax expense together with assessing temporary differences resulting from differing treatment of items , such as deferred revenues , for tax and accounting purposes . these differences result in deferred tax assets and liabilities , which are included in our consolidated balance sheets . we then assess the likelihood of the deferred tax assets being recovered from future taxable income and , to the extent we believe it is more likely than not that the deferred tax assets will not be recovered , or is unknown , we establish a valuation allowance . significant management 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 . at december 31 , 2015 and 2014 , we have recorded a full valuation allowance against our deferred tax assets in the united states due to uncertainties related to our ability to utilize our deferred tax assets , primarily consisting of certain net operating losses carried forward . the valuation allowance is based upon our estimates of taxable income by jurisdiction and the period over which our deferred tax assets will be recoverable . in considering the need for a valuation allowance , we assess all evidence , both positive and negative , available to determine whether all or some portion of the deferred tax assets will not be realized . such evidence includes , but is not limited to , recent earnings history , projections of future income or loss , reversal patterns of existing taxable and deductible temporary differences , and tax planning strategies . we continue to evaluate the need for a valuation allowance on a quarterly basis . as of december 31 , 2015 , we had net operating loss carry-forwards of approximately $ 69.1 million for federal , state , and local income tax purposes . however , due to changes in the company 's capital structure , approximately $ 14.8 million of this amount is available after the application of irc section 382 limitations . as a result of this limitation , in 2016 , we only expect to have approximately $ 6.0 million of the net operating loss carry-forward available for use . if not utilized , these carry-forwards will begin to expire in 2021 for federal and have begun to expire for state and local purposes . please refer to note 12 , `` income taxes , `` included in item 8 for additional information . share-based payments the cost of employee and director stock options and restricted stock units , as well as other share-based compensation arrangements , is reflected in the consolidated financial statements based on the estimated grant date fair value method under the authoritative guidance . management applies the black-scholes option pricing model to options issued to employees and directors to determine the fair value of stock options and apply judgment in estimating key assumptions that are important elements of the model in expense recognition . these elements include the expected life of the option , the expected stock-price volatility , and expected forfeiture rates . the assumptions used in calculating the fair value of share-based awards under black-scholes represent our best estimates , but these estimates involve inherent uncertainties and the application of management judgment . although we believe the assumptions and estimates we have made are reasonable and appropriate , changes in assumptions could materially impact our reported financial results . restricted stock units and stock options issued to non-employees are valued based upon the intrinsic value of the award . see note 11 , `` stockholders ' equity , `` included in item 8 for
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at december 31 , 2015 , we offset the escrow amount by the expected costs to settle the outstanding buyer claims related to the sale of our pool products business . see note 3 , included in item 8 for further information . on september 11 , 2015 , we announced the pricing of a registered underwritten follow-on offering of shares of our common stock by us and certain of our stockholders ( the `` selling stockholders '' ) . we sold 1,500,000 shares of our common stock at a price to the public of $ 17.00 per share and the selling stockholders sold an additional 1,500,000 shares of our common stock on the same terms and conditions . the offering closed on september 16 , 2015 and we received $ 23.6 million in net proceeds from the transaction , after giving effect to underwriting discounts and commissions and estimated expenses . we expect to use the net proceeds from the offering to finance our growth efforts , for working capital , and other general corporate purposes . on august 6 , 2014 , we announced the pricing of a public offering to sell 1,175,000 shares of our common stock at a price to the public of $ 4.50 per share . the underwriters for the offering were given an option to purchase up to an additional 176,250 shares at $ 4.50 per share to cover over allotments . on august 8 , 2014 , they exercised their option to purchase the 176,250 additional shares . the offering closed on august 11 , 2014. the net proceeds we received from the offering , after deducting the underwriting discount and offering expenses paid by us , were $ 5.15 million . the following is a summary of cash flows from operating , investing , and financing activities , as reflected in the consolidated statements of cash flows ( in thousands ) : replace_table_token_6_th 27 cash used in operating activities net cash provided by operating activities of $ 4.4 million in 2015 resulted from the net income , adjusted for non-cash items , including : depreciation and amortization , stock-based compensation , and an adjustment to the reserves for slow-moving and obsolete inventories . operating activities in 2015 also included an increase in accounts receivable of $ 7.5 million and an increase in inventories of $ 2.3 million , partially offset by an increase in accrued liabilities , federal and state taxes , and product warranties of $ 1.9 million . net cash used in operating activities in 2014 and 2013 was $ 0.2
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Liquidity
| 1,035
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we assess classification of our common stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required . our derivative instruments consisting of warrants to purchase our common stock were valued using the black-scholes option pricing model , using the following assumptions at december 31 , 2013 : estimated dividends : none expected volatility : 184 % risk-free interest rate : 0.83 % expected term : 3.25 – 10 years liquidity with the sale of its interests in biozone laboratories , inc. , we presently do not have any regularly recurring revenue . cocrystal believes that its cash and cash equivalents of $ 2.9 million as of march 20 , 2014 , and the assets acquired in a merger in early 2014 , including common stock of a publicly traded company , will be sufficient to allow cocrystal to fund its current operating plan for at least the next 12 months . a portion of the musclepharm common stock ( 600,000 shares ) is being held in escrow to satisfy any breaches of representations under the asset purchase agreement . as cocrystal continues to incur losses , achieving profitability is dependent upon the successful development , approval and commercialization of its product candidates , and achieving a level of revenues adequate to support cocrystal 's cost structure . cocrystal may never achieve profitability , and unless and until it does , cocrystal will continue to need to raise additional capital . over the next 12 months ending march 31 , 2015 , we estimate negative cash flow of approximately $ 7 million . management intends to fund future operations through additional private or public debt or equity offerings , and may seek additional capital through arrangements with strategic partners or from other sources . in addition we may , if appropriate or necessary sell investment stock currently held . there can be no assurances , however , that additional funding will be available on terms acceptable to cocrystal , or at all . related party transactions not applicable . -14- off-balance sheet arrangements we do not have any off-balance sheet arrangements . cautionary note regarding forward looking statements this report includes forward-looking statements including statements regarding our future business development , regulatory compliance , generation of revenues , our liquidity , expectations from proposed capital raises , and the issues relating to the potential claims relating to our former pittsburg , california lease and the related bank loan guarantee . the words “ believe , ” “ may , ” “ estimate , ” “ continue , ” “ anticipate , ” “ intend , ” “ should , ” “ plan , ” “ could , ” “ target , ” “ potential , ” “ is likely , ” “ will , ” “ expect ” and similar expressions , as they relate to us , are intended to identify forward-looking statements . we have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition , results of operations , business strategy and financial needs . the results anticipated by any or all of these forward-looking statements might not occur . important factors , uncertainties and risks that may cause actual results to differ materially from these forward-looking statements are contained in the risk factors that follow . we undertake no obligation to publicly update or revise any forward-looking statements , whether as the result of new information , future events or otherwise . for more information regarding some of the ongoing risks and uncertainties of our business , see the risk factors and our other filings with the sec risk factors you should consider carefully the following risk factors , together with all of the other information included or incorporated in this annual report . each of these risk factors , either alone or taken together , could adversely affect our business , operating results and financial condition , and adversely affect the value of an investment in our common stock . there may be additional risks that we do not know of or that we believe are immaterial that could also impair our business and financial position . risks related to the discovery and development of product candidates because the approach we are taking to discover and develop drugs is novel , it may never lead to marketable products . we are concentrating our antiviral therapeutic product research and development efforts using cocrystal 's proprietary technology , and our future success depends on the continued successful development of this technology and the products derived from it . we have no products or product candidates . the scientific discoveries that form the basis for our efforts to discover and develop product candidates are relatively new . the scientific evidence to support the feasibility of developing product candidates based on our approach is limited . if we do not successfully develop and commercialize product candidates based upon our technological approach , we may not become profitable and the value of our stock may decline . further , our focus on cocrystal 's technology for developing drugs , as opposed to relying entirely on more standard technologies for drug development , increases the risks associated with the ownership of our stock . if we are unsuccessful in developing any product candidates using cocrystal 's technology , we may be required to change the scope and direction of our product development activities . we may not identify and implement successfully an alternative product development strategy . -15- we may not succeed in our efforts to identify or discover potential product candidates . the success of our business depends primarily upon our ability to identify , develop and commercialize antiviral drug products . story_separator_special_tag our research programs may initially show promise in identifying potential product candidates , yet fail to yield product candidates for clinical development for several reasons , including : · our research methodology or that of our partners may be unsuccessful in identifying potential product candidates ; · potential product candidates may have harmful side effects or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval ; and · we or our partners may change their development profiles for potential product candidates or abandon a therapeutic area . such events may force us to abandon our development efforts for a program or programs , which would have a material adverse effect on our business and could cause us to cease operations . research programs to identify new product candidates require substantial technical , financial and human resources . we may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful . we may be unable to successfully complete preclinical testing and clinical trials of our product candidates or experience significant delays in doing so . we intend to invest a significant portion of our efforts and financial resources in the identification and preclinical development of product candidates that target viral replication enzymes . our ability to generate product revenues , which we do not expect will occur for many years , if ever , will depend heavily on the successful development and eventual commercialization of our product candidates . the commercial success of our product candidates will depend on several factors , including : · successful completion of preclinical studies and clinical trials ; · receipt of marketing approvals from regulatory authorities ; · obtaining and maintaining patent and trade secret protection for product candidates ; · establishing and maintaining manufacturing relationships with third parties or establishing our own manufacturing capability ; and · commercializing our products , if and when approved , whether alone or in collaboration with others . if we do not achieve one or more of these factors in a timely manner or at all , we could experience significant delays or an inability to successfully complete development of , or to successfully commercialize , our product candidates , which would materially harm our business . -16- we may be unable to to demonstrate safety and efficacy of our product candidates to the satisfaction of regulatory authorities or we may incur additional costs or experience delays in completing , or ultimately be unable to complete , the development and commercialization of our product candidates . before obtaining marketing approval from regulatory authorities for the sale of product candidates , we or our partners must conduct extensive preclinical studies and clinical trials to demonstrate the safety and efficacy of the product candidates in humans . clinical testing is expensive , difficult to design and implement , can take many years to complete and is uncertain as to outcome . a failure of one or more clinical trials can occur at any stage of testing . the outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials , and interim results of a clinical trial do not predict final results . moreover , preclinical and clinical data are often susceptible to varying interpretations and analyses , and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for their products . events that may cause a delay or unsuccessful completion of clinical development include : · delays in agreeing with the fda or other regulatory authorities on final clinical trial design ; · imposition of a clinical hold following an inspection of our clinical trial operations or trial sites by the fda or other regulatory authorities ; · delays in agreeing on acceptable terms with prospective contract research organizations , or cros , and clinical trial sites ; · delays in obtaining required institutional review board approval at each clinical trial site ; · delays in recruiting suitable patients to participate in a trial ; · delays in the testing , validation , manufacturing and delivery of the product candidates to the clinical sites ; · delays in having patients complete participation in a trial or return for post-treatment follow-up ; · delays caused by patients dropping out of a trial due to product side effects or disease progression ; · clinical sites dropping out of a trial to the detriment of enrollment ; · time required to add new clinical sites ; or · delays by our contract manufacturers in producing and delivering sufficient supply of clinical trial materials . -17- if we or our partners must conduct additional clinical trials or other testing of any product candidates beyond those that are contemplated , or are unable to successfully complete clinical trials or other testing of any the product candidates , or if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns , we or our partners may : · be delayed in obtaining marketing approval for our product candidates ; · not obtain marketing approval at all ; · obtain approval for indications or patient populations not as broad as intended or desired ; · obtain approval with labeling that includes significant use or distribution restrictions or safety warnings ; · be subject to additional post-marketing testing requirements ; or · remove the product from the market after obtaining marketing approval . our product development costs will also increase if we experience delays in testing or in obtaining marketing approvals . we do not know whether any clinical trials will begin as planned , will need to be restructured or will be completed on schedule if at all .
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as a result , the assets and liabilities and the historical operations that will be reflected in cocrystal 's future financial statements with the securities and exchange commission will be those of cocrystal discovery as if cocrystal discovery had always been the reporting company and , on the merger date , changed its name and reorganized its capital stock . -11- plan of operation the financial statements contained in this report are those of cocrystal 's legacy business as of december 31 , 2013 and 2012. accordingly , we do not discuss the results of operation or the cash flows since they are not material to cocrystal , its future operations , cash flow or financial condition . recent successes cocrystal discovery has developed novel pan-genotypic lead molecules targeting hcv ns5b polymerase and ns3 helicase using our proprietary cocrystal technology . ns5b polymerase – the majority of nni molecules in clinical development , such as those advanced by abbvie , gilead , bristol myers squibb , and vertex , have shown a low barrier to resistance and narrow genotype coverage ( i.e. , may be suitable for treating only genotype 1 patients ) . we believe that our hcv lead molecules could be the best-in-class nni in terms of genotype coverage and drug resistance . also , we have demonstrated that our ns5b nni inhibitors block an initiation step of hcv replication . this mechanism of action is unique compared to other ns5b inhibitors , such as gilead 's sofosbuvir , approved by fda in december 2013 , which acts as a chain terminator . we believe that the mechanism of our ns5b nni molecules could demonstrate superior efficacy and be ideal combination therapy candidates with other hcv direct acting antiviral ( daa ) agents . ns3 helicase – we are also applying our drug discovery approach in our program targeting another hcv replication enzyme , ns3 helicase . our pan-genotypic ns3 helicase lead compound is a first-in-class molecule , and we believe that drugs targeting this enzyme have the potential to define a novel treatment paradigm for hcv patients . growth strategy our strategy is to develop and commercialize novel broad spectrum antiviral agents by executing creative partnership and development strategies that will allow these products
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ROO
| 1,359
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principles of consolidation the accompanying consolidated financial statements have been prepared in accordance with u.s. generally accepted accounting principles ( gaap ) . the consolidated financial statements include accounts of pdi and its wholly owned subsidiaries ( tvg , inc. , protocall , inc. , inserve support solutions , and pdi investment company , inc. ) all significant intercompany balances and transactions have been eliminated in consolidation . in the second quarter of 2006 , the company discontinued its medical device and diagnostic ( md & d ) business . the md & d business was part of the company 's sales services reporting segment . the md & d business is accounted for as a discontinued operation under gaap and , therefore , the md & d business results of operations have been removed from the company 's results of continuing operations for 2006. see note 19 , discontinued operations . accounting estimates the preparation of consolidated financial statements in conformity with gaap requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period . management 's estimates are based on historical experience , facts and circumstances available at the time , and various other assumptions that are believed to be reasonable under the circumstances . significant estimates include incentives earned or penalties incurred on contracts , loss contract provisions , valuation allowances related to deferred income taxes , self-insurance loss accruals , allowances for doubtful accounts and notes , income tax accruals and facilities realignment accruals . the company periodically reviews these matters and reflects changes in estimates as appropriate . actual results could materially differ from those estimates . cash and cash equivalents cash and cash equivalents include unrestricted cash accounts , money market investments and highly liquid investment instruments with original maturity of three months or less at the date of purchase . investments in marketable securities available-for-sale securities are carried at fair value with the unrealized gains or losses , net of tax , included as a component of accumulated other comprehensive income ( loss ) in stockholders ' equity . realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in other income ( expense ) , net . the fair values for marketable equity securities are based on quoted market prices . held-to-maturity investments are stated at amortized cost . interest income is accrued as earned . realized gains and losses are computed based upon specific identification and included in interest income , net in the consolidated statement of operations . the company does not have any investments classified as “ trading . ” receivables and allowance for doubtful accounts trade accounts receivable are recorded at the invoiced amount and do not bear interest . management reviews a customer 's credit history before extending credit . the company has recorded a provision for estimated losses resulting from the inability of its customers to make required payments based on historical experience and periodically adjusts these provisions to reflect actual experience . additionally , the company will establish a specific allowance for doubtful accounts when the company becomes aware of a specific customer 's inability or unwillingness to meet its financial obligations ( e.g . , bankruptcy filing ) . allowance for doubtful accounts was $ 0 as of december 31 , 2008 and 2007 , respectively . the company operates almost exclusively in the pharmaceutical industry and to a great extent its revenue is dependent on a limited number of large pharmaceutical companies . the company also partners with customers in the emerging pharmaceutical sector , some of whom may have limited financial resources . a general downturn in the pharmaceutical industry or adverse material event to one or more of the company 's emerging pharmaceutical customers could result in higher than expected customer defaults and additional allowances may be required . f-7 pdi , inc. notes to the consolidated financial statements ( continued ) ( tabular information in thousands , except share and per share data ) unbilled costs and accrued profits and unearned contract revenue in general , contractual provisions , including predetermined payment schedules or submission of appropriate billing detail , establish the prerequisites for billings . unbilled costs and accrued profits arise when services have been rendered and payment is assured but customers have not been billed . these amounts are classified as a current asset . normally , in the case of detailing contracts , the customers agree to pay the company a portion of the fee due under a contract in advance of performance of services because of large recruiting and employee development costs associated with the beginning of a contract . the excess of amounts billed over revenue recognized represents unearned contract revenue , which is classified as a current liability . loans and investments in privately held entities from time to time , the company makes investments in and or loans to privately-held companies . the company determines whether the fair values of any investments in privately held entities have declined below their carrying value whenever adverse events or changes in circumstances indicate that recorded values may not be recoverable . if the company considers any such decline to be other than temporary ( based on various factors , including historical financial results , and the overall health of the investee 's industry ) , a write-down is recorded to estimated fair value . on a quarterly basis , the company reviews outstanding loans receivable to determine if a provision for doubtful notes is necessary . story_separator_special_tag cost of services within the marketing services segment decreased approximately $ 2.8 million , or 16.7 % primarily due to the decrease in new projects and the curtailment or postponement of certain existing projects at pharmakon . replace_table_token_5_th 27 pdi , inc. annual report on form 10-k ( continued ) gross profit in the sales services segment increased slightly on higher revenue for the year ended 2008 as compared to year ended 2007. in 2007 , we recognized $ 0.6 million in revenue associated with a contract with a former emerging pharmaceutical client for services performed in 2006. because of the uncertainty surrounding collections , we recognized revenue from this client on a cash basis and all costs associated with this contract were recognized in 2006. the decrease in gross profit attributable to the marketing services segment was commensurate with the decrease in revenue discussed above as total gross profit decreased at all three business units . the gross profit percentage decreased to 40.8 % from 44.1 % in the comparable prior year period primarily due to a decrease in margin percentage at tvg attributed to a change in product mix . the product commercialization segment 's negative gross profit was attributable to our sales force , promotional costs and contract loss accrual associated with this program plus the $ 1 million non-refundable upfront payment we made to novartis as per the terms of our promotion agreement . ( note : compensation and other selling , general and administrative ( other sg & a ) expense amounts for each segment contain allocated corporate overhead . ) replace_table_token_6_th the decrease in compensation expense was primarily a result of a reduction in incentive compensation accrued for 2008 due to our financial performance relative to the financial targets established for 2008 under our incentive compensation plan . the decrease for both sales services and marketing services segments in 2008 can be attributed to the reason discussed above . the product commercialization segment had compensation costs of $ 1.3 million . this was primarily attributable to employee and sales services support costs . there was no compensation expense attributable to this segment in 2007. replace_table_token_7_th total other sg & a expenses decreased primarily due to the following : 1 ) a decrease in depreciation expense of approximately $ 0.7 million primarily due to the conversion to a new financial reporting system that was at a much lower capitalized cost than our previous system ; 2 ) a decrease in net franchise taxes of approximately $ 1.0 million primarily due to the settlement of one state 's assessment for less than the $ 0.6 million that had been accrued in 2007 ; 3 ) a reduction in executive consulting of approximately $ 1.0 million ; and 4 ) a reduction in business insurance expense of approximately $ 0.4 million . as a percentage of total revenue , other sg & a expenses decreased to 14.7 % in 2008 from 17.1 % in 2007. executive severance in 2008 , we incurred approximately $ 1.2 million in executive severance costs that related to the departure of our chief executive officer and one other executive . in 2007 , we did not have any executive severance costs . legal and related costs in 2008 and 2007 , we had legal expenses of approximately $ 0.3 million , respectively , which primarily pertained to legal expenses incurred by us in the ordinary course of business . 28 pdi , inc. annual report on form 10-k ( continued ) facilities realignment in 2008 , we had charges of approximately $ 75,000 related to the excess office space at our dresher , pennsylvania location . in 2007 , we had net charges of approximately $ 1.0 million primarily related to the impairment of fixed assets and other expenses related to our exiting the computer data center space at our saddle river , new jersey location in december 2007. total charges in 2007 for the sales services segment were approximately $ 1.0 million and approximately $ 26,000 was credited to the marketing services segment . replace_table_token_8_th the increased operating loss in 2008 is primarily attributable to the $ 26.2 million in negative revenue and expenses associated with our promotional program within the product commercialization segment . this was partially offset by a reduction in our total operating expenses of approximately $ 5.0 million , or 10.8 % . interest income , net interest income , net , for 2008 and 2007 was approximately $ 2.8 million and $ 6.1 million , respectively . the decrease is primarily attributable to a decrease in interest rates for 2008 as well as smaller available cash balances . provision for income taxes we recorded a provision for income taxes of $ 0.9 million for 2008 and $ 1.8 million for 2007. our overall effective tax rate was a provision of 2.6 % and a provision of 21.5 % for 2008 and 2007 , respectively . the tax provision for 2007 is primarily attributable to the full valuation allowance on the net deferred tax assets except for the basis difference in goodwill . federal tax attribute carryforwards at december 31 , 2008 , consist primarily of approximately $ 29.2 million of net operating losses and $ 339,000 of capital losses . in addition , we have approximately $ 63.5 million of state net operating losses carryforwards . the utilization of the federal carryforwards as an available offset to future taxable income is subject to limitations under federal income tax laws . if the federal net operating losses are not utilized , they will begin to expire in 2027 and if the current state net operating losses are not utilized they begin to expire in 2009. the capital losses can only be utilized against capital gains and $ 339,000 will expire in 2009. net loss there was a net loss of $ 34.5 million in 2008 , compared to a net loss of $ 10.0 million in 2007
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during 2008 , net cash used in financing activities was approximately $ 62,000 as compared to net cash used by financing activities of approximately $ 460,000 during 2007. for the year ended december 31 , 2008 , net cash used in financing activities represented shares that were delivered back to pdi and included in treasury stock for the payment of taxes resulting from the vesting of restricted stock . we had standby letters of credit of approximately $ 5.9 million and $ 7.3 million at december 31 , 2008 and 2007 , respectively , as collateral for our existing insurance policies and our facility leases . our standby letters of credit are evergreen in that they automatically renew every year unless cancelled in writing by pdi with consent of the beneficiary , generally not less than 60 days before the expiry date . we recorded facility realignment charges totaling approximately $ 75,000 , $ 1.0 million and $ 2.0 million during 2008 , 2007 and 2006 , respectively . these charges were for costs related to excess leased office space at our saddle river , new jersey and dresher , pennsylvania facilities . in 2007 , we sub-leased the excess office space at our saddle river , new jersey location and also secured sub-leases for two of the three vacant spaces at our dresher location . we are currently seeking to sublease the remaining excess space at our dresher location . a rollforward of the activity for the facility realignment plan is as follows : replace_table_token_14_th in april 2008 , we signed a promotion agreement with novartis in connection with our product commercialization initiative . see note 10 to the consolidated financial statements for additional information . under terms of the agreement , we are providing
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Liquidity
| 11,949
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the noncontrolling owner 's proportionate share in the income or losses of the company 's majority owned subsidiaries is subtracted from , or added to , net income to calculate the net income attributable to neogen corporation . all intercompany accounts and transactions have been eliminated in consolidation . share and per share amounts reflect the october 30 , 2013 3-for-2 stock split as if it took place at the beginning of the period presented . use of estimates the preparation of financial statements in conformity with u.s. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes . actual results could differ from these estimates . comprehensive income comprehensive income represents net income and any revenues , expenses , gains and losses that , under u.s. generally accepted accounting principles , are excluded from net income and recognized directly as a component of equity . accumulated other comprehensive income ( loss ) consists solely of foreign currency translation adjustments . accounts receivable and concentrations of credit risk financial instruments which potentially subject the company to concentrations of credit risk consist principally of accounts receivable . management attempts to minimize credit risk by reviewing customers ' credit history before extending credit and by monitoring credit exposure on a regular basis . an allowance for doubtful accounts on accounts receivable is established based upon factors surrounding the credit risk of specific customers , historical trends and other information . collateral or other security is generally not required for accounts receivable . once a receivable balance has been determined to be uncollectible , that amount is written off to the allowance for doubtful accounts . no customer accounted for more than 10 % of accounts receivable at may 31 , 2015. the activity in the allowance for doubtful accounts was as follows : replace_table_token_19_th fair value of financial instruments the carrying amounts of the company 's financial instruments other than cash equivalents and marketable securities , which include accounts receivable and accounts payable , approximate fair value based on either their short maturity or current terms for similar instruments . f-7 fair value measurements fair value measurements are determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of any transaction costs . the company utilizes a fair value hierarchy based upon the observability of inputs used in valuation techniques as follows : level 1 : observable inputs such as quoted prices in active markets ; level 2 : inputs , other than quoted prices in active markets , that are observable either directly or indirectly ; and level 3 : unobservable inputs in which there is little or no market data , which require the reporting entity to develop its own assumptions . cash and cash equivalents cash and cash equivalents consist of bank demand accounts , savings deposits , certificates of deposit and commercial paper with original maturities of 90 days or less . cash and cash equivalents were $ 66,061,000 and $ 40,675,000 at may 31 , 2015 and 2014 , respectively . the carrying value of these assets approximates fair value due to the short maturity of these instruments and meet the level 1 criteria . cash held at foreign subsidiaries was $ 13,277,000 and $ 10,234,000 at may 31 , 2015 and 2014 , respectively . marketable securities the company has marketable securities held by banks or broker-dealers consisting of short-term domestic certificates of deposit of $ 26,109,000 and commercial paper rated at least a-2/p-2 with maturities between 91 days and one year of $ 21,994,000 . outstanding marketable securities at may 31 , 2015 were $ 48,103,000 ; there were $ 35,821,000 marketable securities outstanding at may 31 , 2014. these securities are classified as available for sale . the primary objective of the company 's short-term investment activity is to preserve capital for the purpose of funding operations , capital expenditures and business acquisitions ; short-term investments are not entered into for trading or speculative purposes . these securities are recorded at fair value ( that approximates cost ) based on recent trades or pricing models and therefore meet the level 2 criteria . interest income on these investments is recorded within other income on the income statement . inventories inventories are stated at the lower of cost , determined on the first-in , first-out method , or market . the components of inventories were as follows : replace_table_token_20_th the company 's inventories are analyzed for slow moving , expired and obsolete items no less frequently than quarterly and the valuation allowance is adjusted as required . the valuation allowance for inventory was $ 1,550,000 and $ 1,425,000 at may 31 , 2015 and 2014 , respectively . property and equipment property and equipment is stated at cost . expenditures for major improvements are capitalized while repairs and maintenance are charged to expense . depreciation is provided on the straight-line method over the estimated useful lives of the respective assets , which are generally seven to 39 years for buildings and improvements and three to ten years for furniture , fixtures , machinery and equipment . depreciation expense was $ 6,318,000 , $ 5,383,000 and $ 4,417,000 in fiscal years 2015 , 2014 and 2013 , respectively . goodwill and other intangible assets goodwill represents the excess of purchase price over fair value of tangible net assets of acquired businesses after amounts are allocated to other identifiable intangible assets . other intangible assets include customer relationships , trademarks , licenses , trade names , covenants not-to-compete and patents . amortizable intangible assets are amortized on either an accelerated or a straight-line basis over 5 to 25 years . story_separator_special_tag dna testing revenues , excluding sales through neogen europe and neogen do brasil , increased 14 % in fiscal 2014 compared to fiscal 2013 , due primarily to continued strength in products introduced in the latter half of fiscal 2013 , and new products for the detection of developmental defects in cattle , introduced in fiscal 2014. the customizable nature of the new proprietary offerings allowed the company to expand market share with beef breed associations . additionally , revenues for canine genotyping increased $ 660,000 in fiscal 2014 , primarily due to the company 's relationship with a number of canine associations . cost of revenues replace_table_token_6_th cost of revenues increased 15 % in fiscal 2015 and 27 % in fiscal 2014 in comparison with the prior years . this compares with revenue increases of 14 % and 19 % , respectively . expressed as a percentage of revenues , cost of revenues was 51 % , 50 % and 47 % in fiscal years 2015 , 2014 and 2013 , respectively . for fiscal 2015 , the strength of the u.s. dollar , which adversely impacted top line revenue with no corresponding decline in product cost , had the largest impact on the slight decline in gross margins . for fiscal year 2014 , the increase in cost of revenues , expressed as a percentage of sales , and the corresponding decline in gross margin percentage was due to the overall shift in revenues towards animal safety products and product mix shifts within each segment . food safety gross margins were 60 % , 63 % and 64 % in fiscal years 2015 , 2014 and 2013 , respectively . in fiscal 2015 , the lower gross margins were primarily due to the strength in the u.s. dollar , which resulted in lower revenues and gross margins when international sales in europe , mexico and brazil were converted from local currencies to the dollar . all currencies the company operates in weakened against the dollar in fiscal 2015 , and pressured margins . additionally , a mix shift , the result of transferring revenues of lower gross margin animal safety products for customers in mexico and central america to neogen latinoamerica , negatively impacted gross margins in food safety . in fiscal 2014 , gross margins declined due to a product mix shift , primarily the result of lower sales of mycotoxin test kits due to crops that were largely free of the natural toxins aflatoxin and deoxynivalenol , which had contributed to strong sales of the company 's mycotoxin test kits in fiscal 2013. the lower mycotoxin revenues in fiscal 2014 were replaced with higher revenues in other product lines , such as dehydrated culture media , which had lower gross margins . animal safety gross margins were 40 % , 38 % and 41 % in fiscal years 2015 , 2014 and 2013 , respectively . the improved margins in fiscal 2015 compared to fiscal 2014 reflect a mix shift towards higher margin products and efficiency gains made in a number of the segment 's operating units . rodenticides , which have higher than average gross margins within the segment , had a sales increase of 21 % due to rodent infestation in the northwest u.s. , and the company 's small animal supplements product line experienced an increase of 23 % , due to higher sales of the company 's higher margin thyroid replacement product . the decline in gross margins in 2014 compared to 2013 was largely the result of product mix shifts within the segment during the year , and the impact from three acquisitions the company made in 2014 , which had gross margins which were lower than the segment average . 26 operating expenses replace_table_token_7_th sales and marketing expenses increased by 11 % in fiscal 2015 and 14 % in fiscal 2014 , each compared with the prior year . as a percentage of sales , sales and marketing expense was 18 % , 19 % and 20 % in fiscal years 2015 , 2014 and 2013 , respectively . the company continued to invest in sales and marketing personnel in fiscal 2015 ; however , efficiencies of scale were achieved with the integration of recent acquisitions , resulting in a lower rate of increase in expense than the increase in revenues . salaries and commission expense were the largest increase in this category at 15 % in fiscal 2015 and 11 % in fiscal 2014 , reflecting the increase in personnel and revenue . other significant increases were shipping expense , which was 15 % higher and was commensurate with the increase in revenues , and other personnel-related expenses , such as fringe benefits and travel . general and administrative expenses increased 3 % in fiscal 2015 compared to fiscal 2014 and by 21 % in fiscal 2014 compared to fiscal 2013. the increases in fiscal years 2015 and 2014 , respectively , are primarily due to higher stock option expense and increased amortization of intangible assets resulting from the company 's recent acquisitions . also contributing to the fiscal 2014 increase were increased salary and other personnel-related expenses , primarily due to the integration of acquisitions from fiscal years 2013 and 2014. a $ 1.2 million , or 73 % , decrease in legal expenses , primarily related to a lawsuit that was settled in october 2014 , partially offset the increase in this category for fiscal 2015. research and development expenses increased 15 % in fiscal 2015 compared to fiscal 2014 and 7 % in fiscal 2014 compared to fiscal 2013. in fiscal 2015 , the increase in expense was primarily due to higher salaries , resulting from increased headcount needed to support the company 's efforts , and outside services and lab supplies , due to higher levels of commercialization activities . as a percentage of revenue , these expenses were 3 % in fiscal years 2015
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inventory levels increased by $ 0.4 million or 1 % , in fiscal 2015 compared to may 31 , 2014. throughout fiscal 2015 , the company focused on reducing inventory levels and improving inventory turnover , while identifying and rationalizing redundant product lines resulting from recent acquisitions . inventory turnover improved from 3.0 to 3.2 times per year . neogen has been profitable from operations for its last 89 quarters and has generated positive cash flow from operations during this period . however , the company 's cash on hand and current borrowing availability may not be sufficient to meet the company 's cash requirements to commercialize products currently under development or its potential plans to acquire additional businesses , technology and products that fit within the company 's strategic plan . accordingly , the company may be required , or may choose , to issue equity securities or enter into other financing arrangements for a portion of the its future capital needs . the company is subject to certain legal and other proceedings in the normal course of business that have not had , and , in the opinion of management , are not expected to have , a material effect on its results of operations or financial position . contractual obligations the company has the following contractual obligations due by period : replace_table_token_12_th new accounting pronouncements see discussion of any new accounting pronouncements in note 1 to consolidated financial statements . 29 item
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Liquidity
| 15,339
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since inception , we have financed our operations primarily through the sale of equity and debt securities and our term loans with silicon valley bank , or svb , and westriver innovation lending fund viii , l.p. , or westriver . in april 2019 , we received $ 46.3 million in net proceeds from an underwritten public offering of our common stock . in may 2019 , we received an additional $ 2.5 million under our term loan with svb and westriver , or our 2019 loan , and in october 2019 , we received an additional $ 5.0 million under our 2019 loan . in january 2020 , we entered into the sfj agreement pursuant to which sfj has agreed to provide us up to $ 120.0 million of funding to support the clinical development of bentracimab . as of december 31 , 2020 , sfj has provided funding and paid for amounts on our behalf in the aggregate amount of $ 47.1 million under the sfj agreement . in addition , we expect that sfj will fund or reimburse an additional $ 42.9 million of clinical trial costs and other expenses . sfj will also provide up to an additional $ 30.0 million of funding upon the achievement of specified clinical development milestones with respect to our ongoing reverse-it trial of bentracimab . since our inception , we have incurred significant operating losses . our net loss was $ 98.6 million for the year ended december 31 , 2020. as of december 31 , 2020 , we had an accumulated deficit of $ 260.7 million . we expect to continue to incur significant expenses and operating losses for the foreseeable future . we anticipate that our expenses will increase substantially in connection with our ongoing activities , as we : continue our ongoing clinical trials of bentracimab and pemziviptadil , as well as initiate and complete additional clinical trials , as needed ; 79 seek to expand our geographical reach through the sfj agreement and the corresponding clinical development support fees that we will incur ; pursue regulatory approvals for bentracimab as a reversal agent for the antiplatelet drug ticagrelor and pemziviptadil for the treatment of pah ; develop pb6440 for treatment-resistant hypertension ; seek to discover and develop additional clinical and preclinical product candidates ; scale up our clinical and regulatory capabilities ; establish a commercialization infrastructure and scale up external manufacturing and distribution capabilities to commercialize any product candidates for which we may obtain regulatory approval , including bentracimab and pemziviptadil ; adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products ; maintain , expand and protect our intellectual property portfolio ; hire additional clinical , manufacturing and scientific personnel ; add operational , financial and management information systems and personnel , including personnel to support our product development and possible future commercialization efforts ; and incur additional legal , accounting and other expenses in operating as a public company . recent development in march 2021 , we entered into a supply agreement with biovectra inc. for the manufacture and supply of bulk drug substance for bentracimab for commercial distribution following regulatory approval . under the terms of the supply agreement , biovectra has committed to maintaining capacity to manufacture an agreed number of batches of product per year , although we are free to contract with third parties for the manufacture of bentracimab . refer to `` item 1. business '' under the subheading business - license , co-development and other agreements - biovectra supply agreement in this annual report . financial overview components of operating results revenue grant revenue grant revenue is derived from government grants that support our efforts on specific research projects . we recognize grant revenue when there is reasonable assurance of compliance with the conditions of the grant and reasonable assurance that the grant revenue will be received . revenue under collaborative agreement revenue under collaborative agreement is derived from an agreement with our collaboration partner , immunoforge co. , ltd. , or immunoforge . we have granted immunoforge a license to develop certain compound indications in exchange for an upfront license payment and event-based payments subject to immunoforge 's achievement of specified development , regulatory and sales-based milestones . in addition , we are entitled to royalties if products under the collaboration are commercialized . we recognize revenue for upfront amounts when the license is transferred to immunoforge . development milestones and other fees are recognized as revenue when it is probable that the amount will not result in a significant reversal of revenue in the future . sales-based milestones and royalties can not be recognized until the underlying sales occur . research and development expense research and development expense consists of expenses incurred in connection with the discovery and development of our product candidates . we expense research and development costs as incurred . these expenses include : expenses incurred under agreements with contract research organizations , or cros , as well as investigative sites and consultants that conduct our clinical trials and preclinical studies ; 80 manufacturing and supply scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial supply and potential commercial supply , including manufacturing validation batches ; clinical development support fees that we incur related to the sfj agreement ; outsourced professional scientific development services ; employee-related expenses , which include salaries , benefits and stock-based compensation ; expenses relating to regulatory activities ; and laboratory materials and supplies used to support our research activities . research and development activities are central to our business model . product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development , primarily due to the increased size and duration of later-stage clinical trials . story_separator_special_tag we expect our research and development expense to increase significantly over the next several years as we increase personnel costs , including stock-based compensation , conduct our later-stage clinical trials for bentracimab and pemziviptadil , develop pb6440 , conduct other preclinical studies and clinical trials and prepare regulatory filings and , if we receive regulatory approval for one or more product candidates , prepare for commercialization efforts . the successful development of our product candidates is highly uncertain . at this time , we can not reasonably estimate or know the nature , timing and costs of the efforts that will be necessary to complete the remainder of the development of our product candidates , or when , if ever , material net cash inflows may commence from those candidates . this uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials , which vary significantly over the life of a project as a result of many factors , including : delays in regulators or institutional review boards authorizing us or our investigators to commence our clinical trials or in our ability to negotiate agreements with clinical trial sites or contract research organizations ; our ability to secure adequate supply of product candidates for our trials ; the number of clinical sites included in the trials ; the length of time required to enroll suitable patients ; the number of patients that ultimately participate in the trials ; the number of doses patients receive ; any side effects associated with our product candidates ; the impacts of the covid-19 pandemic on our ability to initiate trial sites , enroll and assess patients , supply study drug and report trial results ; the duration of patient follow-up ; and the results of our clinical trials . our expenditures are subject to additional uncertainties , including the terms and timing of regulatory approvals , and the expense of filing , prosecuting , defending and enforcing any patent claims or other intellectual property rights . we may never succeed in achieving regulatory approval for our product candidates . we may obtain unexpected results from our clinical trials . we may elect to discontinue , delay or modify clinical trials of our product candidates . a change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate . for example , if the fda or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate , or if we experience significant delays in enrollment in any of our clinical trials , we could be required to expend significant additional financial resources and time on the completion of clinical development . product commercialization will take several years and millions of dollars in development costs . general and administrative expense general and administrative expense consists principally of salaries and related costs for personnel in executive and administrative functions , including stock-based compensation , travel expenses and recruiting expenses . other general and administrative expense includes professional fees for legal , accounting and tax-related services and insurance costs . 81 we anticipate that our general and administrative expense will increase as we continue to operate as a public reporting company and continue to develop bentracimab , pemziviptadil , pb6440 and our future product candidates . we believe that these increases likely will include increased costs for director and officer liability insurance , costs related to the hiring of additional personnel and increased fees for outside consultants , lawyers and accountants . we also expect to incur increased costs to comply with corporate governance , internal controls , investor relations , disclosure and similar requirements applicable to public reporting companies . loss from remeasurement of development derivative liability loss from remeasurement of development derivative liability reflects the revaluation at each reporting date of our development derivative liability based on the present value of the estimated consideration to be received and the estimated consideration to be paid pursuant to the contractual terms under the sfj agreement , which is determined to be fair value . the liability is remeasured at the end of each quarter as a level 3 derivative , with the change in fair value recorded in the condensed statements of operations . interest expense interest expense consists of interest expense on our term loan with svb and westriver . license , co-development and other agreements medimmune limited license agreement in november 2017 , we entered into an exclusive license agreement , or the medimmune license , with medimmune limited , or medimmune , a wholly owned subsidiary of astrazeneca plc . pursuant to the medimmune license , medimmune granted us an exclusive , worldwide license under certain patent rights owned or controlled by medimmune to develop and commercialize any products covered by the medimmune license , or the medimmune licensed products , for the treatment , palliation , diagnosis or prevention of any human disorder or condition . under the medimmune license , we paid medimmune an upfront fee of $ 0.1 million . we are also required to pay medimmune : quarterly fees relating to technical services provided by medimmune ; up to $ 18.0 million in clinical and regulatory milestone fees , $ 3.0 million of which had been incurred as of december 31 , 2020 ; up to $ 50.0 million in commercial milestone fees ; and mid-single digit to low-teen royalty percentages on net sales of medimmune licensed products , subject to reduction in specified circumstances . in addition , the medimmune license offers an option for third-party product storage costs . from the inception of the medimmune license through december 31 , 2020 , we have incurred costs of $ 3.6 million under the medimmune license .
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the following table summarizes our research and development expense by functional area for the years ended december 31 , 2020 and 2019 ( in thousands ) : replace_table_token_2_th the following table summarizes our research and development expense by product candidate for the years ended december 31 , 2020 and 2019 ( in thousands ) : replace_table_token_3_th general and administrative expense general and administrative expense was $ 13.1 million for the year ended december 31 , 2020 , compared to $ 11.2 million for the year ended december 31 , 2019. the increase of $ 1.9 million was primarily attributable to increases in personnel expense due to additional headcount , directors and officers liability insurance and professional services related to consulting and legal services . loss from remeasurement of derivative liability loss from remeasurement of derivative liability was $ 12.5 million for the year ended december 31 , 2020. the liability was initially recorded at the present value of the estimated consideration to be received and the estimated consideration to be paid pursuant to the contractual terms of the sfj agreement , which was determined to have been fair value . the derivative liability was subsequently remeasured at year end as a level 3 derivative . 85 interest income interest income was $ 0.2 million for the year ended december 31 , 2020 , compared to $ 1.6 million for the year ended december 31 , 2019. the decrease of $ 1.3 million was attributable to higher balances of cash and cash equivalents and higher interest rates during 2019. interest expense interest expense was $ 1.4 million for the year ended december 31 , 2020 , compared to $ 1.1 million for the year ended december 31 , 2019. the increase of $ 0.4 million was attributable to increased borrowings in 2020 under the 2019 loan . liquidity and capital resources since our inception , we have not generated any revenue from product sales and have incurred net losses and negative cash flows from our operations . we have financed our operations primarily through public offerings of our common stock , private placements of convertible debt and convertible preferred stock and borrowings under our term loans . in future periods we expect sfj to provide up to an additional $ 72.9 million of funding pursuant to the sfj agreement , $ 30.0 million of which we are
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ROO
| 2,583
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employees that work in two leased office buildings in the phoenix area will be consolidated into this new building when it 's expected to be completed in late 2016. although the university is funding the construction of the building and parking garage , the university is marketing these , along with a recently refurbished office building in the same development , as part of a sale-leaseback transaction . these investments are intended to support our growing on-campus student population as well as enhance the brand of the university . community involvement and the public good . in 2014 , the university announced a five-point plan to restore west phoenix through a ) a unique partnership with habitat for humanity to repair hundreds of homes in the university 's neighborhood ; b ) an ongoing initiative with the phoenix police department to improve public safety ; c ) the creation of jobs and commerce on the main campus and along the camelback road corridor in west phoenix ; d ) the development of a trained workforce in the areas of science , technology , engineering and mathematics ; and e ) the continued support of k-12 students at neighborhood schools via our outreach program . our students are serving as tutors and mentors to these high school students and the results thus far have been extremely positive . the university continues to be involved in more than 120 community events and projects throughout the year , helping organizations such as the phoenix dream center , feed my starving children , hopefest , arizona foster care , phoenix rescue mission , boy/girl scouts , goodwill arizona , muscular dystrophy association , young life and elevate phoenix . the university also puts on popular gift drives at christmas and easter to help brighten those seasons for many underprivileged families . our faculty , staff and students also go out into our surrounding neighborhoods to participate in university sponsored programs such as serve the city , canyon kids , 12 months of service and the run to fight children 's cancer . 48 revenue and enrollment net revenue consists principally of tuition , room and board charges attributable to students residing on our ground campus , application and graduation fees , and fees from educational resources such as access to online materials or commissions we earn from bookstore and publication sales , less scholarships . factors affecting our net revenue include : ( i ) the number of students who are enrolled and who remain enrolled in our courses ; ( ii ) the number of credit hours per student ; ( iii ) our degree and program mix ; ( iv ) changes in our tuition rates ; ( v ) the timing of our ground traditional campus semesters ; ( vi ) the amount of the scholarships that we offer ; and ( vii ) the number of students housed in , and the rent charged for , our on-campus student apartments and dormitories . we define enrollment as individual students who attended a course during the last two months of the calendar quarter . we offer three 15-week semesters in a calendar year with one start available per semester for our traditional ground students . online and professional studies students have more frequent class starts in five , seven , eight and sixteen-week courses through the calendar year . enrollments are a function of the number of continuing students at the beginning of each period and new enrollments during the period , which are offset by graduations , withdrawals , and inactive students during the period . inactive students for a particular period include students who are not registered in a class and , therefore , are not generating net revenue for that period , but who have not withdrawn from grand canyon university . we believe that the principal factors that affect our enrollments and net revenue are the number and breadth of the programs we offer ; the attractiveness of our program offerings and learning experience , particularly for career-oriented adults who are seeking pay increases or job opportunities that are directly tied to higher educational attainment ; the effectiveness of our marketing , recruiting and retention efforts , which is affected by our brand strength and price point ; the quality of our academic programs and student services ; the convenience and flexibility of our online delivery platform ; the availability and cost of federal and other funding for student financial aid ; the seasonality of our net revenue , which is enrollment driven and is typically lowest in our second fiscal quarter and highest in our fourth fiscal quarter ; and general economic conditions , particularly as they might affect job prospects in our core disciplines . the following is a summary of our student enrollment at december 31 , 2015 , 2014 , and 2013 by degree type and by instructional delivery method : replace_table_token_9_th replace_table_token_10_th ( 1 ) enrollment represents individual students who attended a course during the last two months of the calendar quarter . included in enrollment at december 31 , 2015 , 2014 and 2013 are students pursuing non-degree certificates of 679 , 585 , and 487 , respectively . ( 2 ) includes 6,302 , 5,570 and 4,285 students pursuing doctoral degrees at december 31 , 2015 , 2014 and 2013 , respectively . ( 3 ) as of december 31 , 2015 , 2014 and 2013 , 47.8 % , 46.0 % and 43.5 % , respectively , of our working adult students ( online and professional studies students ) were pursuing graduate or doctoral degrees . ( 4 ) includes our traditional on-campus students , as well as our professional studies students . story_separator_special_tag 51 results of operations the following table sets forth statements of operations data as a percentage of net revenue for each of the periods indicated : replace_table_token_11_th year ended december 31 , 2015 compared to year ended december 31 , 2014 net revenue . our net revenue for the year ended december 31 , 2015 was $ 778.2 million , an increase of $ 87.1 million , or 12.6 % , as compared to net revenue of $ 691.1 million for the year ended december 31 , 2014. this increase was primarily due to an increase in ground and online enrollment and , to a lesser extent , an increase in room and board and other student fees , partially offset by an increase in institutional scholarships . we did not raise tuition in any of our programs for our 2014-15 academic year . a tuition increase of approximately 1 % was implemented for the majority of our online programs in september 2015. we have not raised our tuition for our traditional ground program in seven years . end-of-period enrollment increased 9.9 % between december 31 , 2015 and 2014 , as ground enrollment increased 19.2 % and online enrollment increased 7.7 % over the prior year . the majority of the ground enrollment growth between years was residential students at our ground traditional campus in phoenix , arizona . we attribute the significant growth in our ground enrollment between years to our increasing brand recognition and the value proposition that our ground traditional campus affords to traditional-aged students and their parents . after scholarships , our ground traditional students pay for tuition , room , board , and fees , often half to a third of what it costs to attend a private , traditional university in another state and an amount comparable to what it costs to attend a public university . although our online enrollment continues to grow , as the proportion of traditional colleges and universities providing alternative learning modalities increases , we will face increasing competition for working adult students from such institutions , including those with well-established reputations for excellence . the growth in revenue per student between years is primarily due to our residential traditional campus enrollment growing at a rate higher than our working adult enrollment . when factoring in room , board and fees , the revenue per student is higher for these students than for our working adult students . instructional costs and services expenses . our instructional costs and services expenses for the year ended december 31 , 2015 were $ 329.7 million , an increase of $ 40.9 million , or 14.1 % , as compared to instructional costs and services expenses of $ 288.8 million for the year ended december 31 , 2014. this increase was primarily due to increases in instructional compensation and related expenses including share-based compensation , faculty compensation , occupancy and depreciation and amortization , dues , fees , subscriptions and other instructional supplies , bad debt expense and other miscellaneous instructional costs and services of $ 15.3 million , $ 7.3 million , $ 8.0 million , $ 7.6 million , $ 1.6 million and $ 1.1 million , respectively . the increase in employee compensation and related expenses and faculty compensation are primarily due to the increase in the number of staff to support the increasing number of students attending the university and increased benefit costs between years . in addition , we continue to increase our full-time faculty between years . the increase in occupancy , depreciation and amortization is the result of us placing into service additional buildings to support the growing number of ground traditional students . the increase in dues , fees , subscriptions and other instructional supplies is primarily due to increased licensing fees related to educational resources and increased food costs associated with a higher number of residential students . our instructional costs and services expenses as a percentage of net revenue increased by 0.6 % to 42.4 % for the year ended december 31 , 2015 , as compared to 41.8 % for the year ended december 31 , 2014 due to an increase in dues , fees , subscriptions and other instructional supplies as a percentage of revenue due to the low profit margin derived on food sales , and occupancy , depreciation and amortization increasing as a percentage of revenue , partially offset by a decrease in bad debt expense from 2.2 % of net revenue for the year ended december 31 , 2014 to 2.1 % of net revenues for the year ended december 31 , 2015. we anticipate that instructional costs and services will continue to increase as a percentage of revenue due to these factors . 52 admissions advisory and related expenses . our admissions advisory and related expenses for the year ended december 31 , 2015 were $ 112.6 million , an increase of $ 4.0 million , or 3.7 % , as compared to admissions advisory and related expenses of $ 108.6 million for the year ended december 31 , 2014. this increase was primarily due to increases in employee compensation and related expenses , partially offset by decreases in other admissions advisory expenses of $ 5.1 million and $ 1.2 million , respectively . employee compensation and related expenses increased as a result of increasing the number of enrollment counselors and increasing benefit costs between years . our admissions advisory and related expenses as a percentage of net revenue decreased by 1.2 % to 14.5 % for the year ended december 31 , 2015 , from 15.7 % for the year ended december 31 , 2014 primarily due to our ability to leverage our admissions advisory personnel across an increasing revenue base . although we are hopeful that we will continue to see leverage of our admissions advisory personnel , we do not anticipate the leverage in future years will be as significant as in 2015.
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in 2015 , in order to accommodate the continued growth of our traditional ground population , we completed four additional dormitories , a classroom building for our college of science , technology and engineering , and a third parking structure prior to the 2015/2016 school year and have recently started construction on three more apartment style residence halls , a 170,000 square foot classroom building for our college of science , engineering and technology , a student service center , and a fourth parking structure , as well as land purchases adjacent to or near our phoenix campus , and purchases of computer equipment , other internal use software projects and furniture and equipment to support our increasing employee headcount . included in off-site development during 2015 is $ 10.0 million we spent to revitalize what was formerly known as the maryvale golf course under a partnership agreement with the city of phoenix . the golf course is now known as grand canyon university championship golf course . also , in late 2015 , we commenced construction on an off-site office building and parking garage that is in close proximity to our ground traditional campus . employees that work in two leased office buildings in the phoenix area will be consolidated into this new building when it 's expected to be completed in late 2016. in 2014 , capital expenditures primarily consisted of ground campus building projects such as the construction of an additional classroom building and parking garage , additional residence halls that accommodate another 1,600 students and land purchases adjacent to our phoenix campus to support our growing traditional student enrollment as well as purchases of computer equipment , other internal use software projects and furniture and equipment to support our increasing employee headcount . in 2013 , capital expenditures primarily consisted of ground campus building projects including the construction costs for two additional dormitories and an expansion of our student union , which includes additional food services and library space to support our growing traditional student enrollment as well as purchases of computer equipment , other internal use software projects and furniture and equipment to support our increasing employee headcount .
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Liquidity
| 6,900
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the transaction price is allocated to separate performance obligations , generally story_separator_special_tag the following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes in this annual report on form 10-k. this may contain forward-looking statements based upon current expectations that involve risks and uncertainties . our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors , including those set forth under 36 item 1a “ risk factors ” and elsewhere in this annual report on form 10-k. unless otherwise stated , references in this report to particular years or quarters refer to our fiscal year and the associated quarters of those fiscal years . we have elected to omit discussion of the earliest of the three years covered by the consolidated financial statements presented . such omitted discussion can be found under item 7 , management 's discussion and analysis of financial condition and results of operations , located in our annual report on form 10-k for the fiscal year ended december 31 , 2019 , filed with the sec on february 26 , 2020 , for reference to discussion of the fiscal year ended december 31 , 2018 , the earliest of the three fiscal years presented . overview our business we are a leader in transforming the pharmacy care delivery model . our medication management automation solutions and adherence tools empower healthcare systems and pharmacies to focus on clinical care , rather than administrative tasks . our solutions support the vision of a fully autonomous pharmacy , a roadmap designed to improve operational efficiencies through a fully automated , medication management infrastructure . our vision is to transform the pharmacy care delivery model through automation designed to replace manual , error-prone processes , combined with a single , cloud-based platform and advanced services offerings . we believe our connected devices , products , and solutions will help our customers harness the power of data and analytics , and deliver improved patient outcomes . over 7,000 facilities worldwide use our automation and analytics solutions which are designed to improve pharmacy workflows , increase operational efficiency , reduce medication errors , deliver actionable intelligence , and improve patient safety . more than 50,000 institutional and retail pharmacies across north america and the united kingdom leverage our innovative medication adherence and population health solutions to improve patient engagement , and adherence to prescriptions and vaccine scheduling , helping to reduce costly hospital readmissions . we sell our product and consumable solutions together with related service offerings . revenues generated in the united states represented 89 % of our total revenues for the year ended december 31 , 2020. over the past several years , our business has expanded from a single-point solution to a platform of products and services that will help to further advance the vision of the autonomous pharmacy . this has resulted in larger deal sizes across multiple products , services , and implementations for customers and , we believe , more comprehensive , valuable , and enduring relationships . we utilize product bookings as an indicator of the success of our business . product bookings generally consist of all firm orders other than for technical services and other less significant items , as evidenced generally by a non-cancelable contract and purchase order for equipment and software products , and by a purchase order for consumables . the majority of connected devices and software license product bookings are installable within twelve months of booking , and are recorded as revenue upon customer acceptance of the installation or receipt of goods . revenues from software-as-a-service ( “ saas ” ) , subscription software , and technology-enabled services product bookings are recorded over the contractual term . product bookings increased by 23 % , from $ 813 million in 2019 to $ 1.002 billion in 2020 , driven by the success of our growth strategies in our comprehensive platform and differentiated products , as well as expanding our customer portfolio . in addition to product solution sales , we provide services to our customers . we provide installation planning and consulting as part of most product sales which is generally included in the initial price of the solution . to help assure the maximum availability of our systems , our customers typically purchase maintenance and support contracts in increments of one to five years . as a result of the growth of our installed base of customers and expanded service offerings , our service revenues have also grown . 37 the following table summarizes each revenue category : revenue category revenue type ( 1 ) income statement classification included in product bookings connected devices , software licenses , and other high visibility/ nonrecurring product yes ( 2 ) technical services high visibility/ recurring service no consumables high visibility/ recurring product yes saas , subscription software , and technology-enabled services high visibility/ recurring service yes _ ( 1 ) all revenue types are highly visible from long-term , sole-source agreements , backlog , or the recurring nature of the revenue stream . ( 2 ) freight revenue and certain other insignificant revenue streams are not included in product bookings . our full-time headcount of approximately 2,860 on december 31 , 2020 , an increase of approximately 160 from december 31 , 2019 , reflects our efforts to grow our operations , while driving profitability and optimizing resource allocation . operating segments we manage our operations as a single segment for the purposes of assessing performance and making operating decisions . our chief operating decision maker ( `` codm '' ) is our chief executive officer . the codm allocates resources and evaluates the performance of omnicell at the consolidated level using information about our revenues , gross profit , income from operations , and other key financial data . all significant operating decisions are based upon an analysis of omnicell as one operating segment , which is the same as our reporting segment . story_separator_special_tag acquisitions on october 1 , 2020 , we completed the acquisition of the 340b link business ( the “ 340b link business ” ) of pharmaceutical strategies group , llc pursuant to the terms and conditions of the equity purchase agreement , dated august 11 , 2020 , as amended , by and among the company , psgh , llc , bw apothecary holdings , llc , the sellers identified therein and the seller 's representative for total cash consideration of $ 225.0 million . the acquisition adds a comprehensive and differentiated suite of software-enabled services and solutions used by certain eligible hospitals , health systems , clinics , and entities to manage compliance and capture 340b drug cost savings on outpatient prescriptions filled through the eligible entity 's pharmacy or a contracted pharmacy partner . the results of the operations of the 340b link business have been included in our consolidated results of operations beginning october 1 , 2020. critical accounting policies and estimates our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements , which have been prepared in accordance with u.s. generally accepted accounting principles ( “ gaap ” ) . the preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities , disclosure of any 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 review our estimates and assumptions , which are based on historical experience and various other factors that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of certain assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates and assumptions . we believe the following critical accounting policies are affected by significant judgments and estimates used in the preparation of our consolidated financial statements : 39 revenue recognition we earn revenues from sales of our products and related services , which are sold in the healthcare industry , our principal market . prior to recognizing revenue , we identify the contract , performance obligations , and transaction price , and allocate the transaction price to the performance obligations . all identified contracts meet the following required criteria : parties to the contract have approved the contract ( in writing , orally , or in accordance with other customary business practices ) and are committed to perform their respective obligations . a majority of our contracts are evidenced by a non-cancelable written agreement . contracts for consumable products are generally evidenced by an order placed via phone or a purchase order . entity can identify each party 's rights regarding the goods or services to be transferred . contract terms are documented within the written agreements . where a written contract does not exist , such as for consumable products , the rights of each party are understood as following our standard business process and terms . the entity can identify the payment terms for the goods or services to be transferred . payment terms are documented within the agreement and are generally net 30 to 60 days from shipment of tangible product or services performed for customers in the united states . where a written contract does not exist , our standard payment terms are net 30 day terms . the contract has commercial substance ( that is the risk , timing , or amount of the entity 's future cash flows is expected to change as a result of the contract ) . our agreements are an exchange of cash for a combination of products and services which result in changes in the amount of our future cash flows . it is probable the entity will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer . we perform a credit check for all significant customers or transactions and where collectability is not probable , payment in full or a substantial down payment is typically required to help assure the full agreed upon contract price will be collected . distinct goods or services are identified as performance obligations . a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer are considered a single performance obligation . where a good or service is determined not to be distinct , we combine the good or service with other promised goods or services until a bundle of goods or services that is distinct is identified . to identify our performance obligations , we consider all of the products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices . when performance obligations are included in separate contracts , we consider an entire customer arrangement to determine if separate contracts should be considered combined for the purposes of revenue recognition . most of our sales , other than renewals of support and maintenance , contain multiple performance obligations , with a combination of hardware systems , consumables and software products , support and maintenance , and professional services . the transaction price of a contract is determined based on the fixed consideration , net of an estimate for variable consideration such as various discounts or rebates provided to customers . as a result of our commercial selling practices , contract prices are generally fixed with minimal , if any , variable consideration . the transaction price is allocated to separate performance obligations proportionally based on the standalone selling price of each performance obligation . standalone selling price is best evidenced by the price we charge for the good or service when selling it separately in similar circumstances to similar customers .
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results of operations total revenues replace_table_token_3_th 44 product revenues represented 71 % and 74 % of total revenues for the years ended december 31 , 2020 and 2019 , respectively . product revenues decreased by $ 23.6 million , primarily due to the impact of the covid-19 pandemic as health systems were focusing resources on covid-19 essential activities during the second and third quarters of 2020. services and other revenues represented 29 % and 26 % of total revenues for the years ended december 31 , 2020 and 2019 , respectively . services and other revenues include revenues from technical services , saas , subscription software , and technology-enabled services , and other services . services and other revenues increased by $ 18.8 million , primarily due to revenues of $ 10.2 million from the newly-acquired 340b link business , as well as continued growth in our installed customer base . our international sales represented 11 % and 10 % of total revenues for the years ended december 31 , 2020 and 2019 , respectively , and are expected to be affected by foreign currency exchange rate fluctuations . we are unable to predict the extent to which revenues in future periods will be impacted by changes in foreign currency exchange rates . our ability to continue to grow revenues is dependent on our ability to continue to obtain orders from customers , our ability to produce quality products and consumables to fulfill customer demand , the volume of installations we are able to complete , our ability to meet customer needs by providing a quality installation experience , and our flexibility in manpower allocations among customers to complete installations on a timely basis . the timing of our product revenues for equipment is primarily dependent on when our customers ' schedules allow for installations .
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ROO
| 15,331
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these non-tuition revenues are recognized upon delivery of goods or as services are performed and represent less than 10 % of our revenues . our revenues are directly dependent on the average number of students enrolled in our schools and the courses in which they are enrolled . our average enrollment is impacted by the number of new students starting , re-entering , graduating and withdrawing from our schools . in addition , our diploma/certificate programs range from 19 to 136 weeks , our associate 's degree programs range from 64 to 98 weeks , and students attend classes for different amounts of time per week depending on the school and program in which they are enrolled . because we start new students every month , our total student population changes monthly . the number of students enrolling or re-entering our programs each month is driven by the demand for our programs , the effectiveness of our marketing and advertising , the availability of financial aid and other sources of funding , the number of recent high school graduates , the job market and seasonality . our retention and graduation rates are influenced by the quality and commitment of our teachers and student services personnel , the effectiveness of our programs , the placement rate and success of our graduates and the availability of financial aid . although similar courses have comparable tuition rates , the tuition rates vary among our numerous programs . the majority of students enrolled at our schools rely on funds received under various government-sponsored student financial aid programs to pay a substantial portion of their tuition and other education-related expenses . the largest of these programs are title iv programs which represented approximately 78 % of our revenue on a cash basis while the remainder is primarily derived from state grants and cash payments made by students during both 2018 and 2017. the higher education act of 1965 , as amended ( the “ hea ” ) requires institutions to use the cash basis of accounting when determining its compliance with the 90/10 rule . we extend credit for tuition and fees to many of our students that attend our campuses . our credit risk is mitigated through the students ' participation in federally funded financial aid programs unless students withdraw prior to the receipt by us of title iv program funds for those students . under title iv programs , the government funds a certain portion of a student 's tuition , with the remainder , referred to as “ the gap , ” financed by the students themselves under private party loans , including credit extended by us . the gap amount has continued to increase over the last several years as we have raised tuition on average for the last several years by 2-3 % per year and restructured certain programs to reduce the amount of financial aid available to students , while funds received from title iv programs increased at lower rates . the additional financing that we are providing to students may expose us to greater credit risk and can impact our liquidity . however , we believe that these risks are somewhat mitigated due to the following : · our internal financing is provided to students only after all other funding resources have been exhausted ; thus , by the time this funding is available , students have completed approximately two-thirds of their curriculum and are more likely to graduate ; · funding for students who interrupt their education is typically covered by title iv funds as long as they have been properly packaged for financial aid ; and · creditworthy criteria to demonstrate a student 's ability to pay . the operating expenses associated with an existing school do not increase or decrease proportionally as the number of students enrolled at the school increases or decreases . we categorize our operating expenses as : · educational services and facilities . major components of educational services and facilities expenses include faculty compensation and benefits , expenses of books and tools , facility rent , maintenance , utilities , depreciation and amortization of property and equipment used in the provision of education services and other costs directly associated with teaching our programs excluding student services which is included in selling , general and administrative expenses . · selling , general and administrative . selling , general and administrative expenses include compensation and benefits of employees who are not directly associated with the provision of educational services ( such as executive management and school management , finance and central accounting , legal , human resources and business development ) , marketing and student enrollment expenses ( including compensation and benefits of personnel employed in sales and marketing and student admissions ) , costs to develop curriculum , costs of professional services , bad debt expense , rent for our corporate headquarters , depreciation and amortization of property and equipment that is not used in the provision of educational services and other costs that are incidental to our operations . selling , general and administrative expenses also includes the cost of all student services including financial aid and career services . all marketing and student enrollment expenses are recognized in the period incurred . 33 index critical accounting policies and estimates our discussions of our financial condition and results of operations are based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america , or gaap . the preparation of financial statements in conformity with gaap requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period . on an ongoing basis , we evaluate our estimates and assumptions , including those related to revenue recognition , bad debts , fixed assets , goodwill and other intangible assets , income taxes and certain accruals . story_separator_special_tag actual results could differ from those estimates . the critical accounting policies discussed herein are not intended to be a comprehensive list of all of our accounting policies . in many cases , the accounting treatment of a particular transaction is specifically dictated by gaap and does not result in significant management judgment in the application of such principles . we believe that the following accounting policies are most critical to us in that they represent the primary areas where financial information is subject to the application of management 's estimates , assumptions and judgment in the preparation of our consolidated financial statements . revenue recognition . prior to adoption of asu 2014-09 revenues are derived primarily from programs taught at our schools . tuition revenues , textbook sales and one-time fees , such as nonrefundable application fees and course material fees , are recognized on a straight-line basis over the length of the applicable program as the student proceeds through the program , which is the period of time from a student 's start date through his or her graduation date ( including internships or externships , if any , occurring prior to graduation ) , and we complete the performance of teaching the student entitling us to the revenue . other revenues , such as tool sales and contract training revenues , are recognized as goods are delivered or training completed . on an individual student basis , tuition earned in excess of cash received is recorded as accounts receivable , and cash received in excess of tuition earned is recorded as unearned tuition . we evaluate whether collectability of revenue is reasonably assured prior to the student commencing a program by attending class and reassess collectability of tuition and fees when a student withdraws from a course . we calculate the amount to be returned under title iv and its stated refund policy to determine eligible charges and , if there is a balance due from the student after this calculation , we expect payment from the student . we have a process to pursue uncollected accounts whereby , based upon the student 's financial means and ability to pay , a payment plan is established with the student to ensure that collectability is reasonable . we continuously monitor our historical collections to identify potential trends that may impact our determination that collectability of receivables for withdrawn students is realizable . if a student withdraws from a program prior to a specified date , any paid but unearned tuition is refunded . refunds are calculated and paid in accordance with federal , state and accrediting agency standards . generally , the amount to be refunded to a student is calculated based upon the period of time the student has attended classes and the amount of tuition and fees paid by the student as of his or her withdrawal date . these refunds typically reduce deferred tuition revenue and cash on our consolidated balance sheets as we generally do not recognize tuition revenue in our consolidated statements of income ( loss ) until the related refund provisions have lapsed . based on the application of our refund policies , we may be entitled to incremental revenue on the day the student withdraws from one of our schools . we record revenue for students who withdraw from one of our schools when payment is received because collectability on an individual student basis is not reasonably assured . after adoption of asu 2014-09 on january 1 , 2018 , we adopted the new standard on revenue recognition , asu 2014-09 , using the modified retrospective approach of asu 2016-10. the adoption of the guidance in asu 2014-09 as amended by asu 2016-10 did not have a material impact on the measurement or recognition of revenue in any prior or current reporting periods and there was no adjustment to retained earnings . the core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to students in an amount that reflects the consideration to which the company expects to be entitled in exchange for such goods or services . substantially all of our revenues are considered to be revenues from contracts with students . the related accounts receivable balances are recorded in our balance sheets as student accounts receivable . we do not have significant revenue recognized from performance obligations that were satisfied in prior periods , and we do not have any transaction price allocated to unsatisfied performance obligations other than in our unearned tuition . we record revenue for students who withdraw from one of our schools only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur . unearned tuition represents contract liabilities primarily related to our tuition revenue . we have elected not to provide disclosure about transaction prices allocated to unsatisfied performance obligations if contract durations are less than one-year , or if we have the right to consideration from a student in an amount that corresponds directly with the value provided to the student for performance obligations completed to date . we have assessed the costs incurred to obtain a contract with a student and determined them to be immaterial . allowance for uncollectible accounts . based upon experience and judgment , we establish an allowance for uncollectible accounts with respect to tuition receivables . we use an internal group of collectors in our collection efforts . in establishing our allowance for uncollectible accounts , we consider , among other things , current and expected economic conditions , a student 's status ( in-school or out-of-school ) , whether or not a student is currently making payments , and overall collection history . changes in trends in any of these areas may impact the allowance for uncollectible accounts . the receivables balances of withdrawn students with delinquent obligations are reserved for based on our collection history .
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the increase in books and tools expense and instructional expense was a direct correlation between providing laptops for a growing number of program offerings and an increased student population year over year . educational services and facilities expenses , as a percentage of revenue , decreased to 47.6 % for the year ended december 31 , 2018 from 49.4 % in the prior year comparable period . selling , general and administrative expense . our selling general and administrative expense increased $ 2.5 million , or 1.8 % , to $ 141.2 million for the year ended december 31 , 2018 from $ 138.8 million in the prior year comparable period . increased costs were driven by $ 3.8 million of additional bad debt expense and $ 2.9 million of marketing investments . partially offsetting the increased expenses were cost savings of $ 4.4 million derived from the transitional segment . bad debt expense has increased mainly due to larger accounts receivable balances driven by higher population and thus higher revenue of $ 12.4 million , or 5.1 % , excluding the transitional segment . also , we are seeing more students graduating with accounts receivable balances as a result of our institutional loan program which began offering the option to defer all payments post-graduation . this change was effective approximately two years ago . furthermore , there has been a shift in our program mix during the year from longer duration programs to shorter more condensed programs . the shifts in program mix have impacted disbursement of title iv funds and , as a result , has contributed to a higher accounts receivable balance year over year . 37 index marketing investments during the year ended december 31 , 2018 were approximately $ 2.9 million higher than the prior year comparable period . while marketing investments have increased during 2018 as expected , the cost to obtain prospective students has remained essentially flat when compared to the prior year . marketing dollars are providing a return on investment and are expected to yield start growth
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ROO
| 3,849
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( 2 ) firm purchase commitments relate to contracts for production and testing of our vaccine products , conduct of clinical trials , and other research-related activities . ( 3 ) pursuant to the emory license , we have committed to make potential future milestone and royalty payments which are contingent upon the occurrence of future events . such events include development milestones , regulatory approvals and product sales . because the achievement of these milestones is currently neither probable nor reasonably estimable , the contingent payments have not been included in the table above or recorded on our consolidated balance sheets . the aggregate total of all potential milestone payments included in the emory license ( excluding royalties on net sales ) is approximately $ 3.5 million . as of december 31 , 2012 , except as disclosed in the table above , we had no other material firm purchase obligations or commitments for capital expenditures and no committed lines of credit or other committed funding or long-term debt . we have employment agreements with our executive officers and a consulting agreement with a member of our board of directors , each of which may be terminated with no more than 90 days advance written notice . the table also excludes budgeted expenses under our a research agreements with emory university which are fully reimbursable to us pursuant to the ipcavd grant from the nih and cover a period of less than one year . net operating loss carryforwards at december 31 , 2012 , we had consolidated net operating loss carryforwards for income tax purposes of $ 69.8 million , which will expire in 2013 through 2032 if not utilized . approximately $ 51.9 million of our net operating loss carryforwards relate to the operations of our predecessor , dauphin technology , inc. prior to the 2006 merger between dauphin technology , inc. and geovax , inc. we also have research and development tax credits of approximately $ 764,000 available to reduce income taxes , if any , which will expire in 2022 through 2031 if not utilized . the amount of net operating loss carryforwards and research tax credits available to reduce income taxes in any particular year may be limited in certain circumstances . based on an assessment of all available evidence including , but not limited to , our limited operating history in our core business and lack of profitability , uncertainties of the commercial viability of our technology , the impact of government regulation and healthcare reform initiatives , and other risks normally associated with biotechnology companies , we have concluded that it is more likely than not that these net operating loss carryforwards and credits will not be realized and , as a result , a 100 % deferred tax valuation allowance has been recorded against these assets . 27 results of operations net loss we recorded net losses of $ 2,135,140 , $ 2,346,826 , and $ 2,747,328 for the years ended december 31 , 2012 , 2011 and 2010 , respectively . our operating results typically fluctuate due to the timing of activities and related costs associated with our vaccine research and development activities and our general and administrative costs , as described in more detail below . grant revenue we recorded grant revenues of $ 2,657,327 , $ 4,899,885 , and $ 5,185,257 for the years ended december 31 , 2012 , 2011 and 2010 , respectively . grant revenues for all three years relate to grants from the nih for our vaccine development activities , except that 2010 includes $ 244,479 related to our receipt of a qualified therapeutic discover program ( qtdp ) grant . in september 2007 , the nih awarded us an ipcavd grant to support our hiv/aids vaccine development , optimization and production . the original project period for the grant covered a five year period ending in august 2012 , but was extended for an additional one year period . the aggregate award totaled $ 20.4 million and there is approximately $ 1.6 million remaining and available for use as of december 31 , 2012. in september 2012 , the nih awarded us an additional grant of $ 1.9 million to support development of versions of our hiv/aids vaccines for the clade c subtype of the hiv virus prevalent in the developing world . the project period of this grant covers a one year period ending in august 2013. there is approximately $ 1.4 million from this grant remaining and available for use as of december 31 , 2012. research and development our research and development expenses were $ 3,043,522 , $ 4,276,375 , and $ 4,793,956 for the years ended december 31 , 2012 , 2011 and 2010 , respectively . research and development expense for these periods includes stock-based compensation expense of $ 78,140 , $ 179,400 , and $ 206,501 for 2012 , 2011 and 2010 , respectively ( see discussion under “ stock-based compensation expense ” below ) . our research and development costs do not include costs incurred by the hvtn in conducting clinical trials of our vaccines ; those costs are funded directly by the nih . our research and development expenses can fluctuate considerably on a period-to-period basis , depending on our need for vaccine manufacturing by third parties , the timing of expenditures related to our grants from the nih , and the timing of costs associated with clinical trials being funding directly by us . the recently completed phase 2a clinical trial for our preventive vaccine was conducted and funded by the hvtn as is the ongoing phase 1 clinical trial of our second generation preventive vaccine , but we are responsible for the manufacture of vaccine product to be used in the trials . story_separator_special_tag we are not currently receiving any government support for the ongoing phase 1 clinical trial of our therapeutic vaccine ( treatment interruption protocol ) . we can not predict the level of support we may receive from hvtn or other federal agencies ( or divisions thereof ) for our future clinical trials . we expect that our research and development costs will increase in the future as we progress into the later stage human clinical trials leading up to possible product approval by the fda . since our inception , all of our research and development efforts have been focused on development of our hiv/aids vaccines , which we have managed and evaluated to date as a single project . upon receipt of the ipcavd grant from the nih in late 2007 , we began incurring additional costs associated with the grant , and reallocated personnel and other internal resources toward activities supported by the grant . the table below summarizes our research and development expenses for each of the years in the three year period ended december 31 , 2012. the amounts shown related to nih grants represent all direct costs associated with grant activities , including salaries and personnel-related expenses , supplies , consulting , contract services and travel . the remainder of our research and development expense is allocated to our general hiv/aids vaccine program . replace_table_token_4_th 28 our vaccine candidates still require significant , time-consuming and costly research and development , testing and regulatory clearances . completion of clinical development will take several years or more , but the length of time generally varies substantially according to the type , complexity , novelty and intended use of a product candidate . the nih has funded the costs of conducting all of our completed and ongoing human clinical trials to date , except for our ongoing pilot phase 1/2 therapeutic trial , with geovax incurring costs associated with manufacturing the clinical vaccine supplies and other study support . we expect the nih will fund the costs of another phase 1 therapeutic trial which we anticipate will start in mid-2013 . we are also having discussions with the hvtn and nih with regard to the conduct of a planned phase 2 efficacy trial of our preventive vaccine , and we expect the nih will provide support for this trial as well . we intend to seek government and or third party support for future clinical human trials , but there can be no assurance that we will be successful . the duration and the cost of future clinical trials may vary significantly over the life of the project as a result of differences arising during development of the human clinical trial protocols , including , among others : · the number of patients that ultimately participate in the clinical trial ; · the duration of patient follow-up that seems appropriate in view of the results ; · the number of clinical sites included in the clinical trials ; and · the length of time required to enroll suitable patient subjects . due to the uncertainty regarding the timing and regulatory approval of clinical trials and pre-clinical studies , our future expenditures are likely to be highly volatile in future periods depending on the outcomes of the trials and studies . from time to time , we will make determinations as to how much funding to direct to these programs in response to their scientific , clinical and regulatory success , anticipated market opportunity and the availability of capital to fund our programs . in developing our product candidates , we are subject to a number of risks that are inherent in the development of products based on innovative technologies . for example , it is possible that our vaccines may be ineffective or toxic , or will otherwise fail to receive the necessary regulatory clearances , causing us to delay , extend or terminate our product development efforts . any failure by us to obtain , or any delay in obtaining , regulatory approvals could cause our research and development expenditures to increase which , in turn , could have a material adverse effect on our results of operations and cash flows . because of the uncertainties of clinical trials , estimating the completion dates or cost to complete our research and development programs is highly speculative and subjective . as a result of these factors , we are unable to accurately estimate the nature , timing and future costs necessary to complete the development of our product candidates . in addition , we are unable to reasonably estimate the period when material net cash inflows could commence from the sale , licensing or commercialization of such product candidates , if ever . general and administrative expense our general and administrative expenses were $ 1,752,765 , $ 2,972,555 , and $ 3,162,134 for the years ended december 31 , 2012 , 2011 and 2010 , respectively . general and administrative costs include officers ' salaries , legal and accounting costs , patent costs , amortization expense associated with intangible assets , and other general corporate expenses . general and administrative expense includes stock-based compensation expense of $ 231,936 , $ 593,597 , and $ 544,031 for 2012 , 2011 and 2010 , respectively ( see discussion under “ stock-based compensation expense ” below ) . the decline in general and administrative expense from 2011 to 2012 is primarily due to lower legal costs , patent costs and stock-based compensation expense related to investment advisory fees and investor warrant extensions . however , we expect that our general and administrative costs may increase in the future in support of expanded research and development activities and other general corporate activities . stock-based compensation expense we recorded total stock-based compensation expense of $ 310,076 , $ 772,997 , and $ 750,532 during the years ended december 31 , 2012 , 2011 and 2010 , respectively , which was allocated to research
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we are utilizing this funding to further our hiv/aids vaccine development , optimization and production . the original project period for the grant covered a five year period ending in august 2012 , but was extended for an additional one year period . the aggregate award totaled $ 20.4 million , with approximately $ 1.6 million remaining and available for use as of december 31 , 2012. in september 2012 , the nih awarded us an additional grant of $ 1.9 million to support development of versions of our hiv/aids vaccines to address the clade c subtype of the hiv virus prevalent in the developing world . the project period of this grant covers a one year period ending in august 2013. there is approximately $ 1.4 million from this grant remaining and available for use as of december 31 , 2012. we are pursuing additional grants from the federal government . however , as we progress to the later stages of our vaccine development activities , government financial support may be more difficult to obtain , or may not be available at all . therefore , it will be necessary for us to look to other sources of funding in order to finance our clinical trials and other vaccine development activities . cash flows from investing activities our investing activities have consisted predominantly of capital expenditures . capital expenditures for the years ended december 31 , 2012 , 2011 and 2010 , were $ -0- , $ 11,896 , and $ 4,706 , respectively , and during 2010 , we received $ 5,580 in proceeds from the sale of equipment . cash flows from financing activities net cash provided by financing activities was $ 2,309,192 , $ 404,410 , and $ -0- for the years ended december 31 , 2012 , 2011 and 2010 , respectively .
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Liquidity
| 7,243
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total loans , excluding covered loans , as of december 31 , 2011 were stable compared to december 31 , 2010. the office , retail , and industrial and other commercial real estate portfolios exhibited 6.2 % growth during this period , substantially in the form of owner-occupied business relationships . offsetting this progress , we continued to reduce our exposure to more troubled construction and multi-family real estate categories during 2011. non-performing assets , excluding covered loans and covered oreo , were $ 248.4 million at december 31 , 2011 , decreasing $ 21.1 million , or 7.8 % , from december 31 , 2010. the reduction was substantially due to management 's remediation activities , dispositions , charge-offs , and the return of accruing tdrs to performing status , partially offset by loans downgraded to non-accrual status . for a detailed discussion of non-performing assets , refer to the section titled `` loan portfolio and credit quality `` of this item 7. total average funding sources for 2011 increased $ 152.4 million , or 2.2 % , from 2010 resulting from a $ 433.0 million , or 10.0 % , increase in average transactional deposits and a $ 12.5 million , or 9.1 % , increase in senior and subordinated debt . these increases were partially offset by declines in higher-costing time deposits of $ 199.6 million , or 10.0 % , and borrowed funds of $ 93.5 million , or 26.0 % . the rise in demand deposits and drop in time deposits resulted in a more favorable product mix . for a discussion of our funding sources , see the section titled `` funding and liquidity management `` of this item 7. in fourth quarter 2011 , we redeemed all of the $ 193.0 million of preferred shares issued to the treasury , resulting in the recognition of $ 1.5 million in accelerated accretion . we funded the redemption through a combination of existing liquid assets and proceeds from a $ 115.0 million senior debt offering . the notes , which have an interest rate of 5.875 % , payable semi-annually , will mature in november 2016. in a related transaction , we redeemed the treasury 's associated warrant . we paid $ 900,000 to the treasury to redeem the warrant , which concluded our 45 participation in the cpp . for a discussion of our capital position , see the section titled `` management of capital `` of this item 7. performance overview for 2010 compared with 2009 net loss in 2010 was $ 9.7 million , before adjustment for preferred dividends and non-vested restricted shares , with a $ 19.7 million loss , or $ 0.27 per share , applicable to common shareholders after such adjustments . this compares to a net loss of $ 25.8 million , before adjustment for preferred dividends and non-vested restricted shares and net loss applicable to common shareholders of $ 35.6 million , or $ 0.71 per share , for 2009. the year-over-year improvement was largely due to higher net interest income and fee-based revenues and lower provision for loan losses , which more than offset higher noninterest expense , including losses recognized on the sale and write-down of oreo . pre-tax , pre-provision operating earnings for 2010 were $ 136.4 million , an increase of 3.8 % from 2009. the increase over 2009 was primarily driven by higher average interest-earning assets , improved net interest margins , and greater fee-based revenues , which offset higher costs related to fdic-assisted transactions and loan remediation activities . our 2010 tax-equivalent net interest income increased $ 24.5 million compared to 2009. interest expense declined $ 40.7 million , reflecting both a decline in total interest-bearing liabilities and the rates paid for those liabilities . tax-equivalent interest income declined $ 16.2 million compared to 2009 due to a 14 basis point decline in tax-equivalent yield . the net result of these changes was an increase in tax-equivalent net interest income . fee-based revenues of $ 86.8 million for 2010 grew by 1.9 % compared to 2009. service charge fees declined primarily from lower overdraft and non-sufficient fund fees . however , this decline was more than offset by increases in other service charges , commissions , and fees ( primarily merchant fee income ) , card-based fees , and wealth management fees . noninterest expense rose by 18.7 % for 2010 compared to 2009. the increase was attributed to higher losses and write-downs on oreo and increases in loan remediation costs ( including costs to service certain assets acquired in fdic-assisted transactions ) , other professional services fees from the valuation and integration of fdic-acquired assets , and compensation expense . we recorded integration expenses associated with our fdic-assisted transactions of $ 3.3 million in 2010. in 2010 , we sold $ 390.2 million in collateralized mortgage obligations ( `` cmos `` ) , other mortgage-backed securities , municipal securities , and corporate bonds for a gain of $ 17.1 million . net securities gains were $ 12.2 million for 2010 and were net of other-than-temporary impairment charges of $ 4.9 million . impairment charges were primarily related to our collateralized debt obligations ( `` cdos `` ) . outstanding loans , excluding covered loans , of $ 5.1 billion as of december 31 , 2010 declined $ 102.7 million , or 2.0 % , from december 31 , 2009 as we charged-off $ 147.1 million in loans in 2010. growth of 1.9 % in commercial and industrial loans , 4.8 % in multi-family loans , and 7.2 % in other commercial real estate lending more than offset a 37.8 % decline in the commercial and residential construction loan portfolios . story_separator_special_tag ( 6 ) for a discussion of the gains on fdic-assisted transactions , refer to note 5 of `` notes to consolidated financial statements `` in item 8 of this form 10-k. 2011 compared to 2010 total noninterest income declined 6.1 % for 2011 compared to 2010. the decrease reflects lower net securities gains , a trading loss in 2011 following a trading gain in 2010 , and a gain on an fdic-assisted transaction in 2010 , all of which more than offset increases in operating revenues . 51 fee-based revenues , which comprise the majority of noninterest income , of $ 94.2 million for 2011 rose 8.6 % compared to 2010 as a result of increases in all categories . the growth in service charges on deposit accounts was due primarily to a combination of higher volumes of non-sufficient-funds fees ( including transactions generated by customers obtained in a 2010 fdic-assisted transaction ) and more fees earned on business and personal checking accounts resulting from market-driven pricing increases . average assets under management for 2011 totaled $ 4.4 billion , a $ 346.5 million increase from 2010 , with such growth derived equally from improved equity market performance and new sales initiatives . the increase in average assets under management fueled the year-over-year growth in wealth management fees . a rise in merchant fees , miscellaneous loan fees , and investment revenue led to the increase in other service charges , commissions , and fees . the year-over-year increase in merchant fees was due primarily to a volume increase resulting from customers acquired in an fdic-assisted transaction . we experienced continued growth in card-based fees resulting from both greater volumes and higher average rates per transaction . the increase in rates earned on card-based fees resulted from the migration in late 2010 from multi-merchant networks to an exclusive mastercard network in most areas , which drove higher transaction yields and incentives . the $ 1.1 million gain on acquisition of deposits related to our purchase of certain chicago-market deposits from old national . the transaction closed in december 2011 and included $ 106.7 million in deposits ( comprised of $ 70.6 million in core transactional deposits and $ 36.1 in time deposits ) and one banking facility . 2010 compared to 2009 total noninterest income decreased 11.7 % for 2010 compared to 2009. the decline from 2009 resulted from changes in gains realized from net securities sales , early extinguishment of debt , and fdic-assisted transactions and the fair value adjustment related to our non-qualified deferred compensation plan , which is reflected in trading ( losses ) gains , net . fee-based revenues of $ 86.8 million for 2010 grew by 1.9 % compared to 2009. service charges on deposit accounts declined primarily due to lower overdraft and non-sufficient funds fees . however , this decline was more than offset by increases in other service charges , commissions , and fees ( primarily merchant fee income ) , card-based fees , and wealth management fees . the majority of the decline in service charges on deposit accounts resulted from a $ 2.5 million decline in fees charged to customers with insufficient funds . the decrease was driven by ( i ) regulatory changes that require customers to affirmatively consent to our overdraft services for automated teller machine and one-time debit card transactions before overdraft fees may be assessed and ( ii ) a change from a tiered rate to a flat rate . wealth management fees improved from 2009 to 2010 primarily due to a $ 666.3 million , or 17.5 % , increase in assets under management during this period . approximately $ 102.7 million of the $ 666.3 million increase was attributable to managed assets acquired in an fdic-assisted transaction . higher retail investment advisory fees and merchant processing fees drove the increase in other service charges , commissions , and fees from 2009 to 2010. merchant processing fees improved 18.5 % , and retail investment advisory fees increased 9.9 % for 2010 compared to 2009 . 52 noninterest expense the following table presents the components of noninterest expense for the years ended december 31 , 2011 , 2010 , and 2009. table 5 noninterest expense analysis ( dollar amounts in thousands ) replace_table_token_14_th n/m not meaningful . ( 1 ) oreo operating expense , net , consists of real estate taxes , commissions on sales , insurance , and maintenance , net of any rental income . ( 2 ) the efficiency ratio expresses noninterest expense , excluding oreo expense , as a percentage of tax-equivalent net interest income plus total fees and other income . 2011 compared to 2010 total noninterest expense for 2011 decreased 6.1 % from 2010. excluding losses on sales and write-downs of oreo , integration costs , and severance-related costs , noninterest expense increased $ 15.2 million , or 6.5 % , as a result of higher loan remediation costs , increased salaries related to the expansion of commercial , retail , and wealth 53 management sales staff and a $ 1.3 million correction of a 2010 actuarial pension expense calculation related to the valuation of future early retirement benefits recorded in fourth quarter 2011. in 2011 , we recorded a $ 2.0 million charge for severance-related costs stemming from an organizational realignment implemented in december 2011. this charge includes $ 1.6 million in salaries and wages , $ 96,000 in retirement and other employee benefits , and $ 274,000 in other professional services . the organizational realignment eliminated approximately 50 open positions and another 50 filled positions . the annual savings in future years is estimated to be $ 5.0 million . the increase in salaries and wages for 2011 compared to 2010 reflected the full year impact of additional staff employed as a result of a third quarter 2010 fdic-assisted transaction , the expansion of commercial sales staff , annual merit increases , higher incentive compensation , and
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in the aggregate , the exchange offers and the subsequent retirement of debt for cash resulted in the recognition of $ 15.3 million in pre-tax gains in 2009. contractual obligations , commitments , off-balance sheet risk , and contingent liabilities through our normal course of operations , we enter into certain contractual obligations and other commitments . such obligations generally relate to the funding of operations through deposits or debt issuances , as well as leases for premises and equipment . as a financial services provider , we routinely enter into commitments to extend credit . while contractual obligations represent our future cash requirements , a significant portion of commitments to extend credit may expire without being drawn upon . such commitments are subject to the same credit policies and approval process as all comparable loans we make . 80 the following table presents our significant fixed and determinable contractual obligations and significant commitments as of december 31 , 2011. further discussion of the nature of each obligation is included in the referenced note of `` notes to the consolidated financial statements '' in item 8 of this form 10-k. table 28 contractual obligations , commitments , contingencies , and off-balance sheet items ( dollar amounts in thousands ) replace_table_token_41_th 81 management of capital capital measurements a strong capital structure is crucial in maintaining investor confidence , accessing capital markets , and enabling us to take advantage of future profitable growth opportunities . our capital policy requires that the company and the bank maintain capital ratios in excess of the minimum regulatory guidelines . it serves as an internal discipline in analyzing business risks and internal growth opportunities and sets targeted levels of return on equity .
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Liquidity
| 1,353
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the following discussion and analysis should be read in conjunction with our financial statements , included herewith . this discussion should not be construed to imply that the results discussed herein will necessarily continue into the future , or that any conclusion reached herein will necessarily be indicative of actual operating results in the future . such discussion represents only the best present assessment of our management . general overview we operate two distinct business operations . these are : ● marine technology business ( “ also referred to as “ products segment ” ) ; and ● marine engineering business ( “ also referred to as “ services segment ” ) . our marine technology business is a technology solution provider to the subsea market . it has a long-established pedigree in this market , and it designs , develops and manufactures proprietary solutions for this market ( both for commercial and defense applications ) including our range of flagship volumetric real time sonar solutions . these solutions/products are used primarily in the underwater construction market , offshore oil and gas , offshore wind energy industry , and in the complex dredging , port security , mining and marine sciences sectors . our customers include service providers to major oil and gas ( “ o & g ” ) companies , law enforcement agencies , ports , mining companies , defense bodies , research institutes and universities . our marine engineering business is a supplier of engineering services and embedded solutions ( such as mission computers ) to prime defense contractors such as raytheon and northrop grumman . generally , the items supplied into the defense market are sub-systems in broader mission critical integrated systems and thus requires a high level of reliability , consistency in standards and robustness . we have long-standing relationships with prime defense contractors , and we use these credentials to secure more business . we support some significant defense programs by supplying and maintaining proprietary parts ( or parts for which we are preferred suppliers ) through obsolescence management programs . these services provide recurring stream of revenues for our services segment . 21 both business operations have established synergies in terms of customers and specialized engineering skill sets encompassing capturing , computing and displaying data in harsh environments . our business is affected by a number of factors including those set out below : a. united kingdom 's withdrawal from the european union ( “ brexit ” ) including the possibility that such withdrawal will take place without a deal on their future relationship ( “ no deal brexit issue ” ) following a national referendum and the recent elections in the united kingdom which saw a majority government , a bill has now been passed for the united kingdom to leave the european union on january 31 , 2020. a transitional period of 12 months is expected . during the transitional period , the united kingdom government and the european union will negotiate its future trade relationship . if no agreement is reached , the uk government which now has a majority for its actions , has stated that it will leave the european union without a deal on its future relationship , a no deal brexit could affect our uk operations which represents a significant part of our earnings ( coda octopus products limited ( edinburgh-based ) and coda octopus martech limited ( portland , england-based ) . the ongoing uncertainty also impacts the british pound ( which is the trading currency of our uk operations ) . although the appointment of a majority government on december 13 , 2019 saw a surge in the uk pound against all major currencies , it is expected that the ongoing uncertainty around the future relationship with the european union will cause the uk pound to continue to be volatile against major currencies , including the us dollar . since our reporting currency is the us dollar , depreciation of the uk pound has an adverse impact on revenues reported and devaluation of our consolidated balance sheet assets . because there is no precedent for a european union member state leaving the union , the full implications for the company are not clear . the outcome is dependent on the type of future relationship that is struck between the united kingdom and the european union . in a worst-case scenario , where no deal on the future of the uk relationship with the european union is struck , it is widely believed that the world trade organization ( wto ) rules will apply . operating on this basis would have far-reaching implications for our company particularly in the area of costs associated with import/export arrangements for our products including custom duties on purchases and sales and delays and increased compliance costs in the supply chain ( both purchasing and selling ) . we currently benefit from mutual recognition rules in a number of areas including export control requirements and quality standards which allow us to distribute our products freely in the european union . if these are removed it is likely to involve new qualifications requirements that we would need to meet with the attendant costs and delays involved . furthermore , if free movement is restricted this will also limit our ability to utilize our trained engineers and experts on customer projects in the european union . the company continues to make plans to mitigate the departure from the european union . the company established a company , coda octopus products a/s , in denmark to maintain a presence in the european union and to address some of the foreseeable issues . however , we can give no assurance that this in itself would be sufficient to address the impact of both a no deal brexit and a no deal brexit . 22 b. currency risks : the company 's operations are split between the united states , united kingdom , australia , and denmark . story_separator_special_tag the preparation of financial statements in conformity with us gaap requires our management to make estimates and assumptions that affect the reported values of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported levels of revenue and expenses during the reporting period . actual results could materially differ from those estimates . below is a discussion of accounting policies that we consider critical to an understanding of our financial condition and operating results and that may require complex judgment in their application or require estimates about matters which are inherently uncertain . a discussion of our significant accounting policies , including further discussion of the accounting policies described below , can be found in note 2 , “ summary of accounting policies ” of our consolidated financial statements . revenue recognition all of our revenues are earned under formal contracts with our customers and are derived from both sales and rental of underwater technologies and equipment for imaging , mapping , defense and survey applications and from the engineering services that we provide . our contracts do not include the possibility for additional contingent consideration so that our determination of the contract price does not involve having to consider potential variable additional consideration . our product sales do not include a right of return by the customer . with regard to our products segment , all of our products are sold on a stand-alone basis and those market prices are evidence of the value of the products . to the extent that we also provide services ( e.g. , installation , training , etc . ) , those services are either included as part of the product or are subject to written contracts based on the stand-alone value of those services . revenue from the sale of services is recognized when those services have been provided to the customer and evidence of the provision of those services exist . for further discussion of our revenue recognition accounting policies , refer to note 2 – “ revenue recognition ” in these financial statements 24 stock based compensation we recognize the expense related to the fair value of stock based compensation awards within the consolidated statements of income and comprehensive income . the stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed ( measurement date ) and is recognized over the periods in which the related services are rendered . income taxes the company accounts for income taxes in accordance with accounting standards codification topic 740 , income taxes ( asc 740 ) . under asc 740 , deferred income tax assets and liabilities are recorded for the income tax effects of differences between the bases of assets and liabilities for financial reporting purposes and their bases for income tax reporting . the company 's differences arise principally from the use of various accelerated and modified accelerated cost recovery system lives for income tax purposes versus straight line depreciation used for book purposes and from the utilization of net operating loss carry-forwards . deferred tax assets and liabilities are the amounts by which the company 's future income taxes are expected to be impacted by these differences as they reverse . deferred tax assets are based on differences that are expected to decrease future income taxes as they reverse . correspondingly , deferred tax liabilities are based on differences that are expected to increase future income taxes as they reverse . note 7 to the consolidated financial statements discusses the amounts of deferred tax assets and liabilities , and also presents the impact of significant differences between financial reporting income and taxable income . 25 for income tax purposes , the company uses the percentage of completion method of recognizing revenues on long-term contracts which is consistent with the company 's financial reporting under u.s. gaap . intangible assets intangible assets consist principally of the excess of cost over the fair value of net assets acquired ( i.e . goodwill ) , customer relationships , non-compete agreements and licenses . goodwill was allocated to our reporting units based on the original purchase price allocation . goodwill is not amortized and is evaluated for impairment annually or more often if circumstances indicate impairment may exist . customer relationships , non-compete agreements , patents and licenses are being amortized on a straight-line basis over periods of 2 to 15 years . the company amortizes its limited lived intangible assets using the straight-line method over their estimated period of benefit . we periodically evaluate the recoverability of intangible assets and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists . the first step of the goodwill impairment test used to identify potential impairment compares the fair value of the reporting unit with its ' carrying amount , including goodwill . if the fair value , which is based on future cash flows , exceeds the carrying amount , goodwill is not considered impaired . if the carrying amount exceeds the fair value , the second step must be performed to measure the amount of the impairment loss , if any . the company will early adopt accounting standards codification 2017 – 04 , simplifying the test for goodwill impairment , which permits the company to impair the difference between carrying amount in excess of the fair value of the reporting unit as the reduction in goodwill . asc 2017-04 eliminates the requirement in previous gaap to perform step 2 of the goodwill impairment test . at the end of each year , we evaluate goodwill on a separate reporting unit basis to assess recoverability , and impairments , if any , are recognized in earnings . an impairment loss would be recognized in an amount equal to the excess of the carrying amount of the goodwill over the fair value of the reporting unit .
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fiscal year 2019 consolidated results of operations during the fiscal year ended october 31 , 2019 , the marine technology business generated 52 % of our consolidated revenues compared to 64 % in the previous fiscal year and , similarly , the marine engineering business generated 48 % compared to 36 % in the previous fiscal year respectively . overall , consolidated revenues in the 2019 fiscal year were up by 39.1 % ; gross profit was up by 29.7 % ; total operating expenses was up by 7.0 % ; income from operations was up by 94.1 % ; net income before taxes was up by 106.5 % . there were no material exceptional costs or financial events in the 2019 fiscal year , except that in fiscal year 2019 , we recorded a tax expense of $ 1,007,354 compared to a tax benefit of $ 1,754,169 in the 2018 fiscal year . in the fiscal year 2019 , r & d expenditures increased by 8.9 % and sg & a by 8.8 % . we believe we have reached the pinnacle of our investments in r & d in our 4 th and 5 th generations of our products and as such in 2020 , we would expect to maintain r & d at approximately the same 2019 levels . the only exceptional expenses we anticipate will be in the investments we need to make to transition the production of the navy head up display ( hud ) product production to the orlando office and incubating our embedded solutions division which we see as an investment in future growth of the company . under the terms of the exclusive license which is being negotiated with naval surface warfare center panama division to practice the invention pertaining to the hud face plate , the company must transfer such manufacturing within 12 months of grant of the exclusive license . we anticipate an investment of around $ 500,000 in the 2020 period to achieve the transfer .
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ROO
| 3,667
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purchased credit impaired loans loans acquired at a discount for which it is probable that all contractual payments will not be received are generally accounted for under asc topic 310-30 , loans and debt securities acquired with deteriorated credit quality ( “ asc 310-30 ” ) . in addition , certain purchased loans with evidence of deteriorated credit quality may be accounted for under this topic even if it is not yet probable that all contractual payments will not be received . these loans are recorded at fair value at the time of acquisition . estimated credit losses are included in the determination of fair value , and therefore , an allowance for loan losses is not recorded on the acquisition date . the excess of expected cash flows at acquisition over the initial investment in acquired loans ( “ accretable yield ” ) is recorded as interest income over the life of the loans if the timing and amount of the future cash flows is reasonably estimable . subsequent to acquisition , the company aggregates individual loans with common risk characteristics into pools of loans . increases in estimated cash flows over those expected at the acquisition date are recognized as interest income , prospectively . decreases in expected cash flows after the acquisition date are recognized by recording an allowance for loan losses . 31 loans accounted for under asc 310-30 are generally considered accruing and performing loans as the loans accrete interest income over the estimated life of the loan when cash flows are reasonably estimable . accordingly , purchased credit impaired loans that are contractually past due are still considered to be accruing and performing loans . if the timing and amount of future cash flows is not reasonably estimable , the loans may be classified as nonaccrual loans and the purchase price discount on those loans is not recorded as interest income until the timing and amount of future cash flows can be reasonably estimated . fdic loss-sharing asset in conjunction with certain of the fdic-assisted acquisitions , the bank entered into loss-sharing agreements with the fdic . at the date of the acquisitions , the company elected to account for amounts receivable under the loss-sharing agreements as an indemnification asset in accordance with the business combinations topic of the fasb asc . subsequent to initial recognition , the fdic loss-sharing asset is reviewed quarterly and adjusted for any changes in expected cash flows . these adjustments are measured on the same basis as the related covered assets . any decrease in expected cash flows due to an increase in expected credit losses will increase the fdic loss-sharing asset and any increase in expected future cash flows due to a decrease in expected credit losses will decrease the fdic loss-sharing asset . increases and decreases to the fdic loss-sharing asset are recorded as adjustments to noninterest income . valuation and recoverability of goodwill goodwill represented $ 382.8 million of our $ 8.95 billion in total assets as of december 31 , 2015 . the company has a , single reporting unit . we review goodwill for impairment annually , during the third quarter , and also test for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of our reporting unit below its carrying amount . such events and circumstances may include among others : a significant adverse change in legal factors or in the general business climate ; significant decline in our stock price and market capitalization ; unanticipated competition ; the testing for recoverability of a significant asset group within the reporting unit ; and an adverse action or assessment by a regulator . any adverse change in these factors could have a significant impact on the recoverability of goodwill and could have a material impact on our consolidated financial statements . under the intangibles – goodwill and other topic of the fasb asc , the testing for impairment may begin with an assessment of qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount . when required , the goodwill impairment test involves a two-step process . in step one , we would test goodwill for impairment by comparing the fair value of the reporting unit with its carrying amount . if the fair value of the reporting unit exceeds the carrying amount of the reporting unit , goodwill is not deemed to be impaired , and no further testing is necessary . if the carrying amount of the reporting unit were to exceed the fair value of the reporting unit , we would perform a second test to measure the amount of impairment loss , if any . to measure the amount of any impairment loss , we would determine the implied fair value of goodwill in the same manner as if the reporting unit were being acquired in a business combination . specifically , we would allocate the fair value of the reporting unit to all of the assets and liabilities of the reporting unit in a hypothetical calculation that would determine the implied fair value of goodwill . if the implied fair value of goodwill is less than the recorded goodwill , we would record an impairment charge for the difference . the accounting estimates related to our goodwill require us to make considerable assumptions about fair values . our assumptions regarding fair values require significant judgment about economic and industry factors and the growth and earnings prospects of the bank . changes in these judgments , either individually or collectively , may have a significant effect on the estimated fair values . based on the results of the annual goodwill impairment test , we determined that no goodwill impairment charges were required as our single reporting unit 's fair value exceeded its carrying amount . story_separator_special_tag the current period adjustment reflected our updated estimate of probable losses . this adjustment is included in “ miscellaneous ” in the table above . also contributing to the increase in other noninterest income was a $ 1.0 million increase in mortgage banking due to an increase in volume of loans held for sale . comparison of 2014 with 2013 the increase in other noninterest income was due to increases in several components of noninterest income , including small business administration premiums , interest rate swap income and credit card fees . the increase in small business administration premiums was due to an increase in volume of small business administration loans coupled with favorable secondary market pricing experienced during 2014. noninterest expense noninterest expense was $ 266.1 million in 2015 , an increase of $ 26.9 million , or 11 % , over 2014 . noninterest expense increased $ 8.4 million , or 4 % , in 2014 over 2013 . 39 the following table presents the significant components of noninterest expense and the related dollar and percentage change from period to period : replace_table_token_13_th the following table shows the impact of the acquisition-related expenses for the periods indicated to the various components of noninterest expense : replace_table_token_14_th comparison of 2015 with 2014 compensation and employee benefits expense increased 14 % to $ 149.4 million in 2015 from $ 130.9 million in 2014 primarily due to the added personnel costs associated with the intermountain acquisition . the remaining noninterest expense categories increased $ 8.3 million , or 8 % , between 2014 and 2015 . the increase was primarily due to higher occupancy and data processing expenses , which were due to higher acquisition-related expenses for these items in 2015. acquisition-related expenses were $ 10.9 million in 2015 compared to $ 9.4 million in 2014 . comparison of 2014 with 2013 compensation and employee benefits expense increased to $ 130.9 million , or 4 % , in 2014 from $ 125.4 million in 2013 primarily due to the added personnel costs associated with the intermountain and west coast acquisitions . the remaining noninterest expense categories increased $ 3.0 million , or 3 % , between 2013 and 2014 . the increase was primarily due to lower benefit on oreo , which was a benefit of $ 7.4 million in 2013 , but only $ 1.0 million in 2014. acquisition-related expenses were $ 9.4 million in 2014 compared to $ 25.5 million in 2013 . 40 other noninterest expense : the following table presents selected items of “ other noninterest expense ” and the related dollar and percentage change from period to period : replace_table_token_15_th ( 1 ) reclassified to conform to current period 's presentation . the reclassification was limited to adding a separate line item for fraud losses , which was previously included in “ miscellaneous . ” comparison of 2015 with 2014 other noninterest expense increased $ 3.5 million due to additional ongoing expenses related to the acquisition of intermountain , increased software support and maintenance related to software upgrades made to our atms , higher fraud losses and increased fdic clawback expense in 2015. comparison of 2014 with 2013 other noninterest expense decreased $ 2.9 million due to acquisition-related costs of $ 2.2 million recorded to other noninterest expense during 2014 compared to $ 6 million in 2013 and the reclassification of investments in affordable housing projects expense to provision for income taxes related to the company 's adoption of asu 2014-01 accounting for investments in qualified affordable housing projects during 2014. income tax for the years ended december 31 , 2015 , 2014 and 2013 we recorded income tax provisions of $ 42.8 million , $ 36.2 million and $ 27.0 million , respectively . the effective tax rate was 30 % in 2015 , 31 % in 2014 and 31 % in 2013 . our effective tax rate continues to be less than our federal statutory rate of 35 % primarily due to the amount of tax-exempt municipal securities held in the investment portfolio , tax-exempt earnings on bank owned life insurance , and loans with favorable tax attributes . for additional information , see note 23 to the consolidated financial statements in “ item 8. financial statements and supplementary data ” of this report . 41 financial condition our total assets increased 4 % to $ 8.95 billion at december 31 , 2015 from $ 8.58 billion at december 31 , 2014 . our available for sale securities portfolio increased $ 59.4 million , or 3 % , due primarily to purchases of securities resulting from deposits growing in excess of loans . the loan portfolio increased $ 371.0 million , or 7 % , to $ 5.75 billion due to substantial new loan production partially offset by contractual payments and prepayments . the fdic loss-sharing asset decreased $ 8.6 million , or 57 % , to $ 6.6 million at december 31 , 2015 . the decrease in the fdic loss-sharing asset was primarily due to $ 6.2 million in amortization and $ 2.8 million in cash received from the fdic . premises and equipment , net decreased $ 7.9 million or 5 % , primarily due to depreciation . deposit balances increased $ 514.1 million , or 7 % , to $ 7.44 billion , due to organic growth . federal home loan bank advances decreased $ 148.0 million to $ 68.5 million as the short-term advance balance outstanding decreased . securities sold under agreements to repurchase increased $ 5.4 million to $ 99.7 million . total shareholders ' equity increased $ 14.0 million to $ 1.24 billion . investment portfolio we invest in securities to generate revenues for the company , to manage liquidity while minimizing interest rate risk and to provide collateral for certain public deposits and short-term borrowings . the amortized cost amounts represent the company 's original cost for the investments , adjusted for accumulated amortization or accretion
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liquidity and sources of funds in general , our primary sources of funds are net income , loan repayments , maturities and principal payments on investment securities , customer deposits , advances from the fhlb , securities repurchase agreements and other borrowings . these funds are used to make loans , purchase investments , meet deposit withdrawals and maturing liabilities and cover operational expenses . scheduled loan repayments and core deposits have proved to be a relatively stable source of funds while other deposit inflows and unscheduled loan prepayments are influenced by interest rate levels , competition and general economic conditions . we manage liquidity through monitoring sources and uses of funds on a daily basis and had unused credit lines with the fhlb and the frb of $ 1.33 billion and $ 85.4 million , respectively , at december 31 , 2015 , that are available to us as a supplemental funding source . the holding company 's sources of funds are dividends from its banking subsidiary which are used to fund dividends to shareholders and cover operating expenses . in addition , we have a shelf registration statement on file with the securities and exchange commission registering an unlimited amount of any combination of debt or equity securities , depositary shares , purchase contracts , units and warrants in one or more offerings . specific information regarding the terms of and the securities being offered will be provided at the time of any offering . proceeds from any future offerings are expected to be used for general corporate purposes , including , but not limited to , the repayment of debt , repurchasing or redeeming outstanding securities , working capital , funding future acquisitions or other purposes identified at the time of any offering .
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Liquidity
| 2,461
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if abbott 's spending for the quarterly period exceeds our spending , we record a net payable in our financial statements equal to the difference between our spending and 50 % of the total spending , and record additional research and development expenses in this amount . as a result , our revenues and research and development expenses for periods that end prior to or include the termination date of the collaboration agreement may fluctuate depending on which party in the collaboration incurred the majority of the development costs in any particular quarterly period . contracts and grants revenues are subject to the estimation processes to the extent that the reimbursable costs underlying these revenues are incurred but not billed and agreed to on a timely basis , and are subject to change in future periods when actual costs are known . to date we have not made material adjustments to these estimates . we recognize revenues from the achievement of research and development milestones , if deemed substantive , when the milestones are achieved . if not deemed substantive , we recognize revenue on a straight line basis over the remaining expected term of continued involvement in the research and development process . inventories inventories are stated at the lower of cost or market , with cost being determined using a standard cost method , which approximates average cost . average cost consists primarily of material , labor and manufacturing overhead expenses and includes the services and products of third party suppliers . we analyze our inventory levels quarterly and write down inventory that has become obsolete , inventory that has a cost basis in excess of its expected net realizable value and inventory in excess of expected customer demand . we also write off costs related to expired inventory . we capitalize the costs associated with the manufacture of biothrax as inventory from the initiation of the manufacturing process through the completion of manufacturing , labeling and packaging . income taxes under the asset and liability method of income tax accounting , deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax basis of assets and liabilities and are measured using the tax rates and laws that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled . a net deferred tax asset or liability is reported on the balance sheet . our deferred tax assets include the unamortized portion of in-process research and development expenses , the anticipated future benefit of the net operating losses and other timing differences between the financial reporting and tax basis of assets and liabilities . we have historically incurred net operating losses for income tax purposes in some states , primarily maryland , and in some foreign jurisdictions , primarily the united kingdom . in connection with our october 2010 acquisition of trubion pharmaceuticals , inc. , or trubion , we acquired significant federal net operating losses and research and development tax credits along with other tax attributes . the amount of the deferred tax assets on our balance sheet reflects our expectations regarding our ability to use our net operating losses and research and development tax credit carryforwards , including those acquired in our acquisition of trubion , to offset future taxable income . the applicable tax rules in particular jurisdictions limit our ability to use net operating losses and research and development tax credit carryforwards as a result of ownership changes . in particular , we believe that these rules will significantly limit our ability to use net operating losses generated by microscience limited , or microscience , and antex biologics , inc. , or antex , prior to our acquisition of microscience in june 2005 and our acquisition of substantially all of the assets of antex in may 2003. we do not expect that these limitation rules will significantly limit the net operating losses and research and development tax credit carryforwards acquired in the trubion acquisition . we review our deferred tax assets on a quarterly basis to assess our ability to realize the benefit from these deferred tax assets . if we determine that it is more likely than not that the amount of our expected future taxable income will not be sufficient to allow us to fully utilize our deferred tax assets , we increase our valuation allowance against deferred tax assets by recording a provision for income taxes on our income statement , which reduces net income or increases net loss for that period and reduces our deferred tax assets on our balance sheet . if we determine that the amount of our expected future taxable income will allow us to utilize net operating losses in excess of our net deferred tax assets , we reduce our valuation allowance by recording a benefit from income taxes on our income statement , which increases net income or reduces net loss for that period and increases our deferred tax assets on our balance sheet . uncertainty in income taxes is accounted for using a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return . we recognize in our financial statements the impact of a tax position if that position is more likely than not of being sustained on audit , based on the technical merits of the position . contingent value rights in accordance with the terms of our acquisition of trubion in october 2010 , we have committed to make potential future contingent value right , or cvr , payments to former shareholders and stock option holders of trubion . the obligation to make cvr payments expires on october 28 , 2013. cvr payments generally become due and payable only upon achievement of certain developmental , regulatory or commercial milestones . story_separator_special_tag we believe that significant investment in product development is a competitive necessity and plan to continue these investments in order to be in a position to realize the potential of our product candidates . we expect that spending for our product pipeline will increase as our product development activities continue based on ongoing advancement of our product candidates , and as we prepare for regulatory submissions and other regulatory activities . we expect that the magnitude of any increase in our research and development spending will be dependent upon such factors as the results from our ongoing preclinical studies and clinical trials , participation of third-party collaborators , number of product candidates under development , the size , structure and duration of any follow-on clinical programs that we may initiate , costs associated with manufacturing our product candidates on a large-scale basis for later-stage clinical trials , and our ability to use or rely on data generated by government agencies , such as studies involving biothrax conducted by the cdc . selling , general and administrative expenses selling , general and administrative expenses consist primarily of salaries and other related costs for personnel serving the executive , sales and marketing , business development , finance , accounting , information technology , legal and human resource functions . other costs include facility costs not otherwise included in cost of product sales or research and development expense and professional fees for legal and accounting services . we currently market and sell biothrax directly to the u.s. government with a small , targeted marketing and sales group . as we seek to broaden the market for biothrax and if we receive marketing approval for additional products , we expect that we will increase our spending for marketing and sales activities . total other income ( expense ) total other income ( expense ) consists primarily of interest income and interest expense , and in 2010 , a charge to reduce previously accrued interest income related to a settlement agreement with protein sciences corporation , or psc . we earn interest income on our cash , cash equivalents and in 2010 , on a note receivable , and we incur interest expense on our indebtedness . we capitalize interest expense based on the cost of major ongoing projects which have not yet been placed in service , such as new manufacturing facilities . some of our existing debt arrangements provide for increasing amortization of principal payments in future periods . see “ liquidity and capital resources — debt financing ” for additional information . results of operations year ended december 31 , 2011 compared to year ended december 31 , 2010 revenues product sales revenues decreased by $ 49.0 million , or 19 % , to $ 202.4 million for 2011 from $ 251.4 million for 2010. this decrease in product sales revenues was primarily due to a 21 % decrease in the number of doses of biothrax delivered . this decrease was due to the redeployment of our potency testing capacity from biothrax release testing to qualification of replacement reference standards and other development testing during the first quarter of 2011 , coupled with lower production yields in the period in which the doses were produced . product sales revenues in 2011 consisted of biothrax sales to hhs and the cdc of $ 200.9 million and aggregate international and other sales of $ 1.5 million . product sales revenue in 2010 consisted of biothrax sales to hhs of $ 248.5 million and aggregate international and other sales of $ 2.9 million . contracts and grants revenues increased by $ 36.2 million , or 104 % , to $ 71.0 million in 2011 from $ 34.8 million in 2010. the increase in contracts and grants revenues was primarily due to revenues from our contract with barda for large-scale manufacturing for biothrax and our collaborations with abbott and pfizer , along with increased activity and associated revenue from our development contracts with niaid and barda for nuthrax and previthrax . contracts and grants revenues in 2011 consisted of $ 48.6 million in development contract and grant revenue from niaid and barda , $ 22.1 million from abbott and pfizer and $ 250,000 from the wellcome trust . contracts and grants revenue for 2010 primarily consisted of $ 30.6 million from niaid and barda , $ 2.2 million from abbott and pfizer , $ 1.2 million related to the u.s. government 's therapeutic-discovery project program and $ 750,000 from a milestone payment related to the 2008 sale of technology rights and related materials to our pertussis technology . cost of product sales cost of product sales decreased by $ 4.9 million , or 10 % , to $ 42.2 million for 2011 from $ 47.1 million for 2010. this decrease was attributable to the 21 % decrease in the number of biothrax doses sold , partially offset by an increase in the cost per dose sold associated with decreased production yields in the period in which the doses were produced . research and development expenses research and development expenses increased by $ 35.5 million , or 40 % , to $ 124.8 million for 2011 from $ 89.3 million for 2010. this increase primarily reflects higher contract service and personnel-related costs , and includes increased expenses of $ 30.0 million for product candidates and technology platform development activities that are categorized in the biosciences segment , increased expenses of $ 4.0 million for product candidates that are categorized in the biodefense segment , and increased expenses of $ 1.6 million in other research and development , which are in support of central research and development activities . during 2011 and 2010 , we incurred research and development expenses net of development contract and grant reimbursements along with the net loss attributable to noncontrolling interests of $ 47.0 million and $ 50.0 million , respectively . the increase in spending on biodefense product candidates , detailed in
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net cash provided by operating activities of $ 98.9 million in 2010 was due principally to net income attributable to emergent biosolutions inc. of $ 51.7 million , a decrease in accounts receivable of $ 19.1 million due to the timing of collection of amounts billed primarily to hhs , a net increase in income taxes related to timing differences of $ 4.8 million , a $ 6.2 million increase in accrued compensation and non-cash charges of $ 7.1 million for stock-based compensation , $ 6.0 million for depreciation and amortization , and $ 6.0 million for development expenses from our joint ventures . net cash provided by operating activities of $ 29.9 million in 2009 was due principally to our net income attributable to emergent biosolutions inc. of $ 31.1 million , and non-cash charges of $ 7.2 million for development expenses from our joint venture with the university of oxford , $ 7.3 million related to the impairment of our frederick facilities , $ 5.0 million for depreciation and amortization and $ 5.0 million for stock-based compensation , partially offset by a $ 30.0 million increase in accounts receivable related to amounts billed in the fourth quarter of 2009 for which payment was not received until january 2010. net cash used in investing activities in 2011 was $ 54.0 million , primarily due to capital expenditures of $ 54.0 million related to the construction and related costs for our facility in baltimore , maryland , and infrastructure investments and other equipment , along with the purchase of u.s. treasury securities of $ 4.2 million , partially offset by proceeds from the maturity of u.s. treasury securities of $ 4.3 million .
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Liquidity
| 12,560
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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
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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
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ROO
| 16,529
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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 . critical audit matters the critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that ( i ) relate to accounts or disclosures that are material to the consolidated financial statements and ( ii ) involved our especially challenging , subjective , or complex judgments . the communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements , taken as a whole , and we are not , by communicating the critical audit matters below , providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate . provisions for revenue reserves - commercial and medicare part d rebates as described in notes 2 and 3 to the consolidated financial statements , product revenues are recorded net of provisions for ( i ) trade discounts and allowances , such as discounts for prompt payment and distributor fees , ( ii ) estimated rebates to third-party payers , estimated payments for medicare part d prescription drug program coverage gap , patient co-pay program coupon utilization , chargebacks and other discount programs , and ( iii ) reserves for expected product returns . management estimates the rebates and chargebacks it expects to be obligated to provide to third-party payers and deducts these estimated amounts from its gross product revenue at the time the revenue is recognized . provisions for revenue reserves reduced product revenues by $ 105.9 million in aggregate for the year ended december 31 , 2019 , a significant portion of which related to commercial and medicare part d rebates . management estimates the rebates and chargebacks based on contractual and statutory requirements , known market events and trends , industry data , forecasted customer mix , and lagged claims . the principal considerations for our determination that performing procedures relating to provisions for revenue reserves - commercial and medicare part d rebates is a critical audit matter are there was significant judgment by management due to the significant measurement uncertainty involved in developing the provisions , as the estimate is based on significant assumptions related to forecasted customer mix and lagged claims . this in turn led to a high degree of auditor judgment , subjectivity , and effort in applying procedures relating to these assumptions . addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements . these procedures included testing the effectiveness of controls relating to rebates for the commercial and medicare part d programs , including controls over the assumptions used to estimate the provisions for these rebates . these procedures also included , among others , developing an independent estimate of the commercial and medicare part d rebates by utilizing third-party data on forecasted customer mix , the terms of the specific rebate programs , and the trend of lagged claims . the independent estimate was compared to the rebates recorded by management to evaluate the reasonableness of management 's estimate . additionally , these procedures included testing a sample of actual rebate claims paid and evaluating those claims for consistency with the contractual terms of the company 's rebate agreements . valuation of and accounting for convertible notes transactions at issuance as described in notes 2 and 10 to the consolidated financial statements , in september 2019 , the company issued convertible notes with an aggregate principal amount of $ 316.25 million to qualified institutional buyers . management separately accounts for the liability and equity components of convertible notes transactions that can be settled in cash by allocating the proceeds from issuance between the liability component and the embedded conversion option in accordance with accounting for convertible debt instruments that may be settled in cash ( including partial cash settlement ) upon conversion . the value of the equity component is calculated by first measuring the fair value of the liability component , using the interest rate of a similar liability that does not have a conversion feature , as of the issuance date . the difference between the proceeds from the convertible debt issuance and the amount measured as the liability component is recorded as the equity component with a corresponding discount recorded on the debt . additionally , in september 2019 , the company bought capped call options from financial institutions for a total of $ 32.9 million in premiums to minimize the impact of potential dilution of the company 's f-3 common stock upon conversion of its convertible notes . the capped call options meet the definition of a derivative , however , qualify for derivative scope exception for instruments indexed to a company 's own stock . accordingly , the premiums for the capped call options were recorded as additional paid-in capital on the company 's consolidated balance sheet as the options are settleable in aerie common stock at the election of the company . as disclosed by management , the estimated fair value of the liability component of the convertible notes was $ 187.9 million at the time of issuance , and was determined based on a discounted cash flow analysis and a binomial lattice model . the valuation required the use of level 3 unobservable inputs and subjective assumptions , including but not limited to the stock price volatility and bond yield . the equity component was approximately $ 128.4 million at the time of issuance and its fair value is not remeasured as long as it continues to meet the conditions for equity classification . story_separator_special_tag the preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets , liabilities , costs and expenses and related disclosures . we evaluate our estimates and judgments on an ongoing basis . significant estimates include assumptions used in the determination of revenue recognition , leases , acquisitions , stock-based compensation and fair value measurements . we base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . our significant accounting policies are more fully described in note 2 to our consolidated financial statements included elsewhere in this report . the following accounting policies are the most critical in fully understanding and evaluating our reported financial results and affect significant judgments and estimates that we use in the preparation of our financial statements . revenue recognition revenue transactions are accounted for under financial accounting standards board ( “ fasb ” ) accounting standards codification ( “ asc ” ) topic 606 , revenue from contracts with customers ( “ asc topic 606 ” ) . in accordance with asc topic 606 , we recognize revenue when our customers obtain control of our product for an amount that reflects the consideration we expect to receive from our customers in exchange for that product . to determine revenue recognition for contracts that are determined to be in scope of asc topic 606 , we perform 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 ) we satisfy the performance obligation . we only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services transferred to our customer . once the contract is determined to be within the scope of asc 81 topic 606 , we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct . we then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied . aerie 's customers include a limited number of national and select regional wholesalers ( the “ distributors ” ) . these distributors subsequently resell the product , primarily to retail pharmacies that dispense the product to patients . we expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that would have been recognized is one year or less or the amount is immaterial . product affordability for the patient drives consumer acceptance , and this is generally managed through coverage by third-party payers , such as government or private healthcare insurers and pharmacy benefit managers ( “ third-party payers ” ) and such product may be subject to rebates and discounts payable directly to those third-party payers . net product revenues for the year ended december 31 , 2019 , were derived from sales of rhopressa ® and rocklatan ® in the united states . product revenue is recorded net of trade discounts , allowances , rebates , chargebacks , estimated returns and other incentives , discussed below . these reserves are classified as either reductions of accounts receivable or as current liabilities . amounts billed or invoiced are included in accounts receivable , net on the consolidated balance sheet . we did not have any contract assets ( unbilled receivables ) at december 31 , 2019 , as customer invoicing generally occurs before or at the time of revenue recognition . we did not have any contract liabilities at december 31 , 2019 , as we did not receive payments in advance of fulfilling our performance obligations to our customers . net product revenue is typically recognized when the distributors obtain control of our product , which occurs at a point in time , typically upon delivery of rhopressa ® to the distributors . for the year ended december 31 , 2019 , three distributors accounted for 36.5 % , 33.3 % and 28.0 % of total revenues , respectively . we evaluate the creditworthiness of each of our distributors to determine whether it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur . we do not assess whether a contract has a significant financing component if the expectation is such that the period between the transfer of the promised goods to the customer and the receipt of payment will be less than one year . standard credit terms do not exceed 75 days . we calculate our net product revenue based on the wholesale acquisition cost that we charge our distributors for rhopressa ® and rocklatan ® less provisions for ( i ) trade discounts and allowances , such as discounts for prompt payment and distributor fees , ( ii ) estimated rebates to third-party payers , estimated payments for medicare part d prescription drug program coverage gap ( commonly called the “ donut hole ” ) , patient co-pay program coupon utilization , chargebacks and other discount programs and ( iii ) reserves for expected product returns . the estimates of reserves established for variable consideration reflect current contractual and statutory requirements , known market events and trends , industry data , forecasted customer mix and lagged claims . provisions for revenue reserves reduced product
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investing activities during the year ended december 31 , 2019 , our investing activities used net cash of $ 183.2 million primarily related to purchases of available-for-sale investments of $ 165.5 million , purchases of property , plant and equipment of $ 10.0 million , primarily related to the completion of the build-out of our manufacturing plant in ireland and $ 7.8 million related to the acquisition of avizorex . during the year ended december 31 , 2018 , our investing activities provided net cash of $ 20.8 million primarily related to purchases of available-for-sale investments of $ 56.2 million , purchases of property , plant and equipment of $ 31.3 million , primarily related to the build-out of our manufacturing plant in ireland , which were partially offset by sales and maturities of investments of $ 108.3 million . during the year ended december 31 , 2017 , our investing activities used net cash of $ 42.8 million primarily related to purchases of available-for-sale investments of $ 104.5 million and purchases of property , plant and equipment of $ 16.0 million to support the growth of our operations and a $ 10.5 million cash payment for the acquisition of assets from envisia , which were partially offset by sales and maturities of investments of $ 88.2 million . financing activities during the years ended december 31 , 2019 , 2018 and 2017 , our financing activities provided net cash of $ 274.8 million , $ 137.0 million and $ 135.6 million , respectively . the net cash provided by financing activities during the year ended december 31 , 2019 was primarily related to the $ 308.3 million of net proceeds from the issuance of convertible notes , partially offset by $ 32.9 million payment in premiums for the capped call options . the net cash provided by financing activities during the years ended december 31 , 2018 and 2017 was primarily related to the issuance and sale of common stock under our prior “ at-the-market ” sales agreements and under underwriting agreements related to registered public offerings , from which we received net proceeds of approximately $ 136.0 million and $ 134.2 million , respectively . operating capital requirements we expect to incur ongoing operating losses until such a time when rhopressa ® or rocklatan
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Liquidity
| 1,780
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additionally , through the ability acquisition in april 2018 , we expanded our subscription-based cloud-based platform offering revenues and we continue to achieve revenue synergies realized through i ) the infusion of inovalon 's data and analytics into ability 's existing offerings , ii ) the combination of the inovalon one ® platform and my ability ® platform capabilities to introduce new and more vertically integrated offerings which appeal to both organizations ' traditional market base , iii ) the enhancement of inovalon 's offerings from ability 's provider point-of-care data , connectivity , and workflow presence , and iv ) the leveraging of ability 's sales channel , techniques and capacity . breadth of healthcare industry connectivity . the healthcare industry is undergoing a significant transition as it becomes increasingly data-driven . as part of this transition , participants across the healthcare industry , including health plans , pharmaceutical companies , medical device manufacturers , and diagnostic companies , are increasingly interested in achieving timely and seamless access to relevant data and being able to drive impact directly with providers and their patients . concurrently , providers are also increasingly interested in access to more advanced analytical tools to support and improve their clinical and financial performance . enhancing and expanding our industry connectivity with payer administrative systems , provider facilities , diagnostic systems , pharmacy systems , healthcare industry systems ( e.g . , electronic healthcare record systems , health information exchange systems , claims processing systems , decision support systems , etc . ) , and other healthcare clinical and business systems , offers the potential for increased differentiation in the healthcare marketplace as well as improved efficiency of our operations . client and analytical process count growth . our business is generally driven by the number of underlying patients for which our platform solutions are being utilized . as such , we track the number of analytical processes that we run on patients each month in fulfillment of our client contracts , as totaled for the trailing 12 months . we believe that pam is indicative of our overall level of analytical activity , and we expect our period-to-period comparisons of our pam to be indicative of underlying growth of our business , although changes in levels of analytical activity do not always directly translate to changes in financial performance of our business . differences in fees charged for different analytical packages exist and differences in how analytics trigger the applicability of our data-driven intervention toolsets may result in increases in analytical activity that do not result in proportional increases in revenue , or net income ( and vice versa ) . therefore , in situations in which a new engagement is initiated for analytical processes that have a higher than average fee rate , revenue could expand disproportionately faster than the increase in pam . likewise , if engagements for analytical processes that have a higher than average fee rate are concluded then such conclusions can negatively affect revenue disproportionately more than pam . seasonality . the nature of our customers ' end-market results in partial seasonality reflected in both revenue and cost of revenue differences during the year . regulatory impact of data submission deadlines in , for example , january , march , june , and september drive some degree of predictable timing of analytics and data processing activity variances from quarter to quarter . further , regulatory clinical encounter deadlines of june 30th and december 31st drive predictable data-driven intervention toolset concentrations variances from quarter to quarter . the timing of these factors results in analytical and data-driven intervention toolset activity mix variances , which have limited predictable impact in the aggregate on our financial performance from quarter to quarter . however , quarter to quarter financial performance may increasingly vary from historical seasonal trends as we continue to expand into adjacent markets and increase the portion of our revenue generated from new offerings . further , we also expect the impact of seasonality to decrease over time as we expand our mix of revenue generated from a subscription-based model . the timing of new contract signings and their respective implementations can also lead to variances in our seasonal revenue performance . regulatory , economic and industry trends . our clients are affected , sometimes directly and sometimes counter-intuitively , by macro-economic trends such as economic growth ( or economic recession ) , inflation , and unemployment . further , industry trends in federal and state laws and regulations , as well as emerging trends in private sector payment models , affect our clients ' businesses and their need for technologies and services to support these challenges . these factors have various effects on our business , and on occasion have resulted in the slowing or cessation of the decision-making process by clients adopting our technologies and services . on the other hand , changes in macro-economic trends and the industry landscape have accelerated the need for our technologies and services from time-to-time , particularly as regulators introduce complex requirements with which our clients must comply . components of results of operations revenue we earn revenue primarily through the sale or subscription licensing of our platform solutions , as well as revenue from related arrangements for advisory , implementation , and support services . platform solutions include arrangements for technology-based offerings representing subscription-based cloud-based platform offerings , including solutions offered through the my ability ® software platform , and legacy platform solutions that are not 36 cloud-based and not billed under a subscription-based contract structure . our platform solutions revenue is driven primarily by cloud-based data connectivity , analytics , data-driven intervention toolsets , and visualization software that enables the identification and resolution of gaps in care , quality , utilization , compliance , and or other gaps that may impact our clients ' achievement of greater healthcare quality and financial performance associated with value-based care . story_separator_special_tag general and administrative expense as a percentage of revenue was 31 % and 39 % for the years ended december 31 , 2019 and 2018 , respectively . depreciation and amortization during the year ended december 31 , 2019 , depreciation and amortization expense increased by $ 11.5 million , or 12 % , compared with the year ended december 31 , 2018 . the increase was primarily attributable to $ 8.3 million of amortization of acquired intangible assets , depreciation of software licenses and computers of $ 1.7 million , and amortization of capitalized software of $ 1.7 million . interest expense during the year ended december 31 , 2019 , interest expense increased by $ 14.9 million , compared with the year ended december 31 , 2018 . the increase in interest expense was primarily attributable to an increase in borrowings in connection with the 2018 term facility and an increase in expense related to the interest rate swaps entered into in connection with the 2018 term facility . benefit from income taxes during the year ended december 31 , 2019 , the benefit from income taxes decreased by $ 12.5 million , or 87 % , compared to the year ended december 31 , 2018 . our effective tax rate for the year ended december 31 , 2019 was approximately ( 32 ) % , resulting in a benefit from income tax , as compared to approximately 27 % for the year ended december 31 , 2018 . the decrease in our benefit from income taxes is primarily attributable to the change in income before taxes compared to prior year . quarterly financial information ( unaudited ) the following tables show a summary of the company 's unaudited quarterly financial information for each of the four quarters of 2019 and 2018 ( in thousands , except per share amounts ) : replace_table_token_8_th replace_table_token_9_th _ ( 1 ) basic and diluted earnings per share are computed independently for each of the quarters presented . therefore , the sum of quarterly basic and diluted per share information may not equal annual basic and diluted earnings per share . 41 liquidity and capital resources the following table presents a summary of our cash flow activity for the periods set forth below ( in thousands ) : replace_table_token_10_th sources of liquidity our principal sources of liquidity have been cash generated by operating activities and proceeds from our 2018 credit facilities . our cash generated from such means has been sufficient to fund our growth , including our capital expenditures . as of december 31 , 2019 , our cash , cash equivalents and short-term investments totaled $ 93.1 million , compared to $ 122.6 million of cash , cash equivalents , and short-term investments as of december 31 , 2018 , of which $ 7.0 million represented short-term , available-for-sale , investment grade , domestic debt-securities . all cash held by us is domiciled in the united states . we believe our current cash , cash equivalents , expected cash generated by operating activities , and availability of cash under our 2018 credit facilities are sufficient to fund our operations , finance our strategic initiatives , and fund our investment in innovation and new service offerings , for the foreseeable future . there can be no assurance that we will continue to generate cash flows at or above current levels or that we will be able to maintain our ability to borrow under our 2018 credit facilities . story_separator_special_tag retainer-based contracts . revenues under fixed-price and retainer-based contracts are recognized ratably over the contract period or upon contract completion . revenue for time and material contracts is recognized based upon contractually agreed upon billing rates applied to direct labor hours expended plus the costs of other items used in the performance of the contract . we recognize revenue when we have the right to invoice the customer using the allowable practical expedient under asc 606-10-55-18 since the right to invoice the customer corresponds with the performance obligations completed . the timing of revenue recognition , billings and cash collections results in billed accounts receivable , unbilled receivables , and deferred revenue . invoices to clients are generated in accordance with the terms of the applicable contract , which may not be directly related to the performance of services . unbilled receivables are invoiced when the achievement of specific events as defined by each contract occurs . unbilled receivables are classified as accounts receivable on the consolidated balance sheet . advanced billings to clients in excess of revenue earned are recorded as deferred revenue until the aforementioned revenue recognition criteria are met . certain of our arrangements entitle a client to receive a refund if we fail to satisfy contractually specified performance obligations . the refund is limited to a portion or all of the consideration paid . in this case , revenue is recognized when any and all performance obligations are satisfied . we maintain an allowance , charged to revenue , which reflects our estimated future billing adjustments resulting from client concessions or resolutions of billing disputes . we believe that our approach and judgments applied to estimating our allowance is reasonable , actual results could differ , and we may be exposed to increases or decreases in revenue to the extent that actual results differ from our estimates . stock-based compensation stock-based awards , including employee stock options , restricted stock unit ( “ rsu ” ) and restricted stock award ( “ rsa ” ) grants , including rsas with performance conditions , are measured and recognized in the financial statements at fair value as of the grant date in accordance with asc 718 , compensation—stock compensation . rsus are share awards that , upon vesting , will deliver to the holder shares of the company 's common stock . rsas are shares of the company 's common stock that are reserved in the grantee 's name upon
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cash flows cash flows from operating activities cash provided by operating activities consisted of net income adjusted for certain non-cash items , including depreciation and amortization , stock-based compensation , and deferred income taxes , as well as the effect of changes in working capital and other activities . cash provided by operating activities during the year ended december 31 , 2019 was $ 106.5 million , representing an increase of $ 16.1 million compared with the year ended december 31 , 2018 . the increase in cash provided by operating activities was primarily driven by an increase in operating income , which was partially offset by the effect of changes in working capital , an increase of $ 19.2 million in cash paid for interest , and payments for acquisition-related contingent consideration , of which $ 2.5 million was included as a reduction to cash provided by operating activities . 42 cash flows from investing activities we make investments in innovation , including research and development expense , capital software development costs , and research and development infrastructure investments , on a recurring basis . cash used in investing activities during the year ended december 31 , 2019 was $ 52.0 million compared with $ 889.4 million during the year ended december 31 , 2018 . the change in cash used in investing activities was primarily due to the acquisition of ability in the prior year of $ 1.1 billion and a decrease in capital expenditures of $ 6.0 million , which was partially offset by a decrease in sales and maturities of short term investments of $ 251.4 million . cash flows from financing activities cash used in financing activities during the year ended december 31 , 2019 was $ 77.0 million , compared with cash provided by financing activities of $ 705.6 million during the year ended december 31 , 2018 . the change in cash used in financing activities was primarily due to proceeds from the 2018 term facility net of repayment of the 2014 credit facility borrowings in the prior year and payment for acquisition-related contingent consideration in the current year .
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Liquidity
| 11,516
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and retain the experienced and skilled personnel we need to compete ; unexpected liabilities under any pension plans applicable to our employees ; work stoppages , union negotiations , labor disputes and other matters associated with our labor force ; our ability to protect and enforce intellectual property rights ; intellectual property infringement suits against us by third parties ; our ability to realize the anticipated benefits of any acquisitions and divestitures ; our joint ventures ' ability to operate according to our business strategy should our joint venture partners fail to fulfill their obligations ; risk that the insurance we maintain may not fully cover all potential exposures ; risks associated with changes in tax rates or regulations , including unexpected impacts of the new u.s. tcja legislation , which may differ with further regulatory guidance and changes in our current interpretations and assumptions ; our substantial indebtedness ; our ability to obtain additional capital on commercially reasonable terms may be limited ; any statements of belief and any statements of assumptions underlying any of the foregoing ; other factors disclosed in this annual report on form 10-k and our other filings with the sec ; and other factors beyond our control . these cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this annual report on form 10-k. we undertake no obligation to update or revise any forward-looking statements , whether as a result of new information , future events or otherwise . overview we are a leading global manufacturer , marketer and distributor of high performance coatings systems . we have over a 150 -year heritage in the coatings industry and are known for manufacturing high-quality products with well-recognized brands supported by market-leading technologies and customer service . our diverse global footprint of 50 manufacturing facilities , four technology centers , 47 customer training centers and approximately 14,000 employees allows us to meet the needs of customers in over 130 countries . we serve our customers through an extensive sales force and technical support organization , as well as through approximately 4,000 independent , locally based distributors . we operate our business in two operating segments , performance coatings and transportation coatings . our segments are based on the type and concentration of customers served , service requirements , methods of distribution and major product lines . through our performance coatings segment , we provide high-quality liquid and powder coatings solutions to a fragmented and local customer base . we are one of only a few suppliers with the technology to provide precise color matching and highly durable coatings systems . the end-markets within this segment are refinish and industrial . through our transportation coatings segment we provide advanced coating technologies to oems of light and commercial vehicles . these increasingly global customers require a high level of technical support coupled with cost-effective , environmentally responsible , coatings systems that can be applied with a high degree of precision , consistency and speed . the end-markets within this segment are light vehicle and commercial vehicle . 34 business highlights general business highlights our net sales increased 7.3 % for the year ended december 31 , 2018 compared to the year ended december 31 , 2017 , driven by volume growth of 4.1 % , primarily within our performance coatings segment . acquisitions contributed to 3.5 % of the volume increase . average selling prices increased net sales by 2.6 % resulting from both end-markets within the performance coatings segment which were slightly offset by pricing concessions within the transportation coatings segment . favorable currency translation contributed to a further increase of net sales of 0.6 % due primarily to the impacts of the strengthening euro and chinese renminbi compared to the u.s. dollar . the following trends have impacted our segment and end-market sales performance : performance coatings : net sales increased 13.1 % compared to 2017 driven primarily by stronger volumes in our industrial end-market , including the impacts of acquisitions , as well as increases in average selling prices across both end-markets . transportation coatings : net sales decreased by 2.0 % compared to 2017 driven primarily by lower average selling prices within the light vehicle end-market , partially offset by increased organic sales volumes in our commercial vehicle end-market . our business serves four end-markets globally as follows : replace_table_token_4_th acquisitions highlights during the year ended december 31 , 2018 , we successfully completed seven strategic acquisitions ( `` 2018 acquisitions `` ) , including two based in asia pacific , two based in north america , and three based in europe , all of which benefited our performance coatings segment . see further detail at note 3 to the consolidated financial statements included elsewhere in this annual report on form 10-k. our 2018 aggregate spending for these 2018 acquisitions was $ 79.9 million . in addition , during the year ended december 31 , 2018 , pursuant to the stock purchase agreement for a joint venture acquired during the year ended december 31 , 2016 , we purchased an additional 24.5 % interest for $ 26.9 million , increasing our total ownership percentage to 75.5 % . belgium manufacturing facility closure during the year ended december 31 , 2018 , we approved a restructuring plan involving the closure of our manufacturing facility at our mechelen , belgium site and transfer of production capabilities to other axalta facilities . in connection with the announced closure and transfer of production to other axalta facilities , we currently expect to incur aggregate pre-tax charges of approximately $ 120 - 130 million , subject to future changes in estimates . completion of the transfer and start-up of production at other axalta manufacturing facilities is estimated to require capital expenditures of approximately $ 65-75 million . story_separator_special_tag net sales replace_table_token_6_th 2018 compared to 2017 net sales increased due to the following : n impacts of acquisitions within our performance coatings segment n higher average selling prices across both end-markets within our performance coatings segment , partially offset by lower average selling prices in our transportation coatings segment n increase in organic sales volumes primarily attributable to increases in our industrial end-market , which was partially offset by declines in our refinish end-market n favorable foreign currency translation due primarily to the impacts of the strengthening euro and chinese renminbi compared to the u.s. dollar 2017 compared to 2016 net sales increased due to the following : n impacts of acquisitions within our performance coatings segment n favorable foreign currency translation due primarily to the impacts of the strengthening euro compared to the u.s. dollar which were slightly offset by the weakening of certain currencies within latin america and asia against the u.s. dollar n increases in organic sales volumes in our commercial vehicle and industrial end-markets , largely offset by our refinish end-market , particularly within latin america and north america partially offset by : n lower average selling prices across both end-markets within our transportation coatings segment other revenue replace_table_token_7_th 2018 compared to 2017 other revenue increased due to the following : n increases in service revenues , primarily within our european light vehicle end-market , and favorable impacts of foreign currency of 2.6 % , primarily related to the strengthening euro compared to the u.s. dollar 2017 compared to 2016 other revenue increased due to the following : n favorable impacts of foreign currency of 1.4 % , primarily related to the strengthening euro compared to the u.s. dollar 40 cost of sales replace_table_token_8_th ( 1 ) see note 2 to the consolidated financial statements included elsewhere in this annual report on form 10-k 2018 compared to 2017 cost of sales , excluding the impact of asu 2014-09 , increased due to the following : n increased raw material costs across both segments n higher sales volumes , inclusive of impacts of acquisitions of 4.1 % n increased incremental accelerated depreciation expense of $ 6.0 million , from $ 4.3 million during the year ended december 31 , 2017 to $ 10.3 million in 2018 n unfavorable impacts of foreign currency of 0.7 % , primarily related to the strengthening euro and chinese renminbi compared to the u.s. dollar cost of sales , excluding the impacts of asu 2014-09 , as a percentage of net sales increased due to the following : n increased raw material costs which surpassed our price recapture in net sales 2017 compared to 2016 cost of sales increased due to the following : n higher sales volumes , inclusive of impacts of acquisitions of 7.6 % n increased raw material costs n unfavorable impacts of foreign currency of 0.5 % primarily related to the strengthening euro compared to the u.s. dollar offset partially by the weakening of certain currencies within latin america and asia compared to the u.s. dollar cost of sales as a percentage of net sales increased due to the following : n lower average selling prices and raw material inflation selling , general and administrative expenses replace_table_token_9_th ( 1 ) see note 2 to the consolidated financial statements included elsewhere in this annual report on form 10-k 2018 compared to 2017 selling , general and administrative expenses , excluding the impact of asu 2014-09 , increased due to the following : n axalta way cost savings initiatives and acquisition related costs of $ 82.8 million , inclusive of $ 70.6 million of severance costs from the announced closure of our mechelen , belgium manufacturing facility , as compared to $ 63.8 million for the year ended december 31 , 2017 , resulting in a $ 19.0 million increase over the comparable period n incremental impact from our acquisitions of $ 5.9 million n unfavorable impacts of foreign currency of 1.0 % , primarily related to the strengthening of the euro and chinese renminbi against the u.s. dollar partially offset by : n reductions in costs due to operational efficiencies associated with our cost savings initiatives 41 2017 compared to 2016 selling , general and administrative expenses increased due to the following : n impacts of acquisitions of $ 48.6 million as well as our focus on opportunities to expand our market presence and invest in commercial capabilities n unfavorable impacts of foreign currency of 0.6 % , primarily related to the strengthening of the euro against the u.s. dollar partially offset by : n decreases in costs associated with our axalta way cost savings initiatives n decreases in our costs savings initiatives and acquisition-related costs which were $ 63.8 million for the year ended december 31 , 2017 as compared to $ 77.6 million of costs for the year ended december 31 , 2016 , resulting in an $ 13.8 million decrease over the comparable period venezuela asset impairment replace_table_token_10_th 2018 compared to 2017 during the year ended december 31 , 2017 , we recorded a loss in conjunction with the deconsolidation of our venezuelan subsidiary . there were no corresponding losses recorded during the year ended december 31 , 2018 . 2017 compared to 2016 during the year ended december 31 , 2017 , we recorded a loss in conjunction with the deconsolidation of our venezuelan subsidiary . during the year ended december 31 , 2016 , we recorded an asset impairment charge relating to our long-lived assets within our venezuelan subsidiary . see further discussion in note 21 to the consolidated financial statements included elsewhere in this annual report on form 10-k. research and development expenses replace_table_token_11_th 2018 compared to 2017 research and development expenses increased due to the following : n impacts of acquisitions of $ 5.4 million due to ongoing research and development activities at the acquired businesses n unfavorable impacts of foreign currency of 1.2 % , primarily related to the strengthening
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net cash provided by operating activities net cash provided by operating activities for the year ended december 31 , 2018 was $ 496.1 million . net income adjusted for non-cash items ( depreciation , amortization and other non-cash items ) generated cash of $ 650.3 million . this was partially offset by uses of working capital of $ 154.2 million . the most significant drivers of the uses of working capital were increases in prepaid expenses and other assets of $ 157.3 million , inventory of $ 48.1 million and accounts receivables of $ 22.3 million , and a decrease in other accrued liabilities of $ 8.4 million . these outflows were primarily driven by customer incentive payments , increased inventory builds to support ongoing operational demands and incremental net sales during the year ended december 31 , 2018 . partially offsetting these outflows were increases in other liabilities and accounts payable of $ 32.4 million and $ 49.5 million , respectfully . net cash used for investing activities net cash used for investing activities for the year ended december 31 , 2018 was $ 216.1 million . this use was driven by purchases of property , plant and equipment of $ 143.4 million , business acquisitions of $ 82.8 million ( net of cash acquired ) , and an investment in a non-controlling interest of $ 26.9 million . these outflows were partially offset by interest and settlement proceeds on swaps designated as net investment hedges of $ 22.5 million and $ 9.4 million , respectively , as well as $ 5.1 million of other investing activities , net . 47 net cash used for financing activities net cash used for financing activities for the year ended december 31 , 2018 was $ 341.3 million .
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Liquidity
| 4,106
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the estimated reserve is based upon specific identification of excess or obsolete inventories . selling , general and administrative expenses are expensed as incurred and are not capitalized as a component of inventory . foreign currency translation and transactions the financial statements of the company 's non-u.s. subsidiaries are translated using the current exchange rate for assets and liabilities and the weighted-average exchange rate for the year for income and expense items . resulting translation adjustments are recorded to accumulated other comprehensive income ( oci ) as a component of shareholders ' equity . the company converts receivables and payables denominated in other than the company 's functional currency at the exchange rate as of the balance sheet date . the resulting transaction exchange gains or losses , except for certain transaction gains or loss related to intercompany receivable and payables , are included in other income and expense . transaction gains and losses related to intercompany receivables and payables not anticipated to be settled in the foreseeable future are excluded from the determination of net income and are recorded as a translation adjustment ( with consideration to the tax effect ) to accumulated other comprehensive income ( oci ) as a component of shareholders ' equity . derivativesforward currency exchange contracts the company enters into forward currency exchange contracts in relationship such that the exchange gains and losses on the assets and liabilities denominated in other than the reporting units ' functional currency would be offset by the changes in the market value of the forward currency exchange contracts it holds . the forward currency exchange contracts that the company has to offset existing assets and liabilities denominated in other than the reporting units ' functional currency have been determined not to be considered a hedge under asc 815-10. the company records at the balance sheet date the forward currency exchange contracts at its market value with any associated gain or loss being recorded in current earnings . both realized and unrealized gains and losses related to forward currency contracts are included in current earnings and are reflected in the statement of operations in the other income expense section on the line titled foreign currency transaction gain ( loss ) . the company has entered into forward currency contracts to hedge certain future u.s. dollar sales of its canadian subsidiary . the forward currency contracts to hedge future sales are designated as cash flow hedges under asc 815-10. as required , forward currency contracts are recognized as an asset or liability at fair value on the company 's consolidated balance sheet . for derivative instruments that are designated and qualify as cash flow hedges , the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings ( date of sale ) . gains or losses on cash flow hedges when recognized into income are included in net revenues ( see note 6 ) . credit risk concentrations financial instruments which potentially subject the company to concentrations of credit risk consist primarily of cash , trade receivables and payables . the company maintains its cash balances and marketable securities at banks located in detroit , michigan , new york , new york toronto , canada as well as several separate italian banks . accounts in the united states are insured by the federal deposit insurance corporation up to $ 250 . at december 31 , 2014 and 2013 , the company had uninsured balances of $ 4,120 and $ 5,814 , respectively . 59 as of december 31 , 2014 and 2013 , no customers accounted for 10 % or more of total company 's accounts receivable in 2014 and 2013 , no one customer accounted for 10 % or more of total company 's revenues . in 2012 , one customer accounted for 11 % of total company revenue . for 2014 , 2013 and 2012 purchases from any single supplier did not exceed 10 % of total purchases . research and development expenses . the company expenses research and development costs , as incurred . for the periods ended december 31 , 2014 , 2013 and 2012 expenses were $ 2,552 , $ 2,912 and $ 2,457 , respectively . advertising advertising costs are expensed as incurred and were $ 458 , $ 626 and $ 517 for the years ended december 31 , 2014 , 2013 and 2012 , respectively . litigation claims in determining whether liabilities should be recorded for pending litigation claims , the company must assess the allegations and the likelihood that it will successfully defend itself . when the company believes it is probable that it will not prevail in a particular matter , it will then record an estimate of the amount of liability based , in part , on advice of outside legal counsel . shipping and handling the company records the amount of shipping and handling costs billed to customers as revenue . the cost incurred for shipping and handling is included in the cost of sales . use of estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states of america requires management to make estimates and assumptions that affect certain reported amounts and disclosures . accordingly , actual results could differ from those estimates . income taxes the company accounts for income taxes under the provisions of asc 740 income taxes , which requires recognition of income taxes based on amounts payable with respect to the current year and the effects of deferred taxes for the expected future tax consequences of events that have been included in the company 's financial statements or tax returns . story_separator_special_tag the increase in income tax is attributed to an increase in pre-tax income , as the company 's effective rate decreased to 29.5 % for 2013 from 32.1 % the effective tax rate for 2012. the effective tax rate for 2013 is favorably impacted by the domestic production activities deduction ( section 199 ) and federal research and development tax credits . in the prior year , the company was not able to recognize the domestic production activities deduction as it had unutilized net operating loss carryforwards . additionally , the company was not able to recognize a federal research and development tax credit in 2012 as the provision in the internal revenue code authorizing the r & d credit had expired . 33 the american taxpayer reconciliation act enacted on january 2 , 2013 , retroactively restored the research and development credit back to january 1 , 2012. the tax provision for 2013 includes discrete items of $ 206 primarily related to 2012 federal research & development tax credits which were retroactively restored . net income net income for the year ended december 31 , 2013 was $ 10.2 million . this compares with a net income for the year ended december 31 , 2012 of $ 8.1 million . segment information lifting equipment segment replace_table_token_8_th ( 1 ) the above results include the results for sabre and valla from their respective dates of acquisition which are august 19 , 2013 and november 30 , 2013 , respectively . year ended december 31 , 2014 compared to year ended december 31 , 2013 net revenues net revenues increased $ 16.7 million to $ 245.4 million for the year ended december 31 , 2014 from $ 228.8 million for the comparable period in 2013. approximately 75 % of the increase in revenues is attributed to having sabre and valla for a full year in 2014. the remaining increase is attributed to high sales of container handling equipment which was offset by a decrease in the sales of crane products . additionally , we saw a shift toward cranes with lower lifting capacity during the year . container handling sales continue to benefit in 2014 from obtaining new dealers in latin america in 2013. additionally , the italian market for container handling equipment strengthened during the year . the decrease in crane sales is due to a softening in demand from the energy sector . operating income and operating margins operating income of $ 21.6 million for the year ended december 31 , 2014 was equivalent to 8.8 % of net revenues compared to an operating income of $ 23.3 million for the year ended december 31 , 2013 or 10.2 % of net revenues . operating income decreased $ 1.7 million which is the result of increase in operating expenses as gross profit was not significantly different between years . the benefit that an increase in revenues had on gross profit was essentially offset by a decrease in the gross margin percent . the increase in operation expense is attributed to an increase in selling , general and administrative expense as research and development cost decreased $ 0.4 million . the increase in operating expenses is attributed to increases in expenses at companies acquired in 2013 ( full year effect ) , cost to participate in the conexpo trade show in march 2014 and higher selling expenses . the decrease in operating margin percent is the result of a decrease in gross margin percent and higher operating expenses . year ended december 31 , 2013 compared to year ended december 31 , 2012 net revenues net revenues increased $ 40.0 million to $ 228.8 million for the year ended december 31 , 2013 from $ 188.8 million for the comparable period in 2012. the revenue increase between 2012 and 2013 was approximately 21.2 % of which 15.5 % is attributed to an increase in revenues from crane products , 5.5 % is attribute an increase in revenues from container handling 34 equipment products , 4.0 % is attributed to sales from companies acquired in 2013 , partially offset by a decrease of other products which had the effect of decreasing revenues 3.8 % . the increase in crane product revenues is principally attributed to an increase in production capacity which allowed the company to reduce its backlog and to more aggressively market cranes with lower lifting capacity . the increase in revenues from the sale of container handling equipment is attributed to increase in sales to markets outside europe , which has historically been the largest market for company 's port handling equipment . this increase is attributed to shipments of tractors to south africa during the first part of the year and an increase in sales to latin america in the second half of the year . the sale of the tractors was related to a large tender order that was awarded to cvs in 2012. the increase in latin american revenues is a benefit from obtaining new dealers in latin america in 2013. the decrease in other products revenues is attributed to the timing of military orders and a decrease in special trailer revenues . operating income and operating margins operating income of $ 23.3 million for the year ended december 31 , 2013 was equivalent to 10.2 % of net revenues compared to an operating income of $ 19.9 million for the year ended december 31 , 2012 or 10.5 % of net revenues . operating income increased $ 3.4 million which is the net of an increase in gross profit of $ 5.1 million offset by increase in operating expenses of $ 1.7 million . the increase in gross profit is attributed to an increase in revenues as there was a modest decrease in the gross profit percent . approximately 40 % of the increase in operating expenses is attributed to companies acquired in 2013. another 25 % of the increase in operating expenses is related
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the following are the principal non-cash items : depreciation and amortization of $ 3.9 million , stock based deferred compensation of $ 0.7 million , and increase in the provision for doubtful accounts of $ 0.2 offset by an increase in net deferred tax assets of $ 0.2 million , a decrease in the reserve for uncertain tax positions of $ 0.1 million and a gain on the disposal of assets of $ 0.1 million . the increase in working capital is principally due to increases in inventory of $ 8.9 million , prepaids of $ 0.4 million , other assets of $ 0.9 million and decreases in accounts payable of $ 4.1 million and accruals of $ 0.1 million and other current liabilities or $ .01 million offset by decrease in accounts receivable of $ 1.7 , and accounts receivablefinance of $ 0.3 million . the increase in inventory is principally due to increased revenues . a slight increase in days in inventory on hand did , however , contribute to the increase . the increase in prepaids is principally attributed to prepayment for the conexpo show , which is held in march every three years and an increase in prepayments to vendor . other assets increase as fees and expenses incurred in connection with the company 's new banking facilities were capitalized and are being amortized . the decrease in accounts payable and accounts receivable is due to the timing of payments to vendors and from customers respectively . cash flows related to investing activities consumed $ 14.1 million of cash for the year ended december 31 , 2013. the company used $ 13.0 million to acquire sabre and invested another $ 1.2 in capital equipment . the $ 1.2 million spent to purchase capital equipment is the total of numerous purchases for various operations . no single item in itself was particularly significant . financing activities generated $ 16.1 million in cash for the year ended december 31 , 2013. the company raised $ 13.9 million in stock offering in september 2013. the proceeds from the stock offering were used to repay debt , principally incurred to purchase sabre . an increase in debt , excluding $ 3.0 of non-cash items ( see note 16 in the financial statements ) provided $ 2.2 million of cash . contingencies the company is involved in various legal proceedings , including product liability and workers ' compensation matters which have arisen in the normal course of operations . certain cases are at a preliminary stage , and it is
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Liquidity
| 16,169
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the guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in accounting standards codification ( asc 606 ) revenue from contracts with customers . the new standard will be effective for the first quarter of our fiscal year ending november 30 , 2019. early adoption is permitted for all entities . we have not yet determined the impact from adoption of this new accounting pronouncement on our financial statements . in february 2016 , the fasb issued asu no . 2016-02 leases ( topic 842 ) . this guidance revises existing practice related to accounting for leases under accounting standards codification topic 840 leases ( asc 840 ) for both lessees and lessors . our leases principally relate to : ( i ) certain real estate , including that related to a number of administrative , distribution and manufacturing locations ; ( ii ) certain machinery and equipment , including a corporate airplane and automobiles ; and ( iii ) certain software . in addition , in 2016 , we entered into a 15-year lease for a headquarters building , which is expected to commence upon completion of building construction and fit-out , currently scheduled for the second half of 2018. the new guidance in asu no . 2016-02 requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases ( other than leases that meet the definition of a short-term lease ) . the lease liability will be equal to the present value of lease payments and the right-of-use asset will be based on the lease liability , subject to adjustment such as for initial direct costs . for income statement purposes , the new standard retains a dual model similar to asc 840 , requiring leases to be classified as either operating or finance . for lessees , operating leases will result in straight-line expense ( similar to current accounting by lessees for operating leases under asc 840 ) while finance leases will result in a front-loaded expense pattern ( similar to current accounting by lessees for capital leases under asc 840 ) . the new standard will be effective for the first quarter of our fiscal year ending november 30 , 2020. early adoption is permitted for all entities . we have not yet determined the impact from adoption of this new accounting pronouncement on our financial statements . in july 2015 , the fasb issued accounting standards update no . 2015-11 simplifying the measurement of inventory ( topic 330 ) . this guidance is intended to simplify the subsequent measurement of inventories by replacing the current lower of cost or market test with a lower of cost and net realizable value test . it will be effective for the first quarter of our fiscal year ending november 30 , 2018. we do not expect the adoption of this new accounting pronouncement to have a material impact on our financial statements . in may 2014 , the fasb issued asu no . 2014-09 revenue from contracts with customers ( topic 606 ) . this guidance is intended to improve — and converge with international standards — the financial reporting requirements for revenue from contracts with customers . the new standard will be effective for the first quarter of our fiscal year ending november 30 , 2019. early adoption is permitted for all entities , but not before the original effective date for public business entities ( that is , annual reporting periods beginning after december 15 , 2016 or our fiscal year ending november 30 , 2018 ) . we do not expect to early adopt this new accounting pronouncement . in preparation for our adoption of the new standard in our fiscal year ending november 30 , 2019 , we have obtained representative samples of contracts and other forms of agreements with our customers in the u.s. and international locations and are evaluating the provisions contained therein in light of the five-step model specified by the new guidance . that five-step model includes : ( 1 ) determination of whether a contract — an agreement between two or more parties that creates legally enforceable rights and obligations — exists ; ( 2 ) identification of the performance obligations in the contract ; ( 3 ) determination of the transaction price ; ( 4 ) allocation of the transaction price to the performance obligations in the contract ; and ( 5 ) recognition of revenue when ( or as ) the performance obligation is satisfied . we are also evaluating the impact of the new standard on certain common practices currently employed by us and by other manufacturers of consumer products , such as slotting fees , co-operative advertising , rebates and other pricing allowances , merchandising funds and consumer coupons . we have not yet determined the impact of the new standard on our financial statements or whether we will adopt on a prospective or retrospective basis in the first quarter of our fiscal year ending november 30 , 2019 . 2. acquisitions acquisitions are part of our strategy to increase sales and profits . acquisition of rb foods on august 17 , 2017 , we completed the acquisition of reckitt benckiser 's food division ( `` rb foods `` ) from reckitt benckiser group plc . the purchase price was approximately $ 4.21 billion , is net of acquired cash of $ 24.3 million , and included a preliminary working capital adjustment of $ 11.2 million . in december 2017 , we paid an additional $ 4.2 million associated with the final working capital adjustment . the acquisition was funded through our issuance of approximately 6.35 million shares of common stock non-voting ( see note 13 ) and through new borrowings comprised of senior unsecured notes and pre-payable term loans ( see note 6 ) . story_separator_special_tag in the asia/pacific region , industrial sales increased 9.0 % in 2017 as compared to 2016 and increased 10.1 % on a constant currency basis . higher volume and product mix added 9.6 % to sales and included growth in sales to leading quick service restaurants supplied from our facilities in both china and southeast asia . pricing actions added 0.1 % to sales and the incremental impact of the gourmet garden acquisition added 0.4 % to sales . these factors partially offset an unfavorable impact from foreign currency exchange rates that reduced sales by 1.1 % compared to 2016 and is excluded from our measure of sales growth of 10.1 % on a constant currency basis . we grew segment operating income for our industrial segment by $ 55.9 million , or 33.6 % , in 2017 compared to 2016. the favorable impact of greater sales and cost savings more than offset the unfavorable impact of higher material costs . on a constant currency basis , segment operating income for our industrial segment rose 37.1 % . segment operating income margin for our industrial segment rose by 190 basis points to 11.9 % in 2017 from 10.0 % in 2016 and reflected the impact of our efforts to shift our business mix to more value-added products through innovation and acquisitions . results of operations—2016 compared to 2015 replace_table_token_13_th sales for 2016 increased 2.7 % from 2015 and increased by 5.5 % on a constant currency basis , with growth in both the consumer and industrial segments that drove higher volume and product mix , and added 1.7 % to sales . this was driven by product innovation , brand marketing and expanded distribution . pricing actions , taken in response to increased material costs , added 1.5 % to sales . the incremental impact of acquisitions completed in 2016 – mainly gourmet garden – and three acquisitions completed in 2015 – brand aromatics , drogheria & alimentari ( d & a ) and stubb 's – added 2.3 % to sales . these factors offset an unfavorable impact from foreign currency exchange that reduced sales by 2.8 % compared to 2015 and is excluded from our measure of sales growth of 5.5 % on a constant currency basis . replace_table_token_14_th in 2016 , gross profit rose 110 basis points to 41.5 % from 40.4 % in 2015 , as the favorable impact of pricing actions , cci-led cost savings and more favorable business mix more than offset the unfavorable impact of higher material costs . replace_table_token_15_th selling , general and administrative expense was $ 1,175.0 million in 2016 compared to $ 1,127.4 million in 2015 , an increase of $ 47.6 million . sg & a as a percentage of net sales was 26.6 % , a 40-basis point increase from 2015. driving this increase in sg & a as a percentage of net sales were higher employee related expenses , an $ 11.6 million increase in our brand marketing from the 2015 level to $ 252.2 million in 2016 and a $ 6.5 million increase in transaction costs , related to both completed and uncompleted acquisitions , from the 2015 level to $ 13.4 million in 2016. partially offsetting these increases were cost savings from cci and from the organization and streamlining actions described in note 3 of the financial statements . replace_table_token_16_th special charges of $ 16.0 million were recorded in 2016 and $ 65.5 million in 2015. of the $ 16.0 million of special charges recorded in 2016 , $ 0.3 million were recorded in cost of goods sold . the 2016 special charges principally consist of $ 5.7 million related to our emea reorganization , which began in 2015 , $ 2.8 million related to our exit from a consolidated joint venture in south africa , $ 1.9 million for other exit costs related to the discontinuance of non-profitable product lines of our kohinoor business in india initiated in 2015 , $ 1.8 million associated with actions in connection with our planned exit of two leased manufacturing facilities in singapore and thailand , and $ 1.7 million for employee severance actions related to our north american effectiveness initiative begun in 2015. see note 3 of the financial statements for more details on these charges . in 2015 , we recorded special charges of $ 65.5 million , of which $ 29.2 million related to employee severance and related costs associated with our north american effectiveness initiative and $ 24.4 million related to a reorganization of our emea business . an additional $ 14.2 million , including a non-cash brand impairment charge of $ 9.6 million , related to the discontinuance by our kohinoor consumer business in india of sales of non-profitable bulk-packaged and broken basmati rice product lines . partially offsetting these charges was a credit of $ 2.3 million for the 2015 reversal of reserves previously accrued as part of special charges in 2014 and 2013. replace_table_token_17_th interest expense for 2016 was higher than the prior year , primarily due to higher average borrowings . other income , net , for 2016 rose by $ 3.1 million over the 2015 level , primarily due to higher interest income and lower non-operating foreign currency losses , both as compared to 2015 , as well as to a gain on the 2016 sale of a non-operating asset . replace_table_token_18_th the effective tax rate decreased 50 basis points to 26.0 % in 2016 , from 26.5 % in 2015 , primarily as a result of the following factors . net discrete tax benefits increased by $ 2.0 million , from $ 19.1 million in 2015 to $ 21.1 million in 2016. both 2016 and 2015 included discrete tax benefits for ( i ) the reversal of reserves for unrecognized tax benefits , net of additional taxes provided , for the expiration of statutes of limitation in several tax jurisdictions , ( ii ) the reversal of valuation
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2018 outlook we project another year of strong financial performance in 2018 and , including the results of rb foods from its acquisition date of august 17 , 2017 , we expect our constant currency growth rate in sales , operating income and adjusted earnings per share to exceed our long-term financial growth objectives . in 2018 , we expect to grow sales 12 % to 14 % , including an estimated 1 % favorable impact from currency rates , or 11 % to 13 % on a constant currency basis . the incremental impact of the rb foods acquisition is projected to contribute approximately 8 % of that sales growth . we expect further increases in volume and product mix in our base business to drive the remaining sales growth anticipated in 2018 as , with material cost inflation projected in the low single digits , we do not expect significant pricing impact in 2018 other than the incremental impact of actions taken in 2017. in 2018 , we expect gross profit margin to be approximately 150 to 200 basis points higher than 2017 , due to a projected low single digit increase in material costs that is more than offset by the effects of favorable business mix , cci-led cost savings and the lack of $ 20.9 million of transaction and integration expenses reflected in cost of goods sold in 2017 related to the rb foods acquisition . led by cci , we expect to reach cost savings of approximately $ 100 million in 2018 , with a large portion impacting our cost of goods sold . material cost inflation is expected to be in the mid-single digit range and we expect to offset most of this incremental impact with our 2017 pricing actions . in 2018 , we expect a significant increase in operating income , in part , due to the effects of the rb foods acquisition including the lower amount of transaction and integration expenses . we expect 2018 's adjusted operating income to increase 23 % to 25 % , which includes the incremental impact of the rb foods acquisition and a 1 % favorable impact from currency rates . for 2018 , we plan to increase brand
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Liquidity
| 7,489
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examples of assets that are connected through our m2m data communications system include trucks , trailers , railcars , containers , heavy equipment , fluid tanks , utility meters , pipeline monitoring equipment , marine vessels , oil and gas wells and irrigation control systems . customers benefiting from our network include original equipment manufacturers , or oems , such as caterpillar , komatsu , doosan infracore america , hitachi , hyundai heavy industries , the manitowoc company and volvo construction equipment . in addition , we market our services through a distribution network of vertical market technology integrators known as vars and ivars , such as i.d . systems , inc. , inthinc technology solutions inc. , and american innovations , ltd. as a result of our acquisitions in 2011 and in 2012 , we provide products and services in the cold chain telematics solutions business that enable customers to proactively monitor , manage and remotely control their refrigerated and other transport assets using complete end-to-end solutions . these solutions enable optimal business efficiencies , increased asset utilization , and substantially reduce asset write-offs and manual yard counts of chassis , refrigeration units , containers and generators ( gensets ) . the information provided from these solutions also help industry leaders realize better fleet efficiency and utilization while reducing risk by adding safety monitoring of perishable cargo , including refrigerated and frozen food . in addition to relationships with leading refrigeration unit manufacturers such as carrier and thermo king , the customer base includes well-known brands such as tropicana , maersk line , prime inc. , c.r . england , ffe transport , inc. , target , chiquita , ryder , j.b. hunt , hapag-lloyd , golden state foods , martin-brower and canadian national railways . these acquisitions enable us to create a global technology platform to transfer capabilities across new and existing vertical markets and deliver complementary products to our channel partners and resellers worldwide . as of december 31 , 2012 , we had approximately 759,000 billable subscriber communicators compared to approximately 648,000 billable subscriber communicators as of december 31 , 2011 , an increase of 17.1 % . satellite replenishments our current fleet of satellites was generally put in service in the late 1990s and has an estimated operating life of approximately nine to twelve years . since 2002 , we have implemented several operational changes and software updates that we believe have enhanced the expected life of the satellites . the majority of these changes focus on extending the life of the primary life limiting component the nickel hydrogen batteries which power the satellites . 53 next-generation satellites through a series of launches , we intend to replenish the existing constellation of satellites with 17 next-generation satellites , which the expected capabilities of the replacement satellites , requiring fewer satellites than we currently use to deliver service . we intend to launch 17 next-generation satellites equipped with increased communications capabilities and our ais payload currently being constructed by snc with the first of several launches using spacex falcon 9 launch vehicles . we anticipate that the launch services will be performed between the second quarter of 2013 and the second quarter of 2014. ais microsatellites on september 28 , 2010 , we entered into an ais satellite agreement with ohb pursuant to which ohb , through its affiliate lxs to ( 1 ) design , construct , launch and in-orbit test two ais microsatellites and ( 2 ) design and construct the required ground support equipment . one ais microsatellite was launched in october 2011 and the second was launched in january 2012 and both are providing full commercial service . acquisitions par logistics management systems corporation effective on the close of business on january 12 , 2012 , we completed the acquisition of the assets of par logistics management systems corporation ( lms ) , a wholly-owned subsidiary of par technology corporation , including but not limited to , accounts receivable , inventory , equipment , intellectual property , all of lms 's rights to customer contracts , supplier lists and certain liabilities pursuant to an asset purchase agreement dated as of december 23 , 2011. the consideration paid to par on closing to acquire lms totaled $ 6.1 million consisting of : ( i ) $ 4.0 million in cash , subject to a final working capital adjustment specified in the asset purchase agreement , which has not yet been finalized and ( ii ) the issuance of 645,162 shares of our common stock , of which 387,097 shares of common stock were placed into an escrow account for up to fifteen months from closing to fund any indemnification obligations to us including for breaches of representations and warranties made by par . in addition to the consideration paid at closing , the asset purchase agreement provides for contingent payments of up to $ 3.9 million payable post-closing by us to par . up to $ 3.0 million of the contingent payments will be payable based on achieving subscriber targets for calendar year 2012. up to $ 0.9 million of the contingent payments will be payable based on achieving sales targets for calendar years 2012 through 2014. any potential earn-out amounts can be paid in common stock , cash or a combination at our option . the potential earn-out amounts for achieving the subscriber and sales targets for calendar year 2012 , if earned , will be paid within 30 days after we file our form 10-k for 2012. the potential earn-out amount for achieving sales targets for calendar years 2013 and 2014 , if earned , will be paid within 30 days after we file our form 10-k for years 2013 and 2014. we recorded at the acquisition date a liability of $ 0.7 million for the estimated fair value of the earn-out amounts . story_separator_special_tag critical accounting policies and estimates our discussion and analysis of our results of operations , liquidity and capital resources are based on our consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the united states of america . the preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and disclosure of contingent assets and liabilities . on an on-going basis , we evaluate our estimates and judgments , including those related to revenue recognition , accounts receivable , accounting for business combinations , goodwill , satellite network and other equipment , long-lived assets , capitalized development costs , income taxes , warranty costs , loss contingencies and the value of securities underlying stock-based compensation . we base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances , including assumptions as to future events . these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . by their nature , estimates are subject to an inherent degree of uncertainty . actual results may differ from our estimates and could have a significant adverse effect on our results of operations and financial position . we believe the following critical accounting policies affect our more significant estimates and judgments in the preparation of our consolidated financial statements . revenue recognition we recognize revenues when persuasive evidence of an arrangement exists , delivery has occurred , the fee is fixed or determinable and collectibility is reasonably assured . our revenue recognition policy requires us to make significant judgments regarding the probability of collection of the resulting accounts receivable balance based on prior history and the creditworthiness of our customers . in instances where collection is not reasonably assured , revenue is recognized when we receive cash from the customer . revenues from the activation of subscriber communicators and sims are initially recorded as deferred revenues and are , thereafter , recognized ratably over the term of the agreement with the customer , generally four years which is the estimated customer relationship period . revenues generated from monthly usage and administrative fees and engineering services are recognized when the services are rendered . revenues generated from extended warranty service agreements extending beyond the initial warranty period of one year are initially recorded as deferred revenues and are , thereafter , recognized ratably over the term of the agreements generally two to five years . revenues generated from royalties under our subscriber communicator manufacturing agreements are recognized when we issue to a third party manufacturer upon request a unique serial number to be assigned to each unit manufactured by such third party manufacturer . revenues generated from the sale of satellite subscriber communicators , sims and other products are either recognized when the products are shipped or when customers accept the products , depending on the specific contractual terms . sales of subscriber communicators and sims and other items are not subject to return and title and risk of loss pass to the customer at the time of shipment . in arrangements that include multiple deliverables , we make significant estimates and judgments with the determination of revenue to be recognized . these significant estimates and judgments include identifying the various elements in an arrangement , determining if the delivered items have stand-alone value and the relative selling prices . 59 accounts receivable accounts receivable are due in accordance with payment terms included in our negotiated contracts . amounts due are stated net of an allowance for doubtful accounts . accounts that are outstanding longer than the contractual payment terms are considered past due . we make ongoing assumptions and judgments relating to the collectibility of our accounts receivable to determine our required allowances based on a number of factors such as the age of the receivable , credit history of the customer , historical experience and current economic conditions that may affect a customer 's ability to pay . past experience may not be indicative of future collections ; as a result , allowances for doubtful accounts may deviate from our estimates as a percentage of accounts receivable and sales . satellite network and other equipment satellite network and other equipment are stated at cost , less accumulated depreciation and amortization . we use judgment to determine the useful life of our satellite network based on the estimated operational life of the satellites and periodic reviews of engineering data relating to the operation and performance of our satellite network . satellite network includes the costs of our constellation of satellites , and the ground and control facilities , which consists of gateway earth stations , gateway control centers and the network control center ( the ground component ) . assets under construction primarily consist of milestone payments pursuant to procurement agreements , which include the design , development , launch and other direct costs relating to the construction of the satellites and upgrades to the company 's infrastructure and the ground component . once these assets are placed in service they will be transferred to satellite network and then depreciation will be recognized using the straight-line method over the estimated lives of the assets . no depreciation has been recorded on these assets as of december 31 , 2012. we capitalize interest on our note payable issued in 2011 during the construction period of our next-generation satellites . capitalized interest is added to the cost of our next-generation satellites . accounting for business combinations we account for business combinations pursuant to fasb topic asc 805 , business combinations . in accordance with asc 805 , the estimated purchase price was allocated to intangible assets and identifiable assets acquired and liabilities assumed based on their relative fair values . the excess of the purchase
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liquidity and capital resources overview our liquidity requirements arise from our working capital needs and to fund capital expenditures to support our current operations , and facilitate growth and expansion . we have financed our operations and expansion mostly from sales of our common stock through public offerings and private placements of debt , convertible redeemable preferred stock and common stock . we had net income in 2012 but have incurred losses through 2011 and at december 31 , 2012 we have an accumulated deficit of $ 68.0 million . as of december 31 , 2012 , our primary source of liquidity consisted of cash , cash equivalents , restricted cash and marketable securities totaling $ 64.9 million . in addition , on january 4 , 2013 , we issued $ 45 million aggregate principal amount of senior notes due on january 4 , 2018. operating activities cash provided by our operating activities in 2012 was $ 13.9 million resulting from net income of $ 8.9 million , supplemented by non-cash items including $ 4.8 million for depreciation and amortization and $ 1.8 million for stock-based compensation , offset by a $ 1.2 million gain on extinguishment of debt and accounts payable . working capital activities primarily consisted of a net use of cash of $ 1.6 million for an increase in accounts receivable primarily due to the increase in revenues . cash provided by our operating activities in 2011 was $ 6.3 million resulting from a net loss of $ 0.1 million , offset by non-cash items including $ 5.0 million for depreciation and amortization , $ 1.9 million for stock-based compensation , $ 0.3 million loss on the disposition of our investment in alanco and amortization of premium on marketable securities of $ 1.2 million . working capital activities primarily consisted of a net use of cash of $ 1.5 million for an increase in accounts receivable primarily due to the increase in revenues . cash provided by our operating activities of continuing operations in 2010 was $ 3.5 million resulting from a net loss of $ 4.9 million , offset by adjustments for non-cash items including $ 6.5
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Liquidity
| 9,457
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56 sykes enterprises , incorporated and subsidiaries consolidated statements of comprehensive income ( loss ) replace_table_token_32_th see accompanying notes to consolidated financial statements . 57 sykes enterprises , incorporated and subsidiaries consolidated statements of changes in shareholders ' equity replace_table_token_33_th see accompanying notes to consolidated financial statements . 58 sykes enterprises , incorporated and subsidiaries consolidated statements of cash flows replace_table_token_34_th 59 sykes enterprises , incorporated and subsidiaries consolidated statements of cash flows ( continued ) replace_table_token_35_th see accompanying notes to consolidated financial statements . 60 sykes enterprises , incorporated and subsidiaries notes to consolidated financial statements note 1. overview and summary of significant accounting policies business sykes enterprises , incorporated and consolidated subsidiaries ( sykes or the company ) provides comprehensive outsourced customer contact management solutions and services in the business process outsourcing arena to companies , primarily within the communications , financial services , technology/consumer , transportation and leisure , and healthcare industries . sykes provides flexible , high-quality outsourced customer contact management services ( with an emphasis on inbound technical support and customer service ) , which includes customer assistance , healthcare and roadside assistance , technical support and product sales to its clients ' customers . utilizing sykes ' integrated onshore/offshore global delivery model , sykes provides its services through multiple communication channels encompassing phone , e-mail , social media , text messaging and chat . sykes complements its outsourced customer contact management services with various enterprise support services in the united states that encompass services for a company 's internal support operations , from technical staffing services to outsourced corporate help desk services . in europe , sykes also provides fulfillment services including order processing , payment processing , inventory control , product delivery and product returns handling . the company has operations in two reportable segments entitled ( 1 ) the americas , which includes the united states , canada , latin america , australia and the asia pacific rim , in which the client base is primarily companies in the united states that are using the company 's services to support their customer management needs ; and ( 2 ) emea , which includes europe , the middle east and africa . acquisition in august 2012 , the company completed the acquisition of alpine access , inc. ( alpine ) , a delaware corporation , pursuant to the agreement and plan of merger , dated july 27 , 2012. the company has reflected the operating results in the consolidated statements of operations since august 20 , 2012. see note 2 , acquisition of alpine access , inc. , for additional information on the acquisition of this business . discontinued operations in march 2012 , the company sold its operations in spain ( the spanish operations ) , pursuant to an asset purchase agreement dated march 29 , 2012 and a stock purchase agreement dated march 30 , 2012. the company reflected the operating results related to the spanish operations as discontinued operations in the consolidated statement of operations for the year ended december 31 , 2012. cash flows from discontinued operations are included in the consolidated statement of cash flows for the year ended december 31 , 2012. see note 3 , discontinued operations , for additional information on the sale of the spanish operations . principles of consolidation the consolidated financial statements include the accounts of sykes and its wholly-owned subsidiaries and controlled majority-owned subsidiaries . all significant intercompany transactions and balances have been eliminated in consolidation . use of estimates the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the united states of america ( generally accepted accounting principles or u.s . gaap ) requires the company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period . actual results could differ from those estimates . subsequent events subsequent events or transactions have been evaluated through the date and time of issuance of the consolidated financial statements . there were no material subsequent events that required recognition or disclosure in the accompanying consolidated financial statements . recognition of revenue the company recognizes revenue in accordance with accounting standards codification ( asc ) 605 revenue recognition ( asc 605 ) . the company primarily recognizes revenues from services as the services are performed , which is based on either a per minute , per call , per transaction or per time and material basis , under a fully executed contractual agreement and record reductions to revenues for contractual penalties and holdbacks for failure to meet specified minimum service levels and other performance based contingencies . revenue recognition is limited to the amount that is not contingent upon delivery of any future product or service or meeting other specified performance conditions . product sales , accounted for within our fulfillment services , are recognized upon shipment to the customer and satisfaction of all obligations . 61 revenues from fulfillment services account for 1.4 % , 1.3 % and 1.5 % of total consolidated revenues for the years ended december 31 , 2014 , 2013 and 2012 , respectively , some of which contain multiple-deliverables . the service offerings for these fulfillment service contracts typically include pick-pack-and-ship , warehousing , process management , finished goods assembly and pass-through costs . in accordance with asc 605-25 revenue recognition multiple-element arrangements ( asc 605-25 ) [ as amended by accounting standards update ( asu ) 2009-13 revenue recognition ( topic 605 ) : multiple-deliverable revenue arrangements a consensus of the fasb emerging issues task force ( asu 2009-13 ) ] , the company determines if the services provided under these contracts with multiple-deliverables represent separate units of accounting . story_separator_special_tag the purchase price of $ 149.0 million was funded through cash on hand of $ 41.0 million and borrowings of $ 108.0 million under our 2012 credit agreement , dated may 3 , 2012. as of december 31 , 2014 , we had $ 215.1 million in cash and cash equivalents , of which approximately 90.3 % or $ 194.4 million , was held in international operations and is deemed to be indefinitely reinvested offshore . these funds may be subject to additional taxes if repatriated to the united states , including withholding tax applied by the country of origin and an incremental u.s. income tax , net of allowable foreign tax credits . there are circumstances where we may be unable to repatriate some of the cash and cash equivalents held by our international operations due to country restrictions . we do not intend nor currently foresee a need to repatriate these funds . we expect our current domestic cash levels and cash flows from operations to be adequate to meet our domestic anticipated working capital needs , including investment activities such as capital expenditures and debt repayment for the next twelve months and the foreseeable future . however , from time to time , we may borrow funds under our 2012 credit agreement as a result of the timing of our working capital needs , including capital expenditures . additionally , we expect our current foreign cash levels and cash flows from foreign operations to be adequate to meet our foreign anticipated working capital needs , including investment activities such as capital expenditures for the next twelve months and the foreseeable future . if we should require more cash in the u.s. than is provided by our domestic operations for significant discretionary unforeseen activities such as acquisitions of businesses and share repurchases , we could elect to repatriate future foreign earnings and or raise capital in the u.s through additional borrowings or debt/equity issuances . these alternatives could result in higher effective tax rates , interest expense and or dilution of earnings . we have borrowed funds domestically and continue to have the ability to borrow additional funds domestically at reasonable interest rates . our cash resources could also be affected by various risks and uncertainties , including but not limited to , the risks detailed in item 1a , risk factors . 36 off-balance sheet arrangements and other at december 31 , 2014 , we did not have any material commercial commitments , including guarantees or standby repurchase obligations , or any relationships with unconsolidated entities or financial partnerships , including entities often referred to as structured finance or special purpose entities or variable interest entities , which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes . from time to time , during the normal course of business , we may make certain indemnities , commitments and guarantees under which we may be required to make payments in relation to certain transactions . these include , but are not limited to : ( i ) indemnities to clients , vendors and service providers pertaining to claims based on negligence or willful misconduct and ( ii ) indemnities involving breach of contract , the accuracy of representations and warranties , or other liabilities assumed by us in certain contracts . in addition , we have agreements whereby we will indemnify certain officers and directors for certain events or occurrences while the officer or director is , or was , serving at our request in such capacity . the indemnification period covers all pertinent events and occurrences during the officer 's or director 's lifetime . the maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited ; however , we have director and officer insurance coverage that limits our exposure and enables us to recover a portion of any future amounts paid . we believe the applicable insurance coverage is generally adequate to cover any estimated potential liability under these indemnification agreements . the majority of these indemnities , commitments and guarantees do not provide for any limitation of the maximum potential for future payments we could be obligated to make . we have not recorded any liability for these indemnities , commitments and other guarantees in the accompanying consolidated balance sheets . in addition , we have some client contracts that do not contain contractual provisions for the limitation of liability , and other client contracts that contain agreed upon exceptions to limitation of liability . we have not recorded any liability in the accompanying consolidated balance sheets with respect to any client contracts under which we have or may have unlimited liability . 37 contractual obligations the following table summarizes our contractual cash obligations at december 31 , 2014 , and the effect these obligations are expected to have on liquidity and cash flow in future periods ( in thousands ) : replace_table_token_27_th ( 1 ) amounts represent the expected cash payments under our operating leases . ( 2 ) amounts represent the expected cash payments under our purchase obligations , which include agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms , including : fixed or minimum quantities to be purchased ; fixed , minimum or variable price provisions ; and the approximate timing of the transaction . purchase obligations exclude agreements that are cancelable without penalty . ( 3 ) accounts payable and accrued employee compensation and benefits , which represent amounts due vendors and employees payable within one year . ( 4 ) income taxes payable , which represents amounts due taxing authorities payable within one year . ( 5 ) other accrued expenses and current liabilties , which exclude deferred grants , include amounts primarily related to restructuring costs , legal and professional fees , telephone charges , rent , derivative contracts
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the sale of the spanish operations resulted in a loss of $ 10.7 million . we do not expect the absence of the cash flows from our discontinued operations in spain to materially affect our future liquidity and capital resources . capital expenditures , which are generally funded by cash generated from operating activities , available cash balances and borrowings available under our credit facilities , were $ 44.7 million for 2014 , compared to $ 59.2 million for 2013 , a decrease of $ 14.5 million . in 2015 , we anticipate capital expenditures in the range of $ 55.0 million to $ 60.0 million , primarily for new seat additions , enterprise resource planning upgrades , facility upgrades , maintenance and systems infrastructure . on may 3 , 2012 , we entered into a $ 245 million revolving credit facility ( the 2012 credit agreement ) with a group of lenders and keybank national association , as lead arranger , sole book runner and administrative agent ( keybank ) . the 2012 credit agreement replaced our previous $ 75 million revolving credit facility dated february 2 , 2010 , as amended , which agreement was terminated simultaneous with entering into the 2012 credit agreement . the 2012 credit agreement is subject to certain borrowing limitations and includes certain customary financial and restrictive covenants . at december 31 , 2014 , we were in compliance with all loan requirements of the 2012 credit agreement and had $ 75.0 million and $ 98.0 million of outstanding borrowings as of december 31 , 2014 and 2013 , respectively , with an average daily utilization of $ 85.9 million and $ 102.5 million during 2014 and 2013 , respectively , and $ 96.8 million for the outstanding period during 2012. during the years ended december 31 , 35 2014 , 2013 and 2012 , the related interest expense , excluding amortization of deferred loan fees , under our credit agreements was $ 1.1 million , $ 1.5 million and $ 0.5 million , respectively , which represented weighted average interest rates of 1.3 % , 1.5 % and 1.5 % , respectively . the 2012 credit agreement includes a $ 184 million alternate-currency sub-facility , a $ 10 million swingline sub-facility and a $ 35 million letter of credit sub-facility , and may be used for general corporate purposes including
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Liquidity
| 11,405
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the animal health business realizes substantially higher gross margin percentages in its technology and value-added services segment than in its supply chain segment . these higher gross margins result from the animal health business being both the developer and seller of software products and services . the tax act on december 22 , 2017 , the u.s. government passed the tax act . the tax act is comprehensive tax legislation that implements complex changes to the code including the reduction of the corporate tax rate from 38 35 % to 21 % , modification of accelerated depreciation , the repeal of the domestic manufacturing deduction and changes to the limitations of the deductibility of interest . additionally , the tax act moves from a global tax regime to a modified territorial regime , which requires u.s. companies to pay a mandatory one-time transition tax on historical offshore earnings that have not been repatriated to the united states . the tax act also includes provisions for tax global intangible low-taxes income , or gilti , foreign derived intangible income , or fdii , a base erosion and anti-abuse tax , or beat , that imposes tax on certain foreign related-party payments and code section 163 ( j ) interest limitation , or interest limitation . due to the complexities of the tax act , the sec staff issued staff accounting bulletin no . 118 , or sab 118 , that allows companies to record a provisional amount for any income tax effects of the tax act in accordance with accounting standard codification 740 , or asc 740 , to the extent that a reasonable estimate can be made . sab 118 allows for a measurement period of up to one year after the enactment date of the tax act to finalize the recording of the related tax impacts . the fasb staff q & a , topic 740 no . 5 , accounting for global intangible low-taxed income , states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as gilti in future years or provide for the tax expense related to gilti in the year the tax is incurred . the business elected to recognize the tax on gilti as a period expense in the period the tax is incurred . in the fourth quarter of 2017 , the animal health business recorded provisional amounts related to the tax act for any items that could be reasonably estimated at the time . this included the one-time transition tax that the animal health business estimated to be $ 13.0 million and a net deferred tax expense of $ 7.3 million attributable to the revaluation of deferred tax assets and liabilities due to the lower enacted federal income tax rate of 21 % . in the aggregate , for the quarter ended december 30 , 2017 , these tax act modifications resulted in a one-time tax expense of approximately $ 20.3 million . absent the effects of the transition tax , the revaluation of deferred tax assets and liabilities , and the adoption of accounting standards update , or asu , no . 2016-09 , stock compensation ( topic 718 ) , or asu 2016-09. asu 2016-09 , accounting for stock compensation , the business ' effective tax rate for the year ended december 30 , 2017 would have been 22.8 % as compared to the business ' actual effective tax rate of 34.6 % . for the year ended december 29 , 2018 , the business recorded a net $ 4.4 million additional expense for the one-time transition tax . the change was a result of additional analysis , changes in interpretation and assumptions , as well as additional regulatory guidance that was issued . as of december 22 , 2018 , the business has completed its analysis of the impact of the tax act in accordance with sab 118 and the amounts are now considered final . due to the one-time transition tax and the imposition of the gilti provisions , all previously unremitted earnings will no longer be subject to u.s. federal income tax ; however , there could be u.s. state and or foreign withholding taxes upon distribution of such unremitted earnings . determination of the amount of unrecognized deferred tax liability with respect to such earnings is not practicable . under topic 740 , the business estimated the impact of each provision of the tax act on the business effective tax and recorded a current tax expense for the gilti provision of $ 1.6 million in the business 's effective tax rate for the year ended december 29 , 2018. for the beat , fdii and interest limitation computations , the business has not recorded an estimate in the effective tax rate for the year ended december 29 , 2018 because management has concluded that these provisions of the tax act will not apply to or will have an immaterial impact on its combined financial statements for the year ended december 29 , 2018 . 39 story_separator_special_tag including accounting , legal , information services , planning , compliance , investor relations , administration and communication , and similar costs ; ( ii ) employee benefits and incentives ; and ( iii ) stock-based compensation . the allocations may not reflect the actual expenses that the animal health business would have incurred as a standalone company for the periods presented . during the years ended december 29 , 2018 and december 30 , 2017 , the business was allocated $ 55.4 million and $ 58.7 million , respectively , of general corporate expenses , which are included within selling , general and administrative expenses . other income , net other income , net for the fiscal years ended december 29 , 2018 and december 30 , 2017 was as follows : replace_table_token_8_th * not meaningful . other income , net was $ 6.1 million for the year ended december 29 , 2018 , compared to $ 3.4 million for the year ended december 30 , 2017 , an increase of $ 2.6 million . story_separator_special_tag other , net was $ 3.1 million for the year ended december 29 , 2018 , an increase of $ 2.2 million from the year ended december 30 , 2017. the change was primarily due to investment proceeds , the impact of foreign currency exchange rates and losses from fixed asset disposals in year ended december 30 , 2017. income taxes for the year ended december 29 , 2018 , the effective tax rate was 25.9 % compared to 34.6 % for the prior year period . in 2018 , the effective tax rate was primarily impacted by an increase in the estimate of transition tax 42 associated with the tax act , the impact of gilti and state and foreign income taxes , partially offset by noncontrolling interests in our partnership investments and the impact of windfall tax benefits from share-based payment . in 2017 , the effective tax rate was primarily impacted by the tax act and the adoption of asu 2016-09 , accounting for stock compensation . net income net income was $ 107.4 million for the year ended december 29 , 2018 , compared to $ 92.0 million for the year ended december 30 , 2017 , an increase of $ 15.4 million or 16.7 % . net income attributable to the animal health business net income attributable to the animal health business was $ 100.9 million for the year ended december 29 , 2018 , compared to $ 64.4 million for the year ended december 30 , 2017 , an increase of $ 36.5 million or 56.7 % . year ended december 30 , 2017 compared to year ended december 31 , 2016 the fiscal year ended december 30 , 2017 consisted of 52 weeks as compared to the fiscal year ended december 31 , 2016 , which consisted of 53 weeks . net sales net sales for the fiscal years ended december 30 , 2017 and december 31 , 2016 were as follows : replace_table_token_9_th net sales were $ 3,579.8 million for the year ended december 30 , 2017 , compared to $ 3,353.2 million for the year ended december 31 , 2016 , an increase of $ 226.6 million , or 6.8 % . the change was driven primarily by an increase of $ 206.6 million in organic growth and $ 63.3 million of growth from acquisitions , partially offset by a $ 43.3 million decrease due to the impact from the extra week in 2016. net sales for the supply chain segment were $ 3,479.3 million for the year ended december 30 , 2017 , compared to $ 3,254.5 million for the year ended december 31 , 2016 , an increase of $ 224.9 million , or 6.9 % . the change was driven primarily by an increase of $ 208.6 million in organic growth and $ 61.9 million of growth from acquisitions , partially offset by a $ 45.6 million decrease due to the impact from the extra week in 2016. the growth in internally generated supply chain revenue was positively affected by year-over-year changes to certain supplier agreements where the animal health business acted as a principal in 2017 versus acting as an agent in the prior year . when excluding the effects of this change , organic growth increased by $ 195.2 million . net sales for the technology and value-added services segment were $ 100.5 million for the year ended december 30 , 2017 , compared to $ 98.7 million for the year ended december 31 , 2016 , an increase of $ 1.8 million , or 1.8 % . the change was driven primarily by a $ 2.2 million increase in net sales denominated in local currencies ( including a $ 2.7 million increase in organic growth , partially offset by a $ 0.5 million decrease due to the impact from the extra week in 2016 ) partially offset by a decrease of $ 0.4 million related to foreign currency exchange . no single customer accounted for more than 10 % of the animal health business ' net sales in the fiscal years ended december 30 , 2017 or december 31 , 2016 . 43 gross profit gross profit and gross margins for the fiscal years ended december 30 , 2017 and december 31 , 2016 were as follows : replace_table_token_10_th gross profit was $ 652.0 million for the year ended december 30 , 2017 , compared to $ 619.9 million for the year ended december 31 , 2016 , an increase of $ 32.1 million , or 5.2 % . gross margin was 18.2 % for the year ended december 30 , 2017 , compared to 18.5 % for the year ended december 31 , 2016 , a decrease of 30 basis points . gross profit for the supply chain segment was $ 591.2 million for the year ended december 30 , 2017 , compared to $ 563.6 million for the year ended december 31 , 2016 , an increase of $ 27.6 million , or 4.9 % . the change was due to a $ 15.8 million increase from organic growth and a $ 23.1 million increase related to acquisitions partially offset by an $ 11.3 million decline in gross profit due to the decrease in the gross margin rates . gross margin for the supply chain segment was 17.0 % for the year ended december 30 , 2017 , compared to 17.3 % for the year ended december 31 , 2016. gross profit for the technology and value-added services segment was $ 60.8 million for the year ended december 30 , 2017 , compared to $ 56.3 million for the year ended december 31 , 2016 , an increase of $ 4.5 million , or 7.9 % . the change was due to $ 1.0 million attributable to organic growth and $ 3.5 million attributable to the increase in gross margin rates .
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net sales for the technology and value-added services segment were $ 100.8 million for the year ended december 29 , 2018 , compared to $ 100.5 million for the year ended december 30 , 2017 , an increase of $ 0.3 million , or 0.3 % . the change was due to growth in net sales denominated in local currencies of $ 0.1 million 40 ( which includes a $ 2.8 million decrease in organic growth and $ 2.9 million of growth from acquisitions ) as well as an increase of $ 0.2 million related to foreign currency exchange . no single customer accounted for more than 10 % of the animal health business ' net sales in the fiscal years ended december 29 , 2018 or december 30 , 2017. gross profit gross profit and gross margins for the fiscal years ended december 29 , 2018 and december 30 , 2017 were as follows : replace_table_token_6_th gross profit was $ 684.1 million for the year ended december 29 , 2018 compared to $ 652.0 million for the year ended december 30 , 2017 , an increase of $ 32.1 million , or 4.9 % . total gross profit margin was 18.1 % for the year ended december 29 , 2018 , compared to 18.2 % for the year ended december 30 , 2017 , a decrease of ten basis points . gross profit for the supply chain segment was $ 624.5 million for the year ended december 29 , 2018 , compared to $ 591.2 million for the year ended december 30 , 2017 , an increase of $ 33.2 million , or 5.6 % . the change was due to a $ 17.3 million increase in organic growth , and $ 17.7 million attributable to acquisitions , partially offset by $ 1.8 million due to a decrease in gross margin rates . gross profit margin for the supply chain segment for the year ended december 29 , 2018 was 17.0 % , the same as for the year ended december 30 , 2017. gross profit for the technology and value-added
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ROO
| 2,016
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such statements reflect the company 's current views with respect to future events and financial performance and involve risks and uncertainties , including , without limitation , general economic and business conditions , changes in foreign , political , social , and economic conditions , regulatory initiatives and compliance with governmental regulations , the ability to achieve further market penetration and additional customers , and various other matters , many of which are beyond the company 's control . should one or more of these risks or uncertainties occur , or should underlying assumptions prove to be incorrect , actual results may vary materially and adversely from those anticipated , believed , estimated , or otherwise indicated . consequently , all of the forward-looking statements made in this filing are qualified by these cautionary statements and there can be no assurance of the actual results or developments . the following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein . this discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions , operations , plans , objectives , and performance that involve risk , uncertainties , and assumptions . the actual results may differ materially from those anticipated in such forward-looking statements . for example , when we indicate that we expect to increase our product sales and potentially establish additional license relationships , these are forward-looking statements . the words expect , anticipate , estimate or similar expressions are also used to indicate forward-looking statements . background of our company we are a company incorporated in nevada on march 25 , 2010. on the move systems corp. ( “ we ” , “ us ” , “ our ” , “ omvs ” , or the “ company ” ) was incorporated in nevada on march 25 , 2010. we reincorporated into nevada on february 17 , 2015. our business focus is transportation services . we are currently exploring the on-demand logistics market by developing a network of logistics partnerships . our year-end is february 28. the company is located at 701 north green valley parkway , suite 200 , henderson , nevada 89074. our telephone number is 702-990-3271. our business focus is transportation-related technology services . we are currently exploring the online , on-demand logistics market by developing a shared economy network of trucking partnerships . we are in the process of building a shared economy app designed to put independent drivers and brokers together for more efficient pricing and booking , optimized operations and quick delivery turnarounds . we have signed a letter of intent with a houston-area software design firm regarding development of such a platform . this app , when released , will revolutionize the trucking industry by connecting national and local carriers , enabling each to maximize revenues and reduce costs . plan of operations we believe we do not have adequate funds to fully execute our business plan for the next twelve months unless we obtain additional funding . however , should we not raise this capital , we will allocate our funding to first assure that all state , federal and sec requirements are met . as of february 29 , 2016 , we had cash on hand of $ 2,223. we intend to pursue capital through public or private financing , as well as borrowing and other sources in order to finance our business activities . we can not guarantee that additional funding will be available on favorable terms , if at all . if adequate funds are not available , then our ability to continue our operations may be significantly hindered . - 8 - results of operations we incurred a net loss of $ 1,267,955 for the year ended february 29 , 2016. we had a working capital deficit of $ 1,041,330 as of february 29 , 2016. we do not anticipate having positive net income in the immediate future . net cash used by operating activities for the year ended february 29 , 2016 was $ 555,840. we continue to rely on advances to fund operating shortfalls and do not foresee a change in this situation in the immediate future . there can be no assurance that we will continue to have such advances available . we will not be able to continue operations without them . we are pursuing alternate sources of financing , but there is no assurance that additional capital will be available to the company when needed or on acceptable terms . fiscal year ended february 29 , 2016 compared to the fiscal year ended february 28 , 2015. revenue revenue was $ 0 for the year ended february 29 , 2016 , compared to $ 6,750 for the year ended february , 28 , 2015. we invoiced customers for revenue of $ 9,143 during the year ended february 29 , 2016 ; however , we have not recognized any revenue for that time period since the revenue was not collectible . expenses related to joint ventures we recognized expenses related to joint ventures in the amount of $ 0 and $ 63,178 for the years ended february 29 , 2016 and 2015 , respectively . during 2015 , we had participated in a joint venture that sponsored a race car . there were no such expenses in fiscal 2016. general and administrative expenses we recognized general and administrative expenses in the amount of $ 572,471 and $ 595,679 for the years ended february 29 , 2016 and 2015 , respectively . the reduction in general and administrative expenses was due to reduced professional fees . interest expense interest expense increased from $ 375,412 for the year ended february 28 , 2015 to $ 647,990 for the year ended february 29 , 2016. interest expense for the year ended february 29 , 2016 included amortization of discount on convertible notes story_separator_special_tag such statements reflect the company 's current views with respect to future events and financial performance and involve risks and uncertainties , including , without limitation , general economic and business conditions , changes in foreign , political , social , and economic conditions , regulatory initiatives and compliance with governmental regulations , the ability to achieve further market penetration and additional customers , and various other matters , many of which are beyond the company 's control . should one or more of these risks or uncertainties occur , or should underlying assumptions prove to be incorrect , actual results may vary materially and adversely from those anticipated , believed , estimated , or otherwise indicated . consequently , all of the forward-looking statements made in this filing are qualified by these cautionary statements and there can be no assurance of the actual results or developments . the following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein . this discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions , operations , plans , objectives , and performance that involve risk , uncertainties , and assumptions . the actual results may differ materially from those anticipated in such forward-looking statements . for example , when we indicate that we expect to increase our product sales and potentially establish additional license relationships , these are forward-looking statements . the words expect , anticipate , estimate or similar expressions are also used to indicate forward-looking statements . background of our company we are a company incorporated in nevada on march 25 , 2010. on the move systems corp. ( “ we ” , “ us ” , “ our ” , “ omvs ” , or the “ company ” ) was incorporated in nevada on march 25 , 2010. we reincorporated into nevada on february 17 , 2015. our business focus is transportation services . we are currently exploring the on-demand logistics market by developing a network of logistics partnerships . our year-end is february 28. the company is located at 701 north green valley parkway , suite 200 , henderson , nevada 89074. our telephone number is 702-990-3271. our business focus is transportation-related technology services . we are currently exploring the online , on-demand logistics market by developing a shared economy network of trucking partnerships . we are in the process of building a shared economy app designed to put independent drivers and brokers together for more efficient pricing and booking , optimized operations and quick delivery turnarounds . we have signed a letter of intent with a houston-area software design firm regarding development of such a platform . this app , when released , will revolutionize the trucking industry by connecting national and local carriers , enabling each to maximize revenues and reduce costs . plan of operations we believe we do not have adequate funds to fully execute our business plan for the next twelve months unless we obtain additional funding . however , should we not raise this capital , we will allocate our funding to first assure that all state , federal and sec requirements are met . as of february 29 , 2016 , we had cash on hand of $ 2,223. we intend to pursue capital through public or private financing , as well as borrowing and other sources in order to finance our business activities . we can not guarantee that additional funding will be available on favorable terms , if at all . if adequate funds are not available , then our ability to continue our operations may be significantly hindered . - 8 - results of operations we incurred a net loss of $ 1,267,955 for the year ended february 29 , 2016. we had a working capital deficit of $ 1,041,330 as of february 29 , 2016. we do not anticipate having positive net income in the immediate future . net cash used by operating activities for the year ended february 29 , 2016 was $ 555,840. we continue to rely on advances to fund operating shortfalls and do not foresee a change in this situation in the immediate future . there can be no assurance that we will continue to have such advances available . we will not be able to continue operations without them . we are pursuing alternate sources of financing , but there is no assurance that additional capital will be available to the company when needed or on acceptable terms . fiscal year ended february 29 , 2016 compared to the fiscal year ended february 28 , 2015. revenue revenue was $ 0 for the year ended february 29 , 2016 , compared to $ 6,750 for the year ended february , 28 , 2015. we invoiced customers for revenue of $ 9,143 during the year ended february 29 , 2016 ; however , we have not recognized any revenue for that time period since the revenue was not collectible . expenses related to joint ventures we recognized expenses related to joint ventures in the amount of $ 0 and $ 63,178 for the years ended february 29 , 2016 and 2015 , respectively . during 2015 , we had participated in a joint venture that sponsored a race car . there were no such expenses in fiscal 2016. general and administrative expenses we recognized general and administrative expenses in the amount of $ 572,471 and $ 595,679 for the years ended february 29 , 2016 and 2015 , respectively . the reduction in general and administrative expenses was due to reduced professional fees . interest expense interest expense increased from $ 375,412 for the year ended february 28 , 2015 to $ 647,990 for the year ended february 29 , 2016. interest expense for the year ended february 29 , 2016 included amortization of discount on convertible notes
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liquidity and capital resources we anticipate needing additional financing to fund our operations and to effectively execute our business plan over the next eighteen months . currently available cash is not sufficient to allow us to commence full execution of our business plan . our business expansion will require significant capital resources that may be funded through the issuance of common stock or of notes payable or other debt arrangements that may affect our debt structure . despite our current financial status , we believe that we may be able to issue notes payable or debt instruments in order to start executing our business plan . however , there can be no assurance that we will be able to raise money in this fashion and have not entered into any agreements that would obligate a third party to provide us with capital . we raised the cash amounts to be used in these activities from the sale of common stock and from advances . we currently have negative working capital of $ 1,041,330. as of february 29 , 2016 , we had $ 2,223 of cash on hand . this amount of cash will be adequate to fund our operations for less than one month . we have no known demands or commitments and are not aware of any events or uncertainties as of february 29 , 2016 that will result in or that are reasonably likely to materially increase or decrease our current liquidity .
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Liquidity
| 12,215
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the fluids division also markets liquid and dry calcium chloride products manufactured at its production facilities or purchased from third-party suppliers to a variety of markets outside the energy industry . the fluids division also provides domestic onshore oil and gas operators with a wide variety of water management services . fluids division revenues increased $ 88.7 million during 2017 compared to 2016 , primarily due to increased cbfs and associated product sales revenues in the u.s. gulf of mexico , including product sales associated with a tetra cs neptune completion fluid project during the period . while offshore rig counts remain low , we have seen an increase in demand from our customers , contributing to this increase . in addition , international offshore fluid sales and onshore manufactured product sales increased compared to the prior year . the fluids water management business is also dependent upon domestic drilling activity , particularly in unconventional shale gas and oil reservoirs . north american onshore rig counts increased during 2017 compared to the prior year . water management service revenues increased resulting from the impact of increased demand , reflecting the growth in domestic onshore rig count . our production testing division generates revenues and cash flows by performing frac flowback , production well testing , offshore rig cooling , early production , and other associated services and products . the primary markets served by the production testing division include many of the major oil and gas producing regions in the united states , mexico , and canada , as well as in oil and gas basins in certain regions in south america , africa , europe , the middle east , and australia . the production testing division 's production testing operations are generally driven by the demand for natural gas and oil and the resulting levels of drilling and completion activities in the markets that the production testing division serves . many of the markets served by the production testing division are characterized by high lifting costs for oil and natural gas , such as in certain unconventional shale gas and oil reservoirs located in certain basins in the u.s. , canada , and certain other international markets . the production testing division 's revenues increased by $ 30.5 million in 2017 compared to 2016 , due to increased activity in certain domestic and international markets and product sales revenues associated with international equipment sales . onshore u.s. activity levels in certain markets have reflected increased rig counts compared to the prior year , although customer pricing levels continue to be challenging due to excess availability of equipment . our compression division , through cclp , generates revenues and cash flows by providing compression services and equipment for natural gas and oil production , gathering , transportation , processing , and storage . the compression division 's equipment sales business includes the fabrication and sale of standard compressor packages , custom-designed compressor packages , and oilfield pump systems designed and fabricated at the compression division 's facilities . the compression division 's aftermarket business provides a wide range of services including operation , maintenance , overhaul and reconfiguration services as well as the sale of compressor package parts and components manufactured by third-party suppliers . the compression division provides its services and equipment to a broad base of natural gas and oil exploration and production , midstream , transmission , and storage companies operating throughout many of the onshore producing regions of the united states as well as in a number of foreign countries , including mexico , canada and argentina . compression division revenues decreased $ 15.8 million in 2017 as compared to 2016 , due to reductions in both compressor sales and compression and related services revenues . although overall utilization of the compression division 's compressor fleet has improved sequentially for five consecutive quarterly periods , customer pricing for compression services and demand for low-horsepower production enhancement compression services remains challenged . our offshore division consists of two operating segments , both of which were disposed in the march 1 , 2018 sale : offshore services and maritech . the offshore services segment generates revenues and cash flows by performing ( 1 ) downhole and subsea services such as oil and gas well plugging and abandonment and workover services , ( 2 ) decommissioning and certain construction services utilizing heavy lift barges and various cutting technologies with regard to offshore oil and gas production platforms and pipelines , and ( 3 ) conventional and saturated diving services . offshore services revenues increased by $ 19.2 million during 2017 compared to 2016 , due to increased revenues from its diving , well abandonment , and cutting businesses , partially offset by decreased 32 heavy lift services revenues . decreased heavy lift activity levels in the u.s. gulf of mexico 2017 reflects decreased utilization , reflecting the impact of increased hurricane activity and other weather disruptions in the u.s. gulf of mexico that caused significant downtime during 2017. revenues for work performed for maritech are eliminated in consolidation . demand for services in 2017 r eflects recent reduced volatility of oil and natural gas commodity prices . the sale of substantially all of maritech 's offshore oil and gas producing properties during 2011 and 2012 essentially removed us from the oil and gas exploration and production business . maritech 's remaining assets and operations , as well as its asset retirement obligations , were conveyed in the march 1 , 2018 sale described in item 1 - business to orinoco . critical accounting policies and estimates this discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements . we prepared these financial statements in conformity with united states generally accepted accounting principles . in preparing our consolidated financial statements , we make assumptions , estimates , and judgments that affect the amounts reported . story_separator_special_tag once a maritech well abandonment and decommissioning project is performed , any remaining decommissioning liability in excess of the actual cost of the work performed is recorded as a gain and is included in earnings in the period in which the project is completed . conversely , estimated or actual costs in excess of the decommissioning liability are charged against earnings in the period in which the work is estimated or performed . we review the adequacy of our decommissioning liabilities whenever indicators suggest that either the amount or timing of the estimated cash flows underlying the liabilities have changed materially . the amount of cash flows necessary to abandon and decommission the property is subject to changes due to seasonal demand , increased demand following hurricanes , regulatory changes , and other general changes in the energy industry environment . accordingly , the estimation of our decommissioning liabilities is imprecise . asset retirement obligations are recorded in accordance with asc 410 `` asset retirement and environmental obligations , `` whereby the estimated fair value of a liability for asset retirement obligations is recorded in the period in which it is incurred and in which a reasonable estimate can be made . such estimates are based on relevant assumptions that we believe are reasonable . the cost estimates for maritech asset retirement obligations are considered reasonable estimates consistent with market conditions at the time they are made , and we believe they reflect the amount of work legally obligated to be performed in accordance with bsee standards , as revised from time to time . during each of the three years ended december 31 , 2017 , maritech adjusted its decommissioning liabilities as a result of increased estimates , as well as the actual cost of significant abandonment and decommissioning work performed during each of those years . maritech recorded approximately $ 5.3 million of excess decommissioning expense during the three years ended december 31 , 2017 , associated with work performed or to be performed on its oil and gas properties . the actual cost of performing maritech 's well abandonment and decommissioning work has often exceeded maritech 's initial estimate of these decommissioning liabilities and has resulted in charges to earnings in the period the work is performed or when the additional liability is determined . the maritech properties , and maritech itself , including its asset retirement obligations , were sold in the march 1 , 2018 sale to orinoco . revenue recognition we generate revenue on certain well abandonment , decommissioning , and dive services projects under contracts which are typically of short duration and that provide for either lump-sum charges or specific time , material , and equipment charges , which are billed in accordance with the terms of such contracts . we generally recognize revenue once the following four criteria are met : ( 1 ) persuasive evidence of an arrangement exists ; ( 2 ) delivery has occurred or services have been provided ; ( 3 ) the sales price is fixed or determinable ; and ( 4 ) collectability is reasonably assured . the majority of our compression services are provided pursuant to contract terms ranging from one month to twenty-four months . collections associated with progressive billings to customers for the construction of compression equipment are generally included in unearned income in the consolidated balance sheets until such time as the equipment is delivered . 35 income taxes we are a u.s. company and are subject to income taxes in the u.s. we also operate in a number of countries under many legal forms . our operations are taxed on various bases , including actual income before taxes , deemed profits ( which are generally determined using a percentage of revenue rather than profits ) and withholding taxes based on revenue . determination of taxable income in any jurisdiction requires the interpretation of the applicable tax laws and regulations and the use of estimates and assumptions regarding significant future events such as the amount , timing , and character of deductions , permissible revenue recognition methods under the applicable tax laws , and the sources and character of income and tax credits . we provide for income taxes by taking into account the differences between the financial statement treatment and tax treatment of certain transactions . deferred tax assets and liabilities are recognized for the anticipated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis amounts . deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled . the effect of a change in tax rates is recognized as income or expense in the period that includes the enactment date . management must make certain assumptions regarding whether tax differences are permanent or temporary and must estimate the timing of their reversal , and whether taxable operating income in future periods will be sufficient to fully recognize any gross deferred tax assets . we establish valuation allowances to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized . in determining the need for valuation allowances , management has considered and made judgments and estimates regarding estimated future taxable income and ongoing prudent and feasible tax planning strategies . changes in state , federal , and foreign tax laws , as well as changes in our financial condition , could affect these estimates . in addition , we maintain liabilities for estimated tax exposures and uncertainties in jurisdictions where we operate . the annual tax provision includes the impact of income tax provisions and benefits for changes to liabilities that we consider appropriate , as well as related interest and penalties . we consider many factors when evaluating and estimating income
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excluding the capital expenditures of our compression division , we expect to spend approximately $ 35 to $ 55 million during 2018. our compression division expects to spend approximately $ 55 to $ 75 million during 2018. the level of future growth capital expenditures depends on forecasted demand for our products and services . if the forecasted demand for our products and services during 2018 increases or decreases , the amount of planned expenditures on growth and expansion will be adjusted accordingly . 52 financing activities during 2017 , the total amount of consolidated cash used by financing activities was $ 21.3 million . to fund our capital expenditure and working capital requirements , we may supplement our existing cash balances and cash flow from operating activities from short-term borrowings , long-term borrowings , leases , equity issuances , and other sources of capital . on march 23 , 2016 , we filed a universal shelf registration statement on form s-3 with the securities and exchange commission and it was declared effective on april 13 , 2016. pursuant to this registration statement and following the offerings described below , we have the ability to sell debt or equity securities in one or more public offerings up to an aggregate public offering price of $ 164.4 million . in june 2016 , pursuant to this shelf registration statement , we completed an underwritten public offering of 11.5 million shares of our common stock , which generated aggregate net proceeds of $ 60.2 million . these proceeds were primarily used to repay outstanding indebtedness . in december 2016 , we completed an underwritten offering of 22.3 million shares of our common stock and the warrants to purchase 11.2 million shares of our common stock at an exercise price of $ 5.75 per share .
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Liquidity
| 10,066
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all reserves are in the united states ( in thousands ) : replace_table_token_46_th the company story_separator_special_tag story_separator_special_tag 100 % ; margin-left : 0pt ; margin-right : 0pt '' > 17 - natural gas marketing natural gas sales are reported net of underlying natural gas purchase costs and thus reflect gross margin . as shown in the table above , gross margins were reduced during 2011 and again in 2012 as average field level purchase volumes were off over 50 percent during the periods presented . the company 's primary source of natural gas supply is the non-shale areas of texas , louisiana and the gulf of mexico and these volumes declined because the company 's suppliers curtailed drilling activity due to suppressed natural gas prices . in addition , development of the nation 's natural gas infrastructure including more diverse areas of production , expanded pipeline and storage capacity , and increased price transparency with the development of the intercontinental exchange ( ice ) have reduced purchase opportunities and per unit margins . historically , prices received for crude oil and natural gas have been volatile and unpredictable with price volatility expected to continue . see discussion under item 1a risk factors . - transportation the transportation segment revenues and operating earnings were as follows ( in thousands ) : replace_table_token_12_th ( 1 ) represents the percentage increase ( decrease ) from the prior year . revenues and operating results improved for the transportation segment in both 2012 and 2011 due to increased customer demand . the company also benefitted in 2012 and 2011 from $ 2.6 million and $ 1.2 million in gains , respectively , from the sale of used equipment following the purchase of new truck replacements . the company 's customers predominately consist of the domestic petrochemical industry and demand for their products has substantially recovered from the slow-down occurring in 2009. serving to improve customer demand was a recovering united states economy , low natural gas prices ( a basic feedstock cost for the petrochemical industry ) and improved export demand for petrochemicals . in addition , during the previous economic downturn , the trucking industry reduced capacity by retiring older units without replacement . with demand improvement , industry capacity has been strained allowing rate increases and improved overall profitability . however , an industry wide shortage of qualified drivers has affected the company by suppressing current year revenues and results of operations . as transportation revenues increase or decrease , operating earnings will typically increase or decrease at an accelerated rate . this trend exists because the fixed cost components of the company 's operation do not vary with changing revenues . as currently configured , operating earnings project at break-even levels when annual revenues average approximately $ 54 million . above that level , operating earnings will grow and below that level , losses result . transportation segment depreciation increased for 2012 as older fully depreciated tractor units were replaced with new model year vehicles . during 2012 , the company replaced 125 truck tractors and one trailer . during 2011 the company replaced 115 older model truck- tractor units and added 10 new units to the fleet . in addition , 25 trailers were added to the fleet during 2011. for 2011 relative to 2010 , increased depreciation expense on new tractor models was offset by certain in-service trailers becoming fully depreciated during the period . 18 - oil and gas oil and gas segment revenues and operating earnings are primarily a function of crude oil and natural gas production volumes and prices . comparative amounts for revenues , operating earnings and depreciation and depletion were as follows ( in thousands ) : replace_table_token_13_th ( 1 ) represents the percentage increase ( decrease ) from the prior year . ( 2 ) includes gains from property sales of $ 2.2 million and $ 2.9 million in 2012 and 2011 , respectively . improved oil and gas segment revenues during 2012 and 2011 resulted from crude oil and natural gas volumes increases as shown in the table below with such volume changes resulting from recent drilling efforts . active drilling , however , also served to increase depreciation and depletion expenses as well as property impairment charges during 2012 and 2011. operating earnings were markedly reduced in 2011 due to increased charges for depreciation , depletion and producing property impairments as well as increased exploration and prospect impairment expenses as shown in the second table below . producing and non-producing property impairments increased significantly in 2011 following a december 2011 decline in the current and forward price for natural gas . natural gas prices remained at relatively low levels during 2012 resulting in additional impairment charges for the year . comparative volumes and prices were as follows : replace_table_token_14_th _ ( 1 ) crude oil prices and volumes include the sale of associated natural gas liquids production . comparative exploration and prospect impairment costs were as follows ( in thousands ) : replace_table_token_15_th 19 during 2012 , the company participated in the drilling of 109 wells with no dry holes . additionally , the company had 34 wells in process on december 31 , 2012 with ultimate evaluation anticipated during 2013. converting natural gas volumes to equate with crude oil volumes at a ratio of six to one , production volumes and proved reserve changes summarize as follows , on an equivalent barrel ( eq . bbls ) basis : replace_table_token_16_th for 2012 and for the three year period ended december 31 , 2012 , estimated reserve additions represented 101 percent and 191 percent , respectively , of production volumes . such reserve additions resulted from active drilling efforts during the periods presented . given the present low natural gas price environment , exploration and development activity during 2013 will be substantially reduced . the company 's current drilling and exploration efforts are primarily focused as follows : east texas project in 2005 , the company joined with its partners in acquiring acreage in nacogdoches and shelby counties , texas . story_separator_special_tag cash and cash equivalents totaled $ 47,239,000 as of december 31 , 2012 , and such balances are maintained in order to meet the timing of day-to-day cash needs . working capital , the excess of current assets over current liabilities , totaled $ 57,799,000 as of december 31 , 2012. the company heavily relies on its ability to obtain open-line trade credit from its suppliers especially with respect to its crude oil marketing operation . in this regard , the company generally maintains substantial cash balances and avoids debt obligations . capital expenditures during 2012 included $ 27,929,000 for marketing and transportation equipment additions , primarily consisting of truck-tractors , and $ 23,083,000 in property additions associated with oil and gas exploration and production activities . for 2013 , the company anticipates expending an additional approximately $ 12 million on oil and gas development and exploration projects . in addition , approximately $ 3 million will be expended during 2013 for the purchase of 35 trailers for the transportation segment and approximately $ 15 million will be expended by the crude oil marketing operation for the purchase of 46 truck-tractors , 60 trailers and the construction of a barge loading facility . these units will serve to replace older units and to increase the marketing fleet by 30 units . funding for these 2013 projects will be from operating cash flow and available working capital . within certain constraints , the proposed projects can be delayed or cancelled should funding become unavailable . at various times during each month , the company makes cash prepayments and or early payments in advance of the normal due date to certain suppliers of crude oil within the marketing operations . crude oil supply prepayments totaled $ 5,000,000 as of december 31 , 2012 and such amounts will be recouped and advanced from month to month as the suppliers deliver product to the company . the company also requires certain counterparties to post cash collateral with the company in order to support their purchase from the company . such cash collateral held by the company totaled $ 7,456,000 as of december 31 , 2012. the company also maintains a stand-by letter of credit facility with wells fargo bank to provide for the issuance of up to $ 60 million in stand-by letters of credit to suppliers of crude oil and natural gas ( see note ( 1 ) to consolidated financial statements ) . the issuance of stand-by letters of credit enables the company to avoid posting cash collateral when procuring crude oil and natural gas supply . as of december 31 , 2012 , letters of credit outstanding totaled $ 21.9 million . the issued stand-by letters of credit are cancelled as the underlying purchase obligations are satisfied by cash payment when due . management believes current cash balances , together with expected cash generated from future operations , and the ease of financing truck and trailer additions through leasing arrangements ( should the need arise ) will be sufficient to meet short-term and long-term liquidity needs . the company utilizes cash from operations to make discretionary investments in its marketing , transportation and exploration businesses , which comprise substantially all of the company 's investing cash outflows for each of the periods in this filing . the company does not look to proceeds from property sales to fund its cash flow needs . except for an approximate $ 9.9 million commitment for storage tank terminal arrangements and office lease space , the company 's future commitments and planned investments can be readily curtailed if operating cash flows contract . 22 historically , the company pays an annual dividend in the fourth quarter of each year , and the company paid a $ .62 per common share dividend or $ 2,615,000 to shareholders of record as of december 3 , 2012. the most significant item affecting future increases or decreases in liquidity is earnings from operations and such earnings are dependent on the success of future operations ( see item 1a . risk factors in this annual report of form 10-k ) . off-balance sheet arrangements the company maintains certain operating lease arrangements with independent truck owner-operators for use of their equipment and driver services on a month-to-month basis . in addition , the company has entered into certain lease and terminal access contracts in order to provide tank storage and dock access for its crude oil marketing business . such contracts require certain minimum monthly payments for the term of the contracts . all operating lease commitments qualify for off-balance sheet treatment . rental expense for the years ended december 31 , 2012 , 2011 , and 2010 was $ 8,110,000 , $ 7,621,000 and $ 5,870,000 , respectively . as of december 31 , 2012 , rental commitments under long-term non-cancelable operating leases and terminal arrangements for the next five years are payable as follows : 2013 - $ 3,404,000 ; 2014 - $ 1,718,000 ; 2015 - $ 1,450,000 ; 2016 - $ 1,431,000 ; 2017 – $ 1,210,000 and $ 724,000 thereafter . contractual cash obligations the company has no capital lease obligations . the company has entered into certain operating lease arrangements and terminal access agreements for tankage , truck-tractors , trailers and office space . a summary of the payment periods for contractual cash obligations is as follows ( in thousands ) : replace_table_token_17_th in addition to its lease obligations , the company is also committed to purchase certain quantities of crude oil and natural gas in connection with its marketing activities . such commodity purchase obligations are the basis for commodity sales , which generate the cash flow necessary to meet such purchase obligations . approximate commodity purchase obligations as of december 31 , 2012 are as follows ( in thousands ) : replace_table_token_18_th insurance from time to time , the marketplace for all forms of insurance enters into periods of severe cost increases .
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results of operations - marketing marketing revenues , operating earnings , depreciation and certain costs are as follows ( in thousands ) : replace_table_token_9_th supplemental volume and price information is : replace_table_token_10_th ( 1 ) reflects the volume purchased from third parties at the oil and natural gas field level and pipeline pooling points . 16 crude oil revenues increased in 2012 relative to 2011 and in 2011 relative to 2010 because of increased field level purchase volumes and generally higher average crude oil prices as shown in the table above . volume increases primarily resulted from new well production established by the company 's customer base in the eagle ford shale trend of south texas beginning in 2011 , while prices fluctuated upwards with general market conditions . - crude oil – field level operating earnings ( non gaap measure ) two significant factors affecting comparative crude oil segment operating earnings are inventory valuations and forward commodity contract ( derivatives or mark-to-market ) valuations . as a purchaser and shipper of crude oil , the company holds inventory in storage tanks and third-party pipelines . inventory sales turnover occurs approximately every three days , but the quantity held in stock at the end of a given period is reasonably consistent . as a result , during periods of increasing crude oil prices , the company recognizes inventory liquidation gains while during periods of falling prices , the company recognizes inventory liquidation and valuation losses . over time , these gains and losses tend to offset and have limited impact on cash flow . while crude oil prices fluctuated during 2012 , the net impact yielded inventory liquidation losses totaling $ 1,596,000 as prices trended down from $ 98 per barrel in the beginning of the year to average $ 95 per barrel at year-end .
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ROO
| 14,491
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in accordance with asc topic 805 , business combinations these financial statements reflect the combination of solar power , inc. and sgt 's financial statements for all periods presented under which both entities were under the common control of ldk . the predecessor entity was determined to be sgt due to the fact that sgt was the first entity controlled by ldk . ldk obtained a controlling interest in sgt on july 10 , 2009. ldk obtained a controlling interest in solar power , inc. on march 31 , 2011. as such , the company recognized the assets and liabilities of sgt ( the accounting receiving entity ) at their historical carrying values in accordance with u.s. gaap and recast the assets and liabilities of the legacy solar power , inc. entity ( the transferring entity ) to reflect carrying value of the parent , ldk , which were stepped up to fair value on march 31 , 2011 upon ldk obtaining a controlling interest in solar power , inc. refer to note 11 —goodwill and other intangible assets for details of the balances carried by ldk now reflected in the consolidated financial statements . upon ldk acquiring its controlling interest in solar power , inc. on march 31 , 2011 , the equity of the new reporting entity for the combined financial statements of solar power , inc. and sgt reflects the preferred and common stock of solar power , inc. and associated additional paid-in capital and sgt 's retained earnings and foreign currency translation at march 31 , 2011. adjustments to eliminate the capital share accounts of sgt were recorded to additional paid-in capital . 6. deconsolidation of solar green technology in november 2013 , the board of directors of sgt approved a voluntary plan for liquidation . on december 30 , 2013 , the board of directors of sgt appointed a liquidator . under italian regulations , the liquidation process is controlled and carried out by the liquidator and the company has no ability to exercise influence over sgt . as a result of these actions , the company deconsolidated sgt on december 30 , 2013 when the company ceased to have a controlling financial interest in sgt . the company recognized a gain on deconsolidation of $ 3.5 million which was recognized in other income in the statement of operations as the liquidation is a run-off of operations . additionally , the company deconsolidated net liabilities owned by sgt to ldk of $ 2.0 million . as ldk is the company 's parent company , this portion of the deconsolidation was treated as debt forgiveness and a capital transaction recorded as an increase to additional paid in capital . the components of the gain on deconsolidation are as follows ( in thousands ) : adjust sgt 's negative net assets to zero $ 6,127 reclassify net liabilities forgiven by ldk to additional paid in capital ( 1,980 ) write-off of advance to sgt ( 438 ) reclassify cumulative foreign currency translation to the statement of operations ( 172 ) gain on deconsolidation $ 3,537 the fair value of the company 's retained investment in sgt is zero at december 31 , 2013. sgt will remain a related party of the company . f-16 7. balance sheet component accrued liabilities ( in thousands ) : replace_table_token_10_th ( 1 ) the noncurrent portion of the capital lease obligation is recorded in financing and capital lease obligations , net of current portion . ( 2 ) the noncurrent portion of the product warranty liability is recorded in other liabilities . 8. accounts and notes receivable during 2013 , th e company recognized $ 13.9 million revenue under the completed-contract method and recorded a receivable of $ 8.8 million ( originally denominated in euro 's ) related to the sale of its greece projects . due to the delay in the customer receiving term financing from cdb , the receivable is currently being collected over a six year agreed upon payment schedule , plus variable interest . the difference of $ 5.1 million between revenue recognized and account receivable balance relates to prior payments received from the customer which had been recorded as a customer deposit within accrued liabilities . as of december 31 , 2013 , due to the extended collection period , $ 2.2 million of the accounts receivable is recorded as current and $ 6.6 million is recorded in accounts receivable , noncurrent . during the second quarter of 2013 , the company reclassified $ 5.9 million of existing accounts receivables from a second unrelated customer to noncurrent based on the expected collection period which is anticipated to exceed one year . as of december 31 , 2013 , the company has $ 2 . 0 million recorded in accounts receivable , current and $ 5.8 million recorded in accounts receivable , noncurrent from this second customer . the company agreed to advance to customer kdc predevelopment and site acquisition costs related to the imclone epc agreement between kdc and the company and recorded the amount as notes receivable . the terms of the epc agreement require repayment of the advance upon final completion of the sef , which was expected to occur in the first half of 2013 but is now expected to occur in the first half of 2014 as the project did not break ground until the second quarter of 2013. the advance bears interest at the rate of 5 % per year that is payable at the time the principal is repaid . the advance and related interest was collected in full in december 2013 as kdc obtained term debt financing for the project in december 2013. as of december 31 , 2013and 2012 , the balance of the note receivable from this project was none and $ 7.0 million , respectively . story_separator_special_tag if these net metering caps are reached and local utilities are not required to purchase solar power , or if the net metering caps do not increase in the locations where we install our solar product , demand for our products could decrease . the solar industry is currently lobbying to extend these arbitrary net metering caps and replace them with either notably higher numbers or with a revised method of calculation that will allow the industry to continue our expansion in a manner consistent with both the industry and state and federal desires . moreover , we anticipate that our solar power installation will be subject to oversight and regulation in accordance with national and local ordinances relating to building codes , safety , environmental protection , utility interconnection and metering and related matters . 9 it is difficult to track the requirements of individual states and design equipment to comply with the varying standards . any new government regulations or utility policies pertaining to our solar power products may result in significant additional expenses to us , our resellers , and our customers and as a result , could cause a significant reduction in demand for our solar power products . compliance with environmental regulations can be expensive and noncompliance with these regulations may result in adverse publicity and potentially significant monetary damages and fines . we are required to comply with extensive environmental laws and regulations at the national , state , local , and international levels . these environmental laws and regulations include those governing the discharge of pollutants into the air and water , the use , management , and disposal of hazardous materials and wastes , the cleanup of contaminated sites , and occupational health and safety . we have incurred and will continue to incur significant costs and capital expenditures in complying with these laws and regulations . in addition , violations of or liabilities under environmental laws or permits may result in restrictions being imposed on our operating activities or in our being subjected to substantial fines , penalties , criminal proceedings , third party property damage or personal injury claims , cleanup costs , or other costs . while we believe we are currently in substantial compliance with applicable environmental requirements , future developments such as more aggressive enforcement policies , and the implementation of new , more stringent laws and regulations , or the discovery of presently unknown environmental conditions may require expenditures that could have a material adverse effect on our business , results of operations , and financial condition . we generally recognize revenue on system installations on a “ percentage of completion ” basis and payments are due upon the achievement of contractual milestones and any delay or cancellation of a project could adversely affect our business . we generally recognize revenue on our system installations on a “ percentage of completion ” basis , and as a result , our revenues from these installations are driven by the performance of our contractual obligations , which is generally driven by timelines for the installation of our solar power systems at customer sites . this could result in unpredictability of revenue and in the near term , a revenue decrease . as with any project-related business , there is the potential for delays within any particular customer project . variation of project timelines and estimates may impact our ability to recognize revenue in a particular period . in addition , certain customer contracts may include payment milestones due at specified points during a project . because we must invest substantial time and incur significant expense in advance of achieving milestones and the receipt of payments , failure to achieve milestones could adversely affect our business and results of operations . we are subject to particularly lengthy sales cycles in some markets . our focus on developing a customer base that requires installation of a solar power system means that it may take longer to develop strong customer relationships or partnerships . moreover , factors specific to certain industries also have an impact on our sales cycles . some of our customers may have longer sales cycles that could occur due to the timing of various state and federal subsidies . these lengthy and challenging sales cycles may mean that it could take longer before our sales and marketing efforts result in revenue , if at all , and may have adverse effects on our operating results , financial condition , cash flows and stock price . our competitive position depends in part on maintaining intellectual property protection . our ability to compete and to achieve and maintain profitability depends in part on our ability to protect our proprietary discoveries and technologies . we currently rely on a combination of copyrights , trademarks , trade secret laws and confidentiality agreements to protect our intellectual property rights . we also rely upon unpatented know-how and continuing technological innovation to develop and maintain our competitive position . from time to time , the u.s. supreme court , other federal courts , the u.s. congress or the u.s. patent and trademark office may change the standards of patentability , and any such changes could have a negative impact on our business . 10 we may face intellectual property infringement claims that could be time-consuming and costly to defend and result in our loss of significant rights and the assessment of damages . if we receive notice of claims of infringement , misappropriation or misuse of other parties ' proprietary rights , some of these claims could lead to litigation . we can not provide assurance that we will prevail in these actions or that other actions alleging misappropriation or misuse by us of third-party trade secrets , infringement by us of third-party patents and trademarks or the validity of our patents will not be asserted or prosecuted against us . we may also initiate claims to defend our intellectual property rights .
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it is unknown at this time if ldk 's joint provisional liquidation will require or result in the company disposing of assets in an orderly manner , in a liquidation scenario or at all . if the company is required to dispose of assets to satisfy ldk 's creditors , it could result in the company incurring losses . these factors raise substantial doubt as to our ability to continue as a going concern . while our management believes that we have a plan to satisfy liquidity requirements for a reasonable period of time , there is no assurance that our plan will be successfully implemented . we are experiencing the following risks and uncertainties in the business : as of december 31 , 2013 and 2012 , the company has accounts payable due to ldk of $ 50.9 million and $ 51.8 million , respectively . all of the accounts payable due to ldk are currently past due and payable to ldk . although there are no formal agreements , ldk has verbally indicated that it will not demand payment until the receivable from the customer has been collected . in light of ldk 's recent filing for liquidation , it is unclear whether or not ldk will be able to continue to allow the company to defer repayment to ldk . should ldk change its position and demand payment for the past due amount prior to collection of the related receivable from the customer , the company does not have the ability to make the payment currently due without additional sources of financing or accelerating the collection of outstanding receivables . with ldk as a majority shareholder , the significant risks and uncertainties associated with their filing for liquidation by ldk could have a significant negative impact on the financial viability of solar power , inc. as well as indicate an inability for ldk to support the company 's business .
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Liquidity
| 2,852
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however , the amount that the company realizes on its acquired loan assets could differ materially from the carrying value reflected in its financial statements , based upon the timing of collections on the acquired loans in future periods . because of the loss sharing agreements with the fdic on certain of these assets , the company did not expect to incur any significant losses related to these assets . to the extent the actual values realized for the acquired loans are different from the estimates , the indemnification asset was generally impacted in an offsetting manner due to the loss sharing support from the fdic . subsequent to the initial valuation , the company continued to monitor identified loan pools for changes in estimated cash flows projected for the loan pools , anticipated credit losses and changes in the accretable yield . analysis of these variables requires significant estimates and a high degree of judgment . see note 4 of the accompanying audited financial statements for additional information regarding the teambank , vantus bank , sun security bank , interbank and valley bank fdic-assisted transactions . 64 as noted above , in 2020 , the company will adopt the new accounting standard related to the allowance for credit losses . the adoption of this standard will required the company to reclassify any remaining non-accretable yield adjustment to the allowance for credit losses . fdic-assisted acquired loans will still be evaluated in their original pools that were determined at the acquisition date of the loans . see note 1 of the accompanying audited financial statements for additional information . goodwill and intangible assets goodwill and intangible assets that have indefinite useful lives are subject to an impairment test at least annually and more frequently if circumstances indicate their value may not be recoverable . goodwill is tested for impairment using a process that estimates the fair value of each of the company 's reporting units compared with its carrying value . the company defines reporting units as a level below each of its operating segments for which there is discrete financial information that is regularly reviewed . as of december 31 , 2019 , the company has one reporting unit to which goodwill has been allocated – the bank . if the fair value of a reporting unit exceeds its carrying value , then no impairment is recorded . if the carrying value amount exceeds the fair value of a reporting unit , further testing is completed comparing the implied fair value of the reporting unit 's goodwill to its carrying value to measure the amount of impairment . intangible assets that are not amortized will be tested for impairment at least annually by comparing the fair values of those assets to their carrying values . at december 31 , 2019 , goodwill consisted of $ 5.4 million at the bank reporting unit , which included goodwill of $ 4.2 million that was recorded during 2016 related to the acquisition of 12 branches from fifth third bank . other identifiable intangible assets that are subject to amortization are amortized on a straight-line basis over a period of seven years . at december 31 , 2019 , the amortizable intangible assets consisted of core deposit intangibles of $ 2.7 million , including $ 1.9 million related to the fifth third bank transaction in january 2016 , $ 600,000 related to the valley bank transaction in june 2014 and $ 153,000 related to the boulevard bank transaction in march 2014. these amortizable intangible assets are reviewed for impairment if circumstances indicate their value may not be recoverable based on a comparison of fair value . see note 1 of the accompanying audited financial statements for additional information . for purposes of testing goodwill for impairment , the company used a market approach to value its reporting unit . the market approach applies a market multiple , based on observed purchase transactions for each reporting unit , to the metrics appropriate for the valuation of the operating unit . significant judgment is applied when goodwill is assessed for impairment . this judgment may include developing cash flow projections , selecting appropriate discount rates , identifying relevant market comparables and incorporating general economic and market conditions . based on the company 's goodwill impairment testing , management does not believe any of the company 's goodwill or other intangible assets were impaired as of december 31 , 2019. while management believes no impairment existed at december 31 , 2019 , different conditions or assumptions used to measure fair value of the reporting unit , or changes in cash flows or profitability , if significantly negative or unfavorable , could have a material adverse effect on the outcome of the company 's impairment evaluation in the future . current economic conditions changes in economic conditions could cause the values of assets and liabilities recorded in the financial statements to change rapidly , resulting in material future adjustments in asset values , the allowance for loan losses , or capital that could negatively impact the company 's ability to meet regulatory capital requirements and maintain sufficient liquidity . following the housing and mortgage crisis and correction beginning in mid-2007 , the united states entered a prolonged economic downturn . unemployment rose from 4.7 % in november 2007 to peak at 10.0 % in october 2009. the elevated unemployment levels negatively impacted consumer confidence , which had a detrimental impact on industry-wide performance nationally as well as in the company 's midwest market area . economic conditions have significantly improved since then , as indicated by consumer confidence levels , increased economic activity and low unemployment levels . in december 2019 , the economy marked its 111th straight month of net job gains with 145,000 jobs added . hiring was below economists ' estimates of 164,000 added jobs but the national unemployment rate held steady at 3.5 % . story_separator_special_tag in the year ended december 31 , 2019 , great southern 's total assets increased $ 338.9 million , or 7.2 % , from $ 4.68 billion at december 31 , 2018 , to $ 5.02 billion at december 31 , 2019. full details of the current year changes in total assets are provided in the “ comparison of financial condition at december 31 , 2019 and december 31 , 2018 ” section . 67 loans . in the year ended december 31 , 2019 , great southern 's net loans increased $ 165.0 million , or 4.1 % , from $ 3.99 billion at december 31 , 2018 , to $ 4.15 billion at december 31 , 2019. e xcluding fdic-assisted acquired loans and mortgage loans held for sale , total gross loans increased $ 99.2 million , or 2.1 % , from december 31 , 2018 to december 31 , 2019. this increase was primarily in commercial real estate loans , owner occupied one- to four-family residential loans and other residential ( multi-family ) loans . these increases were partially offset by decreases in construction loans and consumer auto loans . fdic-assisted acquired loan portfolios decreased $ 40.4 million . as loan demand is affected by a variety of factors , including general economic conditions , and because of the competition we face and our focus on pricing discipline and credit quality , we can not be assured that our loan growth will match or exceed the level of increases achieved in 2019 or prior years . the company 's strategy continues to be focused on maintaining credit risk and interest rate risk at appropriate levels . recent loan growth has occurred in several loan types , primarily construction loans , other residential ( multi-family ) real estate loans and commercial real estate loans and in most of great southern 's primary lending locations , including springfield , st. louis , kansas city , des moines and minneapolis , as well as the loan production offices in atlanta , chicago , dallas , denver , omaha and tulsa . certain minimum underwriting standards and monitoring help assure the company 's portfolio quality . great southern 's loan committee reviews and approves all new loan originations in excess of lender approval authorities . generally , the company considers commercial construction , consumer , and commercial real estate loans to involve a higher degree of risk compared to some other types of loans , such as first mortgage loans on one- to four-family , owner-occupied residential properties . for commercial real estate , commercial business and construction loans , the credits are subject to an analysis of the borrower 's and guarantor 's financial condition , credit history , verification of liquid assets , collateral , market analysis and repayment ability . it has been , and continues to be , great southern 's practice to verify information from potential borrowers regarding assets , income or payment ability and credit ratings as applicable and as required by the authority approving the loan . to minimize construction risk , projects are monitored as construction draws are requested by comparison to budget and with progress verified through property inspections . the geographic and product diversity of collateral , equity requirements and limitations on speculative construction projects help to mitigate overall risk in these loans . underwriting standards for all loans also include loan-to-value ratio limitations which vary depending on collateral type , debt service coverage ratios or debt payment to income ratio guidelines , where applicable , credit histories , use of guaranties and other recommended terms relating to equity requirements , amortization , and maturity . consumer loans are primarily secured by new and used motor vehicles and these loans are also subject to certain minimum underwriting standards to assure portfolio quality . great southern 's consumer underwriting and pricing standards were fairly consistent over the past several years through the first half of 2016. in response to a more challenging consumer credit environment , the company tightened its underwriting guidelines on automobile lending in the latter part of 2016. management took this step in an effort to improve credit quality in the portfolio and lower delinquencies and charge-offs . the underwriting standards employed by great southern for consumer loans include a determination of the applicant 's payment history on other debts , credit scores , employment history and an assessment of ability to meet existing obligations and payments on the proposed loan . in 2019 , the company made the decision to discontinue indirect auto loan originations . of the total loan portfolio at december 31 , 2019 and 2018 , 87.2 % and 84.4 % , respectively , was secured by real estate , as this is the bank 's primary focus in its lending efforts . at december 31 , 2019 and 2018 , commercial real estate and commercial construction loans were 47.6 % and 49.7 % of the bank 's total loan portfolio ( excluding loans acquired through fdic-assisted transactions ) , respectively . commercial real estate and commercial construction loans generally afford the bank an opportunity to increase the yield on , and the proportion of interest rate sensitive loans in , its portfolio . they do , however , present somewhat greater risk to the bank because they may be more adversely affected by conditions in the real estate markets or in the economy generally . at december 31 , 2019 and 2018 , loans made in the springfield , mo . metropolitan statistical area ( springfield msa ) were 9 % and 9 % of the bank 's total loan portfolio ( excluding loans acquired through fdic-assisted transactions ) , respectively . the company 's headquarters are located in springfield and we have operated in this market since 1923. because of our large presence and experience in the springfield msa , many lending opportunities exist . however , if the economic conditions of the
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on december 31 , 2019 , the bank 's common equity tier 1 capital ratio was 13.1 % , its tier 1 capital ratio was 13.1 % , its total capital ratio was 14.0 % and its tier 1 leverage ratio was 12.3 % . as a result , as of december 31 , 2019 , the bank was well capitalized , with capital ratios in excess of those required to qualify as such . on december 31 , 2018 , the bank 's common equity tier 1 capital ratio was 12.4 % , its tier 1 capital ratio was 12.4 % , its total capital ratio was 13.3 % and its tier 1 leverage ratio was 12.2 % . as a result , as of december 31 , 2018 , the bank was well capitalized , with capital ratios in excess of those required to qualify as such . the frb has established capital regulations for bank holding companies that generally parallel the capital regulations for banks . on december 31 , 2019 , the company 's common equity tier 1 capital ratio was 12.0 % , its tier 1 capital ratio was 12.5 % , its total capital ratio was 15.0 % and its tier 1 leverage ratio was 11.8 % . to be considered well capitalized , a bank holding company must have a tier 1 risk-based capital ratio of at least 6.00 % and a total risk-based capital ratio of at least 10.00 % . as of december 31 , 2019 , the company was considered well capitalized , with capital ratios in excess of those required to qualify as such . on december 31 , 2018 , the company 's common equity tier 1 capital ratio was 11.4 % , its tier 1 capital ratio was 11.9 % , its total capital ratio was 14.4 % and its tier 1 leverage ratio was 11.7 % . as of december 31 , 2018 , the company was considered well capitalized , with capital ratios in excess of those required to qualify as such .
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Liquidity
| 12,452
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monoprice offers its products for sale through the www.monoprice.com website , where the majority of our e-commerce revenue is derived , and fulfills those orders from our warehouse in rancho cucamonga , california . we also sell our products through reseller and marketplace agreements . monoprice has built a well-respected brand by delivering products with quality on par with well-known national brands , selling these products at prices far below the prices for those well-known brands , and providing top-tier service and rapid product delivery . the monoprice website showcases 14 product categories and over 6,900 individual products . monoprice has developed an efficient product cost structure that is enabled by a direct import supply chain solution that eliminates traditional layers of mark-ups imposed by intermediaries . consumers are able to access and purchase products 24 hours a day from the convenience of a computer or a mobile device . monoprice 's team of customer service representatives assists customers primarily by online chat or email . nearly all sales are to customers located in the united states . acquisitions hsw : on may 30 , 2014 , infospace acquired hsw for $ 44.9 million in cash . hsw is included in our financial results beginning on may 30 , 2014 , the acquisition date . monoprice : on august 22 , 2013 , we acquired monoprice for $ 182.9 million in cash . monoprice is included in our financial results beginning on august 22 , 2013 , the acquisition date . accordingly , the results discussed below were impacted by the timing of this acquisition , in that 2014 included a full year of monoprice results as compared to a partial year of results in 2013. taxact : on january 31 , 2012 , we acquired taxact for $ 287.5 million in cash . taxact is included in our financial results beginning on january 31 , 2012 , the acquisition date . accordingly , the results discussed below were impacted by the timing of this acquisition , in that 2014 and 2013 included twelve months of taxact results while 2012 included eleven months . in addition , on october 4 , 2013 , taxact acquired balance financial . seasonality our tax preparation segment is highly seasonal , with the significant majority of its annual revenue earned in the first four months of our fiscal year . during the third and fourth quarters , the tax preparation segment typically reports losses because revenue from the segment is minimal while core operating expenses continue at relatively consistent levels . revenue from our e-commerce segment also is seasonal , with revenues historically being the lowest in the second quarter , a period that does not include consumer back-to-school or holiday-related spending . comparability we revised certain amounts for the year ended december 31 , 2012 from the amounts previously reported in that period 's annual report on form 10-k. we reclassified credit card fees previously reported in `` services cost of revenue '' to `` “ sales and marketing '' expense . the reclassification had no effect on our reported revenues , operating income , or cash flows for the year ended december 31 , 2012. refer to `` note 1 : the company and basis of presentation '' of the notes to consolidated financial statements in part ii item 8 of this report . 31 results of operations story_separator_special_tag revenue from distribution partners decreased each quarter in 2014 over the prior year , for a total of $ 98.9 million , or 28 % , driven by decreases of $ 73.8 million and $ 25.1 million in revenue from existing partners and new partners ( both defined in table above ) , respectively . we generated 36 % and 33 % of our search and content revenue through our top five distribution partners in 2014 and 2013 , respectively . the web properties of our top five distribution partners for 2014 generated 30 % of our search and content revenue in 2013 . the decrease in distribution revenue in 2014 was driven by the removal of advertisements for our mobile search services as a result of our new agreement with google , a technology change , loss of certain distribution partner traffic due to increased competition , difficulty in adding new distribution partners , changes in interpretation and enforcement of our search customers ' policies and requirements , and our own compliance efforts . in addition to the year-over-year decline in distribution revenue , it also decreased sequentially each quarter in 2014. the sequential decreases in the second half of 2014 primarily were due to changes in interpretation and enforcement of our search customers ' policies and requirements and our own compliance efforts as well as continued effects of increased competition . as we have previously disclosed , our search customers have broad discretion to unilaterally revise their policies and requirements , and their interpretations of those policies and requirements may differ from ours . recent changes in the interpretation and enforcement of policies and requirements by our search customers have significantly impacted the operations of some of our larger and more tenured distribution partners . these changes generally impact models that have historically been permitted by our search customers , but we believe our search customers now wish to deemphasize these models in their networks . the most significant changes take the form of restrictions on marketing , traffic acquisition , distribution methodologies by certain partners , restrictions on certain content displayed by partners , and changes in categorization of certain traffic , all of which have resulted in decreased revenue and impacted our ability to bring new partners into our network . if our search customers continue to revise their interpretation and enforcement of their requirements and policies , our search and content business will continue to experience volatility . story_separator_special_tag revenue generated by our owned and operated properties ( which includes hsw ) decreased $ 3.3 million , or 5 % , primarily due to lower returns on online marketing in 2014 as compared to 2013. this decrease was offset partially by the revenue contribution from hsw . the lower returns on online marketing were attributable originally to a technology change implemented in the first quarter of 2014. the issues of the technology change were substantially addressed in the second quarter of 2014 ; however , we have been unable to increase our rate of return in the second half of 2014 to the rate previously experienced prior to such technology change and consistent with rates of return achieved in 2013. our inability to consistently and profitably scale our online marketing expenditures was due to a decrease in the revenue earned for this traffic without a corresponding decrease in cost to acquire traffic , which we believe was related to volatility with respect to the quality scores that are applied by our search customers to certain of our sites . we have limited visibility into the factors impacting these scores or how these scores impact revenue and cost , since these elements are proprietary to our search customers . to the extent that we experience continued volatility in quality scores , we could be challenged going forward in our ability to increase marketing expenditures while maintaining our desired rate of return . search and content operating income decreased approximately $ 26.7 million , consisting of the $ 102.2 million decrease in revenue , offset by a decrease of $ 75.5 million in operating expenses . the decrease in search and content operating expenses primarily was due to an $ 81.7 million , or 29 % , decrease in search and content services cost of revenue , which was mainly driven by the decrease in distribution revenue and the resulting revenue share to our distribution partners as well as decreased content costs , and a $ 1.0 million decrease in data center expenses related to the migration of the data center to the cloud in 2013. these decreases were offset by a $ 3.6 million increase in personnel expenses primarily due to overall increased headcount , mainly as a result of the hsw acquisition , and employee separation costs , a $ 2.2 million increase in spending on our online marketing , and a $ 0.8 million increase in professional services associated with development projects and hsw content creation . segment margin decreased primarily due to increased personnel expenses and flat non-personnel operating expenses on declining revenues , as well as a lower return on our online marketing expenditures . as noted above , we have experienced factors that have caused significant volatility , due in part to changes in interpretation and enforcement of our search customers ' requirements and policies , resulting in decreased revenue and margin compression . if our search customers continue to revise their interpretation and enforcement of their requirements and policies , our search and content business will continue to experience volatility and its financial performance will continue to decline . see `` risks related to our search and content business '' in part i item 1a . of this report . we have taken steps to redeploy resources toward initiatives that we believe will better align with our search customers ' preferences , which should drive longer-term and more sustainable segment income . these initiatives will be driven by leadership that we recently brought to this business with the intention to provide product and service diversification to stabilize revenue . we expect further downward pressure on quarterly revenues through at least the first half of 2015 due to the time needed to develop and scale the 34 above initiatives as well as the removal of a distribution partner who accounted for 8 % and 11 % of fourth quarter and full year 2014 search and content revenue , respectively . year ended december 31 , 2013 compared with year ended december 31 , 2012 search and content revenue increased approximately $ 83.7 million , or 24 % , primarily due to revenue generated by our distribution partners which increased by $ 52.3 million , or 17 % , driven by a $ 56.2 million increase in revenue from existing partners . the increase in revenue from existing partners was offset by a $ 3.9 million decrease in revenue from new partners . we generated 33 % and 47 % of our search and content revenue through our top five distribution partners in 2013 and 2012 , respectively . the web properties of our top five distribution partners for 2013 generated 42 % of our search and content revenue in 2012 . further contributing to the increase was a $ 31.3 million , or 77 % , increase in revenue generated from our owned and operated properties . the increase was primarily due to continued investment in online marketing to drive end users to our owned and operated properties . search and content operating income increased approximately $ 20.3 million , consisting of the $ 83.7 million increase in revenue , offset by an increase of $ 63.3 million in operating expenses . the increase in search and content operating expenses primarily was due to a $ 35.7 million , or 15 % , increase in search and content services cost of revenue , which was mainly driven by the increase in distribution revenue and the resulting revenue share to our distribution partners . the remaining increase in search and content operating expenses was primarily due to a $ 26.7 million increase in spending on our online marketing , a $ 0.9 million increase in data center expenses related to the migration of the data center to the cloud , and a $ 0.7 million increase in sales and marketing personnel expenses in support of our continued marketing initiatives .
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segment results are discussed in the next section . year ended december 31 , 2013 compared with year ended december 31 , 2012 total revenues increased approximately $ 167.1 million due to increases of $ 83.7 million in revenue related to our search and content business and $ 29.1 million in revenue related to our tax preparation business , and the addition of $ 54.3 million in product revenue from the monoprice business . operating income increased approximately $ 30.2 million , consisting of the $ 167.1 million increase in revenue and offset by a $ 136.8 million increase in operating expenses . key changes in operating expenses were : $ 63.3 million increase in the search and content segment 's operating expenses primarily as a result of higher revenue share to our distribution partners with the increase in search and content distribution revenue and higher spending on our online marketing . $ 18.6 million increase in the tax preparation segment 's operating expenses primarily due to the timing of the taxact acquisition . $ 49.3 million increase in the e-commerce segment 's operating expenses due to the acquisition of monoprice in 2013 . $ 5.6 million increase in corporate-level expense activity , primarily as a result of amortization expense associated with the acquisitions of monoprice and taxact and higher personnel expenses due to increased 32 headcount to support operations . this was offset by lower stock-based compensation due to $ 5.2 million in expense recognized in 2012 related to the modification of a warrant issued in august 2011 to purchase blucora common stock ( the “ warrant ” ) and the vesting of non-employee stock options upon completion of the taxact acquisition ( for further detail on both items , see `` note 10 : stock-based compensation '' of the notes to consolidated financial statements in part ii item 8 of this report ) . segment results are discussed in the next section . segment revenue/operating
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( 5 ) holders may put their notes to us on february 15 , 2023. conversion rights : holders of our convertible notes may convert their notes under the following circumstances : ( 1 ) if the notes are called for redemption ; ( 2 ) during any calendar quarter if the closing price of our common story_separator_special_tag this discussion should be read in conjunction with the consolidated financial statements and accompanying notes for the year ended august 30 , 2018. all period references are to our fiscal periods unless otherwise indicated . our fiscal year is the 52 or 53-week period ending on the thursday closest to august 31. our fiscal 2018 , 2017 , and 2016 each contain 52 weeks . all production data includes the production of imft and inotera . all tabular dollar amounts are in millions , except per share amounts . for an overview of our business , see `` part i – item 1. business – overview . '' 28 story_separator_special_tag increases in sbu sales volumes for 2018 resulting from strong demand for cloud and enterprise ssd markets more than offset declines in selling prices . sbu sales also include `` non-trade '' products consisting of products manufactured and sold to intel through imft under a long-term supply agreement at prices approximating cost , which included 3d xpoint memory and nand products , aggregating $ 541 million , $ 553 million , and $ 501 million , for 2018 , 2017 , and 2016 , respectively . ebu sales for 2018 increased 29 % as compared to 2017 primarily due to strong demand across ebu 's primary markets including consumer , industrial multimarkets , and automotive . ebu sales were comprised of products incorporating dram , nand , and nor flash in decreasing order of revenue . cnbu sales for 2017 increased 90 % as compared to 2016 due to increases in average selling prices due to strong demand across key markets , growth in the cloud market driven by significant increases in dram content per server , and increases in sales of our gddr5 and gddr5x products into the graphics market driven by strong demand from the gaming industry . mbu sales for 2017 increased 72 % as compared to 2016 primarily due to significant increases in sales volumes , driven by customer qualifications for lpdram and managed nand products , combined with higher memory content in smartphones and growth in sales of emcp products . mbu sales growth in 2017 was partially offset by declines in average selling prices for trade nand products . sbu sales of trade nand products for 2017 increased 41 % as compared to 2016 primarily due to increases in sales volumes from strong demand , particularly for component nand and client and cloud ssd storage products , partially offset by declines in average selling prices . sbu sales of ssd storage products increased by 137 % for 2017 as compared to 2016 primarily as a result of the launch of new ssd products incorporating our tlc 3d nand technology . ebu sales for 2017 increased 39 % as compared to 2016 primarily due to strong demand and higher sales volumes for dram and emcp in consumer markets and dram and emmc products in the automotive markets . 30 operating income ( loss ) by business unit replace_table_token_7_th percentages reflect operating income ( loss ) as a percentage of net sales for each business unit . cnbu operating income for 2018 improved from 2017 primarily due to improved pricing and higher sales volumes resulting from strong demand for our products combined with manufacturing cost reductions . mbu operating income for 2018 improved from 2017 primarily due to increases in pricing and sales volumes for lpdram products , higher sales of high-value managed nand products , and manufacturing cost reductions . sbu operating income for 2018 improved from 2017 primarily due to manufacturing cost reductions enabled by our execution in transitioning to 64-layer tlc 3d nand products and improvements in product mix . sbu operating income for 2018 was adversely impacted by higher costs associated with imft 's production of 3d xpoint memory products at less than full capacity . ebu operating income for 2018 increased as compared to 2017 as a result of increases in average selling prices , manufacturing cost reductions , and increases in sales volumes , partially offset by higher r & d costs . cnbu operating margin for 2017 improved from 2016 primarily due to improved pricing from strong market conditions , manufacturing cost reductions , and product mix . mbu operating income for 2017 improved from 2016 primarily due to manufacturing cost reductions and higher sales volumes , partially offset by higher r & d costs and declines in average selling prices for trade nand products . sbu operating margin for 2017 improved from 2016 primarily due to manufacturing cost reductions , partially offset by declines in average selling prices . ebu operating income for 2017 increased as compared to 2016 as a result of manufacturing cost reductions , which outpaced declines in average selling prices , and increases in sales volumes . operating expenses and other selling , general , and administrative sg & a expenses for 2018 were 9 % higher than 2017 primarily due to increases in legal costs , technical and consulting fees , and employee compensation . sg & a expenses for 2017 were 13 % higher than 2016 primarily due to increases in employee compensation as well as transaction costs related to the inotera acquisition . research and development r & d expenses vary primarily with the number of development wafers processed , the cost of advanced equipment dedicated to new product and process development , and personnel costs . because of the lead times necessary to manufacture our products , we typically begin to process wafers before completion of performance and reliability testing . development of a product is deemed complete when it is qualified through reviews and tests for performance and reliability . story_separator_special_tag beginning in 2019 , our effective tax rate may increase to the low teens percentage depending on the amount and geographic mix of taxable income . income taxes for 2018 , 2017 , and 2016 included tax benefits of $ 1 million , $ 28 million , and $ 58 million , respectively , related to the favorable resolution of certain tax matters , which were previously reserved as uncertain tax positions . during 2018 , we reassessed our capital structure , including our board of directors ' authorization to repurchase up to $ 10 billion of our outstanding common stock beginning in 2019 , the future cash needs of our global operations , and the effects of the tax act . as a result of this reassessment , we deemed a portion of our foreign earnings to be no longer indefinitely reinvested . as a result of the repatriation tax , substantially all of our accumulated foreign earnings prior to december 31 , 2017 32 were subject to u.s. federal taxation . although these earnings have been subject to u.s. federal income tax under the repatriation tax , the repatriation to the united states of all or a portion of these earnings would potentially be subject to foreign withholding and state income tax . as of august 30 , 2018 , we had a deferred tax liability of $ 82 million associated with our undistributed earnings . we operate in a number of tax jurisdictions outside the unites states , including singapore , where we have tax incentive arrangements , which expire in whole or in part at various dates through 2031 , that are conditional , in part , upon meeting certain business operations and employment thresholds . the effect of tax incentive arrangements reduced our tax provision by $ 1.96 billion ( benefiting our diluted earnings per share by $ 1.59 ) for 2018 , by $ 742 million ( $ 0.64 per diluted share ) for 2017 , and were not material in 2016 . ( see `` item 8. financial statements and supplementary data – notes to consolidated financial statements – income taxes . '' ) other net interest expense decreased 60 % for 2018 as compared to 2017 due to decreases in debt obligations and increases in interest income . net interest expense increased 42 % for 2017 as compared to 2016 primarily due to increases in debt obligations , including our borrowings of 80 billion new taiwan dollars in december 2016 in connection with our acquisition of inotera and $ 1.25 billion from the issuance of our 2023 secured notes in april 2016. further discussion of other operating and non-operating income and expenses can be found in the following notes contained in `` item 8. financial statements and supplementary data – notes to consolidated financial statements '' : equity plans research and development other operating income ( expense ) , net other non-operating income ( expense ) , net liquidity and capital resources our primary sources of liquidity are cash generated from operations and financing obtained from capital markets and financial institutions . cash generated from operations is highly dependent on selling prices for our products , which can vary significantly from period to period . we are continuously evaluating alternatives for efficiently funding our capital expenditures and ongoing operations . we expect , from time to time , to engage in a variety of financing transactions for such purposes , including the issuance of securities . we have an undrawn revolving credit facility that expires in july 2023 and provides for borrowings of up to $ 2.00 billion . we expect that our cash and investments , cash flows from operations , and available financing will be sufficient to meet our requirements at least through the next 12 months . to develop new product and process technology , support future growth , achieve operating efficiencies , and maintain product quality , we must continue to invest in manufacturing technologies , facilities and equipment , and r & d . we estimate that capital expenditures in 2019 for property , plant , and equipment , net of partner contributions , to be $ 10.5 billion plus or minus 5 % , focused on technology transitions and product enablement . the actual amounts for 2019 will vary depending on market conditions . as of august 30 , 2018 , we had commitments of approximately $ 1.8 billion for the acquisition of property , plant , and equipment , substantially all of which is expected to be paid within one year . in may 2018 , we announced that our board of directors had authorized the discretionary repurchase of up to $ 10 billion of our outstanding common stock beginning in 2019. we may purchase shares on a discretionary basis through open-market purchases , block trades , privately-negotiated transactions , derivative transactions , and or pursuant to a rule 10b5-1 trading plan , subject to market conditions and our ongoing determination of the best use of available cash . the repurchase authorization does not obligate us to acquire any common stock . from august 31 , 2018 through october 12 , 2018 , we repurchased an aggregate of $ 1.65 billion of our common stock under an accelerated share repurchase ( `` asr '' ) agreement , a rule 10b5-1plan , and through open market repurchases . pursuant to the asr , we entered into an agreement with a financial institution to purchase $ 1.00 billion of our common stock in the first quarter of fiscal 2019. the number of shares ultimately purchased will be calculated by dividing $ 1.00 billion by a volume-weighted average price of our common stock from september 5 , 2018 through as late as november 29 , 2018 ( the 33 `` measurement period '' ) , subject to an agreed-upon discount .
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results of operations consolidated results replace_table_token_5_th total net sales total net sales for 2018 increased 50 % as compared to 2017. higher sales in 2018 for both dram and nand products as compared to 2017 were driven by strong execution in delivering high-value products featuring our 1xnm dram and 64-layer 3d nand technologies combined with strong demand for products across our primary markets . sales of dram products for 2018 increased 64 % from 2017 primarily due to an increase in average selling prices of approximately 35 % and an increase in sales volumes of approximately 20 % as a result of strong market conditions , particularly for cloud , enterprise , mobile , and graphics markets , combined with increased sales into high-value markets . sales of trade nand products for 2018 increased 26 % from 2017 despite declines in average selling prices primarily due to an increase in sales volumes of approximately 40 % driven by increases in sales of high-value ssd and mobile managed nand products enabled by strong demand and our execution in delivering 3d nand products . total net sales for 2017 increased 64 % as compared to 2016 due to strong conditions across our primary markets , particularly for enterprise , mobile , client , and ssd storage . sales of dram products for 2017 increased 80 % from 2016 due to an increase in sales volumes of approximately 50 % and an increase in average selling prices of approximately 20 % as a result of the strong market conditions . sales of trade nand products for 2017 increased approximately 50 % as compared to 2016 due to an increase in sales volumes of approximately 65 % resulting from strong market demand for our 3d nand products , which was partially offset by declines in average selling prices .
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in evaluating goodwill for impairment , the company first assesses qualitative factors to determine whether it is more than likely than not ( that is , a likelihood of more than 50 percent ) that the fair value of a reporting unit is less than its carrying amount . if the company concludes that it is not more likely than not that the fair value of the reporting unit is less than its carrying value , no further testing of goodwill assigned to the reporting unit is required . however , if the company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value , the company applies a two-step fair value-based test to assess goodwill for impairment . the first step compares the fair value of a reporting unit to its carrying amount , including goodwill . if the carrying amount of the reporting unit exceeds its fair value , the second step is then performed . the second step compares the carrying amount of the reporting unit 's goodwill to the implied fair value of the goodwill . if the implied fair value of the goodwill is less than the carrying amount , an impairment loss would be recorded in the statement of operations . the annual goodwill impairment assessment was performed as of july 1 , 2017 , for fiscal year 2017 . revenue recognition the company recognizes revenue when all of the following criteria are met : a buyer submits the winning bid in an auction and , as a result , evidence of an arrangement exists , and the sale price has been determined ; the buyer has assumed the risks and rewards of ownership ; and collection is reasonably assured . liquidity services , inc. and subsidiaries notes to consolidated financial statements ( continued ) revenue is also evaluated to determine whether the company should report the gross proceeds as revenue ( when the company acts as the principal in the arrangement ) or the company should report its net commissions and related fees as revenue ( when the company acts as an agent ) . in arrangements in which the company is deemed to be the primary obligor , bears physical and general inventory risk , and credit risk , the company recognizes as revenue the gross proceeds from the sale , including buyer 's premiums . the company has evaluated its revenue recognition policy related to sales under its purchase transaction model and determined it is appropriate to account for these sales on a gross basis . in the company 's evaluation , the company relied most heavily upon its status as primary obligor in the sales relationship and the fact that the company has general inventory risk . in arrangements in which the company acts as an agent or broker on a consignment basis , without taking physical or general inventory risk , revenue is recognized based on the sales commissions that are paid to the company by the sellers for utilizing the company 's services ; in this situation , sales commissions represent a percentage of the gross proceeds from the sale that the seller pays to the company upon completion of the transaction . such revenue as well as other fee revenue is presented as fee revenue in the consolidated statements of operations . the company collects and remits sales taxes on merchandise that it purchases and sells , and reports such amounts under the net method in its consolidated statements of operations . cost of goods sold cost of goods sold includes the costs of purchasing and transporting property for auction as well as credit card transaction fees . the company purchases the majority of its inventory at a percentage of the vendor 's original acquisition cost under the surplus contract and certain commercial contracts , at a percentage of the vendor 's last retail price under certain commercial contracts , and at a fixed price per pound that varies depending on the type of the inventory purchased under the scrap contract . title for the inventory passes to the company at the time of purchase and the company bears the risks and rewards of ownership . the company does not have title to assets sold on behalf of its commercial or government sellers when it receives only sales commission revenue and , as such , recognizes no inventory and related cost of goods sold associated with those sales . cost of goods sold also includes shipping and handling costs . risk associated with certain concentrations the company does not perform credit evaluations for the majority of its buyers . however , substantially all sales are recorded subsequent to payment authorization being received . as a result , the company is not subject to significant collection risk , as most goods are not shipped before payment is received . for consignment sales transactions , funds are typically collected from buyers and are held by the company on the sellers ' behalf . the funds are included in cash and cash equivalents in the consolidated financial statements . the company releases the funds to the seller , less the company 's commission and other fees due , after the buyer has accepted the goods or within 30 days , depending on the state where the buyer and seller conduct business . the amount of cash held on behalf of the sellers is recorded as payables to sellers in the accompanying consolidated balance sheets . financial instruments that potentially subject the company to significant concentrations of credit risk consist principally of cash and cash equivalents in banks over fdic limits , and accounts receivable . the company deposits its cash with financial institutions that the company considers to be of high credit quality . story_separator_special_tag the fair value of identified intangible assets is based upon an estimate of the future economic benefits expected to result from ownership , which represents the amount at which the assets could be bought or sold in a current transaction between willing parties , that is , other than in a forced or liquidation sale . we test our goodwill for impairment annually or more frequently if events or circumstances indicate impairment may exist . examples of such events or circumstances could include a significant change in business climate , a loss of significant sellers or buyers , or a significant decline in stock price . we make a qualitative evaluation about the likelihood of goodwill impairment to determine whether we should calculate the fair value of a reporting unit . if our evaluation indicates a likelihood of goodwill impairment , we apply a two-step fair value-based test to assess goodwill for impairment of our four reporting units , which are the same as our four operating segments ( rscg , cag , govdeals , and irondirect ) . the first step compares the fair value of a reporting unit to its carrying amount , including goodwill . if the carrying amount of the reporting unit exceeds its fair value , we perform the second step , which compares the carrying amount of the reporting unit 's goodwill to the implied fair value of the goodwill . if the fair value of the goodwill is less than the carrying amount , an impairment loss would be recorded in our statements of operations . intangible assets with definite lives are amortized over their estimated useful lives and are also reviewed for impairment if events or changes in circumstances indicate that their carrying amount may not be realizable . our management makes certain estimates and assumptions in order to determine the fair value of net assets and liabilities , including , among other things , an assessment of market conditions , projected cash flows , cost of capital and growth rates , which could significantly impact the reported value of goodwill and other intangible assets . estimating future cash flows requires significant judgment , and our projections may vary from cash flows eventually realized . the valuations employ a combination of present value techniques to measure fair value , corroborated by comparisons to estimated market multiples . these valuations are based on a discount rate determined by our management to be consistent with industry discount rates and the risks inherent in our current business model . determining the fair value of a reporting unit requires the exercise of significant judgment , including judgments about the appropriate discount rates , terminal growth rates , weighted average costs of capital , exit multiples , and the amount and timing of expected future cash flows . the judgments used in determining the fair value of our reporting units are based on significant unobservable inputs which causes the determination of the implied fair value of goodwill to fall within level three of the gaap fair value hierarchy . the cash flows employed in the discounted cash flow analysis are based on the most recent budgets , forecasts , and business plans as well as various growth rate assumptions for years beyond the current business plan period . discount rate assumptions are based on an assessment of the risk inherent in the future revenue streams and cash flows of the reporting unit . various factors , including the failure to successfully implement our business plan for any of our reporting units , as well as other factors beyond our control , could have a negative effect on the fair value of such reporting unit , and increase the risk of further impairments of goodwill in the future . a reporting unit represents a component of an operating segment that ( a ) constitutes a business , ( b ) has discrete financial information , and ( c ) its performance is reviewed by management . during fiscal year 2016 we concluded we had five reporting units-rscg , cag , govdeals , truckcenter , and irondirect . on january 30 , 2017 , we decided to exit certain truckcenter operations in order to focus our time and resources on our ecommerce marketplace strategy . as a result , as of september 30 , 2017 , we have four reporting units . we will continue to sell trucks and related equipment through our other ecommerce marketplaces . we performed our annual goodwill and finite-lived intangible assets impairment assessment as of july 1 , the first day of our fiscal fourth quarter . as a result , the annual goodwill impairment assessment was performed as of july 1 , 2017 , for fiscal year 2017. we believed that changing the annual goodwill impairment assessment date allows for enhanced internal controls over financial reporting by providing additional time during the fiscal fourth quarter to perform necessary analyses and reviews . during the three months ended december 31 , 2014 , we identified indicators of impairment , including the termination of the wal-mart agreement on december 1 , 2014 , the significant decline in market capitalization during the quarter , and continued uncertainty in projections for fiscal year 2015 and beyond . as a result , we performed step one of our goodwill impairment test as of december 31 , 2014. based on step one of the goodwill impairment test as of the interim testing date , we determined that the carrying values of our two reporting units exceeded their fair values . accordingly , step two of the goodwill impairment test was performed , where we determined the estimated fair values of the assets and liabilities of the reporting units . as a result of the step two test , we recorded a goodwill impairment charge of $ 85.1 million during the first quarter of fiscal year 2015. as part of our annual goodwill impairment assessment as of september 30 ,
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net cash used by financing activities was $ 0.2 million for the year ended september 30 , 2016 and net cash provided by financing activities was $ 0.1 million for the year ended september 30 , 2015. net cash provided by financing activities for the year ended september 30 , 2015 consisted primarily of proceeds from the exercise of common stock options . capital expenditures . our capital expenditures consist primarily of capitalized software , computers and purchased software , office equipment , furniture and fixtures , and leasehold improvements . the timing and volume of such capital expenditures in the future will be affected by the addition of new sellers or buyers or expansion of existing seller or buyer relationships . we intend to fund those expenditures primarily from operating cash flows . our capital expenditures for the twelve months ended september 30 , 2017 were $ 7.8 million . as of september 30 , 2017 , we had no outstanding commitments for capital expenditures . we believe that our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for at least the next 12 months . our future capital requirements will depend on many factors including our rate of revenue growth , the timing and extent of spending to support development efforts , the expansion of sales and marketing activities , the development and deployment of new marketplaces , the introduction of new value-added services and the costs to establish additional distribution centers . although we are currently not a party to any definitive agreement with respect to potential investments in , or acquisitions of , complementary businesses , products or technologies , we may enter into these types of arrangements in the future , which could also require us to seek additional equity or debt financing . the sale of additional equity securities or convertible debt securities would result in additional dilution to our stockholders . additional debt would result in increased interest expense and could result in covenants that would restrict our operations . there is no assurance that such financing , if required , will be available in amounts or on terms acceptable to us , if at all . contractual and commercial commitments the table below represents our significant commercial commitments as of september 30 , 2017. operating leases represent commitments to rent office and warehouse space in the united states . other contractual cash obligations represent information technology commitments related to licensing fee , hardware maintenance and other . these items are not reflected on our balance sheets . replace_table_token_9_th off-balance sheet arrangements we do not have any transactions , obligations or relationships that could be considered material off-balance sheet arrangements .
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Liquidity
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( v ) environmental remediation liability in recording our liabilities for environmental remediation costs the amount of liability for a site is the best estimate , when determinable ; otherwise it is based on the minimum liability or the lower end of the range when there is a range of estimated losses . our environmental liabilities are recorded on an undiscounted basis . our environmental liability accruals are expected to be paid through the year 2057 . ( w ) post-employment and other employee benefits we sponsor defined benefit pension plans that cover the majority of our employees . we also provide health care and life insurance benefits through various postretirement plans for eligible retirees . we evaluate our actuarial assumptions on an annual basis and consider changes based on market conditions and other factors . all of our qualified defined benefit plans are funded in amounts calculated by independent actuaries , based on actuarial assumptions proposed by management . we account for defined benefit pension or other postretirement plans , recognizing an asset or liability for the overfunded or underfunded plan status . for a pension plan , the asset or liability is the difference between the fair value of the plan 's assets and the projected benefit obligation . for any other postretirement benefit plan , the asset or liability is the difference between the fair value of the plan 's assets and the accumulated postretirement benefit obligation . our utility operations reflect all unrecognized prior service costs and credits and unrecognized actuarial gains and losses as regulatory assets rather than in other comprehensive income , as management believes it is probable that such items will be recoverable through the ratemaking process . we use a december 31st measurement date for our benefits plans . we amortize prior service costs for both the pension and other postretirement benefits plans on a straight-line basis over the average remaining service period of participants expected to receive benefits . unrecognized actuarial gains and losses related to the pension and other postretirement benefits plans are amortized over the average remaining service period or 10 years , considering any requirement by the regulators for our networks subsidiaries . our policy is to calculate the expected return on plan assets using the market related value of assets . that value is determined by recognizing the difference between actual returns and expected returns over a five-year period . ( x ) income taxes we use the asset and liability method of accounting for income taxes . deferred tax assets and liabilities reflect the expected future tax consequences , based on enacted tax laws , of temporary differences between the tax basis of assets and liabilities and their financial reporting amounts . in accordance with u.s. gaap for regulated industries , certain of our regulated subsidiaries have established a regulatory asset for the net revenue requirements to be recovered from customers for the related future tax expense associated with certain of these temporary differences . we defer the investment tax credits when earned and amortize them over the estimated lives of the related assets . we also recognize the income tax consequences of intra-entity transfers of assets other than inventory when the transfer occurs . deferred tax assets and liabilities are measured at the expected tax rate for the period in which the asset or liability will be realized or settled , based on legislation enacted as of the balance sheet date . changes in deferred income tax assets and liabilities that are associated with components of oci are charged or credited directly to oci . significant judgment is required in determining income tax provisions and evaluating tax positions . our tax positions are evaluated under a more-likely-than-not recognition threshold before they are recognized for financial reporting purposes . we record valuation allowances to reduce deferred tax assets when it is more likely than not that we will not realize all or a portion of a tax benefit . deferred tax assets and liabilities are netted and classified as non-current on our consolidated balance sheets . we record the excess of state franchise tax computed as the higher of a tax based on income or a tax based on capital in “ taxes other than income taxes ” and “ taxes accrued ” in our consolidated financial statements . positions taken or expected to be taken on tax returns , including the decision to exclude certain income or transactions from a return , are recognized in the financial statements when it is more likely than not the tax position can be sustained based solely on the technical merits of the position . the amount of a tax return position that is not recognized in the financial statements is disclosed as an unrecognized tax benefit . changes in assumptions on tax benefits may also impact interest expense or interest income and may result in the recognition of tax penalties . interest and penalties related to unrecognized tax benefits are recorded within “ interest expense , net of capitalization ” and “ other income and ( expense ) ” in our consolidated statements of income . 94 uncertain tax positions have been classified as non-current unless expected to be paid within one year . in 2019 , we netted our liability for uncertain tax positions against all same jurisdiction deferred tax assets , net operating losses and tax credit carryforwards . our policy is to recognize interest and penalties on uncertain tax positions as a component of interest expense in the consolidated statements of income . federal production tax credits applicable to our renewable energy facilities , that are not part of a tax equity financing arrangement , are recognized as a reduction in income tax expense with a corresponding reduction in deferred income tax liabilities . story_separator_special_tag on may 29 , 2018 , a ten-person complaint was filed with the mpuc against cmp , networks and avangrid . the complaint requested that the mpuc open a rate case to determine if cmp is making excessive returns on investment and , therefore , whether cmp 's retail rates should be lower . the complaint also requested the mpuc deny certain costs associated with the october 2017 windstorm . on july 24 , 2018 , the mpuc issued an order dismissing the complaint and its associated request to deny the recovery of costs associated with the october 2017 windstorm . the order initiated an investigation into cmp 's rates and revenue requirement and directed cmp to make a filing consistent with the requirements for a general rate case no later than october 15 , 2018. on october 15 , 2018 , cmp filed a general rate case as directed by the mpuc requesting a roe of 10 % and an equity ratio of 55 % . cmp 's general rate case filing included a proposal to enhance the resiliency of the energy grid by expanding vegetation management and pursuing additional reliability measures such as pole replacements and addition of tree wire in selected areas . such investments are designed to strengthen cmp 's power grid so it can better stand up to severe weather . cmp planned to use savings from the tax act to pay for the costs of resiliency programs , other investments in infrastructure and certain cost increases since 2014. on december 20 , 2018 , the mpuc released the findings of the forensic audit of cmp 's customer billing system and customer communication practices . on january 14 , 2019 , the mpuc issued an order and notice of investigation initiating an investigation of cmp 's metering and billing practices and initiating a separate investigation of the audit of cmp 's customer service and communication practices and incorporating such investigation into the general rate case . the maine office of public advocate , or opa , for utility issues 51 filed a motion to delay cmp 's rate order decision to allow incorporation of the results of the separate metering and billing investigation . cmp did not oppose this motion . in an order issued on february 19 , 2020 , the mpuc authorized an increase in cmp 's distribution revenue requirement of $ 17 million , or approximately 7 % , based on an allowed roe of 9.25 % and a 50 % equity ratio . the rate increase is effective march 1 , 2020. the mpuc also imposed a 1.00 % roe reduction ( to 8.25 % ) for management efficiency associated with cmp 's customer service performance following the implementation of its new billing system in 2017. the management efficiency adjustment will remain in effect until cmp has demonstrated satisfactory customer service performance on four specified service quality measures for a period of 18 consecutive months with measurement commencing on march 1 , 2020. the order provides additional funding for staffing increases , vegetation management programs and storm restoration costs , while retaining the basic tiered structure for storm cost recovery implemented in the 2014 stipulation . the mpuc order also retains the revenue decoupling mechanism implemented in 2014. the order denies cmp 's request to increase rates for higher costs associated with services provided by its affiliates and will instead initiate a management audit to assess the quality of these services as well as the impacts of the avangrid management structure on the quality of cmp 's customer service . on march 5 , 2015 , mng filed a rate case in order to further recover future investments and provide safe and adequate service . on may 3 , 2016 , all active parties to the case filed a stipulation which settled all matters at issue in the case and reflected a ten-year rate plan through april 30 , 2026. the mpuc approved the stipulation on may 17 , 2016 , for new rates effective june 1 , 2016. the settlement structure for non-augusta customers includes a 34.6 % delivery revenue increase over five years with an allowed 9.55 % roe and 50 % common equity ratio . the settlement structure for augusta customers includes a ten-year rate plan with existing augusta customers being charged rates equal to non-augusta customers plus a surcharge which increases annually for five years . new augusta customers will have rates set based on an alternate fuel market model . in year seven of the rate plan mng will submit a cost of service filing for the augusta area to determine if the rate plan should continue . this cost of service filing will exclude $ 15 million of initial 2012/2013 gross plant investment , however the stipulation allows for accelerated depreciation of these assets . if the augusta area 's cost of service filing illustrates results above a 14.55 % roe then the rate plan may cease , otherwise the rate plan would continue . a disallowance for the initial 2012/2013 gross plant investment is not part of the approved stipulation . cmp 's and ui 's electric transmission rates are determined by a tariff regulated by the ferc and administered by iso-ne . transmission rates are set annually pursuant to a ferc authorized formula that allows for recovery of direct and allocated transmission operating and maintenance expenses , including return of and on investment in assets . the ferc currently provides an initial base roe of 10.57 % and additional incentive adders applicable to assets based upon vintage , voltage , and other factors . in september 2011 , several new england governmental entities , including pura , the connecticut attorney general and the connecticut office of consumer counsel , or occ , filed a joint complaint with the ferc against iso-ne and several new england transmission owners , or netos , ( including cmp and ui ) claiming that the current approved base
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in 2017 , net cash used in investing activities was $ 2,341 million , which was comprised of $ 2,416 million of capital expenditures , partially offset by $ 57 million of contributions in aid of construction , $ 4 million of cash distributions from equity method investments and proceeds of $ 12 million from the sale of assets . financing activities our financing activities have primarily consisted of using our credit facilities and long-term debt issued or redeemed by avangrid and our regulated networks subsidiaries . in 2019 , financing activities provided $ 1,261 million in cash reflecting primarily an issuance of non-current debt at avangrid , inc. , and our regulated subsidiaries with the net proceeds of $ 2,137 million and tax equity financing contributions from non-controlling interests of $ 133 million , offset by a net decrease in non-current debt and current notes payable of $ 374 million , distributions to non-controlling interests of $ 63 million , payments on capital leases of $ 27 million and dividends of $ 545 million . in 2018 , financing activities used $ 230 million in cash reflecting primarily an issuance of non-current debt at nyseg , rg & e , cmp and ui with the net proceeds of $ 597 million , tax equity financing contributions from non-controlling interests of $ 223 million , offset by a net decrease in non-current debt and current notes payable of $ 418 million , distributions to non-controlling interests of $ 76 million , payments on capital leases of $ 13 million and dividends of $ 537 million . 71 in 2017 , financing activities provided $ 528 million in cash reflecting primarily an issuance of non-current debt at rg & e with the net proceeds of $ 294 million and notes at avangrid , inc. with net proceeds of $ 594 million , after price discount and issuance-related expenses , a net increase in non-current debt and current notes payable of $ 320 million , payments on the tax equity financing arrangements of $ 113 million , payments on capital lease of $ 33 million and dividends of $ 535 million . contractual obligations as of december 31 , 2019 , our contractual obligations ( excluding any tax reserves ) were as follows :
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Liquidity
| 9,844
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the continuation of the present broadly applicable economic trends of weak economic growth , constricted credit , public sector austerity measures in response to public budget deficits and foreign currency volatility , particularly with respect to the euro , could have a material adverse effect on our results of operations and our liquidity . in recent years , hospitals in some regions of the united states experienced a decline in admissions , a weaker payor mix , and a reduction in elective procedures . consequently , hospitals took actions to reduce their costs , including limiting their capital spending . more recently , the economic environment has improved somewhat , but has not returned to pre-recession levels , and challenges persist , particularly in some european countries , as discussed below . approximately 94 % of our net revenues come from single-use products primarily used in critical care and surgical applications , and our sales volume could be negatively impacted if hospital admission rates or payor mix change . conversely , our sales volume could be positively impacted due to increases in the number of insured individuals as a result of the affordable care act , which has had the effect of facilitating medical insurance coverage for many persons who previously were not covered , although , as noted above , the affordable care act may be subject to repeal , modification or replacement . a number of european countries continue to contend with considerable government debt , annual deficits and high levels of unemployment . despite some indications of a more positive economic outlook in europe , the healthcare sector remains weak . in particular , budgetary restraints among european countries have led to cost control measures , such as delays in approvals for elective surgeries.the public healthcare systems in certain countries in western europe , most notably greece , spain , portugal and italy , have experienced significantly reduced liquidity due to recessionary conditions , which continues to result in delays in payments to us by customers in these countries . moreover , the impact of brexit , economic and trade policies of the trump administration and the results of several 2017 elections in european nations , including germany and france , are uncertain and could have a profound economic effect in europe and elsewhere . in asia , governments have intensified efforts to manage the cost of healthcare in response to an uncertain economic environment that has resulted in moderate growth rates across the region . we are experiencing an increasing trend of government-driven price management and reimbursement controls , particularly in china , japan and indonesia . there also has been an increase in government initiatives to help local manufacturers access a bigger share of the local market . moreover , many countries in the region have become more proactive with respect to regulatory requirements , and as a result , we expect longer , costlier and more complicated regulatory approval processes in these countries . in latin america , some highly regulated economies such as argentina and venezuela have experienced unusually high inflation rates and weakening currencies . this has impacted the budgets of the public healthcare systems resulting in delays in the importation of medical devices . although latin america does not represent a significant portion of our business , our operations in this region may be adversely affected by these factors . results of operations as used in this discussion , `` new products '' are products that we have sold for 36 months or less , and “ existing products ” are products that we have sold for more than 36 months . discussion of results of operations items that reference the effect of one or more acquired businesses ( except as noted below with respect to acquired distributors ) generally reflects the impact of the acquisitions within the first 12 months following the date of the acquisition . in addition to increases and decreases in the per unit selling prices of our products to our customers , our discussion of the impact of product price increases and decreases also reflects , for the first 12 months following the acquisition of a distributor , the impact on the pricing of our products resulting from the elimination of the distributor from the sales channel . to the extent an acquired distributor had pre-acquisition sales of products other than ours , the impact of the post-acquisition 36 sales of those products on our results of operations is included within our discussion of the impact of acquired businesses . certain financial information is presented on a rounded basis , which may cause minor differences . revenues replace_table_token_6_th comparison of 2016 and 2015 net revenues for the year ended december 31 , 2016 increased 3.2 % , or $ 58.3 million , compared to the prior year . the increase is primarily attributable to an increase in sales volumes of existing products of $ 37.3 million and an increase in new product sales of $ 24.2 million , both across all of our segments . the increase was partially offset by unfavorable fluctuations in foreign currency exchange rates . comparison of 2015 and 2014 net revenues for the year ended december 31 , 2015 decreased 1.6 % , or $ 30.1 million , compared to the prior year . the decrease is primarily attributable to unfavorable fluctuations in foreign currency exchange rates of $ 129.1 million , primarily in the emea and asia segments . the decrease in net revenues was partially offset by a net increase in sales volumes of existing products in most of our segments of $ 51.9 million , and a net increase in new product sales in most of our segments of $ 19.4 million . story_separator_special_tag in addition , the decrease was further offset by sales by acquired businesses , primarily human medics co. , ltd. ( “ human medics ” ) , a distributor of medical devices and supplies primarily in the korean market , mini-lap , a developer of micro-laparoscopic instrumentation , mayo healthcare pty limited , ( `` mayo healthcare '' ) , a distributor of medical devices and supplies , primarily in the australian market , n. stenning & co. pty . ltd. ( `` stenning '' ) , a distributor of medical devices and supplies primarily in the australian market , and truphatek holdings ( 1993 ) limited ( `` truphatek '' ) , a manufacturer of a broad range of disposable and reusable laryngoscope devices , which generated $ 14.8 million , and net price increases , primarily in the asia and surgical north america segments , which generated $ 12.8 million . gross profit replace_table_token_7_th comparison of 2016 and 2015 for the year ended december 31 , 2016 , gross profit as a percentage of revenues increased 110 basis points , or 2.1 % , compared to the prior year . the increase in gross margin is primarily attributable to the impact of an increase in sales of higher margin products , primarily in the anesthesia north america and emea segments , as well as lower manufacturing costs resulting from cost improvement initiatives , including the 2014 manufacturing footprint realignment plan . comparison of 2015 and 2014 for the year ended december 31 , 2015 , gross profit as a percentage of revenues increased 100 basis points , or 2.0 % , compared to the prior year . the increase in gross margin is primarily attributable to the 70 basis point impact of a net increase in sales of higher margin products , primarily in the surgical north america and oem segments , the 60 basis point impact of a net increase in sales volumes of existing products , primarily in the vascular north america , emea and asia segments and the 30 basis point impact of net price increases , primarily in the asia and surgical north america segments . gross margin was negatively impacted by the 80 basis point impact of net unfavorable fluctuations in foreign currency exchange rates and costs associated with product recalls and quality issues first identified during the second quarter 2015 partially offset by lower manufacturing costs resulting from cost improvement initiatives . 37 selling , general and administrative replace_table_token_8_th comparison of 2016 and 2015 selling , general and administrative expenses decreased $ 5.7 million during the year ended december 31 , 2016 compared to the prior year . the decrease is primarily attributable to the favorable impact of the suspension of the excise tax on medical devices under the affordable care act of $ 10.2 million and the favorable impact of fluctuations in foreign currency exchanges rates of $ 2.7 million , partially offset by an increase in selling and marketing expenses of $ 7.5 million . comparison of 2015 and 2014 selling , general and administrative expenses decreased $ 9.7 million during the year ended december 31 , 2015 compared to the prior year . the decrease is due to the favorable impact of foreign currency exchange rate fluctuations of $ 28.5 million and a reduction in medical device excise tax of $ 2.5 million . these declines were partially offset by expenses associated with our 2015 acquisitions and distributor-to-direct sales conversions of $ 11.4 million , an increase in selling expenses of $ 5.4 million , primarily related to higher sales commissions , a reduction , as compared to 2014 , in the benefit resulting from the reversal of contingent consideration liabilities of $ 2.9 million and higher amortization expense of $ 2.6 million . research and development replace_table_token_9_th comparison of 2016 and 2015 the increase in research and development expenses for the year ended december 31 , 2016 is primarily attributable to increased spending on new product development with respect to several of our segments . comparison of 2015 and 2014 the decrease in research and development expenses for the year ended december 31 , 2015 resulted from efficiencies realized through our integration of research and development projects commenced by certain businesses acquired in 2013 that were reflected in research and development expenses for the year ended december 31 , 2014. the decrease is also attributable to the late stage technology acquisitions made in 2015 , which supplement our organic research and development initiatives . 38 restructuring and other impairment charges replace_table_token_10_th 2016 restructuring charges for the year ended december 31 , 2016 , the restructuring charges primarily related to the 2016 manufacturing footprint realignment plan and , to a lesser extent , to other restructuring programs , which are described below . the restructuring charges recognized for the year ended december 31 , 2016 included termination benefits and contract termination costs of $ 13.2 million and $ 1.7 million , respectively . 2016 manufacturing footprint realignment plan on february 23 , 2016 , our board of directors approved a restructuring plan involving the consolidation of operations and a related workforce reduction at certain of our facilities ( the `` 2016 manufacturing footprint realignment plan '' ) . we estimate that we will incur aggregate pre-tax charges in connection with these restructuring activities of approximately $ 34 million to $ 44 million , of which we estimate $ 27 million to $ 31 million will result in future cash outlays . additionally , we expect to incur aggregate capital expenditures of approximately $ 17 million to $ 19 million in connection with the 2016 manufacturing footprint realignment plan . we currently expect to achieve annualized savings of $ 12 million to $ 16 million once the plan is fully implemented and currently expect to realize plan-related savings beginning in 2017 . 2016 other restructuring programs during 2016 , we committed to certain actions designed to further improve operating efficiencies and reduce costs . these actions include the consolidation of global administrative functions and manufacturing operations .
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the increase is primarily attributable to an increase in gross profit , mainly due to the impact of an increase in sales of higher margin products and an increase in sales volumes of existing products . the increase in operating profit was also attributable to the favorable impact of the suspension of the excise tax on medical devices 43 under the affordable care act . the impact of these factors was partially offset by higher amortization and marketing expenses , as well as unfavorable fluctuations in foreign currency exchange rates . surgical north america surgical north america net revenues for the year ended december 31 , 2016 increased $ 10.9 million , or 6.8 % , compared to the prior year . the increase is primarily attributable to an increase in new product sales of $ 6.7 million and price increases of $ 3.9 million . surgical north america operating profit for the year ended december 31 , 2016 increased $ 4.1 million , or 7.8 % , compared to the prior year . the increase is primarily attributable to an increase in gross profit principally reflecting increased new product sales . the increase in operating profit was also attributable to lower amortization expense and the favorable impact of the suspension of the excise tax on medical devices under the affordable care act . the impact of these factors was partially offset by higher selling expense , primarily related to new product sales , the unfavorable effect of an increase in contingent consideration liabilities and unfavorable fluctuations in foreign currency exchange rates . emea emea net revenues for the year ended december 31 , 2016 decreased $ 3.6 million , or 0.7 % , compared to the prior year . the decrease is primarily attributable to unfavorable fluctuations in foreign currency exchange rates of $ 9.3 million , partially offset by an increase in sales volumes of existing products and an increase in new products sales . emea operating profit for the year ended december 31 , 2016 decreased $ 7.9 million
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ROO
| 6,670
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no purchaser accounted for more than 10 % of our oil and gas sales . the company reviews accounts receivable balances when circumstances indicate a balance may not be collectible . based upon the company 's review , no allowance for uncollectible accounts was deemed necessary at december 31 , 2015 and 2014 , respectively . subsequent events the company evaluated subsequent events for disclosure from december 31 , 2015 through the date the consolidated financial statements were issued . recent accounting developments no accounting standards or interpretations issued recently are expected to a have a material impact on our consolidated financial position , operations or cash flows . f-10 note 2—escrow receivable at december 31 , 2015 and december 31 , 2014 , the company 's balance sheet reflected the following escrow receivables relating to various oil and gas properties previously sold by the company : replace_table_token_20_th changes in escrow receivables during 2015 reflect the release of an aggregate of $ 59,412 from the various escrow accounts . note 3—oil and gas properties evaluated oil and gas properties evaluated oil and gas properties subject to amortization at december 31 , 2015 included the following : replace_table_token_21_th evaluated oil and gas properties subject to amortization at december 31 , 2014 included the following : replace_table_token_22_th unevaluated oil and gas properties unevaluated oil and gas properties not subject to amortization at december 31 , 2015 included the following : replace_table_token_23_th unevaluated oil and gas properties not subject to amortization at december 31 , 2014 included the following : replace_table_token_24_th f-11 note 4—asset retirement obligation s the following table describes changes in our asset retirement liability during each of the years ended december 31 , 2015 and 2014. replace_table_token_25_th note 5—stock-based compensation on august 12 , 2005 , the company 's board of directors adopted the houston american energy corp. 2005 stock option plan ( the 2005 plan ) . the terms of the 2005 plan allow for the issuance of up to 500,000 options to purchase 500,000 shares of the company 's common stock . in 2008 , the company 's board of directors adopted the houston american energy corp. 2008 equity incentive plan ( the 2008 plan and , together with the 2005 plan , the plans ) . the terms of the 2008 plan allowed for the issuance of up to 2,200,000 shares of the company 's common stock pursuant to the grant of stock options and restricted stock . persons eligible to participate in the plans are key employees , consultants and directors of the company . during 2012 and 2013 , the company 's board of directors and shareholders adopted amendments to the company 's 2008 equity incentive plan to increase the shares reserved to 6,000,000 shares . stock option activity in 2014 , options to purchase an aggregate of 200,000 shares were granted to non-employee directors and options to purchase an aggregate of 600,000 shares were granted to an employee . the 200,000 options granted to non-employee directors vested 20 % on the grant date and vest as to the remaining 80 % nine months from the grant date , have a ten-year life and have an exercise price of $ 0.415 per share . the option grants to non-employee directors were valued on the date of grant at $ 46,191 using the black-scholes option-pricing model with the following parameters : ( 1 ) risk-free interest rate of 1.57 % , ( 2 ) expected life in years of 4.65 , ( 3 ) expected stock volatility of 103.6 % , and ( 4 ) expected dividend yield of 0 % . the company determined the options qualify as ‘ plain vanilla ' under the provisions of sab 107 and the simplified method was used to estimate the expected option life . the 600,000 options granted to an employee vest 1/3 on each of the first three anniversaries of the grant date , subject to acceleration of vesting in the event of certain changes in control or the realization of revenues from oil and gas production on the serrania prospect or receipt of proceeds from the sale of the serrania prospect , have a ten year life and have an exercise price of $ 0.415 per share . the option grants to the employee were valued on the date of grant at $ 126,355 using the black-scholes option-pricing model with the following parameters : ( 1 ) risk-free interest rate of 1.57 % , ( 2 ) expected life in years of 4.65 , ( 3 ) expected stock volatility of 103.6 % , and ( 4 ) expected dividend yield of 0 % . the company determined the options qualify as ‘ plain vanilla ' under the provisions of sab 107 and the simplified method was used to estimate the expected option life . in 2015 , options to purchase an aggregate of 8,333 shares were granted to a new non-employee director , options to purchase an aggregate of 900,000 shares were granted to a new officer and options to purchase an aggregate of 200,000 shares were granted to non-employee directors . the 8,333 options granted to a new non-employee director vested 20 % on the grant date and vest as to the remaining 80 % nine months from the grant date , have a ten-year life and have an exercise price of $ 0.2158 per share . the option grant to the non-employee director was valued on the date of grant at $ 805 using the black-scholes option-pricing model with the following parameters : ( 1 ) risk-free interest rate of 1.36 % , ( 2 ) expected life in years of 4.98 , and ( 3 ) expected stock volatility of 106 % . story_separator_special_tag the capitalized oil and gas property costs , less accumulated amortization , are limited to an amount ( the ceiling limitation ) equal to the sum of : ( a ) the present value of estimated future net revenues from the projected production of proved oil and gas reserves , calculated using the average oil and natural gas sales price received by the company as of the first trading day of each month over the preceding twelve months ( such prices are held constant throughout the life of the properties ) and a discount factor of 10 % ; ( b ) the cost of unproved and unevaluated properties excluded from the costs being amortized ; ( c ) the lower of cost or estimated fair value of unproved properties included in the costs being amortized ; and ( d ) related income tax effects . costs in excess of this ceiling are charged to proved properties impairment expense . unevaluated oil and gas properties . unevaluated oil and gas properties consist principally of our cost of acquiring and evaluating undeveloped leases , net of an allowance for impairment and transfers to depletable oil and gas properties . when leases are developed , expire or are abandoned , the related costs are transferred from unevaluated oil and gas properties to oil and gas properties subject to amortization . additionally , we review the carrying costs of unevaluated oil and gas properties for the purpose of determining probable future lease expirations and abandonments , and prospective discounted future economic benefit attributable to the leases . unevaluated oil and gas properties not subject to amortization include the following at december 31 , 2015 and 2014 : replace_table_token_10_th the carrying value of unevaluated oil and gas prospects includes $ 79,511 and $ 2,034,008 expended for properties in south america at december 31 , 2015 and december 31 , 2014 , respectively . we are maintaining our interest in these properties and development has or is anticipated to commence within the next twelve months . stock-based compensation . we use the black-scholes option-pricing model , which requires the input of highly subjective assumptions . these assumptions include estimating the volatility of our common stock price over the expected life of the options , dividend yield , an appropriate risk-free interest rate and the number of options that will ultimately not complete their vesting requirements . changes in the subjective assumptions can materially affect the estimated fair value of stock-based compensation and consequently , the related amount recognized on the statements of operations . results of operations year ended december 31 , 2015 compared to year ended december 31 , 2014 oil and gas revenues . total oil and gas revenues increased 18.2 % , to $ 429,435 in 2015 from $ 363,455 in 2014. the increase in revenue was due to production from new wells brought on line during 2014 , partially offset by a decrease in average sales price . 27 the following table sets forth the gross and net producing wells , net oil and gas production volumes and average hydrocarbon sales prices for 2015 and 2014 : replace_table_token_11_th the decline in gross and net producing wells reflects two wells that were no longer economical to produce . the change in average sales prices realized reflects fluctuations in global commodity prices . during the fourth quarter of 2014 and continuing through 2015 , commodity prices declined sharply . oil and gas sales revenues for 2015 and 2014 by region were as follows : replace_table_token_12_th lease operating expenses . lease operating expenses , excluding joint venture expenses relating to our colombian operations discussed below , increased 30.8 % to $ 148,067 in 2015 from $ 113,233 in 2014. the increase in total lease operating expenses was attributable to operation of new wells brought on production during 2014. following is a summary comparison of lease operating expenses for the periods . colombia u.s. total 2015 $ — $ 148,067 $ 148,067 2014 $ — $ 113,233 $ 113,233 consistent with our business model and operating history , we experience steep declines in lease operating expenses following strategic divestitures and anticipate lease operating expenses to ramp up to levels consistent with regional costs as new wells are brought on line . with the planned drilling of our serrania prospect , assuming a successful well is drilled , lease operating expenses in colombia and overall , are expected to increase in 2016. depreciation and depletion expense . depreciation and depletion expense increased by 110 % to $ 756,757 in 2015 from $ 359,897 in 2014. the increase in depreciation and depletion was due to an increase in the cost pool and increased production attributable to additional wells brought on line during 2014. impairment of oil and gas properties . we reported an impairment charge of $ 1,718,088 during 2015 as compared to an impairment charge of $ 1,492,148 during 2014. the charges in both years resulted from the effects of steeply lower commodity prices when applying the ceiling test under the full cost method of accounting . general and administrative expenses . general and administrative expense decreased by 31.4 % to $ 1,541,294 in 2015 from $ 2,246,519 in 2014. the change in general and administrative expense reflects a combination of ( 1 ) a reduction in stock compensation of $ 359,384 , ( 2 ) a reduction in directors and officers insurance of $ 238,424 , and ( 3 ) a reduction in legal fees of $ 235,172. other income ( expense ) . other income ( expense ) consists of interest earned on cash balances net of other bank fees , currency losses relating to funds held for operations in colombia and a contingent loss relating to the 28 company 's sec settlement . net other income ( expense ) totaled $ ( 76,570 ) in 2015 as compared to $ ( 392,654 ) in 2014. the change was attributable to higher interest rates
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depending on the ultimate cost and results of our drilling operations , we may require additional capital to fully fund our future drilling budget and operations . if , for any reason , we are unable to fully fund our drilling budget and fail to satisfy commitments reflected therein , we may be subject to penalties or to the possible loss of some of our rights and interests in prospects with respect to which we fail to satisfy funding commitments . we have no commitments to provide any additional financing should we require and seek such financing and there is no guarantee that we will be able to secure additional financing on acceptable terms , or at all , to fully fund our drilling budget and to support future acquisitions and development activities . outlook continued low oil and natural gas prices during 2015 and recurring delays in drilling of our serrania prospect in colombia have had a significant adverse impact on our business . our financial statements include a going 29 concern qualification reflecting substantial doubt as to our ability to continue as a going concern . while we have no debt and have reduced our overhead , we continue to operate at a loss in the current low price environment . we have budgeted $ 425,000 for drilling of a first test well on our serrania prospect during 2016 and $ 1,000,000 for the planned 2016 acquisition of an interest in tamboran resources limited . given those financial commitments and continuing negative cash flow from operations , depending upon the timing and ultimate drilling results on our serrania prospect , we may be required to seek additional financing or may be divest certain assets in order to support operations until such point , if ever , as our revenues increase sufficiently , either through price increases or the addition of production from serrania , to cover our operating costs and overhead . we can provide no assurance that our efforts will be sufficient to reverse the trend of operating losses or to provide adequate financial resources to sustain operations and retention of our assets pending attainment of profitable operations . contractual obligations . at december 31 , 2015 , our only material contractual obligation requiring determinable future payments on our part was our lease relating to our executive offices . < p class= '' para '' style= '' color : # 000000 ; font-family :
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Liquidity
| 13,280
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additionally , we also operate a small number of retail gas stations in the u.s. acquisitions 2010 acquisitions on january 1 , 2010 , we completed the acquisition of certain assets of falmouth oil services limited ( the fos business ) . the fos business is primarily a marine oil terminal for fuel oil and diesel strategically located in the united kingdom , which we used for fuel storage prior to the acquisition . the financial position and results of operations of the fos business have been included in our consolidated financial statements since its acquisition date . on july 1 , 2010 , we completed the acquisition of certain assets of lakeside oil company , inc. , including the assets comprising its wholesale motor fuel distribution business ( the lakeside business ) . the lakeside business , based in milwaukee , wisconsin , is primarily a distributor of branded and unbranded gasoline and diesel fuel . the financial position and results of operations of the lakeside business have been included in our consolidated financial statements since its acquisition date . on october 1 , 2010 , we completed the acquisition of all of the outstanding stock of western petroleum company , ( western ) , a distributor of unbranded gasoline and diesel fuel in the united states and canada and branded and unbranded aviation fuel in the united states . the financial position and results of operations of western have been included in our consolidated financial statements since its acquisition date . on december 1 , 2010 , we completed the acquisition of all of the outstanding stock of shell company of gibraltar , limited , ( gib oil ) , a distributor of aviation fuel , marine oil and gasoline and diesel fuel in gibraltar . 54 the financial position and results of operations of gib oil have been included in our consolidated financial statements since its acquisition date . on december 31 , 2010 , we completed the acquisition of all of the outstanding stock of the hiller group incorporated and air petro corp. and all of the outstanding membership interest of hg equipment , llc and aht services , llc ( collectively , hiller ) , a distributor of branded aviation fuel to fixed-base operators and corporate flight departments . the financial position and results of operations of hiller have been included in our consolidated financial statements since its acquisition date . the estimated aggregate purchase price for the acquisitions of the fos business , the lakeside business , western , gib oil and hiller ( the 2010 acquisitions ) was $ 238.2 million , and is subject to change based on the final value of the net assets acquired for the 2010 acquisitions completed during the fourth quarter of 2010. the following reconciles the estimated aggregate purchase price for the 2010 acquisitions to the cash paid for the acquisitions , net of cash acquired ( in thousands ) : replace_table_token_29_th the fair value of the common stock issued as part of the consideration paid for our acquisitions was determined on the basis of the closing market price of the common shares on the acquisition date . the estimated purchase price for each of the 2010 acquisitions was allocated to the assets acquired and liabilities assumed based on their estimated fair value at the acquisition date . with the exception of the fos business acquisition , at december 31 , 2010 , the valuations of the assets acquired and liabilities assumed of the 2010 acquisitions have not been completed ; accordingly , the allocation of their purchase price may change . on an aggregate basis , the estimated purchase price allocation for the 2010 acquisitions is as follows ( in thousands ) : replace_table_token_30_th 55 post acquisition , the payment of the assumed pension fund exit fee has been classified as a financing activity in the consolidated statement of cash flows due to the fact that the liability was paid on behalf of the seller subsequent to closing as the actuarially calculated amount was not available prior to the acquisition . the terms of the acquisition agreement called for the termination of participation in the applicable pension plan and a dollar for dollar decrease in the purchase consideration for amounts paid to exit from the plan . in connection with the 2010 acquisitions , we recorded goodwill of $ 15.2 million in our marine segment , $ 45.4 million in our aviation segment and $ 72.6 million in our land segment , of which $ 97.2 is anticipated to be deductible for tax purposes . the aggregate identifiable intangible assets of the 2010 acquisitions are as follows ( in thousands ) : replace_table_token_31_th with the exception of the fos business , our 2010 acquisition contributed revenue of $ 779.2 million and net income of $ 4.3 million for 2010. the revenue and net income contributed by our acquisition of the fos business were not significant as there were no significant third-party customers of the fos business and it has been integrated into our existing business . the following presents the unaudited pro forma results for 2010 and 2009 as if our 2010 acquisitions , with the exception of the fos business , have been completed on january 1 , 2009 , respectively ( in thousands , except per share data ) : replace_table_token_32_th fos is not included in the pro forma information above as its impact on the pro forma amounts is not significant . 2009 acquisitions in april 2009 , we acquired all of the outstanding stock of henty oil limited , tank and marine engineering limited and henty shipping services limited ( collectively , henty ) and completed the acquisition of certain assets of tgs petroleum , inc. , including the assets comprising its wholesale motor fuel distribution business ( the tgs business ) . story_separator_special_tag for 2010 , our effective tax rate was 17.5 % and our income tax provision was $ 31.0 million , as compared to an effective tax rate of 21.6 % and an income tax provision of $ 32.3 million for 2009. the lower effective tax rate for 2010 resulted primarily from differences in the actual results of our subsidiaries in tax jurisdictions with different tax rates as compared to 2009. net income and diluted earnings per share . our net income for 2010 was $ 146.9 million , an increase of $ 29.8 million , or 25.4 % , as compared to 2009. diluted earnings per share for 2010 was $ 2.31 per share , an increase of $ 0.35 per share , or 17.9 % , as compared to 2009. non-gaap net income and non-gaap diluted earnings per share . the following table sets forth the reconciliation between our net income and our non-gaap net income for 2010 and 2009 ( in thousands ) : replace_table_token_10_th the following table sets forth the reconciliation between our diluted earnings per share and our non-gaap diluted earnings per share for 2010 and 2009 : replace_table_token_11_th the non-gaap financial measures exclude costs associated with share-based compensation and amortization of acquired intangible assets , primarily because we do not believe they are reflective of the company 's core operating results . we believe the exclusion of share-based compensation from operating expenses is useful given the variation in expense that can result from changes in the fair value of our common stock , the effect of which is unrelated to the operational conditions that give rise to variations in the components of our operating costs . also , we believe the exclusion of the amortization of acquired intangible assets is useful for purposes of evaluating operating performance of our core operating results and comparing them period-over-period . we believe that these non-gaap financial measures , when considered in conjunction with our financial information prepared in accordance with gaap , are useful to investors to further aid in evaluating the ongoing financial performance of the company and to provide greater transparency as supplemental information to our gaap results . non-gaap financial measures should not be considered in isolation from , or as a substitute for , financial information prepared in accordance with gaap . in addition , our presentation of non-gaap net income and non-gaap earnings per share may not be comparable to the presentation of such metrics by other companies . investors are encouraged to review the reconciliation of these non-gaap measures to their most directly comparable gaap financial measure . 30 2009 compared to 2008 revenue . our revenue for 2009 was $ 11.3 billion , a decrease of $ 7.2 billion , or 39.0 % , as compared to 2008. our revenue during these periods was attributable to the following segments ( in thousands ) : replace_table_token_12_th our aviation segment contributed $ 4.0 billion in revenue for 2009 , a decrease of $ 3.2 billion , or 44.5 % , as compared to 2008. of the total decrease in aviation segment revenue , $ 2.7 billion was due to a decrease in the average price per gallon sold as a result of lower world oil prices in 2009 compared to record prices in 2008. the remaining decrease of $ 501.1 million was due to decreased sales volume , reflecting the result of our efforts to change the business mix to yield higher margins and our continued efforts to achieve risk adjusted returns on invested capital , primarily in the first half of 2009. our marine segment contributed $ 6.0 billion in revenue for 2009 , a decrease of $ 3.9 billion , or 39.1 % , as compared to 2008. of the total decrease in marine segment revenue , $ 2.4 billion was due to decreased sales volume primarily attributable to the deterioration in the overall volumes in the shipping industry compared to last year and our conscious effort to shed risk . the remaining decrease of $ 1.5 billion was due to a decrease in the average price per metric ton sold as a result of lower world oil prices in 2009. our land segment contributed $ 1.2 billion in revenue for 2009 , a decrease of $ 94.7 million , or 7.3 % , as compared to 2008. of the total decrease in land segment revenue , $ 349.5 million was due to a decrease in the average price per gallon sold as a result of lower world oil prices in 2009. offsetting this decrease was $ 254.8 million primarily due to increased sales volume attributable to incremental sales due to the inclusion of the results of the texor business for all of 2009 and henty and the tgs business since april 2009. gross profit . our gross profit for 2009 was $ 375.6 million , a decrease of $ 19.8 million , or 5.0 % , as compared to 2008. our gross profit during these periods was attributable to the following segments ( in thousands ) : replace_table_token_13_th our aviation segment gross profit for 2009 was $ 163.7 million , a decrease of $ 2.1 million , or 1.3 % , as compared to 2008. of the decrease in aviation segment gross profit , $ 3.6 million was due to decreased sales volume which was partially offset by $ 1.5 million in higher gross profit per gallon sold , reflecting the result of our efforts to change the business mix to yield higher margins and our continued efforts to achieve risk adjusted returns on invested capital . our marine segment gross profit for 2009 was $ 168.9 million , a decrease of $ 34.5 million , or 16.9 % , as compared to 2008. in 2008 , we were presented with extraordinary market opportunities , primarily in the second and third quarters , due to near record fuel prices , volatility and general financing constraints in the global credit market
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under the credit facility , we have the right to request increases in available borrowings up to an additional $ 150.0 million , subject to the satisfaction of certain conditions . we had no outstanding borrowings under our credit facility at december 31 , 2010 and 2009. our issued letters of credit under the credit facility totaled $ 72.0 million and $ 47.3 million at december 31 , 2010 and 2009 , respectively . the credit facility expires in september 2015. our liquidity consisting of cash and cash equivalents and availability under the credit facility fluctuate based on a number of factors , including the timing of receipts from our customers and payments to our suppliers as well as commodity prices . our credit facility contains certain financial covenants with which we are required to comply . our failure to comply with the financial covenants contained in our credit facility could result in an event of default . an event of default , if not cured or waived , would permit acceleration of any outstanding indebtedness under the credit facility , trigger cross-defaults under other agreements to which we are a party and impair our ability to obtain working capital advances and letters of credit , which would have a material adverse effect on our business , financial condition and results of operations . as of december 31 , 2010 , we were in compliance with all financial covenants contained in our credit facility . other credit lines . additionally , we have other credit lines aggregating $ 84.0 million for the issuance of letters of credit , bank guarantees and bankers ' acceptances . these credit lines are renewable on an annual basis and are subject to fees at market rates . as of december 31 , 2010 and 2009 , our outstanding letters of credit and bank guarantees under these credit lines totaled $ 44.0 million and $ 20.2 million , respectively . short-term debt . as of december 31 , 2010 , our short-term debt of $ 17.1 million represents the current maturities ( within the next twelve months ) of certain promissory notes related to acquisitions , loans payable to noncontrolling shareholders of a consolidated subsidiary and capital lease obligations . we believe that available funds from existing cash and cash equivalents and our credit facility , together with cash flows generated by operations , remain sufficient to fund our
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Liquidity
| 2,539
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the company defers capitalized exploratory drilling costs for wells that have found a sufficient quantity of producible hydrocarbons but can not be classified as proved because they are located in areas that require major capital expenditures or governmental or other regulatory approvals before production can begin . these costs continue to be deferred as wells-in-progress as long as development is underway , is firmly planned for the near future or the necessary approvals are actively being sought . net changes in capitalized exploratory well costs are reflected in the following table for the periods presented : replace_table_token_33_th as of december 31 , 2011 , the company had no exploratory well costs that were capitalized for a period greater than one year . deferred costs the company capitalizes costs incurred in connection with obtaining financing . these costs are included in deferred costs and other assets on the company 's consolidated balance sheet and are amortized over the term of the related financing using the straight-line method , which approximates the effective interest method . asset retirement obligations in accordance with the financial accounting standard board 's ( fasb ) authoritative guidance on asset retirement obligations ( aro ) , the company records the fair value of a liability for a legal obligation to retire an asset in the period in which the liability is incurred with the corresponding cost capitalized by increasing the carrying amount of the related long-lived asset . for oil and gas properties , this is the period in which the well is drilled or acquired . the aro represents the estimated amount the company will incur to plug , abandon and remediate the properties at the end of their productive lives , in accordance with applicable state laws . the liability is accreted to its present value each period and the capitalized costs are depreciated using the unit-of-production method . the accretion expense is recorded as a component of depreciation , depletion and amortization in the company 's consolidated statement of operations . 79 the company determines the aro by calculating the present value of estimated cash flows related to the liability . estimating the future aro requires management to make estimates and judgments regarding timing and existence of a liability , as well as what constitutes adequate restoration . inherent in the fair value calculation are numerous assumptions and judgments including the ultimate costs , inflation factors , credit adjusted discount rates , timing of settlement and changes in the legal , regulatory , environmental and political environments . these assumptions represent level 3 inputs , as further discussed in note 3 fair value measurements . to the extent future revisions to these assumptions impact the fair value of the existing aro liability , a corresponding adjustment is made to the related asset . revenue recognition revenue from the company 's interests in producing wells is recognized when the product is delivered , at which time the customer has taken title and assumed the risks and rewards of ownership , and collectability is reasonably assured . substantially all of the company 's production is sold to purchasers under short-term ( less than 12 months ) contracts at market-based prices . the sales prices for oil and natural gas are adjusted for transportation and quality differentials . these differentials are based on contractual or historical data and do not require significant judgment . subsequently , these revenue differentials are adjusted to reflect actual charges based on third-party documents . since there is a ready market for oil and natural gas , the company sells the majority of its production soon after it is produced at various locations . as a result , the company maintains a minimum amount of product inventory in storage . revenues payable and production taxes the company calculates and pays taxes and royalties on oil and natural gas in accordance with the particular contractual provisions of the lease , license or concession agreements and the laws and regulations applicable to those agreements . concentrations of market and credit risk the future results of the company 's oil and natural gas operations will be affected by the market prices of oil and natural gas . the availability of a ready market for oil and natural gas products in the future will depend on numerous factors beyond the control of the company , including weather , imports , marketing of competitive fuels , proximity and capacity of oil and natural gas pipelines and other transportation facilities , any oversupply or undersupply of oil , natural gas and liquid products , the regulatory environment , the economic environment , and other regional and political events , none of which can be predicted with certainty . the company operates in the exploration , development and production sector of the oil and gas industry . the company 's receivables include amounts due from purchasers of its oil and natural gas production and amounts due from joint venture partners for their respective portions of operating expenses and exploration and development costs . while certain of these customers and joint venture partners are affected by periodic downturns in the economy in general or in their specific segment of the oil or natural gas industry , the company believes that its level of credit-related losses due to such economic fluctuations has been and will continue to be immaterial to the company 's results of operations over the long-term . trade receivables are generally not collateralized . the company manages and controls market and counterparty credit risk . in the normal course of business , collateral is not required for financial instruments with credit risk . financial instruments which potentially subject the company to credit risk consist principally of temporary cash balances and derivative financial instruments . the company maintains cash and cash equivalents in bank deposit accounts which , at times , may exceed the federally insured limits . story_separator_special_tag production taxes . our production taxes for the years ended december 31 , 2010 and 2009 were 10.7 % and 10.1 % , respectively , as a percentage of oil and natural gas sales . the 2010 production tax rate was higher than the 2009 production tax rate due to the increased weighting of oil revenues in north dakota , which imposes an 11.5 % production tax rate . our production taxes for the year ended december 31 , 2009 were primarily for oil and natural gas sales revenue associated with properties in the montana portion of our west williston project area , which generate revenues subject to lower production tax rates in montana . dd & a . dd & a expense increased $ 21.2 million to $ 37.8 million for the year ended december 31 , 2010 compared to the year ended december 31 , 2009. the increase in dd & a expense for the year ended december 31 , 2010 was primarily due to the production increases from the sanish and east nesson acquisitions completed at the end of the second and third quarters of 2009 , respectively , and as a result of our well completions during the fourth quarter of 2009 and all of 2010. the dd & a rate for the year ended december 31 , 2010 was $ 19.91 per boe compared to $ 23.42 per boe for the year ended december 31 , 2009. the lower dd & a rate was due to the lower cost of reserve additions associated with our 2009 sanish and east nesson acquisitions and our 2010 drilling activities . rig termination . during the first quarter of 2009 , we paid a total of $ 3.0 million in rig termination expenses in connection with the early termination of two drilling rig contracts entered into in 2008. we did not have any rig termination expenses during the year ended december 31 , 2010. impairment of oil and gas properties . no impairment on proved oil and natural gas properties was recorded for the year ended december 31 , 2010. during the year ended december 31 , 2009 , we recorded a non-cash impairment charge of $ 0.8 million on our proved oil and gas properties . during the years ended december 31 , 2010 and 2009 , we recorded non-cash impairment charges of $ 12.0 million and $ 5.4 million , respectively , for unproved property leases that expired during the period . in determining the amount of the non-cash impairment charges for such periods , we considered the application of the factors described under critical accounting policies and estimatesimpairment of proved properties and critical accounting policies and estimatesimpairment of unproved properties. as of december 31 , 2010 , we did not record an impairment charge with respect to any acreage expiring in 2011 based primarily on our ability to actively manage and prioritize our capital expenditures to drill leases and to make payments to extend leases that would otherwise expire . 55 stock-based compensation expenses . for the year ended december 31 , 2010 , we recorded $ 8.7 million of primarily non-cash charges for stock-based compensation expense associated with op management 's grant of c units to certain of our employees in march 2010 and grant of discretionary shares of our common stock to certain of our employees who were not c unit holders and certain contractors in the fourth quarter of 2010. based on the characteristics of these awards , we concluded that they represented equity-type awards and we accounted for the value of these awards as if they had been awarded by us . we used fair-value-based methods to determine the value of stock-based compensation awarded to our employees and contractors and recognized the entire amount as expense due to the immediate vesting of the awards , with no future requisite service period required by the employees . no stock-based compensation expense was recorded for the year ended december 31 , 2009 because we had not historically issued stock-based compensation awards to our employees . general and administrative . our general and administrative expenses increased $ 10.4 million for the year ended december 31 , 2010 from $ 9.3 million for the year ended december 31 , 2009. of this increase , approximately $ 4.2 million was due to higher advisory , audit , legal , tax and filing fees primarily related to our ipo and additional costs of being a public entity . in addition , we recorded approximately $ 1.2 million of amortization of our restricted stock awards for the year ended december 31 , 2010. the remaining increase was primarily due to higher costs related to employee compensation ( including bonuses paid during the first quarter of 2010 and accrued bonuses to be paid in the first quarter of 2011 ) and contract labor . as of december 31 , 2010 , we had 62 full-time employees compared to 27 full-time employees as of december 31 , 2009. derivatives . as a result of our derivative activities , we incurred a cash settlement loss of $ 0.1 million for the year ended december 31 , 2010 and a cash settlement gain of $ 2.3 million for the year ended december 31 , 2009. in addition , as a result of forward oil price changes , we recognized $ 7.5 million and $ 7.0 million of non-cash unrealized mark-to-market derivative losses during the years ended december 31 , 2010 and 2009 , respectively . interest expense . interest expense increased $ 0.4 million to $ 1.4 million for the year ended december 31 , 2010 compared to the year ended december 31 , 2009. the increase was the result of higher monthly amortization on our deferred financing costs related to our amended revolving credit facility coupled with the write-off of the deferred financing costs related to the original revolving credit facility in february 2010. our weighted average debt balance decreased to $
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the weighted average debt outstanding for the year ended december 31 , 2010 was $ 15.3 million . the weighted average interest rate incurred on the outstanding borrowings for the year ended december 31 , 2010 was 3.1 % . 59 senior secured revolving line of credit oasis petroleum llc , as parent , and opna , as borrower , entered into a credit agreement dated june 22 , 2007 ( as amended and restated , the amended credit facility ) . the amended credit facility is restricted to the borrowing base , which is reserve-based and subject to semi-annual redeterminations on april 1 and october 1 of each year . in connection with the fourth amendment to our amended credit facility , a redetermination of our borrowing base was completed at our request on january 21 , 2011 , in lieu of the scheduled april 1 , 2011 semi-annual redetermination . as a result of this redetermination , our borrowing base increased from $ 120 million to $ 150 million . however , in connection with the issuance of our 7.25 % senior unsecured notes discussed below , our borrowing base was automatically decreased to $ 137.5 million . subsequently , we entered into our fifth amendment to our amended credit facility on october 6 , 2011. this amendment reduced the interest rates payable on our borrowings under the amended credit facility , extended the maturity date of the amended credit facility from february 26 , 2015 to october 6 , 2016 , and increased our senior secured revolving line of credit from $ 600 million to $ 1 billion . in connection with this amendment , the semi-annual redetermination of our borrowing base was also completed on october 6 , 2011 , which resulted in the borrowing base of our amended credit facility increasing from $ 137.5 million to $ 350 million . in addition , on october 25 , 2011 , the lenders under the amended credit facility ( lenders ) waived the mandatory reduction of the borrowing base that otherwise would have occurred as a result of the issuance of the senior unsecured notes subsequently offered ( see senior unsecured 2021 notes below ) . borrowings under our amended credit facility are collateralized by perfected first priority liens and security interests on substantially all of our assets , including mortgage liens on oil and natural gas properties having at least 80 % of the reserve value as determined by reserve reports . borrowings under the amended credit
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Liquidity
| 8,581
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85 during the fourth quarter of 2019 , we reported new analyses of red blood cell ( rbc ) transfusion data from simplify-1 , a double-blind phase 3 trial of momelotinib head-to-head versus ruxolitinib in jak inhibitor - naïve patients , which were presented in a poster by dr. ruben mesa , director of the mays cancer center , home to ut health san antonio md anderson cancer center , at the 61 st american society of hematology ( ash ) annual meeting in orlando , florida . these analyses demonstrated that patients who received momelotinib had significantly decreased transfusion requirements compared to those treated with ruxolitinib , including an odds ratio of nearly 10 for receiving no transfusions during the 24-week study period . transfusion dependency and moderate to severe anemia are critical negative prognostic factors for overall survival in myelofibrosis . during the second quarter of 2020 , at the 25 th european hematology association ( eha ) virtual congress , we reported favorable long-term safety and dose intensity data for momelotinib from more than 550 patients across the two previously conducted simplify phase 3 studies and their subsequent ongoing extended treatment periods . more than 90 simplify-1 and simplify-2 patients continued to receive momelotinib for 3.5 years or longer . these data were presented in posters by professor claire harrison , guy 's and st. thomas ' nhs foundation trust , london , united kingdom , and dr. vikas gupta , princess margaret cancer centre , toronto , canada . the key findings were : consistent with prior data , and reflecting momelotinib 's differentiated pharmacological profile , our new long-term safety analyses continue to show a rapid and sustained increase in hemoglobin levels during momelotinib therapy , in contrast to the significant decrease in hemoglobin for patients receiving ruxolitinib . patients treated with momelotinib also experienced significantly higher mean platelet counts compared to those receiving ruxolitinib . importantly , patients who switched from ruxolitinib to momelotinib also achieved a sustained improvement in hemoglobin in both studies , and platelets in simplify-1 . in addition to an absence of significant rates of high-grade hematological toxicities , long-term tolerability was favorable with no new safety signals or evidence of cumulative toxicity . momelotinib 's safety profile and durable benefits facilitated sustained dose intensity across the continuum of jak inhibitor-naïve and previously jak inhibitor treated myelofibrosis patients . while the starting doses for ruxolitinib were often attenuated due to low platelets , further reductions in dose intensity were also commonly required for ruxolitinib . in contrast , momelotinib was initiated at full dose for all subjects enrolled to the simplify studies and high dose intensity was maintained in the majority over extended durations . patients who switched from ruxolitinib to momelotinib saw an immediate and sustained improvement in dose intensity . the data from the two interrelated presentations suggest that the favorable effect on hemoglobin and platelets allows momelotinib to be initiated at full dose intensity and maintained for the majority of patients at full dose intensity over extended durations while retaining a favorable long-term safety profile . notably , some patients continued to receive momelotinib 10 years after enrolling in the initial momelotinib phase 2 trials while 90 phase 3 simplify patients who enrolled into those trials 4 to 6 years ago continued to receive momelotinib . we believe the dosing and safety profile may contribute to momelotinib 's potential ability to provide sustained benefits over extended durations . most recently , we released updated analyses from the previously completed phase 3 simplify studies of momelotinib at the american society of hematology annual meeting in december 2020 , including overall survival data as well as efficacy data for momelotinib compared to ruxolitinib in patients with low platelet levels . the overall survival data received an oral presentation by dr. srdan verstovsek of the university of texas md anderson cancer center in houston , texas , usa ; efficacy data by platelet strata were presented in a poster by dr. jean-jacques kiladjian , saint louis hospital , paris , france . key findings were : robust overall survival was observed in both jak inhibitor-naïve and previously ruxolitinib treated patients . sustained transfusion independence was observed with extended momelotinib treatment , and the median duration of ti in the momelotinib arm has not been reached after more than three years of follow up . we believe these data , in combination with previously reported safety data , further highlight where momelotinib may be a viable treatment option for myelofibrosis patients including those who are not ideal candidates for currently approved therapies . 86 the retrospective analysis of the two phase 3 simplify studies demonstrate that the relative benefit-risk profile of momelotinib and ruxolitinib is influenced by baseline platelet count . in simplify-1 , momelotinib achieved substantially higher t ransfusion i ndependence ( ti ) and splenic response rates and had a similar symptomatic response relative to ruxolitinib in patients whose baseline platelet count was < 150 x 10 9 l. for patients whose platelet count was 150 – 300 x 10 9 /l , momelotinib achieved a higher ti response rate and generally similar splenic and symptom response rates . in patients with platelet counts > 300 x 10 9 /l , ruxolitinib achieved higher splenic and symptom response rates than momelotinib , and the ti rate remained higher with momelotinib . these updated analyses complement previous findings that demonstrate the ability to initiate and maintain near-maximal momelotinib dose intensity regardless of baseline platelet count , suggesting that this durable dosing contributes to its efficacy profile . during 2020 , we continued to operationalize the momentum trial on a global basis , and we anticipate closing screening in the first half of 2021 and remain on track to complete enrollment in mid-2021 . story_separator_special_tag in addition , in february 2021 , we filed a prospectus supplement pursuant to which we can issue and sell an aggregate of up to $ 30.0 million of our common stock from time to time in atm offerings . we expect to incur significant expenses and increasing operating losses for the foreseeable future . we anticipate that our expenses will increase substantially as we : invest to further develop momelotinib , potentially including combination studies as the field of myelofibrosis evolves ; hire additional clinical , regulatory , scientific , drug development and management personnel , as well as personnel to support any future commercialization efforts ; 91 invest in scaling our manufacturing capacity to support development and our global commercialization strategy ; seek regulatory and marketing approvals for any product candidates that we may develop ; achieve regulatory milestones that trigger payments due under our asset purchase agreement with gilead ; ultimately establish a sales , marketing and distribution infrastructure to commercialize any drugs for which we may obtain marketing approval ; acquire or in-license additional product candidates and technologies ; develop additional product candidates ; defend against potential lawsuits or other legal issues ; maintain , expand and protect our intellectual property portfolio ; and add operational , financial and management information systems and personnel related to commercialization and to continue to operate as a public company . to fund our operating plans , we will need to raise additional capital . our existing cash and cash equivalents will not be sufficient for us to complete development and prepare for commercializing momelotinib . accordingly , we will continue to require substantial additional capital to continue our clinical development and potential commercialization activities ; however , we believe that our existing cash and cash equivalents will be sufficient to fund our current operating plans into the second half of 2022 , subject to the potential impact of covid-19 . in addition , series b warrants , if fully exercised , would provide approximately $ 34.0 million in proceeds to us . we can not assure you that the series b warrants will be exercised , or that we will ever be profitable or generate positive cash flow from operating activities . however , our forecast for the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties , and actual results could vary materially . the amount and timing of our future funding requirements will depend on many factors , including the pace and results of our preclinical and clinical development efforts , including any potential impacts of the covid-19 pandemic on our clinical development efforts , costs related to momelotinib commercialization efforts , costs related to potentially develop momelotinib in combination studies or costs to develop additional product candidates . we plan to continue to fund our operating plans ' needs through equity financings or other arrangements , such as strategic partnerships and alliances or licensing arrangements . to the extent that we raise additional capital through future equity financings , the ownership interest of our stockholders will be diluted , and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders . if we raise additional funds through the issuance of debt securities , these securities could contain covenants that would restrict our operations . if we raise additional funds through strategic partnerships and alliances or licensing arrangements with third parties , we may have to relinquish valuable rights to our technologies or momelotinib or grant licenses on terms unfavorable to us . there can be no assurance that such additional financing , if available , can be obtained on terms acceptable to us . if we are unable to obtain such additional financing , we would need to reevaluate our future operating plans . we are exploring options to support the potential continued development of sra737 in the future . there can be no assurance that we will successfully obtain the funding or support necessary to advance sra737 or obtain such funding or support on commercially reasonable terms . 92 story_separator_special_tag liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements , as well as the reported expenses incurred during the reporting periods . our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances , the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . we believe that the accounting policies discussed below are critical to understanding our historical and future performance , as these policies relate to the more significant areas involving management 's judgments and estimates . research and development expenses as part of the process of preparing financial statements , we are required to estimate and accrue expenses , a significant portion of which are research and development expenses . costs for certain research and development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites . this process involves the following : reviewing quotations and contracts , identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost ; estimating and accruing expenses in our financial statements as of each balance sheet date based on facts and circumstances known to us at the time ; and periodically confirming the accuracy of our estimates with selected service providers and making adjustments , if necessary . 94 estimated research and development expenses that we accrue
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cash flows the following table summarizes our cash flows for the periods indicated : replace_table_token_5_th cash flows from operating activities in 2020 , cash used in operating activities of $ 52.4 million was attributable to a net loss of $ 80.9 million , partially offset by $ 27.7 million in non-cash and other adjustments and a net change of $ 0.8 million in our net operating assets and liabilities . the non-cash charges consisted primarily of a $ 16.2 million change in fair value of our warrant liabilities , a $ 1.5 million non-cash charge relating to the securities issuable to gilead in connection with the amendment to the asset purchase agreement , and $ 9.5 million of non-cash stock-based compensation . the change in net operating assets and liabilities was primarily attributable to an increase in our accounts payable of $ 1.2 million , partially offset by a decrease in our accrued , other and operating lease liabilities of $ 0.4 million . in 2019 , cash used in operating activities of $ 51.2 million was attributable to a net loss of $ 88.3 million and a net change of $ 2.0 million in our net operating assets and liabilities , partially offset by $ 39.1 million in non-cash and other adjustments .
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Liquidity
| 6,231
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considerable uncertainty exists regarding how future budget and program decisions will unfold , including the defense spending priorities of the administration and congress and what challenges budget reductions ( required by the bca and otherwise ) will present for the defense industry . if annual appropriations bills are not timely enacted for fy 2021 or beyond , the u.s. government may again operate under a continuing resolution , restricting new contract or program starts , presenting resource allocation challenges and placing limitations on some planned program budgets , and we may face another government shutdown of unknown duration . if a prolonged government shutdown of the dod were to occur , it could result in program cancellations , disruptions and or stop work orders and could limit the u.s. government 's ability to effectively progress programs and to make timely payments , and our ability to perform on our u.s. government contracts and successfully compete for new work . we believe continued budget pressures would have serious negative consequences for the security of our country , the defense industrial base , including the company and the customers , employees , suppliers , investors , and communities that rely on companies in the defense industrial base . it is likely budget and program decisions made in this environment would have long-term implications for our company and the entire defense industry . additionally , funding for certain programs in which we participate may be reduced , delayed or cancelled , and budget cuts globally could adversely affect the viability of our subcontractors and suppliers , and our employee base . while we believe that our business is well-positioned in areas that the dod and other customers have indicated are areas of focus for future defense spending , the long-term impact of the bca , other defense spending cuts , challenges in the appropriations process , the debt ceiling and the ongoing fiscal debates remain uncertain . significant delays or reductions in appropriations ; long-term funding under a continuing resolution ; an extended debt ceiling breach or government shutdown ; and or future budget and program decisions , among other items , may negatively impact our business and programs and could have a material adverse effect on our financial position , results of operations and or cash flows . current reporting segments we operate in two reportable segments . the kgs reportable segment is comprised of an aggregation of kgs operating segments , including microwave electronic products , space , training and cybersecurity , training systems , modular systems , turbine technologies , and defense and rocket support services . the us reportable segment consists of our unmanned aerial , unmanned ground and unmanned seaborne system products . our kgs and us segments provide products , solutions and services for mission critical national security programs . kgs and us customers primarily include national security related agencies , the dod , intelligence agencies and classified agencies , and to a lesser degree , international government agencies and domestic and international commercial customers . we organize our operating segments based primarily on the nature of the products , solutions and services offered . for additional information regarding our reportable segments , see note 14 of the notes to consolidated financial statements . from a customer and solutions perspective , we view our business as an integrated whole , leveraging skills and assets wherever possible . discontinued operations on february 28 , 2018 , the company entered into a stock purchase agreement to sell the operations of kratos public 38 safety & security solutions , inc. , a delaware corporation and wholly owned subsidiary of the company ( “ pss ” ) , to securitas electronic security , inc. , a delaware corporation ( “ buyer ” ) . on june 11 , 2018 , we completed the sale of all of the issued and outstanding capital stock of pss to buyer for a purchase price of $ 69 million in cash , subject to a closing net working capital adjustment ( the “ transaction ” ) . we currently expect to receive approximately $ 70 million of aggregate net cash proceeds from the transaction , after taking into account amounts to be paid by us pursuant to a negotiated transaction services agreement between us and the buyer , receipt of approximately $ 7.0 million in net working capital retained by the company , and associated transaction fees and expenses , excluding the impact of the final settlement and determination of the closing net working capital adjustment . to date , we have collected approximately $ 3.7 million of the retained net working capital . we currently expect that the remaining net working capital retained by the company will be collected during 2020 once certain legacy projects are completed and the project close-out process has been completed . we are currently in dispute with the buyer regarding the closing net working capital adjustment . the amount in dispute is approximately $ 8 million . the company currently expects to recognize a net break-even on the sale of the pss business once the aggregate net proceeds described above have been collected , excluding the impact of the final settlement and determination of the closing net working capital adjustment . any changes or adjustments to the expected net proceeds will be reflected in future periods . for additional information regarding discontinued operations , see note 9 of the notes to consolidated financial statements contained within this annual report . key financial statement concepts as of december 29 , 2019 , we consider the following factors to be important in understanding our financial statements . the company 's business with the u.s. government and prime contractors is generally performed under fixed-price , cost reimbursable , or time and materials contracts . cost reimbursable contracts for the u.s. government provide for reimbursement of costs plus the payment of a fee . story_separator_special_tag cash provided by financing activities from continuing operations is summarized as follows ( in millions ) : replace_table_token_5_th net cash provided by financing activities from continuing operations was $ 3.5 million for the year ended december 29 , 2019 . net cash provided by financing activities from continuing operations was $ 1.7 million for the year ended 43 december 30 , 2018 , which includes $ 1.1 million of fees paid in the beginning of 2018 related to the equity offerings that were completed in 2017. the net operating cash flows of discontinued operations is summarized as follows ( in millions ) : year ended december 29 , 2019 december 30 , 2018 net operating cash flows of discontinued operations $ 1.1 $ ( 7.7 ) the net operating cash flow of discontinued operations for the year ended december 29 , 2019 is substantially related to the discontinued operations of our pss business unit . during 2019 , approximately $ 3.7 million was collected on amounts due related to the legacy projects retained by us , less costs incurred to complete the legacy projects and legal costs related to the ongoing working capital dispute with the buyer of pss . this was also partially offset by a reduction in other current liabilities of $ 1.8 million . the net operating cash flow of discontinued operations for the year ended december 30 , 2018 is substantially related to the discontinued operations of our pss business unit , which includes the payment of $ 3.5 million to the buyer of the pss business pursuant to a negotiated transaction services agreement . 6.5 % senior secured notes due 2025 in november 2017 , we issued and sold $ 300 million aggregate principal amount of 6.5 % senior secured notes due 2025 ( the “ 6.5 % notes ” ) in a private placement conducted pursuant to rule 144a and regulation s under the securities act of 1933 , as amended ( the “ act ” ) . the net proceeds from the issuance of the 6.5 % notes were $ 295.5 million after expenses of $ 4.5 million . we utilized the net proceeds from the sale of the 6.5 % notes , as well as cash from our recent equity offering to extinguish our previously outstanding 7 % notes . the total reacquisition price of the 7 % notes was $ 385.2 million , including a $ 12.0 million call premium , and $ 0.3 million of accrued interest . the 6.5 % notes are governed by the indenture , dated as of november 20 , 2017 ( the “ indenture ” ) , among the company , our existing and future domestic subsidiaries parties thereto ( the “ subsidiary guarantors ” ) and wilmington trust , national association , as trustee and collateral agent ( in such capacity , the “ 2017 trustee and collateral agent ” ) . a subsidiary guarantor can be released from its guarantee if ( a ) all of the capital stock issued by such subsidiary guarantor or all or substantially all of the assets of such subsidiary guarantor are sold or otherwise disposed of ; ( b ) we designate such subsidiary guarantor as an unrestricted subsidiary ; ( c ) we exercise our legal defeasance option or our covenant defeasance option ; or ( d ) upon satisfaction and discharge of the indenture or payment in full in cash of the principal of , premium , if any , and accrued and unpaid interest on the 6.5 % notes . the 6.5 % notes bear interest at a rate of 6.5 % per year from the date of original issuance or from the most recent payment date on which interest has been paid or provided for . interest on the 6.5 % notes is payable in arrears on may 30 and november 30 of each year , beginning on may 30 , 2018. the 6.5 % notes are fully and unconditionally guaranteed by the subsidiary guarantors . the 6.5 % notes and the guarantees ( as set forth in the indenture , the “ guarantees ” ) are our senior secured obligations and are equal in right of payment with all other senior obligations of the subsidiary guarantors ' existing and future secured debt to the extent of the assets securing that secured debt . our obligations under the 6.5 % notes are secured by a first priority lien on substantially all of our assets and the assets of the subsidiary guarantors , except with respect to accounts receivable , inventory , deposit accounts , securities accounts , cash , securities and general intangibles ( other than intellectual property ) , on which the holders of the 6.5 % notes have a second priority lien , junior to the lien securing our obligations under the credit agreement . the 6.5 % notes will be redeemable , in whole or in part , at any time on or after november 30 , 2020 at the respective redemption prices specified in the indenture . in addition , we may redeem up to 40 % of the 6.5 % notes before november 30 , 2020 with the net proceeds of certain equity offerings . we may also redeem some or all of the 6.5 % notes before november 30 , 2020 at a redemption price of 100 % of the principal amount thereof plus accrued and unpaid interest , to , but excluding , the redemption date , if any , plus a “ make whole ” premium . in addition , during each 12-month period commencing on the issue date and ending on or prior to november 30 , 2020 , we may redeem up to 10 % of the original aggregate principal amount of the 6.5 % notes issued under the indenture at a redemption price of 103.000 % of the principal amount thereof , plus accrued and unpaid interest , to , but excluding
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liquidity and capital resources as of december 29 , 2019 , we had cash and cash equivalents of $ 172.6 million compared with cash and cash equivalents of $ 182.7 million as of december 30 , 2018 , which includes $ 24.6 million and $ 12.0 million , respectively , of cash and cash equivalents held by our foreign subsidiaries . we are not presently aware of any restrictions on the repatriation of these funds , however , earnings of these foreign subsidiaries are essentially considered permanently invested in these foreign subsidiaries . if these funds were needed to fund our operations or satisfy obligations in the u.s. they could be repatriated , and their repatriation into the u.s. may cause us to incur additional foreign withholding taxes . we do not currently intend to repatriate these earnings . our total debt , including principal due on the 6.5 % notes , net of debt issuance costs of $ 4.9 million , increased by $ 0.9 million to $ 295.1 million as of december 29 , 2019 from $ 294.2 million as of december 30 , 2018 . the increase in total debt was due to the amortization of debt issuance costs . we use our operating cash flow to finance trade accounts receivable , fund necessary increases in inventory , which may include leaning forward to procure long-lead materials for certain of our unmanned systems programs at our customers ' request , prior to receipt of customer contractual funding documents , fund capital expenditures , our ir & d investments , other product investments , and our ongoing operations , service our debt and make strategic acquisitions .
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Liquidity
| 9,973
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our safety performance improved in 2013 , as we lowered our lost-time incident case rates for both employees and operational contractors . aes ' strategic initiatives have resulted in both better operational availability and reliability of our generation portfolio , as measured by our key performance indicators ( `` kpis '' ) . for example , our asset management program works to optimize the timing of plant maintenance by focusing on market pricing trends to minimize the costs of outages . this is evidenced by our performance in the commercial availability ( `` ca '' ) kpi , as defined below , which improved 4 % . another strategic initiative focuses on the techniques of coal blending and using a variety of coals to improve margin . coal blending can reduce the efficiency of certain generating units , which unfavorably affects our heat rate ; however , it is offset by the financial benefits from utilizing lower-cost coal . our utility portfolio also recorded some improvements in kpis for the year . our dedication to providing reliable energy is evidenced by the improvement in our system average interruption duration index ( `` saidi '' ) and system average interruption frequency index ( `` saifi '' ) , which improved 15 % and 24 % , respectively , compared to 2012. saidi and saifi metrics benefited in 2013 from fewer significant weather events in the us and asset optimization in the us and brazil , such as crew productivity improvement , tree-trimming , and pole replacement . our key performance indicators for 2013 and 2012 are as follows : replace_table_token_20_th _ definitions : lost-time incident case rate : number of lost-time cases per number of full-time employees or contractors . commercial availability : actual variable margin , as a percentage of potential variable margin if the unit had been available at full capacity during outages . equivalent forced outage factor : the percentage of the time that a plant is not capable of producing energy , due to unplanned operational reductions in production . 77 heat rate : the amount of energy used by an electrical generator or power plant to generate one kilowatt-hour ( kwh ) . system average interruption duration index : the total hours of interruption the average customer experiences annually . system average interruption frequency index : the average number of interruptions the average customer experiences annually . non-technical losses : delivered energy that was not billed due to measurement error , theft or other reasons . we achieved the improvement in our kpis while also reducing costs across our portfolio . since 2011 , we have reduced our general and administrative and business development costs at our corporate offices and our sbus by $ 143 million . while we made progress on our kpis and cost cutting initiatives in 2013 , generation in gigawatt-hours ( gwh ) decreased 4 % , driven by dry hydrological conditions in many markets in latin america . the impact of low water inflows on our generation was most significant in panama , colombia , and brazil . finally , two of our utility businesses in brazil and ohio faced some challenges . in brazil , eletropaulo received a ruling on customer refunds in december 2013 , which resulted in a $ 269 million regulatory liability recognized in the fourth quarter . aes owns 16 % of eletropaulo . see item 1. brazil sbu — eletropaulo — eletropaulo regulatory asset base update for further discussion . in ohio , dpl received a ruling on its esp application to establish rates effective january 1 , 2014. while the ruling allows for a non-bypassable charge through 2016 , lower expectations for dark spreads and capacity prices present longer-term challenges for the business . as a result of these and other factors , dpl recorded a goodwill impairment of $ 307 million in the fourth quarter . see item 1. us sbu — dpl — regulatory matters for further discussion of the ruling and note 10. goodwill and other intangibles for further discussion of the impairment . improving available capital and deployment of discretionary cash we continue to focus on improving cash generation and optimizing the use of our parent discretionary cash . during 2013 , we generated $ 2.7 billion of cash flow from operating activities and closed multiple asset sales . in terms of uses , we deployed our discretionary cash to pay four quarterly dividends of $ 0.04 per share , allocated $ 322 million to repurchase 25 million shares ( see note 16 . - equity in item 8 . - financial statements of this form 10-k for further information ) , allocated $ 464 million to reduce recourse debt and extend near-term maturities at the parent company , and invested $ 198 million in our subsidiaries for platform expansions and other purposes . the largest platform investments in 2013 included environmental upgrades at indianapolis power & light facilities that will receive full recovery for qualifying costs , including a return on equity , and our expansion project at our amman east facility in jordan . realigning our geographic focus in 2013 , we announced or closed 8 asset sale transactions , representing $ 497 million in equity proceeds to aes . with these transactions , we exited operations in spain , china , ukraine , and trinidad , and we plan to exit cameroon after the sale of our cameroonian businesses closes in 2014. these asset sales are part of our strategy to drive shareholder value by exiting markets where we do not have a compelling competitive advantage and reinvesting capital into expanding our platforms . throughout 2013 , we added 522 mw of new capacity , through four platform expansion projects . our planned future capacity growth will come from a combination of projects currently under construction and development . story_separator_special_tag we have 2,762 mw of new capacity under construction , including the 531 mw alto maipo hydroelectric project in chile , which broke ground late in 2013. in addition , we have environmental upgrades of approximately 2,400 mw under construction at indianapolis power & light ( ipl ) . these projects are scheduled to come on-line through 2018 . 78 story_separator_special_tag style= '' line-height:120 % ; font-size:10pt ; padding-left:36px ; '' > andes — overall favorable impact of $ 31 million driven by chile due to the impact of new operations at angamos in chile which commenced operations in april 2011 as well as higher contract volume , partially offset by lower spot sales from termoandes in argentina to chile and chivor due to higher prices . favorable drivers above partially offset by unfavorable fx of $ 66 million and argentina due to lower prices and the impact of outages , despite higher volume . brazil — overall unfavorable impact of $ 852 million driven by unfavorable fx of $ 1.1 billion as well as eletropaulo due to lower tariffs as a result of the july 2012 tariff reset , which was delayed from july 2011 , partially offset by higher pass-through costs at sul and higher contract and spot prices at tietê . mcac — overall favorable impact of $ 246 million driven by new operations at changuinola , which commenced operations in october 2011 , and the re-start of operations at the esti plant in panama , as well as the dominican republic due to higher prices and volume from gas sales and higher ancillary services , slightly offset by unfavorable foreign currency translation impact of $ 17 million in mexico . emea — overall unfavorable impact of $ 125 million driven by unfavorable fx of $ 39 million , a decrease at cartagena due to the sale of 80 % of our ownership in february 2012 , somewhat offset by a non-recurring favorable arbitration settlement , and ballylumford in the united kingdom due to higher outages and lower demand . the lower results were partially offset by new operations at maritza , which commenced operations in june 2011. asia — overall favorable impact of $ 108 million driven by masinloc in the philippines due to higher demand net of lower prices , the reversal of a contingency and unrealized derivative gains in 2012 , and favorable foreign currency translation of $ 14 million . operating margin decreased $ 457 million , or 11 % , to $ 3.6 billion in 2012 compared with $ 4.0 billion in 2011 . the key operating drivers of the change at each of the sbus are as follows : us — overall favorable impact of $ 316 million driven by the first full year of operations at dpl , lower repair and maintenance costs at ipl , the short-term restart of two units at southland , and fewer outages at hawaii . andes — overall unfavorable impact of $ 163 million driven by chile due to higher replacement energy costs and lower spot sales at termoandes , argentina due to lower prices and higher fixed costs , partially offset by an increase at chivor due to non-recurring equity tax in 2011 and a net favorable impact of higher spot prices and lower volumes . 81 brazil — overall unfavorable impact of $ 833 million driven by unfavorable fx impact of $ 146 million , lower tariffs at eletropaulo as discussed above and higher fixed costs , partially offset by higher contract prices from the annual ppa price adjustment at tietê , and higher tariffs at sul . mcac — overall favorable impact of $ 48 million driven by panama due to the first full year of operations at changuinola as well as the re-start of operations at the esti plant , somewhat offset by lower prices as well as mexico due to fewer outages and higher volume and the dominican republic due to favorable prices , primarily higher spot and lng prices , somewhat offset by lower availability . emea — overall favorable impact of $ 109 million driven by maritza due to the first full year of operations , kilroot with increased dispatch , and cartagena due to a non-recurring favorable arbitration settlement , somewhat offset by the sale of 80 % as discussed above . the favorable drivers above were partially offset by ballylumford due to lower capacity prices , higher outages and related maintenance costs , and lower volume . asia — overall favorable impact of $ 69 million driven by masinloc due to higher market demand net of lower rates , the reversal of a contingency and higher unrealized derivative gains . general and administrative expenses general and administrative expenses includes expenses related to corporate staff functions and or initiatives , executive management , finance , legal , human resources and information systems , as well as global development costs . general and administrative expenses decrease d $ 54 million , or 20 % , to $ 220 million in 2013 from 2012 primarily due to company restructuring efforts , resulting in a decrease in employee related costs , professional fees and business development costs . general and administrative expenses decrease d $ 72 million , or 21 % , to $ 274 million in 2012 from 2011 primarily due to reductions in business development and systems administration costs . interest expense interest expense decrease d $ 62 million , or 4 % , to $ 1.5 billion in 2013 from 2012 . the decrease was primarily due to reduced debt principal as well as the prior year prepayment of an interest rate cash flow hedge that resulted in a reclassification of deferred losses from other comprehensive income to earnings at the parent company , favorable foreign currency translation and lower interest rates in brazil , as well as income resulting from ineffectiveness on interest rate swaps in puerto rico that continue to qualify for hedge accounting .
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andes — overall unfavorable impact of $ 381 million driven by unfavorable fx of $ 128 million , lower prices from the impact of resolution 95 in argentina , and lower contract and spot prices at gener in chile , partially offset by higher spot prices at chivor in colombia as a result of dry hydrology . brazil — overall unfavorable impact of $ 773 million driven by unfavorable fx of $ 631 million , lower demand as well as lower pass-through costs and the tariff reset implemented in april 2013 at sul , and a decrease at eletropaulo related to the recognition of a regulatory liability for customer refunds ( see item 1 . - business - brazil sbu - eletropaulo regulatory asset base update ) somewhat offset by higher tariffs . negative results above partially offset by higher prices and sales at tietê and the temporary re-start of operations during february and march of 2013 at uruguaiana . mcac — overall favorable impact of $ 140 million driven by higher spot prices as well as higher spot and gas sales to third parties in the dominican republic , higher prices in mexico and puerto rico , partially offset by lower generation net of higher prices due to lower hydrology in panama . emea — overall favorable impact of $ 3 million driven by higher energy prices at kilroot , pass-through costs at maritza and jordan , as well as higher dispatch and fewer outages at ballylumford , partially offset by lower capacity prices . the favorable results above were largely offset by the sale of 80 % of our ownership in cartagena in february 2012 and a non-recurring favorable arbitration settlement in 2012. asia — overall unfavorable impact of $ 183 million due to higher contract levels at lower prices to reduce spot exposure , the reversal of a contingency and unrealized derivative gains in 2012 at masinloc in the philippines as well as lower generation at kelanitissa in sri lanka as a result of higher hydrology . operating margin decrease d
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ROO
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other recent accounting pronouncements issued by the fasb , ( including its emerging issues task force ) , the american institute of certified public accountants , and the sec did not , or are not believed by the company to , have a material impact on the company 's consolidated story_separator_special_tag the following discussion and analysis of our financial condition , results of operations , and cash flows should be read in conjunction with the audited consolidated financial statements and the related notes thereto included elsewhere in this annual report on form 10-k. this section generally discusses the fiscal years ended march 31 , 2020 and 2019 items and comparisons between these fiscal years . discussions of the fiscal year ended march 31 , 2018 items and comparisons between the fiscal years ended march 31 , 2019 and 2018 that are not included in this annual report on form 10-k can be found in item 7 of part ii , “ management 's discussion and analysis of financial condition and results of operations , ” of our annual report on form 10-k for the fiscal year ended march 31 , 2019 filed with the united states securities and exchange commission on may 24 , 2019. business overview we are a healthcare company focused on redefining care for women and for men . our lead product candidate is relugolix , a once-daily , oral , gonadotropin-releasing hormone ( “ gnrh ” ) receptor antagonist for which we have successfully completed multiple phase 3 clinical studies across three distinct indications . we are preparing for potential commercial launches in the u.s. of relugolix combination tablet ( relugolix 40 mg , estradiol 1.0 mg and norethindrone acetate 0.5 mg ) for women with heavy menstrual bleeding associated with uterine fibroids or pain associated with endometriosis and relugolix monotherapy tablet ( 120 mg ) for men with advanced prostate cancer , in anticipation of u.s. food and drug administration ( “ fda ” ) approval to market in these indications . we submitted our new drug application ( “ nda ” ) to the fda for relugolix monotherapy tablet for the treatment of men with advanced prostate cancer in april 2020 , and currently expect to submit an nda to the fda for relugolix combination tablet for the treatment of women with heavy menstrual bleeding associated with uterine fibroids in may 2020. we announced positive results from the first of two replicate phase 3 clinical studies evaluating relugolix combination therapy in women with pain 57 associated with endometriosis , and expect to announce top-line results from the second study in the second quarter of calendar year 2020. in addition , we are developing mvt-602 , an oligopeptide kisspeptin-1 receptor agonist , for the treatment of female infertility as a part of assisted reproduction . takeda pharmaceuticals international ag ( “ takeda ” ) , a subsidiary of takeda pharmaceutical company limited , the originator of relugolix , granted us a worldwide license to develop and commercialize relugolix ( excluding japan and certain other asian countries ) and an exclusive right to develop and commercialize mvt-602 in all countries worldwide . on march 30 , 2020 , we entered into an exclusive license agreement with gedeon richter plc . ( “ richter ” ) for richter to commercialize relugolix combination tablet for uterine fibroids and endometriosis in certain territories outside of the u.s. under this agreement , we have retained all of our rights to relugolix combination tablet in the u.s. and canada , as well as rights to relugolix in other therapeutic areas outside of women 's health . in march 2020 , we submitted a marketing authorisation application ( “ maa ” ) to the european medicines agency ( “ ema ” ) for relugolix combination tablet in uterine fibroids . the maa submission has completed validation and is now under evaluation by the ema . additional information regarding our business and product candidates is included in part i. item 1. , “ business , ” of this annual report on form 10-k. since our inception , we have devoted substantially all of our efforts to identifying and in-licensing our product candidates , organizing and staffing our company , raising capital , preparing for and advancing the clinical development of our product candidates and preparing for potential future regulatory approvals and commercialization of relugolix combination tablet and relugolix monotherapy tablet . on december 27 , 2019 , sumitovant biopharma ltd. ( “ sumitovant ” ) , a subsidiary of sumitomo dainippon pharma co. , ltd. ( “ sumitomo dainippon pharma ” ) , became our majority shareholder and a related party after acquiring approximately 50.2 % of our common shares outstanding on december 27 , 2019 . these common shares were acquired from our former majority shareholder , roivant sciences ltd. ( “ roivant , ” “ rsl , ” or “ former majority shareholder ” ) at the closing of a transaction between roivant and sumitomo dainippon pharma . as of march 31 , 2020 , sumitovant directly , and sumitomo dainippon pharma indirectly , own approximately 52.1 % of our outstanding common shares . as a result of the transfer of these common shares , roivant no longer beneficially owns any of our common shares . fiscal year ended march 31 , 2020 and recent clinical and business highlights the following summarizes our fiscal year ended march 31 , 2020 and recent clinical and business highlights . additional information regarding our relugolix and mvt-602 clinical programs is included in part i. item 1. , “ business , ” of this annual report on form 10-k. relugolix clinical programs phase 3 program for the treatment of advanced prostate cancer ( hero ) ◦ on april 21 , 2020 , we announced the submission of an nda to the fda for once-daily , oral relugolix monotherapy tablet ( 120 mg ) for the treatment of men with advanced prostate cancer . the nda submission was supported by efficacy and safety data from the phase 3 hero study , a randomized pivotal study comparing relugolix monotherapy versus leuprolide acetate . story_separator_special_tag ◦ we completed enrollment of 638 patients in the spirit 1 study and currently expect to report top-line results from the spirit 1 study in the second quarter of calendar year 2020. ovulation inhibition study ◦ on april 22 , 2020 , we announced results from an open-label , single-arm ovulation inhibition study consisting of a pre-treatment period to confirm ovulatory status , an 84-day treatment period ( three cycles ) to assess the effects of relugolix combination therapy on ovulation inhibition , and a post-treatment follow-up period to determine the time to the return of ovulation . ovulation inhibition was based on the hoogland-skouby scale . in this study , relugolix combination therapy achieved 100 % ovulation inhibition in 67 healthy women with no women ovulating during the 84-day treatment period , as evaluated by the hoogland-skouby assessment scale ( score < 5 ) . furthermore , 100 % of women resumed ovulation or menses upon discontinuation of treatment with an average time to ovulation of 23.5 days . 59 bioequivalence study of relugolix combination therapy and relugolix combination tablet ◦ on july 23 , 2019 , we announced that a separate clinical study of our relugolix combination tablet met all required and pre-specified criteria for bioequivalence to the two tablets ( relugolix 40 mg plus estradiol 1.0 mg and norethindrone acetate 0.5 mg ) used in our phase 3 uterine fibroid and endometriosis clinical studies , providing data necessary to include the once-daily dosing regimen of relugolix combination tablet in our nda and maa submissions for the treatment of heavy menstrual bleeding associated with uterine fibroids and endometriosis . corporate on june 4 , 2019 , we completed an underwritten public equity offering of 17,424,243 of our common shares at a public offering price of $ 8.25 per common share . after deducting the underwriting discounts and commissions and offering costs paid by us , the net proceeds to us in connection with the underwritten public equity offering were approximately $ 134.5 million . on december 27 , 2019 , sumitovant became our majority shareholder and a related party after acquiring 45,008,604 of our outstanding common shares , representing approximately 50.2 % of our common shares outstanding on december 27 , 2019 . the se common shares were acquired from our former majority shareholder , roivant , at the closing of a transaction between roivant and sumitomo dainippon pharma . as of may 14 , 2020 , sumitovant directly , and sumitomo dainippon pharma indirectly , own 48,468,472 of our outstanding common shares , representing approximately 53.9 % of our common shares outstanding on may 14 , 2020 . o n december 27 , 2019 , w e entered into an investor rights agreement with sumitomo dainippon pharma and sumitovant that provides certain protections for our minority shareholders for so long as sumitomo dainippon pharma or certain of its affiliates beneficially own more than 50 % of our common shares . pursuant to the investor rights agreement , among other things , we agreed , at the request of sumitovant , to register for sale , under the securities act of 1933 , common shares beneficially owned by sumitovant , subject to specified conditions and limitations . in addition , we agreed to periodically provide sumitovant ( i ) certain financial statements , projections , capitalization summaries and other information and ( ii ) access to our books , records , facilities , and employees . on december 27 , 2019 , we , and our subsidiary , myovant sciences gmbh ( “ msg ” ) , entered into a loan agreement with sumitomo dainippon pharma ( the “ sumitomo dainippon pharma loan agreement ” ) under which sumitomo dainippon pharma agreed to make revolving loans to us in an aggregate principal amount of up to $ 400.0 million , subject to the terms of the sumitomo dainippon pharma loan agreement . through march 31 , 2020 , we have borrowed $ 113.7 million under the sumitomo dainippon pharma loan agreement , which was used to repay all outstanding obligations of us and our subsidiaries to hercules capital , inc. ( “ hercules ” ) and novaquest capital management ( “ novaquest ” ) and to satisfy certain other fees and expenses . as of march 31 , 2020 , approximately $ 286.3 million of borrowing capacity remained available to us under the sumitomo dainippon pharma loan agreement . in april 2020 , we borrowed an additional $ 80.0 million under the sumitomo dainippon pharma loan agreement . the interest rate for any draws under the sumitomo dainippon pharma loan agreement is the 3-month london interbank offered rate ( “ libor ” ) plus a margin of 3 % . on march 30 , 2020 , we entered into an exclusive license agreement with richter for richter to commercialize relugolix combination tablet for uterine fibroids and endometriosis in certain territories outside of the u.s. we have retained all of our rights to relugolix combination tablet in the u.s. and canada , as well as rights to relugolix in other therapeutic areas outside of women 's health . on march 31 , 2020 , we received an upfront payment of $ 40.0 million , which is included in current deferred revenue on our audited consolidated balance sheet , and are eligible to receive up to $ 40.0 million in regulatory milestones ( of which $ 10.0 million was received in april 2020 ) and up to $ 107.5 million in sales-related milestones , and tiered royalties on net sales following regulatory approval . we have also agreed to assist richter in transferring manufacturing technology from our contract manufacturing organizations to enable richter to manufacture relugolix combination tablet . if requested by richter , we have agreed to supply richter with quantities of relugolix combination tablet for its territories pursuant to our agreements with our contract manufacturing organizations .
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results of operations the following table summarizes our results of operations for the years ended march 31 , 2020 and 2019 , respectively ( in thousands ) : replace_table_token_0_th research and development expenses for the years ended march 31 , 2020 and 2019 , our r & d expenses consisted of the following ( in thousands ) : replace_table_token_1_th r & d expenses decreased by $ 30.0 million , to $ 192.6 million , for the year ended march 31 , 2020 compared to $ 222.6 million for the year ended march 31 , 2019 . r & d expenses in both periods primarily include expenses related to our phase 3 clinical programs , manufacturing expenses , as well as personnel-related expenses for employees engaged in r & d activities . r & d expenses for the year ended march 31 , 2019 reflected a ramp up in relugolix phase 3 study costs primarily related to study enrollment , whereas r & d expenses for the year ended march 31 , 2020 reflect declining relugolix phase 3 study costs as certain studies are in the process of winding down . the decrease in relugolix phase 3 study costs of approximately $ 50.9 million were partially offset by increases in other r & d expenses related predominantly to regulatory activities in connection with regulatory submissions for relugolix combination tablet and relugolix monotherapy tablet in multiple indications and jurisdictions and the build out of our medical affairs organization in connection with preparations for our anticipated commercial launches , as well as increases in personnel expenses , share-based compensation expense , and other r & d expenses .
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eden biocell is owned equally by us and triarm and the parties will share decision-making authority , and triarm has committed up to $ 35.0 million to this joint venture and will manage all clinical development to execute trials in the territory . we expect our joint venture with triarm to close in the first half of 2019 and we may evaluate additional programs to pursue in this joint venture . our controlled il-12 platform uses virotherapy based on an engineered replication-incompetent adenovirus ( ad-rts-hil-12 ) plus veledimex as a gene delivery system to conditionally produce il-12 , a potent , naturally occurring anti-cancer protein , to treat patients with solid tumors where a specific target is unknown , including brain cancer . our controlled il-12 platform allows us to deliver il-12 in a tunable dose , which we believe is critical for this potent cytokine . in a phase 1 clinical trial of patients with recurrent glioblastoma multiforme , or rgbm , a subset of patients ( n=6 ) who received low-dose steroids along with 20 mg of veledimex plus ad-rts-hil-12 , achieved 17.8 months median os compared with five to eight months os established in historical controls . thirty-six additional patients with rgbm have been recruited into a sub study designed to encourage use of low-dose steroids and 20 mg veledimex to further understand the potential of controlled il-12 as a monotherapy . we are also developing our controlled il-12 platform in combination with immune checkpoint inhibitors . in june 2018 , we began enrolling patients with rgbm to receive ad-rts-hil-12 plus veledimex in combination with opdivo ® ( nivolumab ) in a phase 1 dose-escalation trial . in november 2018 , we announced a clinical supply agreement with regeneron pharmaceuticals , inc. , or regeneron , to evaluate ad-rts-hil-12 plus veledimex in combination with regeneron 's pd-1 antibody libtayo ® ( cemiplimab-rwlc ) for the treatment of patients with rgbm . we expect to initiate a phase 2 clinical trial in the first half of 2019 in approximately 30 patients with rgbm to measure preliminary safety and efficacy of ad-rts-hil-12 plus veledimex in combination with libtayo . 69 as of december 31 , 2018 , we have approximately $ 61.7 million of cash and cash equivalents . given our current development plans , we anticipate cash resources will be sufficient to fund our operations into the second quarter of 2020 , and we have no committed sources of additional capital at this time . the forecast of cash resources is forward-looking information that involves risks and uncertainties , and the actual amount of our expenses could vary materially and adversely as a result of a number of factors . we have based our estimates on assumptions that may prove to be wrong , and our expenses could prove to be significantly higher than we currently anticipate . management does not know whether additional financing will be on terms favorable or acceptable to us when needed , if at all . if adequate additional funds are not available when required , or if we are unsuccessful in entering into partnership agreements for further development of our product candidates , management may need to curtail its development efforts and planned operations . we have not generated significant revenue and have incurred significant net losses in each year since our inception . for the year ended december 31 , 2018 , we had a net loss of $ 53.1 million , and , as of december 31 , 2018 , we have incurred approximately $ 566.3 million of accumulated deficit since our inception in 2003. we expect to continue to incur significant operating expenditures and net losses . further development of our product candidates will likely require substantial increases in our expenses as we : continue to undertake clinical trials for product candidates ; seek regulatory approvals for product candidates ; work with regulatory authorities to identify and address program-related inquiries ; implement additional internal systems and infrastructure ; hire additional personnel ; and scale-up the formulation and manufacturing of our product candidates . we continue to seek additional financial resources to fund the further development of our product candidates . if we are unable to obtain sufficient additional capital , one or more of these programs could be delayed , and we may be unable to continue our operations at planned levels and be forced to reduce our operations . because of the numerous risks and uncertainties associated with product development , we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability . financial overview story_separator_special_tag style= '' page-break-inside : avoid '' > the length of time required to enroll suitable patients ; the number of patients that ultimately participate in the trials ; the duration of patient follow-up to ensure the absence of long-term product-related adverse events ; and the efficacy and safety profile of the product . as a result of the uncertainties discussed above , we are unable to determine the duration and completion costs of our programs or when and to what extent we will receive cash inflows from the commercialization and sale of a 71 product . our inability to complete our programs in a timely manner or our failure to enter into appropriate collaborative agreements could significantly increase our capital requirements and could adversely impact our liquidity . these uncertainties could force us to seek additional , external sources of financing from time-to-time in order to continue with our product development strategy . our inability to raise additional capital , or to do so on terms reasonably acceptable to us , would jeopardize the future success of our business . general and administrative expenses general and administrative expenses consist primarily of salaries , benefits and stock-based compensation , consulting and professional fees , including patent related costs , general corporate costs and facility costs not otherwise included in research and development expenses or cost of product revenue . story_separator_special_tag other income ( expense ) other income ( expense ) consists primarily of changes in the fair value of our series 1 preferred stock . all of the series 1 preferred stock was forfeited on october 5 , 2018 in conjunction with entering the license agreement with precigen . results of operations for the fiscal year ended december 31 , 2018 versus december 31 , 2017 collaboration revenues revenues for the years ended december 31 , 2018 and 2017 were as follows : replace_table_token_4_th revenue for the year ended december 31 , 2018 decreased by $ 6.2 million in comparison to revenue for the year ended december 31 , 2017 due to the adoption of asc 606 ( note 3 ) . during the year ended december 31 , 2018 , we recognized $ 146 thousand of revenue related to the ares trading agreement under asc 606. during the year ended december 31 , 2017 , we recognized $ 6.4 million through our ares trading agreement under asc 605 . ( note 3 ) . research and development expenses research and development expenses during the years ended december 31 , 2018 and 2017 were as follows : year ended december 31 , 2018 2017 change ( $ in thousands ) research and development $ 34,134 $ 45,084 $ ( 10,950 ) -24 % research and development expenses for the year ended december 31 , 2018 decreased by $ 11.0 million when compared to the year ended december 31 , 2017. the decrease in expense during the year ended december 31 , 2018 was due to a decrease of $ 10.4 million in preclinical activities , a decrease of $ 1.7 million related to graft versus host disease , or gvhd , expenses , and a reduction of $ 0.6 million in other clinical expenses . the decrease in preclinical , gvhd , and other clinical expenses was offset by increases in gorilla il-12 expenses due to precigen under the license agreement of $ 1.0 million ( note 7 ) and of $ 0.7 million related to salary and employee related expense during the year ended december 31 , 2018. we previously determined that the pursuit of gvhd as an indication was not a material part of its corporate strategy and decided to stop pursuing the development of engineered cell therapy strategies , used either separately or in combination , for targeted treatment of gvhd ( note 8 ) . 72 general and administrative expenses general and administrative expenses during the years ended december 31 , 2018 and 2017 were as follows : year ended december 31 , 2018 2017 change ( $ in thousands ) general and administrative $ 19,918 $ 14,798 $ 5,120 35 % general and administrative expenses for the year ended december 31 , 2018 increased by $ 5.1 million as compared to the prior year . the change was primarily due to increased contracted outside services and advisory fees related to our license agreement with precigen ( note 7 ) of $ 4.1 million and an increase of $ 1.3 million related to salary and employee related expense during the year ended december 31 , 2018. the increased costs in 2018 were offset by a reduction of milestone payments of $ 0.3 million due to baxter healthcare s.a. , or baxter , as our license agreement with baxter expired in november 2017 ( note 8 ) . other income ( expense ) other income ( expense ) during the years ended december 31 , 2018 and 2017 were as follows : replace_table_token_5_th during the year ended december 31 , 2018 we recorded a gain on the change in fair value of the derivative liabilities of $ 158 thousand , compared to a loss of $ 1.3 million during the year ended december 31 , 2017 ( note 12 ) . these changes are derived from the number of previously outstanding shares of series 1 preferred stock and their respective valuations . additionally , we recorded $ 631 thousand in other income for the year ended december 31 , 2018 , compared to $ 465 thousand earned in the prior year , due to increases in our cash equivalent accounts ( note 3 ) . results of operations for the fiscal year ended december 31 , 2017 versus december 31 , 2016 collaboration revenues revenues for the years ended december 31 , 2017 and 2016 were as follows : replace_table_token_6_th revenue for the year ended december 31 , 2017 decreased by $ 472 thousand in comparison to revenue for the year ended december 31 , 2016. during each of the years ended december 31 , 2017 and 2016 , we recognized revenue of $ 6.4 million under the ares trading agreement . during the year ended december 31 , 2016 , we recognized $ 272 thousand from our agreement with solasia and $ 200 thousand from our agreement with predictive therapeutics . we recognized no revenue from our agreements with solasia and predictive therapeutics during the year ended december 31 , 2017 . 73 research and development expenses research and development expenses during the years ended december 31 , 2017 and 2016 were as follows : year ended december 31 , 2017 2016 change ( $ in thousands ) research and development $ 45,084 $ 157,791 $ ( 112,707 ) -71 % research and development expenses for the year ended december 31 , 2017 decreased by $ 112.7 million when compared to the year ended december 31 , 2016. during the year ended december 31 , 2016 , we incurred a noncash charge of $ 119.0 million related to series 1 preferred stock and related dividends issued to intrexon .
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the expenses incurred by us to third parties for our phase 1 clinical trial with ad-rts-il-12 plus veledimex in progressive glioblastoma were $ 2.6 million for the year ended december 31 , 2018 , and $ 6.8 million from the project 's inception in june 2015 through december 31 , 2018. the expenses incurred by us to third parties for our phase 1b/2 clinical trial with ad-rts-il-12 plus veledimex in metastatic breast cancer for the year ended december 31 , 2018 were $ 0.2 million , and expenses from the project 's inception in april 2015 through december 31 , 2018 were $ 1.0 million . the expenses incurred by us to third parties for our investigator-led phase 1 clinical trial infusing our 2nd generation cd19-specific car + t cells in patients with advanced lymphoid malignancies were $ 1.9 million for the year ended december 31 , 2018 and $ 4.7 million from the project 's inception in december 2015 through december 31 , 2018. the expenses incurred by us to third parties for our investigator-led phase 1 clinical trial infusing our cd33-specific car + t therapy for relapsed or refractory acute myeloid leukemia for the year ended december 31 , 2018 were $ 2.3 million and $ 3.7 million from the project 's inception in september 2017 through december 31 , 2018. the expenses incurred by us to third parties for our investigator-led phase 1 clinical trial of ad-rts-hil-12 with veledimex for the treatment of pediatric brain tumors were $ 0.9 million for the year ended december 31 , 2018 and the $ 1.5 million from the project 's inception in october 2017 through december 31 , 2018. our future research and development expenses in support of our current and future programs will be subject to numerous uncertainties in timing and cost to completion . we test potential products in numerous preclinical studies for safety , toxicology and efficacy . we may conduct multiple clinical trials for each product . as
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as of december 31 , 2014 , our assets consisted of interests in 97 shopping story_separator_special_tag the following discussion should be read in conjunction with the consolidated and combined financial statements and notes thereto that are included in this annual report on form 10-k. overviewbasis of presentation wpg is an indiana corporation that was created to hold the strip center business and smaller enclosed malls of spg and its subsidiaries . on may 28 , 2014 , wpg separated from spg through the distribution of 100 % of the outstanding shares of wpg to the spg shareholders in a tax-free distribution . prior to the separation , wpg was a wholly owned subsidiary of spg . prior to or concurrent with the separation , spg engaged in certain formation transactions that were designed to consolidate the ownership of its interests in the spg businesses and distribute such interests to wpg and its operating partnership , wpg l.p. pursuant to the separation agreement , spg distributed 100 % of the common shares of wpg on a pro rata basis to spg 's shareholders as of the record date . the consolidated and combined financial statements are prepared in accordance with accounting principles generally accepted in the united states of america ( `` gaap '' ) . the consolidated balance sheet as of december 31 , 2014 includes the accounts of the company and wpg l.p. , as well as their wholly-owned subsidiaries . the consolidated and combined statements of operations include the consolidated accounts of the company and the combined accounts of spg businesses . accordingly , the results presented for the year ended december 31 , 2014 reflect the aggregate operations and changes in cash flows and equity on a carve-out basis of the spg businesses for the period from january 1 , 2014 through may 27 , 2014 and on a consolidated basis of the company subsequent to may 27 , 2014. the financial statements for the periods prior to the separation are prepared on a carve-out basis from the consolidated financial statements of spg using the historical results of operations and bases of the assets and liabilities of the transferred businesses and including allocations from spg . all intercompany transactions have been eliminated in consolidation and combination . in the opinion of management , the consolidated and combined financial statements contain all adjustments , consisting of normal recurring accruals , necessary to present fairly the financial position of the company and its results of operations and cash flows for the interim periods presented . the company believes that the disclosures made are adequate to prevent the information presented from being misleading . the combined financial statements prior to the separation include the allocation of certain assets and liabilities that have historically been held at the spg corporate level but which are specifically identifiable or allocable to spg businesses . cash and cash equivalents , short-term investments and restricted funds held by spg were not allocated to spg businesses unless the cash or investments were held by an entity that was transferred to wpg . long-term unsecured debt and short-term borrowings were not allocated to spg businesses as none of the debt recorded by spg is directly attributable to or guaranteed by spg businesses . all intra-company transactions and accounts have been eliminated . the total net effect of the settlement of these intercompany transactions is reflected in the consolidated and combined statements of cash flow as a financing activity and in the consolidated and combined balance sheets as spg equity in spg businesses for periods prior to the separation . the combined historical financial statements prior to the separation do not necessarily include all of the expenses that would have been incurred had we been operating as a separate , stand-alone entity and may not necessarily reflect our results of operations , financial position and cash flows had we been a stand-alone company during the periods presented prior to the separation . our combined historical financial statements include charges related to certain spg corporate functions , including senior management , property management , legal , leasing , development , marketing , human resources , finance , public reporting , tax and information technology . these expenses have been charged based on direct usage or benefit where identifiable , with the remainder charged on a pro rata basis of revenues , headcount , square footage , number of transactions or other measures . we consider the expense allocation methodology and results to 51 be reasonable for all periods presented . however , the charges may not be indicative of the actual expenses that would have been incurred had wpg operated as an independent , publicly-traded company for the periods presented prior to the separation . wpg now incurs additional costs associated with being an independent , publicly traded company , primarily from newly established or expanded corporate functions . we believe that cash flow from operations will be sufficient to fund these additional corporate expenses . prior to the separation , wpg entered into agreements with spg under which spg provides various services to us , including accounting , asset management , development , human resources , information technology , leasing , legal , marketing , public reporting and tax . the charges for the services are based on an hourly or per transaction fee arrangement and pass-through of out-of-pocket costs . in connection with the separation , we incurred $ 38.9 million of expenses , including investment banking , legal , accounting , tax and other professional fees , which are included in spin-off costs for the year ended december 31 , 2014 in the consolidated and combined statements of operations . at the time of the separation , our assets consisted of interests in 98 shopping centers . story_separator_special_tag additionally , the company incurred $ 3.9 million of bridge loan commitment and structuring fees , which are included in deferred costs and other assets as of december 31 , 2014 in the consolidated and combined balance sheets . the company incurred $ 3.7 million of bridge loan commitment and funding fees in 2015 in connection with the funding of the bridge loan . accordingly , the company will record $ 7.6 million of loan cost amortization in 2015. additional transaction costs totaling approximately $ 18.6 million were incurred in 2015 in connection with the closing of the merger . see item 3 , `` legal proceedings '' for a discussion of merger-related litigation . overview we derive our revenues primarily from retail tenant leases , including fixed minimum rent leases , percentage rent leases based on tenants ' sales volumes and reimbursements from tenants for certain expenses . we seek to re-lease our spaces at higher rents and increase our occupancy rates , and to enhance the performance of our properties and increase our revenues by , among other things , adding anchors or big-boxes , re-developing or renovating existing properties to increase the leasable square footage , and increasing the productivity of occupied locations through aesthetic upgrades , re-merchandising and or changes to the retail use of the space . in addition , we believe that there are opportunities for us to acquire additional shopping centers that match our investment criteria . 53 we invest in real estate properties to maximize total financial return which includes both operating cash flows and capital appreciation . we seek growth in earnings , funds from operations , or ffo , and cash flows by enhancing the profitability and operation of our properties and investments . we consider ffo , noi , and comparable property noi ( noi for properties owned and operating in both periods under comparison ) to be key measures of operating performance that are not specifically defined by accounting principles generally accepted in the united states , or gaap . we use these measures internally to evaluate the operating performance of our portfolio and provide a basis for comparison with other real estate companies . reconciliations of these measures to the most comparable gaap measure are included elsewhere in this report . portfolio data the portfolio data discussed in this overview includes key operating statistics including ending occupancy and average base minimum rent per square foot . core business fundamentals in the overall portfolio during 2014 generally improved compared to 2013. ending occupancy for the shopping centers held steady at 92.7 % as of december 31 , 2014 , as compared to 92.8 % as of december 31 , 2013. average base minimum rent per square foot remained stable across the portfolio as the shopping centers saw an increase of 1.6 % . our share of portfolio noi grew by 5.3 % in 2014 as compared to 2013. comparable property noi increased 1.6 % for the portfolio , net of the approximate 165 basis point impact of increased costs associated with the harsh winter weather conditions in the first quarter of 2014. the following table sets forth key operating statistics for the combined portfolio of properties or interests in properties : replace_table_token_16_th ( 1 ) percentages may not recalculate due to rounding . percentage and basis point changes are representative of the change from the comparable prior period . ending occupancy levels and average base minimum rent per square foot . ending occupancy is the percentage of gross leasable area , or gla , which is leased as of the last day of the reporting period . we include all company owned space except for mall anchors , mall majors , office space , mall freestanding and mall outlots in the calculation of ending occupancy . strip center gla included in the calculation relates to all company owned space . average base minimum rent per square foot is the average base minimum rent charge in effect for the reporting period for all tenants that would qualify to be included in ending occupancy . current leasing activities during the year ended december 31 , 2014 , we signed 225 new leases and 582 renewal leases with a fixed minimum rent ( excluding mall anchors and majors , new development , redevelopment , expansion , downsizing , and relocation ) across the portfolio , comprising approximately 2.3 million square feet , essentially all of which related to consolidated properties . during the year ended december 31 , 2013 , we signed 263 new leases and 404 renewal leases , comprising approximately 1.9 million square feet of which 1.7 million square feet related to consolidated properties . the average annual initial base minimum rent 54 for new leases was $ 21.25 psf in 2014 and $ 19.41 psf in 2013 with an average tenant allowance on new leases of $ 31.18 psf and $ 21.06 psf , respectively . critical accounting policies the preparation of financial statements in conformity with gaap requires management to use judgment in the application of accounting policies , including making estimates and assumptions . we base our estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances . these judgments affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods . if our judgment or interpretation of the facts and circumstances relating to various transactions had been different , it is possible that different accounting policies would have been applied resulting in a different presentation of our financial statements . from time to time , we reevaluate our estimates and assumptions . in the event estimates or assumptions prove to be different from actual results , adjustments are made in subsequent periods to reflect more current information .
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results of operations the following activities related to redevelopments affected our results in the comparative periods : during the second quarter of 2014 , we commenced redevelopment activities at jefferson valley mall , a 556,000 square foot shopping center located in the new york city area . during the third quarter of 2013 , we opened university town plaza , a 580,000 square foot shopping center located in pensacola , florida , after completion of the redevelopment . the following acquisitions and dispositions affected our results in the comparative periods : on december 1 , 2014 , we acquired our partner 's 50 percent interest in whitehall mall , a 613,000 square foot shopping center located in whitehall , pennsylvania . the property was previously accounted for under the equity method , but is now consolidated as it is wholly owned post-acquisition . on july 17 , 2014 , we sold highland lakes center , a wholly owned shopping center in orlando , florida . on june 23 , 2014 , we sold new castle plaza , a wholly owned shopping center in new castle , indiana . on june 20 , 2014 , we acquired our partner 's 50 percent interest in clay terrace , a 577,000 square foot lifestyle center located in carmel , indiana . the property was previously accounted for under the equity method , but is now consolidated as it is wholly owned post acquisition . on june 18 , 2014 , we acquired our partner 's interest in a portfolio of seven open-air shopping centers , consisting of four centers located in florida , and one each in indiana , connecticut and virginia . the properties were previously accounted for under the equity method , but are now consolidated as four properties are wholly owned and three properties are approximately 88.2 percent owned post acquisition .
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28 the $ 8.1 million increase in revenues generated by the enterprise video content management software business from 2011 to 2012 was driven by the inclusion of operations for the software business for a full year in 2012 compared to the post-acquisition period subsequent to october 10 , 2011 for the prior year , and also the closing and fulfillment of several large enterprise sales contracts in the last half of 2012. the increase in revenues consisted of $ 3.6 million in software licenses and appliances and $ 4.4 million in services , comprised of software maintenance contracts , subscription licenses and professional services . disc publishing . the $ 4.9 million decrease in disc publishing revenues from 2012 to 2013 consisted of a $ 6.5 million decline in equipment revenues , partially offset by a $ 1.6 million increase in recurring revenues . the decrease in disc publishing equipment revenues was driven by declines in sales volumes as well as a reduction in average selling prices on a global basis . the increase in recurring revenues was primarily driven by an increase in both the volume and average selling prices of consumables sales . the reduction in equipment revenues in 2013 was most significant in the company 's u.s. region and was impacted by large product refresh orders in 2012 that did not reoccur in 2013. additionally , some of the company 's government and commercial customers continued to face funding challenges , negatively impacting sales in 2013. the increase in consumable sales was primarily due to large orders for media kits from a u.s. retail customer . retail product orders tend to be large and fluctuate from period to period due to timing of purchases . the $ 12.3 million decrease in disc publishing revenues from 2011 to 2012 consisted of declines of $ 6.6 million and $ 6.2 million in equipment revenues and consumables and parts revenues , respectively , partially offset by a $ 0.6 million increase in service revenues . the decrease in disc publishing equipment revenues was driven by sales declines in both europe and the u.s. sales to the company 's european channel partners were negatively impacted by continued economic challenges impacting european markets , increased competition and the negative impact of foreign currency fluctuations . equipment sales in the u.s. were negatively impacted by a significant sale to the government sector in the third quarter of 2011 that did not reoccur in 2012 , as well as reduced sales in the company 's u.s. retail market , where sales can fluctuate significantly between periods . the decline in u.s. consumable sales in 2012 was primarily due to decreased usage of consumable products by the company 's retail customers and other segments of the company 's customer base . future consolidated revenues will be dependent upon many factors , including the rate of growth of the company 's enterprise video content management software business , whether software license arrangements with customers are structured as term or perpetual licenses , which impacts the timing of revenue recognition , the rate of technology substitution and associated decline in revenue for disc publishing products , the success of the company 's deployment of a complete disc publishing solution for medical imaging in hospitals in china and the rate of adoption of the company 's solutions-based products in targeted vertical markets . other factors that will influence future consolidated revenues include the timing of new product introductions , the rate of adoption of other new applications for the company 's products in its targeted markets , the performance of the company 's channel partners , the timing of customer orders and related product deliveries , the company 's ability to maintain continuous supply of its products and components , the impact of changes in economic conditions and the impact of foreign currency exchange rate fluctuations . gross profit . gross profit as a percentage of total revenues was 48.0 % for the year ended december 31 , 2013 , compared to 48.7 % and 50.2 % for the years ended december 31 , 2012 and 2011 , respectively . gross profit as a percentage of sales for the company 's enterprise video content management software segment was 58.5 % , 60.1 % and 52.8 % for the years ended december 31 , 2013 , 2012 and 2011 , respectively . the software segment margins are inclusive of the impact of amortization expense associated with intangible assets acquired as a result of the qumu , inc. acquisition . amortization expense related to the developed technology intangible asset of $ 0.6 million , $ 0.8 million and $ 0.2 million for the years ended december 31 , 2013 , 2012 and 2011 had a 3 % , 8 % and 11 % unfavorable impact on enterprise video content management software gross margins for the respective years . cost of revenues in 2014 are expected to include approximately $ 0.6 million of amortization expense for purchased intangibles . gross profit as a percentage of sales for the company 's disc publishing segment was 45.1 % , 47.1 % and 50.4 % for the years ended december 31 , 2013 , 2012 and 2011 , respectively . the decline in consolidated gross profit as a percentage of total revenues from 2012 to 2013 was primarily impacted by a shift in the concentration of disc publishing sales to lower margin products , consisting primarily of a lower volume and concentration of equipment sales and a higher volume and concentration of media kit sales . lower average selling prices for disc publishing equipment further impacted the decline in gross margin . favorably impacting gross profit as a percentage of total revenues in 2013 was an increased concentration of revenues generated by the enterprise video content management software segment , which generally carries higher margins than the disc publishing segment . story_separator_special_tag the repurchase program has been funded to date using cash on hand . a summary of the company 's repurchase activity is presented in the table below ( in thousands , except per share data ) : replace_table_token_11_th on october 26 , 2012 , the company 's board of directors approved the termination of the company 's quarterly dividend payment . the company did not pay a dividend in 2013 and does not currently expect to pay a dividend in 2014. the following table sets forth the quarterly cash dividends authorized and paid by the company in 2012 ( in thousands , except per share amounts ) : replace_table_token_12_th 33 the following table summarizes the company 's contractual cash obligations at december 31 , 2013 , and the net effect such obligations are expected to have on liquidity and cash flow in future periods . some of the amounts included in this table are based on management 's estimates and assumptions about these obligations , including their duration , the possibility of renewal , anticipated actions by third parties and other factors . because these estimates and assumptions are necessarily subjective , the amounts the company will actually pay in future periods may vary from those reflected in the table . replace_table_token_13_th ( 1 ) amounts include principal and interest . ( 2 ) purchase obligations include all commitments to purchase goods or services that meet one or both of the following criteria : ( 1 ) they are non-cancelable or ( 2 ) the company must make specified minimum payments even if it does not take delivery of the contracted products or services . if the obligation is non-cancelable , the entire value of the contract is included in the table . ( 3 ) the company does not currently expect any income tax liabilities accrued under asc 740 as of december 31 , 2013 to be paid to the applicable tax authorities in 2014 . the full balance of unrecognized tax benefits under asc 740 of $ 1.0 million at december 31 , 2013 , has been excluded from the above table as the period of payment or reversal can not be reasonably estimated . this amount is before reduction for deferred federal benefits of uncertain tax positions and also excludes potential interest and penalties . critical accounting policies management utilizes its technical knowledge , cumulative business experience , judgment and other factors in the selection and application of the company 's accounting policies . the accounting policies described below are considered by management to be the most critical to the presentation of the consolidated financial statements because they require the most difficult , subjective and complex judgments . in applying the critical accounting policies described below , management reassesses its estimates each reporting period based on available information . changes in such estimates did not have a significant impact on earnings for the year ended december 31 , 2013 . revenue recognition . through the third quarter of 2011 , the company earned revenues through the sale of tangible products , consisting primarily of equipment and consumables . as part of its product offering , the company also sells optional services , consisting primarily of separately-priced maintenance contracts and installation services . beginning with the acquisition of qumu , inc. in october 2011 , the company also earns revenues through the sale of software and software-based solutions . software sales may take the form of a software license , a software license on a server appliance or a cloud-hosted software service . the company also sells software-enabled devices , software maintenance support contracts and professional and managed services as part of the enterprise video content management software product offering . the following minimum criteria must be satisfied to enable revenue recognition for the company 's products and services : persuasive evidence of an arrangement exists . customer orders are received for all sales , either through non-cancelable contracts or purchase orders , and sales invoices are sent upon delivery of the product . delivery has occurred . product has been transferred to the customer or the customer 's designated delivery agent , at which time risk of loss transfers . in the case of licensed software , delivery occurs upon providing the customer access to the software by electronic download . the sales price is fixed or determinable . all sales prices are fixed at the time of the sale . collectability is reasonably assured . all sales are made on the basis that collection is expected in line with the company 's payment terms as outlined in the non-cancelable purchase order or contract , and such terms are consistent with industry practice in the geographies in which the company markets its products . the following provides additional information regarding the company 's revenue recognition policies by business segment . 34 enterprise video content management software revenue revenue generated by the enterprise video content management software business includes the sale of software licenses , software licensed on a server appliance and software-enabled devices sold through non-cancelable licensing agreements under either perpetual or subscription arrangements . these arrangements most often include maintenance support and may also include professional services or managed services . the enterprise video content management software business also generates revenues through the sale of cloud-hosted software services , delivered as a software-as-a-service ( saas ) platform . for arrangements that include both software-related and non-software-related elements , the company allocates revenue to the software deliverables and non-software deliverables based on relative selling price . in such circumstances , the accounting principles establish a hierarchy to determine the selling price to be used for allocating revenue to deliverables as follows : a ) vendor-specific objective evidence ( vsoe ) of selling price , b ) third-party evidence of selling price and c ) best estimate of selling price ( estimated selling price ) . when the company is unable to establish a selling price using vsoe
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liquidity and capital resources the company expects it will be able to maintain current operations and meet anticipated capital expenditure requirements for the foreseeable future through its internally generated funds and cash reserves . at december 31 , 2013 , the company had working capital of $ 48.7 million , down $ 7.4 million from working capital reported at december 31 , 2012 . the primary contributors to the decrease in working capital were the generation of a net loss adjusted for non-cash items during the year ended december 31 , 2013 of $ 4.4 million , purchases of property and equipment of $ 1.0 million and an investment of $ 0.4 million in briefcam , a privately-held israeli company that develops video synopsis software for surveillance applications . exclusive of a small amount of capital lease obligations , qumu has no long-term debt and does not require significant capital investment for its ongoing operations . the company 's primary source of cash from operating activities has been cash collections from sales of products and services to customers . the company expects cash inflows from operating activities to be affected by increases or decreases in sales and timing of collections . the company 's primary use of cash for operating activities has been for personnel costs and purchases of inventory .
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Liquidity
| 13,209
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unemployment continues to remain low and consumer confidence has increased in recent months . we expect 2017 will be the u.s. lodging industry 's eighth year of consecutive growth , albeit moderate growth . supply increases , particularly in urban markets , will likely hamper rate growth . our portfolio is weighted towards urban markets , specifically new york city and chicago , which are two markets with recent and expected supply increases in excess of national averages . we enter 2017 with several favorable factors , including : ( 1 ) ownership of a high-quality portfolio concentrated in urban and resort locations ; ( 2 ) increased internal growth from the continuation of our asset management initiatives and recent hotel renovations ; ( 3 ) low leveraged capital structure and only one near-term debt maturity ; and ( 4 ) an unrestricted cash balance of $ 243 million and no outstanding borrowings on our $ 300 million senior unsecured credit facility as of december 31 , 2016. story_separator_special_tag renovations . impairment losses . during the year ended december 31 , 2015 , we recorded impairment losses of $ 0.8 million on the favorable lease asset related to a tenant lease at the lexington hotel new york and $ 9.6 million on the option to acquire a leasehold interest in a parcel of land adjacent to the westin boston waterfront hotel for the development of a new hotel . we did not recognize any impairment losses during the year ended december 31 , 2016 . hotel acquisition costs . we incurred $ 0.9 million of hotel acquisition costs during the year ended december 31 , 2015 due to our acquisitions of the shorebreak hotel and sheraton suites key west , as well as additional transfer taxes on an acquired hotel . we had no hotel acquisitions during the year ended december 31 , 2016 . corporate expenses . corporate expenses principally consist of employee-related costs , including base payroll , bonus and restricted stock . corporate expenses also include corporate operating costs , professional fees and directors ' fees . our corporate expenses decreased $ 0.5 million , from $ 24.1 million for the year ended december 31 , 2015 to $ 23.6 million for the year ended december 31 , 2016 . the decrease is primarily due to a decrease in bonus expense and the reversal of $ 0.7 million of previously recognized compensation expense resulting from the forfeiture of equity awards related to the resignation of our former executive vice president and chief operating officer , partially offset by an increase in other employee compensation and audit fees in 2016 . - 39 - interest expense . our interest expense was $ 41.7 million and $ 52.7 million for the years ended december 31 , 2016 and december 31 , 2015 , respectively , and is comprised of the following ( in millions ) : replace_table_token_10_th the decrease in mortgage debt interest expense is related to the refinancing of a portion of our total debt at lower interest rates . the weighted-average interest rate for our debt decreased from 4.5 % as of december 31 , 2015 to 3.8 % as of december 31 , 2016 . gain on repayments of notes receivable . in november 2015 , we received $ 3.9 million for the repayment of the fully reserved loan we provided to the buyer of the oak brook hills resort upon sale of the hotel in 2014. as a result of the repayment , we recorded a gain of $ 3.9 million during the year ended december 31 , 2015. income taxes . we recorded income tax expense of $ 12.4 million in 2016 and $ 11.6 million in 2015 . the 2016 income tax expense includes $ 12.4 million of income tax expense incurred on the $ 29.4 million pre-tax income of our trs . there was no foreign income tax expense incurred on the trs that owns frenchman 's reef . the 2015 income tax expense includes $ 11.3 million of income tax expense incurred on the $ 29.1 million pre-tax income of our trs , $ 0.3 million of foreign income tax expense incurred on the $ 7.2 million pre-tax income of the trs that owns frenchman 's reef . comparison of the year ended december 31 , 2015 to the year ended december 31 , 2014 . revenue . revenue consists primarily of the room , food and beverage and other operating revenues from our hotels , as follows ( in millions ) : replace_table_token_11_th our total revenues from continuing operations increased $ 58.1 million from $ 872.9 million for the year ended december 31 , 2014 to $ 931.0 million for the year ended december 31 , 2015 . this increase includes amounts that are not comparable year-over-year as follows : $ 2.3 million decrease from the oak brook hills resort , which was sold on april 14 , 2014 . $ 51.4 million decrease from the los angeles airport marriott , which was sold on december 18 , 2014 . $ 5.9 million increase from the inn at key west , which was purchased on august 15 , 2014 . $ 16.2 million increase from the hilton garden inn times square central , which opened on september 1 , 2014 . $ 40.6 million increase from the westin fort lauderdale beach resort , which was purchased on december 3 , 2014 . $ 13.0 million increase from the shorebreak hotel , which was purchased on february 6 , 2015 . $ 7.8 million increase from the sheraton suites key west , which was purchased on june 30 , 2015. excluding these non-comparable amounts our total revenues increased $ 28.3 million , or 3.5 % . story_separator_special_tag the following pro forma key hotel operating statistics for the years ended december 31 , 2015 and 2014 assume we owned each of our 29 hotels since january 1 , 2014 and excludes the hilton garden inn times square central for the period from january 1 , 2014 to august 31 , 2014 since the hotel opened on september 1 , 2014 . - 40 - replace_table_token_12_th room revenue increased across each of our three major customer segments . revenue from the leisure transient segment experienced the highest growth at 9.8 % . business transient revenue increased 3.9 % , and group revenue increased 2.5 % . the growth in the group and business transient segments was driven by increases in adr , offset by slight declines in occupancy . the leisure transient segment growth was the result of a 7 % increase in demand and a 2.6 % increase in adr . food and beverage revenues increased $ 13.1 million from the year ended december 31 , 2014 , which includes amounts that are not comparable year-over-year as follows : $ 1.2 million decrease from the oak brook hills resort , which was sold on april 14 , 2014 . $ 14.3 million decrease from the los angeles airport marriott , which was sold on december 18 , 2014 . $ 0.5 million increase from the inn at key west , which was purchased on august 15 , 2014 . $ 14.1 million increase from the westin fort lauderdale beach resort , which was purchased on december 3 , 2014 . $ 2.9 million increase from the shorebreak hotel , which was purchased on february 6 , 2015 . $ 0.8 million increase from the sheraton suites key west , which was purchased on june 30 , 2015. excluding these non-comparable amounts , food and beverage revenues increased $ 10.3 million , or 5.7 % , driven primarily by increased banquet and catering revenues , which included an over 10 % increase in banquet and group contribution per room . other revenues , which primarily represent spa , parking , resort fees and attrition and cancellation fees , increased by $ 0.3 million from the year ended december 31 , 2014 , primarily due to the implementation of resort fees at certain hotels , partially offset by a decrease due to hotels sold in 2014. hotel operating expenses . the operating expenses consisted of the following ( in millions ) : replace_table_token_13_th our hotel operating expenses increased $ 25.0 million from the year ended december 31 , 2014 . the increase in hotel operating expenses includes amounts that are not comparable year-over-year as follows : $ 3.8 million decrease from the oak brook hills resort , which was sold on april 14 , 2014 . - 41 - $ 39.6 million decrease from the los angeles airport marriott , which was sold on december 18 , 2014 . $ 2.7 million increase from the inn at key west , which was purchased on august 15 , 2014 . $ 9.8 million increase from the hilton garden inn times square central , which opened on september 1 , 2014 . $ 27.3 million increase from the westin fort lauderdale beach resort , which was purchased on december 3 , 2014 . $ 8.6 million increase from the shorebreak hotel , which was purchased on february 6 , 2015 . $ 4.8 million increase from the sheraton suites key west , which was purchased on june 30 , 2015. excluding the non-comparable amounts , hotel operating expenses increased $ 15.2 million , or 2.6 % , from the year ended december 31 , 2014 . franchise fees increased $ 6.7 million , or 43.8 % , primarily due to the opening of the hilton garden inn times square central , higher franchise fees at the lexington hotel new york and the acquisitions of the westin fort lauderdale beach resort and sheraton suites key west . property taxes increased $ 7.1 million , or 17.8 % , primarily due to property tax reassessments at our properties , particularly our chicago hotels , as well as newly acquired hotels . incentive management fees decreased $ 1.1 million , or 12.9 % , primarily due to an amendment to the management agreement at the chicago marriott downtown , which reduced management fees beginning in april 2015. hotel pre-opening and transition costs increased $ 0.7 million , or 70 % , primarily due to the rebranding of the hotel formerly known as the conrad chicago to the gwen , a luxury collection hotel , in 2015. depreciation and amortization . depreciation and amortization is recorded on our hotel buildings over 40 years for the periods subsequent to acquisition . depreciable lives of hotel furniture , fixtures and equipment are estimated as the time period between the acquisition date and the date that the hotel furniture , fixtures and equipment will be replaced . our depreciation and amortization expense increased $ 1.5 million from the year ended december 31 , 2014 . the increase is primarily due to depreciation on capital expenditures from our recent hotel renovations , partially offset by an increase in fully depreciated furniture , fixtures and equipment . impairment losses . during the year ended december 31 , 2015 , we recorded impairment losses of $ 0.8 million on the favorable lease asset related to a tenant lease at the lexington hotel new york and $ 9.6 million on the option to acquire a leasehold interest in a parcel of land adjacent to the westin boston waterfront hotel for the development of a new hotel . hotel acquisition costs . we incurred $ 0.9 million of hotel acquisition costs during the year ended december 31 , 2015 due to our acquisitions of the shorebreak hotel and sheraton suites key west , as well as additional transfer taxes on an acquired hotel .
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% . the following are key hotel operating statistics for the years ended december 31 , 2016 and 2015 . the 2015 amounts reflect the period in 2015 comparable to our ownership period in 2016 for our acquisitions of the shorebreak hotel and the sheraton suites key west , and our dispositions of the orlando airport marriott , hilton minneapolis , and hilton garden inn chelsea/new york city . replace_table_token_8_th excluding non-comparable amounts , our rooms revenues increased $ 1.9 million . the increase in room revenues is primarily a result of a 30.3 % increase in contract business and a 0.3 % increase in the business transient segment , partially offset by a 2.3 % decrease in group business . food and beverage revenues decreased $ 13.4 million from the year ended december 31 , 2015 , which includes amounts that are not comparable period-over-period as follows : $ 0.3 million increase from the shorebreak hotel , which was purchased on february 6 , 2015 . $ 1.1 million increase from the sheraton suites key west , which was purchased on june 30 , 2015 . $ 4.5 million decrease from the orlando airport marriott , which was sold on june 8 , 2016 . $ 10.6 million decrease from the minneapolis hilton , which was sold on june 30 , 2016 . $ 0.1 million decrease from the hilton garden inn chelsea/new york city , which was sold on july 7 , 2016. excluding these non-comparable amounts , food and beverage revenues increased $ 0.4 million , or 0.2 % . other revenues , which primarily represent spa , parking , resort fees and attrition and cancellation fees , increased by $ 2.0 million . excluding non-comparable amounts , our other revenues increased $ 2.3 million , driven primarily by higher resort fees and attrition and cancellation fees . hotel operating expenses . the operating expenses consisted of the following ( in millions ) : - 38 - replace_table_token_9_th our hotel operating expenses decreased $ 31.1 million from $ 649.1 million for the year ended
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ROO
| 5,195
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as consideration for such consulting services , pgc will be paid monthly consulting fees ( payable at the end of each month ) of $ 10,000 during the first year , with a $ 10,000 bonus to be paid upon the opening of the tampa bay store ; $ 12,000 in the second year with a $ 10,000 bonus payable in the last month of the second year upon satisfactory performance ; and $ 13,500 in the third year with a $ 10,000 bonus payable in the last month of the third year upon satisfactory performance . under the pgc agreement , on july 1 , 2014 , we also issued pgc three-year warrants as a sign-on bonus ( `` sign-on warrants `` ) to purchase an aggregate of 350,000 shares of our common stock at an exercise price of $ 1.00 per share exercisable upon the company receiving revenues in excess of $ 1,000,000. pgc will be entitled to ( i ) a three-year ( commencing upon vesting ) cashless warrant to purchase an aggregate of 1,530,000 shares of common stock exercisable at $ 1.00 per share that vests ratably upon reaching incremental revenues of $ 3,000,000 ( from mg product sales which result from the efforts of dennis campbell and pgc ) with a total target revenue of $ 100,000,000 and ( ii ) a three-year cashless warrant to purchase an aggregate of 720,000 shares of common stock at an exercise price of $ 1.00 that vests ratably on a quarterly basis ; and ( iii ) 500,000 shares of our common stock that vest upon reaching revenues of $ 100,000,000 or upon sale of the company . pgc will also be entitled to a $ 25,000 cash bonus at sales milestones for every $ 5,000,000 in new revenue . on july 30 , 2014 , we reached preliminary terms on a llc agreement ( the `` preliminary llc agreement `` ) with alfred a. cullere ( `` cullere `` ) concerning the governance and operations of upt . under the terms of the preliminary llc agreement , we would own 95 % of the membership interests and cullere would own 5 % . cullere 's interest can not be diluted , even if additional membership interests are issued . these terms may change upon formalizing the final agreement . the company 's current operations include product development with inverom and other companies developing products that include the company 's intellectual property . on october 31 , 2016 , the company filed an amended and restated series b preferred stock certificate of designation ( which was originally filed with the secretary of state of nevada on april 19 , 2016 , and amended on august 12 , 2016 ) to designate 3,636,360 shares as series b preferred stock and to provide for supermajority 66 2/3 % voting rights for the series b preferred stock . the series b preferred stock will not bear dividends , will not be entitled to receive any distributions in the event of any liquidation , dissolution or winding up of the company , and will have no other preferences , rights , restrictions , or qualifications , except as otherwise provided by law or the articles of incorporation of the company . the holders of class b stock shall have the right , at such holder 's option , at any time to convert such shares into common stock , in a conversion ratio of one share of common stock for each share of class b stock . if the common stock trades or is quoted at a price per share in excess of $ 2.25 for any twenty consecutive day trading period , ( subject to appropriate adjustment for forward or reverse stock splits , recapitalizations , stock dividends and the like ) , the series b stock will automatically be convertible into the common stock in a conversion ratio of one share of common stock for each share of series b stock . the series b stock may not be sold , hypothecated , transferred , assigned or disposed without the prior written consent of the company and the holders of the outstanding series b preferred stock . 20 bellridge capital , lp on december 6 , 2016 , we entered into a securities purchase agreement and a registration rights agreement ( the “ registration rights agreement ” ) with bellridge , pursuant to which bellridge has agreed to purchase from us up to $ 5,000,000 in shares of our common stock , subject to certain limitations from time to time over a 36 month period commencing on the date of effectiveness of the registration statement which provides for the resale of such shares pursuant to the registration rights agreement . we may direct bellridge , at our sole discretion and subject to certain conditions , to purchase a minimum of $ 25,000 and a maximum of $ 500,000 of shares ( each a “ draw down ” ) that is no more than 300 % of the average trading volume of our common stock during the 10 day period immediately prior to the draw down . in addition , we may direct bellridge to purchase shares only if during the fifteen consecutive days following a draw down request by us , the common stock equals or exceeds $ 0.06 per share . we will control the timing and amount of any sales of common stock to bellridge but we may not request a draw down less than ten business days apart . the proceeds received by us are expected to be used for general corporate purposes . story_separator_special_tag in addition , we may direct bellridge to purchase shares only if during the fifteen consecutive days following a draw down request by us , the common stock equals or exceeds $ 0.06 per share . we will control the timing and amount of any sales of common stock to bellridge but we may not request a draw down less than ten business days apart . the proceeds received by us are expected to be used for general corporate purposes . the securities purchase agreement limits our sales of shares of common stock to bellridge to no more than the number of shares that would result in the beneficial ownership by bellridge , at any single point in time , of more than 4.99 % of the then outstanding shares of our common stock . however , the 4.99 % limitation may be increased by bellridge up to 9.99 % upon at least 61 days ' prior notice to us . as consideration for its commitment to purchase shares of common stock pursuant to the securities purchase agreement , we issued to bellridge 1,250,000 shares of common stock on february 16 , 2017. december 2016 convertible promissory notes on december 6 , 2016 , we also entered into a note purchase agreement which provides for the purchase by bellridge of up to an aggregate of $ 150,000 principal amount of the notes . the notes have a 5 % original issue discount and bear interest at 5 % per annum ( or the lesser of 22 % per annum or the maximum amount permitted by applicable law in the event of a default as described in the notes ) . on december 7 , 2016 , $ 85,000 was paid pursuant to the initial note ( after the deduction of $ 10,000 for bellridge 's legal expenses ) which is due on december 5 , 2017. on december 28 , 2016 , after the filing by the company of a registration statement with the sec , the company issued bellridge another note in the original principal amount of $ 50,000 for $ 47,500. the notes may be prepaid in whole or in part by the company at a 115 % premium if within 120 days of the issue date or 125 % after 120 days of the issue date . the notes are convertible into common stock at a 30 % discount to the lowest trading price for the ten trading days immediately prior to the delivery of a conversion notice , provided that the conversion price will not be less than $ 0.06 per share . if the price per share of the common stock closes at less than $ 0.06 for any five out of ten consecutive trading days after the sooner to occur of the filing of the registration statement , or six months from the date of the note , the company has the right to prepay the note at an amount equal to 125 % of the then principal and interest due on the note . however , if the company fails to prepay the note in its entirety during the thirty days following a market price decline period , then the conversion price floor of $ 0.06 per share will no longer be applicable . 26 if the company fails to timely deliver shares to bellridge upon conversion of the notes , bellridge will be entitled to liquidated damages of $ 10 per trading day for each $ 1,000 being converted ( and $ 20 per day after the tenth trading day ) . if the company fails to timely deliver share certificates and bellridge is required by its brokerage firm to purchase , or its brokerage firm otherwise purchases , common stock to deliver in satisfaction of a sale by bellridge of the conversion shares which bellridge was entitled to receive , then the company will ( a ) pay in cash the amount by which ( x ) bellridge 's total purchase price for the common stock so purchased exceeds ( y ) the product of ( 1 ) the aggregate number of shares of common stock that bellridge was entitled to receive from the conversion multiplied by ( 2 ) the actual sale price at which the sell order giving rise to such purchase obligation was executed and ( b ) at the option of bellridge , either reissue ( if surrendered ) the note in a principal amount equal to the principal amount of the attempted conversion ( in which case such conversion shall be deemed rescinded ) or deliver to bellridge the number of shares of common stock that would have been issued if the company had timely complied with its delivery requirements . the note may not be converted to the extent that after giving effect to the conversion bellridge and its affiliates would beneficially own in excess of 4.99 % of the number of shares of the common stock outstanding , which percentage may be increased to 9.99 % upon not less than 61 days ' prior notice to the company . the note includes antidilution protection in the event of certain subsequent equity sales and dilutive issuances , purchase rights in subsequent rights offerings and pro rata distributions in the event of a dividend or other distribution by the company . if the company engages in a fundamental corporate action as described in the note , bellridge will be entitled to receive shares or other consideration that it would have received for each share that would have been issuable upon conversion immediately before such fundamental corporate action . so long as the note is outstanding , unless with the consent of the holders of the majority in principal amount of the then outstanding notes , the company will not create certain indebtedness , amend its charter to adversely affect bellridge , or enter into transactions with affiliates , unless at arm 's length and approved by
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liquidity and capital resources we have historically met our liquidity requirements primarily through the public sale and private placement of equity securities , debt financing , and exchanging common stock warrants and options for professional and consulting services . at december 31 , 2016 , we had cash and cash equivalents of $ 62,291. working capital is the amount by which current assets exceed current liabilities . we had negative working capital of $ 8,257,987 and $ 3,252,314 , at december 31 , 2016 and 2015 , respectively . the decrease in working capital was due to an increase in derivative liability , accounts payable , amounts due to related parties , and incurring debt for working capital purposes . september 2015 convertible note -- in september 2015 , we entered into a convertible note agreement , which allows us to borrow up to $ 250,000 , bearing interest at 10 % , with principal and interest payable on september 15 , 2017. we borrowed $ 75,000 in september 2015 and $ 50,000 in november 2015 , for a total of $ 125,000 due on september 15 , 2017. at the holder 's option , a portion or all of the unpaid principal and interest may be converted into shares of our common stock at the lesser of $ 0.305 per share or 65 % of the volume weighted average price of our common stock during the five consecutive trading days immediately preceding the applicable conversion date . we determined that the conversion feature meets the requirements for derivative treatment and have recorded a derivative liability and a corresponding debt discount on the consolidated balance sheet . in february 2016 , the $ 75,000 note and interest of $ 16,667 was settled in exchange for 531,429 shares of our common stock . on may 30 , 2016 , we executed an amendment to the convertible note agreement .
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Liquidity
| 15,005
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we have retained healthcare trust properties , llc ( the `` property manager `` ) to serve as our property manager . the advisor and property manager are under common control with ar global investments , llc ( the successor business to ar capital , llc , `` ar global `` ) , the parent of our sponsor , american realty capital vii , llc ( the `` sponsor `` ) , as a result of which they are related parties , and each have received or will receive compensation , fees and expense reimbursements for services related to managing of our business . the advisor , healthcare trust special limited partnership , llc ( the `` special limited partner `` ) and property manager also have received or will receive compensation , fees and expense reimbursements from us related to the investment and management of our assets . significant accounting estimates and critical accounting policies set forth below is a summary of the significant accounting estimates and critical accounting policies that management believes are important to the preparation of our financial statements . certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by our management . as a result , these estimates are subject to a degree of uncertainty . these significant accounting estimates and critical accounting policies include : revenue recognition our rental income is primarily related to rent received from tenants in our mobs and triple-net leased healthcare facilities . rent from tenants in our mob and triple-net leased healthcare facilities operating segments is recorded in accordance with the terms of each lease on a straight-line basis over the initial term of the lease . because many of the leases provide for rental increases at specified intervals , accounting principles generally accepted in the united states ( `` gaap `` ) require us to record a receivable , and include in revenues on a straight-line basis , unbilled rent receivables that we will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease . when we acquire a property , the acquisition date is considered to be the commencement date for purposes of this calculation . for new leases after acquisition , the commencement date is considered to be the date the tenant takes control of the space . for lease modifications , the commencement date is considered to be the date the lease is executed . we defer the revenue related to lease payments received from tenants in advance of their due dates . cost recoveries from tenants are included in operating expense reimbursement in the period the related costs are incurred , as applicable . 57 resident services and fee income primarily relates to rent from residents in our seniors housing — operating properties ( `` shop `` ) held using a structure permitted by the reit investment diversification and empowerment act of 2007 and to fees for ancillary services performed for residents in our shops . rental income from residents of our shop operating segment is recognized as earned . residents pay monthly rent that covers occupancy of their unit and basic services , including utilities , meals and some housekeeping services . the terms of the rent are short term in nature , primarily month-to-month . fees for ancillary services are recorded in the period in which the services are performed . we defer the revenue related to lease payments received from tenants and residents in advance of their due dates . we continually review receivables related to rent and unbilled rent receivables and determine collectability by taking into consideration the tenant 's payment history , the financial condition of the tenant , business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located . in the event that the collectability of a receivable is in doubt , we record an increase in the allowance for uncollectible accounts on the consolidated balance sheets or record a direct write-off of the receivable in the consolidated statements of operations and comprehensive loss . real estate investments investments in real estate are recorded at cost . improvements and replacements are capitalized when they extend the useful life or improve the productive capacity of the asset . costs of repairs and maintenance are expensed as incurred . we evaluate the inputs , processes and outputs of each asset acquired to determine if the transaction is a business combination or asset acquisition . if an acquisition qualifies as a business combination , the related transaction costs are recorded as an expense in the consolidated statements of operations and comprehensive loss . if an acquisition qualifies as an asset acquisition , the related transaction costs are generally capitalized and subsequently amortized over the useful life of the acquired assets . in business combinations , we allocate the purchase price of acquired properties to tangible and identifiable intangible assets or liabilities based on their respective fair values . tangible assets may include land , land improvements , buildings , fixtures and tenant improvements . intangible assets may include the value of in-place leases and above- and below-market leases . in addition , any assumed mortgages receivable or payable and any assumed or issued non-controlling interests are recorded at their estimated fair values . we generally determine the value of construction in progress based upon the replacement cost . during the construction period , we capitalize interest , insurance and real estate taxes until the development has reached substantial completion . the fair value of the tangible assets of an acquired property with an in-place operating lease is determined by valuing the property as if it were vacant , and the “ as-if-vacant ” value is then allocated to the tangible assets based on the fair value of the tangible assets . story_separator_special_tag under ridea , a reit may lease qualified healthcare properties on an arm 's length basis to a taxable reit subsidiary ( `` trs `` ) if the property is operated on behalf of such subsidiary by an entity who qualifies as an eligible independent contractor . as of december 31 , 2016 , we had 11 eligible independent contractors operating 38 shop properties . all of our properties across all three business segments are located throughout the united states . net operating income ( `` noi `` ) is a non-gaap financial measure used by us to evaluate the operating performance of our real estate portfolio . noi is equal to total revenues , excluding contingent purchase price consideration , less property operating and maintenance expense . noi excludes all other financial statement amounts included in net income ( loss ) . we believe noi provides useful and relevant information because it reflects only those income and expense items that are incurred at the property level and presents such items on an unlevered basis . see “ non-gaap financial measures ” included elsewhere in this annual report on form 10-k for additional disclosures regarding noi and a reconciliation to our net income ( loss ) attributable to stockholders , as computed in accordance with gaap . 61 comparison of the year ended december 31 , 2016 to the year ended december 31 , 2015 on january 1 , 2015 , we owned 118 properties ( our `` same store `` properties ) , including two vacant land parcels . we acquired 48 properties during the period from january 1 , 2015 through december 31 , 2016 ( our `` acquisitions `` ) , including one property under development . no properties were acquired during the year ended december 31 , 2016. information based on same store and acquisitions allows us to evaluate the performance of our portfolio based on a consistent population of properties . our results of operations for the year ended december 31 , 2016 as compared to the year ended december 31 , 2015 reflect significant increases in most categories primarily due to our acquisitions . net loss attributable to stockholders was $ 20.9 million and $ 41.7 million for the year s ended december 31 , 2016 and 2015 , respectively . the following table shows our consolidated results of operations for the year s ended december 31 , 2016 and 2015 and the period to period change by line item of the consolidated statement of operations : replace_table_token_17_th _ nm — not meaningful segment results — medical office buildings rental income is primarily related to contractual rent received from tenants in our mobs . generally , operating expense reimbursements increase in proportion with the increase in property operating expenses in our mob segment . pursuant to many of our lease agreements in our mobs , tenants are required to pay their pro rata share of property operating expenses , which may be subject to expense exclusions and floors , in addition to base rent . property operating and maintenance relates to the costs associated with our properties , including real estate taxes , utilities , repairs , maintenance , bad debt expense and unaffiliated third party property management fees . 62 during the year ended december 31 , 2016 , rental income , operating expense reimbursements and property operating and maintenance expense decreased at the same store properties in our mob segment as compared to the year ended december 31 , 2015 , primarily due to a tenant lease termination in may 2015 at the hospital at craig ranch located in mckinney , texas . during the year ended december 31 , 2016 , rental income , operating expense reimbursements and property operating and maintenance expense at our mob segment acquisitions increased significantly as compared to the year ended december 31 , 2015 primarily due to our acquisition of 31 mobs from january 1 , 2015 through december 31 , 2016 . the following table presents the revenue and property operating and maintenance expense and the period to period change within our mob segment for the year s ended december 31 , 2016 and 2015 : replace_table_token_18_th _ ( 1 ) our mob segment included 50 same store properties . ( 2 ) our mob segment included 31 acquisition properties , including one property sold during the year ended december 31 , 2016 . ( 3 ) our mob segment included 81 properties during the year ended december 31 , 2016 , including one property sold during the period . nm — not meaningful the following table presents the number of same store mobs , average occupancy and annualized straight line rental income per rented square foot for single- and multi-tenant mobs in our mob segment for the periods presented : replace_table_token_19_th segment results — triple net leased healthcare facilities rental income is primarily related to contractual rent received from tenants in our triple-net leased healthcare facilities . operating expense reimbursements in our triple net leased healthcare facilities segment generally includes reimbursement for property operating expenses that we pay on behalf of tenants in this segment . pursuant to many of our lease agreements in our triple net leased healthcare facilities , tenants are generally directly responsible for all operating costs of the respective properties in addition to base rent . property operating and maintenance relates to the costs associated with our properties , including real estate taxes , utilities , repairs , maintenance and bad debt expense . all of such expenses , except for bad debt expense , are generally reimbursed by the tenants in this segment . during the year ended december 31 , 2016 , rental income decreased and operating expense reimbursements and property operating and maintenance expense increased at the same store properties in our triple net leased healthcare segment as compared to the year ended december 31 , 2015 . the decrease in rental income was primarily due
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net cash used in financing activities of $ 55.6 million during the year ended december 31 , 2016 related to distributions to stockholders of $ 75.4 million , repayments on the revolving credit facility of $ 55.0 million , common stock repurchases of $ 12.2 million , mortgage principal repayments of $ 15.7 million , payments of deferred financing costs of $ 3.0 million , distributions to non-controlling interest holders of $ 0.7 million and payments for non-designated derivative instruments of approximately $ 30,000 . these cash outflows were partially offset by aggregate proceeds from the revolving credit facility and fannie credit facilities of $ 106.5 million . cash flows for the year ended december 31 , 2015 during the year ended december 31 , 2015 , net cash provided by operating activities was $ 65.8 million . the level of cash flows used in or provided by operating activities is affected by the number of properties owned , the performance of those properties , the timing of interest payments and the amount of borrowings outstanding during the period , as well as the receipt of scheduled rent payments and the level of operating expenses . cash flows provided by operating activities during the year ended december 31 , 2015 included $ 14.7 million of acquisition and transaction related costs . cash inflows related to a net loss adjusted for non-cash items of $ 87.6 million ( net loss of $ 42.0 million adjusted for non-cash items including depreciation and amortization of tangible and identifiable intangible real estate assets , deferred financing costs and mortgage premiums and discounts , equity based compensation , bad debt expense and gain on sale of investment securities of $ 129.5 million ) , an increase in accounts payable and accrued expenses of $ 5.2 million primarily related to accrued professional fees , real estate taxes and property operating expenses for our mobs and shops , as well as accrued related party property management fees and reimbursements and interest expense and an increase of $ 1.3 million in deferred rent .
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Liquidity
| 9,511
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of $ 8 million . all of our operating segments were affected by these actions including $ 16 million related to our international segment , $ 2 million related to our u.s. retail segment , and $ 1 million related to our bakeries and foodservice segment . these restructuring actions are expected to be completed by the end of fiscal 2014. in addition , we recorded $ 1 million of charges associated with other previously announced restructuring actions . in fiscal 2013 , we paid $ 80 million in cash related to restructuring actions . interest , net for fiscal 2013 totaled $ 317 million , $ 35 million lower than fiscal 2012. the average interest rate decreased 60 basis points , including the effect of the mix of debt , generating a $ 43 million decrease in net interest . average interest bearing instruments increased $ 167 million , primarily from an increase in incremental borrowing to fund the acquisition of yoki , generating an $ 8 million increase in net interest . 19 our consolidated effective tax rate for fiscal 2013 was 29.2 percent compared to 32.1 percent in fiscal 2012. the 2.9 percentage point decrease was primarily related to the restructuring of our general mills cereals , llc ( gmc ) subsidiary during the first quarter of fiscal 2013 which resulted in a $ 63 million decrease to deferred income tax liabilities related to the tax basis of the investment in gmc and certain distributed assets , with a corresponding discrete non-cash reduction to income taxes . during fiscal 2013 , we also recorded a $ 34 million discrete decrease in income tax expense and an increase in our deferred tax assets related to certain actions taken to restore part of the tax benefits associated with medicare part d subsidies which had previously been reduced in fiscal 2010 with the enactment of the patient protection and affordable care act , as amended by the health care and education reconciliation act of 2010. our fiscal 2013 tax expense also includes a $ 12 million charge associated with the liquidation of a corporate investment . after-tax earnings from joint ventures for fiscal 2013 increased to $ 99 million compared to $ 88 million in fiscal 2012 primarily due to higher tax rates in fiscal 2012 as a result of discrete tax items and higher operating profit offset by unfavorable foreign currency exchange in fiscal 2013. the change in net sales for each joint venture is set forth in the following table : joint venture change in net sales fiscal 2013 vs. 2012 cpw ( 1 ) % hdj ( 2 ) joint ventures ( 1 ) % in fiscal 2013 , cpw net sales declined by 1 percentage point as 2 percentage points of net sales growth from favorable net price realization and mix were offset by 3 percentage points of net sales decline from unfavorable foreign currency exchange . contribution from volume growth was flat compared to fiscal 2012. in fiscal 2013 , net sales for hdj decreased 2 percentage points from fiscal 2012 as 6 percentage points of net sales growth from volume contribution was offset by 7 percentage points of net sales decline from unfavorable foreign currency exchange and 1 percentage point of net sales decline attributable to unfavorable net price realization and mix . average diluted shares outstanding decreased by 1 million in fiscal 2013 from fiscal 2012 , due primarily to the repurchase of 24 million shares , including 6 million purchased under an accelerated share repurchase ( asr ) agreement . fiscal 2013 consolidated balance sheet analysis cash and cash equivalents increased $ 270 million from fiscal 2012 , as discussed in the liquidity section below . receivables increased $ 123 million from fiscal 2012 primarily as a result of the acquisition of yoki . inventories increased $ 67 million from fiscal 2012 primarily as a result of the acquisition of yoki . prepaid expenses and other current assets increased $ 80 million from fiscal 2012 , mainly due to an increase in other receivables related to the liquidation of a corporate investment . land , buildings , and equipment increased $ 225 million from fiscal 2012 , as $ 614 million of capital expenditures and $ 216 million of additions from acquired businesses were partially offset by depreciation expense of $ 552 million . goodwill and other intangible assets increased $ 750 million from fiscal 2012. we recorded $ 407 million of goodwill and $ 311 million of other intangible assets related to acquisitions in fiscal 2013 . 20 other assets decreased $ 22 million from fiscal 2012 , primarily related to the liquidation of a corporate investment . accounts payable increased $ 274 million from fiscal 2012 , primarily due to the acquisition of yoki and the extension of payment terms . long-term debt , including current portion , and notes payable increased $ 540 million from fiscal 2012 primarily due to $ 1.0 billion of debt issuances , partially offset by $ 587 million of debt and commercial paper repayments . the current and noncurrent portions of net deferred income taxes liability increased $ 149 million from fiscal 2012 primarily as a result of contributions to our pension plan in fiscal 2013. other current liabilities increased $ 401 million from fiscal 2012 , primarily driven by increases in dividend accruals and trade and consumer accruals . other liabilities decreased $ 237 million from fiscal 2012 , primarily driven by a decrease in pension , postemployment , and postretirement liabilities . redeemable interest increased $ 120 million from fiscal 2012 , primarily due to a $ 104 million increase in the redemption value of the redeemable interest . retained earnings increased $ 744 million from fiscal 2012 , reflecting fiscal 2013 net earnings of $ 1,855 million less dividends paid of $ 868 million and dividends declared of $ 243 million . story_separator_special_tag frozen foods net sales were flat compared to fiscal 2011. segment operating profit of $ 2.4 billion in fiscal 2013 improved $ 98 million , or 4 percent , from fiscal 2012. the increase was primarily driven by a 5 percent reduction in advertising and media expense , favorable net price realization and mix , and higher volume , partially offset by an increase in input costs . segment operating profit of $ 2.3 billion in fiscal 2012 declined $ 53 million , or 2 percent , from fiscal 2011. the decrease was primarily driven by higher input costs , lower volume , and a 5 percent increase in advertising and media expense . international segment our international segment consists of retail and foodservice businesses outside of the united states . in canada , our product categories include ready-to-eat cereals , shelf stable and frozen vegetables , dry dinners , refrigerated and frozen dough products , dessert and baking mixes , frozen pizza snacks , refrigerated yogurt , and grain and fruit snacks . in markets outside north america , our product categories include super-premium ice cream and frozen desserts , refrigerated yogurt , snacks , shelf stable and frozen vegetables , refrigerated and frozen dough products , and dry dinners . our international segment also includes products manufactured in the united states for export , mainly to caribbean and latin american markets , as well as products we manufacture for sale to our international joint ventures . revenues from export activities and franchise fees are reported in the region or country where the end customer is located . 25 as part of a long-term plan to conform the fiscal year ends of all our operations , we have changed the reporting period of certain countries within our international segment from an april fiscal year end to a may fiscal year end to match our fiscal calendar . accordingly , in the year of change , our results include 13 months of results from the affected operations compared to 12 months in previous fiscal years . in fiscal 2013 , we changed the reporting period for our operations in europe and australia . the impact of these changes was not material to the fiscal 2013 international segment results of operations . net sales for our international segment totaled $ 5,200 million in fiscal 2013 , up 24 percent from $ 4,194 million in fiscal 2012. the growth in fiscal 2013 was driven by 21 percentage points from new businesses , primarily yoki , yoplait s.a.s . , and yoplait canada . excluding the impact of new businesses , net sales were up 3 percent . volume contributed 34 percentage points of net sales growth , including 32 percentage points resulting from new businesses , partially offset by 6 percentage points of unfavorable net price realization and mix and 4 percentage points of unfavorable foreign currency exchange . net sales totaled $ 4,194 million in fiscal 2012 , up 46 percent from $ 2,876 million in fiscal 2011. the growth in fiscal 2012 was driven by 36 percentage points contributed by the acquisition of yoplait s.a.s . volume contributed 65 percentage points of net sales growth , including 63 percentage points resulting from the acquisition of yoplait s.a.s . , and favorable foreign currency exchange contributed 1 percentage point of net sales growth . these gains were partially offset by a decrease of 20 percentage points due to unfavorable net price realization and mix resulting from the acquisition of yoplait s.a.s . components of international net sales growth fiscal 2013 vs. 2012 fiscal 2012 vs. 2011 contributions from volume growth ( a ) 34 pts 65 pts net price realization and mix ( 6 ) pts ( 20 ) pts foreign currency exchange ( 4 ) pts 1 pt net sales growth 24 pts 46 pts ( a ) measured in tons based on the stated weight of our product shipments . net sales for our international segment by geographic region are shown in the following tables : international net sales by geographic region replace_table_token_6_th ( a ) fiscal 2013 net sales for the europe region include an additional month of results . 26 international change in net sales by geographic region replace_table_token_7_th ( a ) see the non-gaap measures section below for our use of this measure . ( b ) fiscal 2013 percentage change in net sales as reported for the europe region includes 4 percentage points of growth due to an additional month of results . the impact to fiscal 2013 net sales growth for the international segment was not material . the 24 percentage point increase in the international segment fiscal 2013 net sales was driven by growth across all regions . on a constant currency basis , international segment net sales grew 28 percent , with 139 percent growth in the latin america region , 15 percent growth in the europe region , 22 percent growth in the canada region , and 11 percent growth in the asia/pacific region . the 46 percentage point increase in the international segment fiscal 2012 net sales was driven by growth across all regions . on a constant currency basis , international segment net sales grew 45 percent , with 83 percent growth in the europe region , 28 percent growth in the canada region , 20 percent growth in the asia/pacific region , and 14 percent growth in the latin america region . segment operating profit for fiscal 2013 grew 14 percent to $ 490 million from $ 430 million in fiscal 2012 , primarily driven by volume growth , the yoki acquisition , and a full year of activity from yoplait s.a.s . , partially offset by unfavorable foreign currency exchange . during fiscal 2010 , venezuela became a highly inflationary economy . in february 2013 , the venezuelan government devalued the bolivar by resetting the official exchange rate . the effect of the devaluation in fiscal 2013
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the issuance consisted of $ 250 million 0.875 percent notes due january 29 , 2016 and $ 500 million 4.15 percent notes due february 15 , 2043. interest on the fixed-rate notes is payable semi-annually in arrears . the fixed rate notes due january 29 , 2016 may be redeemed in whole , or in part , at our option at any time for a specified make whole amount . the fixed rate notes due february 15 , 2043 may be redeemed in whole , or in part , at our option at any time prior to august 15 , 2042 for a specified make whole amount and any time on or after that date at par . these notes are senior unsecured obligations that include a change of control repurchase provision . the net proceeds were used to reduce our commercial paper borrowings . in january 2013 , we issued $ 250 million floating rate notes due january 29 , 2016. the floating-rate notes bear interest equal to three-month libor plus 30 basis points , subject to quarterly reset . interest on the floating-rate notes is payable quarterly in arrears . the floating rate notes are not redeemable prior to maturity . these notes are senior unsecured obligations that include a change of control repurchase provision . the net proceeds were used to reduce our commercial paper borrowings . in september 2012 , we repaid $ 521 million of 5.65 percent notes . in february 2012 , we repaid $ 1.0 billion of 6.0 percent notes . in november 2011 , we issued $ 1.0 billion aggregate principal amount of 3.15 percent notes due december 15 , 2021. the net proceeds were used to repay a portion of our notes due february 2012 , reduce our commercial paper borrowings , and for general corporate purposes . interest on these notes is payable semi-annually in arrears . these notes may be redeemed at our option at any time prior to september 15 , 2021 for a specified make whole amount and any time on or after that date at par . these notes are senior unsecured , unsubordinated obligations that include a change of control repurchase provision .
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Liquidity
| 1,167
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section 1350 , as adopted pursuant to section 302 of the sarbanes-oxley act of 2002. page 45 exhibits description 31.2 certification of principal financial officer pursuant to 18 u.s.c . section 1350 , as adopted pursuant to section 302 of the sarbanes-oxley act of 2002 . 32.1 certification of principal executive officer and principal financial officer pursuant to 18 u.s.c . section 1350 , as adopted pursuant to section 906 of the sarbanes-oxley act of 2002 . 101.ins xbrl instance document 101.sch xbrl taxonomy extension schema document 101.cal xbrl taxonomy extension calculation linkbase document 101.lab xbrl taxonomy extension label linkbase document 101.pre xbrl taxonomy extension presentation linkbase document 101.def xbrl taxonomy extension definition linkbase document management contract or compensatory plan or arrangement required to be filed as an exhibit to this form 10-k. page 46 story_separator_special_tag results of operations overview schmitt industries , inc. ( the company ) , an oregon corporation , designs , manufactures and sells high precision test and measurement products for two main business segments : the balancer segment and the measurement segment . for the balancer segment , the company designs , manufactures and sells computer-controlled vibration detection , balancing and process control systems for the worldwide machine tool industry , particularly for grinding machines . through its wholly owned subsidiary , schmitt measurement systems , inc. , an oregon corporation , the company designs , manufactures and sells laser and white light sensors for distance , dimensional and area measurement for a wide variety of commercial applications , laser-based microroughness measurement products for the semiconductor wafer and hard disk drive industries and for other industrial applications , laser-based surface analysis and measurement products for a variety of scientific applications , and ultrasonic measurement products that accurately measure the fill levels of tanks holding propane , diesel and other tank-based liquids and transmit that data via satellite to a secure web site for display ( the measurement segment ) . the company also provides sales and service for europe and asia through its wholly owned subsidiary , schmitt europe limited ( sel ) , located in coventry , england and through its sales representative office located in shanghai , china . for the fiscal year ended may 31 , 2015 ( fiscal 2015 ) , total sales increased $ 934,585 , or 7.7 % , to $ 13,069,091 from $ 12,134,506 in the fiscal year ended may 31 , 2014 ( fiscal 2014 ) . balancer segment sales focus throughout the world on end-users , rebuilders and original equipment manufacturers of grinding machines with the target geographic markets of north america , asia , and europe . balancer sales increased $ 129,025 , or 1.7 % , to $ 7,850,236 in fiscal 2015 compared to $ 7,721,211 in fiscal 2014. sales into asia , germany and other european countries increased $ 712,846 , or 23.8 % , for fiscal 2015 as compared to fiscal 2014. these sales were offset by lower volumes of shipments into north america and other regions of the world . the measurement segment product lines consist of sms and lasercheck laser-based surface microroughness measurement systems , acuity laser-based distance measurement and dimensional sizing laser sensors , and xact ultrasonic-based remote tank monitoring products . total measurement segment sales increased $ 805,560 , or 18.3 % , to $ 5,218,855 for the year ended may 31 , 2015 as compared to $ 4,413,295 for the year ended may 31 , 2014. the increase is primarily increased revenues associated with the sales of xact remote tank monitoring products and related monitoring services and an increase in sales of sms laser-based surface measurement products . operating expenses increased $ 66,605 , or 1.1 % , to $ 6,205,156 in fiscal 2015 from $ 6,138,551 in fiscal 2014. general , administrative and sales expenses increased $ 163,730 , or 2.9 % , in fiscal 2015 to $ 5,826,851 as compared to $ 5,663,121 in the prior fiscal year . research and development expenses decreased $ 97,125 , or 20.4 % , to $ 378,305 in fiscal 2015 from $ 475,430 in fiscal 2014. page 18 net loss was $ 93,669 , or $ 0.03 per fully diluted share , for the year ended may 31 , 2015 as compared to net loss of $ 539,624 , or $ 0.18 per fully diluted share , for the year ended may 31 , 2014. critical accounting policies revenue recognition the company recognizes revenue for sales and billing for freight charges upon delivery of the product to the customer at a fixed or determinable price with a reasonable assurance of collection , passage of title to the customer as indicated by shipping terms and fulfillment of all significant obligations , pursuant to the guidance provided by accounting standards codification topic 605. for sales to all customers , including manufacturer representatives , distributors or their third-party customers , these criteria are met at the time product is shipped . when other significant obligations remain after products are delivered , revenue is recognized only after such obligations are fulfilled . in addition , judgments are required in evaluating the credit worthiness of our customers . credit is not extended to customers and revenue is not recognized until we have determined that collectability is reasonably assured . the company estimates customer product returns based on historical return patterns and reduces sales and cost of sales accordingly . allowance for doubtful accounts the company maintains credit limits for all customers based upon several factors , including but not limited to financial condition and stability , payment history , published credit reports and use of credit references . management performs various analyses to evaluate accounts receivable balances to ensure recorded amounts reflect estimated net realizable value . story_separator_special_tag this review includes accounts receivable agings , other operating trends and relevant business conditions , including general economic factors , as they relate to the company 's domestic and international customers . if these analyses lead management to the conclusion that potential significant accounts are uncollectible , a reserve is provided . inventories inventories are valued at the lower of cost or market with cost determined on the average cost basis . costs included in inventories consist of materials , labor and manufacturing overhead , which are related to the purchase or production of inventories . write-downs , when required , are made to reduce excess inventories to their net realizable values . such estimates are based on assumptions regarding future demand and market conditions . if actual conditions become less favorable than the assumptions used , an additional inventory write-down may be required . deferred taxes the company applies the asset and liability method in recording income taxes , under which deferred income tax assets and liabilities are determined , based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using currently enacted tax rates and laws . additionally , deferred tax assets are evaluated and a valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized . management continues to review the level of the valuation allowance on a quarterly basis . there can be no assurance that the company 's future operations will produce sufficient earnings so that the deferred tax assets can be fully utilized . intangible assets intangible and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable . recoverability is determined by comparing the forecasted future undiscounted net cash flows from the operations to which the assets relate , based on management 's best estimates using the appropriate assumptions and projections at the time , to the carrying amount of the assets . if the carrying value is determined to be in excess of future operating cash flows , the asset is considered impaired and a loss is recognized equal to the amount by which the carrying amount exceeds the estimated fair value of the assets . page 19 recently issued accounting pronouncements refer to note 2 of the notes to consolidated financial statements for a discussion of recently issued accounting pronouncements . story_separator_special_tag deductible for income tax reporting , offset by tax credits related to research and experimentation expenses . the effective tax rate in fiscal 2013 was ( 1.5 ) % . the effective tax rate on consolidated net loss in fiscal 2013 differed from the federal statutory tax rate primarily due to changes in the deferred tax valuation allowance and certain expenses not being deductible for income tax reporting offset by tax credits related to research and experimentation expenses . net income ( loss ) net loss decreased $ 445,955 to a net loss of $ 93,669 , or $ 0.03 per diluted share , for fiscal 2015 as compared to net loss of $ 539,624 , or $ 0.18 per diluted share , for fiscal 2014. net loss for fiscal 2015 reflected increased sales and a higher gross margin percentage , which was partially offset by an increase in operating expenses . net loss decreased $ 258 to a net loss of $ 539,624 , or $ 0.18 per diluted share , for fiscal 2014 as compared to net loss of $ 539,882 , or $ 0.18 per diluted share , for fiscal 2013. net loss for fiscal 2014 reflected decreased sales and a lower gross margin percentage , which was partially offset by reduced operating expenses . inflation risk the company does not believe that inflation has had a material effect on its business , financial condition or results of operations . however , if its costs were to become subject to significant inflationary pressures , the company may not be able to fully offset such higher costs through price increases . the company 's inability or failure to do so could harm its business , financial condition and results of operations . off balance sheet arrangements the company did not have any off-balance sheet arrangements during the fiscal year ended may 31 , 2015. liquidity and capital resources the company 's working capital increased $ 75,242 to $ 7,553,315 as of may 31 , 2015 compared to $ 7,478,073 as of may 31 , 2014. cash and cash equivalents increased $ 285,089 from $ 1,510,565 as of may 31 , 2014 to $ 1,795,654 as of may 31 , 2015. cash provided by operating activities was $ 390,146 in fiscal 2015 as compared to cash used in operations of $ 392,376 in fiscal 2014. the increase in the amount of cash used for operating activities was primarily due to the reduction in net loss incurred by the company , reductions in inventories , and increases in accounts payable and accrued liabilities , offset by the increase in accounts receivable . at may 31 , 2015 , accounts receivable increased $ 425,232 to $ 2,660,426 compared to $ 2,235,194 as of may 31 , 2014. the increase in accounts receivable was due to the increase in sales in the fourth quarter and the resulting timing of receipts . inventories decreased $ 232,255 to $ 4,557,567 as of may 31 , 2015 compared to $ 4,789,822 as of may 31 , 2014 as a result of our continued focus on right-sizing the levels of inventories held for each of the company 's product lines . at may 31 , 2015 , total current liabilities increased $ 404,247 to $ 1,615,331 as compared to $ 1,211,084 at may 31 , 2014. the increase was primarily due to the timing of payments on accounts payable and increases in accruals for
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discussion of operating results replace_table_token_3_th sales sales in the balancer segment increased $ 129,025 , or 1.7 % , to $ 7,850,236 for fiscal 2015 compared to $ 7,721,211 for fiscal 2014. this increase was primarily attributed to stronger sales in asia and other regions of the world , offset by lower shipments into north america and europe . sales into asia increased $ 574,923 , or 24.0 % , and sales into other regions of the world increased $ 126,352 , or 117.0 % , during fiscal 2015 as compared to fiscal 2014. north american sales decreased $ 530,905 , or 13.0 % , in fiscal 2015 compared to fiscal 2014. while sales into europe decreased $ 41,345 , or 3.7 % , in fiscal 2015 compared to fiscal 2014 , sales into germany and other european countries increased $ 137,923 , or 18.9 % in fiscal 2015 compared to the prior year . the increases in sales into asia and other regions of the world were due to an increase in demand for the company 's sbs products , while the increase in sales into germany and other european countries is in response to the targeted market strategy we have in those areas . the decline in sales in north america reflected fluctuations in demand in the markets we serve . the levels of demand for our balancer products in any of these geographic markets can not be forecasted with any certainty given current economic trends and the historical volatility experienced in this market . sales in the measurement segment increased $ 805,560 , or 18.3 % , to $ 5,218,855 in fiscal 2015 compared to $ 4,413,295 in fiscal 2014. sales of acuity laser-based distance measurement and dimensional-sizing products decreased $ 499,937 , or 20.1 % , primarily due to a reduction in the markets we serve .
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ROO
| 10,971
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partners that : ( a ) generates revenue , and ( b ) requires a lower cost structure compared to traditional pharmaceutical companies , thereby increasing our gross margins . 3. developing and acquiring on-line marketplaces such as supplementhunt.com and primesavingsclub.com that focus on certain market segments such as lower priced , soon to expire supplement business with the supplementhunt.com acquisition and with the select consumer product business through primesavingsclub.com among others in which we sell third party , brand or non-branded products . our products marketed products we currently market and sell over 35 products in the u.s. and more than 10 in multiple countries around the world through our 12 international commercial partners . we have five core products which we define as having more than $ 1.0 million in annual sales or rapidly growing product . the following represents these core products : 1. vesele® 2. urivarx® 3. fluticare® 4. apeaz® 5. diabasens® 6. prostagorx ® 7. sensum ® in addition , we currently expect to launch in the u.s. the following products in 2019 , subject to the applicable regulatory approvals , if required : 1. thermomax® is a hand cream with two strengths that provides up to eight hours of hand warming relief ( second quarter of 2019 ) ; 2. breastlift is a clinically tested cream to provide safe and natural way to firm sagging breasts ( second quarter of 2019 ) ; 3. healthifeet ® is a foot cream that provides foot warming relief ( second quarter of 2019 ) ; 4. mzs sleeping aid with hemp-derived thc-free oil and melatonin is in tincture form ( launched in first quarter of 2019 ) ; 5. trexar is a supplement to provide neuropathy support and enhanced sensation ( second quarter of 2019 ) ; 6. musclin ® is a proprietary supplement made of two fda generally recognized as safe ( gras ) approved ingredients designed to increase muscle mass , endurance and activity ( second half of 2019 ) . the main ingredient in musclin ® is a natural activator of the transient receptor potential cation channel , subfamily v , member 3 ( trpv3 ) channels on muscle fibers responsible to increase fibers width resulting in larger muscles ; 7. regenerum is a proprietary product containing two natural molecules : the first is an activator of the trpv3 channels resulting in the increase of muscle fiber width , and the second targets a different unknown receptor to build the muscle 's capacity for energy production and increases physical endurance , allowing longer and more intense exercise . regenerum is being developed for patients suffering from muscle wasting . we currently expect to launch this product in 2020 pending successful clinical trials in patients with muscle wasting or cachexia ; and 8. octiq is an expected fda ophthalmic otc monograph compliant product for the treatment of eye redness and eye lubrication ( late 2019/early 2020 ) . sales and marketing channels as discussed , we currently have four main sales and marketing channels making up the beyond human ® sales and marketing platform acquired in march 2016 , which has resulted in the significant revenue growth to $ 24.0 million in the year ended december 31 , 2018 compared with $ 8.8 million in the year ended december 31 , 2017. we feel that these channels complement each other to enhance the innovus pharmaceuticals , inc. brand and awareness of our customers and provide us with the ability to use our sales and marketing in the most efficient way possible in acquiring new customers and maintaining those current customers . print and direct mail marketing through our beyond hum an ® sales and marketing platform , we have access to advertise in the vast majority of newspapers and magazines on a regular basis . we have developed our own proprietary algorithm which allows us to target customers looking for specific health products allowing us to increase the return on our investment and reduce the cost to acquire new customers . during 2018 , we were able to expand our reach to canada with the approval of twelve of our products by health canada and successfully expand our beyond human ® sales and marketing platform . e-commerce we have an extensive on-line media channel through our amazon® , newegg® , walmart.com® , ebay® , wish.com , and walgreens.com sites in addition to our own innovuspharma.com site along with sites for each of our products individually . our expertise allows us to successfully drive product sales through proper marketing campaigns through third-party sites as well as through email marketing campaigns to increase traffic to our own sites . additionally , we have recognized that maintaining a proper e-commerce presence allows those customers who read our advertisements in the newspapers and magazine or receive our direct mail another avenue to purchase products . -22- retail/wholesale we are continuously introducing our products to varieties of retail and wholesale partners to enhance the brand and product awareness for our customers . in 2018 , we significantly increased our advertising expenses specifically in the print and direct mail marketing channel which , in turn , has had a direct positive impact to the success of products in retail . we intend to continue to demonstrate to our retail and wholesale partners the advantages of incorporating our products in their stores , especially due to our proprietary consumer targeted marketing approach that our print advertising allows us to achieve . international distribution we continue to work with our exclusive commercial partners outside of the u.s. that would be responsible for sales and marketing in those territories . we evaluate the performance of each of these partners to ensure a steady flow of consumer activity for each of our products . our strategy outside the u.s. is to partner with companies who can effectively market and sell our products in their countries through their direct marketing and sales teams . story_separator_special_tag in connection with the securities exchange agreement , the company issued a total of 40,481 shares of common stock in exchange for the settlement of principal due totaling $ 340,000. the fair value of the shares of common stock issued was based on the market price of our common stock on the date of the securities exchange agreements was determined to be $ 485,000. due to the settlement of the principal balance of $ 340,000 into shares of common stock , the transaction was recorded as a debt extinguishment and the fair value of the shares of common stock issued in excess of the settled principal balance totaling $ 145,000 and the unamortized debt discount as of the date of settlement of $ 3,000 were recorded as a loss on debt extinguishment in the accompanying condensed consolidated statement of operations . on november 30 , 2018 , the company entered into a securities exchange agreement with one of the february and march 2018 5 % notes payable holders . in connection with the securities exchange agreement , the company issued a total of 20,940 shares of common stock in exchange for the settlement of principal due totaling $ 143,000. the fair value of the shares of common stock issued was based on the market price of our common stock on the date of the securities exchange agreements was determined to be $ 231,000. due to the settlement of the principal balance of $ 143,000 into shares of common stock , the transaction was recorded as a debt extinguishment and the fair value of the shares of common stock issued in excess of the settled principal balance totaling $ 88,000 was recorded as a loss on debt extinguishment in the accompanying condensed consolidated statement of operations . july 2018 5 % note payable on july 19 , 2018 , the company entered into a securities purchase agreement with an unrelated third-party investor in which the investor loaned the company gross proceeds of $ 500,000 pursuant to 5 % promissory notes ( “ july 2018 5 % notes payable ” ) . the notes have an oid of $ 50,000 and require payments of $ 550,000 in principal . the notes bear interest at the rate of 5 % per annum and the principal amount and interest are payable at maturity on february 19 , 2019. in connection with the note , the company issued the investor restricted shares of common stock totaling 15,239 shares . the fair value of the restricted shares of common stock issued was based on the market price of our common stock on the date of issuance of the note . the allocation of the proceeds received to the restricted shares of common stock based on their relative fair value and the oid resulted in the company recording a debt discount of $ 226,000. the discount is being amortized to interest expense using the effective interest method over the term of the note . august 2018 notes payable on august 1 , 2018 , the company entered into a securities purchase agreement with two unrelated third-party investors in which the investors loaned the company gross proceeds of $ 1.0 million pursuant to a 0 % promissory note ( “ august 2018 notes payable ” ) . the notes have an oid of $ 200,000 and require twelve payments of $ 100,000 in principal per month through august 2019. the august 2018 notes payable bear no interest per annum . the effective interest rate is 20 % per annum for the notes . in connection with the august 2018 notes payable , we issued the investors restricted shares of common stock totaling 9,524 shares . the fair value of the restricted shares of common stock issued was based on the market price of our common stock on the date of issuance of the august 2018 notes payable . the allocation of the proceeds received to the restricted shares of common stock based on their relative fair value and the oid resulted in us recording a debt discount of $ 435,000. in connection with the financing , we issued 6,086 restricted shares to a third-party consultant . the fair value of the restricted shares of common stock issued of $ 100,000 was recorded as a debt discount to the carrying value of the august 2018 notes payable . the discount is being amortized to interest expense using the effective interest method over the term of the august 2018 notes payable . september 2018 5 % notes payable on september 12 , 2018 , the company entered into a securities purchase agreement with an unrelated third-party investor in which the investor loaned the company gross proceeds of $ 350,000 pursuant to 5 % promissory notes ( “ september 2018 5 % notes payable ” ) . the notes have an oid of $ 40,000 and require payments of $ 390,000 in principal . the notes bear interest at the rate of 5 % per annum and the principal amount and interest are payable in three installments on march 12 , 2019 , june 12 , 2019 and september 12 , 2019 for the note . in connection with the september 2018 5 % notes payable , the company issued the investor restricted shares of common stock totaling 9,524 shares . the fair value of the restricted shares of common stock issued was based on the market price of our common stock on the date of issuance of the september 2018 5 % notes payable . the allocation of the proceeds received to the restricted shares of common stock based on their relative fair value and the oid resulted in us recording a debt discount of $ 130,000. the discount is being amortized to interest expense using the effective interest method over the term of the note . october 2018 5 % notes payable on october 22 , 2018 , the company entered into a securities purchase agreement with an unrelated
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liquidity and capital resources historically , we have funded losses from operations through the sale of equity and issuance of debt instruments . combined with revenue , these funds have provided us with the capital to operate our business , to sell and support our products , attract and retain key personnel , and add new products to our portfolio . to date , we have experienced net losses each year since our inception . as of december 31 , 2018 , we had an accumulated deficit of $ 43.9 million and a working capital deficit of $ 2.3 million . as of march 29 , 2019 , we had approximately $ 1.7 million in cash and $ 0.6 million held by processors . although no assurances can be given , we currently plan to raise additional capital through the sale of equity or debt securities . we expect , however , that our existing capital resources , the proceeds received from the private placement offering and issuance of notes payable in the first quarter of 2019 totaling $ 2.7 million ( see note 11 in the accompanying consolidated financial statements included elsewhere in this annual report ) , revenue from sales of our products and upcoming new product launches and sales milestone payments from the commercial partners signed for our products , and equity instruments available to pay certain vendors and consultants , will be sufficient to allow us to continue our operations , commence the product development process and launch selected products through at least the next 12 months . in addition , the company 's ceo , who is also a significant shareholder , has deferred the remaining payment of his salary earned through june 30 , 2016 of $ 1.2 million and will continue to defer such compensation if payment would jeopardize the ability of the company to continue its operations .
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Liquidity
| 341
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60 license agreement - biovec on june 10 , 2015 , we entered into an agreement in which biovec agreed to supply us with certain proprietary cell lines and granted to us a non-exclusive , worldwide license to certain of its patent rights and related know-how related to such proprietary cell lines . see note 12 to the financial statements included herein . license agreement - leiden on april 23 , 2015 , we entered into a license agreement with academisch ziekenhuis leiden , or leiden , whereby leiden granted to us an exclusive , worldwide license to its patent rights covering high affinity t-cell receptors targeting preferentially-expressed antigen in melanoma , or prame , and pou2af1 epitopes . the license granted under the leiden agreement is subject to certain restrictions and to leiden 's retained right to use the licensed patents solely for academic research and teaching purposes , including research collaborations by leiden with academic , non-profit research third parties ; provided that leiden provides 30 days advance written notice to us of such academic research collaborations . for more information , see note 12 to the financial statements included herein . lease agreement in may 2015 , we entered into a lease agreement for approximately 27,000 additional square feet of space at our corporate headquarters for the manufacture of bpx-501 for clinical studies and to support the development of our expanding pipeline of tcr and car-t adoptive cell therapy product candidates . for more information , see note 12 to the financial statements included herein . financial operations overview grant revenue cancer research institute of texas ( cprit ) to date , we have only recognized revenue from government grants and we have not generated any product revenue . we have received funds from the cancer prevention and research institute of texas , or cprit , and the national institute of health , or nih , which are awarded based on the progress of the program being funded . in cases when the grant money is not received until expenses for the program are incurred , we accrue the revenue based on the costs incurred for the programs associated with the grant . during 2011 , we entered into a grant agreement with cprit for approximately $ 5.7 million covering a three year period from july 1 , 2011 through june 30 , 2014. the grant initially allowed us to receive funds in advance of costs and allowable expenses being incurred . on a quarterly basis , we were required to submit a financial reporting package outlining the nature and extent of reimbursed costs under the grant . at the end of each period , any excess funds received in advance , or paid prior to reimbursement resulted in a deferred liability or grant receivable . the cprit grant expired as of june 30 , 2014. nih grant during 2013 , we entered into a grant agreement with the nih . the grant is a modular five year grant with funds being awarded each year based on the progress of the program being funded . grant money is not received until expenses for the program are incurred . we have been awarded approximately $ 1.0 million to date , of which $ 0.7 million has been received . we accrue the revenue based on the costs incurred for the programs associated with the grant . in the future , we may generate revenue from a combination of product sales , government or other third-party grants , marketing and distribution arrangements and other collaborations , strategic alliances and licensing arrangements or a combination of these approaches . we expect that any revenue we generate will fluctuate as a result of the timing and amount of license fees , milestone and other payments , and the amount and timing of payments that we receive upon the sale of our products , to the extent any are successfully commercialized . if we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval of them , our ability to generate future revenue , and our results of operations and financial position , would be materially adversely affected . research and development expenses to date , our research and development expenses have related primarily to the development of our cid platform and the identification and development of our product candidates . research and development expenses consist of expenses incurred in performing research and development activities , including compensation and benefits for research and development employees and consultants , facilities 61 expenses , overhead expenses , cost of laboratory supplies , manufacturing expenses , fees paid to third parties and other outside expenses . research and development costs are expensed as incurred . clinical trial and other development costs incurred by third parties are expensed as the contracted work is performed . we accrue for costs incurred as the services are being provided by monitoring the status of the clinical trial or project and the invoices received from our external service providers . we adjust our accrual as actual costs become known . where contingent milestone payments are due to third parties under research and development arrangements , the milestone payment obligations are expensed when the milestone events are achieved . we utilize our research and development personnel and infrastructure resources across several programs , and many of our costs are not specifically attributable to a single program . accordingly , we can not state precisely our total costs incurred on a program-by-program basis . research and development activities are central to our business model . product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development , primarily due to the increased size and duration of later-stage clinical trials . story_separator_special_tag the license transaction was valued on the date of the transaction and the note was discounted to fair market value at a 10 % rate . this resulted in license expense of $ 43.2 million , repurchase of our common stock for $ 5.1 million , and interest expense of $ 1.7 million . we have recorded the returned shares of common stock as treasury stock . for more information , see note 11 to the financial statements included herein . general and administrative expenses general and administrative expenses were $ 4.3 million and $ 2.0 million for the years ended december 31 , 2014 and 2013 , respectively . the increase of $ 2.3 million in 2014 in general and administrative expenses was due to our overall growth and public company related costs , including an increase in personnel , legal and accounting expenses and costs related to facilities , insurance and travel . other income ( expense ) other expense was $ 26.1 million and $ 47,000 for the years ended december 31 , 2014 and 2013 , respectively . the increase in other expense is primarily due to the change in fair value of warrant liability of $ 24.4 million and imputed interest expense from the ariad license restructuring of $ 1.7 million . in connection with the august 2014 issuance of series c convertible preferred stock , bellicum issued warrants to purchase 6,559,598 shares of series c convertible preferred stock with an exercise price of $ 6.00 per share which were convertible into 3,858,549 common shares . the fair value of the warrants on the date of issuance of $ 9.4 million , as determined using the black-scholes option-pricing model , was recorded as a warrant liability . the series c warrants were revalued both at september 30 , 2014 to $ 10.6 million , and again revalued at the time of exercise in december 2014 to $ 33.8 million . the increase in the calculated fair value from the issuance date to the remeasurement dates resulted in non-cash expense of $ 24.4 million in 2014. as all the warrants were either exercised or expired in december 2014 , there will be no future charges in connection with the warrants . liquidity and capital resources sources of liquidity we are a clinical stage biopharmaceutical company with a limited operating history . to date , we have financed our operations primarily through equity and debt financings and grants . we have not generated any revenue from the sale of any products . as of december 31 , 2015 , we had cash , cash equivalents and investment securities of $ 150.4 million . cash in excess of immediate requirements is invested in accordance with our investment policy , primarily with a view to liquidity and capital preservation . on february 12 , 2013 , we received $ 3.5 million of cash proceeds through the issuance of promissory notes , bearing interest at 0.21 % per annum from february 12 , 2013 through july 31 , 2013. on july 31 , 2013 , in connection with the issuance of series b convertible preferred stock , we repaid the notes with 757,497 shares of series b convertible preferred stock at a conversion price of $ 4.625 per share . the converted balances consisted of $ 3.5 million of principal and $ 3,426 of outstanding interest payable . in the first quarter of 2014 , we issued 1,582,705 shares of our series b convertible preferred stock for net proceeds of $ 7.3 million , and received $ 0.2 million pursuant to the exercise of common warrants . in august 2014 , we completed a private placement of 10,091,743 shares of series c convertible preferred stock and warrants to purchase up to 6,559,598 shares of series c convertible preferred stock and received gross proceeds of $ 55.0 million , resulting in net proceeds of $ 51.5 million . the warrants had an exercise price of $ 6.00 per share . the warrants provided for automatic termination upon the date immediately following the date of effectiveness of our registration statement on form s-1 in connection with our initial public offering . as a result , substantially all of such warrants were exercised in december 2014. we received gross proceeds of approximately $ 39.1 million from the exercise of warrants , resulting in net proceeds of $ 38.4 million . see note 8 to the financial statements included herein . in december 2014 , we completed our initial public offering of shares of our common stock which resulted in aggregate gross proceeds to us of approximately $ 160.6 million and net offering proceeds to us of approximately $ 146.3 million , after deducting underwriting discounts and commissions and offering costs . also in conjunction with our initial public offering , $ 3.4 million of accrued series b dividends were paid , of which $ 0.2 million was paid in cash and the remainder was paid by issuance of 168,199 shares of our common stock . in conjunction with the initial public offering , substantially all of the common warrants were exercised resulting in additional proceeds of $ 49,001. also in conjunction with the initial public offering , $ 3.4 million of accrued series b dividends were paid , of which $ 0.2 million was paid in cash and the remainder was paid by issuance of 168,199 shares of common stock . on january 15 , 2016 , we filed a shelf registration statement on form s-3 ( file no . 333-209012 ) , or the shelf registration statement , to enable us to sell securities from time to time as described in the prospectus in one or more offerings up to a total aggregate offering price of $ 150,000,000. the sec declared the shelf registration statement effective on february 1 , 2016 . 66 on march 10 , 2016 , or the closing date , we entered into a loan and security agreement
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net cash used in operating activities was $ 7.6 million for the year ended december 31 , 2013 , which was derived from a net loss of $ 8.0 million , in addition to the following primary components : a decrease in prepaid expenses and other assets of $ 1.1 million , an increase in accounts payable , accrued payroll , and accrued liabilities of $ 0.7 million , a decrease in deferred revenue-grants of $ 1.0 million , and share-based compensation of $ 0.4 million . 68 investing activities net cash used in investing activities for the year ended december 31 , 2015 was $ 86.5 million , which was derived from the purchases of property and equipment of $ 5.4 million and the purchase of investment securities of $ 101.6 million , offset by proceeds from the sale of securities of $ 20.6 million in 2015. net cash used in investing activities for the year ended december 31 , 2014 was $ 0.8 million , which was derived solely from the purchase of property and equipment . net cash used in investing activities for the year ended december 31 , 2013 was $ 0.4 million , which was derived solely from the purchase of property and equipment . financing activities net cash provided by financing activities for the year ended december 31 , 2015 was $ 0.8 million , which was primarily derived from proceeds received from issuance of common stock .
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Liquidity
| 16,346
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restricted stock awards are valued at the closing price on the date of grant . determining the grant date fair value for options requires management to make estimates regarding the variables used in the calculation of the grant date fair value . those variables are the future volatility of our common stock price , the length of time an optionee will hold their options until exercising them ( the “ expected term ” ) , and the number of options that will be forfeited before they are exercised ( the “ forfeiture rate ” ) . we utilize various mathematical models story_separator_special_tag overview we operate in two segments , marine technology products and equipment leasing . the marine technology products segment was previously referred to as our equipment manufacturing and sales segment . we have revised the name of this segment in order to more accurately describe the operations and focus of that part of our business . the change in name has no effect on the composition of the segment or its operations . revenue from the marine technology products segment includes sales of seamap equipment , sales of klein equipment and sales of oceanographic and hydrographic equipment by sap . this segment operates from locations near bristol , united kingdom , brisbane , australia , salem , new hampshire and in singapore . our equipment leasing operations include all leasing activity , sales of lease pool equipment and certain other equipment sales and services related to those operations . this business is conducted from our huntsville , texas headquarters and from our locations in calgary , canada ; brisbane , australia ; bogota , colombia ; budapest , hungary ; singapore and ufa , russia . this includes the operations of our subsidiaries mcl , mel , mml and mse , our branch in colombia and the leasing operations conducted by sap . we acquired klein effective december 31 , 2015 and , accordingly , our consolidated results of operations for the year ended fiscal 2016 included only one month of operations from klein , which amounts were not material . prior to the acquisition of klein in december 2015 , sales of oceanographic and hydrographic equipment by sap were included in our equipment leasing segment . segment operating results for all periods presented have been restated to reflect the revised segment structure . management believes that the performance of our marine technology products segment is indicated by revenues from equipment sales and by gross profit from those sales . management further believes that the performance of our equipment leasing segment is indicated by revenues from equipment leasing and by the level of our investment in lease pool equipment . management monitors ebitda and adjusted ebitda , both as defined in the following table , as key indicators of our overall performance and liquidity . the following table presents certain operating information by operating segment : 22 index to financial statements replace_table_token_5_th 23 index to financial statements replace_table_token_6_th _ ( 1 ) ebitda is defined as net income before ( a ) interest income and interest expense , ( b ) provision for ( or benefit from ) income taxes and ( c ) depreciation and amortization . adjusted ebitda excludes non-cash foreign exchange gains and losses , non-cash costs of lease pool equipment sales , certain non-recurring contract settlement costs , impairment of intangible assets and stock-based compensation . we consider ebitda and adjusted ebitda to be important indicators for the performance of our business , but not measures of performance or liquidity calculated in accordance with accounting principles generally accepted in the united states of america ( “ gaap ” ) . we have included these non-gaap financial measures because management utilizes this information for assessing our performance and liquidity , and as indicators of our ability to make capital expenditures , service debt and finance working capital requirements and we believe that ebitda and adjusted ebitda are measurements that are commonly used by analysts and some investors in evaluating the performance and liquidity of companies such as us . in particular , we believe that it is useful to our analysts and investors to understand this relationship because it excludes transactions not related to our core cash operating activities . we believe that excluding these transactions allows investors to meaningfully trend and analyze the performance of our core cash operations . ebitda and adjusted ebitda are not measures of financial performance or liquidity under gaap and should not be considered in isolation or as alternatives to cash flow from operating activities or as alternatives to net income as indicators of operating performance or any other measures of performance derived in accordance with gaap . in evaluating our performance as measured by ebitda , management recognizes and considers the limitations of this measurement . ebitda and adjusted ebitda do not reflect our obligations for the payment of income taxes , interest expense or other obligations such as capital expenditures . accordingly , ebitda 24 index to financial statements and adjusted ebitda are only two of the measurements that management utilizes . other companies in our industry may calculate ebitda or adjusted ebitda differently than we do and ebitda and adjusted ebitda may not be comparable with similarly titled measures reported by other companies . ( 2 ) non-recurring contract settlement costs of approximately $ 2.1 million in 2016 include approximately $ 1.8 million of deferred cash payments and approximately $ 300,000 of stock based compensation . within our marine technology products segment , we design , manufacture and sell a variety of products used primarily in oceanographic , hydrographic , defense , seismic and maritime security industries . seamap 's primary products include the ( i ) gunlink and digishot seismic source acquisition and control systems , which provide marine operators more precise control of exploration tools ; and ( ii ) the buoylink rgps tracking system used to provide precise positioning of seismic sources and streamers ( marine recording channels that are towed behind a vessel ) . story_separator_special_tag due to the required expansion of our existing facilities necessary to support the manufacture and repair of the streamer products , we do not expect a material contribution from these products until the second half of fiscal 2019. the overall decline in seismic exploration activity has had , and we expect will continue to have , an impact on the demand for seamap 's products and services . however , we believe the expansion of our product offerings and the desire for customers to upgrade to newer , more efficient technology will mitigate this impact to some extent . while seamap is not solely dependent on activity related to oil and gas exploration activity , a recovery of activity in marine exploration activity in the petroleum industry could have a materially beneficial effect on our results of operations . customers for klein 's products primarily consist of domestic and foreign governmental and military organizations and commercial entities involved in the hydrographic and oceanographic industries . revenue from the sale of klein products in fiscal 2018 and 2017 were significantly below our expectations . we believe we the following factors contributed to this shortfall : delays in project awards by domestic and foreign governmental agencies due to budget constraints and processes . an industry-wide decline in the purchase of sonar products . competitive pressures . delays in the introduction of new products in fiscal 2017. despite the disappointing results in fiscal 2018 and 2017 , we are optimistic that revenue from our sonar products will return to historical and anticipated levels . this belief is based on our current inventory of project pursuits , pending orders and independent projections of increased world-wide demand for sonar products . demand for the rental of land seismic exploration equipment varies by geographic region and has been very sporadic in recent periods . we expect continuing demand in europe and improving demand in south america during fiscal 2019. we do anticipate opportunities for projects in other parts of the world , including north africa and the middle east , some of which could be significant . however , competition for such projects is generally intense and there is no assurance that we will have the opportunity to provide equipment for such projects . land leasing activity is expected to remain well below historical levels in fiscal 2019. marine leasing activity increased in fiscal 2018 after having declined over the prior two years ; however , this activity remains well below historical levels . we believe this is due in large part to an excess of equipment in the marine seismic market . as marine contractors have sought to reduce costs by retiring older vessels an excess of used equipment has become available , thereby reducing the demand for rental equipment . while we have experienced an increase in inquiries for marine equipment in recent months , we believe this excess of available equipment will continue into fiscal 2019. we believe one of our key competitive advantages is our broad geographic footprint and ability to operate in a number of areas . we have accomplished this over the past several years by establishing subsidiaries and branch operations such that we now operate in a number of countries . in response to a decline in activity in some regions , we have taken steps to reduce costs such as by reducing personnel and expect to make further reductions in certain locations during fiscal 2019. however , we expect to expand our operations in singapore to facilitate the production of the newly-introduced towed streamer products . a significant portion of our revenues are generated from foreign sources . for fiscal 2018 , 2017 and 2016 , revenues from international customers totaled approximately $ 36.9 million , $ 34.7 million and $ 44.5 million , respectively . these amounts represent 76 % , 85 % and 86 % of consolidated revenues in those fiscal years , respectively . the majority of our transactions with foreign customers are denominated in united states dollars . we have not entered , nor do we intend to enter , into derivative financial instruments for hedging or speculative purposes . our revenues and results of operations have not been materially impacted by inflation or changing prices in the past three fiscal years , except as described above . story_separator_special_tag organizations , has generally been strong over the past three years ; however , revenues from year to year can vary significantly due to the timing of discrete orders . the gross profit from the sale of new seismic , hydrographic and oceanographic equipment by sap amounted to approximately $ 1.2 million in fiscal 2018 , $ 1.1 million in fiscal 2017 , and $ 650,000 in fiscal 2016 , representing gross profit margins of 20 % , 23 % and 26 % , respectively . the changes in gross profit margins between the years reflect changes in product mix from year to year . the effect of sales from klein to sap is eliminated in consolidation and in the table above as “ intra-segment sales ” . as of january 31 , 2018 the backlog of our marine technology products segment was approximately $ 2.7 million , as compared to approximately $ 12.5 million as of january 31 , 2017. we expect essentially all of these orders to be completed in fiscal 2019. based on our experience and the lead times for the production of our product , we do not believe backlog as of a particular date is necessarily indicative of future results . equipment leasing revenues and cost of sales from our equipment leasing segment were comprised of the following : replace_table_token_8_th equipment leasing revenues decreased approximately 23 % in fiscal 2018 compared to fiscal 2017 and 57 % in fiscal 2017 as compared to fiscal 2016. this downward trend reflects the dramatic decline in oil and gas exploration activity in essentially all geographic regions brought about by uncertainty in world-wide oil prices and a global surplus of oil .
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results of operations for fiscal 2018 , 2017 and 2016 , we recorded operating losses of approximately $ 19.7 million , $ 31.3 million and $ 26.8 million , respectively . the improvement in fiscal 2018 from fiscal 2017 was due primarily to higher sales of lease pool equipment and contribution from 26 index to financial statements the sale of marine technology products . the higher operating loss in fiscal 2017 as compared to fiscal 2016 was due primarily to lower equipment leasing activity . revenues and cost of sales marine technology products revenues and cost of sales for our marine technology products segment were as follows : replace_table_token_7_th historically , demand for seamap 's products was dependent to a large degree upon offshore oil and gas exploration activity . in recent periods however , such demand increasingly relates to activity within the hydrographic and geotechnical survey industry . accordingly , in fiscal 2018 seamap 's revenues increased from fiscal 2017 due , in part , to orders from research and hydrographic survey organizations . a large portion of seamap 's sales consist of large discrete orders , the timing of which is dictated by our customers . this timing generally relates to the availability of a vessel in port so that our equipment can be installed . accordingly , there can be significant variation in sales from one period to another which does not necessarily indicate a fundamental change in demand for these products . although recently there has been a softening of demand within the marine seismic industry in general , we believe that we have continued to experience demand for seamap 's products because operators of marine seismic vessels have been upgrading technology on remaining vessels in order to improve operating efficiency . furthermore , some hydrographic survey operators have continued to increase their capacity and upgrade technology .
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ROO
| 1,018
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agricultural – loans secured by crop production and livestock are especially vulnerable to two risk factors that are largely outside the control of the company and borrowers : commodity prices and weather conditions . consumer – the consumer loan portfolio is comprised of a large number of small loans scheduled to be amortized over a specific period . most installment loans are made directly for consumer purchases , but business loans granted for the purchase of heavy equipment or industrial vehicles may also be included . also included in the consumer loan portfolio are home equity lines of credit . economic trends determined by unemployment rates and other key economic indicators are closely correlated to the credit quality of these loans . weak economic trends indicate that the borrowers ' capacity to repay their obligations may be deteriorating . although management believes the allowance to be adequate , ultimate losses may vary from its estimates . at least quarterly , the board of directors reviews the adequacy of the allowance , including consideration of the relative risks in the portfolio , current economic conditions and other factors . if the board of directors and management determine that changes are warranted based on those reviews , the allowance is adjusted . in addition , the company 's primary regulators , the fdic and the california department of business oversight , as an integral part of their examination process , review the adequacy of the allowance . these regulatory agencies may require additions to the allowance based on their judgment about information available at the time of their examinations . allowance for credit losses on off-balance-sheet credit exposures the company also maintains a separate allowance for off-balance-sheet commitments . management estimates probable incurred losses using historical data and utilization assumptions . the allowance for off-balance-sheet commitments is included in accrued interest payable and other liabilities on the consolidated balance sheet . 70 american river bankshares and subsidiaries notes to consolidated financial statements ( continued ) 2. summary of significant accounting policies ( continued ) other real estate owned ( oreo ) other real estate owned includes real estate acquired in full or partial settlement of loan obligations . when property is acquired , any excess of the recorded investment in the loan balance and accrued interest income over the estimated fair market value of the property less estimated selling costs is charged against the allowance for loan and lease losses . any excess of the fair value over the loan balance less estimated selling costs is recorded as noninterest income-other income . a valuation allowance for losses on other real estate may be maintained to provide for temporary declines in value . the valuation allowance is established through a provision for losses on other real estate which is included in other expenses . subsequent gains or losses on sales or write-downs resulting from permanent impairments are recorded in other income or expense as incurred premises and equipment premises and equipment are carried at cost less accumulated depreciation . land is not depreciated . depreciation is determined using the straight-line method over the estimated useful lives of the related assets . the useful life of the building and improvements is forty years . the useful lives of furniture , fixtures and equipment are estimated to be three to ten years . leasehold improvements are amortized over the life of the asset or the term of the related lease , whichever is shorter . when assets are sold or otherwise disposed of , the cost and related accumulated depreciation or amortization are removed from the accounts , and any resulting gain or loss is recognized in income for the period . the cost of maintenance and repairs is charged to expense as incurred . impairment of long-lived assets is evaluated by management based upon an event or changes in circumstances surrounding the underlying assets which indicate long-lived assets may be impaired . goodwill and intangible assets business combinations involving the company 's acquisition of equity interests or net assets of another enterprise or the assumption of net liabilities in an acquisition of branches constituting a business may give rise to goodwill . goodwill represents the excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed . the value of goodwill is ultimately derived from the company 's ability to generate net earnings after the acquisition and is not deductible for tax purposes . a decline in net earnings could be indicative of a decline in the fair value of goodwill and result in impairment . for that reason , goodwill is assessed for impairment at least annually . impairment exists when a reporting unit 's carrying value of goodwill exceeds its fair value . at december 31 , 2017 , the company had one reporting unit and that reporting unit had positive equity and the company elected to perform a qualitative assessment to determine if it was more likely than not that the fair value of the reporting unit exceeded its carrying value , including goodwill . the qualitative assessment indicated that it was more likely than not that the fair value of the reporting unit exceeded its carrying value , resulting in no impairment . bank-owned life insurance the company has purchased life insurance policies on certain key executives . bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date , which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement . 71 american river bankshares and subsidiaries notes to consolidated financial statements ( continued ) 2. summary of significant accounting policies ( continued ) income taxes the company files its income taxes on a consolidated basis with its subsidiaries . the allocation of income tax expense represents each entity 's proportionate share of the consolidated provision for income taxes . story_separator_special_tag operating expenses on the properties held in 2017 totaled $ 52,000 compared to $ 128,000 in 2016. in 2017 , the gains on sale , which offset the overall oreo expense , were lower than in 2016. gains from properties sold in 2017 totaled $ 8,000 compared to a $ 258,000 in 2016. there were no write-downs on any of the properties held during 2017 compared to write-downs of $ 376,000 in 2016. at december 31 , 2017 , the company held one property with a book value of $ 961,000 . 36 the total oreo expense in 2016 was $ 246,000 ( down $ 76,000 or 23.6 % ) compared to $ 322,000 in 2015. the primary reason for the decrease in oreo related expenses was due to the sale of a number of properties , which resulted in lower operating expenses and lower property write-downs . operating expenses on the properties held in 2016 totaled $ 128,000 compared to $ 245,000 in 2015. in 2016 , the gains on sale , which offset the overall oreo expense , were higher than in 2015. gains from properties sold in 2016 totaled $ 258,000 compared to a loss of $ 1,000 in 2015. these reductions were offset by higher write-downs in 2016. in 2016 , write-downs were $ 376,000 compared to $ 76,000 in 2015. this increase in the write-downs in 2016 was related to a single property that was evaluated during the first quarter of 2016. this property was eventually sold in 2016 for a gain of $ 89,000. occupancy , furniture and equipment occupancy expense decreased $ 122,000 ( 10.4 % ) during 2017 to $ 1,053,000 , compared to $ 1,175,000 in 2016. furniture and equipment expense decreased $ 66,000 ( 10.1 % ) during 2017 to $ 586,000 compared to $ 652,000 in 2016. the decrease in occupancy resulted from the company renewing leases at more favorable terms or relocating branch offices to smaller locations . the furniture and equipment expense decrease resulted from lower depreciation expense on equipment owned by the company . occupancy expense decreased $ 8,000 ( 0.1 % ) during 2016 to $ 1,175,000 , compared to $ 1,183,000 in 2015. furniture and equipment expense decreased $ 38,000 ( 5.5 % ) during 2016 to $ 652,000 compared to $ 690,000 in 2015. the decrease in the furniture and equipment expense resulted from lower maintenance expense on the company 's equipment . regulatory assessments regulatory assessments include fees paid to the california department of business oversight ( the “ dbo ” ) and the federal deposit insurance corporation ( the “ fdic ” ) . fdic assessments decreased $ 50,000 ( 19.5 % ) during 2017 to $ 206,000 , compared to $ 256,000 in 2016. the majority of this decrease resulted from a lower assessment rate as a result of the deposit insurance fund achieving the fdic 's target level of 1.15 % during 2016 , which resulted in lower assessments for community banks such as american river bank . the assessments paid to the dbo in 2017 were $ 74,000 , compared to an expense of $ 72,000 in 2016. fdic assessments decreased $ 68,000 ( 21.0 % ) during 2016 to $ 256,000 , compared to $ 324,000 in 2015. the majority of this decrease resulted from a lower assessment rate as a result of lower nonperforming assets and the deposit insurance fund achieving the fdic 's target level of 1.15 % during 2016. the assessments paid to the dbo in 2016 were $ 72,000 compared to $ 71,000 in 2015. other expenses table five below provides a summary of the components of the other noninterest expenses for the periods indicated ( dollars in thousands ) : replace_table_token_6_th 37 other expenses were $ 3,166,000 ( up $ 166,000 or 5.5 % ) for 2017 , compared to $ 3,000,000 for 2016. the increase in other expenses occurred primarily in the professional expense category . professional expenses , which primarily include legal , accounting and other professional services , increased $ 145,000 ( 14.6 % ) , from $ 995,000 in 2016 to $ 1,140,000 in 2017. much of this increase is related to the leadership change that occurred during the fourth quarter of 2017 resulting in professional expenses of $ 78,000 and fees paid in 2017 related to strategic planning consulting of $ 38,000. the overhead efficiency ratio on a taxable equivalent basis for 2017 was 65.8 % compared to 60.8 % in 2016. other expenses were $ 3,000,000 ( up $ 38,000 or 1.3 % ) for 2016 , compared to $ 2,962,000 for 2015. the increase in other expenses occurred primarily in the professional expense category . professional expenses , which primarily include legal , accounting and other professional services , increased $ 132,000 ( 15.3 % ) , from $ 863,000 in 2015 to $ 995,000 in 2016. much of this increase is related to network administration fees . network administration fees increased from $ 278,000 to $ 441,000 related to additional work performed by the network vendor , including full hosting of the company 's computer network . the overhead efficiency ratio on a taxable equivalent basis for 2016 was 60.8 % compared to 62.9 % in 2015. provision for income taxes the effective tax rate on income was 50.4 % , 34.6 % , and 33.7 % in 2017 , 2016 and 2015 , respectively . the effective tax rate differs from the federal statutory tax rate due to state tax expense ( net of federal tax effect ) of $ 420,000 , $ 697,000 , and $ 516,000 in these years . tax-exempt income of $ 1,471,000 , $ 1,681,000 , and $ 1,412,000 from investment securities , loans , and bank-owned life insurance in these years helped to reduce the effective tax rate . the higher effective tax rate in 2017 compared to 2016 resulted from the company recording an income tax
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at december 31 , 2017 , shareholders ' equity was $ 76,921,000 , representing a decrease of $ 6,929,000 ( 8.3 % ) from $ 83,850,000 at december 31 , 2016. the decrease resulted from repurchases of common stock of $ 8,641,000 , the payment of cash dividends of $ 1,293,000 , and a decrease in other comprehensive income of $ 817,000 , as a result of the decrease in the unrealized gain on securities due to an increase in interest rates , exceeding the additions from net income of $ 3,198,000 for the period and the stock based compensation expense of $ 624,000. in 2016 , shareholders ' equity decreased $ 2,225,000 ( 2.6 % ) from $ 86,075,000 at december 31 , 2015. the decrease resulted from the reductions in other comprehensive income and repurchases of common stock exceeding the additions from net income for the period and the increase in stock based compensation expense . table eleven below lists the company 's and american river bank 's actual capital ratios at december 31 , 2017 and 2016 , as well as the minimum capital ratios for capital adequacy . the ratio for the minimum regulatory requirement includes the capital conservation buffer of 1.25 % as of december 31 , 2017 and 0.625 % as of december 31 , 2016. table eleven : capital ratios replace_table_token_12_th capital ratios are reviewed on a regular basis to ensure that capital exceeds the prescribed regulatory minimums and is adequate to meet future needs . at december 31 , 2017 , american river bank 's ratios were in excess of the regulatory definition of “ well capitalized. ” management believes that the company 's capital is adequate to support current operations and anticipated growth and currently foreseeable future capital requirements of the company and its subsidiaries . effective january 1 , 2015 , bank holding companies with consolidated assets of $ 1 billion or more and banks like american river bank must comply with new minimum capital ratio requirements to be phased-in between january 1 , 2015 and january 1 , 2019 , which consist of the following : ( i ) a new common equity tier 1 capital to total risk weighted assets ratio of 4.5 % ; ( ii ) a tier 1 capital to total risk weighted assets ratio of 6 % ; ( iii ) a total capital to total risk weighted assets ratio of 8 % ; and ( iv ) a tier 1 capital to adjusted average total assets ( “ leverage ” ) ratio of 4 % . 47 in addition , a “ capital conservation buffer , ” is established which when fully phased-in will require maintenance of a minimum of 2.5 % of common equity tier 1 capital to total risk weighted assets in excess of the regulatory minimum capital ratio requirements described above . the 2.5 % buffer will
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Liquidity
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the restrictions lapse upon the effectiveness of cyrusone inc. 's registration statement , to be filed by march 24 , 2014. as of december 31 , 2013 , the fair value of this investment was $ 993.2 million based on the quoted market price of cyrusone 's common stock , which is considered a level 1 measurement in the fair value hierarchy . summarized financial information for cyrusone is as follows : ( dollars in millions ) january 24 , 2013 to december 31 , 2013 revenue $ 248.4 operating income 28.9 net loss ( 15.6 ) 84 form 10-k part ii cincinnati bell inc. ( dollars in millions ) as of december 31 , 2013 net investment in real story_separator_special_tag this annual report on form 10-k and the documents incorporated by reference herein contain forward-looking statements regarding future events and results that are subject to the `` safe harbor '' provisions of the private securities litigation reform act of 1995. all statements , other than statements of historical facts , are statements that could be deemed forward-looking statements . see `` private securities litigation reform act of 1995 safe harbor cautionary statement , '' for further information on forward-looking statements . executive summary segment results described in the executive summary and consolidated results of operations section are net of intercompany eliminations . for the year ended december 31 , 2013 , the company was a full-service regional provider of entertainment , data and voice communications services over wireline and wireless networks , a provider of managed and professional information technology services , and a reseller of information technology ( `` it '' ) and telephony equipment . in addition , enterprise customers across the united states rely on cbts , a wholly-owned subsidiary , for efficient , scalable communications systems and end-to-end it solutions . on january 24 , 2013 , we completed the ipo of cyrusone , which owns and operates our former data center colocation business . cyrusone conducts its data center business through cyrusone lp , an operating partnership . although we effectively own approximately 69 % of the economic interests of cyrusone through our ownership of its common stock and partnership units of cyrusone lp , we no longer control its operations . effective january 24 , 2013 , we no longer consolidate the accounts of cyrusone in our consolidated financial statements , but account for our ownership in cyrusone as an equity method investment . due to the change in presentation of cyrusone , our results of operations and cash flows for the year ended december 31 , 2013 are not comparable to prior periods . on a consolidated basis , revenue for the year totaled $ 1,256.9 million . excluding the results of our former data center segment , revenue for 2013 totaled $ 1,241.7 million , down 1 % from the prior year . revenue from our strategic products totaled $ 358.6 million in 2013 , up 17 % compared to 2012 , and continues to increasingly mitigate the revenue declines from our legacy wireline products and the loss of revenue from a declining postpaid wireless subscriber base . operating income in 2013 was $ 163.8 million , down from $ 270.1 million in the prior year due in part to the deconsolidation of cyrusone , which accounted for $ 27.2 million of the decrease . operating income was also negatively impacted by continued loss of postpaid wireless subscribers and higher margin access lines , in addition to the $ 42.6 million of transaction-related compensation paid as a result of the successful ipo of cyrusone . during the third quarter of 2013 , the company amended and restated its corporate credit agreement , originally dated as of november 20 , 2012 , to include a $ 540 million tranche b term loan that matures on september 10 , 2020. net proceeds of $ 529.8 million were used to redeem all of the company 's $ 500 million 8 1/4 % senior notes due 2017 on october 15 , 2013 at a redemption price of 104.125 % . story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > $ 0.5 million and $ 0.4 million , respectively , during 2012 . transaction costs of $ 1.6 million were incurred in 2013 , down from $ 6.3 million incurred in 2012 . in 2013 , these costs represent expenses incurred for exploring strategic alternatives for our wireless business and legal and consulting costs associated with the cyrusone ipo . in 2012 , these costs represented legal and consulting costs incurred to restructure our legal entities in preparation for the proposed ipo of the common stock of cyrusone and to prepare cyrusone to be a real estate investment trust . interest expense was $ 182.0 million in 2013 compared to $ 218.9 million in 2012 , a decrease of $ 36.9 million . the deconsolidation of cyrusone resulted in a $ 7.0 million decrease and the november 2012 redemptions of the 7 % senior notes due 2015 , certain cbt notes and a portion of the 8 3 / 8 % senior notes due 2020 reduced interest expense by $ 27.3 million year-over-year . in the fourth quarter of 2013 , the company redeemed all of the $ 500 million of 8 1 / 4 % senior notes due 2017 at a redemption price of 104.125 % using proceeds from the $ 540 million tranche b term loan facility that was issued on september 10 , 2013. the refinancing of the 8 1 / 4 % senior notes with the more economical tranche b term loan resulted in $ 1.8 million additional interest savings in 2013. the remaining difference was primarily due to lower amortization of note issuance costs . the redemption of the 8 1 / 4 % senior notes due 2017 in the fourth quarter of 2013 resulted in loss on extinguishment of debt totaling $ 29.6 million . story_separator_special_tag lease abandonment charges were $ 0.9 million in 2012. in 2011 , the wireline segment recognized $ 7.7 million of restructuring charges . wireline employee separation charges totaled $ 3.5 million , lease abandonments totaled $ 2.5 million and contract terminations were $ 1.7 million . in addition the it services and hardware and corporate recognized employee separation charges of $ 1.9 million and $ 2.6 million , respectively , in 2011. in 2011 , the company ratified a new labor agreement which curtails future pension service credits for certain employees . as a result of this event , the bargained employees ' pension plan was remeasured and a curtailment loss of $ 4.2 million was recognized in the wireline segment . in 2012 , no events occurred to trigger a remeasurement of our pension plans or curtailment loss . gain on sale or disposal of assets was $ 1.6 million in 2012 , down from $ 8.4 million in 2011. in 2012 , a gain of $ 1.8 million was realized primarily from the sale of copper cables no longer utilized in our wireline network . the data center colocation segment recognized a $ 0.2 million gain on sale of generators following an equipment upgrade at a texas data center . in 2011 , a gain of $ 8.4 million was recognized as a result of selling substantially all of the assets associated with our home security monitoring business . asset impairment losses amounted to $ 14.2 million in 2012 compared to $ 52.4 million in 2011. in 2012 , impairment losses were largely driven by $ 13.3 million of impairment losses in the data center colocation segment on a customer relationship intangible asset and property and equipment that was primarily associated with our 2007 acquisition of gramtel . wireline and wireless asset impairments totaled $ 0.5 million and $ 0.4 million , respectively , in 2012. during 2011 , the company recognized goodwill impairment losses totaling $ 50.3 million that were related to the wireless segment . impairment of assets , excluding goodwill , totaling $ 1.1 million in 2011 related to the write-off of canceled or abandoned wireless capital projects . the wireline segment recorded impairment of assets excluding goodwill in 2011 of $ 1.0 million related to abandoned leasehold improvements on vacated office space and the write-down to fair value of certain assets that were held for sale . 33 form 10-k part ii cincinnati bell inc. transaction costs of $ 6.3 million were incurred in 2012 , up from $ 2.6 million incurred in 2011. in 2012 , these costs represented legal and consulting costs incurred to restructure our legal entities in preparation for the proposed ipo of the common stock of cyrusone and to prepare cyrusone to be a real estate investment trust . in 2011 , transaction costs represented legal and consulting costs to investigate acquisition opportunities . transaction costs are reported as corporate expenses . interest expense was $ 218.9 million in 2012 compared to $ 215.0 million in 2011 , an increase of $ 3.9 million . the increase was largely due to the issuance by cyrusone of $ 525 million of 6 3 / 8 % senior notes due 2022 in the fourth quarter of 2012 which increased interest expense by $ 3.8 million , higher interest costs of $ 2.4 million from lease obligations , as well as $ 0.8 million of lower capitalized interest . the impact of these increases was partially offset by lower interest expense from the redemptions of the 7 % senior notes due 2015 , certain cbt notes and a portion of the 8 3 / 8 % senior notes due 2020. loss on extinguishment of debt of $ 13.6 million was a result of the debt repayment and partial redemptions made during the fourth quarter of 2012 as discussed in the preceding paragraph . no debt extinguishment occurred in 2011. other expense of $ 1.7 million in 2012 , increased by $ 0.8 million compared to 2011 , primarily due to a loss recorded on the termination of a lease financing arrangement . income tax expense was $ 24.7 million in 2012 , substantially the same as the prior year . pre-tax income was lower in 2012 but was largely offset by a higher effective tax rate . the company has certain non-deductible expenses , including interest on securities originally issued to acquire its broadband business ( the `` broadband securities '' ) or securities that the company has subsequently issued to refinance the broadband securities . in periods without tax law changes , the company expects its effective tax rate to exceed statutory rates primarily due to the non-deductible expenses associated with the broadband securities . the company used federal and state net operating losses to defray payment of federal and state tax liabilities . as a result , the company had cash income tax payments , net of refunds , of $ 0.1 million in 2012 . discussion of operating segment results the company manages its business based upon products and service offerings . at december 31 , 2012 , we operated four business segments : wireline , wireless , it services and hardware , and data center colocation . effective january 24 , 2013 , the date of the cyrusone ipo , we no longer include cyrusone , our former data center colocation segment , in our consolidated financial statements and now account for our ownership in cyrusone as an equity method investment . therefore , at december 31 , 2013 , we operated three business segments : wireline , wireless and it services and hardware . certain corporate administrative expenses have been allocated to our business segments based upon the nature of the expense and the relative size of the segment . intercompany transactions between segments have been eliminated .
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consolidated results of operations 2013 compared to 2012 service revenue was $ 1,039.3 million in 2013 , a decrease of $ 233.5 million compared to 2012 , primarily due to the deconsolidation of cyrusone , which accounted for $ 199.7 million of the decline . wireless service revenue was down $ 39.6 million from the prior year as a result of continued postpaid subscriber losses . wireline service revenue declined by only $ 2.7 million compared to 2012 as the growth in our strategic products continues to increasingly mitigate the loss from access line , long-distance and dsl subscriber declines . it services and hardware service revenue was up $ 8.5 million from a year ago due to strong demand from enterprise customers for managed and professional services . product revenue totaled $ 217.6 million in 2013 , up 8 % , compared to 2012 . the increase was largely due to a $ 17.9 million increase in sales of telecommunications and it hardware . these increases were partially offset by slight declines in both wireline and wireless product revenue . 30 form 10-k part ii cincinnati bell inc. cost of services was $ 427.1 million in 2013 , compared to $ 489.9 million in 2012 , which included cyrusone costs of services totaling $ 73.0 million . excluding cyrusone , cost of services increased year-over-year primarily to support the growth in fioptics and managed and professional services . wireline cost of services was up $ 7.5 million compared to the prior year and it services and hardware costs were up $ 8.9 million . wireless cost of services was down $ 10.8 million as a result of a declining subscriber base .
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please read this discussion in conjunction with the consolidated financial statements and notes included in this form 10-k. cautionary statement regarding forward-looking statements our statements , trend analyses and other information contained in this report and elsewhere ( such as in filings by cno with the sec , press releases , presentations by cno or its management or oral statements ) relative to markets for cno 's products and trends in cno 's operations or financial results , as well as other statements , contain forward-looking statements within the meaning of the federal securities laws and the private securities litigation reform act of 1995. forward-looking statements typically are identified by the use of terms such as `` anticipate , '' `` believe , '' `` plan , '' `` estimate , '' `` expect , '' `` project , '' `` intend , '' `` may , '' `` will , '' `` would , '' `` contemplate , '' `` possible , '' `` attempt , '' `` seek , '' `` should , '' `` could , '' `` goal , '' `` target , '' `` on track , '' `` comfortable with , '' `` optimistic , '' `` guidance , '' `` outlook '' and similar words , although some forward-looking statements are expressed differently . you should consider statements that contain these words carefully because they describe our expectations , plans , strategies and goals and our beliefs concerning future business conditions , our results of operations , financial position , and our business outlook or they state other `` forward-looking '' information based on currently available information . the `` risk factors '' in item 1a provide examples of risks , uncertainties and events that could cause our actual results to differ materially from the expectations expressed in our forward-looking statements . assumptions and other important factors that could cause our actual results to differ materially from those anticipated in our forward-looking statements include , among other things : changes in or sustained low interest rates causing reductions in investment income , the margins of our fixed annuity and life insurance businesses , and sales of , and demand for , our products ; expectations of lower future investment earnings may cause us to accelerate amortization , write down the balance of insurance acquisition costs or establish additional liabilities for insurance products ; general economic , market and political conditions , including the performance of the financial markets which may affect the value of our investments as well as our ability to raise capital or refinance existing indebtedness and the cost of doing so ; the ultimate outcome of lawsuits filed against us and other legal and regulatory proceedings to which we are subject ; our ability to make anticipated changes to certain non-guaranteed elements of our life insurance products ; our ability to obtain adequate and timely rate increases on our health products , including our long-term care business ; the receipt of any required regulatory approvals for dividend and surplus debenture interest payments from our insurance subsidiaries ; mortality , morbidity , the increased cost and usage of health care services , persistency , the adequacy of our previous reserve estimates and other factors which may affect the profitability of our insurance products ; changes in our assumptions related to deferred acquisition costs or the present value of future profits ; the recoverability of our deferred tax assets and the effect of potential ownership changes and tax rate changes on their value ; our assumption that the positions we take on our tax return filings will not be successfully challenged by the irs ; changes in accounting principles and the interpretation thereof ; our ability to continue to satisfy the financial ratio and balance requirements and other covenants of our debt agreements ; 46 our ability to achieve anticipated expense reductions and levels of operational efficiencies including improvements in claims adjudication and continued automation and rationalization of operating systems ; performance and valuation of our investments , including the impact of realized losses ( including other-than-temporary impairment charges ) ; our ability to identify products and markets in which we can compete effectively against competitors with greater market share , higher ratings , greater financial resources and stronger brand recognition ; our ability to generate sufficient liquidity to meet our debt service obligations and other cash needs ; our ability to maintain effective controls over financial reporting ; our ability to continue to recruit and retain productive agents and distribution partners ; customer response to new products , distribution channels and marketing initiatives ; our ability to achieve additional upgrades of the financial strength ratings of cno and our insurance company subsidiaries as well as the impact of our ratings on our business , our ability to access capital , and the cost of capital ; regulatory changes or actions , including those relating to regulation of the financial affairs of our insurance companies , such as the payment of dividends and surplus debenture interest to us , regulation of the sale , underwriting and pricing of products , and health care regulation affecting health insurance products ; changes in the federal income tax laws and regulations which may affect or eliminate the relative tax advantages of some of our products or affect the value of our deferred tax assets ; availability and effectiveness of reinsurance arrangements , as well as any defaults or failure of reinsurers to perform ; the performance of third party service providers and potential difficulties arising from outsourcing arrangements ; the growth rate of sales , collected premiums , annuity deposits and assets ; interruption in telecommunication , information technology or other operational systems or failure to maintain the security , confidentiality or privacy of sensitive data on such systems ; events of terrorism , cyber attacks , natural disasters or other catastrophic events , including losses from a disease pandemic ; ineffectiveness of risk management policies and procedures in identifying , monitoring and managing risks ; and the risk factors or uncertainties listed from time to time in our filings with story_separator_special_tag 48 the following summarizes our earnings for the three years ending december 31 , 2015 ( dollars in millions , except per share data ) : replace_table_token_10_th 49 ( a ) management believes that an analysis of net operating income provides a clearer comparison of the operating results of the company from period to period because it excludes : ( i ) the net loss on the sale of clic and gain ( loss ) on reinsurance transactions , including impact of taxes ; ( ii ) the earnings of clic prior to being sold on july 1 , 2014 , net of taxes ; ( iii ) net realized investment gains or losses , net of related amortization and taxes ; ( iv ) fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities , net of related amortization and taxes ; ( v ) fair value changes related to the agent deferred compensation plan , net of taxes ; ( vi ) loss on extinguishment or modification of debt , net of taxes ; ( vii ) changes in the valuation allowance for deferred tax assets ; and ( viii ) other non-operating items consisting primarily of equity in earnings of certain non-strategic investments and earnings attributable to variable interest entities . net realized investment gains or losses include : ( i ) gains or losses on the sales of investments ; ( ii ) other-than-temporary impairments recognized through net income ; and ( iii ) changes in fair value of certain fixed maturity investments with embedded derivatives . ebit is presented as net operating income excluding corporate interest expense and income tax expense . the table above reconciles the non-gaap measure to the corresponding gaap measure . in addition , management uses these non-gaap financial measures in its budgeting process , financial analysis of segment performance and in assessing the allocation of resources . we believe these non-gaap financial measures enhance an investor 's understanding of our financial performance and allows them to make more informed judgments about the company as a whole . these measures also highlight operating trends that might not otherwise be transparent . however , ebit and net operating income are not measurements of financial performance under gaap and should not be considered as alternatives to cash flow from operating activities , as measures of liquidity , or as alternatives to net income as measures of our operating performance or any other measures of performance derived in accordance with gaap . in addition , ebit and net operating income should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items . ebit and net operating income have limitations as analytical tools , and you should not consider such measures either in isolation or as substitutes for analyzing our results as reported under gaap . our definitions and calculation of ebit and net operating income are not necessarily comparable to other similarly titled measures used by other companies due to different methods of calculation . ( b ) increase in valuation allowance of $ 19.4 million in 2014 , related to the expected change in future taxable income following the sale of clic , is included in the `` net loss on sale of clic and gain ( loss ) on reinsurance transactions ( including impact of taxes ) '' . our mission is to be the recognized market leader in providing financial security for the protection and retirement needs of middle-income american working families and retirees . our strategic plans are focused on continuing to grow and deliver long-term value for all our stakeholders . specifically , we will focus on the following priorities : growth focus on initiatives that drive sales including lead programs , new products , agent recruitment and retention expand offering middle-market consumers a range of investment and planning solutions exploring non-organic growth opportunities that are focused on the middle market , fill product gaps , expand our distribution and geographic footprint and or enhance agent recruiting increase profitability and return on equity maintain our strong capital position and favorable financial metrics continue to increase our return on equity effectively manage risk and deploy capital active enterprise risk management process continue to cost effectively repurchase our common stock maintain a competitive dividend payout ratio further enhance the customer experience and agent productivity completion and implementation of new tools to be used by our distribution force further development of capabilities for generating and acting on prospect/customer data insights making it easier to sell and deliver service 50 reduce long-term care exposure by approximately one-half over the next three to six years drive growth of other lines of business evaluate reinsurance and or other potential solutions continue to invest in talent expanded leadership development programs emphasis on skills and experiences that are aligned with our priorities critical accounting policies the preparation of financial statements in accordance with gaap requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period . management has made estimates in the past that we believed to be appropriate but were subsequently revised to reflect actual experience . if our future experience differs materially from these estimates and assumptions , our results of operations and financial condition could be materially affected . we base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances . we continually evaluate the information used to make these estimates as our business and the economic environment change . the use of estimates is pervasive throughout our financial statements . the accounting policies and estimates we consider most critical are summarized below . additional information on our accounting policies is included in the note to our consolidated financial statements entitled `` summary of significant accounting policies '' .
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results of operations the following tables and narratives summarize the operating results of our segments ( dollars in millions ) : replace_table_token_18_th 62 ( a ) these non-gaap measures as presented in the above table and in the following segment financial data and discussions of segment results exclude the net loss on the sale of clic and gain ( loss ) on reinsurance transactions , the earnings of clic prior to being sold , net realized investment gains ( losses ) , fair value changes in embedded derivative liabilities , net of related amortization , fair value changes related to the agent deferred compensation plan , equity in earnings of certain non-strategic investments and earnings attributable to vies , net revenue ( expense ) pursuant to transition and support services agreements , loss on extinguishment or modification of debt and before income taxes . these are considered non-gaap financial measures . a non-gaap measure is a numerical measure of a company 's performance , financial position , or cash flows that excludes or includes amounts that are normally excluded or included in the most directly comparable measure calculated and presented in accordance with gaap . these non-gaap financial measures of `` pre-tax operating earnings '' differ from `` income ( loss ) before income taxes '' as presented in our consolidated statement of operations prepared in accordance with gaap due to the exclusion of the net loss on the sale of clic and gain ( loss ) on reinsurance transactions , the earnings of clic prior to being sold , realized investment gains ( losses ) , fair value changes in embedded derivative liabilities , net of related amortization , fair value changes related to the agent deferred compensation plan , equity in earnings of certain non-strategic investments and earnings attributable to vies , net revenue pursuant to transition and support services agreements and loss on extinguishment or modification of debt .
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you should read the following discussion in conjunction with our consolidated financial statements and related notes included in this annual report on form 10-k ( “ 2016 form 10-k ” ) . this 2016 form 10-k contains certain forward-looking statements within the meaning of the private securities litigation reform act of 1995 ( “ pslra ” ) , section 27a of the securities act of 1933 , as amended ( the “ securities act ” ) , and section 21e of the securities exchange act of 1934 , as amended , ( the “ exchange act ” ) , about our expectations , beliefs , or intentions regarding our business , financial condition , results of operations , strategies , or prospects . you can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters . rather , forward-looking statements relate to anticipated or expected events , activities , trends , or results as of the date they are made . because forward-looking statements relate to matters that have not yet occurred , these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements . many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements . these factors include those contained in part i , “ item 1a . risk factors ” of this 2016 form 10-k. we do not undertake any obligation to update forward-looking statements , except as required by law . we intend that all forward-looking statements be subject to the safe harbor provisions of pslra . these forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance . overview cogint , inc. ( “ we , ” “ us , ” “ our , ” “ cogint , ” or the “ company ” ) , formerly known as idi , inc. , a delaware corporation , is a data and analytics company providing cloud-based mission-critical information and performance marketing solutions to enterprises in a variety of industries . cogint 's mission is to transform data into intelligence utilizing our proprietary technology platforms to solve complex problems for our clients . harnessing the power of data fusion and powerful analytics , we transform data into intelligence , in a fast and efficient manner , so that our clients can spend their time on what matters most , running their organizations with confidence . through our intelligent platforms , core tm and agile audience engine tm , we uncover the relevance of disparate data points to deliver end-to-end , roi-driven results for our customers . our analytical capabilities enable us to build comprehensive datasets in real-time and provide insightful views of people , businesses , assets and their interrelationships . we empower clients across markets and industries to better execute all aspects of their business , from managing risk , identifying fraud and abuse , ensuring legislative compliance , and debt recovery , to identifying and acquiring new customers . with the goal of reducing the cost of doing business and enhancing the consumer experience , our solutions enable our clients to optimize overall decision-making and to have a holistic view of their customers . we provide unique and compelling solutions essential to the daily workflow of organizations within both the public and private sectors . our cloud-based data fusion and customer acquisition technology platforms , combined with our massive database consisting of public-record , proprietary and publicly-available data , as well as a unique repository of self-reported information on millions of consumers , enables the delivery of differentiated products and solutions used for a variety of essential functions throughout the customer life cycle . these essential functions include customer identification and authentication , investigation and validation , and customer acquisition and retention . the company operates through two reportable segments : ( i ) information services and ( ii ) performance marketing . for additional information relating to our segments , see note 16 , “ segment information , ” in our notes to consolidated financial statements . information services —leveraging leading-edge technology , proprietary algorithms , and massive datasets , and through intuitive and powerful analytical applications , we provide solutions to organizations within the risk management and consumer marketing industries . core is our next generation data fusion platform , providing mission-critical information about individuals , businesses and assets to a variety of markets and industries . through machine learning and advanced analytics , our information services segment uses the power of data fusion to ingest and analyze data at a massive scale . the derived information from the data fusion process ultimately serves to generate unique solutions for banking and financial services companies , insurance companies , healthcare companies , law enforcement and government , the collection industry , law firms , retail , telecommunications companies , corporate security and investigative firms . in addition , our data acquisition solutions enable clients to rapidly grow their customer databases by using self-declared consumer insights to identify , connect with , and acquire first-party consumer data and multi-channel marketing consent at massive scale . built in a secure payment card industry ( pci ) compliant environment , our cloud-based next generation technology delivers greater than four 9s of service uptime . by leveraging our proprietary infrastructure design within the cloud , we currently operate in six datacenters spread geographically across the u.s. and are able to dynamically and seamlessly scale as needed . using our intelligent 31 framework and leveraging a micro services architecture where appropriate , we reduce operational cost and complexity , thus delivering sup erior performance at greatly reduced costs compared to traditional datacenter architectures . since the release of our core platform in may 2016 , we have added billions of data records and continue to add approximately over a billion records per month on av erage . story_separator_special_tag future widespread economic slowdowns in any of the industries or markets our clients serve could reduce the technology and marketing expenditures of our clients and prospective customers . our revenues are also significantly influenced by industry trends , including the demand for business analytics services in the industries we serve . companies are increasingly relying on business analytics and big-data technologies to help process data in a cost-efficient manner . as customers have gained the ability to rapidly aggregate data generated by their own activities , they are increasingly expecting access to real-time data and analytics from their service providers as well as solutions that fully integrate into their workflows . the increasing number and complexity of regulations centered around data and provision of information services makes operations for businesses in the big data and analytic sector more challenging . the enactment of new or amended legislation or industry regulations pertaining to consumer or private sector privacy issues could have a material adverse impact on information and marketing services . legislation or industry regulations regarding consumer or private sector privacy issues could place restrictions upon the collection , sharing and use of information that is currently legally available , which could materially increase our cost of collecting and maintaining some data . these types of legislation or industry regulations could also prohibit us from collecting or disseminating certain types of data , which could adversely affect our ability to meet our clients ' requirements and our profitability and cash flow targets . company specific trends and uncertainties our operating results are also directly affected by company-specific factors , including the following : some of our competitors have substantially greater financial , technical , sales and marketing resources , better name recognition and a larger customer base . even if we introduce advanced products that meet evolving customer requirements in a timely manner , there can be no assurance that our new products will gain market acceptance . certain companies in the big data and analytics sector have expanded their product lines or technologies in recent years as a result of acquisitions . further , more companies have developed products which conform to existing and emerging industry standards and have sought to compete on the basis of price . we anticipate increased competition from large data and analytics vendors . increased competition in the big data and analytics sector could result in significant price competition , reduced profit margins or loss of market share , any of which could have a material adverse effect on our business , operating results and financial condition . there can be no assurance that we will be able to compete successfully in the future with current or new competitors . critical accounting policies and estimates management 's discussion and analysis of financial condition and results of operations are based upon cogint 's consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states ( “ us gaap ” ) . the preparation of these financial statements requires cogint to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . on an ongoing basis , cogint evaluates its estimates , including those related to the allowance for doubtful receivables , useful lives of intangible assets , recoverability of the carrying amounts of goodwill and intangible assets , accounting for business combinations , and the assessment of contingent obligations . we base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . 33 we believe the following critical accounting policies govern our more significant j udgments and estimates used in the preparation of our consolidated financial statements . revenue recognition we provide information services and performance marketing services , and generally recognize revenue when persuasive evidence of an arrangement exists , delivery has occurred or a service has been rendered , the price is fixed or determinable and collection is reasonably assured . information services revenue is generated from the risk management industry and consumer marketing industry . information services revenue generated from the risk management industry is generally recognized on ( a ) a transactional basis determined by the customers ' usage , ( b ) a monthly fee or ( c ) a combination of both . revenues pursuant to contracts containing a monthly fee are recognized ratably over the contract period , which is generally one year . revenues pursuant to transactions determined by the customers ' usage are recognized when the transaction is complete . information services revenue generated from the consumer marketing industry is generally recognized when related services are delivered , in accordance with terms detailed in the agreements . these terms typically call for a specific transactional unit price per record delivered based on predefined qualifying characteristics specified by the customer . these records are tracked in real time by the company 's systems , reported , recorded , and regularly reconciled against advertiser data either in real time or at various contractually defined periods , whereupon the number of qualified records during such specified period are finalized and adjustments , if any , to revenue are made . additional revenues are generated through revenue-sharing agreements with marketers who target offers to users provided by the company from the company 's owned and operated sites . performance marketing revenue is recognized when the conversions are generated based on predefined user actions ( for example , a click , a registration , an app install or a coupon print ) subject to certain qualifying characteristics specified by the customer , in accordance with terms detailed in advertiser agreements and or the attendant insertion orders . these terms typically call for a specific transactional unit price per conversion generated .
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full year financial highlights for the year ended december 31 , 2016 , as compared to the year ended december 31 , 2015 : total revenue increased to $ 186.8 million from $ 14.1 million . information service revenue increased to $ 55.4 million from $ 6.4 million . performance marketing revenue increased to $ 131.4 million from $ 7.7 million . gross profit margin increased to 28 % from 27 % . net loss improved to $ 29.1 million from $ 84.5 million . net cash provided by operating activities improved to $ 2.1 million from net cash used in operating activities of $ 10.7 million . adjusted ebitda improved to $ 15.0 million from a loss of $ 6.6 million . 36 recent business high lights within our information services segment : leveraging our agile audience engine , we now interact with over 800,000 consumers daily , generating more than 7 million consumer insights per day and 225 million insights monthly . comprehensive database includes holistic views of greater than 95 % of u.s. population , including unique data assets comprising 130 million self-reported consumer profiles up from 120 million , 224 million unique email addresses up from 150 million , across 75 million households , up from 63 million households . increased demand for our targeted acquisition solutions , leveraging our unique ability to build custom audiences in real-time and deliver specific insights that support stronger roi for our customers ' digital marketing executions . idicore continues to expand in the marketplace , landing key customer wins with head-to-head data tests against our competitors , and winning on speed , accuracy and price . added thousands of users currently utilizing idicore in their daily workflow ; these users represent a variety of industries within the risk management space , including financial services , law firms , collections , government and investigative companies .
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” general we report our results through five segments : assurant solutions , assurant specialty property , assurant health , assurant employee benefits , and corporate and other . the corporate and other segment includes activities of the holding company , financing and interest expenses , net realized gains ( losses ) on investments and investment income earned from short-term investments held . the corporate and other segment also includes the amortization of deferred gains associated with the sales of ffg and ltc , through reinsurance agreements as described below . the following discussion covers the twelve months ended december 31 , 2015 ( “ twelve months 2015 ” ) , twelve months ended december 31 , 2014 ( “ twelve months 2014 ” ) and twelve months ended december 31 , 2013 ( “ twelve months 2013 ” ) . please see the discussion that follows , for each of these segments , for a more detailed analysis of the fluctuations . executive summary consolidated net income decreased $ 329,352 , or 70 % , to $ 141,555 for twelve months 2015 from $ 470,907 for twelve months 2014. the decrease was primarily related to higher loss experience and adverse claims development on 2015 individual major medical policies , a reduction in the 2014 estimated recoveries from the affordable care act risk mitigation programs and $ 106,389 ( after-tax ) of exit and disposal costs , including premium deficiency reserve accruals , severance and retention costs , long-lived asset impairments and other costs associated with our exit from the health insurance market . assurant solutions net income decreased $ 21,765 , or 10 % , to $ 197,183 for twelve months 2015 from $ 218,948 for twelve months 2014. the decrease was primarily due to the previously disclosed loss of a domestic mobile tablet program and declining service contract volumes at certain north american retail clients . total revenues were relatively flat at $ 4,178,140 for twelve months 2015 compared with $ 4,179,360 for twelve months 2014. net earned premiums decreased $ 113,022 primarily due to foreign exchange volatility , the loss of a domestic mobile tablet program and the continued run-off of our credit insurance business . these items were partially offset by growth from our auto warranty business and from a large domestic service contract client . overall , we expect assurant solutions 2016 net income and net earned premiums and fees to increase from twelve months 2015 amounts . results are expected to improve in the second half of 2016 driven by new mobile programs , improved international profitability and additional expense initiatives . foreign exchange volatility , lower service contract revenue from legacy north american retail clients and continued run-off in credit insurance will impact results . assurant specialty property net income decreased $ 34,052 , or 10 % , to $ 307,705 for twelve months 2015 from $ 341,757 for twelve months 2014. the decrease is primarily due to the previously disclosed loss of client business and ongoing normalization in our lender-placed homeowners insurance business , partially offset by more favorable non-catastrophe loss experience and lower catastrophe reinsurance costs . the divestiture of american reliable insurance company ( `` aric '' ) also contributed to the decrease in net income . total revenues decreased $ 365,948 to $ 2,543,105 for twelve months 2015 from $ 2,909,053 for twelve months 2014. the decrease was primarily due to the divestiture of aric , combined with lower lender-placed homeowners insurance net earned premiums . the decline in lender-placed homeowners insurance net earned premiums is primarily due to a decline in placement rates , lower premium rates and previously disclosed loss of client business . these items were partially offset by an increase in fees and other income reflecting contributions from mortgage solutions businesses . the twelve months 2015 expense ratio increased 620 basis points compared with twelve months 2014. the increase was primarily due to lower net earned premiums and higher legal costs related to outstanding matters . in addition , growth in fee-based businesses , which have higher expense ratios than our insurance products , contributed to the increase . for 2016 , we expect assurant specialty property net income and net earned premiums to decrease compared with twelve months 2015 reflecting the ongoing normalization of lender-placed insurance business partially offset by increased efficiencies , including the implementation of new technology , and other expense savings initiatives . contributions from multi-family housing and mortgage solutions businesses are expected to partially offset the decline . in addition , catastrophe losses may affect overall results . 36 as previously announced , the company concluded a comprehensive review of strategic alternatives for its health business and expects to substantially complete the process to exit the health insurance market in 2016. during the remainder of the exit process , we expect to incur up to $ 50,000 of additional exit-related charges , as well as certain overhead expenses that are excluded from the premium deficiency reserve accrual . in addition , the company signed a definitive agreement to sell its assurant employee benefits segment to sun life . the transaction is expected to close by the end of first quarter 2016. for more information , see notes 3 and 4 of the notes to the consolidated financial statements included elsewhere in this report . critical factors affecting results our results depend on the appropriateness of our product pricing , underwriting and the accuracy of our methodology for the establishment of reserves for future policyholder benefits and claims , returns on and values of invested assets and our ability to manage our expenses . factors affecting these items , including unemployment , difficult conditions in financial markets and the global economy , may have a material adverse effect on our results of operations or financial condition . for more information on these factors , see “ item 1a – risk factors. story_separator_special_tag rebate estimate calculations ; and the mlr is calculated using a rolling three years of experience while the gaap loss ratio represents the current year only . assurant health has estimated the 2015 impact of this regulation based on definitions and calculation methodologies outlined in the hhs regulations and guidance . the estimate was based on separate projection models for individual medical and small group business using projections of expected premiums , claims , and enrollment by state , legal entity and market for medical businesses subject to mlr requirements for the mlr reporting year . in addition , the projection models include quality improvement expenses , state assessments , taxes , and estimated impacts of the affordable care act risk mitigation programs ( commonly referred to as the `` 3r 's '' ) . the premium rebate is presented as a reduction of net earned premiums in the consolidated statement of operations and included in unearned premiums in the consolidated balance sheet . affordable care act risk mitigation programs beginning in 2014 , the affordable care act introduced new and significant premium stabilization programs . these programs , discussed in further detail below , are meant to mitigate the potential adverse impact to individual health insurers as a result of affordable care act provisions that became effective january 1 , 2014. a three-year ( 2014-2016 ) reinsurance program provides reimbursement to insurers for high cost individual business sold on or off the public marketplaces . the reinsurance entity established by hhs is funded by a per-member reinsurance fee assessed on all commercial medical plans , including self-insured group health plans . only affordable care act individual plans are eligible for recoveries if claims exceed a specified threshold , up to a reinsurance cap . reinsurance contributions associated with affordable care act individual plans are reported as a reduction in net earned premiums in the consolidated statements of operations , and estimated reinsurance recoveries are established as reinsurance recoverables in the consolidated balance sheets with an offsetting reduction in policyholder benefits in the consolidated statement of operations . reinsurance fee contributions for non-affordable care act business are reported in underwriting , general and administrative expenses in the consolidated statement of operations . 38 a permanent risk adjustment program transfers funds from insurers with lower risk populations to insurers with higher risk populations based on the relative risk scores of participants in affordable care act plans in the individual and small group markets , both on and off the public marketplaces . based on the risk of its members compared to the total risk of all members in the same state and market , considering data obtained from industry studies , the company estimates its year-to-date risk adjustment transfer amount . the company records a risk adjustment transfer receivable ( payable ) in premiums and accounts receivable ( unearned premium ) in the consolidated balance sheets , with an offsetting adjustment to net earned premiums in the consolidated statements of operations when the amounts are reasonably estimable and collection is reasonably assured . a three-year ( 2014-2016 ) risk corridor program limits insurer gains and losses by comparing allowable medical costs to a target amount as defined by hhs . this program applies to a subset of affordable care act eligible individual and small group products certified as qualified health plans . the public marketplace can only sell qualified health plans . in addition , carriers who sell qualified health plans on the public marketplace can also sell them off the public marketplace . variances from the target amount exceeding certain thresholds may result in amounts due to or due from hhs . during 2015 , the company participated in the federal insurance public marketplaces so the risk corridor program is applicable . however , as the current full funding for this program is unclear at this time , no accruals were established for any receivable amounts from this program for 2015 , so there was no impact on the company 's 2015 operations . the company does not anticipate any payables into this program for 2015. reserves reserves are established in accordance with gaap using generally accepted actuarial methods and reflect judgments about expected future claim payments . calculations incorporate assumptions about inflation rates , the incidence of incurred claims , the extent to which all claims have been reported , future claims processing , lags and expenses and future investment earnings , and numerous other factors . while the methods of making such estimates and establishing the related liabilities are periodically reviewed and updated , the calculation of reserves is not an exact process . reserves do not represent precise calculations of expected future claims , but instead represent our best estimates at a point in time of the ultimate costs of settlement and administration of a claim or group of claims , based upon actuarial assumptions and projections using facts and circumstances known at the time of calculation . many of the factors affecting reserve adequacy are not directly quantifiable and not all future events can be anticipated when reserves are established . reserve estimates are refined as experience develops . adjustments to reserves , both positive and negative , are reflected in the consolidated statement of operations in the period in which such estimates are updated . because establishment of reserves is an inherently complex process involving significant judgment and estimates , there can be no certainty that ultimate losses will not exceed existing claim reserves . future loss development could require reserves to be increased , which could have a material adverse effect on our earnings in the periods in which such increases are made . see `` item 1a - risk factors - risks related to our company - our actual claims losses may exceed our reserves for claims , and this may require us to establish additional reserves that may materially affect our results of operations , profitability and capital '' for more detail on this risk .
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results of operations assurant consolidated overview the table below presents information regarding our consolidated results of operations : 46 replace_table_token_14_th ( 1 ) includes amortization of dac and voba and underwriting , general and administrative expenses . year ended december 31 , 2015 compared to the year ended december 31 , 2014 net income decreased $ 329,352 , or 70 % , to $ 141,555 for twelve months 2015 from $ 470,907 for twelve months 2014. the decrease was primarily related to higher loss experience and adverse claims development on 2015 individual major medical policies , a reduction in the 2014 estimated recoveries from the affordable care act risk mitigation program and $ 106,389 ( after-tax ) of exit and disposal costs , including premium deficiency reserves , severance and retention costs , long-lived asset impairments and other costs associated with our exit from the health insurance market . for more information see note 3 of the notes to the consolidated financial statements included elsewhere in this report . year ended december 31 , 2014 compared to the year ended december 31 , 2013 net income decreased $ 18,000 , or 4 % , to $ 470,907 for twelve months 2014 from $ 488,907 for twelve months 2013. the decrease was primarily related to lower net income at assurant specialty property , a net loss at assurant health and a $ 19,400 ( after-tax ) loss associated with a divested business . please see note 4 to the consolidated financial statements for further information . these items were partially offset by improved results in our assurant solutions and assurant employee benefits segments , lower expenses in the corporate and other segment , an increase in net realized gains on investments and a favorable change in tax liabilities , including a $ 20,753 one-time tax benefit related to the conversion of the canadian branch operations of certain u.s. subsidiaries to foreign corporate entities .
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our business strategy has included acquiring other complementary products , technologies , or businesses that allow us to reduce the time or costs required to develop new technologies , incorporate enhanced functionality into and complement our existing product offerings , augment our engineering workforce , and enhance our technological capabilities . in april 2019 , we acquired clearstory data inc. to add talented developers to our organization ; and in october 2019 , we acquired feature labs , inc. to augment our machine learning capabilities and establish an engineering hub on the east coast of the u.s. the consolidated financial statements include the results of operations of all of our acquired companies commencing as of their respective acquisition dates . see note 4 , business combinations , of the notes to our consolidated financial statements included elsewhere in this annual report for additional information related to these acquisitions . 58 key business metrics we review the following key business metrics to evaluate our business , measure our performance , identify trends affecting our business , formulate business plans , and make strategic decisions : number of customers . we believe that our ability to expand our customer base is a key indicator of our market penetration , the growth of our business , and our future potential business opportunities . we define a customer at the end of any particular period as an entity with a subscription agreement that runs through the current or future period as of the measurement date . organizations with free trials have not entered into a subscription agreement and are not considered customers . a single organization with separate subsidiaries , segments , or divisions that use our platform may represent multiple customers , as we treat each entity that is invoiced separately as a single customer . in cases where customers subscribe to our platform through our channel partners , each end customer is counted separately . the following table summarizes the number of our customers at each quarter end for the periods indicated : replace_table_token_3_th dollar-based net expansion rate . our dollar-based net expansion rate is a trailing four-quarter average of the annual contract value , or acv , which is defined as the subscription revenue that we would contractually expect to recognize over the term of the contract divided by the term of the contract , in years , from a cohort of customers in a quarter as compared to the same quarter in the prior year . a dollar-based net expansion rate equal to 100 % would generally imply that we received the same amount of acv from our cohort of customers in the current quarter as we did in the same quarter of the prior year . a dollar-based net expansion rate less than 100 % would generally imply that we received less acv from our cohort of customers in the current quarter than we did in the same quarter of the prior year . a dollar-based net expansion rate greater than 100 % would generally imply that we received more acv from our cohort of customers in the current quarter than we did in the same quarter of the prior year . to calculate our dollar-based net expansion rate , we first identify a cohort of customers , or the base customers , in a particular quarter , or the base quarter . a customer will not be considered a base customer unless such customer has an active subscription on the last day of the base quarter . we then divide the acv in the same quarter of the subsequent year attributable to the base customers , or the comparison quarter , including base customers from which we no longer derive acv in the comparison quarter , by the acv attributable to those base customers in the base quarter . our dollar-based net expansion rate in a particular quarter is then obtained by averaging the result from that particular quarter with the corresponding result from each of the prior three quarters . the dollar-based net expansion rate excludes contract value relating to professional services from that cohort . the following table summarizes our dollar-based net expansion rate at each quarter for the periods indicated : replace_table_token_4_th 59 annual recurring revenue . we derive a large portion of our revenue from subscriptions for use of our platform . subscription periods for our platform generally range from one to three years and the subscription fees are typically billed annually in advance . a portion of revenue from our subscriptions is recognized at the point in time when the platform is first made available to the customer , or the beginning of the subscription term , if later , and the remaining portion is recognized ratably over the life of the contract . this revenue recognition creates variability in the revenue we recognize period to period based on the timing of subscription start dates and the subscription term . in order to measure the underlying performance of our subscription-based contracts , we calculate annual recurring revenue , or arr , which represents the annualized recurring value of all active subscription contracts at the end of a reporting period and excludes the value of non-recurring revenue streams , such as professional services . arr is a performance metric and should be viewed independently of revenue and deferred revenue , and is not intended to be a substitute for , or combined with , any of these items . both multi-year contracts and contracts with terms less than one year are annualized by dividing the total committed contract value by the number of months in the subscription term and then multiplying by twelve . the following table summarizes our annual recurring revenue ( in millions ) for each quarter end for the periods indicated : replace_table_token_5_th components of our results of operations revenue we derive our revenue primarily from the sale of software subscriptions . revenue from subscriptions reflects the revenue recognized from sales of licenses to our platform to new customers and additional licenses to existing customers . story_separator_special_tag subscription fees are based primarily on the number of users of our platform . our subscription agreements generally have terms ranging from one to three years and are billed annually in advance . subscriptions are generally non-cancelable during the subscription term and subscription fees are non-refundable . we recognize a portion of subscription revenue upfront on the date which the platform is first made available to the customer , or the beginning of the subscription term , if later , and the remaining portion of revenue ratably over the subscription term . our subscription agreements generally provide for unspecified future updates , upgrades , enhancements , technical product support , and access to hosted services and support . we also generate revenue from selling subscriptions to third-party syndicated data , which we recognize ratably over the subscription period , as well as revenue from professional services fees earned for consulting engagements related to training customers and channel partners , and consulting services . revenue from professional services relating to training results from contracts to provide educational services to customers and channel partners regarding the use of our technologies and is recognized as the services are provided . revenue from professional services represented 5 % or less of revenue for each of the years ended december 31 , 2020 , 2019 , and 2018. in addition , due to our “ land and expand ” business model , a large portion of our revenue in any given period is attributable to our existing customers compared to new customers . for a description of our revenue recognition policies , see the section titled “ critical accounting estimates ” within this management 's discussion and analysis of financial condition and result of operations . cost of revenue cost of revenue consists primarily of employee-related costs , including salaries and bonuses , stock-based compensation expense , and employee benefit costs associated with our customer support and professional services organizations . it also includes expenses related to hosting and operating our cloud infrastructure in a third-party data center , licenses of third-party syndicated data , amortization and impairment of intangible assets , and related overhead expenses . the majority of our cost of revenue does not fluctuate directly with increases in revenue . we allocate shared overhead costs such as information technology infrastructure , rent , and occupancy charges in each expense category based on headcount in that category . as such , certain general overhead expenses are reflected in cost of revenue . 60 we intend to continue to invest additional resources in our cloud infrastructure . we expect that the cost of third-party data center hosting fees will increase over time as we continue to expand our cloud-based offering . gross profit and gross margin gross profit is revenue less cost of revenue . gross margin is gross profit expressed as a percentage of revenue . our gross margin has fluctuated and may fluctuate from period to period based on a number of factors , including the timing and mix of products and services we sell , the channel through which we sell our products and services , and , to a lesser degree , the utilization of customer support and professional services resources , as well as third-party hosting and syndicated data fees in any given period . our gross margin may fluctuate from period to period depending on the interplay of the factors discussed above . operating expenses our operating expenses are classified as research and development , sales and marketing , and general and administrative . for each of these categories , the largest component is employee-related costs , which include salaries , bonuses , sales commissions , stock-based compensation expense , and employee benefit costs . we allocate shared overhead costs such as information technology infrastructure , rent , and occupancy charges to each expense category based on headcount in that category . research and development . research and development expense consists primarily of employee-related costs for our research and development employees , depreciation of equipment used in research and development , third-party contractors , and related allocated overhead costs . we expect research and development expenses to continue to increase in absolute dollars for the foreseeable future as we continue to increase the functionality and otherwise enhance our platform and develop new products and services . however , we expect research and development expense to decrease as a percentage of revenue over the long term , although research and development expense may fluctuate as a percentage of revenue from period to period due to the seasonality of revenue and the timing and extent of these expenses . sales and marketing . sales and marketing expense consists primarily of employee-related costs for our sales and marketing employees , marketing programs , and related allocated overhead costs . our sales and marketing employees include quota-carrying headcount , sales operations , marketing , and management . marketing programs consist of advertising , promotional events , such as our u.s. , european , and asia-pacific user conferences , corporate communications , brand building , and product marketing activities , such as online lead generation . we plan to continue to invest in sales and marketing by expanding our global promotional activities , building brand awareness , attracting new customers , and sponsoring additional marketing events . the timing of these events , such as our annual sales kickoff and our annual u.s. , european , and asia-pacific user conferences , will affect our sales and marketing expense in the period in which each occurs . we expect sales and marketing expense to continue to increase in absolute dollars for the foreseeable future as we expand our online and offline marketing efforts to increase demand for our platform and awareness of our brand and as we continue to expand our direct sales team and indirect sales channels both in the united states and internationally , and to continue to be our largest operating expense category .
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although the impact of the pandemic on the commercial real estate market is still evolving , the continued restrictions imposed by local authorities over the use of office space could impair our ability to find viable subtenants for our existing corporate headquarters , which could result in additional costs when we cease use of that space . in response to the ongoing covid-19 pandemic , we have implemented plans to manage our costs . in 2020 , we temporarily limited the addition of new employees and third-party contracted services , curtailed most travel expense except where critical to the business , and acted to limit discretionary spending . we intend to resume these activities in 2021 to the extent possible based on our policies and public health guidance , but to the extent the business disruption continues for an extended period , additional cost management actions may be considered . although we continue to monitor the situation and may adjust our current policies as more information and public health guidance become available , the ongoing effects of the covid-19 pandemic and or the precautionary measures that we , our customers and governmental authorities have adopted have resulted in , and could continue to result in , customers not purchasing or renewing our products or services , significant delays or lengthening of our sales cycles , and reductions in average transaction sizes , and could negatively affect our customer success and sales and marketing efforts , result in difficulties or changes to our customer support , or create operational or other challenges , any of which could harm our business and operating results . because our products are offered as subscription-based licenses and a portion of that revenue is recognized over time , the effect of the pandemic may not be fully reflected in our operating results until future periods . further , the covid-19 pandemic and its impact on us and the economy has significantly limited our ability to forecast our future operating results , including our ability to predict revenue and expense levels , and plan for and model future operating results . our competitors could experience
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we manage our r & d organization in a flexible manner , balancing workloads/resources between customer r & d and internal r & d programs primarily based on the level of customer program activity . therefore , costs incurred for customer r & d and internal r & d can shift as customer activity increases or decreases . critical accounting policies the discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the u.s. ( gaap ) . the preparation of these consolidated financial statements is based in part on the application of significant accounting policies , many of which require management to make estimates and 34 assumptions ( see note 2 to the consolidated financial statements in item 8. financial statements and supplementary data in this annual report on form 10-k ) . actual results may differ from these estimates under different assumptions or conditions and could materially impact our results of operations . critical accounting policies are those policies that require the application of management 's most challenging subjective or complex judgment , often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods . critical accounting policies involve judgments and uncertainties that are sufficiently likely to result in materially different results under different assumptions and conditions . we believe the following are critical areas in the application of our accounting policies that currently affect our financial condition and results of operations . revenue recognition . revenue is recognized when all of the following criteria are met : ( 1 ) persuasive evidence of an arrangement exists ; ( 2 ) shipment has occurred or delivery has occurred if the terms specify destination ; ( 3 ) the sales price is fixed or determinable ; and ( 4 ) collectability is reasonably assured . when there are additional performance requirements , revenue is recognized when all such requirements have been satisfied . under revenue arrangements with multiple deliverables , we recognize each separable deliverable as it is earned . we license technology to third parties and collect royalties . royalty revenue is generated when a customer sells products incorporating our licensed technologies . royalty revenue is recognized as our licensees report it to us , and payment is typically submitted concurrently with the report . for stand-alone license agreements , up-front license fees are recognized over the term of the related licensing agreement . minimum royalty fees are recognized in the period earned . revenue related to a performance milestone is recognized upon the achievement of the milestone and meeting specific revenue recognition criteria . product sales to third parties consist of direct and distributor sales and are recognized at the time of shipment , provided that an order has been received , the price is fixed or determinable , collectability of the resulting receivable is reasonably assured and returns can be reasonably estimated . our sales terms provide no right of return outside of our standard warranty policy . payment terms are generally set at 30-45 days . generally , revenue for research and development is recorded as performance progresses under the applicable contract . multiple deliverable revenue arrangements require us to : ( i ) disclose whether multiple deliverables exist , how the deliverables in an arrangement should be separated , and how the consideration should be allocated ; ( ii ) allocate revenue in an arrangement using estimated selling prices ( esp ) of deliverables if a vendor does not have vendor-specific objective evidence of selling price ( vsoe ) or third-party evidence of selling price ( tpe ) ; and ( iii ) eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method . we account for revenue using a multiple attribution model in which consideration allocated to r & d activities is recognized as performed , and milestone payments are recognized when the milestone events are achieved , when such activities and milestones are deemed substantive . accordingly , in situations where a unit of accounting includes both a license and r & d activities , and when a license does not have stand-alone value , we apply a multiple attribution model in which consideration allocated to the license is recognized ratably , consideration allocated to r & d activities is recognized as performed and milestone payments are recognized when the milestone events are achieved , when such activities and milestones are deemed substantive . we enter into license and development arrangements that may consist of multiple deliverables which could include a license ( s ) to our technology , r & d activities , manufacturing services , and product sales based on the customer needs . for example , a customer may enter into an arrangement to obtain a license to our intellectual property which may also include r & d activities , and supply of products manufactured by us . for these services 35 provided , we could receive upfront license fees upon signing of an agreement and granting the license , fees for r & d activities as such activities are performed , milestone payments contingent upon advancement of the product through development and clinical stages to successful commercialization , fees for manufacturing services and supply of product , and royalty payments based on customer sales of product incorporating our technology . our license and development arrangements generally do not have refund provisions if the customer cancels or terminates the agreement . typically all payments made are non-refundable . we are required to evaluate each deliverable in a multiple element arrangement for separability . we are then required to allocate revenue to each separate deliverable using a hierarchy of vsoe , tpe , or esp . story_separator_special_tag we had total deferred tax assets in excess of total deferred tax liabilities of $ 7.1 million as of september 30 , 2014 and $ 6.5 million as of september 30 , 2013 , including valuation allowances of $ 4.8 million as of september 30 , 2014 and $ 5.3 million as of september 30 , 2013. the valuation allowances related to impairment losses on strategic investments were recorded as we do not currently foresee future capital gains within the allowable carryforward and carryback periods to offset these capital losses . as such , no tax benefit has been recorded in the consolidated statements of income . in fiscal 2014 , the company recorded a $ 0.7 million gain upon achievement by vessix vascular , inc. ( vessix ) of a clinical milestone and sales milestone . total remaining potential maximum additional proceeds of $ 3.3 million may be received in fiscal 2015 through fiscal 2017 depending on vessix 's achievement of future sales milestones . no amounts have been recorded associated with these future milestones given the level of uncertainty that exists . any potential additional income will be recognized once the milestones are achieved . if we conclude that it is more likely than not that we will receive these additional proceeds , we will reduce our capital loss carryforward valuation allowance by the lesser of either our capital loss carryforwards or the tax effect of the more than likely realizable sales proceeds . we applied the accounting guidance associated with uncertain tax positions which define standards for recognizing the benefits of tax return positions in the consolidated financial statements as more-likely-than-not to be sustained by the taxing authorities based solely on the technical merits of the position . if the recognition threshold is met , the tax benefit is measured and recognized as the largest amount of tax benefit that , in our judgment , is greater than 50 % likely to be realized . the total gross amount of unrecognized tax benefits as of september 30 , 2014 , 2013 and 2012 was $ 1.2 million , $ 1.3 million and $ 1.4 million , respectively , excluding accrued interest and penalties . of these unrecognized tax benefits , $ 0.9 million , $ 1.0 million and $ 1.0 million would affect our effective tax rate for fiscal 2014 , 2013 and 2012 , respectively . interest and penalties recorded for uncertain tax positions are included in our income tax provision . as of september 30 , 2014 , 2013 and 2012 , $ 0.6 million , $ 0.7 million and $ 0.8 million , respectively , of interest and penalties were accrued , excluding the tax benefits of deductible interest . the internal revenue service ( irs ) completed an examination of the company 's u.s. income tax return for fiscal 2012 in fiscal 2014. u.s. income tax returns for years prior to fiscal 2011 38 are no longer subject to examination by federal tax authorities . for tax returns for state and local jurisdictions , the company is no longer subject to examination for tax years generally before fiscal 2004. in the event that we have determined not to file tax returns with a particular state or local jurisdiction , all years remain subject to examination by the tax authorities . the ultimate outcome of tax matters may differ from our estimates and assumptions . unfavorable settlement of any particular issue would require the use of cash and could result in increased income tax expense . favorable resolution could result in reduced income tax expense . within the next 12 months , we do not expect that our unrecognized tax benefits will change significantly . see note 9 to the consolidated financial statements in item 8. financial statements and supplementary data in this annual report on form 10-k for further information regarding changes in unrecognized tax benefits during fiscal 2014 , 2013 and 2012. results of operations years ended september 30 , 2014 , 2013 and 2012 revenue . fiscal 2014 revenue was $ 57.4 million , a $ 1.3 million , or 2 % increase from fiscal 2013 revenue of $ 56.1 million . fiscal 2013 revenue increased $ 4.2 million , or 8 % , from fiscal 2012. the table below provides a summary of each operating segment 's annual revenue for the three-year period ended september 30 , 2014. replace_table_token_3_th medical device . revenue in medical device was $ 43.1 million in fiscal 2014 a 5 % increase from $ 41.2 million in fiscal 2013. the increase in revenue in fiscal 2014 was generated by each of our revenue categories with increased reagent product sales of $ 0.8 million and an increase in r & d revenue of $ 0.7 million . of our royalty revenue recognized during fiscal 2014 , $ 10.7 million was generated from our third generation of our photolink technology whose family of patents is expected to expire in november 2015 ( in the u.s. ) and october 2016 ( in certain other countries ) . the royalty obligation in our typical license agreement is generally for a specified number of years or the life of our patents , whichever is longer . in cases where the royalty obligation extends beyond the life of the applicable patent , it is because the license also includes rights to our know-how or other proprietary rights , in which case , the royalty rate is also reduced . under these circumstances , the royalty obligation will continue at a reduced royalty rate for a specified number of years , as determined based on the specific terms and conditions of the applicable customer agreement , the date on which the customer 's product was first sold , and other factors . we are actively seeking to migrate customers using this generation of photolink to our serene coating technologies . revenue in medical device was $ 41.2 million in 2013 , a
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we have reclassified our investment in intersect ent from other assets as an available-for-sale security with a fair value of $ 1.6 million as of september 30 , 2014. on november 4 , 2013 , we entered into a three-year $ 20.0 million secured revolving credit facility . borrowings under the credit facility , if any , will bear interest at a benchmark rate plus an applicable margin based on our leverage ratio . no borrowings have yet been made on the credit facility . on july 31 , 2014 , we filed a registration statement with the securities and exchange commission , using a shelf registration process . under this shelf process we may sell , either separately or together , debt securities , preferred stock , depositary shares , common stock and security warrants in one or more offerings up to an aggregate initial offering price of $ 175 million . as of september 30 , 2014 , we have not completed any securities offerings associated with the registration statement . our anticipated liquidity needs for fiscal 2015 may include , but are not limited to , the following : general capital expenditures ranging from $ 2.2 million to $ 2.5 million and $ 30.0 million associated with our share repurchase program authorized by the board of directors in november 2014. the authorization permitted the repurchase of our outstanding common stock through open-market purchases , private transactions , block trades , accelerated share repurchase transactions , tender offers , or by any combination of such methods . the company entered into a $ 20.0 million accelerated share repurchase program on november 11 , 2014 and initially repurchased 758,143 shares . upon final settlement of the program , the company may be entitled to receive additional shares of common stock , or , under certain circumstances specified in the program , the company may be required to deliver shares or remit a settlement amount in cash , at the company 's option .
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Liquidity
| 3,946
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20 evolution of the automotive industry as demand for car-sharing , ride-sharing and autonomous vehicles increases in addition to selling vehicles , oems are increasingly focused on offering their own car-sharing rental businesses and ride-sharing services . car-sharing typically allows consumers to rent a car for a short period of time , while ride-sharing matches people to available carpools or other services that provide on-demand mobility . with continued urbanization , population growth , increased government regulations to ease congestion and generational shifts in preferences , it is expected that the markets for these services will continue to grow , which could cause a change in the type of vehicles utilized . as such , many oems are exploring and expanding their own car-sharing and ride-sharing efforts . another trend developing is the expectation that autonomous , self-driving cars will become more common with continued advancements in technology . autonomous vehicles present many possible benefits , such as a reduction in deadly traffic collisions caused by human error and reduced traffic congestion , but there are also foreseeable challenges such as liability for damage and software safety and reliability . the increased integration of electronics and vehicle connectivity that will likely be required in autonomous vehicle developments will provide an opportunity for suppliers , such as aam , with advanced capabilities in this area to be competitive in this expanding market . global automotive production and industry consolidation as our customers design their products for global markets , they will continue to require global support from their suppliers . for this reason , it is critical that suppliers maintain a global presence in these markets in order to compete for new contracts . we have engineering offices around the world to support our global locations and provide technical solutions to our customers on a regional basis . the cyclical nature of the automotive industry , volatile commodity prices , the shifting demands of consumer preference , regulatory requirements and trade agreements require oems and suppliers to remain agile with regard to product development and global capability . a critical objective for oems and suppliers is the ability to meet these global demands while effectively managing costs . oems and suppliers are preparing for these challenges through merger and acquisition activity , development of strategic partnerships and reduction of vehicle platform complexity . in order to effectively drive technology development , recognize cost synergies , and increase global footprint , the industry may continue to see consolidation in the supply base as companies recognize and respond to the need for scalability . our acquisition of mpg in 2017 was a critical step in achieving the aforementioned objectives . increased demand for fuel efficiency and emissions reductions there has been an increased demand for technologies designed to help reduce emissions , increase fuel economy and minimize the environmental impact of vehicles . as a result , oems and suppliers are competing to develop and market new and alternative technologies , such as electric vehicles , hybrid vehicles , fuel cells , higher speed transmissions , and downsized , fuel-efficient engines . at the same time , oems and suppliers are improving products to increase fuel economy and reduce emissions through lightweighting and efficiency initiatives . we are responding with ongoing research and development ( r & d ) activities that focus on fuel economy , emissions reductions and environmental improvements by integrating electronics and technology . through the development of our ecotrac ® disconnecting awd system , e-aam hybrid and electric driveline systems , quantum tm lightweight axle technology , high-efficiency axles , powerlite ® axles and powerdense ® gears , high strength connecting rod technology , refined vibration control systems , and forged axle tubes , we have significantly advanced our efforts to improve fuel efficiency , safety , and ride and handling performance while reducing emissions and mass . these efforts have led to new business awards and further position us to compete in the global marketplace . in addition to aam 's organic growth in technology and processes , our acquisitions of mpg and certain operations of mitec automotive ag ( mitec ) , as well as our investment in our liuzhou aam joint venture , have provided us with complementary technologies , expanded our product portfolio , significantly diversified our global customer base , and strengthened our long-term financial profile through greater scale . the synergies achieved through our strategic initiatives have enhanced aam 's ability to compete in today 's technological and regulatory environment , while remaining cost competitive through increased scale and integration . 21 the discussion of our results of operations and liquidity and capital resources for 2018 , as compared to 2017 , can be found within `` part ii - item 7. management 's discussion and analysis of financial condition and results of operations `` in our 2018 annual report on form 10-k filed with the sec on february 15 , 2019 , which discussion is incorporated herein by reference . results of operations net sales net sales were $ 6,530.9 million in 2019 as compared to $ 7,270.4 million in 2018 . our change in sales in 2019 , as compared to 2018 , primarily reflects the impact of lower full-sized truck sales resulting from the in-sourcing by our largest customer of a portion of a replacement program that launched in the second half of 2018 , and a reduction of approximately $ 243 million associated with the impact of the gm work stoppage in the second half of 2019. net sales in 2019 were also impacted by customer downtime as a result of program changeovers in 2019 , and lower volumes on certain crossover vehicle programs that we support , as well as a decrease of approximately $ 142 million associated with the effect of metal market pass-throughs to our customers and the impact of foreign exchange related to translation adjustments . story_separator_special_tag the change in sales in our casting segment for the year ended december 31 , 2019 , as compared to the year ended december 31 , 2018 , primarily reflects lower production volumes in the automotive , commercial and industrial markets , and the impact of aam completing the sale of the u.s. casting operations on december 16 , 2019. casting sales in 2019 were also negatively impacted by approximately $ 9 million associated with the gm work stoppage . the increase in sales in our casting segment for the year ended december 31 , 2018 , as compared to the year ended december 31 , 2017 , reflects the inclusion of twelve months of mpg sales in 2018 , as compared to nine months of mpg sales in 2017 , and an increase of approximately $ 13 million in metal market pass-throughs to our customers . we use segment adjusted ebitda as the measure of earnings to assess the performance of each segment and determine the resources to be allocated to the segments . segment adjusted ebitda is defined as ebitda for our reportable segments excluding the impact of restructuring and acquisition-related costs , debt refinancing and redemption costs , gain ( loss ) on the sale of a business , impairment charges , pension settlements , and non-recurring items . for the year ended december 31 , 2019 , as compared to the year ended december 31 , 2018 , the change in segment adjusted ebitda for the driveline segment was primarily attributable to lower global automotive production volumes and the impact of the gm work stoppage . driveline segment adjusted ebitda was also impacted by a change in product mix due to customer downtime as a result of program changeovers in 2019. for the year ended december 31 , 2018 , as compared to the year ended december 31 , 2017 , the change in segment adjusted ebitda for the driveline segment was primarily attributable to increased material and freight costs , as well as an increase in project expense of approximately $ 15 million , and costs associated with increased levels of global launch activity in 2018. the change in metal forming segment adjusted ebitda for the year ended december 31 , 2019 , as compared to the year ended december 31 , 2018 , was primarily attributable to lower global automotive production volumes , as well as an increase in net manufacturing costs , including higher material , freight and tariff costs , of approximately $ 10 million . the increase in metal forming segment adjusted ebitda for the year ended december 31 , 2018 , as compared to the year ended december 31 , 2017 , was primarily due to the acquisition of mpg , partially offset by increased material and freight costs . the change in casting segment adjusted ebitda for the year ended december 31 , 2019 , as compared to the year ended december 31 , 2018 , primarily reflects lower production volumes , offset by the impact of price increases to customers . the increase in casting segment adjusted ebitda for the year ended december 31 , 2018 , as compared to the year ended december 31 , 2017 , was primarily due to the acquisition of mpg , which was partially offset by increased labor costs in an effort to address workforce shortages at certain locations . 28 reconciliation of non-gaap and gaap information in addition to results reported in accordance with accounting principles generally accepted in the united states of america ( gaap ) in this md & a , we have provided certain non-gaap financial measures such as ebitda and total segment adjusted ebitda . such information is reconciled to its closest gaap measure in accordance with securities and exchange commission rules below . we define ebitda to be earnings before interest expense , income taxes , depreciation and amortization . total segment adjusted ebitda is defined as ebitda excluding the impact of restructuring and acquisition-related costs , debt refinancing and redemption costs , gain ( loss ) on the sale of a business , impairment charges , pension settlements , and non-recurring items . we believe that ebitda and total segment adjusted ebitda are meaningful measures of performance as they are commonly utilized by management and investors to analyze operating performance and entity valuation . our management , the investment community and the banking institutions routinely use ebitda and total segment adjusted ebitda , together with other measures , to measure our operating performance relative to other tier 1 automotive suppliers and to assess the relative mix of adjusted ebitda by segment . we also believe that total segment adjusted ebitda is a meaningful measure as it is used for operational planning and decision-making purposes . these non-gaap financial measures are not and should not be considered a substitute for any gaap measure . additionally , non-gaap financial measures as presented by aam may not be comparable to similarly titled measures reported by other companies . replace_table_token_5_th 29 liquidity and capital resources our primary liquidity needs are to fund debt service obligations , capital expenditures and working capital requirements , in addition to advancing our strategic initiatives . we believe that operating cash flow , available cash and cash equivalent balances and available committed borrowing capacity under our senior secured credit facilities will be sufficient to meet these needs . operating activities net cash provided by operating activities was $ 559.6 million in 2019 as compared to $ 771.5 million in 2018 . the following factors impacted cash provided by operating activities : inventories we experienced an increase in cash flow from operating activities of $ 139.2 million related to the change in our inventories balance from december 31 , 2018 to december 31 , 2019 , as compared to the change in our inventories balance from december 31 , 2017 to december 31 , 2018. this change was primarily the result of increased levels of
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debt refinancing and redemption costs in july 2019 , holdings , aam , inc. , and certain subsidiaries of holdings entered into the first amendment to the credit agreement . the first amendment , among other things , 23 established $ 340 million in incremental term loan a commitments under the amended credit agreement with a maturity date of july 29 , 2024 ( term loan a facility due 2024 ) , reduced the availability under the revolving credit facility from $ 932 million to $ 925 million and extended the maturity date of the revolving credit facility from april 6 , 2022 to july 29 , 2024 , and modified the applicable margin with respect to interest rates under the term loan a facility due 2024 and interest rates and commitment fees under the revolving credit facility . the applicable margin and the maturity date for the term loan b facility remained unchanged . the proceeds of $ 340 million were used to repay all of the outstanding loans under the existing term loan a facility and a portion of the outstanding term loan b facility , resulting in no additional indebtedness . we expensed $ 5.1 million for the write-off of the unamortized debt issuance costs related to the existing term loan a facility and a portion of the unamortized debt issuance costs related to our term loan b facility that we had been amortizing over the expected life of the borrowings . in december 2019 , we used a portion of the cash proceeds from the casting sale to make a payment on our term loan b facility , which included a principal payment of $ 59.8 million and $ 0.4 million in accrued interest .
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Liquidity
| 15,541
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net ) with a success rate of 99.5 % in 2014 compared to 181 gross wells ( 153.5 net ) with a success rate of 98.3 % in 2013 . our 2014 total capital and exploration spending was approximately $ 1.6 billion ( excluding the eagle ford shale acquisitions discussed below ) compared to $ 1.2 billion in 2013 . the increase in capital spending was the result of our drilling programs in the marcellus shale and eagle ford shale . we allocate our planned program for capital and exploration expenditures among our various operating areas based on return expectations , availability of services and human resources . our 2015 drilling program includes approximately $ 900.0 million in capital and exploration expenditures and approximately $ 69.8 million in expected contributions to our equity method investments . these expenditures are expected to be funded by operating cash flow , existing cash and , if required , borrowings under our revolving credit facility . we will continue to assess the natural gas and crude oil price environment along with our liquidity position and may increase or decrease our capital and exploration expenditures accordingly . 36 acquisitions and divestitures in december 2014 , we completed the acquisition of certain proved and unproved oil and gas properties in the eagle ford shale in south texas for approximately $ 30.5 million and paid total cash consideration as of the closing date of approximately $ 29.6 million , which reflects the impact of customary purchase price adjustments and acquisition costs . the acquisition was funded with borrowings under our revolving credit facility . in october 2014 , we completed the acquisition of certain proved and unproved oil and gas properties in the eagle ford shale in south texas for approximately $ 210.0 million and paid total net cash consideration as of the closing date of approximately $ 185.2 million , which reflects the purchase price and adjustments of approximately $ 17.4 million for consents that the seller was unable to obtain for certain leaseholds prior to closing and approximately $ 8.0 million for the impact of customary purchase price adjustments and acquisition costs . the acquisition was funded with proceeds from the private placement of senior unsecured fixed rate notes completed in september 2014. in october 2014 , we completed the divestiture of certain proved and unproved oil and gas properties in east texas to a third party for approximately $ 44.3 million . total cash consideration received by the company as of the closing date was approximately $ 42.8 million , which reflects the impact of customary purchase price adjustments . financial condition capital resources and liquidity our primary sources of cash in 2014 were from funds generated from the sale of natural gas and oil production , the issuance of fixed rate notes and proceeds from the sale of certain oil and gas properties during the year . these cash flows were primarily used to fund our capital and exploration expenditures , repayments of borrowings under our revolving credit facility and related interest payments , share repurchases and the payment of dividends . see below for additional discussion and analysis of cash flow . operating cash flow fluctuations are substantially driven by commodity prices and changes in our production volumes and operating expenses . prices for natural gas and crude oil have historically been volatile , including seasonal influences and demand ; however , the impact of other risks and uncertainties have also influenced prices throughout the recent years . in addition , fluctuations in cash flow may result in an increase or decrease in our capital and exploration expenditures . see `` results of operations `` for a review of the impact of prices and volumes on revenues . our working capital is also substantially influenced by the variables discussed above . from time to time , our working capital will reflect a surplus , while at other times it will reflect a deficit . this fluctuation is not unusual . we believe we have adequate availability under our revolving credit facility and liquidity available to meet our working capital requirements . replace_table_token_12_th operating activities . net cash provided by operating activities in 2014 increase d by $ 211.9 million over 2013 . this increase was primarily due to higher operating revenues , partially offset by higher operating expenses ( excluding non-cash expenses ) and an increase in working capital . the increase in operating revenues was primarily due to an increase in equivalent production , partially offset by a decrease in realized natural gas and crude oil prices . equivalent production volumes increased by 29 % for 2014 compared to 2013 as a result of higher natural gas and oil production . average realized natural gas and crude oil prices decrease d by 8 % and 12 % , respectively , for 2014 compared to 2013 . net cash provided by operating activities in 2013 increased by $ 372.4 million over 2012. this increase was primarily due to higher operating revenues partially offset by higher operating expenses ( excluding non-cash expenses ) and unfavorable changes in working capital and other assets and liabilities . the increase in operating revenues was primarily due to an increase in equivalent production , partially offset by lower realized natural gas and crude oil prices . equivalent production volumes increased by 55 % for 2013 compared to 2012 as a result of higher natural gas and crude oil production . average realized natural gas and crude oil prices decreased by 3 % and less than 1 % , respectively , for 2013 compared to 2012 . 37 see `` results of operations `` for additional information relative to commodity price , production and operating expense movements . we are unable to predict future commodity prices and , as a result , can not provide any assurance about future levels of net cash provided by operating activities . realized prices may decline in future periods . story_separator_special_tag because our reserves are predominantly natural gas ( approximately 96 % of equivalent proved reserves ) , changes in natural gas prices may have a more significant impact on our financial results than oil prices . the majority of our production is sold at market responsive prices . generally , if the related commodity index declines , the price that we receive for our production will also decline . therefore , the amount of revenue that we realize is partially determined by factors beyond our control . however , management may mitigate this price risk on all or a portion of our anticipated production with the use of commodity derivatives . most recently , we have used commodity derivatives such as collar and swap arrangements to reduce the impact of declining prices on our revenue . under both arrangements , there is also a risk that the movement of index prices may result in our inability to realize the full benefit of an improvement in market conditions . results of operations 2014 and 2013 compared we reported net income for 2014 of $ 104.5 million , or $ 0.25 per share , compared to net income for 2013 of $ 279.8 million , or $ 0.67 per share . the decrease in net income was due to higher operating expenses , partially offset by an increase in operating revenues and an increase in income tax benefit . 43 revenue , price and volume variances our revenues vary from year to year as a result of changes in commodity prices and production volumes . below is a discussion of revenue , price and volume variances . replace_table_token_16_th replace_table_token_17_th _ ( 1 ) these prices include the realized impact of cash flow hedge settlements , which decreased the price by $ 0.28 per mcf in 2014 and increased the price by $ 0.13 per mcf in 2013 . ( 2 ) these prices include the realized impact of cash flow hedge settlements , which decreased the price by $ 0.17 per bbl in 2014 and increased the price by $ 1.48 per bbl in 2013 . natural gas revenues the increase in natural gas revenues of $ 185.4 million is due to higher production , partially offset by lower natural gas prices . the increase in our production was the result of our marcellus shale drilling program in pennsylvania , partially offset by lower production primarily in oklahoma and west texas as a result of certain non-core asset dispositions in the fourth quarter of 2013 and normal production declines in texas and west virginia . crude oil and condensate revenues the increase in crude oil and condensate revenues of $ 22.5 million is due to higher production , partially offset by lower crude oil prices . the increase in production was a result of our oil-focused eagle ford shale drilling program in south texas , partially offset by lower production associated with certain non-core asset dispositions in oklahoma and west texas in the fourth quarter of 2013. gain ( loss ) on derivative instruments effective april 1 , 2014 , we elected to discontinue hedge accounting on a prospective basis . subsequent to april 1 , 2014 , our derivative instruments were accounted for on a mark-to-market basis with changes in fair value recognized currently in operating revenues in the consolidated statement of operations . gain ( loss ) on derivative instruments includes an $ 81.7 million gain related to the change in fair value of realized cash settlements of derivative instruments previously frozen in accumulated other comprehensive income ( loss ) and a $ 137.6 million unrealized mark-to-market gain on our commodity derivative instruments . 44 impact of derivative instruments on operating revenues the following table reflects the realized and unrealized gain ( loss ) of our derivative instruments : replace_table_token_18_th brokered natural gas replace_table_token_19_th the $ 2.1 million decrease in brokered natural gas margin is a result of lower brokered volumes and an increase in purchase price that outpaced the increase in sales price . 45 operating and other expenses replace_table_token_20_th total costs and expenses from operations increase d by $ 869.9 million from 2013 to 2014 . the primary reasons for this fluctuation are as follows : direct operations increase d $ 4.7 million largely due to higher operating costs as a result of higher production , an increase in disposal and recycling costs related to our marcellus shale operations and an increase in costs associated with oil processing and related fuel charges related to our eagle ford shale operations . partially offsetting these increases were lower costs associated with certain non-core assets in oklahoma and west texas that were sold in the fourth quarter of 2013. transportation and gathering increase d $ 119.8 million due to higher throughput as a result of higher production , slightly higher transportation rates and the commencement of various transportation and gathering agreements in late 2013 and during 2014 . brokered natural gas increase d $ 0.1 million from 2013 to 2014 . see the preceding table titled `` brokered natural gas `` for further analysis . taxes other than income increase d $ 4.0 million due to $ 2.5 million higher drilling impact fees associated with our marcellus shale drilling activities , $ 2.5 million higher production taxes and $ 0.9 million higher franchise and other taxes . production taxes increased due to higher oil production in south texas , offset by taxes associated with certain non-core assets in oklahoma and west texas that were sold in the fourth quarter of 2013. these increases are partially offset by a $ 1.9 million decrease in ad valorem taxes . exploration increase d $ 10.6 million as a result of higher exploratory dry hole costs of $ 7.5 million and higher geophysical and geological and other expenses . depreciation , depletion and amortization decrease d $ 18.3 million due to a $ 36.2 million decrease in amortization of unproved properties in 2014 due to
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cash flows provided by financing activities increase d by $ 539.6 million from 2013 to 2014 due to $ 545.0 million of higher net borrowings and a decrease in share repurchases of $ 25.8 million , partially offset by a decrease of $ 20.3 million in tax benefits associated with our stock-based compensation , an $ 8.0 million increase in dividends paid and an increase in cash paid for capitalized debt issuance costs of $ 2.9 million . cash flows used in financing activities increased by $ 227.9 million from 2012 to 2013 due to $ 164.6 million of stock repurchases , $ 77.0 million of lower net borrowings and an increase in dividends paid of $ 8.5 million , partially offset by an $ 18.9 million increase in the tax benefit associated with our stock‑based compensation and a decrease in cash paid for capitalized debt issuance costs of $ 2.3 million . in september 2014 , we completed a private placement of $ 925 million aggregate principal amount of senior unsecured fixed rate notes with a weighted-average interest rate of 3.65 % , consisting of amounts due in 2021 , 2024 and 2026. effective april 15 , 2014 , the lenders under our revolving credit facility approved an increase in our borrowing base from $ 2.3 billion to $ 3.1 billion as part of the annual redetermination under the terms of the revolving credit facility agreement . the commitments under the revolving credit facility remain unchanged at $ 1.4 billion . see note 5 of the notes to the consolidated financial statements for further details . at december 31 , 2014 , we had $ 140.0 million of borrowings outstanding under our revolving credit facility at a weighted-average interest rate of 2.4 % compared to $ 460.0 million of borrowings outstanding at a weighted-average interest rate of 2.0 % at december 31 , 2013 . as of december 31 , 2014 , we had $ 1.3 billion available for future borrowings under our revolving credit facility .
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Liquidity
| 14,072
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earlier adoption is permitted only for fiscal years beginning after december 15 , 2016 , including interim reporting periods within such fiscal years story_separator_special_tag overview we are a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications . we sell our products and provide related services in diversified markets , including homeland security , healthcare , defense and aerospace . we have three operating divisions : ( a ) security , providing security and inspection systems and turnkey security screening solutions ; ( b ) healthcare , providing patient monitoring , diagnostic cardiology , and anesthesia systems ; and ( c ) optoelectronics and manufacturing , providing specialized electronic components for our security and healthcare divisions , as well as to third parties for applications in the defense and aerospace markets , among others . security division . through our security division , we provide security screening products and services worldwide , as well as turnkey security screening solutions . these products and services are used to inspect baggage , parcels , cargo , people , vehicles and other objects for weapons , explosives , drugs , radioactive and nuclear materials and other contraband . revenues from our security division accounted for 58 % of our total consolidated revenues for fiscal 2017. during fiscal 2017 , in conjunction with ongoing cost optimization efforts , we undertook an initiative to consolidate a manufacturing facility where we incurred approximately $ 0.6 million of costs . this facility consolidation is expected to result in recurring annualized savings of approximately $ 0.8 million . as a result of the terrorist attacks in the u.s. and in other locations worldwide , security and inspection products have increasingly been used at a wide range of facilities other than airports , such as border crossings , railways , seaports , cruise line terminals , freight forwarding operations , sporting venues , government and military installations and nuclear facilities . we believe that our wide-ranging product portfolio together with our ability to provide turnkey screening solutions position us to competitively pursue security and inspection opportunities as they arise throughout the world . currently , the u.s. federal government is discussing various options to address sequestration and the u.s. federal government 's overall fiscal challenges and we can not predict the outcome of these efforts . while we believe that national security spending will continue to be a priority , u.s. government budget deficits and the national debt have created increasing pressure to examine and reduce spending across many federal agencies . additionally , there continues to be volatility in international markets that has impacted international security spending . we believe that the diversified product portfolio and international customer mix of our security division position us well to withstand the impact of these uncertainties and even benefit from specific initiatives within various governments . however , depending on how future sequestration cuts are implemented and how the u.s. federal government and our other international customers manage their fiscal challenges , we believe that these actions could have a material , adverse effect on our business , financial condition and results of operations . healthcare division . through our healthcare division , we design , manufacture , market and service patient monitoring , diagnostic cardiology , and anesthesia delivery and ventilation systems worldwide for sale primarily to hospitals and medical centers . our products monitor patients in critical , emergency and perioperative care areas of the hospital and provide information , through wired and wireless networks , to physicians and nurses who may be at the patient 's bedside , in another area of the hospital or even outside the hospital . revenues from our healthcare division accounted for 21 % of our total consolidated revenues for fiscal 2017. during fiscal 2017 , in conjunction with ongoing cost optimization efforts , we undertook an initiative to consolidate a manufacturing and r & d facility where we incurred approximately $ 1.4 million of employee termination costs and $ 0.6 million of other costs . this facility consolidation is expected to result in recurring annualized savings of approximately $ 3.0 million . the healthcare markets in which we operate are highly competitive . we believe that our customers choose among competing products on the basis of product performance , functionality , value and service . there is continued uncertainty regarding the u.s. federal government budget and the affordable care act , either of which 55 may impact hospital spending , third-party payer reimbursement and fees to be levied on certain medical device revenues , any of which could adversely affect our business and results of operations . in addition , hospital capital spending appears to have been impacted by strategic uncertainties surrounding the affordable care act and economic pressures . we also believe that global economic uncertainty has caused some hospitals and healthcare providers to delay purchases of our products and services . during this period of uncertainty , sales of our healthcare products may be negatively impacted . we can not predict when the markets will fully recover or when the uncertainties related to the u.s. federal government will be resolved and , therefore , when this period of delayed and diminished purchasing will end . a prolonged delay could have a material adverse effect on our business , financial condition and results of operations . optoelectronics and manufacturing division . through our optoelectronics and manufacturing division , we design , manufacture and market optoelectronic devices and provide electronics manufacturing services globally for use in a broad range of applications , including aerospace and defense electronics , security and inspection systems , medical imaging and diagnostics , telecommunications , office automation , computer peripherals , industrial automation , automotive diagnostic systems , and consumer products . we also provide our optoelectronic devices and electronics manufacturing services to oem customers , as well as our own security and healthcare divisions . story_separator_special_tag the determination of whether or not customer acceptance terms are perfunctory or inconsequential impacts the amount and timing of revenue recognition . critical judgments also include estimates of warranty reserves , which are established based on historical experience and knowledge of the product under warranty . allowance for doubtful accounts . the allowance for doubtful accounts involves estimates based on management 's judgment , review of individual receivables and analysis of historical bad debts . we monitor collections and payments from our customers and we maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments . we also assess current economic trends that might impact the level of credit losses in the future . if the financial condition of our customers were to deteriorate , resulting in an impairment of their ability to make payments , additional allowances could be required . inventory . inventory is stated at the lower of cost or market . cost is determined on the first-in , first-out method . we write down inventory for slow-moving and obsolete inventory based on assessments of future demands , market conditions and customers who may be experiencing financial difficulties . if these factors were to become less favorable than those projected , additional inventory write-downs could be required . property and equipment . property and equipment are stated at cost less accumulated depreciation and amortization . depreciation and amortization are charged while assets are used in service and are computed using the straight-line method over the estimated useful lives of the assets taking into consideration any estimated salvage value . amortization of leasehold improvements is calculated on the straight-line method over the shorter of the useful life of the asset or the lease term . leased capital assets are included in property and equipment . amortization of property and equipment under capital leases is included with depreciation expense . in the event that property and equipment are idle , as a result of excess capacity or the early termination , non-renewal or reduction in scope of a turnkey screening operation , such assets are assessed for impairment on a periodic basis and when an indication that impairment may exist . income taxes . our annual tax rate is based on our income , statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate . tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities . significant judgment is required in determining our tax expense and in evaluating our tax positions including evaluating uncertainties . we review our tax positions quarterly and adjust the balances as new information becomes available . deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years . such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities , as well as from net operating loss and tax credit carryforwards . we evaluate the recoverability of these future tax deductions by assessing the adequacy of future expected taxable income from all sources , including reversal of taxable temporary differences , forecasted operating earnings and available tax planning strategies . these sources of income inherently rely on estimates . to provide insight , we use our historical experience and our short and long-range business forecasts . we believe it is more likely than not that a portion of 59 the deferred income tax assets may expire unused and therefore have established a valuation allowance against them . although realization is not assured for the remaining deferred income tax assets , we believe it is more likely than not that the deferred tax assets will be fully recoverable within the applicable statutory expiration periods . however , deferred tax assets could be reduced in the near term if our estimates of taxable income are significantly reduced or available tax planning strategies are no longer viable . business combinations . we allocate the fair value of purchase consideration to the tangible and intangible assets acquired , and liabilities assumed based on their estimated fair values . the excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill . such valuations require management to make significant estimates and assumptions , especially with respect to intangible assets . significant estimates in valuing certain intangible assets include , but are not limited to , future expected cash flows from acquired customers , acquired technology , and trade names , useful lives and discount rates . our estimates of fair value are based upon assumptions believed to be reasonable , but which are inherently uncertain and unpredictable and , as a result , actual results may differ from estimates . during the measurement period , which is one year from the acquisition date , we may record adjustments to the assets acquired and liabilities assumed , with the corresponding offset to goodwill . upon the conclusion of the measurement period , any subsequent adjustments are recorded to earnings . impairment of long-lived assets . goodwill represents the excess purchase price of net tangible and intangible assets acquired in business combinations over their estimated fair value . goodwill is allocated to our segments based on the nature of the product line of the acquired business . the carrying value of goodwill is not amortized , but is annually tested for impairment during our second quarter and more often if there is an indicator of impairment . intangible assets other than goodwill are amortized over their useful lives unless these lives are determined to be indefinite . we assess qualitative factors of each of our reporting units to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount , including goodwill .
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consolidated results fiscal 2017 compared with fiscal 2016. we reported consolidated sales of $ 961.0 million in fiscal 2017 , a 16 % increase over the prior year , which drove a year-over-year increase in gross profit of $ 46.6 million . despite this increase in sales and gross profit , our income from operations decreased by 13 % from the prior year to $ 33.3 million in fiscal 2017. this decline in profitability was driven primarily by a 112 % increase in impairment , restructuring and other charges . such charges related to the abandonment of assets previously built or constructed for our turnkey scanning program in mexico and two product lines in our security division , facility consolidations among all three of our operating divisions , transaction costs for acquisition activity during the fiscal year and costs related to the integration of as & e® , which was acquired in september of 2016. fiscal 2016 compared with fiscal 2015. we reported consolidated sales of $ 829.7 million in fiscal 2016 , a 13 % decrease from the prior year . our operating profit decreased by 58 % from the prior year to $ 38.4 million in fiscal 2016. this decline in profitability was driven primarily by the decrease in sales , which was the primary driver of a $ 48.5 million decrease in gross profit , and a $ 12.1 million increase in impairment , restructuring and other charges . these factors were partially offset by a $ 5.1 million decrease in sg & a expenses and a $ 1.8 million decrease in r & d . acquisitions . in september 2016 , we acquired as & e® , a leading provider of detection solutions for advanced cargo , parcel and personnel inspection . as & e® 's operations are included in our security division .
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as part of our solution , we also develop cloud-based , real-time telematics performance monitoring systems that enable fleet operators to optimize energy and route efficiency . although we operate as a single unit through our subsidiaries , we approach our development through two divisions , automotive and aviation . we are currently focused on our core competency of bringing the n-gen electric cargo van to market and fulfilling our existing backlog of orders . we are also exploring other opportunities in monetizing our intellectual property which could include a sale , license or other arrangement of assets that are outside of our core focus . workhorse electric delivery vans are currently in production and are in use by our customers on u.s. roads . our delivery customers include companies such as ups , fedex express , alpha baking and w.b . mason . data from our in-house developed telematics system demonstrates our vehicles on the road are averaging approximately a 500 % increase in fuel economy as compared to conventional gasoline-based trucks of the same size and duty cycle . in addition to improved fuel economy , we anticipate that the performance of our vehicles on-route will reduce long-term vehicle maintenance expense by approximately 50 % as compared to fossil-fueled trucks . we are an oem capable of manufacturing class 3-6 commercial-grade , medium-duty truck chassis at our union city , indiana facility , marketed under the workhorse® brand . all workhorse last mile delivery vans are assembled in the union city assembly facility . from our development modeling and the existing performance of our electric vehicles on american roads , we estimate that our e-gen range-extended electric delivery vans will save over $ 150,000 in fuel and maintenance savings over the 20-year life of the vehicle . due to the positive return-on-investment , we place a premium price for our vehicles when selling to major fleet buyers . we expect that fleet buyers will be able to achieve a four-year or better return-on-investment ( without government incentives ) , which we believe justifies the higher acquisition cost of our vehicles . our goal is to continue to increase sales and production , while executing on our cost-down strategy to a point that will enable us to achieve gross margin profitability of the last mile-delivery van platform . as a key strategy , we have developed the workhorse n-gen platform , which has been accelerated from our development efforts on the usps ngdv program . 27 the workhorse n-gen electric cargo van platform will be available in multiple size configurations , 450 , 700 and 1,000 cubic feet . we intend to initiate the launch with the 450 cubic foot configuration where it is designed to compete with the sprinter , transit and ram gasoline/diesel trucks in the commercial sector with an emphasis on last-mile delivery and other service-oriented businesses , such as telecom . this ultra-low floor platform incorporates state-of-the-art safety features , economy and performance : we expect these vehicles to achieve a fuel economy of approximately 60 mpge and offer fleet operators the most favorable total cost-of-ownership of any comparable vehicle available today . we believe we are the first american oem to market a u.s. built electric cargo van , and early indications of fleet interest are significant . we expect the n-gen trucks will be supported by our ryder systems partnership . using n-gen light duty prototypes , we delivered over 100,000 packages in san francisco and ohio during our testing . during the period we achieved 50 mpge and successfully demonstrated the role the vehicle can have in last mile delivery . as a direct result of the usps award and development efforts , workhorse has begun development on the workhorse w-15 , a medium- and light-duty pickup truck platform aimed at commercial fleets . the w-15 pickup truck powertrain is a smaller version of its sister vehicle , the medium-duty battery electric powertrain , and will have two purpose-built variants , a w-15 work truck ( pickup ) and an n-gen cargo van . either of these two variants will appeal to delivery fleets , utility companies , telecom companies , municipalities and more . our horsefly delivery drone is a custom designed , purpose-built drone that is fully integrated in our electric trucks . horsefly is an octocopter designed with a maximum gross weight of 30 lbs. , a 10 lb . payload and a maximum air speed of 50 mph . it is designed and built to be rugged and consisting of redundant systems to further meet the faa 's required rules and regulations . surefly is our entry into the emerging vtol market . it is designed to be a two-person , 400-pound payload aircraft with a hybrid internal combustion/electric power generation system . our approach in the design is to build the safest and simplest way to fly rotary wing aircraft in the world . we believe it is a practical answer to personal flight , as well as , commercial transportation segments , including air taxi series , agriculture and beyond . the faa to-date has granted 14 separate experimental airworthiness certifications , registered as n834lw , for the aircraft . these certifications come after an extensive design review and inspection of the aircraft with each renewed certificate . in november 2018 , workhorse signed cooperative research and development agreement with a branch of the u.s. military to test surefly with a specific focus on military applications . this further expands the potential market for the aircraft . we are continuing with our efforts to consummate a sale of the surefly business although we can not guarantee that we will be successful in such efforts . executive team changes on january 30 , 2019 , stephen s. burns , chief executive officer and a member of the board of directors ( the “ board ” ) of the company , resigned as chief executive officer and as a member of the board , effective immediately . story_separator_special_tag subject to the approval by the company 's shareholders of the company 's 2019 stock incentive plan , the company will grant an option to purchase 400,000 shares of the company 's common stock that will vest over a four-year period in equal quarterly installments commencing in the quarter in which the 2019 stock incentive plan is approved . the stock option award will be granted under the company 's 2019 incentive stock plan with an exercise price equal to the closing price of the company 's common stock on the date of shareholder approval of the 2019 incentive stock plan . in the event mr. willison is terminated without cause or resigns for good reason ( as such terms are defined in the retention agreement ) , he will be entitled to severance payments in an amount equal to his base salary plus a prorated portion of his target performance bonus . in addition , any outstanding equity awards will immediately accelerate and vest . the company will also continue to pay the employer portion of the cobra premium cost for up to twelve months . in the event mr. willison is terminated without cause or resigns for good reason within twelve months following a change in control of the company ( as such term is defined in the retention agreement ) he shall be entitled to severance benefits described above . the foregoing summary description of the retention agreement does not purport to be complete and is subject to , and qualified in its entirety by , the full text of the agreement , a copy of which is filed as exhibit 10.1 hereto and incorporated by reference herein . on february 19 , 2019 the company issued a press release regarding mr. willison 's appointment . the press release is filed with this report on form 8-k as exhibit 99.1 and is incorporated herein by reference . 29 story_separator_special_tag ( the “ tranche one loans ” ) which may not be re-borrowed following repayment and ( ii ) a $ 25 million tranche of term loans which may be re-borrowed following repayment ( the “ tranche two loans ” together with the tranche one loans , the “ loans ” ) . the company used the proceeds for the tranche one loans ( x ) to pay off a loan provided by arosa opportunistic fund lp ( “ arosa ” ) in the principal amount of $ 7.8 million plus interest and ( y ) for working capital purposes . draws from the tranche two loans will be used in connection with vehicle production and are subject to the company 's receipt of purchase orders . the company 's ability to borrow amounts under the credit agreement is conditioned upon its compliance with specified covenants , including certain reporting covenants and financial covenants that , in addition to other items , require the company to maintain ( i ) minimum liquidity of at least $ 4 million at all times on or after march 31 , 2019 , ( ii ) a maximum total leverage ratio ( ratio of total debt borrowed by the company to ebitda for the four consecutive fiscal quarters most recently ended , subject to certain adjustments set forth in the credit agreement ) not to exceed 4.50:1.00 on the last day of the quarter ended september 30 , 2019 , which total leverage ratio is adjusted for subsequent quarters as set forth in the credit agreement and ( iii ) a maximum debt service coverage ratio ( ratio of ebitda ( for the four consecutive fiscal quarters most recently ended , subject to certain adjustments set forth in the credit agreement ) to interest expense and payments for operating leases ) not to exceed 1.25:1.00 on the last day of the quarter ended september 30 , 2019 , which debt service coverage ratio is adjusted for subsequent quarters as set forth in the credit agreement . in the event the company breaches the total leverage ratio or the debt service coverage ratio covenants , the company may cure such breach by raising capital through the sale of equity , which capital will be added on a dollar-for-dollar basis to the calculation of ebitda for purposes of such test period to determine compliance with the financial covenant . in each consecutive four fiscal quarter period , equity cures can only be made for two fiscal quarters , and only four equity cures are allowed during the term of the credit agreement . the capital raised in connection with such equity cure must be used to repay the loans . in addition , the credit agreement contains customary representations and warranties and customary affirmative and negative covenants . the tranche one loans , and both the drawn and undrawn portions of the tranche two loan , will bear interest at a rate per annum ( based on a year of 360 days ) equal to libor ( as defined in the credit agreement ) plus 7.625 % , which interest is payable quarterly commencing april 5 , 2019 , as amended . the credit agreement contains customary events of default , including for non-payment , misrepresentation , breach of covenants , defaults under other material indebtedness , material adverse change , bankruptcy , change of control and material judgments . the loans mature on the third anniversary of the closing date . the company is required to repay a portion of the tranche one loans with $ 500,000 installment payments on each of june 30 , 2020 , december 31 , 2020 and june 30 , 2021. upon the occurrence and during the continuance of an event of default , the lenders may declare all outstanding amounts thereunder immediately due and payable and may terminate commitments to make any additional advances under the tranche two loans . the tranche two loans are required to be prepaid in an amount equal to the payments received from the subject purchase orders .
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results of operations our condensed consolidated statement of operations data for the period presented follows : replace_table_token_3_th revenue sales for the years ended december 31 , 2018 and 2017 were $ 0.8 million and $ 10.0 million , respectively . the net sales decrease was primarily due to a decrease in volume of trucks sold due to strategic shift to development of the n-gen platform . cost of sales cost of sales for the years ended december 31 , 2018 and 2017 were $ 8.0 million and $ 24.4 million , respectively . the cost of sales decrease was primarily due to a decrease in volume of trucks sold due to strategic shift to development of the n-gen platform . warranty expense warranty expenses for the years ended december 31 , 2018 and 2017 were $ 8.0 million and $ 0.1 million , respectively . the increase during the current year relates to issues with certain battery packs in our 2016 and 2017 e-series trucks . during the fourth quarter of 2018 , the battery pack monitoring software indicated that some of the battery packs were not performing at expected levels . some vehicles have undergone replacement of battery pack components . the company is continuing to investigate the issue and has found specific quality issues with components from certain vendors . $ 6.9 million of the expense was recorded in the fourth quarter to increase the warranty accrual at year-end . the accrual includes coverage for labor and transportation and excludes any contribution from related vendors . selling , general and administrative expenses selling , general and administrative ( “ sg & a ” ) expenses during year ended december 31 , 2018 were $ 11.5 million , an increase from $ 8.8 million for the year ended december 31 , 2017. the sg & a expense increase primarily related to higher marketing and advertising costs of approximately $ 1.6 million , investment banking related fees of approximately $ 0.7 million and legal settlement costs of $ 0.4 million .
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business overview newell brands is a leading global consumer goods company with a strong portfolio of well-known brands , including paper mate ® , sharpie ® , dymo ® , expo ® , parker ® , elmer 's ® , coleman ® , marmot ® , oster ® , sunbeam ® , foodsaver ® , mr. coffee ® , graco ® , baby jogger ® , nuk ® , calphalon ® , rubbermaid ® , contigo ® , first alert ® and yankee candle ® . for hundreds of millions of consumers , newell brands makes life better every day , where they live , learn , work and play . business strategy in 2018 , newell brands announced its accelerated transformation plan , which aims to accelerate value creation and more rapidly transform the portfolio to one best positioned to leverage the company 's advantaged capabilities in innovation , design and e-commerce . the accelerated transformation plan is designed to significantly increase shareholder value through both strengthened operational and financial performance , while simultaneously deleveraging the balance sheet and returning capital to shareholders . as part of the company 's accelerated transformation plan , during 2018 , the company announced it was exploring strategic options for its industrial and commercial product assets , including the waddington group , process solutions , rubbermaid commercial products , rexair and mapa businesses , as well as non-core consumer businesses , including rawlings , jostens , pure fishing , rubbermaid outdoor , closet , refuse and garage , goody products and u.s. playing cards businesses . these businesses are classified as discontinued operations at december 31 , 2018. prior periods have been reclassified to conform with the current presentation . during 2018 , the company sold goody products , inc. ( goody ) , jostens , inc. ( jostens ) , pure fishing , inc. ( pure fishing ) , the rawlings sporting goods company , inc. ( rawlings ) and waddington group , inc. ( waddington ) and various other subsidiaries as part of the accelerated transformation plan . the company expects to complete the remaining divestitures by the end of 2019. the company expects to incur costs and expenses in connection with the transformation of the portfolio of businesses as part of the accelerated transformation plan . organizational structure in order to align reporting with the company 's accelerated transformation plan , effective june 30 , the company is reporting its financial results in four segments as food and appliances , home and outdoor living , learning and development and other . this new structure reflects the manner in which the chief operating decision maker regularly assesses information for decision-making purposes , including the allocation of resources . all prior periods have been reclassified to conform to the current reporting structure . the company 's three primary operating segments are as follows : segment key brands description of primary products food and appliances ball ® , calphalon ® , crock-pot ® , foodsaver ® , mr. coffee ® , oster ® , rubbermaid ® , sistema ® and sunbeam ® household products , including kitchen appliances , gourmet cookware , bakeware and cutlery , food storage and home storage products and fresh preserving products home and outdoor living chesapeake bay candle ® , coleman ® , contigo ® , exofficio ® , first alert ® , marmot ® , woodwick ® and yankee candle ® products for outdoor and outdoor-related activities , home fragrance products and connected home and security learning and development aprica ® , baby jogger ® , dymo ® , elmer 's ® , expo ® , graco ® , mr. sketch ® , nuk ® , paper mate ® , parker ® , prismacolor ® , sharpie ® , tigex ® waterman ® and x-acto ® writing instruments , including markers and highlighters , pens and pencils ; art products ; activity-based adhesive and cutting products ; labeling solutions ; baby gear and infant care products 21 summary of significant 2018 activities on june 11 , 2018 , the company announced that its board of directors authorized an increase in the then available amount under its existing stock repurchase program ( srp ) . under the updated srp , the company is authorized to repurchase up to approximately $ 3.6 billion of its outstanding shares through the end of 2019. during 2018 , the company repurchased approximately $ 1.5 billion of its shares of common stock ( see capital resources ) . during 2018 , the company completed the sale of its goody business , jostens , pure fishing , team sports business , as well as the rawlings brand , and its waddington business ( collectively , the divestitures ) . during 2018 , the company repurchased approximately $ 2.6 billion aggregate principal amount of its senior notes ( see capital resources ) . the company recorded non-cash impairment charges related to goodwill and indefinite lived intangibles of $ 8.3 billion in continuing operations and $ 1.5 billion in discontinued operations . acquisitions 2017 activity in september 2017 , the company acquired chesapeake bay candle , a leading developer , manufacturer and marketer of premium candles and other home fragrance products , focused on consumer wellness and natural fragrance , for a cash purchase price of approximately $ 75 million . chesapeake bay candle is included in the home and outdoor living segment from the date of acquisition . in april , 2017 , the company acquired sistema plastics , a leading new zealand based manufacturer and marketer of innovative food storage containers with strong market shares and presence in australia , new zealand , u.k. and parts of continental europe for a cash purchase price of approximately $ 472 million . sistema is included in the food and appliances segment from the date of acquisition . in january 2017 , the company acquired smith mountain industries ( smith mountain ) , a leading provider of premium home fragrance products , sold primarily under the woodwick ® candle brand , for a cash purchase price of approximately $ 100 million . story_separator_special_tag restructuring costs associated with integration projects and the transformation plan include employee-related cash costs , including severance , retirement and other termination benefits , and contract termination and other costs . in addition , other costs associated with the jarden integration include advisory and personnel costs for managing and implementing integration projects . project renewal the company 's project renewal restructuring plan was completed during 2017. project renewal was designed , in part , to simplify and align the company 's businesses , streamline and realign the supply chain functions , reduce operational and manufacturing complexity , streamline the distribution and transportation functions , optimize global selling and trade marketing functions and rationalize the company 's real estate portfolio . see footnote 6 of the notes to consolidated financial statements for further information . impacts of tariffs the current u.s. presidential administration has implemented new u.s. tariffs that could impact the level of trade between the u.s and canada , china , and the european union in addition to global commerce in general . u.s. trading partners such as canada , china and the european union have responded by announcing retaliatory tariffs on some u.s. exports . tariffs on imports into the u.s. and exports to canada , china and the european union will increase costs for the company . the company has been successful at negotiating an exception for most of the u.s. tariffs planned on baby gear , which represents a substantial portion of the company 's tariff exposure . however , the u.s. government has announced its intention to increase some of the china tariffs from 10 % to 25 % if there is not a breakthrough in negotiations with the china government . the company 's annualized gross tariff cost exposure from all these actions is estimated at approximately $ 105 million . the company is working to mitigate the tariff exposure , in part through pricing , productivity and in some cases relocation . in addition , if the u.s. presidential administration were to extend the tariffs to additional categories of goods made in china it could have a significant impact on the company . 23 story_separator_special_tag style= '' white-space : nowrap '' > step-up charges primarily related to the jarden acquisition recorded in 2016 ( approximately $ 293 million ) and the impact of divestitures ( approximately $ 632 million ) . gross margin was 34.2 % versus 32.4 % percent in 2016. the change was primarily due to the impact of the inventory step-up charge recorded in 2016 and the benefits of synergies and productivity , partially offset by the negative mix effects partially related to the jarden acquisition . the change in sg & a for 2017 was primarily due to the jarden acquisition , as well as other acquisitions ( approximately $ 305 million ) and increased investment related to brand development , e-commerce and insights , partially offset by the impact of divestitures ( approximately $ 230 million ) and benefits of synergies and productivity . additionally , the decrease in certain labor-related costs was mostly offset by an increase in integration costs . the restructuring costs for 2017 were mostly comprised of costs related to the jarden integration and other restructuring activities , which primarily relate to the jarden acquisition . the majority of the restructuring costs for 2016 related to project renewal . consolidated operating income as a percentage of net sales for 2017 and 2016 was approximately 4.0 % and 3.3 % , respectively . the decrease in aforementioned inventory step-up charge related to the jarden acquisition , the impact of increased net sales and the benefits of synergies and productivity , as well as a reduction in bonus expense , were mostly offset by the negative mix effects related to the jarden acquisition , increased investment related to the expansion of brand development , e-commerce and insights , as well as costs associated with the delivery of synergies , the increase in the impairment of goodwill , intangibles and other assets and the acquisition-related increase in amortization of intangibles . the increase in interest expense for 2017 was primarily due to higher average debt levels versus the same prior year period . the weighted average interest rate for 2017 and 2016 was approximately 4.0 % and 3.7 % , respectively . as a result of the tax cuts and jobs act in the united states , during the fourth quarter of 2017 , the company recorded a deferred tax benefit of $ 1.5 billion due to statutory tax rate changes in the united states and an $ 87.2 million tax benefit to reverse the company 's apb 23 liability on historical jarden earnings , partially offset by a $ 195 million tax expense relating to a mandatory repatriation tax . see footnote 17 of the notes to consolidated financial statements for information regarding income taxes . 26 business segment operating results 2017 vs. 2016 replace_table_token_8_th food and appliances the increase in net sales for 2017 was primarily due to acquisitions ( approximately 17 % ) , partially offset primarily by sales declines in the appliance and cookware category . operating income as a percentage of net sales for 2017 and 2016 was approximately 10.7 % and 7.8 % , respectively . the increase was primarily driven by the impact of the 2016 inventory step-up charge related to the jarden acquisition ( approximately $ 118 million ) and a reduction in bonus expense , which more than offset the negative product mix impact of the jarden acquisition , and the acquisition-related increase in amortization of intangibles , as well as the impact of incremental promotional activity . home and outdoor living the increase in net sales for 2017 was primarily due to the jarden acquisition ( approximately 34 % ) , with the balance of growth generated primarily by the beverage , coleman and technical apparel categories . operating income as a percentage of net sales for 2017 and 2016 was approximately 8.8 % and 7.3 % , respectively .
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results of operations consolidated operating results 2018 vs. 2017 replace_table_token_4_th nmf not meaningful the decrease in net sales for 2018 was primarily due to the 2017 divestitures ( approximately 3 % ) , a decline in sales across all segments ( approximately 5 % ) and the impact of the adoption of new revenue recognition standards ( approximately 2 % ) , partially offset by the impact of acquisitions ( approximately 1 % ) . the decrease in cost of products sold for 2018 was primarily driven by the impact of the 2017 divestitures ( approximately $ 187 million ) and lower sales ( approximately $ 340 million ) and impact of the adoption of new revenue recognition standards ( approximately $ 184 million ) , partially offset by the impact of acquisitions ( approximately $ 58 million ) . reported gross margin was 34.9 % versus 34.2 % as the benefit from pricing , product mix and cost savings was mostly offset by the impact of inflation related to cost of goods , freight and tariffs . the decrease in sg & a for 2018 was primarily due the impact of the 2017 divestitures ( approximately $ 78 million ) , a decrease in integration cost ( approximately $ 133 million ) , as well as the benefits of cost savings . the restructuring costs for 2018 and 2017 were mostly comprised of costs related to the accelerated transformation plan , primarily consisting of severance costs . during 2018 , in connection with the company 's annual impairment testing and subsequent triggering events , the company recorded a non-cash charge of $ 8.3 billion to reflect impairment of goodwill and intangible assets .
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the company recorded a pre-tax charge of $ 3.0 million during the year ended june 30 , 2015 to reflect site closure costs consisting of $ 0.4 million cash payments and $ 2.6 million non-cash write-downs of inventory , property and equipment and related items . activity and reserve balances for restructuring charges at june 30 , 2016 and 2015 were as follows : replace_table_token_34_th 52 carpenter technology corporation notes to consolidated financial statements the remaining reserve is expected to be paid in fiscal year 2017 . 3. earnings per common share the calculations of basic and diluted earnings from continuing operations per common share for the years ended june 30 , 2016 , 2015 and 2014 were as follows : replace_table_token_35_th the following awards issued under share-based compensation plans were excluded from the calculations of diluted earnings per share above because their effects were anti-dilutive : replace_table_token_36_th 53 carpenter technology corporation notes to consolidated financial statements 4. inventories inventories consisted of the following components at june 30 , 2016 and 2015 : replace_table_token_37_th if the fifo method of inventory had been used instead of the lifo method , inventories would have been $ 98.2 million and $ 196.6 million higher as of june 30 , 2016 and 2015 , respectively . current cost of lifo-valued inventories was $ 608.5 million at june 30 , 2016 and $ 697.5 million at june 30 , 2015 . the reductions in lifo-valued inventories increased cost of sales by $ 0.0 million during fiscal year 2016 and $ 1.6 million during fiscal year 2015 and $ 0.0 million during fiscal year 2014 . during the third quarter of fiscal year 2016 , the company recorded a $ 22.5 million excess inventory adjustment in certain reporting units in the pep segment due to the prolonged weakness in oil and gas businesses . 5. property , plant and equipment property , plant and equipment consisted of the following components at june 30 , 2016 and 2015 : replace_table_token_38_th the estimated useful lives of depreciable assets are as follows : asset category useful life ( in years ) buildings and building equipment 10 – 45 machinery and equipment 3 – 30 as a result of the prolonged weakness in oil and gas drilling and exploration activities and the impact this weakness had on certain reporting units in the pep segment , the company recorded an impairment charge of $ 6.5 million during the third quarter of fiscal year 2016. depreciation for the years ended june 30 , 2016 , 2015 and 2014 was $ 106.5 million , $ 107.2 million and $ 93.3 million , respectively . 54 carpenter technology corporation notes to consolidated financial statements 6. goodwill and other intangible assets , net goodwill the company conducts annual goodwill impairment testing at least annually as of june 30 , or more often if events , changes or circumstances indicate that the carrying amount may not be recoverable . two of the company 's reporting units , amega west services ( “ amega ” ) and specialty steel supply ( “ sss ” ) , have been significantly impacted by the prolonged weakness in oil and gas drilling and exploration activity driven by depressed oil prices . given market conditions , depressed customer orders , reporting units results lower than expectation , the company performed an interim impairment test during the third quarter of fiscal year 2016. in connection with the interim impairment test for amega and sss , the company also performed an interim goodwill impairment test for the latrobe distribution reporting unit , for which results have been below expectations for the last several quarters . as a result of the goodwill impairment testing completed in the third quarter of fiscal year 2016 , the company determined that the goodwill associated with amega and sss was impaired and recorded an impairment charge of $ 12.5 million which represents the entire balance of the goodwill recorded for these reporting units . no other impairment was identified at the interim impairment testing date . the company also performed an annual impairment test as of june 30 , 2016 and no additional impairment was identified . the changes in the carrying amount of goodwill by reportable segment for fiscal years 2016 and 2015 were as follows : replace_table_token_39_th the amounts included in “ other ” in the above table represent foreign exchange impacts on the amounts recorded in goodwill . other intangible assets , net replace_table_token_40_th as a result of the prolonged weakness in oil and gas drilling and exploration activities and the impact this weakness had on certain reporting units in the pep segment , the company recorded an impairment charge of $ 1.1 million related to definite lived intangible assets during the third quarter or fiscal year 2016 . 55 carpenter technology corporation notes to consolidated financial statements the company recorded $ 7.3 million of amortization expense related to intangible assets during fiscal year 2016 , $ 9.0 million during fiscal year 2015 and $ 12.2 million during fiscal year 2014 . the estimated annual amortization expense related to intangible assets for each of the succeeding five fiscal years is $ 6.4 million in fiscal year 2017 , $ 6.1 million in fiscal year 2018 , $ 5.9 million in fiscal year 2019 , $ 5.9 million in fiscal year 2020 and $ 5.9 million in fiscal year 2021 . 7. accrued liabilities accrued liabilities consisted of the following as of june 30 , 2016 and 2015 : replace_table_token_41_th 8 . debt the company entered into $ 500.0 million syndicated credit facility ( “ credit agreement ” ) that extends to june 2018. interest on the borrowings under the credit agreement accrue at variable rates , based upon libor or a defined “ base rate , ” both determined based upon the rating of the company 's senior unsecured long-term debt ( the “ debt rating ” ) . story_separator_special_tag our fiscal year 2015 results reflect the impact of increasing sales by 2 percent in a challenging market environment which was more than offset by the weakness in the oil and gas businesses , increased operating costs and the restructuring plan implemented in the third quarter of fiscal year 2015. net sales net sales for fiscal year 2015 were $ 2,226.7 million , which was a 2 percent increase from fiscal year 2014. excluding surcharge revenue , sales were 2 percent higher than fiscal year 2014 on 4 percent lower volume . the results reflect sales increasing in the aerospace and defense , medical and transportation end-use markets , partially offset by the weakness in the energy end-use market due to weak market conditions . the increase in sales combined with lower shipment volume reflects a favorable shift in product mix . geographically , sales outside the united states increased 2 percent from fiscal year 2014 to $ 646.8 million . international sales as a percentage of our total net sales represented 29 percent for both fiscal years 2015 and 2014 . 25 sales by end-use markets we sell to customers across diversified end-use markets . the following table includes comparative information for our net sales , which includes surcharge revenue , by principal end-use markets which we believe is helpful supplemental information in analyzing the performance of the business from period to period : replace_table_token_17_th the following table includes comparative information for our net sales by the same principal end-use markets , but excluding surcharge revenue : replace_table_token_18_th sales to the aerospace and defense end-use market increased 5 percent from fiscal year 2014 to $ 1,053.8 million . excluding surcharge revenue , sales increased 4 percent on 2 percent higher shipment volume . the results reflect an increase in sales of fastener materials and a stronger demand for engine materials , partially offset by lower demand for structural and defense materials . sales to the energy end-use market of $ 285.6 million reflected an 8 percent decrease from fiscal year 2014. excluding surcharge revenue , sales decreased 9 percent on 9 percent lower shipment volume . the results reflect demand softness in materials used in oil and gas drilling and completions in the second half of fiscal year 2015. also , north american average directional and horizontal rig count decreased 46 percent from the prior year . these declines were partially offset by a moderate increase in power generation sales . transportation end-use market sales increased 11 percent from fiscal year 2014 to $ 171.0 million . excluding surcharge revenue , sales increased 9 percent on 5 percent higher shipment volume . the results reflect a strengthening mix for our materials used in engine fasteners , valve and fuel system materials . low fuel prices drove up sales for vehicle platforms with higher carpenter material content . in addition , sales of light trucks increased from the year ago period . also , fiscal year 2015 backlog is experiencing growth due to an improved mix compared to fiscal year 2014. sales to the medical end-use market increased 10 percent to $ 129.4 million from fiscal year 2014. excluding surcharge revenue , sales increased 10 percent on 13 percent higher shipment volume . the results reflect strength in demand for materials used for surgical instruments , as well as increased sales of titanium materials used in orthopedic implant procedures . however , the medical market pricing environment remains extremely competitive . industrial and consumer end-use market sales were $ 450.0 million for fiscal year 2015. excluding surcharge revenue , sales increased 1 percent on 14 percent lower shipment volume . the results reflect a favorable shift in product mix related to high-end consumer electronics and industrial capital goods . 26 distribution end-use market sales decreased 1 percent from the same period a year ago to $ 136.9 million . excluding surcharge revenue , sales decreased 1 percent from the same period a year ago . gross profit gross profit in fiscal year 2015 decreased to $ 318.3 million , or 14.3 percent of net sales ( 17.6 percent of net sales excluding surcharge revenue ) , from $ 398.9 million , or 18.4 percent of net sales ( 22.4 percent of net sales excluding surcharge revenue ) , for fiscal year 2014. the results reflect a stronger product mix which was more than offset by higher operating costs , unfavorable cost absorption as a result of reducing inventory and incremental depreciation expense due to the athens facility which was placed into service late in fiscal year 2014. our surcharge mechanism is structured to recover increases in raw material costs , although in certain cases with a lag effect as discussed above . while the surcharge generally protects the absolute gross profit dollars , it does have a dilutive effect on gross margin as a percent of sales . the following represents a summary of the dilutive impact of the surcharge on gross margin for fiscal years 2015 and 2014. we present and discuss these financial measures because management believes removing the impact of these items provides a more consistent and meaningful basis for comparing results of operations from period to period . see the section “ non-gaap financial measures ” below for further discussion of these financial measures . replace_table_token_19_th selling , general and administrative expenses selling , general and administrative expenses in fiscal year 2015 were $ 177.7 million , or 8.0 percent of net sales ( 9.8 percent of net sales excluding surcharge revenue ) , compared to $ 186.9 million , or 8.6 percent of net sales ( 10.5 percent of net sales excluding surcharge revenue ) , in fiscal year 2014. selling , general and administrative expenses decreased from the same period last year primarily due to lower depreciation and amortization expense of $ 4.3 million , lower variable compensation expense of $ 3.5 million , a reduction in pension eid expense of $ 3.1 million
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we generally target minimum liquidity , consisting of cash and cash equivalents added to available borrowing capacity under our credit agreement , of $ 150.0 million . our syndicated revolving credit agreement ( “ credit agreement ” ) contains a revolving credit commitment of $ 500.0 million and expires in june 2018. as of june 30 , 2016 , we had $ 7.1 million of issued letters of credit . the balance of the credit agreement ( $ 492.9 million as of june 30 , 2016 ) remains available to us . as of june 30 , 2016 , we had total liquidity of approximately $ 575 million , including $ 82.0 million of cash and cash equivalents . from time to time during the year ended june 30 , 2016 we have borrowed under our credit agreement and subsequently repaid any outstanding borrowings prior to june 30 , 2016 . the weighted average daily borrowing under the credit agreement during the year ended june 30 , 2016 was $ 15.3 million with daily outstanding borrowings ranging from $ 0.0 million to $ 50.8 million . we evaluate liquidity needs for alternative uses including funding external growth opportunities , share repurchases as well as funding consistent dividend payments to stockholders . over the last several years , we declared and paid quarterly cash dividends of $ 0.18 per share . 30 < a href= '' https : //www.sec.gov/archives/edgar/data/0000017843/000001784316000094/ # s4f64848b7df154ebb307e8502216f86d ''
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Liquidity
| 2,226
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additionally , because the accounting model for asset acquisitions is a cost accumulation model , preexisting interests in the acquired assets , if any , are not remeasured to fair value but continue to be accounted for at their historical cost . incremental and external direct acquisition costs ( such as legal and third party expenses ) are capitalized if an asset acquisition is probable . if we determine that an asset acquisition is no longer probable , no new costs are capitalized and all capitalized costs that are not recoverable are expensed . the relative fair values used to allocate the cost of an asset acquisition are determined by the same methodologies and assumptions we story_separator_special_tag the following discussion should be read in conjunction with our consolidated financial statements and notes thereto under “ item 15. exhibits and financial statement schedules ” in this annual report on form 10-k. forward-looking statements involve inherent risks and uncertainties regarding events , conditions , and financial trends that may affect our future plans of operations , business strategy , results of operations , and financial position . a number of important factors could cause actual results to differ materially from those included within or contemplated by such forward-looking statements , including , but not limited to , those described under “ item 1a . risk factors ” in this annual report on form 10-k. we do not undertake any responsibility to update any of these factors or to announce publicly any revisions to any of the forward-looking statements contained in this or any other document , whether as a result of new information , future events , or otherwise . as used in this annual report on form 10-k , references to the “ company , ” “ alexandria , ” “ we , ” “ us , ” and “ our ” refer to alexandria real estate equities , inc. and its consolidated subsidiaries . executive summary operating results replace_table_token_24_th the operating results shown above include certain items related to corporate-level investing and financing decisions . refer to the tabular presentation of these items in the “ results of operations ” section within this item 7 for additional information . a reit industry-leading , high-quality tenant roster 52 % of annual rental revenue from investment-grade or publicly traded large cap tenants . continuation of strong rental rate growth and leasing activity strong rental rate increases of 24.1 % and 14.1 % ( cash basis ) for the year ended december 31 , 2018 . the rental rate increase of 14.1 % ( cash basis ) represents our highest annual increase during the past 10 years . our leasing activity aggregating 4.7 million rsf for 2018 represents the second highest annual leasing activity in our history . sale of partial interest in core class a property in february 2019 , we executed a purchase and sale agreement to sell a 60 % interest in 75/125 binney street , a class a property in our cambridge submarket , for a sales price of $ 438 million , or $ 1,880 per rsf , representing a 4.3 % capitalization rate on net operating income ( cash basis ) , annualized for the three months ended december 31 , 2018 . we expect to complete this partial interest sale during the first quarter of 2019 and to reinvest these proceeds into our value-creation pipeline . key sale of unconsolidated real estate joint venture interest in september 2018 , we sold our remaining 27.5 % ownership interest in the unconsolidated real estate joint venture that owned 360 longwood avenue , located in the longwood medical area submarket at a gross sales price of $ 1,659 per rsf , with capitalization rates of 5.1 % and 4.7 % ( cash basis ) . our share of the contractual sales price , net of debt repaid , was $ 70.0 million , and our gain on sale was $ 35.7 million . 73 2018 credit rating improvement during 2018 , moody 's investors service upgraded our corporate issuer credit rating to baa1/stable from baa2/stable and s & p global ratings raised its credit outlook for our corporate credit rating to bbb/positive from bbb/stable . increased common stock dividend common stock dividend declared for the year ended december 31 , 2018 , of $ 3.73 per common share , up 28 cents , or 8 % , over the year ended december 31 , 2017 ; continuation of our strategy to share growth in cash flows from operating activities with our stockholders while also retaining a significant portion for reinvestment . investments we carry our investments in publicly traded companies and certain privately held entities at fair value . as of december 31 , 2018 , cumulative unrealized gains related to changes in fair value aggregated $ 240.2 million . investment income included the following : unrealized losses of $ 94.9 million and unrealized gains of $ 99.6 million recognized during the three months and year ended december 31 , 2018 , respectively ; and realized gains of $ 11.3 million and $ 37.1 million recognized during the three months and year ended december 31 , 2018 , respectively . strong internal growth total revenues of $ 1.3 billion , up 17.7 % , for the year ended december 31 , 2018 , compared to $ 1.1 billion for the year ended december 31 , 2017 . net operating income ( cash basis ) of $ 830.5 million for the year ended december 31 , 2018 , increased by $ 154.7 million , or 22.9 % , compared to the year ended december 31 , 2017 . same property net operating income growth of 3.7 % and 9.2 % ( cash basis ) for the year ended december 31 , 2018 , compared to the year ended december 31 , 2017 . growth of 9.2 % ( cash basis ) represents the highest annual increase during the past 10 years . story_separator_special_tag in november 2018 , ari frankel , our assistant vice president of sustainability and high performance buildings , was elected 2019 chair of nareit 's real estate sustainability council . in january 2019 , we were recognized as the most active biopharma investor by new deal volume in 2017-2018 by silicon valley bank in its “ trends in healthcare investments and exits 2019 ” report and ranked by forbes as the top venture capital investor in the healthcare sector by u.s.-based deal volume in 2018 . 77 operating summary favorable lease structure ( 1 ) same property net operating income growth stable cash flows 97 % percentage of triple net leases increasing cash flows 95 % percentage of leases containing annual rent escalations lower capex burden 96 % percentage of leases providing for the recapture of capital expenditures margins ( 2 ) rental rate growth : renewed/re-leased space operating adjusted ebitda 71 % 69 % ( 1 ) percentages calculated based on rsf as of december 31 , 2018 . ( 2 ) for the year ended december 31 , 2018 . 78 execution of capital strategy during 2018 , we continued to execute on many of the long-term components of our capital strategy . some of our key accomplishments include the following : 2018 capital strategy key metrics $ 18.4 billion of total market capitalization as of december 31 , 2018 $ 2.4 billion of liquidity as of december 31 , 2018 3 % unhedged variable-rate debt as a percentage of total debt replace_table_token_28_th key capital events in 2018 replace_table_token_29_th ( 1 ) includes interest rate reduction of 10 bps and 15 bps on our unsecured senior line of credit and unsecured senior bank term loan , respectively , associated with the upgrade of our corporate issuer credit rating from moody 's investors service . replace_table_token_30_th replace_table_token_31_th ( 1 ) this loan for our unconsolidated real estate joint venture was refinanced with a new loan for $ 145.0 million that bears an interest rate of 4.15 % . the gain on early extinguishment of debt is included in equity in earnings of unconsolidated real estate joint ventures in our consolidated statements of operations under item 15 of this annual report on form 10-k. secured construction loan extension effective date maturity date debt original extended 50/60 binney street secured construction loan january 2019 1/28/19 1/28/20 79 real estate asset sales ( dollars in millions ) date property/market/submarket proceeds july land parcel/northern virginia/maryland $ 6.0 september 360 longwood avenue/greater boston/longwood medical area ( 1 ) 70.0 december 1300 quince orchard boulevard/maryland/gaithersburg 14.4 $ 90.4 ( 1 ) see the “ real estate asset sales ” section under item 2 of this annual report on form 10-k for additional information . issuances of equity ( dollars in millions ) program number of shares sold net proceeds forward equity sales agreements 6,900,000 $ 808.3 atm common stock offering program 4,015,120 496.3 10,915,120 $ 1,304.6 repurchase of equity ( dollars in millions ) stock redeemed shares repurchased total payment preferred stock redemption charge series d convertible preferred stock 402,000 $ 14.0 $ 4.2 replace_table_token_32_th 2019 capital strategy during 2019 , we intend to continue to execute our capital strategy to achieve further improvements to our credit rating , which will allow us to further improve our cost of capital and continue our disciplined approach to capital allocation . for further information , refer to the “ projected results ” section below within this item 7 of this annual report on form 10-k. consistent with 2018 , our capital strategy for 2019 includes the following elements : allocate capital to class a properties located in collaborative life science and technology campuses in aaa urban innovation clusters ; continue to improve our credit profile ; maintain prudent access to diverse sources of capital , which include cash flows from operating activities after dividends , incremental debt supported by our growth in ebitda , real estate asset sales , non-real estate investment sales , joint venture capital , and other capital such as sales of equity ; maintain commitment to long-term capital to fund growth ; prudently ladder debt maturities ; reduce short-term variable-rate debt ; prudently manage equity investments to support corporate-level investment strategies ; maintain significant balance sheet liquidity ; and maintain a stable and flexible balance sheet . given the anticipated delivery of significant incremental ebitda from our development and redevelopment of new class a properties , we expect to be able to debt fund a significant portion of construction on a leverage-neutral basis . we expect to continue to maintain access to a diverse source of debt , including unsecured senior notes payable , as well as secured construction loans for our development and redevelopment projects from time to time . we expect to continue to maintain a significant proportion of our net operating income on an unencumbered basis to allow for future flexibility for accessing both unsecured and secured debt markets , although we expect traditional secured mortgage notes payable will remain a small component of our capital structure . in addition to debt funding on a leverage-neutral basis , we intend to supplement our remaining capital needs with net cash flows from operating activities , after dividends and proceeds from real estate asset sales , non-real estate investment sales , partial interest sales , and other debt and equity capital . 80 improved cost of capital as part of our capital strategy to continue strengthening our credit profile , we expect to complete and place into service development and redevelopment projects currently under construction , which we expect will deliver significant incremental ebitda . as our ebitda grows in 2019 and beyond , this growth in ebitda should allow us to obtain debt funding on a leverage-neutral basis and provide significant capital to fund our development and redevelopment projects . additionally , the resulting improvement in our balance sheet leverage ratio should allow us to access diverse sources of capital , strengthen our credit profile , and reduce our cost of capital .
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results of operations we present a tabular comparison of items , whether gain or loss , that may facilitate a high-level understanding of our results and provide context for the disclosures included in our annual report on form 10-k. we believe this tabular presentation promotes a better understanding for investors of the corporate-level decisions made and activities performed that significantly affect comparison of our operating results from period to period . we also believe this tabular presentation will supplement an understanding of our disclosures and real estate operating results . gains or losses on sales of real estate and impairments of held for sale assets are related to corporate-level decisions to dispose of real estate . gains or losses on early extinguishment of debt and preferred stock redemption charges are related to corporate-level financing decisions focused on our capital structure strategy . significant realized and unrealized gains or losses on non-real estate investments and impairments of real estate and non-real estate investments are not related to the operating performance of our real estate assets as they result from strategic , corporate-level non-real estate investment decisions and external market conditions . significant items , whether a gain or loss , included in the tabular disclosure , for current periods are described in further detail within this item 7 of this annual report on form 10-k. items included in net income attributable to alexandria 's common stockholders are as follows : replace_table_token_35_th ( 1 ) refer to note 7 – “ investments ” to our consolidated financial statements under item 15 of this annual report on form 10-k for more information . ( 2 ) related to two publicly traded non-real estate investments in life science entities .
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ROO
| 12,982
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our actual results may differ substantially from those expressed in or implied by any forward-looking statements herein due to a number of factors , including but not limited to the risks and uncertainties described in this item 7 , in item 1a “ risk factors ” and elsewhere in this annual report . these forward-looking statements reflect our views and assumptions only as of the date such forward-looking statements are made . except as required by law , we assume no responsibility for updating any forward-looking statements , whether as a result of new information , future events or otherwise . the following discussion should be read in conjunction with our audited consolidated financial statements and the related notes and other financial information appearing elsewhere in this annual report and other reports and filings made with the sec . overview kratos is a government contractor at the forefront of the dod 's recapitalization of strategic weapon systems to address peer and near peer threats and its related rapid innovation initiatives . kratos is a leading technology , intellectual property , proprietary product and system company focused on the u.s. and its allies ' national security . kratos is a recognized industry leader in the rapid development , demonstration and fielding of disruptive , transformative and high technology systems and products at an affordable cost . at kratos , affordability is a technology . kratos ' primary focus areas are unmanned systems , space and satellite communications , microwave electronics , cybersecurity/warfare , rocket , hypersonic and missile defense systems , turbine technologies , c5isr systems and training systems . we believe that our technology , intellectual property , proprietary products and designed-in positions on our customers ' programs , platforms and systems , and our ability to rapidly develop , demonstrate and field affordable leading technology systems gives us a competitive advantage . we believe that our extensive past performance qualifications and demonstrated ability to meet or exceed our customers ' demanding requirements creates a high barrier to entry into our markets . our workforce is primarily engineering and technically oriented with a significant number of kratos employees holding national 45 security clearances . much of our work is performed at customer locations , or in a secure manufacturing facility . our primary end customers are national security related agencies . our entire organization is focused on executing our strategy of being the leading technology and intellectual property based product and system company in our industry . our primary end customers are u.s. government agencies , including the dod , intelligence agencies , and other national and homeland security related agencies . we also conduct business with local , state and foreign governments and domestic and international commercial customers . in fiscal 2020 , 2019 and 2018 , we generated 73 % , 71 % and 72 % , respectively , of our total revenues from contracts with the u.s. government ( including all branches of the u.s. military and including fms ) , either as a prime contractor or a subcontractor . we believe our stable customer base , strong customer relationships , intellectual property , specialized and differentiated products , broad array of contract vehicles , “ designed in ” positions on strategic national security platforms , our targeted investments in strategic growth areas , large employee base possessing specialized skills , security clearances , specialized manufacturing facilities and equipment , extensive list of past performance qualifications , and significant management and operational capabilities position us for success . we were incorporated in the state of new york on december 19 , 1994 and began operations in march 1995. we reincorporated in the state of delaware in 1998. industry background on december 27 , 2020 , the consolidated appropriations act , 2021 , was signed into law . the $ 2.3 trillion spending bill combines $ 900 billion in stimulus relief for the covid-19 pandemic in the united states with a $ 1.4 trillion omnibus spending bill for the fy 2021 ( combining 12 separate annual appropriations bills ) . the bills allocate $ 695.9 billion for the dod , a decrease of $ 9.7 billion from fy 2020. the federal budget and debt ceiling are expected to continue to be the subject of considerable debate , which could have a significant impact on defense spending broadly and the company 's programs in particular . the u.s. government 's fiscal year ends september 30. the budget environment , including covid-19 spending increases proposed by the new biden administration , and uncertainty surrounding the debt ceiling and the appropriations process , remain significant short and long-term risks . considerable uncertainty exists regarding how future budget and program decisions will unfold , including the defense spending priorities of the administration and congress and what challenges budget reductions ( required by the bca and otherwise ) will present for the defense industry . if annual appropriations bills are not timely enacted , the u.s. government may again operate under a cra , restricting new contract or program starts , restricting increased funding or additional quantities on existing contracts , presenting resource allocation and forecasting challenges and placing limitations on some planned program budgets , and we may face another government shutdown of unknown duration . if a prolonged government shutdown of the dod were to occur , it could result in program cancellations , disruptions and or stop work orders and could limit the u.s. government 's ability to effectively progress programs and to make timely payments , and our ability to perform on our u.s. government contracts and successfully compete for new work . we believe continued budget pressures , cras or u.s. government shutdowns would have serious negative consequences for the security of our country and the defense industrial base , including the company and the customers , employees , suppliers , investors , and communities that rely on companies in the defense industrial base . it is likely budget and program decisions made in such an uncertain environment would have long-term implications for our company and the entire defense industry . story_separator_special_tag from a customer and solutions perspective , we view our business as an integrated whole , leveraging skills and assets wherever possible . discontinued operations on february 28 , 2018 , the company entered into a stock purchase agreement to sell the operations of kratos public safety & security solutions , inc. , a delaware corporation and wholly owned subsidiary of the company ( “ pss ” ) , to securitas electronic security , inc. , a delaware corporation ( “ buyer ” ) . on june 11 , 2018 , we completed the sale of all of the issued and outstanding capital stock of pss to buyer for a purchase price of $ 69 million in cash , subject to a closing net working capital adjustment ( the “ transaction ” ) . to date , we have received approximately $ 70 million of aggregate net cash proceeds from the transaction , after taking into account amounts that were paid by us pursuant to a negotiated transaction services agreement between us and the buyer , receipt of approximately $ 6.8 million in net working capital retained by the company , and associated transaction fees and expenses , excluding the impact of the final settlement and determination of the closing net working capital adjustment . we are currently in dispute with the buyer regarding the closing net working capital adjustment . 47 the amount in dispute is approximately $ 8 million . the company has recorded a net break-even on the sale of the pss business which includes the aggregate net proceeds described above that have been collected , excluding the impact of the final settlement and determination of the closing net working capital adjustment . the resolution of the ongoing dispute will be recorded in future periods when resolved . for additional information regarding discontinued operations , see note 9 of the notes to consolidated financial statements contained within this annual report . key financial statement concepts as of december 27 , 2020 , we consider the following factors to be important in understanding our financial statements . the company 's business with the u.s. government and prime contractors is generally performed under fixed-price , cost reimbursable , or time and materials contracts . cost reimbursable contracts for the u.s. government provide for reimbursement of costs plus the payment of a fee . some cost reimbursable contracts include award and incentive fees that are awarded based on performance on the contract . under time and materials contracts , we are reimbursed for labor hours at negotiated hourly billing rates and reimbursed for travel and other direct expenses at actual costs plus applied general and administrative expenses . for the majority of contracts , we satisfy the underlying performance obligations over time as the customer obtains control or receives benefits as work is performed on the contract . as a result , under asc 606 revenue is recognized over a period of time utilizing the percentage-of-completion cost-to-cost method . in accordance with asc 606 , we evaluate whether a contract with a customer exists by evaluating a number of criteria including whether collection of consideration is reasonably assured ; comprehensive collection history ; results of our communications with customers ; the current financial position of the customer ; and the relevant economic conditions in the customer 's country . if we have had no prior experience with the customer , we may review reports from various credit organizations to ensure that the customer has a history of paying its creditors in a reliable and effective manner . if the financial condition of our customers were to deteriorate and adversely affect their financial ability to make payments , allowances would be required . we monitor our policies and procedures with respect to our contracts on a regular basis to ensure consistent application under similar terms and conditions as well as compliance with all applicable government regulations . in addition , costs incurred and allocated to contracts with the u.s. government are routinely audited by the dcaa . we manage and assess the performance of our businesses based on our performance on individual contracts and programs obtained generally from government organizations with consideration given to our “ critical accounting principles and estimates ” discussed below . due to the federal acquisition regulation rules that govern our business , most types of costs are allowable , and we do not focus on individual cost groupings ( such as cost of sales or general and administrative costs ) as much as we do on total contract costs , which are a key factor in determining contract operating income . as a result , in evaluating our operating performance , we look primarily at changes in sales and service revenues and operating income , including the effects of significant changes in operating income . changes in contract revenue and cost estimates are reviewed on a contract-by-contract basis and are revised periodically throughout the life of the contract such that adjustments to profit resulting from revisions are made cumulative to the date of the revision in accordance with accounting principles generally accepted in the u.s. ( “ gaap ” ) . significant management judgments and estimates , including the estimated costs to complete the project , which determine the project 's percentage complete , must be made and used in connection with the revenue recognized in any accounting period . material differences may result in the amount and timing of our revenue for any period if management makes different judgments or utilizes different estimates . effective december 31 , 2018 , we adopted the requirements of asu 2016-02 , leases , also referred to as “ asc 842 ” , utilizing the optional transition method , as discussed in note 1 to the accompanying consolidated financial statements . asc 842 requires that lessees recognize assets and liabilities for the rights and obligations underlying leases with a lease term of more than one year .
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results of operations comparison of results for the year ended december 27 , 2020 to the year ended december 29 , 2019 revenues . revenues by reportable segment for the years ended december 27 , 2020 and december 29 , 2019 are as follows ( in millions ) : replace_table_token_3_th revenues increased $ 30.2 million to $ 747.7 million for the year ended december 27 , 2020 from $ 717.5 million for the year ended december 29 , 2019. revenues in our kgs segment increased $ 4.6 million due to revenues from the recent asc signal acquisition , which contributed an aggregate of approximately $ 21.9 million , and increases in our microwave products , defense and rocket support and c5isr businesses of approximately $ 17.9 million . these increases were offset by reduced revenues in our legacy services , commercial satellite and training solutions business of $ 36.2 million primarily reflecting the completion and rescoping of certain international and foreign military sales contracts and reductions in our commercial satellite business as a result of the completion of large foreign satellite infrastructure deployments and from impacts resulting from covid-19 . revenues in our us segment increased $ 25.6 million primarily due to work performed on certain confidential drone programs , and due to contributions of approximately $ 2.5 million from the recent tdi and 5-d acquisitions . product sales increased $ 54.1 million to $ 499.0 million for the year ended december 27 , 2020 from $ 444.9 million for the year ended december 29 , 2019 , primarily as a result of increased production activity in our us segment , increased production in our microwave products , modular systems and rocket support businesses and increases from our recent asc signal acquisition , offset partially by reductions in our commercial satellite and training solutions businesses .
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ROO
| 6,749
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we believe the issues with the greatest potential impact are : ( 1 ) reducing annual market basket updates to providers , which include annual productivity adjustments ( reductions ) , ( 2 ) the possible combining , or “ bundling , ” of reimbursement for a medicare beneficiary 's episode of care at some point in the future , ( 3 ) implementing a voluntary program for accountable care organizations ( “ acos ” ) , ( 4 ) creating an independent payment advisory board , and ( 5 ) modifying employer-sponsored healthcare insurance plans . the 2010 healthcare reform laws include other provisions that could affect us as well . they include the expansion of the federal anti-kickback law and the false claims act that , when combined with other recent federal initiatives , are likely to increase investigation and enforcement efforts in the healthcare industry generally . changes include increased resources for enforcement , lowered burden of proof for the government in healthcare fraud matters , expanded definition of claims under the false claims act , enhanced penalties , and increased rewards for relators in successful prosecutions . the 2010 healthcare reform laws also require the establishment of new mandatory quality data reporting programs for inpatient rehabilitation facilities and long-term acute care hospitals to take effect for fiscal year 2014. cms is required to select and publish quality measures for these providers by october 1 , 2012. under these programs , a provider that fails to report on the selected quality measures will have its annual payment update factor reduced by 2 % for the applicable fiscal year . f-13 some states in which we operate have also undertaken , or are considering , healthcare reform initiatives that address similar issues . while many of the stated goals of the reform initiatives are consistent with our own goal to provide care that is high-quality and cost-effective , legislation and regulatory proposals may lower reimbursements , increase the cost of compliance , and otherwise adversely affect our business . we can not predict what healthcare initiatives , if any , will be enacted , implemented or amended , or the effect any future legislation or regulation will have on us . if we are not able to maintain increased case volumes or reduce operating costs to offset any future pricing roll-back or freeze or increased costs associated with new regulatory compliance obligations , our operating results could be adversely affected . our results could be further adversely affected by other changes in laws or regulations governing the medicare program , as well as possible changes to or expansion of the audit processes conducted by medicare contractors or medicare recovery audit contractors . in addition , there are increasing pressures , including as a result of the 2010 healthcare reform laws , from many third-party payors to control healthcare costs and to reduce or limit increases in reimbursement rates for medical services . our relationships with managed care and non-governmental third-party payors , such as health maintenance organizations and preferred provider organizations , are generally governed by negotiated agreements . these agreements set forth the amounts we are entitled to receive for our services . we could be adversely affected in some of the markets where we operate if we are unable to negotiate and maintain favorable agreements with third-party payors . our third-party payors may also , from time to time , request audits of the amounts paid , or to be paid , to us under our agreements with them . we could be adversely affected in some of the markets where we operate if the auditing payor alleges that substantial overpayments were made to us due to coding errors or lack of documentation to support medical necessity determinations . as discussed in note 22 , contingencies and other commitments , we are a party to a number of lawsuits . we can not predict the outcome of litigation filed against us . substantial damages or other monetary remedies assessed against us could have a material adverse effect on our business , financial position , results of operations , and cash flows . revenue recognition— revenues consist primarily of net patient service revenues that are recorded based upon established billing rates less allowances for contractual adjustments . revenues are recorded during the period the healthcare services are provided , based upon the estimated amounts due from the patients and third-party payors , including federal and state agencies ( under the medicare and medicaid programs ) , managed care health plans , commercial insurance companies , and employers . estimates of contractual allowances under third-party payor arrangements are based upon the payment terms specified in the related contractual agreements . third-party payor contractual payment terms are generally based upon predetermined rates per diagnosis , per diem rates , or discounted fee-for-service rates . other operating revenues , which include revenues from cafeteria , gift shop , rental income , and management and administrative fees , approximated 1.2 % , 1.4 % , and 1.6 % of net operating revenues for the years ended december 31 , 2010 , 2009 , and 2008 , respectively . laws and regulations governing the medicare and medicaid programs are complex , subject to interpretation , and are routinely modified for provider reimbursement . all healthcare providers participating in the medicare and medicaid programs are required to meet certain financial reporting requirements . federal regulations require submission of annual cost reports covering medical costs and expenses associated with the services provided by each hospital to program beneficiaries . annual cost reports required under the medicare and medicaid programs are subject to routine audits , which may result in adjustments to the amounts ultimately determined to be due to healthsouth under these reimbursement programs . these audits often require several years to reach the final determination of amounts earned under the programs . story_separator_special_tag this continued focus on the teamworks initiative , coupled with the dedication and hard work of our employees , allowed us to continue to generate discharge growth throughout 2009 , in spite of the difficult comparisons to 2008 's growth . this growth in discharges helped mitigate the negative impact of the pricing roll-back . decreased outpatient volumes in all periods presented resulted primarily from the closure of outpatient satellite clinics in prior periods . challenges in securing therapy staffing in certain markets and continued competition from physicians offering physical therapy services within their own offices also contributed to the decline . during 2010 , outpatient visit cancellations caused by the severe winter storms in some of our northeast and mid-atlantic markets in the first quarter of 2010 also contributed to the decreased volume . as of december 31 , 2010 , 2009 , and 2008 , we operated 32 , 40 , and 50 outpatient satellite clinics , respectively . as discussed above , the market basket increase of 2.5 % irfs received on october 1 , 2009 was reduced to 2.25 % effective april 1 , 2010. as also discussed above , irfs received a market basket update of 2.5 % under the 2011 rule effective october 1 , 2010. however , this market basket update was reduced to 2.25 % under the requirements of the 2010 healthcare reform laws . salaries and benefits salaries and benefits represent the most significant cost to us and represent an investment in our most important asset : our employees . salaries and benefits include all amounts paid to full- and part-time employees who directly participate in or support the operations of our hospitals , including all related costs of benefits provided to employees . it also includes amounts paid for contract labor . we actively manage the productive portion of our salaries and benefits utilizing certain metrics , including employees per occupied bed , or “ epob . ” this metric is determined by dividing the number of full-time equivalents , including an estimate of full-time equivalents from the utilization of contract labor , by the number of occupied beds during each period . the number of occupied beds is determined by multiplying the number of licensed beds by our occupancy percentage . for the years ended december 31 , 2010 , 2009 , and 2008 , our epob was 3.50 , 3.53 , and 3.62 , respectively , or a year-over-year improvement of 0.8 % and 2.5 % in 2010 and 2009 , respectively . salaries and benefits increased from 2009 to 2010 as a result of an approximate 2.3 % merit increase provided to employees on october 1 , 2009 , an increase in the number of full-time equivalents as a result of our development activities , as discussed above , and a change in the mix of licensed versus non-licensed employees . the process of standardizing our labor practices across all of our hospitals , which we began in 2009 with the roll-out of a new labor management system , and the implementation of the new coverage requirements that became effective january 1 , 2010 have decreased the use of non-licensed employees , which increased our average cost per full-time equivalent . salaries and benefits as a percent of net operating revenues in 2010 continued to be positively impacted by continued improvement in labor productivity , a reduction in self-insured workers ' compensation costs due to revised actuarial estimates , and the medicare pricing changes that became effective on october 1 , 2009. these positive impacts were offset by the decline in outpatient revenues , as discussed above , as well as an increase in the number of full-time equivalents at new or newly acquired hospitals who were ramping up operations during 2010. during late 2008 , we addressed our comprehensive benefits package and made refinements that allowed us , and continue to allow us , to remain competitive in this challenging staffing environment while also being consistent with our goal of being a high-quality , low-cost provider of inpatient rehabilitative services . such refinements included , but were not limited to , passing along a portion of the increased costs associated with medical plan benefits to our employees and reducing certain aspects of our paid-time-off program . also , as a result of our recruiting and retention efforts , costs associated with contract labor decreased in 2009. as a result , salaries and benefits as a percent of net operating revenues decreased from 2008 to 2009. as it is routine to provide merit increases to our employees on october 1 of each year , which normally coincides with our annual medicare pricing adjustment , we provided an approximate 2 % merit increase to our employees effective october 1 , 2010 . 37 other operating expenses other operating expenses include costs associated with managing and maintaining our hospitals . these expenses include such items as contract services , utilities , insurance , professional fees , and repairs and maintenance . other operating expenses in 2010 increased over 2009 due primarily to increased self-insurance costs associated with professional and general liability claims and investments we made in our core business in 2010 , including the investment in our case management function , as discussed above . as a result of the jury verdict discussed in note 22 , contingencies and other commitments , “ other litigation , ” to the accompanying consolidated financial statements , we recorded a $ 4.6 million charge to other operating expenses during the second quarter of 2010. in addition , we update our actuarial estimates surrounding our self-insurance reserves in june and december of each year . during 2010 , we recorded a $ 7.6 million increase in self-insurance costs associated with professional and general liability risks due to revised actuarial estimates that primarily resulted from an increase in expected losses on a subset of claims in our recent claims history . other operating
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our growth strategy in 2011 will again focus on organic growth and disciplined growth from development activities . we believe the changes made to our credit agreement and debt profile in the fourth quarter of 2010 provide us with greater flexibility to execute our business plan . for additional discussion of our strategy and business outlook , see item 1 , business , and the “ executive overview - business outlook ” section of this item . key challenges over the past few years , we have focused on deleveraging , strengthening our balance sheet , growing organically , building new hospitals , and pursuing acquisitions of competitor inpatient rehabilitation facilities ( “ irfs ” ) . we believe continued growth in our adjusted ebitda and our strong cash flows from operations will allow us to continue to reduce our leverage and invest in growth opportunities . in addition , during october 2010 , we closed transactions that are consistent with our capital structure objectives . as discussed above , these transactions include a public offering of $ 275 million in aggregate principal amount of 7.25 % senior notes due 2018 and $ 250 million in aggregate principal amount of 7.75 % senior notes due 2022 , as well as replacing our existing credit agreement with a new credit agreement that matures in 2015 and provides us with a $ 500 million revolving credit facility , including a $ 260 million letter of credit subfacility . see the “ liquidity and capital resources ” section of this item for additional information . while we are pleased with the execution of our business plan to date , the following are some of the challenges we continue to face : volume growth . as discussed above , the majority of patients we serve experience significant physical disabilities due to medical conditions , such as strokes , hip fractures , head injuries , spinal cord injuries , and neurological disorders , that are generally non-discretionary in nature and which require rehabilitative healthcare services in an inpatient setting . in addition , because most of our patients are persons 65 and older , our patients generally have insurance coverage through medicare . however , we do treat some patients with medical conditions that are discretionary in nature . during periods of economic uncertainty like the one we are in now ,
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Liquidity
| 217
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in connection with the company 's acquisition of neurogen in december 2009 , the company issued to neurogen stockholders four cvrs ; real estate , aplindore , vr1 and h3 , that entitle them to cash and or shares of third-party stock under certain circumstances . the company recorded the acquisition-date fair value of the cvrs as part of the purchase price . the acquisition-date fair value of the real estate cvr of $ 3.2 million was estimated using the net proceeds from a pending sale transaction and recorded as a payable to stockholders at december 31 , 2009 . in february 2010 , the company completed the sale of the real estate and subsequently distributed the proceeds to the holders of the real estate cvr . as a result and after final settlement of all related expenses , the real estate cvr was terminated in august 2010 . in 2012 , the company received a notice from a collaborative partner that it was terminating its agreement related to vr1 for convenience and subsequently the company recorded a decrease in the fair value of the liability for the related cvr of $ 0.2 million . additionally , per the cvr agreement , no payment event date for the h3 program can occur after december 23 , 2012 and the company recorded a decrease in the fair value of the liability for the related cvr of $ 0.5 million as of that date . there are no remaining cvr obligations under the agreement with the former neurogen shareholders . fair value of financial instruments fair value is defined as the exit price that would be received to sell an asset or paid to transfer a liability . fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability . the company establishes a three-level hierarchy to prioritize the inputs used in measuring fair value . the levels are described in the below with level 1 having the highest priority and level 3 having the lowest : level 1 - observable inputs such as quoted prices in active markets level 2 - inputs other than the quoted prices in active markets that are observable either directly or indirectly level 3 - unobservable inputs in which there is little or no market data , which require the company to develop its own assumptions 53 the company 's long-term investments include investments in equity securities which were subject to trading restrictions . additionally , there is a liability related to the investment in equity securities for amounts owed to former license holders . the fair value of the investments was previously determined using quoted market prices in active markets and discounted for the restrictive effect . for the year ended december 31 , 2013 , the trading restrictions were removed and the investments were reclassified to short-term investments . the metabasis cvr liability is marked-to-market at each reporting period based upon the quoted market prices of the underlying cvr . the fair value of the cydex contingent liabilities are determined at each reporting period based upon an income valuation model . the co-promote termination payments receivable represents a non-interest bearing receivable for future payments to be made by pfizer and is recorded at its fair value . the receivable and liability will remain equal and adjusted each quarter for changes in the fair value of the obligation including any changes in the estimate of future net avinza product sales . the company evaluates its financial instruments at each reporting period to determine if any transfers between the various three-level hierarchy have occurred and appropriately reclassifies its financial instruments to the appropriate level within the hierarchy . treasury stock the company may on occasion repurchase its common stock on the open market or in private transactions . when such stock is repurchased it is not constructively or formally retired and may be reissued if certain regulatory requirements are met ; however , the company may from time to time choose to retire the shares of common stock held in its treasury . the purchase price of the common stock repurchased is charged to treasury stock . during the year ended december 31 , 2013 , the company retired 1,118,222 shares of its common stock held in treasury . revenue recognition royalties on sales of products commercialized by the company 's partners are recognized in the quarter reported by the respective partner . generally , the company receives royalty reports from its licensees approximately one quarter in arrears due to the fact that its agreements require partners to report product sales between 30 - 60 days after the end of the quarter . the company recognizes royalty revenues when it can reliably estimate such amounts and collectability is reasonably assured . under this accounting policy , the royalty revenues reported are not based upon estimates and such royalty revenues are typically reported in the same period in which payment is received . revenue from material sales of captisol is recognized upon transfer of title , which normally passes upon shipment to the customer . the company 's credit and exchange policy includes provisions for the return of product between 30 to 90 days , depending on the specific terms of the individual agreement , when that product ( 1 ) does not meet specifications , ( 2 ) is damaged in shipment ( in limited circumstances where title does not transfer until delivery ) , or ( 3 ) is exchanged for an alternative grade of captisol . the company records revenue net of sales tax collected and remitted to government authorities . revenue from research funding under the company 's collaboration agreements is earned and recognized on a percentage-of-completion basis as research hours are incurred in accordance with the provisions of each agreement . story_separator_special_tag pursuant to the terms of the avinza purchase agreement , we retained the liability for returns of product from wholesalers that had been sold by us prior to the close of this transaction . accordingly , as part of the accounting for the gain on the sale of avinza , we recorded a reserve for avinza product returns . for the years ended december 31 , 2013 , 2012 , and 2011 , we recognized pre-tax gains of $ 2.6 million , $ 3.7 million and $ 0 , respectively , due to subsequent changes in certain estimates of assets and liabilities recorded as of the sale date . income tax expense on discontinued operations in 2012 , we recorded income tax expense on discontinued operations of $ 1.5 million ( please see the discussion on income taxes above ) . there was no income tax expense on discontinued operations for the years ended december 31 , 2013 and 2011. liquidity and capital resources we have financed our operations through offerings of our equity securities , borrowings from long-term debt , issuance of convertible notes , product sales and the subsequent sales of our commercial assets , royalties , collaborative research and development and other revenues , capital and operating lease transactions . we have incurred significant losses since inception . at december 31 , 2013 , our accumulated deficit was $ 671.3 million and we had negative working capital of $ 4.1 million . we believe that cash flows from operations will improve due to consistent captisol sales , an increase in royalty revenues driven primarily from continued increases in promacta and kyprolis sales , recent product approvals and regulatory developments , as well as anticipated new license and milestone revenues . in the event revenues and operating cash flows do not meet expectations , management plans to reduce discretionary expenses . however , it is possible that we may be required to seek additional financing . there can be no assurance that additional financing will be available on terms acceptable to management , or at all . we believe our available cash , cash equivalents , and short-term investments as well as our current and future royalty , license and milestone revenues will be sufficient to satisfy our anticipated operating and capital requirements , through at least the next twelve months . our future operating and capital requirements will depend on many factors , including , but not limited to : the pace of scientific progress in our research and development programs ; the potential success of these programs ; the scope and results of preclinical testing and clinical trials ; the time and costs involved in obtaining regulatory approvals ; the costs involved in preparing , filing , prosecuting , maintaining and enforcing patent claims ; competing technological and market developments ; the amount of royalties on sales of the commercial products of our partners ; the efforts of our collaborative partners ; obligations under our operating lease agreements ; and the capital requirements of any companies we acquire , including pharmacopeia , neurogen , metabasis and cydex . we believe that the actions presently being taken to generate sufficient operating cash flow provide the opportunity for us to continue as a going concern . while we believe in the viability of our strategy to generate sufficient operating cash flow and in our ability to raise additional funds , there can be no assurances to that effect . our ability to achieve our operational targets is dependent upon our ability to further implement our business plan and generate sufficient operating cash flow . in january 2011 , we entered into a $ 20 million secured term loan credit facility with oxford financial group . the loan was amended in january 2012 to increase the secured credit facility to $ 27.5 million . the original $ 20 million borrowed under the facility bears interest at a fixed rate of 8.6 % . the additional $ 7.5 million bears interest at a fixed rate of 8.9 % . under the terms of the secured debt , we made interest-only payments through february 2013. subsequent to the interest-only payments , the note amortizes with principal and interest payments through the remaining term of the loan . additionally , we must also make an additional final payment equal to 6 % of the total amount borrowed which is due at maturity and is being accreted over the life of the loan . the maturity date of the term loan is august 1 , 2014. in march 2013 , we prepaid $ 7.0 million of the secured term loan credit facility . additionally , we paid a prepayment fee of 1 % of the prepayment amount , or $ 0.1 million and a prorated final-payment fee of 6 % of the final payment , or $ 0.4 million . as of december 31 , 2013 , the remaining principal balance of the note was $ 9.1 million . 32 in october 2013 , we filed a universal shelf registration statement with the sec that was automatically declared effective due to our status as a well-known seasoned issuer . this registration statement provides additional financial flexibility for us to sell shares of common stock or other equity or debt securities as needed at any time , including through our at-the-market equity issuance program . during the year ended december 31 , 2013 , we did not issue any common shares through this at-the market equity issuance program . in connection with the acquisition of cydex on january 24 , 2011 , we issued a series of cvr agreements and assumed certain contractual obligations . we paid the cvr holders $ 4.3 million in january 2012 and may be required to pay additional amounts upon achievement of certain clinical and regulatory milestones to the cydex cvr holders and former license holders . in 2011 , $ 0.9 million was paid to the cydex shareholders
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in addition , the amendment removed from the license agreement a provision that afforded us the potential to earn a 10 % equity position in chiva as a milestone payment . in september 2011 , chiva paid us the $ 0.5 million licensing fee called for by the amendment , of which $ 0.1 million was remitted to cvr holders . cydex in connection with the acquisition of cydex on january 24 , 2011 , we issued a series of cvrs and also assumed certain contingent liabilities . in 2011 , $ 0.9 million was paid to the cydex shareholders upon completion of a licensing agreement with medco for the captisol enabled intravenous formulation of clopidogrel . an additional $ 2.0 million was paid to the cydex shareholders upon acceptance by the fda of onyx 's nda , $ 4.3 million was paid in january 2012 under the terms of the agreement , and an additional $ 3.5 million was paid upon approval by the fda of kyprolis for the potential treatment of patients with relapsed and refractory multiple myeloma . we recorded a cash payment of $ 0.1 million for the topiramate orphan drug designation milestone to former license holders . we may be required to make additional payments upon achievement of certain clinical and regulatory milestones to the cydex shareholders and former license holders . in addition , we will pay cydex shareholders , for each respective year from 2014 through 2016 , ( i ) 20 % of all cydex-related revenue , but only to the extent that and beginning only when cydex-related revenue for such year exceed $ 15.0 million , ( ii ) plus an additional 10 % of all cydex-related revenue recognized during such year , but only to the extent that and beginning only when aggregate cydex-related revenue for such year exceeds $ 35.0 million . we paid $ 0.2 million to the cydex shareholders in march 2012 related to 2011 cydex-related revenue . there was no revenue sharing payment for 2012. the revenue sharing payment for 2013 was $ 2.5 million , $ 0.9 million of which was paid during the year ended december 31 , 2013. the estimated fair value of the contingent liabilities recorded as part of the cydex acquisiton at december 31 , 2013 , 2012 , and 2011 was $ 9.3 million , $ 10.9 million and
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Liquidity
| 9,547
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in addition to these previously named companies , we also compete for projects from time to time with smaller seismic companies which operate in local markets with only one or two crews . story_separator_special_tag markets in the u.s. and canada during the fourth quarter of 2013. in 2013 in the u.s. , we operated nine crews in the first quarter , began the second quarter operating nine crews and ended the second quarter operating two crews . we started the third quarter with three crews and ended the quarter operating five crews which we continued operating during the fourth quarter of 2013. in canada , we operated six crews in the first quarter of 2013 , began the second quarter operating six crews , and ended the quarter operating two crews . we operated no crews in canada during the third quarter of 2013 and started and ended the fourth quarter operating three crews . this compares to 2012 when we operated eight seismic crews in the u.s. during the first and second quarters , added a ninth crew in the third quarter , and continued operating nine crews during the fourth quarter of 2012. we operated seven seismic crews in canada during the first quarter , two crews during the second quarter , the equivalent of 1.5 crews during the third quarter , and five crews during the fourth quarter of 2012. cost of services . our cost of services was $ 107,675,356 for the year ended december 31 , 2013 , compared to $ 135,279,937 for the same period of 2012 , a decrease of 20.4 % . this decrease is attributable to operating fewer crews . when a crew is shut down , several key crew members continue as paid employees of the company ( to retain their skill sets ) , and the majority of the crew is laid off without pay . as a percentage of revenues , cost of services was 80.0 % for the year ended december 31 , 2013 , and 68.9 % for the year ended december 31 , 2012. this increase was primarily attributable to costs we incurred as we idled several crews in the u.s. in the second and third quarters due to the softening in the seismic market , adverse weather conditions in the u.s. and canada , an increase in higher cost shot-hole work , and land permitting issues in canada in the fourth quarter of 2013. selling , general , and administrative expenses . sg & a expenses were $ 9,593,068 for the year ended december 31 , 2013 , compared to $ 8,755,270 for the same period of 2012 , an increase of 9.6 % . this increase was primarily attributable to personnel additions and an increase in share-based compensation expense . sg & a expense as a percentage of revenues was 7.1 % for the year ended december 31 , 2013 , and 4.5 % for the year ended december 31 , 2012 , reflecting the decrease in revenues in 2013. depreciation and amortization expense . depreciation and amortization expense was $ 24,644,190 for the year ended december 31 , 2013 , compared to $ 25,502,597 for the same period of 2012 , a decrease of 3.4 % . this decrease was primarily attributable to our maintenance capital expenditures policy adopted early in the first quarter of 2013. depreciation and amortization expense as a percentage of revenues was 18.3 % for the year ended december 31 , 2013 , compared to 13.0 % for the same period of 2012 reflecting the decline in revenues in 2013 . 20 income ( loss ) from operations . loss from operations was $ 7,378,074 for the year ended december 31 , 2013 , compared to income from operations of $ 26,779,411 for the year ended december 31 , 2012. the decrease was attributable to idling of several crews in the u.s. in the second and third quarters of 2013 due to the softening in the seismic market , adverse weather conditions in the u.s. and canada , an increase in shot-hole work which carries higher costs and lower margins than vibroseis work and land permitting issues in canada in the fourth quarter of 2013. ebitda decreased $ 35,015,892 to $ 17,266,116 for the 12 months ended december 31 , 2013 , from $ 52,282,008 for the same period of 2012 , a decrease of 67.0 % . this decrease was primarily a result of our net loss of $ 6,316,041 for 2013 compared to net income of $ 15,671,879 for the same period in 2012 , and related decrease in income tax expense . for a definition of ebitda , a reconciliation of ebitda to net income , and a discussion of ebitda , refer to the section entitled ebitda found below . interest expense . interest expense was $ 1,091,476 for the year ended december 31 , 2013 , compared to $ 1,222,454 for the same period of 2012 , a decrease of 10.7 % . this decrease was primarily attributable to our pay off in 2013 of three notes payable incurred for the purchase of seismic equipment . income tax ( benefit ) expense . income tax benefit was $ 2,153,509 for the year ended december 31 , 2013 , compared to income tax expense of $ 9,885,078 for the same period of 2012. this decrease was attributable to the net loss in 2013 as compared to net income in 2012. income tax benefit for the year ended december 31 , 2013 reflects the impact of state taxes , net of federal benefit , and permanent tax differences , including share based compensation . see note h of notes to financial statements . ebitda ebitda is a non-gaap financial measure that we define as net income ( loss ) plus interest expense , income tax expense ( benefit ) , and depreciation and amortization expense . story_separator_special_tag we use ebitda as a supplemental financial measure to assess : · the financial performance of our assets without regard to financing methods , capital structures , taxes , or historical cost basis ; · our liquidity and operating performance over time and in relation to other companies that own similar assets and that we believe calculate ebitda in a manner similar to us ; and · the ability of our assets to generate cash sufficient for us to pay potential interest expenses . we also understand that such data is used by investors to assess our performance . however , ebitda is not a measure of operating income , operating performance , or liquidity presented in accordance with u.s. generally accepted accounting principles ( gaap ) . when assessing our operating performance or our liquidity , you should not consider this data in isolation or as a substitute for our net income , cash flow from operating activities , or other cash flow data calculated in accordance with gaap . ebitda excludes some , but not all , items that affect net income and operating income , and these measures may vary among other companies . therefore , ebitda as presented below may not be comparable to similarly titled measures of other companies . further , the results presented by ebitda can not be achieved without incurring the costs that the measure excludes : interest , taxes , depreciation , and amortization . the following table reconciles our ebitda to our net income ( loss ) : replace_table_token_2_th 21 liquidity and capital resources liquidity cash flows from operating activities . net cash provided by operating activities was $ 9,255,375 for the year ended december 31 , 2014 , compared to $ 22,969,342 for the same period of 2013. the $ 13,713,967 decrease was principally attributable to a higher net loss , decreases in depreciation expense and prepaid federal and state income taxes , which were partially offset by increases in trade accounts receivable , trade accounts payable , and billings in excess of cost and estimated earnings on uncompleted contracts . working capital decreased $ 5,226,142 to $ 12,482,021 as of december 31 , 2014 , from the december 31 , 2013 working capital of $ 17,708,163. this decrease was primarily due to decreases of $ 4,767,223 in cash , $ 3,909,198 in prepaid federal and state income taxes , increases of $ 3,666,450 in trade accounts payable and $ 3,797,882 in billings in excess of cost and estimated earnings on uncompleted contracts , partially offset by a $ 8,828,351 increase in trade accounts receivable and a $ 1,137,929 decrease in current maturities of notes payable . cash flows used in investing activities . net cash used in investing activities was $ 963,976 for the year ended december 31 , 2014 , and $ 667,498 for the year ended december 31 , 2013. this $ 296,478 increase was due to a decrease in proceeds from the sale of property and equipment of $ 765,761 partially offset by a decrease in capital expenditures of $ 469,283. cash flows used in financing activities . net cash used in financing activities was $ 13,039,683 for the year ended december 31 , 2014 , and $ 14,996,672 for the year ended december 31 , 2013. the $ 1,956,989 decrease was due primarily to a decrease in principal payments on notes payable of $ 1,684,600 and $ 533,286 in principal payments on capital lease obligations . capital expenditures . during the year ended december 31 , 2014 , we acquired $ 7,954,973 of vehicles and equipment including the purchase in september 2014 of a 10,500-channel inova hawk seismic data acquisition system and replacing and purchasing additional vehicles and equipment . we financed these acquisitions by using a $ 6,096,173 note payable to a commercial bank to finance the inova hawk system disclosed above , $ 1,379,395 of cash on hand and by incurring $ 479,405 in capital lease obligations from a vehicle leasing company . we do not budget for our capital expenditures . early during the year ended december 31 , 2013 we adopted a maintenance capital expenditures program and incurred capital expenditures of $ 2,474,865 , primarily to maintain existing equipment . during the year ended december 31 , 2012 , capital expenditures of $ 57,107,732 were used to acquire seismic equipment and vehicles , replace similar equipment and vehicles , and to purchase our fourth and fifth gsr systems consisting of a total of 14,200 channels and related equipment , our sixth gsr system with 13,000 channels , our first next-generation 3-channel gsx system with 8,000 stations , and seven new inova vibration vehicles . cash of $ 31,970,418 , notes of $ 22,201,800 from a commercial bank , and capital lease obligations from a vehicle leasing company of $ 2,935,514 were used to finance these acquisitions . this major investment has allowed us to benefit from new technology while primarily remaining in a maintenance capital expenditures policy since 2013. capital resources historically , we have relied on cash generated from operations , short-term borrowings from commercial banks and equipment lenders , and loans from directors to fund our working capital requirements and capital expenditures . the company has a revolving line of credit agreement with a commercial bank . the borrowing limit under the revolving line of credit agreement is $ 5,000,000 and was renewed on september 16 , 2013 , and again on september 16 , 2014. the revolving line of credit agreement expires on september 16 , 2015. our obligations under this agreement are secured by a security interest in our accounts receivable . interest on the outstanding amount under the line of credit loan agreement is payable monthly at the greater of the prime rate of interest or five percent . as of december 31 , 2014 , and since its inception , we have had no borrowings outstanding under the line of credit loan agreement . 22 at december 31 , 2014 , the company had four outstanding notes payable to commercial banks for equipment purchases .
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in canada , we began the second quarter of 2013 operating six crews and ended the quarter operating two crews . in the third quarter of 2013 , we operated three crews in canada for short term work at the beginning of the quarter but had no crews operating in canada by the end of the quarter . we started and ended the fourth quarter of 2013 operating three crews in canada . cost of services . our cost of services was $ 101,582,377 for the year ended december 31 , 2014 , compared to $ 107,675,356 for the same period of 2013 , a decrease of 5.7 % . as a percentage of revenues , cost of services was 85.5 % for the year ended december 31 , 2014 , compared to 80.0 % for the same period of 2013. this decrease in cost of services was primarily attributable to our operation of fewer crews in the united states and canada as discussed above . the decrease was partially offset by costs incurred due to adverse winter weather conditions in parts of the united states and canada during the first quarter of this year and an increase in shot-hole work , which carries higher costs and lower margins than vibroseis work , in the united states during the third quarter . selling , general , and administrative expenses . sg & a expenses were $ 11,660,137 for the year ended december 31 , 2014 , compared to $ 9,593,068 for the same period of 2013 , an increase of 21.5 % . this increase was primarily attributable to transaction costs of $ 1,760,919 incurred with respect to the merger . sg & a expense as a percentage of revenues was 9.8 % for the year ended december 31 , 2014 , and 7.1 % for the year ended december 31 , 2013 . 19 depreciation and amortization expense . depreciation and amortization expense was $ 19,152,286 for the year ended december 31 , 2014 ,
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the company is evaluating the provisions of asu 2014-09 , but does not believe that its adoption will have a material impact on the company 's financial condition and results of operations . in january 2014 , the fasb issued asu 2014-04 , reclassification of residential real estate collateralized consumer mortgage loans upon foreclosure , which provides guidance clarifying when an in substance repossession or foreclosure occurs that would require a loan receivable to story_separator_special_tag this discussion and analysis reflects our consolidated financial statements and other relevant statistical data , and is intended to enhance your understanding of our financial condition and results of operations . the information in this section has been derived from the audited consolidated financial statements , which appear beginning on page 45 of this annual report on form 10-k. you should read the information in this section in conjunction with the business and financial information the company provided in this annual report on form 10-k. overview community bank is a pennsylvania-chartered commercial bank headquartered in carmichaels , pennsylvania . community bank operates from 16 offices in greene , allegheny , washington , fayette and westmoreland counties in southwestern pennsylvania . community bank is a community-oriented institution offering residential and commercial real estate loans , commercial and industrial loans , and consumer loans as well as a variety of deposit products for individuals and businesses in its market area . property and casualty , commercial liability , surety and other insurance products are offered through exchange underwriters , inc , the bank 's wholly-owned subsidiary that is a full-service , independent insurance agency . community bank invests primarily in united states government agency securities , bank-qualified , general obligation and special revenue municipal issues , and mortgage-backed securities issued or guaranteed by the united states government or agencies thereof . our principal sources of funds are customer deposits , proceeds from the sale of loans , funds received from the repayment and prepayment of loans and mortgage-backed securities , and the sale , call , or maturity of investment securities . principal sources of income are interest income on loans and investments , sales of loans and securities , service charges , commissions , loan servicing fees and other fees . our principal expenses are interest paid on deposits , employee compensation and benefits , occupancy and equipment expense and fdic insurance premiums . our results of operations depend primarily on our net interest income . net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities . our results of operations also are affected by our provisions for loan losses , noninterest income and noninterest expense . noninterest income currently consists primarily of fees and service charges on deposit accounts , fees and charges on loans , gain on sales of other real estate owned , income from bank-owned life insurance and other income . we expect our noninterest income to increase in future periods as a result of the insurance commissions generated from the acquisition of exchange underwriters . noninterest expense currently consists primarily of expenses related to salaries and employee benefits , occupancy and equipment , contracted services , legal fees , other real estate owned , advertising and promotion , stationery and supplies , deposit and general insurance and other expenses . our results of operations also may be affected significantly by general and local economic and competitive conditions , changes in market interest rates , governmental policies and actions of regulatory authorities . we expect our return on equity to remain relatively low until we are able to leverage the additional capital we received from the stock offering associated with the merger . 33 business strategy we intend to operate as a well-capitalized and profitable community bank dedicated to providing exceptional personal service to our individual and business customers . we believe that we have a competitive advantage in the markets we serve because of our knowledge of the local marketplace and our long-standing history of providing superior , relationship-based customer service . our core business strategies are discussed below . · improve earnings through asset diversification . historically , we have emphasized the origination of residential mortgage loans secured by homes in our market area . however , loan diversification improves our earnings because commercial real estate and commercial and industrial loans generally have higher interest rates than residential mortgage loans . another benefit of commercial lending is that it improves the sensitivity of our interest-earning assets because commercial loans typically have shorter terms than residential mortgage loans and frequently have variable interest rates . · use sound underwriting practices to maintain asset quality . we have sought to maintain a high level of asset quality and moderate credit risk by using underwriting standards that we believe are conservative . although we intend to continue our efforts to originate commercial real estate and commercial and industrial loans , we intend to continue our philosophy of managing loan exposures through our conservative approach to lending . · improve our funding mix by marketing core deposits . core deposits ( demand deposits , money market accounts and savings accounts ) comprised 78.0 % of our total deposits at december 31 , 2014. we value core deposits because they represent longer-term customer relationships and a lower cost of funding compared to certificates of deposit . we have succeeded in growing core deposits by promoting a sales culture in our branch offices that is supported by the use of technology and by offering a variety of products for our business customers , such as sweep and insured money sweep services , remote electronic deposit , online banking with bill pay , mobile banking , and automated clearinghouse . · supplement fee income through our insurance operations . fee income earned through our insurance agency , exchange underwriters , supplements our income from banking operations . we intend to pursue opportunities to grow this line of business , including hiring insurance producers with established books of business and through acquisitions . story_separator_special_tag a three-level of fair value hierarchy prioritizes the inputs used to measure fair value : · level 1—quoted prices in active markets for identical assets or liabilities ; includes certain u.s. treasury and other u.s. government agency debt that is highly liquid and actively traded in over-the-counter markets . · level 2—inputs other than level 1 that are observable , either directly or indirectly , such as quoted prices for similar assets or liabilities , quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities . · level 3—unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities . level 3 assets and liabilities include financial instruments whose value is determined using pricing models , discounted cash flow methodologies , or similar techniques , as well as instruments for which the determination of fair value requires significant management judgment or estimation . the asset or liability 's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement . comparison of financial condition at december 31 , 2014 and december 31 , 2013 total assets at december 31 , 2014 were $ 846.3 million , an increase of $ 299.8 million , or 54.9 % , from total assets of $ 546.5 million at december 31 , 2013. net loans increased $ 306.7 million , or 82.1 % , to $ 680.5 million primarily due to the loan portfolio acquired as part of the merger . bank-owned life insurance increased $ 9.0 million due to the policies acquired through the merger . goodwill increased $ 3.5 million due to the merger and the related core deposit intangible was $ 4.9 million . available-for-sale securities decreased $ 28.4 million primarily from not reinvesting maturities and calls in new securities . security purchases were minimal in 2014 due to a concerted effort to fund loan growth and increase liquid funds in anticipation of funding the merger . total deposits increased $ 217.2 million , or 45.2 % , to $ 697.5 million primarily related to the deposits acquired through the merger . short-term borrowings and other borrowed funds increased $ 31.3 million and $ 11.1 million , respectively , due to federal home loan bank borrowings assumed as part of the merger . stockholders ' equity increased $ 36.9 million , or 82.0 % , to $ 81.9 million at december 31 , 2014 compared to $ 45.0 million at december 31 , 2013 primarily due to the merger . the company issued 1.7 million shares of common stock as part of the merger . in addition , cb recorded $ 4.3 million of net income for the year ended december 31 , 2014 and a $ 1.3 million increase in accumulated other comprehensive income as a result of an increase in the unrealized gain position of the securities portfolio . this was partially offset by the payment of $ 2.3 million in dividends to stockholders and the repurchase of 133,000 shares of cb common stock for $ 2.9 million . 35 comparison of operating results for the years ended december 31 , 2014 and december 31 , 2013 overview . net income was $ 4.3 million for the year ended december 31 , 2014 and was comparable to the year ended december 31 , 2013. net interest income . net interest income for the year ended december 31 , 2014 increased $ 3.2 million , or 20.5 % , to $ 18.9 million compared to $ 15.7 million for the year ended december 31 , 2013.interest income on loans increased $ 3.0 million , or 19.2 % , to $ 18.5 million primarily driven by growth in average loans throughout the year and from the merger . in addition , despite an increase in the average balance of interest-bearing deposits , interest expense on deposits decreased $ 193,000 , or 9.8 % , to $ 1.8 million due to the repricing of maturing certificates of deposit to lower rates . other interest and dividend income increased $ 85,000 primarily due to increased fhlb stock dividends . interest expense on other borrowed funds decreased $ 71,000 due to the decrease in the average cost on outstanding average fhlb debt . these benefits to net interest income were partially offset by a decrease of $ 166,000 on interest income on tax exempt securities due to a decrease in average balances of securities from utilizing calls and maturities to fund loans . provision for loan losses . there was no provision for loan losses for the year ended december 31 , 2014 , compared to $ 100,000 for the year ended december 31 , 2013. no provision was deemed necessary based on management 's review of the allowance for loan losses and the credit quality of the loan portfolio . net charge-offs for the year ended december 31 , 2014 were $ 187,000 compared to $ 621,000 for the year ended december 31 , 2013. noninterest income . noninterest income increased $ 613,000 , or 19.1 % , to $ 3.8 million for the year ended december 31 , 2014 compared to $ 3.2 million for the year ended december 31 , 2013. the acquisition of exchange underwriters , inc. as part of the merger resulted in a $ 470,000 increase in commissions . service fees on deposit accounts increased $ 66,000 primarily from check card interchange fee income . mortgage backed securities and equities were sold in the current period resulting in a $ 60,000 gain . bank owned life insurance income increased $ 30,000 due to the acquisition of policies from the merger . noninterest expenses .
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overview . net income was $ 4.3 million for the year ended december 31 , 2013 , compared to $ 4.2 million in 2012 , an increase of 0.9 % . net interest income . net interest income for the year ended december 31 , 2013 increased $ 213,000 , or 1.4 % , to $ 15.7 million compared to $ 15.5 million for the year ended december 31 , 2012. interest expense decreased $ 857,000 , or 27.7 % , to $ 2.2 million for the year ended december 31 , 2013 compared to $ 3.1 million for the year ended december 31 , 2012 , due to decreases of 20 basis points in the average cost of funds , which offset a $ 14.2 million increase in the average balance of interest-bearing liabilities . interest expense on deposits decreased $ 678,000 due to a decrease in the average balance of higher-cost deposits and a decrease of 18 basis points in average cost of deposits , primarily due to the repricing of deposits to lower rates with the majority of the benefit derived from money market accounts and maturing certificates of deposit . interest expense on borrowings decreased $ 179,000 due to a decrease of $ 10.2 million in average balance as funds generated from deposit growth and reductions in investment securities were used to retire higher cost borrowings . 36 interest and dividend income decreased $ 644,000 , or 3.5 % , to $ 17.9 million for the year ended december 31 , 2013 compared to $ 18.5 million for the year ended december 31 , 2012. interest income on loans decreased $ 307,000 notwithstanding an increase in average loans outstanding of $ 18.0 million , primarily due to a decrease of 39 basis points in the average yield on the loan portfolio .
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