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on july 1 , 2017 , we completed our previously announced acquisition of aig united guaranty insurance ( asia ) limited from aig ( renamed arch mi asia limited ) . our objective is to achieve an average operating return on average equity of 15 % or greater over the insurance cycle , which we believe to be an attractive return to our common shareholders given the risks we assume . we continue to look for opportunities to find acceptable books of business to underwrite without sacrificing underwriting discipline and continue to write a portion of our overall book in catastrophe- arch capital 55 2017 form 10-k exposed business which has the potential to increase the volatility of our operating results . changing economic conditions could have a material impact on the frequency and severity of claims and , therefore , could negatively impact our underwriting returns . in addition , volatility in the financial markets could continue to significantly affect our investment returns , reported results and shareholders ' equity . we consider the potential impact of economic trends in the estimation process for establishing unpaid losses and loss adjustment expenses and in determining our investment strategies . in addition , weakness of the u.s. , european countries and other key economies , projected budget deficits for the u.s. , european countries and other governments and the consequences associated with potential downgrades of securities of the u.s. , european countries and other governments by credit rating agencies is inherently unpredictable and could have a material adverse effect on financial markets and economic conditions in the u.s. and throughout the world . in turn , this could have a material adverse effect on our business , financial condition and results of operations and , in particular , this could have a material adverse effect on the value and liquidity of securities in our investment portfolio . financial measures management uses the following three key financial indicators in evaluating our performance and measuring the overall growth in value generated for arch capital 's common shareholders : book value per share book value per share represents total common shareholders ' equity available to arch divided by the number of common shares and common share equivalents outstanding . management uses growth in book value per share as a key measure of the value generated for our common shareholders each period and believes that book value per share is the key driver of arch capital 's share price over time . book value per share is impacted by , among other factors , our underwriting results , investment returns and share repurchase activity , which has an accretive or dilutive impact on book value per share depending on the purchase price . book value per share was $ 60.91 at december 31 , 2017 , a 10.4 % increase from $ 55.19 at december 31 , 2016 . the growth in 2017 was primarily generated through underwriting and investment returns . operating return on average common equity operating return on average common equity ( “ operating roae ” ) represents annualized after-tax operating income available to arch common shareholders divided by average common shareholders ' equity available to arch during the period . after-tax operating income available to arch common shareholders , a “ non-gaap measure ” as defined in the sec rules , represents net income available to arch common shareholders , excluding net realized gains or losses , net impairment losses recognized in earnings , equity in net income or loss of investment funds accounted for using the equity method , net foreign exchange gains or losses and ugc transaction costs and other , net of income taxes . management uses operating roae as a key measure of the return generated to arch common shareholders . see “ comment on non-gaap financial measures . ” our operating roae was 5.7 % for 2017 , compared to 9.4 % for 2016 and 9.7 % for 2015 . the lower operating roae for 2017 primarily reflected a higher level of catastrophic loss activity , partially offset by strong mortgage insurance underwriting performance and favorable investment returns . total return on investments total return on investments includes investment income , equity in net income or loss of investment funds accounted for using the equity method , net realized gains and losses and the change in unrealized gains and losses generated by arch 's investment portfolio . total return is calculated on a pre-tax basis and before investment expenses excluding amounts reflected in the ‘ other ' segment , and reflects the effect of financial market conditions along with foreign currency fluctuations . management uses total return on investments as a key measure of the return generated to arch common shareholders on the capital held in the business , and compares the return generated by our investment portfolio against benchmark returns which we measured our portfolio against during the periods . the following table summarizes the pre-tax total return ( before investment expenses ) of investment held by arch compared to the benchmark return ( both based in u.s. dollars ) against which we measured our portfolio during the periods : replace_table_token_14_th ( 1 ) our investment expenses were approximately 0.30 % , 0.34 % and 0.35 % , respectively , of average invested assets in 2017 , 2016 and 2015 . total return for our investment portfolio outperformed that of the benchmark return index in 2017 and primarily reflected strong investment returns on our investment grade fixed income portfolio , which represents the majority of our investment portfolio , and in equities and alternatives . total return was impacted by weakening of the u.s. dollar against the euro , british pound sterling and other major currencies which increased total return on non-u.s. dollar denominated arch capital 56 2017 form 10-k investments during 2017 . story_separator_special_tag the increase in net premiums written reflected growth in programs , due to the continued effects of two newer programs , in travel , accident and health , reflecting both new travel business and continued expansion in existing travel accounts , and in professional lines , reflecting increases in small and medium sized accounts . such amounts were partially offset by a reduction in excess and surplus casualty in response to current market conditions . arch capital 60 2017 form 10-k replace_table_token_20_th 2016 versus 2015 : net premiums written by the insurance segment were 1.3 % higher in 2016 than in 2015 . the increase in net premiums written reflected growth in travel , accident and health , construction and national accounts and alternative markets business , partially offset by a reduction in programs and property lines . the growth in travel , accident and health reflected both new travel business and continued expansion in existing travel accounts . the increase in construction and national accounts primarily reflected new business and audit premiums while the increase in alternative markets resulted from new accounts , exposure growth and audit premiums . the reduction in program business primarily reflected the continued impact of the non-renewal of a large program in the latter part of 2015 while the lower level of net premiums written in property lines reflected continued weak market conditions . net premiums earned . the following table sets forth our insurance segment 's net premiums earned by major line of business : replace_table_token_21_th replace_table_token_22_th net premiums earned by the insurance segment were 1.9 % higher in 2017 than in 2016 , reflecting changes in net premiums written over the previous five quarters . net premiums earned by the insurance segment were 1.4 % higher in 2016 than in 2015 . losses and loss adjustment expenses . the table below shows the components of the insurance segment 's loss ratio : replace_table_token_23_th current year loss ratio . 2017 versus 2016 : the insurance segment 's current year loss ratio was 10.1 points higher in 2017 than in 2016 . the 2017 loss ratio included 10.3 points of current year catastrophic event activity , primarily related to hurricanes harvey , irma and maria and the california wildfires , compared to 2.2 points in 2016 . the 2017 loss ratio also reflected changes in the level of attritional large losses and changes in the mix of business . 2016 versus 2015 : the insurance segment 's current year loss ratio was 1.6 points higher in 2016 than in 2015. the 2016 loss ratio included 2.2 points of current year catastrophic event activity , compared to 1.0 points in 2015. the 2016 loss ratio also reflected changes in the mix of business . prior period reserve development . the insurance segment 's net favorable development was $ 8.6 million , or 0.4 points , for 2017 , compared to $ 33.1 million , or 1.6 points , for 2016 , and $ 47.2 million , of 2.3 points , for 2015. see note 6 , “ reserve for losses and loss adjustment expenses , ” to our consolidated financial statements in item 8 arch capital 61 2017 form 10-k for information about the insurance segment 's prior year reserve development . underwriting expenses . 2017 versus 2016 : the insurance segment 's underwriting expense ratio was 32.3 % in 2017 , compared to 31.6 % in 2016 . the comparison of the underwriting expense ratios reflects changes in the level of reinsurance ceded on a quota share basis and changes in the mix of business . 2016 versus 2015 : the insurance segment 's underwriting expense ratio was 31.6 % in 2016 , compared to 31.8 % in 2015 . the underwriting expense ratios were generally flat in 2016 when compared to 2015. reinsurance segment the following table sets forth our reinsurance segment 's underwriting results : replace_table_token_24_th replace_table_token_25_th the reinsurance segment consists of our reinsurance underwriting units which offer specialty product lines on a worldwide basis . product lines include : casualty : provides coverage to ceding company clients on third party liability and workers ' compensation exposures from ceding company clients , primarily on a treaty basis . exposures include , among others , executive assurance , professional liability , workers ' compensation , excess and umbrella liability , excess motor and healthcare business . marine and aviation : provides coverage for energy , hull , cargo , specie , liability and transit , and aviation business , including airline and general aviation risks . business written may also include space business , which includes coverages for satellite assembly , launch and operation for commercial space programs . other specialty : provides coverage to ceding company clients for proportional motor and other lines , including surety , accident and health , workers ' compensation catastrophe , agriculture , trade credit and political risk . property catastrophe : provides protection for most catastrophic losses that are covered in the underlying policies written by reinsureds , including hurricane , earthquake , flood , tornado , hail and fire , and coverage for other perils on a case-by-case basis . property catastrophe reinsurance provides coverage on an excess of loss basis when aggregate losses and loss adjustment expense from a single occurrence or aggregation of losses from a covered peril exceed the retention specified in the contract . property excluding property catastrophe : provides coverage for both personal lines and commercial property exposures and principally covers buildings , structures , equipment and contents . the primary perils in this business include fire , explosion , collapse , riot , vandalism , wind , tornado , arch capital 62 2017 form 10-k flood and earthquake . business is assumed on both a proportional and excess of loss basis . in addition , facultative business is written which focuses on individual commercial property risks on an excess of loss basis . other : includes life reinsurance business
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capital resources this section does not include information specific to watford re . we do not guarantee or provide credit support for watford re , and our financial exposure to watford re is limited to our investment in watford re 's common and preferred shares and counterparty credit risk ( mitigated by collateral ) arising from reinsurance transactions with watford re . at december 31 , 2017 , total capital available to arch of $ 11.30 billion consisted of $ 1.73 billion of senior notes , representing 15.3 % of the total , $ 375.0 million of revolving credit agreement borrowings due in october 2021 , representing 3.3 % of the total , $ 872.6 million of preferred shares , representing 7.7 % of the total , and common shareholders ' equity of $ 8.32 billion , representing 73.6 % of the total . at december 31 , 2016 , total capital available to arch of $ 10.49 billion consisted of $ 1.73 billion of senior notes , representing 16.5 % of the total , $ 500.0 million of revolving credit agreement borrowings , representing 4.8 % of the total , $ 772.6 million of preferred shares , representing 7.4 % of the total , and common shareholders ' equity of $ 7.48 billion , representing 71.3 % of the total . the following table summarizes our capital structure : replace_table_token_65_th ( 1 ) fully and unconditionally guaranteed by arch capital . ( 2 ) redeemed on january 2 , 2018. arch capital and arch-u.s. are each holding companies and , accordingly , they conduct substantially all of their operations through their operating subsidiaries . arch capital finance llc ( “ arch finance ” ) is a wholly owned subsidiary of arch u.s. mi holdings inc. , a u.s. holding company . as a result , arch capital , arch-u.s. and arch finance 's cash flows and their ability to service their debt depends upon the earnings of their arch capital 83 2017 form 10-k operating subsidiaries and on their ability to distribute the earnings , loans or other payments from such subsidiaries to arch capital , arch-u.s. and arch finance , respectively .
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Liquidity
| 13,700
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in connection with the assumed loan , the company incurred and capitalized $ 0.8 million in deferred financing costs . in addition , the company was required to set aside amounts in reserve and cash collateral accounts . as of december 31 , 2011 , $ 2.0 million of restricted cash was included in prepaid expenses and other current assets , and the remaining $ 3.0 million of restricted cash was included in other long term assets . in december 2012 , the company repaid the remaining balance of the assumed loan of $ 37.7 million and entered into a new $ 50.0 million loan collateralized by the land , buildings and tenant improvements comprising the company 's corporate headquarters . the new loan has a 7 year term and maturity date of december 2019. the loan bears interest at one month libor plus a margin of 1.50 % , and allows for prepayment without penalty . the company story_separator_special_tag the information contained in this section should be read in conjunction with our consolidated financial statements and related notes and the information contained elsewhere in this form 10-k under the captions “ risk factors , ” “ selected financial data , ” and “ business. ” overview we are a leading developer , marketer and distributor of branded performance apparel , footwear and accessories . the brand 's moisture-wicking fabrications are engineered in many different designs and styles for wear in nearly every climate to provide a performance alternative to traditional products . our products are sold worldwide and worn by athletes at all levels , from youth to professional , on playing fields around the globe , as well as by consumers with active lifestyles . our net revenues grew to $ 1,834.9 million in 2012 from $ 725.2 million in 2008 . we believe that our growth in net revenues has been driven by a growing interest in performance products and the strength of the under armour brand in the marketplace . we plan to continue to increase our net revenues over the long term by increased sales of our apparel , footwear and accessories , expansion of our wholesale distribution sales channel , growth in our direct to consumer sales channel and expansion in international markets . our direct to consumer sales channel includes our factory house and specialty stores and 21 websites . new offerings for 2012 include our new ua studio line , the armour bra , coldblack ® technology , under armour scent control technology and ua spine footwear . a large majority of our products are sold in north america ; however , we believe our products appeal to athletes and consumers with active lifestyles around the globe . internationally , our products are offered primarily in austria , germany , panama , spain and the united kingdom . a third party licensee sells our products in japan and distributors sell our products in other foreign countries . we hold a minority investment in our licensee in japan . our operating segments are geographic and include north america ; latin america ; europe , the middle east and africa ( “ emea ” ) ; and asia . due to the insignificance of the emea , latin america and asia operating segments , they have been combined into other foreign countries for disclosure purposes . we believe there is an increasing recognition of the health benefits of an active lifestyle . we believe this trend provides us with an expanding consumer base for our products . we also believe there is a continuing shift in consumer demand from traditional non-performance products to performance products , which are intended to provide better performance by wicking perspiration away from the skin , helping to regulate body temperature and enhancing comfort . we believe that these shifts in consumer preferences and lifestyles are not unique to the united states , but are occurring in a number of markets globally , thereby increasing our opportunities to introduce our performance products to new consumers . although we believe these trends will facilitate our growth , we also face potential challenges that could limit our ability to take advantage of these opportunities , including , among others , the risk of general economic or market conditions that could affect consumer spending and the financial health of our retail customers . in addition , we may not be able to effectively manage our growth and a more complex business . we may not consistently be able to anticipate consumer preferences and develop new and innovative products that meet changing preferences in a timely manner . furthermore , our industry is very competitive , and competition pressures could cause us to reduce the prices of our products or otherwise affect our profitability . we also rely on third-party suppliers and manufacturers outside the u.s. to provide fabrics and to produce our products , and disruptions to our supply chain could harm our business . for a more complete discussion of the risks facing our business , refer to the “ risk factors ” section included in item 1a . general net revenues comprise both net sales and license revenues . net sales comprise sales from our primary product categories , which are apparel , footwear and accessories . our license revenues consist of fees paid to us by our licensees in exchange for the use of our trademarks on core products of socks , team uniforms , baby and kids ' apparel , eyewear , inflatable footballs and basketballs , as well as the distribution of our products in japan . beginning in 2011 , net sales includes the sales and related cost of goods sold of internally developed hats and bags . prior to 2011 , hats and bags were sold by a licensee . story_separator_special_tag we do not expect the negative sales mix impact from factory house stores to continue as we progress through 2013 ; and approximate 25 basis point decrease driven by higher inbound freight , partially due to supply chain challenges , required to meet customer demand . we expect this year over year negative impact will continue through the first half of 2013. the above decreases were partially offset by the below increase : approximate 20 basis point increase driven primarily by lower north american apparel product input costs , partially offset by higher north american accessories and footwear input costs . we expect the north american apparel product input cost margin favorability will continue through the first half of 2013. selling , general and administrative expenses increase d $ 120.5 million to $ 670.6 million in 2012 from $ 550.1 million in 2011 . as a percentage of net revenues , selling , general and administrative expenses decrease d to 36.5 % in 2012 from 37.3 % in 2011 . these changes were primarily attributable to the following : marketing costs increased $ 37.5 million to $ 205.4 million in 2012 from $ 167.9 million in 2011 primarily due to increased marketing campaigns for key apparel and footwear launches in 2012 and sponsorship of collegiate and professional teams and athletes , including tottenham hotspur football club . as a percentage of net revenues , marketing costs decreased slightly to 11.2 % in 2012 from 11.4 % in 2011 . 24 selling costs increased $ 37.2 million to $ 176.0 million in 2012 from $ 138.8 million in 2011 . this increase was primarily due to higher personnel and other costs incurred primarily for the continued expansion of our direct to consumer distribution channel . as a percentage of net revenues , selling costs increased slightly to 9.6 % in 2012 from 9.4 % in 2011 . product innovation and supply chain costs increased $ 29.4 million to $ 158.5 million in 2012 from $ 129.1 million in 2011 primarily due to higher distribution facilities operating and personnel costs to support our growth in net revenues and higher personnel costs for the design and sourcing of our expanding apparel , footwear and accessory lines . as a percentage of net revenues , product innovation and supply chain costs decreased slightly to 8.6 % in 2012 from 8.8 % in 2011 . corporate services costs increased $ 16.4 million to $ 130.7 million in 2012 from $ 114.3 million in 2011 . this increase was primarily attributable to higher corporate personnel cost and information technology initiatives necessary to support our growth . as a percentage of net revenues , corporate services costs decreased to 7.1 % in 2012 from 7.7 % in 2011 primarily due to decreased corporate personnel costs as a percentage of net revenues in 2012. income from operations increase d $ 45.9 million , or 28.2 % , to $ 208.7 million in 2012 from $ 162.8 million in 2011 . income from operations as a percentage of net revenues increase d to 11.4 % in 2012 from 11.1 % in 2011 . this increase was a result of the items discussed above . interest expense , net increase d $ 1.4 million to $ 5.2 million in 2012 from $ 3.8 million in 2011 . this increase was primarily due to a full year of interest on the debt related to the acquisition of our corporate headquarters in 2012 as compared to 2011. other expense , net decreased $ 2.0 million to $ 0.1 million in 2012 from $ 2.1 million in 2011 . this decrease was due to lower net losses in 2012 on the combined foreign currency exchange rate changes on transactions denominated in foreign currencies and our foreign currency derivative financial instruments as compared to 2011 . provision for income taxes increase d $ 14.8 million to $ 74.7 million in 2012 from $ 59.9 million in 2011 . our effective tax rate was 36.7 % in 2012 compared to 38.2 % in 2011 , primarily due to state tax credits received in 2012. year ended december 31 , 2011 compared to year ended december 31 , 2010 net revenues increased $ 408.8 million , or 38.4 % , to $ 1,472.7 million in 2011 from $ 1,063.9 million in 2010. net revenues by product category are summarized below : replace_table_token_9_th net sales increased $ 411.5 million , or 40.2 % , to $ 1,436.1 million in 2011 from $ 1,024.6 million in 2010 as noted in the table above . the increase in net sales primarily reflects : $ 152.7 million , or 62.2 % , increase in direct to consumer sales , which include 26 additional factory house stores , or a 48 % increase , since december 31 , 2010 , along with the launch of our updated e-commerce website ; unit growth driven by increased distribution and new offerings in multiple product categories , most significantly in our training ( including fleece and our new charged cotton ® product ) , graphics ( primarily including tech-tees ) , baselayer , running , hunting and golf apparel categories , along with running and basketball shoes ; and $ 88.5 million , or 201.7 % , increase in wholesale accessories sales primarily due to bringing hats and bags sales in-house effective january 2011 . 25 license revenues decreased $ 2.8 million , or 7.1 % , to $ 36.6 million for the year ended december 31 , 2011 from $ 39.4 million during the same period in 2010. this decrease in license revenues was a result of a $ 9.7 million reduction in license revenues related to hats and bags , partially offset by increased sales by our licensees due to increased distribution and continued unit volume growth .
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segment results of operations year ended december 31 , 2012 compared to year ended december 31 , 2011 net revenues by geographic region are summarized below : replace_table_token_10_th net revenues in our north american operating segment increase d $ 343.4 million to $ 1,726.7 million in 2012 from $ 1,383.3 million in 2011 primarily due to the items discussed above in the consolidated results of operations . net revenues in other foreign countries increase d by $ 18.9 million to $ 108.2 million in 2012 from $ 89.3 million in 2011 primarily due to unit sales growth to distributors in our latin american operating segment and in our emea operating segment , as well as increased license revenues from our japanese licensee . operating income by geographic region is summarized below : replace_table_token_11_th operating income in our north american operating segment increased $ 46.6 million to $ 197.2 million in 2012 from $ 150.6 million in 2011 primarily due to the items discussed above in the consolidated results of operations . operating income in other foreign countries decreased by $ 0.7 million to $ 11.5 million in 2012 from $ 12.2 million in 2011 primarily due to higher costs associated with our continued investment to support our international expansion in our emea operating segment , partially offset by unit sales growth and increased license revenues from our japanese licensee as discussed above . year ended december 31 , 2011 compared to year ended december 31 , 2010 net revenues by geographic region are summarized below : replace_table_token_12_th net revenues in our north american operating segment increased $ 385.5 million to $ 1,383.3 million in 2011 from $ 997.8 million in 2010 primarily due to the items discussed above in the consolidated results of operations .
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ROO
| 2,010
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this discussion contains forward-looking statements based upon our current plans , estimates , beliefs and expectations that involve risks , uncertainties and assumptions . our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors , including those set forth under the sections entitled “ risk factors , ” “ special note regarding forward-looking statements ” and elsewhere in this annual report . we are an early-stage cancer diagnostics company that develops and commercializes proprietary circulating tumor cell , or ctc , and circulating tumor dna , or ctdna , tests utilizing a standard blood sample , or “ liquid biopsy. ” our current ctc breast , lung and gastric cancer tests provide , and our planned future tests would provide , information to oncologists and other physicians that enable them to select appropriate personalized treatment for their patients based on better , timelier and more-detailed data on the characteristics of their patients ' tumors . our current breast , lung and gastric cancer tests and our planned future tests utilize our cee technology for the enumeration and analysis of ctcs , and our cee-selector technology for the detection and analysis of ctdna from plasma , each performed on a standard blood sample . the cee technology is an internally developed , microfluidics-based ctc capture and analysis platform , with enabling features that change how ctc testing can be used by clinicians by providing real-time biomarker monitoring with only a standard blood sample . the cee-selector technology enables mutation detection with enhanced sensitivity and specificity and is applicable to nucleic acid from ctcs or other sample types , such as blood plasma for ctdna . we believe the cee-selector technology is an important part of our pipeline and will be a stand-alone test for molecular analysis of biomarkers . at our corporate headquarters facility located in san diego , california , we operate a clinical laboratory that is certified under the clinical laboratory improvement amendments of 1988 , or clia , and accredited by the college of american pathologists , or cap . we manufacture our cee microfluidic channels , related equipment and certain reagents to perform our current tests and our planned future tests at this facility . clia certification is required before any clinical laboratory , including ours , may perform testing on human specimens for the purpose of obtaining information for the diagnosis , prevention , or treatment of disease or the assessment of health . the tests we offer and intend to offer are classified as laboratory developed tests , or ldts , under clia regulations . we are in the process of commercializing our first test , oncocee-br , for breast cancer , and recently launched our oncocee-lu test for non-small cell lung cancer , or nsclc , and our oncocee-ga test for gastric cancer in late 2014. these tests utilize our cee technology platform and provide ctc enumeration as well as biomarker analysis from a standard blood sample . in the case of the oncocee-br and oncocee-ga tests , biomarker analysis involves fluorescence in situ hybridization , or fish , for the detection and quantitation of the human epidermal growth factor receptor 2 , or her2 , gene copy number as well as immunocytochemical analysis of estrogen receptor ( er ) protein , which is currently commercially available . we plan to include immunocytochemical analysis of progesterone receptor proteins in the oncocee-br test during 2015. a patient 's her2 status provides the physician with information about the appropriateness of therapies such as herceptin ® or tykerb ® . estrogen receptor and progesterone receptor ( pr ) status provides the physician with information about the appropriateness of endocrine therapies such as tamoxifen and aromatase inhibitors . the oncocee-lu test 's biomarker analysis currently includes fish testing for alk and ros1 gene rearrangements and molecular analysis of the t790m mutation of the epidermal growth factor receptor or egfr gene using our cee-selector tm platform . we plan to add fish testing for ret and met genes , as well as mutation analysis for deletions 19 and l858r mutation in the ecfr gene , the k-ras gene and the b-raf gene in the future . the l858r mutation of the egfr gene and exon 19 deletions as activators of egfr kinase activity are linked to the drugs tarceva ® , gilotrif ® and iressa ® . the codon 12 and 13 mutations of the k-ras gene are found in patients whose tumors are unlikely to respond to the egfr kinase inhibitors such as erbitux ® and vectibix ® , and the codon 600 mutations of the b-raf gene are linked to zelboraf ® and tafinlar ® , which are both approved for melanoma and are in clinical trials for lung cancer . our oncocee-lu test is performed on a standard blood sample . 60 we plan to add other biomarker analyses on blood samples to our current tests and our planned future oncocee tests as their relevance is demonstrated in clinical trials , for example , ret proto-oncogene gene fusions in nsclc , which may indicate a particular course of therapy , and nras genes for melanoma , which may predict therapy resistance . in addition , we are developing a series of other ctc and ctdna tests for different solid tumor types , including colorectal cancer , prostate cancer , gastric cancer and melanoma , each incorporating treatment-associated biomarker analyses specific to that cancer , planned to be launched as noted in the table below . story_separator_special_tag consequently , our ability to establish and manage partnerships with groups that have sales and marketing capabilities in our target markets and attract and maintain productive sales personnel that have and can grow these relationships will largely determine our ability to grow our clinical services revenue . we expect that in the future the percentage of our revenue which is generated through our arrangement with clarient will diminish . since may 2013 , the number of tests performed under our agreement with clarient has decreased significantly . in 2013 , approximately $ 104,000 was billed to our clinical partner , the dana-farber cancer institute , which represented the majority of our revenue for that year . from january through august 2014 , approximately $ 43,000 was billed to the dana-farber cancer institute . in november 2013 , we first directly billed payors for physician-ordered testing ; until may 2013 , our commercialization partner clarient was responsible for all billing associated with our tests . we do not have data for clarient 's billing and collection experience with respect to our test , because clarient paid us a contracted amount per test performed regardless of their billing and collections . from may to december 2013 , we performed an average of 1-3 physician-ordered tests per month , and from july to december 2014 , 62 we performed an average of 65 physician-ordered tests per month ( in addition to the tests which we have been performing since january 2013 for a clinical utility study with investigators at the dana-farber cancer institute , with an average of 15-30 tests per month performed during the trial 's enrollment period through may 2014 ) . billing for these physician-ordered tests is now handled for us by a non-clarient billing service provider . between may 2013 and december 2014 , we invoiced , through this service provider , for 239 physician-ordered tests . of these , 37 tests were billed to medicare and the remainder were billed to other payors . as of december 31 , 2014 , we have been paid by private payors for 67 of these tests . as of december 31 , 2014 , all of our revenue recognized has come from private payors , and processing of the medicare claims above was delayed due to a new application process relating to a change in our tax identification number . the transition period to the new billing service provider was lengthened due to our focus on other priorities , as we knew the amounts for the small number of unbilled physician-ordered tests were immaterial . the transition of the billing function to our billing service provider was completed in december 2013. our small backlog of unbilled tests has now been billed , and all future tests will be billed in a timely manner . cost of revenues our cost of revenues consists principally of personnel costs , laboratory and manufacturing supplies and overhead . we are pursuing various strategies to reduce and control our cost of revenues , including automating aspects of our processes , developing more efficient technology and methods , attempting to negotiate improved terms with our suppliers and exploring relocating our operations to a lower-cost facility . operating expenses we classify our operating expenses into three categories : research and development , sales and marketing , and general and administrative . our operating expenses principally consist of personnel costs , outside services , laboratory consumables and overhead , development costs , and legal and accounting fees . research and development expenses . we incur research and development expenses principally in connection with our efforts to develop and improve our tests . our primary research and development expenses consist of direct personnel costs , laboratory equipment and consumables and overhead expenses . we anticipate that research and development expenses will increase in the near-term , principally as a result of hiring additional personnel to develop and validate tests in our pipeline and to perform work associated with clinical utility studies and development collaborations . in addition , we expect that our costs related to collaborations with research and academic institutions will increase . all research and development expenses are charged to operations in the periods in which they are incurred . sales and marketing expenses . our sales and marketing expenses consist principally of personnel and related overhead costs for our sales team and their support personnel , travel and entertainment expenses , and other selling costs including sales collaterals and trade shows . general and administrative expenses . general and administrative expenses consist principally of personnel-related expenses , professional fees , such as legal , accounting and business consultants , occupancy costs , and other general expenses . we expect that our general and administrative expenses will increase as we expand our business operations . we further expect that general and administrative expenses will increase significantly due to increased information technology , legal , insurance , accounting and financial reporting expenses associated with being a public company . seasonality we expect our test volume to decrease during vacation and holiday seasons , when patients are less likely to visit their health care providers . we expect this trend in seasonality to continue for the foreseeable future . critical accounting policies and significant judgments and estimates our management 's discussion and analysis of financial condition and results of operations is based on our financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america . the preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenue and expenses and related disclosure of contingent assets and liabilities . on an ongoing basis , we evaluate our estimates based on historical experience and make various assumptions , which management believes to be reasonable under the circumstances , which form the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources .
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results of operations years ended december 31 , 2013 and 2014 the following table sets forth certain information concerning our results of operations for the periods shown : replace_table_token_2_th revenue revenues were approximately $ 133,000 for the year ended december 31 , 2014 , compared with approximately $ 134,000 for the year ended december 31 , 2013 , a decrease of approximately $ 1,000 , or 1 % . the decrease was primarily related to lower dana-farber cancer institute sample volume as the trial 's enrollment approached completion in may 2014 , with 115 development services tests performed during the year ended december 31 , 2014 as compared to 261 during the same period in 2013. this decrease was partially offset by an increase of approximately $ 68,000 in commercial test revenues . the average price collected per commercial test increased from $ 636 for the year ended december 31 , 2013 to an average of $ 1,050 for the year ended december 31 , 2014. the average price per development services test was $ 400 for the year ended december 31 , 2013 and $ 391 for the year ended december 31 , 2014. cost of revenues cost of revenues was approximately $ 2,170,000 for the year ended december 31 , 2014 , compared with approximately $ 2,330,000 for the year ended december 31 , 2013 , a decrease of $ 160,000 , or 7 % . the decrease was primarily due to a $ 669,000 65 decrease associated with a reduction in the proportion of lab volume that related to revenue-generating activities relative to the total number of samples processed for the year ended december 31 , 2014 as compared to the same period in 2013 , partially offset by increases of approximately $ 509,000 in personnel , materials and allocated facilities costs . operating expenses research and development expenses . research and development expenses were $ 4.5 million for the year ended december 31 , 2014 , compared with $ 3.1
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ROO
| 11,461
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fair value is an exit price , representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants based on assumptions that market participants would use in pricing an asset or liability . as a basis for classifying the fair value measurements , a three-tier fair value hierarchy , which classifies the fair value measurements based on the inputs used in measuring fair value , was established as follows : level 1 - observable inputs such as quoted prices in active markets for identical assets or liabilities ; level 2 - significant other inputs that are observable either directly or indirectly ; and level 3 - significant unobservable inputs on which there is little or no market data , which require the company to develop its own assumptions . this hierarchy requires the company to use observable market data , when available , and to minimize the use of unobservable inputs when determining fair value . the company 's cash equivalents are composed of money market funds and time deposits , which are classified within level 1 and level 2 , respectively , in the fair value hierarchy . the company 's marketable securities , which are classified within level 2 of the fair value hierarchy , are valued based on a market approach using quoted prices , when available , or matrix pricing compiled by third party pricing vendors , using observable market inputs such as interest rates , yield curves , and credit risk . the company 's investments in privately-held companies are classified within level 3 of the fair value hierarchy and are valued using model-based techniques , including option pricing models and discounted cash flow models . if applicable , the company will recognize transfers into and out of levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs . there were no transfers between levels during 2019 , 2018 , or 2017 . the company 's assets and liabilities measured at fair value on a recurring basis were : december 31 , 2019 ( in thousands ) level 1 level 2 level 3 total investments in privately-held companies ( 1 ) $ — $ — $ 4,871 $ 4,871 ( 1 ) included in other long-term assets . replace_table_token_45_th ( 1 ) included in other long-term assets . for certain other financial instruments , including accounts receivable , unbilled receivables , and accounts payable , the carrying value approximates fair value due to the relatively short maturity of these items . assets measured at fair value on a nonrecurring basis assets recorded at fair value on a nonrecurring basis , including property and equipment and intangible assets , are recognized at fair value when they are impaired . the company did not recognize any impairments on its assets measured at fair value on a nonrecurring basis during 49 2019 , 2018 , or 2017 . credit risk in addition to receivables , the company is potentially subject to concentrations of credit risk from the company 's cash , cash equivalents , and marketable securities . the company 's cash and cash equivalents are generally held with large , diverse financial institutions worldwide to reduce the credit risk exposure . investment policies have been implemented that limit purchases of marketable debt securities to investment-grade securities . 13. revenue geographic revenue replace_table_token_46_th revenue streams replace_table_token_47_th replace_table_token_48_th ( 1 ) reflects client arrangements ( term license , cloud , and maintenance ) that are subject to renewal . 50 remaining performance obligations ( `` backlog `` ) expected future revenue on existing contracts : replace_table_token_49_th replace_table_token_50_th major clients clients accounting for 10 % or more of the company 's total revenue were : replace_table_token_51_th * client accounted for less than 10 % of total revenue . 14. stock-based compensation the following table presents the stock-based compensation expense included in the company 's consolidated statements of operations : replace_table_token_52_th the company periodically grants stock options and restricted stock units ( “ rsus ” ) for a fixed number of shares upon vesting to employees and non-employee directors . beginning in 2019 , the company granted directors awards in the form of common stock and stock options . most of the company 's stock-based compensation arrangements vest over five years with 20 % vesting after one year and the remaining 80 % vesting in equal quarterly installments over the remaining four years . the company 's stock options have a term of ten years . the company recognizes stock-based compensation using story_separator_special_tag business overview we develop , market , license , host , and support enterprise software applications that help organizations transform the way they engage with their customers and process work across their enterprise . we also license our low-code pega platform for rapid application development to clients that wish to build and extend their business applications . our cloud-architected portfolio of customer engagement and digital process automation applications leverages artificial intelligence ( “ ai ” ) , case management , and robotic automation technology , built on our unified low-code pega platform , empowering businesses to quickly design , extend , and scale their enterprise applications to meet strategic business needs . our target clients are global 3000 organizations and government agencies that require applications to differentiate themselves in the markets they serve . our applications achieve and facilitate differentiation by increasing business agility , driving growth , improving productivity , attracting and retaining customers , and reducing risk . we deliver applications tailored to our clients ' specific industry needs . story_separator_special_tag the primary cash drivers during 2018 were net income of $ 10.6 million and $ 25.8 million from receivables and contract assets , largely due to increased cash collections and the timing of billings . cash provided by ( used in ) investing activities cash used in investing activities is primarily driven by the timing of investment maturities and purchases of new investments . during 2019 , $ 91.6 million in cash was generated from investments , primarily marketable debt securities , which was partially offset by investments of $ 10.6 million in property and equipment and $ 10.9 million to acquire in the chat communications inc. in may 2019. during 2018 , $ 35.5 million of cash was used for investments , primarily marketable securities , and $ 11.9 million was used to purchase property and equipment . cash ( used in ) financing activities we used cash primarily for repurchases of our common stock under our stock repurchase programs , stock repurchases for tax withholdings for the net settlement of our equity awards , and the payment of our quarterly dividend . net cash used in financing activities during 2019 and 2018 was primarily for repurchases of our common stock and the payment of our quarterly dividend . 27 dividends ( in thousands ) 2019 2018 dividend payments to shareholders $ 9,486 $ 9,432 it is our current intention to pay a quarterly cash dividend of $ 0.03 per share , however , the board of directors may terminate or modify this dividend program at any time without prior notice . stock repurchase program remaining authority under existing programs is : replace_table_token_17_th ( 1 ) on march 15 , 2019 , we announced that our board of directors extended the expiration date of the current stock repurchase program to june 30 , 2020 and increased the amount of common stock we are authorized to repurchase by $ 60 million . ( 2 ) purchases may be made from time to time on the open market or in privately negotiated transactions . all stock repurchases under the current program during closed trading window periods are made pursuant to established pre-arranged stock repurchase plans , intended to comply with the requirements of rule 10b5-1and rule 10b-18 under the exchange act . common stock repurchases the following table is a summary of our repurchase activity : replace_table_token_18_th ( 1 ) represents activity under our publicly announced stock repurchase program . ( 2 ) during 2019 and 2018 , instead of receiving cash from the equity holders , we withheld shares with a value of $ 41.7 million and $ 29.5 million , respectively , for the exercise price of options . these amounts have been excluded from the table above . contractual obligations as of december 31 , 2019 , our contractual obligations were : replace_table_token_19_th ( 1 ) see `` 9. leases '' in item 8 of this annual report for additional information . ( 2 ) represents the fixed or minimum amounts due under purchase obligations for hosting services and sales and marketing programs . ( 3 ) we are unable to reasonably estimate the timing of the cash outflow due to uncertainties in the timing of the effective settlement of tax positions . ( 4 ) represents the maximum funding that would be expected under existing investment agreements with privately-held companies . our investment agreements generally allow us to withhold unpaid committed funds at our discretion . a detailed discussion and analysis of the fiscal year 2017 year-over-year changes can be found in item 7. management 's discussion and analysis of financial condition and results of operations of our annual report on form 10-k for the year ended december 31 , 2018 . critical accounting estimates and significant judgments management 's discussion and analysis of the 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. and the rules and regulations of the sec for annual financial reporting . the preparation of these financial statements requires us to make estimates and 28 judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . we base our estimates and judgments on historical experience , knowledge of current conditions , and beliefs of what could occur in the future given available information . we believe that , of our significant accounting policies , which are described in “ 2. significant accounting policies ” in item 8 of this annual report , the following accounting policies are most important to the portrayal of our financial condition and require the most subjective judgment . accordingly , these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations . if actual results differ significantly from management 's estimates and projections , there could be a material effect on our financial statements . revenue recognition our contracts with clients typically contain promises by us to provide multiple products and services . specifically , contracts associated with sales of pega platform and other software applications , sold either as licenses to use functional intellectual property or as a cloud-based solution , typically include consulting services . determining whether such products and services within a client contract are considered distinct performance obligations that should be accounted for separately requires significant judgment . we review client contracts to identify all separate promises to transfer goods and services that would be considered performance obligations .
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results of operations revenue replace_table_token_7_th ( 1 ) reflects client arrangements ( term license , cloud , and maintenance ) that are subject to renewal . we expect our revenue mix to continue to shift in favor of our subscription offerings , particularly cloud arrangements , which could result in slower total revenue growth in the near term . revenue from cloud arrangements is generally recognized over the service period , while revenue from term and perpetual license arrangements is generally recognized upfront when the license rights become effective . subscription revenue the increase in cloud revenue in 2019 reflects the shift in client preferences to cloud arrangements from other types of arrangements . the increase in term license revenue in 2019 was due to several large , multi-year term license contracts executed in 2019. this increase was partially offset by term license contracts with multi-year committed maintenance periods , where a greater portion of the contract value is allocated to maintenance . the increase in maintenance revenue in 2019 was primarily due to the continued growth in the aggregate value of the installed base of our software and strong renewal rates in excess of 90 % . perpetual license the decrease in perpetual license revenue in 2019 reflects the shift in client preferences in favor of our subscription offerings , particularly cloud arrangements . 24 consulting our consulting revenue fluctuates depending upon the mix of new implementation projects we perform as compared to those performed by our enabled clients or led by our partners . see `` our consulting revenue is significantly dependent upon our consulting personnel implementing new license and cloud arrangements '' in item 1a of this annual report for additional information . the decrease in consulting revenue in 2019 was primarily due to a decrease in billable hours .
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ROO
| 12,514
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million for cash , $ 28.9 million for working capital and $ 4.1 million for property and equipment . of this amount , $ 13.6 million related to inventory was recorded in cost of goods sold , and $ 59.6 million related to other assets and liabilities was recorded as a separate line in the combined statement of operations . the assets , liabilities , sales , earnings and cash flows of our venezuelan subsidiary are expected to be immaterial after september 30 , 2015. the inability to use the venezuela generated cash outside the country has had no material impact on the company 's ability to finance its global operations or meet its debt obligations . effect of new accounting standards in july 2013 , the fasb issued asu 2013-11 `` presentation of an unrecognized tax benefit when a net operating loss carryforward , a similar tax loss , or a tax credit carryforward exists . `` this update is intended to improve the consistency surrounding the presentation of an unrecognized tax benefit when a net operating loss carryforward exists , requiring the unrecognized tax benefit to be presented as a reduction to a deferred tax asset for a net operating loss carryforward , a similar tax loss , or a tax credit carryforward . the new requirements are effective for fiscal years beginning after december 15 , 2013 , and for interim periods within those fiscal years , with early adoption permitted . gcp adopted this standard for the 2014 first quarter , and it did not have a material effect on the combined financial statements . in april 2014 , the fasb issued asu 2014-08 `` reporting discontinued operations and disclosures of disposals of components of an entity . `` this update is intended to change the requirements for reporting discontinued operations and enhance convergence of the fasb 's and the international accounting standard board 's ( iasb ) reporting requirements for discontinued operations . the new requirements are effective for fiscal years beginning on or after december 15 , 2014 , and for interim periods within fiscal years beginning on or after december 15 , 2015 , with early adoption permitted . gcp adopted this standard for the 2015 first quarter , and it did not have a material effect on the combined financial statements . 67 notes to combined financial statements ( continued ) 1. basis of presentation and summary of significant accounting and financial reporting policies ( continued ) in may 2014 , the fasb issued asu 2014-09 `` revenue from contracts with customers . `` this update is intended to remove inconsistencies and weaknesses in revenue requirements ; provide a more robust framework for addressing revenue issues ; improve comparability of revenue recognition practices across entities , industries , jurisdictions and capital markets ; provide more useful information to users of financial statements through improved disclosure requirements ; and simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer . the new requirements were to be effective for fiscal years beginning after december 15 , 2016 , and for interim periods within those fiscal years , with early adoption not permitted . on july 9 , 2015 , the fasb voted to defer the effective date by one year but will permit adoption as of the original effective date . the revised standard allows for two methods of adoption : ( a ) full retrospective adoption , meaning the standard is applied to all periods presented , or ( b ) modified retrospective adoption , meaning the cumulative effect of applying the new standard is recognized as an adjustment to the opening retained earnings balance . gcp does not intend to adopt the standard early and is in the process of determining the adoption method as well as the effects the adoption will have on the combined financial statements . in april 2015 , the fasb issued asu 2015-03 `` simplifying the presentation of debt issuance costs . `` this update is part of the fasb 's simplification initiative and is also intended to enhance convergence with the iasb 's treatment of debt issuance costs . the update 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 new requirements are effective for fiscal years beginning after december 15 , 2015 , and for interim periods within those fiscal years , with early adoption permitted . gcp is currently evaluating its effect on the combined financial statements and will adopt this update when it becomes effective . in july 2015 , the fasb issued asu 2015-11 `` simplifying the measurement of inventory . `` this update is part of the fasb 's simplification initiative and is also intended to enhance convergence with the iasb 's measurement of inventory . the update requires that inventory be measured at the lower of cost or net realizable value for entities using fifo or average cost methods . the new requirements are effective for fiscal years beginning after december 15 , 2016 , and for interim periods within those fiscal years , with early adoption permitted . gcp is currently evaluating the timing of adoption and does not expect the update to have a material effect on the combined financial statements . in november 2015 , the fasb issued accounting standards update 2015-17 , “ balance sheet classification of deferred taxes ” as an amendment to asc 740 `` income taxes . `` as part of the fasb 's simplification initiative , this update requires that all deferred tax assets and liabilities , along with any related valuation allowance , be classified as noncurrent on the balance sheet . thus , each jurisdiction will now only present one net noncurrent deferred tax asset or liability . story_separator_special_tag defined benefit pension expense defined benefit pension expense includes costs under u.s. and non-u.s. defined benefit pension plans that provide benefits to operating segment and corporate employees , as well as retirees and former employees of divested businesses where we retained these obligations . under mark-to-market accounting , our pension costs consist of two elements : 1 ) `` certain pension costs `` —ongoing costs recognized quarterly , which include service and interest costs , expected returns on plan assets , and amortization of prior service costs/credits ; and 2 ) `` pension mark-to-market adjustment and other related costs , net `` —mark-to-market gains and losses recognized annually in the fourth quarter , or at an interim period should a significant event occur , resulting from changes in actuarial assumptions , such as discount rates and the difference between actual and expected returns on plan assets . certain pension costs were $ 5.1 million , $ 7.5 million and $ 5.3 million for 2015 , 2014 and 2013 , respectively . the pension mark-to-market adjustment and other related income ( expense ) , net was $ ( 15.0 ) million , $ 18.6 million and $ ( 14.4 ) million for 2015 , 2014 and 2013 , respectively . these costs are reported in `` cost of goods sold `` and in `` selling , general and administrative expenses ” in our combined financial statements based upon the functions of the employees to whom the pension costs relate . our employees participate in certain funded and unfunded defined benefit pension plans , primarily in the u.k. , that we sponsor . we record an asset or liability to recognize the funded status of these plans in the combined balance sheets . our employees also participate in funded and unfunded defined benefit pension and other postretirement benefit plans ( the “ shared plans ” ) sponsored by grace , which include employees of other grace businesses . for purposes of the combined financial statements , we account for the shared plans as multiemployer benefit plans . accordingly , we do not record an asset or liability to recognize the funded status of these plans in the combined balance sheets . as part of the separation , we split certain shared plans and transferred the assets and liabilities of such plans related to gcp employees to gcp . our allocated expense for the shared plans , which is included in certain pension costs , was $ 3.8 million , $ 5.3 million , and $ 3.0 million for the years ended december 31 , 2015 , 2014 , and 2013 , respectively . grace provided postretirement health care and life insurance benefits for retired employees of certain u.s. business units and certain divested business units . the postretirement medical plan provided various levels of benefits to employees hired before 1993 who retired from grace after age 55 with at least 10 years of service . in june 2014 , grace announced that it would discontinue its postretirement medical plan for all u.s. employees effective october 31 , 2014 , and eliminate certain postretirement life insurance benefits . the postretirement plan was further remeasured as of september 30 , 2015 , due to a plan amendment to eliminate certain other postretirement life insurance benefits . our allocated income ( expense ) for the postretirement health care and life insurance benefits plan was $ 1.4 million , $ 0.7 million , and $ ( 1.5 ) million for the years ended december 31 , 2015 , 2014 , and 2013 , respectively . interest and financing expenses interest and financing expenses were $ 1.5 million for 2015 , a decrease of 61.5 % compared with 2014 , primarily due to the repayment of outstanding third-party debt during the first nine months of 2015 , slightly offset by third-party borrowings in november and december of 2015. interest expense was $ 3.9 million for 2014 , an increase of 18.2 % compared with 2013 , primarily due to interest expense related to additional debt incurred during the second half of 2013 , which was outstanding for the full year in 2014. interest expense , net–related party was $ 1.2 million for 2015 , an increase of 33.3 % compared with 2014 , primarily due to the repayment timing of related party loans receivable . interest expense was $ 0.9 million for 2014 , a decrease of 50.0 % compared with 2013 , primarily due to an increase in interest income on lending to related parties . 45 income taxes income tax expense for 2015 , 2014 and 2013 was $ 84.3 million , $ 55.6 million and $ 51.6 million , respectively , on income from combined operations before income taxes of $ 125.2 million , $ 191.1 million and $ 162.9 million in 2015 , 2014 and 2013 , respectively . our effective tax rate was approximately 67 % , 29 % and 32 % in 2015 , 2014 and 2013 , respectively . our 2015 effective tax rate of approximately 67 % was higher than the 35 % u.s. statutory rate primarily due to $ 24.7 million related to the venezuela nondeductible charge , $ 19.9 million due to separation-related repatriation of foreign earnings , $ 6.3 million related to state and local income taxes , and $ 2.5 million for non-deductible expenses , partially offset by $ 8.0 million due to lower taxes in non-u.s. jurisdictions , $ 2.7 million due to the domestic production activities deduction and a $ 2.5 million benefit associated with the return to provision change in estimate . our 2014 effective tax rate of approximately 29 % was lower than the 35 % u.s. statutory rate primarily due to benefits recognized during the year including $ 12.3 million due to lower taxes in non-u.s. jurisdictions , $ 2.2 million due to the domestic production activities deduction and $ 1.9 million related to the release of reserves for uncertain
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the shared plans , which are accounted for as multiemployer benefit plans as discussed above , are excluded from the following discussion . we sponsor defined benefit pension plans for our employees in the u.s. , the u.k. , and a number of other countries , and fund government-sponsored programs in other countries where we operate . certain of our defined benefit pension plans are advance-funded and others are pay-as-you-go . the advance-funded plans are administered by trustees who direct the management of plan assets and arrange to have obligations paid when due . our most significant advance-funded plans cover current and former salaried employees in the u.k. and employees covered by collective bargaining agreements at certain of our u.s. facilities . our u.s. advance-funded plans are qualified under the u.s. tax code . fully-funded plans include several advance-funded plans where the fair value of the plan assets exceeds the projected benefit obligation , or pbo . this group of plans was overfunded by $ 26.1 million as of december 31 , 2015 , and the overfunded status is reflected as `` overfunded defined benefit pension plans '' in the combined balance sheets . underfunded plans include a group of advance-funded plans that are underfunded on a pbo basis by a total of $ 8.0 million as of december 31 , 2015 . additionally , we have several plans that are funded on a pay-as-you-go basis , and therefore , the entire pbo of $ 27.1 million at december 31 , 2015 , is unfunded . the combined balance of the underfunded and unfunded plans was $ 35.1 million as of december 31 , 2015 , and is presented as a liability on the combined balance sheets as follows : $ 1.1 million in `` other current liabilities '' , and $ 34.0 million included in `` underfunded and unfunded defined benefit pension plans . '' based on the u.s. advance-funded plans ' status as of december 31 , 2015 , there are no minimum required payments under erisa for 2016. we contributed $ 0.8 million and $ 1.3 million to these plans in 2014 and 2013 , respectively . we intend to fund non-u.s. pension plans based upon applicable legal requirements and actuarial and trustee recommendations . we contributed $ 2.4 million , $ 3.6 million and $ 2.3 million to these plans in 2015 , 2014 , and 2013 , respectively . tax matters see note
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Liquidity
| 11,012
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during 2012 , we plan to continue to invest in product and technology development and will continue to introduce feature enhancements across our products as well as introduce chair-side applications . enhancing the customer experience . we are committed to enhancing the customer experience through the evolution of our customer facing systems and programs making it easier for our customers to adopt our products into their practice and increase utilization . we provide robust clinical education resources and training programs through instructor-led training classes , seminars and workshops as well as online training through webinars , blogs , and online educational websites such as our aligntech institute ( www.aligntechinstitute.com ) and cadent ( www.cadentinc.com ) websites . our customer support teams consist of over 700 treatment technicians and customer support staff available to help our customers with their cases and treatment plans . our sales representatives provide additional support and practice development tools such as staff training , software tips and tools , practice marketing guides and marketing materials , as well as any assistance with the invisalign or itero/ioc system process . lastly , we offer our customers varying product promotional discounts and incentive programs as a means to improve the customer experience and increase utilization . our largest north american program , the advantage rebate program , allows eligible orthodontist and gps to earn volume rebates and marketing benefits for exceeding quarterly case shipment thresholds and participating in continuing education . additional tiered benefits range from practice development materials , marketing consulting , and access to dedicated clinical technicians . during 2012 , we plan to continue providing our high standard educational resources and improving our customer support processes as we centralize our newly acquired intra-oral scanner-related customer support team . increasing the effectiveness of our consumer demand creation and extending invisalign brand awareness . as an established and known brand within the dental industry , efficiently marketing to the consumer and creating demand is one of our key strategic objectives to driving long-term growth . 38 our market research indicates that the majority of adults with malocclusion forgo treatment rather than elect traditional treatment due to its many limitations , such as compromised aesthetics and oral discomfort . in addition , many parents also elect traditional treatment for their teenagers due to limited awareness of invisalign treatment applicability for teenager use . our goals are to extend our leadership in clear aligner therapy with adults , increase awareness and consumer demand with moms and teens , and to continue expansion of the clear aligner category overall . we continue to be successful with programs that more effectively and efficiently generate demand or pull for invisalign treatment . in the past several years , we continued building awareness and demand through an integrated consumer marketing platform of traditional media , event marketing and digital and social media . in addition , we continued to evolve our marketing program aimed specifically at the teenage segment to increase awareness and educate prospective teen patients and their parents . in 2011 , we leveraged online and mobile widgets , social media and blogs directly targeted to teens and launched a commercial prompting parents and teens to learn more about invisalign treatment . we will continue to build on these programs and efforts in 2012. growth of international markets . we will continue to focus our efforts towards increasing adoption of our products by dental professionals in our core european markets as well as expansion into new markets . in the past five years , we have grown our core direct business in europe and japan from $ 46.6 million in 2007 to $ 115.6 million in 2011. at the end of 2011 , international sales represented approximately 24.1 % of net worldwide revenues . we trained over 17,800 doctors on the invisalign system internationally , predominantly orthodontists in europe which is our primary international market . due to the higher number of complex malocclusion cases in international markets compared to north america , product expansion and enhancements are important to providing doctors with treatment options that address a wider range of potential patient needs with greater treatment flexibility . the recent invisalign g3 and invisalign g4 features designed to address those complex treatment issues is a significant product evolution . we are also expanding our market presence globally . in may 2011 , we announced commercial availability of the invisalign system in china . while we do not expect meaningful revenue from china for several years , our focused strategy to launch invisalign in four major cities of china such as shanghai , beijing , shenzhen , and guangzhou provides us a large growth opportunity long term . additionally , although the vast majority of our international revenues are from direct sales , approximately 13 % of our international invisalign sales in fiscal 2011 are from distribution partners covering non-core country markets in the asia pacific , emea , and latin america regions . in early 2011 , the invisalign system was commercially launched in turkey through our emea distribution partner . in december 2011 , we received regulatory approval for the invisalign system in russia and commercial launch of invisalign in russia and the middle east began in 2012 also through our emea distribution partner . with these efforts , we expect our international revenues to continue to increase in absolute dollars and as a percentage of total net revenues in the foreseeable future . in addition to the successful execution of our business strategy , there are a number of other factors which may affect our results in 2012 and beyond as set forth below : product innovation and clinical effectiveness . we believe that , in addition to an increase in the number of patients visiting dental offices throughout 2011 as reported by our customers , as well as patient interest in higher value procedures , invisalign g3 was an important contributor to the increased utilization in 2011 by our north american orthodontic customers . story_separator_special_tag additionally , since most of our international customers are orthodontists , we believe the international launch of invisalign g3 in may 2011 was important for continued growth both in our existing international markets and to support our expansion in new markets like china . we expect that the innovations in g4 will build on the success we have seen with invisalign g3 and encourage even greater confidence and adoption in our customers ' practices . additionally , with the introduction of new software features to the ioc and itero intra-oral scanners along with invisalign interoperability , we believe that over the long-term these types of product and clinical innovation will increase adoption of invisalign and increase sales of our intra-oral scanners . however , it is difficult to predict the rate of adoption which may vary by region and channel . 39 investments to increase manufacturing capacity . we are currently transitioning our aligner fabrication and intra-oral scannerrelated activities from our existing facility in juarez , mexico into our new 150,000 square foot property purchased facility in september 2011. the lease on our existing facility expires in july 2013. our ability to plan , construct and equip this additional manufacturing facility is subject to significant risk and uncertainty , including delays and cost overruns . if the opening of this facility is significantly delayed for any reason , or if demand for our product in 2012 exceeds our current expectations , or if the timing of receipt of case product orders during a given quarter is different from our expectations , we may not be able to fulfill orders in a timely manner , which may negatively impact our financial results and overall business . consolidation of new jersey operations . in september 2011 , we announced plans to consolidate our cad/cam services and intra-oral scanner-related activities based in carlstadt , new jersey with our existing manufacturing and shared services organizations in order to optimize efficiency , consolidate customer-facing functions , and reduce operating costs . all existing intra-oral scanner research and development and manufacturing operations will remain in or yehuda , israel . these actions include a phased transition of the following activities over the next few quarters : consolidation of customer care for cad/cam services and intra-oral scanners into our existing shared services organization in san jose , costa rica ; transition of cad/cam services and intra-oral scanner distribution and repair to our treat operations in san jose , costa rica and our manufacturing facility in juarez , mexico ; and consolidation of accounting and finance functions at our corporate headquarters in san jose , california ; and closure of the new jersey facility by the third quarter of 2012. the consolidation of our new jersey operations includes a total reduction of 119 full time headcount in carlstadt , new jersey . the transition began in the fourth quarter of 2011 and is expected to be completed by the third quarter of 2012. as part of this consolidation , we will incur costs for severance estimated to be approximately $ 2.0 million , of which approximately $ 1.1 million was realized in 2011 and $ 0.9 million over the first three quarters of 2012. after the new jersey consolidation is complete , we expect to realize annualized net savings of approximately $ 4.0 million per year . see part ii , item 1a risk factors for risks related to the consolidation of new jersey operations . 40 invisalign utilization rates . our goal is to establish invisalign as the treatment of choice for treating malocclusion ultimately driving increased product adoption and frequency of use by dental professionals , or utilization . our quarterly utilization rates for the previous 12 quarters are as follows : * invisalign utilization rates = # of cases shipped divided by # of doctors cases were shipped to total utilization in the fourth quarter of 2011 increased slightly to 4.1 cases per doctor , driven mostly by our north american gp customers and international doctors . utilization among our north american orthodontist customers declined slightly from the third quarter of 2011 to 7.0 cases per doctor , reflecting seasonality in their teenage patient case starts . although we expect that over the long-term our utilization rates will gradually improve , we expect that period over period comparisons of our utilization rates will fluctuate . acquisition of cadent . on april 29 , 2011 , we acquired privately-held cadent , a leading provider of 3d digital scanning solutions for orthodontics and dentistry . the acquisition of cadent positions us as a leader in one of the best growth opportunities in dentistry and medical devices today . over the next five years , we expect that intra-oral scanners will become widely used in dental practices . we believe that the combination of the two companies will help accelerate the use of intra-oral scanning in the dental industry by leveraging align 's global sales reach , extensive professional and consumer marketing capabilities and base of over 55 thousand clincheck software users . intra-oral scanners also strengthen our ability to drive adoption of invisalign by integrating invisalign treatment more fully with mainstream tools and procedures in doctors ' practices . we may , however , experience difficulties in achieving the anticipated financial or strategic benefits of the acquisition . information regarding risks associated with the cadent acquisition may be found in item 1 of this annual report on form 10-k under the heading risk factors. number of new invisalign doctors trained . we continue to expand our invisalign customer base through training new doctors . in 2012 , we expect to train approximately 6,000 orthodontists and gps in north america and internationally , which is approximately the same number we trained in 2011. foreign exchange rates . although the u.s. dollar is our reporting currency , a portion of our revenues and profits are generated in foreign currencies .
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invisalign case volume growth was driven by both improved utilization and an increase in the number of doctors submitting cases . revenue from our clear aligner segment , consisting of our invisalign products , increased by 16.7 % as a result of additional case volumes across all products . the most significant volume percentage increases were in the invisalign teen and assist products . although invisalign teen case volume increased 32.4 % , revenue for invisalign teen was comparable to the prior year primarily because of the $ 14.3 million release of deferred revenue in 2010. invisalign assist revenue growth was comprised of both an increase in case volume and additional revenue being recognized as each batch is shipped over the course of treatment instead of deferring until the final batch shipment . additionally , invisalign non-case revenues , consisting of training fees and sales of ancillary products , were higher in 2011 compared to 2010 primarily due to increased sales of our vivera product . since date of the acquisition until the end of the 2011 fiscal year end , the scanner and cad/cam services segment generated $ 28.1 million of revenue from sales of itero and ioc scanners and orthocad services . 43 fiscal year 2010 compared to fiscal year 2009 total net revenues increased in 2010 as compared to 2009 primarily as a result of worldwide volume growth across all customer channels . the release of revenue previously deferred for invisalign teen replacement aligners in the second quarter of 2010 contributed an additional $ 14.3 million to total net revenues for 2010. in 2010 , north america revenue increased 17.6 % compared to 2009 due to overall case volume growth of 15.2 % as well as an increase in our average selling price . higher case volume was driven primarily by the north american orthodontic channel reflecting increased penetration into the teenage orthodontic market , especially with the invisalign teen product . additionally , the increase also reflects a significant reduction in our revenue deferral rate for teen replacement aligners and lower discounts and rebates . our international
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ROO
| 10,620
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specifically , the company believes that the agreements provide for it to be responsible for all expenses associated with the assets , and to receive all revenue generated from the assets , from april 1 , 2016 , the effective date of the asset purchase agreement , through the closing date , august 25 , 2016. the sellers on the other hand , which include entities owned by richard n. azar , ii , the company 's interim chief executive officer , have argued that the company was only responsible for expenses , and was only due to receive revenue from the assets , beginning on the closing date , august 25 , 2016. the difference in the amounts claimed due to the company from the parties currently varies from a high of $ 1,121,718 , which the company alleges it is due , to a low of $ 342,298 , which the sellers allege that the company is due . the parties continue to discuss the issues raised and to work towards a mutually acceptable settlement ; however , due to the continuing dispute , for the purposes of the attached financial statements , the company has recorded a receivable of $ 1,121,718 with an allowance of $ 779,420 for a net balance of $ 342,298. we intend to grow the company in three ways : the development of our acquired assets and or develop what we own ; expansion of the existing footprint or what would be considered bolt-on acquisitions ; and additional material acquisitions . following the closing of our anticipated acquisition of the assets , we intend to drill the acquired acreage , funding permitting . as previously disclosed , 50 hunton locations have been identified on the acreage to be acquired , and we have further refined those locations to what we believe are six initial wells to be drilled assuming the acquisition is completed and funding is available . beyond those known locations , we believe there exists opportunities to develop other sands present in the acreage . from the top to the bottom of this play , there are 19 different sands that have been produced in various areas of central oklahoma . they include shallow pennsylvanian formations , such as the bartlesville , the redfork and the skinner , and the mississippi lime formation is present in addition to the woodford shale . the prue sand , another potentially productive sand , is of particular interest . we plan to study the prue as a high-priority target for its economic viability . another aspect of our growth plan is to acquire opportunities within or near the assets . we are looking to expand our footprint by acquiring acreage that is nearby or offset to the operations we currently participate in , especially where those opportunities also represent existing production . following the entry into the purchase agreement , we have continued to review opportunities , primarily asset or corporate acquisitions , but also include strategic partnerships , and or merger opportunities . while these types of transactions tend to be large and take time to generate , they also represent material increases in the size and scope of the company . securities and stock purchase agreements on april 2016 , we entered into a securities purchase agreement pursuant to which we issued a redeemable convertible subordinated debenture , with a face amount of $ 530,000 , convertible into 163,077 shares of common stock at a conversion price equal to $ 3.25 per share and a warrant to purchase 1,384,616 shares of common stock at an exercise price equal to $ 3.25 per share ( the “ first warrant ” ) . the debenture had a 5.0 % original issue discount and we received $ 500,000 in connection with the sale of such debenture . the holder has exercised the first warrant for the sum of $ 4.5 million . 46 also on april 2016 , we entered into a stock purchase agreement pursuant to which we agreed , subject to certain conditions , to issue 527 shares of series c redeemable convertible preferred stock ( with a face value of $ 5.26 million ) at a 5 % original issue discount , convertible into 1,618,462 shares of common stock at a conversion price of $ 3.25 per share , and a warrant to purchase 1,111,112 shares of common stock at an exercise price of $ 4.50 per share ( the “ second warrant ” ) . under the terms of the stock purchase agreement , the second warrant and 53 shares of series c preferred stock were sold and issued for $ 500,000 on september 2 , 2016 , and the remaining 474 shares of series c preferred stock were sold and issued for $ 4.5 million on november 17 , 2016. the second warrant expired unexercised pursuant to its terms . operations camber 's objective for our current producing wells is to operate as efficiently as possible , look for technological advancements to increase the life of the wells , evaluate the economic viability of these wells and consider adding or re-drilling our low producing assets . during fiscal 2017 , we completed numerous workovers in the austin chalk and initiated workovers in the coyle ( hunton ) field . costs associated with producing oil , natural gas and ngls are substantial . some of these costs vary with commodity prices , some trend with the type and volume of production , and others are a function of the number of wells we own and operate . production expenses are the costs incurred in the operation of productive properties and workover costs . expenses for utilities , direct labor , water transportation , injection and disposal , materials and supplies comprise the most significant portion of our production expenses . story_separator_special_tag we are required to make monthly payments under the note equal to the greater of ( i ) $ 425,000 ; and ( ii ) fifty percent ( 50 % ) of our monthly net income . the note accrues annual interest at 2 % above the prime rate then in effect , subject to a minimum interest rate of 5.5 % per annum . the note is due and payable on august 25 , 2019. payments under the note are subject to change as the interest rate changes in order to sufficiently amortize the note in 120 monthly installments . we have the right , from time to time and without penalty to prepay the note in whole or in part , subject to the terms thereof . the proceeds of the loan were used to repay and refinance approximately $ 30.6 million of indebtedness owed by certain of the sellers , to the lender ( including an aggregate of $ 18.3 million owed by rad2 and another entity controlled by mr. azar , $ 9.8 million owed by dbs , and $ 2.1 million owed by mr. menchaca ) , as well as to pay the $ 4.975 million due to the sellers at closing . another $ 3.36 million was used to fund a sinking fund required by the lender , as discussed below , to pay principal on the note . the amount owed under the note is secured by a security interest in substantially all of our assets and properties , pursuant to three security agreements . also , each of the guarantors guaranteed the repayment of a portion of the loan agreement pursuant to a limited guaranty agreement ( each a “ guaranty agreement ” ) . additionally , in connection with the parties ' entry into the loan agreement and to further secure amounts due thereunder , certain of the guarantors pledged shares of common stock which they received at the closing to the lender , with rad2 pledging 3,120,606 shares of common stock ; dbs pledging 935,934 shares of common stock ; and saxum pledging 673,392 shares of common stock . the loan agreement includes usual and customary positive and negative covenants , including requiring that ( a ) we maintain an account balance with lender of at least $ 3,360,000 at all times ; ( b ) we comply in all respects with all material agreements , indentures , mortgages , deeds of trust and documents binding on us or affecting our assets , properties or business ; ( c ) that on or before the 15th day following the end of each calendar quarter , and the 120th day following the end of each calendar year , we deliver certain financial statements to the lender ; ( d ) we provide lender a reserve report on june 30th and december 30th of each year in connection with our oil and gas properties , and that we further pay the lender $ 10,000 per year as an engineering fee ; ( e ) our projected net cash flow , less taxes , operating costs and general and administrative expenses , and other expenses , be sufficient to fully amortize the principal balance due under the note on a monthly basis , within the economic half-life of the mortgaged properties securing the repayment of the note ( the “ cash flow test ” ) ; ( f ) the balance of the loan not exceed the lesser of ( i ) 65 % of the present worth of our future net income ( “ pwfni ” ) discounted at 20 % , or ( ii ) fifty percent ( 50 % ) of the pwfni discounted at 9 % ( the “ loan to value determination base ” ) ; ( g ) any additional assets we acquire in the future are promptly pledged to lender to secure the loan ; ( h ) lender consent to any future debt we incur in excess of $ 100,000 per year ; ( i ) that we not reorganize , merge , or affiliate with any other entity without the prior consent of lender , and that we not change the present positions of our management , without the prior written consent of lender ; ( i ) we not sell , contract to sell , convey , assign , transfer , mortgage , pledge , hypothecate , encumber , or in any way alienate any interest in the collateral which secures the repayment of the note , without the prior written consent and approval of lender ; ( j ) our maximum general and administrative expenses , including without limitation , employee compensation , but excluding non-cash expenses , including but not limited to stock and warrants issued as compensation , can not exceed $ 233,333 per month or $ 2,800,000 per annual fiscal year ( with such amounts to be updated by the lender on august 25th of each year that the loan is outstanding ) , without the prior written consent of lender , provided that cash bonuses paid to our directors , officers , and employees are allowed , so long as not more than $ 500,000 in aggregate bonus payments and not more than $ 100,000 in bonus payments to any one recipient , are paid during any fiscal year ; ( k ) we are not permitted to change the employment , position , or scope of duties of any member of our senior management staff , except changes resulting from death or disability ; and ( l ) we maintain a tangible net worth as shown in the financial statements delivered to lender of at least $ 30 million . 53 the loan to value determination base is tested on june 30th and december 30th of each year ; with the first loan to value determination base to be tested on december 30 , 2016 ; however
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liquidity and capital resources the accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the united states of america on a going concern basis , which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business . accordingly , the financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the company be unable to continue as a going concern . our primary sources of cash for the year ended march 31 , 2017 were from funds generated from the sale of preferred stock , exercise of warrants , the sale of natural gas and crude oil production and funds borrowed under funding agreements . the primary uses of cash were funds used in operations and funds used for the acquisition . 51 working capital at march 31 , 2017 , the company 's total current liabilities of $ 48.2 million exceeded its total current assets of $ 3.9 million , resulting in a working capital deficit of $ 44.3 million , while at march 31 , 2016 , the company 's total current liabilities of $ 11.1 million exceeded its total current assets of $ 0.5 million , resulting in a working capital deficit of $ 10.6 million . the $ 33.7 million increase in the working capital deficit is primarily related to the borrowing of $ 40 million ( evidenced by the ibc loan agreement , discussed below ) , which was used to repay and finance approximately $ 30.6 million of indebtedness owed by certain of the sellers as part of the closing of the acquisition .
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Liquidity
| 10,387
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· dpp® zika/dengue/chikungunya assay : the dpp® zika/dengue/chikungunya assay is a rapid , poc , multiplex test for the simultaneous detection of igm/igg antibodies . in february 2016 , we received a grant from the paul g. allen family foundation to initiate development of the dpp® zika/dengue/chikungunya assay . during 2016 , chembio announced collaborations with bio-manguinhos , the unit of the oswaldo cruz foundation ( fiocruz ) responsible for the development and production of vaccines , diagnostics and biopharmaceuticals , primarily to meet the demands of brazil 's national public health system , related to the dpp® zika/dengue/chikungunya assay . in august 2016 , the company received an award from the u.s. government ( hhs/aspr/barda ) , granting the company up to $ 13.2 million ( including an option of $ 7.3 million to develop dpp® zika/dengue/chikungunya assay and obtain u.s. regulatory approval ) . in september 2016 , the company received a contract award from cdc , to initiate a zika , dengue , and chikungunya surveillance program in india , peru , guatemala and haiti and we began selling the dpp® zika/dengue/chikungunya igm/igg assay to cdc for field test purposes during the first quarter of 2017 . · dpp® fever panel assay : the dpp® fever panel assay is a rapid , poc , multiplex test for the simultaneous detection of malaria , dengue , chikungunya , zika , ebola , lassa , and marburg . in october 2015 , we received a $ 2.1 million grant from the paul g. allen ebola program , to develop the dpp® fever panel assay and a $ 0.55 million follow-on grant to add a test for the detection of zika virus . we completed the development of the dpp® fever panel assay in 2016 , including the addition of zika , and we supplied 10,000 tests to find , who will initiate evaluation in peru and nigeria . 29 · dpp® ebola assay and dpp® malaria-ebola assay : the dpp® ebola assay is a rapid poc test for the detection of ebola , and the dpp® malaria-ebola assay is a rapid , poc , multiplex test for the simultaneous detection of malaria and ebola . in october 2014 , we announced plans to develop , validate , and commercialize poc dpp ® assays for ebola and febrile illness . we completed the development of the dpp® ebola assay and submitted it for emergency use authorization ( eua ) with the food & drug administration ( fda ) and world health organization ( who ) , and we are actively engaged with these regulatory agencies . during the third and fourth quarters of 2015 , we sold dpp® ebola and dpp® malaria-ebola assays to the centers for disease control & prevention ( cdc ) for field studies in west africa , which is ongoing . technology collaboration · dpp® cancer assay : the dpp® cancer assay is a rapid , poc , multiplex test for the early detection and monitoring of a specific type of cancer . in october 2014 , we entered into collaboration with an international diagnostics company to develop a poc diagnostic test for a specific type of cancer . this program is fully funded by this partner . however , under the terms of the agreement , neither chembio 's partner nor the specific type of cancer is being disclosed . the cancer project represents an application of the dpp® technology outside of the infectious disease field , and the scope of the agreement involves product development of a quantitative , reader-based cancer assay for two cancer markers , utilizing chembio 's dpp® technology and its dpp® micro reader . during the third quarter of 2015 , we completed successful feasibility , and our partner agreed to fund continued development of the dpp® cancer assay , which development and verification is ongoing . · dpp® traumatic brain injury assay : the dpp® traumatic brain injury assay is a rapid poc test for the detection of traumatic brain injury ( tbi ) and sports-related concussion . in january 2015 , we entered into an agreement with the concussion science group ( csg ) division of perseus science group llc , to combine csg 's patented biomarker with our proprietary dpp® platform and dpp® micro reader , to develop a semi-quantitative or quantitative poc test , to diagnose tbi . the dpp® traumatic brain injury assay is in the feasibility and pre-clinical stage . under institutional review board ( irb ) agreements with multiple hospitals , we are conducting pre-clinical studies of the prototype dpp® traumatic brain injury assay using patient samples . · dpp® bovine tuberculosis : the dpp ® bovidtb assay is a rapid poc test for the detection of bovine tuberculosis ( tb ) . in september 2016 , the company was awarded a $ 600,000 grant from the united states department of agriculture ( usda ) to develop the dpp ® bovidtb assay . the grant will be managed by the small business innovation research program ( sbir ) of the national institute of food and agriculture ( nifa ) , a federal agency within the usda and the assay will be developed in collaboration with national animal disease center ( nadc ) and infectious disease research institute ( idri ) . under the two-year grant , chembio will use its patented dpp ® technology to undertake to develop a simple , rapid , accurate and cost-effective test for bovine tb in cattle . the dpp ® bovidtb assay will be designed to provide results within 20 minutes , thereby significantly improving on the time-consuming , tedious and inadequate diagnostic methods currently in use . regulatory activities · dpp® hiv-syphilis assay : we have developed a u.s. version of the dpp® hiv-syphilis assay , designed to meet the performance requirements for the `` reverse `` algorithm that is currently in clinical use for syphilis testing in the united states . story_separator_special_tag the decrease in net product sales gross margin of $ 1,000,000 is primarily attributable to the change in product sales compared to 2014. the net product sales gross margin decrease is comprised of two components , one is the decrease in product sales of $ 4,063,000 , which at the 35.1 % margin contributed $ 1,428,000 to the decrease , and the other is the increased change in margin percentage of 2.0 % which contributed the balance of $ 427,000. the 2.0 % increase in the percentage , from 35.1 % in 2014 to 37.1 % in 2015 , was primarily due to increased efficiencies from our operations excellence program . 34 research and development : this category includes costs incurred for clinical and regulatory affairs and for product research and development . replace_table_token_10_th expenses for clinical and regulatory affairs for the year ended december 31 , 2015 increased by $ 201,000 as compared to the same period in 2014. this was primarily due to an increase of $ 161,000 in clinical trial expenses and increased wages and related costs of $ 42,000. r & d expenses other than clinical & regulatory affairs increased by $ 1,344,000 in the year ended december 31 , 2015 , as compared with the same period in 2014. the increases were primarily related to an increase in wages and related costs , and in material and supplies , to support our sponsored research and internal development programs . selling , general and administrative expense : replace_table_token_11_th selling , general and administrative expenses for the year ended december 31 , 2015 , increased by $ 131,000 as compared with the same period in 2014 , a 1.7 % increase . this increase resulted primarily from increases in wages and related costs and travel expenses , which for 2015 included the continued development of a sales and marketing team over 2014 , professional fees and in investor relations/investment bankers , which were partially offset by decreases in consulting , commissions ( due to decreased sales to brazil ) , stock-based compensation , and marketing materials . 35 other income and expense : replace_table_token_12_th other ( expense ) for the year ended december 31 , 2015 decreased approximately $ 3,400 , primarily due to decreased interest income , compared to the same period in 2014. income tax provision ( benefit ) : for the year ended december 31 , 2015 the company recognized a $ ( 1,160,000 ) non-cash income tax benefit and increased its deferred tax assets by $ ( 1,160,000 ) . for the year ended december 31 , 2014 , the company recognized a $ ( 413,000 ) non-cash income tax benefit and increased its deferred tax assets by $ ( 413,000 ) . the effective tax rate used to recognize the benefit in 2015 was 32.0 % compared to a 26.6 % rate used in 2014 to record the amount charged . in both years non-deductible expenses for tax purposes accounted for most of the difference from the standard 34 % u.s. tax rate . the company maintains a full valuation allowance on research and development tax credits . 36 material changes in financial condition replace_table_token_13_th cash increased by $ 5,178,000 from december 31 , 2015 , primarily due to net cash provided by financing activities for the year of 2016. the company raised , net of expenses , approximately $ 12,500,000 which was partially offset by cash used in operating activities for the year of 2016. in addition there were increases in accounts receivable , net of allowance , of $ 961,000 , deposits , accounts payable and accrued liabilities of $ 212,000 and other assets of $ 511,000 , deferred revenue of $ 39,000 , and decreases in fixed assets of $ 665,000 after depreciation , prepaid expenses of $ 417,000 , non-current deferred tax asset of $ 5,467,000 , and an increase in additional paid-in-capital of $ 12,831,000. the accounts receivable increase from december 31 , 2015 , is primarily due to an increase in december 2016 versus december 2015 sales of approximately $ 1.50 million , partially offset by lower sales in prior months . the decrease in fixed assets is primarily due to depreciation for the year ending december 2016 versus december 2015. deferred tax asset decrease is related to recording of a full valuation allowance . story_separator_special_tag operations . robert passas , ph.d. , joined the company in october 2016 as president , emea and apac regions , and is responsible for commercial operations in europe , the middle east , africa , and asia . prior to joining the company , dr. passas held positions of increasing responsibility at abbott , quidel , the binding site , and trinity biotech . in his most recent position , he was responsible for worldwide marketing and international sales at trinity biotech . sharon klugewicz , who most recently served as chembio 's chief operating officer , was promoted to president , americas region in october 2016 , with responsibility for commercial operations in the united states , latin america , and canada . ms. klugewicz is responsible for sales , marketing , customer support , clinical and regulatory affairs , and quality systems in the americas , and will be tasked with leading the u.s. commercial team and expanding commercial operations throughout latin america , the u.s. and canada . prior to joining the company in 2012 , she spent 20 years at pall corporation where she held positions of increasing responsibility , including senior vice president , scientific and laboratory services . 38 in addition , chembio has recently hired three international sales executives to oversee commercial expansion in specific regions . javier gutman was named regional director , latin america ; kenneth burns was named regional director , africa ; and mohan anasalam was named regional director , asia pacific . each of these sales executives brings considerable experience to chembio , and each will focus
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expanding chembio 's product portfolio for nearly fifteen years , chembio was primarily focused on poc hiv testing and succeeded in commercializing multiple fda-approved and clia-waived poc hiv tests . in 2014 , the company made the strategic decision to expand its product portfolio and focus on three initiatives : 1 ) strengthening its core sexually transmitted disease business , 2 ) building a highly-differentiated fever and tropical disease business , and 3 ) establishing technology collaborations to further leverage its patented dpp ® technology platform . 1. strengthening the company 's core sexually transmitted disease business began with the decision to terminate its u.s. distribution agreements for hiv 1/2 stat-pak ® assay in 2014 and sure check hiv ® 1/2 assay in 2016 , which provided the company with worldwide commercial control of its legacy poc hiv tests , which are fda-approved , clia-waived , who prequalified and ce marked . the company leveraged its dpp ® technology platform to develop a dpp® hiv 1/2 assay , which became fda-approved and clia-waived in october 2014 for use with blood and oral fluid , the second such entrant in the u.s. market . finally , following the introduction of its dpp ® hiv-syphilis assay in latin america , the company has prioritized the development of a dpp ® hiv-syphilis assay for the u.s. market to address the rise in hiv and syphilis co-infection . 2. building a highly-differentiated fever and tropical disease business began as a response to the 2014-2015 ebola outbreak in west africa , which led to the company 's decision to enter the fever and tropical disease market .
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Liquidity
| 10,595
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the company records its federal income taxes in accordance with accounting for income taxes under gaap which results in the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities . deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this annual report on form 10-k. the following discussion contains “ forward-looking statements ” that reflect our future plans , estimates , beliefs and expected performance . we caution that assumptions , expectations , projections , intentions or beliefs about future events may , and often do , vary from actual results , and the differences can be material . some of the key factors which could cause actual results to vary from our expectations include changes in oil and natural gas prices , weather and environmental conditions , the timing of planned capital expenditures , availability of acquisitions , uncertainties in estimating proved reserves and forecasting production results , operational factors affecting the commencement or maintenance of producing wells , the condition of the capital markets generally , as well as our ability to access them , the proximity to and capacity of transportation facilities , and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting our business , as well as those factors discussed below and elsewhere in this annual report on form 10-k , all of which are difficult to predict . in light of these risks , uncertainties and assumptions , the forward-looking events discussed may not occur . see “ cautionary note regarding forward-looking statements. ” overview we are an independent e & p company focused on the acquisition and development of unconventional oil and natural gas resources primarily in the north dakota and montana regions of the williston basin . since our inception , we have acquired properties that provide current production and significant upside potential through further development . our drilling activity is primarily directed toward projects that we believe can provide us with repeatable successes in the bakken and three forks formations . opna conducts our domestic oil and natural gas e & p activities . we also operate a midstream services business through oms and a well services business through ows , both of which are separate reportable business segments that are complementary to our primary development and production activities . the revenues and expenses related to work performed by oms and ows for opna 's working interests are eliminated in consolidation and , therefore , do not directly contribute to our consolidated results of operations . our use of capital for acquisitions and development allows us to direct our capital resources to what we believe to be the most attractive opportunities as market conditions evolve . we have historically acquired properties that we believe will meet or exceed our rate of return criteria . we built our williston basin assets through acquisitions and development activities , which were financed with a combination of capital from private investors , borrowings under our revolving credit facility , cash flows provided by operating activities , proceeds from our notes , proceeds from our public equity offerings , the sale of certain non-core oil and gas properties and cash settlements of derivative contracts . for acquisitions of properties with additional development , exploitation and exploration potential , we have focused on acquiring properties that we expect to operate so that we can control the timing and implementation of capital spending . in some instances , we have acquired non-operated property interests at what we believe to be attractive rates of return either because they provided an entry into a new area of interest or complemented our existing operations . in addition , the acquisition of non-operated properties in new areas provides us with geophysical and geologic data that may lead to further acquisitions in the same area , whether on an operated or non-operated basis . we intend to continue to acquire both operated and non-operated properties to the extent we believe they meet our return objectives . due to the geographic concentration of our oil and natural gas properties in the williston basin , we believe the primary sources of opportunities , challenges and risks related to our business for both the short and long-term are : commodity prices for oil and natural gas ; transportation capacity ; availability and cost of services ; and availability of qualified personnel . our revenue , profitability and future growth rate depend substantially on factors beyond our control , such as economic , political and regulatory developments as well as competition from other sources of energy . prices for oil and natural gas can fluctuate widely in response to relatively minor changes in the global and regional supply of and demand for oil and natural gas , as well as market uncertainty , economic conditions and a variety of additional factors . since the inception of our oil and natural gas activities , commodity prices have experienced significant fluctuations and may fluctuate widely in the future . as a result of current oil prices , we have increased our planned 2017 capital expenditures as compared to 2016 , excluding acquisitions , and we are continuing to concentrate our drilling activities in certain areas that are the most economic in the williston basin . extended periods of low prices for oil or natural gas could materially and adversely affect our financial position , our results of operations , the quantities of oil and natural gas reserves that we can economically produce and our access to capital . story_separator_special_tag the unweighted arithmetic average first-day-of-the-month prices for the prior twelve months for the years ended december 31 , 2016 , 2015 and 2014 were $ 42.60 per bbl for oil and $ 2.47 per mmbtu for natural gas , $ 50.16 per bbl for oil and $ 2.63 per mmbtu for natural gas and $ 95.28 per bbl for oil and $ 4.35 per mmbtu for natural gas , respectively . these prices were adjusted by lease for quality , transportation fees , geographical differentials , marketing bonuses or deductions and other factors affecting the price received at the wellhead . future operating costs , production taxes and capital costs were based on current costs as of each year-end . changes in commodity prices and future operating costs may significantly affect the economic viability of drilling projects as well as the economic valuation and economic recovery of oil and gas reserves . an extended period of low oil prices could result in a significant decrease in our estimated net proved reserves and related future net revenues , pv-10 and standardized measure in the future . forward commodity prices and estimates of future production also play a significant role in determining impairment . as a result of lower commodity prices and their impact on our estimated future cash flows , we have continued to review our proved oil and natural gas properties for impairment . in 2014 , we recorded a proved impairment loss of $ 40.0 million due to lower oil prices . in 2015 and 2016 , we recorded an impairment charge of $ 9.4 million and $ 1.1 million to write down our proved properties held for sale to their estimated fair value , less costs to sell . no other proved impairment charges were recorded during the year ended december 31 , 2016. in addition , the excess of our expected undiscounted future cash flows over the carrying value of our proved oil and natural gas properties in the bakken and three forks formations has increased to $ 4,111.9 million as of december 31 , 2016 , an increase of approximately 225 % as compared to an excess of $ 1,264.8 million at december 31 , 2015. the underlying commodity prices embedded in our expected undiscounted cash flows were determined using nymex forward strip prices for five years , escalating 3 % per year thereafter . our expected undiscounted estimated cash flows also included a 3 % inflation factor applied to the future operating and development costs after five years . if expected future commodity prices decline by approximately 30 % as compared to december 31 , 2016 , holding all other factors constant , the expected undiscounted cash flows may not exceed the carrying value of our proved oil and natural gas properties in the bakken and three forks formations , and as a result , we may recognize additional proved impairment charges in the future , and such impairment charges could exceed $ 2.5 billion assuming a discount rate of 10 % . 2016 story_separator_special_tag style= '' line-height:120 % ; font-size:10pt ; '' > 55 offset by our 38.1 total net well completions in the core of the williston basin , which had higher gas to oil ratios that resulted in a 40 % increase in natural gas production sold year over year , and the williston basin acquisition completed on december 1 , 2016. see note 6 to our audited consolidated financial statements for a description of our acquisitions and divestitures . midstream revenues . midstream revenues were $ 35.4 million for the year ended december 31 , 2016 , which was a $ 11.6 million increase year over year . this increase was driven by a $ 6.1 million increase related to higher natural gas volumes gathered and processed with the start up of our natural gas processing plant in the third quarter of 2016 , coupled with a $ 6.0 million increase related to increased water volumes flowing through our salt water disposal systems as a result of new well connections and capacity additions . well services revenues . in response to the low commodity price environment , we decreased the pace of our well completions and reduced ows to one fracturing fleet during the first quarter of 2016. as a result , our well services revenues decreased by $ 10.5 million to $ 33.8 million for the year ended december 31 , 2016 as compared to the year ended december 31 , 2015 . well completion revenue decreased $ 7.8 million year over year due to the decreased activity , partially offset by the impact of ows completing opna wells with a higher average third-party working interest year over year . in addition , product sales to third parties decreased $ 1.7 million as a result of ows completing all of opna 's operated wells and equipment rentals decreased $ 1.0 million in 2016 as compared to 2015. year ended december 31 , 2015 as compared to year ended december 31 , 2014 oil and gas revenues . our oil and gas revenues decreased $ 582.3 million , or 45 % , to $ 721.7 million during the year ended december 31 , 2015 compared to the year ended december 31 , 2014 , primarily due to lower realized oil and natural gas sales prices , partially offset by increased production volumes sold . average daily production sold increased by 4,821 boe per day , or 11 % , to 50,477 boe per day during the year ended december 31 , 2015 as compared to the year ended december 31 , 2014. the increase in average daily production sold was primarily a result of our 64.3 total net well completions in the williston basin during 2015 , offset by the natural decline in production in wells that were producing as of december 31 , 2014. production from wells completed contributed to average daily production during 2015 by approximately 11,366 boe per day .
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highlights average daily production was 50,372 boe per day in 2016. we completed and placed on production 57 gross ( 37.6 net ) operated wells during 2016 . as of december 31 , 2016 , the company had 83 gross operated wells awaiting completion . we closed on an accretive acquisition of approximately 55,000 net acres on december 1 , 2016 in the williston basin ( the “ williston basin acquisition ” ) for a purchase price of $ 765.8 million , subject to further customary post-close purchase price adjustments . we completed and brought online our natural gas processing plant and other midstream infrastructure in wild basin . excluding acquisitions , capital expenditures were $ 400.0 million for the year ended december 31 , 2016 , a 31 % decrease as compared to 2015 . we increased total net proved oil and natural gas reserves at december 31 , 2016 by 40 % to 305.1 mmboe , which included an increase of almost 30 % in net proved developed reserves and more than 60 % in net proved undeveloped reserves year over year . we ended the year with a leasehold position of 517,801 total net acres in the williston basin , primarily targeting the bakken and three forks formations . in addition , we increase d our acreage that is held by production to 484,321 net acres as of december 31 , 2016 . we decreased lease operating expenses per boe to $ 7.35 per boe for the year ended december 31 , 2016 . we completed a $ 300.0 million public offering of senior unsecured convertible notes due 2023 and repurchased an aggregate principal amount of $ 447.0 million of our outstanding senior notes . at december 31 , 2016 , we had $ 11.2 million of cash and cash equivalents and had total liquidity of $ 785.9 , including the availability under our revolving credit facility .
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ROO
| 366
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the allowance for doubtful accounts is estimated based on prior experience , as well as an individual assessment of collectability based on factors that include current ability to pay , bankruptcy and payment history . inventories inventories consist primarily of products purchased for resale and are stated at the lower of cost or market . inventory cost is determined by the weighted average cost method . inventory cost includes purchase price from suppliers net of any rebates received , inbound freight and handling , and direct labor and other costs incurred to blend and repackage product and excludes depreciation expense . the company recognized $ 0.8 million , $ 0.8 million and $ 7.3 million of lower of cost or market adjustments to certain of its inventories in the year ended december 31 , 2015 , 2014 and 2013 , respectively . the expense related to these adjustments is included in cost of goods sold ( exclusive of depreciation ) in the consolidated statements of operations . supplier incentives the company has arrangements with certain suppliers that provide cash discounts when certain measures are achieved , generally related to purchasing volume . volume rebates are generally earned and realized when the related products are purchased during the year . the reduction in cost of goods sold ( exclusive of depreciation ) is recorded when the related products , on which the rebate was earned , are sold . discretionary rebates are recorded when received . the unpaid portion of rebates from suppliers is recorded in prepaid expenses and other current assets in the consolidated balance sheets . property , plant and equipment , net property , plant and equipment are carried at historical cost , net of accumulated depreciation . expenditures for improvements that increase asset values and or extend useful lives are capitalized . the company capitalizes interest costs on significant capital projects , as an increase to property , plant and equipment . repair and maintenance costs are expensed as incurred . depreciation is recorded on a straight-line basis over the estimated useful lives of each asset from the time the asset is ready for its intended purpose , with consideration of any expected residual value . the estimated useful lives of plant , property and equipment are as follows : buildings 10-50 years main components of tank farms 5-40 years containers 2-15 years machinery and equipment 5-20 years furniture , fixtures and others 5-20 years information technology 3-10 years 94 the company evaluates the carrying value of property , plant and equipment for impairment if an event occurs or circumstances change that would indicate the carrying value may not be recoverable . if an asset is tested for possible impairment , the company compares the carrying amount of the related asset group to future undiscounted net cash flows expected to be generated by that asset group . if the carrying amount of the asset group is not recoverable on an undiscounted cash flow basis , an impairment loss is recognized to the extent that the carrying amount exceeds its estimated fair value . leasehold improvements are capitalized and amortized over the lesser of the term of the applicable lease , including renewable periods if reasonably assured , or the useful life of the improvement . assets under capital leases where ownership transfers to the company at the end of the lease term or the lease agreement contains a bargain purchase option are depreciated over the useful life of the asset . for remaining assets under capital leases , the assets are depreciated over the lesser of the term of the applicable lease , including renewable periods if reasonably assured , or the useful life of the asset with consideration of any expected residual value . refer to note 11 : property , plant and equipment , net for further information . goodwill and intangible assets goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in business combinations . goodwill is tested for impairment annually on october 1 , or between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount . goodwill is tested for impairment at a reporting unit level using a two-step test . under the first step of the goodwill impairment test , the company 's estimate of fair value of each reporting unit is compared with its carrying value ( including goodwill ) . if the fair value of the reporting unit is less than its carrying value , an indication of goodwill impairment exists for the reporting unit and the company must perform step two of the impairment test ( measurement ) . step two of the impairment test , if necessary , would require the identification and estimation of the fair value of the reporting unit 's individual assets , including currently unrecognized intangible assets and liabilities in order to calculate the implied fair value of the reporting unit 's goodwill . under step two , an impairment loss is recognized to the extent the carrying amount of the reporting unit 's goodwill exceeds the implied fair value . to determine fair value , the company relies on two valuation techniques : the income approach and the market approach . the results of these two approaches are given equal weighting in determining the fair value of each reporting unit . the income approach is a valuation technique used to convert future expected cash flows to a present value . the income approach is dependent on several management assumptions , including estimates of future sales growth , gross margins , operating costs , terminal growth rates , capital expenditures , changes in working capital requirements and the weighted average cost of capital ( discount rate ) . story_separator_special_tag the increase in external net sales from changes in sales pricing and product mix was primarily driven by a shift in product mix towards products with higher average selling prices . gross profit decreased $ 51.2 million , or 11.7 % , to $ 385.5 million in the year ended december 31 , 2015. excluding the impact of volumes , gross profit increased due to changes in sales pricing , product costs and other adjustments primarily due to the continuing implementation of our product mix enrichment strategy including higher sales in the pharmaceutical product and ingredients end-market . gross margin increased from 19.6 % in the year ended december 31 , 2014 to 21.7 % in the year ended december 31 , 2015 primarily due to the factors impacting gross profit discussed above . outbound freight and handling expenses decreased $ 15.9 million , or 21.1 % , to $ 59.6 million primarily due to foreign currency translation and lower reported sales volumes . operating expenses decreased $ 50.2 million , or 18.2 % , to $ 226.0 million in the year ended december 31 , 2015 , but increased as a percentage of external sales from 12.4 % in the year ended december 31 , 2014 to 12.7 % in the year ended december 31 , 2015. foreign currency translation decreased operating expenses by 16.7 % or $ 46.2 million . on a constant currency basis , operating expenses decreased $ 4.0 million , or 1.4 % , which was primarily related to lower pension expense of $ 5.0 million related to higher expected asset returns , lower lease expense of $ 2.0 million due to certain operating leases being replaced by capital leases and lower personnel expenses of $ 1.4 million due to reduced headcount from redundancy and restructuring initiatives . the remaining $ 4.4 million increase related to several insignificant components . adjusted ebitda increased by $ 14.9 million , or 17.5 % , to $ 99.9 million in the year ended december 31 , 2015. foreign currency translation decreased adjusted ebitda by 15.7 % or $ 13.3 million . on a constant currency basis , adjusted ebitda increased $ 28.2 million , or 33.2 % , due to increased gross profit as well as slight reductions in operating expenses . adjusted ebitda margin increased from 3.8 % in the year ended december 31 , 2014 to 5.6 % in the year ended december 31 , 2015 primarily as a result of the increase in gross margin . rest of world . replace_table_token_10_th 62 external sales in the rest of world segment were $ 473.6 million , a decrease of $ 76.7 million , or 13.9 % , in the year ended december 31 , 2015. foreign currency translation decreased external sales dollars when comparing the year ended december 31 , 2015 to the year ended december 31 , 2014 primarily due to the us dollar strengthening against the mexican peso and brazilian real . the increase in external net sales from acquisitions was primarily due to the november 2014 acquisition of d'altomare . the decrease in external net sales from reported sales volumes was primarily due to decreases in the asia pacific region partially offset by increases in mexico . the decrease in external net sales from changes in sales pricing and product mix was primarily due to lower average selling prices resulting from market driven deflationary pressures on upstream oil and gas product offerings and oil derived products . gross profit increased $ 9.9 million , or 12.2 % , to $ 91.1 million in the year ended december 31 , 2015. the increase in gross profit from acquisitions was driven by the november 2014 acquisition of d'altomare . excluding the impact of volumes , gross profit increased due to changes in sales pricing , product costs and other adjustments primarily due to focused margin management efforts . gross margin increased from 14.8 % in the year ended december 31 , 2014 to 19.2 % in the year ended december 31 , 2015 ( 17.7 % excluding d'altomare in the year ended december 31 , 2015 ) primarily due to the factors impacting gross profit discussed above . outbound freight and handling expenses decreased $ 1.5 million , or 14.6 % , to $ 8.8 million in the year ended december 31 , 2015. foreign currency translation decreased outbound freight and handling expenses by 21.4 % or $ 2.2 million . on a constant currency basis , outbound freight and handling expenses increased $ 0.7 million or 6.8 % , which was primarily due to d'altomare . operating expenses increased $ 0.8 million , or 1.5 % , to $ 54.1 million in the year ended december 31 , 2015 and increased as a percentage of external sales from 9.7 % in the year ended december 31 , 2014 to 11.4 % in the year ended december 31 , 2015. d'altomare contributed additional operating expenses of $ 10.4 million in the year ended december 31 , 2015. foreign currency translation decreased operating expenses by 25.3 % or $ 13.5 million . excluding the impact of d'altomare and foreign currency translation , operating expenses increased $ 3.9 million primarily due to higher personnel expenses of $ 2.7 million driven by annual compensation increases and higher variable compensation . the remaining $ 1.2 million increase related to several insignificant components . adjusted ebitda increased by $ 10.6 million , or 60.2 % , to $ 28.2 million in the year ended december 31 , 2015. d'altomare contributed additional adjusted ebitda of $ 9.8 million in the year ended december 31 , 2015. foreign currency translation decreased adjusted ebitda by 47.7 % or $ 8.4 million . on a constant currency basis and excluding d'altomare , adjusted ebitda increased $ 9.2 million primarily due to increased gross profit . adjusted ebitda margin increased from 3.2 % in the year ended december 31 , 2014 to 6.0 % in
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cash provided by operating activities decreased $ 163.0 million from $ 289.3 million for the year ended december 31 , 2013 to $ 126.3 million for the year ended december 31 , 2014. the decrease in cash provided by operating activities was primarily due to a decrease of $ 304.0 million due to working capital changes related to the relatively lower working capital requirements in the year ended december 31 , 2013 resulting from higher than normal working capital levels in 2012 caused by a temporary slowdown in the working capital cycle due to the implementation of an erp system in emea . in addition , as of december 31 , 2014 , we have increased inventory levels to support our customer driven initiative related to improving on-time delivery . another factor contributing to lower cash provided by operating activities was the decrease of $ 23.3 million related to prepaid expenses and other current assets primarily consisting of receiving less cash from taxing authorities related to timing of income tax payments in the year ended december 31 , 2014 compared to the year ended december 31 , 2013. these decreases were partially offset by an increase of $ 131.7 million in net income exclusive of non-cash items primarily consisting of a decrease of $ 43.9 million in interest expense , net , an increase of $ 43.5 million in adjusted ebitda and an increase of $ 18.7 million in other nonoperating income for the year ended december 31 , 2014 compared to the year ended december 31 , 2013. another factor offsetting the lower cash provided by operating activities in the year ended december 31 , 2014 relates to the cash payments of $ 19.9 million related to the french penalty during the year ended december 31 , 2013. refer to results of operations above for additional information . the remaining increase of $ 12.7 million related to several insignificant components . cash ( used ) by investing activities cash used by investing activities increased $ 146.2 million from $ 148.2 million for the year ended december 31 , 2014 to $ 294.4 million for the year ended december 31 , 2015. the increase primarily related to six acquisitions in the year ended 2015 compared to one acquisition in the year ended december 31 , 2014. refer to note 17 : business combinations in item 8 of this annual report on form 10-k for additional information . in addition , there was higher spending on capital expenditures of $ 31.1 million in the year ended december 31 , 2015 compared to the year ended december 31 , 2014. the increases in capital expenditures primarily related to purchasing assets that replaced operating leases and increased information
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Liquidity
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uncollectible accounts receivable are written off when a settlement is reached for an amount that is less than the outstanding historical balance or when we have determined that the balance will not be collected ( note 15 ) . property and equipment overview . property and equipment is recorded at cost . property and equipment is depreciated on a straight line basis over the estimated useful life of each respective asset . the following is a summary of the gross components of property and equipment ( dollars in thousands ) : replace_table_token_39_th the cost of repairs and maintenance is charged to expense as incurred , while the cost of improvements is capitalized . the repair and maintenance expenses totaled $ 38.7 million , $ 32.3 million and $ 29.3 million for the years ended december 31 , 2012 , 2011 and 2010 , respectively . included in machinery , 73 equipment , buildings and leasehold improvements were $ 18.5 million and $ 18.1 million of capitalized software costs at december 31 , 2012 and 2011 , respectively . the total amount charged to expense related to the amortization of these software costs was $ 2.6 million during each of the years ended december 31 , 2012 , 2011 and 2010. assets used in operations are assessed for impairment whenever changes in facts and circumstances indicate a possible significant deterioration in the future cash flows expected to be generated by an asset group . if , upon review , the sum of the undiscounted pretax cash flows is less than the carrying value of the asset group , the carrying value is written down to estimated fair value and reported as an impairment charge in the periods in which the determination of the impairment is made . individual assets are grouped for impairment purposes at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets . our marine vessels are assessed on a vessel by vessel basis , while our rovs are grouped and assessed by asset class . because there usually is a lack of quoted market prices for long-lived assets , the fair value of impaired assets is typically determined based on the present values of expected future cash flows using discount rates believed to be consistent with those used by principal market participants or based on a multiple of operating cash flows validated with historical market transactions of similar assets where possible . the expected future cash flows used for impairment reviews and related fair value calculations are based on judgmental assessments , operating costs , project margins and capital project decisions , considering all available information at the date of review . if an impairment has occurred , we recognize a loss for the difference between the carrying amount and the fair value of the asset . in 2012 , we decided to cease our well intervention operations in australia . we recorded a $ 4.6 million impairment charge to reduce our well intervention assets in australia to their fair value of $ 5.0 million . in 2011 , in association with the reorganization of our australian well intervention operations , we conducted an impairment assessment of its subsea well intervention equipment , which resulted in a $ 6.6 million charge to reduce the carrying value of such well intervention equipment to its then estimated fair value . in 2012 , as a result of diminished work opportunities for the intrepid , we placed the vessel in cold-stack mode and later sold the vessel for $ 14.5 million in cash , which resulted in asset impairment and related loss on disposal charges totaling $ 28.1 million for the intrepid . also in 2012 , we entered into an agreement to sell our two remaining pipelay vessels , the express and the caesar , and other related pipelay equipment for a total sales price of $ 238.3 million , of which we have received a $ 50 million deposit that is only refundable in very limited circumstances . the sales of these vessels are scheduled to close and fund in two stages in 2013 following the completion of each vessel 's existing backlog of work . in connection with the announcement of the sale of our remaining pipelay vessels and related equipment , we recorded an impairment charge of $ 157.8 million to reduce the carrying cost of the caesar and other related pipelay equipment to their respective fair values as determined by the definitive sales agreement . we did not record impairments related to our vessels during 2011 and 2010. see note 3 for disclosure related to the impairment charges associated with certain of our former oil and gas properties . assets are classified as held for sale when we have a formalized plan for disposal and those assets meet the held for sale criteria . assets classified as held for sale are included in other current assets . there were no assets meeting the requirements to be classified as assets held for sale at december 31 , 2012 other than assets associated with our discontinued oil and gas operations ( note 3 ) . we had no assets classified as assets held for sale at december 31 , 2011. interest from external borrowings is capitalized on major projects until the assets are ready for their intended use . capitalized interest is added to the cost of the underlying asset and is amortized over the useful life of the asset in the same manner as the underlying asset . the total of our interest expense capitalized during each of the three years ended december 31 , 2012 , 2011 and 2010 was $ 4.9 million , $ 1.3 million and $ 12.5 million , respectively . equity investments we periodically review our equity investments in deepwater gateway and independence hub for impairment . story_separator_special_tag the $ 2.2 million other than temporary impairment charge in 2010 was associated with our remaining investment in cal dive ( note 2 ) . net interest expense . we reported net interest expense of $ 70.2 million in 2011 as compared to $ 65.6 million in 2010. capitalized interest decreased to $ 1.3 million in 2011 as compared to $ 12.5 million in 2010 reflecting the completion of major capital projects , including the conversions of the caesar and hp i , which were placed in service in the second quarter of 2010 , and the development of the phoenix field , which commenced production in october 2010. the decrease in capitalized interest was offset by lower interest rates and lower levels of debt since year end 2010. interest income increased to $ 1.4 million in 2011 from $ 0.5 million in 2010 , reflecting our substantially higher cash balances . loss on early extinguishment of long-term debt . the $ 2.4 million of charges in 2011 were related to premiums we paid to repurchase approximately $ 75 million of our senior unsecured notes during the third quarter of 2011. other expense , net . net other expenses totaled $ 1.1 million in 2011 as compared to $ 1.0 million for 2010. the decrease in other expense primarily reflects a gain of $ 0.8 million on the sale of our remaining cal dive common stock in 2011. also included in other income ( expense ) are foreign exchange fluctuations in our non u.s. dollar functional currencies and foreign exchange currency contracts . the strengthening of the u.s. dollar against other global currencies resulted in our recording foreign exchange losses totaling $ 1.9 million in 2011 as compared to $ 1.0 million in 2010. income tax provision ( benefit ) . an income tax benefit of $ 36.8 million was recorded in 2011 compared to an income tax provision of $ 19.2 million in 2010. the variance primarily reflects decreased profitability in 2011. the favorable effective tax rate for 2011 reflects the increased benefit derived from the effect of lower tax rates in certain foreign jurisdictions and the $ 31.3 million net tax benefit derived from the reorganization of our australian well intervention operations . the unfavorable effective tax rate for 2010 reflects the non-deductible goodwill impairment , decreased benefit derived from the effect of lower tax rates in certain foreign jurisdictions and an increase in valuation allowance on certain non-u.s. deferred tax assets . discontinued operations — oil and gas comparison of years ended december 31 , 2012 and 2011 the following table details various financial and operational highlights related to our former oil and gas segment for the periods presented : replace_table_token_21_th 45 replace_table_token_22_th ( 1 ) other revenues included fees earned under our process handling agreements . the following table highlights certain relevant expense items in total ( in thousands ) and on a cost per barrel of production basis ( natural gas converted to barrel of oil equivalent at a ratio of six mcf of natural gas to each barrel of oil ) : replace_table_token_23_th ( 1 ) excludes exploration expenses of $ 3.3 million and $ 10.9 million for the years ended december 31 , 2012 and 2011 , respectively . exploration expense is not a component of lease operating expense . ( 2 ) includes production taxes . all of our oil and gas operations were located in the u.s. gulf of mexico as of december 31 , 2012. previously , we had one property located offshore of the united kingdom ( “ u.k. ” ) . in 2012 , we substantially completed the abandonment of this oil and gas property in accordance with the applicable u.k. regulations ( note 3 ) . we had no revenue associated with our u.k. oil and gas property during the three-year period ended december 31 , 2012. the total operating costs associated with our u.k. oil and gas property totaled $ 0.7 million , $ 4.0 million and $ 3.7 million in 2012 , 2011 and 2010 , respectively . the results of our u.k. property are reflected as continuing operations in the accompanying consolidated financial statements . 46 revenues . oil and gas revenues decreased 20 % in 2012 as compared to 2011 , reflecting lower production volumes offset in part by higher oil prices ( inclusive of hedges ) . our production decreased by 24 % in 2012 as compared to 2011 , primarily reflecting much lower natural gas production , normal oil production declines , and the weather-related downtime affecting ( i ) all of our fields in august 2012 associated with hurricane isaac and ( ii ) certain of our fields in june 2012. the decrease in the production of natural gas primarily reflects the disposition of certain oil and gas properties during 2012 , most notably the sale of eight natural gas producing fields in the main pass area in january 2012. operating expenses . oil and gas operating expenses decreased by 6 % in 2012 as compared to 2011 , primarily reflecting lower direct production costs and depletion expense as a result of lower production volumes as discussed in “ revenues ” above . in addition , we recorded an impairment charge of $ 138.6 million associated with the announcement of the sale of ert in 2012 as compared to a total of $ 90.9 million of producing property impairments in 2011. oil and gas operating expenses were also affected by $ 12.4 million of abandonment expense charges associated with non-producing fields in 2012 as compared to $ 22.5 million in 2011 ( note 3 ) . ( gain ) loss on sale of oil and gas properties . the $ 1.7 million loss in 2012 primarily related to the disposition of eight of our former non-operated oil and gas properties located in the main pass area of the gulf of mexico in january 2012. the $ 4.5 million gain in
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to the extent that the purchaser is required to post bonding collateral in an amount greater than $ 100 million to obtain bonds in the aggregate amount required by the boem in order for the boem to release our guaranty of ert 's lease obligations , we have agreed to provide incremental collateral above that amount , if and to the extent required , to the surety/ies providing bonding for the deepwater properties ( the bushwood and phoenix fields ) in the form of letter ( s ) of credit , up to the next $ 50 million of required collateral , for a period not to exceed one year from issuance of the letter ( s ) of credit , after which the purchaser would then be required to provide all collateral associated with the 53 bonding requirements with respect to our former oil and gas properties . as the boem conducts its review of the gulf of mexico decommissioning assessments , we intend to work closely with the purchaser to provide specific information regarding our former lease properties . we anticipate that the boem will determine its assessments of decommissioning costs for our former deepwater fields in the near term and that the bonding amounts , and therefore the bonding collateral requirements , to obtain a release of our guaranty with respect to ert 's lease obligations will be known . at the time of this filing it is uncertain whether the amount of collateral will exceed the $ 100 million threshold so as to require any incremental bonding collateral on our part . whenever we have a contract that qualifies as a loss contract , we estimate the future shortfall between our anticipated future revenues and future costs . in march 2009 , we were notified of a third party 's intention to terminate an international construction contract based on a claimed breach of that contract by one of our subsidiaries . under the terms of the contract , our potential liability for damages was generally capped at approximately $ 32 million australian dollars ( “ aud ” ) . we asserted counterclaims that in the aggregate approximated $ 12 million u.s. dollars . on march 30 , 2010 , an out of court settlement of these claims was reached . pursuant to the
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Liquidity
| 9,596
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the remaining domain names to be transferred to namecheap , as defined under a settlement agreement between the company and namecheap , are expected to be transferred to namecheap in the first quarter of 2019. in addition , one of the resellers for which the company registered domain names using the reseller 's accreditation , was acquired and the registrations were moved to the acquiring reseller , resulting in approximately 0.5 million domains being transferred in the first quarter of 2018. as the company does not defer revenue associated with hosted registry services , there was no impact on deferred revenue as a result of the transfer . our value-added services include hosted email which provides email delivery and webmail access to millions of mailboxes , internet security services , internet hosting , whois privacy , publishing tools and other value-added services . all of these services are made available to end-users through a network of 37,000 web hosts , isps and other resellers around the world . in addition , we also derive revenue by monetizing domain names which are near the end of their lifecycle through advertising revenue or auction sale . our retail domain name registration service , primarily the hover and enom portfolio of websites , including enom , enom central and bulkregister , derive revenues from the sale of domain name registration and email services to individuals and small businesses . retail domain service also includes our personal names service – based on over 36,000 surname domains – that allows roughly two-thirds of americans to purchase an email address based on their last name . portfolio generates revenue by offering names in our domain portfolio for resale through a number of distribution channels , and our reseller network . we also generate advertising revenue from our portfolio . key business metrics and non-gaap measure we regularly review a number of business metrics , including the following key metrics and non-gaap measure , to assist us in evaluating our business , measure the performance of our business model , identify trends impacting our business , determine resource allocations , formulate financial projections and make strategic business decisions . the following tables set forth the key business metrics which we believe are the primary indicators of our performance for the periods presented : 43 adjusted ebitda tucows reports all financial information in accordance with united states generally accepted accounting principles ( “ gaap ” ) . along with this information , to assist financial statement users in an assessment of our historical performance , we typically disclose and discuss a non-gaap financial measure , adjusted ebitda , on investor conference calls and related events that exclude certain non-cash and other charges as we believe that the non-gaap information enhances investors ' overall understanding of our financial performance . please see discussion of adjusted ebitda in the results of operations section below . replace_table_token_5_th ( 1 ) for a discussion of these period-to-period changes in subscribers and devices under management and how they impacted our financial results , see the net revenues discussion below . ( 2 ) subsequent to a review of our subscriber base in the first quarter of 2018 , our comparative 2017 and 2016 accounts under management were reduced by approximately 6 and 4 respectively . domain services replace_table_token_6_th ( 1 ) for a discussion of these period-to-period changes in the domains provisioned and domains under management and how they impacted our financial results see the net revenues discussion below . ( 2 ) throughout 2018 , the company completed bulk transfers of 2.8 million names , for domain names under management related to namecheap . opportunities , challenges and risks as a mvno our ting mobile service is reliant on our mobile network operators ( `` mnos '' ) providing competitive networks . our mnos each continue to invest in network expansion and modernization to improve their competitive positions . deployment of new and sophisticated technology on a very large-scale entails risks . should they fail to implement , maintain and expand their network capacity and coverage , adapt to future changes in technologies and continued access to and deployment of adequate spectrum successfully , our ability to provide wireless services to our subscribers , to retain and attract subscribers and to maintain and grow our subscriber revenues could be adversely affected , which would negatively impact our operating margins . ting mobile enjoyed rapid growth in its first four years of operation with the growth slowing for the past two year . during the rapid growth phase we were able to continue to grow gross customer additions and maintain a consistent churn rate , which allowed us to maintain net new customer additions despite the impact of churn on a fast-growing customer base . we have also been able to supplement organic growth with bulk migrations of customer bases of other mvnos . we expect price competition to grow more intense in the industry which could result in increased customer churn or reductions of customer acquisition rates either of which could result in a further slowing growth rate or in certain cases , our ability to maintain growth . as an isp , we have invested and expect to continue to invest in new fiber to the home ( “ ftth ” ) deployments in select markets in the united states . the investments are a reflection of our ongoing efforts to build ftth network via public-private partnerships in communities we identify as having strong , unmet demand for ftth services . given the significant upfront build and operational investments for these ftth deployments , there is risk that future technological and regulatory changes as well as competitive responses from incumbent local providers , may result in us not fully recovering these investments . 44 the communications industry continues to compete on the basis of network reach and performance , types of services and devices offered , and price . story_separator_special_tag the increased competition in the market for internet services in recent years , which we expect will continue to intensify in the short and long term , poses a material risk for us . as new registrars are introduced , existing competitors expand service offerings and competitors offer price discounts to gain market share , we face pricing pressure , which can adversely impact our revenues and profitability . to address these risks , we have focused on leveraging the scalability of our infrastructure and our ability to provide proactive and attentive customer service to aggressively compete to attract new customers and to maintain existing customers . substantially all of our domain services revenue is derived from domain name registrations and related value-added services from wholesale and retail customers using our provisioning and management platforms . the market for wholesale registrar services is both price sensitive and competitive and is evolving with the introduction of new gtlds , particularly for large volume customers , such as large web hosting companies and owners of large portfolios of domain names . we have a relatively limited ability to increase the pricing of domain name registrations without negatively impacting our ability to maintain or grow our customer base . growth in our domain services revenue is dependent upon our ability to continue to attract and retain customers by maintaining consistent domain name registration and value-added service renewal rates and to grow our customer relationships through refining , evolving and improving our provisioning platforms and customer service for both resellers and end-users . in addition , we also generate revenue through pay-per-click advertising and the sale of names from our portfolio of domain names and through the opensrs domain expiry stream . the revenue associated with names sales and advertising has recently experienced flat to declining trends due to the uncertainty around the implementation of icann 's new gtld program , lower traffic and advertising yields in the marketplace , which we expect to continue . from time-to-time certain of our vendors provide us with market development funds to expand or maintain the market position for their services . any decision by these vendors to cancel or amend these programs for any reason may result in payments in future periods not being commensurate with what we have achieved during past periods . sales of domain names from our domain portfolio have a negative impact on our advertising revenue as these names are no longer available for advertising purposes . in addition , the timing of larger domain names portfolio sales is unpredictable and may lead to significant quarterly and annual fluctuations in our portfolio revenue . our revenue is primarily realized in u.s. dollars and a major portion of our operating expenses are paid in canadian dollars . fluctuations in the exchange rate between the u.s. dollar and the canadian dollar may have a material effect on our business , financial condition and results from operations . in particular , we may be adversely affected by a significant weakening of the u.s. dollar against the canadian dollar on a quarterly and an annual basis . our policy with respect to foreign currency exposure is to manage our financial exposure to certain foreign exchange fluctuations with the objective of neutralizing some or all of the impact of foreign currency exchange movements by entering into foreign exchange forward contracts to mitigate the exchange risk on a portion of our canadian dollar exposure . we may not always enter into such forward contracts and such contracts may not always be available and economical for us . additionally , the forward rates established by the contracts may be less advantageous than the market rate upon settlement . 45 net revenues network access services the company generates network access services revenues primarily through the provisioning of mobile services . other sources of revenue include the provisioning of fixed high-speed internet access as well as billing solutions to isps . mobile ting mobile wireless usage contracts grant customers access to standard talk , text and data mobile services . ting mobile contracts are billed based on the actual amount of monthly services utilized by each customer during their billing cycle and charged to customers on a postpaid basis . voice minutes , text messages and megabytes of data are each billed separately based on a tiered pricing program . the company recognizes revenue for ting mobile usage based on the actual amount of monthly services utilized by each customer . ting mobile services are primarily contracted through the ting website , for one month at a time and contain no commitment to renew the contract following each customer 's monthly billing cycle . the company 's billing cycle for all ting mobile customers is computed based on the customer 's activation date . in order to recognize revenue as the company satisfies its obligations , we compute the amount of revenues earned but not billed from the end of each billing cycle to the end of each reporting period . in addition , revenues associated with the sale of wireless devices and accessories are recognized when title and risk of loss is transferred to the customer and shipment has occurred . incentive marketing credits given to customers are recorded as a reduction of revenue . our roam mobility brands also offer standard talk , text and data mobile services . roam customers prepay for their usage through the roam mobility website . when prepayments are received the amount is deferred , and subsequently recognized as the company satisfies its obligation to provide mobile services . in addition , revenues associated with the sale of sim cards are recognized when title and risk of loss is transferred to the subscriber and shipment has occurred . incentive marketing credits given to customers are recorded as a reduction of revenue . other services other services derive revenues from providing ting internet to individuals and small businesses in select cities .
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impairment of indefinite life intangible assets replace_table_token_31_th as part of our normal renewal process during fiscal 2017 and fiscal 2016 , we assessed that certain domain names acquired in the june 2006 acquisition of mailbank.com inc. should not be renewed and were allowed to expire . accordingly , these domain names , with a book value of $ 0.1 million and less than $ 0.1 million have been written off and recorded as impairment of indefinite life intangible assets for fiscal 2017 and fiscal 2016 , respectively . loss ( gain ) on currency forward contracts although our functional currency is the u.s. dollar , a major portion of our fixed expenses are incurred in canadian dollars . our goal with regard to foreign currency exposure is , to the extent possible , to achieve operational cost certainty , manage financial exposure to certain foreign exchange fluctuations and to neutralize some of the impact of foreign currency exchange movements . accordingly , we enter into foreign exchange contracts to mitigate the exchange rate risk on portions of our canadian dollar exposure . replace_table_token_32_th we have entered into certain forward exchange contracts that do not comply with the requirements of hedge accounting to meet a portion of our future canadian dollar requirements through december 2017. the impact of the fair value adjustment on outstanding contracts for fiscal 2017 was a net loss of less than $ 0.1 million compared to net gain of $ 0.3 million for fiscal 2016. the impact of the fair value adjustment on outstanding contracts was decreased by a realized gain upon settlement of currency forward contracts of $ 0.1 million for fiscal 2017 compared to a realized loss of $ 0.2 million for fiscal 2016. at december 31 , 2017 , we did not hold any forward contracts . 72 other income and ( expenses ) replace_table_token_33_th other income decreased by $ 3.1 million when compared to fiscal 2016 primarily due to interest incurred on our credit facility with the
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ROO
| 13,942
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share-based compensation cost that has been charged against income for stock compensation plans is as follows ( in thousands ) : replace_table_token_12_th the compensation expense for stock options granted during the three-year period ended december 31 , 2013 , was determined as the fair value of the options using the black scholes valuation model . 2013 compensation expense for stock options granted prior to january 1 , 2012 was determined as the fair value of the options using a lattice-based option valuation model . the assumptions are noted as follows : replace_table_token_13_th f-11 the stock volatility for each grant is determined based on a review of the experience of the weighted average of historical daily price changes of the company 's common stock over the expected option term , and the risk-free interest rate is based on the u.s. treasury yield curve in effect at the time of grant for periods corresponding with the expected term of the option . the expected term is calculated based on the simplified method . the total income tax benefit recognized in the statement of operations for share-based compensation arrangements was approximately $ 280,000 , $ 270,000 , and $ 359,000 for the years ended december 31 , 2013 , 2012 and 2011 , respectively . ( m ) deferred rent the company accounts for escalating rental payments on a straight-line basis over the term of the lease . ( n ) shipping and handling costs costs incurred related to shipping and handling are included in cost of sales . amounts charged to customers pertaining to these costs are included in net sales . ( o ) research and development on a routine basis , the company incurs costs related to research and development activity . these costs are expensed as incurred . approximately $ 1.2 million , $ 1.3 million , and $ 1.2 million were expensed in the years ended december 31 , 2013 , 2012 , and 2011 , respectively . ( p ) income taxes the company 's income taxes are accounted for under the asset and liability method . under the asset and liability method , deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards . deferred tax expense ( benefit ) results from the net change during the year in deferred tax assets and liabilities . the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date . the company evaluates the need for a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized . the company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance . should the company determine that it would not be able to realize all or part of its deferred tax assets in the future , an adjustment to the deferred tax assets would be charged to income in the period such determination was made . the company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities , based on the technical merits of the position . the tax benefits recognized in the consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than 50 % likelihood of being realized upon settlement . the company recognizes interest and penalties accrued related to unrecognized tax benefits in tax expense . ( q ) segments and related information the company follows the provisions of asc 280 , segment reporting , which establish standards for the way public business enterprises report information and operating segments in annual financial statements ( see note 19 ) . ( 2 ) supplemental cash flow information cash paid for interest and income taxes is as follows ( in thousands ) : f-12 replace_table_token_14_th the purchase of substantially all of the assets of packaging alternatives corporation in 2012 included consideration in the form of a holdback of $ 600,000 and a long-term note valued at $ 692,000 . ( 3 ) receivables and net sales receivables consist of the following ( in thousands ) : replace_table_token_15_th receivables are written off against these reserves in the period they are determined to be uncollectible , and payments subsequently received on previously written-off receivables are recorded as a reversal of the bad debt provision . the company performs credit evaluations on its customers and obtains credit insurance on a large percentage of its accounts , but does not generally require collateral . the company recorded a provision for doubtful accounts of approximately $ 32,000 and $ 113,000 for the years ended december 31 , 2013 and 2012 , respectively . ( 4 ) inventories inventories consist of the following ( in thousands ) : replace_table_token_16_th ( 5 ) other intangible assets the carrying values of the company 's definite-lived intangible assets as of december 31 , 2013 and 2012 , are as follows ( in thousands ) : replace_table_token_17_th f-13 amortization expense related to intangible assets was approximately $ 478,000 , $ 164,000 and $ 195,000 for the years ended december 31 , 2013 , 2012 and 2011 , respectively . story_separator_special_tag the amount of the net deferred tax asset considered realizable , however , could be reduced in the near term , if estimates of future taxable income during the carry-forward period are reduced . 2012 compared to 2011 net sales increased 2.9 % to $ 131.0 million for the year ended december 31 , 2012 , from net sales of $ 127.2 million in 2011. the $ 3.8 million increase in sales was largely attributable to increased sales to the medical market of approximately $ 3.1 million ( component products segment ) as well as a $ 2.7 million increase in sales of molded fiber packaging reflecting increased demand for environmentally friendly packaging solutions ( component products segment ) . these sales increases were partially offset by a $ 5 million reduction in sales from the phase-out of a significant portion of an automotive program in the southeast . gross margin increased to 29.2 % for the year ended december 31 , 2012 , from 28.5 % in 2011. the increase in gross margin was primarily attributable to improved quality of our book of business relating to the sales increases in the medical market and of molded fiber packaging ( as a percentage of sales , material , and direct labor collectively decreased by 0.9 % in 2012 ) . sg & a increased slightly to $ 21.5 million for the year ended december 31 , 2012 , from $ 21.4 million in 2011. the slight increase in sg & a for the year ended december 31 , 2012 , was primarily due to increased compensation programs of approximately $ 100,000 ( higher plant bonuses across both the component products and packaging segments due to improved performance ) and increased office and equipment depreciation expense of approximately $ 100,000 ( due to erp and other infrastructure computer hardware across both the component products and packaging segments ) , partially offset by a reduction of approximately $ 100,000 in professional and consulting fees ( prior year initiatives across both the component products and packaging segments ) . as a percentage of sales , sg & a decreased to 16.4 % for the year ended december 31 , 2012 from 16.8 % for the same period in 2011. the reduction in sg & a as a percentage of sales was primarily due to relatively flat sg & a expenses measured against higher sales . interest expense net of interest income increased to approximately $ 90,000 for the year ended december 31 , 2012 , from net interest expense of approximately $ 27,000 in 2011. the increase in interest expense was primarily attributable to lower interest earned on excess cash balances , as well as increased debt associated with financing molded fiber equipment . the gain on sale of assets of approximately $ 839,000 in 2011 was derived primarily from the sale of real estate in alabama by united development company limited ( udt ) . of this $ 839,000 gain , approximately $ 428,000 relates to non-controlling interests that have been deducted to determine net income attributable to ufp technologies , inc. , and $ 250,000 represents a one-time fee paid to the company for managing the transaction . the company recorded income tax expense as a percentage of income before income tax expense , excluding net income attributable to non-controlling interests , of 34.3 % and 31.3 % for the years ended december 31 , 2012 , and 2011 , respectively . the increase in the effective tax rate for the year ended december 31 , 2012 , was primarily attributable to the reversal in 2011 of approximately $ 385,000 in reserves previously established for uncertain tax benefits due to a favorable outcome on a concluded federal internal revenue service audit and the statute of limitations expiring on certain other federal income tax filings as well as increased deductions associated with domestic manufacturing . the non-controlling interest previously held in udt was not subject to corporate income tax , which also caused the effective tax rate to be lower in 2011 than 2012 . 19 story_separator_special_tag conditions . the company 's significant accounting policies are described in note 1 to the consolidated financial statements included in item 8 of this report . the company believes the following critical accounting policies necessitated that significant judgments and estimates be used in the preparation of its consolidated financial statements . the company has reviewed these policies with its audit committee . revenue recognition the company recognizes revenue at the time of shipment when title and risk of loss have passed to the customer , persuasive evidence of an arrangement exists , performance of its obligation is complete , its price to the buyer is fixed or determinable , and the company is reasonably assured of collection . if a loss is anticipated on any contract , a provision for the entire loss is made immediately . determination of these criteria , in some cases , requires management 's judgment . should changes in conditions cause management to determine that these criteria are not met for certain future transactions , revenue for any reporting period could be adversely affected . goodwill goodwill is tested for impairment annually , and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate that the carrying amount may be impaired . impairment testing for goodwill is done at a reporting unit level . reporting units are one level below the business segment 21 level , but can be combined when reporting units within the same segment have similar economic characteristics . the company 's reporting units include its component products segment , packaging segment ( excluding its molded fiber operation ) , and its molded fiber operation . an impairment loss generally would be recognized when the carrying amount of the reporting unit 's net assets exceeds the estimated fair value of the reporting unit . the company assessed qualitative factors
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commitments and contractual obligations the following table summarizes the company 's contractual obligations at december 31 , 2013 ( in thousands ) : 20 replace_table_token_5_th the company requires cash to pay its operating expenses , purchase capital equipment , and to service the obligations listed above . the company 's principal sources of funds are its operations and its revolving credit facility . although the company generated cash from operations in the year ended december 31 , 2013 , it can not guarantee that its operations will generate cash in future periods . subject to the risk factors set forth in part i , item 1a of this report and the general disclaimers set forth in our special note regarding forward-looking statements at the outset of this report , we believe that cash flow from operations will provide us with sufficient funds in order to fund our expected operations over the next twelve months . the company does not believe inflation has had a material impact on its results of operations in the last three years . off-balance-sheet arrangements the company had no off-balance-sheet arrangements in 2013 , other than operating leases . critical accounting policies the preparation of consolidated financial statements requires the company 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 , the company evaluates its estimates , including those related to product returns , bad debts , inventories , intangible assets , income taxes , warranty obligations , restructuring charges , contingencies , and litigation . the company bases its estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances , including current and anticipated worldwide economic conditions , both in general and specifically in relation to the packaging and component product industries , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or
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Liquidity
| 9,962
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333-199958 , filed with the commission on november 24 , 2014 ) * 10.17 form of restricted share award agreement ( james river group holdings , ltd. 2014 non-employee director incentive plan ) ( incorporated by reference to exhibit 10.16 of amendment no . 1 to the registration statement on form s-1 , registration no . 333-199958 , filed with the commission on november 24 , 2014 ) * 10.18 form of restricted share unit award agreement ( james river group holdings , ltd. 2014 128 exhibit number description non-employee director incentive plan ) ( incorporated by reference to exhibit 10.17 of amendment no . 3 to the registration statement on form s-1 , registration no . 333-199958 , filed with the commission on december 9 , 2014 ) * 10.19 james river management company , inc. leadership recognition program ( incorporated by reference to exhibit 10.18 of amendment no . 1 to the registration statement on form s-1 , registration no . 333-199958 , filed with the commission on november 24 , 2014 ) * 10.20 amended and restated employment agreement dated november 18 , 2014 among james river group holdings , ltd. , james river group , inc. and j. adam abram ( incorporated by reference to exhibit 10.19 of amendment no . 1 to the registration statement on form s-1 , registration no . 333-199958 , filed with the commission on november 24 , 2014 ) * 10.21 amended and restated employment agreement dated november 18 , 2014 among james river group holdings , ltd. and robert p. myron ( incorporated by reference to exhibit 10.20 of amendment no . 1 to the registration statement on form s-1 , registration no . 333-199958 , filed with the commission on november 24 , 2014 ) * 10.22 amended and restated employment agreement dated november 18 , 2014 by and between james river group holdings , ltd. , james river group inc. and gregg t. davis ( incorporated by reference to exhibit 10.21 to the annual report on form 10-k filed on march 12 , 2015 , commission file no . 001-36777 ) * 10.23 employment agreement dated november 9 , 2011 by and between james river insurance company , james river management company , inc. and richard schmitzer ( incorporated by reference to exhibit 10.21 of amendment no . 1 to the registration statement on form s-1 , registration no . 333-199958 , filed with the commission on november 24 , 2014 ) * 10.24 james river management company , inc. leadership recognition program award letter dated september 30 , 2011 to richard schmitzer ( incorporated by reference to exhibit 10.22 of amendment no . 1 to the registration statement on form s-1 , registration no . 333-199958 , filed with the commission on november 24 , 2014 ) * 10.25 consulting agreement dated november 18 , 2014 by and between james river group holdings , ltd. and conifer group , inc. ( incorporated by reference to exhibit 10.23 of amendment no . 1 to the registration statement on form s-1 , registration no . 333-199958 , filed with the commission on november 24 , 2014 ) * 10.26 registration rights agreement , dated as of december 17 , 2014 , by and among ( 1 ) james river group holdings , ltd. ; ( 2 ) ( a ) d. e. shaw ch-sp franklin , l.l.c . , a delaware limited liability company , d. e. shaw cf-sp franklin , l.l.c . , a delaware limited liability company , and d. e. shaw oculus portfolios , l.l.c . , a delaware limited liability company ; and ( b ) the goldman sachs group , inc. , a delaware corporation , and goldman sachs jrvr investors offshore , l.p. , a cayman islands exempted limited partnership and ( 3 ) the persons identified as “ management investors ” on the signature pages thereto ( incorporated by reference to exhibit 10.25 to the annual report on form 10-k filed on march 12 , 2015 , commission file no . 001-36777 ) 21.1 list of subsidiaries of james river group holdings , ltd. 23.1 consent of ernst & young llp , independent registered public accounting firm 31.1 chief executive officer certification pursuant to rule 13a-14 ( a ) /15d-14 ( a ) 31.2 chief financial officer certification pursuant to rule 13a-14 ( a ) /15d-14 ( a ) 32 chief executive officer and chief financial officer certification pursuant to 18 u.s.c . section 1350 , as adopted pursuant to section 906 of the sarbanes-oxley act of 2002 . * denotes a management contract or compensatory plan or arrangement . + exhibit not filed with the securities and exchange commission pursuant to item 601 ( b ) ( 4 ) ( iii ) of regulation s-k. the company will furnish a copy to the sec upon request . 129 james river group holdings , ltd. and subsidiaries index to financial statements and schedules page report of independent registered public accounting firm f-2 consolidated balance sheets as of december 31 , 2015 and 2014 f-3 consolidated statements of income and comprehensive income for the years ended december 31 , 2015 , 2014 and 2013 f-5 consolidated statements of changes in shareholders ' equity for the years ended december 31 , 2015 , 2014 and 2013 f-6 consolidated statements of cash flows for the years ended december 31 , 2015 , 2014 and 2013 story_separator_special_tag we regularly review our estimates and adjust them as necessary as experience develops or as new information becomes known to us . such adjustments are included in current operations . a $ 16.3 million redundancy developed in 2015 on the reserve for losses and loss adjustment expenses held at december 31 , 2014. this favorable reserve development included $ 25.4 million of favorable development in the excess and surplus lines segment . the excess and surplus lines segment favorable development included $ 17.3 million of favorable development from the 2014 accident year , and $ 10.5 million of favorable development from the 2013 accident year . this favorable development occurred because our actuarial studies at december 31 , 2015 for the excess and surplus lines segment indicated that our loss experience for our shorter-tailed general casualty division for the 2014 accident year is below our 80 initial expected ultimate loss ratios . the actuarial studies at december 31 , 2015 also showed that the experience on our casualty business excluding our shorter-tailed general casualty business continued to be below our initial expected ultimate loss ratios driven by favorable 2015 calendar year emergence ( 45.4 % calendar year loss ratio compared to our expected calendar year loss ratio of 48.1 % ) . favorable reserve development in the specialty admitted insurance segment was $ 3.5 million , and primarily came from accident years 2011 through 2013 , as losses on our workers ' compensation business written prior to 2013 continued to develop more favorably than we had anticipated . in addition , $ 12.6 million of adverse development occured in the casualty reinsurance segment , with the majority of this adverse development coming from three reinsurance relationships from the 2011 , 2012 , and 2013 underwriting years that experienced higher loss development in 2015 than expected . a $ 27.4 million redundancy developed in 2014 on the reserve for losses and loss adjustment expenses held at december 31 , 2013. this favorable reserve development included $ 27.3 million of favorable development in the excess and surplus lines segment . the excess and surplus lines segment favorable development included $ 7.9 million of favorable development from the 2011 accident year , $ 5.0 million of favorable development from the 2009 accident year , and $ 4.2 million of favorable development from the 2007 accident year . this favorable development occurred because our actuarial studies at december 31 , 2014 for the excess and surplus lines segment indicated that our loss experience on our mature casualty business continued to be below our initial expected ultimate loss ratios driven by favorable 2014 calendar year emergence ( 33.1 % calendar year loss ratio compared to our expected calendar year loss ratio of 42.4 % ) . favorable reserve development in the specialty admitted insurance segment was $ 5.9 million , and primarily came from accident years 2007 through 2012 , as losses on our workers ' compensation business written prior to 2013 continued to develop more favorably than we had anticipated . in addition , $ 5.7 million of adverse development occured in the casualty reinsurance segment , with the majority of this adverse development coming from one reinsurance contract from the 2011 underwriting year that experienced higher loss development in 2014 than expected . a $ 37.5 million net redundancy developed during the year ended december 31 , 2013 on the reserve for losses and loss adjustment expenses held at december 31 , 2012. this favorable reserve development included $ 40.7 million of favorable development in the excess and surplus lines segment , including $ 11.7 million of favorable development on casualty lines from the 2009 accident year , $ 7.5 million of favorable development from the 2007 accident year and $ 5.7 million of favorable development from the 2008 accident year . this favorable development occurred because our actuarial studies at december 31 , 2013 for the excess and surplus lines segment indicated that our loss experience on our mature casualty business continued to be below our initial expected ultimate loss ratios . the $ 40.7 million of favorable reserve development for the excess and surplus lines segment was driven by favorable 2013 calendar year emergence ( 42.0 % calendar year loss ratio compared to our expected calendar year loss ratio of 50.0 % ) , significant favorable indications within the 2009 accident year ( which had $ 11.8 million of favorable net reserve development in 2012 ) , and the impact of adjustments to our actuarial assumptions that gave more weight to our own patterns and experience . in addition , we saw a significant reduction in defense and cost containment costs per closed claim in 2013 , as a result of a concerted effort by our claims staff to manage costs and consolidate service providers . favorable reserve development on direct business written in the specialty admitted insurance segment was $ 1.4 million , including favorable development of $ 1.3 million from the 2012 accident year . the reserve strengthening in the specialty admitted insurance segment at december 31 , 2012 was in recognition of inadequate premium rate levels in 2012 , 2011 , and 2010 , which ultimately proved to be redundant in 2013. in addition , $ 4.7 million of adverse development occurred in the casualty reinsurance segment , with $ 1.0 million of adverse development on assumed crop business from the 2012 and 2011 accident years and $ 3.7 million of adverse development on other assumed business , primarily from the 2011 accident year . we terminated all assumed crop business at december 31 , 2012. of the $ 3.7 million of adverse development on non-crop-related assumed business , $ 3.5 million related to the 2011 and 2012 contracts with one cedent . 81 investment valuation and impairment we carry fixed maturity and equity securities classified as “ available-for-sale ” at fair value , and unrealized gains and losses on such securities , net of any deferred taxes
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the terms of this senior debt contain certain covenants , with which we are in compliance and which , among other things , restrict our ability to assume senior indebtedness secured by our u.s. holding company 's common stock or its subsidiaries ' capital stock or to issue shares of its subsidiaries ' capital stock . on june 5 , 2013 , we closed on a three-year $ 125.0 million senior revolving credit facility which matures on june 5 , 2016. the company and jrg re are the borrowers on the senior revolving credit facility . the senior revolving credit facility was initially comprised of : a $ 62.5 million secured revolving facility used by jrg re to issue letters of credit for the benefit of third-party reinsureds . this portion of our credit facility is secured by our investment securities . a $ 62.5 million unsecured revolving facility to meet the working capital needs of the company . all unpaid principal on the revolver is due at maturity . interest accrues quarterly and is payable in arrears at 3-month libor plus a margin , which is subject to change depending upon our total outstanding debt to capitalization . on september 24 , 2014 , we closed on an amendment to the senior revolving credit facility which , among other things , included an increase in the size of the unsecured revolving facility from $ 62.5 million to $ 112.5 million and extended the maturity date from june 5 , 2016 to september 24 , 2019. the amendment also reduced the interest rate applicable to borrowings under the revolver such that the current libor margin dropped from 2.25 % to 2.00 % . on may 20 , 2015 , under a provision of the credit agreement , we requested , and the lenders subsequently agreed , to increase the secured revolving facility by $ 40.0 million to a total capacity of $ 102.5 million . at december 31 , 2015 , the company had $ 35.1 million of letters of credit issued under the $ 102.5 million secured facility and a drawn balance of $ 73.3 million outstanding on the $ 112.5 million unsecured facility . 112 we closed on a second amendment to the senior revolving
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Liquidity
| 8,945
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the company 's “ business-to-customer ” model differs from the traditional “ business to business ” model where products are sold to distributors who then sell the products to ultimate customers . in addition , the company has begun to diversify its offerings of products and services in the recent past , as discussed above in item 1 “ business. ” 13 from 2009 through 2012 , the company constructed a factory and water plant to produce bottled natural soda water in baiquan , heilongjiang province , china . the bottled water factory is fully constructed and all manufacturing equipment has been purchased . after obtaining all the required licenses and passing iso22000 requirements , the factory started production in april 2013 , but production was suspended because tianquan was sued by a contractor who constructed the water plant . the production is expected to resume when the lawsuit is closed . the company operates through its subsidiaries and , unless otherwise noted , any reference to its operations includes the operations of its subsidiaries . industry wide trends that are relevant to the company 's business the nutritional supplement and cosmetic e-business markets have and continue to become increasingly competitive and are rapidly evolving . barriers to entry are minimal . current and new competitors can launch new websites at a relatively low cost . many competitors in this area have greater financial , technical and marketing resources than the company does . continued advancement in technology and increasing access to that technology is paving the way for growth in direct marketing . the company also faces competition for consumers from retailers , duty-free retailers , specialty stores , department stores and specialty and general merchandise catalogs , many of which have greater financial and marketing resources than the company has . notwithstanding the foregoing , the company believes that it is well-positioned within the asian consumer market with its current plan of supplying u.s. merchandise brands to consumers and that its exposure to both the asian and american cultures gives it a competitive advantage . there can be no assurance that the company will maintain its competitive edge or that the company will continue to provide solely u.s.-made merchandise . the company 's products are sensitive to business and personal discretionary spending levels and tend to decline or grow more slowly during economic downturns , including downturns in any of the company 's major markets . the current worldwide downturn is expected to adversely affect the company 's sales and liquidity for the foreseeable future . although the company has mitigated decreases in sales by lowering its levels of inventory to preserve cash on hand , the company does not know when the downturn will subside and when consumer spending will increase from its current depressed levels . even if consumer spending increases , the company is not sure when consumer spending will increase for its products , which will affect its liquidity . the global economy is currently undergoing a period of unprecedented volatility , and the future economic environment may continue to be less favorable than that of recent years . this has led , and could further lead , to reduced consumer spending , and which may affect adversely spending on nutritional and beauty products and other discretionary items , such as the company 's products . in addition , reduced consumer spending may force the company and its competitors to lower prices . these conditions may adversely affect the company 's revenues and profits . in addition , the company expects future operations to be affected by tobyto 's marketing and distribution of eft phones , ezgt 's marketing of the travel program and the company 's water bottling operations . story_separator_special_tag 0pt 0 ; text-align : justify '' > gain/ ( loss ) on disposal of securities available for sale decreased to a loss of approximately $ 53,000 for the year ended march 31 , 2015 from a gain of $ 51,000 for the year ended march 31 , 2014 mainly due to the loss associated with the liquidation of funds held in one of the company 's investment accounts .. 15 write-off and impairment of prepayment on development in progress as required by u.s. gaap , the company performed an impairment analysis related to the prepayment on development in progress asset and recorded an impairment of approximately $ 8,966,000 , related to this asset based on this analysis for the year ended march 31 , 2014. notwithstanding such impairments , the company and its subsidiary eft investment have continued to vigorously pursue the recovery of the full value of the prepayment on the development in progress asset . gain/ ( loss ) on sales of long-term investment the gain on sales of long-term investment of approximately $ 2.4 million for the year ended march 31 , 2015 is mainly from the sale by the company of ctx shares that the company had previously written off . other income other income increased to $ 167,000 for the year ended march 31 , 2015 as compared to approximately $ 109,000 for the year ended march 31 , 2014 due to an increase in the sale of expiring products during the year . income tax expenses in december 2013 , the irs concluded its audit of the company 's returns for the years 2007 through 2010 and issued an examination report that proposed adjustments of $ 12.3 million of additional tax liabilities for the years 2008 through 2010. as a result of this report , the company increased its income tax liability to $ 8.6 million during the quarter ended december 31 , 2013. even though the company increased its income tax provision as a result of this report , the company continued to challenge the irs findings . after receiving further information from the company subsequent to the issuance of its original report , the irs reversed its position on a major issue and has issued a revised report which significantly reduced the amount of tax the company owes . story_separator_special_tag 17 inventories inventory decreased to $ 303,848 at march 31 , 2015 compared to $ 618,919 at march 31 , 2014 due to the sale of overstocked or products nearing expiration during the year to third parties , since the company only orders products on an “ as needed ” basis to avoid overstocking and lower inventory levels are adequate to meet the current demand . in addition , the company recorded a $ 130,787 mark-down allowance on inventory during the year ended march 31 , 2015. property and equipment property and equipment decreased to $ 894,129 for the year ended march 31 , 2015 compared to $ 1,098,308 for the year ended march 31 , 2014 , as a result of scheduled depreciation expense being recorded . prepayment on development in progress the company 's wholly-owned subsidiary , eft investment co. ltd , entered into two sets of agreements with the seller of the office building on may 31 , 2011 to secure what its former general manager represented to be an option to purchase an office building , located in taipei , taiwan . as of march 31 , 2014 , option payments of ntd600 million , equivalent to approximately $ 20.8 million , have been made to the sellers . as required by u.s. gaap , the company performed an impairment analysis related to the prepayment on the development in progress asset and recorded impairment of approximately $ 8,966,000 and $ 11,227,000 related to this asset based on the analysis for the years ended march 31 , 2014 and 2013 , respectively . see notes 8 and 18 to the consolidated financial statements included as part of this report for more information . accounts payable accounts payable slightly decreased to $ 1,073,795 at march 31 , 2015 compared to $ 1,189,494 at march 31 , 2014 , as a result of marketing expenses paid during the year . commission payable commission payable slightly decreased to $ 3,785,004 at march 31 , 2015 compared to $ 3,884,774 at march 31 , 2014 due to lower commissions earned by affiliates this year compared to last year . contingent liabilities contingent liabilities increased to $ 214,019 at march 31 , 2015 compared to $ 213,674 at march 31 , 2014 mainly due to the effect of exchange rate changes . other liabilities other liabilities increased to $ 5,874,187 at march 31 , 2015 compared to $ 5,729,073 at march 31 , 2014. the increase of $ 145,114 is due to the accrual of interest associated with the $ 4,527,000 tax liability accrued in the previous year . unearned revenue unearned revenue slightly decreased to $ 3,198,776 at march 31 , 2015 compared to $ 3,268,916 at march 31 , 2014. the recording of unearned revenue results from temporary delays associated with the recognition of revenue related to the sale of products or services to affiliates . non-controlling interest non-controlling interest changed from $ 6,742,016 at march 31 , 2014 to $ 49,522 at march 31 , 2015 due to the loss recorded by digital during the year ended march 31 , 2015 and the deconsolidation of excalibur . investment the company lent $ 5,000,000 to ctx virtual technologies inc. , “ ctx , ” in july 2010. the loan to ctx was unsecured , bore interest at 8 % per year and had a term of one year to july 26 , 2011. at any time during the one-year term , the company could , at its option , convert the loan into 8,474,576 units , with each unit consisting of one share of ctx 's common stock and one warrant , to be increased by 25 % to 10,593,220 units if ctx common stock was not listed on any of the american stock exchange , the otc bulletin board or nasdaq by february 28 , 2011. on march 12 , 2011 , ctx elected to convert the full amount of $ 5,000,000 into 10,593,220 units and paid the company in full for all accrued and unpaid interest that it owed to the company . 18 from may 2011 , the company 's taiwan subsidiary eft investment entered into agreements to secure an option to invest in a real estate project in taiwan . as of march 31 , 2014 , option payments of ntd600 million , or approximately us $ 20.8 million , have been made to the property developers . as required by u.s. gaap , the company performed an impairment analysis related to the prepayment on development in progress asset and recorded an impairment of approximately $ 8,966,000 related to this asset based on this analysis for the year ended march 31 , 2014. the company performed a similar analysis for the year ended march 31 , 2013 and recorded an impairment of approximately $ 11,227,000. the company also bought securities available for sale to earn interest , and has invested $ 2.1 million in such securities at march 31 , 2015. the unused cash and cash equivalents of $ 2.3 million at march 31 , 2015 will be used in the company 's daily operations . the company has no unused lines of credit or other borrowing facilities . commitments for capital expenditures except as otherwise disclosed herein , the company does not have any commitments for any material capital expenditures . the company does not have any commitments or arrangements from any person to provide it with any additional capital . except as disclosed in item 1a or this item 7 , the company does not know of any trends or demands that affected , or are reasonably likely to affect , its capital resources or liquidity . off-balance sheet arrangements the company does not have any off-balance sheet arrangements that have , or are reasonably likely to have , a current or future effect on its financial condition .
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results of operations comparison for the years ended march 31 , 2015 and 2014 sales revenue , net sales revenues , net of commission expense , decreased to approximately $ 750,000 for the year ended march 31 , 2015 from approximately $ 1,488,000 for the year ended march 31 , 2014 primarily due to a decline in sales demand from the company 's affiliates . the company 's policy is to pay commissions to its affiliates upon receipt of the sales orders even though revenue is not recognized by the company until later when the products are delivered . in addition , sales orders dropped from $ 2.6 million to $ 1.3 million which caused the associated commission expense to decrease to approximately $ 799,000 for the year ended march 31 , 2015 from approximately $ 1,506,000 for the year ended march 31 , 2014. commissions paid to the company 's affiliates are considered to be a reduction of the selling prices of its products , and are recorded as a reduction of revenue . shipping charges shipping charges decreased to $ 218,000 for the year ended march 31 , 2015 from $ 379,000 for the year ended march 31 , 2014 mainly due to the reduction in gross sales . 14 cost of goods sold cost of goods sold consists of merchandise purchased from vendors . cost of goods sold decreased to approximately $ 315,000 for the year ended march 31 , 2015 from $ 557,000 for the year ended march 31 , 2014 mainly due to a reduction in gross sales . gross sales of products declined from approximately $ 2,995,000 to $ 1,548,000 , or 48 % . however , cost of sales of products declined by only 42 % from approximately $ 548,000 to $ 315,000 , mainly due to the sale of $ 139,000 and $ 173,000 of promotional items that were sold at cost during the years ended march 31 , 2015 and 2014 , respectively .
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ROO
| 12,900
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industry and market conditions in 2012 , demand for pulpwood was strong in the gulf states and atlantic regions as pulp mills continued to operate at full capacity and demand for bioenergy continued . the market was impacted by a decreased supply of pulpwood in the gulf states with poor logging conditions due to wet weather . domestic demand for sawtimber gained strength due to slight improvements in the housing market . export sawtimber markets in the pacific northwest region showed continued weakness during the first half of the year primarily due to reduced chinese demand for logs with some price recovery exhibited in the fourth quarter . we anticipate chinese demand for logs will continue to strengthen during 2013. overall , we expect 2013 timber demand and pricing to exceed 2012 levels as general economic conditions improve in the u.s. and chinese demand returns . in real estate , we expect the demand for development property to slowly return with the modestly improving housing market and overall economic climate . however , there are indications of increasing development interest in some local markets . in performance fibers , demand remains strong for our cellulose specialties fibers . sales are typically made under multi-year contracts , which establish target volumes at the beginning of each year and buffer some of the changes in supply and demand typically seen in worldwide commodity pulp and paper markets . we have long-term contracts with the world 's largest manufacturers of acetate-based products and other key customers that extend through 2013 to 2017 and represent a significant majority of our high value cellulose specialties production . our recognized technical and market leadership has allowed us to maintain strong pricing across our cellulose specialties product lines . absorbent materials prices declined during 2012 as market conditions weakened . we expect average 2013 prices to be below 2012. sales of absorbent materials are typically made with an annual volume agreement that allows price to move with the market during the year . during 2013 , we will exit this market when we complete the cse project . critical accounting policies and use of estimates the preparation of financial statements requires us to make estimates , assumptions and judgments that affect our assets , liabilities , revenues and expenses , and to disclose contingent assets and liabilities in our annual report on form 10-k. we base these estimates and assumptions on historical data and trends , current fact patterns , expectations and other sources of information we believe are reasonable . actual results may differ from these estimates . merchantable inventory and depletion costs as determined by forestry timber harvest models significant assumptions and estimates are used in the recording of timberland inventory cost and depletion . merchantable standing timber inventory is estimated by our land information services group annually , using industry-standard computer software . the inventory calculation takes into account growth , in-growth ( annual transfer of oldest pre-merchantable age class into merchantable inventory ) , timberland sales and the annual harvest specific to each business unit . the age at which timber is considered merchantable is reviewed periodically and updated for changing harvest practices , future harvest age profiles and biological growth factors . an annual depletion rate is established for each particular region by dividing merchantable inventory book cost by standing merchantable inventory . pre-merchantable records are maintained for each planted year age class , recording acres planted , stems per acre and costs of planting and tending . changes in the assumptions and or estimations used in these calculations may affect our timber inventory and depletion costs . factors that can impact timber volume include weather changes , losses due to natural causes , differences in actual versus estimated growth rates and changes in the age when timber is considered merchantable . a 22 index to financial statements three percent company-wide change in estimated standing merchantable inventory would cause 2012 depletion expense to change by approximately $ 2 million . acquisitions of timberland can also affect the depletion rate . upon the acquisition of timberland , we make a determination on whether to combine the newly acquired merchantable timber with an existing depletion pool or to create a new separate pool . the determination is based on the geographic location of the new timber , the customers/markets that will be served and species mix . in the fourth quarter of 2012 , we acquired an additional 62,600 acres in the gulf states region . although 2012 depletion expense was not significantly impacted , we anticipate 2013 depletion to change by approximately $ 0.5 million . in 2011 , we acquired approximately 308,000 acr es of timberland mainly located in the gulf states region resulting in a higher depletion rate . the acquisition did not significant ly impact 2011 depletion expense but increased 2012 depletion expense by $ 2.2 million . depreciation and impairment of long-lived assets depreciation expense is computed using the units-of-production method for the performance fibers plant and equipment and the straight-line method on all other property , plant and equipment over the useful economic lives of the assets involved . we believe that these depreciation methods are the most appropriate under the circumstances as they most closely match revenues with expenses versus other generally accepted accounting methods . long-lived assets are periodically reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable . cash flows used in such impairment analyses are based on long-range plan projections , which take into account recent sales and cost data as well as macroeconomic drivers such as customer demand and industry capacity . story_separator_special_tag the physical life of equipment , however , may be shortened by economic obsolescence caused by environmental regulation , competition or other causes . environmental costs associated with dispositions and discontinued operations at december 31 , 2012 , we had $ 82 million of accrued liabilities for environmental costs relating to past dispositions and discontinued operations . numerous cost assumptions are used in estimating these obligations . factors affecting these estimates include changes in the nature or extent of contamination , changes in the content or volume of the material discharged or treated in connection with one or more impacted sites , requirements to perform additional or different assessment or remediation , changes in technology that may lead to additional or different environmental remediation strategies , approaches and workplans , discovery of additional or unanticipated contaminated soil , groundwater or sediment on or off-site , changes in remedy selection , changes in law or interpretation of existing law and the outcome of negotiations with governmental agencies or non-governmental parties . we periodically review our environmental liabilities and also engage third-party consultants to assess our ongoing remediation of contaminated sites . a significant change in any of the estimates could have a material effect on the results of our operations . typically , these cost estimates do not vary significantly on a quarter to quarter basis , although there can be no assurance that such a variance will not occur in the future . in 2012 and 2011 , we increased the liability by $ 1 million and $ 7 million , respectively . see note 15 — liabilities for dispositions and discontinued operations for additional information . determining the adequacy of pension and other postretirement benefit assets and liabilities we have four qualified benefit plans which cover most of our u.s. workforce and an unfunded plan to provide benefits in excess of amounts allowable under current tax law to certain participants in the qualified plans . all plans are currently closed to new participants . pension expense for all plans was $ 19 million in 2012 . numerous estimates and assumptions are required to determine the proper amount of pension and postretirement liabilities and annual expense to record in our financial statements . the key assumptions include discount rate , return on assets , salary increases , health care cost trends , mortality rates , longevity and service lives of employees . although there is authoritative guidance on how to select most of these assumptions , we exercise some degree of judgment when selecting these assumptions based on input from our actuary . different assumptions , as well as actual versus expected results , would change the periodic benefit cost and funded status of the benefit plans recognized in the financial statements . in determining pension expense in 2012 , a $ 25 million return was assumed based on an expected long-term rate of return of 8.5 percent . the actual return for 2012 was a gain of $ 42 million , or 14 percent . our long-term return assumption was established based on historical long-term rates of return on broad equity and bond indices , discussions with our actuary and investment advisors and consideration of the actual annualized rate of return from 1994 ( the date of our spin-off from itt corporation ) through 2012 . at the end of 2012 , we reviewed this assumption for reasonableness and determined that the 2012 long-term rate of return assumption should remain at 8.5 percent . at december 31 , 2012 , our asset mix consisted of 66 percent equities , 31 percent bonds and three percent real estate equity funds . we do not expect this mix to change materially in the near future . in determining future pension obligations , we select a discount rate based on information supplied by our actuary . the actuarial rates are developed by models which incorporate high quality ( aa rated ) , long-term corporate bond rates into their calculations . the discount rate decreased from 4.20 percent at december 31 , 2011 to 3.70 percent at december 31 , 2012 . 23 index to financial statements the company 's pension plans were underfunded by $ 134 million at december 31 , 2012 , a $ 16 million decrease in funding status from december 31 , 2011 due primarily to the decreased discount rate . we had no mandatory pension contributions and did not make discretionary contributions to our qualified pension plans in 2012 or 2011 . we made discretionary contributions of $ 50 million in 2010 . future requirements will vary depending on actual investment performance , changes in valuation assumptions , interest rates and requirements under the pension protection act . see note 20 — employee benefit plans for additional information . in 2013 , we expect pension expense to be slightly above 2012 due to an increase in the amortization of actuarial losses resulting from a decrease in the discount rate . future pension expense will be impacted by many factors including actual investment performance , changes in discount rates , timing of contributions and other employee related matters . the sensitivity of pension expense and projected benefit obligation to changes in economic assumptions is highlighted below : replace_table_token_8_th realizability of both recorded and unrecorded tax assets and tax liabilities as a reit , our forest resources operations are generally not subject to income taxation . as such , our income taxes can vary significantly based on the mix of income between our reit and trs businesses , thereby impacting our effective tax rate and the amount of taxes paid during fiscal periods .
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this strategy , which requires a disciplined approach and rigorous adherence to strategic and financial metrics , can result in significant year-to-year variation in timberland acquisitions and divestitures . for example , we acquired 88,000 acres of timberland in 2012 , 308,000 acres in 2011 , 3,000 acres in 2010 , none in 2009 , and 110,000 acres in 2008. we sold approximately 14,000 , 12,000 and 45,000 acres of non-strategic timberland in 2012 , 2011 and 2010 , respectively . extract maximum value from our hbu properties . in prior years our focus on development properties was to obtain entitlements . our entitlement efforts are largely complete as we have approximately 39,000 acres entitled in florida and georgia . we now will continue to work on monetizing these properties . for our prime industrial and commercial properties , we have focused on mega-site certification . in 2012 we achieved certification of 1,400 acres in bryan county , ga as development-ready for large industrial or commercial uses . we have also made significant progress on certification of an 1,800 acre industrial site in nassau county , fl . we will continue our rural hbu program of sales for conservation , recreation and industrial uses . our primary markets are in our southern u.s. holdings . maintain our global leadership in high purity cellulose specialties through investments to increase capacity , and improve product quality and technical expertise . in may 2011 , our board of directors approved the cse to convert a fiber line at our jesup , georgia mill from production of absorbent materials to cellulose specialties . the cse will add approximately 190,000 metric tons of cellulose specialties capacity , bringing total cellulose specialties capacity to about 675,000 metric tons . production of cellulose specialties is expected to gradually increase to capacity by 2015. customer commitments for the additional volume exceed 85 percent . upon completion of this $ 375 million to $ 390 million project , we will be exiting the more commodity-like absorbent materials business ( estimated 260,000 metric tons of capacity ) . this expansion
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ROO
| 11,756
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the cumulative deferred tax asset for the years 2019 and 2018 is $ 120,237 and $ 33,905 , respectively , which is calculated by multiplying the estimated tax rate by the cumulative net operating loss ( nol ) adjusted for the following items : replace_table_token_8_th details of valuation allowance for the last two years are as follows : replace_table_token_9_th rate reconciliation : replace_table_token_10_th uncertain tax positions unrecognized income tax benefits represent income tax positions taken on income tax returns but not yet recognized in the financial statements . if recognized , substantially all of the unrecognized tax benefits for the company 's fiscal years ended december 31 , 2019 and 2018 would affect the effective income tax rate . there were no unrecognized income tax benefits as of december 31 , 2019 and 2018. the company recognizes the interest and penalties accrued related to unrecognized tax benefits in income tax expense . the company did not recognize any expenses any interest and penalties as of december 31 , 2019 and 2018 , respectively . all tax years since inception are open for examination by taxing authorities . f- 10 note 9 – related party transactions on january 1 , 2018 , the company amended the january 1 , 2015 executive and consulting agreement with sandor miklos , president and member of the board of directors for services rendered . the amended agreement calls for annual compensation of 450,000 common shares of the company fully earned immediately to be assigned and registered fully as at the end of the fiscal year . on november 20 , 2018 , the company received a loan payable in the amount of $ 2,781 from a more than 5 % shareholder for the payment of company expenses . this loan is unsecured , non-interest bearing , and has no specific terms for repayment . as of december 31 , 2019 , the company had a loan payable of $ 2,781 to the same party . on june 1 , 2019 , sandor miklos forgave accrued stock compensation owed to him valued at $ 562,500 , which represents the compensation for the full year 2018 ( $ 450,000 ) and the three months ended march 31 , 2019 ( $ 112,500 ) . for the remaining nine months ended december 31 , 2019 , 337,500 shares valued at $ 1.00 per share for a total of $ 337,500 was accrued as compensation for sandor miklos . as of december 31 , 2019 , there is accrued stock compensation owed to sandor miklos valued at $ 337,500 . note 10 – subsequent events the company 's management evaluated subsequent events through the date the financial statements were issued and there were no subsequent events to report except as noted below . on january 2 , 2020 , the company amended a convertible note payable ( convertible note payable , see note 6 ) to extend the due date to january 1 , 2021. f- 11 signatures pursuant to the requirements of section 13 or 15 ( d ) of the securities exchange act of 1934 , the registrant has duly caused this report to be signed on its behalf by the undersigned , thereunto duly authorized . team 360 sports inc. ( registrant ) date : april 15 , 2020 by : sandor miklos sandor miklos president , chief executive officer chairman of the board of directors ( principal executive officer ) date : april 15 , 2020 by : sandor miklos sandor miklos chief financial officer ( principal financial officer and principal accounting officer ) pursuant to the requirements of the securities exchange act of 1934 , the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized . team 360 sports inc. dated : april 15 , 2020 by : sandor miklos sandor miklos president , chief executive officer , chairman of the board of directors ( principal executive officer ) dated : april 15 , 2020 by : sandor miklos sandor miklos chief financial officer ( principal financial officer and principal accounting officer ) 24 story_separator_special_tag of operations . this discussion summarizes the significant factors affecting the operating results , financial condition , liquidity and cash flows of the company for the fiscal years ended december 31 , 2019 and 2018. the discussion and analysis that follows should be read together with our financial statements and the notes to the financial statements included elsewhere in this annual report on form 10-k. except for historical information , the matters discussed in this section are forward looking statements that involve risks and uncertainties and are based upon judgments concerning various factors that are beyond the company 's control . 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 . overview we were incorporated in nevada on february 26 , 2013 , and on april 4 , 2016 , amended the articles of incorporation to change the name of the company to team 360 sports inc. the company provides amateur sports clubs , leagues and teams with easy to use robust digital administration management systems . the company has had minimal revenues as the company has been developing its technology and platform . the trend in the marketplace is to provide services to teams versus large organizations such as leagues and clubs . the company is planning to move into that marketplace , however there can be no assurances that it will succeed . 14 results of operations comparison of twelve-month periods ended december 31 , 2019 and 2018 revenue we have generated $ 2,557 and $ 2,557 in revenues for the year ended december 31 , 2019 and 2018 , respectively . expenses general and administration expenses story_separator_special_tag the cumulative deferred tax asset for the years 2019 and 2018 is $ 120,237 and $ 33,905 , respectively , which is calculated by multiplying the estimated tax rate by the cumulative net operating loss ( nol ) adjusted for the following items : replace_table_token_8_th details of valuation allowance for the last two years are as follows : replace_table_token_9_th rate reconciliation : replace_table_token_10_th uncertain tax positions unrecognized income tax benefits represent income tax positions taken on income tax returns but not yet recognized in the financial statements . if recognized , substantially all of the unrecognized tax benefits for the company 's fiscal years ended december 31 , 2019 and 2018 would affect the effective income tax rate . there were no unrecognized income tax benefits as of december 31 , 2019 and 2018. the company recognizes the interest and penalties accrued related to unrecognized tax benefits in income tax expense . the company did not recognize any expenses any interest and penalties as of december 31 , 2019 and 2018 , respectively . all tax years since inception are open for examination by taxing authorities . f- 10 note 9 – related party transactions on january 1 , 2018 , the company amended the january 1 , 2015 executive and consulting agreement with sandor miklos , president and member of the board of directors for services rendered . the amended agreement calls for annual compensation of 450,000 common shares of the company fully earned immediately to be assigned and registered fully as at the end of the fiscal year . on november 20 , 2018 , the company received a loan payable in the amount of $ 2,781 from a more than 5 % shareholder for the payment of company expenses . this loan is unsecured , non-interest bearing , and has no specific terms for repayment . as of december 31 , 2019 , the company had a loan payable of $ 2,781 to the same party . on june 1 , 2019 , sandor miklos forgave accrued stock compensation owed to him valued at $ 562,500 , which represents the compensation for the full year 2018 ( $ 450,000 ) and the three months ended march 31 , 2019 ( $ 112,500 ) . for the remaining nine months ended december 31 , 2019 , 337,500 shares valued at $ 1.00 per share for a total of $ 337,500 was accrued as compensation for sandor miklos . as of december 31 , 2019 , there is accrued stock compensation owed to sandor miklos valued at $ 337,500 . note 10 – subsequent events the company 's management evaluated subsequent events through the date the financial statements were issued and there were no subsequent events to report except as noted below . on january 2 , 2020 , the company amended a convertible note payable ( convertible note payable , see note 6 ) to extend the due date to january 1 , 2021. f- 11 signatures pursuant to the requirements of section 13 or 15 ( d ) of the securities exchange act of 1934 , the registrant has duly caused this report to be signed on its behalf by the undersigned , thereunto duly authorized . team 360 sports inc. ( registrant ) date : april 15 , 2020 by : sandor miklos sandor miklos president , chief executive officer chairman of the board of directors ( principal executive officer ) date : april 15 , 2020 by : sandor miklos sandor miklos chief financial officer ( principal financial officer and principal accounting officer ) pursuant to the requirements of the securities exchange act of 1934 , the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized . team 360 sports inc. dated : april 15 , 2020 by : sandor miklos sandor miklos president , chief executive officer , chairman of the board of directors ( principal executive officer ) dated : april 15 , 2020 by : sandor miklos sandor miklos chief financial officer ( principal financial officer and principal accounting officer ) 24 story_separator_special_tag of operations . this discussion summarizes the significant factors affecting the operating results , financial condition , liquidity and cash flows of the company for the fiscal years ended december 31 , 2019 and 2018. the discussion and analysis that follows should be read together with our financial statements and the notes to the financial statements included elsewhere in this annual report on form 10-k. except for historical information , the matters discussed in this section are forward looking statements that involve risks and uncertainties and are based upon judgments concerning various factors that are beyond the company 's control . 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 . overview we were incorporated in nevada on february 26 , 2013 , and on april 4 , 2016 , amended the articles of incorporation to change the name of the company to team 360 sports inc. the company provides amateur sports clubs , leagues and teams with easy to use robust digital administration management systems . the company has had minimal revenues as the company has been developing its technology and platform . the trend in the marketplace is to provide services to teams versus large organizations such as leagues and clubs . the company is planning to move into that marketplace , however there can be no assurances that it will succeed . 14 results of operations comparison of twelve-month periods ended december 31 , 2019 and 2018 revenue we have generated $ 2,557 and $ 2,557 in revenues for the year ended december 31 , 2019 and 2018 , respectively . expenses general and administration expenses
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liquidity and capital resources as of december 31 , 2019 , we have $ 214 in current assets and $ 837,819 in current liabilities . our total assets were $ 214 and our total liabilities were $ 837,819. we had $ 214 in cash and our working capital deficit was $ 837,605. cash flows : replace_table_token_1_th there was $ 54,672 used in operations during the year ended december 31 , 2019 and $ 24,587 net cash used in operating activities during the year ended december 31 , 2018 , $ 54,672 provided by financing activities during the year ended december 31 , 2019 , and $ 6,638 cash provided through financing activities during the year ended december 31 , 2018. this resulted in no changes in net cash during the year ended december 31 , 2019 and $ 17,949 decrease in cash during the year ended december 31 , 2018 . 15 off-balance sheet arrangements we have no off-balance sheet arrangements . critical accounting policies and estimates the preparationof financial statements in conformity with generally accepted accounting principles of the united states ( 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 year .
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Liquidity
| 15,936
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our md & a should be read in conjunction with the consolidated financial statements and related notes included in item 8 , financial statements and supplementary data , of this annual report on form 10-k. overview during 2011 and continuing through 2012 , the u.s. economy has shown signs of a slow recovery from the recession which began in 2008. the national unemployment rate , while still at a high level , declined to 7.8 % for december 2012 , compared to 8.5 % for december 2011. in southern california where we operate , the unemployment rate remains higher at 9.8 % for december 2012. in addition to the challenging economic environment , the regulation and oversight of our business changed significantly during 2011. as described in more detail in item 1 regulation , certain aspects of the dodd-frank act have had and will continue to have an impact on us , including the combination on july 21 , 2011 of our former primary banking regulator , the ots , with the occ , and transfer of the ots 's responsibilities as regulator of savings and loan holding companies to the frb , the imposition of consolidated holding company capital requirements and changes to deposit insurance assessments . total assets decreased during 2012 primarily due to a decrease in our loan portfolio , as loan repayments , foreclosures and charge-offs exceeded loan originations during the year . the decrease in our loan portfolio , including loans held for sale , consisted of a $ 25.4 million decrease in our five or more units residential real estate loan portfolio , a $ 13.5 million decrease in our commercial real estate loan portfolio , a $ 14.1 million decrease in our church loan portfolio , a $ 11.0 million decrease in our one-to-four family residential real estate loan portfolio , a $ 3.1 million decrease in our construction loan portfolio , a $ 3.1 million decrease in our commercial loan portfolio , and a $ 825 thousand decrease in our consumer loan portfolio . total deposits decreased during 2012 , as we continued to allow maturing certificates of deposit and brokered deposits , including deposits obtained through the cdars reciprocal deposit referral system , to run off as total assets declined . since the end of 2011 , fhlb borrowings decreased by $ 3.5 million while subordinated debentures and other borrowings remained unchanged . our net earnings for the year ended december 31 , 2012 were $ 588 thousand , compared to net loss of $ 14.3 million for the same period a year ago , representing an improvement of $ 14.8 million . the increase from a net loss to net earnings was primarily due to lower provisions for loan losses , a $ 2.5 million gain on the sale of our headquarters building , lower provisions for losses on reo and loans held for sale and lower income tax provision expense for the year 2012. going concern and regulatory matters the accompanying consolidated financial statements have been prepared assuming that the company will continue as a going concern . as discussed in note 2 to the financial statements , the company has a tax sharing liability to its consolidated subsidiary that exceeds its available cash , the company is in default under the terms of a $ 5 million line of credit with another financial institution lender in which the stock of its subsidiary bank , broadway federal bank ( the bank ) is held as collateral for the line of credit and the company and the bank are both under formal regulatory agreements . furthermore , the company and the bank are not in compliance with these agreements but management believes that the recapitalization plan that the company is pursing will allow it to address many of the areas of non-compliance . failure to comply with these agreements exposes the company and the bank to further regulatory sanctions . these matters raise substantial doubt about the ability of the company to continue as a going concern . the ability of the company to continue as a going concern is dependent on many factors , one of which is regulatory action , including acceptance of its capital plan . management 's plans in regard to these matters are also described in note 2. the consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty . please also see item 1 , business , business overview ; recent developments . 30 analysis of net interest income net interest income is the difference between income on interest-earning assets and the expense on interest-bearing liabilities . net interest income depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them . the following table sets forth average balance sheets , average yields and costs , and certain other information for the periods indicated . all average balances are daily average balances . the yields set forth below include the effect of deferred loan fees , and discounts and premiums that are amortized or accreted to interest income or expense . we do not accrue interest on loans on non-accrual status ; however , the balance of these loans is included in the total average balance , which has the effect of reducing average loan yields . replace_table_token_18_th ( 1 ) amount is net of deferred loan fees , loan discounts , and loans in process , and includes loans held for sale . ( 2 ) amount excludes interest on non-performing loans . ( 3 ) net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities . ( 4 ) net interest rate margin represents net interest income as a percentage of average interest-earning assets . ( 5 ) percentage is calculated based on dividends on common stocks divided by net earnings ( loss ) less dividends and accretion on preferred stocks . story_separator_special_tag income taxes income tax expense totaled $ 829 thousand for 2012 and $ 1.8 million for 2011. in 2012 , the company reported income tax expense equal to an effective tax rate of 58.50 % , due to an increase in the valuation allowance related to the projected utilization of the company 's federal and state deferred tax assets . in 2011 , the company recorded a tax expense despite having a pre-tax loss . the tax expense in 2011 reflected the impact of tax provision true-ups and an increase in the valuation allowance related to the projected utilization of its federal and state deferred tax assets . the increases in the valuation allowance against our federal and state deferred tax assets during 2012 and 2011 were due to the company 's inability to project sufficient future taxable income . see note 1 summary of significant accounting policies and note 13 income taxes of the notes to consolidated financial statements for a further discussion of income taxes and a reconciliation of income tax at the federal statutory tax rate to actual tax expense ( benefit ) . comparison of financial condition at december 31 , 2012 and 2011 total assets total assets were $ 373.7 million at december 31 , 2012 , which represented a decrease of $ 40.0 million , or 10 % , from december 31 , 2011. during 2012 , net loans held for investment decreased by $ 71.0 million , securities decreased by $ 5.6 million , office properties and equipment decreased by $ 2.0 million and deferred tax assets decreased by $ 850 thousand , while cash and cash equivalents increased by $ 32.8 million , loans held for sale increased by $ 6.1 million and reo increased by $ 1.5 million . the c & ds issued to us by the ots effective september 9 , 2010 , which are now administered by the occ with respect to the bank , limit the increase in the bank 's total assets during any quarter to an amount equal to the net interest credited on deposit liabilities during the prior quarter without the prior written notice to and receipt of notice of non-objection from the occ . loans receivable held for investment our gross loan portfolio decreased by $ 76.7 million to $ 263.1 million at december 31 , 2012 from $ 339.8 million at december 31 , 2011 , as loan repayments , foreclosures and charge-offs exceeded loan originations during 2012. the decrease in our loan portfolio consisted of a $ 24.8 million decrease in our five or more units residential real estate loan portfolio , an $ 18.9 million decrease in our one-to-four family residential real estate loan portfolio , a $ 13.1 million decrease in our commercial real estate loan portfolio , a $ 12.8 million decrease in our church loan portfolio , a $ 3.1 million decrease in our construction loan portfolio , a $ 3.1 million decrease in our commercial loan portfolio , and a $ 825 thousand decrease in our consumer loan portfolio . loan originations for the year ended december 31 , 2012 totaled $ 20.5 million , compared to $ 5.1 million for the year ended december 31 , 2011. loan repayments for the year ended december 31 , 2012 totaled $ 70.6 million , compared to $ 40.6 million for the comparable period in 2011. the increase in loan repayments was primarily attributable to a higher level of refinancings by borrowers who could take advantage of historically low interest rates and new 35 financing opportunities in the stabilized commercial and single family markets . loan charge-offs during 2012 totaled $ 7.1 million , compared to $ 15.4 million of charge-offs during 2011. loans transferred to reo during 2012 totaled $ 9.8 million , compared to $ 9.3 million during 2011. loans transferred to loans held for sale during 2012 totaled $ 9.7 million , compared to $ 2.5 million of loans transferred to loans held for sale during 2011. loans receivable held for sale loans held for sale increased from $ 13.0 million at december 31 , 2011 to $ 19.1 million at december 31 , 2012. the $ 6.1 million increase during 2012 was primarily due to the transfer of $ 9.7 million of classified loans from the held for investment loan portfolio to the held for sale portfolio . this transfer included substantially all of the bank 's non-performing single-family residential loans , which were subsequently sold in february 2013. during 2012 , nonperforming loans sales totaled $ 2.9 million , compared to $ 1.3 million during 2011. loan repayments during 2012 totaled $ 450 thousand , compared to $ 3.6 million during 2011. loans held for sale that were transferred to reo during 2012 totaled $ 334 thousand , compared to $ 1.5 million during 2011. real estate owned during 2012 , reo increased by $ 1.5 million to $ 8.2 million at december 31 , 2012 , from $ 6.7 million at december 31 , 2011. at december 31 , 2012 the bank 's reo consisted of thirteen commercial real estate properties , five of which are church buildings . during 2012 , fifteen loans totaling $ 10.2 million were foreclosed and transferred to reo . as part of our efforts to reduce non-performing assets , fifteen reo properties were sold for total proceeds of $ 7.8 million and a corresponding net gain of $ 292 thousand was recorded during 2012. deposits deposits totaled $ 257.1 million at december 31 , 2012 , down $ 37.6 million , or 13 % , from year-end 2011. this reflects our efforts to improve our net interest margin by reducing higher costing certificates of deposit .
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general our most significant source of income is net interest income , which is the difference between our interest income and our interest expense . generally , interest income is generated from our loans and investments ( interest-earning assets ) and interest expense is generated from deposits and borrowings ( interest-bearing liabilities ) . our results of operations are also affected by our provision for losses , non-interest income generated from service charges and fees on loan and deposit accounts , gain or loss on the sale of loans and securities , non-interest expenses and income taxes . net earnings ( loss ) we recorded net earnings of $ 588 thousand , or ( $ 0.38 ) loss per diluted common share , for the year ended december 31 , 2012 , compared to net loss of ( $ 14.3 ) million , or ( $ 8.81 ) per diluted common share , for the year ended december 31 , 2011. the increase from a net loss to net earnings was primarily due to lower provisions for loan losses , a $ 2.5 million gain on the sale of our headquarters building , lower provisions for losses on reo and loans held for sale and lower income tax provision expense for the year 2012 . 32 net interest income for the year ended december 31 , 2012 , net interest income before provision for loan losses totaled $ 13.5 million , down $ 3.6 million , or 21 % , from $ 17.1 million of net interest income before provision for loan losses for the year ended december 31 , 2011. the $ 3.6 million decrease in net interest income primarily resulted from a $ 58.4 million decrease in average interest-earning assets and a 36 basis point decrease in net interest margin .
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ROO
| 14,923
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account balances are charged against the allowance after all appropriate means of collection have been exhausted and the potential for recovery is considered remote . the annual activity for charges and subsequent recoveries is immaterial . see note 2. inventories inventories are valued at the lower of market value or cost , using a pooled approach for vehicles and the specific identification method for parts . certain acquired inventories are valued using the last-in first-out ( lifo ) method . the lifo reserve associated with this inventory as of december 31 , 2016 and 2015 was immaterial . the cost of new and used vehicle inventories includes the cost of any equipment added , reconditioning and transportation . manufacturers reimburse us for holdbacks , floor plan interest assistance and advertising assistance , which are reflected as a reduction in the carrying value of each vehicle purchased . we recognize advertising assistance , floor plan interest assistance , holdbacks , cash incentives and other rebates received from manufacturers that are tied to specific vehicles as a reduction to cost of sales as the related vehicles are sold . f-8 parts are valued at the lower of market value or cost using the specific identification method . parts purchase discounts that we receive from the manufacturer are reflected as a reduction in the carrying value of the parts purchased from the manufacturer and are recognized as a reduction to cost of goods sold as the related inventory is sold . see note 3. property and equipment property and equipment are stated at cost and depreciated over their estimated useful lives on the straight-line basis . leasehold improvements made at the inception of the lease or during the term of the lease are amortized on a straight-line basis over the shorter of the life of the improvement or the remaining term of the lease . the range of estimated useful lives is as follows : buildings and improvements ( in years ) 5 to 40 service equipment ( in years ) 5 to 15 furniture , office equipment , signs and fixtures ( in years ) 3 to 10 the cost for maintenance , repairs and minor renewals is expensed as incurred , while significant remodels and betterments are capitalized . in addition , interest on borrowings for major capital projects , significant remodels , and betterments are capitalized . capitalized interest becomes a part of the cost of the depreciable asset and is depreciated according to the estimated useful lives as previously stated . for the years ended december 31 , 2016 , 2015 and 2014 , we recorded capitalized interest of $ 0.4 million , $ 0.5 million and $ 0.4 million , respectively . when an asset is retired , or otherwise disposed of , the related cost and accumulated depreciation are removed from the accounts and any gain or loss is credited or charged to income from continuing operations . leased property meeting certain criteria are recorded as capital leases . the company has capital leases for certain locations , expiring at various dates through december 31 , 2050. our capital leases are included in property and equipment on our consolidated balance sheets . amortization of capitalized leased assets is computed on a straight-line basis over the term of the lease , unless the lease transfers title or it contains a bargain purchase option , in which case , it is amortized over the asset 's useful life and is included in depreciation expense . capital lease obligations are recorded as the lesser of the estimated fair market value of the leased property or the net present value of the aggregated future minimum payments and are included in current maturities of long-term debt and long-term debt on our consolidated balance sheets . interest associated with these obligations are included in other interest expense in the consolidated statements of operations . see note 7. long-lived assets held and used by us are reviewed for impairment whenever events or circumstances indicate that the carrying amount of assets may not be recoverable . we consider several factors when evaluating whether there are indications of potential impairment related to our long-lived assets , including store profitability , overall macroeconomic factors and the impact of our strategic management decisions . if recoverability testing is performed , we evaluate assets to be held and used by comparing the carrying amount of an asset to future net undiscounted cash flows associated with the asset , including its disposition . if such assets are considered to be impaired , the amount by which the carrying amount of the assets exceeds the fair value of the assets is recognized as a charge to income from continuing operations . see notes 4 and 12. goodwill goodwill represents the excess purchase price over the fair value of net assets acquired which is not allocable to separately identifiable intangible assets . other identifiable intangible assets , such as franchise rights , are separately recognized if the intangible asset is obtained through contractual or other legal right or if the intangible asset can be sold , transferred , licensed or exchanged . f-9 goodwill is not amortized but tested for impairment at least annually , and more frequently if events or circumstances indicate the carrying amount of the reporting unit more likely than not exceeds fair value . we have the option to qualitatively or quantitatively assess goodwill for impairment and we evaluated our goodwill using a qualitative assessment process . goodwill is tested for impairment at the reporting unit level . our reporting units are individual stores as this is the level at which discrete financial information is available and for which operating results are regularly reviewed by our chief operating decision maker to allocate resources and assess performance . we test our goodwill for impairment on october 1 of each year . we have the option to qualitatively or quantitatively assess indefinite-lived intangible assets for impairment . story_separator_special_tag increases ( decreases ) in same-store warranty work by segment were as follows : replace_table_token_24_th same store wholesale parts grew 1.6 % and 4.6 % , respectively , in 2016 compared to 2015 and in 2015 compared to 2014 , primarily due to increased parts sales to independent repair shops , competing new vehicle dealers and wholesale accounts . same store body shop grew 17.1 % and 3.7 % , respectively , in 2016 compared to 2015 and in 2015 compared to 2014. these increases were due to increased productivity as we increased capacity and improved work flow . we focus on obtaining direct repair relationships with insurance companies as a strategy to increase business . 45 same store service , body and parts gross profit increased 7.7 % and 10.8 % , respectively , in 2016 compared to 2015 and in 2015 compared to 2014. the growth in gross profit in 2016 compared to 2015 was relatively consistent with revenue growth . our gross profit growth in 2015 compared to 2014 was driven by a shift in mix as the growth in warranty , which has a relatively higher gross margin , outpaced customer pay , wholesale parts and body shop growth compared to 2014. segments certain financial information by segment is as follows : replace_table_token_25_th replace_table_token_26_th replace_table_token_27_th 46 replace_table_token_28_th * segment income for each reportable segment is defined as income from continuing operations before income taxes , depreciation and amortization , other interest expense and other ( expense ) income , net . nm - not meaningful replace_table_token_29_th replace_table_token_30_th domestic a summary of financial information for our domestic segment follows : replace_table_token_31_th 47 replace_table_token_32_th revenues in our domestic segment increased in all major business lines in 2016 compared to 2015. though new vehicle units declined 0.7 % on a same store basis , increased average selling prices more than offset this factor . additionally , our domestic stores increased their used vehicle unit sales , improved finance and insurance income per retail unit and experienced strong growth in service , body and parts revenues . the acquisition of eight stores in 2016 contributed 3.7 % of the 11.3 % increase . our domestic segment income decreased 7.8 % in 2016 compared to 2015. the growth in gross profit was offset by increased sg & a expenses , primarily driven by increased variable cost associated with increased sales volume and the eight stores acquired in 2016. additionally , floor plan interest expense increased due to higher inventory levels and rising interest rates . improvement in our domestic operating results in 2015 compared to 2014 was primarily a result of the improvements in all business lines , improving economic environment , new product introductions from manufacturers and enhanced availability of late model used vehicles . additionally , our stores experienced improved operational execution with growth in our segment income exceeding growth in revenues . import a summary of financial information for our import segment follows : replace_table_token_33_th replace_table_token_34_th the increase in our import segment revenue in 2016 compared to 2015 resulted from increases in all business lines . on a same store basis , new vehicle unit sales for our import stores outpaced national performance . additionally , import revenues benefited from improved used vehicle sales due to increased volume , increased finance and insurance revenues as a result of increased volume and finance and insurance income per retail unit sold and improved service , body and parts revenues . the acquisition of seven stores contributed 4.4 % of the 13.0 % increase . our segment income increased 11.6 % in 2016 compared to 2015 mainly due to the improvements in all revenue categories discussed above and a slight improvement in gross margin . additionally , the import segment maintained a consistent sg & a expense as a percentage of gross profit in 2016 compared to 2015. these factors were offset slightly by higher floor plan interest costs due to higher inventory levels and higher interest rates . 48 improvements in our import operating results in 2015 compared to 2014 were primarily a result of the acquisition of the dch auto group in october 2014. of the 27 stores acquired in the dch auto group acquisition , 17 of the locations were import brands , which generated over 90 % of their revenues . additionally , segment income growth exceeded growth in revenues as we integrated the dch auto group into our existing cost structure . luxury a summary of financial information for our luxury segment follows : replace_table_token_35_th replace_table_token_36_th our luxury segment revenue increased in 2016 compared to 2015 primarily due to our acquisition of one store and improvements in finance and insurance and service body and parts revenues . new vehicle units sales declined 3.7 % on a same store basis mainly related to our bmw , audi and mercedes franchises . our luxury segment income decreased in 2016 compared to 2015. gross profits growth outpaced revenue growth due to improved margins ; however , increases in sg & a expense , mainly related to personnel cost and increases in floor plan interest expense due to higher inventory levels and rising interest rates , resulted in a decrease in segment income . improvements in our luxury segment operating results in 2015 compared to 2014 were primarily a result of the acquisition of the dch auto group , which included nine luxury stores in metropolitan markets , which typically are higher volume stores than stores in our historical markets . see note 19 of notes to consolidated financial statements included in part ii , item 8 of this form 10-k for additional information . corporate and other revenue attributable to corporate and other includes the results of operations of our stand-alone collision center offset by certain unallocated reserve and elimination adjustments related to vehicle sales . replace_table_token_37_th replace_table_token_38_th 49 the decreases in corporate and other revenues in 2016 compared to 2015 and in 2015 compared to 2014 were primarily
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58 below are highlights of significant activity related to our cash flows from investing activities ( in thousands ) : replace_table_token_63_th replace_table_token_64_th capital expenditures below is a summary of our capital expenditure activities ( in thousands ) : replace_table_token_65_th many manufacturers provide assistance in the form of additional incentives or assistance if facilities meet manufacturer image standards and requirements . we expect that certain facility upgrades and remodels will generate additional manufacturer incentive payments . also , tax laws allowing accelerated deductions for capital expenditures reduce the overall investment needed and encourage accelerated project timelines . we expect to use a portion of our future capital expenditures to upgrade facilities that we recently acquired . this additional capital investment is contemplated in our initial evaluation of the investment return metrics applied to each acquisition and is usually associated with manufacturer image standards and requirements . if we undertake a significant capital commitment in the future , we expect to pay for the commitment out of existing cash balances , construction financing and borrowings on our credit facility . upon completion of the projects , we believe we would have the ability to secure long-term financing and general borrowings from third party lenders for 70 % to 90 % of the amounts expended , although no assurances can be provided that these financings will be available to us in sufficient amounts or on terms acceptable to us . we expect to make expenditures of approximately $ 123 million in 2017 for capital improvements at recently acquired stores , purchases of land for expansion of existing stores , facility image improvements , purchases of store facilities , purchases of previously leased facilities and replacement of equipment . acquisitions we focus on acquiring stores at opportunistic purchase prices that meet our return thresholds and strategic objectives . we look for acquisitions that diversify our brand and geographic mix as we continue to evaluate our portfolio to minimize exposure to any one manufacturer and achieve financial returns . 59 we are able to subsequently floor new vehicle inventory acquired as part of an acquisition ; however , the cash generated by this transaction is recorded as borrowings on floor plan notes payable , non-trade . adjusted net cash paid for acquisitions , as well as certain other acquisition-related information is presented below ( dollars in thousands ) : replace_table_token_66_th we evaluate potential capital investments primarily based on targeted rates of return on assets and return on our net equity investment . financing activities net cash provided by financing activities , adjusted for borrowing on floor plan facilities : non-trade was as follows : replace_table_token_67_th below are highlights of significant activity related to our cash flows from financing activities , excluding net borrowings on floor plan notes payable : non-trade , which are discussed above
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Liquidity
| 6,366
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forward-looking statements this report contains forward-looking statements , which are based upon current expectations , involve a number of risks and uncertainties , and are subject to the `` safe harbor '' provisions of the private securities litigation reform act of 1995. forward-looking statements include all statements that are not historical statements of fact and those regarding the intent , belief , or expectations of the company , including , without limitation , all statements regarding the company 's future earnings , revenues , and results of operations . readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties , and that actual results may vary from those in the forward-looking statements as a result of various factors , including , but not limited to : impacts from the covid-19 pandemic ( including the response of governmental authorities to combat and contain the pandemic , the closure of fitness centers in our national network ( or operational restrictions imposed on such fitness centers ) , reclosures , and potential additional reclosures as a result of surges in positive covid-19 cases ) on our business , operations or liquidity ; the risks associated with changes in macroeconomic conditions ( including the impacts of any recession or changes in consumer spending resulting from the covid-19 pandemic ) , widespread epidemics , pandemics ( such as the current covid-19 pandemic ) or other outbreaks of disease , geopolitical turmoil , and the continuing threat of domestic or international terrorism ; our ability to collect accounts receivable from our customers and amounts due under our sublease agreements ; the market 's acceptance of our new products and services ; our ability to develop and implement effective strategies and to anticipate and respond to strategic changes , opportunities , and emerging trends in our industry and or business , as well as to accurately forecast the related impact on our revenues and earnings ; the impact of any impairment of our goodwill , intangible assets , or other long-term assets ; our ability to attract , hire , or retain key personnel or other qualified employees and to control labor costs ; the effectiveness of the reorganization of our business ( including the 2020 covid restructuring plan and the 2020 healthcare restructuring plan , each as defined below ) and our ability to realize the anticipated benefits ; our ability to effectively compete against other entities , whose financial , research , staff , and marketing resources may exceed our resources ; the impact of legal proceedings involving us and or our subsidiaries , products , or services , including any claims related to intellectual property rights , as well as our ability to maintain insurance coverage with respect to such legal proceedings and claims on terms that would be favorable to us ; the impact of severe or adverse weather conditions , the current covid-19 pandemic , and the potential emergence of additional health pandemics or infectious disease outbreaks on member participation in our programs ; 25 the risks associated with deriving a significant concentration of our revenues from a limited number of our customers , many of whom are health plans ; our ability and or the ability of our customers to enroll participants and to accurately forecast their level of enrollment and participation in our programs in a manner and within the timeframe we anticipate ; our ability to sign , renew and or maintain contracts with our customers and or our fitness partner locations under existing terms or to restructure these contracts on terms that would not have a material negative impact on our results of operations ; the ability of our health plan customers to maintain the number of covered lives enrolled in those health plans during the terms of our agreements ; our ability to add and or retain paid subscribers in our prime fitness program ; the impact of a reduction in medicare advantage health plan reimbursement rates or changes in plan design ; the impact of any new or proposed legislation , regulations and interpretations relating to medicare , medicare advantage , medicare supplement and privacy and security laws ; the impact of healthcare reform on our business ; the risks associated with potential failures of our information systems or those of our third-party vendors , including as a result of telecommuting issues associated with personnel working remotely , which may include a failure to execute on policies and processes in a work-from-home or remote model ; the risks associated with data privacy or security breaches , computer hacking , network penetration and other illegal intrusions of our information systems or those of third-party vendors or other service providers , including those risks that result from the increase in personnel working remotely , which may result in unauthorized access by third parties , loss , misappropriation , disclosure or corruption of customer , employee or our information , or other data subject to privacy laws and may lead to a disruption in our business , costs to modify , enhance , or remediate our cybersecurity measures , enforcement actions , fines or litigation against us , or damage to our business reputation ; the risks associated with changes to traditional office-centered business processes and or conducting operations out of the office in a work-from-home or remote model by us or our third-party vendors during adverse situations ( e.g. story_separator_special_tag , during a crisis , disaster , or pandemic ) , which may result in additional costs and or may negatively impact productivity and cause other disruptions to our business ; our ability to enforce our intellectual property rights ; the risk that our indebtedness may limit our ability to adapt to changes in the economy or market conditions , expose us to interest rate risk for the variable rate indebtedness and require a substantial portion of cash flows from operations to be dedicated to the payment of indebtedness ; our ability to service our debt , make principal and interest payments as those payments become due , and remain in compliance with our debt covenants ; our ability to obtain adequate financing to provide the capital that may be necessary to support our current or future operations ; counterparty risk associated with our interest rate swap agreements ; and other risks detailed in this report and our other filings with the securities and exchange commission . we undertake no obligation to update or revise any such forward-looking statements . 26 critical accounting policies we describe our significant accounting policies in note 1 of the notes to the consolidated financial statements . we prepare the consolidated financial statements in conformity with generally accepted accounting principles in the united states ( “ u.s . gaap ” ) , which requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and related disclosures at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period . actual results may differ from those estimates . we believe the following accounting policies are the most critical in understanding the estimates and judgments that are involved in preparing our financial statements and the uncertainties that could impact our results of operations , financial condition , and cash flows . revenue recognition beginning in 2018 , we account for revenue from contracts with customers in accordance with accounting standards codification ( “ asc ” ) topic 606 “ revenue from contracts with customers ” ( “ asc topic 606 ” ) . the unit of account in asc topic 606 is a performance obligation , which is a promise in a contract to transfer to a customer either a distinct good or service ( or bundle of goods or services ) or a series of distinct goods or services provided over a period of time . asc topic 606 requires that a contract 's transaction price , which is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer , is to be allocated to each performance obligation in the contract based on relative standalone selling prices and recognized as revenue when or as the performance obligation is satisfied . we earn revenue from continuing operations primarily from thre e p r o g ra m s : silversneakers s e nior fitness , prime fitness and wholehealth living . we provide the silversne a k e rs seni o r fitn e ss pro g ram to me m bers of med i care advant ag e and m edic a re supple m ent plans through our contracts with those plans . we offer prime fitness , a fitness facility access program , through contracts with commercial health plans , employers , and other sponsoring organizations that allow their members to individually purchase the program . we sell our wholehealth living program primarily to health plans . the significant majority of our customer contracts contain one performance obligation - to stand ready to provide access to our network of fitness locations and fitness programming - which is satisfied over time as services are rendered each month over the contract term . there are generally no performance obligations that are unsatisfied at the end of a particular month . there was no material revenue recognized during the year ended december 31 , 2020 from performance obligations satisfied in a prior period . our fees are variable month to month and are generally billed per member per month ( “ pmpm ” ) or billed based on a combination of pmpm and member visits to a network location . we bill pmpm fees by multiplying the contractually negotiated pmpm rate by the number of members eligible for or receiving our services during the month . we bill for member visits approximately one month in arrears once actual member visits are known . payments from customers are typically due within 30 days of invoice date . when material , w e capitalize costs to obtain contracts with customers and amortize them over the expected recovery period . our customer contracts include variable consideration , which is allocated to each distinct month over the contract term based on eligible members and or member visits each month . the allocated consideration corresponds directly with the value to our customers of our services completed for the month . under the majority of our contracts , we recognize revenue each month using the practical expedient available under asc 606-10-55-18 , which provides that revenue is recognized in the amount for which we have the right to invoice . asc 606-10-50-14 ( b ) provides an optional exemption , which we have elected to apply , from disclosing remaining performance obligations when revenue is recognized from the satisfaction of the performance obligation in accordance with the “ right to invoice ” practical expedient . although we evaluate our financial performance and make resource allocation decisions based upon the results of our single operating and reportable segment , we believe the following information depicts how our revenues and cash flows from continuing operations are affected by economic factors .
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following is a discussion of the company 's results of operations and financial condition for 2020 compared to 2019 and for 2019 compared to 2018. revenues revenues from continuing operations were $ 437.7 million for 2020 compared to $ 633.1 million for 2019 , a decrease of $ 195.4 million , primarily as a result of a net decrease in silversneakers revenue of $ 179.2 million driven by a decrease in revenue-generating visits in 2020 due to the covid-19 pandemic , which resulted in the closure of substantially all of our fitness partner locations beginning in march 2020. while some of these locations reopened in may and additional locations reopened in june and throughout the remainder of 2020 , the average participation level of our members after such locations reopened was significantly lower than in the comparable periods in 2019. as a result , revenues from pmpm fees represented 54 % of silversneakers revenue for 2020 , compared to 33 % for 2019. in addition , revenue from prime fitness decreased by $ 25.9 million due to a decrease in paid subscribers for 2020 compared to 2019. these decreases were partially offset by an increase of $ 6.8 million from a program during the second quarter of 2020 with a large employer seeking to improve its employees ' well-being during the covid-19 pandemic . we do not expect revenue from this program to recur at this level . 31 revenues from continuing operations for 2019 increased to $ 633.1 million compared to $ 606.3 million for 2018 , primarily due to ( i ) an increase in prime fitness revenue of $ 19.6 million driven by an increase in average subscribers for 2019 compared to 2018 and ( ii ) a net increase in silversneakers revenue of $ 5.2 million , primarily due t o an increase in revenue-generating visits somewhat offset by a decrease in the number of eligible lives . cost of revenue cost of revenue from continuing operations ( excluding depreciation ) as a percentage of revenues decreased from 2019 ( 70.4 % ) to 2020 ( 57.2 % ) , primarily due to a higher mix of revenues from pmpm fees in 2020 , as noted above , coupled with a decrease in visit costs due to the temporary closure of fitness partner locations
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ROO
| 2,506
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although the market for nuclear fuel is expected to remain oversupplied for the remainder of this decade , the market is expected to experience steady growth as the nuclear power industry expands around the world . after a 30-year hiatus in nuclear power plant construction , utilities in the united states are building five new reactors . according to the world nuclear association , there are 66 reactors under construction and 488 on order , planned or proposed around the world , compared to 439 currently in operation . this includes significant growth in china , korea and india . the new reactor builds will have the potential to improve market conditions in the long-term . much of this growth is driven by rising concern over climate change . nuclear power is the largest source of carbon-free energy in the united states ; globally it is second only to hydropower . climate negotiators in paris in 2015 agreed to target limiting global average temperature increases . this could have significant long-term importance to the nuclear industry since achieving this goal will require significant reductions in carbon emissions which might not be achieved absent a major contribution by nuclear energy . the international energy administration has estimated that nuclear energy capacity would have to more than double , from 396 gigawatts today to 930 gigawatts by 2050 , in order to prevent global average temperatures from rising more than 2 degrees celsius . the enrichment component of leu is customarily sold on long term contracts , with a typical duration of five to ten years and sometimes longer . the company retains an order book of such contracts with a total value of approximately $ 2.3 billion . certain contracts included in the order book have sales prices that are significantly above current market prices . some long-term contracts in our order book were established with milestones related to the deployment of the american centrifuge plant ( “ acp ” ) in piketon , ohio that permit termination with respect to portions of the contract under limited circumstances that vary across the contracts . some of these customers have indicated they expect to exercise their contract termination rights . while we have waived , eliminated or renegotiated 35 those termination rights where possible , we estimate that approximately $ 0.8 billion ( 35 % ) of our order book remains at various levels of risk due to milestones related to acp deployment . advanced technology , manufacturing , and engineering capability the company has a long record as a global leader in advanced technology , manufacturing and engineering . our manufacturing , engineering , testing and demonstration facilities in tennessee and ohio and our highly-trained workforce are deeply engaged in advancing the next generation of uranium enrichment technology . we are exploring a number of options for returning to domestic production , including deployment of our american centrifuge , centrus ' advanced uranium enrichment gas centrifuge technology . in october 2015 , doe issued a report to congress finding that the u.s. must restore its domestic uranium enrichment capability in the future . after evaluating a range of possible technologies , doe found that the american centrifuge is the “ most technically advanced and lowest risk option ” for restoring u.s. uranium enrichment capability to meet long-term national security requirements . from 2012-2013 , the u.s. government and centrus jointly funded the construction of a demonstration cascade of the american centrifuge technology in piketon , ohio . the demonstration cascade completed its mission after nearly two years of continuous operations , delivering valuable operational data to inform future deployment efforts . in september 2015 , doe announced the conclusion of the federally funded demonstration effort . effective october 1 , 2015 , funding for the demonstration cascade was discontinued and the program was consolidated at our engineering and testing facilities in oak ridge , tennessee . we anticipate that doe , through ut-battelle will extend our development work in oak ridge with a contract through september 30 , 2016. the company continued funding cascade operations in piketon from its own funds while it explored potential alternative use of the facility . subsequently , on february 19 , 2016 , we announced our decision to commence with the decontamination and decommissioning ( “ d & d ” ) of the piketon demonstration cascade , and to reduce staffing levels . we will preserve a core staff , expertise , and facilities at piketon to enable the facility to be used to support the company 's other business development initiatives as needed . we intend to resume commercial production when market conditions warrant . today , the economics for commercial deployment of new enrichment capacity are severely challenged by the current supply/demand imbalance in the market for leu and related downward pressure on market prices for separative work units ( “ swu ” ) , which are now at their lowest levels in more than a decade . market conditions are expected to improve in the long term . we currently intend to continue to maintain our nrc license to construct and operate a commercial enrichment facility in piketon . the 30-year license expires in 2037 and includes authorization to enrich uranium to a uranium-235 isotope ( “ u 235 ” ) assay of up to 10 % . the commercial license is based on a plant designed with an initial annual production capacity of 3.8 million swu . demobilization of the demonstration cascade in piketon we notified our american centrifuge employees in september 2015 of possible layoffs beginning in november 2015 as a result of doe 's decision to reduce funding under our then contract with ut-battelle , the operator of ornl . based on the level of funding reduction , we incurred a special charge of $ 8.7 million in the third quarter of 2015 for estimated termination benefits consisting primarily of payments under our severance plan . story_separator_special_tag we initiated a voluntary workforce reduction opportunity in october 2015 and commenced involuntary workforce reductions beginning in the first quarter of 2016. centrus expects to make payments for these workforce reductions through early 2017 . 36 other than severance costs included in special charges for workforce reductions , american centrifuge costs incurred by centrus that were outside of our contract with ut-battelle are included in advanced technology costs . such costs totaled $ 33.0 million in 2015 and $ 17.0 million in 2014. the company incurred $ 18.5 million in 2015 for demobilization and maintenance costs , including $ 10.8 million in the fourth quarter of 2015. in addition , although our ut-battelle agreement expired september 30 , 2015 , we continued to perform work at the expected reduced scope as the parties worked toward a successor agreement . costs for such work totaled $ 7.7 million and are included in advanced technology costs in the fourth quarter of 2015. advanced technology costs in 2015 included $ 6.8 million for an increase to the liability for the d & d of the piketon facility based on updated cost projections . in addition to the severance and demobilization costs , we are beginning to incur expenditures in 2016 as we perform d & d procedures in accordance with the requirements of the u.s. nuclear regulatory commission ( “ nrc ” ) and doe . estimates for such costs have been included in the liability for d & d of the piketon facility . the balance of this liability , included in current liabilities , was $ 29.4 million as of december 31 , 2015 based on cost projections . we expect the d & d effort will continue through the end of 2016. cash expenditures for d & d , employee severance and other demobilization costs are anticipated to occur primarily in 2016 and are projected in a range of $ 50 million to $ 60 million . centrus has previously provided financial assurance to the nrc and doe for d & d and lease turnover costs in the form of surety bonds of approximately $ 16 million and $ 13 million , respectively , which are fully cash collateralized by centrus . centrus expects cash deposits will be returned as surety bonds are cancelled following its performance of d & d or reduced based on our satisfaction of lease conditions . emergence from chapter 11 bankruptcy on march 5 , 2014 , usec inc. filed a voluntary petition for relief ( the “ bankruptcy filing ” ) under chapter 11 of title 11 of the united states code ( the “ bankruptcy code ” ) in the united states bankruptcy court for the district of delaware ( the “ bankruptcy court ” ) . the bankruptcy filing was “ pre-arranged ” and included the filing of a proposed plan of reorganization ( the “ plan of reorganization ” ) supported by certain holders of the claims and interests impaired under the plan of reorganization . on august 18 , 2014 , the company announced that the plan of reorganization was accepted by more than 99 % in both value and number of votes cast of holders of its convertible notes and that both holders of the company 's preferred equity voted in favor of the plan of reorganization . on september 5 , 2014 , the bankruptcy court entered an order approving and confirming the plan of reorganization . on september 30 , 2014 ( the “ effective date ” ) , the company satisfied the conditions of the plan of reorganization , the plan of reorganization became effective and the company emerged from bankruptcy . on the effective date , usec inc. changed its name to centrus energy corp. in accordance with accounting standards codification topic 852 , reorganizations , centrus adopted fresh start accounting upon emergence from chapter 11 bankruptcy . the recorded amounts of assets and liabilities were adjusted to reflect their estimated fair values on the effective date . these fair value adjustments : significantly reduce the future gross profit impact of revenues that were deferred at emergence ; result in the amortization of sales order book and customer relationship intangible assets that were created at emergence ; and result in higher cost of sales as a result of increasing inventory values at emergence . 37 business segments centrus has two reportable segments : the leu segment with two components , swu and uranium , and the contract services segment . leu segment revenue from sales of swu and uranium revenue from our leu segment is derived primarily from : sales of the swu component of leu , sales of both the swu and uranium components of leu , and sales of natural uranium . revenue for our leu segment accounted for approximately 85 % of our total revenue in 2015. the majority of our customers are domestic and international utilities that operate nuclear power plants , with international sales constituting 41 % of revenue from our leu segment in 2015. our agreements with electric utilities are primarily long-term , fixed-commitment contracts under which our customers are obligated to purchase a specified quantity of the swu component of leu ( or the swu and uranium components of leu ) from us . our agreements for natural uranium sales are generally shorter-term , fixed-commitment contracts . our revenues , operating results and cash flows can fluctuate significantly from quarter to quarter and year to year . revenue is recognized at the time leu or uranium is delivered under the terms of our contracts . customer demand is affected by , among other things , electricity markets , reactor operations , maintenance and the timing of refueling outages . utilities typically schedule the shutdown of their reactors for refueling to coincide with the low electricity demand periods of spring and fall . thus , some reactors are scheduled for annual or two-year refuelings in the spring or fall , or for 18-month cycles alternating between both seasons .
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in such cases , the combined results for 2014 provide for a more useful , normalized comparison to the results of the successor company for 2015. combined 2014 results for the consolidated statements of cash flows and for the elements of the consolidated statements of operations that are not categorized by segment are considered non-gaap . when evaluating results of operations below gross profit , management views the year ended december 31 , 2014 as a single , whole measurement period instead of a pair of distinct periods which must be divided and reported separately according to gaap . consequently , the company is presenting the operating results of the predecessor and successor on a combined basis for the year ended december 31 , 2014. this combined presentation is a non-gaap summation of the predecessor 's pre-reorganization results of operations for the period from january 1 , 2014 through september 30 , 2014 and the successor 's results of operations for the period from october 1 , 2014 through december 31 , 2014. management believes that the combined presentation provides additional information that enables meaningful comparison of the company 's financial performance during uniform 46 periods . the non-gaap combined results for 2014 are presented in addition to the gaap results for the three months ended december 31 , 2014 and the nine months ended september 30 , 2014. the following table presents elements of the accompanying consolidated statements of operations that are categorized by segment ( dollar amounts in millions ) : replace_table_token_5_th revenue revenue from the leu segment declined $ 93.9 million ( or 21 % ) in 2015 compared to 2014. the volume of swu sales declined 41 % , reflecting the expected decline in swu deliveries following the cessation of enrichment at the paducah gdp at the end of may 2013 , reduced purchases of russian swu for sale , and the variability in timing of utility customer orders . the average price billed to customers for
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ROO
| 12,659
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kcs capitalizes costs for self-constructed additions and improvements to property including direct labor and material , indirect overhead costs , and interest during long-term construction projects . for purchased assets , all costs necessary to make the asset ready for its intended use are capitalized . expenditures that significantly increase asset values , productive capacity , efficiency , safety or extend useful lives are capitalized . repair and maintenance costs are expensed as incurred . property and equipment are carried at cost and are depreciated primarily on the group method of depreciation , which the company believes closely approximates a straight line basis over the estimated useful lives of the assets measured in years . the group method of depreciation applies a composite rate to classes of similar assets rather than to individual assets . composite depreciation rates are based upon the company 's estimates of the expected average useful lives of assets as well as expected net salvage value at the end of their useful lives . in developing these estimates , the company utilizes periodic depreciation studies performed by an independent engineering firm . depreciation rate studies are performed at least every three years for equipment and at least every six years for road property ( rail , ties , ballast , etc . ) . the company completed depreciation studies for kcsm in 2016 and kcsr in 2015. the impacts of the studies were immaterial to the consolidated financial results for all periods . under the group method of depreciation , the cost of railroad property and equipment ( net of salvage or sales proceeds ) retired or replaced in the normal course of business is charged to accumulated depreciation with no gain or loss recognized . gains or losses on dispositions of land or non-group property and abnormal retirements of railroad property are recognized through income . a retirement of railroad property would be considered abnormal if the cause of the retirement is unusual in nature and its actual life is significantly shorter than what would be expected for that group based on the depreciation studies . an abnormal retirement could cause the company to re-evaluate the estimated useful life of the impacted asset class . costs incurred by the company to acquire the concession rights and related assets , as well as subsequent improvements to the concession assets , are capitalized and amortized using the group method of depreciation over the lesser of the current expected concession term , including probable renewal of an additional 50-year term , or the estimated useful lives of the assets and rights . long-lived assets are reviewed for impairment when events or circumstances indicate that the carrying amount of an asset may not be recoverable . if impairment indicators are present and the estimated future undiscounted cash flows are less than the carrying value of the long-lived assets , the carrying value would be reduced to the estimated fair value . future cash flow estimates for an impairment review would be based on the lowest level of identifiable cash flows , which are the company 's 57 kansas city southern and subsidiaries notes to consolidated financial statements- ( continued ) u.s. and mexican operations . during the years ended december 31 , 2017 and 2016 , management did not identify any indicators of impairment . goodwill . goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in business combinations . as of december 31 , 2017 and 2016 , the goodwill balance was $ 13.2 million , which is included in other assets in the consolidated balance sheets . goodwill is not amortized , but is reviewed at least annually , or more frequently as indicators warrant , for impairment . an impairment loss would be recognized to the extent that the carrying amount exceeds the assets ' fair values . the company performed its annual impairment review for goodwill as of november 30 , 2017 and 2016 , and concluded there was no impairment . fair value of financial instruments . non-financial assets and liabilities are recognized at fair value on a nonrecurring basis . these assets and liabilities are measured at fair value on an ongoing basis but are subject to recognition in the financial statements only in certain circumstances . fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability ( an exit price ) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date . the company determines the fair values of its financial instruments based on the fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value . the hierarchy is broken down into three levels based upon the observability of inputs . fair values determined by level 1 inputs utilize quoted prices ( unadjusted ) in active markets for identical assets or liabilities that the company has the ability to access . level 2 inputs include quoted prices for similar assets and liabilities in active markets , and inputs other than quoted prices that are observable for the asset or liability . level 3 inputs are unobservable inputs for the asset or liability , and include situations where there is little , if any , market activity for the asset or liability . in certain cases , the inputs used to measure fair value may fall into different levels of the fair value hierarchy . in such cases , the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety . story_separator_special_tag revenues decreased $ 23.9 million for the year ended december 31 , 2016 , compared to 2015 , due to a 4 % decrease in carload/unit volumes and a 3 % decrease in revenue per carload/unit . volumes decreased due to service disruptions related to the flooding in the southeastern united states earlier in the year and protests in mexico during july of 2016 , increased truck conversion , and high retail inventory levels . revenue per carload/unit decreased as a result of pricing impacts and shorter average length of haul . automotive . revenues decreased $ 28.8 million for the year ended december 31 , 2016 , compared to 2015 , due to an 18 % decrease in revenue per carload/unit , partially offset by a 5 % increase in carload/unit volumes . revenue per carload/unit decreased due to the weakening of the mexican peso against the u.s. dollar and lower fuel surcharge . volumes increased due to 2015 service-related issues and new customers in 2016 , partially offset by customers ' temporary plant shutdowns in the first half of 2016 . 33 operating expenses operating expenses , as shown below ( in millions ) , decreased $ 99.3 million for the year ended december 31 , 2016 , compared to 2015 , primarily due to the mexican fuel excise tax credit , the weakening of the mexican peso against the u.s. dollar , and lower fuel prices . the weakening of the mexican peso against the u.s. dollar resulted in an expense reduction of approximately $ 63.0 million or 4 % for expense transactions denominated in mexican pesos . the average exchange rate of mexican pesos per u.s. dollar was ps.18.7 for 2016 compared to ps.15.8 for 2015. replace_table_token_10_th compensation and benefits . compensation and benefits increased $ 20.2 million for the year ended december 31 , 2016 , compared to 2015 , due to higher incentive compensation of approximately $ 34.0 million and annual wage increases of approximately $ 14.0 million . incentive compensation increased due to higher expected achievement of short and long-term incentive performance targets in 2016 , as compared to 2015. these increases were partially offset by the weakening of the mexican peso of approximately $ 19.0 million compared to 2015 , and lower u.s. labor costs of approximately $ 15.0 million due to reduced volumes and increased productivity . purchased services . purchased services expense decreased $ 14.5 million for the year ended december 31 , 2016 , compared to 2015 , due to car repair in mexico being performed in-house starting in october 2016 and the weakening of the mexican peso . fuel . fuel expense decreased $ 53.1 million for the year ended december 31 , 2016 , compared to 2015 , due to the weakening of the mexican peso of approximately $ 28.0 million and lower diesel fuel prices of approximately $ 18.0 million and $ 4.0 million in the u.s. and mexico , respectively . the average price per gallon , inclusive of the impact from the weakening of the mexican peso , was $ 1.95 in 2016 , compared to $ 2.32 in 2015. in addition , fuel expense decreased due to improved fuel efficiency and lower fuel consumption . mexican fuel excise tax credit . fuel purchases made in mexico are subject to an excise tax that is included in the price of fuel . in 2016 , the company determined it was eligible for and could utilize an available credit for the excise tax included in the price of fuel that is purchased and consumed in locomotives and certain work equipment in mexico and recognized a $ 62.8 million benefit . the mexican fuel excise tax credit is realized through the offset of the total annual 2016 mexico income tax liability and income tax withholding payment obligations of kcsm , with no carryforward to future periods . equipment costs . equipment costs increased $ 0.6 million for the year ended december 31 , 2016 , compared to 2015 , due to higher car hire expense due to volume mix , partially offset by lower lease expense as a result of the purchase of equipment under existing operating leases and replacement equipment as certain operating leases expired . depreciation and amortization . depreciation and amortization increased $ 20.4 million for the year ended december 31 , 2016 , compared to 2015 , due to a larger asset base . materials and other . materials and other expense was flat for the year ended december 31 , 2016 , compared to 2015 . 34 lease termination costs . lease termination costs were $ 9.6 million for the year ended december 31 , 2015 , due to the early termination of certain operating leases and the related purchase of the equipment . the company did not incur lease termination costs for the year ended december 31 , 2016 . non-operating expenses equity in net earnings of affiliates . equity in net earnings from affiliates decreased $ 3.7 million for the year ended december 31 , 2016 , compared to 2015 , due to lower net earnings from the operations of pcrc and ftvm as a result of lower volumes . interest expense . interest expense increased $ 15.8 million for the year ended december 31 , 2016 , compared to 2015 , due to higher average debt balances and average interest rates as a result of the company 's issuance of debt during the third quarter of 2015 and the second quarter of 2016. for the year ended december 31 , 2016 , the average debt balance ( including short-term borrowings ) was $ 2,492.7 million , compared to $ 2,257.8 million in 2015 . the average interest rate for the year ended december 31 , 2016 was 4.0 % , compared to 3.7 % in 2015 . story_separator_special_tag activities increased $ 109.4 million for 2017 , as compared to 2016 , primarily due to increased operating income of
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included within the 2017 program was authorization for an accelerated share repurchase ( “ asr ” ) program limited to $ 200.0 million . the company entered into an asr program of $ 200.0 million in the third quarter of 2017 , and settled the program in the fourth quarter of 2017. the company 's 2017 repurchases of common stock , which include shares repurchased through the 2015 program and the 2017 program , totaled 3,759,678 shares at an average price of $ 99.90 per share and a total cost of $ 375.6 million . remaining share repurchases are expected to be funded by cash on hand , cash generated from operations and debt . management 's assessment of market conditions , available liquidity and other factors will determine the timing and volume of any future repurchases . refer to note 13 , stockholders ' equity in the notes to the consolidated financial statements in item 8 for additional detail on the company 's share repurchase activity . the company 's financing instruments contain restrictive covenants which limit or preclude certain actions ; however , the covenants are structured such that the company expects to have sufficient flexibility to conduct its operations . the company was in compliance with all of its debt covenants as of december 31 , 2017 . for discussion regarding the agreements representing the indebtedness of kcs , see note 10 , short-term borrowings and note 11 , long-term debt in the notes to the consolidated financial statements section in item 8. during the first half of 2017 , the company 's board of directors declared quarterly cash dividends of $ 0.33 per share or $ 69.9 million on its common stock . during the second half of 2017 , the company 's board of directors declared quarterly cash dividends of $ 0.36 per share or $ 74.3 million on its common stock . on january 23 , 2018 , the company 's board of directors declared a cash dividend of $ 0.36 per share payable on april 4 , 2018 , to common stockholders of record as of march 12 , 2018 . subject to the discretion of the board of directors , capital availability and a determination that cash dividends continue to be in the best interest of its stockholders , the company intends to pay a quarterly dividend on an ongoing basis . on december 31 , 2017 , total available liquidity ( the cash balance plus revolving credit facility availability ) was $
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Liquidity
| 2,823
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management also assesses whether it intends to sell , or it is more likely than not that it will be required to sell , a security in an unrealized loss position before recovery of its amortized cost basis . if either of the criteria regarding intent or requirement to sell is met , the entire difference between amortized cost and fair value is recognized as impairment through earnings . for debt securities that do not meet the aforementioned criteria , the amount of impairment is split into two components as follows : ( 1 ) otti related to credit loss , which must be recognized in the income statement and ( 2 ) otti related to other factors , which is recognized in other comprehensive income ( story_separator_special_tag the following discussion and analysis identifies significant factors that have affected our financial position and operating results during the periods included in the accompanying financial statements . we encourage you to read this discussion and analysis in conjunction with the financial statements and the related notes and the other statistical information also included in this annual report on form 10-k. overview we are headquartered in lexington , south carolina and serve as the bank holding company for the bank . we engage in a general commercial and retail banking business characterized by personalized service and local decision making , emphasizing the banking needs of small to medium-sized businesses , professional concerns and individuals . we operate from our main office in lexington , south carolina , and our 21 full-service offices located in the south carolina counties of lexington county ( 6 offices ) , richland county ( 4 offices ) , newberry county ( 2 offices ) , kershaw county ( 1 office ) , aiken county ( 1 office ) , greenville county ( 2 offices ) , anderson county ( 1 office ) , and pickens county ( 1 office ) ; and in the georgia counties of richmond county ( 2 offices ) and columbia county ( 1 office ) . the following discussion describes our results of operations for 2020 , as compared to 2019 and 2018 , and also analyzes our financial condition as of december 31 , 2020 , as compared to december 31 , 2019. like most community banks , we derive most of our income from interest we receive on our loans and investments . a primary source of funds for making these loans and investments is our deposits , on which we pay interest . consequently , one of the key measures of our success is our amount of net interest income , or the difference between the income on our interest-earning assets , such as loans and investments , and the expense on our interest-bearing liabilities , such as deposits and borrowings . we have included a number of tables to assist in our description of these measures . for example , the “ average balances ” table shows the average balance during 2020 , 2019 and 2018 of each category of our assets and liabilities , as well as the yield we earned or the rate we paid with respect to each category . a review of this table shows that our loans typically provide higher interest yields than do other types of interest earning assets , which is why we intend to channel a substantial percentage of our earning assets into our loan portfolio . similarly , the “ rate/volume analysis ” table helps demonstrate the impact of changing interest rates and changing volume of assets and liabilities during the years shown . we also track the sensitivity of our various categories of assets and liabilities to changes in interest rates , and we have included a “ sensitivity analysis table ” to help explain this . finally , we have included a number of tables that provide detail about our investment securities , our loans , and our deposits and other borrowings . 49 there are risks inherent in all loans , so we maintain an allowance for loan losses to absorb probable losses on existing loans that may become uncollectible . we establish and maintain this allowance by charging a provision for loan losses against our operating earnings . in the following section , we have included a detailed discussion of this process , as well as several tables describing our allowance for loan losses and the allocation of this allowance among our various categories of loans . in addition to earning interest on our loans and investments , we earn income through fees and other expenses we charge to our customers . we describe the various components of this noninterest income , as well as our noninterest expense , in the following discussion . the discussion and analysis also identifies significant factors that have affected our financial position and operating results during the periods included in the accompanying financial statements . we encourage you to read this discussion and analysis in conjunction with the financial statements and the related notes and the other statistical information also included in this report . recent events – covid-19 pandemic our financial performance generally , and in particular the ability of our borrowers to repay their loans , the value of collateral securing those loans , as well as demand for loans and other products and services we offer , is highly dependent on the business environment in our primary markets where we operate and in the united states as a whole . the covid-19 pandemic continues to create extensive disruptions to the global economy and financial markets and to businesses and the lives of individuals throughout the world . in particular , the covid-19 pandemic has severely restricted the level of economic activity in our markets . story_separator_special_tag as a result of payments being resumed at the conclusion of their payment deferral period , loans in which payments have been deferred decreased from the peak of $ 206.9 million to $ 175.0 million at june 30 , 2020 , to $ 27.3 million at september 30 , 2020 , to $ 16.1 million at december 31 , 2020 , and to $ 8.7 million at march 5 , 2021. we had no loans on which payments were deferred related to the covid-19 pandemic at december 31 , 2019. we had no loans remaining on initial deferral status in which both principal and interest were deferred at december 31 , 2020 and march 5 , 2021. the $ 16.1 million in deferrals at december 31 , 2020 consists of seven loans on which only principal is being deferred . we had three loans totaling $ 8.7 million in continuing deferral status in which only principal is being deferred at march 5 , 2021. two of the continuing deferrals at march 5 , 2021 totaling $ 4.5 million are in the retail industry segment identified by us as one of the industry segments most impacted by the covid-19 pandemic ; the other continuing deferral totaling $ 4.2 million is a mixed use office space that we do not consider to be in an industry segment most impacted by the covid-19 pandemic . some of these deferments were to businesses that temporarily closed or reduced operations and some were requested as a pre-cautionary measure to conserve cash . we proactively offered deferrals to our customers regardless of the impact of the pandemic on their business or personal finances . we are also a small business administration approved lender and participated in the ppp , established under the cares act . we had ppp loans totaling $ 43.3 million gross of deferred fees and costs and $ 42.2 million net of deferred fees and costs at december 31 , 2020. we had ppp loans totaling $ 58.5 million gross of deferred fees and costs and $ 57.1 million net of deferred fees and costs at january 31 , 2021. the ppp deferred fees net of deferred costs will be recognized as interest income over the remaining life of the ppp loans . our asset quality metrics as of december 31 , 2020 remained sound . the non-performing asset ratio was 0.50 % of total assets with the nominal level of $ 7.0 million in non-performing assets . loans past due 30 days or more represented 0.23 % of the loan portfolio . the ratio of classified loans plus oreo was 6.89 % of total bank regulatory risk-based capital . during the twelve months ended december 31 , 2020 , we experienced net loan recoveries of $ 142 thousand and net overdraft charge-offs of $ 43 thousand . 51 at december 31 , 2020 , our non-performing assets were not yet materially impacted by the economic pressures of the covid-19 pandemic . however , the increase in non-performing assets to $ 7.0 million at december 31 , 2020 from $ 3.7 million at december 31 , 2019 was related to one credit relationship , which was impacted by the covid-19 pandemic . as we closely monitor credit risk and our exposure to increased loan losses resulting from the impact of covid-19 on our customers , we evaluated and identified our exposure to certain industry segments most impacted by the covid-19 pandemic as of december 31 , 2020 : replace_table_token_5_th we are also monitoring the impact of the covid-19 pandemic on the operations and value of our investments . we mark to market our publicly traded investments and review our investment portfolio for impairment at , a minimum , quarterly . we do not consider any securities in our investment portfolio to be other-than-temporarily impaired at december 31 , 2020. however , because of changing economic and market conditions affecting issuers , we may be required to recognize future impairments on the securities we hold as well as reductions in other comprehensive income . we can not currently determine the ultimate impact of the pandemic on the long-term value of our portfolio . our capital remained strong and exceeded the well-capitalized regulatory requirements at december 31 , 2020. total shareholders ' equity increased $ 16.1 million or 13.4 % to $ 136.3 million at december 31 , 2020 from $ 120.2 million at december 31 , 2019. in 2018 , the federal reserve increased the asset size to qualify as a small bank holding company . as a result of this change , we are generally not subject to the federal reserve capital requirements unless advised otherwise . the bank remains subject to capital requirements including a minimum leverage ratio and a minimum ratio of “ qualifying capital ” to risk weighted assets . these requirements are essentially the same as those that applied to the company prior to the change in the definition of a small bank holding company . each of the regulatory capital ratios for the bank exceeds the well capitalized minimum levels currently required by regulatory statute at december 31 , 2020 and december 31 , 2019. refer to the liquidity management section for more details . replace_table_token_6_th based on our strong capital , conservative underwriting , and internal stress testing , we expect to remain well capitalized throughout the covid-19 pandemic . however , the bank 's reported regulatory capital ratios could be adversely impacted by future credit losses related to the covid-19 pandemic . we recognize that we face extraordinary circumstances , and we intend to monitor developments and potential impacts on our capital . we believe that we have ample liquidity to meet the needs of our customers and to manage through the covid-19 pandemic through our low cost deposits ; our ability to borrow against approved lines of credit ( federal funds purchased ) from correspondent banks ; and our ability to obtain advances secured by certain securities and loans from the federal home loan bank .
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results of operations our net income for the twelve months ended december 31 , 2020 was $ 10.1 million , or $ 1.35 diluted earnings per common share , as compared to $ 11.0 million , or $ 1.45 diluted earnings per common share , for the twelve months ended december 31 , 2019. the $ 872 thousand decrease in net income between the two periods is primarily due to increases in provision for loan losses expense of $ 3.5 million and non-interest expense of $ 2.9 million , partially offset by an increase in net interest income of $ 3.2 million , an increase in non-interest income of $ 2.0 million , and a decrease in income tax expense of $ 362 thousand . the increase in provision for loan losses is primarily related to an increase in the qualitative factors in our allowance for loan losses methodology related to the deteriorating economic conditions and economic uncertainties caused by the covid-19 pandemic . the increase in non-interest expense is primarily related to increased salaries and employee benefits expense of $ 2.8 million , fdic assessments of $ 347 thousand , other real estate expense of $ 120 thousand , and data processing expense of $ 289 thousand , partially offset by a lower equipment expense of $ 256 thousand and amortization of intangibles of $ 160 thousand . the increase in net interest income results from an increase of $ 180.4 million in average earning assets partially offset by a 28 basis point decline in the net interest margin between the two periods .
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ROO
| 15,050
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because of the capital many of the tenants in our mainland properties have invested in these properties and because many of these properties appear to be of strategic importance to the tenants ' businesses , we believe that it is likely that these tenants will renew or extend their leases prior to their expirations . if we are unable to extend or renew our leases , it may be time consuming and expensive to relet some of these properties . hawaii properties . as of december 31 , 2019 , our hawaii properties represented approximately 40.9 % of our annualized rental revenues . as of december 31 , 2019 , certain of our hawaii properties are lands leased for rents that periodically reset based on fair market values , generally every ten years . revenues from our hawaii properties have generally increased under our or our predecessors ' ownership as rents under the leases for those properties have been reset or renewed . lease renewals , lease extensions , new leases and rental rates for our hawaii properties in the future will depend on prevailing market conditions when these lease renewals , lease extensions , new leases and rental rates are set . as rent reset dates or lease expirations approach at our hawaii properties , we generally negotiate with existing or new tenants for new lease terms . if we are unable to reach an agreement with a tenant on a rent reset , our hawaii properties ' leases typically provide that rent is reset based on an appraisal process . despite our and our predecessors ' prior experience with rent resets , lease extensions and new leases in hawaii , our ability to increase rents when rents reset , leases are extended , or leases expire depends upon market conditions which are beyond our control . accordingly , we can not be sure that the historical increases achieved at our hawaii properties will continue in the future . 46 the following chart shows the annualized rental revenues as of december 31 , 2019 subject to rent reset at our hawaii properties : scheduled rent resets at hawaii properties ( dollars in thousands ) replace_table_token_8_th rental rates for which available space may be leased in the future will depend on prevailing market conditions when lease extensions , lease renewals or new leases are negotiated . whenever we extend , renew or enter new leases for our properties , we intend to seek rents that are equal to or higher than our historical rents for the same properties ; however , our ability to maintain or increase the rents for our current properties will depend in large part upon market conditions , which are beyond our control . since the leases at certain of our hawaii properties were originally entered , in some cases as long as 40 or 50 years ago , the characteristics of the neighborhoods in the vicinity of some of those properties have changed . in such circumstances , we and our predecessors have sometimes engaged in redevelopment activities to change the character of certain properties in order to increase rents . because our hawaii properties are currently experiencing strong demand for their current uses , we do not currently expect redevelopment efforts in hawaii to become a major activity of ours in the near term ; however , we may undertake such activities on a selective basis . tenant review process . our manager , rmr llc , employs a tenant review process for us . rmr llc assesses tenants on an individual basis based on various applicable credit criteria . in general , depending on facts and circumstances , rmr llc evaluates the creditworthiness of a tenant based on information concerning the tenant that is provided by the tenant and , in some cases , information that is publicly available or obtained from third party sources . rmr llc also often uses a third party service to monitor the credit ratings of debt securities of our existing tenants whose debt securities are rated by a nationally recognized credit rating agency . investment activities ( dollars in thousands ) during the year ended december 31 , 2019 , we acquired 30 properties with a combined 13,288,180 rentable square feet for an aggregate purchase price of $ 936,750 , excluding acquisition related costs of $ 4,800. in february 2020 , we acquired a net leased class a e-commerce distribution center located in goodyear , az with approximately 820,000 rentable square feet for a purchase price of $ 72,000 , excluding acquisition related costs . this property is 100 % leased and has a remaining lease term of approximately six years . for more information regarding our investment activities , see note 3 to the notes to consolidated financial statements included in part iv , item 15 of this annual report on form 10-k. financing activities ( dollars in thousands ) in january 2019 , we obtained a $ 650,000 mortgage loan secured by 186 of our properties containing approximately 9.6 million square feet located on the island of oahu , hi . in october 2019 , we obtained a $ 350,000 mortgage loan secured by 11 of our mainland properties containing an aggregate of approximately 8.2 million rentable square feet and are located in eight states . we used the proceeds from these mortgage loans to reduce outstanding borrowings under our $ 750,000 unsecured revolving 47 credit facility and to fund acquisitions . in april 2019 , we assumed a $ 56,980 secured mortgage note in connection with one of our acquisitions . story_separator_special_tag in february 2020 , we entered into agreements related to a joint venture with an asian institutional investor for up to 12 of our mainland properties , including 11 properties secured by our $ 350,000 mortgage loan we obtained in october 2019. the investor will contribute approximately $ 108,300 , which includes certain costs associated with the formation of the joint venture , for a 39 % equity interest in the joint venture and we retained the remaining 61 % equity interest in the joint venture . the investment amount is based on an aggregate property valuation of $ 680,000 , less approximately $ 407,000 of existing mortgage debt on the properties at the time of the investment . we closed the joint venture with 11 of the 12 properties and the investor will initially contribute approximately $ 82,000 with the balance contributed when the twelfth property is added . we expect to use the net proceeds from this transaction to reduce outstanding borrowings under our revolving credit facility . for more information regarding our financing activities , see “ liquidity and capital resources—our investment and financing liquidity and resources ” below . 48 story_separator_special_tag style= '' line-height:120 % ; padding-bottom:13px ; text-align : left ; text-indent:24px ; font-size:10pt ; '' > weighted average common shares outstanding . the increase in weighted average common shares outstanding primarily reflects common shares granted under our equity compensation plan since our ipo . net income per common share - basic and diluted . the decrease in net income per common share reflects the changes to net income and weighted average common shares noted above . non-gaap financial measures we present certain “ non-gaap financial measures ” within the meaning of applicable sec rules , including noi , ffo and normalized ffo . these measures do not represent cash generated by operating activities in accordance with gaap and should not be considered alternatives to net income as indicators of our operating performance or as measures of our liquidity . these measures should be considered in conjunction with net income as presented in our consolidated statements of comprehensive income . we consider these non-gaap measures to be appropriate supplemental measures of operating performance for a reit , along with net income . we believe these measures provide useful information to investors because by excluding the effects of certain historical amounts , such as depreciation and amortization expense , they may facilitate a comparison of our operating performance between periods and with other reits and , in the case of noi , reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of our properties . net operating income we calculate noi as shown below . we define noi as income from our rental of real estate less our property operating expenses . the calculation of noi excludes certain components of net income in order to provide results that are more closely related to our property level results of operations . noi excludes amortization of capitalized tenant improvement costs and leasing commissions that we record as depreciation and amortization expense . we use noi to evaluate individual and company-wide property level performance . other real estate companies and reits may calculate noi differently than we do . 50 the following table presents the reconciliation of net income to noi for the years ended december 31 , 2019 and 2018 ( dollars in thousands ) : replace_table_token_10_th funds from operations and normalized funds from operations we calculate ffo and normalized ffo as shown below . ffo is calculated on the basis defined by the national association of real estate investment trusts , which is net income , calculated in accordance with gaap , plus real estate depreciation and amortization , as well as certain other adjustments currently not applicable to us . in calculating normalized ffo , we adjust for the items shown below , if any , and include business management incentive fees , if any , only in the fourth quarter versus the quarter when they are recognized as an expense in accordance with gaap due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year . ffo and normalized ffo are among the factors considered by our board of trustees when determining the amount of distributions to our shareholders . other factors include , but are not limited to , requirements to maintain our qualification for taxation as a reit , limitations in our credit agreement , the availability to us of debt and equity capital , our dividend yield and our dividend yield compared to the dividend yields of other industrial reits , our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations . other real estate companies and reits may calculate ffo and normalized ffo differently than we do . the following table presents our calculation of ffo and normalized ffo and reconciliations of net income to ffo and normalized ffo for the year ended december 31 , 2019 and 2018 ( dollars in thousands , except per share data ) : replace_table_token_11_th 51 liquidity and capital resources our operating liquidity and resources ( dollars in thousands ) our principal sources of funds to meet our operating and capital expenses , pay debt service obligations and make distributions to our shareholders are rents from tenants at our properties and borrowings under our revolving credit facility . we believe that these sources of funds will be sufficient to meet our operating and capital expenses , pay debt service obligations and make distributions to our shareholders for the next 12 months and for the foreseeable future thereafter .
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the increase in real estate taxes primarily reflects our acquisition activity and higher tax assessments at certain of our comparable properties . other operating expenses . other operating expenses primarily include snow removal , legal and property management fees and prior to january 1 , 2019 , bad debt expense ; beginning january 1 , 2019 , the applicable accounting standards require bad debts to be recorded as a reduction of revenues rather than as an expense . other operating expenses also included bad debt expense in the 2018 period . the increase in other operating expenses is primarily due to our acquisition activity , partially offset by a decrease in other operating expenses at our comparable properties . the decrease in other operating expenses at our comparable properties is primarily due to a decrease in bad debts recorded as expense and higher snow removal expenses in the 2018 period , partially offset by increases in insurance expense and repairs and maintenance costs during the 2019 period at certain of our comparable properties . depreciation and amortization . the increase in depreciation and amortization primarily reflects our acquisition activity and an increase in depreciation of capital improvements at certain of our properties after january 1 , 2018. general and administrative . general and administrative expenses primarily include fees paid under our business management agreement , legal fees , audit fees , trustee fees and equity compensation expense . the increase in general and administrative expenses primarily reflects an increase in business management fees as a result of our acquisition activity as well as an increase in our equity compensation expense and increased legal and accounting expenses . interest income . interest income represents interest earned on our cash balances . the increase in interest income is primarily a result of a larger amount of investable cash in the 2019 period compared to the 2018 period . interest expense . the increase in interest expense in the 2019 period is primarily due to increased net
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ROO
| 15,076
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management believes that the most critical accounting policies relate to the reporting of reserves for loss and loss adjustment expenses , including losses that have occurred but have not been reported prior to the reporting date , amounts recoverable from reinsurers , assessments , deferred policy acquisition costs , deferred income taxes , the impairment of investment securities and share-based compensation . the following is a description of our critical accounting policies . reserves for loss and loss adjustment expenses . we record reserves for estimated losses under insurance policies that we write and for loss adjustment expenses , which include defense and cost containment , or dcc , and adjusting and other , or ao , expenses , related to the investigation and settlement of policy claims . our reserves for loss and loss adjustment expenses represent the estimated cost of all reported and unreported loss and loss adjustment expenses incurred and unpaid at any given point in time based on known facts and circumstances . our reserves for loss and dcc expenses are estimated using case-by-case valuations based on our estimate of the most likely outcome of the claim at that time . in addition to these case reserves , we establish reserves on an aggregate basis that have been incurred but not reported , or ibnr . our ibnr reserves are also intended to provide for aggregate changes in case incurred amounts as well as for recently reported claims which an initial case reserve has not been established . the third component of our reserves for loss and loss adjustment expenses is our ao reserve . our ao reserve is established for those future claims administration costs that can not be allocated directly to individual claims . the final component of our reserves for loss and loss adjustment expenses is the reserve for mandatory pooling arrangements . in establishing our reserves , we review the results of analyses using actuarial methods that utilize historical loss data from our more than 26 years of underwriting workers ' compensation insurance . the actuarial analysis of our historical data provides the factors we use in estimating our loss reserves . these factors are primarily measures over time of the number of claims paid and reported , average paid and incurred claim amounts , claim closure rates and claim payment patterns . in evaluating the results of our analyses , management also uses substantial judgment in considering other factors that are not considered in these actuarial analyses , including changes in business mix , claims management , regulatory issues , medical trends , employment and wage patterns , insurance policy coverage interpretations , judicial determinations and other subjective factors . due to the 47 inherent uncertainty associated with these estimates , and the cost of incurred but unreported claims , our actual liabilities may vary significantly from our original estimates . on a quarterly basis , we review our reserves for loss and loss adjustment expenses to determine whether adjustments are required . any resulting adjustments are included in the results for the current period . in establishing our reserves , we do not use loss discounting , which would involve recognizing the time value of money and offsetting estimates of future payments by future expected investment income . additional information regarding our reserves for loss and loss adjustment expenses and the actuarial method and other factors used in establishing these reserves can be found under the caption businessloss reserves in item 1 of this report . amounts recoverable from reinsurers . amounts recoverable from reinsurers represent the portion of our paid and unpaid loss and loss adjustment expenses that are assumed by reinsurers and related commissions due from reinsurers . these amounts are separately reported on our balance sheet as assets and do not reduce our reserves for loss and loss adjustment expenses because reinsurance does not relieve us of liability to our policyholders . we are required to pay claims even if a reinsurer fails to pay us under the terms of a reinsurance contract . we calculate amounts recoverable from reinsurers based on our estimates of the underlying loss and loss adjustment expenses , as well as the terms and conditions of our reinsurance contracts , which could be subject to interpretation . in addition , we bear credit risk with respect to our reinsurers , which can be significant because some of the unpaid loss and loss adjustment expenses for which we have reinsurance coverage remain outstanding for extended periods of time . premiums receivable . premiums receivable represents premium-related balances due from our policyholders based on annual premiums for policies written , including surcharges and deposits and it is adjusted for premium audits , endorsements , cancellations , cash transactions and charge offs . the balance is shown net of the allowance for doubtful accounts and it includes an estimate for ebub . the ebub estimate is subject to significant variability and can either increase or decrease premiums receivable and earned premiums based upon several factors , including changes in premium growth , industry mix and economic conditions . assessments . we are subject to various assessments and premium surcharges related to our insurance activities , including assessments and premium surcharges for state guaranty funds and second injury funds . assessments based on premiums are recorded as an expense as premiums are earned and generally paid one year after the calendar year in which the policies are written . assessments based on losses are recorded as an expense as losses are incurred and are generally paid within one year of when claims are paid by us . state guaranty fund assessments are used by state insurance oversight agencies to pay claims of policyholders of impaired , insolvent or failed insurance companies and the operating expenses of those agencies . second injury funds are used by states to reimburse insurers and employers for claims paid to injured employees for aggravation of prior conditions or injuries . in story_separator_special_tag management believes that the most critical accounting policies relate to the reporting of reserves for loss and loss adjustment expenses , including losses that have occurred but have not been reported prior to the reporting date , amounts recoverable from reinsurers , assessments , deferred policy acquisition costs , deferred income taxes , the impairment of investment securities and share-based compensation . the following is a description of our critical accounting policies . reserves for loss and loss adjustment expenses . we record reserves for estimated losses under insurance policies that we write and for loss adjustment expenses , which include defense and cost containment , or dcc , and adjusting and other , or ao , expenses , related to the investigation and settlement of policy claims . our reserves for loss and loss adjustment expenses represent the estimated cost of all reported and unreported loss and loss adjustment expenses incurred and unpaid at any given point in time based on known facts and circumstances . our reserves for loss and dcc expenses are estimated using case-by-case valuations based on our estimate of the most likely outcome of the claim at that time . in addition to these case reserves , we establish reserves on an aggregate basis that have been incurred but not reported , or ibnr . our ibnr reserves are also intended to provide for aggregate changes in case incurred amounts as well as for recently reported claims which an initial case reserve has not been established . the third component of our reserves for loss and loss adjustment expenses is our ao reserve . our ao reserve is established for those future claims administration costs that can not be allocated directly to individual claims . the final component of our reserves for loss and loss adjustment expenses is the reserve for mandatory pooling arrangements . in establishing our reserves , we review the results of analyses using actuarial methods that utilize historical loss data from our more than 26 years of underwriting workers ' compensation insurance . the actuarial analysis of our historical data provides the factors we use in estimating our loss reserves . these factors are primarily measures over time of the number of claims paid and reported , average paid and incurred claim amounts , claim closure rates and claim payment patterns . in evaluating the results of our analyses , management also uses substantial judgment in considering other factors that are not considered in these actuarial analyses , including changes in business mix , claims management , regulatory issues , medical trends , employment and wage patterns , insurance policy coverage interpretations , judicial determinations and other subjective factors . due to the 47 inherent uncertainty associated with these estimates , and the cost of incurred but unreported claims , our actual liabilities may vary significantly from our original estimates . on a quarterly basis , we review our reserves for loss and loss adjustment expenses to determine whether adjustments are required . any resulting adjustments are included in the results for the current period . in establishing our reserves , we do not use loss discounting , which would involve recognizing the time value of money and offsetting estimates of future payments by future expected investment income . additional information regarding our reserves for loss and loss adjustment expenses and the actuarial method and other factors used in establishing these reserves can be found under the caption businessloss reserves in item 1 of this report . amounts recoverable from reinsurers . amounts recoverable from reinsurers represent the portion of our paid and unpaid loss and loss adjustment expenses that are assumed by reinsurers and related commissions due from reinsurers . these amounts are separately reported on our balance sheet as assets and do not reduce our reserves for loss and loss adjustment expenses because reinsurance does not relieve us of liability to our policyholders . we are required to pay claims even if a reinsurer fails to pay us under the terms of a reinsurance contract . we calculate amounts recoverable from reinsurers based on our estimates of the underlying loss and loss adjustment expenses , as well as the terms and conditions of our reinsurance contracts , which could be subject to interpretation . in addition , we bear credit risk with respect to our reinsurers , which can be significant because some of the unpaid loss and loss adjustment expenses for which we have reinsurance coverage remain outstanding for extended periods of time . premiums receivable . premiums receivable represents premium-related balances due from our policyholders based on annual premiums for policies written , including surcharges and deposits and it is adjusted for premium audits , endorsements , cancellations , cash transactions and charge offs . the balance is shown net of the allowance for doubtful accounts and it includes an estimate for ebub . the ebub estimate is subject to significant variability and can either increase or decrease premiums receivable and earned premiums based upon several factors , including changes in premium growth , industry mix and economic conditions . assessments . we are subject to various assessments and premium surcharges related to our insurance activities , including assessments and premium surcharges for state guaranty funds and second injury funds . assessments based on premiums are recorded as an expense as premiums are earned and generally paid one year after the calendar year in which the policies are written . assessments based on losses are recorded as an expense as losses are incurred and are generally paid within one year of when claims are paid by us . state guaranty fund assessments are used by state insurance oversight agencies to pay claims of policyholders of impaired , insolvent or failed insurance companies and the operating expenses of those agencies . second injury funds are used by states to reimburse insurers and employers for claims paid to injured employees for aggravation of prior conditions or injuries . in
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overview of operating results year ended december 31 , 2011 compared to year ended december 31 , 2010 gross premiums written . gross premiums written for 2011 were $ 272.1 million , compared to $ 228.4 million for 2010 , an increase of 19.1 % . the increase was attributable to a $ 33.1 million increase in premiums resulting from payroll audits and related premium adjustments , a $ 10.6 million increase in annual premiums on voluntary policies written during the period and a $ 0.1 million increase in premiums from mandatory pooling arrangements . these increases were partially offset by a $ 0.2 million decrease in direct assigned risk premiums . related premium adjustments in 2011 include a $ 0.3 million increase in earned but unbilled , or ebub , premium . premium adjustments for the same period in 2010 included a $ 2.5 million decrease in ebub premium . net premiums written . net premiums written for 2011 were $ 258.2 million , compared to $ 207.9 million for 2010 , an increase of 24.2 % . the increase was primarily attributable to the increase in gross premiums written . as a percentage of gross premiums earned , ceded premiums were 5.2 % for 2011 , compared to 8.6 % for 2010. the decrease in ceded premiums as a percentage of gross premiums earned is a result of a change in our reinsurance treaties . net premiums earned . net premiums earned for 2011 were $ 251.0 million , compared to $ 218.9 million for 2010 , an increase of 14.7 % . the increase was attributable to the increase in net premiums written , offset by an increase in unearned premiums . net investment income . net investment income in 2011 was $ 26.3 million , compared to $ 26.2 million in 2010 , an increase of 0.4 % .
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ROO
| 6,848
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to the extent impairment has occurred , the loss will be measured as the excess of the carrying amount of the investment over the estimated fair value of the investment . the company 's estimated fair values are based upon a discounted cash flow model for each joint venture that includes all estimated cash inflows and outflows over a specified holding period and , where applicable , any estimated debt premiums . capitalization rates , discount rates and credit spreads utilized in these models are based upon rates that the company believes to be within a reasonable range of current market rates . realizability of deferred tax assets and uncertain tax positions the company is subject to federal , state and local income taxes on the income from its activities relating to its trs activities and subject to local taxes on certain non-u.s. investments . the company accounts for income taxes using the asset and liability method , which requires that deferred tax assets and liabilities be recognized based on future tax consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis . deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which temporary differences are expected to be recovered or settled . the effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the changes are enacted . a reduction of the carrying amounts of deferred tax assets by a valuation allowance is required , if based on the evidence available , it is more likely than not ( a likelihood of more than 50 percent ) that some portion or all of the deferred tax assets will not be realized . the valuation allowance , which requires significant judgement from management , should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized . the company 's reported net earnings are directly affected by management 's judgement in determining a valuation allowance . the company recognizes and measures benefits for uncertain tax positions , which requires significant judgment from management . although the company believes it has adequately reserved for any uncertain tax positions , no assurance can be given that the final tax outcome of these matters will not be different . the company adjusts these reserves in light of changing facts and circumstances , such as the closing of a tax audit or the refinement of an estimate . changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in the company 's income tax expense in the period in which a change is made , which could have a material impact on operating results ( see footnote 21 of the notes to consolidated financial statements included in this form 10-k ) . executive overview kimco realty corporation is one of north america 's largest publicly traded owners and operators of open-air shopping centers . as of december 31 , 2018 , the company had interests in 437 shopping center properties aggregating 76.3 million square feet of gla located in 27 states and puerto rico . in addition , the company had 290 other property interests , primarily through the company 's preferred equity investments and other real estate investments , totaling 4.7 million square feet of gla . the executive officers are engaged in the day-to-day management and operation of real estate exclusively with the company , with nearly all operating functions , including leasing , asset management , maintenance , construction , legal , finance and accounting , administered by the company . the following highlights the company 's significant transactions , events and results that occurred during the year ended december 31 , 2018 : financial and portfolio information : ● net income available to the company 's common shareholders increased to $ 439.6 million , or $ 1.02 per diluted share for the year ended december 31 , 2018 from $ 372.5 million , or $ 0.87 per diluted share for the year ended december 31 , 2017 . ● funds from operations ( “ ffo ” ) was $ 620.7 million or $ 1.47 per diluted share for the year ended december 31 , 2018 , as compared to $ 655.6 million or $ 1.55 per diluted share for the corresponding period in 2017 ( see additional disclosure on ffo beginning on page 36 ) . ● ffo as adjusted was $ 613.0 million or $ 1.45 per diluted share for the year ended december 31 , 2018 , as compared to $ 644.2 million or $ 1.52 per diluted share for the corresponding period in 2017 ( see additional disclosure on ffo beginning on page 36 ) . 22 ● same property net operating income ( “ same property noi ” ) increased 2.9 % for the year ended december 31 , 2018 , as compared to the corresponding period in 2017 ( see additional disclosure on same property noi beginning on page 38 ) . ● executed 1,046 new leases , renewals and options totaling approximately 7.6 million square feet in the consolidated operating portfolio . ● the company 's consolidated operating portfolio occupancy at december 31 , 2018 was 95.8 % as compared to 95.9 % at december 31 , 2017. acquisition and development activity ( see footnote s 3 and 4 of the notes to consolidated financial statements included in this form 10-k ) : ● acquired two land parcels adjacent to existing shopping centers located in ardmore , pa and elmont , ny , in separate transactions , for an aggregate purchase price of $ 5.4 million . story_separator_special_tag v ) the recognition of a net loss on changes in fair value of available-for-sale marketable securities of $ 3.5 million during 2018 and ( vi ) an increase in deal costs of $ 3.2 million related to transactions the company is no longer pursuing . interest expense – the decrease in interest expense of $ 8.6 million for the year ended december 31 , 2018 , as compared to the corresponding period in 2017 , is primarily the result of the repayment of maturing debt during 2018 and 2017 and lower levels of borrowings during the year ended december 31 , 2018 , as compared to the corresponding period in 2017. early e xtinguishment of d ebt c harges – during the year ended december 31 , 2018 , the company incurred early extinguishment of debt charges of $ 12.8 million in connection with the optional make-whole provisions of unsecured notes that were repaid prior to maturity . during the year ended december 31 , 2017 , the company incurred early extinguishment of debt charges of $ 1.8 million in connection with the tender premium on medium term notes that were partially tendered prior to maturity . equity in i ncome of j oint v entures , n et – the increase in equity in income of joint ventures , net of $ 10.9 million is primarily due to ( i ) an increase in net gains of $ 13.8 million resulting from the sales of properties and ownership interests within various joint venture investments during 2018 as compared to 2017 and ( ii ) the recognition during 2017 of a cumulative foreign currency translation loss of $ 4.8 million as a result of the substantial liquidation of the company 's investments in canada , partially offset by ( iii ) lower equity in income of $ 5.6 million primarily resulting from the sales of properties within various joint venture investments and the acquisition of partnership interests in joint ventures by the company during 2018 and 2017 and ( iv ) an increase in impairment charges of $ 2.1 million recognized during 2018 as compared to 2017. gain on c hange in c ontrol of joint venture i nterests – during 2017 , the company acquired , in separate transactions , a controlling interest in three operating properties from certain joint venture partners in which the company had noncontrolling interests . as a result of these transactions , the company recorded an aggregate gain on change in control of interests of $ 71.2 million related to the fair value adjustment associated with its previously held equity interest in these operating properties . equity in i ncome from o ther r eal e state i nvestments , n et – the decrease in equity in income from other real estate investments , net of $ 37.9 million is primarily due to ( i ) a decrease of $ 34.6 million in equity in income from the albertsons joint venture resulting from cash distributions received in excess of the company 's carrying basis during 2017 and ( ii ) the recognition in 2017 of a cumulative foreign currency translation gain of $ 14.8 million as a result of the substantial liquidation of the company 's investments in canada during 2017 , partially offset by ( iii ) an increase in earnings and profit participation from capital transactions related to company 's preferred equity program of $ 11.4 million during 2018 , as compared to the corresponding period in 2017. net i ncome a ttributable to n oncontrolling i nterests – the decrease in net income attributable to noncontrolling interests of $ 12.9 million is primarily due to equity in income allocated to the company 's noncontrolling interest members as a result of a distribution in excess of basis in the albertsons joint venture during 2017. preferred s tock r edemption charge s – during 2017 , the company partially redeemed its class i preferred stock shares , and as a result , the company recorded a redemption charge of $ 7.0 million . this $ 7.0 million charge was subtracted from net income attributable to the company to arrive at net income available to the company 's common shareholders and used in the calculation of earnings per share for the year ended december 31 , 2017 . 26 preferred dividend s – the increase in preferred dividends of $ 11.6 million is primarily due to the issuances of class l preferred stock and class m preferred stock in 2017 and 2018 , partially offset by the partial redemption of class i preferred stock in 2017. comparison of years ended december 31 , 201 7 to 201 6 the following table presents the comparative results from the company 's consolidated statements of income for the year ended december 31 , 2017 , as compared to the corresponding period in 2016 ( in thousands , except per share data ) : replace_table_token_8_th ( 1 ) the company reclassified $ 239.0 million of reimbursement income and $ 20.0 million of other rental property income from revenues from rental properties on the company 's consolidated statements of income for the year ended december 31 , 2016. the company reclassified $ 30.5 million from general and administrative to operating and maintenance on the company 's consolidated statements of income for the year ended december 31 , 2016. the company reclassified $ 6.0 million from gain on sale of operating properties/change in control of interests to ( provision ) /benefit for income taxes , net on the company 's consolidated statements of income for the year ended december 31 , 2016. see footnote 1 of the notes to the consolidated financial statements for further discussion . net income available to the company 's common shareholders was $ 372.5 million for the year ended december 31 , 2017 , as compared to $ 332.6 million for the comparable period in 2016. on a diluted per share basis ,
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these debt maturities are anticipated to be repaid through operating cash flows , debt refinancing , unsecured credit facilities , proceeds from sales and partner capital contributions , as deemed appropriate . the company intends to maintain strong debt service coverage and fixed charge coverage ratios as part of its commitment to maintain its investment-grade senior , unsecured debt ratings . the company may , from time-to-time , seek to obtain funds through additional common and preferred equity offerings , unsecured debt financings and or mortgage/construction loan financings and other capital alternatives . since the completion of the company 's ipo in 1991 , the company has utilized the public debt and equity markets as its principal source of capital for its expansion needs . since the ipo , the company has completed additional offerings of its public unsecured debt and equity , raising in the aggregate over $ 13.8 billion . proceeds from public capital market activities have been used for the purposes of , among other things , repaying indebtedness , acquiring interests in open-air shopping centers , funding real estate under development projects , expanding and improving properties in the portfolio and other investments . 32 during february 2018 , the company filed a shelf registration statement on form s-3 , which is effective for a term of three years , for the future unlimited offerings , from time-to-time , of debt securities , preferred stock , depositary shares , common stock and common stock warrants . the company , pursuant to this shelf registration statement may , from time-to-time , offer for sale its senior unsecured debt for any general corporate purposes , including ( i ) funding specific liquidity requirements in its business , including property acquisitions , development and redevelopment costs and ( ii ) managing the company 's debt maturities ( see footnotes 12 and 13 of the notes to consolidated financial statements included in this form 10-k ) .
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Liquidity
| 9,399
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we observed an annual net dollar retention rate of 116 % and 103 % for our signed customer base , for the years ended december 31 , 2015 and 2014 , respectively . we calculate annual net dollar retention rate for a given period as the aggregate annualized subscription contract value as of the last day of that year from those customers that were also customers as of the last day of the prior year , divided by the aggregate annualized subscription contract value from all customers as of the last day of the prior year . in calculating ndr , we exclude one-time fees . ndr does not include subscriptions by new customers contracted since the end of the most recently completed year . components of results of operations 39 revenue we generate revenue from subscription fees from customers for access to the products they select , including basic customer service support . we also earn revenue from professional services primarily related to the implementation of our offering , including extensive communications support to drive adoption by our customers ' employees and their dependents . historically , we have derived a substantial majority of our subscription revenue from our core castlight platform . our subscription fees are based primarily on the number of employees and adult dependents that employers identify as eligible to use our offering , which typically includes all of our customers ' u.s. employees and adult dependents that receive health benefits . we recognize subscription fees on a straight-line basis ratably over the contract term beginning when our products are implemented and ready for launch , which is based on the implementation timelines discussed above . our customer agreements generally have a term of three years . we generally invoice our customers in advance on a monthly , quarterly or annual basis . amounts that have been invoiced are initially recorded as deferred revenue . amounts that have not been invoiced are not reflected in our consolidated financial statements . we generally invoice our implementation services upon contract signing on a fixed-fee basis , which is generally when we commence work . as a result of variability in our billing terms , the deferred revenue balance does not represent the total value of our customer contracts , nor do changes in deferred revenue serve as a reliable indicator of our future subscription revenue in a given period . costs and operating expenses cost of revenue . cost of revenue consists of the cost of subscription revenue and cost of professional services revenue . cost of subscription revenue primarily consists of data fees , hosting costs of our cloud-based service , cost of subcontractors , expenses for service delivery ( which includes call center support ) , employee-related expenses ( including salaries , benefits and stock-based compensation ) , allocated overhead , the costs of data center capacity , amortization of internal-use software and depreciation of owned computer equipment and software . cost of professional services revenue consists primarily of employee-related expenses ( including salaries , benefits and stock-based compensation ) associated with these services , the cost of subcontractors and travel costs , and allocated overhead . the time and costs of our customer implementations vary based on the source and condition of the data we receive from third parties , the configurations that we agree to provide and the size of the customer . our cost of revenue is expensed as we incur the costs . however , the related revenue is deferred until our products are ready for use by the customer and then recognized as revenue ratably over the related contract term . therefore , we expense the cost incurred to provide our products and services prior to the recognition of the corresponding revenue . sales and marketing . sales and marketing expenses consist primarily of employee-related expenses ( including salaries , sales commissions and bonuses , benefits and stock-based compensation ) , travel-related expenses and marketing programs . commissions earned by our sales force that can be associated specifically with the noncancellable portion of a subscription contract are deferred and amortized over the noncancellable period . accordingly , commission expense can be materially impacted by changes in the termination provisions of customer contracts that we execute in a given period compared with previous periods . research and development . research and development expenses consist primarily of employee-related expenses ( including salaries , bonuses , benefits and stock-based compensation ) and costs associated with subcontractors . general and administrative . general and administrative expenses consist primarily of employee-related expenses ( including salaries and bonuses , benefits and stock-based compensation ) for finance and accounting , legal , human resources and management information systems personnel , legal costs , professional fees and other corporate expenses . 40 results of operations the following tables set forth selected consolidated statements of operations data and such data as a percentage of total revenue for each of the periods indicated : replace_table_token_6_th revenue replace_table_token_7_th 2015 compared to 2014 total revenue for the year ended december 31 , 2015 , increased $ 29.7 million , or 65 % . the increase in total revenue was primarily attributable to revenue from customers launched during 2015 as well as incremental revenue from customers launched in 2014. new customer launches in 2015 accounted for $ 15.4 million of the increase and customers launched in 2014 accounted for $ 14.5 million of the increase in total revenue . our launched customer base grew more than 35 % year over year . 2014 compared to 2013 total revenue for the year ended december 31 , 2014 , increased $ 32.6 million , or 252 % . the increase in total revenue was primarily attributable to revenue from customers launched during 2014 as well as incremental revenue from customers launched in 2013 . our launched customer base grew more than 135 % year over year . story_separator_special_tag the contractual commitment amounts in the table above are associated with agreements that are enforceable and legally binding and that specify all significant terms , including fixed or minimum services to be used , fixed , minimum or variable price provisions and the approximate timing of the transaction . obligations under contracts that we can cancel without a significant penalty are not included in the table above . off-balance sheet arrangements during the periods presented , we did not have , nor do we currently have , any relationships with unconsolidated entities or financial partnerships , such as entities often referred to as structured finance or special purpose entities , which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes . we are therefore not exposed to the financing , liquidity , market or credit risk that could arise if we had engaged in those types of relationships . critical accounting policies and estimates our consolidated financial statements are 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 assumptions that affect the reported amounts of assets , liabilities , revenue , costs and expenses and related disclosures . on an ongoing basis , we evaluate our estimates and assumptions . our actual results may differ from these estimates under different assumptions or conditions . we believe that of our significant accounting policies , which are described in note 2 to our consolidated financial statements , involve a greater degree of judgment and complexity . accordingly , these are the policies that we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations . revenue recognition we derive our revenue from sales of cloud-based subscription service and professional services contracts . we sell subscriptions to our cloud-based subscription service through contracts that are generally three years in length . 46 our cloud-based subscription service contracts do not provide customers with the right to take possession of the software supporting the cloud-based service and , as a result , are accounted for as service contracts . we commence revenue recognition for our cloud-based subscription service and professional services when all of the following criteria are met : there is persuasive evidence of an arrangement ; the service has been provided to the customer ; collection of the fees is reasonably assured ; and the amount of fees to be paid by the customer is fixed or determinable . our subscription and professional service arrangements do not contain refund provisions for fees earned related to services performed . we do , however , have commitments under service-level agreements , as discussed under `` warranties and indemnification `` in the notes to consolidated financial statements . subscription revenue . subscription revenue recognition commences on the date that our cloud-based service is made available to the customer , which is considered the launch date , provided all of the other criteria described above are met . revenue is recognized based on the terms in our customer contracts , which can provide for ( a ) a variable periodic fee based upon the actual or contractual number of users that is recognized to revenue based on the actual or contractual number of users or ( b ) a fixed fee that is recognized to revenue on a straight-line basis over the contractual term of the arrangement . some of our cloud-based subscription arrangements include performance incentives that are generally based upon employee engagement . fees for performance incentives are considered contingent revenue , and are recognized over the remaining term of the related subscription arrangement commencing at the time they are earned . professional services revenue . professional services revenue is comprised of implementation services and communication related to our cloud-based subscription service , as well as follow-on professional services to assist our customers in further adopting our cloud-based subscription service . nearly all of our professional services are sold on a fixed-fee basis . we do not have standalone value for our implementation services . accordingly , we recognize implementation services revenue in the same manner as the associated cloud-based subscription service , beginning on the launch date , provided all other criteria described above have been met . for follow-on professional services that are sold separately from the cloud-based subscription service , we recognize revenue as the services are delivered . communication services revenue is recognized over the contractual term , generally one year , commencing when the revenue recognition criteria have been met . multiple deliverable arrangements . to date , we have generated substantially all our revenue from multiple deliverable arrangements consisting of multi-year cloud-based subscription services and professional services , including implementation services and communication services . for arrangements with multiple deliverables , we evaluate whether the individual deliverables qualify as separate units of accounting . in order to treat deliverables in a multiple deliverable arrangement as separate units of accounting , the deliverables must have standalone value upon delivery . if the deliverables have standalone value upon delivery , we account for each deliverable separately and revenue is recognized for the respective deliverables as they are delivered . if one or more of the deliverables do not have standalone value upon delivery , the deliverables that do not have standalone value are generally combined with our cloud-based subscription service , and revenue for the combined unit is recognized over the remaining term of the cloud-based subscription service . our deliverables have standalone value if we or any other vendor sells a similar service separately . we have concluded that we have standalone value for our cloud-based subscription service as we sell these services separately through renewals and for our communication services as other vendors sell similar services separately . conversely , we have concluded that our implementation services do not have standalone value
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operating activities for the year ended december 31 , 2015 , cash used in operating activities was $ 56.9 million . the negative cash flows resulted primarily from our net loss of $ 79.9 million , adjusted for $ 24.7 million in non-cash expenses that primarily included stock-based compensation of $ 17.8 million and amortization of deferred commissions of $ 3.5 million . working capital uses of cash included a decrease in accrued expenses of $ 0.5 million , primarily as a result of payout of annual bonuses to our employees , and an increase in accounts receivable of $ 1.7 million driven by 32 % increase in billings year over year and the 44 timing of billings and collections . additionally , deferred revenue increased by $ 6.8 million , primarily attributable to an increase in the amount billed year over year as a result of increased billings for launched customers . for the year ended december 31 , 2014 , cash used in operating activities was $ 54.6 million . the negative cash flows resulted primarily from our net loss of $ 85.9 million , adjusted for $ 23.8 million in non-cash expenses that primarily included stock-based compensation of $ 14.2 million , warrant expense of $ 2.6 million and amortization of deferred commissions of $ 4.1 million . working capital uses of cash included an increase in accounts receivable of $ 6.0 million primarily as a result of overall growth of our business and in part related to the timing of billings and collections .
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Liquidity
| 12,005
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after developers begin to use our software and start to participate in our developer community , they become more likely to apply our technology to additional use cases and evangelize our technology within their organizations . this reduces the time required for our sales force to educate potential leads on our solutions , increasing their efficiency and shortening the sales process . in order to capitalize on our opportunity , we intend to make further investments to keep the elastic stack accessible and well known to software developers around the world . we intend to continue to invest in our products and support and engage our user base and developer community through content , events , and conferences in the u.s. and internationally . our results of operations may fluctuate as we make these investments . 49 developing new features and solutions to expand the use cases to which the elastic stack can be applied . the elastic stack is applied to various use cases both directly by developers and through the solutions we offer . our revenue is derived primarily from subscriptions of the elastic stack and our solutions . we believe that releasing additional open source and proprietary features of the e lastic stack and additional solutions on top of the stack drives usage of our products and ultimately drives our growth . to that end , we plan to continue to invest in building new features and solutions that expand the capabilities of the elastic stack and make it easier to apply to additional use cases . these investments may adversely affect our operating results prior to generating benefits , to the extent that they ultimately generate benefits at all . growing our customer base by converting users of our software to paid subscribers . our financial performance depends on growing our paid customer base by converting free users of our software into paid subscribers . our open source distribution model has resulted in rapid adoption by developers around the world . we have invested , and expect to continue to invest , heavily in sales and marketing efforts to convert additional free users to paid subscribers . our investment in sales and marketing is significant given our large and diverse user base . the investments are likely to occur in advance of the anticipated benefits resulting from such investments , such that they may adversely affect our operating results in the near term . expanding within our current customer base . our future growth and profitability depend on our ability to drive additional sales to existing customers . customers often expand the use of our software within their organizations by increasing the number of developers using our products , increasing the utilization of our products for a particular use case , and expanding use of our products to additional use cases . we focus some of our direct sales efforts on encouraging these types of expansion within our customer base . an indication of how our customer relationships have expanded over time is through our net expansion rate , which is based upon trends in the acv of customers that have entered into annual subscription agreements . to calculate an expansion rate as of the end of a given month , we start with the acv from all such customers as of twelve months prior to that month end , or prior period value . we then calculate the acv from these same customers as of the given month end , or current period value , which includes any growth in the value of their subscriptions and is net of contraction or attrition over the prior twelve months . we then divide the current period value by the prior period value to arrive at an expansion rate . the net expansion rate at the end of any period is the weighted average of the expansion rates as of the end of each of the trailing twelve months . we believe that our net expansion rate provides useful information about the evolution of our business ' existing customers . the net expansion rate includes the dollar-weighted value of our subscriptions that expand , renew , contract , or attrit . for instance , if each customer had a one-year subscription and renewed its subscription for the exact same amount , then the net expansion rate would be 100 % . customers who reduced their annual subscription dollar value ( contraction ) or did not renew their annual subscription ( attrition ) would adversely affect the net expansion rate . our net expansion rate was over 130 % at the end of each of our last ten fiscal quarters . as large organizations expand their use of the elastic stack across multiple use cases , projects , divisions and users , they often begin to require centralized provisioning , management and monitoring across multiple deployments . to satisfy these requirements , we offer elastic cloud enterprise , a proprietary product . we will continue to focus some of our direct sales efforts on driving adoption of our elastic cloud enterprise offering . increasing adoption of elastic cloud . elastic cloud , our family of saas products that includes elasticsearch service , site search service , and app search service , is an important growth opportunity for our business . organizations are increasingly looking for saas deployment alternatives with reduced administrative burdens . in some cases , open source users that have been self-managing deployments of the elastic stack subsequently become paying subscribers of elastic cloud . in the years ended april 30 , 2019 , 2018 and 2017 , elastic cloud contributed 17 % , 16 % and 11 % of our total revenue , respectively . we believe that offering a saas deployment alternative is important for achieving our long-term growth potential , and we expect elastic cloud 's contribution to our subscription revenue to increase over time . story_separator_special_tag in addition , non-deductible stock-based compensation and changes in our valuation allowance had the most significant impact on the difference between the statutory dutch tax rate and our effective tax rate . 54 results of operations the following tables set forth our results of operations for the periods presented in dollars and as a percentage of our total revenue . for a discussion of our consolidated statement of operations data for the fiscal year ended april 30 , 2018 compared to the year ended april 30 , 2017 and as a percentage of revenue for that period , see “ management 's discussion and analysis of financial condition and results of operations ” the company 's final prospectus for its ipo filed with the sec pursuant to rule 424 ( b ) ( 4 ) under the securities act of 1933 , as amended ( file no . 333-227191 ) on october 5 , 2018 . replace_table_token_11_th replace_table_token_12_th 55 replace_table_token_13_th replace_table_token_14_th replace_table_token_15_th 56 replace_table_token_16_th comparison of fiscal years ended april 30 , 2019 and 2018 revenue replace_table_token_17_th total revenue increased by $ 111.7 million , or 70 % , in the year ended april 30 , 2019 compared to the prior year . total subscription revenue increased $ 98.9 million , or 66 % , in the year ended april 30 , 2019 compared to the prior year . approximately 25 % of the increase was due to sales to new customers added during the year ended april 30 , 2019 , and the remaining increase resulted from an increase in sales to existing customers . professional services revenue increased by $ 12.8 million , or 122 % , in the year ended april 30 , 2019 compared to the prior year . the increase in professional services revenue was attributable to increased adoption of our professional services offerings . 57 cost of revenue and gross margin replace_table_token_18_th total cost of subscription revenue increased by $ 25.6 million , or 91 % , in the year ended april 30 , 2019 compared to the prior year . this increase was primarily due to an increase of $ 12.9 million in cloud infrastructure costs and increases of $ 9.4 million in personnel and related charges together with $ 1.0 million in software and equipment expense from growth in headcount in our support organization . in addition , amortization of acquired intangible assets increased $ 0.9 million . stock-based compensation expense , included within personnel and related costs , increased by $ 2.7 million . total subscription margin decreased to 78 % in the year ended april 30 , 2019 from 81 % in the prior year . this decrease is due to growth and related investment in our saas offerings which incur costs related to cloud infrastructure and the increased costs associated with scaling our support organization . cost of professional services revenue increased by $ 11.6 million , or 94 % , in the year ended april 30 , 2019 compared to the prior year . this increase was primarily due to an increase of $ 6.9 million in personnel and related costs and an increase of $ 1.1 million in travel expenses driven by an increase in headcount in our consulting and training organizations . in addition , subcontractor costs increased by $ 1.8 million to supplement our internal resources providing services to our customers and charges for training facility rentals increased by $ 0.9 million . stock-based compensation expense , included within personnel and related costs , increased by $ 0.9 million . gross margin for professional services revenue was ( 3 ) % in the year ended april 30 , 2019 compared to ( 18 ) % for the prior year . historically , our professional services offerings have primarily consisted of training , however we have recently experienced increased demand for consulting services . in the year ended april 30 , 2019 , we have invested in headcount for our professional services organization that we believe will be needed as we continue to grow . our gross margin for professional services may fluctuate or decline in the near-term as we seek to expand our professional services business . operating expenses research and development year ended april 30 , change 2019 2018 $ % ( in thousands ) research and development $ 101,167 $ 55,641 $ 45,526 82 % research and development expense increased by $ 45.5 million , or 82 % , in the year ended april 30 , 2019 compared to the prior year as we continued to invest in the development of new and existing offerings . personnel and related costs increased by $ 35.6 million and software and equipment expense increased by $ 1.8 million , primarily as a result of growth in headcount . in addition , cloud infrastructure costs related to our research and development activities increased $ 4.7 million . stock-based compensation expense , included within personnel and related costs , increased by $ 11.1 million . 58 sales and marketing year ended april 30 , change 2019 2018 $ % ( in thousands ) sales and marketing $ 147,296 $ 82,606 $ 64,690 78 % sales and marketing expense increased by $ 64.7 million , or 78 % , in year ended april 30 , 2019 compared to the prior year . this increase was primarily due to an increase of $ 51.4 million in personnel and related costs as we continue to increase our sales and marketing headcount as well as an increase of $ 9.4 million in commissions expense related to the amortization of contract acquisition costs , together with an increase of $ 8.4 million in stock-based compensation expense . the increased headcount also resulted in an increase of $ 4.9 million in travel expenses and $ 3.7 million in software and equipment expense . in addition , marketing expenses increased $ 3.3 million primarily due to our expanded user conference program in year ended april
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2 million and net cash inflow of $ 1 . 7 million from changes in operating assets and liabilities . non-cash charges primarily consisted of $ 12.7 million for sto ck-based compensation expense , $ 12.7 million for amortization of deferred contract acquisition costs , $ 5.1 million of depreciation and intangible asset amortization expense which were partially offset by a $ 0.3 million increase in deferred income taxes . t he net cash inflow from changes in operating assets and liabilities was the result of a $ 45.8 million increase in deferred revenue due to higher billings and a net increase of $ 1 3 .4 million in accounts payable , accrued expenses and accrued compensation and benefits due to growth in our business and higher headcount . these inflows were partially offset by a $ 21.6 million increase in accounts receivable due to higher billings and timing of collections from our customers , an increase in deferred contract acqui sition costs of $ 20.5 million as our sales commissions increased due to the addition of new customers and expansion of our existing customer subscriptions , and a $ 15.4 million increase in prepaid expenses and other assets primarily related to an increase i n prepaid hosting costs and prepaid software subscription costs driven by the growth in our business . net cash used in operating activities during the year ended april 30 , 2017 was $ 16.1 million , which resulted from a net loss of $ 52.0 million , adjusted for non-cash charges of $ 31.1 million and net cash inflow of $ 4.7 million from changes in operating assets and liabilities . non-cash charges primarily consisted of $ 3.2 million for depreciation and amortization expense , $ 8.4
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Liquidity
| 10,513
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we have calculated our best estimate of the impact of the act in our year end income tax provision based on our understanding of the act and guidance available at the date of this filing . we recorded a $ 23.2 million reduction in tax expense related to the act in the fourth quarter of our fiscal year 2018 , the period in which the legislation was enacted . the provisional benefit related to the remeasurement of certain deferred tax assets and liabilities was $ 25.0 million . the provisional expense related to the one-time tax on the mandatory deemed repatriation of foreign earnings was $ 1.8 million . 17 westinghouse electric company bankruptcy case we had existing contracts with subsidiaries of westinghouse electric company ( “ wec ” ) . wec and the relevant subsidiaries ( the `` debtors `` ) filed relief under chapter 11 of the bankruptcy code on march 29 , 2017 in the united states bankruptcy court for the southern district of new york , jointly administered as in re westinghouse electric company , et al . , case no . 17-10751 ( the `` bankruptcy case `` ) . to date , wec has continued to operate under a debtor-in-possession financing facility and we continue to honor their executory contracts . the company has been collecting on post-petition amounts due and owed . on february 22 , 2018 , the united states bankruptcy court for the southern district of new york approved the debtors ' modified first amended disclosure statement for the joint chapter 11 plan of reorganization . in the disclosure statement , the debtors estimated a 98.9 % to 100 % distribution on allowed general unsecured claims . we have approximately $ 12 million of such claims filed with the court , which includes 100 % of our pre-petition claims . the total claims filed exceed the book value of our exposure . at time of the bankruptcy case , we were subcontractors on various wec engagements , including the vc summer and vogtle bridge projects . the ownership of vc summer halted work earlier in the year and , during the third quarter of fiscal 2018 , we de-booked $ 11.0 million from backlog related to this project . also during the third quarter of fiscal 2018 , we received a notice of cancellation for the vogtle bridge project , which negatively impacted our sales and margin for the second half of fiscal year 2018 by approximately $ 6.1 million and $ 1.2 million , respectively . 18 year ended february 28 , 2017 compared with year ended february 29 , 2016 backlog we ended fiscal 2017 with a backlog of $ 317.9 million , a small increase as compared to fiscal 2016 . the company 's backlog as of year end pertains to the energy segment 's operations . the book-to-ship ratio remained relatively flat compared to fiscal 2016 . the book-to-ship ratio was 0.99 to 1 for fiscal 2017 and 1.02 to 1 for fiscal 2016 . the following table reflects bookings and shipments for fiscal 2017 and 2016 . backlog table ( in thousands ) replace_table_token_7_th net sales our total net sales for fiscal 2017 decreased by $ 25.9 million , or 2.9 % , as compared to fiscal 2016 . the following table reflects the breakdown of revenue by segment ( in thousands ) : replace_table_token_8_th our energy segment recorded net sales for fiscal 2017 of $ 488.0 million as compared to fiscal 2016 net sales of $ 487.0 million . the increase of 0.2 % represented relatively flat growth from the prior year . our metal coatings segment , which consisted of forty-one metal coating facilities as of february 28 , 2017 , generated net sales of $ 375.5 million , a 6.7 % decrease from the prior year 's net sales of $ 402.4 million . the decline was a result of a volume decrease in steel processed caused by softness in the solar , petrochemical , and the oil and gas markets which offset higher pricing during the year . operating income operating income for the energy segment decreased $ 3.9 million , or 6.9 % , for fiscal 2017 , to $ 52.6 million as compared to $ 56.5 million for fiscal 2016 . operating margins for this segment were 10.8 % for fiscal 2017 as compared to 11.6 % for fiscal 2016 . this decrease was attributable to the reduction in refinery turnarounds described above , which typically carry a higher margin , coupled with generally lower margin projects in the balance of the segment . operating income for the metal coatings segment decreased $ 15.7 million , or 16.6 % , for fiscal 2017 to $ 79.0 million as compared to $ 94.8 million for the prior year . operating margins were 21.0 % for fiscal 2017 as compared to 23.6 % for fiscal 2016 . this decrease is attributable to lower volumes in fiscal 2017 and the $ 7.3 million of realignment charge related to the shutdown of two metal coating plants , the repurposing of a third plant , and the disposal of obsolete assets taken in the second quarter of fiscal 2017. corporate expenses were $ 32.7 million for fiscal 2017 and $ 30.9 million for fiscal 2016 . this increase is attributable to higher spend on professional services , higher employee costs , and depreciation of corporate assets in fiscal 2017 . 19 interest interest expense for fiscal 2017 decreased 2.8 % to $ 14.7 million as compared to $ 15.2 million in fiscal 2016 . this decrease is the result of lower borrowings during fiscal 2017 stemming from mandatory and elective principal reductions , partially offset by higher interest rates . for additional information on outstanding debt , see note 12 of the notes to the consolidated financial statements . story_separator_special_tag impairment of long-lived assets , identifiable intangible assets and goodwill we record impairment losses on long-lived assets , including identifiable intangible assets , when events and circumstances indicate that the assets might be impaired and the undiscounted projected cash flows associated with those assets are less than the carrying amounts of those assets . in those situations , impairment losses on long-lived assets are measured based on the excess of the carrying amount over the asset 's fair value , generally determined based upon discounted estimates of future cash flows . a significant change in events , circumstances or projected cash flows could result in an impairment of long-lived assets , including identifiable intangible assets . an annual impairment test of goodwill is performed in the fourth quarter of each fiscal year . the test is calculated using the anticipated future cash flows after tax from our operating segments . based on the present value of the future cash flows , we will determine whether impairment may exist . a significant change in projected cash flows or cost of capital for future years could result in an impairment of goodwill in future years . variables impacting future cash flows include , but are not limited to , the level of customer demand for and response to products and services we offer to the power generation market , the electrical transmission and distribution markets , the general industrial market and the hot dip galvanizing market , changes in economic conditions of these various markets , raw material and natural gas costs and availability of experienced labor and management to implement our growth strategies . our testing concluded that none of our goodwill was impaired . accounting for income taxes our income tax expense , deferred tax assets and liabilities , and liabilities for unrecognized tax benefits reflect management 's best assessment of estimated current and future taxes to be paid . we are subject to income taxes in both the united states and numerous foreign jurisdictions . significant judgments and estimates are required in determining the consolidated income tax expense . deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements , which will result in taxable or deductible amounts in the future . in evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise , we consider all available positive and negative evidence , including scheduled reversals of deferred tax liabilities , projected future taxable income , tax-planning strategies , and results of recent operations . in projecting future taxable income , we begin with historical results adjusted for the results of discontinued operations and incorporate assumptions about the amount of future state , federal , and foreign pretax operating income adjusted for items that do not have tax consequences . the assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses . deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized . the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations . generally accepted accounting principles in the united states of america ( `` gaap `` ) states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination , including resolutions of any related appeals or litigation processes , on the basis of the technical merits . we may ( 1 ) record unrecognized tax benefits as liabilities in accordance with gaap and ( 2 ) adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available . because of the complexity of some of these uncertainties , the ultimate resolution may result in a payment that is materially different from our 23 current estimate of the unrecognized tax benefit liabilities . these differences will be reflected as increases or decreases to income tax expense in the period in which new information is available . we currently do not record unrecognized tax benefits related to u.s. federal , state or , foreign tax exposure . we continue to review our tax exposure for any significant need to record unrecognized tax benefits in the future . in december 2017 , the tax cuts and jobs act of 2017 ( the “ act ” ) was signed into law revising the u.s. corporate income tax . changes include , but are not limited to , a corporate tax rate decrease from 35 % to 21 % effective for tax years beginning after december 31 , 2017 , the elimination of certain deductions and imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries . the act also includes international provisions , which generally establish a territorial-style system for taxing foreign source income of domestic multinational corporations . we are required to recognize the effect of the tax law changes in the period of enactment , such as remeasuring our u.s. deferred tax assets and liabilities , determining the transition tax , as well as reassessing the net realizability of our deferred tax assets and liabilities . the primary impacts of the act reflected in the consolidated financial statements relate to the remeasurement of deferred tax liabilities resulting from the change in the corporate tax rate and a one-time mandatory transition tax on undistributed earnings of foreign affiliates . in december 2017 , the sec staff issued staff accounting bulletin no . 118 , income tax accounting implications of the tax cuts and jobs act ( `` sab 118 `` ) , which allows us to record provisional amounts during a measurement period
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the increase in cash provided during fiscal 2018 was primarily attributable to increased borrowings under our revolving credit facility , partially offset by increased principal payments under our other long-term debt agreements . 2017 term note and revolving credit facility on march 27 , 2013 , the company entered into a credit agreement ( the “ credit agreement ” ) with bank of america and other lenders . the credit agreement provided for a $ 75.0 million term facility and a $ 225.0 million revolving credit facility that included a $ 75.0 million “ accordion ” feature . the credit agreement is used to provide for working capital needs , capital improvements , dividends , future acquisitions and letter of credit needs . on march 21 , 2017 , we executed the amended and restated credit agreement ( the “ 2017 credit agreement ” ) with bank of america and other lenders . the 2017 credit agreement amended the credit agreement entered into on march 27 , 2013 by the following : ( i ) extending the maturity date until march 21 , 2022 , ( ii ) providing for a senior revolving credit facility in a principal amount of up to $ 450 million , with an additional $ 150 million accordion , ( iii ) including a $ 75 million sublimit for the issuance 20 of standby and commercial letters of credit , ( iv ) including a $ 30 million sublimit for swing line loans , ( v ) restricting indebtedness incurred in respect of capital leases , synthetic lease obligations and purchase money obligations not to exceed $ 20 million , ( vi ) restricting
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Liquidity
| 5,964
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evaluations are conducted at least quarterly and more often if deemed necessary . the ultimate recovery of all loans is susceptible to future market factors beyond the company 's control . the company has an established process to determine the adequacy of the allowance for loan losses . the determination of the allowance is inherently subjective , as it requires significant estimates , including the amounts and timing of expected future cash flows on impaired loans , estimated losses on other classified loans and pools of homogeneous loans , and consideration of past loan loss experience , the nature and volume of the portfolio , information about specific borrower situations and estimated collateral values , economic conditions , and other factors , all of which may be susceptible to significant change . the allowance consists of two components of allocations , specific and general . these two components represent the total allowance for loan losses deemed adequate to cover losses inherent in the loan portfolio . commercial and agricultural loans are subject to a standardized grading process administered by an internal loan review function . the need for specific reserves is considered for credits identified as impaired when : ( a ) the customer 's cash flow or net worth appears insufficient to repay the loan ; ( b ) the loan has been criticized in a regulatory examination ; ( c ) the loan is on non-accrual ; or ( d ) other reasons where the ultimate collectability of the loan is in question , or the loan characteristics require special 24 monitoring . specific allowances are established in cases where management has identified significant conditions or circumstances related to an individual credit that we believe indicates the loan is impaired . specific allocations on impaired loans are determined by comparing the loan balance to the present value of expected cash flows or expected collateral proceeds . allocations are also applied to categories of loans not considered individually impaired but for which the rate of loss is expected to be greater than historical averages , including non-performing consumer or residential real estate loans . such allocations are based on past loss experience and information about specific borrower situations and estimated collateral values . general allocations are made for commercial and agricultural loans that are graded as substandard based on migration analysis techniques to determine historical average losses for similar types of loans . general allocations are also made for other pools of loans , including non-classified loans , homogeneous portfolios of consumer and residential real estate loans , and loans within certain industry categories believed to present unique risk of loss . general allocations of the allowance are primarily made based on historical averages for loan losses for these portfolios , judgmentally adjusted for economic , external and internal factors and portfolio trends . economic factors include evaluating changes in international , national , regional and local economic and business conditions that affect the collectability of the loan portfolio . internal factors include evaluating changes in lending policies and procedures ; changes in the nature and volume of the loan portfolio ; and changes in experience , ability and depth of lending management and staff . in setting our external and internal factors we also consider the overall level of the allowance for loan losses to total loans ; our allowance coverage as compared to similar size bank holding companies ; and regulatory requirements . due to the imprecise nature of estimating the allowance for loan losses , the company 's allowance for loan losses includes a minor unallocated component . the unallocated component of the allowance for loan losses incorporates the company 's judgmental determination of inherent losses that may not be fully reflected in other allocations , including factors such as economic uncertainties , lending staff quality , industry trends impacting specific portfolio segments , and broad portfolio quality trends . therefore , the ratio of allocated to unallocated components within the total allowance may fluctuate from period to period . securities valuation securities available-for-sale are carried at fair value , with unrealized holding gains and losses reported separately in accumulated other comprehensive income ( loss ) , net of tax . the company obtains market values from a third party on a monthly basis in order to adjust the securities to fair value . equity securities that do not have readily determinable fair values are carried at cost . additionally , when securities are deemed to be other than temporarily impaired , a charge will be recorded through earnings ; therefore , future changes in the fair value of securities could have a significant impact on the company 's operating results . in determining whether a market value decline is other than temporary , management considers the reason for the decline , the extent of the decline , the duration of the decline and whether the company intends to sell or believes it will be required to sell the securities prior to recovery . as of december 31 , 2017 , gross unrealized gains on the securities available-for-sale portfolio totaled approximately $ 7,149,000 and gross unrealized losses totaled approximately $ 10,150,000. income tax expense income tax expense involves estimates related to the valuation allowance on deferred tax assets and loss contingencies related to exposure from tax examinations presumed to occur . a valuation allowance reduces deferred tax assets to the amount management believes is more likely than not to be realized . in evaluating the realization of deferred tax assets , management considers the likelihood that sufficient taxable income of appropriate character will be generated within carry-back and carry-forward periods , including consideration of available tax planning strategies . tax-related loss contingencies , including assessments arising from tax examinations and tax strategies , are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated . story_separator_special_tag replace_table_token_3_th ( 1 ) n/m = not meaningful trust and investment product fees increased $ 628,000 , or 14 % , during 2017 compared with 2016. the increase was primarily attributable to fees generated from increased assets under management in the company 's wealth advisory group . trust and investment product fees increased $ 687,000 , or 17 % , during 2016 compared with 2015 primarily due to growth in assets under management within the company 's wealth advisory group with this growth coming through both the existing footprint of the company and the river valley acquisition . service charges on deposit accounts increased $ 205,000 , or 3 % , during 2017 compared with 2016. service charges on deposit accounts increased $ 1,147,000 , or 24 % , during 2016 compared with 2015 due primarily to the river valley acquisition . insurance revenues increased $ 238,000 , or 3 % , during 2017 as compared to 2016 as a result of increased commercial insurance revenue and personal insurance revenue partially offset by a decline in contingency revenue . insurance revenues increased $ 252,000 , or 3 % , during 2016 as compared to 2015 as a result of increased commercial insurance revenue , personal insurance revenue and contingency revenue . contingency revenue totaled $ 992,000 in 2017 compared with $ 1,114,000 in 2016 and $ 949,000 in 2015. contingency revenue is reflective of claims and loss experience with insurance carriers that the company represents through its property and casualty insurance agency . company owned life insurance revenue increased $ 354,000 , or 36 % , during 2017 compared with 2016. the increase was largely related to death benefits received from life insurance policies during 2017. company owned life insurance increased $ 141,000 , or 17 % , during 2016 compared with 2015. the increase was largely the result of the river valley acquisition . interchange fee income increased $ 940,000 , or 26 % , during 2017 compared with 2016. the increase was attributable to increased card utilization by customers and a full year of operations from river valley included in 2017 compared with ten months of operations of river valley included in 2016. interchange fee income increased $ 517,000 , or 17 % , during 2016 compared with 2015. the increase was attributable to increased card utilization by customers and the acquisition of river valley . other operating income declined $ 1,062,000 , or 29 % , during 2017 compared with 2016. the decline was largely attributable to decreased fees and fair value adjustments associated with swap transactions with loan customers . other operating income increased $ 151,000 , or 5 % , during 2016 compared with 2015. net gains on sales of loans declined $ 79,000 , or 2 % , during 2017 compared with 2016. net gains on sales of loans increased $ 400,000 , or 14 % , during 2016 compared with 2015. loan sales for 2017 , 2016 , and 2015 totaled $ 130.3 million , $ 133.6 million , $ 132.6 million , respectively . during 2017 , the company realized net gains on the sale of securities of $ 596,000 related to the sale of approximately $ 48.3 million of securities . during 2016 , the company realized net gains on the sale of securities of $ 1,979,000 related to the sale of approximately $ 163.1 million of securities . during 2015 , the company realized net gains on the sale of securities of $ 725,000 related to the sale of approximately $ 18.3 million of securities . 29 non-interest expense during 2017 , non-interest expense increased $ 1,216,000 , or 2 % , compared with 2016. during 2016 , non-interest expense increased $ 15,261,000 , or 25 % , compared with 2015. during 2016 , the company recorded costs related to the river valley merger transaction that totaled $ 4,318,000. the majority of the remainder of the increase in operating expenses during 2016 compared with 2015 were related to the operating costs of river valley . replace_table_token_4_th salaries and benefits increased $ 2,681,000 , or 6 % , during 2017 compared with the 2016. the increase in 2017 compared with 2016 was primarily attributable to having river valley 's operations included for the entire year in 2017 compared with ten months of 2016 combined with an increased number of full-time equivalent employees and higher levels of employee benefit costs including health insurance costs . salaries and benefits increased $ 8,919,000 , or 25 % , in 2016 compared with 2015. included in the increase in 2016 was $ 1,934,000 of merger costs related to the settlement of various employment and benefit arrangements . the remainder of the increase was largely related to a higher number of full-time equivalent employees stemming from the acquisition of river valley . occupancy , furniture and equipment expense increased $ 672,000 , or 8 % , in 2017 compared with 2016. this increase was largely related to capital investments into the company 's branch network and to the operation of river valley 's 15 branch network during all of 2017. occupancy , furniture and equipment expense increased $ 1,746,000 , or 26 % , in 2016 compared with 2015. this increase was related to the operation of river valley 's 15 branch network during 2016. data processing fees declined $ 1,410,000 , or 25 % , in 2017 compared with 2016. the decline during 2017 compared with 2016 was primarily due to expenses totaling $ 1,288,000 related to the consolidation of various data processing and information systems that were incurred for the river valley acquisition during 2016. data processing fees increased $ 2,145,000 , or 61 % , in 2016 compared with 2015 driven largely by the aforementioned $ 1,288,000 of merger costs and the on-going operation of river valley . professional fees declined $ 855,000 , or 23 % , in 2017 compared with 2016. professional fees increased $ 1,011,000 , or 38 % ,
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at december 31 , 2017 , the capital levels for the company and its subsidiary bank remained well in excess of of the minimum amounts needed for capital adequacy purposes and the bank 's capital levels met the necessary requirements to be considered well-capitalized . the table below presents the company 's consolidated and the subsidiary bank 's capital ratios under regulatory guidelines : replace_table_token_5_th ( 1 ) excludes capital conservation buffer . under the the final rules provided for by basel iii , accumulated other comprehensive income ( `` aoci '' ) was to be included in a banking organization 's common equity tier 1 capital . the final rules allowed community banks to make a one-time election not to include the additional components of aoci in regulatory capital and instead use the existing treatment under the general risk-based capital rules that excludes most aoci components from regulatory capital . the company elected , in its march 31 , 2015 regulatory filings ( call report and fr y-9 ) , to opt-out and continue the existing treatment of aoci for regulatory capital purposes . 31 uses of funds loans december 31 , 2017 loans outstanding increased $ 151.6 million , or 8 % , from year-end 2016. the increase in loans during 2017 was from virtually all categories with the exception of residential mortgage loans which experienced a modest decline . this growth came from across the company 's entire southern indiana market area . commercial and industrial loans increased $ 29.3 million , or 6 % , commercial real estate loans increased $ 70.6 million , or 8 % , agricultural loans increased $ 30.1 million , or 10 % , consumer loans increased $ 26.2 million , or 14 % , and residential mortgage loans decreased $ 4.6 million , or 2 % .
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Liquidity
| 8,685
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net income was $ 105.0 million for fiscal year 2014 , an increase of $ 8.7 million , or 9 % , compared $ 96.2 million for fiscal year 2013 , and an increase of $ 32.0 million compared to fiscal year 2012. our net interest margin increased to 3.88 % for fiscal year 2014 from 3.24 % for fiscal year 2013. on an adjusted basis excluding offsetting changes in fair value related to interest rates associated with certain of our loans and interest rate swaps , our adjusted net interest margin of 3.73 % represented a decline of 3 basis points compared to fiscal year 2013 , primarily due to competition for loan pricing across our footprint that was partially offset by improvements in our deposit funding cost . our noninterest income declined during fiscal year 2014 primarily as a result of slower home mortgage activity , particularly refinancings , and a reduction in gains on sales of investment securities . for more information on our adjusted net interest margin , adjusted efficiency ratio and adjusted noninterest income , including a reconciliation of each to the most directly comparable gaap financial measure , see “ item 6. selected financial data . ” - 72 - we believe our operating efficiency is a key component of our growth and profitability . we continue to monitor salary and benefits costs , optimize our branch network ( which resulted in the net closure of 21 branches between september 30 , 2012 and september 30 , 2014 ) and focus on our core business and agribusiness banking competencies . our adjusted efficiency ratio decreased to 50.4 % for fiscal year 2014 , compared to 50.6 % for fiscal year 2013 and 52.8 % for fiscal year 2012 , driven by lower adjusted noninterest expense , partially offset by lower adjusted revenue . our operating efficiency helped drive returns on average total assets and average tangible common equity for fiscal year 2014 which were 1.14 % and 16.6 % , respectively , compared to 1.07 % and 17.5 % , respectively , for fiscal year 2013. while we expect to incur additional costs associated with operating as a public company , we believe our efficiency initiatives , including continuing to optimize our branch network , will allow us to continue our historically efficient operations . for more information on our return on average tangible common equity , including a reconciliation to the most directly comparable gaap financial measure , see “ item 6. selected financial data . ” we have achieved significant and profitable growth organically and through disciplined acquisitions . we have successfully completed eight acquisitions since 2006 , including our 2010 fdic-assisted acquisition of tierone bank , which represented approximately $ 2.5 billion in acquired assets . we maintain a solid funding position supported substantially by customer deposits , which have continued to grow in recent years . our deposit balances were $ 7.05 billion at september 30 , 2014 , an increase of $ 104.0 million compared with september 30 , 2013 and an increase of $ 167.7 million compared with september 30 , 2012. in fiscal year 2013 , we began a strategic initiative to transition the composition of our deposit portfolio away from higher-cost term deposits ( such as certificates of deposit , or cds ) toward more cost-effective transaction accounts ( such as negotiable order of withdrawal , or now , accounts , money market deposit accounts , or mmdas , and savings accounts ) . as a result , cds have decreased to 27 % of our average deposits for fiscal year 2014 compared to 37 % for fiscal year 2013. the effects of this initiative have included a decline in our deposit-related interest expense , with average cost of deposits at 0.36 % for fiscal year 2014 , a decline of 12 basis points compared with fiscal year 2013 and 32 basis points compared with fiscal year 2012. this initiative has also led to slower overall growth in deposits compared to previous years , driven by the runoff of higher cost cd balances , more than offset by growth in transaction accounts . we expect to continue to drive a transformation in our funding by focusing on attracting business deposits by leveraging our agribusiness and business banking relationships . our capital position has remained strong , with tier 1 capital , total capital and tier 1 leverage ratios of 11.8 % , 12.9 % and 9.1 % , respectively , at september 30 , 2014 , compared to 12.4 % , 13.8 % and 9.2 % , respectively , as of september 30 , 2013. our tangible common equity to tangible assets ratio was 8.2 % at september 30 , 2014 and at september 30 , 2013. for more information on our tangible common equity to tangible assets ratio , including a reconciliation to the most directly comparable gaap financial measure , see “ item 6. selected financial data . ” until our initial public offering , which occurred in october 2014 , we were a wholly owned subsidiary of nab , and our results have been part of nab 's consolidated business operations since nab acquired us in 2008. nab is a large financial institution incorporated in australia and listed on the australian securities exchange with operations in australia , new zealand , the united kingdom , the united states and parts of asia . historically , nab and its affiliates have provided financial and administrative support to us . in connection with our initial public offering , we and nab entered into certain agreements that provide a framework for our ongoing relationship , including a stockholder agreement governing nab 's rights as a controlling stockholder and a transitional services agreement pursuant to which nab has agreed to continue to provide us with certain services for a transition period . we do not expect our costs associated with these services to be significant . story_separator_special_tag the most significant component of these intangibles relates to our core deposits , of which $ 13.8 million was amortized as noninterest expense during fiscal year 2014. total scheduled amortization for all intangible assets includes approximately $ 7 million for fiscal year 2015 , approximately $ 3 million for fiscal year 2016 and immaterial amounts for fiscal years 2017 through 2023. for additional information on these intangible assets and their respective amortization schedules , see “ note 1. nature of operations and summary of significant accounting policies—core deposits and other intangibles ” and “ note 12. core deposits and other intangibles ” contained in our audited consolidated financial statements included elsewhere in this annual report on form 10-k. loans and interest rate swaps accounted for at fair value in the normal course of business , we enter into fixed-rate loans having original maturities of 5 years or greater ( typically between 5 and 15 years ) with certain of our business and agribusiness banking customers to assist them in facilitating their risk management strategies . we mitigate our interest rate risk associated with these loans by entering into equal and offsetting fixed-to-floating interest rate swap agreements for these loans with nab london branch . we have elected to account for the loans at fair value under accounting standards codification , or asc , 825 fair value option . changes in the fair value of these loans are recorded in earnings as a component of interest income in the relevant period . we also record an adjustment for credit risk in interest income based on our loss history for similar loans , adjusted for our assessment of existing market conditions for the specific portfolio of loans . if a specific relationship becomes impaired , we measure the estimated credit loss and record that amount through the credit risk adjustment . the related interest rate swaps are recognized as either assets or liabilities in our financial statements and any gains or losses on these swaps are recorded in earnings as a component of noninterest expense . the hedges are fully effective from an interest rate risk perspective , as gains and losses on our swaps are directly offset by changes in fair value of the hedged loans ( i.e . , swap interest rate risk adjustments are directly offset by associated loan interest rate risk adjustments ) . consequently , any changes in interest income associated with changes in fair value resulting from interest rate movement , as opposed to changes in credit quality , on the loans are directly offset by equal and opposite charges to , or reductions in , noninterest expense for the related interest rate swap . to ensure the correlation of movements in fair value between the interest rate swap and the related loan , we pass on all economic costs associated with our hedging activity resulting from loan customer prepayments ( partial or full ) to the borrower . for additional information about the treatment of interest rate swaps and related loans in our financial statements , see “ note 22. fair value of financial instruments and interest rate risk ” in our audited consolidated financial statements included elsewhere in this annual report on form 10-k. - 77 - results of operations—fiscal years ended september 30 , 2014 , 2013 and 2012 overview the following table highlights certain key financial and performance information at and for the years ended september 30 , 2014 , 2013 and 2012 : replace_table_token_11_th ( 1 ) this is a non-gaap financial measure . for more information on this non-gaap financial measure , including a reconciliation to the most directly comparable gaap financial measure , see “ item 6. selected financial data . ” ( 2 ) loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process . - 78 - our total assets were $ 9.37 billion at september 30 , 2014 , compared with $ 9.13 billion at september 30 , 2013 and $ 9.01 billion at september 30 , 2012. the increase in total assets in each year was principally attributable to organic loan growth , partially offset by reductions in the investment portfolio . at september 30 , 2014 , loans as shown above were $ 6.79 billion , an increase of $ 424.8 million , or 7 % , from $ 6.36 billion at september 30 , 2013 and an increase of $ 648.9 million compared to september 30 , 2012. this growth was primarily driven by targeted growth in agricultural and commercial lending . in our most recent fiscal year , total deposits grew 1 % to $ 7.05 billion from september 30 , 2013 to september 30 , 2014. for the fiscal year ended september 30 , 2014 : net income was $ 105.0 million , an increase of $ 8.7 million , or 9 % , compared with fiscal year 2013 , and cash net income was $ 117.9 million , an increase of 5 % compared to fiscal year 2013 , in each case due in large part to continued improvement in the overall credit quality of our lending portfolio , leading to lower net charge-offs compared to fiscal year 2013 and a $ 10.9 million pre-tax reduction in provision for loan losses ; net interest margin was 3.88 % , an increase of 64 basis points compared with fiscal year 2013 , however , our adjusted net interest margin decreased 3 basis points to 3.73 % compared with fiscal year 2013. the increase in our net interest margin was primarily attributable to changes in fair value associated with certain of our long-term loans measured at fair value where we have entered into interest rate swaps , while the decrease in our adjusted net interest margin was primarily due to yield pressures driven by a prolonged low-rate environment driving interest income on loans and investments downward , partially offset
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liquidity liquidity refers to our ability to maintain cash flow that is adequate to fund operations and meet present and future financial obligations through either the sale or maturity of existing assets or by obtaining additional funding through liability management . we consider the effective and prudent management of liquidity to be fundamental to our health and strength . our objective is to manage our cash flow and liquidity reserves so that they are adequate to fund our obligations and other commitments on a timely basis and at a reasonable cost . our liquidity risk is managed through a comprehensive framework of policies and limits overseen by our bank 's asset and liability committee . we continuously monitor and make adjustments to our liquidity position by adjusting the balance between sources and uses of funds as we deem appropriate . our primary measures of liquidity include monthly cash flow analyses under ordinary business activities and conditions and under situations simulating a severe run on our bank . we also monitor our bank 's deposit to loan ratio to ensure high quality funding is available to support our strategic lending growth objectives , and have internal management targets for the fdic 's liquidity ratio , net short-term non-core funding dependence ratio and non-core liabilities to total assets ratio . the results of these measures and analyses are incorporated into our contingency funding plan , which provides the basis for the identification of our liquidity needs . great western . great western 's primary source of liquidity is cash obtained from dividends by our bank . we primarily use our cash for the payment of dividends , when and if declared by our board of directors , and the payment of interest on our outstanding junior subordinated debentures and related party notes payable . we also use cash , as necessary , to satisfy the needs of our bank through equity contributions and for acquisitions . at september 30 , 2014 , great western had $ 5.8 million of cash .
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Liquidity
| 5,005
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from may 21 , 2014 through may 4 , 2015 , the date of viking 's ipo , recorded 100 % of the losses incurred as net loss attributable to noncontrolling interest because it was a primary beneficiary with no equity interest in the vie . the loans issued pursuant to the lsa were included as notes payable by viking and were eliminated as long as the company consolidated viking on its financial statements . upon completion of the viking ipo in may 2015 , the company determined that viking was no longer a vie . the company also determined that it does not have voting control or other elements of control that would require consolidation of viking . as a result story_separator_special_tag story_separator_special_tag million and $ 3.3 million , respectively . the lease exit obligations are related to a facility in cranbury , new jersey . the remaining lease obligations run through august 2016. portions of the facility are subleased with such subleases expiring august 2016. we recorded lease exit and termination costs of $ 1.0 million for the year ended december 31 , 2015 , compared to $ 1.1 million for 2014 , and $ 0.6 million in 2013 . lease exit and termination costs for the years ended december 31 , 2015 , 2014 , and 2013 consisted of accretion costs and adjustments to the liability for lease exit costs due to changes in leasing assumptions . write-off of acquired ipr & d for the years ended december 31 , 2015 and december 31 , 2014 , there was no write-off of ipr & d recorded . for the year ended december 31 , 2013 , we recorded a non-cash impairment charge of $ 0.5 million for the write-off of ipr & d for clopidogrel . clopidogrel is an iv formulation of the anti-platelet medication designed for situations where the administration of oral platelet inhibitors is not feasible or desirable . 30 interest expense , net interest expense was $ 11.8 million for the year ended december 31 , 2015 compared to $ 4.9 million in 2014 and $ 2.1 million in 2013 . the increase in interest expense of $ 6.9 million for the year ended december 31 , 2015 compared with 2014 is due to interest expense and non-cash debt related costs related to the 2019 convertible senior notes , partially offset by a decrease in interest expense related to the term loan facility that we paid off in july 2014. the increase in interest expense of $ 2.8 million for the year ended december 31 , 2014 compared to 2013 was primarily due due to interest expense and non-cash debt related costs related to the 2019 convertible senior notes . change in contingent liabilities we recorded an expense associated with the increase in contingent liabilities of $ 5.0 million for the year ended december 31 , 2015 compared to $ 5.1 million in 2014 and $ 3.6 million in 2013 . the increase in contingent liabilities for the year ended december 31 , 2015 is due to an increase in the fair value of cydex related contingent liabilities of $ 3.8 million and an increase in the metabasis cvrs of $ 1.2 million . the increase in contingent liabilities for the year ended december 31 , 2014 is due to an increase in cydex related contingent liabilities of $ 5.7 million , partially offset by a decrease in the fair value of the metabasis cvr liability of $ 0.5 million . the increase in contingent liabilities for the year ended december 31 , 2013 is due primarily to the increase in the fair value of the metabasis cvr liability of $ 4.2 million . this was partially offset by a decrease in the fair value of $ 0.6 million in cydex contingent liabilities . gain on deconsolidation of viking we recorded a $ 28.2 million gain on deconsolidation of viking for the year ended december 31 , 2015 , primarily related to the equity milestone received from viking upon the close of the viking ipo in addition to the value received upon the underwriters ' exercise of their overallotment option . equity in net losses of viking we recorded a $ 5.1 million equity in net loss of viking for the year ended december 31 , 2015 , for our proportionate share of viking 's losses based on our ownership of viking common stock . other , net we recorded other income of $ 1.8 million for the year ended december 31 , 2015 compared to other expense of $ 1.7 million in 2014 and other income of $ 0.1 million in 2013 . other income for the year ended december 31 , 2015 and 2014 is primarily due to the gain on the sale of short-term investments , partially offset by a decrease in amounts owed to sublicensees . other expense for 2013 is primarily due to an increase in amounts owed to sublicensees , partially offset by changes in certain liabilities . income taxes we recorded an income tax benefit of $ 219.6 million for the year ended december 31 , 2015 compared to an income tax expense from continuing operations of $ 0.4 million for the year ended december 31 , 2014 and an income tax expense of $ 0.4 million for the year ended december 31 , 2013. the income tax benefit for the year ended december 31 , 2015 is primarily the result of releasing a valuation allowance against a significant portion of our deferred tax assets . the tax benefit is primarily comprised of u.s. federal and state net operating loss carryforwards , tax credits , and other temporary differences . the income tax expense recognized in 2014 and 2013 is primarily attributable to deferred taxes associated with the amortization of acquired ipr & d assets for tax purposes . story_separator_special_tag we also sublease a portion of our facilities through leases which expire in 2016. the sublease agreements provide for a 3 % increase in annual rents . we had no off-balance sheet arrangements at december 31 , 2015 , 2014 and 2013. contractual obligations as of december 31 , 2015 , future minimum payments due under our contractual obligations are as follows ( in thousands ) : replace_table_token_16_th ( 1 ) purchase obligations represent our commitments under our supply agreement with hovione for captisol purchases . ( 2 ) contingent liabilities to former shareholders and licenseholders are subjective and affected by changes in inputs to the valuation model including management 's assumptions regarding revenue volatility , probability of commercialization of products , estimates of timing and probability of achievement of certain revenue thresholds and developmental and regulatory milestones and affect amounts owed to former license holders and cvr holders . as of december 31 , 2015 , only those liabilities for revenue sharing payments and milestones achieved as a result of 2015 activities are included in the table above . ( 3 ) represents minimum future lease payments under our non-cancellable operating leases . these amounts assume that the lease for our current corporate headquarters terminates on april 30 , 2016 , pursuant to a termination agreement with our landlord , even though we received a letter from our landlord disputing the date of such termination . if we are obligated to pay rents under the lease after april 30 , 2016 , we will be required to make aggregate future minimum lease payments totalling $ 2.3 million ( nondiscounted ) over the duration of the lease as follows which are not included in the table above : $ 0.5 million within less than one year , $ 1.5 million within one to two years , and $ 0.4 million within three years . additionally , we sublease portions of office and research facilities located in our current corporate headquarters and would receive additional 33 sublease income of $ 1.4 million through the end of such lease which are not in the table above : $ 0.3 million within less than one year , $ 0.9 million within one to two years , and $ 0.2 million within three years . we are also required under our cydex cvr agreement to invest at least $ 1.5 million per year , inclusive of employee expenses , in the acquired business through 2015. as of december 31 , 2015 , we exceeded that amount . operating activities operating activities provided cash of $ 41.7 million , $ 20.6 million and $ 20.7 million in 2015 , 2014 and 2013 , respectively . the cash provided in 2015 reflects net income of $ 254.9 million and $ 214.0 million of non-cash items to reconcile the net income to net cash used in operations . these reconciling items primarily reflect a net deferred tax asset of $ 219.6 million from the release of our valuation allowance , a $ 28.2 million gain on deconsolidation of viking , and a $ 2.6 million gain on the sale of investments . partially offsetting non-cash change in estimated value of contingent liabilities of $ 5.0 million , $ 5.1 million loss on equity investment of viking , depreciation and amortization of $ 2.6 million , stock-based compensation of $ 12.5 million , amortization of debt discount and issuance fees of $ 10.3 million , and a decrease in the fair value of the viking convertible note of $ 0.8 million . the cash provided by operations in 2015 is further impacted by changes in operating assets and liabilities due primarily to a decrease in accounts receivable of $ 6.5 million and a decrease in restricted cash of $ 1.3 million . partially offsetting , other assets increased $ 0.3 million , accounts payable and accrued liabilities decreased $ 4.0 million , deferred revenue decreased $ 2.2 million and inventory increased $ 0.4 million . the cash provided in 2014 reflects net income of $ 10.9 million and $ 20.6 million of non-cash items to reconcile the net income to net cash used in operations . these reconciling items primarily reflect a non-cash change in estimated value of contingent liabilities of $ 5.1 million , depreciation and amortization of $ 2.7 million , stock-based compensation of $ 11.3 million , amortization of debt discount and issuance fees of $ 3.7 million , accretion of notes payable of $ 0.2 million , a non-cash milestone payment received of $ 1.2 million , realized gain on investments of $ 1.5 million and net deferred tax assets and liabilities of $ 0.4 million . the cash provided by operations in 2014 is further impacted by changes in operating assets and liabilities due primarily to an increase in accounts receivable of $ 10.4 million , an increase in other assets of $ 1.9 million and a decrease in accounts payable and accrued liabilities of $ 3.2 million . partially offsetting this , inventory decreased $ 4.4 million and restricted cash decreased $ 0.1 million . the cash provided in 2013 reflects net income of $ 11.4 million , adjusted by $ 2.6 million of gain from discontinued operations and $ 13.2 million of non-cash items to reconcile the net income to net cash used in operations . these reconciling items primarily reflect a non-cash change in estimated value of contingent liabilities of $ 3.6 million , depreciation and amortization of $ 2.7 million , stock-based compensation of $ 5.7 million , write-off of in-process research and development $ 0.5 million , accretion of notes payable of $ 0.4 million , and net deferred tax assets and liabilities of $ 0.4 million . the cash provided by operations in 2013 is further impacted by changes in operating assets and liabilities due primarily to a decrease in accounts receivable of $ 2.4 million , a decrease in inventory of $ 0.6 million , and a decrease in other assets of $ 0.1 million .
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results of operations total revenues for 2015 were $ 71.9 million compared to $ 64.5 million in 2014 and $ 49.0 million in 2013 . our income from continuing operations for 2015 was $ 257.3 million , or $ 12.12 per diluted share , compared to income from continuing operations of $ 12.0 million in 2014 , or $ 0.56 per diluted share , and net income from continuing operations of $ 8.8 million , or $ 0.43 per diluted share , in 2013 . royalty revenue royalty revenues were $ 38.2 million in 2015 , compared to $ 30.0 million in 2014 and $ 23.6 million in 2013 . the increases in royalty revenue of $ 8.2 million and $ 6.4 million for the years ended december 31 , 2015 and 2014 , respectively are primarily due to increases in promacta and kyprolis royalties . the following table represents royalty revenue by program ( in thousands ) : replace_table_token_14_th material sales we recorded material sales of captisol of $ 27.7 million in 2015 compared to $ 28.5 million in 2014 and $ 19.1 million in 2013 . the decrease in material sales of $ 0.8 million for the year ended december 31 , 2015 compared to 2014 is due to timing of customer purchases for captisol for both clinical and commercial uses . the increase in material sales of $ 9.4 million for the year ended december 31 , 2014 compared to 2013 is due to timing of customer purchases of captisol as well as an increase in customer purchases for commercial use .
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ROO
| 8,499
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the current low oil and gas price environment may be intensified and prolonged by the covid-19 pandemic and is increasing the risk and financial stress placed on our customers . we can not reasonably estimate the length or severity of this pandemic , or the extent to which covid-19 will affect our business , financial condition and results of operations in fiscal year 2021 and beyond . cost reduction initiative in july 2020 , we initiated a program to reduce operating and manufacturing expenses in light of decreased demand for products in our oil and gas markets and adjacent markets segments . the program is expected to produce approximately $ 2.0 million of annualized cash savings . the cost reductions were primarily realized through a reduction of employees from our workforce . in connection with the workforce reductions , we incurred $ 0.9 million of termination costs in our fourth quarter of fiscal year 2020. the termination costs were recorded to both cost of revenue and operating expenses in the consolidated statement of operations . there are no outstanding liabilities related to this program as of september 30 , 2020. fiscal year 2020 compared to fiscal year 2019 consolidated revenue for fiscal year 2020 was $ 87.8 million , a decrease of $ 8.0 million , or 8.3 % , from fiscal year 2019. while we experienced reduced demand for most of our product categories due to the factors cited above , the decrease was primarily caused by an $ 8.0 million charge to ( or reduction of ) revenue related to the impairment of an operating lease receivable resulting from the rental of our marine seismic equipment . consolidated gross profit for fiscal year 2020 was $ 23.4 million , a decrease of $ 8.0 million , or 25.4 % , from fiscal year 2019. the decrease in gross profit was also primarily caused by the $ 8.0 million charge to ( or reduction of ) revenue related to the impairment of an operating lease receivable resulting from the rental of our marine seismic equipment . consolidated operating expenses for fiscal year 2020 were $ 41.5 million , an increase of $ 4.0 million , or 10.8 % , from fiscal year 2019. the increase in operating costs were primarily due to ( i ) a $ 3.2 million net non-cash increase in the estimated fair value of contingent earn-out consideration related to our quantum and optoseis ® acquisitions , ( ii ) $ 0.9 in personnel related termination costs associated with our workforce reduction , ( iii ) $ 0.4 million of incremental research and development costs associated with our acquisition of the optoseis ® business in november 2018 and ( iv ) a $ 0.7 million goodwill impairment charge . these increases in operating expenses were partially offset by a $ 0.4 million decrease in bad debt expense . 22 in august 2019 , we sold our real property located at 7334 n. gessner in houston , texas which generated a $ 7.0 million gain on disposal of property in the fourth quarter of fiscal year 2019. the buyer occupied the property as a tenant under a long-term lease . the property was not strategic to our ongoing operations . consolidated other income for fiscal year 2020 was $ 1.4 million compared to $ 1.2 million from fiscal year 2019. the increase was primarily caused by an increase in foreign exchange gains , and was partially offset by a decrease in interest income . consolidated income tax expense for fiscal year 2020 and 2019 was $ 2.6 million and $ 2.4 million , respectively . this increase in income tax expense was primarily the result of an increase in rental revenue earned in foreign jurisdictions requiring tax withholding . we are currently unable to record any tax benefits from the tax losses we incur in the u.s. , canada and russian federation due to the uncertainty surrounding our ability to utilize such losses in the future to offset taxable income . segment results of operations oil and gas markets fiscal year 2020 compared to fiscal year 2019 revenue revenue from our oil and gas markets products for fiscal year 2020 decreased $ 3.3 million , or 5.1 % , from fiscal year 2019. the components of these decreases included the following : traditional exploration product revenue – revenue from our traditional products decreased $ 2.9 million , or 30.0 % , from the prior fiscal year . the decrease reflects lower demand for our sensor products and a decrease in customer product repair and support service revenue . wireless exploration product revenue – revenue from our wireless exploration products increased $ 1.3 million , or 2.5 % , from the prior fiscal year . excluding an $ 8.0 million charge to ( or reduction of ) revenue related to the impairment of an operating lease receivable , our wireless exploration product revenue increased by $ 9.3 million , or 17.6 % . the revenue increase primarily resulted from higher rental demand for our obx systems . the increase was partially offset by a decrease in the recognition of revenue from an international seismic marine customer and lower gsx product revenue . reservoir product revenue – revenue from our reservoir products decreased $ 1.8 million , or 65.2 % , from the prior fiscal year . the decrease for both periods was primarily due to a decrease in sales of our borehole products and lower service revenue . during the second quarter of fiscal year 2020 , we partially financed a $ 12.5 million product sale by entering into a $ 10.0 million promissory note with a customer . the promissory note is for a three-year term with monthly principal and interest payments of $ 0.3 million . due to the financial condition of the customer , we have concerns over the probable collectability of the promissory note . story_separator_special_tag if the carrying value of the asset group exceeds the expected future cash flows , an impairment loss is recognized to the extent that the carrying value of the asset group exceeds its fair value . management makes judgments regarding the interpretation of tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability . in addition , we operate within multiple taxing jurisdictions and are subject to audit in these jurisdictions as well as by the internal revenue service . in management 's opinion , adequate provisions for income taxes have been made for all open tax years . the potential outcomes of examinations are regularly assessed in determining the adequacy of the provision for income taxes and income tax liabilities . management believes that adequate provisions have been made for reasonable and foreseeable outcomes related to uncertain tax matters . we record a write-down of our inventories when the cost basis of any manufactured product , including any estimated future costs to complete the manufacturing process , exceeds its net realizable value . inventories are stated at the lower of cost or net realizable value . cost is determined on a first-in , first-out method , except that our subsidiaries in the russian federation and the united kingdom use an average cost method to value their inventories . we periodically review the composition of our inventories to determine if market demand , product modifications , technology changes , excessive quantities on-hand and other factors hinder our ability to recover our investment in such inventories . management 's assessment is based upon historical product demand , estimated future product demand and various other judgments and estimates . inventory obsolescence reserves are recorded when such assessments reveal that portions or components of our inventory investment will not be realized in our operating activities . the value of our inventories not expected to be realized in cash , sold or consumed during our next operating cycle are classified as non-current assets in our consolidated balance sheets . we recognize revenue from product sales and services in accordance with asc topic 606 , revenue from contracts with customers . this standard applies to contracts for the sale of products and services and does not apply to contracts for the rental or lease of products . under this standard , we recognize revenue when performance of contractual obligations are satisfied , generally when control of the promised goods or services is transferred to our customers , in an amount that reflects the consideration we expect to be entitled in exchange for those goods or services . revenue from product sales is recognized when obligations under the terms of a contract are satisfied , control is transferred and collectability of the sales price is reasonably assured . transfer of control generally occurs with shipment or delivery , depending on the terms of the underlying contract . our products are generally sold without any customer acceptance provisions , and our standard terms of sale do not allow customers to return products for credit . most of our products do not require installation assistance or sophisticated instruction . we offer a standard product warranty , which obligates us to repair or replace our products having manufacturing defects . we maintain a reserve for future warranty costs based on historical experience or , in the absence of historical experience , management estimates . revenue from engineering services is recognized as services are rendered over the duration of a project or as billed on a per hour basis . field service revenue is recognized when services are rendered and is generally priced on a per day rate . we recognize rental revenue as earned over the rental period . rentals of our equipment generally range from daily rentals to rental periods of up to six months or longer . we recognize rental revenue in accordance with asc topic 842 , leases . in the event collectability of lease payments is not probable at the lease commencement date , we recognize revenue when payments are received . we regularly evaluate the collectability of our lease receivables on a lease by lease basis . the evaluation primarily consists of reviewing past due account balances and other factors such as the credit quality of the customer , historical trends of the customer and current economic conditions . we suspend the recognition of rental revenue when the collectability of amounts due are no longer probable and record a direct write-off of the lease receivable to rental revenue . recent accounting pronouncements please refer to note 1 to our consolidated financial statements contained in this annual report for a discussion of recent accounting pronouncements . 27 management 's current outlook and assumptions as further discussed above , there remains uncertainties regarding the duration and to what extent the covid-19 pandemic will ultimately impact the demand for our products and services or with our supply chain . regarding our oil and gas markets business segment , prices for a barrel of wti crude oil declined from over $ 100 in july 2014 to approximately $ 26 in february 2016 , and have recovered to approximately $ 40 today . with this substantial net decline in crude oil prices and the recent reduced global demand for oil and gas as a result of the covid-19 pandemic , oil and gas exploration and production companies experienced a significant reduction in cash flows resulting in sharp reductions in their capital spending budgets for oil and gas exploration-focused activities including seismic data acquisition activities . while we have experienced strong marine nodal rental activity in recent years including fiscal year 2020 , the need for new seismic equipment , particularly land-based equipment , remains restrained due to our customers ' ( i ) limited capital resources , ( ii ) lack of visibility into future demand for their seismic services and ( iii ) in some cases , under-utilized legacy equipment
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fiscal year 2021 cash investments in property , plant and equipment could be approximately $ 5 million . fiscal year 2021 cash investments into our rental fleet will primarily be dependent on demand for our obx marine rental equipment . our capital expenditures are expected to be funded from our cash on hand , internal cash flows , cash flows from our rental contracts or , if necessary , from borrowings under our credit agreement . for fiscal year 2020 we used $ 0.1 million from financing activities for the payment of contingent consideration related to our acquisition of quantum in 2018. since 2014 , the oil and gas industry has experienced a sustained downturn due to low oil and gas prices . recently , the unprecedented sharp decline in crude oil prices since february 2020 has further impacted the overall condition of the oil and gas industry , stifling budgets targeted at the oil and gas exploration industry , including the seismic industry . prior to recent downturn we saw some signs of increased seismic activity in certain areas around the world ; however , we expect the need for new seismic equipment to remain restrained due to current industry conditions , capital limitations affecting many of our customers and excessive on-hand quantities of under-utilized customer-owned seismic equipment . further , we expect product sales of our oil and gas markets products—specifically our legacy land-based traditional and wireless products—to remain low until the oil and gas industry begins to show signs of recovery and exploration-focused seismic activities increase . however , oil and gas pricing and the resultant economic conditions may not recover meaningfully in the near term , and we expect these challenging industry conditions facing our land-based traditional and legacy wireless products will continue in fiscal year 2021. on july 13 , 2020 , we received an interest in a senior secured bond from an international seismic marine customer . our interest in the bond , which has a face value of $ 13.0 million , was received in exchange for $ 13.0 million of unpaid invoices and late fees owed by the customer .
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Liquidity
| 2,820
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this restricts the fda from approving the andas until july 2017 at the earliest , unless a federal district court issues a decision adverse to all of our asserted orange book-listed patents prior to that date . on february 10 and 27 , 2015 , a hedge fund ( acting with affiliated entities and individuals and proceeding under the name of the coalition for affordable drugs ) filed two two separate inter partes review ( ipr ) petitions with the u.s. patent and trademark office , challenging u.s. patent nos . 8,663,685 , and 8,007,826 , which are two of the five ampyra orange book-listed patents . we will oppose the requests to institute these two iprs , and if they are allowed to proceed , we will oppose the full proceedings . the 30-month statutory stay period based on patent infringement suits filed by acorda against anda filers is not impacted by these filings , and remains in effect . in 2011 , the european patent office , or epo , granted ep 1732548 , the counterpart european patent to u.s. patent no . 8,354,437 with claims relating to , among other things , use of a sustained release aminopyridine 86 composition , such as dalfampridine , to increase walking speed . in march 2012 , synthon b.v. and neuraxpharm arzneimittel gmbh filed oppositions with the epo challenging the ep 1732548 patent . we defended the patent , and in december 2013 , we announced that the epo opposition division upheld amended claims in this patent covering a sustained release formulation of dalfampridine for increasing walking in patients with ms through twice daily dosing at 10 mg. both synthon b.v. and neuraxpharm arzneimittel gmbh have appealed the decision . in december 2013 , synthon b.v. , neuraxpharm arzneimittel gmbh and actavis group ptc ehf filed oppositions with the epo challenging our ep 2377536 patent , which is a divisional of the ep 1732548 patent . both european patents are set to expire in 2025 , absent any additional exclusivity granted based on regulatory review timelines . civitas acquisition ; cvt-301 and arcus technology on october 22 , 2014 , we completed the acquisition of civitas therapeutics , inc. , a delaware corporation . as a result of the acquisition , we acquired global rights to cvt-301 , a phase 3 treatment candidate for off episodes of parkinson 's disease , which is further described below . our acquisition of civitas also included rights to civitas 's proprietary arcus pulmonary delivery technology , which we believe has potential applications in multiple disease areas , and a subleased manufacturing facility in chelsea , massachusetts with commercial-scale capabilities . the approximately 90,000 square foot facility also includes office and laboratory space . approximately 45 civitas employees based at the chelsea facility have joined the acorda workforce in connection with the acquisition . the civitas acquisition was completed under an agreement and plan of merger , dated as of september 24 , 2014 , by and among acorda , five a acquisition corporation , a delaware corporation and our wholly-owned subsidiary , civitas and shareholder representative services llc , a colorado limited liability company , solely in its capacity as the securityholders ' representative . pursuant to the terms of the merger agreement , five a acquisition corporation has merged with and into civitas , which is the surviving corporation in the merger and which is continuing as a wholly-owned subsidiary of acorda under the civitas name . pursuant to the terms of the merger agreement , all outstanding shares of civitas common stock and civitas preferred stock , options to purchase shares of civitas common stock and warrants to purchase shares of civitas preferred stock , other than shares of civitas common stock and civitas preferred stock held by civitas ( which were cancelled as a result of the merger ) were converted into the right to receive $ 525.0 million in cash in the aggregate , without interest , less ( i ) $ 5.3 million due and payable under civitas ' existing secured loan facility , consisting of $ 5.0 million in principal and $ 0.3 million in prepayment fees , ( ii ) $ 30.0 million due and payable to alkermes , inc. in connection with the exercise by civitas of its option to purchase manufacturing facility equipment from alkermes and ( iii ) a portion of civitas ' transaction expenses . also pursuant to the merger agreement , upon consummation of the merger , $ 39.375 million of the aggregate consideration was deposited into escrow to secure the indemnification obligations of civitas and civitas 's securityholders , and an additional $ 0.5 million of the aggregate consideration was deposited with srs for reimbursements payable to srs under the terms of the merger agreement . we financed the transaction with cash on hand . zanaflex zanaflex capsules and zanaflex tablets are fda-approved as short-acting drugs for the management of spasticity , a symptom of many central nervous system disorders , including ms and spinal cord injury . these products contain tizanidine hydrochloride , one of the two leading drugs used to treat spasticity . we launched zanaflex capsules in april 2005 as part of our strategy to build a commercial platform for the potential market launch of ampyra . combined net revenue of zanaflex capsules and zanaflex tablets was $ 1.5 million for the year ended december 31 , 2014 and $ 4.1 million for the year ended december 31 , 2013. in 2012 , apotex commercially launched a generic version of tizanidine hydrochloride capsules , and we also launched our own authorized generic version , which is being marketed by watson pharma ( a subsidiary of actavis ) . in march 2013 , mylan pharmaceuticals commercially launched their own generic version of zanaflex capsules . story_separator_special_tag we acquired rights to np-1998 from neurogesx , inc. in 2013 in connection with our purchase of qutenza , an fda-approved dermal patch containing 8 % prescription strength capsaicin . we acquired development and commercialization rights in the united states , canada , latin america and certain other territories . astellas pharma europe ltd. has an option to develop np-1998 in the european economic area ( eea ) including the 28 countries of the european union , iceland , norway , and liechtenstein as well as switzerland , certain countries in eastern europe , the middle east and africa . we believe this liquid formulation of the capsaicin-based therapy has key advantages over the qutenza patch , and we believe np-1998 has the potential to treat multiple neuropathies . however , we have evaluated and reprioritized our research and development pipeline based on our recent acquisition of civitas , and as a result we have no current plans to invest in further development of np-1998 for neuropathic pain . ac105 we terminated our ac105 program in 2014. we had been studying ac105 as a treatment for patients who have suffered acute spinal cord injury . in september 2013 , we announced that the first patient was enrolled in a phase 2 clinical trial evaluating the safety and tolerability of ac105 in people with traumatic spinal cord injury . patient recruitment in this trial was challenging due to several factors , and as a result recruitment into the study has been closed and the study was terminated . we were conducting this program pursuant to a 2011 license medtronic , inc. and one of its affiliates , and we have accordingly terminated this license . 90 convertible senior notes in june 2014 , we completed a public offering of $ 345 million aggregate principal amount of 1.75 % convertible senior notes due 2021 , which aggregate principal amount includes the exercise of the underwriter 's over-allotment option . we conducted the notes offering to raise funds for general corporate purposes , including to fund possible acquisitions of , or investments in , complementary businesses , products and technologies . the net proceeds from the offering helped fund the purchase price and other payments made in connection with the civitas acquisition . corporate update in connection with the civitas acquisition described above , rick batycky , ph.d. , previously chief scientific officer of civitas , became the newest member of our senior leadership team and was appointed to the position of chief technology officer and site head . in this position , dr. batycky is responsible for oversight of our chelsea , ma manufacturing facility . we currently lease approximately 138,000 square feet of office and laboratory space in ardsley , ny . our lease for this facility includes options to lease up to approximately 120,000 additional square feet of space in additional buildings at the same location . in may 2014 , we notified the landlord that we were exercising our option to expand into an additional 25,405 square feet of office space . we occupied the additional space in the first quarter of 2015. outlook for 2015 financial guidance for 2015 we are providing the following guidance with respect to our 2015 financial performance : · we expect 2015 net revenue from the sale of ampyra to range from $ 405 million to $ 420 million . · we expect zanaflex ( tizanidine hydrochloride ) and ex-u.s. fampyra ( prolonged-release fampridine tablets ) 2015 revenue to be approximately $ 25 million , which includes net sales of branded zanaflex products , and royalties from ex-u.s. fampyra and authorized generic tizanidine hydrochloride capsule sales . · research and development expenses in 2015 are expected to range from $ 150 million to $ 160 million , excluding share-based compensation charges and expenditures related to the potential acquisition of new products or other business development activities . the increase in research and development expenses in 2015 is primarily related to phase 3 studies of dalfampridine and cvt-301 . additional expenses include continued development of plumiaz , clinical trials for cimaglermin alfa ( previously ggf2 ) and rhigm22 and cvt-427 , as well ongoing preclinical studies . · selling , general and administrative expenses in 2015 are expected to range from $ 180 million to $ 190 million , excluding share-based compensation charges . we are setting a high priority on managing selling , general and administrative expenses in 2015. the range of sg & a and r & d expenditures for 2015 are non-gaap financial measures because they exclude share-based compensation charges and certain non-cash expenses related to the civitas acquisition . non-gaap financial measures are not an alternative for financial measures prepared in accordance with gaap . however , we believe the presentation of these non-gaap financial measures , when viewed in conjunction with actual gaap results , provides investors with a more meaningful understanding of our projected operating performance because they exclude non-cash charges that are substantially dependent on changes in the market price of our common stock . we believe that non-gaap financial measures that exclude share-based compensation charges and certain non-cash expenses related to the civitas acquisition help indicate underlying trends in our business , and are important in comparing current results with prior period results and understanding expected operating performance . also , our management uses non-gaap financial measures that exclude share-based compensation charges and certain non-cash expenses related to the civitas acquisition to establish budgets and operational goals , and to manage our business and to evaluate its performance . 91 development pipeline goals our planned goals and key initiatives with respect to our pipeline during 2015 are as follows : · continue progressing our phase 3 study of cvt-301 for the treatment of off episodes in parkinson 's disease . we expect results from this efficacy trial in 2016 , and plan to file a new drug application , or nda , in the u.s. by
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cash provided by operations was also partially offset by a decrease in deferred license revenue of $ 9.1 million due to the amortization of the upfront collaboration payment received during the three-month period ended september 30 , 2009. cash provided by operations for the year ended december 31 , 2013 was primarily attributable to net income of $ 16.4 million principally resulting from an increase in net product and royalty revenues , a non-cash share-based compensation expense of $ 25.1 million , a deferred tax provision of $ 9.5 million , depreciation and amortization of $ 7.0 million , and amortization of net premiums and discounts on short-term investments of $ 2.5 million . cash provided by operations was partially offset by a net decrease of $ 12.8 million due to changes 103 in working capital items due to a decrease in deferred license revenue of $ 9.1 million due to the amortization of the upfront collaboration payment received during the three-month period ended september 30 , 2009 , an increase of inventory held by the company and others of $ 5.1 million , an increase of $ 4.5 million in accounts receivable , a decrease of $ 5.8 million in accounts payable , accrued expenses , and other current liabilities resulting from payment timing , an increase in deferred product revenue related to zanaflex of $ 2.8 million , and an increase in prepaid expenses and other current assets of $ 377,000. net cash used in investing net cash used in investing activities for the year ended december 31 , 2014
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Liquidity
| 4,319
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our solutions now include a broad range of services and experiences including corporate banking , regulatory and compliance , digital lending and leasing , baas and digital account opening and sales and marketing solutions both in the u.s. and internationally . we believe that financial services providers are best served by a broad integrated portfolio of digital solutions that provide rapid , flexible and comprehensive integration with internal and third-party systems allowing them to provide modern , intuitive digital financial services in a secure , regulatory-compliant manner . we also believe that the breadth and depth of our solution offerings across the rcfi , alt-fi and fintech markets , our open and flexible platform approach , our position as a leading provider of digital banking solutions to a large network of rcfis , and our expertise in delivering new , innovative , secure and regulatory-compliant digital solutions uniquely position us in the market for digital financial services solutions . we intend to increase investments in technology innovation and software development as we enhance our solutions and platforms and increase or expand the number of solutions that we offer . we believe that delivery of consistent , high-quality customer support is a significant driver of purchasing and renewal decisions of our prospects and customers . to develop and maintain a reputation for high-quality service , we seek to build deep relationships with our customers through our customer service organization , which we staff with personnel who are motivated by our common mission of using technology to help our customers succeed and who are knowledgeable with respect to the regulated and complex nature of the financial services industry . as we grow our business , we must continue to invest in and grow our services organization to support our customers ' needs and maintain our reputation . 47 key operating measures in addition to the united states generally accepted accounting principles , or gaap , measures described below in `` management 's discussion and analysis of financial condition and results of operations—components of operating results , `` we monitor the following operating measures to evaluate growth trends , plan investments and measure the effectiveness of our sales and marketing efforts : installed customers we define installed customers as the number of customers on our digital banking platform from which we are currently recognizing revenues . the average size of our installed customers , measured in both registered users per installed customer and revenues per installed customer , has increased over time as our existing installed customers continue to add registered users and buy more solutions from us , and as we add larger rcfis to our installed customer base . the net rate at which we add installed customers varies based on our implementation capacity , the size and unique needs of our customers , the readiness of our customers to implement our solutions , and customer attrition , including as a result of merger and acquisition activity among financial institutions . we had 401 , 382 and 385 installed customers on our digital banking platform as of december 31 , 2018 , 2017 and 2016 , respectively . registered users we define a registered user as an individual related to an account holder of an installed customer on our digital banking platform who has registered to use one or more of our solutions and has current access to use those solutions as of the last day of the reporting period presented . we price our digital banking platform solutions based on the number of registered users , so as the number of registered users of our solutions increases , our revenues grow . our average number of registered users per installed customer grows as our existing digital banking platform customers add more registered users and as we add larger rcfis to our installed customer base . we anticipate that the number of registered users will grow at a faster rate than our number of installed customers . the rate at which our customers add registered users and the incremental revenues we recognize from new registered users vary significantly period-to-period based on the timing of our implementations of new customers and the timing of registration of new end users . our installed customers had approximately 12.8 million , 10.4 million and 8.6 million registered users as of december 31 , 2018 , 2017 and 2016 , respectively . revenue retention rate we believe that our ability to retain our customers and expand their use of our products and services over time is an indicator of the stability of our revenue base and the long-term value of our customer relationships . we assess our performance in this area using a metric we refer to as our revenue retention rate . we calculate our revenue retention rate as the total revenues in a calendar year , excluding any revenues from solutions of businesses acquired during such year , from customers who were implemented on any of our solutions as of december 31 of the prior year , expressed as a percentage of the total revenues during the prior year from the same group of customers . our revenue retention rate provides insight into the impact on current year revenues of : the number of new customers implemented on any of our solutions during the prior year ; the timing of our implementation of those new customers in the prior year ; growth in the number of end users on such solutions and changes in their usage of such solutions ; sales of new products and services to our existing customers during the current year , excluding any products or services resulting from businesses acquired during such year ; and customer attrition . the most significant drivers of changes in our revenue retention rate each year have historically been the number of new customers in the prior year and the timing of our implementation of those new customers . story_separator_special_tag research and development expenses include salaries and personnel-related costs , including benefits , bonuses and stock-based compensation , third-party contractor expenses , software development costs , allocated overhead and other related expenses incurred in developing new solutions and enhancing existing solutions . research and development expenses are expensed as incurred . certain research and development costs that are related to our software development , which include salaries and other personnel-related costs , including employee benefits and bonuses attributed to programmers , software engineers and quality control teams working on our software solutions , are capitalized and are included in intangible assets , net on the consolidated balance sheet . general and administrative general and administrative expenses consist primarily of salaries and other personnel-related costs , including benefits , bonuses and stock-based compensation , of our administrative , finance and accounting , information systems , legal and human resources employees . general and administrative expenses also include consulting and professional fees , insurance and travel . we expect to continue to incur incremental expenses associated with the growth of our business and to meet increased compliance requirements associated with operating as a public company . these expenses include costs to comply with section 404 of the sarbanes-oxley act and other regulations governing public companies , increased costs of directors ' and officers ' liability insurance and investor relations activities . acquisition related costs acquisition related costs include compensation expenses related to milestone provisions and retention agreements with certain former shareholders and employees of acquired businesses which are recognized as earned , and various legal and professional service expenses incurred in connection with the acquisitions , which were recognized when incurred . amortization of acquired intangibles amortization of acquired intangibles represent the amortization of intangibles recorded in connection with our business acquisitions which are amortized on a straight-line basis over the estimated useful lives of the related assets . 51 unoccupied lease charges unoccupied lease charges include costs related to the early exit from a portion of our south austin facility , partially offset by anticipated sublease income from that facility . total other income ( expense ) , net total other income ( expense ) , net , consists primarily of interest income and expense and loss on disposal of long-lived assets . we earn interest income on our cash , cash equivalents and investments . interest expense consists primarily of the interest from the amortization of debt discount , issuance costs , and coupon interest attributable to our convertible notes issued in february 2018 , or convertible notes , fees and interest associated with the letter of credit issued to our landlord for the security deposit for our corporate headquarters , and the interest incurred on our previously existing credit facility which expired in april 2017. benefit from ( provision for ) income taxes as a result of our current net operating loss position , current income tax expenses and benefits consist primarily of state income taxes , deferred income tax expenses relating to the tax amortization of recently acquired goodwill , and the release of valuation allowance resulting in deferred tax benefits relating to acquired net deferred tax liabilities . we incurred minimal state income taxes for each of the years ended december 31 , 2018 , 2017 and 2016 . our net operating loss carryforwards for federal income tax purposes were $ 276.9 million and $ 168.1 million at december 31 , 2018 and 2017 , respectively , which will expire at various dates beginning in 2026 , if not utilized . we also held state tax credits of $ 1.2 million and $ 0.5 million for the years ended december 31 , 2018 and 2017 , respectively , federal alternative minimum tax credits of zero and $ 0.1 million for the years ended december 31 , 2018 and 2017 , respectively , and federal r & d tax credits of $ 3.2 million and $ 1.2 million for the years ended december 31 , 2018 and 2017 , respectively . the state tax credits will expire in 2026 if not utilized , the federal r & d tax credits will expire at various dates beginning in 2027 , if not utilized , and the federal alternative minimum tax credits have an indefinite carryforward period . critical accounting policies and significant judgments and estimates our management 's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements , which have been prepared in accordance with gaap . the preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities at the date of the consolidated financial statements , and the reported amounts of revenues and expenses . in accordance with gaap , we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances . actual results might differ from these estimates under different assumptions or conditions . our significant accounting policies are described in note 2 to our consolidated financial statements appearing elsewhere in this annual report on form 10-k , and we believe that the accounting policies discussed below involve the greatest degree of complexity and exercise of significant judgments and estimates by our management . the methods , estimates and judgments that we use in applying our accounting policies have a significant impact on our results of operations and , accordingly , we believe the policies described below are the most critical for understanding and evaluating our financial condition and results of operations . revenue recognition revenues are recognized when control of the promised goods or services is transferred to our customers , in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services over the term of the agreement , generally when our solutions are implemented and made available to our
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interest on the convertible notes is payable semi-annually on february 15 and august 15 of each year . we are also party to several purchase commitments for third-party products that contain both a contractual minimum obligation and a variable obligation based upon usage or other factors which can change on a monthly basis . the estimated amounts for usage and other factors are not included within the table below . the following table summarizes our contractual obligations and commitments at december 31 , 2018 ( in thousands ) : replace_table_token_21_th off-balance sheet arrangements as of december 31 , 2018 , we did not have any off-balance sheet arrangements , as defined in item 303 ( a ) ( 4 ) ( ii ) of sec regulation s-k , such as the use of unconsolidated subsidiaries , structured finance , special purpose entities or variable interest entities . recent accounting pronouncements in may 2014 , the financial accounting standards board , or fasb , issued asu no . 2014-09 , `` revenue from contracts with customers ( topic 606 ) , '' which amends the existing accounting standards for revenue recognition . asu 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled to when products are transferred to customers . asu 2014-09 was modified by subsequently issued asus 2015-14 , 2016-08 , 2016-10 , 2016-12 and 2016-20. topic 606 also includes subtopic 340-40 , other assets and deferred costs - contracts with customers , which requires the deferral of incremental costs of obtaining a contract with a customer . collectively , we refer to asu 2014-09 , as amended , and subtopic 340-40 as the `` new revenue standard . ''
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Liquidity
| 7,888
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if united intends to sell , or is more likely than not will be required to sell an impaired debt security before recovery of its amortized cost basis less any current period credit loss , other-than-temporary impairment is recognized in earnings . the amount recognized in earnings is equal to the entire difference between the security 's amortized cost basis and its fair value at the balance sheet date . if united does not intend to sell , and is not more likely than not they will be required to sell the impaired debt security prior to recovery of its amortized cost basis less any current-period credit loss , the other-than-temporary impairment is separated into the following : 1 ) the amount representing the credit loss , which is recognized in earnings , and 2 ) the amount related to all other factors , which is recognized in other comprehensive income . given the recent disruptions in the financial markets , the decision to recognize other-than-temporary impairment on investment securities has become more difficult as complete information is not always available and market conditions and other relevant factors are subject to rapid changes . therefore , the other-than-temporary impairment assessment has become a critical accounting policy for united . for additional information on management 's consideration of investment valuation and other-than-temporary impairment , see note c and note t , notes to consolidated financial statements . income taxes united 's calculation of income tax provision is inherently complex due to the various different tax laws and jurisdictions in which we operate and requires management 's use of estimates and judgments in its determination . the current income tax liability also includes income tax expense related to our uncertain tax positions as required in asc topic 740 , income taxes. changes to the estimated accrued taxes can occur due to changes in tax rates , implementation of new business strategies , resolution of issues with taxing authorities and recently enacted statutory , judicial and regulatory guidance . these 25 changes can be material to the company 's operating results for any particular reporting period . the analysis of the income tax provision requires the assessments of the relative risks and merits of the appropriate tax treatment of transactions , filing positions , filing methods and taxable income calculations after considering statutes , regulations , judicial precedent and other information . united strives to keep abreast of changes in the tax laws and the issuance of regulations which may impact tax reporting and provisions for income tax expense . united is also subject to audit by federal and state authorities . because the application of tax laws is subject to varying interpretations , results of these audits may produce indicated liabilities which differ from united 's estimates and provisions . united continually evaluates its exposure to possible tax assessments arising from audits and records its estimate of probable exposure based on current facts and circumstances . the potential impact to united 's operating results for any of the changes can not be reasonably estimated . see note l , notes to consolidated financial statements for information regarding united 's asc topic 740 disclosures . any material effect on the financial statements related to these critical accounting areas is further discussed in this management 's discussion and analysis of financial condition and results of operations . use of fair value measurements united determines the fair value of its financial instruments based on the fair value hierarchy established in asc topic 820 , whereby the fair value of certain assets and liabilities is an exit price , representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants . asc topic 820 establishes a three-level hierarchy for disclosure of assets and liabilities recorded at fair value . the classification of assets and liabilities within the hierarchy is based on whether the inputs in the methodology for determining fair value are observable or unobservable . observable inputs reflect market-based information obtained from independent sources ( level 1 or level 2 ) , while unobservable inputs reflect management 's estimate of market data ( level 3 ) . for assets and liabilities that are actively traded and have quoted prices or observable market data , a minimal amount of subjectivity concerning fair value is needed . prices and values obtained from third party vendors that do not reflect forced liquidation or distressed sales are not adjusted by management . when quoted prices or observable market data are not available , management 's judgment is necessary to estimate fair value . at december 31 , 2011 , approximately 8.67 % of total assets , or $ 732.77 million , consisted of financial instruments recorded at fair value . of this total , approximately 92.96 % or $ 681.21 million of these financial instruments used valuation methodologies involving observable market data , collectively level 1 and level 2 measurements , to determine fair value . approximately 7.04 % or $ 51.56 million of these financial instruments were valued using unobservable market information or level 3 measurements . most of these financial instruments valued using unobservable market information were pooled trust preferred investment securities classified as available-for-sale . at december 31 , 2011 , only $ 5.05 million or less than 1 % of total liabilities were recorded at fair value . this entire amount was valued using methodologies involving observable market data . united does not believe that any changes in the unobservable inputs used to value the financial instruments mentioned above would have a material impact on united 's results of operations , liquidity , or capital resources . see note t for additional information regarding asc topic 820 and its impact on united 's financial statements . story_separator_special_tag the increase in interest-bearing deposits was due mainly to the centra merger as all major categories of interest-bearing deposits , except interest-bearing checking accounts , increased from year-end 2010. interest-bearing money market accounts ( mmdas ) increased $ 461.73 million or 27.35 % , time deposits over $ 100,000 increased $ 87.21 million or 8.81 % , time deposits under $ 100,000 increased $ 60.63 million or 5.26 % , and regular savings balances increased $ 85.49 million or 22.01 % . the $ 461.73 million increase in interest-bearing mmdas is due to a $ 325.38 million and a $ 177.32 million increase in personal mmdas and commercial mmdas , respectively . public funds mmdas , on the other hand , decreased $ 40.97 million . the $ 87.21 million increase in time deposits over $ 100,000 is the result of a $ 119.25 million increase in fixed rate certificates of deposits ( cds ) . partially offsetting this increase in fixed rate cds was a $ 28.97 million decrease in certificate of deposit account registry service ( cdars ) balances . the $ 60.63 million increase in time deposits under $ 100,000 was due to fixed rate cds increasing $ 89.27 million while variable rate cds decreased $ 25.70 million and cdars balances under $ 100,000 decreased $ 16.12 million . partially offsetting these increases in interest-bearing deposits was a decrease of $ 5.48 million or 1.89 % in interest-bearing checking deposits mainly due to a $ 22.06 million decrease in commercial interest-bearing checking accounts which was partially offset by a $ 14.57 million increase in personal interest-bearing checking accounts and a $ 2.01 million increase in state and municipal interest-bearing checking accounts . the table below summarizes the changes by deposit category since year-end 2010 : replace_table_token_10_th at december 31 , 2011 , the scheduled maturities of time deposits are as follows : replace_table_token_11_th maturities of time certificates of deposit of $ 100,000 or more outstanding at december 31 , 2011 are summarized as follows : replace_table_token_12_th 30 the average daily amount of deposits and rates paid on such deposits is summarized for the years ended december 31 : replace_table_token_13_th more information relating to deposits is presented in note i , notes to consolidated financial statements . borrowings total borrowings at december 31 , 2011 increased $ 20.46 million or 3.53 % during the year of 2011. centra added approximately $ 48 million upon the merger . since year-end 2010 , short-term borrowings increased $ 61.55 million or 31.86 % due to a $ 64.55 million increase in securities sold under agreements to repurchase . centra added approximately $ 28.57 million in short-term borrowings at merger . long-term borrowings decreased $ 41.09 million or 10.63 % since year-end 2010 as long-term fhlb advances decreased $ 60.37 million or 29.86 % due to repayments . partially offsetting this decrease in long-term fhlb advances , united assumed $ 20 million of junior subordinated debt securities in the centra merger . the table below summarizes the changes by borrowing category since year-end 2010 : replace_table_token_14_th for a further discussion of borrowings see notes j and k , notes to consolidated financial statements . accrued expenses and other liabilities accrued expenses and other liabilities at december 31 , 2011 decreased $ 5.86 million or 8.69 % from year-end 2010. the majority of the decrease was due to a $ 9.08 million decrease in income taxes payable due to a timing difference in payments . partially offsetting this decrease was an increase of $ 2.48 million in dividends payable . centra added approximately $ 3.27 million upon the merger . shareholders ' equity shareholders ' equity at december 31 , 2011 increased $ 175.83 million or 22.17 % from december 31 , 2010 mainly as a result of the centra acquisition . the centra transaction added approximately $ 161 million as 6,548,473 shares were issued from 31 united 's authorized but unissued shares for the merger at a cost of $ 170 million . earnings net of dividends for the year of 2011 were $ 18.78 million . accumulated other comprehensive income decreased $ 6.10 million due mainly due to an after tax-adjustment to united 's pension asset resulting in a decline of $ 13.38 million . partially offsetting this decrease was an increase of $ 6.17 million , net of deferred income tax , in the fair value of united 's available for sale investment portfolio . in addition , the accretion of pension costs for the year of 2011 was $ 1.46 million while the after-tax non-credit portion of otti losses for the year of 2011 was $ 354 thousand . earnings summary net income for the year 2011 was $ 75.61 million or $ 1.61 per diluted share compared to $ 71.95 million or $ 1.65 per diluted share for the year of 2010. united 's return on average assets for the year of 2011 was 0.97 % and return on average shareholders ' equity was 8.50 % as compared to 0.95 % and 9.19 % for the year of 2010. united 's most recently reported federal reserve peer group 's ( bank holding companies with total assets between $ 3 and $ 10 billion ) average return on assets was 0.79 % and average return on equity was 7.37 % for the first nine months of 2011. as previously mentioned , united completed its acquisition of centra during the third quarter of 2011. the financial results of centra are included in united 's results from the july 8 , 2011 acquisition date . as a result , comparisons for the fourth quarter and year of 2011 to the same time periods of 2010 are impacted by increased levels of average balances , income , expense , and asset quality results due to the acquisition . at consummation , centra had assets of approximately $ 1.3 billion , loans of $ 1.0 billion , deposits of $ 1.1 billion and
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the following table shows selected consolidated operating and capital ratios for each of the last three years ended december 31 : replace_table_token_24_th 2010 compared to 2009 financial condition summary united 's total assets as of december 31 , 2010 were $ 7.16 billion which was a decline of $ 649.38 million or 8.32 % from december 31 , 2009. the decrease was primarily the result of decreases in investment securities and portfolio loans of $ 172.21 million or 17.81 % and $ 476.48 million or 8.31 % , respectively . the decrease in investment securities was due mainly to a decline of $ 158.50 million or 19.53 % in securities available for sale . this change in securities available for sale reflects $ 1.39 billion in sales , maturities and calls of securities , $ 1.24 billion in purchases , and an increase of $ 32.92 million in fair value . securities held to maturity decreased $ 10.39 million or 13.41 % from year-end 2009 due to calls and maturities of securities . other investment securities declined $ 3.32 million or 4.27 % from year-end 2009 due to the redemption of $ 3.48 million of fhlb stock and an other-than-temporary impairment charge of $ 1.29 million on an investment security during the fourth quarter of 2010. the decline in the loan portfolio was due mainly to a decline in each major loan category as loan demand was soft during 2010 due to poor economic conditions . commercial , financial and agricultural loans declined $ 165.61 million or 5.51 % . within the commercial , financial and agricultural loans category , commercial real estate loans and commercial loans ( not secured by real estate ) decreased $ 95.64 million or 5.05 % and $ 69.96 million or 6.31 % , respectively . residential real estate loans and construction loans declined $ 159.06 million or 8.55 % and $ 88.67 million or 15.84 % , respectively . consumer loans decreased $ 64.09 million or 20.13 % . partially offsetting these decreases to total assets was an $ 11.62 million increase in cash and cash equivalents as united placed its excess cash in an interest-bearing account with the federal reserve .
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Liquidity
| 4,503
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this relinquishment is not expected to impact our consolidated financial statements for the quarter ended march 31 , 2013 , as we have previously recorded the unsuccessful well costs associated with the banda-1 exploration well as exploration expenses . cameroon in january 2012 , kosmos entered into a petroleum contract with the republic of cameroon for the fako block . kosmos is the operator and has a 100 % participating interest in the block . the republic of cameroon has an option to acquire an interest of up to 15 % in a commercial discovery on the block . the block covers 318,519 acres ( 1,289 square kilometers ) and borders the southeast portion of our ndian river block in the rio del rey basin . in october 2012 , the current renewal period of the ndian river block was extended through november 19 , 2013 and carries a one-well obligation . the sipo-1 exploration well on the ndian river block spud in february 2013. this well is expected to reach its target depth in april 2013. mauritania in april 2012 , we completed negotiations with mauritania 's ministry of petroleum , energy and mines and executed separate petroleum contracts covering blocks c8 , c12 and c13 offshore mauritania . kosmos is the operator and has a 90 % participating interest in each of these blocks . the government of mauritania has a 10 % carried interest during the exploration period and the option to participate in any discovery on these blocks , and if it elects to exercise such option its participation 72 interest would be between 10 % and 14 % . the first phase of the exploration period of the petroleum contract covering each of the blocks is four years in duration . these contracts were officially gazetted by the government of mauritania on june 15 , 2012 , thereby establishing the effective date for the petroleum contracts . in order to conform the southern boundaries of blocks c8 and c13 with the mauritanian border with senegal , the petroleum contracts were amended in september 2012. the total area covered by the blocks in now 6.6 million acres ( 26,775 square kilometers ) . the blocks are located within the western margin of the proven mauritanian salt basin , on the atlantic passive margin . the source rock in the basin is the same age and type as the source rock generated by the petroleum system in the jubilee field . additionally , we believe the play model in the basin is similar to the play model found in the jubilee field . a petroleum system in mauritania has been proven by the presence of offshore producing fields in adjacent blocks to those which we hold . during the first half of 2013 , we anticipate initiating a 2d seismic data acquisition program on approximately 6,000 line-kilometers , covering portions of all three blocks . based on interpretation of results of the 2d seismic data , a 3d seismic program will be targeted for commencement in 2013. morocco in march 2012 , we completed a 4,925 square kilometer 3d seismic acquisition program which covered the essaouira offshore block and the foum assaka block , both in the agadir basin offshore morocco . processing and interpretation of the data continues . in october 2012 , the moroccan government issued a joint ministerial order approving our acquisition of the additional 18.75 % participating interest from pathfinder , a wholly owned subsidiary of fastnet , one of our block partners . upon receipt of this order , we closed the acquisition of such additional participating interest with pathfinder . we expect final governmental processes required to officially reflect the acquisition under moroccan law to be completed in due course . after giving effect to the acquisition , our participating interest in the foum assaka offshore block is 56.25 % . in september 2012 , kosmos entered into an agreement to acquire an additional 37.5 % participating interest in the essaouira offshore block from canamens energy morocco sarl , one of our block partners . certain governmental approvals and processes are still required to be completed before this acquisition can be closed . after completing the acquisition , our participating interest in the essaouira offshore block will be 75 % . in september 2012 , kosmos made its election under the tarhazoute reconnaissance contract to enter into a petroleum contract . negotiation of the petroleum contract and associated documents is currently ongoing . we anticipate we will be the operator of the license and hold a 75 % participating interest . suriname in november 2012 , kosmos closed an agreement with chevron under which kosmos assigned half of its interest in block 42 and block 45 , offshore suriname , to chevron . each party now has a 50 % participating interest in block 42 and block 45. in october 2012 , we completed a 3d seismic data acquisition program which covered approximately 3,900 square kilometers of portions of block 42 and block 45 , both in the suriname-guyana basin . processing of the data is ongoing . 73 story_separator_special_tag jurisdictions in which we are not subject to taxes and , therefore , do not generate any income tax benefits ; losses in jurisdictions in which we have valuation allowances against our deferred tax assets and therefore we do not realize any tax benefit on such losses ; and the impact on deferred tax assets based on the book/tax difference related to the decrease in fair value of certain vested equity awards . year ended december 31 , 2011 vs. 2010 replace_table_token_13_th oil and gas revenue . during the year ended december 31 , 2011 , we recorded oil sales of $ 666.9 million due to oil production from the jubilee field . we lifted and sold approximately 5,971 mbbl at an average realized price per barrel of $ 111.70. in 2010 , we had no oil sales and , therefore , no associated revenues . interest income . story_separator_special_tag interest income increased by $ 4.9 million during the year ended december 31 , 2011 , as compared to the year ended december 31 , 2010 , primarily due to interest on notes receivable . the related note receivable was satisfied in december 2011 as part of the acquisition of the fpso we are using to produce hydrocarbons from the jubilee field . other income . other income decreased by $ 4.3 million during the year ended december 31 , 2011 , as compared to the year ended december 31 , 2010 , primarily due to a decrease in technical services fees and overhead charges billed to partners for services provided on the jubilee field phase 1 development . oil and gas production . during the year ended december 31 , 2011 , we recorded oil and gas production costs of $ 83.6 million related to oil production from the jubilee field . our average production cost per barrel was $ 13.99. in 2010 , there were no oil sales and , therefore , no associated oil and gas production costs . 77 exploration expenses . exploration expenses increased by $ 53.3 million during the year ended december 31 , 2011 , as compared to the year ended december 31 , 2010. during the year ended december 31 , 2011 , we incurred $ 32.8 million for seismic costs and $ 91.3 million of unsuccessful well costs , primarily related to the cameroon n'gata-1 , ghana makore-1 , ghana banda-1 and ghana odum exploration wells . during the year ended december 31 , 2010 , the company incurred $ 59.4 million of unsuccessful well costs primarily related to the ghana dahoma-1 and cameroon mombe-1 wells and $ 13.0 million for seismic costs . general and administrative . general and administrative costs increased by $ 14.6 million during the year ended december 31 , 2011 , as compared to the year ended december 31 , 2010 , primarily due to an increase in staffing and increases in non-cash expenses of $ 37.2 million for equity-based compensation , partially offset by decreases in cash expenses for professional fees . total non-cash general and administrative costs were $ 51.0 million and $ 13.8 million for the years ended december 31 , 2011 and 2010 , respectively . depletion and depreciation . depletion and depreciation increased $ 138.0 million during the year ended december 31 , 2011 , as compared with the year ended december 31 , 2010 , due to production from the jubilee field . in 2010 , there were no oil sales and , therefore , no associated depletion . amortizationdeferred financing costs and loss on extinguishment of debt . during the year ended december 31 , 2011 , we incurred approximately $ 52.3 million of deferred financing costs as part of our debt refinancing , in addition to our existing unamortized deferred financing costs of $ 68.6 million . as a result of the debt refinancing , we recorded a $ 59.6 million loss on the extinguishment of debt . the remaining costs were capitalized and are being amortized over the term of the facility . the related amortization of deferred financing costs decreased by $ 12.6 million during the year ended december 31 , 2011 , as compared to the year ended december 31 , 2010 , due to the decrease in capitalized deferred financing costs and the longer term associated with the facility . interest expense . interest expense increased by $ 6.2 million during the year ended december 31 , 2011 , as compared to the year ended december 31 , 2010 , primarily due to a decrease in capitalized interest and higher average outstanding debt during the year ended december 31 , 2011. derivatives , net . derivatives , net decreased $ 16.5 million during the year ended december 31 , 2011 , as compared with december 31 , 2010 , due to the change in fair value of the commodity derivative instruments . doubtful accounts expense . during the year ended december 31 , 2011 , we released a $ 39.8 million allowance for doubtful accounts related to a receivable previously in default that was provided for in 2010. we received the full amount of the receivable during the third quarter of 2011. income tax expense ( benefit ) . the company recognized an income tax provision attributable to earnings of $ 76.7 million during 2011 and an income tax benefit of $ 77.1 million during 2010. the company 's effective tax rates for 2011 and 2010 were 77.4 % and 23.9 % , respectively . the large variance in income taxes between 2011 and 2010 is due to the release of a valuation allowance related to the ghana operations in 2010. the large effective tax rate in 2011 is primarily due to the fact that no tax benefit is currently being provided on losses in jurisdictions with a full valuation allowance and jurisdictions where no income tax is assessed . liquidity and capital resources we are actively engaged in an ongoing process of anticipating and meeting our funding requirements related to exploring for and developing oil and natural gas resources in africa and south america . we have historically secured funding from issuances of equity and commercial debt facilities to meet our ongoing liquidity requirements . we received our first oil sales in january 2011 from jubilee 78 field production , which generated cash flows from operations during 2012 and 2011. accordingly , the cash flows generated from our operating activities may also provide an additional source of future funding . significant sources of capital facility in march 2011 , the company secured a $ 2.0 billion commercial debt facility ( the `` facility '' ) from a number of financial institutions and extinguished the then existing commercial debt facilities . the facility was syndicated to certain participants of the existing facilities , as well as new participants . the facility supports our oil and gas exploration , appraisal and development programs and corporate activities . in february 2012 , the company amended the facility .
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oil and gas production costs increased by $ 11.6 million during the year ended december 31 , 2012 as compared to the year ended december 31 , 2011 primarily due to $ 44.5 million of workover costs related to acid stimulations on jubilee field wells , offset by a decrease due to the purchase of the fpso in december 2011. during the year ended december 31 , 2012 , the amortization of costs capitalized in connection with the purchase of the fpso were expensed as 75 depletion . our average production cost per barrel was $ 16.11 and $ 13.99 for the years ended december 31 , 2012 and 2011 , respectively . exploration expenses . exploration expenses decreased by $ 28.7 million during the year ended december 31 , 2012 , as compared to the year ended december 31 , 2011. during the year ended december 31 , 2012 , we incurred $ 53.9 million for seismic costs for morocco , suriname , ghana and cameroon ; $ 32.2 million of unsuccessful well costs , primarily related to the ghana teak-4a appraisal well and ghana okure-1 exploration well ; and $ 9.9 million of new business costs . during the year ended december 31 , 2011 , we incurred $ 32.8 million for seismic costs and $ 91.3 million of unsuccessful well costs , primarily related to the cameroon n'gata-1 , ghana makore-1 , ghana banda-1 and ghana odum exploration wells . general and administrative . general and administrative costs increased by $ 46.4 million during the year ended december 31 , 2012 , as compared to the year ended december 31 , 2011 , primarily due to increases in non-cash expenses of $ 32.4 million for equity-based compensation and an increase in staffing . total non-cash general and administrative costs were $ 83.4 million and $ 51.0 million for the years ended december 31 , 2012 and 2011 , respectively . depletion and depreciation . depletion and depreciation increased $ 45.2 million during the year ended december 31 , 2012 , as compared with the year ended december 31 , 2011 , primarily due to an increase in the cost basis of our oil and gas properties related to the purchase of the fpso and an increase in the number of completed wells . amortizationdeferred financing
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ROO
| 14,763
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in the event dune fails to redeem shares of preferred stock put to dune by a holder , then the conversion price shall be lowered and the dividend rate increased . after december 1 , 2012 , dune may redeem shares of preferred stock . the company analyzed the adjustment of the conversion right and the make whole premium for derivative accounting under fasb asc 815derivatives and hedges and determined that it was not applicable to either provision . the preferred stock discount is deemed a preferred stock dividend and is being amortized over five years using the effective interest method and is charged to additional paid-in capital as the company has a deficit balance in retained earnings . charges to additional paid-in capital story_separator_special_tag the following discussion will assist you in understanding our financial position , liquidity and results of operations . the information below should be read in conjunction with the consolidated financial statements and the related notes to consolidated financial statements . our discussion contains both historical and forward-looking information . we assess the risks and uncertainties about our business , long-term strategy and financial condition before we make any forward-looking statements but we can not guarantee that our assessment is accurate or that our goals and projections can or will be met . statements concerning results of future exploration , exploitation , development and acquisition expenditures as well as expense and reserve levels are forward-looking statements . we make assumptions about commodity prices , drilling results , production costs , administrative expenses and interest costs that we believe are reasonable based on currently available information . critical estimates and accounting policies we prepare our consolidated financial statements in this report using accounting principles that are generally accepted in the united states ( gaap ) . gaap represents a comprehensive set of accounting and disclosure rules and requirements . we must make judgments , estimates , and in certain circumstances , choices between acceptable gaap alternatives as we apply these rules and requirements . the most critical estimate we make is the engineering estimate of total oil and gas reserves . this estimate affects the application of the successful efforts method of accounting , the calculation of depreciation , depletion , and amortization of oil and gas properties and the estimate of the impairment of our oil and gas properties . it also affects the estimated lives used to determine asset retirement obligations . in addition , the estimates of proved oil and gas reserves are the basis for the related standardized measure of discounted future net cash flows . estimated total oil and gas reserves the evaluation of our oil and gas reserves is critical to management of our operations and ultimately our economic success . decisions such as whether development of a property should proceed and what technical methods are available for development are based on an evaluation of reserves . these oil and gas reserve quantities are also used as the basis of calculating the unit-of-production rates for depreciation , evaluating impairment and estimating the life of our producing oil and gas properties in our asset retirement obligations . our total reserves are classified as proved , possible and probable . proved reserves are classified as either proved developed or proved undeveloped . proved developed reserves are those reserves which can be expected to be recovered through existing wells with existing equipment and operating methods . proved undeveloped reserves include reserves expected to be recovered from new wells from undrilled proven reservoirs or from existing wells where a significant major expenditure is required for completion and production . probable reserves are those additional reserves that are less certain to be recovered than proved reserves and when probabilistic methods are used , there should be at least a 50 % probability that the actual quantities recovered will equal or exceed the proved plus probable estimates . possible reserves are those additional reserves that are less certain to be recovered than probable reserves and when probabilistic methods are used , there should be at least a 10 % probability that the total quantities ultimately recovered will equal or exceed proved plus probable plus possible reserve estimates . independent reserve engineers prepare the estimates of our oil and gas reserves presented in this report based on guidelines promulgated under gaap and in accordance with the rules and regulations of the securities and exchange commission . the evaluation of our reserves by the independent reserve engineers involves their rigorous examination of our technical evaluation and extrapolations of well information such as flow rates and reservoir pressure declines as well as other technical information and measurements . reservoir engineers interpret these data to determine the nature of the reservoir and ultimately the quantity of total oil and gas reserves attributable to a specific property . our total reserves in this report include only quantities that we expect to recover commercially using current prices , costs , existing regulatory practices and technology . while we are reasonably certain that the total reserves will be produced , the timing and ultimate recovery can be affected by a number of factors including completion of development projects , reservoir performance , regulatory approvals 28 and changes in projections of long-term oil and gas prices . revisions can include upward or downward changes in the previously estimated volumes or reserves for existing fields due to evaluation of ( 1 ) already available geologic , reservoir or production data or ( 2 ) new geologic or reservoir data obtained from wells . revisions can also include changes associated with significant changes in development strategy , oil and gas prices or production equipment/facility capacity . standardized measure of discounted future net cash flows the standardized measure of discounted future net cash flows relies on these estimates of oil and gas reserves using commodity prices and costs at year-end . story_separator_special_tag the fair value of asset retirement obligation liabilities has been calculated using an expected present value technique . fair value , to the extent possible , should include a market risk premium for unforeseeable circumstances . a five percent market risk premium was included in the company 's asset retirement obligation fair value estimate . when the liability is initially recorded , the entity increases the carrying amount of the related long-lived asset . over time , accretion of the liability is recognized each period and the capitalized cost is amortized over the useful life of the related asset . upon retirement of the liability , an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement . this standard requires the company to record a liability for the fair value of the dismantlement and plugging and abandonment costs , excluding salvage values . derivatives derivative financial instruments , utilized to manage or reduce commodity price risk related to dune 's production , are accounted for under the provisions of fasb asc 815derivatives and hedging . under this statement , derivatives are carried on the balance sheet at fair value . if the derivative is designated as a fair value hedge , the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings . if the derivative is designated as a cash flow hedge , the effective portions of changes in the fair value of the derivatives are recorded in other comprehensive income or loss and are recognized in the statement of operations when the hedged item affects earnings . if the derivative is not designated as a hedge , changes in the fair value are recognized in other expense . ineffective portions of changes in the fair value of cash flow hedges are also recognized in loss on derivative liabilities . effective january 1 , 2008 , the company discontinued , prospectively , the designation of its derivatives as cash flow hedges . the net derivative loss related to the discontinued cash flow hedges , as of december 31 , 2007 , 30 continued to be reported in accumulated other comprehensive loss through december 31 , 2009 and were charged to loss as the volumes underlying the cash flow hedges were realized . beginning january 1 , 2008 , the gain or loss on derivatives is recognized currently in earnings . stock-based compensation the company follows the provisions of fasb asc 718stock compensation . the statement requires all stock-based payments to employees , including grants of employee stock options , to be recognized in the financial statements based on their fair values on the date of the grant . due to significant declines in the price of dune 's stock since the issuance of many employee grants , stock-based compensation amounts are high compared to current values . business strategy dune is an independent energy company engaged in the exploration , development , acquisition and exploitation of natural gas and crude oil properties , with interest along the gulf coast . on may 15 , 2007 , we closed the stock purchase and sale agreement to acquire all of the capital stock of goldking from goldking energy holdings , l.p. goldking was an independent energy company focused on the exploration , exploitation and development of natural gas and crude properties located onshore and in state waters along the gulf coast . the acquisition of goldking substantially increased our proved reserves , provided significant drilling upside and increased our geographic and geological well diversification . additionally , the acquisition of goldking provided us with exploration opportunities within our core geographic area . our properties now cover over 90,000 gross acres across 26 oil and natural gas fields onshore and in state waters along the texas and louisiana gulf coast . grow through exploitation , development , and exploration of our properties . our primary focus will continue to be the development and exploration efforts in our gulf coast properties . we believe that our properties and acreage position will allow us to grow organically through low risk drilling in the near term , as this property set continues to present attractive opportunities to expand our reserve base through workovers and recompletions , field extensions , delineating deeper formations within existing fields and higher risk/higher reward exploratory drilling . in addition , we will constantly review , rationalize and high-grade our properties in order to optimize our existing asset base . maintain and utilize state of the art technological expertise . we expect to maintain and utilize our technical and operations teams ' knowledge of salt-dome structures and multiple stacked producing zones common in the gulf coast to enhance our growth prospects and reserve potential . we will employ technical advancements , including 3-d seismic data , pre-stack depth migration and directional drilling to identify and exploit new opportunities in our asset base . we also plan to employ the latest drilling , completion and fracturing technology in all of our wells to enhance recoverability and accelerate cash flows associated with these wells . pursue opportunistic acquisitions of underdeveloped properties . we continually review opportunities to acquire producing properties , leasehold acreage and drilling prospects that are in core operating areas . we are seeking to acquire operational control of properties that we believe have a solid proved reserves base coupled with significant exploitation and exploration potential . we intend to continue to evaluate acquisition opportunities and make acquisitions that we believe will further enhance our operations and reserves in a cost effective manner . actively manage the risks and rewards of our drilling program . in summary , our strategy is to increase our oil and gas reserves and production while keeping our finding and development costs and operating costs ( on a per mcf equivalent ( mcfe ) basis ) competitive with our industry peers .
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results of operations comparison of 2009 and 2008 year-over-year production decreased 16 % to 9,521 mmcfe in 2009 compared to 11,364 mmcfe in 2008. this decrease was caused by normal reservoir declines and a very limited capital reinvestment program . additionally , significant reductions in both oil and gas prices were incurred during this time period . the following table reflects the increase ( decrease ) in oil and gas sales revenue due to changes in price and volume : replace_table_token_11_th revenues revenues for the year ended december 31 , 2009 totaled $ 64.9 million as compared to $ 146.6 million for the year ended december 31 , 2008. production volumes for 2009 were 724 mbbls of oil and 5.2 bcf of natural gas or 9.5 bcfe . this compares to 884 mbbls of oil and 6.1bcf of natural gas or 11.4 bcfe for 2008. in 2009 , the average sales price per barrel of oil was $ 58.53 and $ 4.34 per mcf for natural gas as compared to $ 99.87 per barrel and $ 9.62 per mcf , respectively for 2008. the primary reasons behind the decrease in revenue were lower production and lower average sales prices in 2009 versus 2008. average price received per mcfe produced was $ 6.81 in 2009 versus $ 12.90 in 2008 or a decline of 47 % . 34 operating expenses lease operating expense and production taxes the following table presents the major components of dune 's lease operating expense for the last two years on a per mcfe basis : replace_table_token_12_th lease operating expense for the year ended december 31 , 2009 totaled $ 31.9 million versus $ 43.5 million for the year ended december 31 , 2008 representing a reduction of $ 11.6 million or 27 % . this translated to a decrease of $ 0.47/mcfe to $ 3.35/mcfe on a volume basis .
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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 in part i , item 1a , “ risk factors ” in this annual report on form 10-k. see the sections entitled “ risk factors ” and “ cautionary note regarding forward-looking statements. ” company overview we are a clinical-stage pharmaceutical company focused on treating metabolic and inflammatory diseases to minimize their long-term complications and improve the lives of patients . we have an innovative pipeline of first-in-class small molecule clinical and pre-clinical drug candidates for the treatment of a wide range of diseases . 43 our pipeline is led by our programs for the treatment of type 1 diabetes ( ttp399 ) and for psoriasis ( hpp737 ) . we completed the simplici-t1 study , an adaptive phase 1b/2 study supported by jdrf international ( “ jdrf ” ) , to explore the effects of ttp399 in patients with type 1 diabetes at the beginning of 2020. in february 2020 , we reported positive results from the phase 2 - part 2 confirming phase of this study which achieved its primary objective by demonstrating statistically significant improvements in hba1c ( long-term blood sugar ) for ttp399 compared to placebo . we are working on the design for pivotal and registrational studies for ttp399 , with input from the fda . in addition to the pivotal studies of ttp399 , we are conducting a phase 1 mechanistic study in patients with type 1 diabetes to determine the impact of ttp399 on ketone body formation during a period of acute insulin withdrawal . in addition , we are conducting a multiple ascending dose phase 1 study of hpp737 , an orally administered phosphodiesterase type 4 ( “ pde4 ” ) inhibitor , to assess the pharmacokinetics , pharmacodynamics , safety and tolerability of hpp737 in healthy volunteers as part of our psoriasis program . the goal of this study is to confirm the maximum tolerated dose with minimal or no gastrointestinal intolerance in the form of nausea , vomiting , or diarrhea . we expect to complete this study in the second quarter of 2021. on december 15 , 2020 , the company announced that the phase 2 elevage study of azeliragon in people with mild alzheimer 's disease and type 2 diabetes did not meet its primary objective of demonstrating an improvement in cognition as assessed by the 14-item alzheimer 's disease assessment scale – cognitive subscale ( adas-cog14 ) relative to placebo . we are planning an adaptive phase 1b/2 clinical trial assessing the pharmacokinetics , pharmacodynamics , safety and tolerability of ttp273 , an orally administered non-peptidic agonist that targets the glucagon-like peptide 1 receptor ( “ glp-1r ” ) , in patients with cystic fibrosis related diabetes and are seeking a funding partner to enable the conduct of this clinical trial . in addition to our internal development programs , we are furthering the clinical development of four other programs , a small molecule glp-1r agonist , a pde4 inhibitor , a ppar-delta agonist , and an nrf2 activator through partnerships with pharmaceutical partners via licensing arrangements . in december 2017 , we entered into a license agreement with hangzhou zhongmei huadong pharmaceutical co. , ltd. ( “ huadong ” ) ( the “ huadong license agreement ” ) , under which huadong obtained an exclusive and sublicensable license to develop and commercialize our glucagon-like peptide-1 receptor agonist ( “ glp-1r ” ) program , including the compound ttp273 , in china and certain other pacific rim territories , including australia and south korea . we also entered into a license agreement with reneo pharmaceuticals , inc. ( “ reneo ” ) ( the “ reneo license agreement ” ) in december 2017 , under which reneo obtained an exclusive , worldwide , sublicensable license to develop and commercialize our peroxisome proliferation activated receptor delta agonist program , including the compound hpp593 . in may 2018 , we entered into a license agreement with newsoara biopharma co. , ltd. , ( “ newsoara ” ) ( the “ newsoara license agreement ” ) , under which newsoara obtained an exclusive and sublicensable license to develop and commercialize our phosphodiesterase type 4 inhibitors ( “ pde4 ” ) program , including the compound hpp737 , in china and other pacific rim territories . in december 2020 , we entered into a license agreement with anteris bio , inc. ( “ anteris ” ) ( the “ anteris license agreement ” ) , under which anteris obtained a worldwide , exclusive and sublicensable license to develop and commercialize vtv llc 's nrf2 activator , hpp971 . for more information regarding the huadong license agreement , reneo license agreement and the newsoara license agreement , see part 1 – item 1 – “ business – partnered development programs ” of this annual report . vtv therapeutics inc. ( the “ company ” , the “ registrant ” , “ we ” or “ us ” ) is a holding company , and its principal asset is a controlling equity interest in vtv therapeutics llc ( “ vtv llc ” ) , the company 's principal operating subsidiary . the company has determined that vtv llc is a variable-interest entity ( “ vie ” ) for accounting purposes and that vtv therapeutics inc. is the primary beneficiary of vtv llc because ( through its managing member interest in vtv llc and the fact that the senior management of vtv therapeutics inc. is also the senior management of vtv llc ) it has the power to direct all of the activities of vtv llc , which include those that most significantly impact vtv llc 's economic performance . vtv therapeutics inc. has therefore consolidated vtv llc 's results under the vie accounting model in its consolidated financial statements . story_separator_special_tag if we fail to complete the development of our drug candidates in a timely manner or obtain regulatory approval for them , our ability to generate future revenue and our results of operations and financial position will be materially adversely affected . research and development expenses since our inception , we have focused our resources on our research and development activities , including conducting preclinical studies and clinical trials , manufacturing development efforts and activities related to regulatory filings for our drug candidates . we recognize research and development expenses as they are incurred . our direct research and development expenses consist primarily of 45 external costs such as fees paid to investigators , consultants , central laboratories and clinical research organizations ( “ cro ( s ) ” ) , in connection with our clinical trials , and costs related to acquiring and manufacturing clinical trial materials . our indirect research and development costs consist primarily of salaries , benefits and related overhead expenses for personnel in research and development functions and depreciation of leasehold improvements , laboratory equipment and computers . since we typically use our employee and infrastructure resources across multiple research and development programs such costs are not allocated to the individual projects . from our inception through december 31 , 2020 , we have incurred approximately $ 591.0 million in research and development expenses . our research and development expenses by project for the years ended december 31 , 2020 , 2019 and 2018 were as follows ( in thousands ) : replace_table_token_1_th we plan to continue to incur significant research and development expenses for the foreseeable future as we continue the development of ttp399 and hpp737 and further advance the development of our other drug candidates , subject to the availability of additional funding . the successful development of our clinical and preclinical drug candidates is highly uncertain . at this time , we can not reasonably estimate the nature , timing or costs of the efforts that will be necessary to complete the remainder of the development of any of our clinical or preclinical drug candidates or the period , if any , in which material net cash inflows from these drug candidates may commence . this is due to the numerous risks and uncertainties associated with the development of our drug candidates , including : the uncertainty of the scope , rate of progress and expense of our ongoing , as well as any additional , clinical trials and other research and development activities ; the potential benefits of our candidates over other therapies ; our ability to market , commercialize and achieve market acceptance for any of our drug candidates that we are developing or may develop in the future ; future clinical trial results ; our ability to enroll patients in our clinical trials ; the timing and receipt of any regulatory approvals ; and the filing , prosecuting , defending and enforcing of patent claims and other intellectual property rights , and the expense of doing so . a change in the outcome of any of these variables with respect to the development of a drug candidate could mean a significant change in the costs and timing associated with the development of that drug candidate . for example , if the fda or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a drug candidate , 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 with respect to the development of that drug candidate . general and administrative expenses general and administrative expenses consist primarily of salaries , benefits and related costs for employees in executive , finance , corporate development , human resources and administrative support functions . other significant general and administrative expenses include accounting and legal services , expenses associated with obtaining and maintaining patents , cost of various consultants , occupancy costs and information systems . 46 interest expense , net interest expense , net primarily consists of our cash and non-cash interest expense related to our loan agreement . cash interest on the loan agreement was recognized at a floating interest rate equal to 10.5 % plus the amount by which the one-month london interbank offer rate ( “ libor ” ) exceeds 0.5 % . non-cash interest expense represents the amortization of the costs incurred in connection with the loan agreement , the allocated fair value of the warrants to purchase shares of our class a common stock issued in connection with the loan agreement ( the “ warrants ” ) and the accretion of the final interest payment ( which will be paid in cash upon loan maturity ) , all of which are recognized in our consolidated statement of operations using the effective interest method . other income ( expense ) , net other income ( expense ) , net primarily consists of gains and losses related to the adjustment of the fair value of the warrants issued to macandrews in connection with the letter agreements . story_separator_special_tag requirements to date , we have not generated any revenue from drug product sales . we do not know when , or if , we will generate any revenue from drug product sales . we do not expect to generate revenue from drug sales unless and until we obtain regulatory approval of and commercialize any of our drug candidates . at the same time , we expect our expenses to continue or to increase in connection with our ongoing development activities , particularly as we continue the research , development and clinical trials of , and seek regulatory approval for , our drug candidates . in addition , subject to obtaining regulatory approval of any of our drug candidates , we expect to incur significant commercialization expenses for product sales , marketing , manufacturing and distribution . we anticipate that we will need substantial additional funding in connection with our continuing operations .
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results of operations in this section , we discuss the results of our operations for the year ended december 31 , 2020 compared to the year ended december 31 , 2019. for a discussion of the year ended december 31 , 2019 compared to the year ended december 31 , 2018 , please refer to part ii , item 7 , “ management 's discussion and analysis of financial condition and results of operations ” in our annual report on form 10-k for the year ended december 31 , 2019. comparison of the year ended december 31 , 2020 and 2019 the following table sets forth certain information concerning our results of operations for the periods shown : replace_table_token_2_th revenues revenues were $ 6.4 million and $ 2.8 million for the years ended december 31 , 2020 and 2019 , respectively . the revenue recognized in 2020 is primarily attributable to the upfront payment and fair value of the equity interest received by the company in connection with the anteris license agreement . the revenue earned during 2019 primarily relates to the recognition of amounts deferred at the initiation of our license agreements which were related to the transfer of technology performance obligations . the technology service period for our license agreement with reneo ended in the second quarter of 2019. further , in 2019 we recognized an additional $ 1.0 million of revenue related to the satisfaction of a milestone within our license agreement with newsoara . research and development expenses research and development expenses were $ 11.0 million and $ 15.1 million for the years ended december 31 , 2020 and 2019 , respectively .
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n otes to c onsolidated f inancial s tatements f or t he y ears e nded m ay 31 , 2012 , 2011 and 2010 earnings per share note 8 earnings per share basic earnings per share is computed using the weighted average number of shares outstanding . diluted earnings per share is computed using the weighted average number of shares outstanding , adjusted for dilutive incremental shares attributed to outstanding options to purchase common stock . the following table is a reconciliation of the numerators and denominators of the basic and diluted per share computations for each of the three years in the period ended may 31 : replace_table_token_21_th employee benefit plans note 9 employee benefit plans the company adopted the schmitt industries , inc. 401 ( k ) profit sharing plan & trust effective june 1 , 1996. employees must meet certain age and service requirements to be eligible . participants may contribute up to 15 % of their eligible compensation which may be partially matched by the company . the company may further make either a profit sharing contribution or a discretionary contribution . the company made matching contributions in conjunction with employee contributions to the plan totaling $ 65,672 , $ 72,151 and $ 56,532 during fiscal 2012 , 2011 and 2010 , respectively . related party transactions note 10 related party transactions effective june 1 , 2004 , the company entered into a contract to provide consulting services to pulverdryer usa , inc. , ( pulverdryer ) pursuant to which pulverdryer paid the company $ 8,000 a month from june 2004 through october 2004. pulverdryer also buys certain products from the company at normal prevailing rates . the page 37 schmitt industries , inc. n otes to c onsolidated f inancial s tatements f or t he y ears e nded m ay 31 , 2012 , 2011 and 2010 company and pulverdryer extended the contract from november 1 , 2004 forward at that same monthly fee of $ 8,000 . the contract was terminated in february 2010. product sales to pulverdryer during the fiscal years ended may 31 , 2012 , 2011 and 2010 totaled $ 0 , $ 0 and $ 1,408 , respectively . in connection with the contract , the board authorized wayne case , the company 's chief executive officer , to provide advisory services to pulverdryer , and permitted mr. case to receive as compensation the total consulting fees paid by pulverdryer from june 2004 through october 2004. from november 2004 to february 2010 , mr. case received 40 % of the ongoing consulting fee from pulverdryer , which percentage was determined by the compensation committee . mr. case also served on the board of directors of pulverdryer through the termination of the contract . page 38 report of independent registered public accounting firm board of directors and shareholders schmitt industries , inc. we have audited the accompanying consolidated balance sheets of schmitt industries , inc. and its subsidiaries as of may 31 , 2012 and 2011 , and the related consolidated statements of operations , changes in stockholders ' equity and comprehensive income and cash flows for the years ended may 31 , 2012 , 2011 and 2010. these financial statements are the responsibility of the company 's management . our responsibility is to express an opinion on these financial statements based on our audits . we conducted our audits in accordance with the standards of the public company accounting oversight board ( united states ) . those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement . the company is not required to have , nor were we engaged to perform an audit of its internal control over financial reporting . our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances , but not for the purpose of expressing an opinion on the effectiveness of the company 's internal control over financial reporting . accordingly , we express no such opinion . an audit also includes examining , on a test basis , evidence supporting the amounts and disclosures in the financial statements , assessing the accounting principles used and significant estimates made by management , as well as evaluating the overall financial statement presentation . we believe that our audits provide a reasonable basis for our opinions . in our opinion , the financial statements referred to above present fairly , in all material respects , the financial position of schmitt industries , inc. as of may 31 , 2012 and 2011 and the results of its operations and its cash flows for the years ended may 31 , 2012 , 2011 and 2010 in conformity with accounting principles generally accepted in the united states of america . moss-adams llp portland , oregon august 9 , 2012 page 39 item 9. changes in and disagreements with accountants on accounting and financial disclosure none . item 9a . controls and procedures evaluation of disclosure controls and procedures we maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the securities exchange act of 1934 , as amended ( exchange act ) , is recorded , processed , summarized and reported within the time periods specified in sec rules and forms . our disclosure controls and procedures include , without limitation , controls and procedures designed to ensure that information required to be disclosed in our reports filed under the exchange act is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures . story_separator_special_tag sales of remote tank monitoring products increased $ 479,000 to $ 581,000 during fiscal 2012 due to the higher volume of shipments . sales of laser-based surface measurement products increased $ 439,000 , or 67.1 % , primarily due to the sale of two casi scatterometers . future sales of laser-based or ultrasonic measurement products can not be forecasted with any certainty given the historical volatility experienced in this market . sales in the balancer segment increased $ 3.3 million , or 71.5 % , to $ 8.0 million for fiscal 2011 compared to $ 4.7 million for fiscal 2010. this increase is primarily due to higher unit sales volumes in asia , north america and europe during the year . asia sales increased $ 1.8 million , or 93.5 % , in fiscal 2011 compared to fiscal 2010. north american sales increased $ 1.4 million , or 77.9 % , in fiscal 2011 compared to the prior year . european sales increased $ 108,000 , or 13.5 % , in fiscal 2011 compared to fiscal 2010. the increases across all geographies are primarily due to higher volumes of shipments as the worldwide automotive and industrial markets in these regions have begun to recover from the previous low levels due to the global economic downturn . page 19 sales in the measurement segment increased $ 1.3 million , or 63.1 % , to $ 3.5 million in fiscal 2011 compared to $ 2.1 million in fiscal 2010. sales of laser-based distance measurement and dimensional sizing products increased $ 1.1 million , or 67.1 % , primarily due to the higher volume of shipments in the current fiscal year resulting from the economic recovery in the commercial and industrial markets . sales of laser-based surface measurement products increased $ 160,000 , or 32.3 % , primarily due to the sale of a casi scatterometer and the september 30 , 2009 acquisition of optical dimensions which resulted in product sales of $ 202,000 during fiscal 2011. during fiscal 2011 , we started to ship our xact ultrasonic measurement product which resulted in $ 102,000 of revenues . gross margin gross margin in fiscal 2012 decreased to 43.9 % compared to 48.8 % in fiscal 2011. this decrease was primarily due to higher inventory reserves associated with an end-of-life sbs balancer product , higher labor and overhead costs related to the increased sales volumes offset by a reduction in inventory component costs . gross margin in fiscal 2011 increased to 48.8 % compared to 44.7 % in fiscal 2010. this increase is primarily due to a shift in product sales mix with sales increasing in the measurement segment , which typically have higher gross margins than the balancer segment , and sales in the balancer segment rebounding positively in the north american market , which generally have slightly higher margins than asia due to the channel and distributor discounts required in asia . operating expenses operating expenses increased $ 484,000 , or 8.3 % , to $ 6.3 million for fiscal 2012 compared to $ 5.8 million in fiscal 2011. general , administrative and sales expenses increased $ 670,000 , or 12.7 % , to $ 6.0 million in fiscal 2012 compared to $ 5.3 million in the prior year . this increase is due primarily to higher personnel costs , higher commissions related to the increased sales and higher sales and marketing expenses . research and development expenses decreased $ 186,000 , or 36.9 % , to $ 318,000 in fiscal 2012 compared to $ 504,000 in fiscal 2011. the decrease in research and development expense is primarily due to lower material costs associated with new product development related to existing product lines . operating expenses increased $ 1.0 million , or 21.7 % , to $ 5.8 million for fiscal 2011 compared to $ 4.8 million in fiscal 2010. general , administrative and sales expenses increased $ 1.1 million , or 26.6 % , to $ 5.3 million in fiscal 2011 compared to $ 4.2 million in the prior year . this increase is due primarily to higher commissions related to the increase in sales , higher stock-based compensation and higher expenses associated with an international trade show that occurs every two years . research and development expenses decreased $ 80,000 , or 13.7 % , to $ 504,000 in fiscal 2011 as compared to $ 585,000 in fiscal 2010. research and development expenses decreased primarily due to lower material costs associated with new product development . other income other income consists of interest income , foreign currency exchange gain ( loss ) and other income ( expense ) . interest income was $ 2,000 , $ 4,000 and $ 11,000 in fiscal 2012 , 2011 and 2010 , respectively . interest income has decreased due to lower average cash and investment balances and lower interest rates . foreign currency exchange gain was $ 18,000 and $ 19,000 in fiscal 2012 and 2010 , respectively . foreign currency exchange loss was $ 10,000 in fiscal 2011. the foreign currency exchange gain ( loss ) fluctuated with the strength of foreign currencies against the u.s. dollar during the respective periods . other income consisted of an $ 18,000 gain on the sales of fixed assets for fiscal 2012. income tax provision the effective tax rate in fiscal 2012 was 18.1 % . the effective tax rate on consolidated net income in fiscal 2012 differs from the federal statutory tax rate primarily due to the amount of income from foreign jurisdictions , 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 . the effective tax rate on consolidated net loss was ( 0.8 ) % for fiscal 2011. the company 's effective tax rate on consolidated net loss differs from the federal statutory rate primarily due to the amount of income
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during the year ended may 31 , 2012 , net cash used in investing activities was $ 228,000 , which primarily consisted of additions to property and equipment for new manufacturing and computer equipment and vehicles offset by the cash proceeds received from the sale of property and equipment . the company has a $ 2.0 million bank line of credit agreement secured by u.s. accounts receivable , inventories and general intangibles . interest is payable at the bank 's prime rate ( 3.25 % as of may 31 , 2012 ) , or libor plus 2.0 % , ( 2.24 % as of may 31 , 2012 ) . the agreement expires on march 1 , 2014. there were no outstanding balances on the line of credit at may 31 , 2012 and 2011. we believe that our existing cash and investments combined with the cash we anticipate to generate from operating activities , and our available line of credit and financing available from other sources will be sufficient to meet our cash requirements for the foreseeable future . we do not have any significant commitments nor are we aware of any significant events or conditions that are likely to have a material impact on our liquidity or capital resources . quarterly financial data in thousands , except per share information ( unaudited ) replace_table_token_4_th page 21 replace_table_token_5_th item
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Liquidity
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the amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement . unrecognized tax benefits are tax benefits claimed in the company 's income tax returns that do not meet these recognition and measurement standards . assumptions , judgments , and the use of estimates are required in determining whether the `` more likely than not `` standard has been met when developing the provision for income taxes . if certain pending tax matters settle within the next twelve months , the total amount of unrecognized tax benefits may increase or decrease for all open tax years and jurisdictions . audit outcomes and the timing of audit settlements are subject to significant uncertainty . the company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provision , the current taxes payable and deferred taxes in the period in which the facts that give rise to a revision become known . the company accounts for the global intangible low taxed income ( gilti ) tax as a period cost when incurred . the gilti provision is effective beginning in fiscal year 2019. the company accounts for goodwill impairment as a permanent tax difference and as a period cost when incurred effective beginning in fiscal year 2019. f. stock-based compensation certain of the company 's employees ( a ) have been granted stock options to purchase shares of the company 's common stock and ( b ) have been granted restricted stock or restricted stock units under which shares of the company 's common stock vest based on the passage of time or achievement of performance and market conditions . the company recognizes stock-based compensation expense in net earnings based on the fair value of the award on the date of the grant . the company records the impact of forfeitures on stock compensation expense in the period the forfeitures occur . the company determines the fair value of stock options issued using a binomial option-pricing model . the binomial option-pricing model considers a range of assumptions related to volatility , dividend yield , risk-free interest rate , and employee exercise behavior . expected volatilities utilized in the binomial option pricing model are based on a combination of implied market volatilities and historical volatilities of peer companies . similarly , the dividend yield is based on historical experience and expected future dividend payments . the risk-free rate is derived from the u.s. treasury yield curve in effect at the time of grant . the binomial option pricing model also incorporates exercises based on an analysis of historical data . the expected life of a stock option grant is derived from the output of the binomial model and represents the period of time that options granted are expected to be outstanding . the grant date fair value of restricted stock and restricted stock units that vest upon achievement of service conditions is based on the closing price of the company 's common stock on the date of grant . the company also grants performance-based awards that vest over a performance period . certain performance-based awards are further subject to adjustment ( increase or decrease ) based on a market condition defined as total stockholder return of the company 's common stock compared to a peer group of companies . the fair value of performance-based awards subject to a market condition is determined using a monte carlo simulation model . the principal variable assumptions utilized in determining the grant date fair value of performance-based awards subject to a market condition include the risk-free rate , stock volatility , dividend yield , and correlations between the company 's stock price and the stock prices of the peer group of companies . the probability associated with the achievement of performance conditions affects the vesting of the company 's performance-based awards . expense is only recognized for those shares expected to vest . the company adjusts stock-based compensation expense ( increase or decrease ) when it becomes probable that actual performance will differ from the estimate . g. cash and cash equivalents investment securities with an original maturity of three months or less at the time of purchase are considered cash equivalents . 75 h. accounts receivable , net accounts receivable , net comprises trade receivables and lease receivables , net of allowances . trade receivables consist of amounts due to the company in the normal course of business , which are not collateralized and do not bear interest . lease receivables primarily relate to sales-type leases arising from the sale of hardware elements in bundled dms or other integrated solutions . lease receivables represent the current portion of the present value of the minimum lease payments at the beginning of the lease term . the long-term portion of the present value of the minimum lease payments is included within other assets on the consolidated balance sheets . the company considers lease receivables to be a single portfolio segment . the accounts receivable allowances for both trade receivables and lease receivables are estimated based on historical collection experience , an analysis of the age of outstanding accounts receivable , and credit issuance experience . receivables are considered past due if payment is not received by the date agreed upon with the customer . write-offs are made when management believes it is probable a receivable will not be recovered . i. funds receivable and funds held for clients and client fund obligations funds receivable and funds held for clients represent amounts received or expected to be received from clients in advance of performing titling and registration services on behalf of those clients . these amounts are classified within other current assets on the consolidated balance sheets . story_separator_special_tag fiscal 2019 modifications : effective july 1 , 2018 , we modified our presentation of adjusted earnings before income taxes , adjusted provision for income taxes , adjusted net earnings attributable to cdk , and adjusted diluted net earnings attributable to cdk per share to include adjustments for amortization of acquired intangible assets . although we exclude amortization of acquired intangible assets from our non-gaap measure , we believe that it is important for the users of the financial statements to understand that the associated intangible assets contribute to revenue generation . effective october 1 , 2018 , we modified our presentation of adjusted earnings before income taxes , adjusted provision for income taxes , adjusted net earnings attributable to cdk , adjusted diluted earnings attributable to cdk per share , and adjusted ebitda to include adjustments for impairment of intangible assets . during the fourth quarter of fiscal 2019 , we modified our presentation of : i. adjusted earnings before income taxes , adjusted provision for income taxes , adjusted net earnings attributable to cdk , adjusted diluted net earnings attributable to cdk per share , and adjusted ebitda to include adjustments for loss from equity method investment ; ii . adjusted provision for income taxes , adjusted net earnings attributable to cdk , adjusted diluted net earningsattributable to cdk per share to include adjustments for a decrease in valuation allowance ; and 32 iii . adjusted net earnings attributable to cdk , adjusted diluted net earnings attributable to cdk per share , and adjusted ebitda to include adjustments for loss ( earnings ) from discontinued operations , net of taxes . results of operations we review results on a constant currency basis to understand underlying business trends . to present these results on a constant currency basis , current period results for entities reporting in currencies other than the u.s. dollar were translated into u.s. dollars using the average monthly exchange rate for the comparable prior period . as a result , constant currency results neutralize the effects of foreign currency . fiscal 2019 compared to fiscal 2018 the following is a discussion of the results of our consolidated results of operations for fiscal 2019 and 2018 , respectively . for a discussion of our operations by segment , see `` analysis of reportable segments `` below . the table below presents consolidated statements of operations for the periods indicated and the dollar change and percentage change between periods . replace_table_token_3_th revenues . revenues for fiscal 2019 increased by $ 116.8 million as compared to fiscal 2018 . the cdkna segment contributed $ 151.3 million , partially offset by declines in the cdki segment of $ 34.5 million . the impact of foreign exchange rates on revenues was a decrease of $ 18.5 million . the foreign exchange rate impact was primarily due to the strength of the euro , canadian dollar , british pound , and south african rand against the u.s. dollar . cost of revenues . cost of revenues for fiscal 2019 increased by $ 45.3 million as compared to fiscal 2018 which includes a $ 24.7 million decrease for costs to fulfill that were deferred and costs related to revenue that was recognized prior to july 1 , 2018 upon adoption of asc 606. the constant currency impact of foreign exchange rates on cost of revenues was a decrease of $ 8.6 million . cost of revenues increased due to the elead acquisition , a $ 12.0 million impairment charge related to write-off of certain intangible assets within the cdkna segment , higher costs relating to investments in strategic growth initiatives , higher transaction and integration-related costs and incentive compensation ; and a $ 2.6 million impairment charge related to write-off of certain long-lived assets associated with exiting a facility within the other segment . these increases were partially offset by operating efficiencies obtained from the business transformation plan , and lower other business transformation expenses . cost of revenues include expenses to research , develop , and deploy new and enhanced solutions for 33 our customers of $ 79.5 million and $ 115.0 million for fiscal 2019 and 2018 , respectively , representing 4.2 % and 6.4 % of revenues , respectively . selling , general and administrative expenses . selling , general and administrative expenses for fiscal 2019 increased $ 3.5 million as compared to fiscal 2018 . asc 606 did not have a significant impact on selling , general and administrative expenses in fiscal 2019. the constant currency impact of foreign exchange rates on selling , general and administrative expenses was a decrease of $ 4.1 million . selling , general and administrative expenses increased due to the elead acquisition , higher legal and other expenses related to regulatory and competition matters , higher officer transitions related expense , and a $ 2.9 million impairment charge related to write-off of certain intangible assets within the cdkna segment . these increases were partially offset by operating efficiencies obtained from the business transformation plan , costs to implement the new revenue recognition standard in the prior year , lower transaction and integration related expenses and other business transformation expenses , and a net benefit to true-up contingent consideration liabilities related to prior acquisitions . restructuring expenses . restructuring expenses related to the business transformation plan for fiscal 2019 increased $ 7.4 million as compared to fiscal 2018 and relate to the business transformation plan we initiated in fiscal 2015. litigation provision . during fiscal 2019 , the company recorded a $ 90.0 million litigation provision related to antitrust lawsuits . additional information on litigation provision is contained in item 8 of part ii , `` financial statements and supplementary data - note 16 - commitments and contingencies . `` interest expense . interest expense for fiscal 2019 increased $ 43.2 million as compared to fiscal 2018 largely due to higher average debt levels and interest rate in fiscal 2019 compared to fiscal 2018.
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during fiscal 2017 , our primary cash outflows consisted of common stock repurchases of $ 700.0 million , dividend payments to our stockholders of $ 80.7 million , and repayments of debt and capital lease obligation of $ 36.9 million . 53 contractual obligations the following table provides a summary of our contractual obligations as of june 30 , 2019 . replace_table_token_26_th ( 1 ) these amounts represent the principal repayments of the term loan facilities included within our consolidated balance sheet as of june 30 , 2019 . interest on our term loan facilities is based on variable rates , and interest payments will fluctuate as our interest rates fluctuate each period . accordingly , future interest payments related to these instruments have been excluded from the table above . the interest rate per annum on the two $ 300.0 million term loan facilities with three year term was 3.94 % and with five year term was 4.07 % as of june 30 , 2019 . additional information is contained in item 8 of part ii , `` financial statements and supplementary data - note 15 - debt '' in this annual report on form 10-k for further information . ( 2 ) these amounts represent the principal repayments of the senior notes included within our consolidated balance sheet as of june 30 , 2019 and expected future interest payments over the term of the senior notes based on the stated interest rates in effect as of june 30 , 2019 . our 2019 notes bear interest at a rate of 3.80 % , our 2024 notes bear interest at a rate of 5.00 % , our 2026 notes bear interest at a rate of 5.875 % , our 2027 notes bear interest at a rate of 4.875 % , and our 2029 notes bear interest at a rate of 5.250 % . interest is payable semi-annually on april 15 and october 15 of each year for the 2019 and 2024 notes , june 15 and december 15 of each year for the 2026 notes , june 1 and december 1 of each year for the 2027 notes , and march 15 and september 15 of each year for the 2029 notes . additional information is contained in item
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Liquidity
| 1,670
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the company monitors this rate against actual results and forecasted estimates , and adjusts the rate as deemed necessary in order to reflect the amount of consideration it expects to receive from its customers . there were no material changes to the rate during the twelve months ended december 31 , 2018 , and the company 's actual amount of variable consideration related to these sales programs has historically not been materially different from its estimates . however , if the actual variable consideration is significantly different than the accrued estimates , the company may be exposed to adjustments to revenue that could be material . assuming there had been a 10 % increase over the accrued estimated variable consideration for 2018 sales program incentives , pre-tax income for the year ended december 31 , 2018 would have decreased by approximately $ 2.0 million . the company records an estimate for anticipated returns as a reduction of sales and cost of sales , and accounts receivable in the period that the related sales are recorded . sales returns are estimated based upon historical returns , current economic trends , changes in customer demands and sell-through of products . the company also offers its customers sales programs that allow for specific returns . the company records a return liability for anticipated returns related to these sales programs at the time of the sale based on the terms of the sales program . historically , the company 's actual sales returns have not been materially different from management 's original estimates . the company does not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate the allowance for sales returns . however , if the actual costs of sales returns are significantly different than the recorded estimated allowance , the company may be exposed to losses or gains that could be material . assuming there had been a 10 % increase over the recorded estimated allowance for 2018 sales returns , pre-tax income for the year ended december 31 , 2018 would have decreased by approximately $ 2.5 million . allowance for doubtful accounts the company maintains an allowance for estimated losses resulting from the failure of its customers to make required payments . an estimate of uncollectible amounts is made by management based upon historical bad debts , current customer receivable balances , age of customer receivable balances , the customer 's financial condition and current economic trends , all of which are subject to change . if the actual uncollected amounts significantly exceed the estimated allowance , the company 's operating results would be significantly adversely affected . assuming there had been a 10 % increase in uncollectible accounts over the 2018 recorded estimated allowance for doubtful accounts , pre-tax income for the year ended december 31 , 2018 would have decreased by approximately $ 0.6 million . inventories inventories are valued at the lower of cost or net realizable value . cost is determined using the first-in , first-out ( fifo ) method . the inventory balance , which includes material , labor and manufacturing overhead costs , is recorded net of an estimated allowance for obsolete or unmarketable inventory . the estimated allowance for obsolete or unmarketable inventory is based upon current inventory levels , sales trends and historical experience as well as management 's understanding of market conditions and forecasts of future product demand , all of which are subject to change . the calculation of the company 's allowance for obsolete or unmarketable inventory requires management to make assumptions and to apply judgment regarding inventory aging , forecasted consumer demand and pricing , regulatory ( usga and r & a ) rule changes , the promotional environment and technological obsolescence . the company does not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate the allowance . however , if estimates regarding consumer demand are inaccurate or change , the company may need to increase its inventory allowance , which could significantly adversely affect the company 's operating results . assuming there had been a 10 % increase in obsolete or unmarketable inventory over the 2018 recorded estimated allowance for obsolete or unmarketable inventory , pre-tax income for the year ended december 31 , 2018 would have decreased by approximately $ 1.5 million . long-lived assets , goodwill and non-amortizing intangible assets in the normal course of business , the company acquires tangible and intangible assets . the company periodically evaluates the recoverability of the carrying amount of its long-lived assets , including property , plant and equipment and amortizing intangible assets , and investments whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable or exceeds its fair value . the company evaluates the recoverability of its goodwill and non-amortizing intangible 31 assets at least annually or more frequently whenever indicators are present that the carrying amounts of these assets may not be fully recoverable . determining whether an impairment has occurred typically requires various estimates and assumptions , including determining the amount of undiscounted cash flows directly related to the potentially impaired asset , the useful life over which cash flows will occur , the timing of the impairment test , and the asset 's residual value , if any . to determine fair value , the company uses its internal cash flow estimates discounted at an appropriate rate , quoted market prices , royalty rates when available and independent appraisals as appropriate . any required impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value and is recorded as a reduction in the carrying value of the asset and a charge to earnings . the company uses its best judgment based on current facts and circumstances related to its business when making these estimates . story_separator_special_tag however , if actual results are not consistent with the company 's estimates and assumptions used in calculating future cash flows and asset fair values , the company may be exposed to losses that could be material . the company completed its annual impairment test and fair value analysis of goodwill and other indefinite-lived intangible assets as of december 31 , 2018 , and the estimated fair values of the company 's reporting units , as well as the estimated fair values of certain trade names and trademarks , significantly exceeded their carrying values . as a result , no impairment was recorded as of december 31 , 2018 . warranty policy the company has a stated two-year warranty policy for its golf clubs . the company 's policy is to accrue the estimated cost of satisfying future warranty claims at the time the sale is recorded . in estimating its future warranty obligations , the company considers various relevant factors , including the company 's stated warranty policies and practices , the historical frequency of claims , and the cost to replace or repair its products under warranty . the company 's estimates for calculating the warranty reserve are principally based on assumptions regarding the warranty costs of each club product line over the expected warranty period . where little or no claims experience may exist , the company 's warranty obligation calculation is based upon long-term historical warranty rates of similar products until sufficient data is available . as actual model-specific rates become available , the company 's estimates are modified to ensure that the forecast is within the range of likely outcomes . historically , the company 's actual warranty claims have not been materially different from management 's original estimated warranty obligation . the company does not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate the warranty obligation . however , if the number of actual warranty claims or the cost of satisfying warranty claims were to significantly exceed the estimated warranty reserve , the company may be exposed to losses that could be material . assuming there had been a 10 % increase in warranty claims over the 2018 recorded estimated allowance for warranty obligations , pre-tax income for the year ended december 31 , 2018 would have decreased by approximately $ 0.8 million . income taxes current income tax expense or benefit is the amount of income taxes expected to be payable or receivable for the current year . a deferred income tax asset or liability is established for the difference between the tax basis of an asset or liability computed pursuant to asc topic 740 and its reported amount in the financial statements that will result in taxable or deductible amounts in future years when the reported amount of the asset or liability is recovered or settled , respectively . in accordance with the applicable accounting rules , the company maintains a valuation allowance for a deferred tax asset when it is deemed to be more likely than not that some or all of the deferred tax assets will not be realized . in evaluating whether a valuation allowance is required under such rules , the company considers all available positive and negative evidence , including prior operating results , the nature and reason for any losses , its forecast of future taxable income , and the dates on which any deferred tax assets are expected to expire . these assumptions require a significant amount of judgment , including estimates of future taxable income . these estimates are based on the company 's best judgment at the time made based on current and projected circumstances and conditions . for further information , see note 11 “ income taxes . ” pursuant to asc topic 740-25-6 , the company is required to accrue for the estimated additional amount of taxes for uncertain tax positions if it is deemed to be more likely than not that the company would be required to pay such additional taxes . the company is required to file federal and state income tax returns in the united states and various other income tax returns in foreign jurisdictions . the preparation of these income tax returns requires the company to interpret the applicable tax laws and regulations in effect in such jurisdictions , which could affect the amount of tax paid by the company . the company accrues an amount for its estimate of additional tax liability , including interest and penalties in income tax expense , for any uncertain tax positions taken 32 or expected to be taken in an income tax return . the company reviews and updates the accrual for uncertain tax positions as more definitive information becomes available . historically , additional taxes paid as a result of the resolution of the company 's uncertain tax positions have not been materially different from the company 's expectations . the company recognizes interest and or penalties related to income tax matters in income tax expense . for further information , see note 11 “ income taxes . ” in december 2017 , the u.s. government enacted comprehensive tax legislation referred to as the tax cuts and jobs act ( the `` tax act '' ) . shortly after the tax act was enacted , the sec issued staff accounting bulletin no . 118 , income tax accounting implications of the tax cuts and jobs act ( `` sab 118 '' ) , which provides guidance on accounting for the tax act 's impact .
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by $ 14.2 million in 2018 compared to 2017. the company 's gross margin in 2018 improved 70 basis points to 46.5 % compared to 45.8 % in 2017. this increase was primarily due to an increase in average selling prices and a favorable shift in product mix , including the addition of the travismathew business , which is accretive to the company 's gross margins , partially offset by an increase in cost due to the technology incorporated into current year products . operating expenses increased $ 48.3 million or 12.0 % in 2018 compared to 2017 , primarily due to incremental expenses from the travismathew business , an increase in employee costs resulting from increased headcount and inflationary pressures , higher variable expenses due to the increase in net sales as well as increased investments in the business to sustain the company 's growth , including investments in r & d , marketing and tour , and in the ogio and travismathew businesses . the provision for income taxes decreased $ 0.4 million to $ 26.0 million in 2018 compared to 2017 , despite an increase of $ 63.2 million in pre-tax income to $ 131.3 million in 2018 compared to 2017. the decrease in the provision resulted primarily from a decrease in the company 's income tax rate to 19.8 % in 2018 compared to 38.8 % in 2017 , due to the reduction of the u.s. corporate income tax rate as a result of the 2017 tax act , combined with an increase in r & d tax credits in 2018 . 36 diluted earnings per share increased to $ 1.08 in 2018 compared to $ 0.42 in 2017. the increased earnings in 2018 reflect the increased sales in the core business , the addition of travismathew business , improved gross margins and a lower tax rate due to the 2017 tax act . years ended december 31 , 2018 and 2017 net sales for the year ended december 31 ,
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ROO
| 3,442
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the mortgage loan bears interest at a rate of libor + 4.95 % . the stated maturity date of the mortgage loan is december 2017 , with three one-year extension options . the mortgage loan is secured by the bardessono hotel . on december 4 , 2015 , we entered into an agreement to exchange the series a preferred stock for an equal number of shares of its series b preferred stock . the terms and conditions of the series b preferred stock are substantially similar to the series a preferred stock for which it is being exchanged , except that , in contemplation of a public offering of the series b preferred stock either pursuant to the terms of the series b registration rights agreement or the preemptive rights agreement , the series b preferred stock contains certain customary anti-dilution provisions . also in connection with the exchange , the company , together 78 with ashford hospitality prime limited partnership and ashford hospitality advisors llc , entered into a registration rights agreement for the benefit of certain holders of the series b preferred stock . on december 15 , 2015 , we acquired a 100 % interest in the ritz-carlton st. thomas in st. thomas , u.s. virgin islands for total consideration of $ 64.0 million . in connection with the acquisition , we completed the financing of a $ 42.0 million loan . this loan is interest only and provides for a floating interest rate of libor + 4.95 % . the stated maturity date of the mortgage loan is december 2017 , with three one-year extension options . the mortgage loan is secured by the ritz-carlton st. thomas . on february 1 , 2016 , prime gp , as general partner of ashford prime op , entered into that certain second amended and restated agreement of limited partnership of ashford hospitality prime limited partnership ( the “ amended partnership agreement ” ) . the amended partnership agreement was amended to broaden the rights of the company in ashford prime op in several ways . we conduct our business and own substantially all of our assets through our operating partnership . while the holders of partnership units have the same economic rights as holders of the company 's common stock , unless and until holders of partnership units exercise their right to convert the units into shares of common stock such holders would not otherwise have the right to vote on matters submitted to the company 's stockholders . the amendments provide holders of partnership units the opportunity to acquire shares of series c preferred stock , which upon issuance will permit holders of partnership units to vote together with the holders of the company 's common stock . the amended partnership agreement was approved by prime gp and limited partners of ashford prime op holding more than sixty-six and two-thirds percent ( 66 2/3 % ) of the common units of ashford prime op . the amendments to the amended partnership agreement implement the following primary changes : the specified redemption date ( as defined in the amended partnership agreement ) has been changed from the third business day after the receipt by prime gp of the notice of redemption to the fifth business day after the receipt of such notice ; the indemnification rights of prime gp have been broadened to expressly include indemnification of indemnitees involved in any suit , action , inquiry , investigation or proceeding in which the indemnitees may be subpoenaed or otherwise requested to provide documents , information or testimony ; the obligation of ashford prime op to advance fees , costs , expenses and disbursements to prime gp has been made mandatory and such fees , costs , expenses and disbursements must be advanced within five business days after the receipt of a written request from prime gp for such advancement ; prime gp has been granted the power and authority to prosecute , defend , arbitrate or compromise any and all claims or liabilities in favor of or against ashford prime op , on such terms and in such manner as prime gp may determine in its sole discretion ; the minimum number of ashford prime op common units for which a limited partner may exercise its right to covert partnership units into shares of the company 's common stock ( the “ redemption right ” ) has been increased to 2,000 ashford prime op common units ; the amount of time that the company shall have to obtain company stockholder approval if necessary for the delivery of company common stock pursuant to the redemption right has been increased to 180 days and certain deadlines related thereto have been accordingly lengthened ; any partnership loans ( as defined in the amended partnership agreement ) to a limited partner must be paid within ten days after demand for payment is made by ashford prime op and , if not paid within such time , prime gp may elect to make the payment to ashford prime op and shall succeed to all rights and remedies of ashford prime op against the defaulting limited partner ; a limited partner is deemed to have provided any consent or approval required by the amended partnership agreement if such partner fails to respond or object to a request from prime gp for such partner 's consent with twenty days from its receipt of such request ; and the threshold for limited partners to call a special meeting of the partnership has been increased to sixty-six and two-thirds percent ( 66 2/3 % ) of the common percentage interests ( as defined in the amended partnership agreement ) . the amended partnership agreement also includes a number of technical , procedural , conforming and clarifying changes . story_separator_special_tag food and beverage revenue-occupancy and the type of customer staying at the hotel are the major drivers of food and beverage revenue ( i.e . , group business typically generates more food and beverage business through catering functions when compared to transient business , which may or may not utilize the hotel 's food and beverage outlets or meeting and banquet facilities ) . other hotel revenue-occupancy and the nature of the property are the main drivers of other ancillary revenue , such as telecommunications , parking and leasing services . hotel operating expenses . the following presents the components of our hotel operating expenses : 81 rooms expense-these costs include housekeeping wages and payroll taxes , reservation systems , room supplies , laundry services and front desk costs . like rooms revenue , occupancy is the major driver of rooms expense and , therefore , rooms expense has a significant correlation to rooms revenue . these costs can increase based on increases in salaries and wages , as well as the level of service and amenities that are provided . food and beverage expense-these expenses primarily include food , beverage and labor costs . occupancy and the type of customer staying at the hotel ( i.e . , catered functions generally are more profitable than restaurant , bar or other on-property food and beverage outlets ) are the major drivers of food and beverage expense , which correlates closely with food and beverage revenue . management fees-base management fees are computed as a percentage of gross revenue . incentive management fees generally are paid when operating profits exceed certain threshold levels . other hotel expenses-these expenses include labor and other costs associated with the other operating department revenues , as well as labor and other costs associated with administrative departments , franchise fees , sales and marketing , repairs and maintenance and utility costs . most categories of variable operating expenses , including labor costs such as housekeeping , fluctuate with changes in occupancy . increases in occupancy are accompanied by increases in most categories of variable operating expenses , while increases in adr typically only result in increases in limited categories of operating costs and expenses , such as franchise fees , management fees and credit card processing fee expenses which are based on hotel revenues . thus , changes in adr have a more significant impact on operating margins than changes in occupancy . 82 results of operations year ended december 31 , 2015 compared to year ended december 31 , 2014 the following table summarizes the changes in key line items from our consolidated statements of operations for the years ended december 31 , 2015 and 2014 ( in thousands except percentages ) : replace_table_token_30_th 83 net income ( loss ) represents the operating results of twelve hotel properties for the year ended december 31 , 2015 and ten hotel properties for the year ended december 31 , 2014 . the operating results below include : ( 1 ) the sofitel chicago water tower since its acquisition on february 24 , 2014 ; ( 2 ) the pier house resorts since its acquisition on march 1 , 2014 ; ( 3 ) the bardessono hotel since its acquisition on july 9 , 2015 ; and ( 4 ) the ritz-carlton st. thomas since its acquisition on december 15 , 2015. the following table illustrates the key performance indicators of our hotel properties for the periods indicated : replace_table_token_31_th the following table illustrates the key performance indicators of the eight comparable hotel properties that were included for the entire years ended december 31 2015 and 2014 : replace_table_token_32_th net income ( loss ) attributable to the company . net income ( loss ) attributable to the company changed $ 8.7 million , or 446.2 % , from net income attributable to the company of $ 1.9 million for the year ended december 31 , 2014 ( “ 2014 ” ) to net loss attributable to the company of $ 6.7 million for the year ended december 31 , 2015 ( “ 2015 ” ) as a result of the factors discussed below . rooms revenue . rooms revenue from our hotels in creased $ 28.9 million , or 12.8 % , to $ 255.4 million during 2015 compared to 2014 . during 2015 , we experienced a 70 basis point in crease in occupancy and a 8.1 % in crease in room rates . rooms revenue increased ( i ) $ 6.9 million as a result of the acquisition of the bardessono hotel in july 2015 ; ( ii ) $ 4.7 million at the pier house resort due to the inclusion of its operating results for the entire 2015 period as a result of its acquisition in 2014 , higher room rates of 5.9 % and a 497 basis point increase in occupancy at the hotel ; ( iii ) $ 2.6 million at the ritz carlton st. thomas due to the inclusion of its operating results since its acquisition on december 15 , 2015 ; ( iv ) $ 2.5 million at the philadelphia courtyard downtown as a result of 5.9 % higher room rates and a 322 basis point increase in occupancy due to a renovation during 2014 ; ( v ) $ 2.4 million at the seattle marriott waterfront due to higher room rates of 6.1 % and a 255 basis point increase in occupancy at the hotel ; ( vi ) $ 2.0 million at the plano marriott legacy town center as a result of 8.2 % higher room rates and a 191 basis point increase in occupancy at the hotel ; ( vii ) $ 2.0 million at the san francisco courtyard downtown as a result of 4.5 % higher room rates and a 121 basis point increase in occupancy at the hotel ; ( viii ) $ 1.8 million at the la jolla hilton torrey pines as a result of
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million of net deposits to restricted cash for capital expenditures . these outflows were partially offset by inflows of $ 206,000 of key money consideration from the sale of property , plant and equipment and $ 24,000 of proceeds from property insurance claims . for the year ended december 31 , 2014 , investing activities used net cash flows of $ 212.8 million . these cash outlays were primarily attributable to cash outflows of $ 172.1 million attributable to the acquisitions of the sofitel chicago water tower and the pier house resort , $ 19.7 million of net deposits to restricted cash for capital expenditures and $ 21.0 million of capital improvements made to various hotel properties . these outlays were partially offset by inflows of $ 125,000 of proceeds from property insurance claims . net cash flows provided by financing activities . for the year ended december 31 , 2015 , net cash flows provided by financing activities were $ 107.5 million . cash inflows primarily consisted of borrowings on indebtedness of $ 152.0 million and proceeds from the issuance of preferred stock of $ 62.3 million and proceeds from a private placement of common stock of $ 3.1 million .
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Liquidity
| 10,488
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cost of products and services cost of products and services includes primarily labor and related costs , drugs and supplies used primarily in the embryo transfer and in vitro fertilization processes , livestock and feed used in production , and facility charges , including rent and depreciation . fluctuations in the price of livestock and feed have not had a significant impact on our operating margins and no derivative financial instruments are used to mitigate the price risk . research and development expenses we recognize research and development expenses as they are incurred . our research and development expenses consist primarily of : salaries and benefits , including stock-based compensation expense , for personnel in research and development functions ; fees paid to consultants and contract research organizations who perform research on our behalf and under our direction ; costs related to laboratory supplies used in our research and development efforts ; costs related to certain in-licensed technology rights ; depreciation of leasehold improvements and laboratory equipment ; amortization of patents and related technologies acquired in mergers and acquisitions ; and rent and utility costs for our research and development facilities . we have no individually significant research and development projects and our research and development expenses primarily relate to either the costs incurred to expand or otherwise improve our multiple platform technologies , the costs incurred to develop a specific application of our technologies in support of current or prospective collaborators , or costs incurred to expand or otherwise improve our products and services . research and development expenses , including costs for preclinical and clinical development , incurred for programs we support pursuant to an ecc agreement are typically reimbursed by the collaborator at cost and all other research and development programs may be terminated or otherwise deferred at our discretion . the amount of our research and development expenses may be impacted by , among other things , the number of eccs and the number and size of programs we may support on behalf of an ecc . the table below summarizes our research and development expenses incurred to expand or otherwise improve our multiple platform technologies , the costs incurred to develop a specific application of our technologies in support of current or prospective collaborators and licensees , or costs incurred to expand or otherwise improve our products and services for the years ended december 31 , 2016 , 2015 , and 2014 . other research and development expenses for these periods include indirect salaries and overhead expenses that are not allocated to either expanding or improving our multiple platform technologies , specific applications of our technologies in support of current or prospective collaborators and licensees , or expanding or improving our product and services offerings . research and development expenses for the year ended december 31 , 2015 include a $ 59.6 million payment in our common stock for an exclusive license to certain technologies owned by md anderson to be used in the expansion and improvement of our platform technologies . 48 replace_table_token_7_th we expect that our research and development expenses will increase as we continue to enter into collaborations and as we expand our offerings across additional market sectors . we believe these increases will likely include increased costs related to the hiring of additional personnel in research and development functions , increased costs paid to consultants and contract research organizations and increased costs related to laboratory supplies . research and development expenses may also increase as a result of ongoing research and development operations which we might assume through mergers and acquisitions . selling , general and administrative expenses selling , general and administrative , or sg & a , expenses consist primarily of salaries and related costs , including stock-based compensation expense , for employees in executive , operational , finance , sales and marketing , information technology , legal and corporate communications functions . other significant sg & a expenses include rent and utilities , insurance , accounting and legal services and expenses associated with obtaining and maintaining our intellectual property . we expect that our sg & a expenses will increase as we continue to operate as a public company and expand our operations . we believe that these increases will likely include costs related to the hiring of additional personnel and increased fees for business development functions , costs associated with defending the company in litigation matters , the costs of outside consultants and other professional services , including costs to comply with corporate governance , internal controls and similar requirements applicable to public companies . sg & a expenses may also increase as a result of ongoing operations which we might assume through mergers and acquisitions . other income ( expense ) , net we hold equity securities and preferred stock received and or purchased from certain collaborators . other than investments accounted for using the equity method discussed below , we elected the fair value option to account for our equity securities and preferred stock held in these collaborators . these equity securities and preferred stock are recorded at fair value at each reporting date . unrealized appreciation ( depreciation ) resulting from fair value adjustments are reported as other income ( expense ) in the consolidated statement of operations . as such , we bear the risk that fluctuations in the securities ' share prices may significantly impact our results of operations . in june 2015 , we recorded a realized gain related to the distribution of all our shares of ziopharm to our shareholders as a special stock dividend . interest income consists of interest earned on our cash and cash equivalents and short-term and long-term investments . dividend income consists of the monthly preferred stock dividend received from ziopharm . interest expense pertains to deferred consideration payable to the former members of trans ova and long term debt . story_separator_special_tag in conjunction with a prior transaction associated with trans ova 's subsidiary , viagen , in september 2012 , we may be obligated to make certain future contingent payments to the former equity holders of viagen , up to a total of $ 3.0 million if certain revenue targets , as defined in the share purchase agreement , are met . this amount is not included in the table above due to the uncertainty of when we will make any of these future payments , if ever . in january 2009 , aquabounty was awarded a grant to provide funding of a research and development project from the atlantic canada opportunities agency , a canadian government agency . amounts claimed by aquabounty must be repaid in the form of a 10 percent royalty on any products commercialized out of this research and development project until fully paid . because the timing of commercialization is subject to additional regulatory considerations , the timing of repayment is uncertain . aquabounty has claimed all amounts available under the grant , resulting in total long-term debt of $ 1.9 million on our consolidated financial statements as of december 31 , 2016 . this amount is not included in the table above due to the uncertainty of the timing of repayment . net operating losses as of december 31 , 2016 , we had net operating loss carryforwards of approximately $ 253.0 million for u.s. federal income tax purposes available to offset future taxable income and u.s. federal and state research and development tax credits of $ 7.5 million , prior to consideration of annual limitations that may be imposed under section 382. these carryforwards begin to expire in 2022 . our direct foreign subsidiaries have foreign loss carryforwards of approximately $ 119.2 million , most of which do not expire . our past issuances of stock and mergers and acquisitions have resulted in ownership changes within the meaning of section 382. as a result , the utilization of portions of our net operating losses may be subject to annual limitations . as of december 31 , 2016 , approximately $ 15.1 million of our domestic net operating losses generated prior to 2008 are limited by section 382 to annual usage limits of approximately $ 1.5 million . as of december 31 , 2016 , approximately $ 18.6 million of domestic net operating losses were inherited via acquisition and are limited based on the value of the target at the time of the transaction . future changes in stock ownership may also trigger an ownership change and , consequently , a section 382 limitation . we do not file a consolidated income tax return with aquabounty and biopop . as of december 31 , 2016 , aquabounty had loss carryforwards for federal and foreign income tax purposes of approximately $ 22.2 million and $ 12.9 million , respectively , and foreign research tax credits of $ 2.4 million available to offset future taxable income , prior to consideration of annual limitations that may be imposed under section 382 or analogous foreign provisions . these carryforwards will begin to expire in 2018 . as a result of our ownership in aquabounty passing 50 percent in 2013 , an annual section 382 limitation of approximately $ 0.9 million per year will apply to losses and credits carried forward by aquabounty from prior years , which are also subject to prior section 382 limitations . as of december 31 , 2016 , biopop had loss carryforwards of approximately $ 1.4 million for federal income tax purposes available to offset future taxable income . off-balance sheet arrangements we did not have during the periods presented , and we do not currently have , any off-balance sheet arrangements , other than operating leases as mentioned above , as defined under sec rules . 58 critical accounting policies and estimates our management 's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements , which we have prepared in accordance with u.s. gaap . the preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements , as well as the reported revenues and expenses during the reporting periods . we evaluate these estimates and judgments on an ongoing basis . 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 . our actual results may differ from these estimates under different assumptions or conditions . while our significant accounting policies are more fully described in note 2 to our consolidated financial statements appearing elsewhere in this annual report on form 10-k , we believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations . revenue recognition we generate revenue through contractual agreements with collaborators and licensing agreements whereby the collaborators or the licensees obtain exclusive access to our proprietary technologies for use in the research , development and commercialization of products and or treatments in a contractually specified field of use . generally , the terms of these agreements provide that we receive some or all of the following : ( i ) upfront payments upon consummation of the agreement ; ( ii ) reimbursements for costs incurred by us for research and development and or manufacturing efforts related to specific applications provided for in the agreement ; ( iii ) milestone payments upon the achievement of specified development , regulatory and commercial activities ; and ( iv ) royalties on sales of products arising from the collaboration or licensing agreement . our collaborations and licensing agreements
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liquidity and capital resources sources of liquidity we have incurred losses from operations since our inception and as of december 31 , 2016 , we had an accumulated deficit of $ 729.3 million . from our inception through december 31 , 2016 , we have funded our operations principally with proceeds received from private and public offerings , cash received from our collaborators and through product and service sales made directly to customers . as of december 31 , 2016 , we had cash and cash equivalents of $ 62.6 million and short-term and long-term investments of $ 180.6 million . cash in excess of immediate requirements is invested primarily in money market funds , certificates of deposits and u.s. government debt securities in order to maintain liquidity and preserve capital . we currently generate cash receipts primarily from technology access fees , reimbursement of research and development services performed by us and sales of products and services . cash flows the following table sets forth the significant sources and uses of cash for the periods set forth below : replace_table_token_12_th 55 cash flows from operating activities : in 2016 , our net loss of $ 190.3 million , after consideration of significant noncash items of ( i ) $ 58.9 million of unrealized and realized losses on our equity securities and preferred stock , ( ii ) $ 42.2 million of stock-based compensation expense , ( iii ) $ 24.6 million of depreciation and amortization expense , ( iv ) $ 21.1 million of equity in net loss of affiliates , ( v ) $ 10.8 million of shares issued as payment for services , and ( vi ) $ 7.4 million of noncash dividend income was $ 40.1 million . additionally , we had a $ 17.7 million net increase in our operating assets and liabilities primarily as a result of the recognition of previously deferred revenue , partially offset by a $ 10.0 million technology access fee received in cash pursuant to a new collaboration .
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Liquidity
| 240
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deferred financing costs - costs of financing are deferred and amortized on a straight-line basis over the life of the associated loan . inventories - inventories , consisting of mainly medical supplies , are stated at the lower of cost or market with cost determined by the first-in , first-out method . reserves for slow-moving and obsolete inventories are provided based on historical experience and product demand . we evaluate the adequacy of these reserves periodically . property and equipment - property and equipment are stated at cost , less accumulated depreciation and amortization . depreciation and amortization of property and equipment are provided using the straight-line method over the estimated useful lives , which range from 3 to 15 years . leasehold improvements are amortized at the lesser of lease term or their estimated useful lives , whichever is lower , which range from 3 to 30 years . only a few leasehold improvements are deemed to have a life greater than 15 to 20 years . maintenance and repairs are charged to expense as incurred . 60 goodwill - goodwill at december 31 , 2012 totaled $ 193.9 million . goodwill is recorded as a result of business combinations . management evaluates goodwill , at a minimum , on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable . impairment of goodwill is tested at the reporting unit level by comparing the reporting unit 's carrying amount , including goodwill , to the fair value of the reporting unit . the fair value of a reporting unit is estimated using a combination of the income or discounted cash flows approach and the market approach , which uses comparable market data . if the carrying amount of the reporting unit exceeds its fair value , goodwill is considered impaired and a second step is performed to measure the amount of impairment loss , if any . we tested goodwill for impairment on october 1 , 2012. based on our test , we noted no impairment related to goodwill as of october 1 , 2012 as the estimated fair value of each reporting unit exceeded its carrying value by no less than 38 % . our largest reporting unit , which is our california operations , has goodwill of $ 67.5 million and an estimated fair value in excess of carrying value of 43 % as of october 1 , 2012. however , if estimates or the related assumptions change in the future , we may be required to record impairment charges to reduce the carrying amount of goodwill . long-lived assets - we evaluate our long-lived assets ( property and equipment ) and intangibles , other than goodwill , for impairment whenever indicators of impairment exist . the accounting standards require that if the sum of the undiscounted expected future cash flows from a long-lived asset or definite-lived intangible is less than the carrying value of that asset , an asset impairment charge must be recognized . the amount of the impairment charge is calculated as the excess of the asset 's carrying value over its fair value , which generally represents the discounted future cash flows from that asset or in the case of assets we expect to sell , at fair value less costs to sell . no indicators of impairment were identified with respect to our long-lived assets as of december 31 , 2012. income taxes - income tax expense is computed using an asset and liability method and using expected annual effective tax rates . under this method , deferred income tax assets and liabilities result from temporary differences in the financial reporting bases and the income tax reporting bases of assets and liabilities . the measurement of deferred tax assets is reduced , if necessary , by the amount of any tax benefit that , based on available evidence , is not expected to be realized . when it appears more likely than not that deferred taxes will not be realized , a valuation allowance is recorded to reduce the deferred tax asset to its estimated realizable value . for net deferred tax assets we consider estimates of future taxable income , including tax planning strategies , in determining whether our net deferred tax assets are more likely than not to be realized . income taxes are further explained in note 11. uninsured risks – prior to november 1 , 2006 we maintained a self-insured workers ' compensation insurance program for which our third party administrator over this program continues to make payments on behalf of the company for claims incurred from november 1 , 2004 through october 31 , 2006. we are required to maintain a cash collateral account with this administrator as guarantee of our submission of full reimbursement of claims paid on our behalf . we record this collateral deposit as restricted cash and include it as other assets in our consolidated balance sheet which amounted to approximately $ 529,000 as of both december 31 , 2012 and 2011. with respect to the above-mentioned claims incurred from november 1 , 2004 through october 31 , 2006 , the estimated future cash obligation associated with the unpaid portion of those claims that remain open but have not yet been resolved is recorded to accrued expenses in our consolidated balance sheet . this current liability is determined by the administrator 's estimate of loss development of open claims and was approximately $ 188,000 and $ 225,000 at december 31 , 2012 and 2011 , respectively . for the two years from november 1 , 2006 through october 31 , 2008 , we pre-funded our anticipated workers ' compensation claims ' losses through a third party administrator . as of december 31 , 2012 , we anticipate that the loss development on the claims for the latter of these two years will exceed what has already been paid and expensed . story_separator_special_tag service fee revenue , including only those centers which were in operation throughout the full fiscal years of both 2011 and 2010 , increased $ 3.3 million , or 0.7 % . this 0.7 % increase is primarily the result of increases in our procedure volumes . this comparison excludes revenue contributions from centers that were acquired subsequent to january 1 , 2010. for the year ended december 31 , 2011 , net revenue from centers that were acquired subsequent to january 1 , 2010 and excluded from the above comparison was $ 96.3 million . for the year ended december 31 , 2010 , net revenue from centers that were acquired subsequent to january 1 , 2010 and excluded from the above comparison was $ 32.8 million . story_separator_special_tag times new roman , times , serif ; margin : 0pt 0 ; text-align : justify ; text-indent : 0.5in `` > adjusted ebitda we use both gaap and non-gaap metrics to measure our financial results . we believe that , in addition to gaap metrics , these non-gaap metrics assist us in measuring our cash generated from operations and ability to service our debt obligations . we believe this information is useful to investors and other interested parties because we are highly leveraged and our non-gaap metrics removes non-cash and nonrecurring charges that occur in the affected period and provides a basis for measuring the company 's financial condition against other quarters . one non-gaap measure we believe assists us is adjusted ebitda . we define adjusted ebitda as earnings before interest , taxes , depreciation and amortization , each from continuing operations as adjusted to exclude losses or gains on the disposal of equipment , other income or loss , loss on debt extinguishments , bargain purchase gains , loss on de-consolidation of joint ventures and non-cash equity compensation . adjusted ebitda includes equity earnings in unconsolidated operations and subtracts allocations of earnings to non-controlling interests in subsidiaries , and is adjusted for non-cash or extraordinary and one-time events taken place during the period . adjusted ebitda is a non-gaap financial measure used as an analytical indicator by us and the healthcare industry to assess business performance , and is a measure of leverage capacity and ability to service debt . adjusted ebitda should not be considered a measure of financial performance under gaap , and the items excluded from adjusted ebitda should not be considered in isolation or as alternatives to net income , cash flows generated by operating , investing or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of financial performance or liquidity . as adjusted ebitda is not a measurement determined in accordance with gaap and is therefore susceptible to varying methods of calculation , this metric , as presented , may not be comparable to other similarly titled measures of other companies . the following is a reconciliation of the nearest comparable gaap financial measure , net income ( loss ) , to adjusted ebitda for the years ended december 31 , 2012 , 2011 , and 2010 , respectively ( in thousands ) : replace_table_token_11_th liquidity and capital resources we had cash and cash equivalents of $ 362,000 and accounts receivable of $ 129.2 million at december 31 , 2012 , compared to cash of $ 2.5 million and accounts receivable of $ 128.4 million at december 31 , 2011. we had a working capital balance of $ 37.3 million and $ 29.9 million at december 31 , 2012 and 2011 , respectively . we had net income attributable to radnet , inc. 's common stockholders of $ 64.5 million and $ 7.2 million , and a net loss of $ 12.9 million for the years ended december 31 , 2012 , 2011 and 2010 , respectively . we also had a stockholders ' equity deficit of $ 2.0 million and $ 69.8 million at december 31 , 2012 and 2011 , respectively . we operate in a capital intensive , high fixed-cost industry that requires significant amounts of capital to fund operations . in addition to operations , we require a significant amount of capital for the initial start-up and development of new diagnostic imaging facilities , the acquisition of additional facilities and new diagnostic imaging equipment . because our cash flows from operations have been insufficient to fund all of these capital requirements , we have depended on the availability of financing under credit arrangements with third parties . based on our current level of operations , we believe that cash flow from operations and available cash , together with available borrowings from our senior secured credit facilities , will be adequate to meet our short-term and long-term liquidity needs . our future liquidity requirements will be for working capital , capital expenditures , debt service and general corporate purposes . our ability to meet our working capital and debt service requirements , however , is subject to future economic conditions and to financial , business and other factors , many of which are beyond our control . if we are not able to meet such requirements , we may be required to seek additional financing . there can be no assurance that we will be able to obtain financing from other sources on the terms acceptable to us , if at all . 43 on a continuing basis , we also consider various transactions to increase shareholder value and enhance our business results , including acquisitions , divestitures and joint ventures . these types of transactions may result in future cash proceeds or payments but the general timing , size or success of any acquisition , divestiture or joint venture effort and the related potential capital commitments can not be predicted . we expect to fund any future acquisitions primarily with cash flow from operations and borrowings , including borrowing from amounts available under our senior secured credit facilities or through
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this comparison excludes contributions from centers that were acquired or divested subsequent to january 1 , 2010. for the year ended december 31 , 2011 , medical supplies expense from centers that were acquired subsequent to january 1 , 2010 , and excluded from the above comparison was $ 4.7 million . for the year ended december 31 , 2010 , medical supplies expense from centers that were acquired subsequent to january 1 , 2010 , and excluded from the above comparison was $ 1.4 million . · depreciation and amortization expense depreciation and amortization expense increased $ 3.5 million , or 6.5 % , to $ 57.5 million for the year ended december 31 , 2011 when compared to the same period last year . the increase is primarily due to property and equipment additions for existing centers as well as newly acquired centers . · loss ( gain ) on sale and disposal of equipment gain on sale of equipment was approximately $ 2.2 million for the year ended december 31 , 2011 and was primarily from insurance proceeds received on equipment lost in a fire at one of our west coast imaging centers . loss on sale of equipment was approximately $ 1.1 million for the year ended december 31 , 2010 and resulted primarily from the sale of imaging equipment for scrap value upon acquisition of upgraded equipment . · severance costs during the year ended december 31 , 2011 , we recorded severance costs of $ 1.4 million compared to $ 838,000 recorded during the year ended december 31 , 2010. in each period , these costs were primarily associated with the integration of acquired operations . interest expense interest expense increased approximately $ 4.4 million , or 9.1 % , to $ 52.8 million for the year ended december 31 , 2011 compared to $ 48.4 million for the year ended december 31 , 2010. interest expense for the year ended december 31 , 2011 included $ 3.2 million of amortization of deferred financing costs as well as $ 1.2 million of amortization of accumulated other comprehensive loss associated with fair value adjustments to our interest rate swaps accumulated prior to april 6 , 2010 , the date of our debt refinancing . interest expense for the year ended december 31 , 2010 included $ 3.0 million of amortization of deferred financing costs as well as $ 917,000 of amortization of accumulated other comprehensive loss associated with fair value adjustments to our interest rate swaps accumulated prior to april 6 , 2010 , the date of our debt refinancing . see “ liquidity and capital resources ” below
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Liquidity
| 12,489
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our sales and technical support teams are localized in several growing markets . we operate a 200mm wafer fabrication facility located in hillsboro , oregon , or the oregon fab , which is critical for us to accelerate proprietary technology development , new product introduction and improve our financial performance in the long run . to meet the market demand for the more mature high volume products , we also utilize the wafer manufacturing capacity of selected third party foundries . for assembly and test , we primarily rely upon our in-house facilities in china . in addition , we utilize subcontracting partners for industry standard packages . we believe our in-house packaging and testing capability provides us with a competitive advantage in proprietary packaging technology , product quality , cost and sales cycle time . factors affecting our performance our performance is affected by several key factors , including the following : the global , regional economic and pc market conditions : because our products primarily serve consumer electronic applications , a deterioration of the global and regional economic conditions could materially affect our revenue and results of operations . in particular , because a significant amount of our revenue is derived from sales of products in the personal computer , or pc markets , such as notebooks , motherboards and notebook battery packs , a significant decline or downturn in the pc markets can have a material adverse effect on our revenue and results of operations . any decline in the pc markets would 39 have a material negative impact on the demand for our products , revenue , factory utilization , gross margin , our ability to resell excess inventory , and other performance measures . we have been executing and are continuing to execute strategies to diversify our product portfolio and penetrate into other market segments , such as the consumer , communication and industrial market segments , which we believe would mitigate and eventually overcome the reduced demand resulting from the declining pc markets . as we develop and sell new products that serve more diversified markets , we expect that sales based on the pc markets , as a percentage of the total revenue , will continue to decline . our revenue from the pc markets accounted for approximately 45.2 % , 50.0 % and 54.4 % of our total revenue for the years ended june 30 , 2014 , 2013 and 2012 , respectively . however , if the rate of decline in the pc markets is faster than we expected , or if we can not successfully diversify or introduce new products to keep pace with the declining pc markets , we may not be able to alleviate its negative impact , which will adversely affect our results of operations . erosion of average selling price : erosion of average selling prices of established products is typical in our industry . consistent with this historical trend , we expect that average selling prices of our existing products will continue to decline in the future . however , as a normal course of business , we seek to offset the effect of declining average selling prices by introducing new and higher value products , expanding existing products for new applications and new customers , and reducing manufacturing cost of existing products . product introductions and customers ' product requirements : our success depends on our ability to introduce products on a timely basis that meet or are compatible with our customers ' specifications and performance requirements . both factors , timeliness of product introductions and conformance to customers ' requirements , are equally important in securing design wins with our customers . as we accelerate the development of new technology platforms , we expect to increase the pace at which we introduce new products and obtain design wins . our failure to introduce products on a timely basis that meet customers ' specifications and performance requirements , particularly those products with major oem customers , and our inability to continue to expand our serviceable markets , could adversely affect our financial performance , including loss of market shares with customers . distributor ordering patterns and seasonality : our distributors place purchase orders with us based on their forecasts of end customer demand , and this demand may vary significantly depending on the sales outlooks and market and economic conditions of end customers . because these forecasts may not be accurate , channel inventory held at our distributors may fluctuate significantly , which in turn may prompt distributors to make significant adjustments to their purchase orders placed with us . as a result , our revenue and operating results may fluctuate significantly from quarter to quarter . in addition , because our products are used in consumer electronics products , our revenue is subject to seasonality . our sales seasonality is affected by numerous factors , including global and regional economic conditions as well as the pc market conditions , revenue generated from new products , changes in distributor ordering patterns in response to channel inventory adjustments and end customer demand for our products and fluctuations in consumer purchase patterns prior to major holiday seasons . in recent periods , broad fluctuations in the semiconductor markets and the global and regional economic conditions , in particular the decline of the pc market conditions , have had a more significant impact on our results of operations than seasonality . manufacturing costs : our gross margin may be affected by our manufacturing costs , including utilization of our own manufacturing facilities , pricing of wafers from other foundries and semiconductor raw materials , which may fluctuate from time to time largely due to the market demand and supply . capacity utilization affects our gross margin because we have certain fixed costs associated with our in-house packaging and testing facilities and our oregon fab . story_separator_special_tag in our review , we reconsidered the key assumptions in our overall strategic business and manufacturing capacity plans in light of the continued declines in the pc market . as a result , we revised our pc related revenue and volume outlook as well as our manufacturing capacity requirements . these material changes in our outlook and plans , which we were able to determine in the third quarter of fiscal 2013 , triggered an impairment review of our long-lived assets . we determined that the related estimated undiscounted cash flows were not sufficient to recover the carrying value of certain manufacturing machinery and equipment primarily for the packaging of our pc-related products due to the accelerated decline of the pc markets . the average remaining useful life of those impaired assets was approximately two years . we estimated the fair values of those long-lived assets based on net realizable values of similar machinery and equipment recently transacted by third-party used-machine brokers and recorded an asset impairment charge of approximately $ 2.6 million to reduce the related carrying amount to its estimated fair value as of march 31 , 2013. during the fourth quarter of fiscal year 2014 , we evaluated our amortizable intangible assets for impairment and determined that the related estimated undiscounted cash flows exceeded the carrying value of the intangible assets and no impairment charge was recorded . during the same period , we also evaluated our goodwill for impairment and determined that the fair value of the reporting unit , estimated based on the market capitalization approach , was more than its carrying value and no impairment charge was recorded . interest income and expenses interest income was primarily related to interest earned from cash and cash equivalents . the increase in interest income for fiscal year 2014 as compared to fiscal year 2013 was primarily due to increase in average cash balances . the decrease in interest income for fiscal year 2013 as compared to fiscal year 2012 was primarily due to lower average interest rate . interest expense was primarily related to bank borrowings . the decrease in interest expenses for fiscal year 2014 was primarily due to a decrease in bank borrowings related to $ 20.0 million term loan obtained in may 2012 for our oregon fab as compared to fiscal year 2013 . the increase in interest expenses for fiscal year 2013 was primarily due to an increase in bank borrowings , including the $ 20.0 million term loan obtained in may 2012 for working capital of our oregon fab as compared to fiscal year 2012 . 45 income tax expense replace_table_token_9_th fiscal 2014 vs 2013 income tax expense for fiscal years 2014 and 2013 was $ 3.0 million and $ 4.0 million , respectively . income tax expense decreased by $ 1.0 million , or 25.7 % , in fiscal year 2014 as compared to fiscal year 2013 primarily due to a reduction in our uncertain tax positions offset partially by a change in the mix of earnings in various geographic jurisdictions . fiscal 2013 vs 2012 income tax expense for fiscal years 2013 and 2012 was $ 4.0 million and $ 3.6 million , respectively . income tax expense increased by $ 0.4 million , or 11.7 % , in fiscal year 2013 as compared to fiscal year 2012 primarily due to the changes in the mix of earnings in various geographic jurisdictions , which was partially offset by the tax benefits from the january 2013 reinstatement of the u.s. federal r & d credit retroactive to january 1 , 2012. liquidity and capital resources our principal need for liquidity and capital resources is to maintain sufficient working capital to support our operations and to invest adequate capital expenditures to fuel the growth of our business . currently , we primarily financed our operations and capital expenditures through funds generated from operations . on may 11 , 2012 , we entered into a loan agreement with a financial institution that provides a term loan of $ 20.0 million for general purposes and a $ 10.0 million non-revolving credit line for the purchase of equipment . both the term loan and equipment credit line will be fully repayable in may 2015. the borrowings may be made in the form of either eurodollar loans or base rate loans . eurodollar loans accrue interest based on an adjusted london interbank offer rate ( `` libor `` ) as defined in the agreement , plus a margin of 1.00 % to 1.75 % . base rate loans accrue interest at the highest of ( a ) the lender 's prime rate , ( b ) the federal funds rate plus 0.5 % and ( c ) the eurodollar rate ( for a one-month interest period ) plus 1 % ; plus a margin of -0.5 % to 0.25 % . the applicable margins for both eurodollar loans and base rate loans will vary from time to time in the foregoing ranges based on the cash and cash equivalent balances maintained by us and our subsidiaries with the lender . in may 2013 , the equipment credit line expired and there was no outstanding balance . as of july 31 , 2014 and 2013 , the outstanding balance of the term loan was $ 13.5 million and $ 16.4 million , respectively . the obligations under the loan agreement are secured by substantially all assets of two of our subsidiaries , including but not limited to , certain real property and related assets located at the oregon fab . in addition , we and certain of our subsidiaries have agreed to guarantee full repayment and performance of the obligations under the loan agreement . the loan agreement contains customary restrictive covenants and includes certain financial covenants that require us to maintain on a consolidated basis specified financial ratios including total liabilities to tangible net worth , fixed charge coverage and current assets to current liabilities
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net cash provided by operating activities of $ 37.6 million for fiscal year 2014 resulted primarily from net loss of $ 3.3 million , non-cash charges of $ 31.5 million and net change in assets and liabilities providing net cash of $ 9.4 million . the non-cash charges of $ 31.5 million included depreciation and amortization expenses of $ 27.9 million , share-based compensation expense of $ 3.4 million , and net deferred income taxes of $ 0.8 million , partially offset by allowance for doubtful account of $ 0.4 million and gain on disposal of property and equipment of $ 0.2 million during the fiscal year 2014. the net change in assets and liabilities providing net cash of $ 9.4 million was primarily due to $ 1.8 million decrease in inventories as we reduced our inventories , $ 2.1 million decrease in accounts receivable due to the timing of billings and collection of payments , $ 5.5 million increase in accounts payable primarily due to increase in inventory purchase and timing of payment , and $ 2.4 million increase in accrued and other liabilities primarily related to employee compensation and performance bonuses , partially offset by $ 0.9 million decrease in income taxes payable , and $ 1.5 million increase in other current and long-term assets primarily due to increase in advance payments to suppliers . net cash provided by operating activities of $ 28.0 million for fiscal year 2013 resulted primarily from net loss of $ 5.6 million , non-cash charges of $ 37.8 million and net change in assets and liabilities using net cash of $ 4.2 million .
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Liquidity
| 890
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we intend to increase production at the georgia facility over time , particularly in response to orders increasingly being generated from new markets in florida and the carolinas . in order to maintain our growth , we will need to be able to continue to properly estimate anticipated future volumes when making commitments regarding the level of business that we will seek and accept , the mix of products that we intend to manufacture , the timing of production schedules and the levels and utilization of inventory , equipment and personnel . · the coronavirus pandemic is an evolving threat to the economy and all businesses . at this time both the duration of the pandemic and the magnitude of the economic consequences are unknown . risks to the company include but are not limited to : o increased loan losses or deferred loan payments as loan obligors suffer cash flow issues resulting from reduced employment , reduced rental income or unit sales , or other factors ; o reduced sales volume as potential customers are unable to shop for new homes or can not qualify for a home purchase , retail dealers or company stores reduce or stop operations , or mhp owners reduce their future home purchases ; 22 o reduced production resulting from factors such as the spread of the illness through the company 's workforce , reduced product demand , or government-mandated closures of our factories , company-owned stores , or retail lots of independent dealers who carry our products ; o delays in development projects as zoning , regulatory , and permitting decisions are likely to be postponed and the expected negative impact of the pandemic on the construction industry ; o reduced raw material availability related to global supply chain disruption from the pandemic , including possible border closures ; o decreased cash flow from operations which could negatively affect our liquidity ; o an outbreak of illness among our management and accounting staff could negatively affect our ability to maintain operations , operate our financial systems , delay our statutory reporting , and reduce our internal control of financial reporting . we continue to monitor government responses to support the economy and evaluate how those actions might mitigate the risks noted above . at this time , we believe that the pandemic will have a negative effect on our financial results that could range from minor to material . management has taken a number of actions in recent weeks , including stimulating demand by offering discounts and modified purchase terms , reducing production labor , suspending overtime , and reducing rates of pay for non-production workers . additionally , the company has negotiated a new credit agreement with its primary bank that will expand and extend our credit facility . management expects to close and execute the new agreement in the near future . critical accounting policies and estimates our management 's discussion and analysis of our financial condition and results of operations is based upon our 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 estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . management bases its estimates and judgments on historical experience and on 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 . actual results may differ from these estimates under different assumptions or conditions . management believes the following accounting policies are critical to our operating results or may affect significant judgments and estimates used in the preparation of our financial statements . allowance for loan losses—consumer loan receivable the allowance for loan losses reflects management 's estimate of losses inherent in the consumer loans that may be uncollectible based upon review and evaluation of the consumer loan portfolio as of the date of the balance sheet . a reserve is calculated after considering , among other things , the loan characteristics , including the financial condition of borrowers , the value and liquidity of collateral , delinquency and historical loss experience . the allowance for loan losses is comprised of two components : the general reserve and specific reserves . our calculation of the general reserve considers the historical loss rate for the last three years , adjusted for the estimated loss discovery period and any qualitative factors both internal and external to our company . specific reserves are determined based on probable losses on specific classified impaired loans . our policy is to place a loan on nonaccrual status when there is a clear indication that the borrower 's cash flow may not be sufficient to meet payments as they become due , which is normally when either principal or interest is past 23 due and remains unpaid for more than 90 days . management implemented this policy based on an analysis of historical data and performance of loans and the likelihood of recovery once principal or interest payments became delinquent and were aged more than 90 days . payments received on nonaccrual loans are accounted for on a cash basis , first to interest and then to principal , as long as the remaining book balance of the asset is deemed to be collectible . the accrual of interest resumes when the past due principal or interest payments are brought within 90 days of being current . story_separator_special_tag the cost of product sales decreased $ 2.3 million , or 2.2 % , in 2019 as compared to 2018. the reduction in costs is primarily related to the shift in our product sales mix , including the decline in product sales to fema . selling , general and administrative expenses increased $ 4.5 million , or 21.2 % , in 2019 as compared to 2018. this increase resulted from a $ 1.8 million increase in salaries and incentive costs primarily related to our operations as a public company , a $ 1.2 million increase in salaries related to the operations of our company‑owned retail lots , a $ 1.1 million increase in expense for services performed by outside contractors , a $ 0.8 million increase in loan loss reserve and a $ 0.4 million increase in advertising and promotions . these increases were partially offset by a net decrease of $ 0.6 million in warranty costs related to the decline in product sales to fema . in addition , d ealer incentive expense decreased $ 0.1 million , or 11.8 % in 2019 as compared to 2018. this decrease was the result of the decline in consignment sales . other income ( expense ) , net was a loss of $ 0.3 million in 2019 , as compared to a loss of $ 2.2 million in 2018. this decline was primarily due to a decrease of $ 41.4 million in our average borrowings outstanding on our lines of credit after the completion of our ipo . following the completion of our ipo , we paid off over $ 40.0 million borrowed against our lines of credit . income tax expense for 2019 was $ 8.7 million compared to $ 9.1 million for 2018. the effective tax rate for the year ended december 31 , 2019 was 23.3 % and differs from the federal statutory rate of 21 % primarily due to state income taxes . the effective tax rate for the year ended december 31 , 2018 was 29.8 % and differs from the federal statutory rate of 21 % due to recognition of a deferred tax expense associated with the corporate reorganization , state income taxes and other permanent differences between book and tax basis . liquidity and capital resources cash and cash equivalents we consider all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents . we maintain cash balances in bank accounts that may , at times , exceed federally insured limits . we have not incurred any losses from such accounts and management considers the risk of loss to be minimal . we believe that cash flow from operations , cash and cash equivalents at december 31 , 2019 , and availability on our lines of credit will be sufficient to fund our operations and provide for growth for the next 12 to 18 months and into the foreseeable future . we have negotiated a new credit agreement with capital one , n.a . that will replace , expand and extend our credit availability . we expect to close and execute the new agreement in the near future . as of december 31 , 2019 , we had approximately $ 1.7 million in cash and cash equivalents , compared to $ 2.6 million as of december 31 , 2018. in january 2019 , we received gross proceeds of $ 7.2 million from the exercise of the underwriters ' option to purchase additional shares to cover over-allotments in connection with the ipo . these proceeds were primarily used for payments to reduce our borrowings under the lines of credit . 27 story_separator_special_tag agreement with stated annual interest rates of 3.75 % with shipley & sons , ltd. , a related party through the common ownership of kenneth e. shipley , a significant shareholder of our company and our president and chief executive officer . the note was due on demand . interest paid on the note payable was $ 47,000 for the year ended december 31 , 2018. on october 18 , 2018 , this note payable was paid in full . pilot agreement . in december 2016 , we entered into a payment in lieu of taxes ( “ pilot ” ) agreement commonly offered in georgia by local community development programs to encourage industry development . the net effect of the pilot agreement is to provide us with incentives through the abatement of local , city and county property taxes and to provide financing for improvements to our georgia plant ( the “ project ” ) . in connection with the pilot agreement , the putman county development authority provides a credit facility for up to $ 10,000,000 , which can be drawn upon to fund project improvements and capital expenditures as defined in the agreement . if funds are drawn , we would pay transactions costs and debt service payments . the pilot agreement requires interest payments of 6.00 % per annum on outstanding balances , which are due each december 1 through maturity on december 1 , 2021 , at which time all unpaid principal and interest are due . the pilot agreement is collateralized by the assets of the project . as of december 31 , 2019 , we had not drawn down on this credit facility . contractual obligations the following table is a summary of contractual cash obligations as of december 31 , 2019 : replace_table_token_8_th 29 off‑balance sheet arrangements we did not have any off‑balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition , net sales , results of operations , liquidity or capital expenditures . however , we do have a repurchase agreement with a financial institution providing inventory financing for independent retailers of our products . under this agreement , we have agreed to repurchase homes at declining prices over the term of the agreement ( 24 months
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with a maximum credit limit of $ 45,000,000 as of december 31 , 2019. on may 12 , 2017 , revolver 1 was amended to extend the maturity date to may 11 , 2020 and increase the maximum borrowing availability under revolver 1 to $ 45,000,000. for the years ended december 31 , 2019 and 2018 , revolver 1 accrued interest at one-month libor plus 2.40 % . the interest rates in effect as of december 31 , 2019 and 2018 were 4.09 % and 4.78 % , respectively . amounts available under revolver 1 are subject to a formula based on eligible consumer loans and mhp notes and are secured by all accounts receivable and a percentage of the consumer loans receivable and mhp notes . the amount of available credit under revolver 1 was $ 16,140,000 and $ 41,321,000 at december 31 , 2019 and 2018 , respectively . for the years ended december 31 , 2019 and 2018 , interest expense was $ 396,000 and $ 1,701,000 , respectively . the outstanding balance as of december 31 , 2019 and 2018 was $ 28,860,000 and $ 3,679,000 , respectively . we were in compliance with all financial covenants as of december 31 , 2019 , including that we maintain a tangible net worth of at least $ 90,000,000 and that we maintain a ratio of debt to ebitda of 4‑to‑1 , or less . the company has negotiated a new credit agreement with capital one , n.a . that will replace , expand , and extend our credit availability . management expects to close and execute the new agreement in the near future . veritex community bank revolver . in april 2016 , we entered into an agreement with veritex community bank to secure an additional revolving line of credit of $ 15,000,000 ( “ revolver 2 ” ) . revolver 2 accrues interest at one- 28 month libor plus 2.50 % and all unpaid principal and interest is due at maturity on april 4 , 2021. revolver 2 is secured by all finished goods inventory excluding repossessed homes . amounts available under revolver 2 are subject to a formula based on eligible inventory .
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Liquidity
| 5,994
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the allowed composition claims of this patent application encompass genetically-modified human t cells comprising the pbcar19b construct , which is inserted within the t cell receptor alpha constant locus . once issued , patents arising from this patent family will have standard expiration dates in april 2040. in preclinical studies , pbcar19b has shown to delay both t cell and natural killer cell mediated allogeneic rejection in vitro and may improve the persistence of allogeneic car t cells . we expect to advance a program targeting the rare genetic disease ph1 as our lead wholly owned in vivo gene correction program . ph1 affects approximately 1-3 people per million in the united states and is caused by loss of function mutations in the agxt gene , leading to the accumulation of calcium oxalate crystals in the kidneys . patients suffer from painful kidney stones which may ultimately lead to renal failure . using arcus , we are developing a potential therapeutic approach to ph1 that involves knocking out a gene called hao1 which acts upstream of agxt . suppressing hao1 has been shown in preclinical models by us to prevent the formation of calcium oxalate . we therefore believe that a one-time administration of an arcus nuclease targeting hao1 may be a viable strategy for a durable treatment of ph1 patients . pre-clinical research has continued to progress , and we expect to provide an update on this program in the first half of 2021. in january 2021 , we disclosed our intention to spinout our wholly owned subsidiary , elo . we are continuing to explore our strategic options , and the timing of any such sale , spinout or other treatment of elo remains uncertain . since our formation in 2006 , we have devoted substantially all of our resources to developing arcus , conducting research and development activities , recruiting skilled personnel , developing manufacturing processes , establishing our intellectual property portfolio and providing general and administrative support for these operations . we have financed our operations primarily with proceeds from upfront payments from collaboration and licensing agreements , our ipo , and private placements of convertible preferred stock and convertible debt . on april 1 , 2019 , we completed our ipo of 9,085,000 shares of common stock , including the underwriters ' full exercise of their option to purchase an additional 1,185,000 additional shares of common stock , at an offering price of $ 16.00 per share , for net proceeds of approximately $ 130.5 million after deducting underwriting discounts and commissions and offering expenses payable by us . as of december 31 , 2020 , we have generated approximately $ 492.5 million from third parties to date . 100 since our inception , we have incurred significant operating losses and have not generated any revenue from the sale of products . our ability to generate any product revenue or product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates or the product candidates of our collaborators for which we may receive milestone payments or royalties . our net losses were $ 109.0 million and $ 92.9 million for the years ended december 31 , 2020 and december 31 , 2019 , respectively . as of december 31 , 2020 , we had an accumulated deficit of $ 286.1 million . we expect our operating expenses to increase substantially in connection with the expansion of our product development programs and capabilities . we will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for one of our product candidates or the product candidates of our collaborators for which we may receive milestone payments or royalties . if we obtain regulatory approval for any of our product candidates , we expect to incur significant expenses related to developing our commercialization capability to support product sales , marketing and distribution . in addition , we expect to continue to incur additional costs associated with operating as a public company . as a result of these anticipated expenditures , we will need additional financing to support our continuing operations . until such time as we can generate significant revenue from product sales , if ever , we expect to finance our cash needs through a combination of public equity , debt financings or other sources , which may include current and new collaborations with third parties . adequate additional financing may not be available to us on acceptable terms , or at all . our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy . we can not assure you that we will ever generate significant revenue to achieve profitability . because of the numerous risks and uncertainties associated with the development of therapeutic and agricultural products , we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability . even if we are able to generate revenue from product sales , we may not become profitable . if we fail to become profitable or are unable to sustain profitability on a continuing basis , then we may be required to raise additional capital on terms that are unfavorable to us or we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations . we currently conduct our operations through two reportable segments : therapeutics and food . our therapeutics segment is focused on allogeneic car t immunotherapy and in vivo gene correction . our food segment focuses on applying arcus to develop food and nutrition products through collaboration agreements with consumer-facing companies . story_separator_special_tag under the servier agreement , we recognized $ 18.0 million and $ 7.3 million in revenue during the years ended december 31 , 2020 and december 31 , 2019 , respectively . the amount recorded as deferred revenue was $ 82.9 million and $ 80.9 million as of december 31 , 2020 and december 31 , 2019 , respectively . springworks therapeutics in september 2020 , we entered into a clinical trial collaboration agreement with springworks . pursuant to the agreement , pbcar269a will be evaluated in combination with nirogacestat , springworks ' investigational gsi , in patients with r/r multiple myeloma . under the terms of the agreement , we will bear all costs with the conduct of the clinical trial including providing pbcar269a for use in the trial , and springworks is responsible for providing nirogacestat at its sole cost and expense . gilead on july 6 , 2020 , gilead sciences ( “ gilead ” ) notified us of its termination of the collaboration and license agreement dated september 10 , 2018 , subsequently amended by amendment no . 1 dated march 10 , 2020 or ( the “ gilead agreement ” ) , to develop genome editing tools using arcus to target viral dna associated with the hepatitis b virus . pursuant to the termination notice , the gilead agreement terminated on september 4 , 2020. upon termination , we regained full rights and all data we generated for the in vivo chronic hepatitis b program developed under the gilead agreement . we recognized $ 3.9 million and $ 13.3 million in revenue under the gilead agreement during the years ended december 31 , 2020 and december 31 , 2019 , respectively , and $ 1.5 million in deferred revenue as of december 31 , 2019. we did not receive any milestone payments under the gilead agreement during the years ended december 31 , 2020 or december 31 , 2019. trustees of the university of pennsylvania in january 2018 , we entered into a research , collaboration and license agreement with the trustees of the university of pennsylvania ( “ penn ” ) to collaborate on the preclinical development for gene editing products involving the delivery of an arcus nuclease . on april 29 , 2020 , both parties agreed to coordinate a wind-down of all activities in their entirety under the agreement , effective as of june 30 , 2020 , however , in august 2020 and subsequently in january 2021 , both parties agreed to extend certain portions of the agreement until 2022. we will not be required to make termination payments to penn . food segment collaborations dole food company through our wholly owned subsidiary , elo , in june 2020 , we entered into a research , development , and commercialization agreement with dole with the aim to co-develop banana varieties resistant to foc tr4 , utilizing proprietary computational biology workflows and the arcus genome editing platform . the disease caused by foc tr4 , commonly known as fusarium wilt , threatens the continued cultivation of the world 's most popular variety of banana called cavendish , which is of considerable economic significance as this variety is used to produce export bananas for key markets around the globe and dole is one of the largest 103 producers in the industry . fungicides , or other traditional means of disease control have failed as the pandemic continues to spread across vital banana growing economies . development of foc tr4 varieties is critically important to save the banana industry , to protect the livelihoods of millions of banana growers and continue to provide consumers an affordable and nutritious fruit . under the terms of the collaboration , dole will fully fund research and development efforts executed by elo , and elo is eligible to receive royalties on any commercialized plant product . cargill , inc. in 2014 , through elo , we and cargill , inc. entered into a collaboration to produce arcus-optimized canola varieties with significantly lower levels of saturated fatty acids compared to the current levels in greenhouse studies . on july 30 , 2020 , we and cargill mutually agreed to terminate the collaboration , effective august 31 , 2020. components of our results of operations revenue to date , we have not generated any revenue from product sales and do not expect to generate any revenue from product sales in the foreseeable future . we record revenue from collaboration agreements , including amounts related to upfront payments , milestone payments , annual fees for licenses of our intellectual property and research and development funding . research and development expenses research and development expenses consist primarily of costs incurred for our research activities , including our discovery efforts and the development of our product candidates . these include the following : salaries , benefits and other related costs , including share-based compensation expense , for personnel engaged in research and development functions ; expenses incurred under agreements with third parties , including contract research organizations , or cros , and other third parties that conduct preclinical research and development activities and clinical trials on our behalf ; costs of developing and scaling our manufacturing process and manufacturing drug products for use in our preclinical studies and ongoing and future clinical trials , including the costs of contract manufacturing organizations , or cmos , and our mcat facility that will manufacture our clinical trial material for use in our preclinical studies and ongoing and potential future clinical trials ; costs of outside consultants , including their fees and related travel expenses ; costs of laboratory supplies and acquiring , developing and manufacturing preclinical study and clinical trial materials ; license payments made for intellectual property used in research and development activities ; and facility-related expenses , which include direct depreciation costs and expenses for rent and maintenance of facilities and other operating costs if specifically identifiable to research activities . we expense
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net cash used in investing activities during the year ended december 31 , 2020 was $ 5.0 million , compared to $ 24.7 million in the year ended december 31 , 2019. the decrease in cash used in investing activities during the year ended december 31 , 2020 was primarily due to the completion of the build-out of our mcat facility in research triangle park and other leased facilities in 2019. cash provided by financing activities net cash provided by financing activities during the year ended december 31 , 2020 was $ 1.3 million , compared to $ 173.4 million during the year ended december 31 , 2019. the higher cash provided by financing activities during the year ended december 31 , 2019 , compared to the year ended december 31 , 2020 , was due to proceeds received from our ipo , which closed in april 2019 , and proceeds from the 2019 notes , which were issued in march 2019. financing activities in the twelve months ended december 31 , 2020 related to cash proceeds received from stock option exercise and our employee stock purchase plan . debt obligations in march 2019 , we issued an aggregate principal amount of $ 39.6 million of 2019 notes in a private placement transaction . upon settlement , the change in fair value of the 2019 notes was $ 9.8 million and the accrued interest on the 2019 notes was $ 0.2 million . pursuant to their terms , the 2019 notes were settled in 2,921,461 shares of our common stock upon the closing of our ipo at a settlement price of $ 13.60 per share , which is equal to 85 % of the ipo price per share .
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Liquidity
| 3,849
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net proceeds from the offering were approximately $ 28 million , after an approximate 6 % underwriting fee and other offering expenses and reimbursements pursuant to the underwriting agreement . following our ipo , and to meet our obligations under the registration rights agreement , we filed a final prospectus on december 9 , 2013 registering 51,101,434 class a common shares . these shares had previously been issued during our private placement . through our primary mortgage insurance subsidiary , nmic , a monoline mi company , and its affiliated reinsurance company , re one , we provide residential mi in the united states . we are one of seven companies in the u.s. who offer such insurance . we believe the mi industry has significant barriers to entry due to the substantial capital necessary to fund operations and satisfy gse requirements , the need for a customer-integrated operating platform capable of issuing and servicing mortgage insurance policies , the competitive positions and established customer relationships of existing mortgage insurance providers , and in order to conduct mi business nationwide , the need to obtain and maintain insurance licenses in all 50 states and d.c. additionally , the resource commitment required by customers , and larger lenders in particular , to connect to a new mortgage insurance platform , such as ours , is significant , and absent a critical need , such as the capital constraints in the mi industry during the financial crisis , they have historically , in our view , been reluctant to make such an investment . we were formed at a time when the severe dislocation in the private mortgage insurance industry caused by the financial crisis created a need for newly capitalized mortgage insurers and this has facilitated our efforts to establish relationships with lenders . 57 since the company 's inception , our efforts to build our mi business have included , among other things , building an executive management team and hiring other key officers and directors and staff , building our operating processes , designing and developing our business and technology applications , environment and infrastructure , and obtaining state licenses and gse approval . nmic works to differentiate itself primarily by prompt and predictable underwriting , thereby aiming to provide our customers with a higher degree of confidence of coverage than our competitors provide . we have established risk management controls throughout our organization that we believe will support our continued financial strength . as a newly capitalized mortgage insurer , we have the ability to write new business without the burden of risky legacy exposures and believe our current capital supports our current business writing strategy while staying within the regulatory guidelines imposed by state insurance departments and the gses . our financial results to date have been primarily driven by expenditures related to our business development activities , and to a lesser extent , by our investment activities . since we commenced writing mi on a limited test basis in april 2013 , we have become a fully operational mi company , with $ 161.7 million of primary insurance-in-force and $ 5.1 billion of pool insurance in force as of december 31 , 2013 . for the year ended december 31 , 2013 , the company had primary risk-in-force of $ 36.5 million compared to primary risk-in-force of $ 1.2 million at september 30 , 2013. pool risk-in-force for the year ended december 31 , 2013 was $ 93.1 million . we discuss the following in turn below : the significant conditions and factors that have affected our operating results , including the costs associated with the key start-up activities in which we were engaged and development of our investment portfolio ; the factors we expect will impact our future results as our mortgage insurance business continues to grow , and certain issues impacting our holding company , nmih ; our sources and uses of liquidity and capital resources ; our operating results , which were primarily driven by our start up activities , and the composition of our niw and iif ; and critical accounting estimates that require management to exercise significant judgments , often as a result of the need to make estimates about the effect of matters that are inherently uncertain . operating expenses from start up activities our expenses for the years ended december 31 , 2013 , 2012 and 2011 , were $ 60.7 million , $ 27.8 million and $ 1.3 million , respectively , and consist largely of expenses associated with start up activities , including payroll and related expenses , share-based compensation and professional fees . the costs that we have incurred to date represent the culmination of our start-up activities . as such , they do not reflect the same types of expenses that an mi company with an established insurance portfolio after many years of operations would be expected to incur . we anticipate that , as our insurance writings grow and our sale activities increase , our underwriting expenses in future periods will be considerably higher than in the periods presented to date . although we expect our year-over-year expenses to increase as we grow our business , we ultimately expect that the majority of our operating expenses will be relatively fixed in the long term . as our business matures and we deploy the majority of our capital , we are targeting our expense ratio ( expenses to premiums written ) to fall into a range of 20 % to 25 % . during the first few years of operation , our expense ratio is expected to be significantly higher than this range given the low levels of premium written compared to our `` fixed `` costs customary to operating a mortgage insurance company . we believe that we will have an efficient expense structure providing us with greater flexibility . story_separator_special_tag achieving connectivity with leading third-party loan origination systems utilized by regional accounts , including ellie mae encompass360® . the regional accounts who originate loans using these third-party loan origination systems will be able to automatically select nmic as an mi provider within those systems . the progress we have made to date connecting with these loan origination systems is another significant achievement with respect to our readiness to engage with regional accounts . 61 competition the mi industry is highly competitive and includes other private mortgage insurers , governmental agencies that sponsor government-backed mortgage insurance programs and alternatives to credit enhancement products , such as piggy-back loans . see part i , item 1 , `` business - sales and marketing and competition - competition , `` for additional discussion of our competitors . the mi industry has recently been in a state of flux , with some existing companies exiting and new companies entering the space . in addition to ourselves , in 2010 another new mi company was formed and started writing mi . one existing company that had been serving credit unions only was acquired and announced its intent to expand operations to serve the entire mortgage market . in addition , an existing mi company that had previously stopped writing mi business has announced its intent to attempt to resume its mi operations . given this dynamic , we expect that there will be pressure in the coming years for industry participants to establish , grow or maintain their market share and that many mi companies will respond to this pressure by lowering their rates , which will in turn put pressure on the rest of the industry . we believe that our strong capital position and clear terms of coverage convey upon us an advantage in the marketplace . we expect that this advantage will translate to achieving our pro-rata market share on a faster than normal timeline . our competitors ' market share of the private mi industry for the year ended december 31 , 2013 varied from a low of approximately 3 % to a high of approximately 28 % . in general , we expect the total origination market to decline in 2014. however , within the total market of low-down payment loan originations , we expect the overall private mi penetration rate to increase as the fha continues to scale back . see `` - factors expected to affect results as our mortgage insurance operations grow - competition with fha , `` below . employees we believe our company is an attractive , stable place of employment , given that we are a well-capitalized insurance company that has made significant progress in commencing business in the mi marketplace , allowing us to attract what we believe to be high-quality talent . we believe that our growth and future success will depend in large part on our services and the skills of our management team and our ability to motivate and retain these individuals and other key personnel . as of december 31 , 2013 , we had significantly developed our employee base to support our regional and national sales teams , policy acquisition and servicing , it , and all other back-office functions . based on the execution of our business plan , we hired a substantial number of employees since raising our initial capital in april 2012 and expect to continue to add additional staff throughout the first half of 2014 . as of december 31 , 2013 , we had 141 total full-time employees . new business writings nmic commenced , on a limited test basis , writing insurance business in april 2013. as of december 31 , 2013 , nmic has primary insurance-in-force of $ 161.7 million and $ 36.5 million of primary risk-in-force , representing 653 loans . we expect nmic 's insurance-in-force and risk-in-force to increase over the coming months as our operations continue to mature . during the second fiscal quarter of 2013 , nmic bid on a pool insurance transaction proposed by fannie mae . as discussed previously , the fhfa set targets for reducing the gses ' mortgage risk in 2013. one of the methods available to the gses was to utilize mi companies as insurers of particular groups , or pools , of loans . in july 2013 , we were notified that fannie mae had selected nmic for this pool transaction . nmic entered into an agreement with fannie mae , pursuant to which nmic initially insured approximately 22,000 loans with insurance-in-force of $ 5.2 billion ( as of september 1 , 2013 ) . the effective date of the agreement and the coverage was september 1 , 2013 , and in september 2013 , we received our first monthly premium payment from fannie mae . the agreement has an expected term of 10 years from the coverage effective date . the risk-in-force to nmic is $ 93.1 million which represents the amount between a deductible payable by fannie mae on initial losses and a stop loss , above which , losses are borne by fannie mae . nmic provides this same level of risk coverage over the term of the agreement . in addition , the agreement contains counterparty requirements that specify the amount of capital nmic will need to maintain to support the agreement , which is equal to the amount of primary net risk-in-force on this pool . the capital we are required to maintain to support this risk will decline over the 10 -year term of the agreement as the loans in the pool amortize . nmic will be paid monthly premiums by fannie mae based on a fixed premium rate and the aggregate outstanding unpaid principal balance of loans in the pool . similar to other monthly products , we will record the premium received on a monthly basis as written premium . in addition , all of the premium will be recorded as earned in
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liquidity and capital resources our mi companies ' principal operating sources of liquidity will be premiums that we receive from policies and income generated by our investment portfolio . our mi companies ' primary liquidity needs include the payment of claims on our mi policies , operating expenses , investment expenses and other costs of our business . we raised net proceeds of $ 510 million in our private placement , which we have primarily used to fund our operations . we contributed $ 210 million to nmic , whereupon nmic contributed $ 10 million to its wholly-owned subsidiary , re two . in addition , we contributed $ 10 million to re one . on september 30 , 2013 , we merged re two into nmic with nmic surviving the merger . as of december 31 , 2013 , we had approximately $ 465 million in cash and investments of which $ 265 million was held at our holding company . as of december 31 , 2013 , the amount of restricted net assets held by our consolidated insurance subsidiaries totaled approximately $ 193 million of our consolidated net assets of approximately $ 463 million . the following table summarizes our consolidated cash flows from operating , investing and financing activities : replace_table_token_6_th 68 cash used in operating activities for the year ended december 31 , 2013 was higher compared to the same period in 2012 due primarily to significant hiring of management and staff personnel beginning in may 2012 through year end 2013 and professional costs incurred in conjunction with our state licensing process and litigation support , offset somewhat by collected premiums during 2013. cash used in
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Liquidity
| 919
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excluding the impact of the tax act , adjusted income tax expense would have been $ 48.2 million , or 38.5 percent of income before income taxes , for the year ended december 31 , 2017. the 2018 income tax rate is lower than the adjusted 2017 income tax rate primarily due to a reduction in federal tax rate from 35 percent in 2017 to 21 percent in 2018 , offset by $ 2.9 million , or 2.0 percent of non-cash expense related to discrete tax adjustments resulting from applying the tax act in 2018. net income during the year ended december 31 , 2018 decreased $ 122.0 million , or 52.8 percent , compared to the prior year . consolidated results : 2017 compared with 2016 : replace_table_token_8_th fiscal year : fiscal year ended december 31 , 2017 and 2016 include 52 weeks and 53 weeks , respectively . consolidated operating revenue for the year ended december 31 , 2017 increased $ 105.3 million , or 5.4 percent , compared to the prior year due to increases of $ 30.7 million and $ 74.6 million in ocean transportation and logistics revenues , respectively . operating costs and expenses for the year ended december 31 , 2017 increased $ 114.7 million , or 6.4 percent , compared to the prior year . the increase was due to an increase of $ 48.8 million and $ 65.9 million in operating costs and expenses for ocean transportation and logistics , respectively . operating income for the year ended december 31 , 2017 decreased $ 9.4 million , or 6.0 percent , compared to the prior year . the decrease was due to a decrease of $ 18.1 million for ocean transportation , partially offset by an increase of $ 8.7 million for logistics in operating income . the reasons for changes in operating revenue , operating costs and expenses , and operating income are described below , by business segment , in the analysis of operating revenue and income by segment . 28 interest expense was $ 24.2 million for the year ended december 31 , 2017 , compared to $ 24.1 million for the year ended december 31 , 2016. the increase in interest expense was due to higher borrowings as a result of recent acquisitions and vessel construction payments , offset by higher capitalized interest . other income ( expense ) , net for the year ended december 31 , 2017 was income of $ 2.1 million , compared to expense of $ 2.1 million for the year ended december 31 , 2016 , and relates to the amortization of certain components of net periodic benefit costs or gains related to the company 's pension and post-retirement plans . income taxes during the year ended december 31 , 2017 was a non-cash income tax benefit of $ 105.8 million , or 84.5 percent of income before income taxes , as compared to income tax expense of $ 49.1 million , or 37.6 percent of income before income taxes in the prior year . the non-cash income tax benefit includes the benefit of $ 154.0 million related to the remeasurement of the company 's deferred assets and liabilities , and other discrete tax adjustments resulting from applying the tax act as of december 31 , 2017. excluding the impact of the tax act , adjusted income tax expense would have been $ 48.2 million , or 38.5 percent of income before income taxes for the year ended december 31 , 2017. the adjusted 2017 income tax rate would have been higher than the 2016 income tax rate as the 2016 income tax rate was favorably impacted by the release of unrecognized tax benefit reserves during 2016. net income during the year ended december 31 , 2017 increased $ 149.6 million , or 183.8 percent , compared to the prior year . analysis of operating revenue and income by segment additional detailed information related to the operations and financial performance of the company 's reportable segments is included in part ii item 6 and note 3 to the consolidated financial statements in item 8 of part ii below . the following information should be read in relation to the information contained in those sections . ocean transportation : 2018 compared with 2017 : replace_table_token_9_th ( 1 ) approximate volumes included for the period are based on the voyage departure date , but revenue and operating income are adjusted to reflect the percentage of revenue and operating income earned during the reporting period for voyages in transit at the end of each reporting period . ( 2 ) includes containers from services in various islands in micronesia and the south pacific , and in okinawa , japan . ocean transportation revenue increased $ 69.5 million , or 4.4 percent , during the year ended december 31 , 2018 , compared with the year ended december 31 , 2017. this increase was primarily due to higher fuel surcharge revenue , higher average freight rates in china and higher revenue in japan , partially offset by lower revenue in guam . on a year-over-year feu basis , hawaii container volume decreased by 0.7 percent primarily due to lower eastbound volume ; alaska volume increased by 2.5 percent primarily due to an increase in northbound volume , partially offset by a decrease in southbound volume as a result of a weaker-than-expected seafood season compared with the very strong seafood harvest levels in 2017 ; china volume was 6.7 percent lower due to fewer sailings and lower volume during the lunar new year period ; guam volume was 3.0 percent lower primarily due to increased competition ; and other containers volume increased 39.3 percent largely due to the japan service . story_separator_special_tag these asset impairment analyses are highly subjective because they require management to make assumptions and apply considerable judgments to , among other things , estimates of the timing and amount of future cash flows , expected useful lives of the assets , uncertainty about future events , including changes in economic conditions , changes in operating performance , changes in the use of the assets , and ongoing costs of maintenance and improvements of the assets , and thus , the accounting estimates may change from period to period . if management uses different assumptions or if different conditions occur in future periods , the company 's financial condition or its future operating results could be materially impacted . the company has evaluated its long-lived assets and finite lived intangible assets for impairment and determined that the fair values are not less than the carrying amounts . no impairment charges related to long-lived assets and finite-lived intangible assets were recorded for the years ended december 31 , 2018 , 2017 , and 2016. indefinite-life intangible assets and goodwill : the company 's intangible assets include goodwill , customer relationships and a trade name . in estimating the fair value of a reporting unit , the company uses a combination of a discounted cash flow model and fair value based on market multiples of earnings before income taxes , depreciation and amortization ( “ ebitda ” ) . the discounted cash flow approach requires the company to use a number of assumptions , including market factors specific to the business , the amount and timing of estimated future cash flows to be generated by the business over an extended period of time , long-term growth rates for the business , and a discount rate that considers the risks related to the amount and timing of the cash flows . although the assumptions used by the company in its discounted cash flow model are consistent with the assumptions the company used to generate its internal strategic plans and forecasts , significant judgment is required to estimate the amount and timing of future cash flows from the reporting unit and the risk of achieving those cash flows . when using market multiples of ebitda , the company makes judgments about the comparability of multiples in closed and proposed transactions . accordingly , changes in assumptions and estimates , including , but not limited to , changes driven by external factors , such as industry and economic trends , and those driven by internal factors , such as changes in the company 's business strategy and its internal forecasts , could have a material effect on the company 's financial condition or its future operating results . the company has evaluated its indefinite-life intangible assets and goodwill for impairment and determined that the respective fair value of goodwill attributed to the ocean transportation and the logistics reporting units exceeded the 35 carrying amount as of the date of the impairment review . no impairment charges of indefinite-life intangible assets and goodwill were recorded for the years ended december 31 , 2018 , 2017 and 2016. legal contingencies : the company 's results of operations could be affected by significant litigation adverse to the company , including , but not limited to , liability claims , antitrust claims , claims related to coastwise trading matters , lawsuits involving private plaintiffs or government agencies , and environment related matters . the company records accruals for legal matters when the information available indicates that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated . management makes adjustments to these accruals to reflect the impact and status of negotiations , settlements , rulings , advice of outside legal counsel and other information and events that may pertain to a particular matter . in making determinations of likely outcomes of litigation matters , the company considers many factors . these factors include , but are not limited to , the nature of specific claims including un-asserted claims , the company 's experience with similar types of claims , the jurisdiction in which the matter is filed , input from outside legal counsel , the likelihood of resolving the matter through alternative dispute resolution mechanisms and the matter 's current status . predicting the outcome of claims and lawsuits , and estimating related costs and exposure involves substantial uncertainties that could cause actual costs to vary materially from those estimates . uninsured risks and related liabilities : the company is uninsured for certain risks but when feasible , many risks are mitigated by insurance . the company purchases insurance with deductibles or self-insured retentions . such insurance includes , but is not limited to , employee health , workers ' compensation , marine liability , auto liability and physical damage to inland property , equipment and vessels . for certain risks , the company elects to not purchase insurance because of excessive cost of insurance or the perceived remoteness of the risk . in addition , the company retains all risk of loss that exceeds the limits of the company 's insurance policies . when estimating its reserves for uninsured risks and related liabilities , the company considers a number of factors , including historical claims experience , demographic factors , current trends , and analyses provided by independent third-parties . periodically , management reviews its assumptions and estimates used to determine the adequacy of the company 's reserves for uninsured risks and related liabilities . the company 's uninsured risks and related liabilities contain uncertainties because management is required to apply judgment and make long-term assumptions to estimate the ultimate cost to settle reported claims , and of claims incurred but not reported , as of the balance sheet date . if management uses different assumptions or if different conditions occur in future periods , the company 's financial condition or its future operating results could be materially impacted
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liquidity and capital resources · contractual obligations , commitments , contingencies and off-balance sheet arrangements · critical accounting estimates · other matters 25 business outlook the following is the company 's fourth quarter 2018 discussion and 2019 outlook : ocean transportation : the company 's container volume in the hawaii service in the fourth quarter 2018 was flat year-over-year despite modest growth in the hawaii economy supported primarily by healthy tourism activity and low unemployment . the company expects volume in 2019 to approximate the level achieved in 2018 , reflecting modest economic growth in hawaii and stable market share . in china , the company 's container volume in the fourth quarter 2018 was 3.8 percent higher year-over-year as the company experienced elevated demand for its service late in the quarter during a period that is traditionally not as strong . the company continued to realize a sizeable rate premium in the fourth quarter 2018 and achieved average freight rates higher than the fourth quarter 2017. for 2019 , the company expects a lower contribution from its china tradelane following an exceptionally strong performance in 2018 with lower average freight rates and modestly lower volume than the levels achieved in 2018. in guam , the company 's container volume in the fourth quarter 2018 was 10.6 percent higher year-over-year primarily due to typhoon relief volume . for 2019 , the company expects modestly lower volume as the highly competitive environment remains . in alaska , the company 's container volume for the fourth quarter 2018 was 4.2 percent higher year-over-year due to higher northbound volume . for 2019 , the company expects volume to be modestly higher than the level achieved in 2018 with higher northbound volume supported by improving economic conditions in alaska and higher southbound volume due to stronger seafood harvest levels than in 2018. the contribution in the fourth quarter 2018 from the company 's ssat terminal joint venture investment was $ 0.9 million lower than the fourth quarter 2017 due primarily to higher operating costs , partially offset by higher revenue resulting from higher lift volume .
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Liquidity
| 13,184
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managing our growth effectively will require us to continue to maintain adequate distribution capacity , enhance our store management systems , financial and management controls , information systems and other operational system capabilities . in addition , we will be required to hire , train and retain store management and other qualified personnel . for further information , see part i , item 1a “ risk factors-risk relating to our business and industry. ” over the past five years , we have invested a significant amount of capital in infrastructure and systems necessary to support our future growth and we expect to incur additional capital expenditures related to expansion of our infrastructure and systems in future periods . in fiscal 2015 , we invested in a new erp and began the multi-year implementation of the erp , which is designed to enhance functionality and provide timely information to the company 's management team related to the operation of the business . in fiscal 2020 , we invested in a new retail merchandising system and began the multi-year implementation of the retail merchandising system , which is designed to manage , control , and perform seamless execution of day-to-day merchandising activities , including purchasing , distribution , order fulfillment , and financial close . in fiscal 2015 , we opened a distribution center in pedricktown , new jersey . we occupy approximately 1,000,000 square feet at this distribution center , having expanded from 800,000 square feet in september 2018. in fiscal 2016 , we signed a 15-year lease for a new corporate headquarters location in philadelphia , pennsylvania . we currently occupy approximately 190,000 square feet of office space with multiple options to expand in the future . in march 2019 , we completed the purchase of an approximately 700,000 square foot distribution center in forsyth , georgia . we began operating the distribution center in april 2019. in august 2019 , we acquired land in conroe , texas , to build an approximately 860,000 square foot distribution center for approximately $ 56 million . we began operating the distribution center in july 2020. in july 2020 , we acquired land in buckeye , arizona , to build an approximately 860,000 square foot distribution center for approximately $ 65 million . we expect to occupy the distribution center in buckeye , arizona in the second half of 2021. we are planning to lease or build new distribution centers over the next few years to support our growth objectives . we continuously assess ways to maximize the productivity and efficiency of our existing facilities , infrastructure and systems . the timing and amount of investments in our facilities , infrastructure and systems could affect the comparability of our results of operations in future periods . the completion date and ultimate cost of future projects could differ significantly from initial expectations due to construction-related or other reasons . we believe our business strategy will continue to offer significant opportunity , but it also presents risks and challenges . these risks and challenges include , but are not limited to , that we may not be able to effectively identify and respond to changing trends and customer preferences , that we may not be able to find desirable locations for new stores and that we may not be able to effectively manage our future growth . in addition , our financial results can be expected to be directly impacted by substantial increases in product costs due to commodity cost increases or general inflation which could lead to a reduction in our sales as well as greater margin pressure as costs may not be able to be passed on to consumers . to date , changes in commodity prices and general inflation have not materially impacted our business . in response to increasing commodity prices or general inflation , we seek to minimize the impact of such events by sourcing our merchandise from different vendors and changing our product mix . see part i , item 1a “ risk factors ” for a description of these and other important factors that could adversely impact us and our results of operations . how we assess the performance of our business in assessing the performance of our business , we consider a variety of performance and financial measures . these key measures include net sales , comparable sales , cost of goods sold and gross profit , selling , general and administrative expenses and operating income . net sales net sales constitute gross sales net of merchandise returns for damaged or defective goods . net sales consist of sales from comparable stores , non-comparable stores , and e-commerce , which includes shipping and handling revenue . revenue from the sale of gift cards is deferred and not included in net sales until the gift cards are redeemed to purchase merchandise or as breakage revenue in proportion to the pattern of redemption of the gift cards by the customer . our business is seasonal and as a result , our net sales fluctuate from quarter to quarter . net sales are usually highest in the fourth fiscal quarter due to the year-end holiday season . 37 comparable sales comparable sales include net sales from stores that have been open for at least 15 full months from their opening date , and e-commerce sales . comparable stores include the following : stores that have been remodeled while remaining open ; stores that have been relocated within the same trade area , to a location that is not significantly different in size , in which the new store opens at about the same time as the old store closes ; and stores that have expanded , but are not significantly different in size , within their current locations . story_separator_special_tag for stores that are relocated or expanded , the following periods are excluded when calculating comparable sales : the period beginning when the closing store receives its last merchandise delivery from one of our distribution centers through : ▪ the last day of the fiscal year in which the store was relocated or expanded ( for stores that increased significantly in size ) ; or ▪ the last day of the fiscal month in which the store re-opens ( for all other stores ) ; and the period beginning on the first anniversary of the date the store received its last merchandise delivery from one of our distribution centers through the first anniversary of the date the store re-opened . comparable sales exclude the 53rd week of sales for 53-week fiscal years . in the 52-week fiscal year subsequent to a 53-week fiscal year , we exclude the sales in the non-comparable week from the same-store sales calculation . due to the 53rd week in fiscal 2017 , all comparable sales related to any reporting period during the year ended february 2 , 2019 are reported on a restated calendar basis using the national retail federation 's restated calendar comparing similar weeks . there may be variations in the way in which some of our competitors and other retailers calculate comparable or “ same store ” sales . as a result , data in this annual report regarding our comparable sales may not be comparable to similar data made available by other retailers . non-comparable sales are comprised of new store sales , sales for stores not open for a full 15 months , and sales from existing store relocation and expansion projects that were temporarily closed ( or not receiving deliveries ) and not included in comparable sales . measuring the change in fiscal year-over-year comparable sales allows us to evaluate how we are performing . various factors affect comparable sales , including : consumer preferences , buying trends and overall economic trends ; our ability to identify and respond effectively to customer preferences and trends ; our ability to provide an assortment of high-quality , trend-right and everyday product offerings that generate new and repeat visits to our stores ; the customer experience we provide in our stores and online ; the level of traffic near our locations in the power , community and lifestyle centers in which we operate ; competition ; changes in our merchandise mix ; pricing ; our ability to source and distribute products efficiently ; the timing of promotional events and holidays ; the timing of introduction of new merchandise and customer acceptance of new merchandise ; our opening of new stores in the vicinity of existing stores ; the number of items purchased per store visit ; and weather conditions ; and the impacts associated with the covid-19 pandemic , including closures of our stores , adverse impacts on our operations , and consumer sentiment regarding discretionary spending . opening new stores is an important part of our growth strategy . as we continue to pursue our growth strategy , we expect that a significant percentage of our net sales will continue to come from new stores not included in comparable sales . accordingly , comparable sales is only one measure we use to assess the success of our growth strategy . 38 cost of goods sold and gross profit gross profit is equal to our net sales less our cost of goods sold . gross margin is gross profit as a percentage of our net sales . cost of goods sold reflects the direct costs of purchased merchandise and inbound freight , as well as shipping and handling costs , store occupancy , distribution and buying expenses . shipping and handling costs include internal fulfillment and shipping costs related to our e-commerce operations . store occupancy costs include rent , common area maintenance , utilities and property taxes for all store locations . distribution costs include costs for receiving , processing , warehousing and shipping of merchandise to or from our distribution centers and between store locations . buying costs include compensation expense and other costs for our internal buying organization , including our merchandising and product development team and our planning and allocation group . these costs are significant and can be expected to continue to increase as our company grows . the components of our cost of goods sold may not be comparable to the components of cost of goods sold or similar measures of our competitors and other retailers . as a result , data in this annual report regarding our gross profit and gross margin may not be comparable to similar data made available by our competitors and other retailers . the variable component of our cost of goods sold is higher in higher volume quarters because the variable component of our cost of goods sold generally increases as net sales increase . we regularly analyze the components of gross profit as well as gross margin . any inability to obtain acceptable levels of initial markups , a significant increase in our use of markdowns , and a significant increase in inventory shrinkage or inability to generate sufficient sales leverage on the store occupancy , distribution and buying components of cost of goods sold could have an adverse impact on our gross profit and results of operations . changes in the mix of our products may also impact our overall cost of goods sold . selling , general and administrative expenses selling , general and administrative , or sg & a , expenses are composed of payroll and other compensation , marketing and advertising expense , depreciation and amortization expense and other selling and administrative expenses . sg & a expenses as a percentage of net sales are usually higher in lower sales volume quarters and lower in higher sales volume quarters . the components of our sg & a expenses may not be comparable to those of other retailers .
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40 cost of goods sold and gross profit cost of goods sold increased to $ 1,309.8 million in fiscal year 2020 from $ 1,172.8 million in fiscal year 2019 , an increase of $ 137.0 million , or 11.7 % . the increase in cost of goods sold was primarily the result of an increase in the merchandise costs of goods resulting from an increase in sales . also contributing to the increase in cost of goods sold was an increase in store occupancy costs resulting from new store openings . gross profit decreased to $ 652.3 million in fiscal year 2020 from $ 674.0 million in fiscal year 2019 , a decrease of $ 21.7 million , or 3.2 % . gross margin decreased to 33.2 % in fiscal year 2020 from 36.5 % in fiscal year 2019 , a decrease of approximately 330 basis points . the decrease in gross margin was primarily the result of an increase as a percentage of sales in merchandise cost of goods sold and an increase as a percentage of sales in store occupancy costs due to the impact of covid-19 as we temporarily closed all of our stores while still incurring rent expense . selling , general and administrative expenses selling , general and administrative expenses increased to $ 497.5 million in fiscal year 2020 from $ 456.7 million in fiscal year 2019 , an increase of $ 40.8 million , or 8.9 % . as a percentage of net sales , selling , general and administrative expenses increased approximately 70 basis points to 25.4 % in fiscal year 2020 compared to 24.7 % in fiscal year 2019. the increase in selling , general and administrative expenses was the result of an increase of $ 30.7 million of corporate-related expenses , which is net of the benefit related to the cares act . the increase was also driven by an increase of $ 10.1 million in store-related expenses to support new store growth , which is net of the expense savings from the temporary closure of all of our stores , furloughing of employees , and other non-payroll expense reductions due to the impact of covid-19 .
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ROO
| 9,903
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how the critical audit matter was addressed in the audit our audit procedures related to the operating partnership 's evaluation of whether an investment is a vie and whether an investment qualifies for consolidation under the voting interest entity model in connection with the mgp breit venture transaction under asc 810 included the following , among others : 51 we tested the effectiveness of the control over management 's assessment of the investment in mgp breit venture for consolidation , including the judgments and factors used in determining that the mgp breit venture did not meet the definition of a vie and did not qualify for consolidation under the voting interest entity model . we inspected the underlying agreements and evaluated the reasonableness of the application of consolidation accounting guidance . with the assistance of technical accounting specialists , we evaluated the assumptions and judgments used by management to determine whether the investment in mgp breit venture is a vie and whether it qualifies for consolidation . deloitte & touche llp las vegas , nevada february 23 , 2021 we have served as the operating partnership 's auditor since 2015 . 52 mgm growth properties llc consolidated balance sheets ( in thousands , except share amounts ) replace_table_token_9_th the accompanying notes are an integral part of these consolidated financial statements . 53 mgm growth properties llc consolidated statements of operations ( in thousands , except per share amounts ) replace_table_token_10_th the accompanying notes are an integral part of these consolidated financial statements . 54 mgm growth properties llc consolidated statements of comprehensive income ( loss ) ( in thousands ) replace_table_token_11_th the accompanying notes are an integral part of these consolidated financial statements . 55 mgm growth properties llc consolidated statements of cash flows ( in thousands ) replace_table_token_12_th the accompanying notes are an integral part of these consolidated financial statements . 56 mgm growth properties llc consolidated statements of shareholders ' equity ( in thousands , except per share amounts ) replace_table_token_13_th ( * ) excludes amounts attributable to redeemable noncontrolling interest . see note 2. the accompanying notes are an integral part of these consolidated financial statements . 57 mgm growth properties operating partnership lp consolidated balance sheets ( in thousands , except unit amounts ) replace_table_token_14_th the accompanying notes are an integral part of these consolidated financial statements . 58 mgm growth properties operating partnership lp consolidated statements of operations ( in thousands , except per unit amounts ) replace_table_token_15_th the accompanying notes are an integral part of these consolidated financial statements . 59 mgm growth properties operating partnership lp consolidated statements of comprehensive income ( loss ) ( in thousands ) replace_table_token_16_th the accompanying notes are an integral part of these consolidated financial statements . 60 mgm growth properties operating partnership lp consolidated statements of cash flows ( in thousands ) replace_table_token_17_th the accompanying notes are an integral part of these consolidated financial statements . 61 mgm growth properties operating partnership lp consolidated statements of partners ' capital ( in thousands , except per unit amounts ) replace_table_token_18_th ( * ) excludes amounts attributable to redeemable noncontrolling interest . see note 2. the accompanying notes are an integral part of these consolidated financial statements . 62 mgm growth properties llc and mgm growth properties operating partnership lp notes to consolidated financial statements note 1 — business organization . mgm growth properties llc ( “ mgp ” or the “ company ” ) is a limited liability company that was organized in delaware in october 2015. mgp conducts its operations through mgm growth properties operating partnership lp ( the “ operating partnership ” ) , a delaware limited partnership that was formed in january 2016 and became a subsidiary of mgp in april 2016. the company elected to be taxed as a real estate investment trust ( “ reit ” ) commencing with its taxable year ended december 31 , 2016. mgp is organized in an umbrella partnership reit ( commonly referred to as an “ upreit ” ) structure in which mgp owns substantially all of its assets and conducts substantially all of its business through the operating partnership , which is owned by mgp and certain other subsidiaries of mgm and whose sole general partner is one of mgp 's subsidiaries . mgp has two classes of authorized and outstanding voting common shares ( collectively , the “ shares ” ) : class a shares and a single class b share . the class b share is a non-economic interest in mgp which does not provide its holder any rights to profits or losses or any rights to receive distributions from the operations of mgp or upon liquidation or winding up of mgp but which represents a majority of the voting power of mgp 's shares . mgm resorts international ( “ mgm ” or the “ parent ” ) holds a controlling interest in mgp through its ownership of mgp 's class b share , but does not hold any of mgp 's class a shares . the class b share structure was put in place to align mgm 's voting rights in mgp with its economic interest in the operating partnership . mgm will no longer be entitled to the voting rights provided by the class b share if mgm and its controlled affiliates ' ( excluding mgp and its subsidiaries ) aggregate beneficial ownership of the combined economic interests in mgp and the operating partnership falls below 30 % . the operating agreement provides that mgm may only transfer the class b share ( other than transfers to us and mgm 's controlled affiliates ) if and to the extent that such transfer is approved by an independent conflicts committee , not to be unreasonably withheld . no par value is attributed to mgp 's class a and class b shares . story_separator_special_tag in addition , the obligations of each subsidiary guarantor under its guarantee is limited so as not to constitute a fraudulent conveyance under applicable law , which may eliminate the subsidiary guarantor 's obligations or reduce such obligations to an amount that effectively makes the subsidiary guarantee lack value . the summarized financial information of the operating partnership and its guarantor subsidiaries , on a combined basis , is presented below : december 31 , 2020 balance sheet ( in thousands ) real estate investments , net $ 8,310,737 other assets 1,479,503 debt , net 4,168,959 other liabilities 840,605 year ended december 31 , 2020 income statement ( in thousands ) total revenues $ 792,597 income from continuing operations , net of tax 71,315 net income 71,315 40 story_separator_special_tag million of net proceeds from the settlement of forward equity agreements ; offset by a net draw of $ 10.0 million on the revolving credit facility . net cash provided by financing activities for the year ended december 31 , 2019 was $ 93.6 million , which was primarily attributable to our issuance of $ 750 million in aggregate principal amount of 5.75 % senior notes due 2027 , our offering of 19.6 million class a shares in a registered public offering in january 2019 for net proceeds of $ 548.4 million , our offering of 18.0 million class a shares in a registered public offering in november 2019 for net proceeds of $ 540.6 million , and our offering of 5.3 million class a shares under our “ at-the-market ” ( “ atm ” ) equity distribution program throughout 2019 for net proceeds of $ 161.0 million , partially offset by repayments of our bank credit facility of approximately $ 1.1 billion , net , our repayment of approximately $ 246.0 million of assumed indebtedness from the empire city transaction , and $ 533.7 million of dividends paid . net cash used in operating , financing and investing activities for our discontinued operations for the year ended december 31 , 2019 was $ 22.3 million and was entirely due to the operations of the northfield opco , which were transferred to mgm in april 2019. there were no cash flows from discontinued operations for the year ended december 31 , 2020. dividends and distributions the following table presents the distributions declared and paid by the operating partnership and the distributions declared and paid by mgp . mgp pays its dividends with the receipt of its share of the operating partnership 's distributions . replace_table_token_7_th principal debt arrangements we have significant outstanding debt and interest payments . see note 7 to the accompanying consolidated financial statements for information regarding our debt agreements as of december 31 , 2020 and the corresponding maturities of such debt . our estimated cash interest payments based on principal amounts of debt outstanding at december 31 , 2020 and libor rates as of december 31 , 42 2020 for our credit facility , including the impact of the operating partnership 's interest rate swap agreements , are approximately $ 243.0 million , $ 238.0 million and $ 238.0 million for the years 2021 , 2022 , and 2023 , respectively . capital expenditures and lease obligations the mgm-mgp master lease has a triple-net structure , which requires the tenant to pay substantially all costs associated with each property , including real estate taxes , insurance , utilities and routine maintenance , in addition to the rent , ensuring that the cash flows associated with our lease will remain relatively predictable for the duration of its term . additionally , our ground leases are paid by the tenant under mgm-mgp master lease through 2046 ( including renewal periods ) . see note 6 to the accompanying consolidated financial statements for information regarding our ground leases . application of critical accounting policies and estimates our financial statements are prepared in accordance with u.s. gaap . we have identified certain accounting policies that we believe are the most critical to the presentation of our financial information over a period of time . these accounting policies may require our management to make decisions on subjective and or complex matters relating to reported amounts of assets , liabilities , revenue , costs , expenses and related disclosures . these would further lead us to estimate the effect of matters that may inherently be uncertain . estimates are required in order to prepare the financial statements in conformity with u.s. gaap . significant estimates , judgments , and assumptions are required in a number of areas , including , but not limited to , reit qualification , lease accounting , determining the useful lives of real estate investments and property and equipment used in operations and evaluating the impairment of such assets , and purchase price allocations . the judgment on such estimates and underlying assumptions is based on our experience and various other factors that we believe are reasonable under the circumstances . these form the basis of our judgment on matters that may not be apparent from other available sources of information . in many instances changes in the accounting estimates are likely to occur from period to period . actual results may differ from the estimates . the future financial statement presentation , financial condition , results of operations and cash flows may be affected to the extent that the actual results differ materially from our estimates . income taxes - reit qualification we elected to be taxed as a reit for u.s. federal income tax purposes commencing with our taxable year ended december 31 , 2016 , and intend to continue to be organized and to operate in a manner that will permit us to continue to qualify as a reit . to qualify as a reit , we must meet certain organizational and operational requirements , including a requirement to distribute at least 90 % of our annual reit taxable income to shareholders , determined without regard
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we believe that the operating partnership currently has sufficient liquidity to satisfy all of its commitments , including its distributions to mgp , and in turn , that we currently have sufficient liquidity to satisfy all our commitments in the form of $ 626.4 million in cash and cash equivalents held by the operating partnership as of december 31 , 2020 , expected cash flows from operations , expected cash distributions from the mgp breit venture , and $ 1.3 billion of borrowing capacity under the operating partnership 's revolving credit facility as of december 31 , 2020. see note 7 to the accompanying financial statements for a description of our principal debt arrangements as of december 31 , 2020. in addition , we expect to incur additional indebtedness in the future to finance acquisitions , fund potential additional redemptions of the operating partnership units held by mgm , or for general corporate or other purposes . summary of cash flows net cash provided by operating activities for the years ended december 31 , 2020 and 2019 was $ 703.7 million and $ 100.7 million , respectively . the change was primarily due to the cash lease incentive of $ 605.6 million paid to a subsidiary of mgm in connection with the park mgm transaction in march 2019 as well as the receipt of $ 81.0 million of distributions from mgp breit venture in 2020 , the 2 % fixed annual rent escalator at the beginning of the fifth lease year on april 1 , 2020 which increased the annual cash rental payments by $ 14.7 million , the empire city transaction in january 2019 which increased the annual cash rental payments by $ 50.0 million , the park mgm transaction in march 2019 which increased annual cash rental payments by $ 50.0 million , and the northfield real estate assets being added to the mgm-mgp master lease in april 2019 which increased annual cash rental payments by $ 60.0 million . this was partially offset by the decrease in annual cash rental payments of $ 133.0 million as a result of the removal of mandalay bay from the mgm-mgp master lease in february 2020 . 41 net cash provided by investing activities for the year ended december 31 , 2020 of $ 58.6 million related to the net cash proceeds from the mgp breit venture transaction . net cash provided by investing activities for the year ended december 31 , 2019 was $ 3.8 million , related to cash proceeds from the northfield opco transaction . net cash used in financing activities for
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Liquidity
| 16,068
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our salespeople work directly with end-use customers and engineering firms to promote the qualification , specification and acceptance of our products . we also rely on an existing and well-established channel of qualified insulation distributors and contractors in more than 50 countries around the world to ensure rapid delivery of our products and strong end-user support . our salespeople also work to educate insulation contractors about the technical and operating cost advantages of our aerogel blankets . 58 we also perform research services under contracts with various agencies of the u.s. government , including the department of defense and the department of energy , and other institutions . we decided to cease efforts to secure additional funded research contracts and to wind down our existing contract research activities . this decision reflected our desire to focus our research and development resources on initiatives to improve the profitability of our existing business and on efforts to develop new products and next generation technology with application in new , high value markets . we manufacture our products using our proprietary technology at our facility in east providence , rhode island . we have operated the east providence facility since 2008 and have increased our annual capacity in phases through december 31 , 2020 to 55 million square feet of aerogel blankets . we are currently engaged in an initiative , which we refer to as ep20 , designed to increase the capacity of the east providence facility to 60 million square feet of aerogel blankets by the end of 2021. in addition , we anticipate that we will need to construct a state-of-the-art thermal barrier fabrication operation , hire dedicated thermal barrier fabrication employees , and increase our aerogel blanket manufacturing capacity to keep pace with the significant potential demand for our pyrothin thermal barriers . accordingly , we are in the early stages of planning a significant expansion of our aerogel capacity prior to the end of 2023. the expected elements of the completed expansion plan will include the size of the required capacity expansion , the selection of an optimal manufacturing site for the expansion , the appropriate financing structure to fund the project fully and a detailed timeline for the construction and operation of the facility . we had previously completed the design and engineering for a second manufacturing facility to be located in statesboro , georgia . during 2016 , we elected to delay construction of the facility due to our assessment of future demand . in december 2018 , we determined that we will not use the existing design and engineering to construct a second facility in any location . accordingly , we determined that the design and engineering costs were not recoverable and recorded an impairment charge of $ 7.4 million on construction in progress assets during 2018. on september 17 , 2020 , we entered into a contract with a major u.s. automotive original equipment manufacturer to supply fabricated , multi-part thermal barriers for use in the battery system of its next-generation electric vehicles . pursuant to the contract , we are obligated to supply the barriers at fixed annual prices and at volumes to be specified by the customer up to a daily maximum quantity through the term of the agreement , which expires on september 1 , 2026. while the customer has agreed to purchase its requirement for the barriers at locations to be designated from time to time from us , it has no obligation to purchase any minimum quantity of barriers under the contract . in addition , the customer may terminate the contract any time and for any or no reason . all other terms of the contract are generally consistent with the customer 's standard purchase terms , including customary quality and warranty provisions . we are engaged in a strategic partnership with basf to develop and commercialize products for the building materials and other markets . the strategic partnership includes a supply agreement governing the exclusive sale of specified products to basf and a joint development agreement targeting innovative products and technologies . basf has no obligation to purchase any products under the supply agreement . pursuant to the supply agreement , basf may , in its sole discretion , make prepayments to us in the aggregate amount of up to $ 22.0 million during the term of the agreement . we may repay the prepayments to basf at any time in whole or in part for any reason . basf made a prepayment to us of $ 5.0 million during 2018. as of january 1 , 2019 , 25.3 % of any amounts that we invoice for spaceloft a2 sold to basf will be credited against the outstanding balance of the 2018 prepayment . if any amount of the 2018 prepayment remains uncredited at december 31 , 2021 , basf may require that we repay the uncredited amount following a six-week notice period . in january 2019 , basf made an additional prepayment to us of $ 5.0 million . as of january 1 , 2020 , 50 % of any amounts that we invoice for a newly developed product sold to basf will be credited against the outstanding balance of the 2019 prepayment . after december 31 , 2022 , basf may require that we credit 24.7 % of any amounts we invoice for spaceloft a2 sold to basf against the outstanding balance of the 2019 prepayment or may require that we repay the uncredited amount to basf following a six-week notice period . on february 18 , 2020 , we completed an underwritten public offering of 1,955,000 shares of our common stock at an offering price of $ 8.25 per share . we received net proceeds of $ 14.8 million after deducting underwriting discounts and commissions of $ 1.1 million and offering expenses of approximately $ 0.3 million . story_separator_special_tag in 2018 , sales to distribution international , inc. represented 20 % of our total revenue . for each of the noted periods , there were no other customers that represented 10 % or more of our total revenues . we conduct business across the globe and a substantial portion of our revenue is generated outside of the united states . total revenue from outside of the united states , based on shipment destination , amounted to $ 55.5 million , or 55 % of our total revenue , $ 81.0 million , or 58 % of our total revenue , and $ 62.6 million , or 60 % of our total revenue , in the years ended december 31 , 2020 , 2019 and 2018 , respectively . 63 cost of revenue cost of product revenue consists primarily of materials and manufacturing expense . cost of product revenue is recorded when the related product revenue is recognized . material is our most significant component of cost of product revenue and includes fibrous batting , silica materials and additives . material costs as a percentage of product revenue were 44 % , 48 % and 47 % for the years ended december 31 , 2020 , 2019 and 2018 , respectively . material costs as a percentage of product revenue vary from product to product due to differences in average selling prices , material requirements , product thicknesses and manufacturing yields . in addition , we provide warranties for our products and record the estimated cost within cost of revenue in the period that the related revenue is recorded or when we become aware that a potential warranty claim is probable and can be reasonably estimated . as a result of these factors , material costs as a percentage of product revenue will vary from period to period due to changes in the mix of aerogel products sold , the costs of our raw materials or the estimated cost of warranties . we expect that material costs will decrease in absolute dollars during 2021 due to a favorable product mix and the impact of our bill of material cost initiatives . during the year ended december 31 , 2018 , we experienced a significant increase in the costs of certain silica precursor materials , which constitute over 50 % of our raw material costs . in response , we have achieved higher selling prices , implemented lower cost formulations , implemented material sourcing improvements , and enhanced manufacturing yields to reduce the cost of raw materials for our aerogel products . as a result , we expect that material costs will decrease both in absolute dollars and as a percentage of product revenue during 2021. manufacturing expense is also a significant component of cost of revenue . manufacturing expense includes labor , utilities , maintenance expense , and depreciation on manufacturing assets . manufacturing expense also includes stock-based compensation of manufacturing employees and shipping costs . manufacturing expense as a percentage of product revenue was 42 % , 33 % and 42 % for the years ended december 31 , 2020 , 2019 and 2018 , respectively . while product revenue decreased by 27 % during 2020 , manufacturing expense decreased by only 8 % due principally to the high proportion of fixed manufacturing expense in our east providence , rhode island manufacturing facility . in 2021 , we expect that manufacturing expense in both absolute dollars and as a percentage of product revenue will remain level with 2020 as a projected increase in compensation costs is offset by a projected decrease in depreciation expense . in total , we expect that cost of product revenue will decrease in absolute dollars during 2021 and as a percentage of product revenue during 2021 versus 2020 due primarily to a projected favorable product mix and the impact of our on-going initiatives to reduce our bill of material costs . cost of research services revenue consists of direct labor costs of research personnel engaged in the contract research , third-party consulting and subcontractor expense , and associated direct material costs . this cost of revenue also includes overhead expenses associated with project resources , development tools and supplies . cost of research services revenue is recorded when the related research services revenue is recognized . in 2021 , we expect that cost of research services revenue will decline as we wind down our existing contract research activities . gross profit our gross profit as a percentage of revenue is affected by a number of factors , including the volume of aerogel products produced and sold , the mix of aerogel products sold , average selling prices , our material and manufacturing costs , realized capacity utilization and the costs associated with expansions and start-up of production capacity . accordingly , we expect our gross profit in absolute dollars and as a percentage of revenue to vary significantly from period to period . during 2020 , we experienced a significant decline in product revenue due to the impact of covid-19 on the global energy infrastructure market and a decrease in research services revenue resulting from our decision to wind down our contract research activities . we experienced a reduction in both our material costs and manufacturing expense due to the decrease in volume , our efforts to control compensation costs and discretionary expense , and our initiatives to reduce our bill of material costs . due principally to high proportion of fixed manufacturing expense in our manufacturing operations , the material cost and manufacturing expense reductions were insufficient to offset the full impact of the revenue decline . as a result , gross profit decreased both in absolute dollars and as a percentage of revenue during the year . during 2021 , we expect that the covid-19 pandemic will continue to constrain our revenue to 2020 levels . however , we expect gross profit to increase both in absolute dollars and as a percentage
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primary sources of liquidity our principal sources of liquidity are currently our cash and cash equivalents and our revolving credit facility with silicon valley bank . cash and cash equivalents consist primarily of cash and money market accounts on deposit with banks . as of december 31 , 2020 , we had $ 16.5 million of cash and cash equivalents . on february 18 , 2020 , we completed an underwritten public offering of 1,955,000 shares of our common stock at an offering price of $ 8.25 per share . we received net proceeds of $ 14.8 million after deducting underwriting discounts and commissions of $ 1.1 million and offering expenses of approximately $ 0.3 million . on november 5 , 2020 , we entered into a sales agreement for an at-the-market offering program ( atm ) under which we may sell up to $ 33,871,250 of our common stock through b. riley securities , inc. we are not obligated to sell any stock under the sales agreement . we will pay b. riley a commission of 3.0 % of the gross sales proceeds of shares sold under the agreement . during november and december 2020 , we sold 714,357 shares of our stock through the atm and received net proceeds of $ 9.5 million . on may 1 , 2020 , our wholly-owned subsidiary , aspen aerogels rhode island , llc ( borrower ) executed a note for a loan of $ 3.7 million pursuant to the ppp under the cares act , as amended , and administered by the sba . the loan is unsecured , contains customary events of default , carries an interest rate of 1 % per year , and matures on may 1 , 2022. the borrower may repay the loan in full at any time without penalty .
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Liquidity
| 15,619
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the allowance compared to nonperforming loans , net of government guarantees , was 133 % at december 31 , 2018 compared to 100 % the end of 2017 and 152 % the end of 2016 . return on average assets was 1.34 % in 2018 compared to 0.87 % in 2017 and 0.96 % in 2016 . the company continued to maintain strong capital ratios with tier 1 capital to risk adjusted assets of 15.47 % at december 31 , 2018 as compared to 14.65 % at december 31 , 2017 . the aggregate cash dividends paid by the company in 2018 rose 19 % to $ 1.02 per diluted share from $ 0.86 per diluted share paid in 2017 . the company repurchased 15,468 shares of its common stock in 2018 at an average price of $ 31.90 per share , leaving 153,433 shares available under the previously announced repurchase authorization . critical accounting policies the sec defines `` critical accounting policies `` as those that require application of management 's most difficult , subjective or complex judgments , often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in future periods . our significant accounting policies are described in note 1 in the notes to consolidated financial statements in item 8 of this report . not all of these significant accounting policies require management to make difficult , subjective or complex judgments or estimates . management believes that the following accounting policies would be considered critical under the sec 's definition . allowance for loan losses : the company maintains an allowance to reflect inherent losses in its loan portfolio as of the balance sheet date . the company performs regular credit reviews of the loan portfolio to determine the credit quality and adherence to underwriting standards . when loans are originated , they are assigned a risk rating that is reassessed periodically 30 during the term of the loan through the credit review process . the company 's risk rating methodology assigns risk ratings ranging from 1 to 10 , where a higher rating represents higher risk . these risk ratings are then consolidated into five classes , which include pass , special mention , substandard , doubtful and loss . these classes are a primary factor in determining an appropriate amount for the allowance for loan losses . each class is assessed an inherent credit loss factor that determines an amount of allowance for loan losses provided for that group of loans . this allowance is then adjusted for qualitative factors , by segment and class . qualitative factors are based on management 's assessment of current trends that may cause losses inherent in the current loan portfolio to differ significantly from historical losses . some factors that management considers in determining the qualitative adjustment to the general reserve include loan quality trends in our own portfolio , the degree of concentrations of large borrowers in our loan portfolio , national and local economic trends , business conditions , underwriting policies and standards , trends in local real estate markets , effects of various political activities , peer group data , and internal factors such as underwriting policies and expertise of the company 's employees . regular credit reviews of the portfolio also identify loans that are considered potentially impaired . a loan is considered impaired when based on current information and events , we determine that we will probably not be able to collect all amounts due according to the loan contract , including scheduled interest payments . when we identify a loan as impaired , we measure the impairment using discounted cash flows , except when the sole remaining source of the repayment for the loan is the liquidation of the collateral . in these cases , we use the current fair value of the collateral , less selling costs , instead of discounted cash flows . the analysis of collateral dependent loans includes appraisals on loans secured by real property , management 's assessment of the current market , recent payment history and an evaluation of other sources of repayment . the company obtains appraisals on real and personal property that secure its loans during the loan origination process in accordance with regulatory guidance and its loan policy . the company obtains updated appraisals on loans secured by real or personal property based upon its assessment of changes in the current market or particular projects or properties , information from other current appraisals and other sources of information . the company uses the information provided in these updated appraisals along with its evaluation of all other information available on a particular property as it assesses the collateral coverage on its performing and nonperforming loans and the impact that may have on the adequacy of its allowance . if we determine that the value of the impaired loan is less than the recorded investment in the loan , we either recognize an impairment reserve as a specific component to be provided for in the allowance or charge-off the impaired balance on collateral dependent loans if it is determined that such amount represents a confirmed loss . the combination of the risk rating-based allowance component and the impairment reserve allowance component lead to an allocated allowance for loan losses . finally , the company assesses the overall adequacy of the allowance based on several factors including the level of the allowance as compared to total loans and nonperforming loans in light of current economic conditions . this portion of the allowance is deemed “ unallocated ” because it is not allocated to any segment or class of the loan portfolio . story_separator_special_tag in 2018 , occupancy expense included a one-time technical correction that decreased depreciation expense by $ 670,000. oreo expenses net of gains and rental income decreased due to no impairment charges on oreo properties in 2018 and an increase in rental income on oreo properties associated with one commercial property . these decreases were partially offset by increases in oreo operating costs associated with the commercial property , and lower gains on the sale of oreo properties in 2018. lastly , salaries and other personnel expense in the home mortgage lending segment decreased $ 935,000 in 2018 as compared to 2017 , primarily due to a reduction in full-time equivalent employees as mortgage origination volume has declined . this decrease was offset by an $ 864,000 increase in salaries and other personnel expense in the community banking segment in 2018 compared to 2017 , primarily due to an increase in full time equivalent employees and an increase in benefits costs associated with the company 's self-insured group health plan due to higher medical claims . 2017 compared to 2016 other operating expense decreased in 2017 as compared to the prior year primarily due to decreased costs in compensation expense - rml acquisition payments and salaries and other personnel expense , and , to a lesser extent , professional and outside services expense and loss on sale of premises and equipment . compensation expense - rml acquisition payments decreased $ 4.6 million in 2017 as compared to 2016 due in part to the fact that 2016 included a $ 2.3 million non-cash error correction that covered the period from december 1 , 2014 , through june 30 , 2016. the remainder of the decrease in compensation expense - rml acquisition payments resulted from a decrease in net income from rml . salaries and other personnel expense decreased primarily due to lower originator commission expense in the home mortgage lending segment due to lower home mortgage loan originations . these decreases were partially offset by increases in impairment on oreo expense and data processing expense in 2017 compared to 2016. impairment on oreo increased in 2017 as compared to 2016 due to writedowns on two oreo properties resulting from a decrease in sales price assumptions . data processing expense increased in 2017 as compared to 2016 mostly due to higher software amortization and maintenance expense . income taxes the provision for income taxes decreased $ 6.3 million or 61 % , to $ 4.1 million in 2018 as compared to 2017 and increased $ 4.3 million or 71 % , to $ 10.3 million in 2017 as compared to 2016 . the decrease in 2018 is primarily due to a decrease in the corporate tax rate included in federal tax legislation enacted in december 2017. in addition to reducing the company 's federal tax rate from 35 % in 2017 to 21 % in 2018 , this change also resulted in $ 2.7 million in expense in 2017 for the revaluation of the company 's net deferred tax asset . in 2018 , the company finalized its valuation of net deferred tax assets related to the decrease in the federal tax rate after completing a fixed asset cost segregation study for tax planning purposes which resulted in a $ 470,000 decrease in tax expense . the company 's effective tax rates were 17 % , 43 % , and 29 % in 2018 , 2017 , and 2016 , respectively . the changes in the company 's effective tax rates for 2018 and 2017 are primarily due to the items discussed regarding the changes in tax expense for these periods . financial condition investment securities the composition of our investment securities portfolio , which includes securities available for sale , securities held to maturity , and marketable equity securities , reflects management 's investment strategy of maintaining an appropriate level of liquidity while providing a relatively stable source of interest income . the investment securities portfolio also mitigates interest rate and credit risk inherent in the loan portfolio , while providing a vehicle for the investment of available funds , a source of liquidity ( by pledging as collateral or through repurchase agreements ) , and collateral for certain public funds deposits . investment securities designated as available for sale comprised 97 % of the portfolio as of december 31 , 2018 and are available to meet liquidity requirements . our investment portfolio consists primarily of government sponsored entity securities , corporate securities , and municipal securities . investment securities at december 31 , 2018 decreased $ 33.9 million , or 11 % , to $ 278.9 million from $ 312.8 million at december 31 , 2017 . the decrease at december 31 , 2018 as compared to december 31 , 2017 is primarily due to a portion of the proceeds from sales , maturities , and security calls being reinvested in loans as of december 31 , 2018. the average maturity of the investment portfolio was approximately two and a half years at december 31 , 2018 . 37 investment securities may be pledged as collateral to secure public deposits or borrowings . at december 31 , 2018 and 2017 , $ 58.4 million and $ 51.6 million in securities were pledged for deposits and borrowings , respectively . pledged securities increased at december 31 , 2018 as compared to december 31 , 2017 because the company had increased balances in tri-party accounts at december 31 , 2018 . the following tables set forth the composition of our investment portfolio at december 31 for the years indicated : replace_table_token_17_th 38 the following table sets forth the market value , maturities , and weighted average pretax yields of our investment portfolio as of december 31 , 2018 : replace_table_token_18_th the company 's investment in marketable equity securities does not have a maturity date but it has been included in the over 10 years column above . at december 31 , 2018 ,
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liquidity and capital resources the company is a single bank holding company and its primary ongoing source of liquidity is from dividends received from the bank . such dividends arise from the cash flow and earnings of the bank . banking regulations and regulatory authorities may limit the amount of , or require the bank to obtain certain approvals before paying , dividends to the company . given that the bank currently meets and the bank anticipates that it will continue to meet , all applicable capital adequacy requirements for a “ well-capitalized ” institution by regulatory standards , the company expects to continue to receive dividends from the bank during 2019. a requirement to have a conservation buffer began being phased-in in 2016 and is now in full effect , and this requirement could adversely affect the bank 's ability to pay dividends . the bank manages its liquidity through its asset and liability committee . our primary sources of funds are customer deposits and advances from the fhlb . these funds , together with loan repayments , loan sales , other borrowed funds , retained earnings , and equity are used to make loans , to acquire securities and other assets , and to fund deposit flows and continuing operations . the primary sources of demands on our liquidity are customer demands for withdrawal of deposits and borrowers ' demands that we advance funds against unfunded lending commitments . our total unfunded commitments to fund loans , loans held for sale , and letters of credit at december 31 , 2018 , were $ 308.8 million . we do not expect that all of these loans are likely to be fully drawn upon at any one time . additionally , as noted above , our total deposits at december 31 , 2018 , were $ 1.2 billion .
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Liquidity
| 12,229
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58 duluth holdings inc. notes to consolidated financial statements fair value measurements asc topic 820 , fair value measurements and disclosures ( “ asc 820 ” ) , defines fair value as the price that would be received to sell an asset , or paid to transfer a liability , in an orderly transaction between market participants at the measurement date ( i.e . , an exit price ) . the exit price is based on the amount that the holder of the asset or liability would receive or need to pay in an actual transaction ( or in a hypothetical transaction if an actual transaction does not exist ) at the measurement date . asc 820 describes a fair value hierarchy based on three levels of inputs that may be used to measure fair value , of which the first two are considered observable and the last unobservable , as follows : level 1 – quoted prices in active markets for identical assets or liabilities . 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 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 . the carrying values of cash , accounts receivable , accounts payable and long-term obligations approximate fair value . the carrying value of goodwill and intangible assets are tested annually , or more frequently if an event occurs that indicates an impairment loss may have been incurred , using fair value measurements with unobservable inputs ( level 3 ) . the carrying value of the company 's available-for-sale security was valued based on a discounted cash flow method ( level 3 ) . january 28 , 2018 january 29 , 2017 cost or gross gross amortized unrealized unrealized estimated estimated cost gains losses fair value fair value ( in thousands ) level 3 security : corporate trust $ 6,323 $ — $ — $ 6,323 $ — the following table presents the future receipts related to the company 's available-for-sale security by contractual maturity as of january 28 , 2018. cost and estimated fair value are equal . estimated fair value ( in thousands ) within one year $ 28 after one year through five years 739 after five years through ten years 1,208 after ten years 4,348 total $ 6,323 59 duluth holdings inc. notes to consolidated financial statements 3. debt and line s of credit debt consists of the following : replace_table_token_19_th schlecht retail ventures llc srv entered into a mortgage note ( “ srv term a note ” ) with an original balance of $ 0.8 million . the srv term a note was scheduled to mature in september 2017 and required monthly payments of $ 3,300 plus interest at 3.1 % , with a final balloon payment due in september 2017. on july 20 , 2017 , srv refinanced the srv term a note , which extended the maturity date to september 2022 , with a final balloon payment in september 2022 , and changed the interest rate to 3.69 % . the required monthly payments of $ 3,300 did not change . on july 20 , 2017 , srv entered into a mortgage note ( “ srv term b note ” ) with an original balance of $ 0.8 million . the srv term b note matures in september 2022 and requires monthly payments of $ 3,300 plus interest at 3.69 % , with a final balloon payment in september 2022. the srv term a note and srv term b note are guaranteed by the company 's majority shareholder and collateralized by certain real property owned by srv in mt . horeb , wisconsin . line of credit on september 29 , 2017 , the company entered into a first amendment to the amended and restated loan agreement dated as of october 7 , 2016 ( the “ amended and restated agreement ” ) , providing for borrowing availability of up to $ 60.0 million from september 29 , 2017 through july 31 , 2019. effective november 1 , 2017 , the company entered into a second amendment to the amended and restated agreement , providing for borrowing availability of up to $ 80.0 million from november 1 , 2017 through december 31 , 2017 and borrowing availability of up to $ 60.0 million from january 1 , 2018 through july 31 , 2019. the amended and restated agreement matures on july 31 , 2019 , and bears interest , payable monthly , at a rate equal to the adjusted libor rate , as defined in the amended and restated agreement ( effective rate of 2 . 8 % at january 28 , 2018 ) . the amended and restated agreement is secured by essentially all company assets and requires the company to maintain compliance with certain financial and non-financial covenants , including minimum tangible net worth and a minimum trailing twelve month ebitda . in addition , the amended and restated agreement does not contain borrowing base limits . as of january 28 , 2018 and for the fiscal year then ended , the company was in compliance with all financial and non-financial covenants for all debts discussed above . story_separator_special_tag 38 liquidity and capital resources general our business relies on cash from operating activities as well as cash on hand and a $ 6 0 million revolving line of credit as our primary sources of liquidity . our primary cash needs have been for inventory , marketing and advertising , payroll , store leases , and capital expenditures associated with opening new stores , infrastructure and information technol ogy . the most significant components o f our working capital are cash , inventory , accounts payable and other current liabilities . based on our growth plans and capital expenditures discussed b elow , we expect that our current $ 60.0 million revolving line of credit will not be sufficient to support our growth strategy . in the first half of fiscal 2018 , we plan to refinance our current $ 60 million revolving line of credit that locks in longer-term commitments and allows us to increase our borrowing capacity . we expect to spend ap proximately $ 45 .0 million to $ 55.0 million in fiscal 2018 on capital expenditures , net of proceeds from finance lease obligations , inclu ding a total of approximately $ 27.0 million to $ 32 .0 million f or new reta il store expansion . w e expect capital expenditures of $ 2.0 million and starting inventory of $ 0 . 5 million to open a new store . we anticipate opening 15 stores in fiscal 201 8. at january 28 , 201 8 , our working capital was $ 51 . 5 million , which includes cash of $ 2.9 million . due to the seasonality of our business , a significant amount of cash from operating activities is generated during the fourth quarter of our fiscal year . during the first three quarters of our fiscal year , we typically are net users of cash in our operating activities as we acquire inventory in anticipation of our peak selling season , which occurs in the fourth quarter of our fiscal year . we also use cash in our investing activities for capital expenditures throughout all four quarters of our fiscal year . story_separator_special_tag contractual obligations we enter into long term contractual obligations and commitments in the normal cour se of business . as of january 2 8 , 2017 , our contractual cash obligations were as follows : replace_table_token_9_th _ ( 1 ) consists of mortgage note s . ( 2 ) the capital leases represent minimum lease payments , including imputed interest not reflected in the consolidated statements of financial position and notes to consolidated financial statements included elsewhere in this annual report . ( 3 ) our store leases generally have initial lease terms of 5-1 5 years and include renewal options on substantially the same terms and conditions as the original leases . includes related party leases and build-to-suit lease obligations . off-balance sheet arrangements we are not a party to any off balance sheet arrangements , except for operating leases , as discussed in “ contractual obligations ” section above . critical accounting policies and estimates the preparation of financial statements in accordance with accounting principles generally accepted in the united states requires management to make estimates and assumptions that affect amounts reported in our consolidated financial statements and related notes , as well as the related disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period . we evaluate our accounting policies , estimates , and judgments on an on-going basis . we base our estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances . actual results may differ from these estimates under different assumptions and conditions and such differences could be material to the consolidated financial statements . we evaluated the development and selection of our critical accounting policies and estimates and believe that the following involve a higher degree of judgment or complexity and are most significant to reporting our results of operations and financial position , and are therefore discussed as critical . with respect to critical accounting policies , even a relatively minor variance between actual and expected experience can potentially have a materially favorable or unfavorable impact on subsequent results of operations . however , our historical results for the periods presented in the consolidated financial statements have not been materially impacted by such variances . more information on all of our significant accounting policies can be found in note 2 , “ summary of significant accounting policies ” of notes to consolidated financial statements included in this annual report on form 10-k. revenue recognition for fiscal 2017 and prior periods , w e recognize d revenue from direct sales generally upon customer receipt of the product and from retail sales at the point of sale . this represents the point at which all risks and rewards of ownership of the product are passed , there is persuasive evidence that an arrangement exists , title has passed to the customer , the price to the buyer is fixed or determinable and collectability is reasonably assured . for fiscal 2017 and prior periods , w e recognize d shipping and handling fees as revenue included in net sales when generated from a customer order upon customer receipt of the product . costs of shipping and handling are included in selling , general and administrative expenses . sales tax collected is not recognized as revenue as it is ultimately remitted to governmental authorities . we reserve for projected merchandise returns based on both historical and actual experience , as well as various other assumptions that we believe to be reasonable . actual merchandise returns are monitored regularly and have not been materially different from the estimates recorded . product returns often represent merchandise that can be resold . amounts refunded to 41 customers are generally made
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for fiscal 2017 , net cash used i n investing activities was $ 55.8 million , primarily driven by capital expenditures of $ 46.5 million , due mainly to the opening of 15 new stores , and investments in information technology related to our order management system and e-commerce platform , a $ 6.3 million purchase of an available-for-sale security , and change in restricted cash of $ 2.8 million . for fiscal 2016 , net cash used in investing activities was $ 30.3 million , primarily driven by capital expenditures of $ 28.7 million for the opening of seven new store s , expansion of our bel leville distribution center , and investments in information technology . for fiscal 2015 , net cash used in investing activities was $ 7 . 4 million , primarily dr iven by capital expenditures related to the opening of three new stores , coupled with the implementation of our warehouse management system . net cash provided by ( used in ) financing activities financing activities consist primarily of borrowings and payments related to our revolving line of credit and other long-term debts , as well as distributions to the individuals and entities that were our shareholders prior to our ipo and holders of noncontrolling interest in variable interest entiti es and capital contributions to schlecht retail ventures llc . for fiscal 2017 , net cash provided by financing act ivities was $ 4.8 million , which includes borrowings of $ 88.9 million on our revolving line of credit to support our capital expenditures discussed above and working capital needs , offset by payments of $ 88.9 million on our revolving line of credit , proceeds of $ 3.9 from finance lease obligations in connection with our build-to-suit lease transactions , $ 0.8 million in proceeds from long-term debt , and $ 0.8 million for capital contributions to srv . for fiscal 2016 , net cash used in financing activities was $ 3.7 milli on , primarily consisting of uses of $ 4.2 million payments on long-term debt , offset by proceeds of $ 0.7 million for capital contributions to variable interest entities . for fiscal 2015 , ne t cash provided by financing activities was $ 23.1 mil lion , primarily consisting of $ 83 . 9 million in net proceeds from our ipo , which was consummated during the fourth quarter , proceeds of $ 47.1 million from long term debt and $ 0.3 million for capital contributions to variable interest entities , p artially offset by uses of $ 60 .1 million for
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Liquidity
| 11,459
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lumateperone for the treatment of depressive episodes associated with bipolar disorder ( bipolar depression ) our bipolar depression program consists of two phase 3 multi-center , randomized , double-blind , placebo-controlled clinical trials : one to evaluate lumateperone as a monotherapy and the other to evaluate lumateperone as an adjunctive therapy with lithium or valproate . in each trial , patients with a clinical diagnosis of bipolar i or bipolar ii disorder and who are experiencing a current major depressive episode are randomized to receive one of three treatments : 60 mg iti-007 , 40 mg iti-007 , or placebo in a 1:1:1 ratio orally once daily for 6 weeks . in the iti-007-401 trial , patients receive lumateperone or placebo as a monotherapy . in the iti-007-402 trial , patients receive lumateperone or placebo adjunctive to their existing mood stabilizer lithium or valproate . in both trials , we are employing a number of strategies designed to ensure we recruit appropriately diagnosed patients in an effort to reduce the risk of a high placebo response . patient enrollment in the iti-007-401 trial , is expected to complete in the first half of 2018. patient enrollment in the iti-007-402 trial , is expected to complete in the second half of 2018. one of our strategies to optimize potential success in this program is to initiate a third trial in bipolar depression conducted globally . we anticipate completing patient enrollment in our global study by the end of 2018. the primary endpoint for both clinical trials is change from baseline at day 42 on the montgomery-åsberg depression rating scale , or madrs , total score versus placebo . the madrs is a well-validated 10-item checklist that measures the ability of a drug to reduce overall severity of depressive symptoms . individual items are rated by an expert clinician on a scale of 0 to 6 in which a score of 6 represents the most depressed evaluation for each item assessed . the total score ranges from 0 to 60. secondary endpoints include measures of social function and quality of life that may illustrate the differentiated clinical profile of lumateperone . safety and tolerability are also assessed in both clinical trials . lumateperone for the treatment of behavioral disturbances associated with dementia , including alzheimer 's disease in the fourth quarter of 2014 , we announced the top-line data from iti-007-200 , a phase 1/2 clinical trial designed to evaluate the safety , tolerability and pharmacokinetics of low doses of lumateperone in healthy geriatric subjects and in patients with dementia , including ad . the completion of this study marks an important milestone in our strategy to develop low doses of lumateperone for the treatment of behavioral disturbances associated with dementia and related disorders . the iti-007-200 trial results indicate that lumateperone is safe and well-tolerated across a range of low doses , has linear- and dose-related pharmacokinetics and improves cognition in the elderly . the most frequent adverse event was mild sedation at the higher doses . we believe these results further position lumateperone as a development candidate for the treatment of behavioral disturbances in patients with dementia and other neuropsychiatric and neurological conditions . in the second quarter of 2016 , we initiated phase 3 development of lumateperone for the treatment of agitation in patients with dementia , including ad . our iti-007-201 trial is a phase 3 multi-center , randomized , double-blind , placebo-controlled clinical trial in patients with a clinical diagnosis of probable ad and clinically significant symptoms of agitation . in this trial , approximately 360 patients are planned to be randomized to receive 9 mg iti-007 or placebo in a 1:1 ratio orally once daily for four weeks . this study includes a single interim analysis reviewed by an independent data monitoring committee , which will be used to assess the assumptions of variability and effect size . the primary efficacy measure is the cohen-mansfield agitation inventorycommunity version , or cmai-c. the cmai-c is a well-validated 37-item scale that measures the ability of a drug to reduce overall frequency of agitation symptoms , including aggressive behaviors . individual 61 items are rated by an expert clinician on a scale of 1 to 7 in which a score of 7 represents the most frequent for each item assessed . the key secondary efficacy measure is a clinical global impression scale for severity , or cgi-s , of illness . other exploratory secondary endpoints include measures of other behavioral disturbances associated with dementia . safety and tolerability are also assessed in the trial . other indications for lumateperone we are also pursuing clinical development of lumateperone for the treatment of additional cns diseases and disorders . at the lowest doses , lumateperone has been demonstrated to act primarily as a potent 5-ht2a serotonin receptor antagonist . as the dose is increased , additional benefits are derived from the engagement of additional drug targets , including modest dopamine receptor modulation and modest inhibition of serotonin transporters . we believe that combined interactions at these receptors may provide additional benefits above and beyond selective 5-ht2a antagonism for treating agitation , aggression and sleep disturbances in diseases that include dementia , ad , huntington 's disease and autism spectrum disorders , while avoiding many of the side effects associated with more robust dopamine receptor antagonism . as the dose of lumateperone is further increased , leading to moderate dopamine receptor modulation , inhibition of serotonin transporters , and indirect glutamate modulation , these actions complement the complete blockade of 5-ht2a serotonin receptors . at a dose of 60 mg , iti-007 has been shown effective in treating the symptoms associated with schizophrenia , and we believe this higher dose range will be useful for the treatment of bipolar disorder , depressive disorders and other neuropsychiatric diseases . story_separator_special_tag as development of lumateperone for the treatment of schizophrenia progresses , we anticipate costs for that program to continue in the next several years as we conduct clinical trials and are also required to complete non-clinical testing to obtain fda approval and manufacture material needed for clinical trial use , which includes non-clinical testing of the drug product and the creation of an inventory of drug product in anticipation of possible fda approval . in addition we plan to spend increasing amounts to further our development of lumateperone for other indications , including but not limited to , the treatment of depressive episodes associated with bipolar disorder ( bipolar depression ) , for treatment of behavioral disturbances associated with dementia and related disorders , and for treating agitation , aggression and sleep disturbances in diseases that include dementia , ad , huntington 's disease and autism spectrum disorders , and to further our long acting injectable program among other indications . as of december 31 , 2016 , we employed 28 full time personnel in our research and development group as compared to 24 full time personnel at december 31 , 2015. we expect to hire additional staff as we increase our development efforts and grow our business in the upcoming years . we currently have several projects , in addition to lumateperone , that are in the research and development stages , including in the areas of cognitive dysfunction and the treatment of neurodegenerative diseases , including ad , among others . we have used internal resources and incurred expenses not only in relation to the development of lumateperone , but also in connection with these additional projects as well . we have not , however , reported these costs on a project by project basis , as these costs are broadly spread among these projects . the external costs for these projects have been minimal and are reflected in the amounts discussed in this section research and development expenses. during previous years , we also incurred costs that were both reimbursable and non-reimbursable under the takeda license agreement . for the years ended december 31 , 2016 and 2015 , we incurred $ 0 and $ 30,700 , respectively , of costs that were billable to takeda pursuant to ongoing obligations under the termination agreement . we do not expect to incur material costs going forward under this agreement . the research and development process necessary to develop a pharmaceutical product for commercialization is subject to extensive regulation by numerous governmental authorities in the united states and other countries . 65 this process typically takes years to complete and requires the expenditure of substantial resources . the steps required before a drug may be marketed in the united states generally include the following : completion of extensive pre-clinical laboratory tests , animal studies , and formulation studies in accordance with the fda 's good laboratory practice , or glp , regulations ; submission to the fda of an investigational new drug application , or ind , for human clinical testing , which must become effective before human clinical trials may begin ; performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for each proposed indication ; submission to the fda of a new drug application , or nda , after completion of all clinical trials ; satisfactory completion of an fda pre-approval inspection of the manufacturing facility or facilities at which the active pharmaceutical ingredient , or api , and finished drug product are produced and tested to assess compliance with current good manufacturing practices , or cgmps ; satisfactory completion of fda inspections of clinical trial sites to assure that data supporting the safety and effectiveness of product candidates has been generated in compliance with good clinical practices ; and fda review and approval of the nda prior to any commercial marketing or sale of the drug in the united states . the successful development of our product candidates and the approval process requires substantial time , effort and financial resources , and is uncertain and subject to a number of risks . we can not be certain that any of our product candidates will prove to be safe and effective , will meet all of the applicable regulatory requirements needed to receive and maintain marketing approval , or will be granted marketing approval on a timely basis , if at all . data from pre-clinical studies and clinical trials are susceptible to varying interpretations that could delay , limit or prevent regulatory approval or could result in label warnings related to or recalls of approved products . we , the fda , or other regulatory authorities may suspend clinical trials at any time if we or they believe that the subjects participating in such trials are being exposed to unacceptable risks or if such regulatory agencies find deficiencies in the conduct of the trials or other problems with our product candidates . other risks associated with our product candidates are described in the section entitled risk factors in this annual report on form 10-k. general and administrative expenses general and administrative expenses increased for the year ended december 31 , 2016 as compared to the year ended december 31 , 2015 by approximately $ 6.6 million , or 36 % , primarily due to approximately $ 4.1 million of higher stock option expense and to a lesser extent to commercial development , rent , accounting , legal , and labor costs . salaries , bonuses , share based compensation and related benefit costs for our executive , finance and administrative functions for the years ended december 31 , 2016 and 2015 were approximately 61 % and 59 % , respectively , of our total general and administrative costs . our other general and administrative expenses include patent costs and other professional fees and , to a lesser extent , general office-related overhead . we expect general and administrative
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we expect these expenditures to be due primarily to the development of lumateperone in patients with schizophrenia , behavioral disturbances in dementia , bipolar disorder and depressive disorders , our iti-007 long acting injectable development program through pre-clinical and early clinical development , research and preclinical development of our other product candidates , the continuation of manufacturing activities in connection with the development of lumateperone , recurring expenses and costs to produce , develop and validate materials to be used in clinical and non-clinical studies related to lumateperone , and expenses associated with our other development programs , pre-commercialization activities and general operations . we expect that cash expenditures will continue to increase after 2017 as we further expand the lumateperone clinical stage programs , the iti-007 long acting injectable development program through pre-clinical and early clinical development ; research and preclinical development of our other product candidates ; the continuation of manufacturing , pre-commercial activities in connection with the development of lumateperone and the early stage pre-commercial launch activities for lumateperone . we believe that our existing cash and cash equivalents and investments will be sufficient to fund our operating expenses and capital expenditure requirements through the end of 2018. we will require significant additional financing in the future to continue to fund our operations . we believe that we have the funding in place to complete the additional clinical and non-clinical trials , manufacturing and pre-commercialization activities needed for potential regulatory approval and commercialization of lumateperone in patients with schizophrenia . with the remaining proceeds from our public offerings in march 2015 and september 2015 , we believe that we have the funds to complete our proposed clinical trials of lumateperone in bipolar disorder as a monotherapy and as an adjunctive therapy with lithium or valproate .
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Liquidity
| 11,591
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none of mr. byrnes , dr. gardner story_separator_special_tag the following management 's discussion and analysis of financial condition and results of operations ( md & a ) is intended to help the reader understand our results of operations and financial condition . md & a is provided as a supplement to , and should be read in conjunction with , our audited consolidated financial statements and the accompanying notes to the consolidated financial statements and other disclosures included in this annual report on this form 10-k ( including the disclosures under “ item 1a . risk factors ” ) . our consolidated financial statements have been prepared in accordance with u.s. generally accepted accounting principles and are presented in u.s. dollars . overview revance therapeutics , inc. is a clinical-stage specialty biopharmaceutical company focused on the development , manufacturing and commercialization of novel botulinum toxin products for multiple aesthetic and therapeutic indications . we 52 are leveraging our proprietary portfolio of botulinum toxin type a compounds combined with our patented transmts® peptide delivery system to address unmet needs in large and growing neurotoxin markets . our proprietary transmts technology enables delivery of botulinum toxin type a through two novel dose formulations , topical product candidate rt001 and injectable product candidate rt002 . we are pursuing clinical development for rt001 and rt002 in a broad spectrum of aesthetic and therapeutic indications . we hold worldwide rights for all indications of rt001 , rt002 and our transmts technology platform . rt001 has the potential to be the first commercially available non-injectable dose form . we are studying topical rt001 for aesthetic indications , such as crow 's feet lines ( wrinkles around the eyes , also known as lateral canthal lines ) and therapeutic indications such as hyperhidrosis ( excessive sweating ) . rt002 is a novel , injectable formulation of botulinum toxin designed to be more targeted and longer lasting than currently available injectable botulinum toxin type products . we are studying injectable rt002 for aesthetic indications , such as glabellar ( frown ) lines and therapeutic uses , such as muscle movement disorders . both products would have the potential to expand into additional aesthetic and therapeutic indications in the future . we are developing and plan to commercialize rt001 for indications where topical application provides a meaningful advantage over injectable administration . we are evaluating rt001 in a broad clinical program that includes aesthetic indications such as lateral canthal lines and therapeutic indications such as hyperhidrosis and chronic migraine headache . rt001 has the potential to be the first approved non-injectable botulinum toxin product for the treatment of crow 's feet lines . rt001 's primary advantages include painless topical administration , ease of use and limited dependence on administration technique by physicians and medical staff . we believe these advantages should improve the experience of patients undergoing botulinum toxin procedures and make rt001 more suitable for many more indications than currently approved injectable botulinum toxin products . the first indications we are pursuing are in the field of dermatology . if approved , we believe rt001 can expand the overall botulinum toxin aesthetic market by appealing to new patients who would prefer a needle-free approach to treatment . the aesthetic dermatology market is attractive because we believe that patients in this market tend to be open to trying new products and are willing to pay for aesthetic procedures out of pocket , reducing reliance on reimbursement . we are focused on this market not only because of its size and growth potential but also because , in the united states and europe , this market can be easily accessed by a specialty sales force and distributor network . we are in a phase 3 development program of rt001 in north america for the treatment of crow 's feet lines . following the successful completion of an open label clinical trial designed to test the efficacy of our rt001 drug product in the first half of 2015 , we expect to commence a pivotal phase 3 clinical trial of rt001 and report efficacy data from this phase 3 study in the second half of 2015. to date , we have conducted sixteen clinical trials with rt001 for the treatment of crow 's feet lines , with a total of over 1,500 subjects . we are also developing rt001 for therapeutic applications where botulinum toxin has shown efficacy and that are particularly well suited for needle-free treatments . we have successfully completed initial phase 2 clinical trials for the treatment of primary axillary , or underarm , hyperhidrosis , and for the prevention of chronic migraine headache . we expect to initiate and report results of an additional clinical trial for the treatment of hyperhidrosis in the second half of 2015. we are developing rt002 , an injectable formulation of botulinum toxin type a , for indications where deeper delivery of the botulinum toxin is required and a longer lasting effect is desired . we believe rt002 can provide more targeted delivery of botulinum toxin to intended treatment sites while reducing the unwanted spread of botulinum toxin to adjacent areas . we believe , and our preclinical and clinical studies indicate , that this targeted delivery , enabled by our proprietary peptide technology , may permit safe administration of higher doses of botulinum toxin and can result in longer lasting effect . we have demonstrated these properties in preclinical studies and have tested rt002 in a four-cohort , dose escalating , open-label phase 1/2 clinical trial outside of the united states for the treatment of glabellar lines , the vertical lines between the eyebrows and above the nose . data from this clinical trial indicated that rt002 is well-tolerated and efficacious at all four doses . we also reported duration of effect of seven months from the last cohort of this trial , the only one where duration of effect was measured . story_separator_special_tag we recognized royalty revenue during the years ended december 31 , 2014 , 2013 , and 2012 related to the relastin asset purchase and royalty agreement . the relastin royalty agreement provides for minimum royalty payment of $ 0.3 million per year , to be paid quarterly for up to 15 years from the execution date . the royalty agreement also provided for one-time payments upon achievement of certain milestones . in the year ended december 31 , 2013 , we received a one-time milestone payment of $ 150,000. the acquirer may terminate the royalty agreement with 90 days ' notice with the rights to the relastin product line reverting back to us . we do not currently have any plans for the future of relastin as our focus has been primarily on the development of rt001 and rt002 . our license revenue has historically been derived through nonrefundable technology license fees for our rt001 and rt002 product candidates . in the years ended december 31 , 2014 and 2013 , we recognized license revenue of $ 0.1 million and $ 0.2 million , respectively , pursuant to an exclusive technology evaluation agreement , whereby we received an upfront payment in the amount of $ 0.3 million , which was initially recorded as deferred revenue and recognized over the estimated performance period . during the year ended december 31 , 2012 , our license revenue was derived from an arrangement with medicis whereby , prior to our settlement with them , we had granted them specified rights to rt002 in return for an upfront payment . medicis was acquired by valeant pharmaceuticals international , inc. in december 2012. the upfront payment was deferred and recognized over the estimated performance period ; however , we did not recognize any license revenue from the agreement with medicis during the year ended december 31 , 2013 as the prior license agreement was discontinued in connection with the medicis legal settlement in october 2012. costs and operating expenses our cost and operating expenses consist of research and development expenses and sales , general and administrative expenses . the largest component of our operating expenses is our personnel costs , which consist primarily of wages , benefits and bonuses as well as related stock-based compensation . we expect our cash expenditures to increase in the near term to initiate and complete clinical trials and other associated programs relating to rt001 for the treatment of crow 's feet lines , initiate and complete clinical trials using rt001 for the treatment of hyperhidrosis , and to initiate and complete additional clinical trials and associated programs related to rt002 for the treatment of glabellar lines and indications in muscle movement and other disorders . research and development expenses we recognize research and development expenses as they are incurred . since our inception , we have focused on our clinical development programs and the related research and development . we have been developing rt001 and rt002 since 2002 and we typically use our employees , consultants and infrastructure resources across both programs . our research and development expenses consist primarily of : salaries and related expenses for personnel in research and development functions , including expenses related to stock-based compensation granted to such personnel ; expenses related to the initiation and completion of clinical trials for rt001 and rt002 , including expenses related to production of clinical supplies ; fees paid to clinical consultants , clinical trial sites and vendors , including cros in conjunction with implementing and monitoring our preclinical and clinical trials and acquiring and evaluating preclinical and clinical trial data , including all related fees , such as for investigator grants , patient screening fees , laboratory work and statistical compilation and analysis ; the fair value of technology rights reacquired as part of our settlement with medicis ; other consulting fees paid to third parties ; expenses related to production of clinical supplies , including fees paid to contract manufacturers ; expenses related to establishment of our own manufacturing facilities ; expenses related to license fees and milestone payments under in-licensing agreements ; expenses related to compliance with drug development regulatory requirements in the united states , the european union and other foreign jurisdictions ; and depreciation and other allocated expenses . 55 for the years ended december 31 , 2014 , 2013 , and 2012 , costs associated with our manufacturing , quality and regulatory efforts for both rt001 and rt002 development have been our largest research and development related expenses , totaling $ 28.0 million , or 83.7 % , $ 20.3 million , or 73.0 % , and $ 30.3 million , or 92.6 % , of research and development expenses in 2014 , 2013 , and 2012 , respectively . these costs do not include clinical costs associated with the development of rt001 and rt002 . we believe that the strict allocation of costs by product candidate would not be meaningful . as such , we generally do not track these costs by product candidate . clinical costs associated with the development of rt001 and rt002 , including clinical trials of rt001 for the treatment of crow 's feet lines and clinical trials of rt002 for the improvement of glabellar lines , totaled $ 5.4 million , or 16.3 % , $ 7.5 million , or 27.0 % , and $ 2.4 million , or 7.33 % of research and development expenses in 2014 , 2013 , and 2012 , respectively . our research and development expenditures are subject to numerous uncertainties primarily related to the timing and cost needed to complete our respective projects . further , the development timelines , the probability of success and development expenses can differ materially from expectations and the completion of clinical trials may take several years or more depending on the type , complexity , novelty and intended use of a product candidate . accordingly , the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development .
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results of operations for the years ended december 31 , 2014 , 2013 , and 2012 the following table presents our revenue for the periods indicated and related changes from the prior period : 58 revenue replace_table_token_6_th our total revenue for the year ended december 31 , 2014 decreased by 38 % , compared to the same period in 2013 , due to a decrease in license revenue and the relastin product milestone revenue . our total revenue for the year ended december 31 , 2013 decreased by 14 % , compared to the same period in 2012 , due to a decrease in license revenue offset by an increase in royalty revenue . our license revenue decreased to $ 0.2 million for the year ended december 31 , 2013 from $ 0.4 million for the year ended december 31 , 2012. the decrease was due to the termination of a license agreement for rt002 as a result of the medicis settlement in october 2012. prior to the termination of the medicis license agreement , we were recognizing license revenue of $ 0.5 million per year through the amortization of an upfront payment made by medicis during the year ended december 31 , 2009 , which was initially recorded as deferred revenue . as a result of the termination of the medicis license agreement , we no longer recognize any license revenue from the 2009 medicis license agreement for rt002 . this decrease was partially offset by $ 0.2 million of revenue recognized pursuant to an exclusive technology evaluation agreement whereby we received an upfront payment of $ 0.3 million which was initially recorded as deferred revenue and recognized over the estimated performance period . during the year ended december 31 , 2014 , the remaining $ 0.1 million of the upfront payment related to the exclusive technology evaluation agreement was recognized .
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we have one reportable segment with businesses that include our newspaper , websites , mobile applications and related businesses . we generate revenues principally from subscriptions and advertising . other revenues primarily consist of revenues from news services/syndication , digital archive licensing , building rental income , affiliate referrals , nyt live ( our live events business ) and retail commerce . our main operating costs are employee-related costs . in the accompanying analysis of financial information , we present certain information derived from consolidated financial information but not presented in our financial statements prepared in accordance with generally accepted accounting principles in the united states of america ( “ gaap ” ) . we are presenting in this report supplemental non-gaap financial performance measures that exclude depreciation , amortization , severance , non-operating retirement costs and certain identified special items , as applicable . these non-gaap financial measures should not be considered in isolation from or as a substitute for the related gaap measures , and should be read in conjunction with financial information presented on a gaap basis . for further information and reconciliations of these non-gaap measures to the most directly comparable gaap measures , see “ —results of operations—non-gaap financial measures. ” fiscal year 2017 comprised 53 weeks , while all other fiscal years presented in this item 7 comprised 52 weeks . 2017 financial highlights in 2017 , diluted earnings per share from continuing operations were $ 0.03 , compared with $ 0.19 for 2016 . diluted earnings per share from continuing operations excluding severance , non-operating retirement costs and special items discussed below ( or “ adjusted diluted earnings per share , ” a non-gaap measure ) were $ 0.80 for 2017 , compared with $ 0.57 for 2016 . operating profit in 2017 was $ 112.4 million , compared with $ 101.6 million for 2016 . the increase was mainly driven by higher subscription revenues , a postretirement benefit settlement gain and higher digital advertising revenues , partially offset by a pension settlement charge , lower print advertising revenues and higher operating costs . operating profit before depreciation , amortization , severance , non-operating retirement costs and special items discussed below ( or “ adjusted operating profit , ” a non-gaap measure ) was $ 284.5 million and $ 240.9 million for 2017 and 2016 , respectively . total revenues increased 7.7 % to $ 1.68 billion in 2017 from $ 1.56 billion in 2016 primarily driven by a significant increase in digital subscription revenue , as well as increased digital advertising revenue , partially offset by a decrease in print advertising revenue . subscription revenues increased 14.5 % in 2017 compared with 2016 , and surpassed $ 1 billion for the first time in our history . this increase was primarily due to significant growth in the number of subscriptions to the company 's digital subscription products , as well as the 2017 increase in home-delivery prices for the new york times newspaper , which more than offset a decline in print copies sold . revenue from our digital-only subscription products , which include our news product , as well as our crossword product and cooking product ( which first launched as a paid digital product in the third quarter of 2017 ) , increased 46.2 % in 2017 compared with 2016 . paid digital-only subscriptions totaled approximately 2,644,000 as of december 31 , 2017 , a 41.8 % increase compared with year-end 2016 . news product subscriptions totaled approximately 2,231,000 at the end of 2017 , a 37.9 % increase compared with 2016 . other product subscriptions , which include subscriptions to our crossword product and cooking product , totaled approximately 413,000 at the end of 2017 , a 67.2 % increase compared with 2016 . the new york times company – p. 23 total advertising revenues decreased 3.8 % in 2017 compared with 2016 , reflecting a 13.9 % decrease in print advertising revenues , offset by an 14.2 % increase in digital advertising revenues . the decrease in print advertising revenues resulted from a continued decline in display advertising , primarily in the luxury , travel and real estate categories . the increase in digital advertising revenues primarily reflected increases in revenue from smartphone advertising and branded content , partially offset by a continued decrease in traditional website display advertising . other revenues increased 15.6 % in 2017 compared with 2016 , largely due to affiliate referral revenue associated with the product review and recommendation website , wirecutter , which the company acquired in october 2016. operating costs increased in 2017 to $ 1.49 billion from $ 1.41 billion in 2016 , driven by higher marketing and compensation costs , partially offset by a decline in outside printing costs and raw materials expense . operating costs before depreciation , amortization , severance and non-operating retirement costs ( or “ adjusted operating costs , ” a non-gaap measure ) increased in 2017 to $ 1.39 billion from $ 1.31 billion in 2016 . non-operating retirement costs , excluding special items , decreased to $ 11.2 million in 2017 from $ 15.9 million in 2016 , primarily due to lower multiemployer pension plan withdrawal expense . business environment we believe that a number of factors and industry trends have had , and will continue to have , an adverse effect on our business and prospects . these include the following : competition in our industry we operate in a highly competitive environment . our print and digital products compete for subscription and advertising revenue with both traditional and other content providers . competition among companies offering online content is intense , and new competitors can quickly emerge . some of our current and potential competitors may have greater resources than we do , which may allow them to compete more effectively than us . story_separator_special_tag fixed costs a significant portion of our costs are fixed , and therefore we are limited in our ability to reduce these costs in the short term . employee-related costs and raw materials together accounted for approximately half of our total operating costs in 2017 . changes in employee-related costs and the price and availability of newsprint can materially affect our operating results . for a discussion of these and other factors that could affect our business , results of operations and financial condition , see “ item 1a — risk factors. ” the new york times company – p. 25 our strategy we are operating during a period of transformation for our industry and amidst uncertain economic conditions . we anticipate that the challenges we currently face will continue , and we believe that the following elements are key to our efforts to address them . providing journalism worth paying for we believe that the times 's original and high-quality content and journalistic excellence set us apart from other news organizations , and that our readers are willing to pay for trustworthy , insightful and differentiated content . during 2017 , the times again broke stories and produced investigative reports that sparked global conversations on wide-ranging topics . our ground-breaking journalism continues to be recognized , most notably in the number of pulitzer prizes the times has received — more than any other news organization . in addition , we have continued to make significant investments in our newsroom , adding journalistic talent across a wide range of areas — from our business coverage to our opinion page — and investing in new forms of visual and multimedia journalism . we believe that the significant growth over the last year in subscriptions to our products demonstrates the success of our “ subscription-first ” strategy and the willingness of our readers to pay for high-quality journalism . as of december 31 , 2017 , we had approximately 3.6 million total subscriptions to our products , more than at any point in our history . as we look ahead to further executing on our strategic priorities , we remain committed to providing high-quality , trustworthy and differentiated content that we believe sets us apart . strengthening engagement by becoming an essential part of readers ' daily lives we continue to focus on deepening the engagement of readers by making the times an indispensable part of their daily lives . and we continue to communicate the value of independent , high-quality journalism and why it matters . during 2017 , we developed and enhanced products spanning a broad range of topics , interests , formats and platforms . among other things , we introduced the daily podcast in early 2017 , which became one of the most downloaded podcasts of the year , and launched a monthly insert in our print newspaper dedicated to children . and we continued to make investments in our lifestyle products and services , such as our crossword and cooking products and wirecutter . we also continued our efforts to reach and engage readers around the world , investing in , among other things , a news bureau in australia , and opportunities to reach more readers in the united kingdom , europe and canada . in addition , we continued to experiment with reaching new readers on third-party platforms , while remaining focused on building engagement with readers on our own platforms . looking ahead , we will continue to explore opportunities to deeply engage readers and further innovate our products , while remaining committed to creating quality content and a quality user experience , regardless of the distribution model or platform . creating marketing solutions as compelling as our journalism we are focused on continuing to grow our digital advertising revenue by developing innovative and compelling advertising offerings that integrate well with the user experience and provide value to advertisers . we believe we have a powerful brand that , because of the quality of our journalism , attracts educated , affluent and influential audiences , and provides a safe and trusted platform for advertisers ' brands . during 2017 , the digital advertising market continued to shift away from traditional desktop display advertising and towards newer advertising forms , such as branded content and other customized forms of advertising , as well as programmatic , video and mobile advertising . we adapted to this market shift , introducing innovative digital advertising solutions for our mobile and other platforms , and providing advertisers new ways of reaching our audience . looking ahead , we will continue to focus on leveraging our brand in developing and refining our advertising offerings . p. 26 – the new york times company transforming our operations to deliver on our goals we are focused on becoming a more effective and efficient organization and have taken and continue to take a number of steps to achieve this . among other things , we realigned our organizational structure to accelerate our digital transformation , and continue to optimize our product , technology and data systems to improve the speed with which we are able to develop , enhance and deliver our digital products . in addition , we introduced a new editing process in our newsroom intended to further streamline this function , and continued to optimize our print operations and supply chain . we are also engaged in a plan to redesign our headquarters building and consolidate our operations within a smaller number of floors , and to lease the remaining floors to third parties . we believe this plan will generate meaningful rental income for the company and result in a more collaborative workspace . looking ahead , we will continue to focus on optimizing our organizational and cost structure to ensure that we are operating more efficiently and effectively across functions . effectively managing our liquidity and our non-operating costs we have continued to strengthen our liquidity position and further de-leverage and de-risk our balance sheet .
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results of operations overview fiscal year 2017 comprised 53 weeks and fiscal years 2016 and 2015 each comprised 52 weeks . the following table presents our consolidated financial results : replace_table_token_5_th * represents a change equal to or in excess of 100 % or one that is not meaningful . p. 28 – the new york times company revenues subscription , advertising and other revenues were as follows : replace_table_token_6_th subscription revenues in 2017 , the company renamed “ circulation revenues ” as “ subscription revenues. ” subscription revenues consist of revenues from subscriptions to our print and digital products ( which include our news product , as well as our crossword and cooking products ) , and single-copy and bulk sales of our print products ( which represent approximately 10 % of these revenues ) . our cooking product first launched as a paid digital product in the third quarter of 2017. subscription revenues are based on both the number of copies of the printed newspaper sold and digital-only subscriptions , and the rates charged to the respective customers . the following tables summarize digital-only subscription revenues for the years ended december 31 , 2017 , december 25 , 2016 , and december 27 , 2015 : replace_table_token_7_th ( 1 ) includes revenues from subscriptions to the company 's news product . news product subscription packages that include access to the company 's crossword and cooking products are also included in this category . ( 2 ) includes revenues from standalone subscriptions to the company 's crossword and cooking products . the new york times company – p. 29 the following tables summarize digital-only subscriptions as of december 31 , 2017 , december 25 , 2016 , and december 27 , 2015 : replace_table_token_8_th ( 1 ) reflects certain immaterial prior-period corrections . ( 2 ) includes subscriptions to the company 's news product . news product subscription packages that include access to the company 's crossword and cooking products are also included in this category .
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as a percentage of revenue , cost of revenue increase d to 55.1 % in fiscal year 2014 from 54.8 % in fiscal year 2013 , resulting in a decrease in gross margin of approximately 34 basis points to 44.9 % in fiscal year 2014 from 45.2 % in fiscal year 2013 . amortization of intangible assets decrease d and was $ 49.7 million for fiscal year 2014 , as compared to $ 52.0 million for fiscal year 2013 . the mark-to-market adjustment for postretirement benefit plans was a loss of $ 8.4 million for fiscal year 2014 , as compared to a loss of $ 0.8 million for fiscal year 2013 . stock-based compensation expense was $ 1.5 million for fiscal year 2014 , as compared to $ 1.3 million for fiscal year 2013 . the amortization of purchase accounting adjustments to record the inventory from certain acquisitions was $ 2.4 million for fiscal year 2014 , as compared to $ 0.2 million for fiscal year 2013 . acquisition related costs for integration , contingent consideration and other costs added an incremental expense of $ 0.1 million for fiscal year 2014 , as compared to $ 0.2 million for fiscal year 2013 . in addition to the factors noted above , the decrease in gross margin was primarily the result of unfavorable changes in product mix , with an increase in sales of lower gross margin product offerings , pricing pressure , and negative impacts from foreign exchange rates . these items were partially offset by increased sales volume and cost containment and productivity initiatives . 2013 compared to 2012 . cost of revenue for fiscal year 2013 was $ 1,181.4 million , as compared to $ 1,143.7 million for fiscal year 2012 , an increase of approximately $ 37.8 million , or 3 % . as a percentage of revenue , cost of revenue increase d to 54.8 % in fiscal year 2013 from 54.3 % in fiscal year 2012 , resulting in a decrease in gross margin of approximately 43 basis points to 45.2 % in fiscal year 2013 from 45.7 % in fiscal year 2012 . amortization of intangible assets increase d and was $ 52.0 million for fiscal year 2013 , as compared to $ 50.7 million for fiscal year 2012 . the mark-to-market adjustment for postretirement benefit plans was a loss of $ 0.8 million for fiscal year 2013 , as compared to $ 3.7 million for fiscal year 2012 . stock-based compensation expense was $ 1.3 million for both fiscal years 2013 and 2012 . the amortization of purchase 30 accounting adjustments to record the inventory from certain acquisitions was $ 0.2 million for fiscal year 2013 , as compared to $ 5.2 million for fiscal year 2012 . acquisition related costs for integration , contingent consideration and other costs added an incremental expense of $ 0.2 million for fiscal year 2013 . in addition to the factors noted above , the decrease in gross margin was primarily the result of pricing pressure and unfavorable changes in product mix with an increase in sales of lower gross margin product offerings , partially offset by productivity improvements . selling , general and administrative expenses 2014 compared to 2013 . selling , general and administrative expenses for fiscal year 2014 were $ 659.3 million , as compared to $ 581.9 million for fiscal year 2013 , an increase of approximately $ 77.4 million , or 13 % . as a percentage of revenue , selling , general and administrative expenses increase d and were 29.5 % in fiscal year 2014 , compared to 27.0 % in fiscal year 2013 . amortization of intangible assets decrease d and was $ 33.1 million for fiscal year 2014 , as compared to $ 36.9 million for fiscal year 2013 . the mark-to-market adjustment for postretirement benefit plans was a loss of $ 67.1 million for fiscal year 2014 , as compared to income of $ 18.1 million for fiscal year 2013 . stock-based compensation expense increase d and was $ 12.5 million for fiscal year 2014 , as compared to $ 11.9 million for fiscal year 2013 . during fiscal year 2014 , we recorded a benefit of $ 2.3 million for cost reimbursements related to a particular site , of which $ 1.2 million was for future monitoring and mitigation activities , as compared to an expense of $ 4.6 million for environmental costs for fiscal year 2013 . acquisition related costs for integration , contingent consideration and other costs added an incremental expense of $ 0.4 million for fiscal year 2014 and $ 1.1 million for fiscal year 2013 . in addition to the above items , the increase in selling , general and administrative expenses was primarily the result of costs related to growth investments , particularly in emerging territories , partially offset by cost containment and productivity initiatives . 2013 compared to 2012 . selling , general and administrative expenses for fiscal year 2013 were $ 581.9 million , as compared to $ 627.4 million for fiscal year 2012 , a decrease of approximately $ 45.5 million , or 7 % . as a percentage of revenue , selling , general and administrative expenses decrease d and were 27.0 % in fiscal year 2013 , compared to 29.8 % in fiscal year 2012 . amortization of intangible assets decrease d and was $ 36.9 million for fiscal year 2013 , as compared to $ 38.9 million for fiscal year 2012 . the mark-to-market adjustment for postretirement benefit plans was income of $ 18.1 million for fiscal year 2013 , as compared to a loss of $ 27.9 million for fiscal year 2012 . stock-based compensation expense decrease d and was $ 11.9 million for fiscal year 2013 , as compared to $ 18.6 million for fiscal year 2012 . story_separator_special_tag accordingly , we undertook a review of certain of our trade names within our portfolio as part of a realignment of our marketing strategy , which resulted in pre-tax impairment charges of $ 73.4 million in our human health segment and $ 0.7 million in our environmental health segment during fiscal year 2012. interest and other expense , net interest and other expense , net , consisted of the following : replace_table_token_12_th 2014 compared to 2013 . interest and other expense , net , for fiscal year 2014 was an expense of $ 41.1 million , as compared to an expense of $ 64.1 million for fiscal year 2013 , a decrease of $ 23.0 million . the decrease in interest and other expense , net , in fiscal year 2014 as compared to fiscal year 2013 was primarily due to a decrease in interest expense and other expense . interest expense decrease d by $ 13.7 million in fiscal year 2014 as compared to fiscal year 2013 , primarily due to the redemption of our fixed rate 2015 notes in fiscal year 2013 , resulting in lower debt outstanding and an increased mix of variable rate debt with lower interest rates during fiscal year 2014. in addition , during fiscal year 2013 , we wrote-off $ 2.8 million for the remaining unamortized derivative losses for previously settled cash flow hedges and wrote-off $ 0.2 million for the remaining deferred debt issuance costs related to the prepayment of our 2015 notes . other expenses for fiscal year 2014 decrease d by $ 9.3 million as compared to fiscal year 2013 , primarily due to a prepayment premium of $ 11.1 million for the redemption of our 2015 notes in fiscal year 2013 , which was partially offset by expenses related to foreign currency transactions and translation of non-functional currency assets and liabilities . a more complete discussion of our liquidity is set forth below under the heading “ liquidity and capital resources . ” 2013 compared to 2012 . interest and other expense , net , for fiscal year 2013 was an expense of $ 64.1 million , as compared to an expense of $ 48.0 million for fiscal year 2012 , an increase of $ 16.2 million . the increase in interest and other expense , net , in fiscal year 2013 as compared to fiscal year 2012 was primarily due to an increase in other expense , net , resulting from a prepayment premium of $ 11.1 million for the redemption of our 2015 notes . interest expense increase d by $ 4.1 million in fiscal year 2013 as compared to fiscal year 2012 , primarily due to the write-off of $ 2.8 million for the remaining unamortized derivative losses for previously settled cash flow hedges and the write-off of $ 0.2 million for the remaining deferred debt issuance costs related to the prepayment of our 2015 notes . interest income decrease d by $ 0.1 million in fiscal year 2013 as compared to fiscal year 2012 , primarily due to lower cash balances throughout fiscal year 2013. other expenses for fiscal year 2013 increase d by $ 11.9 million as compared to fiscal year 2012 , and consisted primarily of the prepayment premium of $ 11.1 million for the redemption of our 2015 notes , expenses related to foreign currency transactions and translation of non-functional currency assets and liabilities . provision for ( benefit from ) income taxes 2014 compared to 2013 . the fiscal year 2014 provision for income taxes on continuing operations was $ 8.4 million , as compared to a benefit of $ 10.6 million for fiscal year 2013 . the effective tax rate on continuing operations was a provision of 5.0 % for fiscal year 2014 as compared to a benefit of 6.5 % for fiscal year 2013 . the provision for income taxes in fiscal year 2014 was primarily due to income in lower tax rate jurisdictions , partially offset by losses in higher rate jurisdictions and a tax benefit of $ 7.0 million related to discrete items . the benefit from income taxes in fiscal year 2013 was primarily due a tax benefit of $ 24.0 million related to discrete items and losses in higher tax rate jurisdictions , partially offset by a provision from income taxes related to profits in lower tax rate jurisdictions . the $ 24.0 million of discrete items includes $ 9.4 million for 35 lapses in statutes of limitations during the first quarter of fiscal year 2013 and $ 9.2 million primarily for lapses in statutes of limitations and audit settlements in the fourth quarter of fiscal year 2013 . 2013 compared to 2012 . the fiscal year 2013 benefit from income taxes on continuing operations was $ 10.6 million , as compared to a benefit of $ 16.1 million for fiscal year 2012 . the effective tax rate on continuing operations was a benefit of 6.5 % for fiscal year 2013 as compared to a benefit of 29.2 % for fiscal year 2012 . the benefit from income taxes in fiscal year 2013 was primarily due to a tax benefit of $ 24.0 million related to discrete items and losses in higher tax rate jurisdictions , partially offset by a provision from income taxes related to profits in lower tax rate jurisdictions . the $ 24.0 million of discrete items includes $ 9.4 million for lapses in statutes of limitations during the first quarter of fiscal year 2013 and $ 9.2 million primarily for lapses in statutes of limitations and audit settlements in the fourth quarter of fiscal year 2013. the benefit from income taxes in fiscal year 2012 was primarily due to a tax benefit of $ 7.0 million related to discrete items and losses in higher tax rate jurisdictions , which included the pre-tax impairment charges of $ 74.2 million , partially offset by a provision from income taxes related to profits in
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changes in accrued expenses , other assets and liabilities and other items , net , decrease d cash provided by operating activities by $ 144.5 million for fiscal year 2013 and primarily related to the timing of payments for taxes , defined benefit pension plans , royalties , restructuring , and salary and benefits . during fiscal year 2013 , we paid $ 40.3 million for prepaid royalties and we made contributions of $ 37.0 million to our defined benefit pension plan in the united states . we also contributed $ 20.2 million , in the aggregate , to plans outside of the united states during fiscal year 2013 , which includes an additional contribution of $ 10.0 million to our defined benefit pension plan in the united kingdom . investing activities . net cash used in the investing activities of our continuing operations was $ 1.7 million for fiscal year 2013 , as compared to net cash used in the investing activities of our continuing operations of $ 82.8 million for fiscal year 2012 , a decrease of $ 81.1 million . proceeds from dispositions of property , plant and equipment was $ 52.2 million for fiscal year 2013 , primarily due to the sale of a building located in boston , massachusetts for net proceeds of $ 47.6 million . capital expenditures for fiscal year 2013 were $ 39.0 million , primarily for manufacturing equipment and other capital equipment purchases , which included $ 5.9 million of capital improvements to leased buildings , which have been funded by the lessor , as described below in our financing lease obligations . for fiscal year 2013 , we used $ 15.7 million of net cash for acquisitions and investments , as compared to $ 40.9 million used in fiscal year 2012 . financing activities .
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Liquidity
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the company has one of the world 's broadest portfolios of product offerings available from leading electronic components and enterprise computing solutions suppliers , coupled with a range of services , solutions and tools that help industrial and commercial customers introduce innovative products , reduce their time to market , and enhance their overall competitiveness . the company has two business segments , the global components business segment and the global ecs business segment . the company distributes electronic components to oems and cms through its global components business segment and provides enterprise computing solutions to vars and msps through its global ecs business segment . for 2017 , approximately 68 % of the company 's sales were from the global components business segment and approximately 32 % of the company 's sales were from the global ecs business segment . the company 's financial objectives are to grow sales faster than the market , increase the markets served , grow profits faster than sales , and increase return on invested capital . to achieve its objectives , the company seeks to capture significant opportunities to grow across products , markets , and geographies . to supplement its organic growth strategy , the company continually evaluates strategic acquisitions to broaden its product and value-added service offerings , increase its market penetration , and or expand its geographic reach . story_separator_special_tag half of the year . adjusted for the impact of changes in foreign currencies and acquisitions , the company 's global ecs business segment sales decrease d by 0.3 % in 2017 , compared with the year-earlier period . 20 following is an analysis of net sales by business segment for the years ended december 31 ( in millions ) : replace_table_token_7_th * the sum of the components for sales , as adjusted , may not agree to totals , as presented , due to rounding . consolidated sales for 2016 increase d by $ 543.2 million , or 2.3 % , compared with the year-earlier period . the increase in 2016 was driven by an increase in global components business segment sales of $ 1.0 billion , or 7.0 % , offset partially by a decrease in global ecs business segment sales of $ 459.8 million , or 5.2 % , compared with the year-earlier period . adjusted for the impact of changes in foreign currencies and acquisitions , the company 's consolidated sales increased by 0.5 % in 2016 , compared with the year-earlier period . in the global components business segment , sales for 2016 increase d 7.0 % compared with the year-earlier period , primarily driven by increased demand in the asia regions and the impact of recently acquired businesses . adjusted for the impact of changes in foreign currencies and acquisitions , the company 's global components business segment sales increased by 5.1 % in 2016 , compared with the year-earlier period . in the global ecs business segment , sales for 2016 decrease d 5.2 % compared with the year-earlier period , primarily driven by a decrease in hardware sales offset by an increase in software sales , a significant portion of which are recognized on a net basis , and the impact of change in foreign currencies . adjusted for the impact of changes in foreign currencies and acquisitions , the company 's global ecs business segment sales decreased by 7.0 % in 2016 , compared with the year-earlier period . gross profit following is an analysis of gross profit for the years ended december 31 ( in millions ) : replace_table_token_8_th 21 the company recorded gross profit of $ 3.36 billion and $ 3.14 billion for 2017 and 2016 , respectively . the increase in gross profit was primarily due to increased demand and supplier awards in the components business . gross profit margins for 2017 decreased by approximately 70 basis points , compared with the year-earlier period , primarily due to an increase in lower margin distribution services in the americas and emea components businesses . the increase in supplier awards initially drive lower margin fulfillment volume . following is an analysis of gross profit for the years ended december 31 ( in millions ) : replace_table_token_9_th the company recorded gross profit of $ 3.14 billion and $ 3.04 billion for 2016 and 2015 , respectively . the increase in gross profit was primarily due to increased demand for the asia/pacific and europe regions of the components business , offset partially by a shift in the overall percentage of sales attributable to the asia/pacific region . the company 's gross margins in the components business in the asia/pacific region tend to be lower than those in the other markets in which the company sells products and services . gross profit margins for 2016 increase d by approximately 20 basis points , compared with the year-earlier period , primarily due to a more favorable product mix in the global ecs business . adjusted for the impact of changes in foreign currencies and acquisitions , the company 's consolidated gross profit margin increase d approximately 10 basis points in 2016 , compared with the year-earlier period . selling , general , and administrative expenses and depreciation and amortization following is an analysis of operating expenses for the years ended december 31 ( in millions ) : replace_table_token_10_th selling , general , and administrative expenses increase d by $ 110.1 million , or 5.4 % , in 2017 , on a sales increase of 12.5 % , compared with the year-earlier period . selling , general , and administrative expenses , as a percentage of sales , was 8.1 % and 8.6 % for 2017 and 2016 , respectively . depreciation and amortization expense as a percentage of operating expenses was 6.6 % for 2017 compared with 7.2 % in the year-earlier period . included in depreciation and amortization expense is identifiable intangible asset amortization of $ 50.1 million for 2017 compared to $ 54.9 million for 2016 . story_separator_special_tag refer to note 9 , `` restructuring , integration , and other charges '' of the notes to the consolidated financial statements for further discussion of the company 's restructuring and integration activities . operating income following is an analysis of operating income for the years ended december 31 ( in millions ) : replace_table_token_12_th * the sum of the components for consolidated operating income , as adjusted , may not agree to totals , as presented , due to rounding . the company recorded operating income of $ 928.5 million , or 3.5 % of sales , in 2017 compared with operating income of $ 858.5 million , or 3.6 % of sales , in 2016 . included in operating income for 2017 and 2016 were the previously discussed identifiable intangible asset amortization of $ 50.1 million and $ 54.9 million , respectively , and restructuring , integration , and other charges of $ 91.3 million and $ 73.6 million , respectively . included in operating income for 2017 is an impairment of assets held for sale of $ 21.0 million . excluding these items , operating income , as adjusted , was $ 1.1 billion , or 4.1 % of sales , in 2017 compared with operating income , as adjusted , of $ 987.0 million , or 4.1 % of sales , in 2016 . operating margins , as adjusted , were unchanged compared with the year-earlier period , despite a 70 basis point decrease in gross margins due to the company 's ability to efficiently manage operating costs . 24 following is an analysis of operating income for the years ended december 31 ( in millions ) : replace_table_token_13_th * the sum of the components for consolidated operating income , as adjusted , may not agree to totals , as presented , due to rounding . the company recorded operating income of $ 858.5 million , or 3.6 % of sales , in 2016 compared with operating income of $ 824.5 million , or 3.5 % of sales , in 2015 . included in operating income for 2016 and 2015 were the previously discussed identifiable intangible asset amortization of $ 54.9 million and $ 51.0 million , respectively , and restructuring , integration , and other charges of $ 73.6 million and $ 68.8 million , respectively . excluding these items , operating income , as adjusted , was $ 987.0 million , or 4.1 % of sales , in 2016 compared with operating income , as adjusted , of $ 944.3 million , or 4.1 % of sales , in 2015 . loss on investment during 2017 , the company recorded a loss on investment of $ 15.0 million related to a full impairment of a cost method investment . during 2015 , the company recorded a loss on investment of $ 3.0 million , partially offset by a gain on sale of investment of $ 2.0 million . loss on extinguishment of debt during 2017 , the company recorded a loss on extinguishment of debt of $ 59.5 million related to the redemption of the company 's 6.875 % senior debenture due 2018 and refinance of a portion of the company 's 6.00 % notes due april 2020 , 5.125 % notes due march 2021 , and 7.50 % notes due january 2027. during 2015 , the company recorded a loss on extinguishment of debt of $ 2.9 million related to the redemption of $ 250.0 million principal amount of its 3.375 % notes due november 2015. interest and other financing expense , net net interest and other financing expense increased 8.7 % in 2017 to $ 163.8 million , compared with $ 150.7 million in 2016 , primarily due to higher average debt outstanding . net interest and other financing expense increased by 11.3 % in 2016 to $ 150.7 million , compared with $ 135.4 million in 2015 , primarily due to higher average debt outstanding and an increase in variable interest rates . income taxes for the year ended december 31 , 2017 , the company recorded provision for income taxes of $ 287.1 million , equivalent to an effective tax rate of 41.4 % . the company 's provision for income taxes and effective tax rates are impacted by such costs as restructuring , integration , and other charges , identifiable intangible asset amortization , loss on extinguishment of debt , impairment of assets held for sale , loss on investment , and tax law changes . excluding the impact of the aforementioned items , the company 's effective tax rate for 2017 was 26.4 % . for the years ended december 31 , 2016 and 2015 , the company reported provision for income taxes of $ 190.7 million ( an effective tax rate of 26.7 % ) and $ 191.7 million ( an effective tax rate of 27.7 % ) , respectively . excluding restructuring , integration and other charges , identifiable intangible asset amortization , loss on extinguishment of debt , impairment of assets held for sale , and loss on investment , the company 's effective tax rates for 2016 and 2015 would have been 27.4 % and 27.1 % , respectively . the company 's effective tax rate deviates from the statutory u.s. federal income tax rate mainly due to the mix of foreign taxing jurisdictions in which the company operates and where its foreign subsidiaries generate taxable income . in 2017 , the effective tax 25 rate increased significantly primarily due to the change in the u.s. tax law . specifically , on december 22 , 2017 , the u.s. federal government enacted comprehensive tax legislation ( the “ tax act ” ) , which significantly revises the u.s. corporate income tax law by , among other things , lowering the u.s. federal corporate income tax rate from 35 % to 21 % , implementing a territorial tax system , imposing a one-time transition tax on foreign unremitted earnings , and setting limitations on deductibility of certain costs ( e.g. , interest expense ) . the lower u.s.
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executive summary consolidated sales for 2017 increase d by 12.5 % , compared with the year-earlier period , due to a 19.0 % increase in global components business segment sales and a 0.8 % increase in global ecs business segment sales . adjusted for the change in foreign currencies and acquisitions , consolidated sales increase d 11.6 % compared with the year-earlier period . net income attributable to shareholders decrease d to $ 402.0 million in 2017 compared with net income attributable to shareholders of $ 522.8 million in the year-earlier period . the following items impacted the comparability of the company 's results for the years ended december 31 , 2017 and 2016 : a loss on extinguishment of debt of $ 59.5 million in 2017 ; restructuring , integration , and other charges of $ 91.3 million in 2017 and $ 73.6 million in 2016 ; impairment of assets held for sale of $ 21.0 million in 2017 ; identifiable intangible asset amortization of $ 50.1 million in 2017 and $ 54.9 million in 2016 ; a loss on investment of $ 14.2 million in 2017 ; and impact of the u.s. federal government enacted tax legislation ( `` tax act '' ) of $ 124.7 million . excluding the aforementioned items , net income attributable to shareholders increase d to $ 679.0 million in 2017 compared with $ 609.8 million in the year-earlier period .
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income taxes : in fiscal 2015 and 2014 the income tax benefit for continuing operations had an effective tax rate of ( 110.5 % ) as compared to income tax expense with an effective rate of .2 % in fiscal 2014. prior to june 30 , 2014 and through march 31 , 2015 , the company had a full valuation allowance recorded against deferred tax assets . as of the year ended june 30 , 2015 , the company reduced the valuation allowance by $ 5,503,417. the change in the valuation allowance includes a $ 1,499,297 write-off of deferred tax assets against its corresponding valuation allowance . the write-off primarily pertains to a loss in tax benefit for net operating losses subject to limitation under federal tax law that preclude its utilization . in addition , during the fourth quarter of fiscal 2015 , based on our consideration of all available positive and negative evidence including achieving cumulative profitable operating performance over the past three years and our positive outlook for taxable income in the future , the company reevaluated its deferred tax asset . based upon the guidance under asc 740 , we concluded that it was more likely than not that the company would realize the benefit of such deferred tax assets . the portion of the valuation allowance release attributable to income in future years resulted in the recognition of a tax benefit of $ 2,892,000 in continuing operations in the fourth quarter of fiscal 2015. the deferred tax asset will be realized against future income tax expense that would be payable in the absence of the net operating loss carryforwards . the company still maintains a full valuation allowance on foreign net operating losses . fiscal years ended june 30 , 2014 and 2013 : net sales : net sales increased $ 2,233,209 to $ 17,060,435 in fiscal 2014 from $ 14,827,226 in fiscal 2013. the increase is due to higher bonescalpel revenue of $ 1,340,540 , higher sonastar revenue of $ 1,037,032 and higher sonicone revenue of $ 369,644 , partially offset by lower service revenue of $ 385,202 , lower lysonix revenue of $ 114,679 and lower other revenue of $ 14,126 . 26 set forth below are tables showing the company 's net sales by ( i ) product category and ( ii ) geographic region for the years ended june 30 , 2014 and 2013 : replace_table_token_17_th replace_table_token_18_th net sales for the three months ended june 30 , 2014 were $ 5,578,147 , an increase of $ 1,819,164 from $ 3,758,983 for the three months ended june 30 , 2013. the increase is due to higher sonastar revenue of $ 1,047,342 , higher bonescalpel revenue of $ 975,434 , higher sonicone revenue of $ 63,614 and higher other revenue of $ 1,521 , partially offset by lower lysonix revenue of $ 168,386 and lower service revenue of $ 100,361. set forth below are tables showing the company 's net sales by ( i ) product category and ( ii ) geographic region for the three months ended june 30 , 2014 and 2013 : replace_table_token_19_th replace_table_token_20_th 27 gross profit : gross profit increased to 65.2 % in fiscal 2014 from 49.9 % in fiscal 2013. the increase is primarily due to the reversal of $ 438,509 of soma related costs previously accrued in fiscal 2013 in accordance with the puricore settlement agreement ( see note 8 to consolidated financial statements included in this annual report ) in addition to $ 638,000 of soma-related costs booked in fiscal 2013 , in addition to inventory reserves booked in the fourth quarter 2013. gross profit increased to 65.4 % for the three months ended june 30 , 2014 from 34.2 % for the three months ended june 30 , 2013. the increase is primarily related to soma-related costs of approximately $ 189,000 and inventory reserves of approximately $ 610,000 booked against the soma and anika inventory in fiscal 2013. selling expenses : selling expenses increased $ 496,522 to $ 7,272,726 ( 42 % of sales ) in fiscal 2014 from $ 6,776,204 ( 46 % of sales ) in fiscal 2013. the increase is due to higher sales commissions of $ 765,711 , higher depreciation expense of $ 176,598 ( due to the increase in number of demonstration units placed in the field ) and higher other expenses of $ 3,779 , partially offset by lower personnel expenses of $ 221,248 and lower travel expenses of $ 228,318. selling expenses for the three months ended june 30 , 2014 decreased $ 160,935 to $ 1,846,402 ( 33 % of sales ) from $ 2,007,337 ( 53 % of sales ) for the three months ended june 30 , 2013. the decrease is due to lower personnel costs of $ 167,154 , lower travel expenses of $ 144,452 and lower advertising expenses of $ 69,751 , partially offset by higher sales commission expenses of $ 215,479 and higher other expenses of $ 4,943. general and administrative expenses : general and administrative expenses increased $ 244,566 to $ 4,691,055 in fiscal 2014 from $ 4,446,489 in fiscal 2013. the increase is related to higher non-cash compensation expenses from the issuance of stock options of $ 208,413 , higher legal expenses of $ 45,167 and higher accounting and travel expenses of $ 42,132 , partially offset by lower bad debt expense of $ 50,000 and other lower expenses of $ 1,145. for the three months ended june 30 , 2014 , general and administrative expenses increased $ 16,949 to $ 1,172,767 from $ 1,155,818 for the three months ended june 30 , 2013. the increase is primarily related to higher non-cash compensation expenses from the issuance of stock options of $ 55,468 and other higher expenses of $ 6,428 , partially story_separator_special_tag offset by lower consulting expenses of $ 44,947. research and development expenses : research and development expenses increased $ 215,693 to $ 1,711,751 in fiscal 2014 from $ 1,496,058 in fiscal 2013. the increase in research and development expenses is due to higher product development material costs of $ 75,625 , higher temporary help expenses of $ 57,592 , higher legal expenses of $ 34,246 , higher amortization expense of $ 24,099 and other higher expenses of $ 24,131. for the three months ended june 30 , 2014 , research and development expenses increased $ 44,609 to $ 397,378 from $ 352,769 for the three months ended june 30 , 2013. the increase is due to higher product development labor expenses of $ 21,331 , higher legal expenses of $ 18,849 and higher other expenses of $ 4,429. other income : other income increased $ 1,309,345 to $ 3,706,174 in fiscal 2014 from $ 2,396,829 in fiscal 2013. the increase in other income is related to higher royalty income from covidien of $ 1,213,781. other income increased $ 486,502 to $ 1,169,916 for the three months ended june 30 , 2014 from $ 683,414 for the three months ended june 30 , 2013. the increase is due to higher royalty income from covidien of $ 431,110. income taxes : in fiscal 2014 and 2013 the income tax benefit for continuing operations had an effective tax rate of .2 % . overall , when considering discontinued operations , the company had minimal income tax expense . in prior years the company established a valuation allowance against deferred tax assets due to the net loss from operations over the past 5 years which caused management to conclude that it is more likely than not that its deferred tax assets may not be fully realized . 28 discontinued operations : the following represents the results of the laboratory and forensic safety products business along with legal and other expenses associated with labcaire systems limited and misonix hifu technologies limited which are included in discontinued operations : replace_table_token_21_th see note 1 of the notes to consolidated financial statements included in item 8 of this annual report for further discussion of the nature of discontinued operations . liquidity and capital resources : working capital at june 30 , 2015 and 2014 was $ 18,289,000 and $ 12,277,000 , respectively . for the fiscal year ended june 30 , 2015 , cash provided by operations totaled $ 2,371,339 , mainly due to higher net income , partially offset by higher inventory and accounts receivable . for the fiscal year ended june 30 , 2015 , cash used in investing activities totaled $ 778,203 , primarily consisting of the purchase of property , plant and equipment along with filing for additional patents . for the fiscal year ended june 30 , 2015 , cash provided by financing activities was $ 723,560. cash provided by discontinued operations was $ 267,115. as of june 30 , 2015 , the company had a cash balance of $ 9,623,949 and believes it has sufficient cash to finance operations for at least the next 12 months . the company maintains cash balances at various financial institutions . at june 30 , 2015 , these financial institutions held cash that was approximately $ 9,375,735 in excess of amounts insured by the federal deposit insurance corporation . commitments the company has commitments under operating leases that will be funded from operating sources . at june 30 , 2015 , the company 's contractual cash obligations and commitments relating to operating leases are as follows : replace_table_token_22_th off-balance sheet arrangements the company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the company 's financial condition , changes in financial condition , revenues or expenses , results of operations , liquidity , capital expenditures or capital resources that is material to the company . other in the opinion of management , inflation has not had a material effect on the operations of the company . 29 critical accounting policies : new accounting pronouncements : we are required to adopt certain new accounting pronouncements . see note 1 to our consolidated financial statements included as part of this annual report . general : note 1 of the notes to consolidated financial statements included in this annual report includes a summary of the company 's significant accounting policies and methods used in the preparation of its financial statements . the company 's discussion and analysis of its financial condition and results of operations is based upon the company 's financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states . the preparation of these financial statements requires the company to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses . on an on-going basis , management evaluates its estimates and judgments , including those related to bad debts , inventories , goodwill , property , plant and equipment , stock-based compensation and income taxes . management bases its estimates and judgments on historical experience and on 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 . actual results may differ from these estimates under different assumptions or conditions .
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for the same period in fiscal 2014. set forth below are tables showing the company 's net sales by ( i ) product category and ( ii ) geographic region for the three months ended june 30 , 2015 and 2014 : replace_table_token_15_th replace_table_token_16_th gross profit : gross profit increased to 67.2 % in fiscal 2015 from 65.2 % in fiscal 2014. the increase is primarily related to higher sales volume as well as a favorable product mix of higher margin product deliveries in fiscal 2105. the higher sales volume resulted in higher coverage of fixed expenses resulting in higher margins . gross profit increased to 66.6 % for the three months ended june 30 , 2015 from 65.4 % for the three months ended june 30 , 2014. the increase is due to higher sales volume as well as a favorable product mix of higher margin product deliveries for the three months ended june 30 , 2015. the higher sales volume resulted in higher coverage of fixed expenses resulting in higher margins . selling expenses : selling expenses increased $ 1,789,969 to $ 9,062,695 in fiscal 2015 from $ 7,272,726 in fiscal 2014. the increase is related to higher sales commissions of $ 560,371 , higher salary expenses of $ 484,083 due to increased head count , higher depreciation expense of $ 233,833 due the increase in the number of demo units used for consignments in the field , higher travel expense of $ 218,143 , higher employee welfare and office expense of $ 92,426 and higher other expenses of $ 12,638. selling expenses increased $ 646,030 to $ 2,492,432 for the three months ended june 30 , 2015 from $ 1,846,402 for the three months ended june 30 , 2014. the increase is due to higher salary and benefit expenses of $ 290,165 due to increased headcount , higher travel expenses of $ 134,718 , higher sales commissions of $ 108,156 , higher depreciation expense
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due to the timing of the ipo and the formation transactions , the company 's financial condition as of december 31 , 2014 reflects the financial condition of the company and the predecessor and the results of operations for the year ended december 31 , 2014 and 2013 reflect the financial condition and results of operations of the predecessor . the company 's financial condition as of december 31 , 2015 and results of operations for the year ended december 31 , 2015 reflect the financial condition and results of operations of the predecessor combined with the company for the period prior to february 11 , 2015 , and the company 's consolidated results for the period from february 11 , 2015 through december 31 , 2015 . 2. summary of significant accounting policies the preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenues and expenses during the reporting period . actual results could differ from those estimates . in light of the significant differences that exist between our basis of accounting subsequent to the ipo ( historical cost accounting ) and the pre-ipo basis of accounting ( investment company accounting ) , we present the significant accounting policies for both periods below . a ) significant accounting policies for the company post-ipo real estate properties real estate properties comprise all tangible assets we hold for rent . real property is recognized at cost less accumulated depreciation . betterments , major renovations and certain costs directly related to the improvement of real properties are capitalized . maintenance and repair expenses are charged to expense as incurred . f-9 when we acquire properties , we allocate the purchas e price to numerous tangible and intangible components . our process for determining the allocation to these components requires many estimates and assumptions , including the following : ( 1 ) determination of market rental rates ; ( 2 ) estimation of leasing and tenant improvement costs associated with the remaining term of acquired leases ; ( 3 ) assumptions used in determining the in-place lease and if-vacant value including the rental rates , period of time that it would take to lease vacant space and estimated te nant improvement and leasing costs ; ( 4 ) renewal probabilities ; and ( 5 ) allocation of the if-vacant value between land and building . a change in any of the above key assumptions can materially change not only the presentation of acquired properties in our c onsolidated financial statements but also our reported results of operations . the allocation to different components affects the following : · the amount of the purchase price allocated among different categories of assets and liabilities on our consolidated balance sheets ; and the amount of costs assigned to individual properties in multiple property acquisitions ; · where the amortization of the components appear over time in our consolidated statements of operations . allocations to above- and below-market leases are amortized into rental revenue , whereas allocations to most of the other tangible and intangible assets are amortized into depreciation and amortization expense . as a reit , this is important to us since much of the investment community evaluates our operating performance using non-gaap measures such as funds from operations , the computation of which includes rental revenue but does not include depreciation and amortization expense ; and · the timing over which the items are recognized as revenue or expense in our consolidated statements of operations . for example , for allocations to the as-if vacant value , the land portion is not depreciated and the building portion is depreciated over a longer period of time than the other components ( generally 40 years ) . allocations to above- and below-market leases and in-place lease value are amortized over significantly shorter timeframes , and if individual tenants ' leases are terminated early , any unamortized amounts remaining associated with those tenants are written off upon termination . these differences in timing can materially affect our reported results of operations . tenant improvements are capitalized in real property when we own the improvement . when we are required to provide improvements under the terms of a lease , we need to determine whether the improvements constitute landlord assets or tenant assets . if the improvements are considered landlord assets , we capitalize the cost of the improvements and recognize depreciation expense associated with such improvements over the shorter of the useful life of the assets or the term of the lease and recognize any payments from the tenant as rental revenue over the term of the lease . if the improvements are considered tenant assets , we defer the cost of improvements funded by us as a lease incentive asset and amortize it as a reduction of rental revenue over the term of the lease . our determination of whether improvements are landlord assets or tenant assets also may affect when we commence revenue recognition in connection with a lease . in determining whether improvements constitute landlord or tenant assets , we consider numerous factors that may require subjective or complex judgments , including : whether the improvements are unique to the tenant or reusable by other tenants ; whether the tenant is permitted to alter or remove the improvements without our consent or without compensating us for any lost fair value ; whether the ownership of the improvements remains with us or remains with the tenant at the end of the lease term ; and whether the economic substance of the lease terms is properly reflected . depreciation of an asset begins when it is available for use and is calculated using the straight-line method over the estimated useful lives . story_separator_special_tag net cash proceeds received by us from any of fering of our capital stock after the closing date of the facility , ( v ) the minimum ratio of adjusted consolidated ebitda to consolidated fixed charges ( each as defined in the agreement ) may not be less than 1.50 to 1.00 on any date , ( vi ) the maximum ratio of consolidated unsecured indebtedness to unencumbered asset value ( each as defined in the agreement ) may not exceed 60 % as of any date and ( vii ) the minimum ratio of adjusted consolidated net operating income from unencumbered assets ( as defined in the a greement ) to interest payable on unsecured debt ( as determined in accordance with the agreement ) shall not be less than 1.75 to 1.00 on any date . additionally , under the senior unsecured revolving credit facility , our distributions may not exceed the great er of ( i ) 95.0 % of our ffo or ( ii ) the amount required for us to maintain our status as a reit and avoid the payment of federal or state income or excise tax . our senior unsecured revolving credit facility also includes customary limits on the percentage of our total asset value that may be invested in unimproved land , unconsolidated joint ventures , redevelopment and development assets ( as defined in the agreement ) , loans , advances or extensions of credit and investments in mixed used assets and require that we obtain consent for mergers in which the company is not the surviving entity . these financial and restrictive covenants may limit the investments we may make and our ability to make distributions . as of december 31 , 2015 , we were in compliance with all financial and restrictive covenants under our senior unsecured revolving credit facility . for the year ended december 31 , 2015 , the weighted average annual interest rate for borrowings under our revolving credit facility was 1.62 % . as of december 31 , 2015 , the weighted average interest rate payable on borrowings under our revolving credit facility was 1.75 % . additionally , as of december 31 , 2015 we had $ 154.4 million outstanding and $ 245.6 million available under our senior unsecured revolving credit facility . story_separator_special_tag new roman ; text-transform : none ; font-variant : normal ; `` > operati ng activities year ended december 31 , 2015 compared with year ended december 31 , 2014 cash provided by operating activities for the year was $ 30.0 million for the year ended december 31 , 2015 compared to the $ 22.4 million of cash used for operating activities during the year ended december 31 , 2015. net cash provided by operating activities for the year ended december 31 , 2015 included a $ 30.0 million increase in net cash from rental activities net of expenses . net cash used for operating activities for the year ended december 31 , 2014 included $ 30.3 million for net real estate fund investments due to the purchase of two new investments , pto — arlington and fbi — little rock , $ 0.5 million for investments in existing assets , offset by $ 7.6 million in distributions from investments . as noted above , activities such as these engaged in directly or through our consolidated subsidiaries will be reflected as investing activities following the formation transactions . year ended december 31 , 2014 compared with year ended december 31 , 2013 our predecessor used $ 22.4 million of cash for operating activities during the year ended december 31 , 2014 , a decrease of $ 22.1 million compared to the $ 44.5 million used during the year ended december 31 , 2013. net cash used for operating activities for the year ended december 31 , 2014 included $ 30.3 million for net real estate fund investments due to the purchase of two new investments , pto — arlington and fbi — little rock , $ 0.5 million for investments in existing assets , offset by $ 7.6 million in distributions from investments . net cash from operating activities for the year ended december 31 , 2013 included $ 46.9 million for net real estate fund investments due to the acquisition of five new assets , ice — charleston , mepcom — jacksonville , uscg — martinsburg , dot — lakewood , and fbi — omaha , and $ 1.2 million for investments in existing assets , offset by $ 5.4 million in distributions from investments . as noted above , activities such as these engaged in directly or through our consolidated subsidiaries will be reflected as investing activities following the formation transactions . investing activities year ended december 31 , 2015 compared with year ended december 31 , 2014 the company used $ 164.6 million of cash for investing activities during the year ended december 31 , 2015. no cash was attributed to investing activities during the year ended december 31 , 2014. net cash used for investing activities for the year ended december 31 , 2015 included $ 170.2 million related to the purchase of seven new properties purchased subsequent to our initial public offering offset by $ 6.2 million in cash assumed in formation . year ended december 31 , 2014 compared with year ended december 31 , 2013 no cash was attributed to investing activities during both the years ended december 31 , 2014 and december 31 , 2013. financing activities year ended december 31 , 2015 compared with year ended december 31 , 2014 the company generated $ 111.3 million in cash provided by financing activities during the year ended december 31 , 2015 and $ 50.5 million during the twelve months ended december 31 , 2014. net cash provided by financing activities for the twelve months ended december 31 , 2015 includes $ 193.5 million net proceeds from our initial public offering , $ 75.6
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such dividends were paid on december 3 , 2015. on february 26 , 2016 , the board of directors declared a dividend for the fourth quarter of 2015 in the amount of $ 0.22 per share of common stock and per common unit of our operating partnership , outstanding to stockholders and common unit holders of record as of the close of business on march 10 , 2016. our board of directors also declared a dividend for the fourth quarter of 2015 for each ltip unit in an amount equal to 10 % of the dividend paid per common unit of our operating partnership . such dividends are to be paid on march 25 , 2016. cash flow — our predecessor as noted above , following the completion of our initial public offering , our predecessor no longer uses investment company accounting to account for the assets contributed from the private real estate funds that our predecessor controlled . instead , we now account for these assets using historical cost accounting . moving from investment company accounting to historical cost accounting has resulted in a significant change in the classification of our cash flows . we indirectly own all of the assets of the easterly funds acquired in the formation transactions and we account for these assets using historical cost accounting . the classification of our cash flows following the formation transactions differs significantly from , and is not comparable with , the historical classification of our predecessor 's cash flows . for example , the purchase and sale of investments by the easterly funds historically was treated as an operating activity per investment company accounting and such purchases and sales were shown net of any related mortgage debt entered into upon acquisition or repaid upon sale . in addition , the net income for our predecessor historically reflected significant unrealized gains or losses relating to properties owned by these funds . any unrealized gains or losses are reversed to arrive at net cash flow provided by or used in operating activities . gains or losses arising from sales of properties owned by us directly or through our consolidated subsidiaries are only recognized by us when realized . once historical cost accounting is applied , the acquisition of investments and the proceeds of sales are reflected in net cash provided by investing activities . the following table sets forth a summary of cash flows for our predecessor for the years ended december 31 , 2015 , 2014 and 2013 : replace_table_token_12_th 43 < p style= '' margin-bottom:0pt ; margin-top:8pt ; margin-left:2.27 % ; text-indent:0 % ; font-weight : bold ; font-style : italic ; font-size:10pt ; font-family : times
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Liquidity
| 10,584
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the u.s. unemployment rate remains elevated , but declined to its lowest level in three years exiting 2011. in commercial real estate , despite the volatility in the global economy and public equity markets , operating fundamentals remain healthy across all of our real estate investment types . the office sector is benefiting from historically low levels of new supply , combined with slow but steady growth in gdp and employment , which has resulted in increasing occupancy and rents . there are similar trends of positive absorption and declining vacancy in our industrial , retail and senior living sectors . in the hospitality sector , trends remain positive , with u.s. industry revpar ( revenue per available room ) up 8 % for 2011. blackstone 's businesses are materially affected by conditions in the financial markets and economic conditions in the u.s. , western europe , asia and , to a lesser extent , elsewhere in the world . significant transactions on may 16 , 2011 , the partnership , through gso , completed the acquisition of management agreements relating to four collateralized loan obligation vehicles previously managed by allied irish banks . on november 4 , 2011 , the agreement of limited partnership of blackstone was amended to provide that the common units purchased by china investment corporation and its affiliates subsequent to blackstone 's ipo will no longer be non-voting . on january 5 , 2012 , gso completed the acquisition of harbourmaster , a leading european leveraged loan manager and adviser . 68 key financial measures and indicators our key financial measures and indicators are discussed below . revenues revenues primarily consist of management and advisory fees , performance fees , investment income , interest and dividend revenue and other . please refer to part i. item 1. business , incentive arrangements / fee structure and critical accounting policies , revenue recognition for additional information regarding the manner in which base management fees and performance fees are generated . management and advisory fees management and advisory fees are comprised of management fees , including base management fees , transaction and other fees , management fee reductions and offsets , and advisory fees . the partnership earns base management fees from limited partners of funds in each of its managed funds , at a fixed percentage of assets under management , net asset value , total assets , committed capital or invested capital , or in some cases , a fixed fee . base management fees are based on contractual terms specified in the underlying investment advisory agreements . transaction and other fees ( including monitoring fees ) are fees charged directly to funds and portfolio companies . the investment advisory agreements generally require that the investment adviser reduce the amount of management fees payable by the limited partners to the partnership ( management fee reductions ) by an amount equal to a portion of the transaction and other fees directly paid to the partnership by the portfolio companies . the amount of the reduction varies by fund , the type of fee paid by the portfolio company and the previously incurred expenses of the fund . management fee offsets are reductions to management fees payable by our limited partners , which are granted based on the amount they reimburse blackstone for placement fees . advisory fees consist of advisory retainer and transaction-based fee arrangements related to merger , acquisition , restructuring and divestiture activities and fund placement services for alternative investment funds . advisory retainer fees are recognized when services for the transactions are complete , in accordance with terms set forth in individual agreements . transaction-based fees are recognized when ( a ) there is evidence of an arrangement with a client , ( b ) agreed upon services have been provided , ( c ) fees are fixed or determinable and ( d ) collection is reasonably assured . fund placement fees are recognized as earned upon the acceptance by a fund of capital or capital commitments . accrued but unpaid management and advisory fees , net of management fee reductions and management fee offsets , as of the reporting date , are included in accounts receivable or due from affiliates in the consolidated statements of financial condition . performance fees performance fees earned on the performance of blackstone 's hedge fund structures are recognized based on fund performance during the period , subject to the achievement of minimum return levels , or high water marks , in accordance with the respective terms set out in each hedge fund 's governing agreements . accrued but unpaid performance fees charged directly to investors in blackstone 's offshore hedge funds as of the reporting date are recorded within due from affiliates in the consolidated statements of financial condition . performance fees arising on blackstone 's onshore hedge funds are allocated to the general partner . accrued but unpaid performance fees on onshore funds as of the reporting date are reflected in investments in the consolidated statements of financial condition . in certain fund structures , specifically in private equity , real estate and certain credit-oriented funds ( carry funds ) , performance fees ( carried interest ) are allocated to the general partner based on cumulative fund 69 performance to date , subject to a preferred return to limited partners . at the end of each reporting period , the partnership calculates the carried interest that would be due to the partnership for each fund , pursuant to the fund agreements , as if the fair value of the underlying investments were realized as of such date , irrespective of whether such amounts have been realized . story_separator_special_tag as the fair value of underlying investments varies between reporting periods , it is necessary to make adjustments to amounts recorded as carried interest to reflect either ( a ) positive performance resulting in an increase in the carried interest allocated to the general partner or ( b ) negative performance that would cause the amount due to the partnership to be less than the amount previously recognized as revenue , resulting in a negative adjustment to carried interest allocated to the general partner . in each scenario , it is necessary to calculate the carried interest on cumulative results compared to the carried interest recorded to date and make the required positive or negative adjustments . the partnership ceases to record negative carried interest allocations once previously recognized carried interest allocations for such fund have been fully reversed . the partnership is not obligated to pay guaranteed returns or hurdles , and therefore , can not have negative carried interest over the life of a fund . accrued but unpaid carried interest as of the reporting date is reflected in investments in the consolidated statements of financial condition . carried interest is realized when an underlying investment is profitably disposed of and the fund 's cumulative returns are in excess of the preferred return . performance fees earned on hedge fund structures are realized at the end of each fund 's measurement period . carried interest is subject to clawback to the extent that the carried interest actually distributed to date exceeds the amount due to blackstone based on cumulative results . as such , the accrual for potential repayment of previously received performance fees , which is a component of due to affiliates , represents all amounts previously distributed to blackstone holdings and non-controlling interest holders that would need to be repaid to the blackstone funds if the blackstone carry funds were to be liquidated based on the current fair value of the underlying funds ' investments as of the reporting date . generally , the actual clawback liability does not become realized until the end of a fund 's life or one year after a realized loss is incurred , depending on the fund . investment income ( loss ) investment income ( loss ) represents the unrealized and realized gains and losses on the partnership 's principal investments , including its investments in blackstone funds that are not consolidated , its equity method investments , and other principal investments . investment income ( loss ) is realized when the partnership redeems all or a portion of its investment or when the partnership receives cash income , such as dividends or distributions , from its non-consolidated funds . unrealized investment income ( loss ) results from changes in the fair value of the underlying investment as well as the reversal of unrealized gain ( loss ) at the time an investment is realized . interest and dividend revenue interest and dividend revenue comprises primarily interest and dividend income earned on principal investments held by blackstone . other revenue other revenue consists of foreign exchange gains and losses arising on transactions denominated in currencies other than u.s. dollars and other revenues . expenses compensation and benefitscompensation compensation and benefits consists of ( a ) employee compensation , comprising salary and bonus , and benefits paid and payable to employees , including senior managing directors and ( b ) equity-based compensation associated with the grants of equity-based awards to employees , including senior managing directors . equity-based compensation compensation cost relating to the issuance of share-based awards to senior managing directors and employees is measured at fair value at the grant date , taking into consideration expected forfeitures , and expensed over the vesting period on a straight line basis . equity-based awards that do not require future service are expensed immediately . cash settled equity-based awards are classified as liabilities and are re-measured at the end of each reporting period . 70 compensation and benefitsperformance fee performance fee compensation and benefits consists of carried interest and performance fee allocations to employees , including senior managing directors , participating in certain profit sharing initiatives . such compensation expense is subject to both positive and negative adjustments . unlike carried interest and performance fees , compensation expense is based on the performance of individual investments held by a fund rather than on a fund by fund basis . other operating expenses other operating expenses represent general and administrative expenses including interest expense , occupancy and equipment expenses and other expenses , which consist principally of professional fees , public company costs , travel and related expenses , communications and information services and depreciation and amortization . fund expenses the expenses of our consolidated blackstone funds consist primarily of interest expense , professional fees and other third-party expenses . non-controlling interests in consolidated entities non-controlling interests in consolidated entities represent the component of partners ' capital in consolidated entities held by third party investors . such interests are adjusted for general partner allocations and by subscriptions and redemptions in funds of hedge funds and certain credit-oriented funds which occur during the reporting period . non-controlling interests related to funds of hedge funds and certain other credit-oriented funds are subject to annual , semi-annual or quarterly redemption by investors in these funds following the expiration of a specified period of time ( typically between one and three years ) , or may be withdrawn subject to a redemption fee in the funds of hedge funds and certain credit-oriented funds during the period when capital may not be withdrawn . as limited partners in these types of funds have been granted redemption rights , amounts relating to third party interests in such consolidated funds are presented as redeemable non-controlling interests in consolidated entities within the consolidated statements of financial condition . when redeemable amounts become legally payable to investors , they are classified as a liability and included in accounts payable , accrued expenses and other liabilities in the consolidated statements of financial condition .
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the increase in management and advisory fees was primarily attributable to ( a ) increases in management fees in our private equity segment , driven by fees generated from bcp vi and bep funds , which commenced their investment periods during the first and third quarters of 2011 , respectively , ( b ) increases in transaction fees in our real estate segment , driven by the continued increase in investment activity in our brep funds , primarily as a result of brep vi 's acquisition of the u.s. assets of centro in the second quarter of 2011 , and management fees earned from the management of the bank of america merrill lynch asia real estate platform , and ( c ) increases in management fees in our credit businesses and hedge fund solutions segments due to higher fee-earning assets under management . the increase in performance fees was due to improved operating performance and projected cash flows resulting in the appreciation in the fair value of the investments across our real estate carry funds and the impact of the catch-up provisions of the real estate funds ' profit allocations . the catch-up provisions of the real estate funds ' profit allocations specify that once a fund 's preferred return hurdle has been reached , blackstone is entitled to a disproportionately greater share ( 80 % of the profits ) until it effectively reaches its full share of performance fees ( 20 % of the total profits ) . total revenues were $ 3.1 billion for the year ended december 31 , 2010 , an increase of $ 1.3 billion compared to $ 1.8 billion for the year ended december 31 , 2009. the increase in revenues was primarily attributable to an increase of $ 716.7 million in performance fees , an increase of $ 520.6 million in investment income ( loss ) and an increase of $ 102.5 million in management and advisory fees . the increase in performance fees was primarily driven by improved performance of our real estate carry funds in our real estate segment and our credit-oriented funds and funds of hedge funds in our credit businesses and hedge fund solutions segments , respectively . investment income ( loss ) improved primarily due to valuation increases in the underlying portfolio investments in our real estate and private equity segments . the increase in management and advisory fees was primarily due to ( a ) increases in advisory fees from our fund placement business which is included in our financial advisory segment , ( b ) increases in base management fees in our hedge fund solutions segment driven by higher fee-earning assets under management from positive
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ROO
| 3,687
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the increase was primarily due to a $ 1.0 billion increase in our iei segment , as well as $ 0.6 billion increases in each of our hrs and ctg segments , partially offset by a $ 0.7 billion decrease in our cec segment . our fiscal year 2018 gross profit totaled $ 1.6 billion , representing an increase of $ 75 million , or 4.9 % , from the prior year , which is primarily due to contribution flow through from the additional $ 1.6 billion in sales from the prior year , offset by restructuring charges of $ 67 million included in cost of sales in fiscal year 2018. our net income totaled $ 429 million , representing an increase of $ 109 million , or 34 % , compared to fiscal year 2017 . the increase in net income during fiscal year 2018 is primarily due to the same factors explained above coupled 35 with the recognition of a $ 152 million gain from the deconsolidation of our subsidiary , elementum scm ( cayman ) ltd ( `` elementum `` ) , and a $ 39 million gain from sale of wink labs inc. ( `` wink `` ) . refer to note 6 and note 2 to the consolidated financial statements in item 8 , `` financial statements and supplementary data `` for details of the deconsolidation of elementum and the disposition of wink , respectively . cash provided by operations decreased by approximately $ 0.3 billion to $ 0.8 billion for fiscal years 2018 compared with $ 1.1 billion for fiscal year 2017 primarily due to unfavorable changes in operating assets and liabilities . our average net working capital , defined as accounts receivable , including the deferred purchase price receivables from our asset-backed securitization programs , plus inventory , less accounts payable , as a percentage of annualized sales decreased by 0.5 % to 6.4 % . our free cash flow , which we define as cash from operating activities less net purchases of property and equipment , was $ 236 million for fiscal year 2018 compared to $ 660 million for fiscal year 2017 . the decrease in free cash flow is primarily due to lesser cash flows from operations and higher capital expenditures in fiscal year 2018. refer to the liquidity and capital resources section for the free cash flows reconciliation to our most directly comparable gaap financial measure of cash flows from operations . cash used in investing activities increased by approximately $ 0.2 billion to $ 0.9 billion for fiscal year 2018 , compared with $ 0.7 billion for fiscal year 2017 , primarily due to an increase in the amount of cash paid for acquired businesses during fiscal year 2018. cash used in financing activities totaled $ 188 million during fiscal year 2018 , which decreased $ 54 million from $ 242 million in the prior year , primarily due to a lower level of repurchases of ordinary shares . additionally , in fiscal year 2018 , the company initiated targeted restructuring activities , focused on optimizing our cost structure in lower growth areas and , more importantly , streamlining certain corporate and segment functions . the objective of the plan is to make flex a faster , more responsive and agile company , better positioned to react to marketplace opportunities . during the year ended march 31 , 2018 , we recognized $ 91 million of pre-tax restructuring charges , comprised of $ 79 million of cash charges predominantly related to severance costs and $ 12 million of non-cash charges primarily related to asset impairment and other exit charges . audit committee investigation completed as previously disclosed , the audit committee of the company 's board of directors ( the “ audit committee ” ) , with the assistance of independent outside counsel , undertook an independent investigation relating to the accounting treatment of customer obligations and certain related reserves . the independent outside counsel also notified the sec . the audit committee has now completed its investigation . the company , working with its independent registered public accounting firm , identified and the audit committee concurred with such identification , material weaknesses in our internal control over financial reporting which could , if not remediated , result in material misstatements in our financial statements . notwithstanding the identification of such material weaknesses , management believes that the company 's financial statements included in this annual report on form 10-k fairly present , in all material respects , the company 's financial condition , results of operations and cash flows as of , and for the periods presented , in conformity with accounting principles generally accepted in the united states of america . the conclusions of management , with which the audit committee concurred , concerning the material weaknesses in the company 's internal control over financial reporting are described further in item 9a “ controls and procedures ” . we have undertaken , and will continue to undertake , steps to improve our internal control over financial reporting to address and remediate the material weaknesses . the proposed plan to remediate the material weaknesses is described further in item 9a “ controls and procedures ” . critical accounting policies and estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states of america ( `` u.s. gaap `` or `` 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 . actual results may differ from those estimates and assumptions . we believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements . story_separator_special_tag our ctg segment increased $ 0.6 billion or 10 % largely attributable to stronger sale in our connected living and mobile devices businesses , offset by a decrease in gaming . our hrs segment increased $ 0.6 billion or 15 % from higher sales in our automotive business . these increases were partially offset by a decrease of $ 0.7 billion or 8 % in our cec segment , largely attributable to lower sales within our telecom and networking businesses , offset by increased sales in our cloud and data center business . 39 net sales during fiscal year 2017 decreased $ 0.6 billion or 9 % in the ctg segment and $ 0.5 billion or 5 % in the cec segment . the decline in sales for ctg was primarily due to a decline in demand from our largest smartphone customer , lenovo/motorola , in connection with our exit of a china operation dedicated to this customer , partially offset by revenues from our bose acquisition , as well as ramping of a broad mix of customers . the decrease in cec is largely attributable to lower sales within our legacy server and storage business . these decreases were partially offset by a $ 287 million or 6 % increase in sales from our iei segment driven by contribution from our nextracker inc. ( `` nextracker `` ) acquisition and expansion within our capital equipment business , and by a $ 250 million or 6 % increase in sales from our hrs segment primarily driven by our automotive business . our ten largest customers during fiscal years 2018 , 2017 and 2016 accounted for approximately 41 % , 43 % and 46 % of net sales , respectively . we have made substantial efforts toward the diversification of our portfolio which allows us to operate at scale in many different industries , and , as a result , no customer accounted for greater than 10 % of net sales in fiscal year 2018 and 2017. during fiscal year 2016 , only lenovo/motorola , which is reflected in our ctg segment , accounted for greater than 10 % of net sales . gross profit gross profit is affected by a number of factors , including the number , size and complexity of new manufacturing programs , product mix , component costs and availability , product life cycles , unit volumes , pricing , competition , new product introductions , capacity utilization , and the expansion and consolidation of manufacturing facilities including specific restructuring activities from time to time . the flexible design of our manufacturing processes allows us to build a broad range of products in our facilities and better utilize our manufacturing capacity across our diverse geographic footprint . in the cases of new programs , profitability normally lags revenue growth due to product start-up costs , lower manufacturing program volumes in the start-up phase , operational inefficiencies , and under-absorbed overhead . gross margin for these programs often improves over time as manufacturing volumes increase , as our utilization rates and overhead absorption improve , and as we increase the level of manufacturing services content . as a result of these various factors , our gross margin varies from period to period . gross profit during fiscal year 2018 increased $ 75 million to $ 1.6 billion from $ 1.5 billion during fiscal year 2017 , primarily as a result of the increase in revenue offset by $ 67 million , or 30 basis points , of restructuring charges incurred during fiscal year 2018. gross margin decreased 10 basis points , to 6.2 % of net sales in fiscal year 2018 , from 6.3 % of net sales in fiscal year 2017 , mainly attributable to the same factors previously described , coupled with elevated levels of investments in ramping new operations for our strategic footwear customer . gross profit during fiscal year 2017 decreased $ 87 million to $ 1.5 billion from $ 1.6 billion during fiscal year 2016 , primarily as a result of the $ 93 million , or 40 basis points , of charges recognized related to the significant decline in prices for solar modules and the slowdown in demand as previously discussed under our customer credit risk section , coupled with the restructuring charges incurred during fiscal year 2017 , to accelerate our ability to support more sketch-to-scaletm efforts across the company . a portion of this decrease was offset by our strategic evolution and structural mix shift to higher margin end markets in our iei and hrs segments , while also providing greater levels of innovation , design and engineering services . gross margin decreased 30 basis points to 6.3 % of net sales in fiscal year 2017 , from 6.6 % of net sales in fiscal year 2016 , mainly attributable to the same factors previously described . in addition , we have been ramping several new programs this year along with the continued development of our long-term strategic partnership with a ctg customer which has negatively impacted our margins due to elevated investment costs and under-absorbed overhead . segment income an operating segment 's performance is evaluated based on its pre-tax operating contribution , or segment income . segment income is defined as net sales , less cost of sales and segment selling , general and administrative expenses , and does not include amortization of intangibles , stock-based compensation , distressed customer charges , contingencies and other , restructuring charges , other charges ( income ) , net and interest and other , net . a portion of depreciation is allocated to the respective segment together with other general corporate research and development and administrative expenses . the following table sets forth segment income and margins : 40 replace_table_token_9_th corporate and other primarily includes corporate services costs that are not included in the codm 's assessment of the performance of each of the identified reporting segments . ( 1 )
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cash used in investing activities was $ 0.7 billion during fiscal year 2017. this resulted primarily from $ 490 million of net capital expenditures for property and equipment to expand capability and capacity in support of our automotive and medical businesses and further investments in both automation and expanding technologies to support our innovation services . we also paid $ 189 million for the acquisition of four businesses , net of cash acquired , including $ 162 million , net of $ 18 million of cash acquired related to the acquisition of manufacturing facilities from bose . further , $ 60 million was paid for a non-controlling interest in a joint venture with rib software ag as our partner . offsetting this was proceeds from various other investing activities of $ 64 million , most notably the receipt of $ 38 million for the sale of two non-strategic businesses . cash used in financing activities was $ 242 million during fiscal year 2017. this was primarily the result of repurchases of ordinary shares in the amount $ 350 million , and $ 31 million of cash paid to a third-party banking institution for certain assets that were financed by the third party banking institution on behalf of a customer , which is included in other financing activities , as further discussed in note 2 to the consolidated financial statements in item 8 , `` financial statements and supplementary data '' . these cash outflows were partially offset by $ 171 million of net proceeds from bank borrowings and long-term debt , of which $ 130 million is the incremental amount borrowed extending the maturity date of one of our loan agreements from august 30 , 2018 to november 30 , 2021 , and $ 107 million is the amount of proceeds from the 100 million term loan , discussed further in note 8 to the consolidated financial statements in item 8 , `` financial statements and supplementary data '' .
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Liquidity
| 3,002
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in such case , we consider ( i ) the extent of our effort to achieve the milestone and or the enhancement of the value of the delivered item ( s ) as a result of milestone achievement and ( ii ) if the milestone payment is reasonable relative to all of the deliverables and payment terms ( including other potential milestone consideration ) within the arrangement . we have historically assessed the contractual value of these milestones upon their achievement to be identical to the allocation of value of our performance obligations and thus representing the “ transaction price ” for each milestone at contract inception . we recognize this revenue in the period that the regulatory approval occurs ( i.e . , when we complete the “ performance obligation ” ) under the “ most likely amount ” method , and revenue recognition is otherwise “ constrained ” until regulatory approval occurs , given its inherent uncertainty and the requirement of a significant revenue reversal not being probable if achievement does not occur . at each reporting period , we re-evaluate the probability of milestone achievement and the associated revenue constraint ; any resulting adjustments would be recorded on a cumulative catch-up basis , thus reflected in our financial statements in the period of adjustment . ( c ) service revenue : we receive fees under certain arrangements for ( i ) sales and marketing services , ( ii ) supply chain services , ( iii ) research and development services , and ( iv ) clinical trial management services . our rights to receive payment for these services may be established by ( 1 ) a fixed-fee schedule that covers the term of the arrangement , so long as we meet ongoing performance obligations , ( 2 ) our completion of product delivery in our capacity as a procurement agent , ( 3 ) the successful completion of a phase of drug development , ( 4 ) favorable results from a clinical trial , and or ( 5 ) regulatory approval events . we consider whether revenue associated with these service arrangements is reportable each period , based on our completed services or deliverables ( i.e . , satisfied “ performance obligations ” ) during the reporting period , and the terms of the arrangement that contractually result in fixed payments due to us . the promised service ( s ) within these arrangements are distinct and explicitly stated within each contract , and our customer benefits from the separable service ( s ) delivery/completion . further , the nature of the promise to our customer as stated within the respective contract is to deliver each named service individually ( not a transfer of combined items to which the promised goods or services are inputs ) , and thus are separable for revenue recognition . ( ii ) cash and cash equivalents cash and cash equivalents consist of bank deposits and highly liquid investments with maturities of three months or less from the purchase date . ( iii ) marketable securities marketable securities consist of our holdings in equity securities , mutual funds , bank certificates of deposit ( “ bank cds ” ) , government-related debt securities , and corporate debt securities . since we classify these investments as “ available-for-sale ” any ( 1 ) realized gains ( losses ) or ( 2 ) unrealized gains ( losses ) on these securities are respectively recognized in ( 1 ) “ other ( expense ) income , net ” on the accompanying consolidated statements of operations , or ( 2 ) depending on the nature of the marketable securities recognized in “ accumulated other comprehensive loss ” as a separate component of stockholder 's equity f-12 notes to consolidated financial statements ( all tabular amounts presented in thousands , except share , per share , per unit , and number of years ) on the accompanying consolidated statements of stockholders ' equity , or in “ other ( expense ) income , net ” on the accompanying consolidated statements of operations . ( iv ) accounts receivable our accounts receivable , net of allowance for doubtful accounts are derived from our product sales and license fees , and do not bear interest . the allowance for doubtful accounts is management 's best estimate of the amount of probable credit losses in our existing accounts receivable . account balances are written off against the allowance after appropriate collection efforts are exhausted . ( v ) inventories we value our inventory at the lower of ( i ) the actual cost of its purchase or manufacture , or ( ii ) its net realizable value . inventory cost is determined on the first-in , first-out method . we regularly review our inventory quantities in process of manufacture and on hand . when appropriate , we record a provision for obsolete and excess inventory to derive its net realizable value , which takes into account our sales forecast by product and corresponding expiry dates of each product lot . manufacturing costs of drug products that are pending u.s. food and drug administration ( “ fda ” ) approval during clinical development and trials , and at-risk inventory build in anticipation of commercialization , are exclusively recognized through “ research and development ” expense on the accompanying consolidated statements of operations . ( vi ) property and equipment our property and equipment is stated at historical cost , and is depreciated on a straight-line basis over an estimated useful life that corresponds with its designated asset category . we evaluate the recoverability of “ long-lived assets ” ( which includes property and equipment ) whenever events or changes in circumstances in our business indicate that the asset 's carrying amount may not be recoverable through our on-going operations . story_separator_special_tag selling , general and administrative expenses decreased $ 1.3 million in 2019. this decrease is primarily due to ( i ) $ 2.8 million of decreased legal and consulting costs ( substantially related to non-recurring expenses associated with the termination of our former chief executive officer and reimbursed legal expenses by our insurance carriers ) and ( ii ) $ 0.3 million of decreased market research expenses . this decrease was partially offset by ( i ) $ 1.5 million of employee severance expense and ( ii ) $ 0.2 million of various costs related to the commercial product portfolio transaction . research and development . research and development expenses increased $ 4.1 million in 2019. our increase in 2019 poziotinib expenses were near equal to the 2019 decrease in rolontis expenses ; this was due to offsetting activities within clinical and manufacturing operations . accordingly , the $ 4.1 million increase is primarily due to ( i ) $ 3.3 million of costs associated with our in-license for anti-cd20-ifná in april 2019 ( see note 10 ( b ) ( iii ) ) , ( ii ) $ 0.3 million of severance expense for research and development employees as part of the commercial product portfolio transaction , and ( iii ) $ 0.5 million of costs for our various other research and development projects . total other ( expense ) income replace_table_token_6_th total other ( expense ) income decreased by $ 13.1 million primarily due to $ 12.7 million of unrealized loss for the mark-to-market of our casi equity securities in the current period ( see note 3 ( a ) to the accompanying consolidated financial statements ) , as compared to $ 10.5 million of unrealized gain in the prior year period . the recognized expense from this decline in casi stock value was partially offset in the current period by ( i ) $ 2.7 million of realized gain from the sale of 1.5 million shares of casi through a forward-sales contract that settled in april 2019 ( see note 8 ) , ( ii ) $ 3.3 million interest expense decrease due to the december 2018 maturity of our 2013 convertible notes ( see note 9 ) , ( iii ) $ 2.0 million increase in interest income on our other marketable securities , ( iv ) $ 1.1 million increase in the value of our deferred compensation plan assets ( see notes 3 ( f ) ) , and ( v ) $ 0.7 million of billable services rendered to acrotech as part of a transition services agreement that expired in may 2019 ( see note 13 ) . income taxes replace_table_token_7_th we reported pre-tax losses from continuing operations and pre-tax income from discontinued operations on the consolidated statements of operations for the years ended december 31 , 2019 and 2018. under applicable intraperiod tax allocation guidance ( see note 11 to the accompanying consolidated financial statements ) we are required to allocate income taxes between continuing operations and other categories of earnings . due to the required allocation , we recorded an income tax benefit of $ 7.7 million and $ 1.9 million from continuing operations ( though such amounts are not indicative of income tax refunds due to us ) , income tax expense of $ 7.5 million and $ 1.9 million within income from discontinued operations , net of income taxes , and income tax expense of $ 0.2 million and $ 0 within other comprehensive income ( loss ) on the consolidated statements of comprehensive loss for the years ended december 31 , 2019 and 2018 , respectively . 45 our net tax benefit for the year ended december 31 , 2019 prior to the application of intraperiod allocation guidance was $ 1.5 million . this tax benefit arose from the reversal of deferred tax liabilities recorded on our consolidated balance sheets as of december 31 , 2018 that were associated with indefinite-lived intangible assets that were sold as part of the commercial product portfolio transaction . the tax benefit for the year ended december 31 , 2018 , prior to the application of intraperiod tax allocation guidance was $ 0. year ended december 31 , 2018 versus december 31 , 2017 operating expenses replace_table_token_8_th selling , general and administrative . selling , general and administrative expenses decreased $ 2.1 million primarily due to a $ 7 million decrease in personnel and benefit-related costs as compared to prior year , largely attributed to the one-time contractual amounts due to our former chief executive officer upon his termination in december 2017. this decrease was partially offset by the following : ( i ) $ 3.3 million increase in legal expenses that were primarily associated with the departure of our former chief executive officer , as well as various corporate development initiatives , and ( ii ) $ 2.1 million increase in employer payroll tax expenses primarily related to significant stock option exercises in 2018 by our former chief executive officer . research and development . research and development expenses increased in 2018 by $ 23.7 million compared to the prior year , primarily due to the following factors : ( i ) $ 19.1 million increase in product manufacturing costs for the eventual commercial launch of rolontis , ( ii ) $ 2.9 million increase in fda regulatory costs associated with the bla submission for rolontis , ( iii ) $ 10.8 million increase in clinical initiatives related to poziotinib , ( iv ) $ 0.5 million upfront payment to md anderson upon execution of the exclusive patent and technology license agreement for poziotinib ( see note 10 ( b ) ( ii ) ) . these increases were partially offset by $ 10.1 million decrease in clinical related expenses associated with rolontis , as both the advance and recover studies completed enrollment during the first quarter of 2018 and associated costs were down significantly compared to 2017. total other income (
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we had no sales under the atm during the year ended december 31 , 2018. in april 2019 , we entered into a new collective at-market-issuance sales agreement with cantor fitzgerald & co. , h.c. wainwright & co. , llc and b. riley fbr , inc. ( the “ april 2019 atm agreement ” ) connected to our automatic shelf registration statement on form s-3asr , filed with the sec on april 5 , 2019. the april 2019 atm agreement allows us to raise aggregate gross proceeds of $ 150 million from the periodic sales of our common stock on the public market . through december 31 , 2019 , we raised aggregate proceeds of $ 1.8 million net under this at-the-market offering . these proceeds and any future proceeds raised will support the advancement of our in-development drug candidates , activities in connection with the launch of these drugs ( including the hiring of personnel , building of inventory supply , and equipment purchases ) , completing acquisitions of assets , businesses , or securities , and for all other working capital purposes . sale of our commercialized drug portfolio and future proceeds on march 1 , 2019 , we completed the sale of our commercial product portfolio to acrotech . upon closing we received $ 158.8 million in an upfront cash payment ( of which $ 4 million was held in escrow until november 5 , 2019 ) . we are also entitled to receive up to an aggregate of $ 140 million upon acrotech 's future achievement of certain regulatory milestones ( totaling $ 40 million ) and sales-based milestones ( totaling $ 100 million ) relating to the commercial product portfolio . future capital requirements we believe that the future growth of our business will depend on our ability to successfully develop and acquire new drugs for the treatment of cancer and successfully bring these drugs to market . the timing and amount of our future capital requirements will depend on many factors , including : the need for additional capital to fund future development programs ; the need for additional capital to fund strategic acquisitions ; the need for additional capital to fund licensing arrangements ; our requirement for additional information technology infrastructure and systems ; and adverse outcomes from potential litigation and the cost to defend such litigation . we believe that our $ 224 million in aggregate cash and cash equivalents , and marketable securities as of december 31 , 2019 is sufficient to fund our current and planned operations . we may , however , require additional liquidity as we continue to execute our business strategy , and in connection with opportunistic acquisitions or licensing arrangements . we anticipate that to the extent that we require additional liquidity , it will be funded through additional equity or debt financings ( see note 5 to the accompanying consolidated financial statements ) . however , we can not provide assurance that we will be able to obtain this
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Liquidity
| 10,862
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29 fair value of contingent obligations management continues to analyze and quantify contingent obligations ( expected earn-out payments ) over the applicable pay-out period . management will assess no less frequently than each reporting period the fair value of contingent obligations . any change in the expected obligation will result in an expense or income recognized in the period in which it is determined the fair market value of the obligation has changed . income taxes income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities . deferred income taxes are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted rates in effect during the year in which the differences are expected to reverse . valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized . asc topic 740 , “ accounting for income taxes ” clarifies the accounting for uncertainty in income taxes recognized in an enterprise 's financial statements . tax positions shall initially be recognized in the financial statements when it is more likely than not that the position will be sustained upon examination by the tax authorities . such tax positions shall initially and subsequently be measured as the largest amount of tax benefit that has a probability of fifty percent ( 50 % ) or greater of being realized upon ultimate settlement with the tax authority , assuming full knowledge of the position and all relevant facts . recently issued accounting standards in may 2014 , the fasb issued accounting standards update ( “ asu ” ) no . 2014-09 , “ revenue from contracts with customers ” ( “ asu 2014-09 ” ) . asu 2014-09 provides guidance for revenue recognition and affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets and supersedes the revenue recognition requirements in topic 605 , “ revenue recognition , ” and most industry-specific guidance . the core principle of asu 2014-09 is the recognition of revenue when a company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled to in exchange for those goods or services . asu 2014-09 defines a five-step process to achieve this core principle and , in doing so , companies will need to use more judgment and make more estimates than under the current guidance . these may include identifying performance obligations in the contract , estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation . asu 2014-09 is effective for fiscal years beginning after december 15 , 2016 and interim periods therein , using either of the following transition methods : ( i ) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients , or ( ii ) a retrospective approach with the cumulative effect of initially adopting asu 2014-09 recognized at the date of adoption ( which includes additional footnote disclosures ) . early adoption is not permitted . the company is currently evaluating the method and impact the adoption of asu 2014-09 will have on the company 's consolidated financial statements and disclosures . in june 2014 , the fasb issued asu no . 2014-12 , “ compensation - stock compensation ( topic 718 ) : accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period ” ( “ asu 2014-12 ” ) . asu 2014-12 affects entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period . the amendments in asu 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition . asu 2014-12 is effective for fiscal years beginning after december 15 , 2015. early adoption is permitted . the company is currently evaluating the method and impact the adoption of asu 2014-12 will have on the company 's consolidated financial statements and disclosures . in august 2014 , the fasb issued asu 2014-15 , “ disclosure of uncertainties about an entity 's ability to continue as a going concern ” ( “ asu 2014-15 ” ) . asu 2014-15 provides guidance on management 's responsibility in evaluating whether there is substantial doubt about a company 's ability to continue as a going concern and about related footnote disclosures . for each reporting period , management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company 's ability to continue as a going concern within one year from the date the financial statements are issued . the amendments in asu 2014-15 are effective for annual reporting periods ending after december 15 , 2016 , and for annual and interim periods thereafter . early adoption is permitted . the company will adopt the methodologies prescribed by asu 2014-15 by the date required , and does not anticipate that the adoption of asu 2014-15 will have a material effect on its consolidated financial position or results of operations . management does not believe that any other recently issued , but not yet effective , accounting pronouncements , if currently adopted , would have a material effect on the company 's consolidated financial statements . 30 story_separator_special_tag justify '' > interest and finance expense interest and finance expense for the current year decreased by approximately $ 0.24 million to $ 1.49 million , compared to $ 1.73 million in the prior year . story_separator_special_tag this was primarily due to the net $ 0.05 million decrease attributable to lower interest rates in the company 's term debt , partially offset by higher term debt principal balances from financing a portion of the ripka brand acquisition , and a decrease of $ 0.19 million in the current year of interest expense and finance charges from the amortization of debt discounts and deferred finance costs compared with the prior year . provision for income taxes the effective income tax rate for the current year was approximately ( 183.52 % ) , resulting in a $ 0.10 million income tax benefit . the effective income tax rate for the prior year was ( 361.20 % ) which resulted in a $ 1.32 million income tax benefit . during the current year , the company recorded a $ 0.6 million gain on the reduction of contingent obligations related to the acquisition of the isaac mizrahi business . this gain is not subject to tax and was treated as a discrete item . during the prior year , the company recorded a $ 5.12 million gain on the reduction of contingent obligations related to the acquisition of the isaac mizrahi business . this gain is not subject to tax and was treated as a discrete item . additionally , there was an increase in the state income tax rate which was booked to deferred income tax expense and treated as a discrete item during the prior year . discontinued operations the loss from discontinued operations , net , is attributable to the net loss related to our retail operations , as a result of our decision to discontinue our retail stores and focus on e-commerce , which will be a component of our licensing business . the current year loss from discontinued operations , net of $ 1.08 million mainly represents compensation expense , other general and administrative expenses and wind down costs associated with the closing of our retail stores , inclusive of inventory write-downs and impairment of property and equipment , offset by an income tax benefit of $ 0.70 million . the prior year loss from discontinued operations , net of $ 0.16 million mainly represents compensation expense and other general and administrative expenses , offset by the gross margin recognized by the retail stores and an income tax benefit of $ 0.08 million . adjusted earnings before interest depreciation and amortization ( “ ebitda ” ) adjusted ebitda for the current year increased approximately $ 2.86 million to $ 7.01 million from $ 4.15 million for the prior year . adjusted ebitda should not be considered in isolation or as alternatives to net income or any other measure of financial performance calculated and presented in accordance with gaap . given that adjusted ebitda is a financial measure not deemed to be in accordance with gaap and is susceptible to varying calculations , our adjusted ebitda may not be comparable to similarly titled measures of other companies , including companies in our industry , because other companies may calculate adjusted ebitda in a different manner than we calculate these measures . in evaluating adjusted ebitda , you should be aware that in the future we may or may not incur expenses similar to some of the adjustments in this presentation . our presentation of adjusted ebitda does not imply that our future results will be unaffected by these expenses or any unusual or non-recurring items . when evaluating our performance , you should consider adjusted ebitda alongside other financial performance measures , including our net income and other gaap results , and not rely on any single financial measure . the following table is a reconciliation of net ( loss ) income ( our most directly comparable financial measure presented in accordance with gaap ) to adjusted ebitda : replace_table_token_3_th 32 liquidity and capital resources liquidity our principal capital requirements have been to fund working capital needs , and to a lesser extent , capital expenditures . on april 3 , 2014 , we paid $ 12.4 million of cash for the acquisition of the ripka brand , which includes $ 9.0 million of jr term loan proceeds . on december 22 , 2014 , we paid $ 18.5 million of cash for the acquisition of the h halston brands , which includes $ 10.0 million of h term loan proceeds . at december 31 , 2014 and 2013 , our unrestricted cash and cash equivalents were $ 8.53 million and $ 7.46 million , respectively . on december 22 , 2014 , we issued to six accredited investors an aggregate of 1,086,667 shares of our common stock at a purchase price of $ 9.00 per share or gross proceeds of $ 9,780,000 in a private offering . we expect that existing cash and operating cash flows will be adequate to meet our operating needs , debt service obligations and capital expenditure needs , including the debt service under our term loan facilities for the twelve months subsequent to december 31 , 2014. we are dependent on our licensees for most of our revenues , and there is no assurance that the licensees will perform as projected . we do not require significant capital expenditures . we launched an e-commerce platform in may 2014 , for which we incurred $ 0.02 million of capital expenditures in each of the current year and prior year . the company 's contingent obligations ( see note 7 in the consolidated financial statements ) are payable in stock and or cash , at the company 's discretion . payment of these obligations in stock would not affect the company 's liquidity . the im seller note ( see note 7 in the consolidated financial statements ) is payable in cash up to $ 1.5 million beginning in 2015 , of which $ 1.0 million of the cash payment is subject to bank of hapoalim b.m . 's ( “ bhi ” ) approval .
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the company 's operating income from continuing operations was $ 1.44 million in the current year , compared to operating income from continuing operations of $ 2.09 million in the prior year . total revenue s current year total revenues increased approximately $ 7.55 million to $ 20.71 million from $ 13.16 million for the prior year . this was primarily related to increases in net licensing revenues of $ 7.58 million and net sales revenues ( which is comprised of our e-commerce revenues ) of $ 0.13 million , partially offset by a decrease in design and service fees of $ 0.16 million . net licensing revenues for the current year increased by $ 7.58 million , compared with the prior year primarily due to an increase in direct-response television revenues of $ 7.10 million . licensing revenues attributable to the ripka brand , which commenced in april 2014 , and the continuing growth of isaac mizrahi brand were the main contributing factors . we are also focusing on our international expansion . in september 2013 , we commenced marketing our isaac mizrahi brand through direct-response television in canada on tsc . in april 2014 , upon our acquisition of the ripka brand , we launched the ripka brand on tsc in canada . in may 2014 we brought the isaacmizrahilive brand to the united kingdom through qvc . net e-commerce sales were $ 0.13 million as a result of the launch of the e-commerce platform in may 2014. wholesale licensing revenues increased by $ 0.48 million in the current year , compared with the prior year . current year design and service fee revenue decreased by $ 0.16 million , compared with the prior year primarily due to a non-recurring service fees recognized in the prior year . gross profit gross profit for the current year was $ 20.63 million , compared to $ 13.17 million for the prior year . the increase in gross profit is primarily attributable to the increase in revenues . gross profit for the current year of $
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ROO
| 16,407
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our actual results could differ materially from those discussed in the forward-looking statements . factors that could cause or contribute to those differences include those discussed below and elsewhere in this annual report on form 10-k , particularly in “ risk factors , ” “ note regarding forward-looking statements , ” and “ note regarding user metrics and other data. ” the following generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019. discussion of historical items and year-to-year comparisons between 2019 and 2018 that are not included in this discussion can be found in “ management 's discussion and analysis of financial condition and results of operations ” in our annual report on form 10-k for the fiscal year ended december 31 , 2019 , filed with the sec on february 4 , 2020. overview of full year 2020 results our key user metrics and financial results for fiscal year 2020 are as follows : user metrics daily active users , or daus , increased to 265 million in q4 2020 , compared to 218 million in q4 2019. average revenue per user , or arpu , increased 33 % to $ 3.44 in q4 2020 , compared to $ 2.58 in q4 2019. story_separator_special_tag measurement services , and personnel-related costs , including salaries , benefits , and stock-based compensation expenses . cost of revenue also includes facilities and other supporting overhead costs , including depreciation and amortization , and inventory costs for spectacles . research and development expenses research and development expenses consist primarily of personnel-related costs , including salaries , benefits , and stock-based compensation expense for our engineers , designers , and other employees engaged in the research and development of our products . in addition , research and development expenses include facilities and other supporting overhead costs , including depreciation and amortization . research and development costs are expensed as incurred . sales and marketing expenses sales and marketing expenses consist primarily of personnel-related costs , including salaries , benefits , commissions , and stock-based compensation expense for our employees engaged in sales and sales support , business development , media , marketing , corporate partnerships , and customer service functions . sales and marketing expenses also include costs incurred for advertising , market research , tradeshows , branding , marketing , promotional expense , and public relations , as well as facilities and other supporting overhead costs , including depreciation and amortization . general and administrative expenses general and administrative expenses consist primarily of personnel-related costs , including salaries , benefits , and stock-based compensation expense for our finance , legal , information technology , human resources , and other administrative teams . general and administrative expenses also include facilities and supporting overhead costs , including depreciation and amortization , and external professional services . interest income interest income consists primarily of interest earned on our cash , cash equivalents , and marketable securities . interest expense interest expense consists primarily of interest expense associated with our senior convertible notes , or the convertible notes , and commitment fees and amortization of financing costs related to our revolving credit facility . other income ( expense ) , net other income ( expense ) , net consists of realized gains and losses on sales of marketable securities , our portion of non-marketable investment income and losses , foreign currency transaction gains and losses , and gains and impairments on non-marketable investments . other income ( expense ) , net also includes any gains or losses on divestitures of businesses . income tax benefit ( expense ) we are subject to income taxes in the united states and numerous foreign jurisdictions . these foreign jurisdictions have different statutory tax rates than the united states . additionally , certain of our foreign earnings may also be taxable in the united states . accordingly , our effective tax rates will vary depending on the relative proportion of foreign to domestic income , use of tax credits , changes in the valuation of our deferred tax assets and liabilities , and changes in tax laws . 49 adjusted ebitda we define adjusted ebitda as net income ( loss ) , excluding interest income ; interest expense ; other income ( expense ) , net ; income tax benefit ( expense ) ; depreciation and amortization ; stock-based compensation expense and related payroll tax expense ; and certain other non-cash or non-recurring items impacting net income ( loss ) from time to time . we consider the exclusion of certain non-cash and non-recurring expenses in calculating adjusted ebitda to provide a useful measure for period-to-period comparisons of our business and for investors and others to evaluate our operating results in the same manner as does our management . additionally , we believe that adjusted ebitda is an important measure since we use third-party infrastructure partners to host our services and therefore we do not incur significant capital expenditures to support revenue-generating activities . see “ selected financial data — non-gaap financial measures ” for additional information and a reconciliation of net loss to adjusted ebitda . discussion of results of operations the following table sets forth our consolidated statements of operations data : replace_table_token_5_th ( 1 ) stock-based compensation expense included in the above line items : replace_table_token_6_th ( 2 ) depreciation and amortization expense included in the above line items : replace_table_token_7_th ( 3 ) see “ selected financial data—non-gaap financial measures ” of this annual report on form 10-k for more information and for a reconciliation of adjusted ebitda to net loss , the most directly comparable financial measure calculated and presented in accordance with gaap . story_separator_special_tag ” unaudited quarterly results of operations data the following table sets forth the primary components of our unaudited quarterly consolidated statements of cash flows for each of the four quarters in the periods ended december 31 , 2020 and december 31 , 2019. these unaudited quarterly statements of cash flows have been prepared on the same basis as our audited consolidated financial statements included in “ financial statements and supplementary data ” in this annual report on form 10-k. in the opinion of management , the financial information reflects all normal recurring adjustments necessary for the fair statement of results of operations for these periods . this information should be read in conjunction with our consolidated financial statements and the related notes included in “ financial statements and supplementary data ” in this annual report on form 10-k. the results of historical periods are not necessarily indicative of the results in any future period . replace_table_token_19_th 54 the following table sets forth the major components of our unaudited quarterly consolidated statements of operations for each of the four quarters in the periods ended december 31 , 2020 and december 31 , 2019. these unaudited quarterly results of operations have been prepared on the same basis as our audited consolidated financial statements included in “ financial statements and supplementary data ” in this annual report on form 10-k. in the opinion of management , the financial information reflects all normal recurring adjustments necessary for the fair statement of results of operations for these periods . this information should be read in conjunction with our consolidated financial statements and the related notes included in “ financial statements and supplementary data ” in this annual report on form 10-k. the results of historical periods are not necessarily indicative of the results in any future period . replace_table_token_20_th ( 1 ) stock-based compensation expense included in the above line items : replace_table_token_21_th ( 2 ) depreciation and amortization expense included in the above line items : replace_table_token_22_th 55 the following table presents a reconciliation of free cash flow to net cash used in operating activities , the most comparable gaap financial measure , for each of the periods presented : replace_table_token_23_th the following table presents a reconciliation of adjusted ebitda to net loss , the most comparable gaap financial measure , for each of the periods presented : replace_table_token_24_th 56 the following table sets forth the components of our unaudited quarterly consolidated statements of operations for each of the periods presented as a percentage of revenue : replace_table_token_25_th liquidity and capital resources cash , cash equivalents , and marketable securities were $ 2.5 billion as of december 31 , 2020 , primarily consisting of cash on deposit with banks and highly liquid investments in u.s. government and agency securities , corporate debt securities , certificates of deposit , and commercial paper . our primary source of liquidity is cash generated through financing activities . our primary uses of cash include operating costs such as personnel-related costs and the infrastructure costs of the snapchat application , facility-related capital spending , and acquisitions and investments . there are no known material subsequent events that could have a material impact on our cash or liquidity . we may contemplate and engage in merger and acquisition activity that could materially impact our liquidity and capital resource position . in april 2020 , we entered into a purchase agreement for the sale of an aggregate of $ 1.0 billion principal amount of senior convertible notes , or the 2025 notes . the net proceeds from the issuance of the 2025 notes were $ 888.6 million , net of debt issuance costs and cash used to pay the costs of the capped call transactions , or the 2025 capped call transactions , discussed further in note 7 . the 2025 notes mature on may 1 , 2025 unless repurchased , redeemed , or converted in accordance with their terms prior to such date . the sale price for conversion was satisfied as of december 31 , 2020 and as a result , the 2025 notes first became eligible for optional conversion during the first quarter of 2021. in august 2019 , we entered into a purchase agreement for the sale of an aggregate of $ 1.265 billion principal amount of senior convertible notes , or the 2026 notes . the net proceeds from the issuance of the 2026 notes were $ 1.15 billion , net of debt issuance costs and cash used to pay the costs of the capped call transactions , or the 2026 capped call transactions , discussed further in note 7 . the 2026 notes mature on august 1 , 2026 unless repurchased , redeemed , or converted in accordance with their terms prior to such date . the sale price for conversion was satisfied as of december 31 , 2020 and as a result , the 2026 notes first became eligible for optional conversion during the first quarter of 2021. in july 2016 , we entered into a five-year senior unsecured revolving credit facility , or the credit facility , with lenders some of which are affiliated with certain members of the underwriting syndicate for our convertible notes offering , that allows us to borrow up to $ 1.1 billion to fund working capital and general corporate-purpose expenditures . the loan bears interest at libo plus 0.75 % , as well as an annual commitment fee of 0.10 % on the daily undrawn balance of the facility . no origination fees were incurred at the closing of the credit facility . in december 2016 , the amount we are permitted to borrow under the credit facility was increased to $ 1.2 billion . in february 2018 , the amount we are permitted to borrow under the credit facility was increased to $ 1.25 billion . in august 2018 , we amended the credit facility to extend the term to august 2023 with respect to an aggregate of $ 1.05 billion of the $ 1.25 billion that we may borrow under the credit facility .
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financial results cash used in operating activities was $ ( 167.6 ) million in 2020 , compared to $ ( 305.0 ) million in 2019. free cash flow was $ ( 225.5 ) million in 2020 , compared to $ ( 341.4 ) million in 2019. common shares outstanding plus shares underlying stock-based awards , including restricted stock units , restricted stock awards , and outstanding stock options , totaled 1,630 million at december 31 , 2020 , compared with 1,576 million one year ago . capital expenditures were $ 57.8 million in 2020 , compared to $ 36.5 million in 2019. cash , cash equivalents , and marketable securities were $ 2.5 billion as of december 31 , 2020. revenue increased 46 % to $ 2.5 billion in 2020 , compared to $ 1.7 billion in 2019. total costs and expenses excluding stock-based compensation and related payroll tax expense increased 21 % to $ 2.5 billion in 2020 , compared to $ 2.1 billion in 2019. net loss decreased 9 % to $ ( 944.8 ) million in 2020 , compared to $ ( 1.0 ) billion in 2019. diluted net loss per share decreased 13 % to $ ( 0.65 ) in 2020 , compared to $ ( 0.75 ) in 2019. adjusted ebitda increased 122 % to $ 45.2 million in 2020 , compared to $ ( 202.2 ) million in 2019. overview snap inc. is a camera company . we believe that reinventing the camera represents our greatest opportunity to improve the way that people live and communicate . we contribute to human progress by empowering people to express themselves , live in the moment , learn about the world , and have fun together . our flagship product , snapchat , is a camera application that helps people communicate visually with friends and family through short videos and images called snaps .
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ROO
| 4,632
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we also have a collaboration with rti for the development of products for certain orthopedic applications using our stem cell technologies in the bone graft substitutes market , and we have received royalty revenue from product sales and and a payment associated with achievement of a commercial milestones . however , rti has announced that it will cease distribution of its bone graft product that utilizes our technology . no milestones were achieved for the year ended december 31 , 2018 , and we expect the rti royalties to cease . financial we have entered into a series of agreements with healios , our collaborator in japan and currently our largest stockholder . under the collaboration that began in 2016 , healios is responsible for the development and commercialization of the multistem product for the licensed fields in the licensed territories , and we provide manufacturing services to healios for which we are compensated , a portion of which may be credited by healios against potential future milestone payments , as defined . in 2016 , we received license fees of $ 15 million , and in connection with the expansion of the collaboration in june 2018 , we received license fees of $ 20 million , of which $ 10 million may be credited by healios against potential future milestone payments . each license agreement with healios has defined economic terms , and we may receive success-based milestone payments . while there is no assurance that we will receive milestone proceeds under the healios collaboration , any milestone payment we receive is non-refundable and non-creditable towards future royalties or any other payment due from healios . also , we are entitled to receive tiered royalties on net product sales , as defined in the license agreements . the rofn period , as extended , with respect to the option for a license in china expires in june 2019 , and we received a $ 2.0 million payment from healios in december 2018 for the most recent extension . furthermore , healios may make an additional payment of $ 3.0 million to extend the rofn period for another six months through december 31 , 2019. all such extension payments would be creditable against the option fee payable by healios upon execution of the china option agreement , if applicable , or otherwise , against milestone payments under the licensed programs . in march 2018 , healios purchased 12,000,000 shares of our common stock and a warrant to purchase up to an additional 20,000,000 shares of common stock for $ 21.1 million , or approximately $ 1.76 per share . the healios warrant is ( i ) not exercisable with respect to 16,000,000 shares unless during the rofn period , we and healios have entered into a china option agreement , and ( ii ) exercisable with respect to 4,000,000 shares at an exercise price equal to a reference price , as defined , but no less than $ 1.76 per share . as of december 31 , 2018 , 1,500,000 of the 16,000,000 shares underlying the healios warrant will no longer be exercisable according to the terms of the healios warrant . in february 2017 , we completed a public offering generating net proceeds of approximately $ 20.9 million through the issuance of 22,772,300 shares of common stock at an offering price of $ 1.01 per share . we have had equity purchase agreements in place since 2011 with aspire capital , which provide us the ability to sell shares to aspire capital from time-to-time , as appropriate . the current agreement was entered into in february 2018 and includes aspire capital 's commitment to purchase up to an aggregate of $ 100 million of shares of common stock over a three-year period . the terms of the 2018 equity facility are similar to the previous arrangements , and we issued 450,000 shares of our common stock to aspire capital as a commitment fee in february 2018 and filed a registration statement for the resale of 24,700,000 shares of common stock in connection with the new equity facility . also in connection with the new equity facility , aspire capital invested $ 1.0 million to purchase 500,000 shares of common stock at $ 2.00 per share . during the years ended december 31 , 2018 , 2017 and 2016 , we sold 8,708,582 , 9,400,000 , and 2,191,418 shares , respectively , to aspire capital at average prices of $ 1.78 , $ 1.75 and $ 1.84 per share , respectively . as of february 28 , 2019 , we had 18,050,000 million shares remaining to sell to aspire capital under the 2018 agreement . during the year ended december 31 , 2017 , we received proceeds of approximately $ 1.9 million from the exercise of warrants . all of our previously outstanding warrants were either exercised prior to expiration or expired in march 2017 , and we had only the healios warrant outstanding at december 31 , 2018. in 2016 , a flood caused damage to our primary facilities that required the reconstruction of certain laboratory space and was covered by insurance at replacement cost . insurance recovery proceeds of $ 0.7 million were received in 2016. in 2018 , we received an additional $ 0.6 million in insurance proceeds , net of associated expenses . 43 results of operations since our inception , our revenues have consisted of license fees , contract revenues and milestone payments from our collaborators , and grant proceeds primarily from federal , state and foundation grants . we have derived no revenue from the commercial sale of therapeutic products to date , but we have received royalties on commercial sales by a licensee of products using our technologies , which we expect to cease in connection with the licensees strategic transformation . story_separator_special_tag a discussion of the material implications of uncertainties associated with the methods , assumptions and estimates underlying our critical accounting polices is as follows : revenue recognition our license and collaboration agreements may contain multiple elements , including license and technology access fees , research and development funding , product supply revenue , service revenue , cost-sharing , milestones and royalties . the deliverables under such an arrangement are evaluated under asu 606 , revenue from contracts with customers . each deliverable is evaluated to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services . we have license and other agreements with healios that contain multiple elements and deliverables . for a description of the collaboration agreements and the determination of contract revenues , see note e to our audited consolidated financial statements . contract revenue from healios : at the inception of the healios arrangement and again each time that the arrangement has been modified , all material performance obligations are identified , which include ( i ) licenses to our technology , ( ii ) product supply services , and ( iii ) services to transfer technology to a contract manufacturer on healios ' behalf . we determine whether the performance obligations are both capable of being distinct and distinct within the context of the contract . we develop assumptions that require judgment to determine the standalone selling price in order to account for our collaborative agreements , as these assumptions typically include probabilities of obtaining marketing approval for the product candidates , estimated timing of commercialization , estimated future cash flows from potential product sales of our product candidates , estimating the cost and markup of providing product supply and technical services , and appropriate discount rates . in order to determine the transaction price , in addition to the fixed payments , we estimate the amount of variable consideration utilizing the expected value or most likely amount method , depending on the facts and circumstances relative to the contract , and the estimates for variable consideration are reassessed each reporting period . we constrain , or reduce , the estimates of 47 variable consideration if it is probable that a significant reversal of previously recognized revenue could occur throughout the life of the contract , and both the likelihood and magnitude of a potential reversal of revenue are taken into consideration . at inception and upon each modification date , once the estimated transaction price is established , amounts are allocated to each separate performance obligation on a relative standalone selling price basis . these performance obligations include any remaining , undelivered elements at the time of modifications and any new elements from a modification to the arrangement if the conditions are not met for being treated as a separate agreement . for performance obligations satisfied over time , we apply an appropriate method of measuring progress each reporting period and , if necessary , adjust the estimates of performance and the related revenue recognition . our technology transfer services are satisfied over time , and we recognize revenue in proportion to the contractual services provided . for performance obligations satisfied at a point in time ( i.e . , product supply ) , we recognize revenue upon delivery . royalty revenue : we recognize revenue from royalties relating to the sale by a licensee of the licensed product . royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement and based on the receipt from the licensee of the relevant information to enable calculation of the royalty due . grant revenue : revenues from grants consist of funding under cost reimbursement programs primarily from federal and non-profit foundation sources for qualified research and development activities performed by us , and as such , are not based on estimates that are susceptible to change . such amounts are invoiced and recorded as revenue as tasks are completed . clinical trial costs clinical trial costs are accrued based on work performed by outside contractors that manage and perform the trials , and that manufacture clinical product . we obtain initial estimates of total costs based on enrollment of subjects , project management estimates , manufacturing estimates and other activities . actual costs are typically charged to us and recognized as the tasks are completed by the contractor , and if we are invoiced based on progress payments as opposed to actual costs , we develop estimates of work completed to date . accrued clinical trial costs may be subject to revisions as clinical trials progress , and any revisions are recorded in the period in which the facts that give rise to the revisions become known . stock-based compensation we recognize stock-based compensation expense on the straight-line method and use a black-scholes option-pricing model to estimate the grant-date fair value of share-based awards . the expected term of options granted represent the period of time that option grants are expected to be outstanding . we use the “ simplified ” method to calculate the expected life of option grants given our limited history and determine volatility by using our historical stock volatility . estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards . we recognize the impact of forfeitures as they occur . all of the aforementioned estimates and assumptions are evaluated on a quarterly basis and may change as facts and circumstances warrant . changes in these assumptions can materially affect the estimate of the fair value of our share-based payments and the related amount recognized in our financial statements . pending adoption of new accounting pronouncements refer to note b to the consolidated financial statements for a discussion of recently issued accounting standards . cautionary note
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we also receive payments from healios for clinical product supply and other manufacturing services . certain proceeds from healios may be used by healios to offset milestone payments that may become due in the future . 45 in connection with the expansion , healios purchased 12,000,000 shares of our common stock for $ 21.1 million and received the healios warrant to purchase up to 20,000,000 shares of common stock in march 2018 , subject to certain conditions . the healios warrant is currently exercisable with respect to 4,000,000 shares underlying the healios warrant . as of december 31 , 2018 , of the 16,000,000 shares , 1,500,000 will no longer be exercisable according to the terms of the agreement and the remaining 14,500,000 shares will become exercisable only in the event that healios executes an option to expand into the china territory . the healios warrant has an overall term that expires in september 2020 , as defined , includes both fixed and floating exercise price mechanisms , and is capped such that in no event will healios own more than 19.9 % of our common stock . we may receive additional proceeds from the exercise of the healios warrant over its term , although there can be no assurances that healios will exercise the healios warrant in whole or in part . as of december 31 , 2018 , no shares have been issued under the healios warrant . in february 2017 , we completed a public offering generating net proceeds of approximately $ 20.9 million through the issuance of 22,772,300 shares of common stock at an offering price of $ 1.01 per share . we have had an equity purchase arrangement in place with aspire capital since 2011 , through two-to-three year equity facilities , each with similar terms . the most current facility with aspire capital was entered into in february 2018 and includes aspire capital 's commitment to purchase up to an aggregate of $ 100.0 million of shares of our common stock over a new three-year period , and an investment in us of $ 1.0 million at $ 2.00 per share of common stock .
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Liquidity
| 3,924
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statements . because of its inherent limitations , internal control over financial reporting may not prevent or detect misstatements . also , projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions , or that the degree of compliance with the policies or procedures may deteriorate . pricewaterhousecoopers llp pricewaterhousecoopers llp hartford , connecticut february 24 , 2016 f-1 lydall , inc. consolidated statements of operations replace_table_token_19_th the accompanying notes are an integral part of these consolidated financial statements . f-2 lydall , inc. consolidated statements of comprehensive income replace_table_token_20_th the accompanying notes are an integral part of these consolidated financial statements . f-3 lydall , inc. consolidated balance sheets replace_table_token_21_th the accompanying notes are an integral part of these consolidated financial statements . f-4 lydall , inc. consolidated statements of cash flows replace_table_token_22_th non-cash capital expenditures of $ 5.9 million and $ 5.0 million were included in accounts payable at december 31 , 2015 and 2014 , respectively . the accompanying notes are an integral part of these consolidated financial statements . f-5 lydall , inc. consolidated statements of changes in stockholders ' equity replace_table_token_23_th the accompanying notes are an integral part of these consolidated financial statements . f-6 lydall , inc. notes to consolidated financial statements 1. significant accounting policies business — lydall , inc. and its subsidiaries ( collectively , the “ company ” or “ lydall ” ) design and manufacture specialty engineered filtration media , industrial thermal insulating solutions , automotive thermal and acoustical barriers for filtration/separation and thermal/acoustical applications . on february 20 , 2014 , the company acquired certain industrial filtration businesses ( `` industrial filtration `` ) of andrew industries limited , an altham , united kingdom based corporation . the industrial filtration business serves a global customer base in the manufacture of non-woven felt filtration media and filter bags used primarily in industrial air filtration applications including power , cement , asphalt , incineration , food and pharmaceutical . this business , which strengthened the company 's position as an industry leading , global provider of filtration and engineered materials products , added complementary and new technologies and diversified the company 's end markets and geographic base . principles of consolidation — the consolidated financial statements include the accounts of lydall , inc. and its wholly owned subsidiaries . all intercompany accounts and transactions have been eliminated . estimates and assumptions — the preparation of the company 's consolidated financial statements in conformity with accounting principles generally accepted in the united states of america requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the financial statement dates and the reported amounts of revenues and expenses during the reporting periods . actual results could differ from those estimates . risks and uncertainties — worldwide economic cycles and political changes affect the markets that the company 's businesses serve and affect demand for lydall 's products and impact profitability . among other factors , disruptions in the global credit and financial markets , including diminished liquidity and credit availability , swings in consumer confidence and spending , unstable economic growth and fluctuations in unemployment rates has caused economic instability and can have a negative impact on the company 's results of operations , financial condition and liquidity . cash and cash equivalents — cash and cash equivalents include cash on hand and highly liquid investments with original maturities of three months or less at the date of purchase . concentrations of credit risk — financial instruments that potentially subject the company to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable . the company places its cash and cash equivalents in high-quality financial institutions . concentrations of credit risk with respect to trade accounts receivable are limited by the large number of customers comprising the company 's customer base and their dispersion across many different industries and geographies . at december 31 , 2015 , ford motor company ( `` ford `` ) represented 13.2 % of total accounts receivable . no other customers accounted for more than 10.0 % of total accounts receivable at december 31 , 2015 and 2014 . foreign and export sales were 44.2 % of the company 's net sales in 2015 , 46.2 % in 2014 , and 45.2 % in 2013 . export sales primarily to canada , mexico , asia and europe were $ 52.5 million , $ 57.6 million , and $ 52.1 million in 2015 , 2014 , and 2013 , respectively . the company performs ongoing credit evaluations of its customers ' financial condition and generally does not require collateral . sales to the automotive market , included in the thermal/acoustical metals and thermal/acoustical fibers segments , were 56.6 % of the company 's net sales in 2015 , 54.1 % in 2014 , and 68.5 % in 2013 . sales to ford were 18.2 % , 16.5 % , and 20.0 % of lydall 's 2015 , 2014 , and 2013 net sales , respectively . sales to chrysler group llc ( `` chrysler `` ) accounted for 10.9 % of lydall 's 2013 net sales . no other customers accounted for more than 10 % of total net sales in 2015 , 2014 , and 2013 . inventories — inventories are valued at lower of cost or market , cost being determined using the first-in , first-out ( fifo ) cost method . inventories in excess of requirements for current or anticipated orders have been written down to net realizable value . pre-production design and development costs — the company enters into contractual agreements with certain customers to design and develop molds , dies and tools ( collectively , “ tooling ” ) . story_separator_special_tag this increase in selling , general and administrative costs was offset to some extent by an increase in gross profit of $ 3.2 million , primarily in north america and europe , due to increased sales volume and a favorable mix of sales of automotive parts . this increased gross profit was offset to some extent by higher production costs , primarily related to sourcing raw material in china as the company began production operations in 2014 . 25 thermal/acoustical fibers segment segment net sales increased by $ 10.2 million , or 7.9 % , in 2015 compared to 2014. automotive parts net sales increased by $ 11.1 million , or 8.9 % , in 2015 compared to 2014. higher volumes of parts net sales were primarily due to increased consumer demand for vehicles in north america on lydall 's existing platforms and new platform awards . tooling net sales decreased $ 1.0 million , or 23.7 % , in 2015 compared to 2014 due to timing of new product launches . domestic automobile production increased 2.7 % in 2015 compared to 2014. the thermal/acoustical fibers segment reported 2015 operating income of $ 37.1 million , or 26.7 % of net sales , compared to operating income of $ 29.2 million , or 22.7 % , in 2014. the increase in operating income was primarily attributable to increased parts net sales and gross margin improvement of approximately 400 basis points as a result of lower raw material costs , favorable mix of product sales , improved absorption of fixed costs and labor efficiencies . segment selling , product development and administrative expenses increased by $ 0.4 million in 2015 compared to 2014 primarily due to increased salaries and increased product development expenses . segment selling , product development and administrative expenses as a percentage of net sales was 5.1 % in both 2015 and 2014. segment net sales increased by $ 14.3 million , or 12.5 % , in 2014 compared to 2013. automotive parts net sales increased by $ 18.6 million , or 17.6 % , in 2014 compared to 2013. higher volumes of net sales were primarily due to improved consumer demand for vehicles in north america on lydall 's existing platforms and new platform awards as well as the timing of certain customer purchases . tooling net sales decreased $ 4.3 million , or 51.1 % , in 2014 compared to 2013 due to timing of new product launches . domestic automobile production increased 5.2 % in 2014 compared to 2013. the thermal/acoustical fibers segment reported operating income of $ 29.2 million , or 22.7 % of net sales , in 2014 compared to operating income of $ 21.5 million , or 18.8 % , in 2013. this increase was due to higher net sales and improved gross margin realized from a favorable mix of part sales as well as improved absorption of fixed costs due to higher production levels , lower material costs , and labor efficiencies resulting in gross margin improvement of 360 basis points . segment selling , product development and administrative expenses increased by $ 0.4 million in 2014 compared to 2013 primarily due to increased salaries and accrued incentive compensation . however , segment selling , product development and administrative expenses decreased as a percentage of sales to 5.1 % in 2014 compared to 5.4 % in 2013. other products and services on january 30 , 2015 , the company sold all of the outstanding shares of common stock of its life sciences vital fluids business for a cash purchase price of $ 30.1 million . the disposition was completed pursuant to a stock purchase and sale agreement , dated january 30 , 2015 , by and among the company , and the buyer . the company recognized a pre-tax gain on the sale of $ 18.6 million , reported as non-operating income in the first quarter of 2015. net of income taxes , the company reported a gain on sale of $ 11.8 million . life sciences vital fluids net sales in 2015 decreased by $ 18.0 million in 2015 compared to 2014. life sciences vital fluids reported operating income of $ 0.1 million , or 7.1 % of net sales , in 2015 compared to operating income of $ 1.6 million , or 8.0 % of net sales , in 2014. the decreases in net sales and operating income were due to the sale of this business in the first quarter of 2015. life sciences vital fluids net sales increased $ 2.5 million , or 14.6 % , in 2014 , compared to 2013 , due to higher volumes of bioprocessing and cell therapy product net sales , and to a lesser extent , price increases . life sciences vital fluids reported operating income of $ 1.6 million , or 8.0 % of net sales , in 2014 compared to $ 0.8 million , or 4.5 % of net sales , in 2013. this increase in operating income was due to a higher net sales , favorable mix of products and improved absorption of fixed costs , partially offset by increased selling and product development and administrative expenses . contributing to the increase in selling , product development and administrative expenses was an increase in accrued incentive compensation of $ 0.3 million , as a result of exceeding operating performance targets in 2014 compared to 2013 when operating performance targets were not met by the business , and an asset write off associated with the termination of a product distribution agreement . however , selling , product development and administrative expenses decreased as a percentage of sales to 22.6 % in 2014 compared to 23.8 % in 2013 . 26 corporate office expenses the decrease in corporate office expenses of $ 6.2 million in 2015 compared to 2014 was primarily due to a non-cash pension plan settlement charge of $ 4.9 million in 2014 associated with a voluntary one-time lump
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additionally , net sales increased in the performance materials segment by $ 3.9 million , or 3.5 % , and in the life sciences vital fluids business by $ 2.5 million , or 14.6 % , compared to 2013. cost of sales replace_table_token_7_th cost of sales in 2015 decreased $ 18.8 million , or 4.5 % , compared to 2014. lower cost of sales from the divested life sciences vital fluids business , the impact of foreign currency translation , lower raw material costs and labor efficiencies were offset by volume increases in the t/a fibers , t/a metals , and industrial filtration segments . foreign currency translation lowered cost of sales in 2015 compared to 2014 by $ 21.9 million , or 5.2 % . cost of sales decreased $ 12.5 million in 2015 compared to 2014 as a result of the divested life sciences vital fluids business which was sold on january 30 , 2015. these decreased costs of sales were partially offset by increases in cost of sales of $ 15.6 million related to increases in sales volume , primarily in the industrial filtration and t/a fibers segments , offset to some extent by lower raw material costs and labor efficiencies , primarily in the industrial filtration , t/a fibers and performance materials segments . cost of sales in 2014 increased $ 108.1 million , or 34.6 % , compared to 2013. the acquisition of industrial filtration in february 2014 contributed to the increase in cost of sales of $ 96.3 million , or 30.8 % , including a purchase accounting adjustment related to inventory step-up of $ 2.1 million , or 0.7 % . the start-up of a manufacturing facility in china by the t/a metals segment resulted in an increase in cost of sales of $ 2.5 million , or 0.8 % , in 2014 compared to 2013. the remaining increase in cost of sales in 2014 of $ 9.3 million , or 3.0 % , compared to 2013 , was due to improved sales volume in all pre-acquisition segments , reduced principally by favorable changes in product mix in the t/a metals and 19 t/a fibers segments , and to a lesser extent , lower raw material costs , improved absorption of fixed overhead costs and labor efficiencies primarily in the t/a fibers segment . foreign currency translation had a minimal impact on cost of sales in 2014 compared to 2013. gross profit replace_table_token_8_th < font
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Liquidity
| 12,514
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for our mexico segment , we do not designate derivative financial instruments that we purchase to mitigate commodity purchase or currency exchange rate exposures as cash flow hedges ; therefore , we recognize changes in the fair value of these derivative financial instruments immediately in earnings . for our u.k. and europe segment , we do designate certain derivative financial instruments that we have purchased to mitigate foreign currency transaction exposures as cash flow hedges ; therefore , before the settlement date of the financial derivative instruments , we recognize changes in the fair value of the effective portion of the cash flow hedge in accumulated other comprehensive income ( loss ) , while we recognize changes in the fair value of the ineffective portion immediately in earnings . when the derivative financial instruments associated with the effective portion are settled , the amount in accumulated other comprehensive income ( loss ) is then reclassified to earnings . gains or losses related to these derivative financial instruments are included in the line item cost of sales in the consolidated and combined statements of income . we recognized $ 27.1 million in net losses related to changes in the fair value of our derivative financial instruments during 2018. we recognized $ 6.7 million in net gains and $ 4.3 million in net losses related to changes in the fair value of our derivative financial instruments during 2017 and 2016 , respectively . although changes in the market price paid for feed ingredients impact cash outlays at the time we purchase the ingredients , such changes do not immediately impact cost of sales . the cost of feed ingredients is recognized in cost of sales , on a first-in-first-out basis , at the same time that the sales of the chickens that consume the feed grains are recognized . thus , there is a lag between the time cash is paid for feed ingredients and the time the cost of such feed ingredients is reported in cost of goods sold . for example , corn delivered to a feed mill and paid for one week might be used to manufacture feed the following week . however , the chickens that eat that feed might not be processed and sold for another 42 to 63 days , and only at that time will the costs of the feed consumed by the chickens become included in cost of goods sold . commodities such as corn , soybean meal , and soybean oil are actively traded through various exchanges with future market prices quoted on a daily basis . these quoted market prices , although a good indicator of the commodity 's base price , do not represent the final price for which we can purchase these commodities . there are several components in addition to the quoted market price , such as freight , storage and seller premiums , that are included in the final price that we pay for grain . although 31 changes in quoted market prices may be a good indicator of the commodity 's base price , the components mentioned above may have a significant impact on the total change in grain costs recognized from period to period . market prices for chicken products are currently at levels sufficient to offset the costs of feed ingredients . however , there can be no assurance that chicken prices will not decrease due to such factors as competition from other proteins and substitutions by consumers of non-protein foods because of uncertainty surrounding the general economy and unemployment . acquisition activity moy park acquisition . on september 8 , 2017 , we acquired 100 % of the issued and outstanding shares of moy park from jbs s.a. for cash of $ 301.3 million and a note payable to the seller in the amount of £562.5 million . moy park is one of the top-ten food companies in the u.k. , northern ireland 's largest private sector business and one of europe 's leading poultry producers . with 4 fresh processing plants , 10 prepared foods cook plants , 3 feed mills , 7 hatcheries and 1 rendering facility in the u.k. , france and the netherlands , the acquired business processes 6.0 million birds per seven-day work week , in addition to producing around 456.0 million pounds of prepared foods per year . moy park currently has approximately 10,200 employees . see “ note 2. business acquisitions ” of our consolidated and combined financial statements included in this annual report for additional information relating to this acquisition . the moy park operations constitutes our u.k. and europe segment . the acquisition was treated as a common-control transaction under u.s. gaap . a common-control transaction is a transfer of net assets or an exchange of equity interests between entities under the control of the same parent . the accounting and reporting for a transaction between entities under common control is not to be considered a business combination under u.s. gaap . accordingly , for the period from september 30 , 2015 through september 7 , 2017 , the consolidated and combined financial statements includes the accounts of our company and our majority-owned subsidiaries combined with the accounts of moy park . for the periods subsequent to september 8 , 2017 , the consolidated and combined financial statements includes the accounts of our company and our majority-owned subsidiaries , including moy park . gnp acquisition . on january 6 , 2017 , we acquired 100 % of the membership interests of gnp from maschhoff family foods , llc for a cash purchase price of $ 350 million , subject to customary working capital adjustments . gnp is a vertically integrated poultry business based in st. cloud , minnesota . the acquired business has a production capacity of 2.1 million birds per five-day work week in its two plants and employed approximately 1,600 people at the time of acquisition . this acquisition further strengthens our strategic position in the u.s. chicken market . the gnp operations are included in our u.s. segment . story_separator_special_tag 2017 tax reform on december 22 , 2017 , the u.s. government enacted comprehensive tax legislation ( the “ tax act ” ) , which significantly revises the ongoing u.s. corporate income tax law by lowering the u.s. federal corporate income tax rate from 35.0 % to 21.0 % , implementing a territorial tax system , imposing one-time tax on foreign unremitted earnings and setting limitations on deductibility of certain costs ( e.g. , interest expense ) , among other things . we applied the guidance in staff accounting bulletin ( “ sab ” ) 118 when accounting for the enactment date effects of the tax act . as of december 30 , 2018 , we have completed our accounting for all of the tax effects of the tax act . as further discussed below , during 2018 , we recognized adjustments of $ 18.2 million to the provisional amounts recorded at december 31 , 2017 and included these adjustments as a component of income tax expense . as of december 31 , 2017 , we estimated no tax liability on foreign unremitted earnings due to a net earnings and profits ( “ e & p ” ) deficit on accumulated post-1986 deferred foreign income . therefore , we did not accrue any amount of tax expense for the tax act 's one-time transition tax on the foreign subsidiaries ' accumulated , unremitted earnings going back to 1986 for the year ended december 31 , 2017. upon further analysis of certain aspects of the tax act and a refinement of the historical calculation of e & p on accumulated post-1986 deferred foreign income during 2018 , we finalized the e & p analysis of our foreign subsidiaries and recalculated significant overall positive e & p . therefore , due to this recalculation , we recorded a $ 26.4 million tax liability for the one-time transition tax . this one-time transition tax adjustment increased the 2018 effective tax rate by approximately 7.9 % . we have elected to pay this liability over the eight-year period provided in the tax act . as of december 30 , 2018 the remaining balance of our transition tax obligation is $ 7.7 million , which will be paid over the next seven years . no additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the one-time transition tax or any additional outside basis difference inherent in these foreign subsidiaries , as these amounts continue to be permanently reinvested in foreign operations . the undistributed earnings of our mexico , puerto rico and u.k. subsidiaries totaled $ 683.0 million , $ 13.2 million and $ 2.2 million , respectively , at december 30 , 2018. as of december 31 , 2017 , we accrued $ 41.5 million in provisional tax benefit related to the net change in deferred tax liabilities stemming from the tax act 's reduction of the u.s. federal tax rate from 35 % to 21 % for the year ended december 31 , 2017. due to return to provision adjustments which resulted from the filing of our 2017 federal income tax return , we recorded 32 an additional $ 8.2 million tax benefit resulting from the tax act 's rate reduction . this benefit reduced the 2018 effective tax rate by approximately 2.5 % . the tax act subjects a u.s. shareholder to tax on global intangible low-taxed income ( “ gilti ” ) earned by certain foreign subsidiaries . the fasb staff q & a , topic 740 , no . 5 , accounting for gilti , states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis 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 as a period expense only . we have elected to account for gilti in the year the tax is incurred . as of december 30 , 2018 , we recorded a $ 5.4 million federal gilti tax liability , which increased the 2018 effective tax rate by approximately 1.6 % . the tax act provides for a foreign-derived intangible income ( “ fdii ” ) deduction , which is available to domestic c corporations that derive income from the export of property and services . as of december 30 , 2018 , we recorded a $ 0.1 million federal fdii benefit , which decreased the 2018 effective tax rate by an immaterial amount . potential impact of tariffs we continue to monitor recent trade and tariff activity and its potential impact to exports and inputs costs across our segments . currently , we are experiencing impacts to domestic and export prices of chicken resulting from uncertainty in trade policies and increased tariffs . we are unable to give any assurance as to the scope , duration , or impact of any changes in trade policies or tariffs , how successful any mitigation efforts will be , or the extent to which mitigation will be necessary , and accordingly , changes in trade policies and increased tariffs could have a material adverse effect on our business and results of operations . business segment and geographic reporting we operate in three reportable business segments : the u.s. , the u.k. and europe , and mexico . we measure segment profit as operating income . corporate expenses are allocated to mexico based upon various apportionment methods for specific expenditures incurred related thereto with the remaining amounts allocated to the u.s. for additional information , see “ note 22. business segment and geographic reporting ” of our consolidated and combined financial statements included in this annual report . story_separator_special_tag individually immaterial .
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( c ) mexico sales generated in 2018 increased $ 35.1 million , or 2.6 % , from mexico sales generated in 2017 primarily because of an increase in net sales per pound and an increase in sales volume , partially offset by the impact of foreign currency translation . the increase in net sales per pound contributed $ 46.1 million , or 3.5 percentage points , to the increase in mexico net sales . the increase in sales volume contributed $ 10.0 million , or 0.8 percentage points , to the increase in mexico net sales . the impact of foreign currency translation partially offset the overall net sales increase by $ 21.0 million , or 1.6 percentage points . gross profit . gross profit decreased by $ 628.1 million , or 42.7 % , from $ 1.5 billion generated in 2017 to $ 843.5 million generated in 2018. the following tables provide gross profit information : 33 replace_table_token_12_th replace_table_token_13_th replace_table_token_14_th ( a ) cost of sales incurred by our u.s. operations in 2018 increased $ 561.4 million , or 8.8 % , from cost of sales incurred by our u.s. operations in 2017. cost of sales primarily increased because of increased cost per pound sold , increased poultry sales volume , increased freight and storage costs , and increased grower costs . increased cost per pound contributed $ 353.0 million mainly due to increased feed costs of $ 143.2 million and increased poultry sales volume contributed $ 78.2 million to the increase in cost of sales . the increased freight and storage costs contributed $ 77.2 million mainly due to driver shortages and the impact of new federal regulations . the increased grower costs contributed $ 51.8 million to the increase in cost of sales , mainly due to increased grower pay rates , feed delivery costs and utility costs . other factors affecting u.s. cost of sales were individually immaterial . ( b ) cost of sales incurred by the u.k. and europe operations during 2018 increased $ 169.7 million , or 9.4 % , from cost of sales incurred by the
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the company is continuing its evaluation , which may identify additional impacts this standard will have on its consolidated financial statements and related disclosures . f-11 in july 2018 , the fasb issued asu 2018-11 , leases – targeted improvements ( “ asu 2018-11 ” ) , which provides entities with relief from the costs of implementing certain aspects of asu 2016-02. the asu provides a practical expedient which allows l essors to not separate lease and non-lease components in a contract and allocate the consideration in the contract to the separate components if both ( i ) the timing and pattern of revenue recognition for the non-lease component and the related lease compon ent are the same and ( ii ) the combined single lease component would be classified story_separator_special_tag financial condition and results of operations the following is a discussion and analysis of our financial condition and our historical results of operations . the following should be read in conjunction with our financial statements and accompanying notes . this discussion contains forward-looking statements that involve risks and uncertainties . our actual results could differ materially from those projected , forecasted , or expected in these forward-looking statements as a result of various factors , including , but not limited to , those discussed below and elsewhere in this annual report . see “ cautionary statement regarding forward-looking statements ” and “ risk factors ” in this annual report . our management believes the assumptions underlying the company 's financial statements and accompanying notes are reasonable . however , the company 's financial statements and accompanying notes may not be an indication of our financial condition and results of operations in the future . overview as of december 31 , 2018 , our portfolio consisted of 35 multifamily properties primarily located in the southeastern and southwestern united states encompassing 12,555 units of apartment space that was approximately 94.6 % leased with a weighted average monthly effective rent per occupied apartment unit of $ 985. substantially all of our business is conducted through the op . we own the portfolio through the op and our trs . the op owns approximately 99.9 % of the portfolio ; our trs owns approximately 0.1 % of the portfolio . the op gp is the sole general partner of the op . as of december 31 , 2018 , there were 23,819,402 op units outstanding , of which 23,746,169 , or 99.7 % , were owned by us and 73,233 , or 0.3 % , were owned by an unaffiliated limited partner ( see note 10 to our consolidated financial statements ) . we are primarily focused on directly or indirectly acquiring , owning , and operating well-located multifamily properties with a value-add component in large cities and suburban submarkets of large cities , primarily in the southeastern and southwestern united states . we generate revenue primarily by leasing our multifamily properties . we intend to employ targeted management and a value-add program at a majority of our properties in an attempt to improve rental rates and the noi at our properties and achieve long-term capital appreciation for our stockholders . we are externally managed by the adviser through the advisory agreement , by and among the op , the adviser and us . the advisory agreement was renewed on february 13 , 2019 for a one-year term set to expire on march 16 , 2020. the adviser is wholly owned by nexpoint advisors , l.p. , which is an affiliate of our sponsor . we began operations on march 31 , 2015 as a result of the transfer and contribution by nhf of all but one of the multifamily properties owned by nhf through its wholly owned subsidiary nreo in exchange for 100 % of its outstanding common stock . we use the term “ predecessor ” to mean the carve-out business of nreo , which owned all or a majority interest in the multifamily properties transferred or contributed to us by nhf through nreo . on march 31 , 2015 , nhf distributed all of the outstanding shares of our common stock held by nhf to holders of nhf common shares . we refer to the distribution of our common stock by nhf as the “ spin-off. ” substantially all of our operations were conducted by our predecessor prior to march 31 , 2015. with the exception of a nominal amount of initial cash funded at inception , we did not own any assets prior to march 31 , 2015. our predecessor included all of the properties in our portfolio that were held indirectly by nreo prior to the spin-off . our predecessor was determined in accordance with the rules and regulations of the sec . references throughout this report to the “ company , ” “ we , ” or “ our , ” include the activity of the predecessor defined above . on november 14 , 2018 , in connection with the 2018 offering , we issued 2,702,500 shares of our common stock , par value $ 0.01 per share , at a public offering price of $ 33.00 per share , for net proceeds of approximately $ 84.8 million ( after underwriters ' discounts and offering costs ) . we contributed the net proceeds from the 2018 offering to the op in exchange for 2,702,500 op units , and the op in turn used a majority of the net proceeds to repay the $ 50.0 million outstanding under the $ 60 million credit facility and the $ 30.0 million outstanding under the $ 30 million bridge facility ( see notes 6 and 8 to our consolidated financial statements ) . we have elected to be taxed as a reit under sections 856 through 860 of the code , and expect to continue to qualify as a reit . to qualify as a reit , we must meet a number of organizational and operational requirements , including a requirement that we distribute at least 90 % of our reit taxable income to our stockholders . story_separator_special_tag corporate general and administrative expenses . corporate general and administrative expenses were $ 7.8 million for the year ended december 31 , 2018 compared to $ 6.3 million for the year ended december 31 , 2017 , which was an increase of approximately $ 1.5 million . the increase between the periods was primarily due to approximately $ 4.2 million of equity-based compensation expense recognized during the year ended december 31 , 2018 related to the grants of restricted stock units to our directors , officers , employees and certain key employees of our adviser pursuant to our long-term incentive plan ( the “ 2016 ltip ” ) , compared to $ 3.1 million of equity-based compensation expense recognized during the year ended december 31 , 2017 ( see note 8 to our consolidated financial statements ) . subject to the expense cap , corporate general and administrative expenses may increase in future periods as we acquire additional properties . property general and administrative expenses . property general and administrative expenses were $ 6.1 million for the year ended december 31 , 2018 compared to $ 6.2 million for the year ended december 31 , 2017 , which was a decrease of approximately $ 0.1 million . the decrease between the periods was primarily due to our acquisition and disposition activity in 2017 and 2018 and the timing of the transactions , as described above . depreciation and amortization . depreciation and amortization costs were $ 47.5 million for the year ended december 31 , 2018 compared to $ 48.8 million for the year ended december 31 , 2017 , which was a decrease of approximately $ 1.3 million . the decrease between the periods was primarily due to the amortization of intangible lease assets of $ 2.5 million related to four properties for the year ended december 31 , 2018 compared to $ 8.9 million related to seven properties for the year ended december 31 , 2017 , which was a decrease of approximately $ 6.4 million . the decrease between the periods was partially offset by a $ 5.1 million increase in depreciation expense , primarily due to our acquisition activity in 2017 and 2018 and the timing of the transactions , as described above . the amortization of intangible lease assets over a six-month period from the date of acquisition is expected to increase the amortization expense during the initial year of operations for each property . other income and expense interest expense . interest expense was $ 28.6 million for the year ended december 31 , 2018 compared to $ 29.6 million for the year ended december 31 , 2017 , which was a decrease of approximately $ 1.0 million . the decrease between the periods was primarily due to an increase in gain recognized related to the effective portion of changes in fair value of our interest rate swap derivatives designated as cash flow hedges of approximately $ 5.3 million ( see “ debt , derivatives and hedging activity – interest rate swap agreements ” below ) . the decrease between the periods was partially offset by an increase in interest on debt of approximately $ 4.6 million . the following table details the various costs included in interest expense for the years ended december 31 , 2018 and 2017 ( in thousands ) : replace_table_token_12_th ( 1 ) prior to our adoption of asu 2017-12 , derivatives and hedging ( topic 815 ) ( “ asu 2017-12 ” ) on january 1 , 2018 , the ineffective portion of changes in the fair value of our derivatives designated as cash flow hedges was recognized directly in net income ( loss ) as interest expense . the adoption of asu 2017-12 eliminates the separate measurement of effectiveness and ineffectiveness , and all changes in the fair value of derivatives that are designated as cash flow hedges are recorded directly in other comprehensive income ( “ oci ” ) . see notes 2 and 7 to our consolidated financial statements for additional information . 51 loss on extinguishment of debt and modification costs . loss on extinguishment of debt and modification costs was $ 3.6 mill ion for the year ended december 31 , 2018 compared to $ 5.7 million for the year ended december 31 , 2017 , which was a decrease of approximately $ 2.1 million . the decrease between the periods was primarily due to decreases in debt modification and other extinguishment costs of approximately $ 1.5 million and prepayment penalties and defeasance costs of approximately $ 1.0 million . the following table details the various costs included in loss on extinguishment of debt and modific ation costs for the years ended december 31 , 2018 and 2017 ( in thousands ) : replace_table_token_13_th gain on sales of real estate . gain on sales of real estate was $ 13.7 million for the year ended december 31 , 2018 compared to $ 78.4 million for the year ended december 31 , 2017 , which was a decrease of approximately $ 64.7 million . during the year ended december 31 , 2018 , we sold one property ; during the year ended december 31 , 2017 , we sold nine properties . the year ended december 31 , 2017 as compared to the year ended december 31 , 2016 the following table sets forth a summary of our operating results for the years ended december 31 , 2017 and 2016 ( in thousands ) : replace_table_token_14_th the change in our net income for the year ended december 31 , 2017 as compared to the year ended december 31 , 2016 primarily relates to increases in total revenues and gain on sales of real estate , and was partially offset by increases in total property operating expenses , depreciation and amortization expense , interest expense and loss on extinguishment of debt and modification costs .
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results of operations for the years ended december 31 , 2018 , 2017 and 2016 the year ended december 31 , 2018 as compared to the year ended december 31 , 2017 the following table sets forth a summary of our operating results for the years ended december 31 , 2018 and 2017 ( in thousands ) : replace_table_token_11_th the change in our net income ( loss ) for the year ended december 31 , 2018 as compared to the year ended december 31 , 2017 primarily relates to a decrease in gain on sales of real estate , and was partially offset by an increase in total revenues and decreases in total property operating expenses , depreciation and amortization expense and loss on extinguishment of debt and modification costs . the change in our net income ( loss ) between the periods was also due to our acquisition and disposition activity in 2017 and 2018 and the timing of the transactions ( we acquired one property in the first quarter of 2017 , one property in the second quarter of 2017 , one property in the fourth quarter of 2017 and three properties in the third quarter of 2018 ; we sold four properties in the second quarter of 2017 , five properties in the third quarter of 2017 and one property in the first quarter of 2018 ) . revenues rental income . rental income was $ 128.0 million for the year ended december 31 , 2018 compared to $ 125.0 million for the year ended december 31 , 2017 , which was an increase of approximately $ 3.0 million .
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reported net income for the year ended december 31 , 2017 includes a charge of $ 13.6 million to income tax expense attributable to the remeasurement of the company 's deferred tax assets and deferred tax liabilities due to the recently enacted federal tax legislation that reduces the company 's future federal corporate tax rate . highlights of the company 's performance in 2017 include the following : total assets were $ 7.86 billion at december 31 , 2017 , an increase of $ 964.2 million , or 14.0 % , from december 31 , 2016. organic growth in loans amounted to $ 941.0 million for 2017 , or 20.3 % of december 31 , 2016 loans excluding purchased loan pools and covered loans . total deposits were $ 6.63 billion at december 31 , 2017 , an increase of $ 1.05 billion , or 18.8 % , from december 31 , 2016. non-interest bearing demand deposits grew $ 203.8 million , or 12.9 % , during 2017 to end the year at 26.8 % of total deposits . total revenue increased 12.1 % to $ 364.6 million . the company 's net interest margin decreased 4 basis point to 3.95 % in 2017 , from 3.99 % in 2016. this decrease was primarily attributable to higher funding costs even though yields on substantially all earning asset classes increased . deposit costs , the company 's largest funding expense , increased from 0.24 % in 2016 to 0.34 % in 2017. non-deposit funding yields decreased from 2.26 % in 2016 to 2.11 % in 2017. net income from retail mortgage , warehouse lending , sba and premium finance lines of business increased 44.0 % to $ 26.4 million , compared with $ 18.3 million in 2016. total non-accrual loans , decreased approximately $ 11.5 million , or 27.9 % , to $ 29.6 million during 2017. non-accrual loans , excluding purchased loans , decreased approximately $ 3.9 million , or 21.6 % , to $ 14.2 million during 2017. legacy oreo ( excluding purchased oreo and oreo sourced from purchased loans ) decreased from $ 10.9 million at december 31 , 2016 to $ 8.5 million at december 31 , 2017. non-performing assets to total assets continued to improve during 2017 , decreasing from 0.94 % at december 31 , 2016 to 0.68 % at december 31 , 2016. net charge-offs for 2017 remained low at 0.13 % of average total legacy loans , compared with 0.11 % for 2016. net charge-offs for 2017 remained low at 0.12 % of average total loans , compared with 0.03 % for 2016. tangible common equity to tangible assets increased from 7.46 % at december 31 , 2016 to 8.62 % at december 31 , 2017. tangible common book value per share increased 23.9 % from $ 14.42 at december 31 , 2016 to $ 17.86 at december 31 , 2017 . 36 critical accounting policies and estimates ameris has established certain accounting and financial reporting policies to govern the application of accounting principles generally accepted in the united states of america ( “ gaap ” ) in the preparation of its financial statements . our significant accounting policies are described in note 1 to the consolidated financial statements . certain accounting policies involve significant judgments and assumptions by management which have a material impact on the carrying value of certain assets and liabilities ; management considers these accounting policies to be critical accounting policies . the judgments and assumptions used by management are based on historical experience and other factors which are believed to be reasonable under the circumstances . because of the nature of the judgments and assumptions made by management , actual results could differ from the judgments and estimates adopted by management which could have a material impact on the carrying values of assets and liabilities and the results of our operations . we believe the following accounting policies applied by ameris represent critical accounting policies . allowance for loan losses we believe the allowance for loan losses is a critical accounting policy that requires the most significant judgments and estimates used in the preparation of our consolidated financial statements . the allowance for loan losses represents management 's estimate of probable incurred losses in the company 's loan portfolio . calculation of the allowance for loan losses represents a critical accounting estimate due to the significant judgment , assumptions and estimates related to the amount and timing of estimated losses , consideration of subjective environmental factors and the amount and timing of cash flows related to impaired loans . management believes that the allowance for loan losses is adequate . while management uses available information to recognize losses on loans , future additions to the allowance for loan losses may be necessary based on changes in economic conditions . in addition , various regulatory agencies , as an integral part of their examination processes , periodically review the company 's allowance for loan losses . such agencies may require the company to recognize additions to the allowance for loan losses based on their judgments about information available to them at the time of their examination . considering current information and events regarding a borrower 's ability to repay its obligations , management considers a loan to be impaired when the ultimate collectability of all amounts due , according to the contractual terms of the loan agreement , is in doubt . when a loan is considered to be impaired , the amount of impairment is measured based on the present value of expected future cash flows discounted at the loan 's effective interest rate or if the loan is collateral-dependent , the fair value of the collateral is used to determine the amount of impairment . impairment losses are included in the allowance for loan losses through a charge to the provision for loan losses . subsequent recoveries are credited to the allowance for loan losses . cash receipts for accruing loans are applied to principal and interest under the contractual terms of the loan agreement . story_separator_special_tag income taxes as required by gaap , we use the asset and liability method of accounting for deferred income taxes and provide deferred income taxes for all significant income tax temporary differences . see note 16 , “ income taxes , ” in the notes to consolidated financial statements for additional details . as part of the process of preparing our consolidated financial statements we are required to estimate our income taxes in each of the jurisdictions in which we operate . this process involves estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items , such as the provision for loan losses and gains on fdic-assisted transactions , for tax and financial reporting purposes . these differences result in deferred tax assets and liabilities that are included in our consolidated balance sheet . we must also assess the likelihood that our deferred tax assets will be recovered from future taxable income , and to the extent we believe that recovery is not likely , we must establish a valuation allowance . significant management judgment is required in determining our provision for income taxes , our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets . to the extent we establish a valuation allowance or adjust this allowance in a period , we must include an expense within the tax provisions in the statement of income . long-lived assets , including intangibles intangible assets consist of goodwill and core deposit intangibles . goodwill represents the excess purchase price over the fair value of net assets acquired in business acquisitions . core deposit intangibles represent premiums paid for deposits acquired via 38 acquisition and are being amortized over their estimated useful lives , typically five to ten years . net income/ ( loss ) and earnings per share the company 's net income during 2017 was $ 73.5 million , or $ 1.98 per diluted share , compared with $ 72.1 million , or $ 2.08 per diluted share , in 2016 , and $ 40.8 million , or $ 1.27 per diluted share , in 2015. for the fourth quarter of 2017 , the company recorded net income of $ 9.2 million , or $ 0.24 per diluted share , compared with $ 18.2 million , or $ 0.52 per diluted share , for the quarter ended december 31 , 2016 , and $ 14.1 million , or $ 0.43 per diluted share , for the quarter ended december 31 , 2015. earning assets and liabilities average earning assets were approximately $ 6.76 billion in 2017 , compared with approximately $ 5.60 billion in 2015. the earning asset and interest-bearing liability mix is regularly monitored to maximize the net interest margin and , therefore , increase return on assets and shareholders ' equity . the following statistical information should be read in conjunction with the remainder of “ management 's discussion and analysis of financial condition and results of operation ” and the consolidated financial statements and related notes included elsewhere in this annual report and in the documents incorporated herein by reference . 39 the following tables set forth the amount of average balance , interest income or interest expense , and average interest rate for each category of interest-earning assets and interest-bearing liabilities , net interest spread and net interest margin on average interest-earning assets . federally tax-exempt income is presented on a taxable-equivalent basis assuming a 35 % federal tax rate . replace_table_token_6_th 40 story_separator_special_tag were 0.13 % of average legacy loans , compared with 0.11 % in 2016 and 0.22 % in 2015. at december 31 , 2017 , non-performing assets amounted to $ 53.1 million , or 0.68 % of total assets , compared with $ 64.5 million , or 0.94 % of total assets , at december 31 , 2016. legacy non-performing assets totaled $ 28.7 million and $ 29.0 million at december 31 , 2017 and 2016 , respectively . legacy other real estate was approximately $ 8.5 million as of december 31 , 2017 , reflecting a 22.2 % decrease from the $ 10.9 million reported at december 31 , 2016. purchased other real estate was $ 9.0 million at december 31 , 2017 , reflecting a 28.1 % decrease from the $ 12.5 million at december 31 , 2016. the company 's allowance for loan losses at december 31 , 2017 was $ 25.8 million , or 0.43 % of loans compared with $ 23.9 million , or 0.45 % , and $ 21.1 million , or 0.54 % , at december 31 , 2016 and 2015 , respectively . excluding purchased loans and purchased loan pools , the company 's allowance for loan losses at december 31 , 2017 was $ 21.5 million , or 0.44 % of loans excluding purchased loans and purchased loan pools , compared with $ 20.5 million , or 0.56 % , and $ 20.5 million , or 0.85 % , at december 31 , 2016 and 2015 , respectively . a significant portion of the company 's loan growth during 2017 consisted of municipal loans , residential mortgages and commercial insurance premium loans , each of which presents a lower risk of default than other loan types , such as acquisition , construction and development or investor commercial real estate loans . the growth in lower-risk loans during 2017 , combined with the improved historical loss rates and qualitative factors , are the primary reasons the allowance for loan losses as a percentage of loans , excluding purchased loans and purchased loan pools , decreased during the year . 42 noninterest income following is a comparison of noninterest income for 2017 , 2016 and 2015 . replace_table_token_8_th 2017 compared with 2016 . total noninterest income in 2017 was $ 104.5 million , compared with $ 105.8 million in 2016 , reflecting a decrease of 1.3 % , or $ 1.3 million .
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results of operations net interest income net interest income represents the amount by which interest income on interest-earning assets exceeds interest expense incurred on interest-bearing liabilities . net interest income is the largest component of our income and is affected by the interest rate environment and the volume and composition of interest-earning assets and interest-bearing liabilities . our interest-earning assets include loans , investment securities , other investments , interest-bearing deposits in banks and federal funds sold . our interest-bearing liabilities include deposits , securities sold under agreements to repurchase , other borrowings and subordinated deferrable interest debentures . 2017 compared with 2016. for the year ended december 31 , 2017 , interest income was $ 294.3 million , an increase of $ 55.3 million , or 23.1 % , compared with the same period in 2016. average earning assets increased $ 1.16 billion , or 20.7 % , to $ 6.76 billion for the year ended december 31 , 2017 , compared with $ 5.60 billion as of december 31 , 2016. yield on average earning assets on a taxable equivalent basis increased during 2017 to 4.46 % , compared with 4.35 % for the year ended december 31 , 2016.average yields on all interest-earning asset categories increased from 2016 to 2017 with the exception of purchased loans , which experienced a decrease in accretion income .
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the estimate of our credit losses is applied to two general categories of loans : loans that we evaluate individually for impairment under asc 310-10 , receivables ; and groups of loans with similar risk characteristics that we evaluate collectively for impairment under asc 450-20 , loss contingencies. the allowance for loan losses is evaluated on a regular basis by management and reflects consideration of all significant factors that affect the collectability of the loan portfolio . the factors used to evaluate the collectability of the loan portfolio include , but are not limited to , current economic conditions , our historical loss experience , the nature and volume of the loan portfolio , the financial strength of the borrower , and estimated value of any underlying collateral . this evaluation is inherently subjective as it requires estimates that are subject to significant revision as more information becomes available . actual loan losses may be significantly more than the allowance for loan losses we have established which could have a material negative effect on our financial results . see also business allowance for loan losses. income tax accounting . the provision for income taxes is based upon income in our consolidated financial statements , rather than amounts reported on our income tax return . deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases . deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled . the effect of a change in tax rates on our deferred tax assets and liabilities is recognized as income or expense in the period that includes the enactment date . under gaap , a valuation allowance is required to be recognized if it is more likely than not that a deferred tax asset will not be realized . the determination as to whether we will be able to realize the deferred tax assets is highly subjective and dependent upon judgment concerning our evaluation of both positive and negative evidence , our forecasts of future income , applicable tax planning strategies , and assessments of current and future economic and business conditions . positive evidence includes the existence of taxes paid in available carryback years as well as the probability that taxable income will be generated in future periods , while negative evidence includes any cumulative losses in the current year and prior two years and general business and economic trends . any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets . any required valuation allowance would result in additional income tax expense in the period and could have a significant impact on our future earnings . positions taken in our tax returns may be subject to challenge by the taxing authorities upon examination . the benefit of an uncertain tax position is initially recognized in the financial statements only when it is more likely than not the position will be sustained upon examination by the tax authorities . such tax positions are both initially and subsequently measured as the largest amount of tax benefit that is greater than 50 % likely of being realized upon settlement with the tax authority , assuming full knowledge of the position and all relevant facts . differences between our position and the position of tax authorities could result in a reduction of a tax benefit or an increase to a tax liability , which could adversely affect our future income tax expense . 42 we believe our tax policies and practices are critical accounting policies because the determination of our tax provision and current and deferred tax assets and liabilities have a material impact on our net income and the carrying value of our assets . we believe our tax liabilities and assets are properly recorded in the consolidated financial statements at june 30 , 2012 and no valuation allowance was necessary . comparison of financial condition at june 30 , 2012 and june 30 , 2011 total assets increased $ 514,000 , or 0.1 % , to $ 511.3 million at june 30 , 2012 from $ 510.8 million at june 30 , 2011. the increase was primarily due to a $ 33.0 million increase in investment securities and a $ 18.9 increase in net loans , partially offset by an decrease of $ 52.3 million in cash and cash equivalents . the large change in cash and cash equivalents was a result of our mutual-to-stock conversion that closed on july 7 , 2011. the stock offering in connection with the conversion was oversubscribed which resulted in $ 68.9 million in over subscriptions being refunded to subscribers shortly after the closing of the conversion . net loans receivable , including loans held for sale , increased by $ 18.9 million , or 7.9 % , to $ 258.9 million at june 30 , 2012 from $ 240.0 million at june 30 , 2011. the increase in net loans receivable during this period was due primarily to a $ 12.2 million , or 46.6 % , increase in multi-family loans , a $ 5.5 million , or 20.2 % increase in commercial real estate loans , a $ 4.4 million , or 107.9 % , increase in construction loans , and a $ 1.8 million , or 15.3 % increase in commercial loans . these increases were partially offset by a $ 2.2 million , or 13.9 % , decrease in consumer loans , a $ 1.0 million , or 10.4 % decrease in in home equity lines of credit , and a $ 762,000 , or 0.51 % decrease in one-to four-family residential loans ( due primarily to increased sales of loans originated ) . story_separator_special_tag investment securities , consisting entirely of securities available for sale , increased $ 33.0 million , or 17.4 % , to $ 223.3 million at june 30 , 2012 from $ 190.3 million at june 30 , 2011. purchased investment securities , consisted primarily of agency debt obligations with terms of four to seven years and fixed-rate mortgage backed securities with terms of 15 years . we had no securities held to maturity at june 30 , 2012 or june 30 , 2011. as of june 30 , 2012 , other assets decreased $ 988,000 to $ 1.2 million , federal home loan bank stock increased $ 1.1 million to $ 4.2 million , and other real estate owned increased $ 558,000 to $ 1.3 million from the respective balances as of june 30 , 2011. the decrease in other assets was mostly attributable to prepaid conversion costs which were $ 766,000 at june 30 , 2011 and reduced to zero at june 30 , 2012. federal home loan bank stock increased as a result of stock purchases to support an increase in federal home loan bank advances . other real estate owned increased due to new foreclosures as of june 30 , 2012. at june 30 , 2012 , our investment in bank-owned life insurance was $ 7.5 million , an increase of $ 260,000 from $ 7.2 million at june 30 , 2011. we invest in bank-owned life insurance to provide us with a funding source for our benefit plan obligations . bank-owned life insurance also generally provides us noninterest income that is non-taxable . federal regulations generally limit our investment in bank-owned life insurance to 25 % of the association 's tier 1 capital plus our allowance for loan losses , which totaled $ 15.5 million at june 30 , 2012. deposits decreased $ 99.6 million , or 22.4 % , to $ 344.5 million at june 30 , 2012 from $ 444.1 million at june 30 , 2011. certificates of deposit decreased $ 10.7 million , or 5.4 % , to $ 188.7 million , savings , now , and money market accounts decreased $ 96.6 million , or 41.9 % , to $ 133.7 million , brokered certificates of deposit increased $ 5.5 million , or 91.6 % , to $ 11.5 million , and noninterest bearing demand accounts increased $ 2.2 million , or 26.3 % , to $ 10.6 million . the large decrease in deposits was due to our mutual-to-stock conversion which closed on july 7 , 2011 , for which we held approximately $ 113 million in escrow deposit balances at june 30 , 2011. borrowings , which consisted solely of advances from the federal home loan bank of chicago , increased $ 52.5 million , or 233.3 % , to $ 75.0 million at june 30 , 2012 from $ 22.5 million at june 30 , 2011. we increased our borrowings to fund loans , replace deposit outflow , and purchase investment securities as we reposition our portfolio in anticipation of securities being called over the next several months . current interest rates on borrowings are more favorable than rates paid on deposits . other liabilities remained consistent at $ 1.9 million at june 30 , 2012 and june 30 , 2011 total equity increased $ 47.2 million , or 119.7 % , to $ 86.6 million at june 30 , 2012 from $ 39.4 million at june 30 , 2011. the increase was primarily the result of our mutual-to-stock conversion which increased capital $ 46.4 million net of conversion costs of $ 1.7 million . equity was also increased due to an increase in unrealized gains on 43 securities available for sale of $ 3.0 million and net income of $ 1.4 million . these increases to equity were partially offset by the purchase of employee stock ownership plan ( esop ) shares of $ 3.8 million . the increase in unrealized gains on securities available-for-sale was due to higher market values of available-for-sale securities . the esop was established at the time of the conversion . the net income was impacted by a contribution to our newly established charitable foundation , iroquois federal foundation , inc. , of 314,755 shares of if bancorp , inc. stock ( valued at $ 3,147,550 at the time of the conversion ) and $ 450,000 in cash . comparison of operating results for the years ended june 30 , 2012 and 2011 story_separator_special_tag premium resulting from the new fdic formula used to calculate this premium . income tax expense . we recorded a provision for income tax of $ 559,000 for the year ended june 30 , 2012 , compared to a provision for income tax of $ 1.4 million for the year ended june 30 , 2011 , reflecting effective tax rates of 28.5 % and 33.1 % , respectively . the decreased tax rate for the year ended june 30 , 2012 was a result of a lower taxable income due to a contribution to our newly established charitable foundation , iroquois federal foundation , inc. , of 314,755 shares of if bancorp , inc. stock ( valued at $ 3,147,550 at time of conversion ) as well as a cash donation of $ 450,000 . 45 asset quality at june 30 , 2012 , our non-accrual loans totaled $ 5.4 million , including $ 3.7 million in one-to four-family loans , $ 1.5 million in multi-family loans , $ 95,000 in commercial real estate loans , $ 2,000 in commercial business loans and $ 113,000 in consumer loans . the commercial real estate loans are secured by commercial rental properties . at june 30 , 2012 , we had no loans delinquent 90 days or greater and still accruing interest . at june 30 , 2012 , loans classified as substandard equaled $ 5.6 million .
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our net interest margin decreased 1 basis point to 3.04 % for the year ended june 30 , 2012 compared to 3.05 % for the year ended june 30 , 2011 , and our net interest rate spread decreased 3 basis points to 2.89 % for the year ended june 30 , 2012 compared to 2.92 % for the year ended june 30 , 2011. interest income . interest income increased $ 1.1 million , or 6.3 % , to $ 18.0 million for the year ended june 30 , 2012 from $ 16.9 million for the year ended june 30 , 2011. the increase in interest income was primarily due to a $ 1.5 million increase in interest income on securities , which resulted from an increase in the average balance of securities of $ 63.0 million , or 43.5 % , to $ 207.7 million for the year ended june 30 , 2012 from $ 144.7 million for the year ended june 30 , 2011. the average balance of securities increased due to the investment of the proceeds received in the mutual-to-stock conversion . this increased average balance of securities was partially offset by a 17 basis point , or 5.7 % decrease in the average yield on securities from 2.96 % to 2.79 % . the decrease in the average yield was primarily due to lower market interest rates during the period . interest income on loans decreased $ 468,000 as a $ 10.8 million increase in the average balance of loans to $ 250.8 million at june 30 , 2012 was more than offset by a 41 basis point decrease in the average yield on loans from 5.27 % to 4.86 % . the decrease in the average yield on loans reflected both a reduction in the current interest rates charged on loans originated during the period versus the average rates on existing loans in the portfolio , and the adjustment of a portion of our adjustable rate one-to four-family residential loans to a lower rate at the contractual adjustment term . interest expense . interest expense decreased $ 1.2 million , or 24.1 % , to $ 3.8 million for the year ended june 30 , 2012 from $ 5.0 million for the year ended june 30 , 2011. the decrease occurred due to lower market interest rates partially offset by and increase
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ROO
| 8,531
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the following table shows operating expense breakout for the years ended december 26 , 2013 and december 27 , 2012 ( in millions ) : replace_table_token_14_th advertising operating costs . advertising operating costs decreased $ 2.3 million , or 7.3 % , from $ 31.3 million for the year ended december 27 , 2012 to $ 29.0 million for the year ended december 26 , 2013. this 44 decrease was primarily the result of a $ 2.9 million decrease in affiliate advertising payments . the decrease in affiliate advertising payments was driven by an 8.0 % decrease in the number of average affiliate screens in 2013 , compared to 2012. the decrease in affiliate screens is due to the acquisition of certain affiliate screens by ncm llc 's founding members , partially offset by the addition of new affiliate screens to our network by existing affiliates and the addition of six new affiliate circuits during 2013. fathom events operating costs . fathom events operating costs decreased $ 3.5 million , or 12.1 % , from $ 29.0 million for the year ended december 27 , 2012 to $ 25.5 million for the year ended december 26 , 2013. the decrease was primarily due to a decrease in costs associated with the fathom consumer events division of $ 1.9 million due to lower programming costs as a percentage of event revenue and fewer events in 2013 , compared to 2012. in addition , costs associated with the fathom business events division declined $ 1.6 million in 2013 compared to 2012 as this division was wound-down in the first quarter of 2012. network costs . network costs decreased $ 0.4 million , or 2.0 % , from $ 19.8 million for the year ended december 27 , 2012 to $ 19.4 million for the year ended december 26 , 2013. the decrease was primarily due to a decrease of $ 0.4 million in share-based compensation expense . theatre access fees . theatre access fees increased $ 4.9 million , or 7.6 % , from $ 64.5 million for the year ended december 27 , 2012 to $ 69.4 million for the year ended december 26 , 2013. approximately $ 3.3 million of the increase was from an increase in fees for digital screens and equipment and the remaining $ 1.6 million of the increase was due to the 3.7 % increase in founding member attendance in 2013 , compared to 2012. the fees for digital screens and equipment increased due to an annual 5 % rate increase specified in the esas and a higher number of ncm llc 's founding member theatres equipped with the higher quality digital cinema equipment year-over-year . as of december 26 , 2013 , the number of founding member theatres equipped with digital cinema projectors as a percentage of the total founding member network was 86 % , compared to 84 % as of december 27 , 2012 and as of december 26 , 2013 , 96 % of our network screens were showing advertising on digital projectors . selling and marketing costs . selling and marketing costs increased $ 1.0 million , or 1.7 % , from $ 60.5 million for the year ended december 27 , 2012 to $ 61.5 million for the year ended december 26 , 2013. this increase was primarily due to an increase of $ 1.7 million in non-cash barter expense partially offset by a decrease of $ 0.8 million in personnel costs due primarily to lower salaries and lower share-based compensation expense . administrative and other costs . administrative and other costs decreased $ 2.1 million , or 6.7 % , from $ 31.5 million for the year ended december 27 , 2012 to $ 29.4 million for the year ended december 26 , 2013. the decrease was primarily due to $ 1.5 million decrease in personnel costs due primarily to lower share-based compensation expense and a decrease of $ 0.5 million in legal and professional expenses due to a one-time fee paid in 2012 to consultants that assisted us with the restructuring of the fathom events business . depreciation and amortization . depreciation and amortization expense increased $ 6.2 million , or 30.4 % , from 20.4 million for the year ended december 27 , 2012 to $ 26.6 million for the year ended december 26 , 2013. the increase was due to higher amortization of intangible assets related to new affiliate agreements and ncm llc founding member common unit adjustments , as well as , an increase in depreciation expense resulting from greater average property , plant and equipment balances year-over-year related primarily to equipment installed into new network affiliate theatres . non-operating expenses . total non-operating expenses for the year ended december 26 , 2013 were $ 52.0 million , a decrease of 47.9 % , from $ 99.8 million for the 2012 period due primarily to the $ 25.4 million gain on the sale of the fathom events business and loss on terminations of interest rate swap agreements in 2012. the 45 following table shows the non-operating expense breakout for the years ended december 26 , 2013 and december 27 , 2012 ( in millions ) : replace_table_token_15_th interest on borrowings decreased $ 5.1 million due primarily to lower average interest rates in 2013 , compared to 2012 , as a result of the company 's debt refinancings in 2012 and 2013. interest due to ncm llc 's founding members under the tax receivable agreement increased $ 3.9 million due to changes in tax rates and ncm llc ownership rates period over period . in connection with the termination of interest rate swaps during 2012 , the company recorded a loss in 2012 of $ 26.7 million , recorded higher amortization on terminated derivatives of $ 6.3 million in 2013 and no longer recorded changes in derivative fair value , all of which decreased non-operating expenses by $ 17.4 million in 2013 , compared to 2012. story_separator_special_tag additionally , the increase in non-operating expenses was due to a $ 7.5 million increase in interest on borrowings due primarily to the issuance of senior unsecured notes in july 2011 and to a lesser extent the issuance of our senior secured notes in april 2012. additionally , during the year ended december 29 , 2011 , we incurred an impairment charge of $ 6.7 million that we did not incur during the year ended december 27 , 2012. net income . net income decreased $ 18.1 million , or 57.5 % , from $ 31.5 million for the year ended december 29 , 2011 to $ 13.4 million for the year ended december 27 , 2012. our income tax expense increased $ 7.3 million primarily due an adjustment to the measurement of our deferred tax asset and the long-term payable to our founding member liability 's expected net realized tax benefit which included approximately $ 9.6 million attributable to prior periods . refer to note 7 to the audited consolidated financial statements . these decreases in net income were partially offset by a $ 17.2 million decrease in net income attributable to noncontrolling interest due to lower ncm llc net income during the periods . 49 known trends and uncertainties trends and uncertainties related to our business , industry and corporate structure the current macro-economic environment and its impact on the national television and local and regional advertising markets in general , presents uncertainties that could impact our results of operations , including the timing and amount of spending from our national advertising clients . the impact to our business associated with these issues will be mitigated somewhat over time due to factors including the expansion of our advertising network , the related increase in salable advertising impressions , growth in our advertising client base , the effectiveness of cinema advertising relative to other advertising mediums , and the technical quality of our network and inventory management systems . during 2013 and thus far in 2014 , we have added seven new affiliate theatre circuits ( with 303 screens ) to our national network . in total , these contracted new affiliate theatres are expected to add approximately 8 million new attendees on a full-year pro-forma basis , which we expect will result in approximately 118 million new salable national advertising impressions ( assuming 14 national advertising units of 30 seconds each ) . our sales force integrates these additional impressions into the advertising sales process as they are added to our network and thus these attendees will provide the opportunity for expansion of our revenue , operating income and cash flow . we believe that the continued growth of our network will expand our national reach and geographic coverage will strengthen our selling proposition and competitive positioning versus other national and local television , video and other advertising platforms . in addition , during 2012 and 2013 , ncm llc 's founding members acquired several of ncm llc 's affiliates making the majority of them a part of the founding members ' network immediately with the remaining in the future as existing agreements with another cinema advertising provider expire ( 14 theatres with 223 screens in november 2018 ) . ncm llc pays a theatre access fee to its founding members , rather than affiliate payments . theatre access fees are generally lower , as a percentage of revenue , than affiliate payments , which results in improved operating margins for the company . on december 26 , 2013 , ncm llc sold its fathom events business to a newly formed limited liability company ( ac jv , llc ) owned 32 % by each of the founding members and 4 % by ncm llc . in consideration for the sale , ncm llc received a total of $ 25.0 million in promissory notes from its founding members ( one-third or approximately $ 8.3 million from each founding member ) . the notes bear interest at a fixed rate of 5.0 % per annum , compounded annually . interest and principal payments are due annually in six equal installments commencing on the first anniversary of the closing . due to the related party nature of the transaction , we formed a committee of independent directors that hired a separate legal counsel and an investment banking firm who advised the committee and rendered an opinion as to the fairness of the transaction . ncm llc deconsolidated fathom events and recognized a gain on the sale of approximately $ 25.4 million ( net of direct expenses ) during the year ended december 26 , 2013. ncm llc amended and restated its existing esas with each of the founding members to remove those provisions addressing the rights and obligations related to the digital programming services of the fathom events business . these rights and obligations were conveyed to ac jv , llc in connection with the sale . in connection with the sale , ncm llc entered into a transition services agreement to provide certain corporate overhead services for a fee and reimbursement for the use of facilities and certain services including creative , technical event management and event management for the newly formed limited liability company for a period of nine months following the closing . in addition , ncm llc entered into a services agreement with a term coinciding with the esas , which grants the newly formed limited liability company advertising on-screen and on our len and a pre-feature program prior to fathom events reasonably consistent with what was previously dedicated to fathom . in addition , the services agreement provides that we will assist with event sponsorship sales in return for a share of the sponsorship revenue . ncm llc has also agreed to provide creative and media production services for a fee . in 2013 , we experienced a decline of 7.6 % in national advertising cpms ( excluding beverage revenue ) due primarily to the
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the $ 71.5 million increase in cash provided by operating activities for the year ended december 26 , 2013 versus the year ended december 27 , 2012 was primarily due to the absence of $ 63.4 million of payments for interest rate swap terminations that were incurred in 2012 , a $ 11.9 million increase in other operating activities , an $ 8.1 million lower payment to our founding members under the tax receivable agreement in 2013 due to a larger tax loss in 2012 and a $ 5.8 million increase in income after non-cash items , partially offset by a $ 21.5 million decrease in accounts receivable collections period over period primarily from the timing of collections in the period . investing activities . the $ 36.5 million increase in cash used in investing activities for the year ended december 26 , 2013 compared to the year ended december 27 , 2012 was due primarily to higher purchases of marketable securities , net of sales and maturities , of $ 34.9 million and an increase of $ 1.7 million in affiliate payments for the up-front fees paid upon commencement of certain network affiliate agreements . 53 financing activities . the $ 59.2 million increase in cash used in financing activities during the year ended december 26 , 2013 compared to the year ended december 27 , 2012 was due primarily to a decrease in cash proceeds from borrowings , net of payments , of $ 74.0 million and an increase in distributions to ncm llc 's founding members of $ 15.8 million , partially offset by greater proceeds from stock option exercises of $ 18.1 million and $ 10.6 million lower debt issuance costs . cash flowsyears ended december 27 , 2012 and december 29 , 2011 operating activities . the decrease in cash provided by operating activities for the year ended december 27 , 2012 versus the 2011 period was primarily due to the $ 63.4 million paid for the swap terminations and an increase in interest on borrowings . investing activities .
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Liquidity
| 14,047
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information about payments under the specified contractual obligations and commercial commitments of hei and its subsidiaries was as follows : replace_table_token_15_th 1 includes contractual obligations and commitments for capital expenditures and expense amounts . the table above does not include other categories of obligations and commitments , such as deferred taxes , trade payables , amounts that will become payable in future periods under collective bargaining and other employment agreements and employee benefit plans , and potential refunds of amounts collected from ratepayers ( e.g. , under the earnings sharing mechanism ) . as of december 31 , 2019 , the fair value of the assets held in trusts to satisfy the obligations of the company 's retirement benefit plans did not exceed the retirement benefit plans ' benefit obligation . minimum funding requirements for retirement benefit plans have not been included in the tables above ; however , see note 10 of the consolidated financial statements for 2020 estimated contributions . there were no material uncertain tax positions as of december 31 , 2019 . see note 3 of the consolidated financial statements for a discussion of fuel and power purchase commitments . see note 4 of the consolidated financial statements for a further discussion of asb 's commitments . the company adopted asu no . 2016-02 on january 1 , 2019 , which had a material effect on its balance sheet as of january 1 , 2019 due to the recognition of lease liabilities and right-of-use assets . see note 1 , “ summary of significant accounting policies—recent accounting pronouncements—leases , ” and note 8 , “ leases , ” of the consolidated financial statements . off-balance sheet arrangements . although the company and the utilities have off-balance sheet arrangements , management has determined that it has no off-balance sheet arrangements that either have , or are reasonably likely to have , a current or future effect on the company 's and the utilities ' financial condition , changes in financial condition , revenues or expenses , 37 results of operations , liquidity , capital expenditures or capital resources that are material to investors , including the following types of off-balance sheet arrangements : 1. obligations under guarantee contracts , 2. retained or contingent interests in assets transferred to an unconsolidated entity or similar arrangements that serve as credit , liquidity or market risk support to that entity for such assets , 3. obligations under derivative instruments , and 4. obligations under a material variable interest held by the company or the utilities in an unconsolidated entity that provides financing , liquidity , market risk or credit risk support to the company or the utilities , or engages in leasing , hedging or research and development services with the company or the utilities . material estimates and critical accounting policies . in preparing financial statements , management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities , the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses . actual results could differ significantly from those estimates . material estimates that are particularly susceptible to significant change include the amounts reported for pension and other postretirement benefit obligations ; contingencies and litigation ; income taxes ; regulatory assets and liabilities ; electric utility unbilled revenues ; allowance for loan losses ; fair value ; and asset retirement obligations . management considers an accounting estimate to be material if it requires assumptions to be made that were uncertain at the time the estimate was made and changes in the assumptions selected could have a material impact on the estimate and on the company 's results of operations or financial condition . in accordance with sec release no . 33-8040 , “ cautionary advice regarding disclosure about critical accounting policies , ” management has identified the accounting policies it believes to be the most critical to the company 's financial statements—that is , management believes that the policies discussed below are both the most important to the portrayal of the company 's results of operations and financial condition , and currently require management 's most difficult , subjective or complex judgments . the policies affecting both of the company 's two principal segments are discussed below and the policies affecting just one segment are discussed in the respective segment 's section of “ material estimates and critical accounting policies. ” management has reviewed the material estimates and critical accounting policies with the hei audit & risk committee and , as applicable , the hawaiian electric audit & risk committee . for additional discussion of the company 's accounting policies , see note 1 of the consolidated financial statements and for additional discussion of material estimates and critical accounting policies , see the electric utility and bank segment discussions below under the same heading . pension and other postretirement benefits obligations . the company 's reported costs of providing retirement benefits are dependent upon numerous factors resulting from actual plan experience and assumptions about future experience . for example , retirement benefits costs are impacted by actual employee demographics ( including age and compensation levels ) , the level of contributions to the plans , earnings and realized and unrealized gains and losses on plan assets , and changes made to the provisions of the plans . costs may also be significantly affected by changes in key actuarial assumptions , including the expected return on plan assets , the discount rate and mortality . the company 's accounting for retirement benefits under the plans in which the employees of the utilities participate is also adjusted to account for the impact of decisions by the puc . changes in obligations associated with the factors noted above may not be immediately recognized as costs on the income statement , but generally are recognized in future years over the remaining average service period of plan participants . based on various assumptions in note story_separator_special_tag information about payments under the specified contractual obligations and commercial commitments of hei and its subsidiaries was as follows : replace_table_token_15_th 1 includes contractual obligations and commitments for capital expenditures and expense amounts . the table above does not include other categories of obligations and commitments , such as deferred taxes , trade payables , amounts that will become payable in future periods under collective bargaining and other employment agreements and employee benefit plans , and potential refunds of amounts collected from ratepayers ( e.g. , under the earnings sharing mechanism ) . as of december 31 , 2019 , the fair value of the assets held in trusts to satisfy the obligations of the company 's retirement benefit plans did not exceed the retirement benefit plans ' benefit obligation . minimum funding requirements for retirement benefit plans have not been included in the tables above ; however , see note 10 of the consolidated financial statements for 2020 estimated contributions . there were no material uncertain tax positions as of december 31 , 2019 . see note 3 of the consolidated financial statements for a discussion of fuel and power purchase commitments . see note 4 of the consolidated financial statements for a further discussion of asb 's commitments . the company adopted asu no . 2016-02 on january 1 , 2019 , which had a material effect on its balance sheet as of january 1 , 2019 due to the recognition of lease liabilities and right-of-use assets . see note 1 , “ summary of significant accounting policies—recent accounting pronouncements—leases , ” and note 8 , “ leases , ” of the consolidated financial statements . off-balance sheet arrangements . although the company and the utilities have off-balance sheet arrangements , management has determined that it has no off-balance sheet arrangements that either have , or are reasonably likely to have , a current or future effect on the company 's and the utilities ' financial condition , changes in financial condition , revenues or expenses , 37 results of operations , liquidity , capital expenditures or capital resources that are material to investors , including the following types of off-balance sheet arrangements : 1. obligations under guarantee contracts , 2. retained or contingent interests in assets transferred to an unconsolidated entity or similar arrangements that serve as credit , liquidity or market risk support to that entity for such assets , 3. obligations under derivative instruments , and 4. obligations under a material variable interest held by the company or the utilities in an unconsolidated entity that provides financing , liquidity , market risk or credit risk support to the company or the utilities , or engages in leasing , hedging or research and development services with the company or the utilities . material estimates and critical accounting policies . in preparing financial statements , management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities , the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses . actual results could differ significantly from those estimates . material estimates that are particularly susceptible to significant change include the amounts reported for pension and other postretirement benefit obligations ; contingencies and litigation ; income taxes ; regulatory assets and liabilities ; electric utility unbilled revenues ; allowance for loan losses ; fair value ; and asset retirement obligations . management considers an accounting estimate to be material if it requires assumptions to be made that were uncertain at the time the estimate was made and changes in the assumptions selected could have a material impact on the estimate and on the company 's results of operations or financial condition . in accordance with sec release no . 33-8040 , “ cautionary advice regarding disclosure about critical accounting policies , ” management has identified the accounting policies it believes to be the most critical to the company 's financial statements—that is , management believes that the policies discussed below are both the most important to the portrayal of the company 's results of operations and financial condition , and currently require management 's most difficult , subjective or complex judgments . the policies affecting both of the company 's two principal segments are discussed below and the policies affecting just one segment are discussed in the respective segment 's section of “ material estimates and critical accounting policies. ” management has reviewed the material estimates and critical accounting policies with the hei audit & risk committee and , as applicable , the hawaiian electric audit & risk committee . for additional discussion of the company 's accounting policies , see note 1 of the consolidated financial statements and for additional discussion of material estimates and critical accounting policies , see the electric utility and bank segment discussions below under the same heading . pension and other postretirement benefits obligations . the company 's reported costs of providing retirement benefits are dependent upon numerous factors resulting from actual plan experience and assumptions about future experience . for example , retirement benefits costs are impacted by actual employee demographics ( including age and compensation levels ) , the level of contributions to the plans , earnings and realized and unrealized gains and losses on plan assets , and changes made to the provisions of the plans . costs may also be significantly affected by changes in key actuarial assumptions , including the expected return on plan assets , the discount rate and mortality . the company 's accounting for retirement benefits under the plans in which the employees of the utilities participate is also adjusted to account for the impact of decisions by the puc . changes in obligations associated with the factors noted above may not be immediately recognized as costs on the income statement , but generally are recognized in future years over the remaining average service period of plan participants . based on various assumptions in note
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asb sold two office facilities that were no longer needed when asb moved into its new campus headquarters , which resulted in a gain on sale of real estate of $ 10.8 million . there were no such sales in 2018. the increase in mortgage banking income was due to an increase in loan sales into the secondary market as a result of higher residential mortgage loan production in 2019 compared to 2018. the higher bank-owned life insurance income was due to higher proceeds from life insurance policies received in 2019 compared to the previous year . revenues 339 314 25 the increase in revenues was due to higher interest and noninterest income . interest expense 18 15 3 higher interest expense was primarily due to an increase in term certificate balances and increased deposit rates . average deposit balances for 2019 increased by $ 155 million compared to 2018 due to an increase in core deposits and time certificates of $ 134 million and $ 21 million , respectively . average cost of deposits for 2019 was 27 basis points , or 4 basis points above the average cost of deposits for 2018. the other borrowings average balance decreased by $ 28 million primarily due to a decrease in repurchase agreements . average cost of other borrowings for 2019 was 1.42 % , or 32 basis points above the average cost of borrowings for 2018. provision for loan losses 24 15 9 the provision for loan losses for 2019 increased by $ 8.7 million compared to the provision for loan losses in 2018. the provision for loan losses in 2019 was primarily for additional loss reserves for the consumer and credit scored loan portfolios to cover net charge-offs , and reserves for an impaired commercial credit , partly offset by the release of reserves resulting from recoveries of previously charged-off loans . the provision for loan losses for 2018 was primarily for additional loss reserves for the consumer loan portfolio as a result of growth and increased net charge-offs , partly offset by the release of reserves for the commercial , commercial
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ROO
| 3,070
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investment security interest is earned on 30/360 day basis monthly . 3 yields and interest income on tax-exempt securities and loans are presented on a taxable-equivalent basis using the federal statutory rate of 21 % in 2018 and 35 % in 2017 . 4 average balances on loans outstanding include non-performing loans . the amortized portion of net loan origination fees is included in interest income on loans , representing an adjustment to the yield . page-25 table 2 analysis of changes in net interest income the following table presents the effects of changes in average balances ( volume ) or changes in average rates on tax- equivalent net interest income for the years indicated . volume variances are equal to the increase or decrease in average balances multiplied by prior period rates . rate variances are equal to the increase or decrease in rates multiplied by prior period average balances . mix variances are attributable to the change in yields or rates multiplied by the change in average balances . 2018 compared to 2017 ( in thousands , unaudited ) volume yield/rate mix total interest-bearing due from banks $ ( 27 ) $ 507 $ ( 14 ) $ 466 investment securities 1 3,408 1,016 356 4,780 loans 1 8,749 2,745 350 11,844 total interest-earning assets 12,130 4,268 692 17,090 interest-bearing transaction accounts 39 58 21 118 savings accounts 5 1 — 6 money market accounts 71 645 84 800 time accounts , including cdars ( 34 ) 2 ( 2 ) ( 34 ) fhlb borrowings and overnight borrowings 2 — — 2 subordinated debentures ( 50 ) 1,070 ( 120 ) 900 total interest-bearing liabilities 33 1,776 ( 17 ) 1,792 $ 12,097 $ 2,492 $ 709 $ 15,298 1 yields and interest income on tax-exempt securities and loans are presented on a taxable-equivalent basis using the federal statutory rate of 21 % in 2018 and 35 % in 2017 . 2018 compared to 2017 net interest income totaled $ 91.5 million and $ 74.9 million in 2018 and 2017 , respectively . the increase of $ 16.6 million , or 22.2 % in 2018 was primarily due to a $ 337.7 million , or 16.8 % , increase in average earning assets and higher average yields across all earning asset categories , partially offset by $ 916 thousand in accelerated discount accretion from the early redemption of one high-rate subordinated debenture assumed in the norcal community bancorp acquisition . this transaction removed a high cost source of borrowing and the bank will benefit from reduced interest expense going forward . while we do not plan to redeem the remaining subordinated debenture in the short-term , we may early redeem it in the future depending on changes in rates and our capital position . the tax-equivalent net interest margin increased ten basis points to 3.90 % in 2018 compared to 3.80 % in 2017 for the same reasons , despite the 0.04 % negative impact from the early redemption of a subordinated debenture . the yield on average interest-earning assets increased sixteen basis points in 2018 compared to 2017. the loan portfolio as a percentage of average interest-earning assets , decreased to 72.5 % in 2018 , from 75.1 % in 2017. investment securities increased to 24.1 % of average interest-earning assets in 2018 , compared to 20.9 % in 2017. market interest rates market interest rates are , in part , based on the target federal funds interest rate ( the interest rate banks charge each other for short-term borrowings ) implemented by the federal reserve open market committee ( `` fomc `` ) . actions by the fomc to increase the target federal funds rate by 25 basis points in december 2015 , december 2016 , march 2017 , june 2017 , december 2017 , march 2018 , june 2018 , september 2018 and december 2018 have positively impacted yields on our rate sensitive interest-earning assets . the increase in december 2018 , to the current target range for the federal funds rate of 2.25 % to 2.50 % , was the ninth rate hike since 2008. if interest rates continue to rise , we anticipate that our net interest income will increase over time . while short-term interest rates have risen and improved the bank 's yields on prime-rate adjustable assets , the yield curve flattened in 2018 with less movement in longer-term rates that influence pricing for fixed-rate lending activities . in its january 2019 meeting , the fomc indicated that it will be patient with future rate hikes in light of global economic and financial uncertainties and muted inflation pressures and might plan to stop reducing the federal reserve 's asset holdings in late 2019. page-26 impact of acquired loans on net interest margin early payoffs or prepayments of our acquired loans with significant unamortized purchase discount/premium could result in volatility in our net interest margin . accretions and gains on payoffs of purchased loans are recorded in interest income . as our acquired loans from prior acquisitions continue to pay off , we expect accretion income from these loans to continue to decline . the positive affect on our net interest margin during the past two years was as follows : replace_table_token_3_th provision for loan losses management assesses the adequacy of the allowance for loan losses quarterly based on several factors including growth of the loan portfolio , analysis of probable losses in the portfolio , historical loss experience and the current economic climate . actual losses on loans are charged against the allowance , and the allowance is increased by loss recoveries and provisions for loan losses charged to expense . for further discussion , see note 1 to the consolidated financial statements in item 8 of this report . we recorded no provision for loan losses in 2018 , compared to $ 500 thousand in 2017 . story_separator_special_tag also , see item 1a , risk factors , regarding our loan concentration risk . the following table summarizes our commercial real estate loan portfolio by the geographic location in which the property is located as of december 31 , 2018 and 2017 . table 7 commercial real estate loans outstanding by geographic location replace_table_token_9_th commercial real estate loans increased by $ 62.7 million in 2018 and $ 152.0 million in 2017. the increase in 2018 was primarily in sonoma , napa , alameda and san francisco counties . the increase in 2017 included $ 92.3 million from the bank of napa acquisition , as well as lending activities in marin and alameda counties . of the commercial real estate loans at december 31 , 2018 , 74 % were non-owner occupied and 26 % were owner occupied . almost the entire commercial real estate loan portfolio is comprised of term loans for which the primary source of repayment is the operating cash flow from the leasing activities of the real estate collateral . originated loans are subject to our conservative credit underwriting standards and both the acquired and originated loans are actively managed . we occasionally provide interest-only term loans to borrowers who exhibit strong financial capacity and or for commercial real estate loans during the occupancy stabilization period . these interest-only term loans must meet our stringent underwriting standards and are generally short-term in nature , usually less than two years . in addition , we may make interest-only concessions in a modified troubled debt restructuring ( `` tdr `` ) . at december 31 , 2018 and 2017 , approximately 2.9 % and 2.0 % , respectively , of our total loans contained an interest-only feature as part of the loan terms . all of these loans were current with their payments as of december 31 , 2018. except for two tdr loans to one borrowing relationship totaling $ 7.0 million as of december 31 , 2018 , all were considered to have low credit risk ( graded `` pass `` ) . page-32 the following table shows an analysis of construction loans by type and location as of december 31 , 2018 and 2017 . table 8 construction loans outstanding by type and geographic location replace_table_token_10_th construction loans increased by $ 12.6 million in 2018 and decreased by $ 11.0 million in 2017. the increase in 2018 was primarily due to new construction projects , partially offset by payoffs related to completed construction projects . the $ 8.1 million decrease in napa construction loans primarily resulted from the successful completion of three projects and one completed project that converted to a commercial real estate term loan . the improving economy resulted in a number of new financing opportunities for existing and new customers who had successfully completed construction projects in the past . the following table presents the maturity distribution of our commercial and construction loans as of december 31 , 2018 based on their contractual maturity dates and does not include scheduled payments or potential prepayments . table 9a commercial and construction loan maturity distribution replace_table_token_11_th the following table shows the mix of variable-rate loans to fixed-rate loans for commercial and construction loans . the large majority of the variable-rate loans are tied to independent indices ( such as the wall street journal prime rate or a treasury constant maturity rate ) . most loans with original terms of more than five years have provisions for the fixed rates to reset , or convert to variable rates , after three , five or seven years . these loans are included in variable-rate balances below . page-33 table 9b commercial and construction loan interest rate sensitivity replace_table_token_12_th allowance for loan losses credit risk is inherent in the business of lending . as a result , we maintain an allowance for loan losses to absorb probable losses in our loan portfolio through a provision for loan losses charged against earnings . all specifically identifiable and quantifiable losses are charged off against the allowance . the balance of our allowance for loan losses is management 's best estimate of the remaining probable losses in the portfolio . the ultimate adequacy of the allowance is dependent upon a variety of factors beyond our control , including the real estate market , changes in interest rates and economic and political environments . based on the current conditions of the loan portfolio , management believes that the $ 15.8 million allowance for loan losses at december 31 , 2018 is adequate to absorb losses in our loan portfolio , but provides no assurance that adverse economic conditions or other circumstances will not result in increased losses in the portfolio . the components of the allowance for loan losses as stated in note 1 to the consolidated financial statements in item 8 of this report , the overall allowance consists of 1 ) specific allowances for individually identified impaired loans ( `` asc 310-10 `` ) and 2 ) general allowances for pools of loans ( `` asc 450-20 `` ) , which incorporate quantitative ( e.g . , historical loan loss rates ) and qualitative risk factors ( e.g . , portfolio growth and trends , credit concentrations , economic and regulatory factors , etc . ) . the first component , specific allowances , results from the analysis of identified problem credits and the evaluation of sources of repayment including collateral , as applicable . management evaluates these loans individually for impairment . management considers an originated loan to be impaired when it is probable we will be unable to collect all amounts due according to the contractual terms of the loan agreement . for pci loans , specific allowances are established to account for credit deterioration subsequent to acquisition if we have probable decreases in cash flows expected to be collected . for loans determined to be impaired , the extent of the impairment is measured based on the
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t he most significant factor in our daily liquidity position has been the level of customer deposits . we attract and retain new deposits , which depends upon the variety and effectiveness of our customer account products , service and convenience , and rates paid to customers , as well as our financial strength . the cash cycles of some of our large commercial depositors may cause short-term fluctuations in their deposit balances held with us . at december 31 , 2018 our liquid assets , which included unencumbered available-for-sale securities and cash , totaled $ 433.2 million , a decrease of $ 68.7 million from december 31 , 2017. our cash and cash equivalents decreased $ 169.3 million from december 31 , 2017. significant uses of liquidity during 2018 were $ 237.9 million in investment securities purchased , $ 84.6 million in loan originations and advances , net of repayments , $ 8.9 million in cash dividends paid on common stock to our shareholders , $ 6.9 million in common stock repurchases , and a $ 4.1 million repayment of a subordinated debenture . significant sources of liquidity during 2018 included $ 98.5 million in paydowns , maturities and sales of investment securities , $ 42.1 million in net cash provided by operating activities , an increase in deposits of $ 26.2 million , and a $ 7.0 million overnight borrowing outstanding at year-end . refer to the consolidated statement of cash flows in this form 10-k for additional information on our sources and uses of liquidity .
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Liquidity
| 1,522
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of these sales , approximately 52 % were comprised of sales of products we purchased in u.s. dollars . currency fluctuations within our colombia market adversely affected our consolidated results of operations in prior fiscal years . m ajor changes in the value of the colombian peso ( “ cop ” ) relative to the u.s. dollar negatively impacted sales and margins in that market during fiscal years 2015 and 2016 . for example , in fiscal year 2016 , the devaluation of the colombian peso against the u.s. dollar resulted in decreased u.s. dollar reported warehouse club sales for that market , after translation , by approximately 26 % when compared to fiscal year 2015 , following an approximately 60 % devaluation that occurred in fiscal year 2015. a devaluation of the cop not only reduces the value of sales and membership income that is generated in colombia when translated to u.s. dollars for our consolidated results , but also increases the local currency price of imported merchandise , which impacts demand for a significant portion of the company 's merchandise offering . this , along with the fact that we are still relatively new in the colombian market , and the sophisticated level of competition in that market , impacted overall business performance resulting in an operating loss in colombia in fiscal years 2015 and 2016. a stabilization of the currency during fiscal year 2017 has contributed to improving business conditions in colombia , resulting in good sales growth and a return to operating profitability in our colombia segment . certain of our central american and caribbean markets have experienced some slowing of overall economic activity during the fiscal year which may continue to impact the level of consumer spending in the coming months . in particular , trinidad 's economy , with its dependence on oil and gas exports as a major source of income and resulting government policy to manage its foreign exchange reserves , has been experiencing overall difficult economic conditions with a corresponding impact on consumer spending . other countries where general market conditions have provided a difficult operating environment which we expect may continue into fiscal year 2018 include barbados , and usvi where hurricanes irma and maria had a severe impact on the infrastructure of the island . our capture of retail and wholesale sales can vary from market to market due to competition and the availability of other shopping options for our members . in larger , more developed countries , such as costa rica , panama and colombia , customers have many alternatives available to them to satisfy their shopping needs , and therefore , our market share is less than in other smaller countries , such as jamaica and nicaragua , where consumers have a limited number of shopping options . demographic characteristics within each of our markets can also affect both the overall level of sales and also future sales growth opportunities . island countries such as aruba , barbados and the u.s. virgin islands offer us limited upside for sales growth given their overall market size . countries with a smaller upper and middle class consumer population , such as honduras , el salvador , jamaica and nicaragua , also have a more limited potential opportunity for sales growth as compared to more developed countries with larger upper and middle class consumer population s . political and other factors in each of our markets may have significant effects on our business . for example , when national elections are being held , the political situation can introduce uncertainty about how the leadership change may impact the economy and affect near-term consumer spending . the need for increased tax revenue in certain countries can cause changes in tax policies affecting consumer 's personal tax rates , and or added consumption taxes , such as vat ( value-added taxes ) effectively raising the prices of various products . from time to time we have experienced a lack of availability of u.s. dollars in certain markets ( u.s. dollar illiquidity ) . this impedes our ability to convert local currencies obtained through warehouse sales into u.s. dollars to settle the u.s. dollar liabilities associated with our imported products , increasing our foreign exchange exposure to any devaluation of the local currency relative to the u.s. dollar . during fiscal year 2017 and continuing into fiscal year 2018 , we experienc ed this situation in trinidad ( “ tt ” ) . we have been and continue to work with our banks in trinidad to source tradable currencies ( including euros and canadian dollars ) , but until the central bank in trinidad makes more u.s. dollars available , this illiquidity condition is likely to continue . during part of the first half of fiscal year 2017 we limited shipments of merchandise to trinidad from our distribution center in miami to levels that generally aligned with our trinidad subsidiary 's ability to source u.s. dollars to pay for th at merchandise . this resulted in a reduced level of shipments , which negatively affected sales in the second quarter , particularly december , although by less than our initial estimate . these actions did not impact the level of merchandise we obtain locally in trinidad . starting in the third quarter of fiscal year 2017 , we were able to improve our sourcing of tradeable currencies , which , in addition to other steps we took , allowed for a more normalized flow of imported merchandise during the third and fourth fiscal quarters . a s of august 31 , 2017 , our trinidad subsidiary had net u.s. dollar denominated assets of approximately $ 4.0 million . story_separator_special_tag all other central american countries recorded positive growth in warehouse sales for the twelve-month period , with panama , guatemala , and honduras all recording sales growth of between 4-5 % . our caribbean segment had a full-year sales decline of 1.6 % driven largely by sales decreases in trinidad , our largest market in that segment . the difficult economic environment there continues to negatively impact consumer spending , and earlier in the year , we restricted shipments of u.s. goods for a period of three months as a result of currency illiquidity in the market . trinidad net warehouse club sales for fiscal year 2017 declined 4.8 % compared to fiscal year 2016. the company is not currently limiting shipments to trinidad , but illiquidity concerns remain , which may again cause us to restrict shipments in the future . net warehouse sales in our colombia segment reported growth with the addition of our new chia club on september 1 , 2016 contributing to an overall net warehouse club sales growth of 27.2 % for the twelve-month period . with the stabilization of the exchange rate between the colombian peso and the u.s. dollar over the past eighteen months , we have seen an improving sales picture in all of our warehouse clubs in colombia . this , coupled with our efforts to source high quality merchandise from local suppliers , resulted in a 15.2 % increase in transactions in the fiscal year and average ticket growth of 10.4 % . during fiscal year 2016 , the average exchange rate was 3,070 pesos to the dollar , and in the current fiscal year , the rate was 2,983 . comparison of 2016 and 2015 net warehouse sales growth resulted from a 6.2 % increase in transactions and a 2.4 % decrease in the average sale . net warehouse sales growth in central america was positively impacted by the openings of two new warehouse clubs , one in panama ( june 2015 ) and one in nicaragua ( november 2015 ) . all other central american countries without additional warehouse clubs also recorded positive sales growth in fiscal year 2016 compared to fiscal year 2015 . the caribbean segment had no new warehouse clubs opened in the comparable periods and recorded a 2.3 % increase in net warehouse sales . a significant increase in the number of products subject to value added taxes starting in february in trinidad and currency devaluations in both trinidad and the dominican republic ( the company 's two largest markets in the caribbean segment ) resulted in a negative sales growth in the second half of the fiscal year compared to the same period last year . net warehouse sales in colombia were significantly impacted during the fiscal year by the devaluation of the colombian peso relative to the u.s. dollar . the strength of the u.s. dollar causes the price of imported merchandise to increase in colombian pesos , which reduces sales volumes of those products . in addition , net warehouse sales made in colombian pesos when translated yielded 26 % fewer u.s. dollars in the fiscal year compared to the year ago period . net warehouse sales in local currency ( cop ) for fiscal year 2016 grew 6.0 % , reflecting the addition of three new warehouse clubs for fiscal year 2016 compared to fiscal year 2015 and a stabilizing currency exchange rate in the fourth fiscal quarter of fiscal year 2016 . 25 net warehouse club sales by category the following table indicates the approximate percentage of net sales accounted for by each major category of items sold us during the fiscal y ears ended august 31 , 2017 , 2016 and 2015 . replace_table_token_11_th comparison of 2017 to 201 6 the mix of sales by major category did not change between fiscal year 201 7 and 201 6 . comparison of 2016 to 2015 there was a slight shift in the mix of sales by major category between fiscal year 2016 and 2015 , with a slight decrease in food and hardlines compared to the other categories . these categories were impacted more by price compression and the effect of devaluation in colombia than the other merchandise categories . comparable sales we report comparable warehouse club sales on a “ same week ” basis with 13 weeks in each quarter beginning on a monday and ending on a sunday . the periods are established at the beginning of the fiscal year to provide as close a match as possible to the calendar month and quarter that is used for financial reporting purposes . this approach equalizes the number of weekend days and weekdays in each period for improved sales comparison , as we experience higher warehouse club sales on the weekends . approximately every five years , the company uses a 53-week year and a six-week “ august ” to account for the fact that 52 weeks is only 364 days . for fiscal year 2016 , we used a 53-week year and a six-week “ august . ” further , each of the warehouse clubs used in the calculations was open for at least 13 ½ calendar months before its results for the current period were compared with its results for the prior period . for example , sales related to the warehouse club opened in colombia on september 1 , 2016 will not be used in the calculation of comparable sales until november 2017. sales transacted through our e-commerce platform are included in our calculation of comparable warehouse sales . the following tables indicate the comparable net warehouse club sales in the reportable segments in which we operate , and the percentage growth in net warehouse club sales by segment during fiscal years 2017 and 2016 . replace_table_token_12_th comparison of 2017 to 201 6 comparable warehouse club sales
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liquidity and capital resources financial position and cash flow we require cash to fund our operating expenses and working capital requirements , including the investment in merchandise inventories , acquisition of land and construction of new warehouse clubs and distribution centers , expansion of existing warehouse clubs and distribution centers , acquisitions of fixtures and equipment , routine upgrades and maintenance of fixtures and equipment within existing warehouse clubs , investments in joint ventures in panama and costa rica to own and operate commercial retail centers located adjacent to the new warehouse clubs , the purchase of treasury stock upon the vesting of restricted stock awards and payment of dividends to stockholders . our primary sources for funding these requirements are cash and cash equivalents on hand , cash generated from operations and bank borrowings . we evaluate on a regular basis whether we may need to borrow additional funds to cover any shortfall in our ability to generate sufficient cash from operations to meet our operating and capital requirements . as such , we may enter into or obtain additional loans and or credit facilities to provide additional liquidity when necessary . in november 2016 , the fasb issued asu no . 2016-18 , statement of cash flows ( topic 33 230 ) —restricted cash . this asu addresses the diversity in practice that exists regarding the classification and the presentation of changes in restricted cash on the statement of cash flows . the amendments in asu no .
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Liquidity
| 13,014
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vacancy rates for multifamily properties across all boroughs of new york city have increased since the start of the covid-19 pandemic , with the largest increases in manhattan . the work from home phenomenon resulted in significant number of people moving out of urban areas to suburban areas . this has driven a drop in rental rates and an increase in concessions resulting in lower net effective rents primarily on new leases . in recent months , with the implementation of covid-19 vaccination programs and companies encouraging employees to return to the office , more potential tenants are moving back into new york city , which we anticipate should result in a reduction in concessions over time . new york state imposed a moratorium on tenant evictions in march 2020 that will be in place until may 1 , 2021 , unless extended 21 further . rent collections at our properties have been strong and in line with pre-pandemic collection rates . notwithstanding these broader market trends , although multifamily property sales transaction volumes decreased in 2020 , signs of distress , including discounted sales prices and debt workouts , in the new york city investment market has been almost non-existent over the past year . transactions , development and other activities during 2020 continued progress in development of 77 greenwich as of december 31 , 2020 , we completed all 45 stories of the superstructure at 77 greenwich and 100 % of the building enclosure is complete ( excluding the hoist area ) . the project continues to be on schedule and on budget and was approximately 86 % complete at december 31 , 2020. other activities ● in january 2020 , we , along with our joint venture partner tf cornerstone group llc ( “ tfc ” ) closed on the acquisition of 250 north 10 th property , a market-leading 234-unit apartment building in williamsburg , brooklyn located one block from the berkley . ● in april 2020 , the sca closed on the purchase of the school condominium unit from us . the sca is now proceeding to complete the buildout of the interior space , which is planned to become an approximately 476 seat public elementary school . the pace of completion of the buildout by the sca has been impacted by covid-19 and its scheduled timeline is currently anticipated to be august 2022. upon conveyance , we recognized a gain on the sale of approximately $ 20.0 million and an additional gain of $ 4.2 million related to the recognition of our construction supervision fee , and our liquidity requirement on the 77 greenwich construction facility decreased from $ 15.0 million to $ 10.0 million . ● in june 2020 , we amended our senior loan on 237 11 th by extending the maturity date to june 2021 and providing for a $ 4.25 million delay draw facility to be used to fund a portion of the remediation costs at this property . as of december 31 , 2020 , remediation work on floors 4-12 had been completed , other than a few specific units . we expect the remediation and restoration project to be completed by spring 2021. as of december 31 , 2020 , 58 units have been remediated , many of which are now occupied , and our leasing efforts continue , although the pace of leasing in the current environment remains uncertain . additional units will be introduced back into the market as they become available . see item 2. properties for additional information . ● in december 2020 , we amended our 77 greenwich construction facility to modify the sales pace covenant and other financial covenants , and paid down the facility by $ 8.0 million . ● simultaneous with the 77 greenwich construction facility amendment , we entered into a new $ 7.5 million mezzanine loan with an affiliate of the lender under our corporate credit facility and amended that facility . story_separator_special_tag net loss from unconsolidated joint ventures represents our 50 % share in the berkley and our 10 % share in 250 north 10 th . for the year ended december 31 , 2020 , our share of the loss is primarily comprised of operating income before depreciation of $ 1.8 million offset by depreciation and amortization of $ 2.6 million and interest expense of $ 800,000. for the year ended december 31 , 2019 , our share of the loss , which consisted only of the berkley , is primarily comprised of operating income before depreciation of $ 1.2 million offset by depreciation and amortization of $ 1.0 million and interest expense of $ 953,000. unrealized gain on warrants of $ 965,000 represents the change in the mark-to-market of the valuation of warrants during the year ended december 31 , 2020. interest expense , net increased by $ 1.5 million to $ 1.4 million for the year ended december 31 , 2020 from approximately $ 67,000 of interest income , net for the year ended december 31 , 2019. for the year ended december 31 , 2020 , there was approximately $ 17.2 million of gross interest expense incurred , $ 15.7 million of which was capitalized , and $ 57,000 of interest income . for the year ended december 31 , 2019 , there was approximately $ 13.5 million of gross interest expense incurred , all of which was capitalized , and $ 67,000 of interest income . the increase in gross interest expense and capitalized interest is due to the larger and growing borrowings outstanding on the 77 greenwich construction facility during the period , as well as new borrowings under the corporate credit facility as described in more detail in the liquidity and capital resources section below . interest expense - amortization of deferred finance costs of $ 202,000 for the year ended december 31 , 2020 represents the amount of amortization of finance costs for our loans and line of credit that were not capitalized as part of real estate under development . story_separator_special_tag we recorded $ 306,000 in tax expense for the year ended december 31 , 2020 compared to $ 128,000 in tax in expense for the year ended december 31 , 2019. net income attributable to common stockholders increased by approximately $ 8.7 million to $ 6.5 million for the year ended december 31 , 2020 from a loss of $ 2.2 million for the year ended december 31 , 2019 as a result of the changes discussed above , principally the gain on sale of the school condominium to the sca . liquidity and capital resources we currently expect that our principal sources of funds to meet our short-term and long-term liquidity requirements for working capital and funds for acquisition and development or redevelopment of properties , tenant improvements , leasing costs , and repayments of outstanding indebtedness will include some or all of the following : ( 1 ) cash on hand ; ( 2 ) proceeds from new debt financings , increases to existing debt financings and or other forms of secured or unsecured debt financing ; ( 3 ) proceeds from equity or equity-linked offerings , including rights offerings or convertible debt or equity or equity-linked securities issued in connection with debt financings ; ( 4 ) cash flow from operations ; and ( 5 ) net proceeds from divestitures of properties or interests in properties . cash flow from operations is primarily dependent upon the occupancy level of our portfolio , the net effective rental rates achieved on our leases , the collectability of rent , operating escalations and recoveries from our tenants and the level of operating and other costs . as of december 31 , 2020 , we had total cash and restricted cash of $ 16.1 million , of which approximately $ 6.5 million was cash and cash equivalents and approximately $ 9.6 million was restricted cash . as of december 31 , 2019 , we had total cash and restricted cash of $ 18.7 million , of which approximately $ 9.2 million was cash and cash equivalents and approximately $ 9.5 million was restricted cash . restricted cash represents amounts required to be restricted under our loan agreements , letters of credit ( see note 10 – loans payable and secured line of credit to our consolidated financial statements for 24 further information ) , deposits on residential condominium sales at 77 greenwich and tenant related security deposits . in addition , cash and cash equivalents includes cash which , together with availability under our line of credit , is required to be maintained to meet certain liquidity requirements under the 77 greenwich construction facility , described below . this liquidity requirement , inclusive of cash and line of credit availability , decreased to $ 10.0 million when we closed on the conveyance of the school condominium to the sca in april 2020 and decreases further upon the achievement of certain construction related milestones at 77 greenwich . corporate credit facility in december 2019 , we entered into a credit agreement ( the “ corporate credit facility ” ) with an affiliate of a global institutional investment management firm as initial lender ( the “ ccf lender ” ) and trimont real estate advisors , llc , as administrative agent ( the “ corporate facility administrative agent ” ) , pursuant to which the ccf lender agreed to extend us credit in multiple draws aggregating $ 70.0 million , which may be increased by $ 25.0 million subject to satisfaction of certain conditions and the consent of the ccf lender . draws under the corporate credit facility may be made during the 32-month period following the closing date of the corporate credit facility ( the “ closing date ” ) . the corporate credit facility matures on december 19 , 2024 , subject to extensions until december 19 , 2025 and june 19 , 2026 , respectively , under certain circumstances . the proceeds of the corporate credit facility may be used for investments in certain multi-family apartment buildings in the greater new york city area and certain non-residential real estate investments approved by the ccf lender in its reasonable discretion , as well as in connection with certain property recapitalizations and in specified amounts for general corporate purposes and working capital . the corporate credit facility bears interest at a rate per annum equal to the sum of ( i ) 5.25 % and ( ii ) a scheduled interest rate ( the “ cash pay interest rate ” ) based on six-month periods from the closing date , which cash pay interest rate , from the closing date until the six-month anniversary of the closing date initially equaled 4.0 % and increases by 125 basis points in each succeeding six-month period , subject to increase during the extension periods . a $ 2.45 million commitment fee was payable 50 % on the initial draw with the remaining 50 % payable as amounts under the corporate credit facility are drawn , with any remaining balance due on the last date of the draw period , and a 1.0 % exit fee is payable in respect of corporate credit facility repayments . as of december 31 , 2020 , we had paid $ 1.85 million of the commitment fee . the corporate credit facility may be prepaid at any time subject to a prepayment premium on the portion of the corporate credit facility being repaid . at december 31 , 2020 , the corporate credit facility had an outstanding balance of $ 35.75 million and an effective interest rate of 9.5 % . accrued interest totaled approximately $ 1.5 million at december 31 , 2020. the corporate credit facility was undrawn at december 31 , 2019 . ( see note 10 – notes payable and secured line of credit to our consolidated financial statements for further discussion ) .
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the increase was partially offset by a reduction expenses from the west palm beach , florida property which was sold in november 2019. these amounts consisted primarily of expenses incurred for utilities , payroll , covid-19 related supplies and general operating expenses as well as repairs and maintenance at 237 11 th . real estate tax expense decreased by $ 249,000 to $ 79,000 for the year ended december 31 , 2020 from $ 328,000 for the year ended december 31 , 2019 , due primarily to the sale of the west palm beach , florida property in november 2019. general and administrative expenses decreased by $ 394,000 to $ 5.0 million for the year ended december 31 , 2020 from $ 5.4 million for the year ended december 31 , 2019. for the year ended december 31 , 2020 , approximately $ 708,000 related to stock-based compensation , $ 2.5 million related to payroll and payroll related expenses , $ 980,000 related to other corporate expenses , including board fees , corporate office rent and insurance , and $ 788,000 related to legal , accounting and other professional fees which included approximately $ 200,000 of legal fees to resolve a legacy syms claim related to the multiemployer pension plan ( see note 9 – commitments – legal proceedings to our consolidated financial statements for further information regarding the claim ) . for the year ended december 31 , 2019 , approximately $ 859,000 related to stock-based compensation , $ 2.7 million related to payroll and payroll related expenses , $ 1.1 million related to other corporate expenses , including board fees , corporate office rent and insurance and $ 743,000 related to legal , accounting and other professional fees . pension related costs decreased by $ 388,000 to $ 345,000 for the year ended december 31 , 2020 from $ 733,000 for the year ended december 31 , 2019. these costs represent professional fees and other periodic pension costs incurred in connection with the legacy syms pension plan ( see note 8 – pension plans to our consolidated financial statements for further information ) . transaction related costs decreased by $ 34,000
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ROO
| 6,251
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year ended december 31 , 2017 compared to the year ended december 31 , 2016 interest income increased by $ 5.8 million from $ 123.0 million for the year ended december 31 , 2016 to $ 128.8 million for the year ended december 31 , 2017 primarily due to an increase in the weighted average cost of our gaap investment portfolio ( excluding sfr ) and u.s. treasury securities , if any , period over period by $ 0.1 billion from $ 2.8 billion for the year ended december 31 , 2016 to $ 2.9 billion for the year ended december 31 , 2017 . this was coupled with an increase in the weighted average yield on our gaap investment portfolio ( excluding sfr ) and u.s. treasury securities , if any , during the period of 0.08 % from 4.37 % for the year ended december 31 , 2016 to 4.45 % for the year ended december 31 , 2017 . interest expense interest expense is calculated based on the actual financing rate and the outstanding financing balance of our gaap investment portfolio and u.s. treasury securities , if any . year ended december 31 , 2018 compared to the year ended december 31 , 2017 interest expense increased by $ 28.4 million from $ 43.7 million for the year ended december 31 , 2017 to $ 72.1 million for the year ended december 31 , 2018 primarily due to an increase in the weighted average financing rate on our gaap investment portfolio and u.s. treasury securities , if any , during the period , by 0.72 % from 1.86 % for the year ended december 31 , 2017 to 2.58 % for the year ended december 31 , 2018 . this was coupled with an increase in the weighted average financing balance on our gaap investment portfolio and u.s. treasury securities , if any , of $ 0.5 billion from $ 2.3 billion for the year ended december 31 , 2017 to $ 2.8 billion for the year ended december 31 , 2018 . refer to the `` financing activities `` section below for a discussion of material changes in our cost of funds . year ended december 31 , 2017 compared to the year ended december 31 , 2016 interest expense increased by $ 9.9 million from $ 33.8 million for the year ended december 31 , 2016 to $ 43.7 million for the year ended december 31 , 2017 primarily due to an increase in the weighted average financing rate on our gaap investment portfolio and u.s. treasury securities , if any , during the period , by 0.39 % from 1.47 % for the year ended december 31 , 2016 to 1.86 % for the year ended december 31 , 2017 . the weighted average financing balance on our gaap investment portfolio and u.s. treasury securities , if any , was $ 2.3 billion for the years ended december 31 , 2016 and december 31 , 2017 . 51 rental income rental income is accrued monthly on a straight-line basis over the terms of the leases on our sfr portfolio . we acquired a stabilized portfolio of sfr in september 2018. year ended december 31 , 2018 compared to the year ended december 31 , 2017 for the year ended december 31 , 2018 , rental income was $ 4.1 million . there was no rental income for the year ended december 31 , 2017 . year ended december 31 , 2017 compared to the year ended december 31 , 2016 there was no rental income for the years ended december 31 , 2017 and december 31 , 2016 . net realized gain/ ( loss ) net realized gain/ ( loss ) represents the net gain or loss recognized on any ( i ) sales of real estate securities out of our gaap investment portfolio , ( ii ) sales of loans out of our gaap investment portfolio , transfers of loans from our gaap investment portfolio to real estate owned included in other assets , and sales of other assets , ( iii ) sales of single-family rental properties out of our gaap investment portfolio , if any , ( iv ) sales of derivatives and other instruments , and ( v ) other-than-temporary-impairment ( `` otti `` ) charges recorded during the period . see note 2 , note 3 and note 4 of the notes to consolidated financial statements for further discussion on otti . the following table presents a summary of net realized gain/ ( loss ) for the years ended december 31 , 2018 , december 31 , 2017 and december 31 , 2016 ( in thousands ) : replace_table_token_9_th net interest component of interest rate swaps net interest component of interest rate swaps represents the net interest income received or expense paid on our interest rate swaps . year ended december 31 , 2018 compared to the year ended december 31 , 2017 net interest component of interest rate swaps increased by $ 10.0 million from $ ( 7.8 ) million at december 31 , 2017 to $ 2.2 million at december 31 , 2018 due to an increase in three-month libor , coupled with an increase in swap notional amount for the period . three-month libor increased from 1.694 % at december 31 , 2017 to 2.808 % at december 31 , 2018 . in addition , the weighted average swap notional increased from $ 1.4 billion for the year ended december 31 , 2017 to $ 2.3 billion for the year ended december 31 , 2018 . story_separator_special_tag there was no property management fee for the year ended december 31 , 2017 . years ended december 31 , 2017 compared to the year ended december 31 , 2016 there was no property management fee for the years ended december 31 , 2017 and december 31 , 2016 . equity in earnings/ ( loss ) from affiliates equity in earnings/ ( loss ) from affiliates represents our share of earnings and profits of investments held within affiliated entities . a majority of these investments are comprised of real estate securities , loans and our investment in ag arc . year ended december 31 , 2018 compared to the year ended december 31 , 2017 for the years ended december 31 , 2018 and december 31 , 2017 , we recorded equity in earnings/ ( loss ) from affiliates of $ 15.6 million and $ 12.6 million , respectively . the increase primarily pertains to increased security prices causing an increase in unrealized gains on securities and loans . year ended december 31 , 2017 compared to the year ended december 31 , 2016 for the years ended december 31 , 2017 and december 31 , 2016 , we recorded equity in earnings/ ( loss ) from affiliates of $ 12.6 million and $ 1.5 million , respectively . the increase primarily pertains to an increased allocation of our capital to investments held within affiliated entities , increased security prices , and realized gains recognized on certain investments held by our affiliates . book value per share as of december 31 , 2018 , december 31 , 2017 , and december 31 , 2016 , our book value per common share was $ 17.21 , $ 19.62 , and $ 17.86 respectively . undepreciated book value per share is a non-gaap book value metric which adds accumulated depreciation and amortization back to book value to present an adjusted book value that incorporates the company 's single-family rental property portfolio at its undepreciated basis . this metric allows management to consider the investment portfolio exclusive of non-cash adjustments and facilitates the comparison of our financial performance to peer reits . a reconciliation of book value per share to undepreciated book value per share as of december 31 , 2018 , december 31 , 2017 and december 31 , 2016 is presented below . replace_table_token_11_th per share amounts for book value are calculated using all outstanding common shares in accordance with gaap , including all shares granted to ag reit management , llc , our external manager , and our independent directors under our equity incentive plans as of quarter-end . book value is calculated using stockholders ' equity less net proceeds of the company 's 8.25 % series a and 8.00 % series b cumulative redeemable preferred stock as the numerator . 56 presentation of investment , financing and hedging activities in the `` investment activities , `` `` financing activities , `` `` hedging activities `` and `` liquidity and capital resources `` sections of this part ii , item 7 , where we disclose our investment portfolio and the related financing arrangements , we have presented this information inclusive of ( i ) unconsolidated ownership interests in affiliates that are accounted for under gaap using the equity method and ( ii ) tbas , which are accounted for as derivatives under gaap . our investment portfolio and the related financing arrangements are presented along with a reconciliation to gaap . this presentation of our investment portfolio is consistent with how our management evaluates the business , and we believe this presentation , when considered with the gaap presentation , provides supplemental information useful for investors in evaluating our investment portfolio and financial condition . see note 2 to the notes to consolidated financial statements for a discussion of investments in debt and equity of affiliates and tbas . net interest margin and leverage ratio our gaap net interest margin is calculated by subtracting the weighted average cost of funds on our gaap investment portfolio from the weighted average yield for our gaap investment portfolio , which excludes cash held by us and any net tba position . both elements of cost of funds on our gaap investment portfolio are weighted by the outstanding financing arrangements on our gaap investment portfolio , securitized debt , and loan participation payable at quarter end , exclusive of repurchase agreements associated with u.s. treasury securities , if any . net interest margin , a non-gaap financial measure , is calculated by subtracting the weighted average cost of funds from the weighted average yield for our investment portfolio , which excludes cash held by us and any net tba position . the weighted average yield on our agency rmbs portfolio and our credit portfolio represents an effective interest rate , which utilizes all estimates of future cash flows and adjusts for actual prepayment and cash flow activity as of year-end . the weighted average yield on our sfr portfolio represents annualized fourth quarter net operating income divided by the carrying value of our sfr portfolio gross of accumulated depreciation and amortization . net operating income on our sfr portfolio is comprised of rental income and other sfr related income less property operating and maintenance expenses and property management fees . the calculation of weighted average yield is weighted on net carrying value . the weighted average cost of funds is the sum of the weighted average funding costs on total financing outstanding at year-end and our weighted average hedging cost , which is the weighted average of the net pay rate on our interest rate swaps , the net receive/pay rate on our treasury long and short positions , respectively , and the net receivable rate on our io index derivatives , if any . both elements of cost of funds are weighted by the outstanding financing arrangements on our investment portfolio , securitized debt , and loan participation payable at year-end , exclusive
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as of december 31 , 2018 , we sold 972,700 shares of common stock under the equity distribution agreements for net proceeds of approximately $ 18.1 million . common offering on february 14 , 2019 , the company completed a public offering of 3,000,000 shares of its common stock and subsequently issued an additional 450,000 shares pursuant to the underwriters ' over-allotment option at a price of $ 16.70 per share . net proceeds to the company from the offering were approximately $ 57.3 million , after deducting estimated offering expenses . 79 forward-looking statements regarding liquidity based upon our current portfolio , leverage and available borrowing arrangements , we believe that the net proceeds of our common equity offerings , preferred equity offerings , and private placements , combined with cash flow from operations and our available borrowing capacity will be sufficient to enable us to meet our anticipated liquidity requirements , including funding our investment activities , paying fees under our management agreement , funding our distributions to stockholders and paying general corporate expenses . contractual obligations management agreement on june 29 , 2011 , we entered into an agreement with our manager pursuant to which our manager is entitled to receive a management fee and the reimbursement of certain expenses . the management fee is calculated and payable quarterly in arrears in an amount equal to 1.50 % of our stockholders ' equity , per annum .
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Liquidity
| 2,069
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nanotron acquisition on october 6 , 2020 , we acquired , through our wholly-owned subsidiary inpixon gmbh , a limited liability company incorporated under the laws of germany ( the “ purchaser ) , all of the outstanding capital stock ( the “ nanotron shares ” ) of nanotron technologies gmbh , a limited liability company incorporated under the laws of germany ( “ nanotron ” ) , pursuant to the terms and conditions of that certain share sale and purchase agreement , dated as of october 5 , 2020 ( the “ purchase agreement ” ) , among the purchaser , nanotron and sensera limited , a stock corporation incorporated under the laws of australia and the sole shareholder of nanotron ( the “ seller ” ) . as a result of the acquisition , we now own 100 % of nanotron . nanotron 's business consists of developing and manufacturing location-aware iot systems and solutions . at the closing , the purchaser paid to the seller an aggregate purchase price of $ 8,700,000 ( less the holdback funds ( as defined below ) and certain other closing adjustments ) for the nanotron shares ( “ purchase price ” ) . the purchase price may be subject to certain post-closing adjustments based on actual working capital as of the closing as described in the purchase agreement . the purchaser retained $ 750,000 ( the “ holdback funds ” ) from the purchase price to secure the seller 's obligations under the purchase agreement , with any unused portion of the holdback funds to be released to the seller on the date that is 18 months after the closing date . the purchaser paid the purchase price from funds received in connection with a capital contribution from us , and a portion of the purchase price was used by the seller to satisfy outstanding loans payable by the seller to obtain the release of certain existing security interests on nanotron 's assets . on february 24 , 2021 , we agreed to the early release of the holdback funds , in exchange for a reduction in the total amount payable to the seller by $ 225,000. in addition , the amount payable was further reduced by $ 59,156.74 in connection with a post closing working capital adjustment 37 and the satisfaction of a claim related to a customer dispute . a balance of $ 465,843.26 was paid to the seller in full satisfaction of the holdback funds payable by the purchaser to the seller pursuant to the purchase agreement . subscription of units of cardinal venture holdings on september 30 , 2020 , we entered into a subscription agreement ( the “ subscription agreement ” ) with cardinal venture holdings llc , a delaware limited liability company ( “ cvh ” ) , pursuant to which we agreed to ( i ) contribute up to $ 1,800,000 ( the “ contribution ” ) to cvh and ( ii ) purchase up to 599,999 class a units of cvh ( the “ class a units ” ) and up to 1,800,000 class b units of cvh ( the “ class b units , ” and , together with the class a units , the “ units ” ) . the $ 1,800,000 purchase price was paid on october 12 , 2020 and therefore that is the date the purchase of the units was closed . on december 16 , 2020 , the company increased it capital contribution by $ 700,000 in exchange for an additional 700,000 class b units . the company owns an aggregate of 599,999 class a units and 2,500,000 class b units . cvh owns certain interests in the sponsor entity ( the “ sponsor ” ) to a special purpose acquisition company formed for the purpose of pursuing an initial public offering of its securities followed by effecting a merger , capital stock exchange , asset acquisition , stock purchase , reorganization or similar business combination with one or more businesses ( the “ spac ” ) . it is anticipated that the contribution will be used by cvh to fund the sponsor 's purchase of securities in the spac . nadir ali , our chief executive officer , beneficially owns membership interests in cvh through 3am llc , a delaware limited liability company and a founding member of cvh ( “ 3am ” ) . concurrently with our entry into the subscription agreement , we entered into the amended and restated limited liability company agreement of cvh ( the “ llc agreement ” ) , dated as of september 30 , 2020. under the terms of the llc agreement , in the event the managing member ( as defined in the llc agreement ) can no longer manage cvh 's affairs due to his death , disability or incapacity , 3am will serve as cvh 's replacement managing member . except as may be required by law , the company , as a non-managing member under the llc agreement , does not have any voting rights and generally can not take part in the management or control of cvh 's business and affairs . the llc agreement provides that each class a unit and each class b unit represents the right of the company to receive any distributions made by the sponsor on account of the class a interests and class b interests , respectively , of the sponsor . we are not required to make additional capital contributions to cvh , unless any such capital contribution is approved by all of cvh 's members . in addition , the llc agreement contains terms and conditions that provide for limitations on liability , restrictions on rights to distributions and certain indemnification rights for cvh 's members . story_separator_special_tag the right of first refusal does not apply to an exempt issuance ( as defined in the purchase agreement ) or to a registered offering made pursuant to a registration statement on form s-1 or form s-3 . note exchanges during the first quarter ended march 31 , 2020 , we entered into exchange agreements with a noteholder pursuant to which we issued an aggregate of 1,896,557 shares of common stock in exchange for the satisfaction of an aggregate amount of approximately $ 4,194,030 of the outstanding balance of promissory notes issued on may 3 , 2019 and june 27 , 2019 to the holders of such notes at exchange prices between $ 1.12 and $ 4.05 per share , in each case at a price per share equal to nasdaq 's “ minimum price ” as defined by nasdaq listing rule 5635 ( d ) . during the quarter ended june 30 , 2020 , we entered into exchange agreements with noteholders pursuant to which we issued an aggregate of 3,889,990 shares of common stock in exchange for the satisfaction of an aggregate amount of approximately $ 4.6 million of the outstanding balance of promissory notes issued on december 21 , 2018 , august 8 , 2019 , september 17 , 2019 and november 22 , 2019 to the holders of such notes at exchange prices between $ 1.09 and $ 1.362 per share , in each case at a price per share equal to nasdaq 's “ minimum price ” as defined by nasdaq listing rule 5635 ( d ) . on november 19 , 2020 , we entered into an exchange agreement pursuant to which we issued an aggregate of 389,863 shares of common stock in exchange for the satisfaction of an aggregate amount of approximately $ 400,000 of the outstanding balance of the march 2020 note at a price per share equal to $ 1.026 , which was equal to nasdaq 's “ minimum price ” as defined by nasdaq listing rule 5635 ( d ) . on november 24 , 2020 , we entered into an exchange agreement pursuant to which we issued an aggregate of 686,813 shares of common stock in exchange for the satisfaction of an aggregate amount of approximately $ 750,000 of the outstanding balance of the march 2020 note at a price per share equal to $ 1.092 , which was equal to nasdaq 's “ minimum price ” as defined by nasdaq listing rule 5635 ( d ) . on february 11 , 2021 , we entered into an exchange agreement pursuant to which we issued an aggregate of 893,921 shares of common stock in exchange for the satisfaction of an aggregate amount of approximately $ 1.5 million of the outstanding balance of the march 2021 note at a price per share equal to $ 1.678 , which was equal to nasdaq 's “ minimum price ” as defined by nasdaq listing rule 5635 ( d ) . equity distribution agreement on march 3 , 2020 , we entered into an equity distribution agreement ( `` eda `` ) with maxim group llc ( “ maxim ” ) under which we may offer and sell shares of our common stock in connection with the atm in an aggregate offering amount of up to $ 50 million from time to time through maxim , acting exclusively as our sales agent ( the “ offering ” ) . we intend to use the net proceeds of the offering primarily for working capital and general corporate purposes . we may also use a portion of the net proceeds to invest in or acquire businesses or technologies that we believe are complementary to our own . 40 we issued and sold 33,416,830 shares of common stock during the year ended december 31 , 2020 , in connection with the atm at per share prices between $ 1.07 and $ 2.11 , resulting in net proceeds to the company of approximately $ 46.1 million , after subtracting sales commissions and other offering expenses . such sales were made pursuant to the company 's effective shelf registration statement on form s-3 ( file no . 333-223960 ) , which was filed with the securities and exchange commission ( the “ sec ” ) on march 27 , 2018 , as amended on may 15 , 2018 , and declared effective on june 5 , 2018 ( the “ registration statement ” ) , and a base prospectus dated as of june 5 , 2018 included in the registration statement and the prospectus supplements relating to the atm filed with the sec on march 3 , 2020 and june 22 , 2020. the eda was terminated as of february 12 , 2021. reverse stock split on january 7 , 2020 , we effected a 1-for-45 reverse split of our outstanding common stock . critical accounting policies and estimates our consolidated financial statements are prepared in accordance with u.s. generally accepted accounting principles ( “ gaap ” ) . in connection with the preparation of our consolidated financial statements , we are required to make assumptions and estimates about future events , and apply judgments that affect the reported amounts of assets , liabilities , revenue , expenses and the related disclosures . we base our assumptions , estimates and judgments on historical experience , current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared . on a regular basis , we review the accounting policies , assumptions , estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with gaap . however , because future events and their effects can not be determined with certainty , actual results could differ from our assumptions and estimates , and such differences could be material . our significant accounting policies are discussed in note 2 of the audited consolidated financial statements for the years
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cash flows related to investing activities during the year ended december 31 , 2020 include $ 972,000 for the purchase of property and equipment , $ 862,000 for investment in capitalized software , $ 8.0 million for a short term investment , $ 2.2 million for cash paid the in systat license agreement , $ 1.5 million for cash paid for the ten degrees acquisition , $ 7.8 million for cash paid in the nanotron acquisition , $ 311,000 of cash acquired in the nanotron acquisition , and $ 2.5 million for a long term investment . cash flows related to investing activities during the year ended december 31 , 2019 include $ 89,000 for the purchase of property and equipment , $ 927,000 investment in capitalized software , $ 250,000 for cash paid for the gtx asset acquisition , $ 204,000 for cash paid for the locality acquisition , $ 70,000 of cash acquired in the locality acquisition , $ 3.7 million for cash paid for the jibestream acquisition , and $ 6,000 of cash acquired in the jibestream acquisition .. cash flows from financing activities as of december 31 , 2020 and 2019 net cash flows provided by financing activities during the year ended december 31 , 2020 was $ 57.3 million . net cash flows provided by financing activities during the year ended december 31 , 2019 was $ 19.4 million .
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Liquidity
| 7,876
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we expect this trial to be initiated by the end of the calendar year 2017. mskcc collaboration in may 2015 , we entered into a sponsored research agreement with investigators at mskcc to identify effective treatment combinations based on our phosphatidylserine ( “ ps ” ) -targeting agents , including bavituximab , with other checkpoint inhibitors or immune stimulating agents that will further guide our clinical development program . to date , preclinical data generated from the investigators at mskcc have further supported our belief that bavituximab modulates the immunosuppressive tumor microenvironment and enhances the activity of other immunotherapy agents . mskcc continues to evaluate bavituximab with other immunotherapy agents , which will further guide our clinical development program . phase iii sunrise trial in december 2013 , we initiated a randomized , double-blind , placebo-controlled phase iii trial evaluating bavituximab plus docetaxel , versus docetaxel plus placebo , for the treatment of previously-treated nsclc ( the “ phase iii sunrise trial ” ) . in february 2016 , we announced that we were discontinuing the phase iii sunrise trial based on the recommendation of the study 's independent data monitoring committee following a pre-specified interim analysis performed after 33 % of targeted overall events ( patient deaths ) . results of the analysis demonstrated that the patients treated in the bavituximab plus docetaxel treatment arm did not show a sufficient improvement in overall survival as compared to the patients treated in the docetaxel plus placebo treatment arm to warrant continuation of the study . patient enrollment was discontinued and existing patients in the trial were given the choice to continue chemotherapy and or bavituximab , as appropriate . patient treatment and follow-up data from the trial were collected through march 2017 and the trial is now closed . following the discontinuation of the phase ii sunrise trial , we promptly initiated and are nearing completion of an extensive review and analysis of the available data and testing the numerous collected samples for potential biomarkers in order to understand what subgroups may have benefited more from the bavituximab treatment . we believe such information will be important in supporting and refining our clinical strategy , as discussed above . the most compelling data to date was presented in april 2017 at the annual meeting of the aacr . in a subgroup analysis , we looked at the outcome of 91 patients that were enrolled in the phase iii sunrise trial that were subsequently treated with immune checkpoint inhibitors ( “ ici 's ” ) post study treatments . the results from this analysis demonstrated that the patients who received docetaxel plus bavituximab and subsequent ici 's ( anti-pd-1/pd-l1 ) had not yet reached median overall survival ( “ mos ” ) compared to mos of 13.0 months for patients who received docetaxel plus placebo ( hazard ratio [ hr ] , 0.43 ; p=0.005 ) . the statistically significant difference between the two arms in the trial provides strong rationale for combining bavituximab with ici 's and supports the hypothesis that bavituximab may modulate the tumor microenvironment to enhance the anti-tumor activity of ici 's . 32 in june 2017 , we announced additional supportive data at the annual meeting of the american society of clinical oncology ( “ asco ” ) demonstrating that patients in the bavituximab containing arm who had low baseline pd-l1 expression on tumor cells ( i.e . , patients typically with poorer response to pd-1/pd-l1 checkpoint inhibitors ) lived significantly longer than patients with high baseline pd-l1 expression . these data further support the hypothesis that bavituximab may modulate the tumor microenvironment to complement and enhance the anti-tumor activity of ici 's . results of operations the following table compares the consolidated statements of operations and comprehensive loss for the fiscal years ended april 30 , 2017 , 2016 and 2015. this table provides you with an overview of the changes in the statements of operations and comprehensive loss for the comparative periods , which are further discussed below . replace_table_token_7_th contract manufacturing revenue fiscal year 2017 compared to fiscal year 2016 : the increase in contract manufacturing revenue of $ 13,273,000 ( 30 % ) during fiscal year 2017 was primarily due to manufacturing services provided to support the process validation of three separate customer products in the amount of $ 15,444,000 , all of which were manufactured in our myford facility . no process validation services were provided in the prior year for third-party customers . excluding any future potential new business , we expect contract manufacturing revenue for fiscal year 2018 to slightly decline in comparison to fiscal year 2017. part of this decline is due to lower anticipated commitments from halozyme , inc. ( our largest customer ) based on their most recent committed forecast ( covering the three quarters ending march 2018 ) , which amount is expected to be partially offset by revenue in the amount of $ 10 million that was expected to be recognized in fiscal year 2017 , but has been shifted to fiscal year 2018 due to a delay in shipping product that was complete and ready for shipment as of the fiscal year ended april 30 , 2017 . 33 as we continue to seek to diversify our customer base , over the recent months , we have secured four new customers . these new customers are predominately in an earlier stage of development and , therefore , we expect that contract manufacturing revenue from these new customers during fiscal year 2018 will only partially offset the net anticipated decrease from our other existing customers . therefore , based on our current commitments for manufacturing services and the anticipated completion of in-process third-party customer manufacturing runs , we expect contract manufacturing revenue for fiscal year 2018 to range from $ 50 to $ 55 million . story_separator_special_tag revenue is recognized for these “ bill-and-hold ” arrangements in accordance with the authoritative guidance , which requires , among other things , the existence of a valid business purpose for the arrangement ; the “ bill-and-hold ” arrangement is at the request of the customer ; title and risk of ownership must pass to the customer ; the product is complete and ready for shipment ; a fixed delivery date that is reasonable and consistent with the customer 's business practices ; the product has been separated from our inventory ; and no further performance obligations by us exist . in addition , we also follow the authoritative guidance when reporting revenue as gross when we act as a principal versus reporting revenue as net when we act as an agent . for transactions in which we act as a principal , have discretion to choose suppliers , bear credit and inventory risk and perform a substantive part of the services , revenue is recorded at the gross amount billed to a customer and costs associated with these reimbursements are reflected as a component of cost of sales for contract manufacturing services . any amounts received prior to satisfying our revenue recognition criteria are recorded as deferred revenue or customer deposits in the accompanying consolidated financial statements . we also record a provision for estimated contract losses , if any , in the period in which they are determined . research and development expenses research and development expenses primarily include ( i ) payroll and related costs , including share-based compensation associated with research and development personnel , ( ii ) costs related to clinical trials and preclinical testing of our technologies under development , ( iii ) costs to develop and manufacture the product candidates , including raw materials and supplies , product testing , depreciation , and facility related expenses , ( iv ) expenses for research services provided by universities and contract laboratories , including sponsored research funding , and ( v ) other research and development expenses . research and development expenses are charged to expense as incurred when these expenditures relate to our research and development efforts and have no alternative future uses . clinical trial costs are a significant component of our research and development expenses . we have a history of contracting with third parties that perform various clinical trial activities on our behalf in the ongoing development of our product candidates . the financial terms of these contracts are subject to negotiations and may vary from contract to contract and may result in uneven payment flow . expenses related to clinical trials are accrued based on our estimates and or representations from third parties ( including clinical research organizations ) regarding services performed . if the contracted amounts are modified ( for instance , as a result of changes in the clinical trial protocol or scope of work to be performed ) , we modify our accruals accordingly on a prospective basis . revisions in the scope of a contract are charged to expense in the period in which the facts that give rise to the revision become reasonably certain . there were no material adjustments for a change in estimate to research and development expenses in the accompanying consolidated financial statements in any of the three years ended april 30 , 2017. under certain research and development agreements , we are obligated to make certain advance payments , including nonrefundable amounts , for goods or services that will be used or rendered for future research and development activities and are deferred and capitalized as prepaid research and development expenses . these advance payments are recognized as an expense in the period the related goods are delivered or the related services are performed . we assess our prepaid research and development expenses for impairment when events or changes in circumstances indicate that the carrying amount of the prepaid expense may not be recoverable or provide future economic benefit . 37 in addition , under certain in-licensing agreements associated with the research and development of our product candidates , we are obligated to pay certain milestone payments based on potential clinical development and regulatory milestones ( as described in note 4 to the accompanying consolidated financial statements ) . these milestone payments have no alternative future uses ( in other research and development projects or otherwise ) and therefore have no separate economic values and are expensed as research and development costs at the time the costs are incurred . we have no in-licensed product candidates that have alternative future uses in research and development projects or otherwise . in addition , we do not perform any research and development activities for any unrelated entities . share-based compensation we account for stock options and other share-based awards granted under our equity compensation plans in accordance with the authoritative guidance for share-based compensation . the estimated fair value of share-based payments to employees in exchange for services is measured at the grant date , using a fair value based method , such as a black-scholes option valuation model , and is recognized as expense on a straight-line basis over the requisite service periods . the fair value of modifications to share-based awards , if any , is generally estimated using a black-scholes option valuation model , unless a lattice model is required . share-based compensation expense recognized during the period is based on the value of the portion of the share-based payment that is ultimately expected to vest during the period and is reduced for estimated forfeitures . the authoritative guidance requires forfeitures to be estimated at the time of grant and revised , if necessary , in subsequent periods if actual forfeitures differ from those estimates . as of april 30 , 2017 , there were no outstanding share-based awards with market or performance conditions . the estimated fair value of stock options are measured at the grant date , using a
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cash used in investing activities during fiscal year 2017 consisted of property and equipment acquisitions of $ 1,501,000 related to our manufacturing operations combined with an increase in other assets of $ 1,491,000 primarily related to deposits and or progress payments for certain equipment to support the growth of our manufacturing operations . cash used in investing activities during fiscal year 2016 consisted of property and equipment acquisitions of $ 9,324,000 offset by a decrease in other assets of $ 533,000. property and equipment acquisitions during fiscal year 2016 primarily related to costs associated with the construction of our myford facility to support avid 's projected revenue growth and to support the manufacturing of our product candidates . the construction of the myford facility was completed and placed into service during fiscal year 2016. cash used in investing activities during fiscal year 2015 consisted of property and equipment acquisitions of $ 9,047,000 offset by a decrease in other assets of $ 598,000. property and equipment acquisitions during fiscal year 2015 primarily related to construction-in-progress associated with the construction of the aforementioned myford facility , the implementation of an enterprise resource planning system , and the acquisition of laboratory equipment . 40 cash provided by financing activities . net cash provided by financing activities for the fiscal years ended april 30 , 2017 , 2016 , and 2015 , was $ 28,165,000 , $ 41,793,000 and $ 34,979,000 , respectively .
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Liquidity
| 2,591
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income taxes cbiz recorded income tax expense from continuing operations of $ 16.4 million and $ 14.1 million for the years ended december 31 , 2013 and 2012 , respectively . the effective tax rate for the years ended december 31 , 2013 and 2012 was 39.7 % and 38.2 % , respectively . the increase in the effective tax rate is primarily due to an increase in state taxes driven by a release of a valuation allowance in 2012 with respect to a state tax credit carryforward as well as a lower amount of valuations allowances released in 2013 compared to 2012 with respect to state net operating losses . for further discussion regarding income tax expense , see note 7 to the accompanying consolidated financial statements . earnings per share and non-gaap earnings per share earnings per share from continuing operations were $ 0.51 and $ 0.46 per diluted share for the years ended december 31 , 2013 and 2012 , respectively . earnings per share for the year ended december 31 , 2012 included a gain of approximately $ 0.02 per diluted share related to a legal settlement recovery that was recorded in other income and a gain of approximately $ 0.03 per diluted share related to the divestiture of the wealth management business that occurred in the first quarter of 2011. non-gaap earnings per share were $ 1.08 and $ 0.92 per diluted share for the years ended december 31 , 2013 and 2012 , respectively . the company believes non-gaap earnings and non-gaap earnings per diluted share , which are both non-gaap measures , illustrate the impact of certain non-cash charges to income from continuing operations and are a useful performance measure for the company , its analysts and its stockholders . management uses these performance measures to evaluate cbiz 's business , including ongoing performance and the allocation of resources . non-gaap earnings and non-gaap earnings per diluted share are provided in addition to the presentation of gaap measures and should not be regarded as a replacement or alternative of performance under gaap . the following is a reconciliation of income from continuing operations to non-gaap earnings from operations and earnings per diluted share from continuing operations to non-gaap earnings per diluted share for the years ended december 31 , 2013 and 2012. non-gaap earnings and per share data reconciliation of income from continuing operations to non-gaap earnings from continuing operations replace_table_token_9_th 28 operating practice groups financial services replace_table_token_10_th the growth in same-unit revenue was approximately 65 % attributable to stronger performance in the units that provide certain national services and 35 % attributable to the traditional accounting and tax services . growth in the national units was primarily due to increased project work in the federal and state governmental health care compliance industry as well as in risk and advisory services . the growth in the traditional accounting and tax services was due to a 0.7 % increase in billable hours and a 1.3 % increase in revenue per hour for the year ended december 31 , 2013 compared to the same period a year ago . revenue from acquired businesses was the result of the acquisition of phbv partners , l.l.p . ( phbv ) , which occurred on december 31 , 2012. cbiz provides a range of services to affiliated cpa firms under joint referral and asas . fees earned by cbiz under the asas are recorded as revenue in the accompanying consolidated statements of comprehensive income and were approximately $ 140.2 million and $ 116.1 million for the years ended december 31 , 2013 and 2012 , respectively . the increase in asa fees was primarily the result of the phbv acquisition . the largest components of operating expenses for the financial services practice group are personnel costs , occupancy costs , and travel and related costs which represented 89.3 % and 89.1 % of total operating expenses for the years ended december 31 , 2013 and 2012 , respectively . personnel costs increased $ 30.9 million during the year ended december 31 , 2013 compared to the same period in 2012 , and represented 68.7 % and 68.9 % of revenue for the years ended december 31 , 2013 and 2012 , respectively . the increase was largely attributable to the acquisition of phbv , comprising $ 23.0 million of the variance , as well as a same-unit increase of $ 7.1 million due to increased headcount . occupancy costs are relatively fixed in nature and were $ 25.2 million and $ 24.3 million , or 5.5 % and 5.9 % of revenue , for the years ended december 31 , 2013 and 2012 , respectively . the increase in occupancy costs is related primarily to the phbv acquisition . travel and related costs were $ 14.8 million and $ 11.4 million , or 3.2 % and 2.8 % of total revenue , for the years ended december 31 , 2013 and 2012 , respectively . the increase in travel and related costs was due to a higher volume of engagement-related costs ( which are billed to clients ) and professional staff training efforts , as well as from the impact of the phbv acquisition . in addition to the expenses discussed above , professional service costs were $ 6.2 million and $ 3.3 million , or 1.4 % and 0.8 % of total revenue , for the years ended december 31 , 2013 and 2012 , respectively . the increase in professional service costs was associated with outside services related to client engagements for our federal and state governmental health care contracts . 29 employee services replace_table_token_11_th the increase in same-unit revenue was attributable to several factors . property and casualty revenues increased 5.1 % due to better pricing throughout the industry as well as strong performance within the specialty program businesses . payroll business revenues increased 5.0 % primarily due to an increase in volume resulting from new clients coupled with pricing increases for core services . story_separator_special_tag retirement consulting revenues increased 4.3 % due to net growth in assets resulting from client contributions and favorable equity market conditions . these increases were partially offset by a decline in the life insurance business of $ 2.5 million due to several large non-recurring policies that were placed in 2012. excluding the impact of the life insurance business , same-unit revenue increased 2.1 % for the year ended december 31 , 2013 compared to the year ended december 31 , 2012. the growth in revenue from acquisitions was provided by : strategic employee benefit services , an employee benefits client list in the chicago , illinois market that was acquired in the first quarter of 2012 ; primarily care , inc. , an employee benefits business located in cranston , rhode island that was acquired in the second quarter of 2012 ; stoltz and company , ltd. , l.l.p. , a property and casualty insurance and employee benefits business headquartered in midland , texas that was acquired in the third quarter of 2012 ; trinity risk advisors , inc. , a property and casualty insurance business located in atlanta , georgia that was acquired in the third quarter of 2012 ; strategic employee benefit services the pruett group , inc. , an employee benefits business headquartered in nashville , tennessee that was acquired in the fourth quarter of 2012 ; the employee benefit division of leavitt pacific insurance brokers , inc. , located in the san jose , california market that was acquired in the fourth quarter of 2012 ; diversified industries , inc. d/b/a payroll control systems , a payroll business in minneapolis , minnesota that was acquired in the fourth quarter of 2012 ; and associated insurance agents , a property and casualty and employee benefits business located in minneapolis , minnesota , that was acquired in the second quarter of 2013. the largest components of operating expenses for the employee services group are personnel costs , including commissions paid to third party brokers , and occupancy costs , representing 82.1 % and 82.6 % of total operating expenses for the year ended december 31 , 2013 and 2012 , respectively . excluding costs related to the acquired businesses of $ 9.7 million , personnel costs increased approximately $ 0.5 million , primarily due to commissions paid to producers relating to increased revenue in the property and casualty , payroll , and retirement services 30 businesses . occupancy costs are relatively fixed and were $ 11.3 million and $ 10.7 million the years ended december 31 , 2013 and 2012 , respectively , and increased due to the acquisitions in 2013. national practices replace_table_token_12_th the national practices group is primarily comprised of a cost-plus contract with cbiz 's largest client ( edward jones ) and cbiz 's healthcare consulting business . revenues from the edward jones business accounted for approximately 70 % of the national practice group 's revenue , with the healthcare consulting accounting for the remaining revenue . effective december 31 , 2013 , cbiz sold its mergers and acquisition business which comprises the divested operations reflected in the table above . the increase in same-unit revenue was attributable to an increase of $ 1.4 million resulting from an increase in services provided to edward jones as a result of an increase in required technology support as well as an increase in reimbursement dollars due to an increase in compensation . the largest components of operating expenses for the national practices group are personnel costs , occupancy costs , and travel and related costs representing 94.5 % and 94.0 % of total operating expenses for the years ended december 31 , 2013 and 2012 , respectively . personnel costs increased $ 1.0 million for the year ended december 31 , 2013 compared to the same period in 2012 , and increased as a percentage of revenue to 82.9 % of revenue for the year ended december 31 , 2013 compared to 80.6 % of revenue for the same period last year . the increase in personnel costs is due primarily to increases in demand for services provided under the edward jones cost-plus contract arrangement as well as an increase in wages for annual raises . travel and related costs were relatively consistent in both periods and were $ 0.3 million and $ 0.4 million for the years ended december 31 , 2013 and 2012 , respectively . occupancy costs are relatively fixed in nature and were $ 0.5 million for the years ended december 31 , 2013 and 2012 . 31 year ended december 31 , 2012 compared to year ended december 31 , 2011 revenue the following table summarizes total revenue for the years ended december 31 , 2012 and 2011 ( in thousands , except percentages ) : replace_table_token_13_th a detailed discussion of revenue by practice group is included under operating practice groups . gross margin and operating expenses operating expenses increased to $ 555.5 million for the year ended december 31 , 2012 from $ 518.5 million in 2011 , and increased as a percentage of revenue to 88.7 % for the year ended december 31 , 2012 from 87.7 % for 2011. the primary components of operating expenses for the years ended december 31 , 2012 and 2011 are illustrated in the following table : replace_table_token_14_th ( 1 ) other operating expenses include office expenses , equipment costs , restructuring charges , bad debt and other expenses , none of which are individually significant as a percentage of total operating expenses . personnel costs as a percentage of revenue increased 0.6 % to 67.9 % for the year ended december 31 , 2012 compared to 2011. the increase in personnel costs as a percentage of revenue was primarily the result of a 0.3 % increase in incentive compensation and a 0.3 % increase in salaries and wages and related benefits costs resulting from an increase in headcount and personnel investments made in the financial services practice group .
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during the year ended december 31 , 2013 , cbiz acquired two businesses : associated insurance agents ( aia ) , located in minneapolis , minnesota , an insurance brokerage agency specializing in property and casualty insurance , personal lines and health and benefit insurance ; and knight field fabry , llp ( knight ) , primarily located in denver , colorado , an accounting service company providing traditional accounting , tax , litigation support and valuation services . revenues from these business acquisitions are estimated to exceed $ 5.3 million for the year ending december 31 , 2014. the operating results of aia and knight are reported in the employee services and financial services practice groups , respectively . in addition to the business acquisitions , cbiz acquired three client lists , two of which are reported in the employee services practice group and the third being reported in the financial services practice group . for more details regarding cbiz 's acquisitions , refer to note 19 of the accompanying consolidated financial statements . on august 30 , 2013 , cbiz sold all of the issued and outstanding capital stock of cbiz medical management professionals , inc. and cbiz medical management , inc. and substantially all of the stock of their subsidiary companies , collectively consisting of all of cbiz 's mmp 's ongoing operations and business for a purchase price of $ 201.6 million , subject to final working capital adjustments pursuant to a stock purchase agreement among cbiz operations , inc. and zotec partners , llc dated july 26 , 2013. after transaction costs and taxes , proceeds from the transaction were approximately $ 145 million . the proceeds were used to repurchase shares from westbury as discussed below and to pay down outstanding debt on the unsecured credit facility . the results of operations for mmp for the years ended december 31 , 2013 , 2012 and 2011 are included in income for discontinued operations , net of tax and the gain on the sale of mmp of approximately $ 58.3 million is recorded in gain on disposal of discontinued operations , net of tax on the consolidated statements of comprehensive income . the assets and liabilities of mmp have been consolidated and are included in assets of discontinued
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” 63 fair value of derivative instruments : the fair value of derivative instruments in autodesk 's consolidated balance sheets were as follows as of january 31 , 2012 and january 31 , 2011 : balance sheet location fair value at january 31 , 2012 january 31 , 2011 derivative assets foreign currency contracts designated as cash flow hedges prepaid expenses and other current assets $ 11.9 $ 5.1 derivatives not designated as hedging instruments story_separator_special_tag the discussion in our md & a contains trend analyses and other forward-looking statements within the meaning of section 27a of the securities act of 1933 and section 21e of the securities exchange act of 1934. forward-looking statements are any statements that look to future events and consist of , among other things , our business strategies , including those discussed below in “ strategy ” below , anticipated future net revenue , future operating margin and other future financial results ( by product type and geography ) and operating expenses , the effect of unemployment and availability of credit , the effects of the u.s. credit downgrade and weak global economic conditions , our backlog , expected trends in certain financial metrics , expected market trends , including the growth of cloud , mobile and social computing , the impact of acquisitions and investment activities , the effect of fluctuations in exchange rates and our hedging activities on our financial results , the impact of natural disaster on our operations and financial results , our abilities to successfully expand adoption of our products , our ability to gain market acceptance of new businesses and sales initiatives , and our ability to successfully increase sales of product suites as part of our overall sales strategy , our belief that the strength of our channel network , technological leadership , brand recognition , breadth of product line , and large installed base are benefiting us as global economies recover , the impact of economic volatility and geopolitical activities in certain countries , particularly emerging economy countries , and the resulting effect on our financial results , and the impact of our restructuring activities . in addition , forward-looking statements also consist of statements involving expectations regarding product acceptance , continuation of our stock repurchase program , statements regarding our liquidity and short-term and long-term cash requirements , as well as , statements involving trend analyses and statements including such words as “ may , ” “ believe , ” “ could , ” “ anticipate , ” “ would , ” “ might , ” “ plan , ” “ expect , ” and similar expressions or the negative of these terms or other comparable terminology . these forward-looking statements speak only as of the date of this annual report on form 10-k and are subject to business and economic risks . as such , our actual results could differ materially from those set forth in the forward-looking statements as a result of the factors set forth above in item 1a , “ risk factors , ” and in our other reports filed with the u.s. securities and exchange commission . we assume no obligation to update the forward-looking statements to reflect events that occur or circumstances that exist after the date on which they were made . strategy autodesk 's vision is to help people imagine , design and create a better world . we do this by developing software for the world 's designers , architects , engineers , and digital artists—the people who create the world 's products , buildings , infrastructure , films , and games . autodesk serves customers in three primary markets : architecture , engineering and construction ; manufacturing ; and digital media and entertainment . our goal is to provide our customers with the world 's most valuable , innovative , and engaging software and services . our product and services portfolio allow our customers to digitally visualize , simulate , and analyze their projects , helping them to better understand the consequences of their design decisions ; save time , money , and resources ; and become more innovative . today , complex challenges such as globalization , urbanization , and sustainable design are driving our customers to new levels of performance and competitiveness , and we are committed to helping them address those challenges and take advantage of new opportunities . to achieve these goals , we are capitalizing on two of our strongest competitive advantages : our ability to bring advanced technology to mainstream markets , and the breadth and depth of our product portfolio . by innovating in existing technology categories , we bring powerful new design capabilities to volume markets . our products are designed to be easy-to-learn and use , and to provide customers with a low cost of deployment , a low total cost of ownership , and a rapid return on investment . in addition , our software architecture allows for extensibility and integration with other products . the breadth of our technology and product line gives us a unique competitive advantage , because it allows our customers to address a wide variety of problems in ways that transcend industry and disciplinary boundaries . this is particularly important in helping our customers address the complex challenges mentioned above . we also believe that our technological leadership and global brand recognition have positioned us well for long-term growth and industry leadership . in addition to the competitive advantages afforded by our technology , our large global network of distributors , resellers , third-party developers , customers , educational institutions , faculty and students is a key competitive advantage . this network of relationships provides us with a broad and deep reach into volume markets around the world . our distributor and reseller network is extensive and provides our customers with the resources to purchase , deploy , learn , and support our products quickly and easily . story_separator_special_tag in fiscal 2012 , we increased the number , pace and dollars spent on acquisitions in comparison to fiscal 2011 , but our decision to acquire businesses or technology is dependent on our business needs , the availability of suitable sellers and technology , and our own financial condition . 28 our strategy depends upon a number of assumptions , including that we will be able to continue making our technology available to mainstream markets ; leverage our large global network of distributors , resellers , third-party developers , customers , educational institutions , and students ; improve the performance and functionality of our products ; and adequately protect our intellectual property . if the outcome of any of these assumptions differs from our expectations , we may not be able to implement our strategy , which could potentially adversely affect our business . for further discussion regarding these and related risks see part i , item 1a , “ risk factors . ” critical accounting policies and estimates our consolidated financial statements are prepared in conformity with u.s. generally accepted accounting principles . in preparing our consolidated financial statements , we make assumptions , judgments and estimates that can have a significant impact on amounts reported in our consolidated financial statements . we base our assumptions , judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances . actual results could differ materially from these estimates under different assumptions or conditions . we regularly reevaluate our assumptions , judgments and estimates . our significant accounting policies are described in note 1 , “ business and summary of significant accounting policies , ” in the notes to consolidated financial statements . we believe that of all our significant accounting policies , the following policies involve a higher degree of judgment and complexity . accordingly , these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations . revenue recognition . we recognize revenue when persuasive evidence of an arrangement exists , delivery has occurred or services have been rendered , the price is fixed or determinable and collection is probable . however , determining whether and when some of these criteria have been satisfied often involves assumptions and judgments that can have a significant impact on the timing and amount of revenue we report . for multiple element arrangements , we allocate the sales price among each of the deliverables using the residual method , under which revenue is allocated to undelivered elements based on their vendor-specific objective evidence ( “ vsoe ” ) of fair value . vsoe is the price charged when an element is sold separately or a price set by management with the relevant authority . if we do not have vsoe of an undelivered software license , we defer revenue recognition on the entire sales arrangement until all elements for which we do not have vsoe are delivered . if we do not have vsoe for undelivered maintenance or services , the revenue for the arrangement is recognized over the longest contractual service period in the arrangement . we are required to exercise judgment in determining whether vsoe exists for each undelivered element based on whether our pricing for these elements is sufficiently consistent . our assessment of likelihood of collection is also a critical factor in determining the timing of revenue recognition . if we do not believe that collection is probable , the revenue will be deferred until the earlier of when collection is deemed probable or payment is received . our indirect channel model includes both a two-tiered distribution structure , where distributors sell to resellers , and a one-tiered structure where autodesk sells directly to resellers . our product license revenue from distributors and resellers are generally recognized at the time title to our product passes to the distributor , in a two-tiered structure , or reseller , in a one-tiered structure , provided all other criteria for revenue recognition are met . this policy is predicated on our ability to estimate sales returns , among other criteria . we are also required to evaluate whether our distributors and resellers have the ability to honor their commitment to make fixed or determinable payments , regardless of whether they collect payment from their customers . our policy also presumes that we have no significant performance obligations in connection with the sale of our product licenses by our distributors and resellers to their customers . if we were to change any of these assumptions or judgments , it could cause a material increase or decrease in the amount of revenue that we report in a particular period . marketable securities . at january 31 , 2012 we had $ 447.2 million of short and long-term marketable securities . marketable securities are stated at fair value . as described in note 2 , “ financial instruments , ” in the notes to the consolidated financial statements , we estimate the fair value of our marketable securities each quarter . fair value is defined as an exit price , representing the amount that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date . when identical or similar assets are traded in active markets , the level of judgment required to estimate their fair value is relatively low . this is generally true for our cash and cash equivalents and the majority of our marketable securities , which we consider to be level 1 assets and level 2 assets . however , determining the fair value of marketable securities when observable inputs are not available ( level 3 ) requires significant judgment .
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results of operations net revenue replace_table_token_5_th fiscal 2012 net revenue compared to fiscal 2011 net revenue license and other revenue license and other revenue is comprised of two components : all forms of product license revenue and other revenue . product license revenue includes revenue from the sale of new seat licenses and upgrades . other revenue consists of revenue from creative finishing , consulting and training services and hosted technology solutions . total license and other revenue increased 16 % during fiscal 2012 as compared to fiscal 2011 . this increase was primarily due to the 16 % increase in revenue from commercial new seat licenses during fiscal 2012 as compared to fiscal 2011 . during fiscal 2012 , 13 percentage points of the 16 % increase was due to the increase in the number of seats sold , and 3 percentage points was due to an increase in the average net revenue per seat . commercial new seat revenue , as a percentage of license and other revenue , was 67 % for both fiscal 2012 and 2011 . also contributing to the increase in license and other revenue during fiscal 2012 , as compared to fiscal 2011 , was the 14 % increase in upgrade revenue . upgrade revenue increased during fiscal 2012 in comparison to fiscal 2011 primarily due to an acad lt upgrade promotion during the first quarter of fiscal 2012 , an increase in large enterprise transactions , customers migrating from stand-alone products to suites and a promotion that was run related to the education solutions suites . backlog related to current software license product orders that had not shipped at the end of the quarter decreased by $ 0.4 million during fiscal 2012 from $ 27.5 million at january 31 , 2011 to $ 27.1 million at january 31 , 2012 .
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the company assesses its leasing arrangements to determine the rate implicit in the lease arrangement . historically , the company 's leasing arrangements do not contain the information necessary to determine the rate implicit in the lease . as such , the company utilizes its incremental borrowing rate over the relevant lease term , which is the rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment . the incremental borrowing rate is determined at the lease commencement date and is developed utilizing a readily available market interest rate story_separator_special_tag overview we are a global provider of specialty catalysts , chemicals and services with leading supply positions across our portfolio . we compete in the global specialty chemicals and materials industry where we seek to focus on attractive , high-growth applications . our products and services provide critical performance to our customers ' products and we are able to offer many of our customers regionally sourced materials to reduce costs and improve delivery logistics . we provide our customers with a combination of product technology and applications knowledge , global supply chain capabilities , and local production and logistical support . we conduct operations through three reporting segments : ( 1 ) refining services , ( 2 ) catalysts ( including our 50 % interest in the zeolyst joint venture ) and ( 3 ) performance chemicals . refining services : we are the leading provider of sulfuric acid recycling services to north american refineries for the production of alkylate , an essential gasoline component for lowering vapor pressure and increasing octane to meet stringent gasoline specifications and fuel efficiency standards . we are also a leading north american producer of on-purpose virgin sulfuric acid for water treatment , mining , and industrial applications . catalysts : we are a global supplier of finished silica catalysts and catalyst supports necessary to produce high strength and high stiffness plastics used in packaging films , bottles , containers , and other molded applications . we are also a leading global supplier of zeolites used for catalysts that remove nitrogen oxides from diesel engine emissions as well as sulfur from fuels during the refining process . performance chemicals : we are a leading global supplier of silicate and derivative products which serve as an environmentally friendly substitute for materials used in a variety of applications . these include end uses such as matting agents in surface coatings , clarifying agents for edible oils and beverages , additives for paints and coatings , and in cosmetics to improve feel attributes . in 2020 , we served over 2,000 customers globally across many end uses and , as of december 31 , 2020 , operated out of 40 manufacturing facilities , which are strategically located across five continents . on december 14 , 2020 , we completed the sale of our performance materials business to potters buyer , llc ( the “ purchaser ” ) , an affiliate of the jordan company , l.p. , for a purchase price of $ 650 million , which was subject to certain adjustments for indebtedness , working capital and cash at the closing of the transaction . the results of operations , financial condition , and cash flows for the performance materials businesses are presented herein as discontinued operations . refer to note 4 to our consolidated financial statements for additional information . recent developments on marc h 1 , 2021 , we announced that we entered into a definitive agreement to sell our performance chemicals business for a purchase price of $ 1.1 billion . we expect to use after-tax cash proceeds from the sale to reduce debt and return capital to our shareholders , subject to board approval and declaration . the transaction is expected to close by the end of 2021 , subject to regulatory approvals and customary closing conditions . beginning in the first quarter of 2021 , we expect to present the financial results of the performance chemicals business as discontinued operations . impact of covid-19 on our business and results in march 2020 , the outbreak of covid-19 was declared a national emergency by the united states . covid-19 continues to spread throughout the world and has adversely impacted economic activity and contributed to volatility in financial markets . in response to the covid-19 pandemic , the federal government , various states , local and foreign governments have issued decrees and orders that have disrupted many businesses and implemented social distancing , travel and other restrictions . in response to these restrictions , we have taken a variety of actions , including an international travel ban , distribution of personal protective equipment to employees , and work-at-home requirements for many of our employees who are not an integral part of our manufacturing operations . we have also implemented and refined our existing business continuity plans in an effort to minimize disruptions to our operations . these measures remain in place as of december 31 , 2020 . 46 recent and near term trends on business segment end uses the covid-19 pandemic led to unprecedented disruptions within the macro economy , with lower sales volume demand during 2020 , including the fourth quarter . the timing and magnitude of the impact to sales volume demand varied across our portfolio of businesses due to the many end uses . most of pq 's end use customers experienced improved demand during the fourth quarter , largely driven by a recovery of consumer products ranging from packaged products to automotive sales . the construction and mining segments also demonstrated improving demand . the company continues to match costs and production with the pattern and pace of demand recovery , which remains variable across end use subsectors . story_separator_special_tag adjusted ebitda consists of ebitda adjusted for ( i ) non-operating income or expense , ( ii ) the impact of certain non-cash , nonrecurring or other items included in net income ( loss ) and ebitda that we do not consider indicative of our ongoing operating performance , and ( iii ) depreciation , amortization and interest of our 50 % share of the zeolyst joint venture . adjusted net income consists of net income ( loss ) attributable to pq group holdings adjusted for ( i ) non-operating income or expense and ( ii ) the impact of certain non-cash , nonrecurring or other items included in net income ( loss ) that we do not consider indicative of our ongoing operating performance . we believe that these non-gaap financial measures provide investors with useful financial metrics to assess our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business . you should not consider adjusted ebitda or adjusted net income in isolation or as alternatives to the presentation of our financial results in accordance with gaap . the presentation of adjusted ebitda and adjusted net income financial measures may differ from similar measures reported by other companies and may not be comparable to other similarly titled measures . in evaluating adjusted ebitda and adjusted net income , you should be aware that we are likely to incur expenses similar to those eliminated in this presentation in the future and that certain of these items could be considered recurring in nature . our presentation of adjusted ebitda and adjusted net income should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items . reconciliations of adjusted ebitda and adjusted net income to gaap net income ( loss ) are included in the results of operations discussion that follows for each of the respective periods . 48 key factors and trends affecting operating results and financial condition sales our refining services and catalysts segments ' sales have grown primarily due to expansion into new end applications , including emission control catalysts , polymer catalysts , and refining catalysts , as well as continued supply share gains . sales in our refining services and catalysts segments are made on both a purchase order basis and pursuant to long-term contracts . historically , our performance chemicals segment has experienced relatively stable demand throughout economic cycles , due to the diverse consumer and industrial end uses that our products serve . expansions into new applications , including personal care and consumer cleaning , as well as share gains in existing end uses , have added to our sales growth . product sales from our performance chemicals segment are made on both a purchase order basis and pursuant to long-term contracts . cost of goods sold cost of goods sold consists of variable product costs , fixed manufacturing expenses , depreciation expense and freight expenses . variable product costs include all raw materials , energy and packaging costs that are directly related to the manufacturing process . fixed manufacturing expenses include all plant employment costs , manufacturing overhead and periodic maintenance costs . the primary raw materials for our refining services segment include spent sulfuric acid , sulfur , sodium silicates , acids , bases , and certain metals . the primary raw materials used in the manufacture of products in our performance chemicals an d catalysts segments include soda ash , industrial sand , aluminum trihydrate and sodium hydroxide ( also known as `` caustic soda '' ) . most of our refining services contracts feature take-or-pay volume protection and or quarterly price adjustments for commodity inputs , labor , the chemical engineering index ( u.s. chemical plant construction cost index ) and natural gas . spent acid for our refining services segment is supplied by customers for a nominal charge as part of their contracts . over 80 % of our refining services segment sales for the year ended december 31 , 2020 were under contracts featuring quarterly price adjustments . the price adjustments generally reflect actual costs for producing acid and tend to protect us from volatility in labor , fixed costs and raw material pricing . for the year ended december 31 , 2020 , approximately 50 % of our north american silicate sales , which is a significant portion of our performance chemicals segment sales , were derived from contracts that included raw material pass-through clauses . under these contracts , there generally is a time lag of three to nine months for price changes to pass through , depending on the magnitude of the change in cost and other market dynamics . freight expenses are generally passed through directly to customers . while natural gas is not a direct feedstock for any product , all businesses use natural gas powered furnaces to heat raw materials and create the chemical reactions necessary to produce end-products . we maintain multiple suppliers wherever possible , hedge exposure to fluctuations in prices for natural gas purchases in the united states , make forward purchases of natural gas in the united states , canada , and europe to mitigate our exposure to price volatility , and structure our customer contracts when possible to allow for the pass-through of raw material and natural gas costs . joint ventures we account for our investments in our equity joint ventures under the equity method . our largest joint venture , the zeolyst joint venture , manufactures high performance , specialty , zeolite-based catalysts for use in the emission control industry , the petrochemical industry and other areas of the broader chemicals industry . we share proportionally in the management of our joint ventures with the other parties to each such joint venture . seasonality our refining services segment typically experiences seasonal fluctuations as a result of higher demand for gasoline products in the summer and lower demand in the winter months . these demand fluctuations results in higher sales and working capital requirements in the second and third quarter .
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results of operations year ended december 31 , 2020 compared to the year ended december 31 , 2019 highlights the following is a summary of our financial performance for the year ended december 31 , 2020 compared with the year ended december 31 , 2019. sales sales decreased $ 92.5 million to $ 1,107.4 million . the decrease in sales was primarily due to lower sales volumes , the unfavorable effects of foreign currency translation , and pass-through of lower sulfur pricing . gross profit gross profit decreased $ 25.0 million to $ 273.4 million . the decrease in gross profit was primarily due to lower sales volumes and the unfavorable effects of foreign currency translation , partly offset by favorable fixed manufacturing costs . operating ( loss ) income operating ( loss ) income decreased $ 310.4 million to $ 162.9 million . the decrease in operating ( loss ) income was primarily due to a goodwill impairment charge of $ 260.0 million related to our performance chemicals segment , a decrease in gross profit and an increase in transaction-related charges for the year ended december 31 , 2020. equity in net income from affiliated companies equity in net income of affiliated companies for the year ended december 31 , 2020 was $ 21.2 million , compared with net income of $ 46.0 million for the year ended december 31 , 2019. the decrease was due to lower earnings of $ 24.6 million generated by the zeolyst joint venture during the year ended december 31 , 2020 as compared to the year ended december 31 , 2019 .
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an allowance is also estimated for non-adversely classified loans using a historical loss percentage based on losses arising specifically from non-adversely classified loans , adjusted for various economic and environmental factors related to the underlying loans . each month the company 's senior loan committee reviews each business unit 's allowance , and the aggregate allowance for the company and , on a quarterly basis , adjusts and approves the adequacy of the allowance . in addition , annually or more frequently as needed , the senior loan committee evaluates and establishes the loss percentages used in the estimates of the allowance based on historical loss data , and giving consideration to their assessment of current economic and environmental conditions . to facilitate the senior loan committee 's evaluation , the company 's asset quality department performs periodic reviews of each of the company 's business units and reports on the adequacy of management 's identification of impaired and adversely classified loans , and their adherence to the company 's loan policies and procedures . the process of evaluating the adequacy of the allowance for loan losses necessarily involves the exercise of judgment and consideration of numerous subjective factors and , accordingly , there can be no assurance that the estimate of incurred losses will not change in light of future developments and economic conditions . different assumptions and conditions could result in a materially different amount for the allowance for loan losses . income taxes the company files a consolidated income tax return . deferred taxes are recognized under the liability method based upon the future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities , using the tax rates expected to apply to taxable income in the periods when the related temporary differences are expected to be realized . the amount of accrued current and deferred income taxes is based on estimates of taxes due or receivable from taxing authorities either currently or in the future . changes in these accruals are reported as tax expense , and involve estimates of the various components included in determining taxable income , tax credits , other taxes and temporary differences . changes periodically occur in the estimates due to changes in tax rates , tax laws and regulations , and implementation of new tax planning strategies . the process of determining the accruals for income taxes necessarily involves the exercise of considerable judgment and consideration of numerous subjective factors . management performs an analysis of the company 's tax positions annually and believes it is more likely than not that all of its tax positions will be utilized in future years . intangible assets and goodwill core deposit intangibles are amortized on a straight-line basis over the estimated useful lives of seven to ten years and customer relationship intangibles are amortized on a straight-line basis over the estimated useful life of eight to eighteen years . mortgage servicing rights are amortized based on current prepayment assumptions . goodwill is not amortized . at least annually in the fourth quarter , intangible assets , excluding mortgage servicing rights , and goodwill are evaluated for possible impairment . impairment losses are measured by comparing the fair values of the intangible assets with their recorded amounts . any impairment losses are reported in the statement of comprehensive income . mortgage servicing rights are revalued quarterly . the evaluation of remaining original core deposit intangibles for possible impairment involves reassessing the useful lives and the recoverability of the intangible assets . the evaluation of the useful lives is performed by reviewing the levels of core deposits of the respective branches acquired . the actual life of a core deposit base 30 may be longer than originally estimated due to more successful retention of customers , or may be shorter due to more rapid runoff . amortization of core deposit intangibles would be adjusted , if necessary , to amortize the remaining net book values over the remaining lives of the core deposits . the evaluation for recoverability is only performed if events or changes in circumstances indicate that the carrying amount of the intangibles may not be recoverable . the evaluation of goodwill for possible impairment is performed by comparing the fair values of the related reporting units with their carrying amounts including goodwill . the fair values of the related business units are estimated using market data for prices of recent acquisitions of banks and branches . the evaluation of intangible assets and goodwill for the years ended december 31 , 2011 , 2010 and 2009 resulted in no material impairments . fair value of financial instruments securities that are being held for indefinite periods of time , or that may be sold as part of the company 's asset/liability management strategy , to provide liquidity or for other reasons , are classified as available for sale and are stated at estimated market value . unrealized gains or losses on securities available for sale are reported as a component of stockholders ' equity , net of income tax . securities that are determined to be impaired , and for which such impairment is determined to be other than temporary , are adjusted to fair value and a corresponding loss is recognized . the estimates of fair values of securities and other financial instruments are based on a variety of factors . in some cases , fair values represent quoted market prices for identical or comparable instruments . in other cases , fair values have been estimated based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of risk . accordingly , the fair values may not represent actual values of the financial instruments that could have been realized as of year end or that will be realized in the future . story_separator_special_tag future application of accounting standards see note ( 1 ) of the notes to consolidated financial statements for a discussion of recently issued accounting pronouncements and their expected impact on the company 's financial statements . segment information see note ( 22 ) of the notes to consolidated financial statements for disclosures regarding the company 's operating business segments . results of operations net interest income in 2011 , net interest income , which is the company 's principal source of operating revenue , increased $ 14.1 million to $ 156.9 million compared to an increase of $ 11.4 million in 2010 , and a decrease of $ 7.8 million in 2009. in 2011 , $ 12.0 million of the increase in net interest income was related to the company 's acquisitions made in the later part of 2010 and the acquisition made during 2011. the net interest margin on a taxable equivalent basis for 2011 was 3.20 % , compared to 3.37 % for 2010 and 3.42 % for 2009. changes in the volume of earning assets and interest-bearing liabilities , and changes in interest rates determine the changes in net interest income . the following volume/rate analysis summarizes the relative contribution of each of these components to the changes in net interest income in 2011 and 2010. for 2011 , the decrease in net interest margin was due to continued low interest rates and an increase in earning assets at relatively low rates . for 2010 , lower deposit rates resulted in a positive rate variance partially offset by higher deposit volumes . for 2009 , declining 31 loan rates resulted in a significant decrease in net interest income . if interest rates and or loan volume do not increase , management expects continued compression of its net interest margin in 2012 as higher yielding loans and securities mature and are replaced at current market rates . volume/rate analysis taxable equivalent basis replace_table_token_5_th ( 1 ) changes in the mix of earning assets and interest-bearing liabilities have been combined with the changes due to volume . the following interest rate sensitivity analysis measures the sensitivity of the company 's net interest margin to changes in interest rates by analyzing the repricing relationship between its earning assets and interest-bearing liabilities . this analysis is limited by the fact that it presents a static position as of a single day and is not necessarily indicative of the company 's position at any other point in time , and does not take into account the sensitivity of rates of specific assets and liabilities to changes in market rates . the company 's approach to managing the interest sensitivity gap limits risk while taking advantage of the company 's stable core deposit base and the historical existence of a positively sloped yield curve . the analysis of interest rate sensitivity presents the company 's earning assets and interest-bearing liabilities based on maturity and repricing frequency at december 31 , 2011. the company 's cumulative negative gap position in the one year interval decreased to $ 193 million at december 31 , 2011 from $ 621 million at december 31 , 2010 , and decreased as a percentage of total earning assets to 3.7 % from 13.2 % for the years ended december 31 , 2011 and 2010 , respectively . this negative gap position assumes that the company 's core savings and transaction deposits are immediately rate sensitive . in a falling rate or sustained low rate environment , the benefit of the company 's noninterest-bearing funds is decreased , resulting in a decrease in the company 's net interest margin over time . in the first quarter of 2011 with rates remaining at historically low levels , the company , through its asset and liability committee ( alco ) and senior loan committee decided to offer a seven to fifteen year , fixed 32 rate , amortizing loan product primarily for commercial real estate loans . during 2011 , the company added approximately $ 160 million of this fixed rate product with maturities between seven and fifteen years and amortizations ranging primarily from ten to twenty years . to offset this fixed rate exposure , the company purchased approximately $ 254 million of floating rate securities from securities maturing during 2011. the company believes this will help stabilize its net interest margin if rates remain low for the next several years . analysis of interest rate sensitivity december 31 , 2011 replace_table_token_6_th ( 1 ) represents the amount of demand deposits required to support earning assets in excess of interest-bearing liabilities and stockholders ' equity . provision for loan losses the provision for loan losses was $ 4.5 million for 2011 , compared to $ 3.0 million for 2010 and $ 10.4 million for 2009. during 2011 , $ 1.7 million of the increase in the provision for loan losses was related to the company 's acquisitions made in the later part of 2010 and the acquisition made during 2011. during 2010 , credit quality generally stabilized as previously identified problem loans were moved to other real estate owned while potential problem loans decreased . in 2009 , credit quality deteriorated with higher levels of potential problem loans and nonperforming loans resulting in an additional provision for loan losses . the company establishes an allowance as an estimate of the probable inherent losses in the loan portfolio at the balance sheet date . net loan charge-offs were $ 2.6 million for 2011 , compared to $ 3.6 million for 2010 and $ 8.3 million for 2009. the net charge-offs equated to 0.09 % , 0.13 % and 0.30 % of average loans for 2011 , 2010 and 2009 , respectively . a more detailed discussion of the allowance for loan losses is provided under loans ( including acquired loans ) . 33 noninterest income noninterest income was $ 77.0 million in 2011 versus $ 69.9 million in 2010 and $ 66.9 million in 2009. total noninterest income increased $ 7.1 million in 2011 , an increase of 10.0 % .
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% at december 31 , 2011 , compared to 9.74 % at december 31 , 2010 and 10.15 % at december 31 , 2009. asset quality improved in 2011 as measured by a ratio of nonperforming and restructured assets to total assets of 0.71 % for the year ended december 31 , 2011 , compared to 1.01 % at december 31 , 2010 and 1.13 % at december 31 , 2009. the company sold a commercial property held in other real estate owned valued at $ 6.0 million in the first quarter of 2011. the allowance for loan losses equaled 163.5 % of nonperforming and restructured loans at december 31 , 2011 , versus 127.2 % at the end of 2010 and 91.1 % at the end of 2009. net charge-offs to average loans for 2011 decreased to 0.09 % , compared to 0.13 % for 2010 and 0.30 % for 2009. the allowance for loan losses as a percentage of total loans was 1.25 % in 2011 compared to 1.27 % in 2010 and 1.33 % in 2009. on january 19 , 2012 , council oak investment corporation , a wholly-owned subsidiary of bancfirst completed the sale of one of its investments that resulted in a pretax gain of approximately $ 4.5 million . after related expenses and income taxes , the increase in net income approximated $ 2.6 million or $ 0.17 per share on a fully diluted basis . the gain will be included in first quarter 2012 earnings . 27 on july 12 , 2011 , the company completed the acquisition of fbc financial corporation and its subsidiary bank , 1st bank oklahoma with banking locations in claremore , verdigris , and inola , oklahoma . the company paid a premium of $ 1.5 million above the equity capital of fbc financial corporation . at acquisition , 1st bank oklahoma had approximately $ 217 million in total assets , $ 116 million in loans , $ 178 million in deposits and
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| 12,329
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in 2016 , 2015 , and 2014 , the company sold 25 hotels , 1 7 hotels , and 1 3 hotels , respectively , resulting in total gains of $ 24 ,256 , $ 7,759 , and $ 2,749 , respectively , of which $ 23,575 , $ 4,996 , and $ 0 , respectively , was included in continuing operations . included story_separator_special_tag overview condor hospitality trust , inc. is a self-administered reit for federal income tax purposes that specializes in the investment and ownership of high-quality select-service , limited-service , extended stay , and compact full service hotels . substantially all of our opera tions are conducted through chlp , our operating partnership , of which the company is the sole general p artner . as of december 31 , 2016 , the company owned 19 hotels , representing 2,047 rooms , in 12 states , including one hotel owned through an 80 % interest in an unconsolidated joint venture . condor experienced another year of positive transition in 2016 with significant enhancements to its portfolio composition , equity structure , debt profile , and brand . the company 's new strategy enabled the company to announce its first common dividend since 2009. the company declared and paid three consecutive quarterly dividends commencing in the second quarter of 2016. s ignificant accomplishments for 2016 are summarized as follows : portfolio composition : in 2016 , the company sold 25 legacy hotels generating $ 61.4 million of gross proceeds . these legacy asset sales were completed in individual transactions at valuations management believes were attractive . the net proceeds were re cycled into two acquisitions . in august 2016 , the company closed on a joint venture to acquire the aloft atlanta downtown for $ 43.6 million . in december 2016 , the company acquired the aloft leawood for $ 22.5 million . both of these assets are representative of the company 's new inve stment strategy to acquire high-quality , premium- branded , select- service assets . subsequent to the close of the year , on january 23 , 2017 , the company announced that it had executed an agreement to purchase a portfolio of four home2 suites hotels for $ 73.8 million . the transaction is expected to close in the first quarter of 2017 , subject to customary closing conditions . equity structure : on march 16 , 2016 , the company closed on a $ 30 .0 million private placement , enabling the full redemption , including accrued dividends , of the series a and series b preferred stock . simultaneous ly with the sale and issuance of condor 's series d preferred stock in the $ 30.0 million private placement , the company exchanged all of its outstanding series c preferred stock for new series d pre ferred stock . subsequent to the close of 2016 , on february 28 , 2017 , the holders of the series d preferred stock voluntarily converted to common stock . at the time of conversion , the series d holders were granted $ 9.3 million of newly created series e preferred stock . debt profile : subsequent to the c lose of the year , on march 1 , 2017 , the company closed a new $ 90 .0 million secured credit facility . keybank and the huntington national bank served as the joint lead arrangers for the revolving credit facility . the new credit facility significantly reduced the company 's weighted average cost of debt and enabled the refinancing of all 2017 and 2018 maturities . the credit facility also enables the company to accelerate the closing of acquisitions . management believes the new facility is a strong indicator of condor 's credit-worthiness and the confidence of the debt community in the company 's new strategic direction . rebranding : the company completed a comprehensive rebranding in 2016. the company launched a new website in march 2016 and revised all reporting materials to reflect the new strategic direction of the company . with the aforementioned successes serving as a foundation for future growth , condor 's management is excited about 2017 and is confident in its ability to achieve the mission of providing attractive total returns in the lodging sector to condor 's shareholders . condor remains cautiously optimistic on the outlook of the hospitality sector in 2017. the hospitality sector experienced its seventh straight year of positive revpar growth in 2016. the expected decline in the pace of revpar growth materialized in 2016 and is expected to continue into 2017. most industry forecasts estimate that u.s. revpar will grow at a slower pace in 2017 , generally between 2.0 % - 3.0 % . the slower pace of revpar growth we believe is primarily driven by concerns on new supply and concerns on slowing economic growth . condor management believes the sectors and segments it targets will see growth in excess of these estimates . while many primary markets have a large influx of new supply , the markets condor targets are experiencing less 31 aggressive supply growth . additionally , the markets c ondor targets are less affected , we believe , by alternative lodging platforms like airbnb . these supply factors , combined with the possibility of cont inued positive economic growth , we believe should enable our hotels to experience growth in revpar in 2017. we believe that the performance of the hotel industry is strongly correlated with the per formance of the macro-economy . t he equity markets have so far reacted favorably following the u.s. presidential election . however , it is unknown if the new a dministration 's policies will have a position or negative impact on the economy . additionally , the continued threat of terrorism and economic and geopolitical turbulence abroad could derail the macro-economy . story_separator_special_tag at the beginning of 2016 , the company had 16 hotels held for sale and during the year classified an additional 1 6 hotels as held for sale . twenty-five of these hotels were sold during 2016. if a hotel is considered held for sale as of the most recent balance sheet presented or was sold in any period presented , the hotel property and the debt it collateralizes are shown as held for sale in all periods presented . as discussed in the footnotes to the consolidated financial statements , as of october 1 , 2014 we adopt ed asu 2014-08 which changes the criteria for reporting a discontinued operation such that only disposals representing a strategic shift in operations should be presented as discontinued operations subsequent to adoption . as a result of this adoption , only the operations of hotels meeting the criteria to be considered held fo r sale prior to october 1 , 2014 ( excluding those subsequently reclassified as held for use ) , none of which remain unsold at december 31 , 2016 , are included in discontinued operations for all periods presented as no individual hotel disposition represents a strategic s hift that has ( or will have ) a major effect on our operations or financial results . 34 operating performance metrics the following table presents our revpar , adr , and o ccupancy for our same store operations . the comparisons fo r same store operations include all of our hote ls owned as of december 31 , 2016 with the exception of the three ho tels we acquired in october 2015 , the hotel acquired through our atlanta jv in august 2016 , and the hotel acquired in december 2016 ( 14 hotels in cluded in same store results , seven of which are considered held for use ( “ hfu ” ) and seven of which are considered held for sale ( “ hfs ” ) ) . all hotels included in same store operations were owned throughout each of the periods presented . the performance metrics for the hotels acquired in 2015 and 2016 represent post-acquisition operations only and are separately presented . performance metrics presented for the hotel owned through our atlanta jv reflect 100 % of the operating results of the property including our interest and the interest of our joint venture partner . replace_table_token_10_th in the same store hfu portfolio of hotels , 2016 revpar decreased 1.3 % , driven by a decrease of 3.2 % in occupancy partially offset by an increase of 2.0 % in adr . this decrease in occupancy was driven by market challenges facing these hotels as a result of declines in the oil and gas , rail , and fracking industries as well as renovation interruption at three of these hotels during the 2016. despite the decrease in occupancy , the company was able to increase adr due to continued improvement in the economy and , to a lesser extent , decreases in inventory as a result of the ongoing renovations at certain hotels . in the same store hfu portfolio of hotels , 2015 revpar increased 7.9 % from 2014 , driven by an increase in adr of 8.1 % . in 2015 , the company focused on increasing adr in light of an improving economy and increasing leisure and transient travel . story_separator_special_tag weighted average interest rate on total debt outstanding between the periods , from 6.48 % at december 31 , 2014 to 5.31 % at december 31 , 2015 , as a result of debt repaid upon the sale of properties and debt refinancings during 2015 . 37 the $ 1,301 increase in general and administrative expense was driven by increased compensation expense resulting from compensation arrangements put into place with the new management team in 2015 and severance accrued for management who left the company during the year , as well as recruiting expenses incurred in relation to those transitions . increased director and officer insurance premiums , increased travel , legal , and professional fees expense resulting from our name change , increased transactional activity during t he year , and increased director s ' fees resulting from the increased size of our board of directors also contributed to this change . acquisition and terminated transaction costs will fluctuate period to period based on our acquisition activities . acquisition costs typically consist of transfer taxes , legal fees , and other costs associated with acquiring a hotel property as well as expenses incurred related to transactions that were terminated during the year . the increase in these expenses in 2015 was a result of the three acquisitions consummated during the year as well as increased activity by management to review potential future transactions . the $ 246 of terminated equity transactions expense in 2015 consists of charges incurred in the preparation of an exchange offer commenced on august 6 , 2015. this offer was withdrawn on september 17 , 2015 . impairment ( loss ) recovery in 2015 , we incurred $ 3,708 of imp airment losses , all of which were included in continuing operations with the exception o f net recovery of $ 121 included in discontinued operations . in 2014 , we incurred impairment losses totaling $ 2,921 , of which $ 1,269 was in continuing operations and $ 1,652 was in discontinued operations . all impairments recognized in both years related either to hotels held for sale at some point or sold during the year . dispositions in 2015 , eight hotels were sold with gains totaling $ 7,759 and nine hotels were sold that had been previously impaired and as such had no gains . in 2014 , five hotels were sold with gains totaling $ 2,749 and eight hotels were sold that had been previously impair ed and as such had no gains .
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results of operations comparison of the year ended december 31 , 2016 to the year en ded december 31 , 2015 ( in thousands , except per share amounts ) replace_table_token_11_th 35 revenue during 2016 , revenue from continuing operations decreased by $ 8,067 between the periods . revenue from properties acquired i n and subsequent to the fourth quarter of 2015 increased $ 10,175 and revenue from our other held for use asset s remained consistent , decreasing by $ 129 . revenue from held for sale and sol d properties decreased by $ 18,113 driven by property sales during the periods presented . expenses hotel and property operations expense from continuing operations decreased by $ 6,275 , driven by declines resulting from sold hotels partially offset by increases related to newly acquired properties . in totality , hotel and operations expenses from continuing operations decreased as a percentage of revenue by 0.6 % because of increases in adr and because the legacy hotels that remain in our portfolio and our recent acquisitions have higher operating margins than the hotels that were sold during the period . interest exp ense and depreciation expense from continuing operations decreased by $ 812 and $ 210 , respectively , between the periods as a result of a net decrease in the size of the company 's hotel portfolio and thus its debt levels . additionally , interest expense was favorably impacted by a decrease in the weighted average interest rate on total debt outstanding between the periods , from 5.31 % at december 31 , 2015 to 4.86 % at december 31 , 2016 , as a result of debt repaid upon the sale of properties and the lower than average interest rate obtained on the great western bank debt obtained as part of the leawood aloft acquisition in december 2016 .
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| 2,079
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we record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset . accretion expense is included in “ depreciation , depletion and amortization ” on our consolidated statements of operations . see note 4 . the estimated fair value of the company 's asset retirement obligations at inception is determined by utilizing the income approach by applying a credit-adjusted risk-free rate , which takes into account the company 's credit risk , the time value of money , and the current economic state , to the undiscounted expected abandonment cash flows . given the unobservable nature of the inputs , the measurement of the asset retirement obligations was classified as level 3 in the fair value hierarchy . revenue recognition —oil and natural gas revenues are recognized when production is sold to a purchaser at a fixed or determinable price , when delivery has occurred and title has transferred , and if collectability of the revenue is probable . revenues from the production of crude oil and natural gas properties in which we have an interest with other producers are recognized using the entitlements method . we record a liability or an asset for natural gas balancing when we have sold more or less than our working interest share of natural gas production , respectively . at december 31 , 2017 and 2016 , the net liability for natural gas balancing was immaterial . differences between actual production and net working interest volumes are routinely adjusted . derivative instruments —we use derivative instruments such as futures , forwards , options , collars and swaps for purposes of hedging our exposure to fluctuations in the price of crude oil and natural gas and to hedge our exposure to changing interest rates . accounting standards related to derivative instruments and hedging activities require that all derivative instruments subject to the requirements of those standards be measured at fair value and recognized as assets or liabilities in the balance sheet . we offset the fair value of our asset and liability positions with the same counterparty for each commodity type . changes in fair value are required to be recognized in earnings unless specific hedge accounting criteria are met . all of our realized gain or losses on our derivative contracts are the result of cash settlements . we have not designated any of our derivative contracts as hedges ; accordingly , changes in fair value are reflected in earnings . see note 9 . income taxes —we account for income taxes , as required , under the liability method . deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards . deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled . the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date . deferred tax assets are reduced by a valuation allowance when , in the opinion of management , it is more likely than not that some portion or all of the deferred tax assets will not be realized . we recognize , as required , the financial statement benefit of an uncertain tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit . for tax positions meeting the more likely-than-not threshold , the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority . see note 7 . net income or net loss per share —basic income ( loss ) per common share is computed by dividing net income ( loss ) applicable to common stockholders for each reporting period by the weighted-average number of common shares outstanding during the period . diluted income ( loss ) per common share is computed by dividing net income ( loss ) applicable to common stockholders for each reporting period by the weighted average number of common shares outstanding during the period , plus the effects of potentially dilutive restricted stock calculated using the treasury stock method and the potential dilutive effect of the conversion of convertible securities , such as warrants and convertible notes , into shares of our common stock . see note 6 . 67 goodrich petroleum corporation and subsidiary notes to consolidated financial statements commitments and contingencies —liabilities for loss contingencies , including environmental remediation costs , arising from claims , assessments , litigation , fines and penalties , and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and or remediation can be reasonably estimated . recoveries from third parties , when probable of realization , are separately recorded and are not offset against the related environmental liability . see note 10 . concentration of credit risk —due to the nature of the industry , we sell our oil and natural gas production to a limited number of purchasers and , accordingly , amounts receivable from such purchasers could be significant . the revenues compared to our total oil and natural gas revenues from the top purchasers for the years ended december 31 , 2017 , and pro forma full year 2016 are as follows : replace_table_token_26_th share-based compensation —we account for our share-based transactions using the fair value as of the grant date and recognize compensation expense over the requisite service period . see note 3 . story_separator_special_tag the gain on the settlement of liabilities subject to compromise was $ 395.9 million and the gain on fresh start adjustments of $ 19.5 million was reduced by a net $ 16.0 million related to professional fees and adjustments to debt . reorganization costs incurred for professional fees as of october 12 , 2016 was $ 11.0 million . in addition to the costs of professional fees , reorganization cost was affected by various non-cash adjustments to the carrying amounts of our second lien notes and senior notes , including a $ 5.5 million charge for the unwinding of an embedded derivative related to the second lien notes . 43 income tax benefit we recorded a $ 1.0 million income tax benefit for the year ended december 31 , 2017 and no income tax benefit for the year ended december 31 , 2016. we recorded a valuation allowance at december 31 , 2016 , which resulted in no net deferred tax asset or liability appearing on our statement of financial position . we recorded this valuation allowance after an evaluation of all available evidence ( including our recent history of net operating losses in 2016 and prior years ) that led to a conclusion that based upon the more-likely-than-not standard of the accounting literature , our deferred tax assets were unrecoverable . the income tax benefit recorded in 2017 is due to the projected refund of alternative minimum tax ( “ amt ” ) credits for which we also recorded a non-current deferred tax asset . considering the company 's taxable income forecasts , our assessment of the realization of our deferred tax assets other than for the amt credits has not changed , and we continue to maintain a full valuation allowance for our net deferred tax assets as of december 31 , 2017. on december 22 , 2017 , the united states enacted tax reform legislation known as the h.r.1 , commonly referred to as the “ tax cuts and jobs act ” ( the “ act ” ) , resulting in significant modifications to existing law . the company has completed the accounting for the effects of the act during 2017. our financial statements for the year ended december 31 , 2017 reflect certain effects of the act which includes a reduction in the corporate tax rate from 35 % to 21 % effective january 1 , 2018 , as well as other changes . adjusted ebitda/ebitdax adjusted ebitda/ebitdax is a supplemental non-united states generally accepted accounting principle ( “ us gaap ” ) financial measure that is used by management and external users of our consolidated financial statements , such as industry analysts , investors , lenders and rating agencies . the predecessor defined adjusted ebitdax as earnings before interest expense , income and similar taxes , dd & a , exploration expense , share-based compensation expense and impairment of oil and natural gas properties . the successor calculates adjusted ebitda in the same way , but ebitda reflects the absence of exploration expense in the full cost method of accounting used by the successor . in calculating adjusted ebitda/ ebitdax , gains on reorganization , gains/losses on commodity derivatives not designated as hedges and net cash received or paid in settlement of derivative instruments are also excluded . other excluded items include interest income and any extraordinary non-cash gains or losses . adjusted ebitda/ebitdax is not a measure of net income ( loss ) as determined by us gaap . adjusted ebitda/ebitdax should not be considered an alternative to net income ( loss ) , as defined by us gaap . the following table presents a reconciliation of the non-us gaap measure of adjusted ebitda/ebitdax to the us gaap measure of net income ( loss ) , its most directly comparable measure presented in accordance with us gaap : replace_table_token_15_th ( 1 ) other items include interest income and other , gain on sale of assets and other expense . management believes that this non-us gaap financial measure provides useful information to investors because it is 44 monitored and used by our management and widely used by professional research analysts in the valuation and investment recommendations of companies within the oil and natural gas exploration and production industry . our computations of adjusted ebitda/ebitdax may not be comparable to other similarly totaled measures of other companies . 45 liquidity and capital resources overview our primary sources of cash during 2017 were cash on hand , cash flow from operating activities , which includes a $ 1.2 million refund of escrowed funds related to the sale of our east texas properties in 2014 and $ 0.7 million in ad valorem tax refunds , and cash from asset sale proceeds of $ 0.6 million . we used cash in 2017 primarily to fund our drilling and development capital program . in 2016 , our primary sources of cash on and after the effective date were cash on hand , cash flow from operating activities , proceeds from the sale of the convertible second lien notes , proceeds from the private placement of our common stock and proceeds from the sale of non-core oil and gas properties . we used cash to fund our capital expenditures , to pay interest on and pay down amounts outstanding on the exit credit facility and to pay professional fees related to the reorganization . on october 17 , 2017 , we entered into the 2017 senior credit facility , which provides for revolving loans of up to the borrowing base then in effect . total lender commitments under the 2017 senior credit facility are $ 250 million subject to a borrowing base limitation , which as of december 31 , 2017 was $ 40 million . the 2017 senior credit facility matures on a ) october 17 , 2021 or b ) if the convertible second lien notes have not been voluntarily redeemed , repurchased , refinanced or otherwise retired by
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million for the 2016 successor period . while we booked capital expenditures of approximately $ 4.3 million , we paid out cash amounts totaling $ 3.2 million in the period . the difference is attributed to utilizing $ 0.4 million of net cash calls and a net $ 0.5 million increased in the capital expenditure 47 accrual . the successor period also reflects the receipt of $ 0.8 million in proceeds from the december 2016 sale of the shallow rights in our longwood properties located in louisiana . we conducted drilling and completion operations on two gross wells in in the successor period . financing activities : net cash provided in financing activities for successor period consisted of net proceeds from the issuance of convertible second lien notes of $ 40.0 million and net proceeds from the sale of common stock of $ 23.6 million partially offset by net repayments of borrowings under our 2017 senior credit facility and exit credit facility of $ 23.7 million . debt consisted of the following balances as of the dates indicated ( in thousands ) : replace_table_token_17_th ( 1 ) the carrying amounts for the exit credit facility and 2017 senior credit facility represent fair value as they were fully secured . ( 2 ) the debt discount is being amortized using the effective interest rate method based upon a maturity date of august 30 , 2019. the principal includes $ 1.2 million of paid-in-kind
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Liquidity
| 6,208
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our actual results may differ materially from those discussed in or implied by any of the forward-looking statements as a result of various factors , including but not limited to those listed under “ risk factors ” and “ special note regarding forward-looking statements. ” we enable risk-bearing businesses to better understand and manage their risks and opportunities associated with those risks . we provide value to our customers by supplying proprietary data that , combined with our analytic methods , creates embedded decision support solutions . we are the largest aggregator and provider of data pertaining to u.s. property and casualty , or p & c , insurance risks . we offer predictive analytics and decision support solutions to customers in rating , underwriting , claims , catastrophe and weather risk , global risk analytics , natural resources intelligence , economic forecasting , and many other fields . our customers use our solutions to make better risk decisions with greater efficiency and discipline . we refer to these products and services as “ solutions ” due to the integration among our products and the flexibility that enables our customers to purchase components or the comprehensive package of products . these solutions take various forms , including data , statistical models or tailored analytics , all designed to allow our clients to make more logical decisions . we believe our solutions for analyzing risk positively impact our customers ' revenues and help them better manage their costs . we organize our business in two segments : risk assessment and decision analytics . our risk assessment segment provides statistical , actuarial and underwriting data for the u.s. p & c insurance industry . our risk assessment segment revenues represented approximately 33.3 % and 37.2 % of our revenues for the years ended december 31 , 2015 and 2014 , respectively . our decision analytics segment provides solutions to our customer in insurance , financial services , healthcare , and energy and specialized markets . our decision analytics segment revenues represented approximately 66.7 % and 62.8 % of our revenues for the years ended december 31 , 2015 and 2014 , respectively . on march 11 , 2014 , we sold our mortgage services business , interthinx , inc. , or interthinx . results of operations for the mortgage services business are reported as a discontinued operation for the year ended december 31 , 2014 and for all prior periods presented . see note 10 of our consolidated financial statements included in this annual report on form 10-k. as necessary , the amounts have been retroactively adjusted in all periods presented to give recognition to the discontinued operations . 29 executive summary key performance metrics we believe our business 's ability to generate recurring revenue and positive cash flow is the key indicator of the successful execution of our business strategy . we use year over year revenue growth and ebitda margin as metrics to measure our performance . ebitda and ebitda margin are non-gaap financial measures ( see note 3 within item 6. selected financial data section of management 's discussion and analysis of financial condition and results of operations ) . revenue growth . we use year over year revenue growth as a key performance metric . we assess revenue growth based on our ability to generate increased revenue through increased sales to existing customers , sales to new customers , sales of new or expanded solutions to existing and new customers and strategic acquisitions of new businesses . ebitda margin . we use ebitda margin as a metric to assess segment performance and scalability of our business . we assess ebitda margin based on our ability to increase revenues while controlling expense growth . revenues we earn revenues through subscriptions , long-term agreements and on a transactional basis . subscriptions for our solutions are generally paid in advance of rendering services either quarterly or in full upon commencement of the subscription period , which is usually for one year and automatically renewed each year . as a result , the timing of our cash flows generally precedes our recognition of revenues and income and our cash flow from operations tends to be higher in the first quarter as we receive subscription payments . examples of these arrangements include subscriptions that allow our customers to access our standardized coverage language , our claims fraud database or our actuarial services throughout the subscription period . in general , we experience minimal revenue seasonality within the business . our long-term agreements are generally for periods of three to five years . we recognize revenue from subscriptions ratably over the term of the subscription and most long-term agreements are recognized ratably over the term of the agreement . certain of our solutions are also paid for by our customers on a transactional basis . for example , we have solutions that allow our customers to obtain property-specific rating and underwriting information to price a policy on a commercial building , or compare a p & c insurance , medical or workers ' compensation claim with information in our databases . for the years ended december 31 , 2015 and 2014 , 25.3 % and 27.7 % of our revenues , respectively , were derived from providing transactional solutions . we earn transactional revenues as our solutions are delivered or services performed . in general , transactions are billed monthly at the end of each month . approximately 90.1 % and 89.6 % of the revenues in our risk assessment segment for the years ended december 31 , 2015 and 2014 , respectively , were derived from subscriptions and long-term agreements for our solutions . our customers in this segment include most of the p & c insurance providers in the united states . approximately 67.0 % and 61.9 % of the revenues in our decision analytics segment , for the years ended december 31 , 2015 and 2014 , respectively , were derived from subscriptions and long-term agreements for our solutions . story_separator_special_tag movements of commodity prices affect the profitability of energy and metals and mining companies , while stock markets and mergers and acquisitions , or m & a , are the principal drivers of activity for financial institutions . among the specific trends influencing commodity prices are global gross domestic product growth , supply of individual commodities , and geopolitical factors . the slow down of the chinese economy is currently contributing to an oversupply of a number of commodities . rising u.s. oil and gas production , opec policy , and the partial lifting of sanctions against iran in january 2016 has led to a sharp fall in crude oil prices ; and most metals markets are currently in oversupply . lower commodity prices have reduced discretionary spending for clients and has stalled m & a activity . however , the uncertainty also increases client demand for our data and services . commodity prices are expected to recover over time to incentivize the investment required to meet growing energy demand . longer term the paris global accord on climate change signals a period of change in the energy mix , incentivizing growth in renewable energy and other low carbon technologies , while fossil fuels are expected to remain a core part of energy demand for the foreseeable future . we will continue to evolve our offerings to meet the needs of our clients in an increasingly complex market . trends in the u.s. healthcare market can affect a portion of our revenues in the decision analytics segment . that market continues to undergo significant change as the result of healthcare reform legislation . the specific trends affecting our current healthcare business include payment reform , expansion of insurance coverage , and efforts at cost containment . payment reform is driving the market to value-based reimbursement , which has caused healthcare providers to bear increased financial risk and responsibility for quality outcomes . the expansion of insurance coverage has reduced the uninsured population through both 31 increased enrollment in medicaid and in the commercial market through statewide health exchanges . as the government seeks to control fraud , waste , and abuse , efforts to contain costs will likely continue to become more prevalent . although such changes have the potential to disrupt the healthcare marketplace , we believe the requirements for reform could increase demand for our analytic solutions in the areas of population health management , quality measurement , risk adjustment for medicare advantage and qualified health plans participating on statewide health exchanges , and detection of prepayment fraud , waste and abuse . we experience seasonality in our medicare advantage risk adjustment business in the second half of our fiscal year , related to the cms submission deadline . description of acquisitions we acquired six businesses since january 1 , 2013. these acquisitions affect the comparability of our consolidated results of operations between periods . on may 19 , 2015 , we acquired 100 % of the stock of wood mackenzie . wood mackenzie is a global provider of data analytics and commercial intelligence for the energy , chemicals , metals and mining verticals . this acquisition advances our strategy to expand internationally and positions ourselves in the global energy market . wood mackenzie is included in the energy and specialized markets vertical , formerly named the specialized markets vertical , of the decision analytics segment . see note 9 to our consolidated financial statements included in this annual report on form 10-k for the preliminary purchase price allocations . on november 6 , 2015 , we acquired 100 % of the stock of infield systems limited , or infield . infield is a provider of business intelligence , analysis , and research to the oil , gas , and associated marine industries . infield has become part of wood mackenzie and continues to provide services to enhance wood mackenzie 's upstream and supply chain capabilities in the decision analytics segment . see note 9 to our consolidated financial statements included in this annual report on form 10-k for the preliminary purchase price allocations . on november 20 , 2015 , we acquired 100 % of the stock of the pci group , or pci . pci is a consortium of five specialist companies that offer integrated data and subscriptions research in the chemicals , fibers , films , and plastics sectors . pci has become part of wood mackenzie , and continues to provide services to enhance wood mackenzie 's chemicals capabilities in the decision analytics segment . see note 9 to our consolidated financial statements included in this annual report on form 10-k for the preliminary purchase price allocations . on december 8 , 2014 , we acquired 100 % of the stock of maplecroft . using a proprietary data aggregation and analytical approach , maplecroft enables its customers to assess , monitor , and forecast a growing range of worldwide risks , including geopolitical and societal risks . within our decision analytics segment , this acquisition positions us as a provider of value chain optimization tools , providing comprehensive quantitative risk analytics and platforms by which customers can visualize , quantify , mitigate , and manage their risk . maplecroft is headquartered in bath , england . on october 31 , 2014 , we acquired the net assets of dart consulting limited , or dart . dart is a provider of benchmarking and advisory solutions to financial services institutions in australia , new zealand , and other key asia-pacific markets . as part of our decision analytics segment , dart provides benchmarking solutions and professional services critical to financial services institutions in the management of lending and payment portfolios . on january 29 , 2014 , we acquired the net assets of inovatus , llc , or inovatus . the assets primarily consisted of software and are embedded in our existing models focusing on reducing fraud and premium leakage for personal auto insurance carriers .
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quarterly results of operations the following table sets forth our quarterly unaudited consolidated statement of operations data for each of the eight quarters in the period ended december 31 , 2015 . in management 's opinion , the quarterly data has been prepared on the same basis as the audited consolidated financial statements included in this annual report on form 10-k , and reflects all necessary adjustments for a fair presentation of this data . the results of historical periods are not necessarily indicative of the results of operations for a full year or any future period . replace_table_token_11_th 39 liquidity and capital resources as of december 31 , 2015 and 2014 , we had cash and cash equivalents and available-for-sale securities of $ 141.9 million and $ 43.2 million , respectively . subscriptions for our solutions are billed and generally paid in advance of rendering services either quarterly or in full upon commencement of the subscription period , which is usually for one year . subscriptions are automatically renewed at the beginning of each calendar year . we have historically generated significant cash flows from operations . as a result of this factor , as well as the availability of funds under our syndicated revolving credit facility , we believe we will have sufficient cash to meet our working capital and capital expenditure needs , and to fuel our future growth plans . we have historically managed the business with a working capital deficit due to the fact that , as described above , we offer our solutions and services primarily through annual subscriptions or long-term contracts , which are generally prepaid quarterly or annually in advance of the services being rendered . when cash is received for prepayment of invoices , we record an asset ( cash and cash equivalents ) on our balance sheet with the offset recorded as a current liability ( deferred revenues ) .
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additionally , our management team 's focus on improving operational and cost efficiencies increases the likelihood of achieving our core growth strategies and enhancing long-term value for our shareholders . a summary of our 2014 performance compared to the comparable 2013 and 2012 periods follows : replace_table_token_7_th ( a ) adjusted net income is a non-gaap financial measure . see the adjusted net income section of this md & a for more information . our operating environment industry the animal health industry , which focuses on both livestock and companion animals , is a growing industry that impacts billions of people worldwide . the primary livestock species for the production of animal protein are cattle ( both beef and dairy ) , swine , poultry , sheep and fish . livestock health and production are essential to meeting the growing demand for animal protein of a global population . factors influencing growth in demand for livestock medicines and vaccines include : human population growth and increasing standards of living , particularly in many emerging markets ; increasing demand for improved nutrition , particularly animal protein ; natural resource constraints , such as scarcity of arable land , fresh water and increased competition for cultivated land , resulting in fewer resources that will be available to meet this increased demand for animal protein ; and increased focus on food safety . the primary companion animal species are dogs , cats and horses . health professionals indicate that companion animals improve the physical and emotional well-being of pet owners . factors influencing growth in demand for companion animal medicines and vaccines include : economic development and related increases in disposable income , particularly in many emerging markets ; increasing pet ownership ; and companion animals living longer , increasing medical treatment of companion animals and advances in companion animal medicines and vaccines . product development initiatives our future success depends on both our existing product portfolio and our pipeline of new products , including new products that we may develop through joint ventures and products that we are able to obtain through license or acquisition . we believe we are an industry leader in animal health r & d , with a track record of generating new products and product lifecycle developments . the majority of our r & d programs focus on product lifecycle development , which is defined as r & d programs that leverage existing animal health products by adding new species or claims , achieving approvals in new markets or creating new combinations and reformulations . perceptions of product quality , safety and reliability we believe that animal health medicines and vaccines customers value high-quality manufacturing and reliability of supply . the importance of quality and safety concerns to pet owners , veterinarians and livestock producers also contributes to animal health brand loyalty , which we believe often continues after the loss of patent-based and regulatory exclusivity . we depend on positive perceptions of the safety and quality of our products , and animal health products generally , by our customers , veterinarians and end-users . 34 | the issue of the potential transfer of increased antibacterial resistance in bacteria from food-producing animals to human pathogens , and the causality of that transfer , are the subject of global scientific and regulatory discussion . antibacterials refer to small molecules that can be used to treat or prevent bacterial infections and are a sub-categorization of the products that make up our anti-infectives and medicated feed additives portfolios . in some countries , this issue has led to government restrictions and bans on the use of specific antibacterials in some food-producing animals , regardless of the route of administration ( topical , oral , intramuscular/subcutaneous injections , or intravenous ) . these restrictions are more prevalent in countries where animal protein is plentiful and governments are willing to take restrictive actions even when there is scientific uncertainty . our total revenue attributable to antibacterials for livestock was approximately $ 1.3 billion for the year ended december 31 , 2014 . in december 2013 , the fda announced final guidance establishing procedures for the voluntary phase out in the united states over a three year period of the use of medically important antibacterials in animal feed for growth promotion in food production animals ( medically important antibacterials include classes that are prescribed in animal and human health ) . the guidance provides for continued use of antibacterials in food producing animals for treatment , control and under certain circumstances for prevention of disease , all under the supervision of a veterinarian . we believe the impact of this fda guidance on our financial performance will not be significant based on the overall diversity and breadth of our product portfolio of medicines , vaccines and diagnostics serving eight core species . in addition , in october 2014 , the french parliament passed a law that , inter-alia , prohibits rebates and discounts on antibiotics and requires the reporting of antibiotics sold to and agreements entered into with certain animal healthcare providers ( including veterinarians , veterinary schools , pharmacists and students ) . the parliament indicated that the law is in response to a government initiative aimed at fighting antimicrobial resistance in animals and reducing the use of certain categories of antibiotics by 25 % ( compared to 2013 ) by december 31 , 2016. we can not predict whether antibacterials resistance concerns will result in additional restrictions or bans , expanded regulations or public pressure to discontinue or reduce use of antibacterials in food-producing animals , which could materially adversely affect our operating results and financial condition . the overall economic environment in addition to industry-specific factors , we , like other businesses , face challenges related to global economic conditions . growth in both the livestock and companion animal sectors is driven by overall economic development and related growth , particularly in many emerging markets . story_separator_special_tag in recent years , certain of our customers and suppliers have been affected directly by economic downturns , which decreased the demand for our products and , in some cases , hindered our ability to collect amounts due from customers . the cost of medicines and vaccines to our livestock producer customers is small relative to other production costs , including feed , and the use of these products is intended to improve livestock producers ' economic outcomes . as a result , demand for our products has historically been more stable than demand for other production inputs . similarly , industry sources have reported that pet owners indicated a preference for reducing spending on other aspects of their lifestyle , including entertainment , clothing and household goods , before reducing spending on pet care . while these factors have mitigated the impact of recent downturns in the global economy , further economic challenges could increase cost sensitivity among our customers , which may result in reduced demand for our products , which could have a material adverse effect on our operating results and financial condition . competition the animal health industry is competitive . although our business is the largest by revenue in the animal health medicines and vaccines industry , we face competition in the regions in which we operate . principal methods of competition vary depending on the particular region , species , product category or individual product . some of these methods include new product development , quality , price , service and promotion to veterinary professionals , pet owners and livestock producers . our competitors include the animal health businesses of large pharmaceutical companies and specialty animal health businesses . in addition to competition from established market participants , there could be new entrants to the animal health medicines and vaccines industry in the future . in certain markets , we also compete with companies that produce generic products , but the level of competition from generic products varies from market to market . for example , the level of generic competition is higher in europe and certain emerging markets than in the united states . weather conditions and the availability of natural resources the animal health industry and demand for many of our animal health products in a particular region are affected by weather conditions , as usage of our products follows varying weather patterns and weather-related pressures from pests , such as ticks . as a result , we may experience regional and seasonal fluctuations in our results of operations . in addition , veterinary hospitals and practitioners depend on visits from and access to the animals under their care . veterinarians ' patient volume and ability to operate could be adversely affected if they experience prolonged snow , ice or other severe weather conditions , particularly in regions not accustomed to sustained inclement weather . furthermore , livestock producers depend on the availability of natural resources , including large supplies of fresh water . their animals ' health and their ability to operate could be adversely affected if they experience a shortage of fresh water due to human population growth or floods , droughts or other weather conditions . in the event of adverse weather conditions or a shortage of fresh water , veterinarians and livestock producers may purchase less of our products . for example , drought conditions could negatively impact , among other things , the supply of corn and the availability of grazing pastures . a decrease in harvested corn results in higher corn prices , which could negatively impact the profitability of livestock producers of cattle , pork and poultry . higher corn prices and reduced availability of grazing pastures contribute to reductions in herd or flock sizes that in turn result in less spending on animal health products . as such , a prolonged drought could have a material adverse impact on our operating results and financial condition . factors influencing the magnitude and timing of effects of a drought on our performance include , but may not be limited to , weather patterns and herd management decisions . the widespread drought which impacted parts of the united states during 2011 , 2012 , and 2013 was considered the worst in many years and affected our performance in the u.s. market in 2012 and in the first half of 2013 . 35 | disease outbreaks sales of our livestock products could be adversely affected by the outbreak of disease carried by animals . outbreaks of disease may reduce regional or global sales of particular animal-derived food products or result in reduced exports of such products , either due to heightened export restrictions or import prohibitions , which may reduce demand for our products . also , the outbreak of any highly contagious disease near our main production sites could require us to immediately halt production of our products at such sites or force us to incur substantial expenses in procuring raw materials or products elsewhere . alternatively , sales of products that treat specific disease outbreaks may increase . for example , since the second quarter of 2013 some producers in the united states have experienced an outbreak of the porcine epidemic diarrhea virus ( pedv ) . pedv has existed in parts of asia for many years . it is important to note that the virus , which affects piglets , does not create a food safety issue . we are committed to supporting pork producers in understanding and controlling pedv and we are partnering with the key stakeholders , including various academic institutions such as the university of minnesota and iowa state university . in september 2014 , the u.s. department of agriculture ( usda ) granted us a conditional license for a vaccine to help fight pedv . in order to receive the conditional license , we had to demonstrate the safety of the vaccine in a field study and provide a reasonable expectation of the vaccine 's efficacy .
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2014 vs. 2013 u.s. operating segment u.s. segment revenue increased by $ 157 million , or 8 % , in 2014 compared with 2013 , of which approximately $ 129 million resulted from growth in livestock products and approximately $ 28 million resulted from growth in companion animal products . livestock revenue growth was driven by increased sales across the cattle , swine , and poultry portfolios . strong growth in sales of cattle products was primarily due to higher demand for our premium products as a result of improved market conditions , driven by higher cattle prices and lower costs of feed , compared with 2013. growth in swine products was due to the successful launch of new products , tempered by the impact of pedv on the number of treatable animals . sales of poultry products benefited from new vaccines and growth in medicated feed additives . companion animal revenue growth was driven by the introduction of apoquel ® as well as sales growth in other key brands . results were partially offset by competitive pressures in our vaccine and pain portfolios and were tempered by competition in our parasiticides portfolio . u.s. segment earnings increased by $ 131 million , or 13 % , in 2014 compared with 2013 , due to strong revenue growth and improved gross margin due to the benefit of higher prices and favorable product mix . segment earnings growth also benefited from limited growth in operating expenses . euafme operating segment euafme segment revenue increased by $ 26 million , or 2 % , in 2014 compared with 2013 . operational revenue growth was $ 28 million , or 2 % , of which approximately $ 15 million resulted from growth in livestock products and $ 13 million resulted from growth in companion animal products . livestock revenue growth was primarily driven by higher sales in the cattle portfolio , particularly in emerging markets , driven by strong performance of our anti-infectives portfolio and the introduction of new products . additionally , sales in the poultry portfolio increased due to strong performance in
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the company uses the simplified method to calculate the expected term for options granted to employees and non-employees whereby , the expected term equals the arithmetic average of the vesting term and the original contractual term of the options due to its 114 lack of sufficient historical data . the risk-free interest rate is based on u.s. treasury securities with a maturity date commensurate with the expected term of the associated award . the expected dividend yield is assumed to be zero as the company has never paid dividends and has no current plans to pay any dividends on its common stock . prior to the adoption of compensation — stock compensation ( topic 718 ) : improvements to nonemployee share-based payment accounting ( asu 2018-07 ) , the measurement date for non-employee awards was generally the date the services are completed , resulting in financial reporting period adjustments to share-based compensation during the vesting terms for changes in the fair value of the awards . after the adoption of asu 2018-07 on january 1 , 2018 , the measurement date for non-employee awards is the date of grant without changes in the fair value of the award . in determining the exercise prices for options granted , the company has considered the estimated fair value of the common stock as of the measurement date . prior to the ipo , the estimated fair value of the common stock had been determined at each grant date based upon a variety of factors , including the illiquid nature of the common stock , the effect of the rights and preferences of the preferred stockholders , and the prospects of a liquidity event . among other factors were the company 's financial position and historical financial performance , the status of technological developments within the company 's research , the composition and ability of the current research and management team , an evaluation or benchmark of the company 's competition , and the current business climate in the marketplace . significant changes to the key assumptions underlying the factors used could have resulted in different fair values of common stock at each valuation date . following the closing of the ipo , the fair value of common stock was the closing price of the company 's common stock on the nasdaq global market as reported on the date of the grant . patent costs all patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure . amounts incurred are classified as general and administrative expenses in the accompanying statements of operations . rent expense the company 's real estate operating lease provides for scheduled annual rent increases throughout the lease term . the company recognizes the effects of the scheduled rent increases on a straight-line basis over the full term of the lease . income taxes the company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the company 's financial statements and tax returns . deferred tax assets and liabilities are determined based upon the differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and for loss and credit carryforwards , using enacted tax rates expected to be in effect in the year in which the differences are expected to reverse . deferred tax assets are reduced by a valuation allowance if it is more likely than not that these assets may not be realized . the company determines whether it is more likely than not that a tax position will be sustained upon examination . if it is not more likely than not that a position will be sustained , none of the benefit attributable to the position is recognized . the tax benefit to be recognized for any tax position that meets the more-likely-than-not recognition threshold is calculated as the largest amount that is more than 50 % likely of being realized upon resolution of the contingency . the company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes . fair value of financial instruments asc topic 820 , fair value measurement ( asc 820 ) , establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data ( observable inputs ) and the company 's own assumptions ( unobservable inputs ) . observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the company . unobservable inputs are inputs that reflect the company 's assumptions about the inputs that market participants would use in pricing the assets or 115 liability and are developed based on the best information available in the circumstances . asc 820 identifies fair value as the price that would be received to sell an asset or paid to transfer a liability , in an orderly transaction between market participants at the measurement date . as a basis for considering market participant assumptions in fair value measurements , asc 820 establishes a three-tiered value hierarchy that distinguishes between the following : ● level 1 : quoted market prices in active markets for identical assets or liabilities . ● level 2 : inputs other than level 1 inputs that are either directly or indirectly observable , such as quoted market prices , interest rates and yield curves . ● level 3 : unobservable inputs for the asset or liability ( i.e . supported by little or no market activity ) . story_separator_special_tag the fair value of stock options is estimated at the time of grant using the black-scholes option pricing model , which requires the use of inputs and assumptions such as the estimated fair value of the underlying common stock , exercise price of the option , expected term , risk-free interest rate , expected volatility and dividend yield , the most critical of which is the estimated fair value of our common stock . the inputs and assumptions used to estimate the fair value of share-based payment awards represent management 's best estimates and involve inherent uncertainties and the application of management 's judgment . as a result , if factors change and management uses different inputs and assumptions , our share-based compensation expense could be materially different for future awards . these subjective assumptions are estimated as follows : ● expected volatility . the expected volatility was based on the historical stock volatility of several of our comparable publicly traded companies over a period of time equal to the expected term of the options , as we do not have sufficient trading history to use the volatility of our own common stock . ● fair value of common stock . on october 2 , 2020 , we closed our ipo . following the closing , the fair value of common stock was the closing price of our common stock on the nasdaq global market as reported on the date of the grant . prior to that , our common stock had not historically been publicly traded and we had to periodically estimate the fair value of common stock . estimating the fair value of common stock prior to may 2020 , in valuing our common and preferred stock , we determined the equity value of our business by using a net asset approach . the net asset approach is predicated on the assumption that a prudent buyer would pay no more than it would cost to purchase the assets ( tangible and intangible ) of a company at current market prices . this approach requires estimating the individual market values of our assets and liabilities to derive an adjusted enterprise value . the enterprise values determined by the net asset approach were then allocated to our common stock using the option pricing method , or opm . the opm treats common stock and preferred stock as call options on a company 's enterprise value , with exercise prices based on the liquidation preferences of the preferred stock . therefore , the common stock has value only if the funds available for distribution to the stockholders exceed the value of the liquidation preference at the time of an assumed liquidity event such as a merger , sale or initial public offering . the common stock is modeled as a call option with a claim on the enterprise at an exercise price equal to the remaining value immediately after the preferred stock is liquidated . the opm uses the black-scholes option-pricing model to determine the price of the call option . the opm is appropriate to use when the range of possible future outcomes is so difficult to predict that forecasts would be highly speculative . beginning in may 2020 , we used the probability-weighted expected return method to determine the value of our common stock . under the probability-weighted expected return method , the value of an enterprise 's common stock is estimated based upon an analysis of future values assuming various possible future liquidity events , such as an initial public offering , a strategic sale or merger and remaining a private enterprise without a liquidity event . the fair market value of the stock is based upon the probability-weighted present value of expected future net cash flows as a result of distributions to stockholders considering each of the possible future events , as well as the rights and preferences of each class of stock . 100 given the absence of a public trading market for our capital stock at the time , our board of directors exercised reasonable judgment and considered a number of subjective factors to determine the best estimate of the fair value of our common stock , including : ● our business , financial condition and results of operations , including related industry trends affecting our operations ; ● the likelihood of achieving a liquidity event , such as an initial public offering or the sale of the company , given prevailing market conditions ; ● the lack of marketability of our preferred and common stock ; ● the market performance of comparable publicly traded companies ; and ● united states and global economic and capital market conditions and outlook . warrant liability the company issued warrants to purchase shares of series a convertible preferred stock in connection with the june 2020 series a convertible preferred stock sale . the warrants were classified as a liability as the underlying series a convertible preferred stock was contingently redeemable and outside of the company 's control ( see note 12 , common stock and convertible preferred stock ) . the fair value of the warrants on the date of issuance was recorded as a reduction of the carrying value of the series a convertible preferred stock and as a long-term liability in the balance sheet . the warrants were subsequently remeasured to fair value at each balance sheet date with the changes in the fair values of the warrants recognized as other income or expense in the statements of operations . the change in fair value of the warrants during the year ended december 31 , 2020 was $ 5.5 million . upon completion of the ipo on october 6 , 2020 , the warrants became exercisable for shares of the company 's common stock and were reclassified to additional paid-in capital in october 2020 upon the consummation of the ipo . as a result , the warrants will no longer be remeasured to fair value .
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million , respectively , for the purchase of property and equipment . financing activities during the year ended december 31 , 2020 , cash provided by financing activities was $ 49.9 million , consisting primarily of $ 38.9 million of net proceeds received from our ipo , $ 11.0 million of net proceeds received from the issuance of our series a convertible preferred stock and $ 0.5 million received from the ppp loan , offset by $ 0.5 million for payments related to our capital lease obligations and equipment loan payables . 97 during the year ended december 31 , 2019 , financing activities provided $ 11.4 million from the sale of our convertible promissory notes and series a convertible preferred stock , offset by $ 0.6 million for payments related to our capital lease obligations and equipment loan payables and $ 0.1 million for the payment of issuance costs related to the sale of series a convertible preferred stock . funding requirements our operating expenses are expected to increase substantially as we continue to advance our portfolio of programs . specifically , our expenses will increase if and as we : ● further develop our discovery engine ; ● continue our current research programs and our preclinical development of product candidates from our current research programs ; ● seek to identify additional research programs and additional product candidates ; ● initiate preclinical testing and clinical trials for any product candidates we identify and develop ; ● maintain , expand , enforce , defend , and protect our intellectual property portfolio and provide reimbursement of third-party expenses related to our patent portfolio ; ● < span
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Liquidity
| 8,137
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federal funds sold balances increased from zero in 2017 to an average balance of $ 18,688,000 in 2018. however , the yield on these lower earning federal fund balances was 1.86 % , thus partially reducing the overall yield on earning assets . the volume decrease of $ 119,000 was primarily from a decrease in loans ( $ 515,000 ) , partially offset by an increase in investment balances ( $ 391,000 ) . average loans balances decreased $ 11,266,000 , ( or 3.5 % ) , from $ 319,631,000 during 2017 to $ 308,365,000 during 2018 and the average investment balances increased $ 21,344,000 , ( or 8.2 % ) , from $ 261,554,000 during 2017 to $ 282,898,000 in 2018. the fully taxable equivalent interest income component decreased $ 814,000 ( 3.8 % ) from $ 21,618,000 in 2016 to $ 20,804,000 in 2017. the decrease in the fully taxable equivalent interest income for 2017 compared to the same period in 2016 is comprised of two components - rate ( down $ 1,337,000 ) and volume ( up $ 523,000 ) . the rate decrease primarily occurred in the loan and investment portfolios . while average loans increased by $ 12,894,000 ( 4.2 % ) from $ 306,737,000 during 2016 to $ 319,631,000 during 2017 , due to the overall lower interest rate environment in 2017 , the new loans added were at lower yields than the existing loans . the yield on loans decreased from 4.88 % in 2016 to 4.57 % in 2017 and contributed to a decrease of $ 961,000 in loan interest income . the investment portfolio also contributed to the decrease in interest income . the yield on the investments decreased from 2.51 % in 2016 to 2.36 % in 2017 and contributed to a decrease of $ 379,000 in interest income . this decrease in investment income due to rates can also be attributed to the lower overall rate environment as proceeds from paid down securities were invested at lower rates . the volume increase of $ 523,000 was primarily from the increase of $ 12,894,000 in average loans mentioned above contributing $ 600,000 in interest income and partially offset by the decrease in investments reducing interest income by $ 80,000. when compared to 2016 , average investment securities decreased $ 2,622,000 ( 1.0 % ) from $ 264,176,000 in 2016 compared to $ 261,554,000 in 2017 , as a portion of these funds helped fund the increase in loans . interest expense was $ 535,000 ( or 50.4 % ) higher in 2018 compared to 2017 , increasing from $ 1,061,000 to $ 1,596,000. the $ 535,000 increase in interest expense during 2018 compared to 2017 was due to higher rates ( up $ 531,000 ) and higher volume ( up $ 4,000 ) . the increase in interest expense can be attributed to an increase in rates paid on deposit and borrowing balances during a higher interest rate environment . rates paid on interest bearing liabilities increased 11 basis points from 0.30 % to 0.41 % for 2017 compared to 2018. the largest increase due to rates occurred in the time deposits . some of these time deposits are indexed to the three- or six-month treasury rates which have increased over the past twelve months . interest expense on time deposits increased by $ 367,000 , ( or 52.9 % ) , from $ 694,000 in 2017 to $ 1,061,000 in 2018 while the average time deposit balances decreased by $ 1,634,000 , ( or 2.0 % ) , from $ 81,056,000 in 2017 to $ 79,422,000 in 2018 . 34 interest expense was $ 151,000 ( 16.6 % ) higher in 2017 compared to 2016 , increasing from $ 910,000 to $ 1,061,000. the primary increase in interest expense relates to higher rates ( up $ 177,000 ) . rates paid on interest bearing liabilities increased four basis points from 0.26 % to 0.30 % in 2017 compared to 2016. the average balances on interest bearing liabilities were $ 358,756,000 ( or $ 7,661,000 and 2.2 % higher ) in 2017 compared to $ 351,095,000 in 2016. despite the slightly higher average balances , the company experienced a slight decrease in interest expense of $ 26,000 due to volume as a result of a decrease in the higher cost time deposits and other borrowings . time deposits decreased from $ 83,144,000 in 2016 to $ 81,056,000 in 2017 and had a $ 14,000 impact on the decrease in interest expense due to volume and other borrowings decreased from $ 17,201,000 in 2016 to $ 15,522,000 in 2017 and had an $ 18,000 impact on the decrease in interest expense due to volume . table two , analysis of net interest margin on earning assets , and table three , analysis of volume and rate changes on net interest income and expenses , are provided to enable the reader to understand the components and past trends of the company 's interest income and expenses . table two provides an analysis of net interest margin on earning assets setting forth average assets , liabilities and shareholders ' equity ; interest income earned and interest expense paid and average rates earned and paid ; and the net interest margin on earning assets . table three sets forth a summary of the changes in interest income and interest expense from changes in average asset and liability balances ( volume ) , computed on a daily average basis , and changes in average interest rates . table two : analysis of net interest margin on earning assets replace_table_token_4_th ( 1 ) loan and lease interest includes loan and lease fees of $ 533,000 , $ 238,000 and $ 253,000 in 2018 , 2017 and 2016 , respectively . ( 2 ) includes taxable-equivalent adjustments that primarily relate to income on certain loans and securities that is exempt from federal income taxes . story_separator_special_tag 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. provision for income taxes the effective tax rate on income was 24.3 % , 50.4 % , and 34.6 % in 2018 , 2017 and 2016 , respectively . the effective tax rate differs from the federal statutory tax rate due to state tax expense ( net of federal tax effect ) of $ 523,000 , $ 420,000 , and $ 697,000 in these years . tax-exempt income of $ 1,315,000 , $ 1,471,000 , and $ 1,681,000 from investment securities , loans , and bank-owned life insurance in these years helped to reduce the effective tax rate . the lower effective tax rate in 2018 compared to prior years results from the new lower corporate federal income tax rate of 21 % effective january 1 , 2018 , which was a reduction from the company 's 2017 and 2016 rate of 34 % . the higher effective tax rate in 2017 compared to 2016 resulted from the company recording an income tax expense adjustment of $ 1,220,000 related to “ h.r.1 ” commonly referred to as the tax cuts and jobs act that was signed into law on december 22 , 2017. the adjustment relates to revaluing the company 's net deferred tax assets using the new lower corporate federal income tax rate of 21 % . the company 's taxable income in 2018 was $ 6,474,000 up slightly from $ 6,450,000 in 2017 , however , the combined federal and state income tax expense decreased $ 1,678,000 ( 51.6 % ) from $ 3,252,000 in 2017 to $ 1,574,000 in 2018. excluding the $ 1,220,000 adjustment related to h.r.1 , the tax expense would have been $ 2,032,000 in 2017. comparing the actual expense of $ 1,574,000 in 2018 to the adjusted expense of $ 2,032,000 in 2017 points out the benefit of the lower 21 % federal tax rate . balance sheet analysis the company 's total assets were $ 688,092,000 at december 31 , 2018 compared to $ 655,622,000 at december 31 , 2017 , representing an increase of $ 32,470,000 ( 5.0 % ) . the average balances of total assets during 2018 were $ 681,630,000 , up $ 28,910,000 or 4.4 % from the 2017 average balances of total assets of $ 652,720,000. investment securities the company classifies its investment securities as trading , held-to-maturity or available-for-sale . the company 's intent is to hold all securities classified as held-to-maturity until maturity and management believes that it has the ability to do so . securities classified as available-for-sale may be sold to implement asset/liability management strategies as part of our contingency funding plan and in response to changes in interest rates , prepayment rates and similar factors . table six below summarizes the values of the company 's investment securities held on december 31 of the years indicated . the company did not have any investment securities classified as trading in any of the years indicated below . 39 table six : investment securities composition ( dollars in thousands ) replace_table_token_7_th net unrealized losses on available-for-sale investment securities totaling $ 2,664,000 were recorded , net of $ 788,000 in tax liabilities , as accumulated other comprehensive income within shareholders ' equity at december 31 , 2018 and net unrealized gains on available-for-sale investment securities totaling $ 456,000 were recorded , net of $ 135,000 in tax liabilities , as accumulated other comprehensive income within shareholders ' equity at december 31 , 2017. management periodically evaluates each investment security in a loss position for other than temporary impairment relying primarily on industry analyst reports , observation of market conditions and interest rate fluctuations . management has the ability and intent to hold securities with established maturity dates until recovery of fair value , which may be until maturity , and believes it will be able to collect all amounts due according to the contractual terms for all of the underlying investment securities ; therefore , management does not consider these investments to be other-than-temporarily impaired . see table fifteen , “ securities maturities and weighted average yields , ” for a breakdown of the investment securities by maturity and the corresponding weighted average yields . loans and leases the company concentrates its lending activities in the following principal areas : ( 1 ) commercial ; ( 2 ) commercial real estate ; ( 3 ) multi-family real estate ; ( 4 ) real estate construction ( both commercial and residential ) ; ( 5 ) residential real estate ; ( 6 ) lease financing receivable ; ( 7 ) agriculture ; and ( 8 ) consumer loans . at december 31 , 2018 , these categories accounted for approximately 9 % , 62 % , 18 % , 2 % , 5 % , 0 % , 1 % and 3 % , respectively , of the company 's loan portfolio . this mix was relatively unchanged compared to approximately 8 % , 59 % , 25 % , 2 % , 5 % , 0 % , 1 % and 0 % , respectively , at december 31 , 2016. also , as noted in table 7 below , the company 's primary focus is commercial and real estate loans , however , in 2018 the company was selected by a lender that specializes in classic and collector cars . the company began funding these loans during the third quarter of 2018 and recorded
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the company 's and american river bank 's capital amounts and classification are also subject to qualitative judgments by the regulators about components , risk weightings and other factors . as of december 31 , 2018 and 2017 , the most recent regulatory notification categorized american river bank as well capitalized under the regulatory framework for prompt corrective action . there are no conditions or events since that notification that management believes have changed the bank 's categories . 47 at december 31 , 2018 , shareholders ' equity was $ 74,721,000 , representing a decrease of $ 2,200,000 ( 2.9 % ) from $ 76,921,000 at december 31 , 2017. the decrease in 2018 resulted from repurchases of common stock of $ 4,773,000 , the payment of cash dividends of $ 1,188,000 , and a decrease in other comprehensive income of $ 1,555,000 , 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 $ 4,900,000 for the period and the stock based compensation of $ 416,000. in 2017 , shareholders ' equity decreased $ 6,929,000 ( 8.2 % ) from $ 83,850,000 at december 31 , 2016. the decrease in 2017 resulted from the reductions in other comprehensive income , payment of cash dividends , 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 , 2018 and 2017 , as well as the minimum capital ratios for capital adequacy for american river bank . the ratio for the minimum regulatory requirement includes the capital conservation buffer of 1.875 % as of december 31 , 2018 and 1.25 % as of december 31 , 2017. 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 , 2018 , american river bank 's ratios were in excess of the regulatory definition of “ well capitalized.
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Liquidity
| 7,465
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our specialty homeowners insurance line is primarily comprised of either wind-exposed homeowners insurance providing hurricane and wind coverage to underserved homeowners in texas , hawaii and florida or low-value dwelling insurance tailored for owners of lower valued homes , which we offer in illinois , indiana , louisiana and texas . due to certain florida-based industry events , we have deemphasized our florida homeowners business and other wind-exposed business in texas and hawaii . we plan to continue to shift focus to low-value dwelling lines of business in order to bring personal lines premium levels back up and to maintain a strategic balance of commercial and personal lines of business . 34 critical accounting policies and estimates general we identified the accounting estimates below as critical to the understanding of our financial position and results of operations . critical accounting estimates are defined as those estimates that are both important to the portrayal of our financial condition and results of operations and which require us to exercise significant judgment . we use significant judgment concerning future results and developments in applying these critical accounting estimates and in preparing our consolidated financial statements . these judgments and estimates affect the reported amounts of assets , liabilities , revenues and expenses and the disclosure of material contingent assets and liabilities . actual results may differ materially from the estimates and assumptions used in preparing the consolidated financial statements . we evaluate our estimates regularly using information that we believe to be relevant . see the consolidated financial statements note 1 – summary of significant accounting policies , for further details . loss and loss adjustment expense reserves our recorded loss and loss adjustment expenses ( `` lae `` ) reserves represent management 's best estimate of unpaid loss and lae at each balance sheet date , based on information , facts and circumstances known at such time . our loss and lae reserves reflect our estimates at the balance sheet date of : case reserves , which are unpaid loss and lae amounts that have been reported ; and incurred but not reported ( `` ibnr `` ) reserves , which are ( 1 ) unpaid loss and lae amounts that have been incurred but not yet reported ; and ( 2 ) the expected development on case reserves . we do not discount the loss and lae reserves for the time value of money . case reserves are initially set by our claims personnel . when a claim is reported to us , our claims department completes a case‑basis valuation and establishes a case reserve for the estimated amount of the probable ultimate losses and lae associated with that claim . our claims department updates their case‑basis valuations upon receipt of additional information and reduces case reserves as claims are paid . the case reserve is based primarily upon an evaluation of the following factors : the type of loss ; the severity of injury or damage ; our knowledge of the circumstances surrounding the claim ; the jurisdiction of the occurrence ; policy provisions related to the claim ; expenses intended to cover the ultimate cost of settling claims , including investigation and defense of lawsuits resulting from such claims , costs of outside adjusters and experts , and all other expenses which are identified to the case ; and any other information considered pertinent to estimating the indemnity and expense exposure presented by the claim . ibnr reserves are determined by subtracting case reserves and paid loss and lae from the estimated ultimate loss and lae . our actuarial department develops estimated ultimate loss and lae on a quarterly basis . our reserve review committee ( which includes our chief executive officer , president , chief financial officer , other members of executive management , and key actuarial , underwriting and claims personnel ) meets each quarter to review our actuaries ' estimated ultimate expected loss and lae . we use several generally accepted actuarial methods to develop estimated ultimate loss and lae estimates by line of business and accident year . this process relies on the basic assumption that past experience , adjusted for the effects of current developments and likely trends , is a reasonable basis for predicting future outcomes . these methods utilize various inputs , including : written and earned premiums ; paid and reported losses and lae ; expected initial loss and lae ratio , which is the ratio of incurred losses and lae to earned premiums ; and 35 expected claim reporting and payout patterns based on our own loss experience and supplemented with insurance industry data where applicable . the principal standard actuarial methods used by our actuaries for their comprehensive reviews include : loss ratio method—this method uses loss and lae ratios for prior accident years , adjusted for current trends , to determine an appropriate expected loss and lae ratio for a given accident year ; loss development methods—loss development methods assume that the losses and lae yet to emerge for an accident year are proportional to the paid or reported loss and lae amounts observed to‑date . the paid loss development method uses losses and lae paid to date , while the reported loss development method uses losses and lae reported to date ; bornheutter‑ferguson method—this method is a combination of the loss ratio and loss development methods , where the loss development factor is given more weight as an accident year matures ; and frequency/severity method—this method projects claim counts and average cost per claim on a paid or reported basis for high frequency , low severity products . our actuaries give different weights to each of these methods based upon the amount of historical experience data by line of business and by accident year , and based on judgment as to what method is believed to result in the most accurate estimate . story_separator_special_tag adjusted operating income and adjusted operating income per share are intended as supplemental information and are not meant to replace net income or net income per share . adjusted operating income and adjusted operating income per share should be read in conjunction with the gaap financial results . our definition of adjusted operating income may be different from that used by other companies . the following is a reconciliation of net income to adjusted operating income ( dollars in thousands ) , as well as net income per share to adjusted operating income per share : replace_table_token_10_th we use adjusted operating income and adjusted operating income per share , in conjunction with other financial measures , to assess our performance and to evaluate the results of our business . we believe these measures provide investors with valuable information relating to our ongoing performance that may be obscured by the effect of investment gains and 40 losses as a result of our market risk sensitive instruments , which primarily relate to fixed income securities that are available-for-sale and not held for trading purposes . realized investment gains and losses may vary significantly between periods and are generally driven by external economic developments , such as capital market conditions . accordingly , adjusted operating income excludes the effect of items that tend to be highly variable from period to period and highlights the results from our ongoing business operations and the underlying loss or profitability of our business . we believe that it is useful for investors to evaluate adjusted operating income and adjusted operating income per share , along with net income and net income per share , when reviewing and evaluating our performance . executive overview for the year ended december 31 , 2018 , we continued to expand our commercial lines and reposition our personal lines of business . our commercial lines gross written premiums grew by $ 5.6 million , or 6.1 % , to $ 97.7 million in 2018 , compared to $ 92.1 million in 2017. personal lines gross written premiums decreased by $ 15.5 million , or 69.9 % , to $ 6.7 million in 2018 , compared to $ 22.2 million in 2017. the company reported a net loss of $ 9.2 million , or $ 1.08 per share , in 2018 , compared to a net loss of $ 21.5 million , or $ 2.74 per share , in 2017. adjusted operating loss , a non-gaap measure , was $ 3.7 million , or $ 0.44 per share , for the year ended december 31 , 2018 , compared to an adjusted operating loss of $ 22.8 million , or $ 2.90 per share , for the year ended december 31 , 2017. the 2018 results were mainly driven by $ 9.0 million of adverse development . the largest difference between net loss and adjusted operating loss is related to the adc ( described below ) in which $ 5.7 million of benefit from the adc was included in the adjusted operating loss , but is deferred under retrospective accounting and will be recognized as a benefit over the next two years . in 2018 , there was $ 583,000 of loss development on hurricane harvey and $ 1.0 million of catastrophe reinsurance reinstatement costs relating to hurricane irma . the reinstatement costs , plus a short-term reduction in net earned premiums as we repositioned our business profile , contributed to a slightly higher expense ratio . in an effort to reduce interest costs , we restructured our debt during 2018 by issuing $ 25.3 million of public senior unsecured notes ( the `` notes `` ) and paid down $ 19.5 million of our subordinated notes to $ 10.5 million . in 2017 , we entered into the adc to protect against loss development of up to $ 17.5 million in excess of stated reserves as of june 30 , 2017. the agreement provides up to $ 17.5 million of reinsurance for adverse net loss reserve development for accident years 2005 through 2016. the agreement attaches when net losses exceed $ 1.4 million of the $ 36.6 million carried reserves at june 30 , 2017 , and extends to $ 19.5 million in coverage up to $ 57.5 million ( inclusive of a 10 % co-participation ) . the 2017 results were mainly driven by adverse development on prior-year reserves , the cost of the adc , and losses from hurricanes irma and harvey . potential impact of adc on future periods we purchased the adc to greatly reduce our exposure to prior-year adverse development . the benefits of the adc can be seen during 2018 wherein we ceded $ 10.3 million of adverse development to the adc . of the $ 10.3 million of ceded losses , $ 4.6 million was amortized in 2018 , and reduced losses and lae expense . the remaining $ 5.7 million was recognized as a deferred gain under retroactive reinsurance accounting rules and will be amortized over the next two years as a reduction in losses and lae expense using the interest method . in 2017 , we recorded $ 7.2 million in ceded premiums under the adc , and ceded $ 7.2 million in losses . as of december 31 , 2018 , the adc has been fully utilized . 41 results of operations - 2018 compared to 2017 the following table summarizes our operating results for the years indicated ( dollars in thousands ) : summary operating results replace_table_token_11_th * percentage change is not meaningful premiums earned premiums are earned ratably over the term of the policy , whereas written premiums are reflected on the effective date of the policy . all commercial lines and homeowners products have annual policies , under which premiums are earned evenly over one year . almost all personal automobile policies are six month term policies under which premiums are earned evenly over a six-month period . the
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liquidity and capital resources sources and uses of funds at december 31 , 2018 , we had $ 19.7 million in cash and short-term investments . our principal sources of funds , excluding capital raises , are insurance premiums , investment income , proceeds from maturity and sale of invested assets and installment fees . these funds are primarily used to pay claims , commissions , employee compensation , taxes and other operating expenses , and service debt . we believe that our existing cash , short-term investments and investment securities balances will be adequate to meet our capital and liquidity needs and the needs of our subsidiaries on a short-term and long-term basis . we conduct our business operations primarily through our insurance company subsidiaries . our ability to service debt , and pay administrative expenses is primarily reliant upon our intercompany service fees paid by the insurance company subsidiaries to the holding company for management , administrative , and information technology services provided to the insurance company subsidiaries by the holding company . secondarily , the holding company may receive dividends from the insurance company subsidiaries ; however , this is not the primary means in which the holding company supports its funding as state insurance laws restrict the ability of our insurance company subsidiaries to declare dividends to the holding company under certain circumstances . generally , the limitations are based on the greater of statutory net income for the preceding year or 10 % of statutory surplus at the end of the preceding year . no dividends were paid from our insurance company subsidiaries in 2018 or 2017 , and $ 5.5 million of dividends were paid from our insurance company subsidiaries to the holding company in 2016. we made no contributions to our insurance company subsidiaries in 2018 , and we contributed $ 20.9 million to our insurance company subsidiaries in 2017 , and $ 2.1 million in 2016 , to increase their statutory surplus levels . we believe that the current statutory surplus levels and the funds available at the holding company level will provide the necessary statutory capital to support our premium volume growth over the next two years . cash flows operating activities .
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Liquidity
| 1,805
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on an ongoing basis , we evaluate estimates which are subject to significant judgment , including those related to the going concern assessments of our financial statements , allocation of direct and indirect expenses , useful lives associated with long-lived intangible assets , machinery and equipment , loss contingencies , valuation allowances related to deferred income taxes , and assumptions used to value stock-based awards , debt or other equity instruments . actual results could differ materially from those estimates . on an ongoing basis , we evaluate our estimates compared to historical experience and trends , which form the basis for making judgments about the carrying value of assets and liabilities . to the extent that there are material differences between our estimates and our actual results , our future financial statement presentation , financial condition , results of operations and cash flows will be affected . we believe the assumptions and estimates associated with the following have the greatest potential impact on our financial statements . 42 going concern assessment with the implementation of fasb 's standard on going concern , asu no . 2014-15 , we assess going concern uncertainty in our financial statements to determine if we have sufficient cash and cash equivalents on hand and working capital , including available loans or lines of credit , if any , to operate for a period of at least one year from the date our financial statements are issued , which is referred to as the “ look-forward period ” as defined by asu no . 2014-15. as part of this assessment , based on conditions that are known and reasonably knowable to us , we consider various scenarios , forecasts , projections , and estimates , and we make certain key assumptions , including the timing and nature of projected cash expenditures or programs , and our ability to delay or curtail those expenditures or programs , if necessary , among other factors . based on this assessment , as necessary or applicable , we make certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent we deem probable those implementations can be achieved and we have the proper authority to execute them within the look-forward period in accordance with asu no . 2014-15. related party transactions - shared facilities and services agreement as more fully described in note 4 to our financial statements , to the extent we do not employ our own human resources for operations , biotime , or biotime subsidiaries provide certain employees for administrative or operational services , as necessary , for our benefit , under the shared facilities agreement . accordingly , biotime allocates expenses such as personnel costs and related benefits incurred and paid on behalf of oncocyte based on the amount of time that particular employees devote to our affairs . other expenses such as legal , accounting , marketing , travel , and entertainment expenses are allocated to us to the extent that those expenses are incurred by or on behalf of oncocyte . biotime also allocates certain overhead expenses such as facilities , utilities , leasing , property taxes , internet and telephone expenses based on a percentage determined by management . these allocations are made based upon activity-based allocation drivers such as time spent , percentage of square feet of office or laboratory space used , and percentage of personnel devoted to our operations or management . management evaluates the appropriateness of the percentage allocations on a periodic basis and believes that this basis for allocation is reasonable . accounting for warrants we determine the accounting classification of warrants we issue , as either liability or equity classified , by first assessing whether the warrants meet liability classification in accordance with asc 480-10 , accounting for certain financial instruments with characteristics of both liabilities and equity , then in accordance with asc 815-40 , accounting for derivative financial instruments indexed to , and potentially settled in , a company 's own stock . under asc 480 , warrants are considered liability classified if the warrants are mandatorily redeemable , obligate us to settle the warrants or the underlying shares by paying cash or other assets , and warrants that must or may require settlement by issuing variable number of shares . if warrants do not meet the liability classification under asc 480-10 , we assess the requirements under asc 815-40 , which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value , irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature . if the warrants do not require liability classification under asc 815-40 , in order to conclude equity classification , we also assess whether the warrants are indexed to our common stock and whether the warrants are classified as equity under asc 815-40 or other gaap . after all such assessments , we conclude whether the warrants are classified as liability or equity . liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations . equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date . we do not have any liability classified warrants as of any period presented . see note 6 to our financial statements included elsewhere in this report . stock-based compensation we recognize compensation expense related to share-based payments in accordance with asc 718 , compensation - stock compensation ( “ asc 718 ” ) , which requires the measurement and recognition of compensation expense for share-based payment awards made to directors and employees based on estimated fair values . story_separator_special_tag the state net operating losses expire in varying amounts between 2029 and 2037. we also have capital loss carryforwards for federal and state income tax purposes of $ 1.3 million each , which expire between 2020 and 2023 . 46 as of december 31 , 2018 , we have research and development credit carryforwards for federal and state purposes of $ 1.2 million each . the federal credits will expire between 2030 and 2038 , while the state credits have no expiration . on november 28 , 2018 , biotime distributed shares of agex common stock to its shareholders , including to oncocyte , on a pro-rata basis as a dividend-in-kind . as part of the distribution of agex common stock , we received 35,326 shares of agex common stock , resulting in a taxable gain $ 0.1 million . we have sufficient current year losses from operations to offset the entire taxable gain , resulting in no income taxes due . a valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized . we established a full valuation allowance for all periods presented due to the uncertainty of realizing future tax benefits from our net operating loss carryforwards and other deferred tax assets . accordingly , d ue to losses incurred for all periods presented , we did not record any provision or benefit for income taxes . liquidity and capital resources since inception , we have financed our operations through the sale of our common stock and warrants , warrant exercises , a bank loan , and sales of biotime common shares that we hold as marketable equity securities . biotime also provided oncocyte with the use of biotime facilities and services under the shared facilities agreement as described in note 4 to the financial statements . we have incurred operating losses and negative cash flows since inception and had an accumulated deficit of $ 71.3 million at december 31 , 2018. we expect to continue to incur operating losses and negative cash flows for the near future . at december 31 , 2018 , we had $ 8.0 million of cash and cash equivalents and held shares of biotime and agex common stock as marketable equity securities valued at $ 0.4 million . during february 2019 we raised an additional $ 37.4 million of net proceeds , after the payment of underwriting fees and estimated offering expenses , through a public offering and sale of 10,733,334 shares of our common stock . we believe that our current cash , cash equivalents and marketable equity securities is sufficient to carry out our current operations through at least twelve months from the issuance date of the financial statements included in this report . on february 21 , 2017 , oncocyte entered into a loan and security agreement ( the “ loan agreement ” ) with silicon valley bank ( the “ bank ” ) pursuant to which oncocyte borrowed $ 2.0 million on march 23 , 2017. payments of interest only on the principal balance were due monthly from the draw date through october 31 , 2017 , and , beginning on november 1 , 2017 , monthly payments of principal of approximately $ 67,000 plus interest are due and payable . the outstanding principal balance of the loan bears interest at a stated floating annual interest rate equal to the greater of ( i ) three-quarters of one percent ( 0.75 % ) above the prime rate or ( ii ) four and one-quarter percent ( 4.25 % ) . as of december 31 , 2018 , the latest published prime rate plus 0.75 % was 6.25 % per annum . the outstanding principal amount plus accrued interest will be due and payable to the bank at maturity on april 1 , 2020. at maturity , oncocyte will also pay the bank an additional final payment fee of 5.8 % of the original principal borrowed . oncocyte accrued the $ 116,000 final payment fee included in the loan payable as a deferred financing cost on march 23 , 2017. oncocyte may prepay in full the outstanding principal balance at any time , subject to a prepayment fee equal to 1.0 % of the outstanding principal balance . any amounts borrowed and repaid may not be reborrowed . as of december 31 , 2018 , no amounts are available to be borrowed under this loan agreement . the outstanding principal amount of the loan , with interest accrued , the final payment fee , and the prepayment fee may become due and payable prior to the applicable maturity date if an “ event of default ” as defined in the loan agreement occurs and is not cured within any applicable cure period . upon the occurrence and during the continuance of an event of default , all obligations due to the bank will bear interest at a rate per annum which is 5 % above the then applicable interest rate . an event of default includes , among other events , failure to pay interest and principal when due , material adverse changes , which include a material adverse change in oncocyte 's business , operations , or condition ( financial or otherwise ) , failure to provide the bank with timely financial statements and copies of filings with the sec , as required , legal judgments or pending or threatened legal actions of $ 50,000 or more , insolvency , and delisting from the nyse american . oncocyte 's obligations under the loan agreement are collateralized by substantially all of its assets other than intellectual property such as patents and trade secrets that oncocyte owns . accordingly , if an event of default were to occur and not be cured , the bank could foreclose on its security interest in the collateral . oncocyte was in compliance with the loan agreement as of the filing
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cash used in operations during the years ended december 31 , 2018 and 2017 , our research and development expenses were $ 6.5 million and $ 7.2 million , our general and administrative expenses were $ 7.0 million and $ 9.2 million , and our sales and marketing expenses were $ 1.7 million and $ 2.4 million , respectively . net loss for the years ended december 31 , 2018 and 2017 amounted to $ 15.8 million and $ 19.4 million , respectively . net cash used in operating activities during these periods amounted to $ 11.6 million and $ 13.4 million , respectively . the amount by which our net loss exceeded net cash used in our operating activities during 2018 is primarily due to the following noncash items : $ 1.5 million of stock-based compensation ; a $ 0.6 million impairment charge recorded for our intangible assets ; $ 0.6 million in depreciation and amortization expenses ; and $ 0.4 million in unrealized loss on marketable equity securities . changes in working capital were approximately $ 1.0 million as a source of cash . cash used in investing activities during the year ended december 31 , 2018 , cash used for investing activities was insignificant . cash provided by financing activities during the year ended december 31 , 2018 , cash provided by financing activities was $ 12.1 million . w e received $ 9.9 million in net cash proceeds from the sale of 7,936,508 shares of our common stock in a private offering .
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Liquidity
| 14,881
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101 , revenue recognition in financial statements , as amended by sab no . 104 , revenue recognition . we generally sell our products free-on-board shipping and recognize revenue when products are shipped . revenue from service contracts is recognized using the completed-performance or proportional-performance method depending on the terms of the service agreement . when there are acceptance provisions based on customer-specified subjective criteria , the completed-performance method is used . for contracts where the services performed in the last series of acts is very significant , in relation to the entire contract , performance is not deemed to have occurred until the final act is completed . once customer acceptance has been received , or the last significant act is performed , revenue is recognized . we use the proportional-performance method when a service contract specifies a number of acts to be performed and we have the ability to determine the pattern and value in which service is provided to the customer . the company was awarded a grant from arpa-e on january 30 , 2012. the purpose of the grant is to perform research and development on components that may improve the efficiency of the company 's technology . arpa-e 's share of the research and development project is $ 2.5 million . we currently expect to exceed the originally estimated cost of the project of $ 2.8 million by approximately $ 0.5 to $ 1.0 million and the program has been extended to may 29 , 2015. the incremental cost will be fully funded by the company . the company works with arpa-e 's program manager to agree upon the specifications and work plans for the grant . the company then directs all the work to be performed by arpa-e approved subcontractors , which historically have been universities but are now commercial subcontractors . upon completion of the work , the company submits to arpa-e for payment of 90 % of the costs incurred by the company . historically , this has been done on a quarterly basis , but it may be as frequently as monthly . the company bears responsibility for the remaining 10 % of the total costs incurred by the company under the agreed work plans , which amount is included ( less any costs that the applicable subcontractor has agreed to share ) in our cost of revenues . the company is also responsible for any costs incurred under the program in excess of the program amount . any such costs would be recorded in research and development costs rather than cost of revenues . all invoices are supported with copies of expenses and invoices that the company has received from arpa-e approved subcontractors . notwithstanding the foregoing , the company is the primary obligor of all the costs incurred under the work plans for the grant , except for any costs that the applicable subcontractor has agreed to share . the agreement with arpa-e establishes go/no go milestones and deliverables . for each go/no go milestone and deliverable , the arpa-e program director must review the company 's work under the previously agreed work plan , confirm in writing that the company has achieved the go/no go milestone and deliverable , and authorize the company to commence work on the next milestone and deliverable under a corresponding next work plan . if the project were to stop due to an arpa-e determination that a milestone or deliverable had not been met , then the company would not submit to arpa-e for payment any further invoices ( except for costs incurred under the previously agreed work plan ) . as of december 31 , 2014 , the company had fully utilized arpa-e 's share of the research and development project . the payment conditions of the $ 150,000 phase i sbir grant that we received were substantially similar to those of the arpa-e grant , except that in the case of the sbir grant , the company receives payment from sbir of one hundred percent of the costs incurred by the company under the agreed work plans . nevertheless , the company is the primary obligor of all the costs incurred under the agreed work plans for the sbir grant . the work related to the sbir grant was completed in 2013 . 30 revenues from government grants are recognized in accordance with the provisions of sab no . 104 in the period during which the related costs are incurred , provided that the company has incurred the costs in accordance with the specifications and work plans for the applicable grant . expenses included in cost of revenues are directly related to research and development activities performed by our subcontractors in order to fulfill the specifications and work plans for the applicable grant . there are no contingencies or ongoing obligations of the company related to these grant arrangements , other than the obligation of the company to submit to the applicable government entity invoices for costs incurred by the company under the agreed work plans for the applicable grant . under no circumstances is the company required to repay monies that it receives under any of its government grants , provided that the company receives no more than the government 's agreed share of the total cost of the project and , with respect to the arpa-e grant , provided that the company meets its obligation to cover its share of costs as described above . costs incurred related to the grants are recorded as grant research and development costs within cost of revenues . costs incurred in excess of grant award amounts are recorded as research and development costs in operating expenses . story_separator_special_tag revenues related to the arpa-e grant decreased due to the timing of spending and as the arpa-e grant was fully funded by the end of 2014. royalty revenue decreased from $ 100,000 to $ 0 as the royalty agreement with lockheed martin corporation ended december 31 , 2013. in the year ended december 31 , 2014 , revenue from the sale of our products was $ 1,215,015 , a 191 % increase compared to the year ended december 31 , 2013 , and related to our 30kw battery converter and , to a much lesser extent , our new grid-resilient 30kw multi-port power conversion system . in the year ended december 31 , 2013 , revenue from the sale of products was $ 417,468 with approximately half of our product revenue from each of our 30kw battery converter and 30kw pv inverter . we elected not to sell our 30kw pv inverter in 2014 as the 30kw battery converter , based on the same hardware platform , provided a higher selling price and thus enhanced margins . cost of revenues . cost of revenues for the year ended december 31 , 2014 of $ 2,270,850 were $ 123,877 , or 6 % , higher than the $ 2,146,973 cost of revenues for the year ended december 31 , 2013 as the result of an $ 911,254 increase in product cost of revenue partially offset by a $ 787,377 decrease in grant research and development costs . in the year ended december 31 , 2014 , cost of revenues from the sale of products was $ 1,627,429. in the year ended december 31 , 2013 , the cost of revenues from the sale of products was $ 716,175. the increase in cost of revenues from the sale of products was due to higher unit sales , overhead , including personnel costs , and testing costs for our 30kw battery converter . the decrease in grant research and development costs was due to the timing of spending under the arpa-e grant , the full utilization of the arpa-e grant funds prior to the end of 2014 and the completion of the sbir grant in may 2013. during the years ended december 31 , 2014 and 2013 , we recognized $ 579,079 and $ 1,229,036 , respectively , in grant revenue and $ 643,421 and $ 1,284,878 , respectively , in grant research and development costs from our arpa-e grant . we had a cost-sharing arrangement with arpa-e whereby we contributed ten percent of the total costs of the project ( less any costs that our subcontractors have agreed to 32 share ) , which resulted in our costs exceeding our revenue . during the year ended december 31 , 2013 , we also recognized $ 145,920 in grant revenues and $ 145,920 in grant research and development costs from our sbir grant . as the arpa-e grant was fully utilized in 2014 , we do not expect any grant revenue or grant research and development costs for this program in 2015. any spending in 2015 related to the arpa-e grant or related technology development will be fully funded by us and recorded as research and development expenses within operating expenses . gross loss . gross loss for the years ended december 31 , 2014 and 2013 was $ 476,756 and $ 254,549 , respectively . gross loss for the year ended december 31 , 2014 was $ 222,207 higher than in the year ended december 31 , 2013 primarily due to increased engineering personnel costs , as we added resources to support our existing products , and higher testing costs related to our 30kw battery converter . we recognized $ 151,229 in higher personnel costs and $ 134,266 in higher testing costs within cost of revenues in the year ended december 31 , 2014 as compared to the year ended december 31 , 2013. in addition , royalty revenue was $ 100,000 lower in the year ended december 31 , 2014 as compared to the year ended december 31 , 2013. higher contributions from increased unit sales of our 30kw battery converter partially offset the higher personnel and testing costs and lower royalty revenue . the decreases in grant revenue and grant research and development costs had an insignificant impact on gross loss in comparing the years ended december 31 , 2014 and 2013 as grant costs exceeded revenues by $ 64,342 in the year ended december 31 , 2014 compared to $ 55,842 for the year ended december 31 , 2013. general and administrative expenses . general and administrative expenses increased by $ 854,095 , or 40 % , to $ 2,993,131 in the year ended december 31 , 2014 from $ 2,139,036 in the year ended december 31 , 2013. the increase was due primarily to higher stock compensation expense of $ 291,379 , inclusive of $ 143,037 in higher stock compensation paid to consultants , d & o insurance costs of $ 166,621 , personnel costs of $ 158,622 , legal and professional fees of $ 121,816 and board fees of $ 112,500 as the board elected not to receive cash compensation until we completed our initial public offering in the fourth quarter of 2013. research and development expenses . research and development expenses increased by $ 1,046,171 , or 86 % , to $ 2,258,469 in the year ended december 31 , 2014 from $ 1,212,298 in the year ended december 31 , 2013. the increase was due primarily to higher personnel costs of $ 521,821 and contract labor costs of $ 321,028 as we added both firmware and hardware engineering resources , and costs related to advanced power switch development of $ 73,198 as we funded these efforts after fully utilizing the arpa-e grant program funding . sales and marketing expenses . sales and marketing expenses increased by $ 742,286 , or 162 % , to $ 1,199,578 in the year ended december 31 , 2014 from
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cash outflows for the development of patents in the years ended december 31 , 2014 and 2013 were $ 418,255 and $ 142,708 , respectively , and cash outflows for the acquisition of fixed assets in the years ended december 31 , 2014 and 2013 were $ 342,247 and $ 78,941 , respectively . cash outflows for the development of patents increased as we expanded and broadened our patent portfolio while cash outflows for the acquisition of fixed assets increased as we purchased equipment for our development lab to support current and future products . in the year ended december 31 , 2014 , we received $ 4,966 in net proceeds from the exercise of stock options and warrants . in the year ended december 31 , 2013 , we raised $ 17,250,000 in gross proceeds ( $ 15,015,985 net of costs ) from our initial public offering and $ 750,000 in gross proceeds ( $ 611,256 net of costs ) from the sale of convertible promissory notes , later converted into common stock at the completion of our initial public offering . our long-term debt balance , including current portion , was $ 0 at december 31 , 2014 and 2013 due to the conversion of our convertible promissory notes to shares of our common stock following the closing of our initial public offering and the cancellation of our promissory note with the state of texas in december 2013 upon its exercise of its rights under the investment unit issued on october 1 , 2010 , as amended .
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Liquidity
| 5,094
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the company story_separator_special_tag the following discussion should be read in conjunction with our consolidated financial statements and accompanying notes included in “ item 8. financial statements and supplementary data ” of this annual report on form 10-k. we have omitted discussion of the earliest of the three years covered by our consolidated financial statements presented in this report as that disclosure is included in our annual report on form 10-k for the year ended december 31 , 2019 filed with the securities and exchange commission ( “ sec ” ) on march 10 , 2020. you are encouraged to reference the discussion and analysis of our results of operations for the year ended december 31 , 2018 compared to the year ended december 31 , 2019 in “ item 7. management 's discussion and analysis of financial condition and results of operations ” within that report . overview we are a maryland corporation and an externally managed real estate investment trust ( “ reit ” ) that is primarily focused on originating , holding and managing commercial real estate ( “ cre ” ) mortgage loans and other commercial real estate-related debt investments . on july 31 , 2020 , our management contract was acquired from exantas capital manager inc. , a subsidiary of c-iii capital partners llc , by acres capital , llc ( the “ manager ” ) , a subsidiary of acres capital corp. ( collectively , “ acres ” ) , a private commercial real estate lender exclusively dedicated to nationwide middle market cre lending with a focus on multifamily , student housing , hospitality , office and industrial in top united states ( “ u.s. ” ) markets ( the “ acres acquisition ” ) . our manager draws upon the management team of acres and its collective investment experience to provide its services . our objective is to provide our stockholders with total returns over time , including quarterly distributions and capital appreciation , while seeking to manage the risks associated with our investment strategies as well as to maximize long-term stockholder value by maintaining stability through our available liquidity and diversified cre loan portfolio . in connection with the acres acquisition : we entered into a fourth amended and restated management agreement ( the “ management agreement ” ) which was amended and restated to ( i ) extend its term to july 21 , 2023 , ( ii ) allow for board designation rights that give the manager the right to designate not less than two nominees for election to our board of directors ( “ board ” ) , ( iii ) provide for a termination fee to be payable to the manager upon its termination of the management agreement due to our default in the performance of any material term , condition or covenant in the management agreement , ( iv ) provide for a minimum monthly base management fee through july 31 , 2022 and ( v ) revise the computation of incentive compensation with respect to each fiscal quarter commencing with the quarter ended december 31 , 2022. we entered into separate agreements with massachusetts mutual life insurance company ( “ massmutual ” ) and a fund managed by oaktree capital management , l.p. ( “ oaktree ” ) for new capital commitments aggregating up to $ 375 million . the asset-based revolving loan facility of up to $ 250.0 million can be used to finance our core cre lending business and is not subject to mark-to-market provisions . the senior note and warrant purchase agreement ( the “ note and warrant purchase agreement ” ) of up to $ 125.0 million can be used for general corporate purposes . see further discussion of these commitments in “ liquidity and capital resources. ” we entered into a $ 12.0 million promissory note ( the “ promissory note ” ) as lender with acres to partially fund the acquisition of our management contract . an important aspect of the acres acquisition was that it delivered operational liquidity in order to substantially mitigate additional potential margin call risk , allowing us to focus on asset management within the existing portfolio and restart loan originations and underwriting . additionally , our manager expects to leverage the complementary nature of our lending platforms , its experience and its network of relationships to generate a cre pipeline to improve and grow book value and earnings . ( back to index ) 38 ( back to index ) in december 2019 , a novel strain of coronavirus ( “ covid-19 ” ) was identified . the resulting spread of covid-19 throughout the globe led the world health organization to designate covid-19 as a pandemic and numerous countries , including the u.s. , to declare national emergencies . many countries have responded to the outbreak by instituting quarantines and restrictions on travel and limiting operations of non-essential offices and retail centers , which has resulted in the closure or remote operation of non-essential businesses and increased rates of unemployment . while certain countries around the world have eased restrictions and financial markets have stabilized to some degree , the pandemic continues to cause uncertainty surrounding its ultimate impact on the global economy , generally , and the cre business in particular . we continue to actively and responsibly manage corporate liquidity and operations in light of the market disruptions caused by covid-19 . additionally , nationwide restrictions placed on most businesses in response to covid-19 are expected to cause significant cash flow disruptions across the economy that will likely impact our borrowers and their ability to stay current with their debt obligations in the near term . we have used and continue to expect to use a variety of legal and structural options to manage that risk effectively , including through forbearance and extension provisions or agreements . it is inherently difficult to accurately assess the impact of covid-19 on our revenues , profitability and financial position due to uncertainty of the severity and duration of the pandemic . story_separator_special_tag except for four loans ( two of which were paid currently as of february 2021 ) , all of our loans were current on debt service at december 31 , 2020 . additionally , we have provided relief in the form of forbearance agreements , term extensions and other modifications on 25 loans during the year ended december 31 , 2020. thirteen of these loans were given forbearances , with a weighted average forbearance period of five months . eighteen loans were extended by a weighted average of 10 months in exchange for $ 891,000 of extension fees , in an effort to manage credit risk that was created in connection with the effects of the covid-19 pandemic . our cre mezzanine loan and preferred equity investments earn interest at fixed rates and were current on debt service at december 31 , 2020 . we use leverage to enhance our returns . the cost of borrowings to finance our investments is a significant part of our expenses . our net interest income depends on our ability to control these expenses relative to our revenue . our cre loans may initially be financed with term facilities , such as cre loan warehouse financing facilities , in anticipation of their ultimate securitization . we ultimately seek to finance our cre loans through the use of non-recourse long-term , match-funded cre debt securitizations . in september 2020 , with an improved liquidity profile , we repaid the outstanding balances on all of our cre warehouse financing facilities , and in october 2020 , we amended all three of our cre loan warehouse financing facilities to revise a covenant definition to be in line with other market participants as well as , at our request , to reduce the maximum borrowing capacity from $ 400.0 million to $ 250.0 million on one warehouse financing facility as well as to extend the maturity of that same warehouse facility one year . at december 31 , 2020 and 2019 , we had an outstanding balance of $ 12.3 million and $ 544.9 million , respectively , on our cre loan warehouse financing facilities , representing 0.94 % and 29.1 % , respectively , of total outstanding borrowings . we expect to utilize our cre loan warehouse financing facilities to fund our loan origination pipeline in 2021 alongside the equity we will invest . we also expect to utilize cre securitization financing alternatives as market conditions permit in 2021. at december 31 , 2020 and 2019 , we had outstanding balances of $ 1.0 billion and $ 746.4 million , respectively , on cre debt securitizations , or 78.8 % and 39.9 % , respectively , of total outstanding borrowings . in march 2020 , we closed a cre debt securitization that financed cre loans of $ 522.6 million at a weighted average cost of libor plus 1.43 % . in september 2020 , we closed a cre debt securitization that financed $ 297.0 million of cre loan commitments at a weighted average cost of libor plus 3.13 % . we anticipate that we will close cre debt securitizations of between $ 500.0 million and $ 1.0 billion for the year ended december 31 , 2021. in september 2020 , we liquidated our 2018 cre debt securitization by refinancing loans with our senior secured financing facility obtained as a result of the acres acquisition . at december 31 , 2020 , we had an outstanding principal balance on our senior secured financing facility of $ 33.4 million . also in conjunction with the acres acquisition , we issued $ 50.0 million in 12.00 % senior unsecured notes due 2027 ( “ senior unsecured notes due 2027 ” ) and warrants to purchase 466,661 shares of our common stock to improve and stabilize our corporate liquidity . in january 2020 , we adopted updated accounting guidance that replaced the incurred loss approach with the current expected credit losses ( “ cecl ” ) model for the determination of our allowance for credit losses and write-offs on our investment securities available-for-sale . upon adoption on january 1 , 2020 , we recorded an initial cecl reserve of approximately $ 4.5 million , of which $ 3.0 million , or $ 0.29 per share , was recorded as a charge to retained earnings . the estimated cecl reserve represented 0.25 % of the aggregate outstanding principal balance of our $ 1.8 billion commercial loan portfolio at december 31 , 2019. we reevaluate our cecl reserves quarterly , incorporating our current expectations of macroeconomic factors considered in the determination of our cecl reserves . at december 31 , 2020 , the cecl reserves on our cre loan portfolio was $ 34.3 million or 2.21 % of our $ 1.5 billion loan portfolio , which reflects weakened macroeconomic factors , including increased unemployment , declining cre values and less liquidity in cre capital markets since the adoption of cecl on january 1 , 2020. we historically used derivative financial instruments to hedge a portion of the interest rate risk associated with our borrowings . we generally sought to minimize interest rate risk with a strategy that is expected to result in the least amount of volatility under accounting principles generally accepted in the united states of america ( “ gaap ” ) while still meeting our strategic economic objectives and maintaining adequate liquidity and flexibility . these hedging transactions may include interest rate swaps , collars , caps or floors , puts , calls and options . ( back to index ) 40 ( back to index ) in april 2020 we terminated all interest rate hedges in conjunction with the disposition of our financed cmbs portfolio . at termination , we recognized a realized loss in equity of $ 11.8 million that will be amortized into interest expense over the remaining life of the debt . during the year ended december 31 , 2020 , we recognized amortization expense on these terminated contracts of $ 1 . 3 million . we target originating transitional floating-rate cre loans between $ 10.0 million and $ 80.0 million .
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results of operations our net loss allocable to common shares for the year ended december 31 , 2020 was $ 208.1 million , or $ ( 19.33 ) per share-basic ( $ ( 19.33 ) per share-diluted ) , as compared to net income allocable to common shares of $ 25.6 million , or $ 2.45 per share-basic ( $ 2.43 per share-diluted ) , for the year ended december 31 , 2019 . ( back to index ) 41 ( back to index ) net interest income the following table analyzes the change in interest income and interest expense for the comparative years ended december 31 , 2020 and 2019 by changes in volume and changes in rates . the changes attributable to the combined changes in volume and rate have been allocated proportionately , based on absolute values , to the changes due to volume and changes due to rates ( dollars in thousands , except amounts in footnotes ) : replace_table_token_2_th ( 1 ) percent change is calculated as the net change divided by the respective interest income or interest expense for the year ended december 31 , 2019 . ( 2 ) includes decreases in fee income of approximately $ 1.2 million , $ 49,000 and $ 9,000 recognized on our floating-rate cre whole loans , legacy cre loan and cre preferred equity investments , respectively , that were due to changes in volume . ( 3 ) includes the change in interest income recognized on one legacy cre loan with an amortized cost of $ 11.4 million and $ 11.5 million at december 31 , 2020 and 2019 , respectively , classified as a cre loan on the consolidated balance sheet . ( 4 ) includes a decrease from net accretion income of approximately $ 2.1 million that was due to changes in volume .
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ROO
| 2,765
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we expect to generate operating losses for the foreseeable future , but intend to try to limit the extent of these losses by entering into co-development or collaboration agreements with one or more strategic partners . although we have raised capital in the past and with net proceeds of $ 29 million , $ 15.4 million and $ 19.4 million through the sale of common stock in 2013 , 2012 and 2011 , respectively , we can not assure you that we will be able to secure such additional financing , if needed , or that it will be adequate to execute our business strategy . even if we obtain additional financing , it may be costly and may require us to agree to covenants or other provisions that will favor new investors over existing shareholders . 37 our primary focus is advancing the clinical development of our core assets : ampion and optina . we have previously announced the initiation of a phase iii final pivotal trial of ampion in osteoarthritis of the knee and a phase iib clinical trial of optina in diabetic macular edema . these trials will be blinded and conducted by third party clinical research organizations . on december 16 , 2013 , we announced a ten-year lease of a multi-purpose facility containing 19,346 square feet . this facility will include an fda compliant clean room to manufacture ampion and will be our new headquarters . the facility is expected to be operational by the summer of 2014. significant accounting policies and estimates our consolidated financial statements have been prepared in accordance with accounting policies generally accepted in the united states of america . the preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period . on an on-going basis , management evaluates its estimates and judgments , including those related to recoverability of long-lived assets , fair value of our derivative instruments , allowances and contingencies . management bases its estimates and judgments on historical experience and on 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 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 . the methods , estimates , and judgments used by us in applying these most critical accounting policies have a significant impact on the results we report in our consolidated financial statements . patents costs of establishing patents consisting of legal fees paid to third parties and related costs are currently expensed as incurred . we will continue this practice unless we can demonstrate that such costs add economic value to our business , in which case we will capitalize such costs as part of intangible assets . the primary consideration in making this determination is whether or not we can demonstrate that such costs have , in fact , increased the economic value of our intellectual property . legal and related costs which do not meet the above criteria will be expensed as incurred . the $ 500,000 fair value of the zertane patents acquired in connection with the march 2011 acquisition of biosciences is being amortized over the remaining u.s. patent lives of approximately 11 years beginning april 2011. in-process research and development in-process research and development ( iprd ) relates to the zertane product and clinical trial data acquired in connection with the march 2011 business combination of biosciences . the $ 7,500,000 recorded was based on an independent third party appraisal of the fair value of the assets acquired . iprd is considered an indefinite-lived intangible asset and its fair value will be assessed for impairment annually and written down if impaired . once the zertane product obtains regulatory approval and commercial production begins , iprd will be amortized over its estimated useful life . if the commercialization of zertane becomes impracticable or we abandon this drug , we will expense the $ 7.5 million iprd asset . research and development research and development costs are expensed as incurred . these costs consist primarily of expenses for personnel engaged in the design and development of product candidates ; the scientific research necessary to produce commercially viable applications of our proprietary drugs or compounds ; early stage clinical testing of product candidates or compounds ; expenditures for design and engineering of the orp product ; and development equipment and supplies , facilities costs and other related overhead . stock-based compensation we account for stock-based payments by recognizing compensation expense based upon the estimated fair value of the awards on the date of grant . we determine the estimated grant fair value of options using the black-scholes option pricing model and recognize compensation costs ratably over the vesting period using the straight-line method . common stock issued in exchange for services is recorded at the fair value of the common stock at the date at which we become obligated to issue the shares . the value of the shares is expensed over the requisite service period . derivatives we account for hybrid financial instruments ( debentures with embedded derivative features conversion options , down-round protection and a mandatory conversion provision ) and related warrants by recording the fair value of each hybrid instrument in its entirety and recording the fair value of the warrant derivative liability . the fair value of the hybrid financial instruments and warrants 38 was calculated using a binomial-lattice-based valuation model . we recorded a derivative expense at the inception of each instrument reflecting the difference between the fair value and cash received . changes in the fair value in subsequent periods were recorded as unrealized gain or loss on fair value of derivative instruments for the hybrid financial instruments and to derivative income or expense for the warrants . story_separator_special_tag the warrants associated with these financial instruments expired on december 31 , 2013 and the warrant derivative liability was eliminated . income taxes we use the liability method of accounting for income taxes . under this method , we recognize deferred assets and liabilities based on the differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years . we establish a valuation allowance for all deferred tax assets for which there is uncertainty regarding realization . results of operationsyear ended december 31 , 2013 , 2012 and 2011 see notes to consolidated financial statements . results of operations for the years ended december 31 , 2013 , 2012 and 2011 reflected losses of $ 24.0 million , $ 11.6 million and $ 18.4 million , respectively . these losses include non-cash charges related to depreciation and amortization expense , derivative expense , stock-based compensation , stock issued for services and losses on the fair value of debt instruments in the amount of $ 4.2 million in 2013 , $ 1.5 million in 2012 and $ 9.2 million in 2011. revenue we are a development stage enterprise and have not generated material revenue in our operating history . the $ 50,000 license revenue recognized in 2013 and 2012 represents the amortization of the upfront payment received from our license agreement . the initial payment of $ 500,000 from the license agreement with a korean pharmaceutical company was deferred and being recognized over 10 years . expenses research and development research and development costs consist of labor , research and development of patents and intellectual property , stock-based compensation as well as drug development and clinical trials . these costs relate solely to research and development without an allocation of general and administrative expenses and are summarized as follows : replace_table_token_3_th comparison of years ended december 31 , 2013 and 2012 research and development expenses increased $ 10,795,000 , or 144 % , in 2013 over 2012. this was due primarily to costs associated with the production of study drugs , clinical trials of ampion and optina and the luoxis development of its orp platform . labor and stock-based compensation increased due to bonuses paid/accrued and stock options granted in both ampio and luoxis as well as the continuing vesting of stock option awards granted in previous years . we continue to maintain and increase our patent portfolio . comparison of years ended december 31 , 2012 and 2011 research and development expenses increased approximately 13 % in 2012 over 2011. this was due primarily to costs associated with fda pre-ind filings for our three major drug candidates , the ind submissions for ampion and optina , and clinical trials of ampion and optina . we also incurred costs related to the production of the study drugs for the ampion and optina trials . we continue to maintain and strengthen our patent portfolio while labor and stock compensation costs were relatively flat . 39 general and administrative general and administrative expenses consist of personnel costs for employees in executive , business development and operational functions ; professional fees include legal , auditing and accounting ; occupancy , travel and other includes rent , governmental and regulatory compliance , insurance , investor/public relations and professional subscriptions . these costs are summarized as follows : replace_table_token_4_th comparison of years ended december 31 , 2013 and 2012 general and administrative costs increased $ 1,408,000 , or 32 % , in 2013 over 2012. the increase in labor costs and stock-based compensation primarily relates to the addition of our chief operating officer in december 2012 , increased professional staffing in luoxis , bonuses paid/accrued and stock options granted in both ampio and luoxis as well as the continuing vesting of stock option awards granted in previous years . the labor costs in 2012 includes an employment agreement payout to our former ceo . the increase in professional fees is associated with the formation of the subsidiaries for luoxis and vyrix and the fees associated with legal defense costs . occupancy , travel and other increased primarily due to insurance premiums , regulatory and compliance fees and travel expenses . comparison of years ended december 31 , 2012 and 2011 there was an overall decrease of approximately 3 % in general and administrative costs in 2012 from 2011. labor costs increased in 2012 as the result of the employment agreement payout to our former ceo upon the granting of an indefinite compassionate leave of absence in january 2012. stock-based compensation decreased in 2012 due to longer vesting periods being incorporated into new awards , resulting in straight line amortization of the fair value over a longer period . professional fees consist primarily of legal , audit and accounting costs , public company compliance costs , and consulting related to capital formation . professional fees decreased in 2012 as compared to 2011 since we had only routine filing and reporting requirements in 2012. in 2011 we had additional professional fees related to the filing of a form s-4 with the sec and the acquisition of biosciences . travel and investor/public relations costs increased in 2012 as we pursued business development and financing opportunities . directors ' fees decreased because only regularly scheduled meetings were held during 2012 , compared to 2011 when additional meetings were required . no general and administrative costs are currently being allocated to the research and development activities . derivative expense we recorded approximately ( $ 517,000 ) , $ 206,000 and ( $ 1.6 ) million in non-cash derivative income ( expense ) in 2013 , 2012 and 2011 , respectively , in connection with our hybrid financial instruments consisting of debentures and related warrants .
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patients receiving ampion achieved significantly greater reduction in pain , womac a , across 12 weeks compared to saline vehicle control ( p = 0.01 ) patients receiving ampion also achieved significantly greater improvement in function , ( womac c ) , from baseline to 12 weeks compared to saline vehicle control ( p = 0.044 ) . patients receiving ampion also demonstrated significantly greater improvement in patient global assessment ( pga ) of disease severity from baseline to 12 weeks compared to saline vehicle control ( p = 0.012 ) . clinical efficacy defined as pain reduction was evident as early as four weeks after the injection ( p = 0.025 ) and continued to show improvement through 12 weeks ( p = 0.0038 ) . severe patients , defined as kellgren-lawrence iv , receiving ampion achieved significantly greater reduction in pain , womac a , from baseline to 12 weeks compared to severe patients receiving saline vehicle control ( p = 0.017 ) ampion was well tolerated with minimal adverse events ( aes ) reported in the study . aes were well balanced between ampion and control groups . there were no drug-related serious adverse events ( saes ) . on february 4 , 2014 , we announced that an article reporting the results of the spring study was published in plose one , an international , open-access , online publication . the article entitled : a randomized clinical trial to evaluate two doses of an intra-articular injection of lmwf-5a in adults with pain due to osteoarthritis of the knee details the efficacy and safety outcomes of the use of ampion in the spring study . we decided to follow 97 patients who were administered either 4 ml ampion or saline vehicle control for an additional 8 weeks past the original 12 week primary endpoint . at week twenty , 50 % of patients in the kellgren-lawrence grades of 3 and 4 ( severe osteoarthritis ) had improvement of 40 % or more in the womac a pain scale compared to 25 % in the vehicle control group ( p=0.04 ) . patients were also classified as responders if they achieved 40 % or greater improvement
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| 12,201
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sales to foreign and domestic distributors accounted for 45.7 % , 48.9 % and 50.2 % of our net revenues for fiscal 2012 , 2011 and 2010 , respectively . the following direct customers accounted for 10 % or more of our net revenues in one or more of the following periods : 31 replace_table_token_7_th cisco systems , our largest oem customer , purchases our products primarily through its consignment warehouses , smart modular technologies , jabil circuit and flextronics technology , and also purchases some products through its contract manufacturers and directly from us . historically , purchases by cisco systems have fluctuated from period to period . based on information provided to us by cisco systems ' consignment warehouses and contract manufacturers , purchases by cisco systems represented approximately 41 % , 37 % and 35 % of our net revenues in fiscal 2012 , 2011 and 2010 , respectively . our revenues have been substantially impacted by the fluctuations in sales to cisco systems , and we expect that future direct and indirect sales to cisco systems will continue to fluctuate significantly on a quarterly basis and that such fluctuations may significantly affect our operating results in future periods . to our knowledge , none of our other oem customers accounted for more than 10 % of our net revenues in fiscal 2012 , 2011 or 2010 . cost of revenues . our cost of revenues consists primarily of wafer fabrication costs , wafer sort , assembly , test and burn-in expenses , the amortized cost of production mask sets , stock-based compensation and the cost of materials and overhead from operations . all of our wafer manufacturing and assembly operations , and a significant portion of our wafer sort testing operations , are outsourced . accordingly , most of our cost of revenues consists of payments to tsmc and independent assembly and test houses . because we do not have long-term , fixed-price supply contracts , our wafer fabrication and other outsourced manufacturing costs are subject to the cyclical fluctuations in demand for semiconductors . cost of revenues also includes expenses related to supply chain management , quality assurance , and final product testing and documentation control activities conducted at our headquarters in sunnyvale , california and our branch operations in taiwan . gross profit . our gross profit margins vary among our products and are generally greater on our higher density products and , within a particular density , greater on our higher speed and industrial temperature products . we expect that our overall gross margins will fluctuate from period to period as a result of shifts in product mix , changes in average selling prices and our ability to control our cost of revenues , including costs associated with outsourced wafer fabrication and product assembly and testing . research and development expenses . research and development expenses consist primarily of salaries and related expenses for design engineers and other technical personnel , the cost of developing prototypes , stock-based compensation and fees paid to consultants . we charge all research and development expenses to operations as incurred . we charge mask costs used in production to costs of revenues over a 12-month period . however , we charge costs related to pre-production mask sets , which are not used in production , to research and development expenses at the time they are incurred . these charges often arise as we transition to new process technologies and , accordingly , can cause research and development expenses to fluctuate on a quarterly basis . we believe that continued investment in research and development is critical to our long-term success , and we expect to continue to devote significant resources to product development activities . accordingly , we expect that our research and development expenses will increase in future periods , although such expenses as a percentage of net revenues may fluctuate . selling , general and administrative expenses . selling , general and administrative expenses consist primarily of commissions paid to independent sales representatives , salaries , stock-based compensation and related expenses for personnel engaged in sales , marketing , administrative , finance and human resources activities , professional fees , costs associated with the promotion of our products and other corporate expenses . we expect that our sales and marketing expenses will increase in absolute dollars in future periods as we continue to grow and expand our sales force but that , to the extent our revenues increase in future periods , these expenses will generally decline as a percentage of net revenues . we also expect that , in support of our continued growth and our operations as a public company , general and administrative expenses will continue to increase in absolute dollars for the foreseeable future . general and administrative expenses increased significantly in fiscal 2012 , primarily as a result of substantial legal expense related to our pending patent infringement and antitrust litigation with cypress semiconductor corporation . although we expect these expenses to be substantially reduced during the quarter ending june 30 , 32 2012 , pending the anticipated issuance in july of an initial determination in the itc proceeding , legal expenses may again become substantial in future quarters if the litigation continues . acquisition on august 28 , 2009 , we acquired substantially all of the assets related to the sram memory device product line of sony corporation and its subsidiaries ( collectively , `` sony '' ) . as part of the transaction , we also entered into an intellectual property agreement with sony under which we acquired certain patents and license rights to other intellectual property used in connection with the acquired product line . the acquisition was undertaken in order to increase our market share in the sram memory business , expand our relationships with our major customers and expand our product portfolio . story_separator_special_tag the acquisition resulted in a bargain purchase as sony had been incurring significant losses on an annual basis , had a minimal product offering , had only one customer and declining annual revenues at the time of the acquisition and was therefore motivated to sell the assets of its sram product line . we adopted authoritative guidance for business combinations as a result of this acquisition . the acquisition has been accounted for as a purchase under authoritative guidance for business combinations . acquisition related costs of approximately $ 533,000 incurred in connection with this acquisition have been expensed in accordance with the authoritative guidance and are included in selling , general and administrative expenses in the consolidated statement of operations for the year ended march 31 , 2010. contingent consideration was recognized at the date of the acquisition and recorded at its fair value . changes to the fair value of the contingent consideration subsequent to september 30 , 2009 have been recorded in general and administrative expense and amounted to $ 105,000 , $ 64,000 and $ 47,000 in fiscal 2010 , 2011 and 2012 , respectively . the purchase price of the acquisition has been preliminarily allocated to the net tangible and intangible assets acquired , with the excess of the fair value of assets acquired over the purchase price recorded as a bargain purchase gain . the results of operations and estimated fair value of assets acquired and liabilities assumed were included in our consolidated financial statements beginning august 29 , 2009. the total purchase consideration was approximately $ 7.1 million in cash , of which approximately $ 5.2 million was paid at the closing , $ 1.2 million was paid in october 2009 following a post-closing adjustment to reflect actual product inventory on hand at the closing and $ 727,000 consisted of contingent consideration that was payable on the basis of sales of certain acquired sram products over an eight quarter period commencing with the quarter ended september 30 , 2009 , the quarter in which we first derived revenue from shipments of such products . the allocation of the purchase price to acquired tangible and identifiable intangible assets was based on their estimated fair values at the date of acquisition . prior to the closing of the acquisition , there were no material relationships between us and sony or any related parties or affiliates of sony . 33 story_separator_special_tag at approximately $ 604,000 that were acquired in the sony acquisition and are being amortized over four quarters . cost of revenues included stock-based compensation expense of $ 300,000 and $ 291,000 , respectively , in fiscal 2011 and fiscal 2010. gross profit . gross profit increased by 53.2 % from $ 29.2 million in fiscal 2010 to $ 44.8 in fiscal 2011. gross margin increased from 43.2 % in fiscal 2010 to 45.8 % in fiscal 2011. the increase in gross profit was primarily related to the increased net revenues.the increase in gross margin was primarily related to a shift in product mix to a higher percentage of higher density , higher margin products , partially offset by a reduction in the percentage of sales of products for military applications and increased depreciation and amortization expense related to assets acquired from sony . research and development expenses . research and development expenses increased 17.2 % from $ 9.1 million in fiscal 2010 to $ 10.6 million in fiscal 2011. this increase was primarily due to increases in payroll related expenses of $ 695,000 , facility related expenses of $ 241,000 and lesser increases in software maintenance expense , stock-based compensation expense and depreciation expense . the increase in payroll expenses was related to increases in headcount to support our low latency dram project and various high speed sram projects . research and development expenses included stock-based compensation expense of $ 834,000 and $ 686,000 , respectively , in fiscal 2011 and fiscal 2010. selling , general and administrative expenses . selling , general and administrative expenses increased 12.5 % from $ 9.5 million in fiscal 2010 to $ 10.7 million in fiscal 2011. this increase was primarily related to increases of $ 710,000 in independent sales representative commissions , $ 521,000 in payroll related expenses and a smaller increase in facility related expenses , partially offset by a decrease in outside consulting expenses . selling , general and administrative expenses in fiscal 2010 included $ 533,000 in legal and accounting fees and changes to the fair value of the contingent consideration related to the sony acquisition , compared to $ 64,000 in such acquisition related expenses in fiscal 2011. stock-based compensation expense of $ 578,000 and $ 502,000 were included in selling , general and administrative expenses in fiscal 2011 and fiscal 2010 , respectively . interest and other income ( expense ) , net . interest and other income ( expense ) , net decreased 76.5 % from $ 2.0 million in fiscal 2010 to $ 461,000 in fiscal 2011. this decrease was primarily the result of a $ 1.1 million bargain purchase gain resulting from our acquisition of the sony sram memory device product line in the quarter ended september 30 , 2009 , and decreases in interest income due to lower interest rates received on our cash , short-term and long-term investments . in addition , we recorded an exchange loss of $ 212,000 in fiscal 2011 compared to an exchange loss of $ 29,000 in fiscal 2010 , related to our taiwan branch operations . provision for income taxes . the provision for income taxes increased from $ 2.2 million in fiscal 2010 to $ 5.0 million in fiscal 2011. this increase was due to the increased pre-tax income and changes in the relative mix of income within operating jurisdictions in fiscal 2011 . 35 net income . net income increased 81.8 % from $ 10.4 million in fiscal 2010 to $ 18.9 million in fiscal 2011. this increase was primarily due to the increased net revenues and changes in operating expenses and gross profit discussed above .
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fiscal 2011 cost of revenues included approximately $ 252,000 related to masks valued at approximately $ 604,000 that were acquired in the sony acquisition and that were amortized over four quarters . cost of revenues included stock-based compensation expense of $ 321,000 and $ 300,000 , respectively , in fiscal 2012 and fiscal 2011. gross profit . gross profit decreased by 18.1 % from $ 44.8 million in fiscal 2011 to $ 36.6 in fiscal 2012. gross margin decreased from 45.8 % in fiscal 2011 to 44.4 % in fiscal 2012. the decrease in gross profit was primarily related to the decreased net revenues . the decrease in gross margin was primarily related to the increases in manufacturing overhead expenses described above . research and development expenses . research and development expenses were unchanged at $ 10.6 million in fiscal 2011 and in fiscal 2012. a decrease of $ 727,000 in research and development mask expense was primarily offset by increases in payroll related expenses and stock-based compensation . research and development expenses included stock-based compensation expense of $ 1,061,000 and $ 834,000 , respectively , in fiscal 2012 and fiscal 2011. selling , general and administrative expenses . selling , general and administrative expenses increased 80.5 % from $ 10.7 million in fiscal 2011 to $ 19.4 million in fiscal 2012. this increase was due to an increase of $ 9.3 million in legal fees related to the pending patent infringement and antitrust litigation involving cypress semiconductor corporation , partially offset by a decrease in independent sales representative commissions of $ 475,000 and a lesser decrease in non-legal professional fees . stock-based compensation expense of $ 714,000 and $ 578,000 were included in selling , general and administrative expenses in fiscal 2012 and fiscal 2011 , respectively . interest and other income ( expense ) , net . interest and other income ( expense ) , net increased 13.9 % from $ 461,000 in 34 fiscal 2011 to $ 525,000 in fiscal 2012. interest income decreased by $ 131,000 due to lower interest rates received on our cash and short-term and long-term
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| 4,097
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a 0.25 % change in the level of price inflation assumption would change the pbo by approximately $ 19 million and the net pension credit for 2017 would change by approximately $ 0.2 million . further information is provided in note 9 of the notes to the consolidated financial statements . 26 deferred tax and uncertain income tax positions as at december 31 , 2016 , no deferred taxes have been provided for on the unremitted earnings of our overseas subsidiaries as any tax basis differences relating to investments in these overseas subsidiaries are considered to be permanent in duration . we have no current intention to repatriate past or future earnings of our overseas subsidiaries and consider that these earnings have been reinvested overseas . if circumstances were to change that would cause these earnings to be repatriated an additional u.s. tax liability could be incurred , and we continue to monitor this position . the calculation of our tax liabilities involves evaluating uncertainties in the application of complex tax regulations . we recognize liabilities for anticipated tax audit issues based on our estimate of whether , and the extent to which , additional taxes will be required . if we ultimately determine that payment of these amounts is unnecessary , we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary . we also recognize tax benefits to the extent that it is more likely than not that our positions will be sustained , based on technical merits , when challenged by the taxing authorities . to the extent that we prevail in matters for which liabilities have been established , or are required to pay amounts in excess of our liabilities , our effective tax rate in a given period may be materially affected . an unfavorable tax settlement may require cash payments and result in an increase in our effective tax rate in the year of resolution . a favorable tax settlement may be recognized as a reduction in our effective tax rate in the year of resolution . we report interest and penalties related to uncertain income tax positions as income taxes . for additional information regarding uncertain income tax positions , see note 10 of the notes to the consolidated financial statements . goodwill the company 's reporting units , the level at which goodwill is assessed for potential impairment , are consistent with the reportable segments . the components in each segment ( including products , markets and competitors ) have similar economic characteristics and the segments , therefore , reflect the lowest level at which operations and cash flows can be sufficiently distinguished , operationally and for financial reporting purposes , from the rest of the company . initially the company performs a qualitative assessment to determine whether it is more likely than not that the fair value of a segment is less than the carrying amount prior to performing the two-step goodwill impairment test . if a two-step test is required we assess the fair value based on projected post-tax cash flows discounted at the company 's weighted average cost of capital . at december 31 , 2016 we had $ 374.8 million of goodwill relating to our fuel specialties , performance chemicals and oilfield services segments . our impairment assessment concluded that there had been no impairment of goodwill in respect of those reporting segments . 27 while we believe our assumptions for impairment assessments are reasonable , they are subjective judgments , and it is possible that variations in any of the assumptions may result in materially different calculations of any potential impairment charges . property , plant and equipment and other intangible assets ( net of depreciation and amortization , respectively ) as at december 31 , 2016 we had $ 157.4 million of property , plant and equipment and $ 144.4 million of other intangible assets ( net of depreciation and amortization , respectively ) , that are discussed in notes 6 and 8 of the notes to the consolidated financial statements , respectively . these long-lived assets relate to all of our reporting segments and are being amortized or depreciated straight-line over periods of up to 17 years in respect of the other intangible assets and up to 25 years in respect of the property , plant and equipment . we continually assess the markets and products related to these long-lived assets , as well as their specific carrying values , and have concluded that these carrying values , and amortization and depreciation periods , remain appropriate . we also test these long-lived assets for any potential impairment when events occur or circumstances change which suggests that impairment may have occurred . these types of events or changes in circumstances could include , but are not limited to : introduction of new products with enhanced features by our competitors ; loss of , material reduction in purchases by , or non-renewal of a contract by , a significant customer ; prolonged decline in business or consumer spending ; sharp and unexpected rise in raw material , chemical or energy costs ; and new laws or regulations inhibiting the development , manufacture , distribution or sale of our products . in order to facilitate this testing the company groups together assets at the lowest possible level for which cash flow information is available . undiscounted future cash flows expected to result from the asset groups are compared with the carrying value of the assets and , if such cash flows are lower , an impairment loss may be recognized . the amount of the impairment loss is the difference between the fair value and the carrying value of the assets . fair values are determined using post-tax cash flows discounted at the company 's weighted average cost of capital . story_separator_special_tag if events occur or circumstances change it may cause a reduction in periods over which these long-lived assets are amortized or depreciated , or result in a non-cash impairment of a portion of their carrying value . a reduction in amortization or depreciation periods would have no effect on cash flows . 28 story_separator_special_tag replace_table_token_14_th the impact on the effective tax rate from profits earned in foreign jurisdictions with lower tax rates varies as the geographical mix of the company 's profits changes year on year . in 2016 , the company 's income tax expense benefited to a greater degree from a proportion of its overall profits arising in switzerland than in 2015. this resulted in a $ 7.8 million benefit in switzerland ( 2015 $ 7.5 million ) . in addition , there was an $ 8.4 million benefit in relation to the united kingdom ( 2015 $ 6.8 million ) and a $ 0.5 million benefit in relation to germany ( 2015 $ 0.3 million ) , and a $ 0.3 million benefit in other jurisdictions ( 2015 $ 0.1 million reduction ) . foreign income inclusions arise each year from certain types of income earned overseas being taxable under u.s. tax regulations . these types of income include subpart f income , principally from foreign based company sales in the united kingdom , including the associated section 78 tax gross up , and also from the income earned by certain overseas subsidiaries taxable under the u.s. tax regime . in 2016 , subpart f income and the associated section 78 gross up resulted in u.s. taxation of $ 5.7 million ( 2015 $ 4.7 million ) . certain overseas subsidiaries taxable under the u.s. tax regime incurred losses of $ 0.2 million ( 2015 $ 0.2 million losses ) . foreign tax credits can fully or partially offset these incremental u.s. taxes from foreign income inclusions . the utilization of foreign tax credits varies year on year as this is 34 dependent on a number of variable factors which are difficult to predict and may in certain years prevent any offset of foreign tax credits . in total , $ 6.1 million of foreign tax credits were utilized during 2016 to offset the incremental u.s. taxes arising from foreign income inclusions in the year ( 2015 $ 4.7 million ) . of this balance , $ 0.5 million of foreign tax credit carry forwards from earlier years was utilized ( 2015 $ 2.4 million ) . as at december 31 , 2016 , the company has utilized all foreign tax credit carry forwards from earlier years . the united kingdom 's 1 % reduction in the corporation tax rate effective from april 2020 from 18 % to 17 % , enacted in september 2016 , resulted in a deferred tax credit of $ 0.6 million in the fourth quarter of 2016 primarily in relation to the deferred tax position of the united kingdom defined benefit pension plan . further details are given in note 10 of the notes to the consolidated financial statements . results of operations fiscal 2015 compared to fiscal 2014 : replace_table_token_15_th 35 fuel specialties net sales : the table below details the components which comprise the year on year change in net sales spread across the markets in which we operate : replace_table_token_16_th volumes in the americas were higher than the prior year as a result of increased demand . emea volumes increased from the prior year driven by a strong performance in our core markets . volumes were lower in aspac driven by lower demand . an adverse price and product mix in emea negatively impacted revenues primarily due to sales of lower margin products compared to the prior year . avtel volumes were lower than the prior year due to the timing of shipments to customers as opposed to any change in the long-term outlook for that market , with an improved price and product mix . emea and aspac were adversely impacted by exchange rate movements year over year , driven primarily by a weakening of the european union euro and the british pound sterling against the u.s. dollar . gross margin : the year on year increase of 2.9 percentage points primarily reflected the higher margins achieved in the americas , together with the higher margin contribution from avtel and the positive effect of weaker exchange rates versus the u.s. dollar on our cost base . operating expenses : the year on year decrease of $ 2.7 million , was primarily due to favorable exchange rates in emea and aspac resulting from a weakening of the european union euro and the british pound sterling against the u.s. dollar . performance chemicals net sales : the table below details the components which comprise the year on year change in net sales spread across the markets in which we operate : replace_table_token_17_th volumes were higher in the americas and emea , primarily due to increased personal care volumes , partly offset by adverse pricing pressures affecting the price and product mix . aspac saw lower volumes offset by a favorable price and product mix . a weakening of the european union euro and the british pound sterling against the u.s. dollar resulted in an 36 adverse exchange variance for emea and aspac . the disposal of our aroma chemicals business has been excluded from the market analysis above and included as one variance for the segment total . gross margin : the year on year increase of 2.8 percentage points was primarily driven by a greater proportion of sales from our higher margin personal care business , following the disposal of our aroma chemicals business at the start of the third quarter .
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avtel volumes were higher than the prior year due to new customer orders combined with a favorable price and product mix from a richer customer mix . emea was adversely impacted by exchange rate movements year over year , driven by a weakening of the european union euro and the british pound sterling against the u.s. dollar . gross margin : the year on year increase of 3.6 percentage points was primarily achieved from reduced sales of lower margin products in the americas , together with the positive effect of weaker exchange rates versus the u.s. dollar on our cost base in emea and aspac and the higher margin contribution from additional avtel volumes . operating expenses : the year on year increase of $ 1.9 million , was primarily driven by increased share-based compensation accruals due to the rise in the innospec share price in the year together with increased provisions against doubtful debts . performance chemicals net sales : the table below details the components which comprise the year on year change in net sales spread across the markets in which we operate : replace_table_token_12_th volumes were higher in all our regions , driven by increased personal care volumes . americas and emea experienced pricing pressures in personal care which adversely affected the price and product mix . aspac benefited from favorable pricing in personal care . a weakening of 31 the european union euro and british pound sterling against the u.s. dollar resulted in an adverse exchange rate variance for emea and aspac . the disposal of our aroma chemicals business in 2015 has been excluded from the market analysis above and included as one variance for the segment total . gross margin : the year on year increase of 3.9 percentage points was primarily driven by a greater proportion of sales from our higher margin personal care business following the disposal of our lower margin aroma chemicals business in the prior year ,
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| 2,691
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on june 6 , 2012 , we entered into a five-year $ 750.0 million unsecured credit agreement which provides for a $ 750.0 million revolving line of credit , including up to $ 150.0 million in available letters of credit . the interest rate on the facility is based , at our option , on a libor rate , plus a margin , or an alternate base rate , plus a margin . overview our net sales are derived from the sale of merchandise . two major factors tend to affect our net sales trends . first is our success at opening new stores or adding new stores through acquisitions . second , sales vary at our existing stores from one year to the next . we refer to this change as a change in comparable store net sales , because we compare only those stores that are open throughout both of the periods being compared . we include sales from stores expanded during the year in the calculation of comparable store net sales , which has the effect of increasing our comparable store net sales . the term 'expanded ' also includes stores that are relocated . at january 31 , 2015 , we operated 5,367 stores in 48 states and the district of columbia , and five canadian provinces , with 46.5 million selling square feet compared to 4,992 stores with 43.2 million selling square feet at february 1 , 2014 . during fiscal 2014 , we opened 391 stores , expanded 72 stores and closed 16 stores , compared to 343 new stores opened , 71 stores expanded and 22 stores closed during fiscal 2013 . in the current year we increased our selling square footage by 7.4 % . of the 3.2 million selling square foot increase in 2014 , 0.2 million was added by expanding existing stores . the average size of our stores opened in 2014 was approximately 8,060 selling square feet ( or about 10,000 gross square feet ) . for 2015 , we continue to plan to open stores that are approximately 8,000 - 10,000 selling square feet ( or about 10,000 - 12,000 gross square feet ) . we believe that this store size is our optimal size operationally and that this size also gives our customers an ideal shopping environment that invites them to shop longer and buy more . fiscal 2014 and fiscal 2013 which ended on january 31 , 2015 , and february 1 , 2014 , respectively , each included 52 weeks . fiscal 2012 ended on february 2 , 2013 and included 53 weeks , commensurate with the retail calendar . the 53rd week in 2012 added approximately $ 125 million in sales . 26 in fiscal 2014 , comparable store net sales increased by 4.3 % . the comparable store net sales increase was the result of a 3.4 % increase in the number of transactions and a 0.9 % increase in average ticket . we believe comparable store net sales continued to be positively affected by a number of our initiatives , as debit and credit card penetration continued to increase in 2014 , and we continued the roll-out of frozen and refrigerated merchandise to more of our stores . at january 31 , 2015 we had frozen and refrigerated merchandise in approximately 3,620 stores compared to approximately 3,160 stores at february 1 , 2014 . we believe that the addition of frozen and refrigerated product enables us to increase sales and earnings by increasing the number of shopping trips made by our customers . in addition , we accept food stamps ( under the supplemental nutrition assistance program ( “ snap ” ) ) in approximately 5,000 qualified stores compared to 4,620 at the end of 2013 . our point-of-sale technology provides us with valuable sales and inventory information to assist our buyers and improve our merchandise allocation to our stores . we believe that this has enabled us to better manage our inventory flow resulting in more efficient distribution and store operations . we must continue to control our merchandise costs , inventory levels and our general and administrative expenses as increases in these line items could negatively impact our operating results . pending acquisition on july 27 , 2014 , we executed an agreement and plan of merger ( the `` merger agreement `` ) to acquire family dollar in a cash and stock transaction ( the “ acquisition ” ) . under the acquisition , which was approved by family dollar shareholders on january 22 , 2015 , the family dollar shareholders will receive $ 59.60 in cash plus no more than 0.3036 and no less than 0.2484 shares of our common stock for each share of family dollar common stock they own . on january 31 , 2015 , family dollar had approximately 114.5 million outstanding shares of common stock . due to the vesting of outstanding equity awards , family dollar is expected to have up to an additional 2.0 million shares of common stock outstanding at closing in connection with the acquisition . family dollar stock options and rsus will convert into options and rsus in our common stock . after the acquisition , we expect that former family dollar stockholders will own no more than 15.1 % and no less than 12.7 % of the outstanding shares of dollar tree common stock . the transaction is subject to expiration or termination of the applicable waiting period under the hart-scott-rodino antitrust improvements act ( `` hsr act `` ) and satisfaction or waiver of the other customary closing conditions . story_separator_special_tag our estimated capital expenditures for fiscal 2015 are between $ 465.0 million and $ 475.0 million , including planned expenditures for our new and expanded stores , the addition of freezers and coolers to approximately 320 stores , the initial phases of work on our eleventh distribution center and the expansion of our olive branch , mississippi distribution center . we believe that we can adequately fund our working capital requirements and planned capital expenditures for the next few years from net cash provided by operations and potential borrowings under our existing credit facility . the following tables summarize our material contractual obligations at january 31 , 2015 , including both on- and off-balance sheet arrangements , and our commitments , including interest on long-term borrowings ( in millions ) : replace_table_token_11_th 32 replace_table_token_12_th lease financing operating lease obligations . our operating lease obligations are primarily for payments under noncancelable store leases . the commitment includes amounts for leases that were signed prior to january 31 , 2015 for stores that were not yet open on january 31 , 2015 . long-term borrowings senior notes . in september 2013 , we entered into a note purchase agreement with institutional accredited investors in which we issued and sold $ 750.0 million of senior notes ( the `` notes `` ) in an offering exempt from the registration requirements of the securities act of 1933. the notes consist of three tranches : $ 300.0 million of 4.03 % senior notes due september 16 , 2020 ; $ 350.0 million of 4.63 % senior notes due september 16 , 2023 ; and $ 100.0 million of 4.78 % senior notes due september 16 , 2025 . interest on the notes is payable semi-annually on january 15 and july 15 of each year . for complete terms of the notes please see item 8. financial statements and supplementary data , `` note 5 - long-term debt `` beginning on page 54 of this form 10-k. demand revenue bonds . in may 1998 , we entered into an agreement with the mississippi business finance corporation under which it issued $ 19.0 million of variable-rate demand revenue bonds . we used the proceeds from the bonds to finance the acquisition , construction and installation of land , buildings , machinery and equipment for our distribution facility in olive branch , mississippi . the bonds did not have a prepayment penalty as long as the interest rate remained variable . the bonds contained a demand provision and , therefore , outstanding amounts were classified as current liabilities . in 2014 , we repaid the $ 12.8 million outstanding under the demand revenue bonds and the debt was retired . forgivable promissory note . in 2012 , we entered into a promissory note with the state of connecticut under which the state loaned us $ 7.0 million in connection with our acquisition , construction and installation of land , building , machinery and equipment for our distribution facility in windsor , connecticut . if certain performance targets are met , the loan and any accrued interest will be forgiven in fiscal 2017. if the performance targets are not met , the loan and accrued interest must be repaid over a five-year period beginning in fiscal 2017. interest on long-term borrowings . these amounts represent interest payments on the notes , and forgivable promissory note using the interest rates for each at january 31 , 2015 . commitments letters of credit and surety bonds . we are a party to three letter of credit reimbursement and security agreements providing $ 110.0 million , $ 100.0 million and $ 20.0 million , respectively for letters of credit . letters of credit are generally issued for the routine purchase of imported merchandise and we had approximately $ 162.9 million of purchases committed under these letters of credit at january 31 , 2015 . we also have approximately $ 11.9 million of letters of credit outstanding for our self-insurance programs and $ 4.2 million of surety bonds outstanding primarily for certain utility payment obligations at some of our stores . technology assets . we have commitments totaling approximately $ 13.4 million to primarily purchase store technology assets and maintenance for our stores during 2015. telecommunication contracts . we have contracted for telecommunication services with contracts expiring in 2017. the total amount of these commitments is approximately $ 16.8 million . derivative financial instruments in 2014 and 2013 , we were party to fuel derivative contracts with third parties which included approximately 1.6 million and 2.8 million gallons of diesel fuel , or approximately 10 % and 20 % of our domestic truckload fuel needs , respectively . these derivative contracts did not qualify for hedge accounting and therefore all changes in fair value for these derivatives are included in earnings . we currently have fuel derivate contracts to hedge 6.6 million gallons of diesel fuel , or approximately 40 % of our domestic truckload fuel needs from february 2015 through january 2016 . 33 critical accounting policies the preparation of financial statements requires the use of estimates . certain of our estimates require a high level of judgment and have the potential to have a material effect on the financial statements if actual results vary significantly from those estimates . following is a discussion of the estimates that we consider critical . inventory valuation as discussed in item 8. financial statements and supplementary data , `` note 1 - summary of significant account policies `` under the caption `` merchandise inventories `` beginning on page 44 of this form 10-k , inventories at the distribution centers are stated at the lower of cost or market with cost determined on a weighted-average basis . cost is assigned to store inventories using the retail inventory method on a weighted-average basis . under the retail inventory method , the valuation of inventories at cost and the resulting gross margins are computed by applying a calculated
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liquidity and capital resources our business requires capital to build and open new stores , expand our distribution network and operate and expand existing stores . our working capital requirements for existing stores are seasonal and usually reach their peak in september and october . historically , we have satisfied our seasonal working capital requirements for existing stores and have funded our store opening and distribution network expansion programs from internally generated funds and borrowings under our credit facilities . the following table compares cash-flow related information for the years ended january 31 , 2015 , february 1 , 2014 and february 2 , 2013 : replace_table_token_10_th net cash provided by operating activities increased $ 132.7 million in 2014 compared to 2013 due primarily to an increase in accrued expenditures related to the family dollar acquisition and a decrease in cash used to purchase merchandise inventories . 29 net cash provided by operating activities increased $ 115.8 million in 2013 compared to 2012 due to a decrease in cash used for prepaid rent and purchasing merchandise inventory partially offset by a decrease in income taxes payable . net cash used in investing activities decreased $ 10.0 million in 2014 compared with 2013 primarily due to reduced capital expenditures , increased proceeds on fixed asset dispositions and reduced purchases of restricted investments .
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Liquidity
| 13,727
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as a result , changes in spending behavior in any given quarter or during any economic downturn can reduce our revenue . spending on network construction , maintenance , expansion and upgrades is also affected by seasonality , delays in the purchasing cycles and reductions in budgets of network operators . finally , we may face direct and indirect risks as a result of our planned international expansion , including expenses of doing business in multiple jurisdictions , differing regulatory environments , foreign currency fluctuations and varying collection practices . in may 2013 , we closed our initial public offering ( ipo ) whereby 8,899,022 shares of common stock were sold to the public , including 899,022 shares of common stock issued pursuant to the partial exercise of the overallotment option granted to the underwriters . the aggregate net proceeds we received from the offering were $ 87.2 million , net of underwriting discounts and issuance expenses . upon the closing of the ipo , all shares of our outstanding convertible preferred stock automatically converted into 33,897,005 shares of common stock . in addition , certain warrants to purchase shares of convertible preferred stock were exercised resulting in the issuance of 792,361 shares of common stock and the remaining outstanding warrants to purchase convertible preferred stock were converted into warrants to purchase 115,001 shares of common stock . in november 2013 , the remaining warrants to purchase common stock were net exercised resulting in the issuance of 83,349 shares of common stock . how we generate revenue we generate revenue primarily from the sales of our z-series platforms and licenses to our blue planet software-defined networking solutions and various professional service fees . cyan z-series our z-series hardware is a family of high-capacity , multi-layer switching and transport platforms . each z-series platform is comprised of a chassis that supports a variety of interchangeable z-series line cards to provide a wide range of network applications . our customers make an initial purchase of chassis and line cards to address their particular network deployment needs , then typically make subsequent purchases of line cards and or larger chassis as the capacity and service needs of their networks evolve . the majority of our revenue is generated from sales of our z-series platforms . we generally recognize product revenue at the time of shipment provided that all other revenue recognition criteria have been met . cyan blue planet in december 2012 , we expanded our network virtualization and management software offerings with the commercial launch of blue planet . blue planet is the latest implementation of the network virtualization and management software that we first introduced in 2009 to work in combination with our z-series platforms . blue planet is available to customers regardless of whether they have deployed our z-series platforms in their networks . customers may purchase blue planet using standard configurations to address common network needs or may customize their implementations by pairing the blue planet orchestration layer with their own selection of applications and element adapters . we offer blue planet on a variety of models . where we sell blue planet on a term license basis or on a software-as-a-service ( saas ) basis deployed from the cloud , we invoice customers for the entire contract amount at the start of the contract term , which will lead to the majority of these invoiced amounts being treated as deferred revenue that will be recognized ratably over the term of the contract . while term-based licenses make up the majority of related revenues , we occasionally license software to customers on a perpetual basis with on-going support and maintenance services . revenue from software that functions together with the tangible hardware elements to deliver the tangible products ' essential functionality is generally recognized upon shipment assuming all other revenue recognition criteria are met . revenue from application software and related software elements which are not considered essential to the functionality of hardware is accounted for in accordance with software industry guidance , and therefore is recognized ratably over the longest service period for post-contract customer support , or pcs , and professional services as we have not established vsoe for software or the related software elements . cynoc professional services our cynoc offering is a network operations center service through which we monitor , and , in some cases , manage our customers ' multi-vendor networks . additionally , a number of our customers which maintain their own internal noc leverage our services as a backup noc . these services are typically sold to our customers for a one-year term at the time of the initial product sale and renewed on an annual basis thereafter . maintenance , support and training services we offer cyan pro professional services , including our cysupport and cyservice offerings , to provide a variety of customer service products and support through our technical support engineers as well as through our growing network of authorized and certified channel partners . these services are sold to our customers at the time of the initial product sale , typically for one-year terms that customers may choose to renew for successive annual or multi-year periods . these services are invoiced separately at the time of the initial product sale . we also provide training and other professional services to our end-customers , including services related to the implementation , use , functionality and ongoing maintenance of our products . these services are invoiced separately when the services are delivered . deferred revenue our deferred revenue consists of amounts that have been invoiced but that have not yet been recognized as revenue as of the period end , pending completion of the revenue recognition process . our deferred revenue was $ 19.1 million and $ 17.4 million as of december 31 , 2013 and december 31 , 2012. the majority of our deferred revenue consists of amounts related to sales of our z-series platforms , and relates primarily to shipped and billed hardware awaiting customer acceptance . story_separator_special_tag the remainder consists primarily of term license , support and maintenance revenue that is recognized ratably over the contractual service period . we monitor our deferred revenue balance because it represents a significant portion of revenue to be recognized in future periods . over the longer term , we expect that the proportion of our deferred revenue relating to blue planet will increase relative to z-series related deferred revenue . in most cases , we expect to invoice our customers for the entire contract amount at the start of the blue planet license term , which will lead to the majority of these invoiced amounts being treated as deferred revenue and recognized ratably over the term of the contract . 39 components of operating results revenue our revenue has grown rapidly since our inception , increasing from $ 40.4 million in the year ended december 31 , 2011 , to $ 95.9 million in the year ended december 31 , 2012 , and to $ 116.6 million in the year ended december 31 , 2013. we believe that our revenue growth is a positive sign that our products have a significant value proposition to our customers and that the markets that we compete in are still expanding . costs of revenue cost of revenue primarily consists of manufacturing costs of our products payable to our contract manufacturer . our cost of revenue also includes third-party manufacturing and supply chain logistics costs , provisions for excess and obsolete inventory , warranty , hosting costs , certain allocated costs for facilities , depreciation and other expenses associated with logistics and quality control . additionally , it includes salaries , benefits and stock-based compensation for personnel directly involved with manufacturing , installation , maintenance and support services and the provision of blue planet . gross margin gross margin , or gross profit as a percentage of revenue , has been and will continue to be affected by a variety of factors . in the near term , we generally expect gross margin to increase modestly as a result of our continued efforts and those of our contract manufacturer to manage our supply chain and raw materials pricing and scale efficiencies in our production model , as well as shifts in product mix from line cards that are more focused on pure optical transport to line cards with packet handling capabilities . in the longer term , we expect that the market adoption of blue planet , and the resulting increase in blue planet revenue as a percentage of our revenue , will contribute to increases in gross margin . from time to time , however , we may experience lower gross margin in any particular period as a result of large initial deployments . these deployments typically include a significant proportion of lower-margin z-series chassis . as our customers expand their networks after large initial deployments , they typically purchase additional higher-margin line cards . operating expenses operating expenses consist of research and development , sales and marketing , and general and administrative expenses . personnel-related costs , including stock-based compensation , commission and bonus , are the most significant component of each of these expense categories . the increase in employees is the most significant driver behind the increase in costs and operating expenses for the year ended december 31 , 2013 compared to prior year periods . the timing and number of additional hires has and could materially affect our operating expenses , both in absolute dollars and as a percentage of revenue , in any particular period . research and development . research and development expense consists primarily of personnel and consultant costs . research and development expense also includes costs for prototypes , product certification , travel , depreciation , recruiting and allocated costs for certain facilities costs . sales and marketing . sales and marketing expense consists primarily of personnel costs including commission costs . we expense commission costs as incurred . sales and marketing expense also includes the costs of trade shows , marketing programs , promotional materials , demonstration equipment , travel , depreciation , recruiting and allocated costs for certain facilities costs . general and administrative . general and administrative expense consists of personnel costs , professional services costs as well as allocated costs for certain facilities costs . general and administrative personnel include our executive , finance , human resources , it and legal organizations . professional services consist primarily of legal , auditing , accounting , and other consulting costs . stock-based compensation stock-based compensation expense was $ 7.2 million , $ 2.1 million and $ 0.8 million for the years ended december 31 , 2013 , 2012 and 2011. we expect to continue to incur significant stock-based compensation expense and anticipate further growth in stock-based compensation expense as our employee base grows because we expect stock-based compensation to continue to play an important part in the overall compensation structure for our employees . 40 stock-based compensation included in the statements of operations data above was as follows ( in thousands ) : replace_table_token_6_th significant factors , assumptions and methodologies used in determining fair value prior to our initial public offering in may 2013 , the fair values of the common stock underlying share-based payment awards had been determined by the board of directors , with input from management . in the absence of a publicly traded market for the company 's common stock , the board of directors determined the fair value of the common stock in accordance with the guidelines outlined in the american institute of certified public accountants practice guide , valuation of privately-held-company equity securities issued as compensation . we determined a business enterprise value of our company by taking a weighted combination of the enterprise values calculated under two valuation approaches , an income approach and a market approach . the income approach estimates the present value of future estimated debt-free cash flows , based upon forecasted revenue and costs .
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to drive and support this growing demand and increase in our revenue , we increased our sales and marketing headcount by 48 , or 52 % , for the year ended december 31 , 2013 and by 46 , or 98 % , for the year ended december 31 , 2012 . 47 cost of revenue , gross profit and gross margin replace_table_token_10_th cost of revenue increased by $ 11.1 million or 19.3 % , and gross profit increased by $ 9.6 million or 25.0 % , for the year ended december 31 , 2013 from the year ended december 31 , 2012 , corresponding to the increased revenue . gross margin increased by 1.1 % to 41.3 % from 40.2 % , for the year ended december 31 , 2013 as compared to the year ended december 31 , 2012. the increase in gross margin during this period was attributable to a shift in product mix as well as component and materials cost reductions , partially offset by a $ 1.0 million write-down for slow moving inventory in the fourth quarter of 2013. cost of revenue increased by $ 30.2 million or 112 % , and gross profit increased by $ 25.2 million or 189 % for the year ended december 31 , 2012 from the year ended december 31 , 2011 corresponding to the increased revenue . gross margin increased by 7.2 % , to 40.2 % from 33 % , for the year ended december 31 , 2012 as compared to the year ended december 31 , 2011. the increase in gross margin during this period was attributable to component and materials cost reductions as well as a decrease in our manufacturing overhead resulting from scale efficiencies as a result of higher volume production . we expect our gross margin to generally continue to improve as a result of continued increases in sales of higher margin products , the addition of software revenue to our revenue stream and ongoing component and materials cost reductions . our gross margin , however , may fluctuate from quarter to quarter depending primarily on the product mix sold . research and development replace_table_token_11_th research and
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ROO
| 8,944
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