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securities for which market quotations are not readily available or for which a pricing source is not sufficient may include , but are not limited to , the following : private placements and restricted securities that do not have an active trading market ; securities whose trading has been suspended or for which market quotes are no longer available ; debt securities that have recently gone into default and for which there is no current market ; securities whose prices are stale ; securities affected by significant events ; and securities that the investment adviser believes were priced incorrectly . determination of fair value involves subjective judgments and estimates . accordingly , the notes to our financial statements express the uncertainty with respect to the possible effect of such valuations , and any change in such valuations , on our financial statements . gaap fair value measurement guidance classifies the inputs used to measure these fair values into the following hierarchy : level 1. financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the company has the ability to access ( examples include active exchange-traded equity securities and exchange-traded derivatives ) . level 2. financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability . level 2 inputs include the following : a ) quoted prices for similar assets or liabilities in active markets ; b ) quoted prices for identical or similar assets or liabilities in non-active markets ( examples include corporate and municipal bonds , which trade infrequently ) ; c ) pricing models whose inputs are observable for substantially the full term of the asset or liability ( examples include most over-the-counter derivatives , including foreign exchange forward contracts ) ; and d ) pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability . level 3. financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement . these inputs reflect management 's own assumptions about the assumptions a market participant would use in pricing the asset or liability ( examples include certain of our private debt and equity investments ) and long-dated or complex derivatives ( including certain equity and currency derivatives ) . 48 the following table shows the level of our investments and credit facility as of december 31 , 2011 ; fair value measurements as of december 31 , 2011 replace_table_token_8_th there were no investments transferred into or out of level 1 , 2 , or 3 during the period january 28 , 2011 to december 31 , 2011. credit facility the company has made an irrevocable election to apply the fair value option of accounting to the credit facility , in accordance with asc 825-10. accounting for the credit facility at fair value will better align the measurement methodologies of assets and liabilities , which may mitigate certain earnings volatility . as a result of this election , approximately $ 2.8 million of costs related to the establishment of the credit facility was expensed during the period ending december 31 , 2011 , rather than being deferred and amortized over the life of the credit facility . for the period from february 28 , 2011 to december 31 , 2011 , the credit facility had no net change in unrealized ( appreciation ) depreciation . we used an independent third-party valuation firm to measure the fair value of the credit facility . revenue recognition our revenue recognition policies are as follows : sales : gains or losses on the sale of investments are calculated by using the specific identification method . interest income : interest income , adjusted for amortization of premium and accretion of discount , is recorded on an accrual basis . origination , closing and or commitment fees associated with investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans . upon the prepayment of a loan or debt security , any prepayment penalties and unamortized loan origination , closing and commitment fees are recorded as part of interest income . we may have loans in our portfolio that contain a pik provision . pik interest is accrued at the contractual rates and added to the loan principal on the reset dates . non-accrual : loans are placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected . accrued interest is generally reversed when a loan is placed on non-accrual status . interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management 's judgment about ultimate collectability of principal . non-accrual loans are restored to accrual status when past due principal and interest is paid and , in management 's judgment , are likely to remain current . payment-in-kind interest we may have investments in our portfolio which contain a pik interest provision . over time , pik interest increases the principal balance of the investment , but is recorded as interest income . for us to maintain our status as a ric , substantially all of this income must be paid out to stockholders in the form of dividends , even though we have not currently collected cash with respect to the pik interest . story_separator_special_tag 49 new accounting pronouncements and accounting standards updates in may 2011 , the financial accounting standards board issued accounting standards update ( asu ) 2011-04 , fair value measurement ( topic 820 ) : amendments to achieve common fair value measurement and disclosure requirements in u.s. gaap and ifrss ( asu 2011-04 ) . asu 2011-04 was issued concurrently with international financial reporting standards no . 13 ( ifrs 13 ) , fair value measurements , to provide largely identical guidance about fair value measurement and disclosure requirements as is currently required under asu 2010-06 , fair value measurements and disclosures ( topic 820 ) . the new standards do not extend the use of fair value but , rather , provide guidance about how fair value should be applied where it already is required or permitted under ifrs or gaap . for gaap , most of the changes are clarifications of existing guidance or wording changes to align with ifrs 13. asu 2011-04 eliminates the concepts of in-use and in-exchange when measuring fair value of all financial instruments . for level 3 fair value measurements , the asu requires that our disclosure include quantitative information about significant unobservable inputs , a qualitative discussion about the sensitivity of the fair value measurement to changes in the unobservable inputs and the interrelationship between inputs , and a description of our valuation process . public companies are required to apply asu 2011-04 prospectively for interim and annual periods beginning after december 15 , 2011. upon adoption of asu 2011-04 , it is not expected that it will have a significant impact on the company 's financial statements and the company is currently evaluating the impact on its disclosures . portfolio investments the total value of our investments was approximately $ 177.7 million at december 31 , 2011. during the period from january 28 , 2011 to december 31 , 2011 , we originated approximately $ 219.1million of new investments in 23 portfolio companies . in certain instances , we receive payments on our debt investments based on scheduled amortization of the outstanding balances . in addition , we may receive repayments of certain debt investments prior to their scheduled maturity date . the frequency or volume of these repayments may fluctuate significantly from period to period . our portfolio activity also reflects sales of securities . during the year ended december 31 , 2011 , we received approximately $ 32.0 million in sales from 7 portfolio companies and approximately $ 2.2 million of principal repayments from 11 portfolio companies . at december 31 , 2011 , we had investments in debt securities of 21 portfolio companies , totaling approximately $ 177.7 million . the following table shows the fair value of our portfolio of investments by asset class as of december 31 , 2011 : december 31 , 2011 cost fair value bank debt/senior secured investments $ 176,839 $ 174,701 unsecured bonds 3,184 3,048 total $ 180,023 $ 177,749 as of december 31 , 2011 , the weighted average yield on income producing investments in our portfolio was approximately 8.5 % . as of december 31 , 2011 , there were no investments on non-accrual status . results of operations for the period january 28 , 2011 to december 31 , 2011 solar senior capital was formed in december 2010 and commenced operations on january 28 , 2011. as a result , there is no comparable period to compare results of operations for the period january 28 , 2011 to december 31 , 2011 . 50 revenue investment income of approximately $ 7.89 million for the period ended december 31 , 2011 was primarily attributable to interest earned from investments in the 21 portfolio companies and from interest earned on cash and cash equivalents . expenses the largest expense component was for debt issuance costs of approximately $ 2.80 million which were incurred for upfront commitment and legal fees related to the establishment of the credit facility on august 26 , 2011. investment advisory and management fees of approximately $ 0.94 million were calculated at an annual rate of 1.00 % of gross assets . remaining expenses of approximately $ 1.55 million were mostly for recurring general and administrative expenses . net realized and unrealized loss on investments net realized and unrealized losses of approximately $ 2.85 million were attributable to general weakness in fixed income prices and widening of credit market spreads , which occurred mostly during the third quarter of 2011. liquidity and capital resources our liquidity and capital resources were generated and are generally available through the credit facility , the proceeds of the ipo and concurrent private placement , cash flows from operations , investment sales of liquid assets , repayments of loans , income earned on investments and cash equivalents , and we expect through periodic follow-on equity and or debt offerings . we may from time to time issue securities in either public or private offerings . the issuance of debt or equity securities will depend on future market conditions , funding needs and other factors and there can be no assurance that any such issuance will occur or be successful . the primary use of existing funds and any funds raised in the future is expected to be for investments in portfolio companies , cash distributions to our shareholders or for other general corporate purposes . at december 31 , 2011 , we had cash and cash equivalents of approximately $ 2.9 million . cash used in operating activities for the period ended december 31 , 2011 was approximately $ 175.6 million . we expect that all current liquidity needs will be met with cash flows from operations , borrowings , and other activities .
| our investment objective is to seek to maximize current income consistent with the preservation of capital . we seek to achieve our investment objective by investing primarily in senior loans , including first lien , unitranche , and second lien debt instruments , made to private middle-market companies whose debt is rated below investment grade , which we refer to collectively as senior loans. we may also invest in debt of public companies that are thinly traded . under normal market conditions , at least 80 % of the value of our net assets ( including the amount of any borrowings for investment purposes ) will be invested in senior loans . senior loans typically pay interest at rates which are determined periodically on the basis of a floating base lending rate , primarily libor , plus a premium . senior loans in which we expect to invest are typically made to u.s. and , to a limited extent , non-u.s. corporations , partnerships and other business entities which operate in various industries and geographical regions . senior loans typically are rated below investment grade . securities rated below investment grade are often referred to as leveraged loans or high yield securities , and may be considered high risk compared to debt instruments that are rated above investment grade . we expect to invest in senior loans made primarily to private leveraged middle-market companies with approximately $ 20 million to $ 60 million of ebitda . our business model is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors . we expect that our investments will generally range between $ 5 million and $ 30 million each , although we expect that this investment size will vary proportionately with the size of our capital base . in addition , we may invest a portion of our portfolio in other types of investments , which we refer to as opportunistic investments , which are not our primary focus but are intended to enhance our overall returns . these opportunistic investments may include , but
| ROO | 6,129 |
overview general we were incorporated under the general corporation laws of the state of delaware on february 18 , 2005. we operate as an externally managed , closed-end , non-diversified management investment company and have elected to be treated as a business development company ( bdc ) under the investment company act of 1940 , as amended ( the 1940 act ) . for federal income tax purposes , we have elected to be treated as a regulated investment company ( ric ) under subchapter m of the internal revenue code of 1986 , as amended ( the code ) . in order to continue to qualify as a ric for federal income tax purposes and obtain favorable ric tax treatment , we must meet certain requirements , including certain minimum distribution requirements . we were established for the purpose of investing in debt and equity securities of established private businesses operating in the united states ( u.s. ) . our investment objectives are to : ( 1 ) achieve and grow current income by investing in debt securities of established businesses that we believe will provide stable earnings and cash flow to pay expenses , make principal and interest payments on our outstanding indebtedness and make distributions to stockholders that grow over time ; and ( 2 ) provide our stockholders with long-term capital appreciation in the value of our assets by investing in equity securities of established businesses that we believe can grow over time to permit us to sell our equity investments for capital gains . to achieve our objectives , our investment strategy is to invest in several categories of debt and equity securities , with each investment generally ranging from $ 5 million to $ 30 million , although investment size may vary , depending upon our total assets or available capital at the time of investment . we seek to avoid investments in high-risk , early stage enterprises . we expect that our investment portfolio over time will consist of approximately 75 % in debt securities and 25 % in equity securities , at cost . as of march 31 , 2015 , our investment portfolio was made up of 73 % in debt securities and 27 % in equity securities , at cost . we focus on investing in small and medium-sized private businesses in the united states ( u.s. ) that meet certain criteria , including , but not limited to , the following : the sustainability of the business ' free cash flow and its ability to grow it over time , adequate assets for loan collateral , experienced management teams with a significant ownership interest in the borrower , reasonable capitalization of the borrower , including an ample equity contribution or cushion based on prevailing enterprise valuation multiples , and the potential to realize appreciation and gain liquidity in our equity position , if any . we anticipate that liquidity in our equity position will be achieved through a merger or acquisition of the borrower , a public offering of the borrower 's stock or by exercising our right to require the borrower to repurchase our warrants , though there can be no assurance that we will always have these rights . we lend to borrowers that need funds for growth capital or to finance acquisitions or recapitalize or refinance their existing debt facilities . we seek to avoid investing in high-risk , early-stage enterprises . we invest by ourselves or jointly with other funds and or management of the portfolio company , depending on the opportunity . if we are participating in an investment with one or more co-investors , our investment is likely to be smaller than if we were investing alone . in july 2012 , the securities and exchange commission ( sec ) granted us an exemptive order that expanded our ability to co-invest with certain of our affiliates under certain circumstances and any future business development company or closed-end management investment company that is advised ( or sub-advised if it controls the fund ) by our external investment adviser , or any combination of the foregoing , subject to the conditions in the sec 's order . we believe this ability to co-invest has enhanced and will continue to enhance our ability to further our investment objectives and strategies . in general , our investments in debt securities have a term of no more than seven years , accrue interest at variable rates ( based on the one-month london interbank offered rate ( libor ) ) and , to a lesser extent , at fixed rates . we seek debt instruments that pay interest monthly or , at a minimum , quarterly , and which may include a yield enhancement such as a success fee or deferred interest provision and are primarily interest only with all principal and any accrued but unpaid interest due at maturity . generally , success fees accrue at a set rate and are contractually due upon a change of control of the business . some debt securities have deferred interest whereby some portion of the interest payment is added to the principal balance so that the interest is paid , together with the principal , at maturity . this form of deferred interest is often called pik interest . 37 typically , our investments in equity securities take the form of common stock , preferred stock , limited liability company interests , or warrants or options to purchase the foregoing . often , these equity investments occur in connection with our original investment , buyouts and recapitalizations of a business , or refinancing existing debt . we are externally managed by our investment advisor , gladstone management corporation ( the adviser ) , a sec registered investment adviser and an affiliate of ours , pursuant to the advisory agreement . the adviser manages our investment activities . we have also entered into an administration agreement ( the administration agreement ) with gladstone administration , llc ( our administrator ) , an affiliate of ours and the adviser , whereby we pay separately for administrative services . story_separator_special_tag at our 2014 annual meeting of stockholders held on august 7 , 2014 , our stockholders approved a proposal authorizing us to issue and sell shares of our common stock at a price below our then current nav per share , subject to certain limitations , including that the number of common shares issued and sold pursuant to such authority does not exceed 25.0 % of our then outstanding common stock immediately prior to each such sale , provided that our board of directors ( our board of directors ) makes certain determinations prior to any such sale . this august 2014 stockholder authorization is in effect for one year from the date of stockholder approval . with our board of directors ' subsequent approval , we issued shares of our common stock in march and april 2015 at a price per share below the then current nav per share . we sought and obtained stockholder approval concerning a similar proposal at the annual meeting of stockholders held in august 2012 , and with our board of directors ' subsequent approval , we issued shares of our common stock in october and november 2012 at a price per share below the then current nav per share . the resulting proceeds , in part , have allowed us to grow the portfolio by making new investments , generate additional income through these new investments , provide us additional equity capital to help ensure continued compliance with regulatory tests and increase our debt capital while still complying with our applicable debt-to-equity ratios . refer to liquidity and capital resources equity common stock for further discussion of our common stock . regulatory compliance our ability to seek external debt financing , to the extent that it is available under current market conditions , is further subject to the asset coverage limitations of the 1940 act , which require us to have an asset coverage ratio ( as defined in section 18 ( h ) of the 1940 act ) , of at least 200 % on our senior securities representing indebtedness and our senior securities that are stock ( collectively the senior securities ) . as of march 31 , 2015 , our asset coverage ratio was 229.9 % . investment highlights for the fiscal year ended march 31 , 2015 , we disbursed $ 108.2 million in new debt and equity investments and extended $ 24.7 million of investments to existing portfolio companies through revolver draws or additions to term notes . from our initial public offering in june 2005 through march 31 , 2015 , we have made 237 investments in 113 companies for a total of approximately $ 1.1 billion , before giving effect to principal repayments on investments and divestitures . investment activity during the fiscal year ended march 31 , 2015 , the following significant transactions occurred : in may 2014 , ndli , inc. ( ndli ) , one of our portfolio companies , completed the purchase of certain of noble logistics , inc. 's assets , one of our other portfolio companies , out of bankruptcy . 39 in august 2014 , we made a $ 1.8 million equity investment in roanoke industries corp. ( roanoke ) , formerly known as tread real estate corp. , which purchased the building owned by another one of our portfolio companies , tread corporation ( tread ) . this building has subsequently been leased back to tread . in september 2014 , we invested $ 20.2 million in cambridge sound management , inc. ( cambridge ) through a combination of secured debt and equity . cambridge , based in waltham , massachusetts , is the developer of sound systems and solutions . in october 2014 , we invested $ 24.4 million in old world through a combination of secured debt and equity . old world , headquartered in spokane , washington , is a designer and distributor of an extensive collection of blown glass christmas ornaments , table top figurines , vintage-style light covers and nostalgic greeting cards into the independent gift channel . in december 2014 , we invested $ 19.6 million in b+t group acquisition inc. ( b+t ) through a combination of secured debt and equity . b+t , headquartered in tulsa , oklahoma , is a full-service provider of structural engineering , construction , and technical services to the wireless tower industry for tower upgrades and modifications . gladstone capital also participated as a co-investor by providing $ 8.4 million of debt and equity financing at the same price and terms as our investment . in december 2014 , b-dry , llc ( b-dry ) was restructured , resulting in $ 2.0 million of secured debt being converted into preferred equity . in march 2015 , we invested $ 10.8 million in logo sportswear , inc. ( logo ) through a combination of secured debt and equity . logo , headquartered in cheshire , connecticut , is an online provider of user-customized uniforms and apparel for teams , leagues , schools , businesses and organizations . in march 2015 , we invested $ 32.0 million in counsel press , inc. ( counsel press ) through a combination of secured debt and equity . counsel press , headquartered in new york , new york , provides expert assistance in preparing , filing , and serving appeals in state and federal appellate courts nationwide and several international tribunals . recent developments registration statement on june 3 , 2014 , we filed post-effective amendment no . 3 to the registration statement on form n-2 ( file no . 333-181879 ) , and subsequently filed a post-effective amendment no .
| results of operations comparison of the fiscal year ended march 31 , 2015 , to the fiscal year ended march 31 , 2014 replace_table_token_8_th nm = not meaningful investment income total investment income increased by 14.8 % for the year ended march 31 , 2015 , as compared to the prior year . this increase was due to an increase in interest income , which resulted primarily from an increase in the size of our portfolio during the year ended march 31 , 2015 , partially offset by a decline in other income for the same period . this decline in other income was primarily a result of success fees and dividend income related to the exit of venyu , which were recorded during the year ended march 31 , 2014 , but did not recur in the year ended march 31 , 2015. interest income from our investments in debt securities increased 20.4 % for the year ended march 31 , 2015 , as compared to the prior year . the level of interest income from investments is directly related to the principal balance of our interest-bearing investment portfolio outstanding during the period multiplied by the weighted average yield . the weighted average principal balance of our interest-bearing investment portfolio during the year ended march 31 , 2015 , was approximately $ 292.2 million , compared to approximately $ 241.5 million for the prior year . this increase was primarily due to approximately $ 84.7 million in new debt investments originated after march 31 , 2014 , including roanoke , cambridge , old world , b+t , logo , and counsel press .
| ROO | 9,248 |
or a portion , of a reporting unit , the testing for recoverability of a significant asset group within a reporting unit , or recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of a reporting unit ; and , if applicable , a sustained decrease in share price ( considered in both absolute terms and relative to peers ) . on september 17 , 2014 , emcore entered into an asset purchase agreement with photon to sell the photovoltaics business for $ 150.0 million in cash , subject to working capital adjustments . as of september 30 , 2014 , management performed the step 1 test , which compares the fair value of the reporting unit with its carrying value , including goodwill . as of september 30 , 2014 , no impairment existed . on december 10 , 2014 emcore completed the sale of its photovoltaics business to photon . see note 18 - subsequent events for additional information . 76 other intangible assets . our intangible assets consist primarily of intellectual property that has been internally-developed or acquired . acquired intangible assets include existing core technology , trademarks and trade names , and customer contracts . intangible assets are amortized using the straight-line method over estimated useful lives that could range up to fifteen years . valuation of long-lived assets . long-lived assets consist primarily of property , plant , and equipment and intangible assets . since our long-lived assets are subject to amortization , we review these assets for impairment in accordance with the provisions of asc 360 , property , plant , and equipment . we review long-lived assets for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable . our impairment testing of long-lived assets consists of determining whether the carrying amount of the long-lived asset ( asset group ) is recoverable , in other words , whether the sum of the future undiscounted cash flows expected to result from the use and eventual disposition of the asset ( asset group ) exceeds its carrying amount . the determination of the existence of impairment involves judgments that are subjective in nature and may require the use of estimates in forecasting future results and cash flows related to an asset or group of assets . in making this determination , we use certain assumptions , including estimates of future cash flows expected to be generated by these assets , which are based on additional assumptions such as asset utilization , the length of service that assets will be used in our operations , and estimated salvage values . asset retirement and environmental obligations . pursuant to asc 410 , asset retirement and environmental obligations , an asset retirement obligation is recorded when there is a legal obligation associated with the retirement of a tangible long-lived asset and the fair value of the liability can reasonably be estimated . upon initial recognition of an asset retirement obligation , a company increases the carrying amount of the long-lived asset by the same amount as the liability . over time , the liabilities are accreted for the change in their present value through charges to operations costs . the initial capitalized costs are depleted over the useful lives of the related assets through charges to depreciation , depletion , and or amortization . if the fair value of the estimated asset retirement obligation changes , an adjustment is recorded to both the asset retirement obligation and the asset retirement cost . revisions in estimated liabilities can result from revisions of estimated inflation rates , escalating retirement costs , and changes in the estimated timing of settling asset retirement obligations . we have known conditional asset retirement conditions , such as certain asset decommissioning and restoration of rented facilities to be performed in the future . we previously completed a review of our asset retirement and environmental obligations and we recorded an asset retirement obligation with an offset to fixed assets totaling $ 5.3 million and $ 5.1 million as of september 30 , 2014 and 2013 , respectively . fair value of financial instruments . we determine the fair value of our financial instruments in accordance with asc 820 , fair value measurements and disclosures . the carrying amounts of cash and cash equivalents , restricted cash , accounts receivable , prepaid expenses and other current assets , borrowings under our credit facility , accounts payable , accrued expenses and other current liabilities approximate fair value because of the short maturity of these instruments . equity investments . we accounted for our equity investment in our suncore joint venture in accordance with asc 323 , investments - equity method and joint ventures . an equity investment in which we exercised significant influence but did not control and were not the primary beneficiary , was accounted for using the equity method . we regularly reviewed our investment to determine whether a decline in fair value below the cost basis was other than temporary . in our opinion , neither san'an nor emcore held a controlling financial interest in suncore because neither party had exclusive authority over decision-making related to significant ordinary course of business actions such as establishing a budget , compensation , and the hiring and firing of certain executive personnel . in june 2013 , we entered into an agreement to sell our 40 % registered ownership interest in suncore to san'an for a purchase price of $ 4.8 million . the sale closed during the fourth quarter of fiscal 2013. revenue recognition . revenue is recognized upon shipment , provided persuasive evidence of a contract exists , the price is fixed , the product meets our customer 's specifications , title and ownership have transferred to the customer , and there is reasonable assurance of collection of the sales proceeds . story_separator_special_tag pursuant to asc 605-25-25-5 , revenue recognition - multiple-element arrangements , we have concluded that product revenue should not be considered a unit of accounting separate from the service revenue for these types of research contracts . contract manufacturers . in our fiber optics segment , prior to certain customers accepting product that is manufactured at one of our contract manufacturers , these customers require that they first qualify the product and manufacturing processes at our contract manufacturer . the customers ' qualification process determines whether the product manufactured at our contract manufacturer achieves their quality , performance , and reliability standards . after a customer completes the initial qualification process , we receive approval to ship qualified product to that 49 customer . as part of the manufacturing process at our contract manufacturers , the finished product is tested prior to shipment to the customer using the same criteria that our customer uses to test product it receives . revenue is recognized upon shipment of customer-qualified product , provided persuasive evidence of a contract exists , the price is fixed , the product meets our customer 's specifications , title and ownership have transferred to the customer , and there is reasonable assurance of collection of the sales proceeds . product warranty reserves we provide our customers with limited rights of return for non-conforming shipments and warranty claims for certain products . pursuant to asc 450 , contingencies , we make estimates of product warranty expense using historical experience rates as a percentage of revenue and or costs of revenue and accrue estimated warranty expense as a cost of revenue . we estimate the costs of our warranty obligations based on historical experience of known product failure rates and anticipated rates if warranty claims , use of materials to repair or replace defective products , and service delivery costs incurred in correcting product issues . in addition , from time to time , specific warranty accruals may be made if unforeseen technical problems arise . should our actual experience relative to these factors differ from our estimates , we may be required to record additional warranty reserves . alternatively , if we provide more reserves than needed , we may reverse a portion of such provisions in future periods . see note 10 - accrued expenses and other current liabilities in the notes to the consolidated financial statements for additional disclosures related to our product warranty reserves . stock-based compensation stock-based compensation expense is measured at the stock option grant date , based on the fair value of the award , and is recorded to cost of sales , sales , general , and administrative , and research and development expense based on an employee 's responsibility and function over the requisite service period . we use the black-scholes option-pricing model and the straight-line attribution approach to determine the fair value of stock-based awards in accordance with asc 718 , compensation . this option-pricing model requires the input of subjective assumptions , including the option 's expected life , the price volatility of the underlying stock , and expected forfeitures . expected term represents the period that stock-based awards are expected to be outstanding and is determined based on historical experience of similar awards , giving consideration to the contractual terms of the stock-based awards , vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based awards . the expected stock price volatility is based on our historical stock prices . we are required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates . we use historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest . if we use different assumptions for estimating stock-based compensation expense in future periods or if actual forfeitures differ materially from our estimated forfeitures , the change in our non-cash stock-based compensation expense could adversely affect our results of operations . see note 15 - equity in the notes to the consolidated financial statements for additional disclosures related to our stock-based compensation . litigation contingencies we are subject to various legal proceedings , claims , and litigation , either asserted or unasserted that arise in the ordinary course of business . while the outcome of these matters is currently not determinable , we do not expect the resolution of these matters will have a material adverse effect on our business , financial position , results of operations , or cash flows . however , the results of these matters can not be predicted with certainty . professional legal fees are expensed when incurred . we accrue for contingent losses when such losses are probable and reasonably estimable . in the event that estimates or assumptions prove to differ from actual results , adjustments are made in subsequent periods to reflect more current information . should we fail to prevail in any legal matter or should several legal matters be resolved against the company in the same reporting period , then the financial results of that particular reporting period could be materially affected . see note 14 - commitments and contingencies in the notes to our consolidated financial statements for disclosures related to our legal proceedings . 50 warrant valuation as of september 30 , 2014 and 2013 , warrants representing 400,001 shares , of our common stock were outstanding . all of our warrants are classified as a liability since the warrants meet the classification requirements for liability accounting pursuant to asc 815 , derivatives and hedging . each quarter , we expect an impact on our statement of operations when we record the change in fair value of our outstanding warrants using the monte carlo option valuation model . the monte carlo option valuation model is used since it allows the valuation of each warrant to factor in the value
| inventory : we generally expect the level of inventory at any given quarter to reflect the change in our expectations of forecasted sales . our inventory balances have fluctuated historically due to the timing of customer orders and product shipments , changes in our internal forecasts related to customer demand , as well as adjustments related to excess and obsolete inventory . accounts payable : the fluctuation of our accounts payable balances is primarily driven by changes in inventory purchases as well as changes related to the timing of actual payments to vendors . accrued expenses : our largest accrued expense typically relates to compensation . historically , fluctuations of our accrued expense accounts have primarily related to changes in the timing of actual compensation payments , receipt or application of advanced payments , adjustments to our warranty accrual , and accruals related to professional fees . net cash ( used in ) provided by investing activities replace_table_token_16_th fiscal 2014 : our investing activities consumed $ 3.3 million of cash primarily from capital related expenditures of $ 3.0 million , the funding of restricted cash of $ $ 0.7 million , partially offset by cash proceeds of $ 0.3 million from the sale of an investment . fiscal 2013 : our investing activities provided $ 3.8 million of cash primarily from the sale of an unconsolidated affiliate of $ 4.8 million , flood related insurance proceeds of $ 5.4 million , sale of certain assets of $ 1.2 million , and cash proceeds of $ 0.5 million related to the disposal of equipment partially offset by capital related expenditures of $ 7.2 million and the funding of restricted cash of $ 0.7 million . fiscal 2012 : our investing activities provided $ 5.3 million of cash primarily due to $ 13.1 million received from the sale of assets to a subsidiary of sei , $ 2.6 million of flood-related insurance proceeds from equipment and a net distribution of capital related to our suncore joint venture of $ 1.6 million ; largely offset by $ 12.2 million related to capital expenditures and $ 0.4 million deposits on equipment orders . see note 1 - description of business in the notes to the consolidated financial statements for additional disclosures related to the sei asset sale . 62 < div
| Liquidity | 5,618 |
an impairment loss , if one exists , is then measured as the amount by which the carrying amount of the asset exceeds the discounted estimated future cash flows . assets to be disposed of are reported at the lower of the carrying amount or fair value of such assets less costs to sell . asset impairment charges are recorded to reduce the carrying amount of the long-lived asset that will be sold or disposed of to their estimated fair values . charges for the asset impairment reduce the carrying amount of the long-lived assets to their estimated salvage value in connection with the decision to dispose of such assets . for the year ended december 31 , 2019 , the company determined that there were no events or circumstances indicating possible impairment of its long-lived assets . upon the receipt of the closure notice from the people 's government of yangkou town , shouguang city in september 2018 ( see note 1 ( b ) ) , the company demolished the affected factories . as a result , the company wrote off net book value of the affected factories ' property , plant and equipment in the amount of $ 18,644,473 which was recorded in the loss on demolition of factories in the consolidated statements of loss for the fiscal year ended december 31 , 2018. the company will negotiate with the local villages over compensation for the payment already made for the land leases and mineral rights of these factories . however , the company is uncertain of the amount that it could recover and when this could be accomplished . therefore , the company wrote off the mineral rights of the affected factories of $ 1,284,832 included in the write-off/impairment on property , plant and equipment in the consolidated statements of loss for the fiscal year ended december 31 , 2018 and $ 52,926 of prepaid land lease recorded in other operating loss in the consolidated statements of loss for fiscal year ended december 31 , 2018. the company incurred dismantling fees in the amount of $ 273,757 recorded in other operating loss in the consolidated statements of loss for fiscal year ended december 31 , 2018. in addition , the company recorded a write-off of $ 112,481 included in the write-off/impairment of property , plant and equipment for certain wells and equipment damaged by flood from a typhoon that occurred in august 2018 . ( k ) retirement benefits pursuant to the relevant laws and regulations in the prc , the company participates in a defined contribution retirement plan for its employees arranged by a governmental organization . the company makes contributions to the retirement plan at the applicable rate based on the employees ' salaries . the required contributions under the retirement plans are charged to the consolidated statement of loss on an accrual basis when they are due . the company 's contributions totaled $ 1,035,687 and $ 1,216,096 for the years ended december 31 , 2019 and 2018 , respectively . f- 13 gulf resources , inc. and subsidiaries notes to consolidated financial statements december 31 , 2019 ( expressed in u.s. dollars ) note 1 – basis of presentation and summary of significant accounting policies – continued ( l ) mineral rights the company follows fasb asc 805 “ business combinations ” that certain mineral rights are considered tangible assets and that mineral rights should be accounted for based on their substance . mineral rights are included in property , plant and equipment . ( m ) leases the company determines if an arrangement is a lease at inception . operating leases are included in operating lease right-of-use ( “ rou ” ) assets and operating lease liabilities in the consolidated balance sheets . finance leases are included in finance lease rou assets and finance lease liabilities in the consolidated balance sheets . rou assets represent the company 's right to use an underlying asset for the lease term and lease liabilities represent the company 's obligation to make lease payments arising from the lease . operating lease and finance lease rou assets and liabilities are recognized at january 1 , 2019 based on the present value of lease payments over the lease term discounted using the rate implicit in the lease . in cases where the implicit rate is not readily determinable , the company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments . lease expense for lease payments is recognized on a straight-line basis over the lease term . the company has elected not to recognize operating lease rou assets and liabilities arising from short-term lease . ( n ) basic and diluted earnings per share of common stock basic earnings per common share are based on the weighted average number of shares outstanding during the periods presented . diluted earnings per share are computed using weighted average number of common shares plus dilutive common share equivalents outstanding during the period . potential common shares that would have the effect of increasing diluted earnings per share are considered to be anti-dilutive , i.e . the exercise prices of the outstanding stock options were greater than the market price of the common stock . anti-dilutive common stock equivalents which were excluded from the calculation of number of dilutive common stock equivalents amounted to 103,392 and 51,747 shares for the years ended december 31 , 2019 and 2018 , respectively . these awards could be dilutive in the future if the market price of the common stock increases and is greater than the exercise price of these awards . story_separator_special_tag other income , net , which represent bank interest income , net of finance lease interest expense was $ 301,325 for the fiscal year 2019 , an decrease of $ 199,365 ( or approximately 40 % ) as compared to the same period in 2018. net income ( loss ) . net loss was $ 25,800,045 for the fiscal year 2019 , compared to net loss of $ 69,963,986 in the same period in 2018. this decrease in the net loss was attributable to resume production and sales of two factories . effective tax rate . our effective income tax ( expense ) benefit rate for the fiscal years 2019 and 2018 were ( 12 % ) and 16 % respectively . this was mainly due to an increase in valuation allowance of $ 8,672,817 in the fiscal year 2019. the effective income tax benefit rate of 16 % for the fiscal year 2018 differs from the prc statutory income tax rate of 25 % mainly due to non-taxable item in connection with the unrealized exchange gain . 27 story_separator_special_tag bold 10pt times new roman , times , serif ; margin : 0pt 0 ; text-align : justify `` > contractual obligations and commitments we have no significant contractual obligations not fully recorded on our consolidated balance sheets or fully disclosed in the notes to our consolidated financial statements . additional information regarding our contractual obligations and commitments at december 31 , 2019 is provided in the notes to our consolidated financial statements . see “ notes to consolidated financial statements , note 19 - capital commitment and operating lease commitments . ” 29 material off-balance sheet arrangements we do not currently have any off-balance sheet arrangements falling within the definition of item 303 ( a ) of regulation s-k. critical accounting policies and estimates our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the united states of america ( u.s. gaap ) , which requires us to make judgments , estimates and assumptions . see “ note 1 – nature of business and summary of significant accounting policies , ” in notes to the consolidated financial statements , which is included in “ item 8. financial statements and supplementary data , ” which describes our significant accounting policies and methods used in the preparation of our consolidated financial statements . the methods , estimates and judgments that we use in applying our accounting policies require us to make difficult and subjective judgments , often as a result of the need to make estimates regarding matters that are inherently uncertain . our most critical estimates include : · allowance for doubtful accounts , which impacts revenue ; · the valuation of inventory , which impacts gross margins ; · impairment of long-lived assets ( including goodwill ) ; · the valuation and recognition of share-based compensation , which impacts operating expenses ; and · the recognition and measurement of deferred income taxes , which impact our provision for taxes . allowance for doubtful accounts we makes estimates of the uncollectibility of accounts receivable , especially analyzing accounts receivable and historical bad debts , customer concentrations , customer credit-worthiness , current economic trends and changes in customer payment terms , when evaluating the adequacy of the allowance for doubtful accounts . credit evaluations are undertaken for all major sale transactions before shipment is authorized . on a quarterly basis , we evaluate aged items in the accounts receivable aging report and provide an allowance in an amount we deem adequate for doubtful accounts . if management were to make different judgments or utilize different estimates , material differences in the amount of our reported operating expenses could result . inventory valuation inventory is stated at the lower of cost or market , with cost determined on a first-in first-out basis . the carrying value of inventory is reduced for estimated obsolescence by the difference between its cost and the estimated market value based upon assumptions about future demand . we evaluate the inventory carrying value for potential excess and obsolete inventory exposures by analyzing historical and anticipated demand . if actual future demand or market conditions are less favorable than those projected by management , additional inventory write-downs may be required in the future , which could have a material adverse effect on our results of operations . depreciation of property , plant and equipment property , plant and equipment are stated at cost less accumulated depreciation and any impairment losses . expenditures for new facilities or equipment , and major expenditures for betterment of existing facilities or equipment are capitalized and depreciated using the straight-line method at rates sufficient to depreciate such costs over the estimated productive lives . all other ordinary repair and maintenance costs are expensed as incurred . mineral rights are recorded at cost less accumulated depreciation and any impairment losses . mineral rights are amortized ratably over the term of the lease , or the equivalent term under the units of production method , whichever is shorter . in some situations , the life of the asset may be extended or shortened if circumstances arise that would lead us to believe that the estimated life of the asset has changed . the life of leasehold improvements may change based on the extension of lease contracts with our landlords . changes in the estimated lives of assets will result in an increase or decrease in the amount of depreciation recognized in future periods . 30 impairment of long lived assets we periodically evaluate whether events or circumstances have occurred that indicate long-lived assets may not be recoverable or that the remaining useful life may warrant revision . when such events or circumstances are present , we assess the recoverability of long-lived assets by determining whether the carrying value will be recovered through the expected undiscounted future cash flows resulting from the use of the asset . in the event the sum of
| we also used approximately $ 28.6 million to perform the rectification and improvements of our bromine and crude salt factories and the relocation of our chemical factories for the fiscal year 2018. net cash used in financing activities we have no major financing activities for the year ended december 31 , 2019. we believe that our available funds and cash flows generated from operations will be sufficient to meet our anticipated ongoing operating needs for the next twelve months . we had available cash of approximately $ 100 million at december 31 , 2019 , all of which is in highly liquid current deposits which earn no or little interest . we do not anticipate paying cash dividends in the foreseeable future . we intend to continue to focus our efforts on the activities of schc , syci and dchc as these segments continue to expand within the chinese market . we may not be able to identify , successfully integrate or profitably manage any businesses or business segment we may acquire , or any expansion of our business . an expansion may involve a number of risks , including possible adverse effects on our operating results , diversion of management 's attention , inability to retain key personnel , risks associated with unanticipated events and the financial statement effect of potential impairment of acquired intangible assets , any of which could have a materially adverse effect on our condition and results of operations . in addition , if competition for acquisition candidates or operations were to increase , the cost of acquiring businesses could increase materially . we may effect an acquisition with a target business which may be financially unstable , under-managed , or in its early stages of development or growth . our inability to implement and manage our expansion strategy successfully may have a material adverse effect on our business and future prospects . < p style= '' font :
| Liquidity | 2,696 |
the company has committed to the following repayments : 2020 $ 9,188 2021 $ 2,297 as of december 31 , 2019 , company was in compliance with all loan covenants . replace_table_token_28_th f- 22 replace_table_token_29_th 14. convertible note payable in october 2018 , the company issued a convertible note payable in the amount of $ 1,000,000 in connection with the acquisition of enp investments llc . the convertible note is due on or before september 30 , 2023 with 5 % interest due per year . at the option of the holder , the note may be converted to 400,000 shares in the company 's common stock . the company has the option to extend the note to no later than september 30 , 2028. in june 2019 , the holder opted to convert $ 500,000 of the convertible note payable into 200,000 shares of the company 's common stock . 15. income taxes the provision for income tax expense ( benefit ) is comprised of the following : replace_table_token_30_th the following table reconciles the income tax benefit at the u.s. federal statutory rate to income tax benefit at the company 's effective tax rates . replace_table_token_31_th f- 23 deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes . deferred tax assets ( liabilities ) at december 31 , 2019 and 2018 are comprised of the following : replace_table_token_32_th the company has non-operating loss carryforwards of approximately $ 3,347,903 ( 2018 - $ 2,060,971 ) which may be carried forward to apply against future year income tax for canadian income tax purposes , subject to the final determination by taxation authorities , expiring in the following years : expiry loss 2032 401,480 2037 1,659,491 2039 1,286,932 total 3,347,903 as at december 31 , 2019 , the company has no net operating losses carryforward available for us tax purposes . f- 24 accounting for uncertainty for income tax effective january 1 , 2009 , the company adopted the interpretation for accounting for story_separator_special_tag results of operations we have three product lines . the first is a chemical ( “ ewcp ” ) used in swimming pools and spas . the product forms a thin , transparent layer on the water 's surface . the transparent layer slows the evaporation of water , allowing the water to retain a higher temperature for a longer period of time thereby reducing the energy required to maintain the desired temperature of the water . a modified version of ewcp can also be used in reservoirs , potable water storage tanks , livestock watering pods , canals , and irrigation ditches for the purpose of reducing evaporation . the second product , biodegradable polymers ( “ tpas ” ) , is used by the petroleum , chemical , utility and mining industries to prevent corrosion and scaling in water piping . tpas can also be used to increase biodegradability in detergents and in the agriculture industry to increase crop yields by enhancing fertilizer uptake . the third product line is nitrogen conservation products for the agriculture industry . these products decrease the loss of nitrogen fertilizer after application to the field and allow less fertilizer to be used . these products are made and sold by our tpa division . material changes in the line items in our statement of operations for the year ended december 31 , 2019 as compared to the same period last year , are discussed below : item increase ( i ) or decrease ( d ) reason sales ewcp products tpa products i i increased customer orders . growth in most product lines and sales attributable to our enp acquisition . wages i increased employee count . advertising and promotion i the enp subsidiary makes greater use of advertising and promotion . lease expense i increased locations related to the addition of the enp subsidiary . interest expense i increased debt resulted in increased interest expense . consulting i added consultant to increase future growth . professional fess i increased accounting fees related to the acquisition and general legal representation . 13 travel i larger head count resulted in additional travel costs . commissions i commissionable sales increased against uncommissionable sales . bad debt expense i a customer failed to pay for product . gain on involuntary disposition d final insurance payment was received in 2018. currency exchange i currency exchange increased as a result of the movements in the us/canadian dollar exchange rate and its effects on us dollar cash balances and us dollar payables held by the company 's ' canadian subsidiaries . gain on investment i new investment in florida llc in 2019. the factors that will most significantly affect future operating results will be : ● the sale price of crude oil which is used in the manufacture of aspartic acid we import from china . aspartic acid is a key ingredient in our tpa product ; ● activity in the oil and gas industry , as we sell our tpa product to oil and gas companies ; ● drought conditions , since we also sell our tpa product to farmers ; and ● impact of covid-19 virus other than the foregoing we do not know of any trends , events or uncertainties that have had , or are reasonably expected to have , a material impact on our revenues or expenses . story_separator_special_tag style= `` font-family : times new roman , times , serif ; font-size : 10pt `` > valuation of goodwill and intangible assets . we consider goodwill and intangible assets to determine if there are qualitative factors which exist which may indicate that the carrying value exceeds the fair value . our estimates are based upon an assessment of market conditions and expected future cash flows to be generated by the reporting units and related assets . if factors exist which indicate that the carrying value exceeds the fair value story_separator_special_tag the company has committed to the following repayments : 2020 $ 9,188 2021 $ 2,297 as of december 31 , 2019 , company was in compliance with all loan covenants . replace_table_token_28_th f- 22 replace_table_token_29_th 14. convertible note payable in october 2018 , the company issued a convertible note payable in the amount of $ 1,000,000 in connection with the acquisition of enp investments llc . the convertible note is due on or before september 30 , 2023 with 5 % interest due per year . at the option of the holder , the note may be converted to 400,000 shares in the company 's common stock . the company has the option to extend the note to no later than september 30 , 2028. in june 2019 , the holder opted to convert $ 500,000 of the convertible note payable into 200,000 shares of the company 's common stock . 15. income taxes the provision for income tax expense ( benefit ) is comprised of the following : replace_table_token_30_th the following table reconciles the income tax benefit at the u.s. federal statutory rate to income tax benefit at the company 's effective tax rates . replace_table_token_31_th f- 23 deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes . deferred tax assets ( liabilities ) at december 31 , 2019 and 2018 are comprised of the following : replace_table_token_32_th the company has non-operating loss carryforwards of approximately $ 3,347,903 ( 2018 - $ 2,060,971 ) which may be carried forward to apply against future year income tax for canadian income tax purposes , subject to the final determination by taxation authorities , expiring in the following years : expiry loss 2032 401,480 2037 1,659,491 2039 1,286,932 total 3,347,903 as at december 31 , 2019 , the company has no net operating losses carryforward available for us tax purposes . f- 24 accounting for uncertainty for income tax effective january 1 , 2009 , the company adopted the interpretation for accounting for story_separator_special_tag results of operations we have three product lines . the first is a chemical ( “ ewcp ” ) used in swimming pools and spas . the product forms a thin , transparent layer on the water 's surface . the transparent layer slows the evaporation of water , allowing the water to retain a higher temperature for a longer period of time thereby reducing the energy required to maintain the desired temperature of the water . a modified version of ewcp can also be used in reservoirs , potable water storage tanks , livestock watering pods , canals , and irrigation ditches for the purpose of reducing evaporation . the second product , biodegradable polymers ( “ tpas ” ) , is used by the petroleum , chemical , utility and mining industries to prevent corrosion and scaling in water piping . tpas can also be used to increase biodegradability in detergents and in the agriculture industry to increase crop yields by enhancing fertilizer uptake . the third product line is nitrogen conservation products for the agriculture industry . these products decrease the loss of nitrogen fertilizer after application to the field and allow less fertilizer to be used . these products are made and sold by our tpa division . material changes in the line items in our statement of operations for the year ended december 31 , 2019 as compared to the same period last year , are discussed below : item increase ( i ) or decrease ( d ) reason sales ewcp products tpa products i i increased customer orders . growth in most product lines and sales attributable to our enp acquisition . wages i increased employee count . advertising and promotion i the enp subsidiary makes greater use of advertising and promotion . lease expense i increased locations related to the addition of the enp subsidiary . interest expense i increased debt resulted in increased interest expense . consulting i added consultant to increase future growth . professional fess i increased accounting fees related to the acquisition and general legal representation . 13 travel i larger head count resulted in additional travel costs . commissions i commissionable sales increased against uncommissionable sales . bad debt expense i a customer failed to pay for product . gain on involuntary disposition d final insurance payment was received in 2018. currency exchange i currency exchange increased as a result of the movements in the us/canadian dollar exchange rate and its effects on us dollar cash balances and us dollar payables held by the company 's ' canadian subsidiaries . gain on investment i new investment in florida llc in 2019. the factors that will most significantly affect future operating results will be : ● the sale price of crude oil which is used in the manufacture of aspartic acid we import from china . aspartic acid is a key ingredient in our tpa product ; ● activity in the oil and gas industry , as we sell our tpa product to oil and gas companies ; ● drought conditions , since we also sell our tpa product to farmers ; and ● impact of covid-19 virus other than the foregoing we do not know of any trends , events or uncertainties that have had , or are reasonably expected to have , a material impact on our revenues or expenses . story_separator_special_tag style= `` font-family : times new roman , times , serif ; font-size : 10pt `` > valuation of goodwill and intangible assets . we consider goodwill and intangible assets to determine if there are qualitative factors which exist which may indicate that the carrying value exceeds the fair value . our estimates are based upon an assessment of market conditions and expected future cash flows to be generated by the reporting units and related assets . if factors exist which indicate that the carrying value exceeds the fair value
| we do not have any commitments or arrangements from any person to provide us with any equity capital . see note 2 to the consolidated financial statements included as part of this report for a description of our significant accounting policies . critical accounting policies and estimates allowances for product returns . we grant certain of our customers the right to return product which they are unable to sell . upon sale , we evaluate the need to record a provision for product returns based on our historical experience , economic trends and changes in customer demand . allowances for doubtful accounts receivable . we evaluate our accounts receivable to determine if they will ultimately be collected . this evaluation includes significant judgments and estimates , including an analysis of receivables aging and a review of large accounts . if , for example , the financial condition of a customer deteriorates resulting in an impairment of its ability to pay or a pattern of late payment develops , an allowance may be required . provisions for inventory obsolescence . we may need to record a provision for estimated obsolescence and shrinkage of inventory . our estimates would consider the cost of inventory , the estimated market value , the shelf life of the inventory and our historical experience . if there are changes to these estimates , provisions for inventory obsolescence may be necessary . < font
| Liquidity | 9,553 |
the company has no other material income other than that generated by the bank and its subsidiaries . the bank 's primary business strategy is attracting deposits from the general public and using those funds to originate residential mortgage loans , multi-family residential loans , commercial real estate and business loans and consumer loans . the bank invests excess liquidity primarily in interest-bearing deposits with the fhlb and other financial institutions , federal funds sold , u.s. government and agency securities , local municipal obligations and mortgage-backed securities . in recent years , the company 's operating strategy has also included strategies designed to enhance profitability by increasing sources of noninterest income and improving operating efficiency while managing its capital and limiting its credit risk and interest rate risk exposures . to accomplish these objectives , the company has focused on the following : monitoring asset quality and credit risk in the loan and investment portfolios , with an emphasis on reducing nonperforming assets and originating high-quality commercial and consumer loans . as noted above , nonperforming assets acquired with peoples decreased from $ 6.3 million at december 31 , 2015 to $ 5.0 million at december 31 , 2017. a key focus of management in 2018 will be the continued reduction of nonperforming assets through improved collection efforts and underwriting on nonperforming loans and the sale of foreclosed real estate properties . being active in the local community , particularly through our efforts with local schools , to uphold our high standing in our community and marketing to our next generation of customers . improving profitability by expanding our product offerings to customers and investing in technology to increase the productivity and efficiency of our staff . continuing to emphasize commercial real estate and other commercial business lending as well as consumer lending . the bank will also continue to focus on increasing secondary market lending as a source of noninterest income . with our integration of peoples now complete , management intends to continue to focus on growth in the loan portfolio and the secondary market lending program in the bullitt county , kentucky market . growing commercial and personal demand deposit accounts which provide a low-cost funding source . evaluating vendor contracts for potential cost savings and efficiencies . continuing our capital management strategy to enhance shareholder value through the repurchase of company stock and the payment of dividends . evaluating growth opportunities to expand the bank 's market area and market share through acquisitions of other financial institutions or branches of other institutions . the acquisition of peoples in december 2015 expanded our market area into bullitt county , kentucky , where peoples was the leader in deposit account market share among fdic-insured institutions . we opened our new river ridge office in clark county , indiana in may 2017. our focus in 2018 will be to continue the enhancement and expansion of our customer relationships in these new markets . ensuring that the company attracts and retains talented personnel and that an optimal level of performance and customer service is promoted at all levels of the company . 44 critical accounting policies and estimates the accounting and reporting policies of the company comply with u.s. gaap and conform to general practices within the banking industry . the preparation of financial statements in conformity with u.s. gaap requires management to make estimates and assumptions . the financial position and results of operations can be affected by these estimates and assumptions , which are integral to understanding reported results . critical accounting policies are those policies that require management to make assumptions about matters that are highly uncertain at the time an accounting estimate is made ; and different estimates that the company reasonably could have used in the current period , or changes in the accounting estimate that are reasonably likely to occur from period to period , would have a material impact on the company 's financial condition , changes in financial condition or results of operations . most accounting policies are not considered by management to be critical accounting policies . several factors are considered in determining whether or not a policy is critical in the preparation of financial statements . these factors include , among other things , whether the estimates are significant to the financial statements , the nature of the estimates , the ability to readily validate the estimates with other information including third parties or available prices , and sensitivity of the estimates to changes in economic conditions and whether alternative accounting methods may be utilized under u.s. gaap . significant accounting policies , including the impact of recent accounting pronouncements , are discussed in note 1 of the accompanying notes to consolidated financial statements . those policies considered to be critical accounting policies are described below . allowances for loan losses . the allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date . the allowance is established through the provision for loan losses , which is charged to income . determining the amount of the allowance for loan losses necessarily involves a high degree of judgment . among the material estimates required to establish the allowance are : loss exposure at default ; the amount and timing of future cash flows on impacted loans ; value of collateral ; and determination of loss factors to be applied to the various elements of the portfolio . all of these estimates are susceptible to significant change . management reviews the level of the allowance at least quarterly and establishes the provision for loan losses based upon an evaluation of the portfolio , past loss experience , current economic conditions and other factors related to the collectability of the loan portfolio . story_separator_special_tag replace_table_token_19_th ( 1 ) interest income on loans includes fee income of $ 984,000 , $ 919,000 and $ 756,000 for the years ended december 31 , 2017 , 2016 , and 2015 , respectively . ( 2 ) average loan balances include loans held for sale and nonperforming loans . ( 3 ) interest income on loans includes net accretion on acquired loans of $ 124,000 , $ 623,000 and $ 74,000 for the years ended december 31 , 2017 , 2016 and 2015 , respectively . ( 4 ) includes taxable debt securities and fhlb stock . ( 5 ) includes interest-bearing deposits with banks , money market funds , federal funds sold and interest-bearing time deposits . ( 6 ) stockholders ' equity attributable to first capital , inc. 49 rate/volume analysis . the following table sets forth the effects of changing rates and volumes on net interest income and interest expense computed on a tax-equivalent basis . information is provided with respect to ( i ) effects on interest income attributable to changes in volume ( changes in volume multiplied by prior rate ) ; ( ii ) effects attributable to changes in rate ( changes in rate multiplied by prior volume ) ; and ( iii ) effects attributable to changes in rate and volume ( change in rate multiplied by changes in volume ) . tax exempt income on loans and investment securities has been adjusted to a tax-equivalent basis using the federal marginal tax rate of 34 % . replace_table_token_20_th 50 comparison of financial condition at december 31 , 2017 and 2016 total assets increased from $ 743.7 million at december 31 , 2016 to $ 759.0 million at december 31 , 2016 primarily due to increases in net loans receivable and securities available for sale , partially offset by a decrease in cash and cash equivalents . net loans increased from $ 381.2 million at december 31 , 2016 to $ 409.6 million at december 31 , 2017. the primary contributing factor to the increase in net loans was an increase of $ 10.1 million in commercial business loans . the bank also increased home equity and second mortgage loans , land loans , commercial real estate loans and other consumer loans by $ 6.9 million , $ 4.3 million , $ 3.7 million and $ 3.5 million , respectively , during 2017. residential mortgage loans decreased $ 1.4 million during 2017 as the bank continued to sell the majority of newly originated residential mortgage loans in the secondary market . the bank originated $ 63.4 million in new residential mortgages for sale in the secondary market during 2017 compared to $ 51.6 million in 2016. these loans were originated and funded by the bank for sale in the secondary market . of the total originations for 2017 , $ 20.3 million paid off existing loans in the bank 's portfolio . originating mortgage loans for sale in the secondary market allows the bank to better manage its interest rate risk , while offering a full line of mortgage products to prospective customers . gross loans attributable to the peoples locations increased from $ 57.3 million at december 31 , 2016 to $ 63.1 million at december 31 , 2017 , as management has increased lending in this new market while also working to improve asset quality for the acquired portfolio . securities available for sale , at fair value , consisting primarily of u.s. agency mortgage-backed obligations , u.s. agency notes and bonds , and municipal obligations , increased from $ 255.8 million at december 31 , 2016 to $ 271.2 million at december 31 , 2017. purchases of securities available for sale totaled $ 48.9 million in 2017. these purchases were offset by principal repayments of $ 25.6 million , maturities of $ 5.5 million and sales of $ 1.6 million in 2017. the bank invests excess cash in securities that provide safety , liquidity and yield . accordingly , we purchase mortgage-backed securities to provide cash flow for loan demand and deposit changes , we purchase federal agency notes for short-term yield and low risk , and municipals are purchased to improve our tax equivalent yield focusing on longer term profitability . cash and cash equivalents decreased from $ 45.9 million at december 31 , 2016 to $ 25.9 million at december 31 , 2017. the decrease is due primarily to cash equivalents being invested in high quality loans and investment securities . foreclosed real estate decreased from $ 4.7 million at december 31 , 2016 to $ 4.0 million at december 31 , 2017. at december 31 , 2017 , foreclosed real estate includes $ 3.8 million acquired in the peoples acquisition compared to $ 4.0 million at december 31 , 2016. this amount includes the contingent assets identified in note 2 in the accompanying notes to consolidated financial statements , valued at $ 3.5 million at december 31 , 2017 and $ 3.7 million at december 31 , 2016. total deposits decreased $ 88,000 from $ 664.7 million at december 31 , 2016 to $ 664.6 million at december 31 , 2017. during 2017 , savings and noninterest-bearing demand deposit accounts increased $ 9.7 million and $ 8.5 million , respectively , while interest-bearing demand deposits , money market accounts and time deposits decreased $ 3.5 million , $ 3.3 million and $ 11.5 million , respectively . this continues a trend of decreasing certificate of deposit balances as some customers are unwilling to lock into long-term commitments while interest rates remain at their current low levels . deposits attributable to the peoples locations decreased from $ 225.1 million at december 31 , 2016 to $ 217.0 million at december 31 , 2017 , primarily due to a $ 6.0 million decrease in time deposits . federal home loan bank borrowings increased $ 10.0 million during 2017. new advances of $ 27.1 million were drawn during the
| liquidity and capital resources liquidity refers to the ability of a financial institution to generate sufficient cash flow to fund current loan demand , meet deposit withdrawals and pay operating expenses . the bank 's primary sources of funds are new deposits , proceeds from loan repayments and prepayments and proceeds from the maturity of securities . the bank may also borrow from the fhlb . while loan repayments and maturities of securities are predictable sources of funds , deposit flows and mortgage prepayments are greatly influenced by market interest rates , general economic conditions and competition . at december 31 , 2017 , the bank had cash and interest-bearing deposits with banks ( including interest-bearing time deposits ) of $ 35.2 million and securities available for sale with a fair value of $ 271.2 million . if the bank requires funds beyond its ability to generate them internally , it has additional borrowing capacity with the fhlb , collateral eligible for repurchase agreements and unsecured federal funds purchased lines of credit with other financial institutions . the bank must maintain an adequate level of liquidity to ensure the availability of sufficient funds to support loan growth and deposit withdrawals , to satisfy financial commitments and to take advantage of investment opportunities . at december 31 , 2017 , the bank had total commitments to extend credit of $ 117.9 million . see note 17 in the accompanying notes to consolidated financial statements . at december 31 , 2017 , the bank had certificates of deposit scheduled to mature within one year of $ 40.6 million . historically , the bank has been able to retain a significant amount of its deposits as they mature . the company is a separate legal entity from the bank and must provide for its own liquidity . in addition to its operating expenses , the company requires funds to pay any dividends to its shareholders and to repurchase any shares of its common stock . the company 's primary source of income is dividends received from the bank and the captive .
| Liquidity | 7,884 |
issuance of 2020 senior notes on april 24 , 2013 , we completed a private placement of $ 775 million of 2020 senior notes . the 2020 senior notes were priced at par and interest is payable on june 15 and december 15 of each year . the 2020 senior notes are fully and unconditionally guaranteed by all of our material subsidiaries , or guarantor subsidiaries . approximately $ 380 million of the net proceeds from the private placement were used to finance the cash consideration for the 2013 ef acquisition , including initial purchase price adjustments . the remaining net proceeds were used to pay down borrowings under the revolver and to fund a portion of the tender offer and the redemption . in july 2013 , we completed an exchange offer to register of all of the 2020 senior notes . 29 results of operations year ended december 31 , 2013 compared to the year ended december 31 , 2012 production the following tables set forth a summary of our total and daily production volumes by product and geographic region for the periods presented ( certain results in the tables below may not calculate due to rounding ) : replace_table_token_15_th replace_table_token_16_th replace_table_token_17_th replace_table_token_18_th 1 comprised primarily of production from our eagle ford shale wells as well as our pearsall shale and austin chalk wells . 2 subsequent to the sale of our appalachian natural gas properties in july 2012 , our remaining production from this region is provided by 3 gross ( 3.0 net ) wells in the marcellus shale . total production increased during 2013 compared to 2012 due primarily to the 2013 ef acquisition and the continued expansion of our development program in the eagle ford shale . the increase was partially offset by the effect of the sale of our appalachian natural gas properties in july 2012 along with natural production declines in our east texas and mid-continent regions . the effect of the sale of the appalachian properties was approximately 741 mboe . approximately 65 % of total production during 2013 was attributable to oil and ngls , which represents an increase of approximately 41 % over the prior 30 year . during 2013 , our eagle ford shale production represented approximately 60 % of our total production as compared to approximately 36 % from this play during 2012. product revenues and prices the following tables set forth a summary of our revenues and prices per unit of volume by product and geographic region for the periods presented : replace_table_token_19_th replace_table_token_20_th replace_table_token_21_th replace_table_token_22_th 31 as illustrated below , the effect of higher oil and ngl production volume coupled with improved natural gas prices more than offset the overall decline in crude oil and ngl prices and natural gas production volume . the following table provides an analysis of the change in our revenues for 2013 as compared to 2012 : replace_table_token_23_th effects of derivatives in 2013 , we paid $ 1.0 million and , in 2012 , we received $ 28.3 million in cash settlements of oil and gas derivatives . the following table reconciles crude oil and natural gas revenues to realized prices , as adjusted for derivative activities , for the periods presented : replace_table_token_24_th gain ( loss ) on sales of property and equipment in 2013 , we recognized losses related to certain properties in west virginia associated with our 2012 sale of appalachian natural gas assets as well as certain post-closing adjustments for other asset sales that occurred in prior years . in 2012 , we recognized a gain attributable to the sale of substantially all of our appalachian natural gas assets . in addition , we recognized several individually insignificant gains and losses on the sale of property , equipment , tubular inventory and well material during both periods . other revenues other revenues , which includes gathering , transportation , compression and water disposal fees and other miscellaneous operating income , net of marketing and related expenses , decreased during 2013 due primarily to accretion expense attributable to our unused firm transportation obligation in the appalachian region partially offset by a gain of $ 1.6 million on the sale of certain proprietary seismic data . total accretion expense recognized during 2013 was $ 1.7 million representing a full year as compared to $ 0.6 million for one quarter in 2012. production and lifting costs replace_table_token_25_th lease operating expense increased during 2013 due primarily to higher subsurface maintenance costs for wells located in east texas . in addition , we incurred subsurface maintenance costs for certain wells in the 2013 ef acquisition in which we had 32 to remove submersible pumps and replace them with rods and pumps . we also incurred higher water disposal and chemical costs associated with our increased oil production . these increases were partially offset by the effect of the sale of our higher-cost appalachian natural gas properties in july 2012. replace_table_token_26_th gathering , processing and transportation charges decreased during 2013 as compared to 2012 due primarily to the effect of the sale of our higher-cost appalachian properties in july 2012 , partially offset by an increase in processing costs related to expanded natural gas production in the eagle ford shale . production and ad valorem taxes replace_table_token_27_th production and ad valorem taxes increased during 2013 due primarily to our increased leasing and drilling activities in the eagle ford shale in gonzales and lavaca counties . in addition , we recognized approximately $ 4 million of non-recurring credits in the 2012 period for severance tax rebates on certain horizontal and ultra-deep natural gas wells in oklahoma and texas . general and administrative replace_table_token_28_th recurring general and administrative expenses increased due primarily to higher compensation , benefits and cash-based incentive charges resulting from higher employee headcount . liability-classified share-based compensation is attributable to our performance-based restricted stock units , or pbrsus , and represents mark-to-market charges associated with the increase in fair value of both the 2013 and 2012 pbrsu grants . story_separator_special_tag equity-classified share-based compensation charges attributable to stock options and restricted stock units , which represent non-cash expenses , decreased during 2013 due primarily to fewer employees receiving grants . we incurred transaction costs associated with the 2013 ef acquisition including advisory , legal , due diligence and other professional fees , as well as certain integration expenses including transition accounting services , settlement statement audit fees and costs to convert acquired land and related records for use in our systems . in 2013 , we initiated a project to replace certain of our primary information technology platforms with an integrated erp system that became operational during the first quarter of 2014. accordingly , we incurred certain costs including those associated with the preliminary project analysis , data conversion from our legacy systems , backfill labor and end-user training that were not subject to capitalization . restructuring charges during the 2012 period include employee termination benefits and a provision for lease costs attributable to exit activities in connection with the sale of our appalachian assets . 33 exploration the following table sets forth the components of exploration expenses for the periods presented : replace_table_token_29_th unproved leasehold amortization declined during 2013 as costs related to successful eagle ford shale wells were transferred to proved properties . in addition , due to the significance of the unproved acreage acquired in the 2013 ef acquisition , our unproved property in the eagle ford shale is now considered a “ significant leasehold ” and is not subject to systematic amortization . for further discussion of this matter , see “ critical accounting estimates — oil and gas properties. ” geological and geophysical costs increased during 2013 due primarily to the purchase of certain seismic data for the south texas region . delay rentals decreased during 2013 due primarily to the sale of our appalachian natural gas properties . depreciation , depletion and amortization ( dd & a ) the following table sets forth the nature of the dd & a variances for the periods presented : replace_table_token_30_th the effect of higher overall production volumes and higher depletion rates associated with oil and ngl production were the primary factors attributable to the increase in dd & a . our average dd & a rate increased due primarily to higher capitalized finding and development costs attributable to our drilling program in the eagle ford shale as well as lower natural gas reserves due to revisions . impairments the following table summarizes the impairments recorded for the periods presented : replace_table_token_31_th in 2013 , we recognized oil and gas asset impairments of $ 121.8 million in the granite wash in the mid-continent , $ 9.5 million in the marcellus shale in pennsylvania and $ 0.9 million in the selma chalk in mississippi , in each case due primarily to market declines in current and expected future commodity prices . in june 2012 , we recognized a $ 28.4 million impairment of our appalachian assets triggered by the expected disposition of those properties and a $ 75.0 million impairment of our marcellus shale assets due primarily to market declines in natural gas prices and the resultant reduction in proved natural gas reserves . we also recognized impairments of certain tubular inventory and well materials in 2012 due primarily to declines in asset quality . loss on firm transportation commitment we have a contractual commitment for certain firm transportation capacity in the appalachian region that expires in 2022. subsequent to the sale of our natural gas assets in that region in 2012 , we no longer have production to satisfy this commitment . as a result , we recorded a charge of $ 17.3 million in 2012 representing the liability for estimated discounted future net cash outflows over the remaining term of the contract . accretion of this liability for 2013 and 2012 has been recorded as a component of other revenues . 34 interest expense the following table summarizes the components of our interest expense for the periods presented : replace_table_token_32_th interest expense increased during 2013 due primarily to higher overall weighted-average debt outstanding and a larger proportion of fixed-rate debt with higher interest rates in the 2013 period as compared to a larger proportion of revolver borrowings at lower variable interest rates in 2012. the increase was partially offset by higher capitalized interest resulting from the significant increase in the value of our proved undeveloped and unproved properties following the 2013 ef acquisition . for further discussion of this matter , see “ critical accounting estimates — oil and gas properties. ” loss on extinguishment of debt in may 2013 , we completed the tender offer and the redemption for all of our outstanding 2016 senior notes . we paid a total of $ 330.9 million including consent payments and accrued interest in connection with the tender offer and redemption and recognized a loss on the extinguishment of debt of $ 29.2 million . the loss on extinguishment of debt included non-cash charges of $ 10.0 million attributable to the write-off of unamortized debt issuance costs and the remaining debt discount associated with the 2016 senior notes . when we entered into the revolver in september 2012 , we expensed issuance costs of $ 3.2 million attributable to our previous revolving credit facility . derivatives the following table summarizes the components of our derivatives income for the periods presented : replace_table_token_33_th we paid net cash settlements of $ 1.0 million , all of which were attributable to commodity derivatives , during 2013 and $ 29.7 million , including $ 1.2 million attributable to the termination of an interest rate swap agreement , during 2012. the loss in the 2013 period is due primarily to period-end oil prices exceeding hedged prices as well as a substantially lower volume of natural gas production being hedged during 2013 period as compared to 2012. income taxes replace_table_token_34_th due to the operating losses incurred , we recognized an income tax benefit during both periods .
| our expansion in the eagle ford shale and our overall shift in investment to liquids-focused opportunities has been financed over the past several years by a combination of cash from operating activities , the sale of non-core assets , borrowings under the revolver and a mix of debt and equity offerings . our most recent financing transaction occurred in april 2013 with the private placement and subsequent registration of $ 775 million of 8.5 % senior notes due 2020 , or 2020 senior notes . the 2020 senior notes were used to finance a portion of the 2013 ef acquisition as well as adjust our total capitalization by retiring our high-cost $ 300 million of 10.375 % senior notes due 2016 , or 2016 senior notes resulting in an annual reduction of interest payments of $ 5.6 million . we also issued 10 million shares of common stock to the seller in connection with the 2013 ef acquisition . key developments the following general business developments and corporate actions had or will have a significant impact on the financial reporting and disclosure of our financial position , results of operations and cash flows : ( i ) drilling results and future development plans for the eagle ford shale , ( ii ) the 2013 ef acquisition , ( iii ) the amendment , or amendment , of the revolver , and the borrowing base redetermination thereunder , ( iv ) the sale of our natural gas gathering assets in south texas , ( v ) hedging a portion of our oil and gas production through calendar year 2015 to the levels permitted by our revolver and our internal policies , ( vi ) the tender offer and the redemption , or the tender offer and the redemption , of our 2016 senior notes and ( vii ) the private placement and subsequent registration of our 2020 senior notes to finance the 2013 ef acquisition , the tender offer and the redemption . drilling results and future development plans for the eagle ford shale during 2013 , we drilled 49 gross ( 30.8 net ) successful wells , and our joint venture
| ROO | 2,338 |
34 carrier customer revenue our carrier revenue base , which has been relatively stable , represented 22 % of total revenue for eight consecutive quarters through march 31 , 2011 , declined to 21 % of total revenue in the three months ended june 30 , 2011 and further declined to 20 % of total revenue in each of the three months ended september 30 and december 31 , 2011 due to the higher contribution from enterprise customer revenue . carrier revenue increased 2 % for the year ended december 31 , 2011 from the year ended december 31 , 2010 , primarily due to installed sales of ethernet services to wireline and wireless carrier customers to serve their end users ' needs , somewhat offset by churn . in the year ended december 31 , 2011 , approximately 30 % of carrier revenue was from wireless providers . our carrier revenue historically has been impacted by pricing declines in connection with carrier customer contract renewals , disconnections resulting from price competition from other carriers , customer cost cutting measures and carrier consolidation . we expect these impacts on our carrier revenue to continue . intercarrier compensation revenue intercarrier compensation revenue , which consists of switched access and reciprocal compensation , represented 3 % of our total revenue for 11 consecutive quarters through the three months ended december 31 , 2010. for the year ended december 31 , 2011 , intercarrier compensation revenue declined to 2 % of total revenue . intercarrier compensation revenue is expected to continue to decline in the future as a percentage of total revenue due to federal and state mandated rate reductions and changes in the regulatory regime for intercarrier compensation . as a result of a recent fcc order , we believe approximately half of this revenue will be eliminated over a six year period ending july 2018 and expect approximately $ 2.0 million of this reduction in the second half of 2012. intercarrier compensation revenue also may fluctuate from quarter to quarter based on variations in minutes of use originating and terminating on our network and changes in customer dispute activity . revenue and customer churn revenue churn , defined as the average lost recurring monthly billing for the period from a customer 's partial or complete disconnection of services ( excluding pricing declines upon contract renewals and lost usage revenue ) compared to reported revenue , is a measure used by management to evaluate revenue retention . customer and service disconnections occur as part of the normal course of business and are primarily associated with price competition from other providers , customers moving facilities to other locations and customer cost cutting , business contractions , financial difficulties and consolidation , among other reasons . beginning in late 2007 and continuing through 2009 , disconnections increased , we believe due to the economic downturn , resulting in average monthly revenue churn of 1.2 % and 1.3 % in the years ended december 31 , 2008 and 2009 , respectively . revenue churn improved in the year ended december 31 , 2010 to pre-recession levels of 1.0 % of monthly revenue and further improved to 0.9 % for the year ended december 31 , 2011. we believe that the improvement in revenue churn is a result of improved economic conditions as well as our service portfolio , measures we put in place to increase revenue retention and our customer experience initiatives . as a component of revenue churn , revenue lost from customers fully disconnecting services was 0.2 % for the years ended december 31 , 2011 and 2010 and 0.3 % for the years ended december 31 , 2009 and 2008. we can not predict the total impact on revenue from future customer disconnections or the timing of such disconnections or whether these favorable churn trends will continue . customer churn , defined as the average monthly customer turnover for the period compared to the average monthly customer count for the period , was 1.0 % , 1.1 % , 1.3 % and 1.4 % for the years ended december 31 , 2011 , 2010 , 2009 and 2008 , respectively . the majority of this churn came from our smaller customers , which we expect will continue . pricing we experience significant price competition across our service categories that impacts our revenue . this competition is particularly intense for traditional inter-city point-to-point services , carrier pop to pop and pop to customer premise legacy dedicated services , data center to data center dedicated services , internet access , voice service and integrated service bundles . we also believe that technology advancements over the years in the telecommunications industry have resulted in lower unit costs for some electronics and equipment that drives customer demand for higher bandwidth at the same or lower prices . in our industry , service agreements typically range from two to five years , with fixed pricing for the contract term . when contracts are renewed with no changes to the services , pricing may be reduced to current market levels as a renewal incentive . in addition , during the terms of agreements , customers often purchase additional services or increase or decrease the capacity of existing services , subject to applicable early termination charges , depending on their business needs . during periods of economic downturn , our customers ' needs may contract , resulting in fewer service additions . 35 expenses and modified ebitda trends pricing of special access services we provide special access services to customers over our own fiber facilities in competition with ilecs , and we also purchase special access and other services from ilecs to extend the reach of our network . the ilecs have argued before the fcc that the high capacity telecommunications services that they sell , including special access services we buy from them , should no longer be subject to regulations governing price and quality of service . story_separator_special_tag although our cash flow projections over the most recent three-year period have been reasonable compared to our actual results , actual results may vary significantly from estimates . our methodology for our 2011 assessment was consistent with the methodology used in the prior year period . our 2011 assessment resulted in the determination that the carrying value of our reporting unit does not exceed its fair value . to assess the sensitivity of the assumptions used in our dcf analysis , we applied reductions of 20 % to our critical estimates to test for impairment which we believe represents a reasonable change to our assumptions . when we applied a hypothetical two percentage point increase in the weighted average cost of capital , the resultant reduction in our fair value calculation would not have resulted in an impairment under our 2011 assessment . to assess the sensitivity of our future cash flow estimates including the terminal value used to derive the reporting unit 's fair value , we applied a hypothetical reduction of 20 % to the estimated fair value of our reporting unit . the resultant reduction in fair value would not have resulted in an impairment under our 2011 assessment . we are not aware of any reasonably likely changes in our assumptions that would result in an impairment . impairment of long-lived assets we periodically assess our ability to recover the carrying amount of property , plant and equipment and intangible assets , which requires an assessment of risk associated with our ability to generate sufficient future cash flows from these assets . if we determine that the future cash flows expected to be generated by a particular asset do not exceed the carrying value of that asset , we recognize a charge to write down the value of the asset to its fair value . estimates are used to determine whether sufficient cash flows will be generated to recover the carrying amount of our investments in long term assets . the estimates are made for each of our seven regions . expected future cash flows are based on historical experience and management 's expectations of future performance . the assumptions used represent our best estimates including market growth rates , future pricing , market acceptance of our products and services and the future capital investments necessary . our 2011 assessment did not result in any impairment charges . a hypothetical 20 % reduction in our projected modified ebitda for each region would not have resulted in an impairment as of december 31 , 2011. regulatory and other contingencies we are subject to significant government and jurisdictional regulation , some of which is uncertain due to legal challenges of existing rules . such regulation is subject to differing interpretations and inconsistent application , and has historically resulted in disputes with other carriers , regulatory authorities , and municipalities regarding the classification of traffic , rates , minutes of use and right-of-way fees . 38 management estimates and accrues for its estimate of probable losses associated with regulatory and other contingencies . these estimates are based on assumptions and other considerations including expectations regarding regulatory rulings , historic experience and ongoing negotiations . we evaluate these reserves on an ongoing basis and make adjustments as necessary . a 10 % unfavorable or favorable change in the estimates used for such reserves would have resulted in approximately a $ 14.1 million decrease or $ 9.7 million increase , respectively , in net income for the year ended december 31 , 2011. deferred tax accounting we have had a history of nols for tax purposes . when it is more likely than not that all or some portion of deferred tax assets may not be realized , we establish a valuation allowance for the amount that may not be realized . each quarter we evaluate the need to retain all or a portion of the valuation allowance on our net deferred tax assets . during 2010 , we determined that it is more likely than not that the vast majority of our deferred tax assets , including nols , will be realized , and as a result reversed $ 299.0 million of the valuation allowance . in making this determination , we analyzed , among other things , our recent history of earnings , cumulative earnings for the last 12 quarters , and forecasts of future earnings . the reversal of the valuation allowance recorded during 2010 resulted in an income tax benefit of $ 299.0 million , or $ 1.98 per basic share and $ 1.72 per diluted share , for the year ended december 31 , 2010 , and an increase in the current and non-current deferred tax assets on the consolidated balance sheet as of december 31 , 2010. we continue to maintain a valuation allowance against certain deferred tax assets totaling $ 35.4 million . we believe it is more likely than not that deferred tax assets resulting from nols subject to certain limitations and those that require future income of special character will not be realized . additionally , we have certain deferred tax assets attributable to stock option deductions for which the related valuation allowance can not be reversed due to relevant accounting guidance concerning tax benefits related to the exercise of non-qualified stock options prior to the adoption of such accounting guidance . as of december 31 , 2011 , we had nols for federal income tax purposes of $ 1.0 billion . if not utilized to reduce taxable income in future periods , these nols generally expire in various amounts beginning in 2021 and ending in 2026. we utilized nols to offset income tax obligations in each of the tax returns filed for the years ended december 31 , 2010 , 2009 , 2008 and 2007. the tax reform act of 1986 contains provisions that limit the utilization of nols if there has been an “ ownership change ” as described in
| income tax expense was $ 41.5 million for the year ended december 31 , 2011 compared to income tax benefit of $ 291.3 million for the the year ended december 31 , 2010. this change primarily related to a $ 299.0 million non-cash income tax benefit recognized during the three months ended june 30 , 2010 resulting from the recognition of the value of deferred tax assets that we believe are realizable ( see note 9 to the consolidated financial statements ) , as well as a higher effective tax rate in 2011 and an increase in income before income taxes for the year ended december 31 , 2011. our effective tax rate in 2011 was 42 % and we expect our 2012 effective tax rate to be similar to 2011. net income and modified ebitda . net income was $ 57.9 million for the year ended december 31 , 2011 compared to $ 340.9 million for the year ended december 31 , 2010. the decrease in net income of $ 283.0 million resulted from the income tax expense ( benefit ) described above , partially offset by the increase in income before income tax expense . modified ebitda increased $ 34.1 million to $ 497.7 million , or 36 % of total revenue for the year ended december 31 , 2011 , from $ 463.6 million , or 36 % of total revenue in 2010. the increase in modified ebitda was primarily the result of the contribution from revenue growth partially offset by an increase in employee and field related costs . modified ebitda margins include the absorption of higher costs associated with the expansion of our employee base for sales , sales support , it and technical personnel , increases in access costs due to higher prices and increased volume and increases in revenue and expenses for certain taxes and fees .
| Liquidity | 5,434 |
this increase was primarily due to the issuance of $ 5.0 billion aggregate principal amount of senior unsecured notes in september 2016 ( the 2016 notes ) . during 2016 , we generated $ 16.7 billion in operating cash flow , utilized $ 11.0 billion to repurchase stock and paid cash dividends of $ 2.5 billion . outlook 2017 in 2017 , we will continue to maintain our strong operating and financial discipline . from a r & d perspective , we will continue to invest in conducting new and ongoing clinical studies , which support both our existing products and our product candidates . we expect to move forward on a number of late-stage clinical studies for new product candidates , including progress of our phase 3 studies of selonsertib for nash . in order to further develop our product pipeline , we will focus on leveraging our capital to pursue external licensing and acquisition opportunities which fit into our long-term strategic plan . from a commercial perspective , we will continue to focus on supporting the uptake of our recently launched taf-based regimens and continue to promote the use of our existing commercial products . we also hired a field-based team to promote truvada for prep as we believe it will continue to be an integral part of our growth in hiv in the united states as communities embrace the public health benefits of prevention . in hcv , it is very difficult for us to accurately predict our revenue because hcv is a cure market . we expect patient starts to decline relative to 2016 in all major markets , and this will be the primary driver of our expected decline in total product sales . we also expect product sales to be impacted by the effects of competition on market share and net price , as well as a continued decrease in the average duration of treatment as fewer patients are treated for 24 or 12 weeks and more patients are treated for 8 weeks . while we anticipate hcv revenues in 2017 to decline from prior year levels , there are still many patients to treat and we expect our hcv products to generate significant revenues and cash flows in the future . we will continue to focus on helping hcv patients get diagnosed and into treater care . in addition , we will continue to invest strategically and selectively in educational programs that raise awareness and access to our medications . we will continue to focus on ensuring patient access to our products around the world . our progress on all of these initiatives is subject to a number of uncertainties , including , but not limited to , the continuation of an uncertain global macroeconomic environment ; additional pricing pressures from payers and competitors ; slower than anticipated growth in our hiv franchise ; an increase in discounts , chargebacks and rebates due to ongoing contracts and future negotiations with commercial and government payers ; market share and price erosion caused by the introduction of generic versions of truvada outside the united states and viread later in 2017 ; inaccuracies in our hcv patient start estimates ; potential amendments to the affordable care act or other government action that could have the effect of lowering prices ; a larger than anticipated shift in payer mix to more highly discounted payer segment ; and volatility in foreign currency exchange rates . 48 story_separator_special_tag compared to 2014 . product sales in other international locations increased to $ 3.8 billion in 2015 compared to $ 1.2 billion in 2014 , primarily due to the launch in japan of sovaldi in may 2015 and harvoni in september 2015. the following table summarizes the period over period changes in our product sales : replace_table_token_5_th * percentage not meaningful 50 the following is additional discussion of our results by product : harvoni harvoni was approved by fda in october 2014 , by the european commission in november 2014 and by the japanese mhlw in july 2015. harvoni sales accounted for 33 % , 46 % and 9 % of our total antiviral product sales for 2016 , 2015 and 2014 , respectively . in 2016 , product sales were $ 4.9 billion in the united states , $ 1.8 billion in europe , $ 1.8 billion in japan and $ 491 million in other international locations . in 2015 , product sales were $ 10.1 billion in the united states , $ 2.2 billion in europe , $ 1.0 billion in japan and $ 545 million in other international locations . in 2014 , product sales were $ 2.0 billion in the united states and $ 103 million in europe . in the united states , the decrease in 2016 compared to 2015 was primarily due to lower sales volume and a lower average net selling price , which was partially offset by a favorable revision to our sales return reserve of $ 181 million recorded during the second quarter of 2016. the number of patients that started treatment with harvoni in the united states peaked in the first half of 2015 , as many warehoused patients initiated treatment after the product launch . in europe , the decrease in 2016 compared to 2015 was primarily due to lower sales volume and unfavorable foreign currency exchange , net of hedges . in japan , the increase in 2016 compared to 2015 was driven by higher sales volume , partially offset by a mandatory price reduction of 32 % that was effective april 1 , 2016. in other international locations , the decrease in 2016 compared to 2015 was primarily due to a lower average net selling price , partially offset by the continued launches of harvoni across various locations . the increase in product sales in 2015 compared to 2014 was primarily due to the launch of harvoni in the united states , europe and japan . story_separator_special_tag sovaldi sovaldi was approved by fda in december 2013 , by the european commission in january 2014 and by the japanese mhlw in march 2015. sovaldi sales accounted for 14 % , 17 % and 45 % of our total antiviral product sales for 2016 , 2015 and 2014 , respectively . in 2016 , product sales were $ 1.9 billion in the united states , $ 891 million in europe , $ 635 million in japan and $ 580 million in other international locations . in 2015 , product sales were $ 2.4 billion in the united states , $ 1.6 billion in europe , $ 878 million in japan and $ 409 million in other international locations . in 2014 , product sales were $ 8.5 billion in the united states , $ 1.5 billion in europe and $ 230 million in other international locations . in the united states , the decrease in 2016 compared to 2015 was primarily due to lower sales volume , partially offset by a favorable revision to our sales return reserve of $ 98 million recorded during the second quarter of 2016. in europe , the decrease in 2016 compared to 2015 was primarily due to lower sales volume . in japan , the decrease in 2016 compared to 2015 was primarily due to a mandatory price reduction of 32 % that was effective april 1 , 2016 and lower sales volume . in other international locations , the increase in 2016 compared to 2015 was primarily driven by higher sales volume . the decrease in product sales in 2015 compared to 2014 was primarily due to volume declines in the united states with patients being prescribed harvoni instead of sovaldi , partially offset by volume increases in japan and europe due to the launch of sovaldi . epclusa epclusa was launched in the united states and europe in june and july 2016 , respectively , and accounted for 6 % of our total antiviral product sales . in 2016 , product sales were $ 1.8 billion , primarily driven by sales in the united states of $ 1.6 billion . truvada truvada sales accounted for 13 % , 11 % and 15 % of our total antiviral product sales for 2016 , 2015 and 2014 , respectively . in 2016 , product sales were $ 2.4 billion in the united states , $ 913 million in europe and $ 269 million in other international locations . in 2015 , product sales were $ 2.1 billion in the united states , $ 1.1 billion in europe and $ 284 million in other international locations . in 2014 , product sales were $ 1.8 billion in the united states , $ 1.3 billion in europe and $ 278 million in other international locations . truvada sales increased by 3 % to $ 3.6 billion in 2016 , compared to $ 3.5 billion in 2015 , primarily due to a higher average net selling price and higher sales volume in the united states , as a result of the increased usage of truvada for prep . truvada sales increased by 4 % in 2015 , compared to $ 3.3 billion in 2014 , primarily due to sales volume growth and an increase in the average net selling price in the united states . 51 atripla atripla sales accounted for 9 % , 10 % and 15 % of our total antiviral product sales for 2016 , 2015 and 2014 , respectively . in 2016 , product sales were $ 1.9 billion in the united states , $ 520 million in europe and $ 187 million in other international locations . in 2015 , product sales were $ 2.2 billion in the united states , $ 694 million in europe and $ 218 million in other international locations . in 2014 , product sales were $ 2.4 billion in the united states , $ 888 million in europe and $ 225 million in other international locations . atripla sales decreased by 17 % to $ 2.6 billion in 2016 , compared to $ 3.1 billion in 2015 and by 10 % in 2015 , compared to $ 3.5 billion in 2014 , primarily due to declines in sales volume as doctors prescribed newer regimens , including tdf- and taf-based regimens . the efavirenz component of atripla , which has a gross margin of zero , comprised $ 966 million , $ 1.2 billion and $ 1.3 billion of our atripla sales in 2016 , 2015 and 2014 , respectively . a generic version of bristol-myers squibb company 's sustiva ( efavirenz ) was made available in canada and europe in 2013 and will be made available in the united states in 2017. while we have observed some pricing pressure related to the efavirenz component of our atripla sales , we have not yet observed any meaningful splitting of the atripla single-tablet regimen . stribild stribild sales accounted for 7 % , 6 % and 5 % of our total antiviral product sales for 2016 , 2015 and 2014 , respectively . in 2016 , product sales were $ 1.5 billion in the united states and $ 314 million in europe . in 2015 , product sales were $ 1.5 billion in the united states and $ 282 million in europe . in 2014 , product sales were $ 1.0 billion in the united states and $ 145 million in europe . stribild sales increased by 5 % to $ 1.9 billion in 2016 , compared to $ 1.8 billion in 2015 , primarily due to a favorable revision to our rebate reserves of $ 223 million during the third quarter of 2016 , partially offset by lower sales volume as a result of the continued launch of our new taf-based product , genvoya . stribild sales increased by 52 % in 2015 , compared to $ 1.2 billion in 2014 , primarily due to higher sales volume in the united states and europe .
| we record product sales net of estimated mandatory and supplemental discounts to government payers , in addition to discounts to private payers , including rebates , chargebacks , cash discounts for prompt payment , distributor fees and other related costs . these deductions are generally referred to as gross-to-net deductions and totaled $ 20.3 billion or 40 % of gross product sales in 2016 , compared to $ 18.1 billion or 36 % in 2015 . of the $ 20.3 billion in 2016 , $ 19.1 billion or 38 % of gross product sales was related to government and other rebates and chargebacks , and $ 1.2 billion was related to cash discounts for prompt payment , distributor fees and other related costs . the increase in our 2016 gross-to-net deductions was primarily due to an increase in discounts and a higher percentage of sales to more deeply discounted segments for our hcv products in the united states . product sales in the united states decreased by 9 % to $ 19.3 billion in 2016 , compared to $ 21.2 billion in 2015 . declines in sales of our hcv products were partially offset by increases in sales of our hiv and other antiviral products . the increases in the sales of our hiv and other antiviral products were primarily driven by sales of our newly launched taf-based products and a favorable revision to our rebate reserves of $ 332 million , primarily related to our tdf-based products . product sales in europe decreased by 15 % to $ 6.1 billion in 2016 , compared to $ 7.2 billion in 2015 , primarily due to lower harvoni and sovaldi sales volume . foreign currency exchange , net of hedges , had an unfavorable impact of $ 503 million on our product sales in 2016 compared to 2015 . product sales in japan , which consist of sovaldi and harvoni , increased by 31 % to $ 2.5 billion in 2016 , compared to $ 1.9 billion
| ROO | 7,887 |
the partnership views the anticipated combination of ( i ) increasing global population , ( ii ) decreasing arable land per capita , ( iii ) continued evolution to more protein-based diets in developing countries , ( iv ) sustained use of corn as feedstock for the domestic production of ethanol and ( v ) positioning at the lower end of the global cost curve will continue to provide a solid foundation for nitrogen fertilizer producers in the u.s over the longer term . december 31 , 2018 | 36 the table below shows relevant market indicators for the nitrogen fertilizer segment for the years ended december 31 , 2018 , 2017 , and 2016 : _ ( 1 ) information used in the charts was obtained from various third party sources including martketview and the u.s. energy information administration ( ‘ eia ' ) , amongst others . non-gaap measures our management uses certain non-gaap performance measures to evaluate current and past performance and prospects for the future to supplement our gaap financial information presented in accordance with u.s. gaap . these non-gaap financial measures are important factors in assessing our operating results and profitability and include the performance and liquidity measures defined below . during the fourth quarter of 2018 , management revised its internal and external use of non-gaap measures to eliminate any adjustments to earnings before interest , tax , depreciation and amortization ( “ ebitda ” ) for business interruption insurance recoveries . refer to the revised definition below for further information . ebitda - net income ( loss ) before ( i ) interest expense , net , ( ii ) income tax expense ( benefit ) and ( iii ) depreciation and amortization expense . adjusted ebitda - ebitda adjusted to exclude turnaround expense and other non-recurring items which management believes are material to an investor 's understanding of the partnership 's underlying operating results . available cash for distribution - adjusted ebitda reduced for cash reserves established by the board of directors of our general partner for ( i ) debt service , ( ii ) maintenance capital expenditures , ( iii ) turnaround expenses and , to the extent applicable , ( iv ) reserves for future operating or capital needs that the board of directors of our general partner deems necessary or appropriate , if any . available cash for distribution may be increased by the release of previously established cash reserves , if any , and other excess cash , at the discretion of the board of directors of our general partner . december 31 , 2018 | 37 we present these measures because we believe they may help investors , analysts , lenders and ratings agencies analyze our results of operations and liquidity in conjunction with our u.s. gaap results , including but not limited to our operating performance as compared to other publicly traded companies in the refining industry , without regard to historical cost basis or financing methods and our ability to incur and service debt and fund capital expenditures . non-gaap measures have important limitations as analytical tools , because they exclude some , but not all , items that affect net earnings and operating income . these measures should not be considered substitutes for their most directly comparable u.s. gaap financial measures . see “ non-gaap reconciliations ” section included herein for reconciliation of these amounts . items or events impacting comparability during the fourth quarter of 2018 , the partnership recognized a $ 6.1 million business interruption insurance recovery associated with an outage at its coffeyville , kansas facility ( the “ coffeyville facility ” ) during 2017. the recovery is recorded in the other income ( expense ) line item . prior year amounts , which were not material , were conformed to the current year presentation . refer to the “ non-gaap measures ” section above for discussion of the change made during the fourth quarter of 2018 to the partnership 's definition of adjusted ebitda . coffeyville facility during 2018 , the coffeyville facility had a planned , full facility turnaround lasting 15 days and incurred approximately $ 6.4 million in turnaround expense in the second quarter of 2018. during 2017 , the coffeyville facility 's third-party air separation unit experienced a shut down . paired with this shut down and subsequent operational challenges , the coffeyville facility experienced unplanned uan downtime of 11 days during the second quarter of 2017. east dubuque facility during 2017 , our east dubuque , illinois facility ( the “ east dubuque facility ” ) had a planned , full facility turnaround lasting 14 days and incurred approximately $ 2.6 million in turnaround expense in the third quarter of 2017. additionally , during the fourth quarter of 2017 , the east dubuque facility experienced unplanned downtime totaling 12 days . december 31 , 2018 | 38 results of operations the following sections should be read in conjunction with the information outlined in the previous sections of this item 7 and the financial statements and related notes thereto in item 8. key operating data utilization - the following charts summarize our ammonia utilization rates on a consolidated basis and at each of our facilities . utilization is an important measure used by management to assess operational output at each of the partnership 's facilities . utilization is calculated as actual tons produced divided by capacity . we present our utilization on a two-year rolling average to take into account the impact of our current turnaround cycles on any specific period . the two-year rolling average is a more useful presentation of the long-term utilization performance of our plants . we present utilization solely on ammonia production rather than each nitrogen product as it provides a comparative baseline against industry peers and eliminates the disparity of plant configurations for upgrade of ammonia into other nitrogen products . with our efforts being primarily focused on ammonia upgrade capabilities , this measure provides a meaningful view of how well we operate . story_separator_special_tag december 31 , 2018 | 39 sales and pricing per ton . two of our key operating metrics are total sales for ammonia and uan along with the product pricing per ton realized at the gate . product pricing at gate represents net sales less freight revenue divided by product sales volume in tons and is shown in order to provide a pricing measure that is comparable across the fertilizer industry . production volumes . gross tons produced for ammonia represent the total ammonia produced , including ammonia produced that was upgraded into other fertilizer products . net tons available for sale represent the ammonia available for sale that was not upgraded into other fertilizer products . replace_table_token_3_th feedstock . our coffeyville facility utilizes a pet coke gasification process to produce nitrogen fertilizer . our east dubuque facility uses natural gas in its production of ammonia . replace_table_token_4_th _ ( 1 ) the feedstock natural gas shown above does not include natural gas used for fuel . the cost of fuel natural gas is included in direct operating expense ( exclusive of depreciation and amortization ) . december 31 , 2018 | 40 story_separator_special_tag style= '' vertical-align : top ; padding-left:2px ; padding-top:2px ; padding-bottom:2px ; padding-right:2px ; '' > uan $ ( 24.0 ) $ ( 7.2 ) ammonia ( 4.5 ) 6.5 operating income ( loss ) - for 2017 , operating income decreased by $ 36.9 million as compared to 2016 to a loss of $ 10.3 million . the significant decrease in operating income is primarily due to the unfavorable pricing conditions experienced in 2017. also contributing in 2017 was an increase of $ 15.8 million in depreciation and amortization expense primarily driven by the full year of depreciation recognized in 2017 associated with east dubuque facility in april 2016. these increased costs were offset by lower turnaround expense of $ 4.0 million year-over-year in 2017. net income ( loss ) - the partnership 's net loss of $ 72.8 million in 2017 increased significantly compared to 2016 due to the operational and market conditions and operational expenses incurred in 2017. additionally , in 2017 , an increase of $ 14.3 million in interest expense occurred due to a full year of interest on the long-term debt obtained as part of the east dubuque facility acquisition in april 2016. available cash for distribution - due to the more favorable market conditions in the first half of 2016 and lower interest costs in 2016 , the partnership declared and paid distributions totaling $ 49.9 million for the first two quarters of 2016 compared to $ 2.3 million declared and paid for the second quarter of 2017. december 31 , 2018 | 42 non-gaap reconciliations reconciliation of net loss to ebitda and adjusted ebitda replace_table_token_5_th _ ( a ) represents a loss on extinguishment of debt incurred by cvr partners in june 2016 in connection with the repurchase of senior notes assumed in the east dubuque facility acquisition . ( b ) represents legal and other professional fees and other merger related expenses associated with the east dubuque facility acquisition . reconciliation of net cash provided by ( used in ) operating activities to ebitda replace_table_token_6_th december 31 , 2018 | 43 reconciliation of adjusted ebitda to available cash for distribution replace_table_token_7_th _ ( a ) amount represents the cumulative available cash based on full year results . however , available cash for distribution is calculated quarterly for distribution in the following period . for the fourth quarter 2018 , the partnership 's general partner , on february 20 , 2019 , declared a distribution of $ 0.12 per common unit , or $ 14.1 million , payable on march 11 , 2019 to unitholders of record as of march 4 , 2019. december 31 , 2018 | 44 liquidity and capital resources our principal source of liquidity has historically been cash from operations , which can include cash advances from customers resulting from prepay contracts . our principal uses of cash are for working capital , capital expenditures , funding our debt service obligations and paying distributions to our unitholders , as further discussed below . we believe that our cash from operations and existing cash and cash equivalents , along with borrowings , as necessary , under the abl credit facility ( defined below ) , will be sufficient to satisfy anticipated cash requirements associated with our existing operations for at least the next 12 months , and that we have sufficient cash resources to fund out operations for at least the next 12 months . however , our future capital expenditures and other cash requirements could be higher than we currently expect as a result of various factors . additionally , our ability to generate sufficient cash from our operating activities and secure additional financing depends on our future performance , which is subject to general economic , political , financial , competitive and other factors beyond our control . depending on the needs of our business , contractual limitations and market conditions , we may from time to time seek to issue equity securities , incur additional debt , issue debt securities , or otherwise refinance our existing debt . there can be no assurance that we will seek to do any of the foregoing or that we will be able to do any of the foregoing on terms acceptable to us or at all . cash balance and other liquidity as of december 31 , 2018 , we had cash and cash equivalents of $ 61.8 million , including $ 23.7 million of customer advances . combined with $ 50.0 million available under our abl credit facility less $ 25.0 million in cash included in our borrowing base , we had total liquidity of $ 86.8 million at december 31 , 2018. as of december 31 , 2017 , we had $ 49.2 million in cash and cash equivalents , including $ 12.9 million of customer advances .
| as a result of a wetter than expected fall season , customers were unable to apply ammonia , resulting in certain customers canceling ammonia contracts for delivery in the fourth quarter of 2018. december 31 , 2018 | 41 operating income ( loss ) - for 2018 , operating income was $ 6.3 million compared to a loss of $ 10.3 million in 2017. the $ 16.6 million increase in operating income in 2018 is driven by the increase in net sales discussed above . net sales increase were offset by increased feedstock , including higher pet coke prices , and purchased ammonia costs in cost of materials and other and higher direct operating expenses driven by an increase of $ 3.8 million year-over-year in turnaround expenses . during 2018 , our coffeyville facility used less pet coke but at higher prices . from the year ended december 31 , 2017 as compared to the year ended december 31 , 2018 , the total volume of pet coke consumed decreased by 5 % . the facility 's cost of pet coke increased due to a higher proportion of pet coke being purchased from third parties as well as due to pricing increases . the purchase prices from third parties and cvr energy 's coffeyville refinery increased by 51 % and 56 % , respectively , year-over-year . direct operating expenses were higher due to $ 6.4 million being spent on the coffeyville facility 's 2018 turnaround compared to $ 2.6 million on the east dubuque facility 's 2017 turnaround . the increases in cost of materials and other and direct operating expenses were offset by a decrease in depreciation and amortization of $ 2.4 million due to changes in amounts capitalized to inventory as a result of tons yet to be sold at december 31 , 2018. net loss - the partnership 's net loss of $ 50.0 million decreased significantly as compared to 2017 due to the operational and market improvements discussed above . additionally , in december 2018 , the partnership recognized a business interruption insurance recovery of $ 6.1 million related to outages at our coffeyville facility in 2017 and 2018. available cash for distribution - as a result of the fourth quarter earnings and cash flows as presented in the partnership 's ebitda and adjusted ebitda measures , the partnership 's general partner , on february 20 , 2019 , declared a
| ROO | 11,380 |
the number of warehouse clubs in operation as of august 31 , 2016 for each country or territory are as follows : replace_table_token_8_th in fiscal year 2014 , we purchased land in pereira and medellin , colombia and leased land in the city of bogota , colombia . we built new warehouse clubs on these three sites . during fiscal year 2015 we opened the bogota location in october 2014 and the pereira and medellin locations in november 2014. together with the three warehouse clubs that were already operating in colombia ( one in barranquilla and two in cali ) , these three new clubs brought the number of operating pricesmart warehouse clubs in colombia to six at the end of fiscal year 2015. we constructed a new warehouse club on land acquired in may 2015 in chia , colombia that opened in september 2016 , fiscal year 2017 , bringing the total of warehouse clubs operating in colombia to seven . in september 2014 , we acquired land in la chorrera ( `` costa verde '' ) , west of panama city , panama , on which we opened our fifth pricesmart warehouse club in panama in june 2015. in april 2015 , we acquired land in managua , nicaragua . we constructed and then opened a warehouse club on this site in november 2015. on december 4 , 2015 we signed an option to acquire two properties and then swap them for 59,353 square feet of land adjacent to our san pedro sula warehouse club in honduras . we exercised this option and completed the swap during may 2016. we will use the acquired land to expand the parking lot for the san pedro sula warehouse club . our warehouse clubs and local distribution centers are located in latin america and the caribbean , and our corporate headquarters , u.s. buying operations and regional distribution centers are located primarily in the united states . during the second quarter of fiscal year 2015 , the company created a new reportable segment comprised of its colombia operations and separated the colombia operations from the latin america operations , renaming that reportable segment central america operations . the company has made this change as a result of the information that the company 's chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance and the growing level of investment and sales activity in colombia . therefore , beginning in the second quarter of fiscal year 2015 , the company has reported its financial performance based on these new segments and retrospectively adopted this change for the disclosure of financial information presented by segment . the company 's operating segments are the united states , central america , the caribbean and colombia . general market factors our sales and profits vary from market to market depending on general economic factors , including gdp growth ; consumer spending patterns ; foreign currency exchange rates ; political policies and social conditions ; local demographic characteristics ( such as population growth ) ; the number of years pricesmart has operated in a particular market ; and the level of retail and wholesale competition in that market . our consolidated results of operations during the past two fiscal years were adversely affected by events in colombia , resulting largely from a major decline in the value of the colombian peso ( cop ) relative to the u.s. dollar beginning in august 2014 which negatively impacted sales and margins in that market . over the course of fiscal year 2016 , the devaluation of the colombian peso against the u.s. dollar resulted in decreased u.s. dollar reported warehouse clubs sales , after translation by approximately 26 % when compared to fiscal year 2015. however , by the end of the fiscal year , the value of the colombian peso was approximately 5.4 % higher than at the end of fiscal year 2015 , following the approximately 60 % overall devaluation that 4 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 colombia market , and the sophisticated level of competition in that market , impacted overall business performance resulting in an operating loss in colombia . 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 . our capture of retail and wholesale sales can vary from market to market due to competition and the availability of other retail options for the consumer . 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 . story_separator_special_tag 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 a larger upper and middle class consumer population . 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 . in addition , if a major employer in a market reduces its work force , as has happened in the past in aruba and costa rica , overall consumer spending can suffer . currency fluctuations can be the largest variable affecting our overall sales and profit performance , as we experienced in fiscal year 2015 and 2016 , as many of our markets are susceptible to foreign currency exchange rate volatility . currency exchange rate changes either increase or decrease the cost to our subsidiaries of imported products purchased in u.s. dollars and priced in local currency . in fiscal year 2016 , approximately 77.3 % of our net warehouse sales were in currencies other than the u.s . dollar . meanwhile , approximately 52 % of net warehouse sales were comprised of sales of products we purchased in u.s. dollars that w ere sold in countries whose currencies were other than the u.s. dollar . currency exchange rate fluctuations also affect our consolidated sales and membership income as local-currency-denominated sales are translated to u.s. dollars , which can impact year over year growth when measured in u.s. dollars compared to local currency growth rates . in addition , we revalue on a monthly basis all u.s. dollar-denominated monetary assets and liabilities within our markets that do not use the u.s. dollar as their functional currency . these monetary assets and liabilities include , but are not limited to , excess cash permanently reinvested offshore , u.s. dollar-denominated long-term debt used to finance land acquisitions and the construction of warehouse clubs , and u.s. dollar-denominated accounts payable related to the purchase of merchandise . we report the gains or losses associated with the revaluation of these monetary assets and liabilities on our consolidated statements of income under the heading “ other income ( expense ) , net. ” where possible , we seek to minimize the impact of negative foreign exchange fluctuations on our results by utilizing from time to time one or more of the following strategies : ( 1 ) adjusting prices on goods acquired in u.s. dollars on a periodic basis to maintain our target margins after taking into account changes in exchange rates and our competition ; ( 2 ) obtaining local currency loans from banks within certain markets where it is economical to do so and where management believes the risk of devaluation and the level of u.s. dollar denominated liabilities warrants this action ; ( 3 ) reducing the time between the acquisition of product in u.s. dollars and the settlement of that purchase in local currency ; ( 4 ) maintaining a balance between assets held in local currency and in u.s. dollars ; and ( 5 ) entering into cross-currency interest rate swaps and non-deliverable forward contracts . we have local-currency-denominated long-term loans in honduras and guatemala and have employed cross-currency interest rate swaps in colombia , costa rica and honduras and non-deliverable forward contracts in costa rica and colombia . future volatility regarding currencies could have a material impact on our operations in future periods ; however , there is no way to accurately forecast the impact of the change in rates on our future demand for imported products , reported sales or financial results . 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 . in the second half of fiscal year 2016 and continuing into fiscal year 2017 , we are experiencing this situation in trinidad ( “ tt ” ) . we are limited in our ability to convert tt dollars that we generate through sales of merchandise into u.s. dollars to settle u.s. dollar liabilities , increasing our foreign exchange exposure to any devaluation 5 of the tt dollar . the june 2016 international monetary fund country report for trinidad and tobago suggests that the tt dollar could be overvalued , in the range of 20 % -50 % per u.s. dollar . we are working with our banks to source other tradeable currencies ( such as euros and canadian dollars ) , but until the central bank makes more u.s. dollars available , this condition will continue . as of august 31 , 2016 , we have net u.s. dollar denominated liabilities of approximately $ 18.9 million that would be exposed to a potential devaluation of trinidad dollars . if for example , a hypothetical 20 % devaluation of the tt currency occurred , the net effect on other expense would be approximately $ 3.8 million . t o the extent we are unable to exchange tt dollars for u.s. dollars , this causes delays in payments owed to us by our trinidad subsidiary . this , in turn , reduces our ability to deploy that cash for corporate purposes . the trinidad government is aware that having limited tradable currency poses challenges to u.s. companies doing business in trinidad , including pricesmart .
| net cash provided by ( used in ) financing activities for the period presented is summarized below : replace_table_token_43_th net cash provided by long term and short term loan activities decreased approximately $ 27.1 million in fiscal year 2016 over fiscal year 2015. we received cash during fiscal year 2016 from short-term borrowings for approximately $ 28.9 million and cash from additional long-term loans entered into by our subsidies of approximately $ 14.4 million . this increase in cash was offset by repayments of long-term loans of approximately $ 2.8 million and regularly scheduled loan payments of $ 13.7 million . additional payments for approximately $ 19.3 million on the short-term loans were recorded . this activity accounted for an overall increase in cash provided by long term and short term loan activities of approximately $ 7.5 million . during fiscal year 2015 , we received cash from seven additional loans entered into by our panama , guatemala , honduras ( three loans in honduras ) , trinidad and colombia subsidiaries for approximately $ 10.0 million , $ 7.5 million , $ 16.9 million , $ 3.6 million and $ 15.0 million , respectively . additionally , during fiscal year 2015 , $ 2.9 million in restricted cash was released back to us due to the repayment of one of the loans borrowed by our honduras subsidiary and $ 24.0 million in restricted cash was released back to us due to the repayment of four loans by our colombia subsidiary . these increases were offset by repayments of long-term loans of approximately $ 3.2 million and $ 13.3 million by our honduras subsidiary and $ 3.2 million by our trinidad subsidiary , the payment of approximately $ 24.0 million in derivative obligations associated with our colombia subsidiary loans , and regularly scheduled loan payments of $ 11.2 million . additionally we received cash from short-term borrowings for 24 approximately $ 51.7 million , offset by payments for approximately $ 42.1 million on the short-term loans were recorded . this activity accounted for an overall increase in cash provided by loan activities of approximately $ 34.5 million . for the twelve-months ended august 31 , 2015 , net cash provided by loan activities increased approximately $ 8.3 million over the same period in fiscal year 2014 .
| ROO | 15,903 |
consolidated financial statements . this discussion and analysis contains forward-looking statements that involve risks , uncertainties and assumptions . see “ special note regarding forward-looking statements. ” our actual results could differ materially from those forward-looking statements as a result of many factors , including those discussed in “ risk factors ” and elsewhere in this form 10-k. overv iew we are a leading manufacturer of high quality graphite electrode products essential to the production of eaf steel and other ferrous and non‑ferrous metals . we believe that we have the most competitive portfolio of low‑cost uhp graphite electrode manufacturing facilities in the industry , including three of the highest capacity facilities in the world . we are the only large scale graphite electrode producer that is substantially vertically integrated into petroleum needle coke , a key raw material for graphite electrode manufacturing . between 1984 and 2011 , eaf steelmaking was the fastest‑growing segment of the steel sector , with production increasing at an average rate of 3.5 % per year , based on wsa data . historically , eaf steel production has grown faster than the overall steel market due to the greater resilience , more variable cost structure , lower capital intensity and more environmentally friendly nature of eaf steelmaking . this trend was partially reversed between 2011 and 2015 due to global steel production overcapacity driven largely by chinese bof steel production . beginning in 2016 , efforts by the chinese government to restructure china 's domestic steel industry have led to limits on bof steel production and lower export levels , and developed economies , which typically have much larger eaf steel industries , have instituted a number of trade policies in support of domestic steel producers . in response to this increased demand , we modified our commercial strategy and executed long-term take‑or‑pay contracts with our customers . since 2000 , eaf production has grown at an average rate of 3.2 % . we service customers at over 300 locations across the globe , all of which have been impacted by the covid-19 pandemic during 2020. in the second half of 2020 , we began to see a measured recovery in the global steel markets compared to the second quarter of 2020 , with each region recovering at different rates , and anticipate this will have a positive influence on graphite electrode demand . in the fourth quarter of 2020 , both the global ( ex-china ) and u.s. steel market capacity utilization rates improved to over 72 % . by late february 2021 , the capacity utilization rate in the u.s. steel market was approximately 77 % . the commercial team has worked diligently in 2020 to achieve solid results in the current environment . full year 2020 sales volumes were 135,000 mt , consisting of long-term agreement ( “ lta ” ) volumes of 113,000 mt and non-lta volumes of 22,000 mt . during the fourth quarter of 2020 , our average price from ltas was approximately $ 9,600 per mt and our average price for non-lta business was approximately $ 4,900 per mt . market prices for graphite electrodes declined throughout 2020 , including through the fourth quarter and into the early part of the first quarter of 2021. there is a lag between the time we negotiate price for non-lta sales and when our electrodes are delivered and recognized in revenue . we estimate that our non-lta price for electrodes delivered and recognized in revenue for the first six weeks of 2021 averaged approximately $ 4,200 per mt . given this impact , for the first half of 2021 we anticipate earnings per share and adjusted ebitda will decline by high single digits , on a percentage basis , compared to the first half of 2020. we believe market prices for graphite electrodes are now improving and expect this to positively impact our financial results beginning in the second half of 2021. during the challenging market conditions in 2020 , we were able to work with our valued customers to develop mutually beneficial solutions to their challenges , including volume commitments . we are pleased to have successfully negotiated lta modifications with many of these customers . we also continue to work to preserve our rights under the ltas in a few arbitrations that arose from some lta non-performance and other disputes during the year . 39 covid-19 and operational update we continue to proactively manage through the covid-19 crisis to support the health and safety of our team . our plants have remained operational and maintained a 97 % on-time delivery rate in the fourth quarter of 2020. our global footprint gives us the flexibility to move or adjust production if needed . capital structure and capital allocation as of december 31 , 2020 , we had cash and cash equivalents of $ 145 million and total debt of approximately $ 1.4 billion . during 2020 , capital allocation included $ 400 million of debt repayment , $ 36 million of capital expenditures , $ 31 million of dividend payments , and $ 30 million for share repurchases . in 2021 , we expect our primary use of cash to continue to be debt repayment . we expect 2021 full year capital expenditures to range between $ 55 and $ 65 million . on december 22 , 2020 , we issued our $ 500 million aggregate principal amount of 2020 senior notes . the proceeds of the 2020 senior notes were used to repay a portion of our secured 2018 term loans due february 2025 under the 2018 credit agreement . industry conditions the graphite electrode industry has historically followed the growth of the eaf steel industry and , to a lesser extent , the steel industry as a whole , which has been highly cyclical and affected significantly by general economic conditions . historically , eaf steel production has grown faster than the overall steel market due to the greater resilience , more variable cost structure , lower capital intensity and more environmentally friendly nature of eaf steelmaking . story_separator_special_tag 41 effects of changes in currency exchange rates when the currencies of non‑u.s . countries in which we have a manufacturing facility decline ( or increase ) in value relative to the u.s. dollar , this has the effect of reducing ( or increasing ) the u.s. dollar equivalent cost of sales and other expenses with respect to those facilities . in certain countries in which we have manufacturing facilities , and in certain export markets , we sell in currencies other than the u.s. dollar . accordingly , when these currencies increase ( or decline ) in value relative to the u.s. dollar , this has the effect of increasing ( or reducing ) net sales . the result of these effects is to increase ( or decrease ) operating profit and net income . many of the non-u.s. countries in which we have a manufacturing facility have been subject to significant economic and political changes , which have significantly impacted currency exchange rates . we can not predict changes in currency exchange rates in the future or whether those changes will have net positive or negative impacts on our net sales , cost of sales or net income . the impact of these changes in the average exchange rates of other currencies against the u.s. dollar on our net sales was an increase of $ 3.6 million for the year ended december 31 , 2020 , a decrease of $ 6.9 million for the year ended december 31 , 2019 , and an increase of $ 10.5 million for the year ended december 31 , 2018. the impact of these changes in the average exchange rates of other currencies against the u.s. dollar on our cost of sales was decreases of $ 4.9 million and $ 9.1 million for the years ended december 31 , 2020 and 2019 , respectively , and an increase of $ 3.6 million for the year ended december 31 , 2018. as part of our cash management , we also have intercompany loans between our subsidiaries . these loans are deemed to be temporary and , as a result , remeasurement gains and losses on these loans are recorded as currency gains or losses in other income ( expense ) , net , on the consolidated statements of operations . we have in the past and may in the future use various financial instruments to manage certain exposures to risks caused by currency exchange rate changes , as described under “ quantitative and qualitative disclosures about market risks '' . key metrics used by management to measure performance in addition to measures of financial performance presented in our consolidated financial statements in accordance with gaap ( as defined below ) , we use certain other financial measures and operating metrics to analyze the performance of our company . the “ non‑gaap ” financial measures consist of ebitda from continuing operations and adjusted ebitda from continuing operations , which help us evaluate growth trends , establish budgets , assess operational efficiencies and evaluate our overall financial performance . the key operating metrics consist of sales volume , production volume , production capacity and capacity utilization . key financial measures replace_table_token_3_th ( 1 ) see below for more information and a reconciliation of ebitda from continuing operations and adjusted ebitda from continuing operations to net income , the most directly comparable financial measure calculated and presented in accordance with gaap . key operating metrics in addition to measures of financial performance presented in accordance with gaap , we use certain operating metrics to analyze the performance of our company . the key operating metrics consist of sales volume , production volume , production capacity and capacity utilization . these metrics align with management 's assessment of our revenue performance and profit margin , and will help investors understand the factors that drive our profitability . sales volume reflects the total volume of graphite electrodes sold for which revenue has been recognized during the period . for a discussion of our revenue recognition policy , see “ —critical accounting policies—revenue recognition ” in this section . sales volume helps investors understand the factors that drive our net sales . 42 production volume reflects graphite electrodes produced during the period . production capacity reflects expected maximum production volume during the period under normal operating conditions , standard product mix and expected maintenance downtime . capacity utilization reflects production volume as a percentage of production capacity . production volume , production capacity and capacity utilization help us understand the efficiency of our production , evaluate cost of sales and consider how to approach our contract initiative . replace_table_token_4_th ( 1 ) sales volume reflects only graphite electrodes manufactured by graftech . ( 2 ) production volume reflects graphite electrodes we produced during the period . ( 3 ) in the first quarter of 2018 , our st. marys facility began graphitizing a limited amount of electrodes sourced from our monterrey , mexico facility . ( 4 ) production capacity reflects expected maximum production volume during the period under normal operating conditions , standard product mix and expected maintenance outage . actual production may vary . ( 5 ) capacity utilization reflects production volume as a percentage of production capacity . ( 6 ) includes graphite electrode facilities in calais , france ; monterrey , mexico ; pamplona , spain and st. marys , pennsylvania . non-gaap financial measures in addition to providing results that are determined in accordance with generally accepted accounting principles in the united states ( “ gaap ” ) , we have provided certain financial measures that are not in accordance with gaap . ebitda from continuing operations and adjusted ebitda from continuing operations are non‑gaap financial measures . we define ebitda from continuing operations , a non‑gaap financial measure , as net income or loss plus interest expense , minus interest income , plus income taxes , and depreciation and amortization .
| results of operations results of operations for 2020 as compared to 2019 the tables presented in our period-over-period comparisons summarize our consolidated statements of operations and illustrate key financial indicators used to assess the consolidated financial results . throughout our management discussion and analysis ( `` md & a '' ) , insignificant changes may be deemed not meaningful and are generally excluded from the discussion . replace_table_token_7_th net sales . net sales decreased by $ 566.4 million , or 32 % , from $ 1.8 billion in 2019 to $ 1.2 billion in 2020. this decrease was primarily driven by a 21 % decrease in sales volume of graftech manufactured electrodes and decreased pricing for our products both driven by lower customer demand as a result of the covid-19 pandemic and prolonged customer destocking taking place for the majority of 2020. the current market for graphite electrodes continues to be competitive , as our industry lags behind the improving fundamentals in the steel industry . if the strength in the steel industry continues , we would expect market conditions for our products to improve later in 2021 . 45 cost of sales . cost of sales decreased by $ 186.5 million , or 25 % , from $ 750.4 million in 2019 to $ 563.9 million in 2020. this decrease was primarily the result of the lower sales volume and decreased usage of third-party needle coke as we progressed through 2020. selling and administrative expenses . selling and administrative expenses increased by $ 4.2 million , or 7 % , from $ 63.7 million in 2019 to $ 67.9 million in 2020 due to increased legal expenses , partially offset by lower bad debt expense in 2020. other expense ( income ) , net .
| ROO | 9,297 |
as a result , for the full year 2016 , the company expects its hawaii container volume to be moderately higher than 2015. in the china trade , despite freight rates for other ocean carriers reaching historic lows , the company achieved average freight rates that approximated the strong rates achieved in the fourth quarter 2014. and , as expected , the company 's china volume in the fourth quarter 2015 was moderately lower due to one fewer sailing , the absence of the extraordinarily high demand experienced in the fourth quarter 2014 during the u.s. west coast labor disruptions , and market softness . in 2016 , international vessel overcapacity is expected to persist with vessel deliveries outpacing demand growth and putting continued pressure on international ocean carrier freight rates . the company expects its expedited service to continue to realize a sizable premium and maintain high vessel utilization in 2016 , albeit at average freight rates that are significantly lower than 2015 . 20 in guam , economic activity in the fourth quarter 2015 was stable and the company achieved modest volume growth as the expected launch of a new competitor 's bi-weekly u.s. flagged containership service to guam was delayed until early 2016. for the full year 2016 , the company expects to experience competitive volume losses to this new service . in alaska , volume for the fourth quarter 2015 was approximately 14,200 containers . in 2016 , the company expects alaska volume to be modestly lower than the total 67,300 containers carried by horizon and matson in 2015. the company intends to operate a base deployment of three containerships in alaska and expects to complete the installation of exhaust gas scrubbers on those ships in 2016. the company 's integration of the alaska operations is progressing well and is expected to be substantially complete by the end of the third quarter 2016. selling , general and administrative expenses related to the horizon acquisition are not expected to materially exceed the incremental run-rate target of $ 15.0 million per year in 2016. further , the company continues to expect to achieve its earnings and cash flow accretion targets for the horizon acquisition by mid-2017 . the company 's terminal joint venture , ssat , continued to benefit from improved lift volume during the fourth quarter . for the full year 2016 , the company expects ssat to contribute profits modestly lower than the $ 16.5 million contributed in 2015 , primarily due to the absence of factors related to the clearing of international cargo backlog in the first half of 2015 that resulted from the u.s. west coast labor disruptions . for the full year 2016 , the company expects that ocean transportation operating income to be modestly lower than the $ 187.8 million achieved in 2015. in the first quarter 2016 , the company expects operating income to be approximately 25 percent lower than the first quarter 2015 level of $ 43.9 million . logistics : volume declines in logistics ' businesses extended into the fourth quarter 2015 and the company achieved an operating income margin of 2.5 percent . the company expects 2016 operating income to modestly exceed the 2015 level of $ 8.5 million , driven by volume growth and continued expense control . interest expense : the company expects its interest expense in 2016 to be approximately $ 19.0 million . income tax expense : the company expects its effective tax rate for the full year 2016 to be approximately 39.0 percent . capital spending and vessel dry-docking : for the full year 2015 , the company made maintenance capital expenditures of $ 46.9 million , scheduled contract payments for its two vessels under construction of $ 20.9 million , and dry-docking payments of $ 25.7 million . for the full year 2016 , the company expects to make maintenance capital expenditures of approximately $ 65 million , scheduled new vessel construction progress payments of $ 67.2 million , and dry-docking payments of approximately $ 60 million . for the full year 2016 , the company expects depreciation and amortization to total approximately $ 133 million compared to $ 105.8 million in 2015 , inclusive of dry-docking amortization of approximately $ 35 million expected in 2016 and $ 23.1 million in 2015 . 21 consolidated results of operations the following analysis of the financial condition and results of operations of matson should be read in conjunction with the consolidated financial statements in item 8 of part ii below . consolidated results : 2015 compared with 2014 : replace_table_token_9_th consolidated operating revenue for the year ended december 31 , 2015 increased $ 170.7 million , or 10.0 percent , compared to the prior year . this increase was due to an increase of $ 219.6 million for ocean transportation , partially offset by a decrease of $ 48.9 million for logistics . operating costs and expenses for the year ended december 31 , 2015 increased $ 114.4 million , or 7.3 percent , compared to the prior year . the increase was due to an increase of $ 162.9 million for ocean transportation , partially offset by a decrease of $ 48.5 million for logistics . operating income during the year ended december 31 , 2015 increased $ 56.3 million , or 40.2 percent , compared to the prior year . the increase was due to an increase of $ 56.7 million for ocean transportation , partially offset by a decrease of $ 0.4 million for logistics . 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 . story_separator_special_tag 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 must make judgments about the comparability of those 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 goodwill and intangible assets for impairment and determined that the fair value of each reporting unit substantially exceeds book value . no impairment charges were recorded for the years ended december 31 , 2015 , 2014 and 2013 , respectively . deferred dry-docking costs : the company 's u.s. flagged vessels must meet specified seaworthiness standards established by u.s. coast guard rules and classification society requirements . these standards require that the company 's vessels undergo two dry-docking inspections within a five-year period . however , the majority of the company 's u.s. flagged vessels are enrolled in the u.s. coast guard 's underwater survey in lieu of dry-docking ( uwild ) program . the uwild program allows eligible vessels to have their intermediate dry-docking requirement met with far less costly underwater inspection . the company operates four non-u.s. flag vessels ( one owned ; one under a bareboat charter arrangement ; and the remaining two on time charter ) in the pacific islands . the company is responsible for ensuring that the owned and bareboat chartered vessels meet international standards for seaworthiness , which among other requirements generally mandate that the company perform two dry-docking inspections every five years . the dry-dockings of the company 's time chartered vessels are the responsibility of the vessels ' owners . as costs associated with dry-docking inspections provide future economic benefits to the company through continued operation of the vessels , the costs are deferred and amortized until the next regulated scheduled dry-docking , which is usually over a two to five-year period . routine vessel maintenance and repairs that do not improve or extend asset lives are charged to expense as incurred . amortized amounts are charged to operating expenses of the ocean transportation segment in the consolidated statements of income and comprehensive income . 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 . 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 . 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 . a detailed discussion of significant litigation matters is contained in note 14 to the consolidated financial statements included in item 8 of part ii below . uninsured liabilities : the company is uninsured for certain losses including , but not limited to , employee health , workers ' compensation , general liability , real and personal property . where feasible , the company obtains third-party excess insurance coverage to limit its exposure to these claims . when estimating its uninsured 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 the analyses provided by independent third-parties to determine the adequacy of the company 's uninsured liabilities . the company 's uninsured 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 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 . 31 pension and post-retirement estimates : the estimation of the company 's pension and post-retirement benefit expenses and liabilities requires that the company make various assumptions . these assumptions include factors such as discount rates , expected long-term rate of return
| other sources of liquidity : cash flows provided by operating activities are the company 's primary source of liquidity . additional sources of liquidity available to the company at december 31 , 2015 and 2014 are as follows : replace_table_token_19_th ( 1 ) the decrease in cash and cash equivalents was due partially due to the horizon acquisition related payments of $ 495.4 million ( see note 3 to the consolidated financial statements in item 8 of part ii below for additional information related to the horizon acquisition ) , partially offset by net proceeds from debt of $ 75.0 million . ( 2 ) the increase in accounts receivable was partially due to account receivables related to the alaska service that was acquired in 2015 as part of the horizon acquisition , and increased revenue during 2015 . ( 3 ) the decrease in cash on deposit in the ccf deposits relates to progress payments made for the jones act vessels acquired as part of the horizon acquisition ( see note 7 to the consolidated financial statements in item 8 of part ii below for additional information on the ccf ) . the company had working capital of $ ( 19.7 ) million at december 31 , 2015 , compared to $ 296.0 million at december 31 , 2014. as of december 31 , 2015 , the company had $ 389.0 million of availability under the revolving credit facility ( see note 8 to the consolidated financial statements in item 8 of part ii below for additional information about debt ) . 27 contractual obligations , commitments , contingencies and off-balance sheet arrangements contractual obligations : at december 31 , 2015 , the company had the following estimated contractual obligations ( in millions ) : replace_table_token_20_th ( 1 ) capital expenditure obligations includes : ( i ) contractual project payments related to the construction of two new vessels ; ( ii ) installation of scrubbers on two vessels ; and ( iii ) other dry-docking related obligations . ( 2 ) total debt obligations include principal repayments of outstanding debt and capital leases ( see note 8 to the consolidated financial statements in item 8 of part ii below for additional information about debt ) .
| Liquidity | 14,898 |
the company 's derivative financial instruments consist of forward foreign exchange contracts and are f-16 netscout systems , inc. notes to consolidated story_separator_special_tag the following information should be read in conjunction with the audited consolidated financial information and the notes thereto included in this annual report on form 10-k. in addition to historical information , the following discussion and other parts of this annual report contain forward-looking statements that involve risks and uncertainties . you should not place undue reliance on these forward-looking statements . actual events or results may differ materially due to competitive factors and other factors discussed in item 1a . “ risk factors ” and elsewhere in this annual report . these factors may cause our actual results to differ materially from any forward-looking statement . forward-looking statements do not contemplate the proposed acquisition . overview we are an industry leader for advanced network , application and service assurance solutions , providing high-quality performance analytics and operational intelligence solutions that facilitate the evolution toward new computing paradigms , such as virtualization , mobility and cloud . we design , develop , manufacture , market , license , sell and support these products focused on assuring service delivery quality , performance and availability for some of the world 's largest , most demanding and complex internet protocol ( ip ) based service delivery environments . we manufacture and market these products in integrated hardware and software solutions that are used by commercial enterprises , large governmental agencies and telecommunication service providers worldwide . we have a single operating segment and substantially all of our identifiable assets are located in the united states . we have been a technology innovator for three-plus decades since our founding in 1984. our solutions continue to change how organizations manage and optimize the delivery of business applications and services and assure user experience across global ip networks . we have continually enhanced and expanded our product portfolio to meet the needs of organizations by providing solutions to manage dynamic network and application environments and by improving user experience by providing high-value analytics that help validate and assure service availability , quality and reliability . our solutions are intended to help users in various roles to : quickly analyze data , achieve real-time visibility into and intelligence about their organization 's operations , identify service delivery issues early , improve service levels , reduce operational costs , mitigate security risks , and drive better business decisions . our value proposition to our customers is helping them to achieve their objectives regarding return on investments and risk mitigation as they develop their it infrastructure to support their business needs . our proactive intelligence and analytics provides our customer with knowledge regarding potential issues before their users are impacted . our mission is to enable information technology ( it ) and service providers to realize maximum benefit with minimal risk from technology advances , like ip convergence , network function virtualization ( nfv ) , software defined networking ( sdn ) , virtualization , cloud , mobility , bring your own device ( byod ) , web , and the evolving internet by managing the inherent complexity in a cost-effective manner . our adaptive session intelligence ( asi ) technology , which we have developed in support of this mission , has the potential of not only expanding our leadership in the network performance management and application performance management ( npm+apm ) space , but can also serve as a gateway for future intelligence solutions including cyber and business intelligence . 30 many of the largest service providers , cloud based businesses , enterprise and government customers rely on us to assure service delivery and the user experience of their customers . our customers are in just about every vertical market including financials , health care , utilities , internet , manufacturing , retail , as well as the service providers . we are a market leader in helping service provider 's get a return on their 4g/lte investment by providing them with the intelligence they need about aspects of service delivery from handset performance to user preferences to network speed . our operating results are influenced by a number of factors , including , but not limited to , the mix and quantity of products and services sold , pricing , costs of materials used in our products , growth in employee related costs , including commissions , and the expansion of our operations . factors that affect our ability to maximize our operating results include , but are not limited to , our ability to introduce and enhance existing products , the marketplace acceptance of those new or enhanced products , continued expansion into international markets , development of strategic partnerships , competition , successful acquisition integration efforts , our ability to achieve expense reductions and make structural improvements and current economic conditions . during fiscal year 2015 , we continued to invest in development programs aimed at enhancing our range of offerings , including delivering new features and functionality for our ngeniusonetm platform that addresses the evolving requirements of our enterprise , service provider and government customers . the ngeniusone platform is powered by adaptive session intelligence ( asi ) 2.0 , netscout 's next generation deep packet inspection ( dpi ) technology that exploits the inherent richness of packet-flow data to provide real-time , contextual analysis of service , network , and application performance . the patented asi technology is a critical differentiating technology that enables the creation of statistical metadata , session transaction records and adaptive session traces enabling real-time , scalable monitoring of all users , all applications and all services consistently across the network . netscout 's solutions are used by customers to better understand and manage network and application performance , alert themselves to problems that impacting end users , validate services and network policy , plan and optimize network capacity , generate timely reports and conduct deep forensic and historical analysis . story_separator_special_tag 33 for multi-element arrangements comprised of a combination of hardware and software elements , the total arrangement consideration is bifurcated between the hardware and hardware related deliverables and the software and software related deliverables based on the relative selling prices of all deliverables as a group . then , arrangement consideration for the hardware and hardware-related services is recognized upon delivery or as the related services are provided outlined above and revenue for the software and software-related services is allocated following the residual method and recognized based upon delivery or as the related services are provided . our product is distributed through our direct sales force and indirect distribution channels through alliances with resellers . revenue arrangements with resellers are recognized on a sell-in basis ; that is , when we deliver the product to the reseller . we record consideration given to a reseller as a reduction of revenue to the extent we have recorded revenue from the reseller . we do not offer contractual rights of return , stock balancing , or price protection to our resellers , and actual product returns from them have been insignificant to date . in addition , we have a history of successfully collecting receivables from the resellers . as a result , we do not maintain reserves for reseller product returns . valuation of goodwill , intangible assets and other acquisition accounting items the carrying value of goodwill was $ 197.4 million and $ 203.4 million at march 31 , 2015 and 2014 , respectively . we have two reporting units : ( 1 ) unified service delivery and ( 2 ) test optimization . goodwill is tested for impairment at a reporting unit level at least annually , or on an interim basis if an event occurs or circumstances change that would , more likely than not , reduce the fair value of the reporting segment below its carrying value . we performed the qualitative step 0 assessment on our unified service delivery reporting unit . in performing the qualitative step 0 assessment , we considered certain events and circumstances specific to the entity at the reporting unit level , such as macroeconomic conditions , industry and market considerations , overall financial performance and cost factors when evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount . no indicators of impairment were noted at january 31 , 2015 . we performed the quantitative step 1 assessment on our test optimization reporting unit . if the reporting unit 's carrying value exceeds its fair value , we record an impairment loss equal to the difference between the carrying value of goodwill and its implied fair value . we estimate the fair values of our reporting units using discounted cash flow valuation models . those models require estimates of future revenues , profits , capital expenditures , working capital , terminal values based on revenue multiples , and discount rates for each reporting unit . we estimate these amounts by evaluating historical trends , current budgets , operating plans and industry data . the estimated fair value of the test optimization reporting unit was approximately 120 percent greater than its carrying value as of january 31 , 2015. additionally , the market capitalization of netscout as a whole significantly exceeded its carrying value . the carrying value of intangible assets was $ 50.2 million and $ 58.5 million at march 31 , 2015 and 2014 , respectively . intangible assets acquired in a business combination are recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition . we amortize intangible assets over their estimated useful lives , except for the acquired tradename which resulted from the network general acquisition , which has an indefinite life and thus , is not amortized . the carrying value of the indefinite lived tradename is evaluated annually or more frequently if events or changes in circumstances indicate that the asset might be impaired . indefinite-lived intangible assets are tested for impairment at a reporting unit level at least annually , or on an interim basis if an event occurs or circumstances change that would , more likely than not , reduce the fair value of the reporting segment below its carrying value . to test impairment , we first assess qualitative factors to determine whether the existence of events and circumstances indicate that it is more likely than not that the indefinite-lived intangible asset is impaired . if based on our qualitative assessment we conclude that it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount , quantitative impairment testing is required . however , if we conclude otherwise , quantitative impairment testing is not required . we completed our annual impairment test of the indefinite lived intangible at january 31 , 2015 using the qualitative step 0 assessment described above , which largely mirrors the unified service delivery analysis , as the tradenames apply to a majority of the products and branding within that reporting unit . no impairment indicators were observed as of january 31 , 2015 . 34 we have acquired two companies during the three year period ended march 31 , 2015 . the acquisition method of accounting requires that we estimate the fair value of the assets and liabilities acquired as part of these transactions . in order to estimate the fair value of acquired intangible assets we use a relief from royalty model which requires management to estimate : future revenues expected to be generated by the acquired intangible assets , a royalty rate which a market participant would pay related to the projected revenue stream , a present value factor which approximates a risk adjusted rate of return for a market participant purchasing the assets , and a technology migration curve representing a period of time over which the technology assets or some portion thereof are still being used .
| results overview we generated continued growth during the fiscal year ended march 31 , 2015 , with product revenue growth of 16 % and overall revenue growth of 14 % compared to the prior fiscal year . our diluted net income per share for the fiscal year ended march 31 , 2015 was $ 1.47 per share , representing a $ 0.30 , or 26 % , increase over the same period in the prior year . our business has maintained strong gross profit margins . our gross margin for the fiscal year ended march 31 , 2015 remained flat at 79 % compared to the same period in the prior year . the combination of continued revenue growth , strong gross profit margins and a scalable infrastructure supported by prudent investment across key areas of our business , including research and development initiatives , and sales and marketing programs , has enabled us produce strong operating profit margins . despite higher one-time expenses associated with the aforementioned planned acquisition of danaher 's communications business , our operating profit margin for the fiscal year ended march 31 , 2015 was 21 % , as compared to 20 % for the same period in the prior year . we continue to maintain strong liquidity . at march 31 , 2015 , we had cash , cash equivalents and marketable securities of $ 264.9 million . this represents an increase of $ 46.1 million over the previous fiscal year ended march 31 , 2014 . use of non-gaap financial measures we supplement the generally accepted accounting principles ( gaap ) financial measures we report in quarterly and annual earnings announcements , investor presentations and other investor communications by reporting the following non-gaap measures : non-gaap revenue , non-gaap net income and non-gaap net income per diluted share . non-gaap revenue eliminates the gaap effects of acquisitions by adding back revenue related to deferred revenue revaluation .
| ROO | 12,998 |
unless otherwise noted , “ we , ” “ our ” or `` us ” in this report refers to rfmd and its subsidiaries prior to the closing of the business combination and to qorvo and its subsidiaries after the closing of the business combination . qorvo® is a leading provider of technologies and solutions that address the growing demand for always-on , high reliability , broadband data connectivity . we combine one of the industry 's broadest portfolios of radio frequency ( “ rf ” ) solutions and semiconductor technologies with deep systems-level expertise and scale manufacturing capabilities to enable a diverse set of cutting-edge customer products , including smartphones , tablets , wearables , 34 broadband customer premise equipment , home automation , in-vehicle infotainment , data center and military radar and communications . our products are helping to drive the ongoing , rapid transformation of how people around the world interact with their communities , access and use data , and transact commerce . we have more than 7,300 global employees dedicated to delivering solutions for everything that connects the world . we have world-class iso-certified manufacturing facilities , and our richardson , texas facility is a u.s. department of defense ( “ dod ” ) -accredited ‘ trusted source ' ( category 1a ) for gallium arsenide ( “ gaas ” ) , gallium nitride ( “ gan ” ) and bulk acoustic wave ( “ baw ” ) technologies , products and services . our design and manufacturing expertise encompasses many semiconductor process technologies , which we source both internally and through external suppliers . we operate worldwide with design , sales and manufacturing facilities located throughout asia , europe and north america . our primary manufacturing facilities are located in north carolina , oregon , texas and florida , and our primary assembly and test facilities are located in china , costa rica and texas . business segments we design , develop , manufacture and market our products to leading u.s. and international original equipment manufacturers ( “ oems ” ) and original design manufacturers ( “ odms ” ) in the following operating segments : mobile products ( mp ) - mp is a leading global supplier of rf solutions that perform various functions in the increasingly complex cellular radio front end section of smartphones and other cellular devices . these rf solutions are required in fourth generation ( “ 4g ” ) data-centric devices operating under long-term evolution ( “ lte ” ) 4g networks , as well as third generation ( “ 3g ” ) and second generation ( “ 2g ” ) mobile devices . our solutions include complete rf front end modules that combine high-performance filters , power amplifiers ( “ pas ” ) , low noise amplifiers ( `` lnas `` ) and switches , pa modules , transmit modules , antenna control solutions , antenna switch modules , diversity receive modules and envelope tracking ( `` et `` ) power management devices . mp supplies its broad portfolio of rf solutions into a variety of mobile devices , including smartphones , notebook computers , wearables , tablets , and cellular-based applications for the internet of things ( “ iot ” ) . infrastructure and defense products ( idp ) - idp is a leading global supplier of rf solutions that support diverse global applications , including ubiquitous high-speed network connectivity to the cloud , data center communications , rapid internet connectivity throughout the home and workplace , and upgraded military capabilities across the globe . qorvo 's rf solutions enhance performance and reduce complexity in cellular base stations , optical long haul , data center and metro networks , wifi networks , cable networks , and emerging fifth generation ( “ 5g ” ) wireless networks . our idp products include high power gaas and gan pas , lnas , switches , rf filter solutions , cmos system-on-a-chip ( “ soc ” ) solutions and various multichip and hybrid assemblies . our market-leading rf solutions for defense and aerospace upgrade communications and radar systems for air , land and sea . our rf solutions for the iot enable the connected car and an array of industrial applications , and we serve the home automation market with soc solutions based on zigbee and bluetooth smart technologies . as of april 2 , 2016 , our reportable segments are mp and idp . these business segments are based on the organizational structure and information reviewed by our chief executive officer , who is our chief operating decision maker ( or codm ) , and are managed separately based on the end markets and applications they support . the codm allocates resources and evaluates the performance of each operating segment primarily based on operating income and operating income as a percentage of revenue . in connection with the business combination , in the fourth quarter of fiscal 2015 , we renamed our cellular products group operating segment as mp and our multi-market products group operating segment as idp . additionally , the codm elected to discontinue reporting compound semiconductor group as an operating segment ( see note 15 of the notes to the consolidated financial statements in part ii , item 8 of this report for additional information regarding our operating segments ) . fiscal 2016 management summary our revenue increased 52.6 % in fiscal 2016 to $ 2,610.7 million as compared to $ 1,711.0 million in fiscal 2015 , primarily because fiscal 2015 included only three months of triquint revenue . 35 our gross margin for fiscal 2016 was 40.2 % compared to 40.3 % for fiscal 2015 . this slight decrease was primarily due to cash and non-cash expenses related to the business combination ( including intangible amortization and stock-based compensation ) and average selling price erosion . story_separator_special_tag the decrease was comprised of $ 135.7 million for domestic deferred tax assets for which realization is now more likely than not with the increase in domestic deferred tax liabilities related to domestic amortizable intangible assets arising in connection with the business combination and other changes in the net deferred tax assets for foreign subsidiaries during the fiscal year , offset by an increase of $ 6.2 million related to deferred tax assets acquired in the business combination which are not more likely than not of being realized . at the end of fiscal 2015 , a $ 0.2 million valuation allowance remained against foreign net deferred tax assets and a $ 13.6 million valuation 40 allowance remained against domestic deferred tax assets as it is more likely than not that the related deferred tax assets will not be realized , effectively increasing the domestic net deferred tax liabilities . the valuation allowance against net deferred tax assets increased in fiscal 2014 by $ 20.9 million from the $ 164.2 million balance as of the end of fiscal 2013. the decrease was comprised of the reversal of the $ 12.0 million u.k. valuation allowance established during fiscal 2013 and $ 15.1 million related to deferred tax assets used against deferred intercompany profits , offset by increases related to a $ 3.4 million adjustment in the net operating losses acquired in the acquisition of amalfi semiconductor , inc. ( `` amalfi `` ) and $ 2.8 million for other changes in net deferred tax assets for domestic and other foreign subsidiaries during the fiscal year . the u.k. valuation allowance was reversed in connection with the sale of the u.k. manufacturing facility in fiscal 2014 and the write-off of the remaining u.k. deferred tax assets . as of april 2 , 2016 , we had federal loss carryovers of approximately $ 220.5 million that expire in fiscal years 2017 to 2035 if unused and state losses of approximately $ 173.5 million that expire in fiscal years 2017 to 2035 if unused . federal research credits of $ 94.3 million , federal foreign tax credits of $ 4.9 million , and state credits of $ 52.4 million may expire in fiscal years 2018 to 2036 , 2017 to 2026 , and 2017 to 2031 , respectively . federal alternative minimum tax credits of $ 3.2 million carry forward indefinitely . included in the amounts above are certain net operating losses and other tax attribute assets acquired in conjunction with the acquisitions of filtronic compound semiconductors , limited ; sirenza microdevices , inc. ; silicon wave , inc. ; amalfi ; and the business combination in prior years . the utilization of these acquired domestic tax assets is subject to certain annual limitations as required under internal revenue code section 382 and similar state income tax provisions . our gross unrecognized tax benefits totaled $ 69.1 million as of april 2 , 2016 , $ 59.4 million as of march 28 , 2015 , and $ 39.4 million as of march 29 , 2014. of these amounts , $ 64.2 million ( net of federal benefit of state taxes ) , $ 55.0 million ( net of federal benefit of state taxes ) , and $ 30.9 million ( net of federal benefit of state taxes ) as of april 2 , 2016 , march 28 , 2015 , and march 29 , 2014 , respectively , represent the amounts of unrecognized tax benefits that , if recognized , would impact the effective tax rate in each of the fiscal years . it is our policy to recognize interest and penalties related to uncertain tax positions as a component of income tax expense . during fiscal years 2016 , 2015 and 2014 , we recognized $ 1.6 million , $ 1.2 million and $ 0.9 million , respectively , of interest and penalties related to uncertain tax positions . accrued interest and penalties related to unrecognized tax benefits totaled $ 5.0 million , $ 3.4 million , and $ 2.3 million as of april 2 , 2016 , march 28 , 2015 , and march 29 , 2014 , respectively . within the next 12 months , we believe it is reasonably possible that only a minimal amount of gross unrecognized tax benefits will be reduced as a result of reductions for tax positions taken in prior years where the only uncertainty was related to the timing of the tax deduction . stock-based compensation under financial accounting standards board ( `` fasb `` ) asc 718 , “ compensation – stock compensation , ” stock-based compensation cost is measured at the grant date , based on the estimated fair value of the award using an option pricing model for stock options ( black-scholes ) and market price for restricted stock units , and is recognized as expense over the employee 's requisite service period . as of april 2 , 2016 , total remaining unearned compensation cost related to nonvested restricted stock units and options was $ 78.9 million , which will be amortized over the weighted-average remaining service period of approximately 1.2 years . story_separator_special_tag style= `` font-family : inherit ; font-size:10pt ; `` > , compared to $ 112.9 million in fiscal 2015 . this increase in net cash used in financing activities was primarily due to the repurchase of 24.3 million shares of our common stock for approximately $ 1,300.0 million , which was partially offset by the net proceeds from the issuance of our notes of approximately $ 987.8 million . during fiscal 2015 , the remaining principal balance of the 2014 notes of $ 87.5 million was paid . our future capital requirements may differ materially from those currently anticipated and will depend on many factors , including market acceptance of and demand for our products , acquisition opportunities , technological advances and our relationships with suppliers and customers . based on current and projected levels of cash
| liquidity and capital resources cash generated by operations is our primary source of liquidity . as of april 2 , 2016 , we had working capital of approximately $ 1,135.4 million , including $ 425.9 million in cash and cash equivalents , compared to working capital at march 28 , 2015 , of $ 1,174.8 million , including $ 299.8 million in cash and cash equivalents . our total cash , cash equivalents and short-term investments were $ 612.7 million as of april 2 , 2016 . this balance includes approximately $ 205.2 million held by our foreign subsidiaries . if all of these funds held by our foreign subsidiaries are needed for our operations in the u.s. , we would be required to accrue and pay u.s. taxes to repatriate these funds . we currently expect to reinvest these funds outside of the u.s. permanently and do not expect to repatriate them to fund our u.s. operations . 41 stock repurchase on november 5 , 2015 , we announced that our board of directors authorized a new share repurchase program to repurchase up to $ 1.0 billion of our outstanding common stock through november 4 , 2016. on february 16 , 2016 , we entered into variable maturity accelerated share repurchase ( asr ) agreements ( a$ 250.0 million collared agreement and a $ 250.0 million uncollared agreement ) with bank of america , n.a .
| Liquidity | 3,173 |
our customers include world-class original equipment manufacturers ( “ oems ” ) , original design manufacturers ( “ odms ” ) , corporate enterprises ( “ enterprises ” ) , silicon vendors ( “ svs ” ) and peripheral vendors . a significant portion of our business historically has also been focused on reselling software from microsoft , from which a majority of our revenue currently continues to be derived . beginning in early 2014 , we initiated development efforts focused on new proprietary software products addressing the industrial internet of things ( “ iiot ” ) market , by interconnecting of uniquely identifiable devices , extracting data from those devices and applying advanced analytics and machine learning to the data in order to derive meaningful and actionable insights . while iiot is a relatively new market , we believe the work we have engaged in since our inception—namely adding intelligence and connectivity to discrete standalone devices and systems—embodies much of what is central to the core functionality of iiot . these software development efforts have driven a new business initiative for bsquare , which we refer to as datav . our datav solution includes software products , applications and services that are designed to turn raw iiot device data into meaningful and actionable data for our customers . we launched datav late in the first quarter of 2016 and announced our first three major customer bookings later that year . these bookings comprised software licensing , software maintenance and related systems integration services and are , we believe , indicative of the potential customer demand for datav . during 2017 we began selling data analytics services and datav application pilots to major industrial customers primarily in the transportation , oil and gas and manufacturing vertical markets and signed four pilots in the first six months of 2017 and another fifteen pilots in the second half of 2017 , the majority of which are still ongoing . we believe that datav presents high growth opportunities in a large , expanding addressable market , at substantially higher gross margins as compared to our traditional business . developing , selling and implementing datav has become our primary focus , as approximately 65 % of our non-administrative employees are now working solely on datav , representing a transition away from dependence on resale software and professional engineering services toward increased reliance on our own proprietary software and related systems integration services . we intend to continue to run our legacy software resale business to maximize cash flow for the foreseeable future . our legacy professional engineering services business is now managed as a part of our overall services business , which increasingly serves datav customers and prospects . critical accounting judgments revenue recognition we recognize revenue when control of the promised goods or services is transferred to our customers , in an amount that reflects the consideration that we expect to receive in exchange for those goods or services . we generate all of our revenue from contracts with customers . third-party software we sell third-party software licenses based upon a customer purchase order , shipping a certificate of authenticity ( “ coa ” ) to satisfy this single performance obligation . these shipments are also subject to limited return rights ; historically , returns have averaged less than one-quarter of one percent . we recognize revenue from third-party products at the time of shipment when the customer accepts control of the coa . 22 proprietary software we sell our proprietary software products to customers under a contract or by purchase order . our datav software contracts generally include professional services , a perpetual or term license and support and maintenance . in contracts with multiple performance obligations , we identify each performance obligation and evaluate whether the performance obligations are distinct within the context of the contract at contract inception . performance obligations that are not distinct at contract inception are combined . contracts that include software customization may result in the combination of the customization services with the software license as one distinct performance obligation . the transaction price is generally in the form of a fixed fee at contract inception . certain datav contracts also include variable consideration in the form of royalties earned when customers meet contractual volume thresholds . we allocate the transaction price to each distinct performance obligation based on the estimated standalone selling price for each performance obligation . we then look to how control transfers to the customer in order to determine the timing of revenue recognition . in contracts that include customer acceptance , we recognize revenue when we have delivered the software and received customer acceptance . we recognize revenue from support and maintenance performance obligations over the service delivery period . we recognize revenue from royalties in the period of usage . our non-datav software products generally do not include customization or modification services and are sold in the form of term licenses . these software licenses represent only one distinct performance obligation . revenue is recognized when the software is delivered to the customer . there are two items involving revenue recognition on datav software contracts that require us to make more difficult and subjective judgments : the determination of which performance obligations are distinct within the context of the overall contract and the estimated standalone selling price of each performance obligation . in instances where our datav contracts include significant customization or modification services , the customization and modification services are generally combined with the software license and recorded as one distinct performance obligation . we estimate the standalone selling price of each performance obligation based on either a cost-plus-margin approach or an adjusted market assessment approach . story_separator_special_tag additional revenue details were as follows : replace_table_token_5_th 25 revenue total revenue consists of sales of third-party software and revenue realized from sales of our own proprietary software products , which include software license sales and support and maintenance revenue , and professional engineering services that support proprietary datav software customers and legacy service customers . third-party software revenue decreased in 2017 compared to 2016 , primarily due to lower sales of microsoft windows embedded operating systems , a portion of which is attributable to higher levels of buying activity late in 2016 as customers anticipated higher pricing following the cessation of microsoft 's volume purchase discount programs on december 31 , 2016. sales of microsoft operating systems represented approximately 80 % and 81 % of our total revenue and 54 % and 74 % of our total gross profit for 2017 and 2016 , respectively . proprietary software revenue increased in 2017 compared to 2016 , primarily due to approximately $ 3.0 million in datav software revenue recognized in 2017 , the vast majority of which was recognized in the first quarter of 2017 when we delivered and received customer acceptance on a datav software license . we expect that revenue from both datav and our other proprietary software will continue to fluctuate in timing and amount in future periods . we anticipate that our datav revenue will grow over time , but that other proprietary software product sales will decline over time as they approach the end of their respective life cycles . professional engineering service revenue decreased in 2017 compared to 2016 , due to declines in service revenue generated in north america , asia and europe with the completion in 2016 and early 2017 of several existing customer projects and a shift in our sales generation priorities and staffing to datav . our largest professional engineering customers in 2017 were coca-cola and google . we expect that professional engineering service revenue will grow over time as we continue our strategic focus on datav ; we will continue to serve our legacy services customers as long as our contracts are profitable and such revenue will continue to vary in timing and amounts . as we started to conclude those existing customer projects in 2016 and began to align our organizational structure with our increasing focus on datav , our board of directors approved a restructuring plan in july 2016 that included a workforce reduction in our professional engineering service group . we incurred pre-tax restructuring charges of approximately $ 1.0 million in 2016 , the vast majority of which was included in cost of service revenue . the staff reductions from this restructuring were completed in the fourth quarter of 2016. see also professional engineering service gross profit and gross margin discussion below . gross profit and gross margin cost of software revenue consists primarily of the cost of third-party software products payable to third-party vendors and support costs associated with our proprietary software products . cost of service revenue consists primarily of salaries and benefits , contractor costs and re-billable expenses , related facilities and depreciation costs , and amortization of certain intangible assets related to acquisitions . gross profit and gross margin were as follows : year ended december 31 , ( in thousands , except percentages ) 2017 2016 $ change % change ( 1 ) third-party software gross profit $ 10,594 $ 12,378 $ ( 1,784 ) ( 14 ) % third-party software gross margin 16 % 15 % - 1 % proprietary software gross profit $ 4,483 $ 1,610 $ 2,873 178 % proprietary software gross margin 96 % 83 % - 13 % professional engineering service gross profit $ 3,045 $ 1,832 $ 1,213 66 % professional engineering service gross margin 29 % 12 % - 17 % total gross profit $ 18,122 $ 15,820 $ 2,302 15 % total gross margin 22 % 16 % - 6 % ( 1 ) for gross margin , amounts represent percentage point change . gross profit and gross margin third-party software gross profit declined in 2017 compared to 2016 , with lower levels of third-party software sales , but gross margins increased . we experienced increased competition in a number of larger third-party software accounts during 2017 as price protections under microsoft volume pricing agreements came to an end in 2016 ; revenues lost in these accounts were more heavily weighted to lower margin customers , enabling slightly improved gross margins in 2017. gross profit on third-party software was positively impacted by rebate credits we receive from microsoft for the sale of windows embedded operating systems earned through the achievement of defined objectives . under the microsoft rebate program , we recorded $ 499,000 and $ 345,000 of rebates in 2017 and 2016 , respectively , which were accounted for as reductions in cost of revenue . additionally , we recorded $ 0.7 26 million and $ 1.1 million in rebates in 2017 and 2016 , respectively , which were accounted for as reductions in marketing expenses . there was a balance of approximately $ 411,000 in outstanding rebates for which we qualified as of december 31 , 2017. if qualified program expenditures are made , these will be accounted for as reductions in marketing expense in the period in which such expenditures a re made . proprietary software gross profit and gross margin increased in 2017 compared to 2016 , due primarily to the recognition of approximately $ 3.0 million in datav software revenue recognized in 2017 , the vast majority of which was recognized in the first quarter of 2017 when we delivered and received customer acceptance on a datav software license sold to paccar . we anticipate that software gross profit and gross margin will continue to fluctuate in future periods due to the timing of datav software revenue recognition . professional engineering service gross profit and gross margin increased in 2017 compared to 2016 , resulting from higher utilization
| liquidity and capital resources as of december 31 , 2017 , we had $ 24.8 million of cash , cash equivalents and investments , compared to $ 33.2 million at december 31 , 2016 , reflecting a net use of approximately $ 8.4 million in cash , cash equivalents and investments . we generally invest our excess cash in high quality marketable investments . these investments generally include corporate notes and bonds , commercial paper and money market funds , although specific holdings can vary from period to period depending upon our cash requirements . our investments held at december 31 , 2017 had minimal default risk and short-term maturities . 27 operating activities used cash of approximately $ 8.2 million in 2017 , which included a net loss of $ 9.1 million , non-cash adjustments of $ 2.4 million , and a working capital usage of approximately $ 1.5 mil lion . operating activities provided cash of approximately $ 2.6 million in 2016 , which included net loss of approximately $ 1.1 million , non-cash adjustments of approximately $ 1.8
| Liquidity | 4,968 |
these statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed or implied by such forward-looking statements . for a detailed discussion of these risks and uncertainties , see the “ risk factors ” section in item 1a of part i of this form 10-k. we caution the reader not to place undue reliance on these forward-looking statements , which reflect management 's analysis only as of the date of this form 10-k. we undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this form 10-k. overview we are a biopharmaceutical company with a focus on the development and commercialization of innovative products to enhance cancer care . we in-license the global development and commercialization rights to three drug candidates—pb272 ( neratinib ( oral ) ) , pb272 ( neratinib ( intravenous ) ) and pb357 . neratinib is a potent irreversible tyrosine kinase inhibitor , or tki , that blocks signal transduction through the epidermal growth factor receptors , her1 , her2 and her4 . currently , we are primarily focused on the development of the oral version of neratinib , and our most advanced drug candidates are directed at the treatment of her2-positive breast cancer . we believe neratinib has clinical application in the treatment of several other cancers as well , including non-small cell lung cancer and other tumor types that over-express or have a mutation in her2 . our efforts and resources to date have been focused primarily on acquiring and developing our pharmaceutical technologies , raising capital and recruiting personnel . we have had no product sales to date and we will have no product sales until we receive approval from the united states food and drug administration , or fda , or equivalent foreign regulatory bodies to begin selling our pharmaceutical candidates . developing pharmaceutical products , however , is a lengthy and very expensive process . assuming we do not encounter any unforeseen safety issues during the course of developing our product candidates , we do not expect to receive approval of a product candidate until approximately 2017. a large portion of our expenses to date have been related to the clinical development of our lead product candidate , pb272 ( neratinib ( oral ) ) , and the transition of the neratinib program from pfizer , inc. , or the licensor . during this transition period , as we built up our infrastructure and assumed responsibility for the neratinib program , a duplication of effort took place that resulted in higher than normal operating expenses . the license agreement for pb272 established a limit for our expenses related to the pfizer-initiated clinical trials for pb272 that were ongoing at the time of the agreement . this capped our “ out-of-pocket ” costs incurred in conducting these existing trials beginning january 1 , 2012. we reached the cost cap during the fourth quarter of 2012 , which resulted in a reduction of our research and development , or r & d , expenses for the fourth quarter of 2012 and for the year ended december 31 , 2013. in july 2014 the company signed an amendment to the license agreement with the licensor whereby the company would be responsible for the expenses incurred or accrued in conducting the ongoing legacy clinical trials after december 31 , 2013. additionally , our expenses to date have been related to hiring staff , commencing company-sponsored clinical trials and the build out of our corporate infrastructure . as we proceed with clinical development of pb272 ( neratinib ( oral ) ) , and as we further develop pb272 ( neratinib ( intravenous ) ) , and pb357 , our second and third product candidates , respectively , we expect our r & d expenses and expenses related to our third-party contractors will continue to increase . we recently completed a phase iii clinical trial of neratinib for the extended adjuvant treatment of women with early stage her2-positive breast cancer , which we refer to as the extenet trial . based on the results from the extenet trial , we expect to file for regulatory approval of neratinib in the extended adjuvant setting in the united states in the first quarter of 2016 and in the european union in the first half of 2016. we are continuing to evaluate potential commercialization options for neratinib in this indication , including developing a direct sales force , contracting with third parties to provide sales and marketing capabilities , some combination of these two options or other strategic options . additionally , we believe we currently have sufficient inventory on hand to support at least the first year of commercialization in the extended adjuvant setting and will continue to monitor and evaluate our third party manufacturers ' ability to provide commercial supply of the product . we expect that our expenses will continue to increase as we continue to evaluate our options with regard to commercialization efforts . to the extent we are successful in acquiring additional product candidates for our development pipeline , our need to finance r & d will increase . accordingly , our success depends not only on the safety and efficacy of our product candidates , but also on our ability to finance product development . our major sources of working capital have been proceeds from public offerings of our common stock and sales of our common stock in private placements . 43 summary of expenses general and administrative , or g & a , expenses consist primarily of salaries and related personnel costs , including stock-based compensation expense , professional fees , business insurance , rent , general legal activities , and other corporate expenses . r & d expenses include costs associated with services provided by consultants who conduct clinical services on our behalf , contract organizations for manufacturing of clinical materials and clinical trials . story_separator_special_tag 46 reconciliation of gaap net loss to non-gaap adjusted net loss and gaap net loss per share to non-gaap adjusted ne t loss per share ( in thousands except share and per share data ) years ended december 31 , 2015 2014 2013 gaap net loss $ ( 239,284 ) $ ( 141,965 ) $ ( 54,659 ) adjustments : stock-based compensation - general and administrative 17,166 9,154 2,331 ( 1 ) research and development 77,768 29,997 5,188 ( 2 ) non-gaap adjusted net loss $ ( 144,350 ) $ ( 102,814 ) $ ( 47,140 ) gaap net loss per share - basic and diluted $ ( 7.45 ) $ ( 4.73 ) $ ( 1.90 ) adjustment to net loss ( as detailed above ) 2.96 1.30 0.26 non-gaap adjusted net loss per share $ ( 4.49 ) $ ( 3.43 ) $ ( 1.64 ) ( 3 ) ( 1 ) to reflect a non-cash charge to operating expense for general and administrative stock-based compensation . ( 2 ) to reflect a non-cash charge to operating expense for research and development stock-based compensation . ( 3 ) non-gaap adjusted net loss per share was calculated based on 32,126,094 , 30,010,979 , and 28,696,573 weighted average common shares outstanding for the years ended december 31 , 2015 , 2014 , and 2013 , respectively . liquidity and capital resources operating activities we reported net losses of approximately $ 239.3 million , $ 142.0 million , and $ 54.7 million for the years ended december 31 , 2015 , 2014 and 2013 , respectively . we also reported negative cash flows from operating activities of approximately $ 154.5 million , $ 77.2 million and $ 55.0 million for the years ended december 31 , 2015 , 2014 and 2013 , respectively . net cash used in operating activities for the year ended december 31 , 2015 , includes a net loss of $ 239.3 million adjusted for non-cash items of approximately $ 94.9 million for stock option expense , build-out allowance of $ 0.2 million and $ 0.8 million for depreciation and amortization of property and equipment . further changes in cash flows from operations include a decrease in accounts payable and accrued expenses of approximately $ 12.0 million , a decrease of $ 1.8 million in licensor receivables , and an increase in prepaid expenses and other assets of approximately $ 1.0 million . the decrease in accrued expenses reflects a payment of approximately $ 16.4 million for employee payroll taxes withheld related to the exercise of employee stock options during december 2014 , paid in january 2015. the increase in prepaid expenses and other assets reflects up-front payments made to various cros for company-initiated clinical trials , for various insurance policies and the comparator inventory . net cash used in operating activities for the year ended december 31 , 2014 , includes a net loss of $ 142.0 million adjusted for non-cash items of approximately $ 39.2 million for stock option expense , build-out allowance of $ 0.2 million and $ 0.6 million for depreciation and amortization of property and equipment . further changes in cash flows from operations include an increase in accounts payable and accrued expenses of approximately $ 25.2 million , a decrease of $ 8.1 million in licensor receivables , and an increase in prepaid expenses and other assets of approximately $ 8.6 million . the increase in both accounts payable and accrued expenses reflect an increase in clinical trial cost and an accrual of approximately $ 16.4 million for employee payroll taxes withheld related to the exercise of employee stock options during december 2014. the proceeds from the exercise of the stock options were primarily received in december 2014 while the payments for taxes withheld were made in january 2015. the increase in prepaid expenses and other assets reflects up-front payments made to various cros for company-initiated clinical trials , for various insurance policies and the comparator inventory . net cash used in operating activities for the year ended december 31 , 2013 , includes a net loss of $ 54.7 million adjusted for non-cash items of approximately $ 7.5 million for stock option expense and $ 0.4 million for depreciation and amortization of property and equipment . further changes in cash flow from operations include a decrease in accounts payable and accrued expenses of approximately $ 2.4 million , a decrease of $ 0.8 million in licensor receivables , and an increase in prepaid expenses and other assets of approximately $ 6.7 million . at december 31 , 2012 , we had a large receivable from the licensor covering costs incurred in the fourth quarter of 2012. the decrease in both accounts payable and accrued expenses reflect the payment of this receivable and subsequent 47 payments for ongoing costs associated with the licensor-initiated clinical trials . the increase in prepaid expenses and other assets reflects up-front payments made to various cros for company-initiated clinical trials and for various insurance policies . investing activities net cash used in investing activities was approximately $ 85.9 million for the year ended december 31 , 2015. a significant portion of this is comprised of cash used for the purchase of available-for-sale securities of approximately $ 214.8 million offset by the sale and maturity of available-for-sale securities of $ 133.2 million . additionally , approximately $ 3.1 million of net cash used in investing activities was transferred to restricted cash to secure a standby letter of credit for the additional office leases and approximately $ 1.2 million was used for leasehold improvements and the purchase of property and equipment to support corporate growth . net cash used in investing activities was approximately $ 63.3 million for the year ended december 31 , 2014. a significant portion of this is comprised of cash used for the purchase of available-for-sale securities of approximately $ 132.3 million offset by the sale and maturity of available-for-sale securities of $ 70.3 million .
| results of operations the following summarizes our results of operations for the years ended december 31 , 2015 , 2014 and 2013. general and administration expenses : replace_table_token_3_th year ended december 31 , 2015 compared to year ended december 31 , 2014 total g & a expenses increased approximately 64.3 % to $ 31.8 million for the year ended december 31 , 2015 from $ 19.4 million for the year ended december 31 , 2014. approximately $ 8.0 million of this increase , or 64.4 % of the total increase , is related to an increase in stock-based compensation expense , attributable to our increased headcount and additional incentive awards to existing employees . the remaining approximately $ 4.4 million increase in g & a expense for the year ended december 31 , 2015 compared to the same period in 2014 was primarily attributable to : ● an approximately $ 2.2 million increase in professional fees and expenses , which consist primarily of legal , auditing , consulting and investor relations fees . included in this expense is approximately $ 0.3 million in consulting expense for our pre-commercialization efforts . we expect professional fees and expenses to increase as we continue to defend against the pending class action and defamation lawsuits filed against us and as we continue to implement compliance measures related to the sarbanes-oxley act of 2002 , as amended , or sarbanes-oxley . ● an approximately $ 0.9 million increase in payroll and related costs as administrative headcount increased from 15 to 18 to support corporate growth and to prepare for the filing of a new drug application , or nda , with the fda and a marketing authorization application with the ema , which we anticipate will occur in the first quarter and first half of 2016 , respectively . ● an approximately $ 0.6 million increase in facility and equipment costs .
| ROO | 12,957 |
during the third quarter of 2011 , upm-kymmene announced its intention to permanently reduce paper capacity at several locations in europe by the end of 2011. the company operated a pcc satellite facility at one of these locations at anjalankoski , finland , which ceased operations in the fourth quarter of 2011. the company accelerated depreciation of the assets at this location , which had a net book value of $ 0.7 million at the time of the announcement , over the last four months of the year . sales at the company 's satellite at anjalankoski for 2011 were approximately $ 15 million . 19 the company will continue to focus on innovation and new product development and other opportunities for continued growth as follows : · develop multiple high-filler technologies , such as filler-fiber , under the fulfill tm platform of products , to increase the fill rate in freesheet paper and continue to progress with commercial discussions and full-scale paper machine trials . · increase our sales of pcc for paper by further penetration of the markets for paper filling at both freesheet and groundwood mills , particularly in emerging markets . · expand the company 's pcc coating product line using the satellite model . · promote the company 's expertise in crystal engineering , especially in helping papermakers customize pcc morphologies for specific paper applications . · expand pcc produced for paper filling applications by working with industry partners to develop new methods to increase the ratio of pcc for fiber substitutions . · develop unique calcium carbonates and talc products used in the manufacture of novel biopolymers , a new market opportunity . · deploy new talc and gcc products in paint , coating and packaging applications . · deploy value-added formulations of refractory materials that not only reduce costs but improve performance . · expand our solid core wire product line into bric , middle eastern and other asian countries . · deploy our laser measurement technologies into new applications . · deploy operational excellence principles into all aspects of the organization , including system infrastructure and lean principles . · explore selective acquisitions to fit our core competencies in minerals and fine particle technology . however , there can be no assurance that we will achieve success in implementing any one or more of these opportunities . results of operations sales ( dollars in millions ) replace_table_token_8_th worldwide net sales in 2011 increased 4 % from the previous year to $ 1.045 billion . foreign exchange had a favorable impact on sales of $ 21.0 million or less than 2 percentage points of growth . sales in the specialty minerals segment , which includes the pcc and processed minerals product lines , increased 2 % to $ 676.1 million from $ 665.0 million in 2010. sales in the refractories segment grew 9 % to $ 368.8 million from $ 337.4 million in the previous year . in 2010 , worldwide net sales increased 10 % to $ 1.002 billion from $ 907.3 million in the prior year . in 2010 , specialty minerals segment sales increased 6 % and refractories segment sales increased 21 % from 2009 levels . in 2011 , worldwide net sales of pcc , which is primarily used in the manufacturing process of the paper industry , increased 1 % to $ 560.6 million from $ 554.6 million in the prior year . foreign exchange had a favorable impact on sales of approximately $ 10.9 million or less than 2 percentage points of growth . worldwide net sales of paper pcc were flat at $ 497.0 million , increasing slightly from the $ 496.6 million in the prior year . total paper pcc volumes decreased 4 % from prior year levels with declines in all regions . volume decreases of approximately $ 20.7 million were offset by contractual price increases and the effects of foreign exchange . sales 20 of specialty pcc increased 10 % to $ 63.6 million from $ 58.0 million in 2010. this increase was attributable to higher volumes and the effects of foreign exchange . in 2010 , worldwide net sales of pcc increased 4 % to $ 554.6 million from $ 534.7 million in the prior year . foreign exchange had a favorable impact on sales of approximately $ 3.5 million or less than 1 percentage point of growth . worldwide net sales of paper pcc increased 2 % to $ 496.6 million from $ 484.6 million in the prior year . total paper pcc volumes increased 3 % from 2009 levels with moderate volume increases with the exception of asia where there was an 18 % increase in volumes due to the startup of a new satellite facility in india and increase of volumes at other facilities . volume increases of approximately $ 18.2 million were partially offset by $ 10 million in contractual price decreases . sales of specialty pcc increased 16 % in 2010 to $ 58.0 million from $ 50.1 million in the prior year . this increase was primarily attributable to higher volumes . net sales of processed minerals products in 2011 increased 5 % to $ 115.5 million from $ 110.4 million in 2010. gcc products and talc products increased 3 % and 7 % to $ 68.6 million and $ 46.9 million , respectively . the increases in the processed minerals product line was attributable to increased volumes due to slight improvements in the residential and commercial construction markets and moderate improvements in the automotive market . volumes increased 7 % from the prior year . net sales of processed minerals products in 2010 increased 18 % to $ 110.4 million from $ 93.7 million in 2009. gcc products and talc products increased 8 % and 36 % to $ 66.4 million and $ 44.0 million , respectively . story_separator_special_tag replace_table_token_14_th the decrease in the income attributable to non-controlling interests is due to the lower profitability in our joint ventures and the deconsolidation of our korean joint venture upon the sale of a 50 % interest . replace_table_token_15_th * percentage not meaningful 23 the company recorded net income of $ 67.5 million in 2012 as compared to $ 66.9 million in 2010. diluted earnings per share were $ 3.73 as compared with $ 3.58 in the previous year . in 2009 , the company recorded a net loss of $ 23.8 million which was attributable to impairment of assets and restructuring charges . outlook looking forward , we remain cautious about the state of the global economy , particularly in europe , and the impact it will have on our product lines . although we saw market stabilization and improvement in 2010 , which continued in 2011 , there remains uncertainty as to the sustainability of the upturn . in 2012 , we plan to focus on the following growth strategies : · develop multiple high-filler technologies , such as filler-fiber , under the fulfill tm platform of products , to increase the fill rate in freesheet paper and continue to progress with commercial discussions and full-scale paper machine trials . · increase our sales of pcc for paper by further penetration of the markets for paper filling at both freesheet and groundwood mills , particularly in emerging markets . · expand the company 's pcc coating product line using the satellite model . · promote the company 's expertise in crystal engineering , especially in helping papermakers customize pcc morphologies for specific paper applications . · expand pcc produced for paper filling applications by working with industry partners to develop new methods to increase the ratio of pcc for fiber substitutions . · develop unique calcium carbonates and talc products used in the manufacture of novel biopolymers , a new market opportunity . · deploy new talc and gcc products in paint , coating and packaging applications . · deploy value-added formulations of refractory materials that not only reduce costs but improve performance . · expand our solid core wire product line into bric , middle eastern and other asian countries . · deploy our laser measurement technologies into new applications . · deploy operational excellence principles into all aspects of the organization , including system infrastructure and lean principles . · explore selective acquisitions to fit our core competencies in minerals and fine particle technology . however , there can be no assurances that we will achieve success in implementing any one or more of these strategies . story_separator_special_tag cellspacing= `` 0 `` style= `` font-family : times new roman ; font-size : 10pt ; font-size : 10pt ; font-family : times new roman `` width= `` 100 % `` > · revenue recognition : revenue from sale of products is recognized at the time the goods are shipped and title passes to the customer . in most of our pcc contracts , the price per ton is based upon the total number of tons sold to the customer during the year . under those contracts , the price billed to the customer for shipments during the year is based on periodic estimates of the total annual volume that will be sold to the customer . revenues are adjusted at the end of each year to reflect the actual volume sold . there were no significant revenue adjustments in the fourth quarter of 2011 and 2010 , respectively . we have consignment arrangements with certain customers in our refractories segment . revenues for these transactions are recorded when the consigned products are consumed by the customer . revenues from sales of equipment are recorded upon completion of installation and receipt of customer acceptance . revenues from services are recorded when the services are performed . · allowance for doubtful accounts : substantially all of our accounts receivable are due from companies in the paper , construction and steel industries . accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future . such allowance is established through a charge to the provision for bad debt expenses . we recorded bad debt expenses of $ 0.9 million , $ 0.1 million and $ 1.2 million in 2011 , 2010 and 2009 , respectively . in addition to specific allowances established for bankrupt customers , we also analyze the collection history and financial condition of our other customers considering current industry conditions and determine whether an allowance needs to be established or adjusted . 25 · property , plant and equipment , goodwill , intangible and other long-lived assets : property , plant and equipment are depreciated over their useful lives . useful lives are based on management 's estimates of the period that the assets can generate revenue , which does not necessarily coincide with the remaining term of a customer 's contractual obligation to purchase products made using those assets . our sales of pcc are predominately pursuant to long-term evergreen contracts , initially ten years in length , with paper mills at which we operate satellite pcc plants . the terms of many of these agreements have been extended , often in connection with an expansion of the satellite pcc plant . failure of a pcc customer to renew an agreement or continue to purchase pcc from our facility could result in an impairment of assets or accelerated depreciation at such facility . · valuation of long-lived assets , goodwill and other intangible assets : we assess the possible impairment of long-lived assets and identifiable amortizable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable . goodwill is reviewed for impairment at least annually . factors we consider important that could trigger an impairment review include the following : significant under-performance relative to historical or projected future operating results ; significant changes in the manner
| in 2011 , the company 's board of directors authorized the company 's management to repurchase , at its discretion , up to $ 75 million of additional shares over a two-year period upon completion of the prior program . as of december 31 , 2011 , 59,615 shares have been repurchased under this program at an average price of approximately $ 50.25 per share . on january 25 , 2012 , the company 's board of directors declared a regular quarterly dividend on its common stock of $ 0.05 per share . no dividend will be payable unless declared by the board and unless funds are legally available for payment thereof . 24 the following table summarizes our contractual obligations as of december 31 , 2011 : contractual obligations replace_table_token_16_th we have $ 185.6 million in uncommitted short-term bank credit lines , of which $ 5.8 million was in use at december 31 , 2011. the credit lines are primarily in the us , with approximately $ 15.6 million or 8 % outside the us . the credit lines are generally one year in term at competitive market rates at large well-established institutions . the company typically uses its available credit lines to fund working capital requirements or local capital spending needs . at the present time , we have no indication that the financial institutions would be unable to commit to these lines of credit should the need arise . we anticipate that capital expenditures for 2012 should be between $ 60 million to $ 75 million , principally related to the construction of pcc plants and other opportunities that meet our strategic growth objectives .
| Liquidity | 10,603 |
therefore , iot has established a valuation allowance for deferred tax assets of approximately $ 1,422,000 , $ 1,460,000 and $ 1,446,000 as of december 31 , 2013 , 2012 and 2011 , respectively . 34 in 2013 , iot used approximately $ 8,729,000 of current losses from the consolidated group . in 2012 , the company used approximately $ 2,397,000 of losses from the arl consolidated group . in 2011 , iot used approximately $ 1,847,000 of losses from the consolidated group . in 2010 and prior , the company generated taxable loss carryforwards totaling $ 2,837,968 . the most recent loss year is 2010 , which , if not used , will expire in 2030. the alternative minimum tax credit balance did not change in 2013 and remains at approximately $ 164,000 . the credit has no expiration date . note 9. operating segments our segments are based on management 's method of internal reporting which classifies its operations by property type . the segments are commercial , land and other . significant differences among the accounting policies of the operating segments as compared to the consolidated financial statements principally involve the calculation and allocation of administrative and other expenses . management evaluates the performance of each of the operating segments and allocates resources to them based on their net operating income and cash flow . items of income that are not reflected in the segments are interest , other income , gain on debt extinguishment , gain on condemnation award , equity in partnerships , and gains on sale of real estate . expenses that are not reflected in the segments are provision for losses , advisory , net income and incentive fees , general and administrative , non-controlling interests , foreign currency transaction loss and net loss from discontinued operations before gains on sale of real estate . the segment labeled as “ other ” consists of revenue and operating expenses related to the notes receivable and corporate debt . the company 's segments are based on our method of internal reporting which classifies operations by the type of property in the portfolio . the company 's segments by use of property are ; commercial , land and other ( dollars in thousands ) . replace_table_token_22_th 35 replace_table_token_23_th the tables below reconcile the segment information to the corresponding amounts in the consolidated statements of operations ( dollars in thousands ) : replace_table_token_24_th the table below reconciles the segment information to the corresponding amounts in the consolidated balance sheets ( dollars in thousands ) : replace_table_token_25_th note 10. discontinued operations the company applies the provisions of asc topic 360 , “ property , plant and equipment . ” asc topic 360 requires that long-lived assets that are to be disposed of by sale be measured at the lesser of ( 1 ) book value or ( 2 ) fair value less cost to sell . in addition , it requires that one accounting model be used for long-lived assets to be disposed of by sale and broadens the presentation of discontinued operations to include more disposal transactions . discontinued operations relates to properties that were either sold or repositioned as held-for-sale as of the year ended 2013 , 2012 and 2011. there were no properties sold in 2013 or 2012. in 2011 , we sold 13.0 acres of land with a storage warehouse ( eagle crest ) . the statements of operations for all prior periods presented have been restated to reflect the reclassification to discontinued operations . the results of operations from these properties are shown below ( dollars in thousands ) : 36 replace_table_token_26_th the company 's application of asc topic 360 results in the presentation of the net operating results of these qualifying properties sold or held for sale during 2013 , 2012 and 2011 as income from discontinued operations . the application of asc topic 360 does not have an impact on net income available to common shareholders . asc topic 360 only impacts the presentation of these properties within the consolidated statements of operations . note 11. quarterly data the following is a table of quarterly results of operations for the years 2013 , 2012 and 2011 : replace_table_token_27_th 37 replace_table_token_28_th replace_table_token_29_th 38 note 12. commitments , contingencies and liquidity litigation the company and its subsidiaries , from time to time , have been involved in various items of litigation incidental to and in the ordinary course of its business and , in the opinion of management ; the outcome of such litigation will not have a material adverse impact upon the company 's financial condition , results of operations or liquidity . liquidity management anticipates that iot will generate excess cash from operations in 2014 due to the interest collected from notes receivable ; however , such excess may not be sufficient to discharge all of iot 's debt obligations as they mature . management intends to reduce its cash invested with its advisor to meet its cash requirements not funded through operations . note 13. subsequent events the company has evaluated subsequent events through march 31 , 2014 , the date the financial statements were available to be issued , and has determined that there are none to be reported . 39 schedule iii income opportunity realty investors , inc. real estate and accumulated depreciation december 31 , 2013 gross amounts at which initial cost carried at end of year encumbrances land building & i mprovements cost capitalized subsequent to acquisition and improvements land building & improvements total ( dollars in thousands ) properties held for investment mercer crossing land mercer/travelers land , farmers branch , tx 12,357 24,511 - - 24,511 - 24,511 $ 12,357 $ 24,511 $ - $ - $ 24,511 $ - $ 24,511 40 schedule iii ( continued ) income opportunity realty investors , inc. real estate and accumulated depreciation december 31 , story_separator_special_tag there was no income generated from this segment for the twelve months ended december 31 , 2013 and december 31 , 2012. expenses general and administrative expenses were $ 734,000 for the twelve months ended december 31 , 2013. this represents an increase of $ 400,000 , as compared to the prior period operating expenses of $ 334,000. this increase relates to the other segment and was primarily due to increased professional fees . in addition , there was an increase in cost reimbursements paid to our advisor . net income fee was $ 695,000 for the twelve months ended december 31 , 2013. this represents an increase of $ 515,000 , as compared to the prior period net income fee of $ 180,000. the net income fee paid to pillar is calculated at the rate of 7.5 % of net income . the net income increased from last year due to the $ 5.8 million discount recognized for the company 's portion of the mercer/travelers land mortgage note buyout . other income ( expense ) interest income was $ 7.1 million for the twelve months ended december 31 , 2013. this represents an increase of $ 1.9 million in the current year , as compared to interest income of $ 5.2 million in the prior period . this increase was due to an agreement made on january 1 , 2013 , whereby the company extended the maturity on the surplus cash flow notes receivable from uhf for an additional term of five years in exchange for an early termination of the preferred interest rate . the original note gave a five-year period of preferred interest rate at 5.25 % , before returning to the original note rate of 12 % . 15 other income was $ 5.8 million for the twelve months ended december 31 , 2013. there was no other income recorded in 2012. on december 30 , 2013 the mercer/travelers land mortgage note buyout was paid off at a discounted rate . the company recognized its prorated share of that discount , shared with its parent , tci . loan charges were $ 0.8 million for the twelve months ended december 31 , 2013. there were no loan charges in 2012. these charges were due to extension fees relating to the mercer/travelers land mortgage note buyout and were shared with the company 's parent , tci . income tax expense was $ 3.1 million for the twelve months ended december 31 , 2013. this represents an increase of $ 2.2 million as compared to the prior period income tax expense of $ 876,000. the increase was due to the increase in the current period net income , as compared to the prior period . iot is part of a tax sharing and compensating agreement with respect to federal income taxes between arl , tci and iot and their subsidiaries that was entered into in july of 2009 and due to the positive net income in the current period , it used net operating losses from its parent ( s ) and is required to compensate for those losses used in the current period . discontinued operations there were no properties sold in 2013 or 2012. the statements of operations for all prior periods presented have been restated to reflect the reclassification to discontinued operations . the results of operations from these properties are shown below ( dollars in thousands ) : replace_table_token_4_th comparison of the year ended december 31 , 2012 to the year ended december 31 , 2011 we had net income $ 1.5 million or $ 0.36 per diluted earnings per share for the year ended december 31 , 2012 , as compared to net income $ 669,000 or $ 0.16 per diluted earnings per share for the same period ended 2011. revenue land held for development or sale is our sole operating segment . there was no income generated from this segment for the twelve months ended december 31 , 2012 and december 31 , 2011. in 2011 , we recognized the sale of the land and storage warehouse known as eagle crest , resulting in no further rental revenues and the reclassification of all financial results to discontinued operations . expenses general and administrative expenses were $ 334,000 for the twelve months ended december 31 , 2012. this represents a decrease of $ 112,000 , as compared to the prior period expenses of $ 446,000. this decrease was mainly due to a decrease in professional fees and a decrease in cost reimbursements due to our advisor . net income fee was $ 180,000 for the twelve months ended december 31 , 2012. this represents an increase of $ 126,000 , as compared to the prior period net income fee of $ 54,000. the net income fee paid to pillar is calculated at the rate of 7.5 % of net income . the net income was higher than in the prior year due to a $ 1.5 million provision for loss that was booked for the sale of eagle crest in 2011 . 16 other income ( expense ) interest income was $ 5.2 million for the twelve months ended december 31 , 2012. this represents an increase of $ 736,000 in the current year , as compared to interest income of $ 4.4 million in the prior period . the increase is due to the payments received on our notes receivables from unified housing foundation , a related party . the receivables are surplus cash flow notes . prior to january 1 , 2012 , on cash flow notes where payments are based upon surplus cash from operations , accrued but unpaid interest income was only recognized to the extent that cash was received . as of january 1 , 2012 , due to the consistency of cash received on the surplus cash notes , we are recording interest as earned . mortgage loan interest expense was $ 1.3 million for the twelve
| the increase was a result of the following increases and decreases in cash flows : replace_table_token_6_th n et cash provided by operating activities is primarily related to the receipt of accrued interest on notes receivable from related parties and expenses relating to land and other segments . net cash provided by operating activities was lower in the current period due to an increase in professional services and tax sharing agreement expenses , due to our parent , tci , offset by the discount received on the mercer/travelers land mortgage note buyout the increase in the net cash provided by investing activities was due to the decrease in the related party receivables from our parent , tci , by facilitating the payoff of the mercer/travelers land mortgage note buyout . the net cash used in financing activities was to pay off the mercer/travelers land loan , net of new financing proceeds . iot borrowed funds in order to fund the debt payoff per the buyout agreement . we paid no dividends in 2013 , 2012 , or 2011. it is unlikely that we will pay any quarterly dividends in 2014. environmental matters under various federal , state and local environmental laws , ordinances and regulations , iot may be potentially liable for removal or remediation costs , as well as certain other potential costs , relating to hazardous or toxic substances ( including governmental fines and injuries to persons and property ) where property-level managers have arranged for the removal , disposal or treatment of hazardous or toxic substances . in addition , certain environmental laws impose liability for release of asbestos-containing materials into the air and third parties may seek recovery for personal injury associated with such materials . management is not aware of any environmental liability relating to the above matters that would have a material adverse effect on iot 's business , assets or results of operations . < div style= '' text-align :
| Liquidity | 11,752 |
in 2013 , we launched oxtellar xr ( extended-release oxcarbazepine ) and trokendi xr ( extended-release topiramate ) , our two novel treatments for epilepsy . since that time , we have significantly grown our net product sales . oxtellar xr and trokendi xr were the first once-daily extended release oxcarbazepine and topiramate products , indicated for patients with epilepsy launched in the u.s. market . net product sales from these products reached $ 210.1 million in 2016 representing significant growth compared to the $ 143.5 million in net product sales in 2015. we are continuing to expand our intellectual property portfolio to provide additional protection for our technologies , products , and product candidates . we currently have seven issued u.s. patents covering oxtellar xr and eight issued u.s. patents covering trokendi xr , with the patents expiring no earlier than 2027 for each product . data from intercontinental marketing services ( ims ) shows 136,145 prescriptions were filled for both drugs during the three months ended december 31 , 2016 , representing a 22.0 % increase over the 111,627 product prescriptions for the fourth quarter of 2015. product prescriptions for trokendi xr and oxtellar xr totaled 506,542 for the year ended 2016 , a 33.9 % increase over the 378,173 product prescriptions for the year ended 2015. we expect the number of prescriptions filled for oxtellar xr and trokendi xr to continue to increase in the future . net product sales for the year ended december 31 , 2016 totaled $ 210.1 million , an increase of 46.4 % over 2015. net product sales for the fourth quarter of 2016 were $ 61.1 million , compared to net product sales of $ 42.6 million for the same quarter last year , an increase of 43.4 % . operating income for the year ended december 31 , 2016 totaled $ 54.2 million compared to an operating income of $ 20.8 million in 2015 , an increase of $ 33.4 million or 160.6 % . we received several paragraph iv notice letters concerning oxtellar xr and trokendi xr from various third-parties , asserting that our patents are invalid , or that our patents are not infringed by their formulations , or both . in response to these paragraph iv notice letters , we initiated litigation against these third parties alleging infringement of our intellectual property rights . in october 2015 , we reached a settlement agreement with one of these generic drug makers , par pharmaceutical companies , inc. , concerning our trokendi xr patents . in 2016 , the u.s. district court and federal court of appeals ruled in our favor against actavis concerning oxtellar xr patents . in march 2017 , we signed settlement agreements with two other generic drug makers , actavis and zydus , concerning our trokendi xr patents . we intend to vigorously defend our intellectual property rights against twi concerning our oxtellar xr patents . we anticipate continuing to incur substantial amounts of legal fees 64 and related expenses for these cases as they progress . ( see part i , item 3legal proceedings for additional information . ) we are developing multiple product candidates in psychiatry to address large unmet medical needs and market opportunities . we are developing spn-810 ( molindone hydrochloride ) to treat impulsive aggression ( ia ) in patients who have attention deficit hyperactivity disorder ( adhd ) . there are currently no approved products indicated for the treatment of ia . we are also developing a novel non-stimulant product candidate spn-812 ( viloxazine hydrochloride ) to treat patients who have adhd . we initiated two phase iii clinical trials for spn-810 during the third quarter of 2015 and a phase iib clinical trial for spn-812 in the fourth quarter of 2015. we expect to continue recruiting in the two phase iii clinical trials for spn-810 during 2017. results for the phase iib clinical trial for spn-812 were announced in 2016. subsequent to holding an end of phase ii meeting with the fda , we plan to initiate phase iii clinical trials for spn-812 during the second half of 2017. we expect to incur significant research and development expenses related to the continued development of each of our product candidates , with a total cost of approximately $ 85 million to $ 90 million for each of the two programs , from 2017 through fda approval . on january 19 , 2017 , shire announced that the fda acknowledged receipt of the class 2 resubmission of a new drug application ( nda ) for shp465 , for the treatment of adhd . the fda is expected to provide a decision on or around june 20 , 2017. if approved by the fda , shp465 is expected to be launched by shire in the second half of 2017. shp465 was originally developed by shire laboratories , the former division of shire which subsequently became supernus pharmaceuticals . based on the agreement between supernus and shire , shire will pay to supernus a single digit percentage royalty on net sales of the product . critical accounting policies and the use of estimates the significant accounting policies and bases of presentation for our consolidated financial statements are described in note 2 `` summary of significant accounting policies . `` the preparation of our consolidated financial statements in accordance with u.s. generally accepted accounting principles ( gaap ) requires us to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenues , expenses and to disclose contingent assets and liabilities . actual results could differ from those estimates . story_separator_special_tag our working capital at december 31 , 2016 was $ 70.7 million , an increase of $ 21.7 million compared to our working capital of $ 49.0 million at december 31 , 2015. in addition , our long term marketable securities at december 31 , 2016 were $ 75.4 million , an increase of $ 20.4 million compared to our long term marketable securities of $ 55.0 million at december 31 , 2015. our stockholders ' equity increased by $ 103.7 million during the year ended december 31 , 2016 , primarily as a result of net income , the issuance of shares related to the conversion of our notes and share-based compensation . in july 2014 , we entered into a royalty interest acquisition agreement ( the agreement ) with hc royalty . pursuant to the agreement , hc royalty paid us $ 30.0 million in consideration for acquiring certain royalty and milestone rights related to the commercialization of orenitram ( treprostinil ) extended-release tablets by united therapeutics corporation . full ownership of the royalty rights will revert back to us if and when a certain threshold is reached per the terms of the agreement . in addition to income from operations , we historically financed our business through the sale of our debt and equity securities . our two most recent financings occurred on may 3 , 2013 , when we issued $ 90.0 million aggregate principal amount of notes to qualified institutional buyers , the initial purchasers of the notes ( initial purchasers ) , and on july 2014 when we raised $ 30.0 million through a non-recourse liability related to the sale of future royalties . as of december 31 , 2016 , holders of the notes have converted a total of approximately $ 85.4 million of the notes . cumulatively , through december 31 , 2016 , we issued a total of approximately 16.1 million shares of common stock in conversion of the principal amount of the notes and issued an additional 2.2 million shares of common stock and paid approximately $ 1.7 million cash in settlement of the interest make-whole provision related to the converted notes . subsequent to december 31 , 2016 , holders of the notes converted approximately $ 1.0 million of the notes . we issued a total of approximately 0.2 million shares of common stock in conversion of the principal amount of the notes and accrued interest thereon . we believe our current working capital and long term marketable securities , along with increased revenues from increasing product sales , will be sufficient to finance the company . we achieved positive cash flow and profitability from operations in each quarter of 2015 and 2016. while we expect continued profitability in 2017 as we continue to increase sales , while also increasing spending to advance our clinical product candidates , we anticipate there may be significant variability from quarter to quarter in our level of profitability . 71 cash flows the following table sets forth the major sources and uses of cash for the periods set forth below summarized , in thousands : replace_table_token_7_th operating activities net cash provided by/used in operating activities is comprised of two components ; cash provided by operating income/loss and cash provided by/used in changes in working capital . results for the years ended december 31 , 2016 and december 31 , 2015 are summarized below , in thousands : replace_table_token_8_th the increase in net cash provided by operating activities is primarily driven by increased revenue generated from the sale of trokendi xr and oxtellar xr . the decrease in cash provided by changes in working capital is primarily driven by increased net sales deductions associated with our increased revenue . the changes in certain operating assets and liabilities are , in thousands : replace_table_token_9_th investing activities we invest excess cash in accordance with our investment policy . marketable securities consist of investments which mature in four years or less , including u.s. treasury and various government agency debt securities , as well as investment grade securities in industrial and financial institutions . 72 fluctuations in investing activities between periods relate exclusively to the timing of marketable security purchases and the related maturities of these securities . net cash used in investing activities for the year ended december 31 , 2016 of $ 36.0 million related to net purchase of marketable securities of $ 15.6 million , deferred legal fees of $ 18.8 million and property and equipment purchases of $ 1.6 million . net cash used in investing activities for the year ended december 31 , 2015 of $ 39.3 million consisted of deferred legal fees of $ 10.9 million and property and equipment purchases of $ 2.1 million , and net purchase of marketable securities of $ 26.3 million . financing activities net cash provided by financing activities for the year ended december 31 , 2016 was $ 2.1 million , resulting from proceeds received from stock option exercises . net cash provided by financing activities for the year ended december 31 , 2015 was $ 1.9 million , resulting from proceeds received from stock option exercises . contractual obligations and commitments the following table summarizes our contractual obligations and commitments as of december 31 , 2016 ( except as noted below ) , in thousands : replace_table_token_10_th ( 1 ) our commitments for operating leases relate to our lease of office equipment , fleet vehicles and office and laboratory space as of december 31 , 2016 . ( 2 ) relates primarily to agreements and purchase orders with contractors . ( 3 ) this table does not include ( a ) any milestone payments which may become payable to third parties under license agreements as the timing and likelihood of such payments are not known , ( b ) any royalty payments to third parties as the amounts , timing and likelihood of such payments are not known and ( c ) contracts
| loss on extinguishment of debt . during the year ended december 31 , 2016 , we recognized a non-cash loss on extinguishment of debt of $ 0.7 million related to the conversion of $ 3.9 million of our notes . during the year ended december 31 , 2015 , we recognized a non-cash loss on extinguishment of debt of $ 2.3 million related to the conversion of $ 27.5 million of our notes . income tax . during the year ended december 31 , 2016 , we recorded $ 40.9 million of current tax benefit related primarily to releasing all of our valuation allowance on deferred tax assets . during the year ended december 31 , 2015 , we recorded $ 0.7 million of current tax expense related to an increase in our reserve for an uncertain tax position related to the alternative minimum tax . net income . we realized net income of $ 91.2 million during the year ended december 31 , 2016 , compared to net income of $ 13.9 million during the year ended december 31 , 2015 , an increase of $ 77.3 million . this change was primarily due to the revenue generated from our two commercial products , oxtellar xr and trokendi xr , increase in r & d and sg & a spending , and the impact of the elimination of the valuation allowance on our deferred tax asset . 68 comparison of the year ended december 31 , 2015 and december 31 , 2014 replace_table_token_6_th net product sales . net product sales are based on gross revenue from shipments to distributors , less estimates for discounts , rebates , allowances , other sales deductions and returns . our net product sales of $ 143.5 million for the year ended december 31 , 2015 is comprised of $ 33.2 million of revenue from oxtellar xr and $ 110.3 million of revenue from trokendi xr . the increase in net product sales from 2014 to 2015 is primarily driven by increased prescriptions .
| Liquidity | 4,250 |
during 2017 , net operating revenues increased by 7.1 % over 2016 due primarily to pricing and volume growth in our inpatient rehabilitation segment and volume growth in our home health and hospice segment . within our inpatient rehabilitation segment , discharge growth of 4.0 % coupled with a 2.0 % increase in net patient revenue per discharge in 2017 generated 5.5 % growth in net operating revenues compared to 2016 . discharge growth included a 1.8 % increase in same-store discharges . within our home health and hospice segment , home health admission growth of 17.0 % coupled with the impact of a 1.1 % decrease in revenue per episode in 2017 generated 14.2 % growth in home health and hospice revenue compared to 2016 . home health admission growth included a 11.4 % increase in same-store admissions . many of our quality and outcome measures remained above both inpatient rehabilitation and home health industry averages . not only did we treat more patients and enhance outcomes , we did so in a cost-effective manner . see the “ results of operations ” section of this item . our growth efforts continued to yield positive results in 2017 . in our inpatient rehabilitation segment , we : began operating the 33-bed inpatient rehabilitation hospital in gulfport , mississippi with our joint venture partner , memorial hospital at gulfport , in april 2017 ; began operating a new 60-bed inpatient rehabilitation hospital in westerville , ohio with our joint venture partner , mount carmel health system , in april 2017 ; began operating a new 48-bed inpatient rehabilitation hospital in jackson , tennessee and our existing 40-bed inpatient rehabilitation hospital in martin , tennessee with our joint venture partner , west tennessee healthcare , in july 2017 ; entered into an agreement with university medical center health system in september 2017 to own and operate a new 40-bed inpatient rehabilitation hospital in lubbock , texas . we expect construction of the new hospital to commence in the second quarter of 2018. the joint venture hospital is expected to begin operating in the second quarter of 2019 subject to customary closing conditions , including regulatory approvals ; began accepting patients at our new , 40-bed inpatient rehabilitation hospital in pearland , texas in october 2017 ; continued planning the operation of our 29-bed joint venture hospital with tidelands health in murrells inlet , south carolina . the hospital is expected to begin operating in the fourth quarter of 2018 ; continued planning the construction of our 68-bed joint venture hospital with novant health , inc. in winston-salem , north carolina . the hospital is expected to begin operating in the fourth quarter of 2018 ; continued our capacity expansions by adding 166 new beds to existing hospitals ; and continued development of the following de novo hospitals : replace_table_token_11_th ( 1 ) in june 2016 , we were awarded a certificate of need ( “ con ” ) , acquired land , and began the design and permitting process . ( 2 ) in august 2016 , we were awarded a con , acquired land , and began the zoning , design , and permitting process . ( 3 ) in august 2014 , we acquired land and began the design and permitting process . 44 we also continued our growth efforts in our home health and hospice segment . during 2017 , we : acquired the assets of celtic healthcare of maryland , inc. , a home health provider with locations in owings mill , maryland and rockville , maryland in february 2017 ; acquired the assets of two home health locations from community health services , inc. located in owensboro , kentucky and elizabethtown , kentucky in february 2017 ; acquired the assets of two home health locations from bio care home health services , inc. and kinsman enterprises , inc. located in irving , texas and longview , texas in may 2017 ; acquired the assets of four home health locations from vna healthtrends located in bourbonnais , illinois ; des plaines , illinois ; schererville , indiana ; and tempe , arizona in july 2017 and two additional home health locations in forsyth , illinois and canton , ohio in august 2017 ; acquired the assets of a home health location from ware visiting nurses services , inc. located in savannah , georgia in october 2017 ; acquired the assets of a home health location from pickens county health care authority located in carrollton , alabama in october 2017 ; and began accepting patients at our new home health location in braintree , massachusetts and new hospice locations in amarillo , texas and austin , texas . to support our growth efforts , we continued taking steps to further increase the strength and flexibility of our balance sheet . specifically , during the second quarter of 2017 , we exercised the early redemption option and subsequently retired all $ 320 million of 2.00 % convertible senior subordinated notes due 2043 ( the “ convertible notes ” ) . during the third quarter of 2017 , we amended our existing credit agreement to increase the size of our revolving credit facility from $ 600 million to $ 700 million , decrease the balance of our term loan facilities by approximately $ 110 million to $ 300 million , reduce the interest rate spread by 25 basis points , extend the agreement 's maturity by two years to 2022 , and amend the covenants to , among other things , allow for additional capacity for investments , restricted payments , and capital expenditures . story_separator_special_tag as the industry and its regulators explore this transformation , we are attempting to position the company in preparation for whatever changes are ultimately made to the delivery system as discussed in item 1 , business , “ competitive strengths . ” given the complexity and the number of changes in the 2010 healthcare reform laws and other pending regulatory initiatives , we can not predict their ultimate impact . as noted above , it is not clear whether congress will pass legislation to modify or repeal the 2010 healthcare laws , nor can we predict whether other legislation affecting medicare and post-acute care providers will be enacted , or what actions the trump administration may take or cause through the regulatory process that may result in modifications to the 2010 healthcare laws or the medicare program . therefore , the ultimate nature and timing of the transformation of the healthcare delivery system is uncertain , and will likely remain so for some time . we will continue to evaluate these laws and regulations and position the company for this industry shift . based on our track record , we believe we can adapt to these regulatory and industry changes . further , we have engaged , and will continue to engage , actively in discussions with key legislators and regulators to attempt to ensure any healthcare laws or regulations adopted or amended promote our goal of high-quality , cost-effective care . additionally , in october 2014 , president obama signed into law the impact act . the impact act was developed on a bi-partisan basis by the house ways and means and senate finance committees and incorporated feedback from healthcare providers and provider organizations that responded to the committees ' solicitation of post-acute payment reform ideas and proposals . it directs the united states department of health and human services ( “ hhs ” ) , in consultation with healthcare stakeholders , to implement standardized data collection processes for post-acute quality and outcome measures . although the impact act does not specifically call for the development of a new post-acute payment system , we believe this act will lay the foundation for possible future post-acute payment policies that would be based on patients ' medical conditions and other clinical factors rather than the setting where the care is provided , also referred to as “ site neutral ” reimbursement . for additional details on the impact act , see item 1a , risk factors . maintaining strong volume growth . various factors , including competition and increasing regulatory and administrative burdens , may impact our ability to maintain and grow our hospital , home health , and hospice volumes . in any particular market , we may encounter competition from local or national entities with longer operating histories or other competitive advantages , such as acute care hospitals who provide post-acute services similar to ours or other post-acute providers with relationships with referring acute care hospitals or physicians . aggressive payment review practices by medicare contractors , aggressive enforcement of regulatory policies by 48 government agencies , and restrictive or burdensome rules , regulations or statutes governing admissions practices may lead us to not accept patients who would be appropriate for and would benefit from the services we provide . in addition , from time to time , we must get regulatory approval to expand our services and locations in states with certificate of need laws . this approval may be withheld or take longer than expected . in the case of new-store volume growth , the addition of hospitals , home health agencies , and hospice agencies to our portfolio also may be difficult and take longer than expected . recruiting and retaining high-quality personnel . see item 1a , risk factors , for a discussion of competition for staffing , shortages of qualified personnel , and other factors that may increase our labor costs . recruiting and retaining qualified personnel for our inpatient hospitals and home health and hospice agencies remain a high priority for us . we attempt to maintain a comprehensive compensation and benefits package that allows us to remain competitive in this challenging staffing environment while remaining consistent with our goal of being a high-quality , cost-effective provider of post-acute services . see also item 1 , business , and item 1a , risk factors . these key challenges notwithstanding , we believe we have a strong business model , a strong balance sheet , and a proven track record of achieving strong financial and operational results . we are attempting to position the company to respond to changes in the healthcare delivery system and believe we will be in a position to take advantage of any opportunities that arise as the industry moves to this new stage . we believe we are positioned to continue to grow , adapt to external events , and create value for our shareholders in 2018 and beyond . results of operations payor mix during 2017 , 2016 , and 2015 , we derived consolidated net operating revenues from the following payor sources : replace_table_token_12_th our payor mix is weighted heavily towards medicare . we receive medicare reimbursements under the irf-pps , the hh-pps , and the hospice-pps . for additional information regarding medicare reimbursement , see the “ sources of revenues ” section of item 1 , business . as part of the balanced budget act of 1997 , congress created a program of private , managed healthcare coverage for medicare beneficiaries . this program has been referred to as medicare part c , or “ medicare advantage . ” the program offers beneficiaries a range of medicare coverage options by providing a choice between the traditional fee-for-service program ( under medicare parts a and b ) or enrollment in a health maintenance organization , preferred provider organization , point-of-service plan , provider sponsor organization , or an insurance plan operated in conjunction with a medical savings
| net cash used in investing activities during 2016 compared to 2015 resulted primarily from the decrease in cash used in the acquisition of businesses offset by the proceeds received from the divestiture of our home health pediatric assets in 2016. cash outflows were significantly higher in 2015 due to the acquisitions of reliant and caresouth described in note 2 , business combinations , to the accompanying consolidated financial statements . financing activities . the decrease in net cash used in financing activities during 2016 compared to 2015 primarily resulted from the 2015 debt transactions , including the public offering of the 2023 notes , the additional offering of the 2024 notes , and the private offering of the 2025 notes to fund the acquisitions of reliant and caresouth as discussed and defined in note 9 , long-term debt , to the accompanying consolidated financial statements . contractual obligations our consolidated contractual obligations as of december 31 , 2017 are as follows ( in millions ) : replace_table_token_22_th ( a ) included in long-term debt are amounts owed on our bonds payable and other notes payable . these borrowings are further explained in note 9 , long-term debt , to the accompanying consolidated financial statements . ( b ) interest on our fixed rate debt is presented using the stated interest rate . interest expense on our variable rate debt is estimated using the rate in effect as of december 31 , 2017 . interest pertaining to our credit agreement is included to its ultimate maturity date . interest related to capital lease obligations is excluded from this line . future minimum payments , which are accounted for as interest , related to sale/leaseback transactions involving real estate accounted for as financings are included in this line ( see note 6 , property and equipment , and note 9 , long-term debt , to the accompanying consolidated financial statements ) . amounts exclude amortization of debt discounts , amortization of loan fees , or fees for lines of credit that would be included in interest expense in our consolidated statements of operations . ( c ) amounts include interest portion of future minimum capital lease payments .
| Liquidity | 13,742 |
although our fiber laser technology has a leading market position within select materials processing applications , our share within many other laser applications is significantly smaller and non-existent in many other applications . we estimate fiber lasers comprise less than 35 % of total laser source sales and that laser-based machine tools comprise less than 25 % of all machine tools used for cutting and welding of metals . given the potential for our fiber laser technology to gain deeper penetration within the broader markets we serve and plan to target , we continue to introduce new technologies and products to expand our market presence . we expect that some new technologies and products will have returns above our cost of capital but may have gross margins below our corporate average . if we are able to develop opportunities that are significant in size , competitively advantageous or leverage our existing technology base and leadership , our current gross margin levels may not be maintained . instead , we aim to deliver industry-leading levels of gross and operating margins by growing our market position across the broader markets we serve . the mix of sales between oem customers and other customers can affect gross margin because we provide sales price discounts on products based on the number of units ordered . as the number of oem customers increase and the number of units ordered increases , the average sales price per unit will be reduced . we expect that the impact of reduced sales price per unit will be offset by the manufacturing efficiency provided by high unit volume orders , but the timing and extent of achieving these efficiencies may not always match the mix of sales in any given time period or be realized at all . we invested $ 126.5 million , $ 127.0 million and $ 70.1 million in capital expenditures in 2017 , 2016 and 2015 , respectively . most of this investment relates to expansion of our manufacturing capacity and , to a lesser extent , research and development and sales-related facilities . a high proportion of our costs is fixed so costs are generally difficult or may take time to adjust in response to changes in demand . in addition , our fixed costs increase as we expand our capacity . if we expand capacity faster than is required by sales growth , gross margins could be negatively affected . gross margins generally decline if production volumes are lower as a result of a decrease in sales or a reduction in inventory because the absorption of fixed manufacturing costs will be reduced . gross margins generally improve when the opposite occurs . if both sales and inventory decrease in the same period , the decline in gross margin may be greater if we can not reduce fixed costs or choose not to reduce fixed costs to match the decrease in the level of production . if we experience a decline in sales that reduces absorption of our fixed costs , or if we have production issues , our gross margins will be negatively affected . we also regularly review our inventory for items that are slow-moving , have been rendered obsolete or are determined to be excess . any provision for such slow-moving , obsolete or excess inventory affects our gross margins . for example , we recorded provisions for slow-moving , obsolete or excess inventory totaling $ 16.9 million , $ 22.8 million and $ 15.4 million in 2017 , 2016 and 2015 , respectively . sales and marketing expense . we expect to continue to expand our worldwide direct sales organization , build and expand applications centers , hire additional sales and marketing personnel at our existing and new geographic locations as well as to support sales of new product lines , increase the number of units for demonstration purposes and otherwise increase expenditures on sales and marketing activities in order to support the growth in our net sales . as such , we expect that our sales and marketing expenses will increase in the aggregate . research and development expense . we plan to continue to invest in research and development to improve our existing components and products and develop new components , products , systems and applications technology . the amount of research and development expense we incur may vary from period to period . in general , if net sales continue to increase we expect research and development expense to increase in the aggregate . 37 general and administrative expense . we expect our general and administrative expenses to increase as we continue to invest in systems and resources in management , finance , legal , information technology , human resources and administration to support our worldwide operations . legal expenses vary from quarter to quarter based primarily upon the level of litigation and transaction activities . major customers . while we have historically depended on a few customers for a large percentage of our annual net sales , the composition of this group can change from year to year . net sales derived from our five largest customers as a percentage of our annual net sales were 28 % , 22 % and 25 % in 2017 , 2016 and 2015 . our largest customer accounted for 13 % , 9 % and 13 % of our net sales in 2017 , 2016 and 2015 , respectively . we seek to add new customers and to expand our relationships with existing customers . we anticipate that the composition of our significant customers will continue to change . we generally do not enter into agreements with our customers obligating them to purchase our fiber lasers or amplifiers . if any of our significant customers were to substantially reduce their purchases from us , our results would be adversely affected . story_separator_special_tag we provide reserves for potential payments of tax to various tax authorities related to uncertain tax positions and other issues . reserves recorded are based on a determination of whether and how much of a tax benefit taken by us in our tax filings or positions is `` more likely than not `` to be realized following resolution of any potential contingencies present related to the tax benefit , assuming that the matter in question will be raised by the tax authorities . potential interest and penalties associated with such uncertain tax positions is recorded as a component of income tax expense . at december 31 , 2017 , we had unrecognized tax benefits of approximately $ 10.4 million that , if recognized , would be recorded as a reduction in income tax expense . at december 31 , 2017 , we had $ 191.7 million of cash and cash equivalents and $ 206.3 million in short-term investments in the united states and $ 718.2 million of cash and cash equivalents at foreign locations . cash and cash equivalents outside of the united states are intended to fund working capital , capital expenditures and business expansion outside the united states . 40 results of operations the following table sets forth selected statement of operations data for the periods indicated in dollar amounts and expressed as a percentage of net sales . replace_table_token_10_th comparison of year ended december 31 , 2017 to year ended december 31 , 2016 net sales . net sales increased by $ 402.7 million , or 40.0 % , to $ 1,408.9 million in 2017 from $ 1,006.2 million in 2016 . the table below sets forth sales by application ( in thousands , except for percentages ) : replace_table_token_11_th 41 the table below sets forth sales by type of product and other revenue ( in thousands , except for percentages ) : replace_table_token_12_th sales for materials processing applications increased due to higher sales of high power lasers , medium power lasers , pulsed lasers , qcw lasers and laser systems . the increase in high power laser sales related to growth in cutting and welding . high power lasers continue to displace co2 lasers . we believe our revenue growth has benefited from an accelerated replacement cycle for older co2 based cutting systems and also from displacement of non-laser technologies , which has resulted in higher demand for the fiber based cutting and welding systems sold by our oem customers . within cutting applications , we continue to see a migration to lasers with higher output powers which improve processing speeds and enable processing of thicker materials . the shift towards lasers with higher output powers has also benefited sales due to their higher average selling prices . medium power sales increased due to growth in laser sintering and fine welding applications , which was partially offset by decreases in sales for fine cutting applications because fine cutting systems using medium power lasers migrated to using high power 1 to 2 kilowatt lasers . average selling prices for medium power lasers also declined . pulsed laser sales increased due to growth in marking and engraving , cleaning and stripping , solar cell manufacturing and cutting applications . within the pulsed laser category , the rate of sales increases was larger for high power pulsed lasers than for pulsed lasers with lower average power . qcw laser sales increased due to the demand for welding and drilling applications . welding applications for qcw lasers are primarily related to consumer electronics . materials processing sales also increased as a result of improved laser systems and parts and service sales , which are included in other revenue in the sales by product chart above . the increase in laser systems sales was mainly driven by the july 2017 acquisition of innovative laser technologies , llc ( `` ilt `` ) . sales for other applications increased due to higher sales for telecom and advanced applications . telecom sales benefited from an increase in sales of pluggable transceivers used in data transmission and an increase in amplifier sales used for last mile fiber access to the home applications . for 2017 , the rate of growth of telecom sales benefited from the contribution of sales by menara , which we acquired in may 2016. sales of telecom products are included in other revenue in the sales by product chart above . advanced application sales are typically uneven from quarter to quarter . the increase in advanced applications sales was driven by increase in demand from defense , semiconductor and scientific applications across various product lines . cost of sales and gross margin . cost of sales increased by $ 158.0 million , or 34.8 % , to $ 612.0 million in 2017 from $ 453.9 million in 2016 . our gross margin increased to 56.6 % in 2017 from 54.9 % in 2016 . gross margin increased due to a decrease in the cost of internally manufactured components , increased manufacturing efficiency and product mix which included increased sales of high power , qcw and pulsed lasers with higher average powers . these increases in gross margin were partially offset by lower average selling prices . expenses related to provisions for excess or obsolete inventory and other valuation adjustments decreased by $ 5.9 million to $ 16.9 million , or 1.2 % of sales , for the year ended december 31 , 2017 , as compared to $ 22.8 million , or 2.3 % of sales , for the year ended december 31 , 2016 . sales and marketing expense . sales and marketing expense increased by $ 11.4 million , or 29.7 % , to $ 49.8 million in 2017 from $ 38.4 million in 2016 , primarily as a result of an increase in personnel , trade show and exhibitions , travel and 42 depreciation expense . as a percentage of sales , sales and marketing expense decreased
| our long-term debt consists of two long-term notes with a combined total outstanding balance at december 31 , 2017 of $ 49.0 million of which $ 3.6 million is the current portion . we have an unsecured note with an outstanding balance at december 31 , 2017 of $ 22.0 million of which $ 1.2 million is the current portion . the interest on this unsecured note is variable at 1.20 % above libor and is fixed using an interest rate swap at 2.85 % per annum . the unsecured note matures in may 2023 , at which time the outstanding debt balance will be $ 15.4 million . we have another note that is secured by our corporate aircraft . the outstanding balance on this secured note at december 31 , 2017 was $ 27.0 million of which $ 2.4 million is the current portion . the interest rate on this secured note is fixed at 2.74 % per annum and it matures in july 2022 , at which time the outstanding debt balance will be $ 15.4 million . we believe that our existing cash and cash equivalents , short-term investments , our cash flows from operations and our existing lines of credit provide us with the financial flexibility to meet our liquidity and capital needs , as well as to complete certain acquisitionsof businesses and technologies .
| Liquidity | 6,856 |
· freight out expense increased by $ 0.7 million in fiscal year 2018 as compared to fiscal year 2017 due to our increased sales . · expenses related to information technology increased by $ 0.7 million in fiscal year 2018 as compared to fiscal year 2017 primarily due to increased cost relating to tessco.com improvements . 31 · during fiscal year 2017 we incurred corporate support expenses including both recruiting and professional service fees relating to the transition to our new ceo . as the transition was completed during fiscal 2017 , corporate support expense decreased by $ 0.9 million in fiscal year 2018 as compared to fiscal year 2017. we continually evaluate the credit worthiness of our existing customer receivable portfolio and provide an appropriate reserve based on this evaluation . we also evaluate the credit worthiness of prospective and current customers and make decisions regarding extension of credit terms to such customers based on this evaluation . accordingly , we recorded a provision for bad debts of $ 797,100 and $ 674,200 for fiscal year 2018 and fiscal year 2017 , respectively . interest , net . net interest expense increased , from $ 58,600 in fiscal year 2017 to $ 429,100 in fiscal year 2018. the increase is primarily related higher borrowing levels on our secured revolving credit facility . refer to note 6 through 8 to the financial statements included as part of this annual report on form 10-k for additional information on our borrowings . income taxes , net income and diluted earnings per share . the effective tax rates in fiscal year 2018 and 2017 were 30.5 % and 41.9 % , respectively . the effective tax rate was lower for fiscal 2018 , primarily due to the 2017 tax act that went into effect in the third quarter of fiscal 2018 , as well as a change in treatment of a deferred tax liability relating to our accounting for a key man life insurance policy , discussed below . the 2017 tax act requires fiscal year companies to blend their federal tax rates this year . our annual federal rate for fiscal 2018 will be based on 9 months at the old rate of approximately 35 % rate and 3 months at the new 21 % rate . we were also able to take a benefit on our net deferred tax liabilities in fiscal 2018 , which now reflect the lower federal rate . see note 13 income taxes to the financial statements included as part of this annual report on form 10-k for additional information on the effect of the 2017 tax act and the change in treatment of the deferred tax liability . as a result of the factors discussed above , net income and diluted earnings per share for fiscal year 2018 increased 259.5 % and 258.8 % , respectively , compared with fiscal year 2017. after we announced our fourth quarter fiscal year 2018 financial results by press release dated may 7 , 2018 , we determined it necessary to change how we account for the cash surrender value of certain key-man life insurance policies held by us . we had for many years recorded a deferred tax liability related to the incremental increase year over year in the cash surrender value of the policies . after further analysis , it was determined that the annual change in cash surrender value , which has accumulated slowly over many years , should have been treated as an offset to the non-deductible insurance premiums related to the same policies , and not as a deferred tax liability . as such , we adjusted our fiscal 2018 financial results to reflect the favorable change in tax treatment as applied to the aggregate amount of the incremental increases that have accumulated over the multi-year period . specifically , net deferred tax assets increased by an aggregate of $ 0.5 million and income tax expense correspondingly decreased by an aggregate of $ 0.5 million . correspondingly , net income and earnings per share for the fourth quarter of fiscal 2018 increased by $ 0.5 million and $ 0.06 per share , respectively , due to a one-time adjustment resulting from this change in tax treatment . there was no impact on net cash flow used in operations . this change has no impact on previously filed tax returns . fiscal year 2017 compared to fiscal year 2016 revenues . revenue for fiscal year 2017 increased slightly by 0.5 % as compared to fiscal year 2016. revenue from our government market increased by 11.1 % for fiscal year 2017 as compared to fiscal year 2016. we have continued to invest in this market , which has led to an increase in government contracts , especially with our state and local government customers . revenues within our private system operators market increased by 7.4 % for fiscal year 2017 as compared to fiscal year 2016 , primarily due to an increase in sales to our utility customers . revenue from the public carrier and value-added resellers markets , decreased by 8.0 % and 1.4 % , respectively , due to a dramatic slowdown in the purchases by our cellular carrier customers and the general contractors and integrators doing work on their behalf , beginning in the third quarter of fiscal 2015. during the second half of fiscal 2017 , we saw improved year-over-year quarterly sales in the carrier markets as purchases increased from key contractors and integrators . revenue in the second half of fiscal 2017 increased 23.0 % in the public carrier market as compared to the same period of fiscal 2016 as a result of these increased purchases . gross profit . story_separator_special_tag no lender is obligated to increase its commitment . availability is determined in accordance with a borrowing base , which has been expanded to include not only eligible receivables but also eligible inventory and is generally : ( a ) the sum of ( i ) 85 % of eligible receivables ; ( ii ) the inventory formula amount for all eligible inventory which is aged less than 181 days ; and ( iii ) the lesser of ( x ) $ 4 million and ( y ) the inventory formula amount for all eligible inventory which is aged at least 181 days ; minus ( b ) reserves . upon closing , there was $ 23.4 million outstanding under the amended and restated credit agreement . like the secured revolving credit facility as existing prior to the execution and delivery of the amended and restated credit agreement , borrowings under the secured revolving credit facility as now evidenced by the amended and restated credit agreement initially accrue interest from the applicable borrowing date at an applicable rate equal to the eurodollar rate plus the applicable margin . the eurodollar rate is the rate per annum obtained by dividing ( i ) libor by ( ii ) a percentage equal to 1.00 minus the eurodollar reserve percentage . when the applicable rate is the eurodollar rate plus the applicable margin , the applicable margin is 1.50 % if average availability is greater than or equal to $ 15 million , and 1.75 % otherwise . under certain circumstances , the applicable rate is subject to change at the lenders ' option from the eurodollar rate plus the applicable margin to the base rate plus the applicable margin . in any event , following an event of default , in addition to changing the applicable rate to the base rate plus the applicable margin , the lenders ' may at their option set the applicable margin at 0.50 % if the base rate applies or 1.75 % if the eurodollar rate applies , and increase the applicable rate by an additional 200 basis points . the applicable rate adjusts on the first business day of each calendar month . the company is required to pay a monthly commitment fee on the average daily unused portion of the revolving credit facility provided for pursuant to the amended and restated credit agreement , at a per annum rate equal to 0.25 % . as of april 1 , 2018 , we had a $ 10.8 million balance on the revolving credit facility ; therefore , we had $ 64.2 million available , subject to the borrowing base limitations and compliance with the other applicable terms of the credit agreement , including the covenants referenced above . in connection with the entering into of the amended and restated credit agreement , the company and the other loan parties executed and delivered to suntrust bank , as administrative agent , a reaffirmation agreement , pursuant to which the obligations of the loan parties under the guaranty and security agreement delivered by the loan parties in connection with the secured credit facility as previously existing ( including the previously existing guaranty by the loan parties not otherwise borrowers and the previously existing grant by the company and the other loan parties of a continuing first priority security interest in inventory , accounts receivable and deposit accounts , and on all documents , instruments , general intangibles , letter of credit rights , and all proceeds ) were ratified and confirmed as respects the obligations arising under the amended and restated credit facility from time to time . at the end of fiscal year 2018 , we were in compliance with the financial covenants applicable under our revolving 36 credit facility with suntrust bank . on march 31 , 2009 , we entered into a term loan with the baltimore county economic development revolving loan fund for an aggregate principal amount of $ 250,000. the term loan is payable in equal monthly installments of principal and interest of $ 2,300 , with the balance due at maturity on april 1 , 2019. the term loan bears interest at 2.00 % per annum and is secured by a subordinate position on our hunt valley , maryland facility . at april 1 , 2018 , the principal balance of this term loan was approximately $ 29,600. working capital ( current assets less current liabilities ) decreased to $ 74.8 million as of april 1 , 2018 , from $ 77.2 million as of march 26 , 2017. shareholders ' equity was flat at $ 108.1 million as of april 1 , 2018 , and $ 108.0 million as of march 26 , 2017. we believe that our existing cash , payments from customers , and availability under our revolving credit facility ( including any amendment or replacement thereof ) , or if needed , financing we believe would be available to us from other sources , will be sufficient to support our operations for at least the next twelve months . we expect to meet short-term liquidity needs through cash on our balance sheet and operating cash flow , supplemented by our revolving credit facility ; and we expect to meet long-term liquidity needs through these same resources . if we were to undertake an acquisition or other major capital purchases that require funds in excess of our existing sources of liquidity , we would look to sources of funding from additional credit facilities , debt and or equity issuances . there can be no assurances that such additional future sources of funding , either to fund an acquisition or major capital purchase , or to support our cash flow needs in the event of the termination of our existing revolving credit facility before it can be replaced with an asset based facility , would be available on terms acceptable to us , if at all . in addition
| the reduction in prepaid expenses and other assets as well as the decrease in accrued expense and other liabilities are both primarily related to a tower owner customer whose inventory we have held on its behalf since fiscal year 2015. because we held the inventory on the tower owner 's behalf , the cost of these goods was recorded in prepaid expenses and other current assets , and we were unable to recognize the revenue and related cost of goods sold associated with the transaction until the product physically shipped . during fiscal year 2017 , most of the remaining inventory was shipped and therefore the corresponding portion of the deferred revenue and cost of goods sold were partially recognized . we generated $ 20.1 million of net cash from operating activities during fiscal year 2016. this inflow was driven by net income ( net of depreciation and amortization and non-cash stock compensation expense ) , a decrease in accounts receivable and product inventory , and a decrease in prepaid expenses and other current assets , partially offset by a decrease in trade accounts payable and accrued expense and other current liabilities . the decrease in accounts receivable was primarily related to better collections in the fourth quarter of fiscal year 2016 as compared to the fourth quarter of fiscal year 2015. the decrease in inventory was primarily due to an effort to reduce overall inventory levels while maintaining high service levels . the reduction in prepaid expenses and other assets as well as the decrease in accrued expense and other liabilities are both primarily related to the tower owner customer referred to above .
| Liquidity | 12,967 |
the aggregate intrinsic value of in the money options outstanding was $ 159,529 as of april 30 , 2011. f-27 sigmatron international , inc. and subsidiaries notes to consolidated financial statements continued april 30 , 2011 and 2010 story_separator_special_tag in addition to historical financial information , this discussion of the business of sigmatron international , inc. , its wholly-owned subsidiaries standard components de mexico s.a. , ablemex s.a. de c.v. , and sigmatron international trading co. , and its wholly-owned foreign enterprise wujiang sigmatron electronics co. , ltd. ( sigmatron china ) and international procurement office sigmatron taiwan ( collectively the company ) and other items in this annual report on form 10-k contain forward-looking statements concerning the company 's business or results of operations . words such as continue , anticipate , will , expect , believe , plan , and similar expressions identify forward-looking statements . these forward-looking statements are based on the current expectations of the company . because these forward-looking statements involve risks and uncertainties , the company 's plans , actions and actual results could differ materially . such statements should be evaluated in the context of the risks and uncertainties inherent in the company 's business including , but not necessarily limited to , the company 's continued dependence on certain significant customers ; the continued market acceptance of products and services offered by the company and its customers ; pricing pressures from our customers , suppliers and the market ; the activities of competitors , some of which have greater financial or other resources than the company ; the variability of our operating results ; the results of long-lived assets impairment testing ; the variability of our customers ' requirements ; the availability and cost of necessary components and materials ; the ability of the company and our customers to keep current with technological changes within our industries ; regulatory compliance ; the continued availability and sufficiency of our credit arrangements ; changes in u.s. , mexican , chinese or taiwanese regulations affecting the company 's business ; the turmoil in the global economy and financial markets ; the stability of the u.s. , mexican , chinese and taiwanese economic , labor and political systems and conditions ; currency exchange fluctuations ; the expenses and savings from the relocation of our hayward , california facility to union city , california ; and the ability of the company to manage its growth . these and other factors which may affect the company 's future business and results of operations are identified throughout the company 's annual report on form 10-k and as risk factors and may be detailed from time to time in the company 's filings with the securities and exchange commission . these statements speak as of the 16 date of such filings , and the company undertakes no obligation to update such statements in light of future events or otherwise unless otherwise required by law . overview the company operates in one business segment as an independent provider of ems , which includes printed circuit board assemblies and completely assembled ( box-build ) electronic products . in connection with the production of assembled products , the company also provides services to its customers , including ( 1 ) automatic and manual assembly and testing of products ; ( 2 ) material sourcing and procurement ; ( 3 ) design , manufacturing and test engineering support ; ( 4 ) warehousing and shipment services ; and ( 5 ) assistance in obtaining product approval from governmental and other regulatory bodies . the company provides these manufacturing services through an international network of facilities located in the united states , mexico , china and taiwan . the company relies on numerous third-party suppliers for components used in the company 's production process . certain of these components are available only from single sources or a limited number of suppliers . in addition , a customer 's specifications may require the company to obtain components from a single source or a small number of suppliers . the loss of any such suppliers could have a material impact on the company 's results of operations . further , the company could operate at a cost disadvantage compared to competitors who have greater direct buying power from suppliers . in fiscal year 2011 , the company experienced an increase in lead times for various types of components due to industry-wide shortages of electronic components and the shortage may continue to occur due to increased demand . increased demands for components and rising commodity prices have resulted in upward pricing pressure from the company 's supply chain , which has and could continue to affect our results of operations . the company does not enter into long-term purchase agreements with major or single-source suppliers . the company believes that short-term purchase orders with its suppliers provides flexibility , given that the company 's orders are based on the needs of its customers , which constantly change . sales can be a misleading indicator of the company 's financial performance . sales levels can vary considerably among customers and products depending on the type of services ( consignment and turnkey ) rendered by the company and the demand by customers . consignment orders require the company to perform manufacturing services on components and other materials supplied by a customer , and the company charges only for its labor , overhead and manufacturing costs , plus a profit . in the case of turnkey orders , the company provides , in addition to manufacturing services , the components and other materials used in assembly . turnkey contracts , in general , have a higher dollar volume of sales for each given assembly , owing to inclusion of the cost of components and other materials in net sales and cost of goods sold . variations in the number of turnkey orders compared to consignment orders can lead to significant fluctuations in the company 's revenue levels . story_separator_special_tag deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense . in evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise , the company considers all available positive and negative evidence , 18 including scheduled reversals of deferred tax liabilities , projected future taxable income , tax planning strategies and recent financial operations . in projecting future taxable income , the company begins with historical results adjusted for the results of discontinue operations and changes in accounting policies , and incorporates assumptions including the amount of future state , federal and foreign pretax operating income , the reversal of temporary differences , and the implementation of feasible and prudent tax planning strategies . these assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates the company uses to manage the underlying businesses . in evaluating the objective evidence that historical results provide , the company considers three years of cumulative operating income and or loss . changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future . management is not presently aware of any such changes that would have a material effect on the company 's results of operations , cash flows or financial position . 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 . fasb asc topic 740 , income taxes provides 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 , based on the technical merits . asc topic 740 also provides guidance on measurement , derecognition , classification , interest and penalties , accounting in interim periods , disclosure and transition . the company recognizes tax liabilities in accordance with asc topic 740 and the company adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available . due to the complexity of some of these uncertainties , the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities . these differences will be reflected as increases or decreases to income tax expense in the period in which they are determined . new accounting standards : in october 2009 , the financial accounting standards board ( fasb ) issued accounting standards update ( asu ) no . 2009-13 for updated revenue recognition guidance under the provisions of asc 605-25 , multiple-element arrangements . the previous guidance has been retained for criteria to determine when delivered items in a multiple-deliverable arrangements should be considered separate units of accounting , however the updated guidance removes the previous separation criterion that objective and reliable evidence of fair value of any undelivered items must exist for the delivered items to be considered a separate unit or separate units of accounting . this guidance was effective for fiscal years beginning on or after july 15 , 2010. the adoption of this guidance did not have a material effect on the company 's consolidated results of operations and financial condition . in march 2010 , the fasb issued asu 2010-11 , scope exception related to embedded credit derivatives to address questions that have been raised in practice about the intended breadth of the embedded credit derivative scope exception in paragraphs 815-15-15-8 through 815-15-15-9 of asc 815 , derivatives and hedging . the amended guidance clarifies that the scope exception applies to contracts that contain an embedded credit derivative that is only in the form of subordination of one financial instrument to another . this guidance was effective on august 1 , 2010 for the company . the adoption of this guidance did not have a material impact on the company 's consolidated results of operations and financial condition . in december 2010 , the fasb issued authoritative guidance regarding asc no . 805 , business combinations , on the disclosure of supplementary pro forma information for business combinations . asc no . 805 requires a public entity to disclose pro forma information for business combinations that occurred in the current reporting period . the disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period . the adoption of this guidance did not have a material impact on the company 's consolidated results of operations and financial condition . 19 in may 2011 , the fasb issued asu 2011-04 , amendments to achieve common fair value measurement and disclosure requirements in u.s. gaap and ifrs , which results in common fair value measurement and disclosure requirements in u.s. gaap and ifrs . consequently , the amendments change the wording used to describe many of the requirements in u.s. gaap for measuring fair value and for disclosing information about fair value measurements . asu 2011-04 is effective for interim and annual periods beginning after december 15 , 2011 , which will first be applicable to the company 's fiscal quarter beginning february 1 , 2012. the adoption of this guidance is not expected to have a material impact on the company 's consolidated results of operations and financial condition . story_separator_special_tag net income $ 1,978,034 eps reconciliation : income per common share assuming dilution before relocation expenses $ 0.65 net income per common share assuming dilution of relocation expenses net of tax ( $ 0.14 ) net income per common share assuming dilution $ 0.51 weighted average number of common equivalent shares outstanding assuming dilution 3,890,949 liquidity and capital resources : operating activities .
| results of operations : fiscal year ended april 30 , 2011 compared to fiscal year ended april 30 , 2010 the following table sets forth the percentage relationships of expense items to net sales for the years indicated : replace_table_token_2_th net sales increased 23.9 % to $ 151,728,084 in fiscal year 2011 from $ 122,476,340 in the prior year . the company 's sales increased in fiscal year 2011 in fitness , gaming , medical/life sciences , industrial and consumer electronics and semiconductor marketplaces as compared to the prior year . the increase in sales dollars for these marketplaces was partially offset by a decrease in sales dollars in the appliance and telecommunications marketplaces . the increase in net sales for the fiscal year 2011 is a result of our existing customers ' increased demand for product and the addition of some new customer programs ramping up compared to the previous fiscal year . the company 's sales in a particular industry are driven by the fluctuating forecasts and end-market demand of the customers within that industry . sales to customers are subject to variations from period to period depending on customer order cancellations , the life cycle of customer products and product transition . sales to the company 's five largest customers accounted for 62 % and 68 % of net sales for fiscal years 2011 and 2010 , respectively . gross profit increased to $ 15,787,206 of net sales in fiscal year 2011 compared to $ 13,757,237 of net sales in the prior year . the increase in the company 's gross profit in total dollars is due to increased revenue levels , the mix of product shipped to various customers and the continuing efforts to control operational costs . gross profit as a percent of net sales decreased to 10.4 % in fiscal year 2011 compared to 11.2 % in the prior fiscal year .
| ROO | 16,004 |
net interest income increased by $ 2.9 million , or 9.8 % , compared to an increase of $ 4.9 million , or 19.3 % in 2017. during 2016 , there was non-recurring security amortization recorded in the amount of $ 1.7 million as a result of accelerated amortization on bonds issued by two u.s. sub-agencies . the corporation 's net interest margin remained stable in 2018 at 3.46 % , the same margin as 2017 , however this was with higher yields on loans and lower yields on tax-exempt securities due to the change in corporate tax law . loan yields increased as a result of four federal reserve rate moves in 2018 , lifting the yields on the corporation 's variable rate loans . this coupled with volume growth in the loan portfolio , increased loan interest income by $ 3.7 million , or 15.3 % . the corporation 's non-interest income increased by $ 716,000 , or 6.9 % , from 2017 to 2018. earnings on bank owned life insurance were $ 1,638,000 in 2018 , compared to $ 688,000 in 2017 , resulting in higher non-interest 31 enb financial corp management 's discussion and analysis income . losses on securities transactions were $ 291,000 in 2018 , compared to gains of $ 675,000 in 2017 , a decrease in income of $ 966,000. the financial services industry uses two primary performance measurements to gauge performance : return on average assets ( roa ) and return on average equity ( roe ) . roa measures how efficiently a bank generates income based on the amount of assets or size of a company . roe measures the efficiency of a company in generating income based on the amount of equity or capital utilized . the latter measurement typically receives more attention from shareholders . the corporation 's 2018 roa was 0.93 % , compared to 0.63 % in 2017. roe increased from 6.46 % in 2017 to 9.94 % in 2018. the increase in roa and roe was primarily due to higher income in 2018 compared to 2017. the below table highlights the corporation 's key performance ratios for the years ended 2018 , 2017 , and 2016. replace_table_token_7_th the results of the corporation 's operations are best explained by addressing in further detail the five major sections of the income statement , which are as follows : · net interest income · provision for loan losses · other income · operating expenses · income taxes the following discussion analyzes each of these five components . net interest income net interest income ( nii ) represents the largest portion of the corporation 's operating income . in 2018 , nii generated 75.0 % of the corporation 's gross revenue stream , compared to 74.5 % in 2017 , and 69.4 % in 2016. since nii comprises a significant portion of the operating income , the direction and rate of increase or decrease will often indicate the overall performance of the corporation . the following table shows a summary analysis of nii on a fully taxable equivalent ( fte ) basis . for analytical purposes and throughout this discussion , yields , rates , and measurements such as nii , net interest spread , and net yield on interest earning assets , are presented on an fte basis . this differs from the nii reflected on the corporation 's consolidated statements of income , where the nii is simply the interest earned on loans and securities less the interest paid on deposits and borrowings . by calculating the nii on an fte basis , the added benefit of having tax-free loans and securities is factored in to more accurately represent what the corporation earns through the nii . the fte adjustment shows the benefit these tax free loans and securities bring in a dollar amount because the corporation does not pay tax on the income they generate . as a result , the fte nii shown in both tables below will exceed the nii reported on the consolidated statements of income . the amount of fte adjustment totaled $ 879,000 for 2018 , $ 2,341,000 for 2017 , and $ 2,151,000 for 2016. the significant decline in fte adjustment in 2018 was primarily due to the corporate tax rate change implemented at the end of 2017 as well as lower levels of tax-free income . 32 enb financial corp management 's discussion and analysis net interest income ( dollars in thousands ) replace_table_token_8_th nii is the difference between interest income earned on assets and interest expense incurred on liabilities . accordingly , two factors affect nii : · the rates charged on interest earning assets and paid on interest bearing liabilities · the average balance of interest earning assets and interest bearing liabilities the federal funds rate , the prime rate , the shape of the u.s. treasury curve , and other wholesale funding curves , all affect nii . the federal reserve controls the federal funds rate , which is one of a number of tools available to the federal reserve to conduct monetary policy . the federal funds rate , and guidance on when the rate might be changed , is often the focal point of discussion regarding the direction of interest rates . until december 16 , 2015 , the federal funds rate had not changed since december 16 , 2008. on december 16 , 2015 , the federal funds rate was increased 25 basis points to 0.50 % , from 0.25 % . then again , on december 14 , 2016 , the federal funds rate was increased another 25 basis points to 0.75 % . story_separator_special_tag management is able to price loan customers with higher levels of credit risk at prime plus pricing , such as prime plus 0.75 % , currently 6.25 % . however , there are relatively few of these higher rate loans in the commercial and agricultural portfolios due to the strong credit quality of the corporation 's borrowers . the asset liability committee ( alco ) carefully monitors the nim because it indicates trends in net interest income , the corporation 's largest source of revenue . for more information on the plans and strategies in place to protect the nim and moderate the impact of rising rates , please refer to item 7a . quantitative and qualitative disclosures about market risk . earnings and yields on the corporation 's securities decreased by 54 basis points for the year ended december 31 , 2018 , compared to the same period in 2017. the corporation 's securities portfolio consists of nearly all fixed income debt instruments . the corporation 's taxable securities experienced a 27 basis-point increase in yield for 2018 , compared to 2017. some security reinvestment in 2018 had been occurring at higher rates and regular amortization was lower due to the slightly higher interest rate environment . these variables caused taxable security yields to increase . the yield on tax-exempt securities decreased by 167 basis points in 2018 , compared to 2017 , primarily due to the lower corporate tax rate , which negatively impacted the tax equivalent yield on municipal securities . the interest rate paid on deposits increased for the year ended december 31 , 2018 , from the same period in 2017. management follows a disciplined pricing strategy on core deposit products that are not rate sensitive , meaning that the balances do not fluctuate significantly when interest rates change . rates on interest-bearing checking accounts and money market accounts were changed minimally in 2018 , and two time deposit specials were introduced in the fourth quarter of 2018 resulting in the cost of funds on these instruments increasing by five basis points during the year . typically , the corporation sees increases in time deposits during periods when consumers are not confident in the stock market and economic conditions deteriorate . during these periods , there is a “ flight to safety ” to federally insured deposits . this trend occurred in past years , but time deposit balances declined throughout 2016 , 2017 , and 2018. as the rate between time deposits and core deposits narrowed , many customers chose to transfer funds from maturing time deposits into checking and savings accounts . since the financial crisis , depositors have been more concerned about the financial health of their financial institution . this concern affects their desire to obtain the best possible market interest rates . this trend benefits the corporation due to its high capital levels and track record of strong and stable earnings . the corporation 's bauer financial rating of 5 , the highest level of their rating scale , has assisted the bank in gaining core deposits over the past several years . the corporation 's average rate on borrowed funds increased by 38 basis points from 2017 to 2018 , as refinancing of several long-term borrowings maturing in 2018 was completed at higher market interest rates . throughout 2018 , the new fixed borrowing rates were higher than the average rate paid on the corporation 's existing borrowings . the corporation will likely not have opportunities to decrease borrowing costs in 2019 because the fixed rate borrowings that will be maturing were initiated in prior years when market interest rates were materially lower . 38 enb financial corp management 's discussion and analysis provision for loan losses the allowance for loan losses provides for losses inherent in the loan portfolio as determined by a quarterly analysis and calculation of various factors related to the loan portfolio . the amount of the provision reflects the adjustment that management determines is necessary to ensure that the allowance for loan losses is adequate to cover any losses inherent in the loan portfolio . the corporation gives special attention to the level of underperforming loans when calculating the necessary provision for loan losses . the analysis of the loan loss allowance takes into consideration , among other things , the following factors : · levels and trends in delinquencies , non-accruals , and charge-offs , · levels of classified loans , · trends within the loan portfolio , · changes in lending policies and procedures , · experience of lending personnel and management oversight , · national and local economic trends , · concentrations of credit , · external factors such as legal and regulatory requirements , · changes in the quality of loan review and board oversight , and · changes in the value of underlying collateral . a provision expense of $ 660,000 was recorded in 2018 , compared to $ 940,000 in 2017 , and $ 325,000 in 2016. the provision expense in 2018 was primarily due to higher levels of charge-offs during the year as well as organic loan portfolio growth . while charge-offs were higher in 2018 than 2017 , net charge-offs were lower than 2017 resulting in a lower provision compared to the prior year . net charge-offs improved by $ 28,000 from 2017 to 2018. in addition , the amount of business and commercial substandard loans as of december 31 , 2018 , was $ 688,000 lower than on december 31 , 2017. the amount of substandard loans has a larger influence over the allowance for loan loss calculation due to a greater likelihood of further credit deterioration . these factors led to a lower provision for loan losses in 2018 than in 2017. the allowance as a percentage of loans decreased from 1.38 % at december 31 , 2017 , to 1.25 % by the end of 2017. it is anticipated that the corporation will
| cash and cash equivalents cash and cash equivalents consist of the cash on hand in the corporation 's vaults , operational transaction accounts with the federal reserve bank ( frb ) , and deposits in other banks . the frb requires a specified amount of cash available either in vault cash or in an frb account . known as cash reserves , these funds provide for the daily clearing house activity of the corporation and fluctuate based on the volume of each day 's transactions . beyond these requirements , the corporation maintains additional cash levels as part of management 's active asset liability and liquidity strategy . management has been carrying larger cash balances to provide an immediate hedge against interest rate risk and liquidity risk . as of december 31 , 2018 , the corporation had $ 41.4 million in cash and cash equivalents , compared to $ 53.1 million as of december 31 , 2017. as a result of the actions of the board of governors on december 16 , 2008 , financial institutions have been able to receive a rate equivalent to the federal funds rate on reserves held at the frb . because this rate matched the federal funds rate that could be obtained at other correspondent banks , management began to keep larger balances at the frb and less federal funds .
| Liquidity | 10,119 |
as of may 28 , 2011 , approximately $ 152.2 million remains available for share purchases under our stock repurchase programs . 65 resources connection , inc. notes to consolidated financial statements ( continued ) the company has 70,000,000 authorized shares of common stock story_separator_special_tag the following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes . this discussion and analysis contains forward-looking statements that involve risks and uncertainties . our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors including , but not limited to , those discussed in part i item 1a . risk factors. and elsewhere in this annual report on form 10-k. overview resources global is a multinational professional services firm that provides clients with experienced professionals specializing in finance , accounting , risk management and internal audit , corporate advisory , strategic communications and restructuring , information management , human capital , supply chain management , actuarial , 31 legal and regulatory services in support of client-led projects and initiatives . we assist our clients with discrete projects requiring specialized expertise in : finance and accounting services , such as financial analyses ( e.g. , product costing and margin analyses ) , budgeting and forecasting , audit preparation , public-entity reporting , tax-related projects , mergers and acquisitions due diligence , initial public offering assistance and assistance in the preparation or restatement of financial statements ; information management services , such as financial system/enterprise resource planning implementation and post implementation optimization ; corporate advisory , strategic communications and restructuring services ; risk management and internal audit services ( provided via our subsidiary resources audit solutions ) , including compliance reviews , internal audit co-sourcing and assisting clients with their compliance efforts under the sarbanes-oxley act of 2002 ( sarbanes ) ; supply chain management services , such as strategic sourcing efforts , contract negotiations and purchasing strategy ; actuarial services for pension and life insurance companies ; human capital services , such as change management and compensation program design and implementation ; and legal and regulatory services , such as providing attorneys , paralegals and contract managers to assist clients ( including law firms ) with project-based or peak period needs . we were founded in june 1996 by a team at deloitte & touche , led by our chief executive officer , donald b. murray , who was then a senior partner with deloitte & touche . our founders created resources connection to capitalize on the increasing demand for high quality outsourced professional services . we operated as a part of deloitte & touche from our inception in june 1996 until april 1999. in april 1999 , we completed a management-led buyout in partnership with several investors . in december 2000 , we completed our initial public offering of common stock and began trading on the nasdaq stock market . we currently trade on the nasdaq global select market . in january 2005 , we announced the change of our operating entity name to resources global professionals to better reflect the company 's multinational capabilities . we operated solely in the united states until fiscal year 2000 , when we opened our first three international offices and began to expand geographically to meet the demand for project professional services across the world . as of may 28 , 2011 , we served clients from offices in 21 countries , including 29 international offices and 51 offices in the united states . in november 2009 , we acquired certain assets of sitrick and company , a strategic communications firm and brincko associates , inc. , a corporate advisory and restructuring firm with operations primarily in the united states , through the purchase of all of the outstanding membership interests in sitrick brincko group . we paid cash of approximately $ 28.8 million and issued an aggregated of 822,060 shares of restricted common stock , valued at approximately $ 16.1 million , to sitrick and company , brincko associates and michael sitrick ( collectively , the sellers ) for the acquisition . we believe this acquisition provides a significant opportunity for us to expand our service offerings to include corporate advisory , strategic communications and restructuring services , using the expertise of personnel of sitrick brincko group leveraged with the skills of our consultant base , our geographic footprint and our client base . the acquisition agreement provides an opportunity to the sellers to receive contingent consideration following the fourth anniversary of the acquisition , provided that sitrick brincko group 's average annual ebitda over a period of four years following the acquisition date exceeds $ 11.3 million . for the year ended november 27 , 2010 ( the first annual measurement period ) , sitrick brincko group 's ebitda was approximately $ 8.9 million . we expect to continue opportunistic domestic and multinational expansion while also investing in complementary professional services lines that we believe will augment our service offerings . 32 we primarily charge our clients on an hourly basis for the professional services of our consultants . we recognize revenue once services have been rendered and invoice the majority of our clients on a weekly basis . our clients are contractually obligated to pay us for all hours billed . to a much lesser extent , we also earn revenue if a client hires one of our consultants . this type of contractually non-refundable revenue is recognized at the time our client completes the hiring process and represented 0.5 % , 0.5 % and 0.6 % of our revenue for the years ended may 28 , 2011 , may 29 , 2010 and may 30 , 2009 , respectively . we periodically review our outstanding accounts receivable balance and determine an estimate of the amount of those receivables we believe may prove uncollectible . our provision for bad debts is included in our selling , general and administrative expenses . story_separator_special_tag an increase in the earn-out expected to be paid will result in a charge to operations in the quarter that the anticipated fair value of contingent consideration increases , while a decrease in the earn-out expected to be paid will result in a credit to operations in the quarter that the anticipated fair value of contingent consideration decreases . in addition , under the terms of our acquisition agreements for sitrick brincko group , up to 20 % of the contingent consideration is payable to employees of the acquired business at the end of the measurement period to the extent certain ebitda growth targets are achieved . the company records the estimated amount of the contractual obligation to pay the employee portion of the contingent consideration as compensation expense over the service period as it is deemed probable that the growth targets will be achieved . the estimate of the amount of the employee portion of contingent consideration requires very subjective assumptions to be made of future operating results . future revisions to these assumptions could materially change our estimate of the amount of the employee portion of contingent consideration and therefore materially affect the company 's future financial results and financial condition . allowance for doubtful accounts we maintain an allowance for doubtful accounts for estimated losses resulting from our clients failing to make required payments for services rendered . we estimate this allowance based upon our knowledge of the financial condition of our clients ( which may not include knowledge of all significant events ) , review of historical receivable and reserve trends and other pertinent information . while such losses have historically been within our expectations and the provisions established , we can not guarantee that we will continue to experience the same credit loss rates that we have in the past . a significant change in the liquidity or financial position of our clients could cause unfavorable trends in receivable collections and additional allowances may be required . these additional allowances could materially affect the company 's future financial results . income taxes in order to prepare our consolidated financial statements , we are required to make estimates of income taxes , if applicable , in each jurisdiction in which we operate . the process incorporates an assessment of any current tax exposure together with temporary differences resulting from different treatment of transactions for tax and financial statement purposes . these differences result in deferred tax assets and liabilities that are included in our consolidated balance sheets . the recovery of deferred tax assets from future taxable income must be assessed and , to the extent recovery is not likely , we will establish a valuation allowance . an increase in the valuation allowance results in recording additional tax expense and any such adjustment may materially affect the company 's future financial result . if the ultimate tax liability differs from the amount of tax expense we have reflected in the consolidated statements of operations , an adjustment of tax expense may need to be recorded and this adjustment may materially affect the company 's future financial results and financial condition . 34 revenue recognition we primarily charge our clients on an hourly basis for the professional services of our consultants . we recognize revenue once services have been rendered and invoice the majority of our clients in the united states on a weekly basis . some of our clients served by our international operations are billed on a monthly basis . our clients are contractually obligated to pay us for all hours billed . to a much lesser extent , we also earn revenue if a client hires one of our consultants . this type of contractually non-refundable revenue is recognized at the time our client completes the hiring process . stock-based compensation under our 2004 performance incentive plan , officers , employees , and outside directors have received or may receive grants of restricted stock , stock units , options to purchase common stock or other stock or stock-based awards . under our espp , eligible officers and employees may purchase our common stock in accordance with the terms of the plan . the company estimates a value for employee stock options on the date of grant using an option-pricing model . we have elected to use the black-scholes option-pricing model which takes into account assumptions regarding a number of highly complex and subjective variables . these variables include the expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors . additional variables to be considered are the expected term , expected dividends and the risk-free interest rate over the expected term of our employee stock options . in addition , because stock-based compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest , it is reduced for estimated forfeitures . forfeitures must be estimated at the time of grant and revised , if necessary , in subsequent periods if actual forfeitures differ from those estimates . forfeitures are estimated based on historical experience . if facts and circumstances change and we employ different assumptions in future periods , the compensation expense recorded may differ materially from the amount recorded in the current period . the company uses its historical volatility over the expected life of the stock option award to estimate the expected volatility of the price of its common stock . the risk-free interest rate assumption is based upon observed interest rates appropriate for the term of our employee stock options . on july 20 , 2010 , the company 's board of directors announced the commencement of a quarterly dividend of $ 0.04 per common share , subject to quarterly board of director approval . consequently , effective with option grants in the first quarter of fiscal 2011 , the impact of expected dividends is now incorporated in determining the estimated value per share of employee stock option grants . the company 's historical expected life of stock option grants is 5.2
| quarterly results the following table sets forth our unaudited quarterly consolidated statements of operations data for each of the eight quarters in the two-year period ended may 28 , 2011. in the opinion of management , this data has been prepared on a basis substantially consistent with our audited consolidated financial statements appearing elsewhere in this document , and includes all adjustments , consisting of normal recurring adjustments , necessary for a fair presentation of the data . the quarterly data should be read together with our consolidated financial statements and related notes appearing elsewhere in this document . the operating results are not necessarily indicative of the results to be expected in any future period . replace_table_token_11_th 43 ( 1 ) the quarter ended august 29 , 2009 includes $ 4.8 million in severance costs and $ 2.2 million of accelerated compensation expense from the vesting of certain stock option grants related to the resignation of two senior executives . ( 2 ) the quarter ended may 29 , 2010 includes $ 500,000 as an estimate of contingent consideration potentially payable to employees related to the sitrick brincko group acquisition . ( 3 ) the quarters ended may 28 , 2011 and november 27 , 2010 include favorable adjustments of $ 3.2 million and $ 23.7 million , respectively , related to revised estimates of the fair value of contingent consideration based upon updates to the probability weighted assessment of various projected ebitda scenarios associated with the acquisition of sitrick brincko group . the quarters ended february 26 , 2011 , august 28 , 2010 , may 29 , 2010 and february 27 , 2010 include ( $ 239,000 ) , $ 1.3 million , $ 704,000 and $ 788,000 , respectively , related to the recognition of the change in the fair value of the contingent consideration liability ( calculated from changes in the risk-free interest rate , used in determining the appropriate discount factor for time value of money purposes ) associated with the acquisition of sitrick brincko group .
| ROO | 10,293 |
as a result , current changes in a specific index may not manifest themselves in our reported pricing for several quarters into the future . 29 adjusted diluted earnings per share the following is a summary of anticipated adjusted diluted earnings per share for the year ending december 31 , 2016 compared to the actual adjusted diluted earnings per share for the year ended december 31 , 2015. adjusted diluted earnings per share is not a measure determined in accordance with u.s. gaap : replace_table_token_8_th the 2016 anticipated adjusted diluted earnings per share assumes an effective tax rate of approximately 39.5 % . we believe that the presentation of adjusted diluted earnings per share , which excludes restructuring charges , bridgeton insurance recovery , and withdrawal costs - other funds , provides an understanding of operational activities before the financial impact of certain items . we use this measure , and believe investors will find it helpful , in understanding the ongoing performance of our operations separate from items that have a disproportionate impact on our results for a particular period . we have incurred comparable charges and costs and have recorded similar recoveries in prior periods , and similar types of adjustments can reasonably be expected to be recorded in future periods . our definition of adjusted diluted earnings per share may not be comparable to similarly titled measures presented by other companies . property and equipment , net in 2016 , we anticipate receiving approximately $ 900 million of property and equipment , net of proceeds from sales of property and equipment , as follows : replace_table_token_9_th restructuring in january 2016 , we realigned our field support functions by combining two organizational layers into one . this includes the elimination of our three regions , the consolidation of our 20 areas into 10 and the streamlining of select roles at our phoenix headquarters . we will reinvest and deploy resources into our areas by creating 10 area offices equipped with enhanced teams of operators and functional support roles . we expect to reduce administrative staffing levels , relocate office space and close certain office locations . as such , we will incur restructuring charges of approximately $ 25 million primarily for severance benefits , transition costs and lease termination costs . substantially all of these charges will be recorded in our corporate segment , and we expect the majority of the charges to be incurred in the first half of 2016. we expect the savings realized from these restructuring efforts will be re-invested in our customer-focused programs and other initiatives we recently launched . additionally , as part of these customer initiatives , we also will be consolidating our call center operations . over the next two years , we will consolidate over 100 customer service locations into three customer resource centers . the new state-of-the-art facilities and the technology deployed will provide our customer service employees with the tools and capabilities they need to provide better service to customers across a myriad of touch points , including voice , email , text , social channels and live chat . we expect severance and other restructuring related charges may approximate $ 10 million over the consolidation period . 30 results of operations revenue we generate revenue primarily from our solid waste collection operations . our remaining revenue is from other services , including transfer station , landfill disposal , recycling , and energy services . our residential and small-container commercial collection operations in some markets are based on long-term contracts with municipalities . certain of our municipal contracts have annual price escalation clauses that are tied to changes in an underlying base index such as the consumer price index . we generally provide small-container commercial and large-container industrial collection services to customers under contracts with terms up to three years . our transfer stations , landfills and , to a lesser extent , our recycling facilities generate revenue from disposal or tipping fees charged to third parties . in general , we integrate our recycling operations with our collection operations and obtain revenue from the sale of recycled commodities . our revenue from energy services consists mainly of fees we charge for the treatment of liquid and solid waste derived from the production of oil and natural gas , as well as waste generated by coal-fired power plants . other non-core revenue consists primarily of revenue from national accounts , which represents the portion of revenue generated from nationwide contracts in markets outside our operating areas where the associated waste handling services are subcontracted to local operators . consequently , substantially all of this revenue is offset with related subcontract costs , which are recorded in cost of operations . the following table reflects our revenue by service line for the years ended december 31 , 2015 , 2014 and 2013 ( in millions of dollars and as a percentage of revenue ) : replace_table_token_10_th 31 the following table reflects changes in components of our revenue , as a percentage of total revenue , for the years ended december 31 , 2015 , 2014 and 2013 : replace_table_token_11_th average yield is defined as revenue growth from the change in average price per unit of service , expressed as a percentage . core price is defined as price increases to our customers and fees , excluding fuel recovery , net of price decreases to retain customers . we also measure changes in average yield and core price as a percentage of related-business revenue , defined as total revenue excluding recycled commodities and fuel recovery fees , to determine the effectiveness of our pricing strategies . average yield as a percentage of related-business revenue was 2.6 % , 1.5 % , and 1.4 % for 2015 , 2014 and 2013 , respectively . core price as a percentage of related-business revenue was 4.0 % , 3.4 % , and 3.6 % for 2015 , 2014 and 2013 , respectively . story_separator_special_tag depreciation , amortization and depletion of property and equipment the following table summarizes depreciation , amortization and depletion of property and equipment for the years ended december 31 , 2015 , 2014 and 2013 ( in millions of dollars and as a percentage of revenue ) : replace_table_token_13_th depreciation , amortization and depletion of property and equipment - 2015 compared to 2014 depreciation and amortization of property and equipment increased primarily due to higher acquisition costs of replacement vehicles , increased trucks to support volume growth , additional assets acquired with our acquisitions , and an increased number of cng vehicles in our fleet , which are more expensive to purchase than diesel vehicles . in addition , we made increased investments in new and upgraded recycling infrastructure projects that became operational over the past several quarters . landfill depletion and amortization expense increased primarily due to increased landfill disposal volumes and an overall increase in our average depletion rate . additionally , during 2015 , we recorded favorable amortization adjustments of $ 0.7 million relative to asset retirement obligations , compared to favorable amortization adjustments of $ 13.3 million during 2014 . depreciation , amortization and depletion of property and equipment - 2014 compared to 2013 depreciation and amortization of property and equipment increased primarily due to higher acquisition costs of replacement vehicles and an increased number of cng vehicles in our fleet . in addition , we made increased investments in new and upgraded recycling infrastructure projects . landfill depletion and amortization expense increased primarily due to increased landfill disposal volumes and an overall increase in our average depletion rate . offsetting these increases were favorable amortization adjustments of $ 13.3 million that were recognized in 2014 relative to asset retirement obligations , compared to favorable adjustments of $ 0.3 million in 2013. included in these favorable adjustments are increases in deemed probable expansion airspace at certain of our active solid waste landfills . amortization of other intangible assets and other assets expenses for amortization of other intangible assets and other assets were $ 71.9 million , $ 68.4 million and $ 70.7 million for the years ended december 31 , 2015 , 2014 and 2013 , respectively , or 0.8 % of revenue for each of 2015 , 2014 and 2013 . our other intangible assets and other assets primarily relate to customer relationships , franchise agreements , other municipal agreements , favorable lease assets and , to a lesser extent , non-compete agreements and trade names . the increase in amortization expense is the result of assets acquired in the acquisitions of various waste businesses throughout the year , partially offset by certain intangible assets now being fully amortized . accretion expense accretion expense was $ 79.4 million , $ 78.0 million and $ 76.6 million , or 0.9 % of revenue , for each of the years ended december 31 , 2015 , 2014 and 2013 , respectively . accretion expense has remained relatively unchanged as our asset retirement obligations remained relatively consistent period over period . 35 selling , general and administrative expenses selling , general and administrative expenses include salaries , health and welfare benefits , and incentive compensation for corporate and field general management , field support functions , sales force , accounting and finance , legal , management information systems , and clerical and administrative departments . other expenses include rent and office costs , fees for professional services provided by third parties , legal settlements , marketing , investor and community relations services , directors ' and officers ' insurance , general employee relocation , travel , entertainment and bank charges . restructuring charges are excluded from selling , general and administrative expenses and are discussed separately below . the following table summarizes our selling , general and administrative expenses for the years ended december 31 , 2015 , 2014 and 2013 ( in millions of dollars and as a percentage of revenue ) : replace_table_token_14_th these cost categories may change from time to time and may not be comparable to similarly titled categories used by other companies . as such , you should take care when comparing our selling , general and administrative expenses by cost component to those of other companies . selling , general and administrative expenses – 2015 compared to 2014 salaries increased primarily due to higher wages , benefits , and other payroll related items resulting from merit increases and increased headcount , as well as higher management incentive compensation . other selling , general and administrative expenses increased primarily due to costs associated with strategic growth initiatives , as well as acquisition-related transaction and integration costs primarily associated with our acquisition of tervita in february 2015. this increase was partially offset by favorable litigation results during 2015. selling , general and administrative expenses – 2014 compared to 2013 salaries increased primarily due to higher wages resulting from merit increases , increased headcount and management incentive pay . provision for doubtful accounts increased primarily due to a net favorable adjustment , recorded in our corporate segment in 2013 , of $ 8.3 million resulting from a change in our estimated future bad debts . other selling , general and administrative expenses increased primarily due to costs associated with strategic growth initiatives , as well as costs incurred with the acquisition of various solid waste businesses . negotiation and withdrawal costs - central states pension and other funds during 2015 , we recorded charges to earnings of $ 4.1 million for withdrawal events at the multiemployer pension plan to which we contribute related to our operations in puerto rico , as well as $ 0.4 million of legal charges . during 2014 , we recorded charges to earnings of $ 1.5 million , primarily related to costs associated with our 2013 withdrawal from the fund . during 2013 , we recorded charges to earnings of $ 157.7 million , primarily related to our negotiation and withdrawal
| we intend to use excess cash on hand and cash from operating activities to fund capital expenditures , acquisitions , dividend payments , share repurchases and debt repayments . debt repayments may include purchases of our outstanding indebtedness in the secondary market or otherwise . we believe that our excess cash , cash from operating activities and our availability to draw from our credit facilities provide us with sufficient financial resources to meet our anticipated capital requirements and maturing obligations as they come due . we may choose to voluntarily retire certain portions of our outstanding debt before their maturity dates using cash from operations or additional borrowings . we may also explore opportunities in the capital markets to fund redemptions should market conditions be favorable . early extinguishment of debt will result in an impairment charge in the period in which the debt is repaid . the loss on early extinguishment of debt relates to premiums paid to effectuate the repurchase and the relative portion of unamortized note discounts and debt issue costs . credit facilities in june 2014 , we entered into a $ 1.25 billion unsecured revolving credit facility ( the replacement credit facility ) , which replaced our $ 1.0 billion credit facility maturing in april 2016. the replacement credit facility matures in june 2019 and includes a feature that allows us to increase availability , at our option , by an aggregate amount up to $ 500.0 million through increased commitments from existing lenders or the addition of new lenders . at our option , borrowings under the replacement credit facility bear interest at a base rate , or a eurodollar rate , plus an applicable margin based on our debt ratings ( all as defined in the agreements ) . contemporaneous with the execution of the replacement credit facility , we entered into amendment no .
| Liquidity | 7,279 |
we expect our general and administrative expense to increase in absolute dollars and it may decrease as a percentage of revenue . other income ( expense ) , net other income ( expense ) , net consists primarily of interest income related to cash , cash equivalents and marketable securities , interest expense related to our debt and gains ( losses ) from foreign currency transactions . provision for income taxes provision for income taxes consists primarily of income taxes in certain foreign jurisdictions in which we conduct business and state income taxes in the united states . we have recorded no u.s. federal current income tax and provided a full valuation allowance for u.s. deferred tax assets , which includes net operating loss carryforwards and tax credits related primarily to research and development . we expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not that the assets will not be realized based on our history of losses . 39 results of operations the following tables set forth our results of operations for the periods presented in dollars and as a percentage of total revenue ( in thousands ) : revenue replace_table_token_4_th total revenue increased in fiscal 2021 by $ 40.7 million , or 2 % , compared to fiscal 2020. the decrease in product revenue during fiscal 2021 compared to fiscal 2020 was largely driven by headwinds caused by the covid-19 pandemic , despite sales growth from our flashblade and flasharray//c offerings and purchases from new customers . our customer base grew from over 7,500 at the end of fiscal 2020 to over 8,700 at the end of fiscal 2021. the increase in subscription services revenue was primarily driven by increases in sales of our evergreen storage subscription services , and our unified subscription that includes paas and cloud block store , as well as increased recognition of deferred subscription services revenue contracts . total revenue increased in fiscal 2020 by $ 283.6 million , or 21 % , compared to fiscal 2019 despite being adversely impacted by significant accelerated declines in prices of certain key components that we use in our solutions . the increase in product revenue during fiscal 2020 compared to fiscal 2019 was driven by multiple factors including increased sales of our new products such as flashblade and flasharray//c , sales of larger flasharray systems , increases in repeat purchases from existing customers and purchases from new customers . our customer base grew from over 5,800 at the end of fiscal 2019 to 7,500 at the end of fiscal 2020. the increase in subscription services revenue was primarily driven by increases in sales of our evergreen storage subscription services , and our unified subscription that includes paas and cloud block store , as well as increased recognition of deferred subscription services revenue contracts . during fiscal year 2021 compared to fiscal 2020 , total revenue in the united states grew by 1 % from $ 1,184.9 million to $ 1,195.4 million and total rest of the world revenue grew by 7 % from $ 458.5 million to $ 488.8 million . during fiscal 2020 compared to fiscal 2019 , total revenue in the united states grew by 21 % from $ 979.5 million to $ 1,184.9 million and total rest of the world revenue grew by 21 % from $ 380.4 million to $ 458.5 million . for further details on revenues by geography , see note 16 of part ii , item 8 of this annual report on form 10-k. deferred revenue deferred revenue primarily consists of amounts that have been invoiced but have not yet been recognized as revenue and including performance obligations pertaining to subscription services . the current portion of deferred revenue represents the amounts that are expected to be recognized as revenue within one year of the consolidated balance sheet dates . changes in total deferred revenue during the periods presented are as follows ( in thousands ) : replace_table_token_5_th revenue recognized during fiscal 2020 and 2021 from deferred revenue at the beginning of each respective period was $ 267.0 million and $ 353.1 million . 40 remaining performance obligations total contracted but not recognized revenue was $ 1,093.5 million at the end of fiscal 2021. contracted but not recognized revenue consists of both deferred revenue and non-cancelable amounts that are expected to be invoiced and recognized as revenue in future periods . orders that are contracted but have not been fulfilled and that can be canceled by customers are excluded from remaining performance obligations . cancellable orders received and not fulfilled at the end of fiscal 2021 have increased compared to the end of fiscal 2020. of the $ 1,093.5 million contracted but not recognized revenue at the end of fiscal 2021 , we expect to recognize approximately 43 % over the next 12 months , and the remainder thereafter . cost of revenue and gross margin replace_table_token_6_th cost of revenue increased by $ 25.4 million , or 5 % , for fiscal 2021 compared to fiscal 2020. the decrease in product cost of revenue was primarily attributable to the corresponding decline in product revenue due to headwinds caused by the covid-19 pandemic , partially offset by increased costs in our manufacturing operations associated with increased headcount and an increase in the amortization of acquired intangible assets . the increase in subscription services cost of revenue was primarily attributable to higher costs in our customer support organization . the decline in product gross margin for fiscal 2021 compared to fiscal 2020 was primarily attributable to lower component costs for certain key raw materials that we use for our solutions and increased sales of larger flasharray systems in fiscal 2020. the increase in subscription services gross margin for both periods was driven by increased renewals in evergreen storage subscriptions and increased sales of unified subscription services . story_separator_special_tag 49 contractual obligations and commitments the following table sets forth our non-cancelable contractual obligations and commitments at the end of fiscal 2021. replace_table_token_16_th _ ( 1 ) consists of ( i ) principal and interest payments on our convertible senior notes due 2023 , ( ii ) principal , interest , and unused commitment fees on our august 2020 revolving credit facility based on debt outstanding and rates in effect at january 31 , 2021 , and ( iii ) principal and interest on a five year loan . ( 2 ) represents aggregate future minimum lease payments under non-cancelable operating leases . ( 3 ) includes primarily non-cancellable inventory purchase commitments , software service and sponsorship contracts , and hosting arrangements . purchase orders are not included in the table above as they represent authorizations to purchase rather than binding agreements . the contractual commitment amounts in the table above are associated with agreements that are enforceable and legally binding . obligations under contracts that we can cancel without a significant penalty are not included in the table above . in april 2018 , we issued $ 575.0 million of 0.125 % convertible senior notes due 2023 in a private placement and received proceeds of $ 562.1 million , after deducting the underwriters ' discounts and commissions . the notes are unsecured obligations that do not contain any financial covenants or restrictions on the payments of dividends , the incurrence of indebtedness , or the issuance or repurchase of securities by us or any of our subsidiaries . in september 2020 , we drew down $ 250.0 million under a five-year , senior secured $ 300.0 million revolving credit facility which remained outstanding at the end of fiscal 2021 . see further discussion in note 7 in part ii , item 8 of this annual report . off-balance sheet arrangements through the end of fiscal 2021 , we did not have any relationships with any entities or financial partnerships , such as structured finance or special purpose entities established for the purpose of facilitating off-balance sheet arrangements or other purposes . critical accounting policies and estimates our consolidated financial statements are prepared in accordance with u.s. generally accepted accounting principles ( gaap ) . the preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenue , expenses , and related disclosures . we evaluate our estimates and assumptions on an ongoing basis . our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances . our actual results could differ from these estimates . the critical accounting estimates , assumptions and judgments that we believe have the most significant impact on our consolidated financial statements are described below . revenue recognition we generate revenue primarily from two sources : ( 1 ) product revenue which includes hardware and embedded software and ( 2 ) subscription services revenue which includes evergreen storage subscriptions , our unified subscription that includes pure as-a-service and cloud block store . our product revenue is derived from the sale of integrated storage hardware and operating system software . we typically recognize product revenue upon transfer of control to our customers . products are typically shipped directly by us to customers . 50 our subscription services revenue is derived from the services we perform in connection with the sale of subscription services and is recognized ratably over the contractual term , which generally ranges from one to six years . the majority of our product solutions are sold with an evergreen storage subscription service agreement , which typically commences upon transfer of control of the corresponding products to our customers . costs for subscription services are expensed when incurred . in addition , our evergreen storage subscription provides our customers with a new controller based upon certain contractual terms . the controller refresh represents a separate performance obligation that is included within the evergreen storage subscription service agreement and the allocated revenue is recognized upon shipment of the controller . our subscription services also include the right to receive unspecified software updates and upgrades on a when-and-if-available basis , software bug fixes , replacement parts and other services related to the underlying infrastructure , as well as access to our cloud-based management and support platform . we also sell professional services such as installation and implementation consulting services and the related revenue is recognized as services are performed . we recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration we expect to be entitled in exchange for those goods or services . this is achieved through applying the following five-step approach : identification of the contract , or contracts , with a customer identification of the performance obligations in the contract determination of the transaction price allocation of the transaction price to the performance obligations in the contract recognition of revenue when , or as , we satisfy a performance obligation when applying this five-step approach , we apply judgment in determining the customer 's ability and intention to pay , which is based on a variety of factors including the customer 's historical payment experience and or published credit and financial information pertaining to the customer . to the extent a customer contract includes multiple promised goods or services , we determine whether promised goods or services should be accounted for as a separate performance obligation . the transaction price is determined based on the consideration which we will be entitled to in exchange for transferring goods or services to the customer . we allocate the transaction price to each performance obligation for contracts that contain multiple performance obligations based on a relative standalone selling price which is determined based on the price at which the performance obligation is sold separately , or if not observable through past transactions , is estimated taking
| the credit facility expires , absent default or early termination by us , on the earlier of ( i ) august 24 , 2025 or ( ii ) 91 days prior to the stated maturity of the convertible senior notes unless , on such date and each subsequent day until the convertible senior notes are paid in full , the sum of our cash , cash equivalents and marketable securities and the aggregate unused commitments then available to us exceed $ 625.0 million . the annual interest rates applicable to loans under the credit facility are , at our option , equal to either a base rate plus a margin ranging from 0.50 % to 1.25 % or libor ( based on one , three , or six-month interest periods ) , subject to a floor of 0 % , plus a margin ranging from 1.50 % to 2.25 % . interest on revolving loans is payable quarterly in arrears with respect to loans based on the base rate and at the end of an interest period in the case of loans based on libor ( or at each three-month interval , if the interest period is longer than three months ) . we are also required to pay a commitment fee on the unused portion of the commitments ranging from 0.25 % to 0.40 % per annum , payable quarterly in arrears that commenced on september 30 , 2020. loans under the credit facility are collateralized by substantially all of our assets and subject to certain restrictions and two financial ratios measured as of the last day of each fiscal quarter , commencing with the fiscal quarter ending january 31 , 2021 : a consolidated leverage ratio not to exceed 4.5:1 and an interest coverage ratio not to be less than 3:1. in september 2020 , we drew down $ 250.0 million under the credit facility to fund the acquisition of portworx which remained outstanding at the end of fiscal 2021. the outstanding loan bore weighted-average interest at the one-month libor of approximately 1.65 % .
| Liquidity | 5,941 |
management continued to evaluate opportunities in those markets and held out hope for a recovery that would allow us to reopen the closed stores . during the first quarter of 2009 , management assessed the likelihood of reopening the closed stores in the next twelve months as remote . as a result , we began negotiating with landlords for termination of the closed store leases . with the determination that store re-openings were unlikely , we recorded a reserve for closed store leases . this amount represents management 's best estimate of the amounts we are likely to pay in settlement of the outstanding lease obligations on the closed stores . management has concluded that total lease obligations on closed stores as of december 30 , 2011 is approximately $ 83,000. management has concluded that the potential liability for closed stores could be between $ 40,000 and $ 200,000 . ( see note 14 to the financial statements ) . workers ' compensation deposits : we expect that additional capital will be required to fund operations during fiscal year 2012. the amount of our capital needs will depend on store operating performance , revenue growth , our ability to control costs , and the continued impact on our business from the general economic slowdown and or recovery cycle . we are currently working on several projects intended to bring additional capital into the company . we have approximately $ 930,000 on deposit with three former workers ' compensation insurers and are pursuing the refund of amounts that we believe to be excess collateral . also , we have approximately 12.1 million warrants outstanding which may offer a source of additional capital at a future date upon exercise . management will continue to evaluate capital needs and sources of capital as we execute our business plan in 2012. critical accounting policies management 's discussion and analysis of financial condition and results of operations provides a narrative discussion of our financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america . management believes the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of our financial statements . use of estimates : the preparation of financial statements in conformity with accounting principles generally accepted in the united states of america requires management to make estimates and assumptions that affect 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 revenue and expenses during the reporting period . actual results could differ from those estimates . fiscal year end : the financial statements for the periods ended december 30 , 2011 and december 31 , 2010 are presented on a 52/53-week fiscal year end basis , with the last day of the year ending on the last friday of each calendar year . in fiscal years consisting of 53 weeks , the final quarter will consist of 14 weeks . in fiscal years with 52 weeks , all quarters will consist of thirteen weeks . 2011 was a 52-week year and 2010 was a 53-week year . cost of services : cost of services includes the wages of temporary employees , related payroll taxes and workers ' compensation expenses , and other direct costs of services . accounts receivable and allowance for bad debts : accounts receivable are recorded at the invoiced amount . we regularly review our accounts receivable for collectability . the allowance for doubtful accounts is determined based on historical write-off experience , age of receivable , other qualitative factors and extenuating circumstances , and current economic data and represents our best estimate of the amount of probable losses on our accounts receivable . the allowance for doubtful accounts is reviewed monthly . generally , we refer overdue balances to a collection agency at 120 days and the collection agent typically pursues collection for another 60 or more days . all balances over 180 days past due are either written off to bad debt or fully reserved . 17 workers ' compensation reserve : in accordance with the terms of our workers ' compensation liability insurance policy , we maintain working loss funds for our workers ' compensation claims . we use actuarial estimates of the future costs of the claims and related expenses discounted by a present value interest rate of 3 % to determine the amount of the reserve . we evaluate the reserve regularly throughout the year and make adjustments as needed . if the actual cost of the claims incurred and related expenses exceed the amounts estimated , additional reserves may be required . in monopolistic states , we utilize the state funds for our workers ' compensation insurance and pay our premiums in accordance with the state plans . goodwill and other intangible assets : goodwill and other intangible assets are measured for impairment at least annually and or whenever events and circumstances arise that indicate impairment may exist such as a significant adverse change in the business climate . in assessing the value of goodwill , assets and liabilities are assigned to the reporting units and appropriate valuation methodologies are used to determine fair value . identified intangible assets are amortized using the straight-line method over their estimated useful lives which are estimated to be between 36 and 69 months . useful life of intangible assets : we have adopted a policy for determining the useful lives of intangible assets . this policy determines what should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset for goodwill and other intangible assets . the policy is effective for fiscal years beginning after december 15 , 2008. the adoption of this policy did not have a material effect on our financial position , results of operations or cash flows . fair value of financial story_separator_special_tag management continued to evaluate opportunities in those markets and held out hope for a recovery that would allow us to reopen the closed stores . during the first quarter of 2009 , management assessed the likelihood of reopening the closed stores in the next twelve months as remote . as a result , we began negotiating with landlords for termination of the closed store leases . with the determination that store re-openings were unlikely , we recorded a reserve for closed store leases . this amount represents management 's best estimate of the amounts we are likely to pay in settlement of the outstanding lease obligations on the closed stores . management has concluded that total lease obligations on closed stores as of december 30 , 2011 is approximately $ 83,000. management has concluded that the potential liability for closed stores could be between $ 40,000 and $ 200,000 . ( see note 14 to the financial statements ) . workers ' compensation deposits : we expect that additional capital will be required to fund operations during fiscal year 2012. the amount of our capital needs will depend on store operating performance , revenue growth , our ability to control costs , and the continued impact on our business from the general economic slowdown and or recovery cycle . we are currently working on several projects intended to bring additional capital into the company . we have approximately $ 930,000 on deposit with three former workers ' compensation insurers and are pursuing the refund of amounts that we believe to be excess collateral . also , we have approximately 12.1 million warrants outstanding which may offer a source of additional capital at a future date upon exercise . management will continue to evaluate capital needs and sources of capital as we execute our business plan in 2012. critical accounting policies management 's discussion and analysis of financial condition and results of operations provides a narrative discussion of our financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america . management believes the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of our financial statements . use of estimates : the preparation of financial statements in conformity with accounting principles generally accepted in the united states of america requires management to make estimates and assumptions that affect 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 revenue and expenses during the reporting period . actual results could differ from those estimates . fiscal year end : the financial statements for the periods ended december 30 , 2011 and december 31 , 2010 are presented on a 52/53-week fiscal year end basis , with the last day of the year ending on the last friday of each calendar year . in fiscal years consisting of 53 weeks , the final quarter will consist of 14 weeks . in fiscal years with 52 weeks , all quarters will consist of thirteen weeks . 2011 was a 52-week year and 2010 was a 53-week year . cost of services : cost of services includes the wages of temporary employees , related payroll taxes and workers ' compensation expenses , and other direct costs of services . accounts receivable and allowance for bad debts : accounts receivable are recorded at the invoiced amount . we regularly review our accounts receivable for collectability . the allowance for doubtful accounts is determined based on historical write-off experience , age of receivable , other qualitative factors and extenuating circumstances , and current economic data and represents our best estimate of the amount of probable losses on our accounts receivable . the allowance for doubtful accounts is reviewed monthly . generally , we refer overdue balances to a collection agency at 120 days and the collection agent typically pursues collection for another 60 or more days . all balances over 180 days past due are either written off to bad debt or fully reserved . 17 workers ' compensation reserve : in accordance with the terms of our workers ' compensation liability insurance policy , we maintain working loss funds for our workers ' compensation claims . we use actuarial estimates of the future costs of the claims and related expenses discounted by a present value interest rate of 3 % to determine the amount of the reserve . we evaluate the reserve regularly throughout the year and make adjustments as needed . if the actual cost of the claims incurred and related expenses exceed the amounts estimated , additional reserves may be required . in monopolistic states , we utilize the state funds for our workers ' compensation insurance and pay our premiums in accordance with the state plans . goodwill and other intangible assets : goodwill and other intangible assets are measured for impairment at least annually and or whenever events and circumstances arise that indicate impairment may exist such as a significant adverse change in the business climate . in assessing the value of goodwill , assets and liabilities are assigned to the reporting units and appropriate valuation methodologies are used to determine fair value . identified intangible assets are amortized using the straight-line method over their estimated useful lives which are estimated to be between 36 and 69 months . useful life of intangible assets : we have adopted a policy for determining the useful lives of intangible assets . this policy determines what should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset for goodwill and other intangible assets . the policy is effective for fiscal years beginning after december 15 , 2008. the adoption of this policy did not have a material effect on our financial position , results of operations or cash flows . fair value of financial
| when the account is paid , the remaining 10 % is paid to us , less applicable fees and interest . net accounts receivable sold pursuant to the current agreement at december 30 , 2011 were approximately $ 6.1 million . the term of the current agreement is for the period ending april 7 , 2012. the current agreement bears interest at the greater of the prime rate plus 2.5 % or the london interbank offered rate ( libor ) plus 5.5 % , with a floor of 6.25 % , per annum . prime and or libor are defined by the wall street journal , money rates section . at december 30 , 2011 , the effective interest rate was 6.25 % . interest is payable on the actual amount advanced or $ 3 million , whichever is greater . additional charges include an annual facility fee equal to 1 % of the facility threshold in place ( currently $ 10 million ) , a monthly monitoring fee of $ 5,000 , and lockbox fees . as collateral for repayment of any and all obligations , we granted wells fargo bank , n.a . a security interest in all our property , including , but not limited to , accounts , intangible assets , contract rights , investment property , deposit accounts , and other such assets . the agreement also contains a covenant that requires the sum of excess available advances pursuant to the agreement , plus or minus book cash balance as of the close of each month , must at all times be greater than accrued payroll and payroll taxes . we were in compliance with this covenant at december 30 , 2011. on october 27 , 2010 , we made the final payment in full satisfaction of a short-term note payable , amended on march 24 , 2010. the amended agreement was with sonoran pacific resources ( `` sonoran '' ) regarding the short-term note owed them that was previously amended on april 13 , 2009. the note had an initial principal balance of $ 1.3 million and bore simple interest of 12 % per annum .
| Liquidity | 6,468 |
the restaurant design is intended to create a fun , casual , family atmosphere where children can interact with parents and each other and where everyone enjoys freshly prepared , organic , nutritious and reasonably priced meals . the original giggles n hugs opened its doors in february of 2008 and was located in the posh brentwood district of los angeles . the unique design and 1,500 square-foot play area was a huge success and solidified our proof of concept . however , due to the limited size of the location , our ability to offer “ drop-off ” services , one of our most popular features , was hindered . drop-off services allow parents to drop their children off in our play area and go shopping while their children play in a supervised environment . in addition , other factors such as lack of available parking , the location 's strip mall characteristics , and isolated location became problematic . as a result , we decided it was in our best interest to close the restaurant and secure a larger venue elsewhere . with the successful launch and proof of concept that was realized at our brentwood location , the company decided to expand to the westfield shopping mall in century city in december of 2010. the century city mall began a $ 700 million remodeling of the westfield shopping mall , which closed 90 % of the retailers , including the giggles n hugs store . on may 13 , 2016 , giggles n ' hugs , inc. entered into a termination of lease agreement with century city mall , llc ( “ landlord ” ) , accelerating the termination date of the lease dated january 13 , 2010 for its store located in westfield century city , los angeles , california . pursuant to the agreement , the lease terminated june 30 , 2016 and the landlord agreed to a monetary reimbursement of $ 350,000 which was received by june 26 , 2016. as such , sales from june 30 , 2016 only include operations from two stores , as compared to three stores in the prior fiscal year . the company continues to operate its restaurants in westfield mall in topanga , california and in the glendale galleria mall in glendale , california . 12 results of operations replace_table_token_2_th * not divisible by zero net sales . during the fiscal year ended december 31 , 2017 , net sales reflected a drop of $ 997,647 , a decline of 33 % , from the year ended january 1 , 2017. due to the major remodeling of the century city westfield mall , our century city store closed on june 30 , 2016. the remaining two stores combined had increased sales of 0.6 % . cost and operating expenses . total costs and operating expenses of $ 3,931,427 for the year ended december 31 , 2017 , reflected a slightly drop from $ 3,953,942 for the year ended january 1 , 2017. the decline of $ 22,515 ( 1 % ) was mainly due to multiple factors such as the closing of the century city store ; lower other operating expenses ; and lower depreciation . cost of operations . cost of operations during the year ended december 31 , 2017 decreased by $ 655,152 ( 26 % ) from comparison in prior year , of which $ 414,157 was attributable to the closing of the century city store on june 30 , 2016. the additional decrease of $ 240,995 was due to reduced food cost and renegotiation of lease at glendale store , which is more than offset by slightly higher labor cost and other restaurant costs . general and administrative costs . total general and administrative costs increased by $ 731,594 ( 83 % ) from comparison in the prior year . the significant increase included the fair value of $ 531,000 for warrants issued as payment for professional services rendered . additionally , legal fees and non-employee stock compensation increased $ 290,442 compared to the fiscal year ended january 1 , 2017. depreciation and other operating expenses . depreciation and other operating expenses declined by $ 98,957 ( 37 % ) , which was mostly reflected by the closing of the century city store . 13 loss from operations . the loss from operations during the year ended december 31 , 2017 increased by $ 546,854 ( 59 % ) as compared to the prior period mainly due to an increase in noncash stock compensation costs included in general and administrative expenses . story_separator_special_tag into an exchange agreement with st. george investments , llc , to replace the original promissory note with a new convertible promissory note ( “ note ” ) . the note carries a conversion clause that allows the holder to have a cashless conversion into shares of common stock for all or part of the principal , at a price equal to the average market price for 20 days prior to the conversion . as of january 1 , 2017 , the amount due under the promissory note was $ 193,450. during january and february of 2017. the holder converted $ 48,914 of its debt into 15,660,611 shares of common stock with a fair value of $ 48,914. in addition , the company paid $ 7,517 of the principal balance . on march 23 , 2017 , st. george investments , llc ( “ st . george ” ) served an arbitration demand and summons claiming that the company had breached its obligations under a convertible note by preventing st. george from converting the remaining balance of the note to common stock . the parties disagreed as to the conversion price set in the note agreement due to execution by the parties of different versions of the document . st. george claimed for additional damages . the company believed these claims lacked merit and the company retained counsel to vigorously story_separator_special_tag the restaurant design is intended to create a fun , casual , family atmosphere where children can interact with parents and each other and where everyone enjoys freshly prepared , organic , nutritious and reasonably priced meals . the original giggles n hugs opened its doors in february of 2008 and was located in the posh brentwood district of los angeles . the unique design and 1,500 square-foot play area was a huge success and solidified our proof of concept . however , due to the limited size of the location , our ability to offer “ drop-off ” services , one of our most popular features , was hindered . drop-off services allow parents to drop their children off in our play area and go shopping while their children play in a supervised environment . in addition , other factors such as lack of available parking , the location 's strip mall characteristics , and isolated location became problematic . as a result , we decided it was in our best interest to close the restaurant and secure a larger venue elsewhere . with the successful launch and proof of concept that was realized at our brentwood location , the company decided to expand to the westfield shopping mall in century city in december of 2010. the century city mall began a $ 700 million remodeling of the westfield shopping mall , which closed 90 % of the retailers , including the giggles n hugs store . on may 13 , 2016 , giggles n ' hugs , inc. entered into a termination of lease agreement with century city mall , llc ( “ landlord ” ) , accelerating the termination date of the lease dated january 13 , 2010 for its store located in westfield century city , los angeles , california . pursuant to the agreement , the lease terminated june 30 , 2016 and the landlord agreed to a monetary reimbursement of $ 350,000 which was received by june 26 , 2016. as such , sales from june 30 , 2016 only include operations from two stores , as compared to three stores in the prior fiscal year . the company continues to operate its restaurants in westfield mall in topanga , california and in the glendale galleria mall in glendale , california . 12 results of operations replace_table_token_2_th * not divisible by zero net sales . during the fiscal year ended december 31 , 2017 , net sales reflected a drop of $ 997,647 , a decline of 33 % , from the year ended january 1 , 2017. due to the major remodeling of the century city westfield mall , our century city store closed on june 30 , 2016. the remaining two stores combined had increased sales of 0.6 % . cost and operating expenses . total costs and operating expenses of $ 3,931,427 for the year ended december 31 , 2017 , reflected a slightly drop from $ 3,953,942 for the year ended january 1 , 2017. the decline of $ 22,515 ( 1 % ) was mainly due to multiple factors such as the closing of the century city store ; lower other operating expenses ; and lower depreciation . cost of operations . cost of operations during the year ended december 31 , 2017 decreased by $ 655,152 ( 26 % ) from comparison in prior year , of which $ 414,157 was attributable to the closing of the century city store on june 30 , 2016. the additional decrease of $ 240,995 was due to reduced food cost and renegotiation of lease at glendale store , which is more than offset by slightly higher labor cost and other restaurant costs . general and administrative costs . total general and administrative costs increased by $ 731,594 ( 83 % ) from comparison in the prior year . the significant increase included the fair value of $ 531,000 for warrants issued as payment for professional services rendered . additionally , legal fees and non-employee stock compensation increased $ 290,442 compared to the fiscal year ended january 1 , 2017. depreciation and other operating expenses . depreciation and other operating expenses declined by $ 98,957 ( 37 % ) , which was mostly reflected by the closing of the century city store . 13 loss from operations . the loss from operations during the year ended december 31 , 2017 increased by $ 546,854 ( 59 % ) as compared to the prior period mainly due to an increase in noncash stock compensation costs included in general and administrative expenses . story_separator_special_tag into an exchange agreement with st. george investments , llc , to replace the original promissory note with a new convertible promissory note ( “ note ” ) . the note carries a conversion clause that allows the holder to have a cashless conversion into shares of common stock for all or part of the principal , at a price equal to the average market price for 20 days prior to the conversion . as of january 1 , 2017 , the amount due under the promissory note was $ 193,450. during january and february of 2017. the holder converted $ 48,914 of its debt into 15,660,611 shares of common stock with a fair value of $ 48,914. in addition , the company paid $ 7,517 of the principal balance . on march 23 , 2017 , st. george investments , llc ( “ st . george ” ) served an arbitration demand and summons claiming that the company had breached its obligations under a convertible note by preventing st. george from converting the remaining balance of the note to common stock . the parties disagreed as to the conversion price set in the note agreement due to execution by the parties of different versions of the document . st. george claimed for additional damages . the company believed these claims lacked merit and the company retained counsel to vigorously
| no assurance can be given that any future financing will be available or , if available , that it will be on terms satisfactory to the company . even if the company is able to obtain additional financing , it may contain undue restrictions on its operations , in the case of debt financing or cause substantial dilution for our stockholders , in the case of equity financing . notes payables ggp limited partnership - on february 12 , 2013 , the company entered into a $ 700,000 promissory note payable agreement with ggp limited partnership ( “ lender ” ) to be used by the company for a portion of the construction work to be performed by the company under the lease by and between the company and glendale ii mall associates , llc . the note payable accrued interest at a rate of 10 % through october 15 , 2015 , 12 % through october 31 , 2017 , and 15 % through october 31 , 2023 and matures on october 31 , 2023. on august 12 , 2016 , the company entered into a third amendment on its lease at the glendale galleria . the amendment covered several areas , including adjustment to percentage rent payable , reduced the minimum rent payable , along with the payment and principal of promissory note . the promissory note was adjusted to a balance due of $ 763,261.57 from $ 683,316 , with zero percent interest , payable in equal monthly instalments of $ 5,300 through maturity of note on may 31 , 2028. the company imputed interest using a discount rate of 10 % to determine a fair value of the note of $ 433,521. the balance of note payable at december 31 , 2017 and january 1 , 2017 was $ 422,361 and $ 432,717 , respectively . the lender under the note is ggp limited partnership ( ggp ) . ggp is an affiliate of glendale ii mall associates , the lessor of the company 's glendale mall restaurant location . in accordance with the note agreement , an event of default would occur if the borrower defaults under the lease between the company and glendale ii mall associates . upon the occurrence of an event of default , the entire balance of the note payable and accrued interest would become due and payable , and the balance due becomes subject to a default interest rate ( which is 5 % higher than the defined interest rate ) . as december 31 ,
| Liquidity | 11,273 |
the prior year tax benefit reflects a one-time adjustment due to the tax rate reduction enacted through the tax cuts and jobs act in 2017 and a corresponding revaluation of our deferred taxes . net income : we had net income of $ 10.7 million the year ended december 31 , 2018 , which reflects the increased demand for our products and successful execution of 2018 business plans . this compares to $ 7.6 million for 2017 , all of which was generated by the one-time tax benefit discussed above . 18 201 7 results compared to 201 6 replace_table_token_10_th market segment information : replace_table_token_11_th 19 melt type information : replace_table_token_12_th the majority of our products are sold to service centers rather than the ultimate end market customers . the end market information in this annual report is our estimate based upon our knowledge of our customers and the grade of material sold to them , which they will in-turn sell to the ultimate end market customer . end market information : replace_table_token_13_th net sales : net sales for the year ended december 31 , 2017 increased $ 48.2 million , or 31.2 % , as compared to the same period in 2016. the increase in our sales primarily reflects a 25.1 % increase in consolidated tons shipped in 2017 , compared to 2016 , as demand for our products increased as a result of strengthening market conditions throughout 2017. in addition , a 4.9 % increase in sales dollars per ton was primarily due to product mix and better surcharge alignment . our product sales to all of our end markets increased as noted in the above table . our premium alloy sales were $ 27.3 million , or 13.5 % of total sales , for the year ended december 31 , 2017 , compared to $ 14.4 million , or 9.3 % of total sales , for the year ended december 31 , 2016. our premium alloy sales are primarily for the aerospace end market . gross margin : our gross margin , as a percentage of net sales , increased to 11.4 % in 2017 from 8.8 % for 2016. the increase in gross margin is a result of better alignment of melt costs and surcharges , and the realization of manufacturing and productivity savings . gross margin in 2017 was adversely impacted by temporarily higher and unplanned maintenance costs as well as by costly outsourcing , as the company ramped up its business in response to continued strong levels of backlog at a time of a tightening labor market . 20 selling , general and administrative expenses : our sg & a expenses consist primarily of employee costs , which include salaries , payroll taxes and benefit related costs , legal and accounting services , share compensation and insurance costs . our sg & a expenses increased by $ 1.3 million in the year ended december 31 , 2017 as compared to the year ended december 31 , 2016. approximately $ 1.0 million is due to increased employee costs , $ 0.2 million is due to higher share-based compensation expense , and $ 0.6 million of the increase is due to higher legal costs , reflecting external legal expenses related to a lawsuit against a supplier for unauthorized substitution of material and defense of a claim of non-compliant material . these increases in sg & a were partially offset by $ 0.6 million reduction in variable compensation . as a percentage of sales , our sg & a expenses were 9.3 % and 11.3 % , respectively , for the years ended december 31 , 2017 and 2016 , respectively . interest expense and deferred financing amortization : our interest costs on our debt increased to $ 4.0 million for the year ended december 31 , 2017 from $ 3.7 million for the year ended december 31 , 2016. approximately $ 0.2 million of this increase is due to higher interest rates and approximately $ 0.1 million is due to increased borrowings . the interest rate on our variable rate debt is determined by a libor-based rate plus an applicable margin based upon achieving certain ratios . our deferred financing costs are associated with our credit facility and the amended and restated convertible notes ( collectively , the “ notes ” ) . our deferred financing costs decreased to $ 0.7 million from $ 1.0 million for the years ended december 31 , 2017 and 2016 , respectively . the decrease in deferred financing costs is due to the 2016 write off of $ 0.8 million of deferred financing costs associated with our prior credit agreement when we entered into our new credit agreement in january 2016. other ( income ) expense : other income was less than $ 0.1 million in 2017 compared to approximately $ 0.2 million of expense for the same period of 2016. this change reflects foreign currency losses in 2016 of $ 0.2 million . benefit from income taxes : the 2017 income tax benefit of $ 7.6 million reflects a one-time adjustment due to the tax rate reduction enacted through the tax cuts and jobs act , fractionally offset by state tax items and new share compensation accounting guidance for 2017. net income ( loss ) : we had net income of $ 7.6 million for the year ended december 31 , 2017 , reflecting the one-time tax benefit noted above , compared to a net loss of $ 5.3 million for the year ended december 31 , 2016. liquidity and capital resources historically , we have financed our operations through cash provided by operating activities and borrowings on our credit facilities . on may 25 , 2018 , the company completed an underwritten , public offering involving the issuance and sale by the company of 1,224,490 shares of common stock at a public offering price of $ 24.50 per share . story_separator_special_tag million has been classified within current portion of long-term debt . additionally , the company has the option to further extend the maturity date of the notes to march 17 , 2021. extending the maturity date of the notes to march 17 , 2021 would require a principal payment in the aggregate amount of $ 2.0 million to be made in march 2020. the notes bore interest at a rate of 5.0 % per year through and including august 17 , 2017 and bear a rate of 6.0 % per year from and after august 18 , 2017. through and including june 18 , 2017 , all accrued and unpaid interest was payable semi-annually in arrears on each june 18 and december 18. after june 18 , 2017 , all accrued and unpaid interest is payable quarterly in arrears on each september 18 , december 18 , march 18 and june 18. the holder had the right to elect at any time on or prior to august 17 , 2017 to convert all or any portion of the outstanding principal amount of the notes . the holder 's conversion rights expired and are no longer subject to exercise . capital leases the company enters into capital lease arrangements from time to time , and the capital assets and obligations are recorded at the present value of minimum lease payments . the assets are included in property , plant and equipment , net on the consolidated balance sheets , and are depreciated over the respective lease terms which range from three to five years . the long-term component of the capital lease obligations is included in long-term debt and the current component is included in current portion of long-term debt . during 2017 , the company entered into capital lease agreements for which the net present value of the minimum lease payments , at inception , was $ 0.5 million . these amounts have been excluded from the consolidated statements of cash flows as they are non-cash . share-based activity we granted stock options and issued shares of our common stock to officers , employees , and non-employee directors during 2018 , 2017 and 2016 through our incentive compensation plans . refer to note 11 for further information . 24 contractual obligations at december 31 , 2018 , we had the following contractual principal , interest and purchase obligations : replace_table_token_14_th ( a ) amounts include interest expense , which was estimated based upon the december 31 , 2018 interest rate for our debt and assumes that debt will not be repaid until its maturity . the less than 1 year period includes a $ 2 million required principal payment on the notes in 2019. the 1-3 years period includes the maturity of the remaining $ 17 million of the notes . ( b ) purchase obligations include the value of all open purchase orders with established quantities and purchase prices as well as minimum purchase commitments and operating leases . contingent items product claims . we are subject to various claims and legal actions that arise in the normal course of conducting business . there were no material product claims outstanding at december 31 , 2018. environmental matters . we , as well as other steel companies , are subject to demanding environmental standards imposed by federal , state and local environmental laws and regulations . we are not aware of any environmental condition that currently exists at any of our facilities that are probable or reasonably possible of having a material impact on our results of operations or liquidity . we are aware of energy usage concerns relating to climate change ; however , we are not aware of any pending regulations that are expected to have a material impact on our results of operations or liquidity . legal matters . from time to time , various lawsuits and claims have been or may be asserted against us relating to the conduct of our business , including routine litigation relating to commercial and employment matters . the ultimate cost and outcome of any litigation or claim can not be predicted with certainty . management believes , based on information presently available , that the likelihood that the ultimate outcome of any such pending matter will have a material adverse effect on its financial condition , or liquidity or a material impact to its results of operations is remote , although the resolution of one or more of these matters may have a material adverse effect on its results of operations for the period in which the resolution occurs . critical accounting estimates the company 's revenues are primarily composed of sales of products . revenue from the sale of products is recognized when the company satisfies its performance obligation under a contract by transferring control of the promised product to its customer , which in most cases coincides with shipment of the related product . certain sales qualify for over-time revenue recognition . sales of certain specified product grades and shapes , and sales from conversion services , are recognized over-time . the company 's identification of and accounting for these sales is discussed further in note 2. management regularly monitors the ability to collect its unpaid sales invoices and the valuation of its receivables . the allowance for doubtful accounts includes specific reserves for the value of outstanding invoices issued to customers that are deemed potentially not collectible . inventories are stated at the lower of cost or net realizable value . the cost of inventory is principally determined by the weighted average cost method for material and operation costs . an inventory reserve is provided for material on hand for which management believes cost exceeds net realizable value . we reserve for slow-moving inventory and inventory that is being evaluated under our quality control process . the reserves are based upon management 's expected method of disposition . 25 property , plant and equipment ( “ pp
| we decreased borrowings under our credit agreement , notes and capital leases by $ 32.2 million , and entered into the new credit agreement during the year . financing activities were also impacted by borrowings related to the mid-size bar cell capital project at our dunkirk , ny facility . these borrowings were made in conjunction with utilization of the nmtc financing program and higher working capital levels . during 2017 , financing activities provided $ 7.0 million in cash . we increased borrowings under the credit facility by $ 11.5 million , paid $ 5.1 million on the term loan and capital leases , and received $ 0.6 million in proceeds from the issuance of common stock . we believe that our cash flows from continuing operations , as well as available borrowings under our credit facility , are adequate to satisfy our working capital , capital expenditure requirements , and other contractual obligations for the foreseeable future , including at least the next 12 months . 22 raw materials the cost of raw materials represents approximately 40 % of the cost of products sold in 2018. the major raw materials used in our operations include nickel , chrome , molybdenum and carbon scrap . the average price per pound of nickel in 2018 was $ 5.95 , which was 26 % higher than in 2017. the average price per pound of molybdenum in 2018 was $ 11.96 , which was 45 % higher than in 2017. the average price per pound of carbon scrap in 2018 was $ 0.19 , which was 12 % higher than in 2017. the average price per pound of chrome decreased 6 % compared to 2017 to $ 1.37. we maintain sales price surcharge mechanisms on certain of our products , priced at time of order or shipment , to mitigate the risk of substantial raw material cost fluctuations . the market values for these raw materials and others continue to fluctuate based on supply and demand , market disruptions and other factors .
| Liquidity | 858 |
in 2018 , the finalization of the purchase price allocation increased the bargain gain on purchase $ 20 million . the operating results of the acquisition have been included in our results beginning november 2017. see note 4 — tembec acquisition of our consolidated financial statements for additional information . high purity cellulose we manufacture and market high purity cellulose , which is sold as either cellulose specialties or commodity products . we are the leading global producer of cellulose specialties , which are primarily used in dissolving chemical applications that require a highly purified form of cellulose . pricing for our cellulose specialties products is typically set by contract for a duration of at least one year based on discussions with customers . our commodity products primarily consist of commodity viscose and absorbent materials . commodity viscose is a raw material required for the manufacture of viscose staple fibers which are used in woven and non-woven applications . absorbent materials , typically referred to as fluff fibers , are used as an absorbent medium in consumer products . pricing for commodity products is typically referenced to published indexes or based on publicly available spot market prices . sales of chemicals and energy , a majority of which are by-products , are included in the high purity cellulose segment . our four production facilities , located in the u.s. , canada and france , have a combined annual production capacity of approximately 775,000 metric tons of cellulose specialties or commodity products . additionally , we have dedicated approximately 245,000 metric tons of annual production to commodity products . wood fiber , chemicals , and energy represent approximately 28 percent , 14 percent and 6 percent , respectively , of the per metric ton cost of sales . labor , manufacturing and maintenance supplies , depreciation , manufacturing overhead and transportation costs represent the remaining cost of sales . forest products we manufacture and market high-quality construction-grade lumber in north america . the lumber , primarily spruce , pine , or fir , is used in the construction of residential and multi-family homes , light industrial and commercial facilities , and the home repair and remodel markets . the chips , manufactured as a by-product of the lumber manufacturing process , are used in our canadian high purity cellulose , pulp and newsprint plants . pricing for lumber is typically referenced to published indexes marketed through our internal sales team . our seven production facilities located in canada have a targeted annual production capacity of approximately 770 million board feet of lumber . wood pulp and energy represents approximately 45 percent and 5 percent , respectively , of the per million board feet cost of sales . labor , manufacturing and maintenance supplies , depreciation , manufacturing overhead and transportation costs represent the remaining cost of sales . paperboard we manufacture and market paperboard that is used for printing documents , brochures , promotional materials , paperback book or catalog covers , file folders , tags , and tickets . pricing for paperboard is typically referenced to published indices and marketed through our internal sales team . our production facility located in canada has the capacity to annually produce 180,000 metric tons of paperboard . wood fiber , chemicals , and energy represent approximately 64 percent , 14 percent and 5 percent , respectively , of the per metric ton cost of sales . labor , manufacturing and maintenance supplies , depreciation , manufacturing overhead and transportation costs represent the remaining cost of sales . pulp & newsprint pulp 25 we manufacture and market high-yield pulp which is used by paper manufacturers to produce paperboard , packaging , printing and writing papers and a variety of other paper products . pricing for high-yield pulp is typically referenced to published indexes marketed through our internal sales team . our production facility located in canada has the capacity to annually produce 300,000 metric tons of high-yield pulp . wood fiber , chemicals , and energy represent approximately 20 percent , 12 percent and 11 percent , respectively , of the per metric ton cost of sales . labor , manufacturing and maintenance supplies , depreciation , manufacturing overhead and transportation costs represent the remaining cost of sales . newsprint we manufacture newsprint , a paper grade used to print newspapers , advertising materials and other publications . pricing for newsprint is typically referenced to published indices and marketed through our internal sales team . our production facility located in canada has the capacity to annually produce 205,000 metric tons of newsprint . wood fiber and chemicals represent approximately 16 percent and 4 percent , respectively , of the per metric ton cost of sales . labor , manufacturing and maintenance supplies , depreciation , manufacturing overhead and transportation costs represent the remaining cost of sales . outlook recent developments action on tariffs on imported goods into china on february 18 , the tariff commission of the state council in china announced a notice to eliminate the tariff on certain raw material purchases by accepting application by the relevant chinese entities for this removal beginning on march 2 , 2020. the list of raw materials eligible for such tariff elimination include dissolving wood pulp ( including cellulose specialties and viscose ) and fluff pulp . based upon our understanding of the notice and process , we believe that tariffs on our products into china will be eliminated by late first or early second quarter of 2020. we had approximately $ 230 million of sales from the u.s. to china in 2019. coronavirus in late 2019 and early 2020 , a strain of coronavirus was reported in china . in january 2020 , in response to human health concerns , chinese authorities ordered some businesses and ports closed . we have been in regular contact with our customers . to date , we have not seen a slowdown in order volumes , shipments or cash collections for our cellulose specialties customers . story_separator_special_tag in high-yield pulp , we have seen some slowdown of orders , which is being offset by sales to other geographic regions . given the dynamic and fluid nature of this situation , the potential financial impact , if any , can not be reasonably estimated at this time . momentum in lumber prices lumber prices have seen recent improvements supported by strong housing starts of 1.6 million in december and january , representing the best housing start numbers in over a decade . lumber index prices have improved by $ 45 per thousand board feet since the start of the year and the tone in the market is better . on february 3 , the u.s. department of commerce announced a preliminary determination that combined anti-dumping and countervailing duties on the company 's softwood lumber would fall to 8.2 percent from 20.2 percent beginning in august , as it relates to the company , which deposited $ 23 million of duties in 2019. a final determination is expected in august . high purity cellulose for 2020 , we expect cellulose specialties prices to increase approximately 2 percent on a contractual basis as a result of our decision to enhance product margins . as anticipated , cellulose specialties volumes are expected to decline due to a ramp down in certain contractual volumes driven by decisions not to pursue lower margin cellulose specialties business , a negative impact expected from sales timing and forecasted weakness in automotive end markets . driven by the u.s.-china trade dispute and slowing global economic growth , pricing for commodity products ( primarily viscose and fluff pulp ) are currently at decades lows . we expect these commodity prices to increase progressively throughout the year but on average be below the average pricing for 2019. commodity sales volumes are expected to increase materially in 2020 due to improved operations , asset optimization and lower cellulose specialties volumes . total sales volumes for the segment are expected to increase mid-single digits percent with commodity sales volumes anticipated to account for approximately 50 percent of the total sales volume in 2020. overall , we anticipate segment ebitda to increase modestly from last year ; however , the extent of this improvement will be primarily dependent upon the level of improvement in commodity product pricing and the impact of the current health crisis in china . 26 forest products u.s. housing starts and remodeling activity are the key drivers for lumber demand . u.s. housing starts were reported at a seasonally adjusted annual rate of 1.6 million in december and january , the highest figure in 13 years . residential-improvement expenditures were also revised sharply higher to end 2019 ; as a result , demand on north american lumber mills is rebounding . this increased demand coupled with reduced supply are leading to improved pricing . duties on lumber sales from canada into the u.s. will continue to impact financial results . the u.s. department of commerce 's preliminary determination impacting these duties is expected to significantly reduce these impacts beginning in august . since the duties started in 2017 , we have paid approximately $ 59 million of lumber duties . based on current market conditions and prices , we expect improved results in 2020 from 2019 performance . paperboard paperboard prices and volumes are expected to remain relatively constant in 2020. on a full year comparable basis , margins should improve as raw material costs for pulp have declined . pulp & newsprint high-yield pulp prices appear to have reached the bottom in the fourth quarter of 2019. we expect markets to improve gradually from the bottom of the cyclical lows but remain below 2018 realized prices . newsprint prices remain challenged due to demand weakness ; however , sales volumes are expected to increase due to improved productivity . overall , the segment results are expected to be flat to slightly up in 2020 , subject to the assumptions above . in addition , a significant portion of high-yield pulp sales are to china and it is unclear how the current health crisis will impact the business . reconciliation of non-gaap measures for a reconciliation of ebitda to net income , see item 7 — management 's discussion and analysis of financial condition and results of operations — performance and liquidity indicators . 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 consolidated financial statements . 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 . new accounting pronouncements see note 2 — summary of significant accounting policies and new accounting pronouncements of our consolidated financial statements for a discussion of recently issued accounting pronouncements that may affect our financial results and disclosures in future periods . revenue recognition and measurement revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied . the majority of our contracts have a single performance obligation to transfer products . accordingly , we recognize revenue when control has been transferred to the customer . generally , control transfers upon delivery to a location in accordance with terms and conditions of the sale . changes in customer contract terms and conditions , as well as the timing of orders and shipments , may have an impact on the timing of revenue recognition . revenue is measured as the amount of consideration we expect to receive in exchange for transferring our products and is generally based upon contractual arrangements with customers or published indices . we sell our products both directly to customers and through distributors and agents typically under agreements with payment terms less than 90 days .
| we recognized a $ 20 million gain on bargain purchase during 2018 primarily from tax-related adjustments and the sale of the resins business as a result of finalizing the purchase price allocation of the acquisition . see note 4 — tembec acquisition . income taxes the full year 2019 effective tax rate from continuing operations was a benefit of 20 percent compared to an expense of 21 percent for the same period in 2018. the effective tax rate benefit differs from the federal statutory rate of 21 percent primarily due to nondeductible interest expense in the u.s. , tax credits , excess tax deductions on vested stock compensation , u.s. global intangible low-taxed income , and different statutory tax rates of foreign operations . see note 20 — income taxes of our consolidated financial statements for additional information . discontinued operations income from discontinued operations increased $ 67 million and reflects the $ 84 million gain from the sale of the matane mill in 2019. excluding the gain , income from discontinued operations declined $ 17 million during 2019 principally driven from lower sales prices and professional fees to sell the operations . see note 3 — discontinued operations of our consolidated financial statements for additional information . 31 operating results by segment high purity cellulose replace_table_token_7_th changes in high purity cellulose net sales are as follows : net sales ( in millions ) 2018 changes attributable to : 2019 price volume/mix cellulose specialties $ 832 $ ( 16 ) $ ( 51 ) $ 765 commodity products and other 244 ( 33 ) 69 280 other sales ( a ) 116 — ( 34 ) 82 total net sales $ 1,192 $ ( 49 ) $ ( 16 ) $ 1,127 ( a ) other sales include sales of electricity , resins , lignin and other by-products to third parties . the absence of the resins business in 2019 resulted in the decline of $ 26 million in other
| ROO | 9,263 |
the new standard also requires expanded disclosures regarding leasing arrangements . the new standard becomes effective for the company in the first quarter of fiscal year 2019 and early adoption is permitted . the new standard is required to be adopted using the modified retrospective approach and requires application of the new story_separator_special_tag overview open surgery remains the predominant form of surgery and is used in almost every area of the body . however , the large incisions required for open surgery create trauma to patients , typically resulting in longer hospitalization and recovery times , increased hospitalization costs , and additional pain and suffering relative to mis , where mis is available . for over three decades , mis has reduced trauma to patients by allowing selected surgeries to be performed through small ports rather than large incisions . mis has been widely adopted for certain surgical procedures . da vinci surgical systems enable surgeons to extend the benefits of mis to many patients who would otherwise undergo a more invasive surgery by using computational , robotic and imaging technologies to overcome many of the limitations of conventional mis . surgeons using a da vinci surgical system operate while seated comfortably at a console viewing a 3-d representation of an hd image of the surgical field . this immersive visualization connects surgeons to the surgical field and their instruments . while seated at the console , the surgeon manipulates instrument controls in a natural manner , similar to the open surgery technique . our technology is designed to provide surgeons with a range of motion of mis instruments in the surgical field analogous to the motions of a human wrist , while filtering out the tremor inherent in a surgeon 's hand . in designing our products , we focus on making our technology easy and safe to use . our products fall into four broad categories - the da vinci surgical systems , insite and firefly fluorescence imaging systems ( “ firefly ” ) , instruments and accessories ( e.g. , endowrist , endowrist vessel sealer , da vinci single-site and endowrist stapler ) , and training technologies . we have commercialized the following da vinci surgical systems : the da vinci standard surgical system , commercialized in 1999 , the da vinci s surgical system , commercialized in 2006 , the da vinci si surgical system , commercialized in 2009 , the da vinci xi surgical system , commercialized in 2014 , and the da vinci x surgical system , commercialized in the second quarter of 2017. these systems include a surgeon 's console ( or consoles ) , imaging electronics , a patient-side cart , and computational hardware and software . we offer over 80 different multi-port da vinci instruments enabling surgeons ' flexibility in choosing the types of tools needed in a particular surgery . these multi-port instruments are generally robotically controlled versions of surgical tools that surgeons would use in either open or laparoscopic surgery . we offer advanced instrumentation for the da vinci si , da vinci xi , and da vinci x platforms , including the endowrist vessel sealer and endowrist stapler products , to provide surgeons with sophisticated , computer-aided tools to precisely and efficiently interact with tissue . da vinci x and da vinci xi surgical systems share the same instruments whereas da vinci si surgical system uses different instruments . we offer single-site instruments for use with the da vinci si , da vinci xi , and da vinci x surgical systems . single-site instruments are most commonly used in cholecystectomy and hysterectomy procedures . single-site instruments enable surgeons to also perform surgery through a single port via the patient 's belly button , resulting in the potential for virtually scarless results . training technologies include our da vinci skills simulator , da vinci connect remote case observation and mentoring tool , and our dual console for use in surgeon proctoring and collaborative surgery . business model overview we generate revenue from the initial capital sales of da vinci surgical systems , including systems under sales-type lease arrangements , and revenue from operating lease arrangements and from the subsequent sales of instruments , accessories , and service . the da vinci surgical system generally sells for approximately between $ 0.5 million and $ 2.5 million , depending upon the model , configuration and geography , and represents a significant capital equipment investment for our customers . our instruments and accessories have limited lives and will either expire or wear out as they are used in surgery , at which point they need to be replaced . we typically enter into service contracts at the time systems are sold at an annual rate of approximately $ 80,000 to $ 170,000 , depending upon the configuration of the underlying system and composition of the services offered under the contract . these service contracts have generally been renewed at the end of the initial contractual service periods . recurring revenue recurring revenue consists of instrument and accessory revenue , service revenue , and operating lease revenue . recurring revenue increased to $ 2.2 billion , or 72 % of total revenue in 2017 , compared with $ 1.9 billion , or 71 % of total revenue in 2016 , and $ 1.7 billion , or 70 % of total revenue in 2015 . instrument and accessory revenue has generally grown at a faster rate than system revenue in the last few fiscal years . instrument and accessory revenue increased to $ 1.6 billion in 2017 , compared with $ 1.4 billion in 2016 and $ 1.2 billion in 2015 . the growth of instrument and accessory revenue largely reflect continued procedure adoption . 38 service revenue growth has been driven by the growth of the base of installed da vinci surgical systems . story_separator_special_tag in april 2017 , we received ce mark clearance for our da vinci x surgical system in europe . following the ce mark , in may 2017 , we received u.s. food and drug administration ( “ fda ” ) clearance to market our da vinci x surgical system in the u.s. we received regulatory clearance for the da vinci x surgical system in south korea in september 2017 ( see the description of the da vinci x surgical system in the new product introductions section below ) . regulatory clearances for da vinci x surgical system may be received in other markets over time . in january 2016 , we received fda clearance for our integrated table motion product . in march 2016 , we received fda 510 ( k ) clearances in the u.s. and ce mark clearances in europe for single-site instruments and the 30mm endowrist stapler products for the da vinci xi surgical system ( see the description of the endowrist stapler 30 in the new product introductions section below ) . in april 2014 , we received fda clearance to market our da vinci single port surgical system in the u.s. for single-port urologic surgeries . at the time , we decided not to market that version of the da vinci single port surgical system . we instead elected to pursue the necessary modifications to integrate it into our fourth generation da vinci xi/x product family as a dedicated single port patient console compatible with the existing da vinci xi/x surgeon console , vision cart , and other equipment . we have since completed these modifications and executed clinical evaluations of the product . in december 2017 , we submitted our form 510 ( k ) for this da vinci single port surgical system for certain urology procedures . in the future , we intend to file additional form 510 ( k ) s for procedures in which a single small entry point to the body and parallel delivery of instruments is important . such surgeries could include those performed through a natural orifice like the mouth for head and neck procedures or those performed through a single skin incision . we obtained approval from the japanese ministry of health , labor , and welfare ( “ mhlw ” ) for our da vinci xi surgical system in march 2015. national reimbursement status was received for dvp procedures in japan effective april 2012 and for da vinci partial nephrectomy procedures in april 2016. with our support , japanese university hospitals and surgical societies are seeking reimbursement for additional procedures through the mhlw 's senshin iryo ( advanced medical care ) processes as well as alternative reimbursement processes . there are multiple pathways to obtain reimbursement for procedures including those that require in-country clinical data/economic data . reimbursements are considered in april of even numbered years . in january 2018 , a committee of the mhlw recommended 12 additional procedures for reimbursement . the reimbursement levels for each procedure is uncertain and may be inadequate for broad adoption . there can be no assurance that we will gain additional reimbursements for the procedures or at the times we have targeted . if we are not successful in obtaining additional regulatory clearances , and adequate procedure reimbursements for future products and procedures , then the demand for our products in japan could be limited . recalls and corrections medical device companies have regulatory obligations to correct or remove medical devices in the field that could pose a risk to health . the definition of “ recalls and corrections ” is expansive and includes repair , replacement , inspections , relabeling , and issuance of new or additional instructions for use or reinforcement of existing instructions for use and training when such actions are taken for specific reasons of safety or compliance . these field actions require stringent documentation , reporting , and monitoring worldwide . there are other actions a medical device manufacturer may take in the field without reporting , including , but not limited to , routine servicing and stock rotations . as we determine whether a field action is reportable in any regulatory jurisdiction , we prepare and submit notifications to the appropriate regulatory agency for the particular jurisdiction . regulators can require the expansion , reclassification , or change in scope and language of the field action . in general , upon submitting required notifications to regulators regarding a field action which is a recall or correction , we will notify customers regarding the field action , provide any additional documentation required in their national language , and arrange , as required , return or replacement of the affected product or a field service visit to perform the correction . field actions as well as certain outcomes from regulatory activities can result in adverse effects on our business , including damage to our reputation , delays by customers of purchase decisions , reduction or stoppage of the use of installed systems , and reduced revenue as well as increased expenses . 40 procedures we model patient value as equal to procedure efficacy / invasiveness . in this equation procedure efficacy is defined as a measure of the success of the surgery in resolving the underlying disease and invasiveness is defined as a measure of patient pain and disruption of regular activities . when the patient value of a da vinci procedure is greater than that of alternative treatment options , patients may benefit from seeking out surgeons and hospitals that offer da vinci surgery , which could potentially result in a local market share shift . da vinci procedure adoption occurs procedure by procedure , market by market , and is driven by the relative patient value and total treatment costs of da vinci procedures as compared to alternative treatment options for the same disease state or condition . worldwide procedures da vinci systems and instruments are regulated independently in various countries and regions of the world .
| 2017 financial highlights total revenue increased by 16 % to $ 3.1 billion for the year ended december 31 , 2017 , compared with $ 2.7 billion for the year ended december 31 , 2016. approximately 877,000 da vinci procedures were performed during the year ended december 31 , 2017 , an increase of approximately 16 % compared with approximately 753,000 for the year ended december 31 , 2016 . 43 instrument and accessory revenue increased by 17 % to $ 1.6 billion for the year ended december 31 , 2017 , compared with $ 1.4 billion for the year ended december 31 , 2016 . systems revenue increased by 15 % to $ 910.2 million for the year ended december 31 , 2017 , compared with 791.6 million for the year ended december 31 , 2016 . a total of 684 da vinci surgical systems were shipped for the year ended december 31 , 2017 , compared with 537 for the year ended december 31 , 2016 . as of december 31 , 2017 , we had a da vinci surgical system installed base of approximately 4,409 systems , an increase of approximately 13 % compared with the installed base as of december 31 , 2016 . gross profit as a percentage of revenue increased to 70.1 % for the year ended december 31 , 2017 , compared with 69.9 % for the year ended december 31 , 2016 . gross profit for the year ended december 31 , 2017 , was reduced by $ 7.8 million related to a litigation settlement charge . gross profit for the year ended december 31 , 2016 , benefited from a $ 7.1 million medical device excise tax ( “ mdet ” ) refund . operating income increased by 12 % to $ 1,054.6 million for the year ended december 31 , 2017 , compared with $ 945.2 million for the year ended december 31 , 2016 .
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32 mobile gaming and free-to-play games wide adoption of smartphones globally and the free-to-play business model on mobile platforms have increased the total addressable audience for gaming significantly by introducing gaming to new age groups and new regions and allowing gaming to occur more widely outside the home . mobile gaming is estimated to be larger than console and pc gaming , and continues to grow at a significant rate . king is a leading developer of mobile and free-to-play games , and our other business units have mobile efforts underway that present the opportunity for us to expand the reach of , and drive additional player investment in , our franchises . the 2019 launch of call of duty : mobile is an example of these efforts . in addition , the free-to-play business model , which allows players to try a new game with no upfront cost , has begun to receive broader acceptance on pc and console platforms . this provides opportunities for us to increase the reach of our franchises through free-to-play offerings , which , in turn , provides opportunities to further drive player investment , as was seen with our recent call of duty : warzone release . concentration of sales among the most popular franchises the top titles in the industry are also becoming more consistent as players and revenues concentrate more heavily in established franchises . of the top 10 gaming franchises in the u.s. in 2020 , all 10 were established prior to 2020. a significant portion of our revenues historically has been derived from video games based on a few popular franchises , and these video games have also been responsible for a disproportionately higher percentage of our profits . for example , in 2020 , the call of duty , candy crush , and world of warcraft franchises , collectively , accounted for 76 % of our consolidated net revenues—and a significantly higher percentage of our operating income . in addition to investing in new content for our top franchises , with the aim of releasing such content more frequently , we are continually exploring additional ways to expand those franchises , such as our recent release of activision 's call of duty : warzone . additionally , we have been increasing our development efforts to focus on expanding our franchises to the mobile platform , as demonstrated by the release of call of duty : mobile , as well as our plans for diablo immortal and crash bandicoot : on the run ! , which are both currently in development . overall , we expect that a limited number of popular franchises will continue to produce a disproportionately high percentage of our , and the industry 's , revenues and profits in the near future . accordingly , our ability to maintain our top franchises and our ability to successfully compete against our competitors ' top franchises can significantly impact our performance . recurring revenue business models increased consumer online connectivity has allowed us to offer players new investment opportunities and to shift our business further towards a more consistently recurring and year-round model . while our business does continue to experience some periods of “ seasonality ” driven primarily by the timing of our releases of new premium full games , our in-game content and free-to-play offerings allow our players to access and invest in new content throughout the year . this incremental content not only provides additional high-margin revenues , but it can also increase player engagement . opportunities to expand franchises outside of games our fans spend significant time engaging in our franchises and investing through purchases of our game content , including full games and in-game content . given the passion our players have for our franchises , we believe there are emerging opportunities to drive additional engagement and investment in our franchises outside of games , such as with our overwatch and call of duty leagues . our efforts to build these adjacent o pportunities are still relatively nascent . 33 upcoming content release highlights in the second half of 2021 , we plan to release the next premium title in our call of duty franchise . in addition , throughout the year we expect to deliver ongoing content for our various franchises , including continued in-game content for call of duty : black ops cold war , which includes seasonal content updates for call of duty : warzone , seasonal content updates for call of duty : mobile , content updates for w orld of warcraft , expansion packs and content updates for hearthstone , and continued releases of content , features , and services across king 's portfolio with an ongoing focus on the candy crush franchise . we will also continue to invest in opportunities that we think have the potential to drive our growth over the long-term , including continuing to build on our advertising initiatives and investments in mobile titles , some of which we anticipate will launch in 2021 , including crash bandicoot : on the run and diablo immortal . 34 consolidated statements of operations data the following table sets forth consolidated statements of operations data for the periods indicated ( amounts in millions ) and as a percentage of total net revenues , except for cost of revenues , which are presented as a percentage of associated revenues : replace_table_token_5_th ( 1 ) represents the loss on extinguishment of debt we recognized in connection with our debt financing activities during the year ended december 31 , 2020. refer to note 13 of the notes to the consolidated financial statements included in item 8 of this annual report on form 10-k for further disclosures regarding our debt obligations . 35 consolidated net revenues the key drivers of changes in our consolidated results , operating segment results , and sources of liquidity are presented in the order of significance . story_separator_special_tag the following table summarizes our consolidated net revenues and in-game net revenues ( amounts in millions ) : replace_table_token_6_th ( 1 ) in-game net revenues primarily includes the net amount of revenue recognized for microtransactions and downloadable content during the period . consolidated net revenues the increase in consolidated net revenues for 2020 , as compared to 2019 , was primarily driven by an increase in revenues of $ 1.9 billion due to higher revenues from : call of duty : modern warfare , which was released in october 2019 , as compared to call of duty : black ops 4 , which was released in october 2018 ; call of duty : mobile , which was released in october 2019 ; world of warcraft , which includes the release of world of warcraft : shadowlands in november 2020 ; our distribution business ; the candy crush franchise ; and the call of duty franchise catalog titles . the increase was partially offset by a decrease in revenues of $ 339 million due to lower revenues from : overwatch ; call of duty : black ops cold war , which was released in november 2020 , as compared to call of duty : modern warfare ; and sekiro : shadows die twice , which was released in march 2019. in-game net revenues the increase in in-game net revenues for 2020 , as compared to 2019 , was primarily driven by an increase in in-game net revenues of $ 1.2 billion due to higher in-game net revenues from : call of duty : modern warfare , as compared to call of duty : black ops 4 ; and call of duty : mobile . 36 operating segment results we have three reportable segments—activision , blizzard , and king . our operating segments are consistent with the manner in which our operations are reviewed and managed by our chief executive officer , who is our chief operating decision maker ( “ codm ” ) . the codm reviews segment performance exclusive of : the impact of the change in deferred revenues and related cost of revenues with respect to certain of our online-enabled games ; share-based compensation expense ; amortization of intangible assets as a result of purchase price accounting ; fees and other expenses ( including legal fees , expenses , and accruals ) related to acquisitions , associated integration activities , and financings ; certain restructuring and related costs ; and certain other non-cash charges . the codm does not review any information regarding total assets on an operating segment basis , and accordingly , no disclosure is made with respect thereto . our operating segments are also consistent with our internal organizational structure , the way we assess operating performance and allocate resources , and the availability of separate financial information . we do not aggregate operating segments . information on the reportable segment net revenues and segment operating income are presented below ( amounts in millions ) : replace_table_token_7_th ( 1 ) intersegment revenues reflect licensing and service fees charged between segments . 37 reconciliations of total segment net revenues and total segment operating income to consolidated net revenues and consolidated income before income tax expense are presented in the table below ( amounts in millions ) : replace_table_token_8_th ( 1 ) includes other income and expenses from operating segments managed outside the reportable segments , including our distribution business . also includes unallocated corporate income and expenses . ( 2 ) since certain of our games are hosted online or include significant online functionality that represents a separate performance obligation , we defer the transaction price allocable to the online functionality from the sale of these games and then recognize the attributable revenues over the relevant estimated service periods , which are generally less than a year . the related cost of revenues is deferred and recognized as an expense as the related revenues are recognized . this table reflects the net effect from the deferrals of revenues and recognition of deferred revenues , along with the related cost of revenues , on certain of our online enabled products . ( 3 ) intersegment revenues reflect licensing and service fees charged between segments . ( 4 ) reflects the impact of other unusual or unique tax-related items and activities . segment net revenues activision the increase in activision 's segment net revenues for 2020 , as compared to 2019 , was primarily due to higher revenues from : call of duty : modern warfare , which was released in october 2019 , as compared to call of duty : black ops 4 , which was released in october 2018 ; call of duty : mobile , which was released in october 2019 ; and the call of duty franchise catalog titles . 38 the increase was partially offset by lower revenues from sekiro : shadows die twice , which was released in march 2019. blizzard the increase in blizzard 's segment net revenues for 2020 , as compared to 2019 , was primarily due to higher revenues from world of warcraft , which includes the release of world of warcraft : shadowlands in november 2020. the increase was partially offset by lower revenues from overwatch . king the increase in king 's net revenues for 2020 , as compared to 2019 , was primarily due to higher revenues from advertising and in-game player purchases , primarily in the candy crush franchise . segment income from operations activision the increase in activision 's operating income for 2020 , as compared to 2019 , was primarily due to higher segment net revenues . the increase was partially offset by : higher cost of revenues and marketing costs for the call of duty franchise ; and higher product development costs driven by higher personnel bonuses as a result of strong business performance .
| content release and event highlights throughout the year we regularly release new content through seasonal and live services updates within our franchises , including call of duty , candy crush , and hearthstone . in addition to these updates , notable game releases during 2020 , included : activision 's call of duty : warzone , a free-to-play experience on console and pc platforms ; activision 's tony hawk 's tm pro skater tm 1 and 2 ; activision 's crash tm bandicoot 4 : it 's about time tm ; activision 's call of duty : black ops cold war ; and blizzard 's world of warcraft : shadowlands . international sales international sales are a fundamental part of our business . an important element of our international strategy is to develop content that is specifically directed toward local cultures and customs . net revenues from international sales accounted for approximately 52 % , 54 % , and 54 % of our total consolidated net revenues for the years ended december 31 , 2020 , 2019 , and 2018 , respectively . the majority of our net revenues from foreign countries are generated by consumers in australia , canada , china , france , germany , italy , japan , south korea , spain , sweden , and the u.k. our international business is subject to risks typical of an international business , including , but not limited to , foreign currency exchange rate volatility and changes in local economies . accordingly , our future results could be materially and adversely affected by changes in foreign currency exchange rates and changes in local economies . 30 operating metrics the following operating metrics are key performance indicators that we use to evaluate our business . the key drivers of changes in our operating metrics are presented in the order of significance . net bookings and in-game net bookings we monitor net bookings and in-game net bookings as key operating metrics in evaluating the performance of our business because they enable an analysis of performance based on the timing of actual transactions with our customers and provide a more timely indication of trends in our operating results . net bookings is the net amount of
| ROO | 8,149 |
31 the following tables summarize our investments in real estate and mortgage and other notes receivable as of december 31 , 2020 ( $ in thousands ) : replace_table_token_7_th replace_table_token_8_th for the year ended december 31 , 2020 , operators of facilities who provided 3 % or more and collectively 79 % of our total revenues were ( parent company , in alphabetical order ) : bickford senior living ; chancellor health care ; discovery senior living ; health services management ; holiday retirement ; life care services ; national healthcare corporation ; senior living communities ; senior living management ; and the ensign group . as of december 31 , 2020 , our average effective annualized rental income was $ 8,724 per bed for snfs , $ 11,704 per unit for slcs , $ 14,355 per unit for alfs , $ 12,701 per unit for ilfs , $ 22,747 per unit for efcs , $ 39,330 per bed for hospitals , and $ 8 per square foot for mobs . 32 covid-19 pandemic the world health organization declared coronavirus disease 2019 ( “ covid-19 ” ) a pandemic on march 11 , 2020. the continually evolving pandemic has resulted in a widespread health crisis adversely affecting governments , businesses , and financial markets . in response to the covid-19 pandemic , many state , local and federal agencies instituted various health and safety measures including temporary closures of many businesses , “ shelter in place ” orders , and social distancing guidelines that remain in place to some degree . the covid-19 pandemic and related health and safety measures have created a significant strain on the operations of many of the company 's tenants , operators and borrowers . the federal government passed the coronavirus aid , relief , and economic security ( “ cares ” ) act into law in march 2020 that provides economic assistance and other forms of relief from the financial hardships caused by the covid-19 pandemic . funds have been distributed by various government agencies including the us department of treasury and the department of health and human services ( “ hhs ” ) which oversees the distributions to healthcare providers who participate in various government reimbursement programs ( e.g . , medicare ) . this federal government assistance has mitigated to some extent the negative financial impact of the covid-19 pandemic for certain of our tenants and operators who are eligible . revenues for the operators of our properties are significantly impacted by occupancy . building occupancy rates have been and may continue to be adversely affected by the covid-19 pandemic if it continues to cause sustained negative trends such as early resident move-outs , delays in admitting new residents , or other collateral events such as a weakening in the housing market , a typical funding source for our senior housing operators ' customers . in addition , actions our operators take to address outbreaks could materially increase their operating costs , including costs related to enhanced health and safety precautions among other measures . a decrease in occupancy or increase in costs could have a material adverse effect on the ability of our operators to meet their financial and other contractual obligations to us , including the payment of rent , as well as on our results of operations . for the year ended december 31 , 2020 , contractual cash collected and deferred or abated was as follows : replace_table_token_9_th 1 contractual cash collected for january 2021 is approximately 95.1 % . we agreed to defer rent due from bickford senior living totaling $ 5,850,000 for 2020 and $ 750,000 for january 2021 as a result of the impact from the covid-19 pandemic . of the 2020 deferral , $ 2,100,000 related to the third quarter with half of the deferral placed in escrow . we continue our negotiations with bickford for the sale of nine properties which are currently leased to bickford and have a gross book value of approximately $ 76,658,000 as of december 31 , 2020. the $ 2,100,000 of deferred rent will be forgiven contingent upon bickford 's ability to close on the acquisition of these properties . rental income from this portfolio was $ 7,878,000 ( net of $ 182,000 of the deferral mentioned above ) for the year ended december 31 , 2020 and $ 9,383,000 and $ 8,859,000 for the years ended december 31 , 2019 and 2018 , respectively , including straight-line rental income of $ 283,000 , $ 680,000 and $ 331,000 , respectively . the deferred rent for bickford of $ 3,750,000 pertaining to the fourth quarter and the $ 750,000 pertaining to january 2021 bears interest at 8 % per annum with repayments , including accrued interest , over twelve months beginning in june 2021. we agreed to rent concessions with another tenant totaling $ 1,072,000 in deferrals for 2020 , $ 50,000 in abatements for 2020 , and $ 447,000 in deferrals related to the first quarter of 2021. of the 2020 totals , approximately $ 534,000 in deferrals and $ 20,000 in abatements are related to the third quarter and $ 538,000 in deferrals and $ 30,000 in abatements relate to the fourth quarter . the deferred amounts accrue interest from the date of the deferral until paid in full with payments due starting in july 2021 and due no later than december 2022. the initial interest is 8 % on the deferrals through december 31 , 2021 , after which time the rate increases to 9 % . 33 in the fourth quarter of 2020 , we also modified a transition property 's lease in response to the covid-19 pandemic that extended the lease term by one year and deferred rent of $ 160,000. see “ other portfolio activity ” transitioning tenants for information regarding our transition properties . story_separator_special_tag the 15-year master lease has an initial lease rate of 7.25 % with fixed annual escalators of 2.25 % and offers two optional extensions of five years each . nhi was also granted a purchase option on a newly opened indiana facility . watermark retirement on june 12 , 2020 , we provided a $ 5,000,000 loan commitment to watermark retirement to provide working capital liquidity in connection with the renewal of an existing lease on two continuing care retirement communities . 41 management on september 30 , 2020 , we acquired a 43-unit assisted living and memory care facility located in bellevue , wisconsin , from 41 management . the acquisition price was $ 12,300,000 and included the full payment of an outstanding mortgage loan of $ 3,870,000 , plus accrued interest . the property is leased to an affiliate of 41 management pursuant to a 15-year master lease that has an initial lease rate of 7.5 % with fixed annual escalators of 2.5 % and offers two optional extensions of five years each . on november 24 , 2020 , we committed to providing first mortgage financing to 41 management , llc for up to $ 22,200,000 to construct , a 110-unit independent living , assisted living and memory care community in sussex , wisconsin . the approximate four year loan has an annual interest rate of 8.5 % and two one year extensions . the agreement includes a purchase option , 37 effective upon stabilization of the facility . additional security on the loan includes personal and corporate guarantees and the funding of a $ 4,900,000 working capital escrow . the total amount funded on the note was $ 4,040,000 as of december 31 , 2020. notes receivable repayments on july 31 , 2020 , senior living communities repaid two fully drawn mezzanine loans of $ 12,000,000 and $ 2,000,000 , respectively . the purpose of the mezzanine loans were to partially fund construction of a 186-unit senior living campus on daniel island in south carolina , which opened in april 2018. the loans bore interest , payable monthly , at a 10 % annual rate . on september 30 , 2020 , evolve repaid a fully drawn mortgage loan of $ 10,000,000 , including accrued interest . the loan bore interest , payable monthly , at an 8 % annual rate . asset dispositions as of december 31 , 2019 , we classified a portfolio of eight assisted living properties located in arizona ( 4 ) , tennessee ( 3 ) and south carolina ( 1 ) as held for sale , after the current tenant , brookdale senior living , expressed an intention to exercise its purchase option on the properties . the purchase option called for the parties to split any appreciation on a 50/50 basis above $ 37,520,000. during the first quarter of 2020 , nhi and the tenant agreed to a fair valuation of $ 41,000,000 for the properties , and , accordingly , on january 22 , 2020 , we disposed of the properties at the agreed price of $ 39,260,000. we recognized rental income from this portfolio of $ 229,000 for the year ended december 31 , 2020 and $ 4,250,000 for both of the years ended december 31 , 2019 and 2018. on february 21 , 2020 , we disposed of two assisted living properties previously classified as held-for-sale in exchange for a term note of $ 4,000,000 from the buyer , bickford . the note , which is due february 2025 and bears interest at 7 % , began amortizing on a 25-year basis in january 2021. in january 2019 , we classified these properties as held-for-sale , recorded an adjustment to lease revenues to write off the associated $ 124,000 in straight-line receivables and recognized an impairment loss of $ 2,500,000 to write down the properties to their estimated net realizable value . tenant purchase options certain of our leases contain purchase options allowing tenants to acquire the leased properties . for options open or coming open in the near future , we are engaged in preliminary negotiations to continue as lessor or in some other capacity . a summary of these tenant options , excluding properties classified as held for sale , is presented below ( $ in thousands ) : replace_table_token_11_th 1 in january 2021 , we received notification of tenant 's intention to exercise its purchase option on the property in july 2021 for approximately $ 26,375,000. tenant purchase options generally give the lessee an option to purchase the underlying property for consideration determined by ( i ) greater of fixed base price or fair market value ; ( ii ) a fixed base price plus a specified share in any appreciation ; ( iii ) fixed base price ; or ( iv ) a fixed capitalization rate on lease revenue . we can not reasonably estimate at this time the probability that these purchase options will be exercised in the future . consideration to be received from the exercise of any tenant purchase option is expected to exceed our net investment in the leased property or properties . 38 other our leases are typically structured as “ triple net leases ” on single-tenant properties having an initial leasehold term of 10 to 15 years with one or more 5-year renewal options . as such , there may be reporting periods in which we experience few , if any , lease renewals or expirations . there were no material renewing or expiring leases during 2020 that did not renew . most of our existing leases contain annual escalators in rent payments . for financial statement purposes , rental income is recognized on a straight-line basis over the term of the lease . certain of our operators hold purchase options allowing them to acquire properties they currently lease from nhi . typically , for options open or coming open in the short term , we
| liquidity and capital resources at december 31 , 2020 , we had $ 252,000,000 available to draw on our revolving credit facility , $ 43,344,000 in unrestricted cash and cash equivalents , and the potential to access capital through the issuance of common stock under the company 's $ 500,000,000 atm equity program . in addition , the company maintains an effective automatic shelf registration statement through which capital could be raised via the issuance of debt and or equity securities . in july 2020 , we entered into a new one-year $ 100,000,000 term loan bearing interest at a rate of 30-day libor ( with a 50 basis point floor ) plus 185 basis points , based on our current leverage ratios . the proceeds from this loan were used to repay amounts outstanding on the unsecured revolving credit facility . the term loan was subsequently repaid in january 2021. during the year ended december 31 , 2020 , we issued 535,990 common shares through the atm program with an average price of $ 66.30 , resulting in net proceeds of approximately $ 34,649,000 initially used to pay down our revolving credit facility . during the year ended december 31 , 2019 , 1,209,522 common shares were issued for $ 95,774,000 in net proceeds . we intend to use the proceeds from any further activity under the atm program for general corporate purposes , which may include future acquisitions and repayment of indebtedness , including borrowings under our credit facility .
| Liquidity | 14,902 |
the significant increase in net revenues for the segment in the fourth quarter , which was primarily related to the delivery of certain projects for our steel business , had a significant impact on the book-to-bill ratio for weighing and control systems segment for the quarter despite a relatively healthy order intake during the period as exhibited by the segment end-of-period backlog . the gross profit margin for the fourth quarter of 2017 , decreased 0.1 % compared to the third quarter of 2017 , and increased 0.4 % from the fourth quarter of 2016 . sequentially , improved gross profit margins in the force sensors and weighing and control systems segments , due mainly to higher volume , were offset by a decline in gross profit margin in the foil technology products segment , due to inventory adjustments , increases in wages and repairs and maintenance and negative foreign currency impacts . compared to the fourth quarter of 2016 , improved gross profit margins in the force sensors segment , mainly due to higher volume , were partially offset by lower gross profit margins in the foil technology products and weighing and control systems segments . the foil technology products segment gross profit margins were negatively impacted by inventory adjustments and negative foreign currency impacts with the israeli shekel . the weighing and control systems segment gross profit margins were negatively impacted by higher fixed manufacturing costs . optimize core competence the company 's core competency and key value proposition is providing customers with proprietary foil technology products and precision measurement sensors and sensor-based systems . our foil technology resistors and strain gages are recognized as global market leading products that provide high precision and high stability over extreme temperature ranges , and long life . our force sensor products and our weighing and control systems products are also certified to meet some of the highest levels of precision measurements of force , weight , pressure , torque , tilt , motion , and acceleration . we continue to optimize all aspects of our development , manufacturing and sales processes , including by increasing our technical sales efforts ; continuing to innovate in product performance and design ; and refining our manufacturing processes . our foil technology research group developed innovations that enhance the capability and performance of our strain gages , while simultaneously reducing their size and power consumption as part of our advanced sensors product line . we believe this unique foil technology will create new markets as customers “ design in ” these next generation products in existing and new applications . our development engineering team is also responsible for creating new processes to further automate manufacturing , and improve productivity and quality . our advanced sensors manufacturing technology also offers us the capability to produce high-quality foil strain gages in a highly automated environment , which we believe results in reduced manufacturing and lead times , improved quality and increased margins . our design , research , and product development teams , in partnership with our marketing teams , drive our efforts to bring innovations to market . we intend to leverage our insights into customer demand to continually develop and roll out new , innovative products within our existing lines and to modify our existing core products in ways that make them more appealing , addressing changing customer needs and industry trends in terms of form , fit , and function . we also seek to achieve significant production cost savings through the transfer , expansion , and construction of manufacturing operations in countries such as india and israel , where we can benefit from lower labor costs , improved efficiencies , or available tax and other government-sponsored incentives . for example , in 2017 we closed two leased facilities in the u.s. and moved to more cost effective locations . in 2016 , we relocated a significant portion of our force sensor manufacturing from leased locations with higher labor costs , to the owned facility we constructed in india . we closed a facility in costa rica and consolidated its functions to existing operations where significant efficiencies were available . this consolidation was part of our global restructuring and cost reduction program announced in november 2015 and substantially completed in 2016 . - 30 - acquisition strategy we expect to continue to make strategic acquisitions where opportunities present themselves to grow our segments . historically , our growth and acquisition strategy has been largely focused on vertical product integration , using our foil strain gages in our force sensor products , and incorporating those products into our weighing and control systems . the acquisitions of stress-tek and kelk , each of which employ our foil strain gages to manufacture load cells for their systems , continue this strategy . additionally , the kelk acquisition resulted in the acquisition of certain optical sensor technology . the pacific instruments acquisition significantly broadened our existing data acquisition offerings and opened new markets for us . along with our recent success in mems technology for on-board weighing , we expect to expand our expertise , and our acquisition focus , outside our traditional vertical approach to other precision sensor solutions in the fields of measurement of force , weight , pressure , torque , tilt , motion , and acceleration . we believe acquired businesses will benefit from improvements we implement to reduce redundant functions and from our current global manufacturing and distribution footprint . research and development research and development will continue to play a key role in our efforts to introduce innovative products to generate new sales and to improve profitability . we expect to continue to expand our position as a leading supplier of precision foil technology products . we believe our r & d efforts should provide us with a variety of opportunities to leverage technology , products , and our manufacturing base in order to ultimately improve our financial performance . story_separator_special_tag the amount charged to expense for research and development aggregated $ 11.7 million , $ 11.1 million , and $ 9.6 million for the years ended december 31 , 2017 , 2016 , and 2015 , respectively . cost management to be successful , we believe we must seek new strategies for controlling operating costs . through automation in our plants , we believe we can optimize our capital and labor resources in production , inventory management , quality control , and warehousing . we are in the process of moving some manufacturing to more cost effective locations . this may enable us to become more efficient and cost competitive , and also maintain tighter controls of the operation . production transfers , facility consolidations , and other long-term cost-cutting measures require us to initially incur significant severance and other exit costs . we are realizing the benefits of our restructuring through lower labor costs and other operating expenses , and expect to continue reaping these benefits in future periods . however , these programs to improve our profitability also involve certain risks which could materially impact our future operating results , as further detailed in part i , item 1a “ risk factors ” of this annual report on form 10-k. the company recorded restructuring costs of $ 2.0 million , $ 2.7 million , and $ 4.5 million during the years ended december 31 , 2017 , 2016 , and 2015 , respectively . restructuring costs were comprised primarily of employee termination costs , including severance and statutory retirement allowances , and were incurred in connection with various cost reduction programs . we are evaluating plans to further reduce our costs by consolidating additional manufacturing operations . these plans may require us to incur restructuring and severance costs in future periods . while streamlining and reducing fixed overhead , we are exercising caution so that we will not negatively impact our customer service or our ability to further develop products and processes . foreign currency we are exposed to foreign currency exchange rate risks , particularly due to transactions in currencies other than the functional currencies of certain subsidiaries . u.s. gaap requires that entities identify the “ functional currency ” of each of their subsidiaries and measure all elements of the financial statements in that functional currency . a subsidiary 's functional currency is the currency of the primary economic environment in which it operates . in cases where a subsidiary is relatively self-contained within a particular country , the local currency is generally deemed to be the functional currency . however , a foreign subsidiary that is a direct and integral component or extension of the parent company 's operations generally would have the parent company 's currency as its functional currency . we have subsidiaries that fall into each of these categories . foreign subsidiaries which use the local currency as the functional currency our operations in europe , canada , and certain locations in asia primarily generate and expend cash using local currencies , and accordingly , these subsidiaries utilize the local currency as their functional currency . for those subsidiaries where the local currency is the functional currency , assets and liabilities in the consolidated balance sheets have been translated at the rate of exchange as of the balance sheet date . translation adjustments do not impact the results of operations and are reported as a separate component of equity . for those subsidiaries where the local currency is the functional currency , revenues and expenses are translated at the average exchange rate for the year . while the translation of revenues and expenses into u.s. dollars does not directly impact the consolidated - 31 - statements of operations , the translation effectively increases or decreases the u.s. dollar equivalent of revenues generated and expenses incurred in those foreign currencies . foreign subsidiaries which use the u.s. dollar as the functional currency our operations in israel and certain locations in asia primarily generate cash in u.s. dollars , and accordingly , these subsidiaries utilize the u.s. dollar as their functional currency . for those foreign subsidiaries where the u.s. dollar is the functional currency , all foreign currency financial statement amounts are remeasured into u.s. dollars . exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in the results of operations . while these subsidiaries transact most business in u.s. dollars , they may have significant costs , particularly related to payroll , which are incurred in the local currency . effects of foreign exchange rate on operations for the year ended december 31 , 2017 , exchange rate impacts reduced net revenues by $ 0.1 million , and increased costs of products sold and selling , general , and administrative expenses by $ 2.8 million , when compared to the prior year . for the year ended december 31 , 2016 , exchange rate impacts reduced net revenues by $ 2.8 million , and costs of products sold and selling , general , and administrative expenses by $ 3.1 million , when compared to the prior year . for the year ended december 31 , 2015 , exchange rate impacts reduced net revenues by $ 17.5 million , and costs of products sold and selling , general , and administrative expenses by $ 16.4 million , when compared to the prior year . off-balance sheet arrangements as of december 31 , 2017 and 2016 , we did not have any off-balance sheet arrangements . critical accounting policies and estimates our significant accounting policies are summarized in note 1 to our consolidated financial statements . we identify here a number of policies that entail significant judgments or estimates by management . revenue recognition we recognize revenue on product sales during the period when the sales process is complete .
| the precision sensor market is integral to the development of intelligent products across a wide variety of end markets upon which we focus , including medical , agricultural , transportation , industrial , avionics , military , and space applications . we believe that as original equipment manufacturers ( “ oems ” ) continue a drive to make products “ smarter , ” they will integrate more sensors and related systems into their solutions to link the mechanical/physical world with digital control and or response . we believe this offers a substantial growth opportunity for our products and expertise . vpg reports in three product segments : the foil technology products segment , the force sensors segment , and the weighing and control systems segment . the foil technology products reporting segment is comprised of the foil resistor and strain gage operating segments . the force sensors reporting segment is comprised of transducers , load cells , and modules . the weighing and control systems reporting segment is comprised of complete systems which include load cells and instrumentation for weighing , force control and force measurement for a variety of uses such as process control and on-board weighing applications . net revenues for the year ended december 31 , 2017 were $ 254.4 million compared to net revenues of $ 224.9 million for the year ended december 31 , 2016 . net earnings attributable to vpg stockholders for the year ended december 31 , 2017 were $ 14.3 million , or $ 1.07 per diluted share , compared to $ 6.4 million , or $ 0.48 per diluted share , for the year ended december 31 , 2016 . the results of operations for the years ended december 31 , 2017 and 2016 include items affecting comparability as listed in the reconciliations below . the reconciliations below include certain financial measures which are not recognized in accordance with u.s. generally accepted accounting principles ( `` gaap '' ) , including adjusted gross profits , adjusted gross profit margin , adjusted net earnings , and adjusted net earnings
| ROO | 9,097 |
in addition , through fiscal 2016 , our belgian based subsidiary , orgenesis sprl , was awarded grants from the regional walloon of 13.5 million ( approximately $ 7.7 million as of the date of this report ) , of which 7.4 million ( approximately $ 7.7 million ) was funded . -42- our other belgian based subsidiary , masthercell , recorded revenues of approximately $ 6.4 million during fiscal 2016 , representing a 115 % increase over the amount of revenues recorded in fiscal 2015. as of the date of this report on form 10-k , masthercell had backlog of approximately $ 7.3 million ( 6.9 million ) . we define our backlog as products and services that masthercell is obligated to deliver based on firm commitments relating to contracts with its customers . however , no assurance can be provided that such contracts will not be cancelled , in which case we will not be authorized to deliver and record the anticipated revenues . in january 2017 , our subsidiary , masthercell , paid out 1.5 million ( approximately $ 1.7 million ) in principal amount and accrued interest owing under a series of bonds that were issued by it in 2014 and came due september 2016. in february 2017 , we and admiral ventures inc. ( “ admiral ” ) , a creditor , reached a settlement agreement pursuant to which approximately $ 1.9 million due and payable has been extended to june 2018. under the terms of the agreement , we agreed to pay to admiral by march 1 , 2017 , $ 1.5 million on account of the amounts due to it . we also agreed to pay to admiral , commencing april 2017 , $ 125 thousand each calendar month to reduce the amounts outstanding and also agreed to remit from the equity investment subscription proceeds raised after february 28 , 2017 of $ 500 thousand or more , 20 % of such proceeds , and of $ 1 million or more , 25 % of such proceeds . in addition , we have agreed to prepay , on our about march 7 , 2017 , approximately $ 402,500 of principal and accrued interest on short-term loans . critical accounting policies and use of estimates the discussion and analysis of our financial condition and results of operations are based upon our financial statements , which have been prepared in accordance with generally accepted accounting principles in the united states . the preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . on an on-going basis , we evaluate our estimates , including those related to revenue recognition , bad debts , investments , intangible assets and income taxes . our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances . actual results may differ from these estimates . we have identified the accounting policies below as critical to our business operations and the understanding of our results of operations . business combination we allocated the purchase price of the business we acquired to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values on the acquisition date . any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill . acquired in-process backlog , customer relations , brand name and know how are recognized at fair value . the purchase price allocation process requires from us to make significant estimates and assumptions , especially at the acquisition date with respect to intangible assets . direct transaction costs associated with the business combination are expensed as incurred . the allocation of the consideration transferred in certain cases may be subject to revision based on the final determination of fair values during the measurement period , which may be up to one year from the acquisition date . we included the results of operations of the business that we acquired in the consolidated results prospectively from the date of acquisition , when control was obtained . intangible assets intangible assets are recorded at acquisition cost less accumulated amortization and impairment . definite lived intangible assets are amortized over their estimated useful life using the straight-line method over their estimated period of useful life , which is determined by identifying the period over which the cash flows are expected to be generated . -43- goodwill goodwill represents the excess of the purchase price of an acquired business over the estimated fair value of the identifiable net assets acquired . goodwill is not amortized but is tested for impairment at least annually ( at november 30 ) , at the reporting unit level or more frequently if events or changes in circumstances indicate that the goodwill might be impaired . the goodwill impairment test is applied by performing a qualitative assessment before calculating the fair value of the reporting unit . if , on the basis of qualitative factors , it is considered not more likely than not that the fair value of the reporting unit is less than the carrying amount , further testing of goodwill for impairment would not be required . otherwise , goodwill impairment is tested using a two-step approach . the first step involves comparing the fair value of the reporting unit to its carrying amount . if the fair value of the reporting unit is determined to be greater than its carrying amount , there is no impairment . if the reporting unit 's carrying amount is determined to be greater than the fair value , the second step must be completed to measure the amount of impairment , if any . story_separator_special_tag the second step involves calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets , excluding goodwill , of the reporting unit from the fair value of the reporting unit as determined in step one . the implied fair value of the goodwill in this step is compared to the carrying value of goodwill . if the implied fair value of the goodwill is less than the carrying value of the goodwill , an impairment loss equivalent to the difference is recorded . as of november 30 , 2016 , the fair value of the reporting unit , cdmo , exceeded the carrying value by approximately $ 3 million . a decrease in the terminal year growth rate of 1 % and an increase in the discount rate of 1 % would reduce the fair value of the reporting unit by approximately $ 4 million and would result in an impairment . given the small amount that the fair value exceeded the carrying value of the reporting unit , a negative change in the future to the income approach based on discounted cash flows of a number of assumptions ( including the expected cash flows , discount rate , growth rate and terminal rate ) will result in an impairment . given that the reporting unit is still in its growth stage , there can be no assurance that an impairment may not occur in the near future . impairment of long-lived assets we are reviewing the property and equipment , intangible assets subject to amortization and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset class may not be recoverable . indicators of potential impairment include : an adverse change in legal factors or in the business climate that could affect the value of the asset ; an adverse change in the extent or manner in which the asset is used or is expected to be used , or in its physical condition ; and current or forecasted operating or cash flow losses that demonstrate continuing losses associated with the use of the asset . if indicators of impairment are present , the asset is tested for recoverability by comparing the carrying value of the asset to the related estimated undiscounted future cash flows expected to be derived from the asset . if the expected cash flows are less than the carrying value of the asset , then the asset is considered to be impaired and its carrying value is written down to fair value , based on the related estimated discounted cash flows . there were no impairment charges in 2016 and 2015. revenue recognition we recognize the revenue for services linked to cell process development and cell manufacturing services based on individual contracts in accordance with accounting standards codification ( asc ) 605 , revenue recognition , when the following criteria have been met : persuasive evidence of an arrangement exists ; delivery of the processed cells has occurred or the services that are milestones based have been provided ; the price is fixed or determinable and collectability is reasonably assured . we determine that persuasive evidence of an arrangement exists based on written contracts that define the terms of the arrangements . in addition , we determine that services have been delivered in accordance with the arrangement . we assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment . service revenues are recognized as the services are provided . we also incur revenue from selling of some consumables which are incidental to the services provided as foreseen in the clinical services contracts . such revenue is recognized upon delivery of the processed cells in which they were consumed . -44- story_separator_special_tag november , 2015 , ( ii ) a decrease of $ 1,113 thousand in the interest income from changes in fair value of convertible bonds primarily resulting from changes in our assumptions related to the occurrence of the convertible bonds conversion option during the year 2015 and ( iii ) $ 229 thousand loss from extinguishment of a convertible loan and ( iv ) a decrease of $ 728 thousand in income from changes in the fair value of the embedded derivatives , due to the fact that in 2015 there was a strong impact of the decrease in the share price . this decrease was partially offset by interest income of $ 1,476 thousand in 2016 from changes in fair value of the price protection derivative , due to changes in our assumptions related to the probability of activating the anti-dilution mechanism . in addition , part of the decrease is primarily attributable to $ 208 thousand of stock-based compensation expenses related to warrants granted due to expiration of our credit facility . working capital deficiency replace_table_token_7_th current assets decreased by $ 4 million , which was primarily attributable to a decrease of $ 3.3 million in cash and cash equivalents that were used for , among other things , the repayment of short and long-term debt in amount of $ 2.1 million , purchase of property and equipment in amount of $ 1.4 million for the manufacturing facility in belgium in order to meet customers ' demands and expanding capacity . furthermore , the prepaid expenses and other receivables decreased by $ 0.5 million and the grants receivable decreased by $ 0.5 million mainly due to reduction in the expected receivables from the dgo6 resulting from dgo6 's of certain expenses . this was partially offset by an increase of $ 0.1 million in inventory .
| expenses cost of sales replace_table_token_3_th -45- cost of sales for the year ended november 30 , 2016 increased by 97 % , or $ 3.8 million , compared to 2015. an increase of 39 % , or $ 1.5 million , in costs of sales for the year ended november 30 , 2016 compared to 2015 was due to consolidation of the full period results of masthercell in 2016. salaries and related expenses for the year ended november 30 , 2016 increased by 154 % , or $ 2 million compared to 2015. the increase in salaries and related expenses for the year ended november 30 , 2016 compared to 2015 , was due to recruitment by masthercell of new employees as part of our plans to expand the manufacturing facility 's capacity in belgium and to addition of staff to support the increase in the volume of services provided . accordingly , masthercell employed as of november 30 , 2016 an average of 80 compared to 35 employees in the corresponding period last year . professional fees and consulting services for the year ended november 30 , 2016 , increased by 134 % , or $ 554 thousand , compared to 2015. of the increase in professional fees and consulting services 160 thousand is partially attributable to the engagement of two new consultants and a new service provider . raw materials for the year ended november 30 , 2016 , increased by 40 % , or $ 509 thousand , compared to year ended november 30 , 2015 due to the increase in the volume of our services and the execution of two qualification runs . amortization and depreciation expenses , net for the year ended november 30 , 2016 , increased by 66 % , or $ 518 thousand , compared to the year ended november 30 , 2015 as a result of depreciation expenses of equipment purchased during 2016 for two production rooms and a new clean room . research and development expenses replace_table_token_4_th the increase in salaries and related expenses for the year ended november 30 , 2016 compared to 2015 is primarily due to the expansion of our development team in belgium from one part time employee to three employees . in addition , during the year 2016 we expanded our research and development team in our israeli subsidiary compared to last year . professional fees and consulting services for the year ended november 30 , 2016 compared to 2015 , decreased by 15 % , or $ 76 thousand , and is attributable to the merger with masthercell , which was one of our subcontractors for the dgo6 project before the acquisition . the increase in lab expenses in the year ended november 30 , 2016
| ROO | 16,308 |
excluding political advertising revenue , which is cyclical based on election cycles , for the year ended december 31 , 2016 , approximately 22 % , 10 % and 7 % of our broadcast advertising revenue was obtained from advertising sales to advertising customers in the automotive , medical and restaurant industries , respectively . we experienced similar industry-based concentrations of revenue in the years ended december 31 , 2015 and 2014. although our revenues can be affected by changes within these industries , we believe this risk is in part mitigated due to the fact that no one customer accounted for in excess of 5 % of our broadcast advertising revenue in any of these periods . furthermore , we believe that our large geographic operating area partially mitigates the potential effect of regional economic impacts . earnings per share we compute basic earnings per share by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the relevant period . the weighted-average number of common shares outstanding does not include restricted shares . these shares , although classified as issued and outstanding , are considered contingently returnable until the restrictions lapse and , in accordance with u.s. gaap , are not included in the basic earnings per share calculation until the shares vest . diluted earnings per share is computed by including all potentially dilutive common shares , including restricted shares and shares underlying stock options , in the diluted weighted-average shares outstanding calculation , unless their inclusion would be antidilutive . the following table reconciles basic weighted-average shares outstanding to diluted weighted-average shares outstanding for the years ended december 31 , 2016 , 2015 and 2014 ( in thousands ) : replace_table_token_23_th 72 valuation of broadcast licenses , goodwill and other intangible assets we have acquired a significant portion of our assets in acquisition transactions . among the assets acquired in these transactions were broadcast licenses issued by the fcc , goodwill and other intangible assets . for broadcast licenses acquired prior to january 1 , 2002 , we recorded their respective values using a residual method ( analogous to “ goodwill ” ) where the excess of the purchase price paid in the acquisition over the fair value of all identified tangible and intangible assets acquired was attributed to the broadcast license . this residual basis approach generally produces higher valuations of broadcast licenses when compared to applying an income method as discussed below . for broadcast licenses acquired after december 31 , 2001 , we record their respective values using an income approach . under this approach , a broadcast license is valued based on analyzing the estimated after-tax discounted future cash flows of the acquired station , assuming an initial hypothetical start-up operation maturing into an average performing station in a specific television market and giving consideration to other relevant factors such as the technical qualities of the broadcast license and the number of competing broadcast licenses within that market . for television stations acquired after december 31 , 2001 , we allocate the residual value of the station to goodwill . when renewing broadcast licenses , we incur regulatory filing fees and legal fees . we expense these fees as they are incurred . other intangible assets that we have acquired include network affiliation agreements , retransmission agreements , advertising contracts , client lists , talent contracts and leases . although each of our stations is affiliated with at least one broadcast network , we believe that the value of a television station is derived primarily from the attributes of its broadcast license rather than its network affiliation agreement . as a result , we allocate only minimal values to our network affiliation agreements . we classify our other intangible assets as finite-lived intangible assets . the amortization period of our other intangible assets is equal to the shorter of their estimated useful life or contract period , including expected extensions thereof . when renewing other intangible asset contracts , we incur legal fees that are expensed as incurred . impairment testing of indefinite-lived intangible assets we test for impairment of our indefinite-lived intangible assets on an annual basis on the last day of each fiscal year . however , if certain triggering events occur , we test for impairment during the relevant reporting period . for goodwill , we have elected to bypass the qualitative assessment provisions and to perform the prescribed testing steps for goodwill on an annual basis . for purposes of testing goodwill for impairment , each of our individual television markets is considered a separate reporting unit . we review each television market for possible goodwill impairment by comparing the estimated fair value of each respective reporting unit to the recorded value of that reporting unit 's net assets . if the estimated fair value exceeds the recorded net asset value , no goodwill impairment is deemed to exist . if the estimated fair value of the reporting unit does not exceed the recorded value of that reporting unit 's net assets , we then perform , on a notional basis , a purchase price allocation by allocating the reporting unit 's fair value to the fair value of all tangible and identifiable intangible assets with residual fair value representing the implied fair value of goodwill of that reporting unit . the recorded value of goodwill for the reporting unit is written down to this implied value . 73 to estimate the fair value of our reporting units , we utilize a discounted cash flow model supported by a market multiple approach . we believe that a discounted cash flow analysis is the most appropriate methodology to test the recorded value of long-term assets with a demonstrated long-lived/enduring franchise value . story_separator_special_tag % for 2015 from 39.8 % for 2014. our effective income tax rates differed from the statutory rate due to the following items : replace_table_token_9_th 45 liquidity and capital resources general the following tables present data that we believe is helpful in evaluating our liquidity and capital resources ( dollars in thousands ) : replace_table_token_10_th replace_table_token_11_th on february 7 , 2017 , gray amended and restated the 2014 senior credit facility in the form of the 2017 senior credit facility to , among other things , reduce our interest rate under the term loan facility to libor plus 2.50 % , increase our availability under the revolving credit facility from $ 60.0 million to $ 100.0 million , and extend the maturity of the revolving credit facility and term loan facility to 2022 and 2024 , respectively . see note 11 “ subsequent events ” to our audited consolidated financial statements included elsewhere herein for more information on the 2017 senior credit facility . prior to entry into the 2017 senior credit facility , the 2014 senior credit facility consisted of a revolving loan and a term loan . excluding accrued interest , the amount outstanding under our 2014 senior credit facility as of december 31 , 2016 and 2015 consisted solely of a term loan balance of $ 556.4 million . as of december 31 , 2016 , we had $ 700.0 million of our 2026 notes outstanding and $ 525.0 million of our 2024 notes outstanding . as of december 31 , 2016 and 2015 , the interest rate on the balance outstanding under the 2014 senior credit facility was 3.9 % and 3.8 % , respectively . as of december 31 , 2016 , the interest rate and yield on the original 2026 notes were each 5.875 % ; the interest rate and yield on the additional 2026 notes were 5.875 % and 5.398 % , respectively ; and the interest rate and yield on the 2024 notes were each 5.125 % . as of december 31 , 2016 and 2015 , we had a deferred loan cost balance , net of accumulated amortization , of $ 12.2 million and $ 6.1 million , respectively , related to the senior credit facility . as of december 31 , 2016 , we had a deferred loan cost balance , net of accumulated amortization , of $ 10.6 million related to our 2026 notes and $ 7.7 million related to our 2024 notes . our obligations under the 2017 senior credit facility are secured by substantially all of the assets of gray and substantially all of our subsidiaries , excluding real estate . in addition , substantially all of our subsidiaries are joint and several guarantors of , and our ownership interests in those subsidiaries are pledged to collateralize , our obligations under the 2017 senior credit facility . 46 the 2017 senior credit facility contains affirmative and restrictive covenants that we must comply with , including ( a ) limitations on additional indebtedness , ( b ) limitations on liens , ( c ) limitations on the sale of assets , ( d ) limitations on guarantees , ( e ) limitations on investments and acquisitions , ( f ) limitations on the payment of dividends and share repurchases , ( g ) limitations on mergers , and ( h ) maintenance of a first lien leverage ratio not to exceed certain maximum limits while any amount is outstanding under the revolving credit facility as well as other customary covenants for credit facilities of this type . the 2026 notes and 2024 notes each include covenants with which we must comply and are typical for borrowing transactions of their nature . as of december 31 , 2016 and 2015 , we were in compliance with all required covenants under all our debt obligations . for further information concerning our debt obligations , see note 3 “ long-term debt ” and note 11 “ subsequent events ” to our audited consolidated financial statements included elsewhere herein . for estimates of future principal and interest payments under our debt obligations , see “ tabular disclosure of contractual obligations as of december 31 , 2016 ” included elsewhere in this management 's discussion and analysis of financial condition and results of operations . income taxes we file a consolidated federal income tax return and such state or local tax returns as are required based on our current forecasts , we expect to make minimal federal and state income tax payments in 2017 and expect to begin paying significant federal and state income taxes in 2018. liquidity giving effect to the the amendment and restatement of our credit facility , as of february 7 , 2017 , we have $ 5.6 million in debt principal repayments due during the remainder of 2017. we estimate that we will make approximately $ 122.4 million in debt interest payments , including accrued interest of $ 32.5 million as of december 31 , 2016 , and we will pay approximately $ 35.0 million for capital expenditures during the twelve months immediately following december 31 , 2016. although our cash flows from operations are subject to a number of risks and uncertainties , we anticipate that our cash on hand , future cash expected to be generated from operations , borrowings from time to time under the 2017 senior credit facility ( or any such other credit facility as may be in place at the appropriate time ) and , potentially , external equity or debt financing , will be sufficient to fund these debt service obligations and estimated capital expenditures . any potential equity or debt financing would depend upon , among other things , the costs and availability of such financing at the appropriate time . we also presently believe that our future cash expected to be generated from operations and borrowing availabity under the 2017 senior credit facility ( or any such other credit
| broadcast operating expenses broadcast operating expenses ( before depreciation , amortization and loss on disposal of assets ) increased $ 88.2 million , or 31 % , to $ 374.2 million for 2015 compared to 2014 , due primarily to increases in compensation expense of $ 27.9 million and non-compensation expense of $ 60.3 million . the 2015 acquired stations and the 2014 acquired stations accounted for approximately $ 91.4 million and $ 34.8 million of our total broadcast operating expenses in 2015 and 2014 , respectively . compensation expense increased by $ 27.9 million in 2015 compared to 2014 , primarily as a result of $ 25.5 million in additional compensation related costs , resulting primarily from the addition of employees at the 2015 acquired stations and 2014 acquired stations . in addition , expenses related to matching contributions and discretionary profit sharing contributions to our defined contribution 401 ( k ) plan increased by $ 3.4 million . these added employee benefit costs were offset , in part , by a decrease of $ 1.6 million in expenses related to our defined benefit pension plan . non-compensation expense increased primarily due to an increase in network affiliation fees of $ 50.6 million related to our increased retransmission consent revenue under our affiliation agreements , as well as the commencement in the first quarter of 2015 of network program fees payable to cbs . our national sales representation fees increased $ 3.0 million as a result of a $ 6.3 million one-time charge resulting from the previously disclosed termination of our national advertising sales representation agreements effective january 1 , 2016. this one-time charge was partially offset by decreased commissions resulting from reduced political advertising revenues in 2015 compared to 2014 reflecting the off-year of the political advertising cycle .
| Liquidity | 692 |
in addition , the nominating and corporate governance committee develops and reviews background information on candidates for the board and makes recommendations to the board regarding such candidates . the nominating and corporate governance committee also prepares and supervises the board 's annual review of director independence and the board 's performance self-evaluation . the charter of the nominating and corporate governance committee was adopted on november 16 , 2012 and updated in 2016 , and is available on the company 's investor relations website ( www.whlr.us ) . all of the members of the nominating and corporate governance committee are independent within the meaning of the listing standards of the nasdaq stock market and the company 's corporate governance principles . the nominating and corporate governance committee met six times in 2018. compensation committee our compensation committee consists of three of our independent directors : john mcauliffe , jeffrey zwerdling , and john sweet . mr. zwerdling has been designated as chair of the compensation committee . the compensation committee is responsible for overseeing the policies of the company relating to compensation to be paid by the company to the company 's principal executive officer and any other officers designated by the board , and to make recommendations to the board with respect to such policies , produce necessary reports on executive compensation for inclusion in the company 's proxy statement in accordance with applicable rules and regulations and to monitor the development and implementation of succession plans for the principal executive officer and other key executives and make recommendations to the board with respect to such plans . the charter of the compensation committee was adopted on november 16 , 2012 and updated in 2014 and 2016 , and is available on the company 's investor relations website ( www.whlr.us ) . all of the members of the compensation committee are independent within the meaning of the listing standards of the nasdaq stock market and the company 's corporate governance principles . the compensation committee may not delegate its authority to other persons . while the company 's executives will communicate with the compensation committee regarding executive compensation issues , the company 's executive officers do not participate in any executive compensation decisions . the compensation committee met once in 2018 . 63 the compensation committee retained mercer as its independent compensation consultant to assist in executive compensation issues . specifically , mercer assisted the compensation committee in its review and design of the company 's executive compensation program for executives and directors . mercer was engaged by the compensation committee after review and consideration of other proposals submitted by prospective compensation consultants . the compensation committee engaged mercer based upon the value and the scope of services that they provide . the compensation committee instructed mercer to provide market assessment of executive and officer compensation , and provide appropriate executive compensation plan designs . mercer reported directly to the compensation committee and performs no other work for the company . the compensation committee has analyzed whether the work of mercer as a compensation consultant has raised any conflict of interest , taking into consideration the following factors : i. the provision of other services to the company by mercer ; ii . the amount of fees from the company paid to mercer as a percentage of the firm 's total revenue ; iii . mercer policies and procedures that are designed to prevent conflicts of interest ; iv . any business or personal relationship of mercer or the individual compensation advisors employed by the firm with an executive officer of the company ; v. any business or personal relationship of the individual compensation advisors with any member of the compensation committee ; and vi . any stock of the company owned by mercer or the individual compensation advisors employed by the firm . the compensation committee has determined , based on its analysis of the above factors , that the work of mercer and the individual compensation advisors employed by mercer as compensation consultants to the company has not created any conflict of interest . investment committee our investment committee consists of two independent directors : sean armstrong and jeffrey zwerdling . mr. armstrong has been designated as the chair of this committee . the investment committee is responsible for reviewing and analyzing strategic real estate acquisitions and investments . in addition , the investment committee makes recommendations to the board regarding the potential real estate acquisitions and investments . the investment committee was formed on september 25 , 2013 and has not adopted a charter . all of the members of the investment committee are independent within the meaning of the listing standards of the nasdaq stock market and the company 's corporate governance principles . members of the investment committee toured certain properties of ours in 2018. finance committee our finance committee consists of four independent directors : stewart j. brown , john mcauliffe , sean armstrong and andrew jones . mr. mcauliffe has been designated as chair of this committee . the finance committee is responsible for overseeing the financial policies and practices of the company . in addition , the finance committee oversees the budget process of the company , including the review of budget policies , practices , and annual budget schedule . the finance committee provides regular review of the budget throughout the year and recommends to the board any changes , additions or deletions to the financial policies and practices as it deems appropriate . the finance committee was formed in february 2016 and has not adopted a charter . all of the members of the finance committee are independent within the meaning of the listing standards of the nasdaq stock market and the company 's corporate governance principles . story_separator_special_tag discontinued operations net loss from discontinued operations totaled $ 3.04 million for the year ended december 31 , 2018 , compared to net income of $ 1.52 million for the year ended december 31 , 2017. the loss for 2018 is primarily a result of $ 3.94 million impairment charge on land parcels , partially offset by the gain on the sale of the laskin road land parcel while income for 2017 resulted from the sale of ruby tuesday 's and outback steakhouse at pierpont centre . same store and new store operating income net operating income ( “ noi ” ) is a widely-used non-gaap financial measure for reits . the company believes that noi is a useful measure of the company 's property operating performance . the company defines noi as property revenues ( rental and other revenues ) less property and related expenses ( property operation and maintenance and real estate taxes ) . because noi excludes general and administrative expenses , depreciation and amortization , interest expense , interest income , provision for income taxes , gain or loss on sale or capital expenditures , impairment of goodwill , impairment of notes receivable and leasing costs , it provides a performance measure , that when compared year over year , reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact to operations from trends in occupancy rates , rental rates and operating costs , providing perspective not immediately apparent from net income . the company uses noi to evaluate its operating performance since noi allows the company to evaluate the impact of factors , such as occupancy levels , lease structure , lease rates and tenant base , have on the company 's results , margins and returns . noi should not be viewed as a measure of the company 's overall financial performance since it does not reflect general and administrative expenses , depreciation and amortization , involuntary conversion , interest expense , interest income , provision for income taxes , gain or loss on sale or disposition of assets , and the level of capital expenditures and leasing costs necessary to maintain the operating performance of the company 's properties . other reits may use different methodologies for calculating noi , and accordingly , the company 's noi may not be comparable to that of other reits . the following table is a reconciliation of same store and new store noi from the most directly comparable gaap financial measure of net income ( loss ) . same stores consist of those properties we owned during all periods presented in their entirety , while new stores consist of those properties acquired during the periods presented . the discussion below focuses on same store results of operations since the janaf acquisition occurred in january 2018 and there were no 2017 acquisitions . same store discontinued operations financial information reflects the activity for the following properties : outback steakhouse and ruby tuesday ground leases at pierpont centre ( acquired january 14 , 2015 , sold february 28 , 2017 ) laskin road land parcel ( acquired january 9 , 2015 , sold june 19 , 2018 ) 48 replace_table_token_10_th property revenues total same store property revenues for the year ended december 31 , 2018 decreased to $ 54.68 million compared to $ 56.17 million for the year ended december 31 , 2017. the decrease is primarily a result of seg recaptures and rent modifications accompanied by expiring anchor leases at south lake , fort howard and walnut hill offset by the $ 980 thousand termination fee for the farm fresh shopping center at berkley shopping center . the twelve months ended december 31 , 2018 , represents a partial period of activity for janaf shopping center . this property ( new stores ) contributed $ 10.70 million in revenues for 2018 compared to no revenue for 2017. property expenses total same store property expenses for the year ended december 31 , 2018 were relatively flat at $ 15.57 million , compared to $ 15.39 million for the year ended december 31 , 2017 , representing an increase of $ 183 thousand . total property expenses increased primarily due to new store increases of $ 2.90 million . there were no significant unusual or non-recurring items included in new store property expenses for the year ended december 31 , 2018. property net operating income total property net operating income was $ 46.40 million for the year ended december 31 , 2018 , compared to $ 40.33 million for the year ended december 31 , 2017 representing an increase of $ 6.07 million over 2017. new stores accounted for 49 this increase by generating $ 7.69 million in property net operating income for the year ended december 31 , 2018 , compared to $ 0 for the year ended december 31 , 2017. funds from operations we use ffo , a non-gaap measure , as an alternative measure of our operating performance , specifically as it relates to results of operations and liquidity . we compute ffo in accordance with standards established by the board of governors of nareit in its march 1995 white paper ( as amended in november 1999 , april 2002 and december 2018 ) . as defined by nareit , ffo represents net income ( computed in accordance with gaap ) , excluding gains ( or losses ) from sales of property , plus real estate related depreciation and amortization ( excluding amortization of loan origination costs ) , plus impairment of goodwill , impairment of real estate related long-lived assets and after adjustments for unconsolidated partnerships and joint ventures . most industry analysts and equity reits , including us , consider ffo to be an appropriate supplemental measure of operating performance because , by excluding gains or losses on dispositions and excluding depreciation , ffo is a helpful tool that can assist in the comparison of
| result of the 2017 paydown of debt related to the sale of ruby tuesdays/outback at pierpont shopping center ; and $ 6.15 million decrease in cash outflows for dividends and distributions primarily as a result of suspending common stock dividend distributions in 2018 resulting in a decrease of $ 8.40 million partially offset by an increase of $ 2.24 million in series d preferred distributions ; we intend to continue managing our debt prudently so as to maintain a conservative capital structure and minimize leverage within our company . as of december 31 , 2018 and 2017 , our debt balances , excluding unamortized debt issuance costs , consisted of the following ( in thousands ) : replace_table_token_8_th 43 the weighted average interest rate and term of our fixed-rate debt including liabilities held for sale are 4.71 % and 5.18 years , respectively , at december 31 , 2018 . we have $ 88.04 million of debt maturing , including scheduled principal repayments , during the year ending december 31 , 2019. while we anticipate being able to refinance all the loans at reasonable market terms upon maturity , our inability to do so may materially impact our financial position and results of operations . see the note 7 included in the audited consolidated financial statements for additional mortgage indebtedness details . future liquidity needs the primary liquidity needs of the company , in addition to the funding of our ongoing operations , at december 31 , 2018 are $ 88.04 million in debt maturities and principal payments due in 2019 and covenant requirements as detailed in our amended and restated credit agreement as described in note 7. included in the $ 88.04 million due in the year ended december 31 , 2019 is $ 52.10 million on the keybank line of credit . the keybank line of credit is collateralized by ten properties within our portfolio and may be extended at the company 's option for an additional one year period , subject to certain customary conditions . management intends to refinance the $ 22.12 million rivergate loan , maturing in december 2019. management intends to refinance the $ 6.50 million perimeter loan , maturing in march 2019 , or sell to pay-off the outstanding balance . the revere term loan has been reduced by $ 553 thousand since december 31 , 2018 , $ 200 thousand from operating cash , $ 323 thousand in proceeds from the jenks plaza sale and $ 30 thousand in proceeds from the harbor pointe sale . this loan is expected to be paid in full by april 1 , 2019. subsequent to year end , upon the sale of a portion of the harbor pointe property the $ 460 thousand loan was paid in full . additionally , $ 1.44 million in maturing debt fully amortizes through regularly scheduled principal payments . in addition to liquidity required to fund debt payments we may incur some level of capital expenditures during the year for our existing properties that can not be passed on to our tenants . the majority of
| Liquidity | 10,481 |
excluding this credit , our effective tax rate would have been 32.2 % , compared to 32.9 % in fiscal 2016. this increase of 70 basis points was due to changes in state income tax laws , combined with a higher percentage of earnings in the u.s. , where the tax rate is higher than in the foreign jurisdictions in which we operate . segment analysis architectural glass replace_table_token_7_th fiscal 2017 compared to fiscal 2016. fiscal 2017 net sales increased $ 34.2 million , or 9.0 percent , over the prior year . this was primarily due to volume growth and improved pricing and mix in our u.s.-based business , as a result of our focus on growth in the mid-size building sector , as well as the effects of a positive u.s. construction market . currency did not have a meaningful impact on segment sales as compared to the prior year . operating margin improved 140 basis points , driven by leverage on volume growth , pricing , mix and productivity . fiscal 2016 compared to fiscal 2015. fiscal 2016 net sales improved 9.0 percent over the prior year , or 12.2 percent on a constant currency basis , primarily due to improved pricing , mix and volume growth in the u.s. as a result of the strong u.s. construction market , partially offset by declines in volume and mix in our brazilian operation and lower export sales from the u.s. operating margin improved 470 basis points , doubling the fiscal 2015 operating margin , with improvement driven by pricing and mix , as well as strong operational performance and volume leverage in the u.s. , partially offset by the impact of ongoing challenging brazilian economic conditions . architectural framing systems replace_table_token_8_th fiscal 2017 compared to fiscal 2016. net sales improved 25.1 percent , or $ 77.4 million , over fiscal 2016 due to volume growth across our businesses . our volume growth resulted from strong u.s. construction market conditions , increased penetration into certain geographies and new product introductions . in addition , sotawall , acquired in the fourth quarter of fiscal 2017 , contributed net sales of $ 17.8 million in fiscal 2017 , or approximately six percentage points of growth . currency did not have a meaningful impact on segment sales as compared to the prior year . operating margin improved 130 basis points over fiscal 2016 , driven by leverage on volume growth and productivity . fiscal 2016 compared to fiscal 2015. net sales improved 3.4 percent over fiscal 2015 , or 6.0 percent on a constant currency basis , on volume growth from strong u.s. construction markets , and improved pricing and mix in our u.s. businesses , partially offset by volume weakness in our canadian business . 17 operating margin improved 300 basis points over fiscal 2015 , driven by improved pricing and mix , lower raw material costs and volume leverage in the u.s. , partially offset by the volume weakness in our canadian business . architectural services replace_table_token_9_th fiscal 2017 compared to fiscal 2016. net sales improved 10.2 percent , or $ 25.0 million , over the prior year , driven by volume growth due to year-on-year timing of project activity , as we have continued to experience strong commercial construction activity in the u.s. operating margin improved 200 basis points over the prior year , as a result of leveraging volume growth and continued good execution on projects with better margins . fiscal 2016 compared to fiscal 2015. net sales improved 6.6 percent over the prior year , driven by volume growth due to increased commercial construction activity in the u.s. operating margin improved 160 basis points over the prior year , as a result of continued focus on project selection , improved project margins and good execution . large-scale optical technologies ( lso ) replace_table_token_10_th fiscal 2017 compared to fiscal 2016. net sales in our lso segment increased 1.3 percent over the prior year . operating margin declined 90 basis points over the prior year as a result of increased investments in new market opportunities . fiscal 2016 compared to fiscal 2015. net sales in this segment increased 1.0 percent over the prior year as a result of an improved mix of value-added products and stable demand . operating margin improved 90 basis points over the prior year as a result of improved product mix and strong operational performance . story_separator_special_tag as of march 4 , 2017 , we had reserves of $ 4.0 million and $ 1.4 million for long-term unrecognized tax benefits and environmental liabilities , respectively . we expect approximately $ 0.4 million of the unrecognized tax benefits to lapse during the next 12 months . we are unable to reasonably estimate in which future periods the remaining unrecognized tax benefits and environmental liabilities will ultimately be settled . at march 4 , 2017 , we had ongoing letters of credit of $ 23.5 million related to industrial revenue bonds and construction contracts that expire in fiscal 2018 and that reduce availability of funds under our committed credit facility . in addition to the above standby letters of credit , we are required , in the ordinary course of business , to provide surety or performance bonds that commit payments to our customers for any non-performance by us . at march 4 , 2017 , $ 96.2 million of our backlog was bonded by performance bonds with a face value of $ 343.7 million . performance bonds do not have stated expiration dates , 19 as we are released from the bonds upon completion of the contracts . story_separator_special_tag we have never been required to make any payments related to these performance bonds with respect to any of our current portfolio of businesses . we had total cash and short-term marketable securities of $ 20.0 million , and $ 106.5 million available under our committed revolving credit facility , at march 4 , 2017 . due to our ability to generate strong cash from operations and borrowing capability under our committed revolving credit facility , we believe that our sources of liquidity will continue to be adequate to fund our working capital requirements , planned capital expenditures and dividend payments for at least the next 12 months . off-balance sheet arrangements . with the exception of operating leases , we had no off-balance sheet financing arrangements at march 4 , 2017 or february 27 , 2016 . outlook the following statements are based on our current expectations for fiscal 2018 results . these statements are forward-looking , and actual results may differ materially . revenue growth of approximately 10 percent over fiscal 2017 . gross margin of approximately 28 percent and operating margin of approximately 12.5 percent . earnings per diluted share of $ 3.35 to $ 3.55. capital expenditures of approximately $ 50 to $ 60 million . recently issued accounting pronouncements see note 1 of the notes to consolidated financial statements within item 8 of this form 10-k for information pertaining to recently issued accounting pronouncements , incorporated herein by reference . critical accounting policies our analysis of operations and financial condition is based on our consolidated financial statements prepared in accordance with u.s. gaap . preparation of these consolidated financial statements requires us to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the consolidated financial statements , reported amounts of revenues and expenses during the reporting period and related disclosures of contingent assets and liabilities . in developing these estimates and assumptions , a collaborative effort is undertaken involving management across the organization including finance , sales , project management , quality , risk , legal and tax , as well as outside advisors such as consultants , engineers , lawyers and actuaries . our estimates are evaluated on an ongoing basis and are drawn from historical experience and other assumptions that we believe to be reasonable under the circumstances . actual results could differ under other assumptions or circumstances . the following items in our consolidated financial statements require significant estimation or judgment : revenue recognition . we recognize revenue when title has transferred , except within our architectural services segment and for one business within our architectural framing systems segment , which enter into fixed-price contracts for projects typically performed over a 12- to 24-month timeframe . the contracts clearly specify the enforceable rights of the parties , the consideration and the terms of settlement , and both parties can be expected to satisfy all obligations under the contract . we record revenue for these contracts on a percentage-of-completion basis as we are able to reasonably estimate total contract revenue and total contract costs . we compare the total costs incurred to date to the total estimated costs for the contract , and record that proportion of the total contract revenue in the period . contract costs include materials , labor and other direct costs related to contract performance . we believe utilizing the cost-to-cost method for revenue recognition provides the greatest degree of accuracy in measuring revenue throughout the contract period . provisions are established for estimated losses , if any , on uncompleted contracts in the period in which such losses are determined . amounts representing contract change orders , claims or other items are included in contract revenue only upon customer approval . recognizing revenue under the percentage-of-completion method of accounting requires significant estimates , including total costs and the percentage complete on the contract , as well as any potential losses or contract overruns . during fiscal 2017 , approximately 26 percent of our consolidated sales were recorded on a percentage-of-completion basis . goodwill impairment . we evaluate goodwill for impairment annually at our year-end , or more frequently if impairment indicators exist . this year we elected to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount ( commonly referred to as “ step 0 ” ) . if , after assessing all events and circumstances , it is determined that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount , then the two-step goodwill impairment assessment is unnecessary . if we proceed in the goodwill analysis , step 1 of the process compares the fair value of each of our reporting units to carrying value , including goodwill . if the fair value exceeds the carrying value , goodwill impairment is not indicated . each of our business units represents a reporting unit for the goodwill 20 impairment analysis . based on our assessment process , we determined that it was not more likely than not that the fair value of any of our reporting units was less than its carrying amount . when we perform step 1 of the goodwill impairment assessment , we base our determination of fair value on a discounted cash flow methodology that involves significant judgment about projections of future performance . assumptions about future revenues and expenses , capital expenditures and changes in working capital are based on the annual operating plan and long-term business plan for each business unit . these plans take into consideration numerous factors , including historical experience , anticipated future economic conditions and growth expectations for the industries and end markets in which we participate . growth rates for revenues and operating profits vary for each reporting unit . the discount rate assumption for each reporting unit takes
| as part of this review , we may acquire other businesses , pursue geographic expansion , take actions to manage capacity and further invest in , fully divest and or sell parts of our current businesses . financing activities . we paid dividends totaling $ 14.7 million in fiscal 2017. additionally , we repurchased 250,001 shares under our authorized share repurchase program during fiscal 2017 , for a total cost of $ 10.8 million . we repurchased 575,000 shares under the program in fiscal 2016 and 203,509 shares under the program during fiscal 2015. we have repurchased a total of 3,307,633 shares , at a total cost of $ 72.3 million , since the inception of this program during fiscal 2004. we have remaining authority to repurchase 942,367 shares under this program , which has no expiration date . we maintain a $ 175.0 million committed revolving credit facility that expires in november 2021 as further described in note 8 of the notes to consolidated financial statements . $ 45.0 million was outstanding under this credit facility as of march 4 , 2017 , as we used this facility to partially finance the sotawall acquisition . nothing was outstanding under this credit facility at the end of either of the two prior years .
| Liquidity | 7,307 |
ebitda and adjusted ebitda are not measures of financial performance or liquidity under gaap and should not be considered in isolation or as alternatives to cash flow from operating activities or as alternatives to net income as indicators of operating performance or any other measures of performance derived in accordance with gaap . in evaluating our performance as measured by ebitda , management recognizes and considers the limitations of this measurement . ebitda and adjusted ebitda do not reflect our obligations for the payment of income taxes , interest expense or other obligations such as capital expenditures . accordingly , ebitda and adjusted ebitda are only two of the measurements that management utilizes . other companies in our industry may calculate ebitda or adjusted ebitda differently than we do and ebitda and adjusted ebitda may not be comparable with similarly titled measures reported by other companies . 23 index to financial statements within our marine technology products segment , we design , manufacture and sell a variety of products used primarily in oceanographic , hydrographic , defense , seismic and maritime security industries . seamap 's primary products include the ( i ) gunlink and digishot seismic source acquisition and control systems , which provide marine operators more precise control of exploration tools ; and ( ii ) the buoylink rgps tracking system used to provide precise positioning of seismic sources and streamers ( marine recording channels that are towed behind a vessel ) and ( iii ) beginning in fiscal 2019 sealink marine sensors and solid streamer systems ( collectively the “ sealink ” product line or the “ towed streamer products ” ) . these towed streamer products are primarily designed for three-dimensional , high-resolution marine surveys in hydrographic industry applications . klein designs , manufactures and sells side scan sonar and water-side security systems to commercial , governmental and military customers throughout the world . sap sells equipment , consumable supplies , systems integration , engineering hardware and software maintenance support services to the seismic , hydrographic , oceanographic , environmental and defense industries throughout southeast asia and australia . in our equipment leasing segment , we lease seismic data acquisition equipment primarily to seismic data acquisition companies conducting land , transition zone and marine seismic surveys worldwide . we provide short-term leasing of seismic equipment to meet a customer 's requirements . all active leases at january 31 , 2019 were for a term of less than one year . seismic equipment held for lease is carried at cost , net of accumulated depreciation . we acquire some marine lease pool equipment from our marine technology products segment . these amounts are carried in our lease pool at the cost to our marine technology products segment , less accumulated depreciation . from time to time , we sell lease pool equipment . these sales are transacted when we have equipment for which we do not have near term needs in our leasing business or is otherwise considered excess . additionally , when equipment that has been leased to a customer is lost or destroyed , the customer is charged for such equipment at amounts specified in the underlying lease agreement . these charges are included in “ lease pool equipment sales ” in the accompanying financial statements . our results of operations can experience fluctuations in activity levels due to a number of factors outside of our control . these factors include , but are not limited to , budgetary or financial concerns , difficulties in obtaining licenses or permits , security issues , labor or political issues and weather issues . see item 1a- “ risk factors . ” business outlook we have implemented a strategy to emphasize our marine technology products segment and to make certain changes in our equipment leasing segment . the vision statement for the company ( see “ item 1 - business ” ) was developed to serve as a guide for the new strategy . the strategy and related vision statement were influenced by changes that have taken place in our leasing segment and our perception of opportunities available to us . prior to fiscal 2017 the majority of our revenues were generated by our equipment leasing segment . since fiscal 2017 we have seen a significant decline in revenues from leasing activity . this decline has been caused , we believe , by a number of factors including the following : a reduction in demand for seismic services brought about by reduced oil and gas exploration activities , which was in turn caused by lower prices for oil and gas and by excess inventories of those commodities . an excess of capacity in the seismic industry , specifically excess supplies of seismic equipment . technological advances which have reduced the cost of certain seismic equipment , therefore resulting in pressure on prices for the rental or sale of such equipment . increased competition among providers of seismic equipment . we believe that many of these factors will have a lasting effect on the seismic equipment industry . therefore , we believe that it is unlikely that the results of our equipment leasing segment will return to levels seen historically . accordingly , we have implemented a strategy to emphasize our marine technology products segment and to make certain changes in our equipment leasing segment . the vision statement for the company ( see “ item 1 - business ” ) was developed to serve as a guide for the new strategy . our strategy includes the following key points : increased emphasis on our marine technology products segment . we are expanding our product offerings with an emphasis on products and services that are not exclusively dependent upon oil and gas exploration activity . story_separator_special_tag we reduced our lease pool additions in fiscal 2016 through fiscal 2019 in response to industry conditions . we anticipate maintaining a low level of lease pool additions in fiscal 2020. therefore , as existing assets become fully depreciated and as we sell certain lease pool assets , we expect that lease pool depreciation expense will continue to decline . the equipment is depreciated on a straight-line basis over its estimated useful life . the useful lives of our assets range from two to 10 years . at january 31 , 2019 , lease pool assets with an acquisition cost of approximately $ 105.4 million were fully depreciated , yet remained in service . this compares to approximately $ 99.0 million at january 31 , 2018. these assets , though fully depreciated , are expected to continue to generate revenues through leasing activity . we recorded direct costs related to seismic leasing for fiscal 2019 in the amount of approximately $ 4.4 million as compared to approximately $ 3.5 million in fiscal 2018 and approximately $ 3.3 million in fiscal 2017. these costs as a percentage of leasing revenues for fiscal 2019 , 2018 and 2017 are 38 % , 44 % and 32 % , respectively . direct costs typically fluctuate with leasing revenues , as the three main components of direct costs are freight , repairs and sublease expense . however , a portion of these costs are fixed , such as warehouse and employee related expenses . costs related to subleased equipment increased in fiscal 2019 due to arrangements with certain oem 's which provide us access to equipment for rental at no , or reduced , initial investment . operating expenses selling , general and administrative expenses for fiscal 2019 amounted to approximately $ 20.9 million , compared to approximately $ 19.7 million and $ 19.8 million in fiscal 2018 and 2017 , respectively . the increase in operating expenses during fiscal 2019 was due to incremental costs related to new technologies of approximately $ 1.5 million , offset by the non-recurrence of restructuring costs of approximately $ 400,000 in the fourth quarter of 2018. general and administrative expenses were consistent between fiscal 2018 and 2017. in fiscal 2019 , 2018 and 2017 , we provided approximately $ 200,000 , $ 1.0 million and $ 750,000 , respectively , for doubtful accounts . at january 31 , 2019 and 2018 , we had trade accounts and note receivables over 180 days past due of approximately $ 4.3 million and $ 11.7 million , respectively . in our industry , and in our experience , it is not unusual for accounts to become delinquent from time to time and this is not necessarily indicative of an account becoming uncollectable . as of january 31 , 2019 and 2018 , our allowance for doubtful accounts receivable amounted to approximately $ 2.1 million and $ 6.2 million , respectively . depreciation and amortization , other than lease pool depreciation , relates primarily to the depreciation of furniture , fixtures and office equipment and the amortization of intangible assets . the increase in depreciation and amortization expense in fiscal 2019 is due primarily to asset additions in relation to the start-up of the sealink product line . other income and expense other income and expense for fiscal 2019 primarily relates to losses on the sale of our russian and australian entities of approximately $ 5.4 million , a $ 1.2 million reserve against foreign non-current prepaid income taxes , as well as a net foreign exchange loss . the loss on sale was primarily due to the cumulative translation loss related to our russian operations which was recorded as a charge to the statement of operations as a result of the sale . the foreign exchange loss for the twelve month period for fiscal 2019 and fiscal 2018 were relatively consistent due to a general strengthening of the u.s. dollar . other expense for fiscal 2018 increased compared to fiscal 2017 due mainly to increased foreign exchange losses , primarily based on strengthening of the u.s. dollar . provision for income taxes our provision for income taxes was approximately $ 252,000. this amount differed from the result expected when applying the u.s. statutory rate of 21 % to our loss before income taxes due primarily to recording a valuation allowance against the fiscal 2019 increase in our deferred tax assets and the effect of foreign branch and withholding taxes . recent changes to united states tax laws , including a reduction in the corporate tax rate and the manner in which earnings from foreign operations are taxed , did not have a material effect on our provision for income taxes in fiscal 2019. in fiscal 2018 , our provision for income taxes was approximately $ 910,000. this amount differed from the expected income tax benefit at the u.s. statutory rate of 32 % due primarily to recording a valuation allowance against all of the fiscal 2018 increase in deferred tax assets and the effect of foreign withholding taxes . in fiscal 2017 , our provision for income taxes was approximately $ 1.8 million . this amount differed from the expected income tax benefit at the u.s. statutory rate of 34 % due primarily to recording a valuation allowance against all of the fiscal 2017 increase in deferred tax assets and the effect of foreign withholding taxes . story_separator_special_tag estimates of future payments of our consolidated contractual obligations as of january 31 , 2019 ( in thousands ) : replace_table_token_10_th we regularly evaluate opportunities to expand our business through the acquisition of other companies , businesses or product lines . if we were to make any such acquisitions , we believe they could generally be financed with a combination of cash on hand and cash flows from operations . however , should these sources of financing not be adequate , we may seek other sources of capital to fund future acquisitions
| liquidity and capital resources 28 index to financial statements our principal source of liquidity and capital over the past three fiscal years has been cash flows provided by operating activities and proceeds from the issuance of preferred stock . the principal factor that has affected our cash flow from operating activities is the level sales and rental activities as discussed above . we believe that our liquidity needs for the next 12 months will be met from cash on hand , cash provided by operating activities , proceeds from the sale of lease pool equipment and from proceeds from the issuance of additional shares of preferred stock , taking into account the possible restrictions on funds from our foreign subsidiaries . in june 2016 , we completed an offering of 9.00 % cumulative preferred stock ( the “ series a preferred stock ” ) . the series a preferred stock ( i ) allows for redemption on at our option ( even in the event of a change of control ) , ( ii ) does not grant holders with voting control of our board of directors , and ( iii ) provides holders with a conversion option ( into common stock ) only upon a change of control which upon conversion would be subject to a limit on the maximum number of shares of common stock to be issued . should our needs for liquidity increase , such as to make an acquisition , acquire lease pool assets , or make other investments , we may seek to issue other debt or equity securities .
| Liquidity | 4,075 |
such forward-looking statements involve known and unknown risks , uncertainties and other important factors that could cause the actual results , performance or achievements of the company , or industry results , to differ materially from future results , performance or achievements expressed or implied by such forward-looking statements . readers are cautioned not to place undue reliance on these forward-looking statements , which reflect management 's view only as of the date of this form 10-k. the company undertakes no obligation to update the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events , conditions or circumstances . overview the company is a leading manufacturer of flexible metal hose , and is currently engaged in a number of different markets , including construction , manufacturing , transportation , petrochemical , pharmaceutical and other industries . -12- the company 's business is managed as a single operating segment that consists of the manufacture and sale of flexible metal hose and accessories . the company 's products are concentrated in residential and commercial construction , and general industrial markets . the company 's primary product , flexible gas piping , is used for gas piping within residential and commercial buildings . through its flexibility and ease of use with patented fittings distributed under the trademark autoflare ® , tracpipe ® and tracpipe ® counterstrike ® flexible gas piping allows users to substantially cut the time required to install gas piping , as compared to traditional methods . most of the company 's products are manufactured at the company 's exton , pennsylvania facilities with a minor amount of manufacturing performed in the united kingdom . a majority of the company 's sales across all industries are generated through independent outside sales organizations such as sales representatives , wholesalers and distributors , or a combination of both . the company has a broad distribution network in north america and to a lesser extent in other global markets . changes in financial condition the cash balance was $ 8,257,000 at december 31 , 2013 , compared to $ 939,000 at december 31 , 2012 , increasing $ 7,318,000 ( 779.3 % ) during the year . net income attributable to omega flex , inc. for 2013 was $ 10,037,000 , which helped to replenish cash throughout the year . the income for 2013 includes an accrual for incentive compensation of approximately $ 2,800,000 which will not be paid until the first quarter of 2014 , and therefore adds to cash as of december 31 , 2013. the company did however have a couple of significant outflows during 2013. on december 31 , 2013 the company funded a dividend amounting to $ 4,289,000 , which is described in detail in note 6 , under shareholders ' equity . in addition , the company also paid the uk settlement of approximately $ 1,300,000 , which is detailed in note 11 , commitments and contingencies . accounts payable has decreased $ 944,000 ( 34.5 % ) , ending at $ 1,793,000 at december 31 , 2013 , from a balance of $ 2,737,000 at december 31 , 2012. the majority of the change is timing related , with less payments due to vendors outstanding at december 31 , 2013 than experienced at december 31 , 2012. the company 's line of credit , discussed in detail within note 5 , had an outstanding balance of $ 324,000 at december 31 , 2012 , but was paid off in its entirety during the first quarter of 2013. accrued compensation was $ 3,114,000 at december 31 , 2013 , compared with $ 349,000 at december 31 , 2012 , thus increasing $ 2,765,000 ( 792.3 % ) . a majority of the incentive compensation that was earned in 2012 was paid during the fourth quarter of 2012. the accrual at december 31 , 2013 represents the accumulation of the current year 's accrual for a full twelve months , as earned in correlation with profits . typically , incentive compensation is paid during the first quarter of the following year , but in 2012 it was largely earned and paid in the same year , thus diminishing the accrual at the end of that year . other liabilities were $ 3,575,000 at december 31 , 2013 , compared to $ 4,214,000 at december 31 , 2012. as disclosed in note 11 , commitments and contingencies , the company 's subsidiary , ofl , had been sued regarding the installation of tracpipe product in an apartment complex in england . the company had reached a settlement of approximately $ 1,300,000 regarding this issue in march of 2013 , and recorded the amount in other liabilities as of december 31 , 2012. ofl then paid $ 1,300,000 during march of 2013 and thus diminished the balance of the liability accordingly , which accounts for a majority of the change between periods . this event along with various other partially offsetting items accounts for the 15.2 % change in years of $ 639,000 . -13- results of operations three-months ended december 31 , 2013 vs. december 31 , 2012 the company reported comparative results from continuing operations for the three-month period ended december 31 , 2013 and 2012 as follows : replace_table_token_1_th net sales . story_separator_special_tag the company may elect to use either the libor or prime rates . as of december 31 , 2013 , the actual rate to borrow was at approximately 2.00 % . interest rates are also significant to the company as a participant in the residential construction industry , since interest rates can be a determinant factor on whether or not borrowing funds for building will be affordable to our customers . ( see construction activity , above ) . currently , interest rates are at historic lows , but any dramatic change to interest rates could have a detrimental effect on the business . retention of qualified personnel the company does not operate with multiple levels of management . it is relatively flat organizationally , which does subject the company to the risks associated with the loss of critical managers . from time to -17- time , there may be a shortage of skilled labor , which may make it more difficult and expensive for the company to attract and retain qualified employees . the company is dependent upon the relatively unique talents and managerial skills of a small number of key executives . critical accounting policies and use of estimates financial reporting release no . 60 , released by the securities and exchange commission , requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements . note 2 in the notes to the consolidated financial statements include a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements . the following is a brief discussion of the company 's more significant accounting policies . the preparation of financial statements in conformity with generally accepted accounting principles ( gaap ) 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 dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods . the most significant estimates and assumptions relate to revenue recognition , inventory valuations , goodwill and intangible asset valuations , product liability costs , phantom stock and accounting for income taxes . actual amounts could differ significantly from these estimates . our critical accounting policies and significant estimates and assumptions are described in more detail as follows : revenue recognition the company 's revenue recognition activities relate almost entirely to the manufacture and sale of flexible metal hose and pipe . under gaap , revenues are considered to have been earned when the company has substantially accomplished what it must do to be entitled to the benefits represented by the revenues . the following criteria represent preconditions to the recognition of revenue : · persuasive evidence of an arrangement for the sale of product or services must exist . · delivery has occurred or services rendered . · the sales price to the customer is fixed or determinable . · collection is reasonably assured . the company generally recognizes revenue upon shipment in accordance with the above principles . gross sales are reduced for all consideration paid to customers for which no identifiable benefit is received by the company . this includes promotional incentives , which includes various programs including year-end rebates and discounts . the amounts of certain incentives are known with reasonable certainty at the time of sale , while others are projected based upon the most reliable information available at the reporting date . commissions , for which the company receives an identifiable benefit , are accounted for as a selling expense . accounts receivable accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future . the estimated allowance for uncollectible amounts is based primarily on specific analysis of accounts in the receivable portfolio and historical write-off experience . while management believes the allowance to be adequate , if the financial condition of the company 's customers were to deteriorate , resulting in their inability to make payments , additional allowances may be required . inventory inventories are valued at the lower of cost or market . cost of inventories is determined by the first-in , first-out ( fifo ) method . the company generally considers inventory quantities beyond two-years usage , measured on a historical usage basis , to be excess inventory and reduces the gross carrying value of inventory accordingly . -18- goodwill in accordance with financial accounting standards board ( fasb ) asc topic 350 , with respect to goodwill , the company performs annual impairment tests using the market capitalization on the last day of the year to determine the fair value of the reporting unit and then compares that value to the carrying value . as of december 31 , 2013 and december 31 , 2012 , the fair value of the reporting unit exceeded the carrying value , and therefore the company concluded that goodwill was not impaired . product liability reserves product liability reserves included in the consolidated financial statements primarily represents an accrual for legal costs for services previously rendered and outstanding settlements for existing claims . phantom stock the company uses the black-scholes option pricing model as its method for determining fair value of the units . the company uses the straight-line method of attributing the value of the stock-based compensation expense relating to the units . the compensation expense ( including adjustment of the liability to its fair value ) from the units is recognized over the requisite service period of each grant or award . the fasb asc topic 718 stock compensation requires forfeitures to be estimated at the time of grant and revised , if necessary , in subsequent periods if actual forfeitures differ from those estimates in order to derive the company 's best estimate of awards ultimately to vest . forfeitures represent only the unvested portion of a surrendered unit and are typically estimated based
| liquidity and capital resources historically , the company 's primary cash needs have been related to working capital items ( including inventory purchases ) , which the company has largely funded through cash generated from operations . as of december 31 , 2013 , the company had a cash balance of $ 8,257,000. additionally , the company has the full use of a $ 10,000,000 line of credit available with santander bank , as discussed in detail in note 5. at december 31 , 2012 , the company had cash of $ 939,000 , and had borrowings of $ 324,000 outstanding upon the line of credit . operating activities cash provided by operating activities is net income adjusted for certain non-cash items and changes in certain assets and liabilities , such as those included in working capital . -19- for 2013 and 2012 , the company 's cash provided from operating activities was $ 12,389,000 and $ 7,298,000 , respectively , increasing $ 5,091,000 between periods . the cash generation during 2013 has been of a more normal nature , as it mostly reflects cash from general operations , but did however also include a payment of approximately $ 1,300,000 during the first quarter of 2013 related to the settlement in england , which is discussed in note 11 , commitments and contingencies . a significant portion of the cash provided in 2012 was largely related to the ilr also discussed in note 11 , which enhanced cash from operations by approximately $ 2,500,000 after considering the deduction for auxiliary costs . as a general trend , the company tends to deplete cash early in the year , as significant payments are typically made for accrued promotional incentives , incentive compensation , and taxes . cash has then historically shown a tendency to be restored and accumulated during the latter portion of the year . investing activities cash used in investing activities during 2013 and 2012 was $ 487,000 and $ 130,000 , respectively , all related to capital expenditures for both periods .
| Liquidity | 14,197 |
we review conditions in the agricultural industry in the areas in which our lands are located and seek to keep as much of our lands as possible under lease to local ranchers at competitive rates . in recent years , we have been successful at keeping over 96 % of our land subject to grazing leases . 9 results of operations the trust 's primary sources of income are revenue derived from sales of land , either for cash or a combination of cash and mortgage notes , and revenue derived from the trust 's land and mineral interests . on june 20 , 2007 , the trustees authorized a five-for-one split of sub-shares in certificates of proprietary interest , effective july 2 , 2007. as a result , the par value of sub-shares was reduced from $ .16-2/3 per sub-share to $ .03-1/3 per sub-share . all figures presented in this report relative to sub-shares outstanding , earnings per sub-share , dividends per sub-share , the number and cost of sub-shares purchased for cancellation , and the market price of sub-shares reflect the five-for-one split . 2011 compared to 2010 total operating revenues and investing revenues in 2011 aggregated $ 34,319,036 , an increase of $ 14,227,364 , or 70.8 % , from the $ 20,091,672 of total operating revenues and investing revenues recorded in 2010. this increase resulted primarily from increases in land sales , oil and gas royalty revenue , and easements and sundry income . these increases were partially offset by decreases in interest income from notes receivable and investments and , to a much lesser extent , a modest decrease in grazing lease revenue . earnings per sub-share certificate were $ 2.21 for 2011 compared to $ 1.17 in 2010. the trust purchased and retired 373,030 sub-shares during 2011 , leaving 9,175,414 sub-shares outstanding at december 31 , 2011. land sales in 2011 were $ 11,873,112 compared to $ 2,738,070 in 2010 , an increase of $ 9,135,042 , or 333.6 % . a total of 31,446 acres were sold in 2011 at an average price of $ 378 per acre , compared to 2,424 acres and 223 town lots , totaling 43 acres , in 2010 at an average price per acre of $ 1,110. rentals , royalties and other income ( including interest on investments ) were $ 22,445,924 in 2011 compared to $ 17,353,602 in 2010 , an increase of 29.3 % . oil and gas royalty revenue in 2011 was $ 14,685,502 compared to $ 11,573,563 in 2010 , an increase of 26.9 % . oil royalty revenue was $ 11,434,640 and gas royalty revenue was $ 3,250,862 in 2011. crude oil production from trust royalty wells increased 8.4 % in 2011 from 2010. the average prices per royalty barrel of crude oil for 2011 and 2010 were $ 89.21 and $ 74.57 , respectively . total gas production increased 14.6 % , and the average price of gas increased by 2.9 % , during 2011 compared to 2010 . 10 grazing lease income in 2011 was $ 499,400 compared to $ 506,211 in 2010. interest revenue ( including interest on investments ) was $ 898,277 in 2011 compared to $ 1,107,726 in 2010 , a decrease of 18.9 % . interest on notes receivable amounted to $ 879,749 in 2011 compared to $ 1,082,019 in 2010. at year end 2011 , notes receivable from land sales were $ 10,354,103 compared to $ 14,342,898 at year end 2010. interest on investments amounted to $ 18,528 in 2011 and $ 25,707 in 2010 , respectively . total principal cash payments on notes receivable were $ 4,163,545 in 2011 including $ 2,683,841 of prepaid principal . easement and sundry income revenue in 2011 was $ 6,362,745 compared to $ 4,166,102 in 2010. the increase in easement and sundry income revenue was primarily attributable to increases in the amount of pipeline easement income and the amount of sundry lease rental income received in 2011 compared to 2010. easement and sundry income is unpredictable and may vary significantly from period to period . taxes , other than income taxes were $ 922,951 in 2011 compared to $ 775,380 in 2010. oil and gas production taxes were $ 769,807 in 2011 compared to $ 612,362 in 2010. ad valorem taxes were $ 102,625 in 2011 compared to $ 112,531 in 2010. all other expenses were $ 2,640,167 in 2011 compared to $ 2,892,111 in 2010 . 2010 compared to 2009 total operating revenues and investing revenues in 2010 aggregated $ 20,091,672 , an increase of $ 6,953,385 , or 52.9 % , from the $ 13,138,287 of total operating revenues and investing revenues recorded in 2009. this increase resulted primarily from increases in oil and gas royalty revenue , land sales , easements and sundry income and , to a much lesser extent , a modest increase in grazing lease revenue . these increases were partially offset by decreases in interest income from notes receivable and from investments . earnings per sub-share certificate were $ 1.17 for 2010 compared to $ .69 in 2009. the trust purchased and retired 346,070 sub-shares during 2010 , leaving 9,548,444 sub-shares outstanding at december 31 , 2010. land sales in 2010 were $ 2,738,070 compared to $ 523,010 in 2009 , an increase of $ 2,215,060 , or 423.5 % . a total of 2,424 acres and 223 town lots , totaling 43 acres , were sold in 2010 at an average price of $ 1,110 per acre , compared to 696 acres in 2009 at an average price per acre of $ 751. rentals , royalties and other income ( including interest on investments ) were $ 17,353,602 in 2010 compared to $ 12,615,277 in 2009 , an increase of 37.6 % . oil and gas royalty revenue in 2010 was $ 11,573,563 compared to $ 8,686,187 in 2009 , an increase of 33.2 % . oil royalty revenue story_separator_special_tag we review conditions in the agricultural industry in the areas in which our lands are located and seek to keep as much of our lands as possible under lease to local ranchers at competitive rates . in recent years , we have been successful at keeping over 96 % of our land subject to grazing leases . 9 results of operations the trust 's primary sources of income are revenue derived from sales of land , either for cash or a combination of cash and mortgage notes , and revenue derived from the trust 's land and mineral interests . on june 20 , 2007 , the trustees authorized a five-for-one split of sub-shares in certificates of proprietary interest , effective july 2 , 2007. as a result , the par value of sub-shares was reduced from $ .16-2/3 per sub-share to $ .03-1/3 per sub-share . all figures presented in this report relative to sub-shares outstanding , earnings per sub-share , dividends per sub-share , the number and cost of sub-shares purchased for cancellation , and the market price of sub-shares reflect the five-for-one split . 2011 compared to 2010 total operating revenues and investing revenues in 2011 aggregated $ 34,319,036 , an increase of $ 14,227,364 , or 70.8 % , from the $ 20,091,672 of total operating revenues and investing revenues recorded in 2010. this increase resulted primarily from increases in land sales , oil and gas royalty revenue , and easements and sundry income . these increases were partially offset by decreases in interest income from notes receivable and investments and , to a much lesser extent , a modest decrease in grazing lease revenue . earnings per sub-share certificate were $ 2.21 for 2011 compared to $ 1.17 in 2010. the trust purchased and retired 373,030 sub-shares during 2011 , leaving 9,175,414 sub-shares outstanding at december 31 , 2011. land sales in 2011 were $ 11,873,112 compared to $ 2,738,070 in 2010 , an increase of $ 9,135,042 , or 333.6 % . a total of 31,446 acres were sold in 2011 at an average price of $ 378 per acre , compared to 2,424 acres and 223 town lots , totaling 43 acres , in 2010 at an average price per acre of $ 1,110. rentals , royalties and other income ( including interest on investments ) were $ 22,445,924 in 2011 compared to $ 17,353,602 in 2010 , an increase of 29.3 % . oil and gas royalty revenue in 2011 was $ 14,685,502 compared to $ 11,573,563 in 2010 , an increase of 26.9 % . oil royalty revenue was $ 11,434,640 and gas royalty revenue was $ 3,250,862 in 2011. crude oil production from trust royalty wells increased 8.4 % in 2011 from 2010. the average prices per royalty barrel of crude oil for 2011 and 2010 were $ 89.21 and $ 74.57 , respectively . total gas production increased 14.6 % , and the average price of gas increased by 2.9 % , during 2011 compared to 2010 . 10 grazing lease income in 2011 was $ 499,400 compared to $ 506,211 in 2010. interest revenue ( including interest on investments ) was $ 898,277 in 2011 compared to $ 1,107,726 in 2010 , a decrease of 18.9 % . interest on notes receivable amounted to $ 879,749 in 2011 compared to $ 1,082,019 in 2010. at year end 2011 , notes receivable from land sales were $ 10,354,103 compared to $ 14,342,898 at year end 2010. interest on investments amounted to $ 18,528 in 2011 and $ 25,707 in 2010 , respectively . total principal cash payments on notes receivable were $ 4,163,545 in 2011 including $ 2,683,841 of prepaid principal . easement and sundry income revenue in 2011 was $ 6,362,745 compared to $ 4,166,102 in 2010. the increase in easement and sundry income revenue was primarily attributable to increases in the amount of pipeline easement income and the amount of sundry lease rental income received in 2011 compared to 2010. easement and sundry income is unpredictable and may vary significantly from period to period . taxes , other than income taxes were $ 922,951 in 2011 compared to $ 775,380 in 2010. oil and gas production taxes were $ 769,807 in 2011 compared to $ 612,362 in 2010. ad valorem taxes were $ 102,625 in 2011 compared to $ 112,531 in 2010. all other expenses were $ 2,640,167 in 2011 compared to $ 2,892,111 in 2010 . 2010 compared to 2009 total operating revenues and investing revenues in 2010 aggregated $ 20,091,672 , an increase of $ 6,953,385 , or 52.9 % , from the $ 13,138,287 of total operating revenues and investing revenues recorded in 2009. this increase resulted primarily from increases in oil and gas royalty revenue , land sales , easements and sundry income and , to a much lesser extent , a modest increase in grazing lease revenue . these increases were partially offset by decreases in interest income from notes receivable and from investments . earnings per sub-share certificate were $ 1.17 for 2010 compared to $ .69 in 2009. the trust purchased and retired 346,070 sub-shares during 2010 , leaving 9,548,444 sub-shares outstanding at december 31 , 2010. land sales in 2010 were $ 2,738,070 compared to $ 523,010 in 2009 , an increase of $ 2,215,060 , or 423.5 % . a total of 2,424 acres and 223 town lots , totaling 43 acres , were sold in 2010 at an average price of $ 1,110 per acre , compared to 696 acres in 2009 at an average price per acre of $ 751. rentals , royalties and other income ( including interest on investments ) were $ 17,353,602 in 2010 compared to $ 12,615,277 in 2009 , an increase of 37.6 % . oil and gas royalty revenue in 2010 was $ 11,573,563 compared to $ 8,686,187 in 2009 , an increase of 33.2 % . oil royalty revenue
| it is our opinion that we fully disclose our significant accounting policies in the notes to the financial statements . consistent with our disclosure policies , we include the following discussion related to what we believe to be our most critical accounting policies that require our most difficult , subjective or complex judgment . valuation of notes receivable - management of the trust monitors delinquencies to assess the propriety of the carrying value of its notes receivable . at the point in time that notes receivable become delinquent , management reviews the operations information of the debtor and the estimated fair value of the collateral held as security to determine whether an allowance for losses is required . any required allowance for losses is recorded in the period of determination . at december 31 , 2011 , and 2010 , there were no significant delinquencies and , as such , no allowances for losses have been recorded . valuation of real estate acquired through foreclosure - the value of real estate acquired through foreclosure is established at the lower of cost or fair value less disposition costs at the date of foreclosure . cost is considered to be the aggregate of the outstanding principal and interest , past due ad valoremtaxes and other fees associated with the foreclosure .
| Liquidity | 11,726 |
, references to “ we , ” “ our , ” “ us , ” and “ our company ” refer to postal realty trust , inc. , a maryland corporation , together with our consolidated subsidiaries , including postal realty lp , a delaware limited partnership ( “ our operating partnership ” ) , of which we are the sole general partner and which we refer to in this section as our operating partnership . prior to the closing of our ipo on may 17 , 2019 , andrew spodek , our chief executive officer and a member of our board of directors ( the “ board ” ) , directly or indirectly controlled 190 properties owned by the predecessor that were contributed as part of the formation transactions ( as defined below ) . of these 190 properties , 140 were held indirectly by our predecessor through a series of holding companies , which we refer to collectively as “ uph. ” the remaining 50 properties were owned by mr. spodek through 12 limited liability companies and one limited partnership , which we refer to collectively as the “ spodek llcs. ” references to our predecessor consist of uph , the spodek llcs and nationwide postal management , inc. , a property management company whose management business we acquired in the formation transactions ( as defined below ) , collectively . this management 's discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks , uncertainties and assumptions . see “ cautionary statement regarding forward-looking statements ” for a discussion of the risks , uncertainties and assumptions associated with those statements . our actual results may differ materially from those expressed or implied in the forward-looking statements as a result of various factors , including , but not limited to , those in “ risk factors ” and included in other portions of this report . overview company we were formed as a maryland corporation on november 19 , 2018 and commenced operations upon completion of our ipo on may 17 , 2019 and the related formation transactions ( the “ formation transactions ” ) . we conduct our business through a traditional upreit structure in which our properties are owned by our operating partnership directly or through limited partnerships , limited liability companies or other subsidiaries . at the completion of our ipo and the formation transactions , we owned a portfolio of 271 postal properties located in 41 states comprising approximately of 872,000 net leasable interior square feet , all of which were leased to the usps . from may 17 , 2019 to december 31 , 2019 , we acquired 195 postal properties leased to the usps for approximately $ 57.5 million . as of december 31 , 2019 , our portfolio consisted of 466 owned postal properties , located in 44 states and comprising approximately 1.4 million net leasable interior square feet . 30 the following charts show certain statistics of our portfolio as of december 31 , 2019 : we are the sole general partner of our operating partnership through which our postal properties are directly or indirectly owned . as of march 25 , 2020 , we owned approximately 66.0 % of the outstanding common units of limited partnership interest in the operating partnership ( each , an “ op unit , ” and collectively , the “ op units ” ) including long term incentive units of the operating partnership ( each , an “ ltip unit ” and collectively , the “ ltip units ) . our board oversees our business and affairs . initial public offering on may 17 , 2019 , we completed our ipo , pursuant to which we sold 4,500,000 shares of our class a common stock , par value $ 0.01 per share ( our “ class a common stock ” ) , at a public offering price of $ 17.00 per share . we raised $ 76.5 million in gross proceeds , resulting in net proceeds to us of approximately $ 71.1 million after deducting approximately $ 5.4 million in underwriting discounts and before giving effect to $ 6.4 million in other expenses relating to our ipo . our class a common stock began trading on the new york stock exchange ( the “ nyse ” ) under the symbol “ pstl ” on may 15 , 2019. in connection with our ipo and the formation transactions , we also issued 1,333,112 op units , 637,058 shares of class a common stock and 27,206 shares of class b common stock , par value $ 0.01 per share ( our “ class b common stock ” or “ voting equivalency stock ” ) , to mr. spodek and his affiliates in exchange for the predecessor properties and interests . executive overview we are an internally managed reit with a focus on acquiring and managing properties leased to the usps . we believe the overall opportunity for consolidation that exists in the sector is very attractive . we continue to execute our strategy to acquire and consolidate postal properties that will generate strong earnings for our shareholders . emerging growth company we are an “ emerging growth company , ” as defined in the jumpstart our business startups act of 2012 ( the “ jobs act ” ) and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “ emerging growth companies , ” including not being required to comply with the auditor attestation requirements of section 404 of the sarbanes-oxley act of 2002 , reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved . story_separator_special_tag the expenses of owning and operating a property are not necessarily reduced when circumstances , such as market factors and competition , cause a reduction in income from the property . if revenues drop , we may not be able to reduce our expenses accordingly . costs associated with real estate investments generally will not be materially reduced even if a property is not fully occupied or other circumstances cause our revenues to decrease . as a result , if revenues decrease in the future , static operating costs may adversely affect our future cash flow and results of operations . general and administrative general and administrative expenses include employee compensation costs ( including equity-based compensation ) , professional fees , legal fees , insurance , consulting fees , portfolio servicing costs and other expenses related to corporate governance , filing reports with the united states securities and exchange commission ( the “ sec ” ) and the nyse , and other compliance matters . our predecessor was privately owned and historically did not incur costs that we incur as a public company . in addition , while we expect that our general and administrative expenses will continue to rise as our portfolio grows , we expect that such expenses as a percentage of our revenues will decrease over time due to efficiencies and economies of scale . depreciation and amortization depreciation and amortization expense relate primarily to depreciation on properties and improvements and to amortization of certain lease intangibles . indebtedness and interest expense interest expense for our predecessor related primarily to three mortgage loans payable and related party interest-only promissory notes , see note 6. debt and note 7. loans payable — related party to the notes of the consolidated and combined consolidated financial statements . as a result of the formation transactions , we assumed certain indebtedness of the predecessor , a portion of which was repaid without penalty using a portion of the net proceeds from our ipo . on september 27 , 2019 , we entered into a credit agreement ( the “ credit agreement ” ) with people 's united bank , national association , individually and as administrative agent , bmo capital markets corp. , as syndication agent , and certain other lenders . the credit agreement provides for a senior revolving credit facility ( the “ credit facility ” ) with revolving commitments in an aggregate principal amount of $ 100.0 million and , subject to customary conditions , the option to increase the aggregate lending commitments under the agreement by up to $ 100.0 million ( the “ accordion feature ” ) . on january 30 , 2020 , we exercised a portion of the accordion feature to increase the maximum amount available under the credit facility to $ 150.0 million . we intend to use the credit facility for working capital purposes , which may include repayment of indebtedness , property acquisitions and other general corporate purposes . consistent with the method adopted by our predecessor , we amortize on a non-cash basis the deferred financing costs associated with its debt to interest expense using the straight-line method , which approximates the effective interest rate method over the terms of the related loans . any changes to the debt structure , including debt financing associated with property acquisitions , could materially influence the operating results depending on the terms of any such indebtedness . income tax benefit ( expense ) as a reit , we generally will not be subject to federal income tax on our net taxable income that we distribute currently to our stockholders . under the code , reits are subject to numerous organizational and operational requirements , including a requirement that they distribute each year at least 90 % of their reit taxable income , determined without regard to the deduction for dividends paid and excluding any net capital gains . if we fail to qualify for taxation as a reit in any taxable year and do not qualify for certain statutory relief provisions , our income for that year will be taxed at regular corporate rates , and we would be disqualified from taxation as a reit for the four taxable years following the year during which we ceased to qualify as a reit . even if we qualify as a reit for federal income tax purposes , we may still be subject to state and local taxes on our income and assets and to federal income and excise taxes on our undistributed income . additionally , any income earned by prm and any other trs we form in the future , will be subject to federal , state and local corporate income tax . lease renewal as of december 31 , 2019 , 20 of our leases were either in holdover status or expired on december 31 , 2019. see “ item 2. properties— lease expiration schedule ” . as of march 25 , 2020 , 32 leases were in holdover status representing $ 1.1 million of annual rental revenue for the year ended december 31 , 2019. we might not be successful in renewing the leases that are in holdover status or that are expiring in 2020 , or obtaining positive rent renewal spreads , or even renewing the leases on terms comparable to those of the expiring leases . if we are not successful , we will likely experience reduced occupancy , traffic , rental revenue and net operating income , which could have a material adverse effect on our financial condition , results of operations and ability to make distributions to shareholders . 33 story_separator_special_tag offset by a reduction in contractual interest expense on our mortgage debt due a repayment of indebtedness in connection with our ipo .
| results of operations comparison of the year ended december 31 , 2019 and december 31 , 2018 our results of operations for the year ended december 31 , 2019 include our consolidated results for the period from may 17 , 2019 through december 31 , 2019 and combined consolidated results of our predecessor for the period from january 1 , 2019 through may 16 , 2019. the year ended december 31 , 2018 reflects the results of our predecessor and accordingly may not be directly comparable thereto . we incurred a net loss of $ 2.0 million since our ipo on may 17 , 2019 , which includes a loss on early extinguishment of our predecessor 's debt of $ 0.2 million and equity-based compensation of approximately $ 1.0 million . in the discussion below , we have highlighted the impact of our ipo and the formation transactions , where applicable . replace_table_token_3_th revenues total revenues increased by $ 3.6 million for the year ended december 31 , 2019 compared to the year ended december 31 , 2018. the increase in revenue is attributable to the 81 properties that were acquired in connection with the formation transactions , as well as the 195 properties that were acquired since our ipo . rental income – rental income increased by $ 3.2 million year over year and is made up of $ 2.1 million related to the properties purchased by our predecessor and the properties acquired as part of the formation transactions as well as $ 1.1 million for the 195 properties that were acquired since our ipo . tenant reimbursements – tenant reimbursements increased $ 0.4 million for the year ended december 31 , 2019 compared to the year ended december 31 , 2018 primarily due to the acquisition of the 81 properties in connection with the formation transactions and the 195 properties that were acquired since our ipo .
| ROO | 6,323 |
we generate revenue and cash primarily through the design , manufacture , sale and service of a diverse portfolio of industrial and commercial products that include well-recognized , premium brand names such as ingersoll-rand ® , trane ® , thermo king ® , american standard ® and club car ® . to achieve our mission of being a world leader in creating comfortable , sustainable and efficient environments , we continue to focus on increasing our recurring revenue stream from parts , service , used equipment and rentals ; and to continuously improve the efficiencies and capabilities of the products and services of our high-potential businesses . additional emphasis is placed on expanding market coverage in terms of geography or by taking advantage of a particular vertical market or opportunity . we also continue to focus on operational excellence strategies as a central theme to improving our earnings and cash flows . trends and economic events we are a global corporation with worldwide operations . as a global business , our operations are affected by worldwide , regional and industry-specific economic factors , as well as political factors , wherever we operate or do business . our geographic and industry diversity , and the breadth of our product and services portfolios , have helped mitigate the impact of any one industry or the economy of any single country on our consolidated operating results . given the broad range of products manufactured and geographic markets served , management uses a variety of factors to predict the outlook for the company . we monitor key competitors and customers in order to gauge relative performance and the outlook for the future . we regularly perform detailed evaluations of the different market segments we are serving to proactively detect trends and to adapt our strategies accordingly . in addition , we believe our order rates are indicative of future revenue and thus a key measure of anticipated performance . in those industry segments where we are a capital equipment provider , revenues depend on the capital expenditure budgets and spending patterns of our customers , who may delay or accelerate purchases in reaction to changes in their businesses and in the economy . current market conditions remain challenging across different international markets . residential and commercial new construction activity are slowly recovering in the united states . this is impacting the results of our commercial heating , ventilation and air conditioning ( hvac ) business . non-residential new construction remains sluggish in europe and is growing at slower pace in asia . however , hvac equipment replacement and aftermarket continue to experience steady growth . we have seen slower worldwide industrial equipment and aftermarket activity . as economic conditions stabilize , we expect moderate growth in worldwide construction markets and slow growth in industrial markets , along with benefits from productivity programs for the remainder of the year . despite the current market environment , we believe we have a solid foundation of global brands and leading market shares in all of our major product lines . our growing geographic and industry diversity coupled with our large installed product base provides growth opportunities within our service , parts and replacement revenue streams . in addition , we are investing substantial resources to innovate and develop new products and services which we expect will drive our future growth . 22 significant events in 2014 announcement to acquire cameron international corporation 's centrifugal compression division on august 18 , 2014 , the company announced an agreement to acquire the assets of cameron international corporation 's centrifugal compression division ( the division ) for $ 850 million . the acquisition was completed on january 1 , 2015 , and was funded through a combination of cash from operations and debt . the division provides centrifugal compression equipment and aftermarket parts and services for global industrial applications , air separation , gas transmission and process . the assets acquired and the results of its operations will be reflected in our consolidated financial statements beginning in the first quarter of 2015. issuance of senior notes due 2020 , 2024 , and 2044 in october 2014 , we issued $ 1.1 billion principal amount of senior notes in three tranches through a newly-created wholly-owned subsidiary , ingersoll-rand luxembourg finance s.a. ( ir-lux ) . the tranches consist of $ 300 million of 2.625 % senior notes due in 2020 , $ 500 million of 3.55 % senior notes due 2024 , and $ 300 million of 4.65 % senior notes due in 2044. the notes are fully and unconditionally guaranteed by ingersoll-rand plc ( ir-ireland ) and certain of our wholly-owned subsidiaries . the proceeds from the notes were primarily used to ( i ) fund the october 2014 redemption of the $ 200 million of 5.50 % notes due 2015 and $ 300 million 4.75 % senior notes due 2015 , and ( ii ) fund the acquisition of cameron international corporation 's centrifugal compression division on january 1 , 2015. related to the redemption , the company recognized $ 10.2 million of premium expense in interest expense . for additional information regarding the terms of the notes and the related guarantees , see notes 7 and 19 to the consolidated financial statements . 2014 dividend increase and share repurchase activity in february 2015 , we announced an increase in our quarterly dividend from $ 0.25 to $ 0.29 per share beginning with our march 2015 payment . in february 2014 , our board of directors authorized the repurchase of up to $ 1.5 billion of our ordinary shares under a new share repurchase program . the new share repurchase program began in the second quarter of 2014. during 2014 , the company repurchased 23.0 million shares for $ 1.4 billion , of which 9.8 million shares for $ 583.4 million were under the 2014 program . shares repurchased prior to october 2014 were canceled upon repurchase and beginning in october 2014 , repurchased shares were held in treasury and recognized at cost . story_separator_special_tag furthermore , a substantial amount of information has been provided to the irs in connection with its audit of our 2007-2011 tax years . we expect the irs to propose similar adjustments with respect to the 2001 debt , although we do not know how the irs will apply its position to the different facts presented in these years or whether the irs will take a similar position with respect to intercompany debt instruments not outstanding in prior years . we have vigorously contested all of these proposed adjustments and intend to continue to do so . although the outcome of these matters can not be predicted with certainty , based upon an analysis of the merits of our position we believe that we are adequately reserved under the applicable accounting standards for these matters and do not expect that the ultimate resolution will have a material adverse impact on our future results of operations , financial condition , or cash flows . as we move forward to resolve these matters with the irs , the reserves established may be adjusted . although we continue to contest the irs 's position , there can be no assurance that we will be successful . if the irs 's position with respect to the 2002-2006 tax years is ultimately sustained we would be required to record additional charges and the resulting liability would have a material adverse impact on our future results of operations , financial condition and cash flows . we believe that we have adequately provided for any reasonably foreseeable resolution of any tax disputes , but will adjust our reserves if events so dictate in accordance with gaap . to the extent that the ultimate results differ from our original or adjusted estimates , the effect will be recorded in the provision for income taxes . significant events in 2013 allegion spin-off on december 1 , 2013 , the company completed the previously announced separation of its commercial and residential security businesses by distributing the related ordinary shares of allegion , on a pro rata basis , to the company 's shareholders of record as of november 22 , 2013. following the spin-off , allegion became an independent publicly traded company . we do not beneficially own any ordinary shares of allegion , and no longer consolidate allegion into our financial results . allegion 's historical financial results for all periods prior to december 1 , 2013 are presented as a discontinued operation in our consolidated financial statements . see “ discontinued operations ” within management 's discussion and analysis of financial condition and results of operations and also note 15 to the consolidated financial statements for a further discussion of our discontinued operations . issuance of senior notes due 2019 , 2023 , and 2043 in june 2013 , we issued $ 1.55 billion principal amount of senior notes in three tranches through our wholly-owned subsidiary , ingersoll-rand global holding company limited ( ir-global ) pursuant to rule 144a of the u.s. securities act of 1933 ( securities 24 act ) . the tranches consist of $ 350 million of 2.875 % senior notes due in 2019 , $ 700 million of 4.250 % senior notes due in 2023 , and $ 500 million of 5.750 % senior notes due in 2043. later in 2013 , the notes were modified to include ir-jersey as a co-obligor . the notes are also fully and unconditionally guaranteed by ir-ireland and certain of our wholly-owned subsidiaries . the proceeds from these notes were primarily used to fund the july 2013 redemption of $ 600 million of 6.000 % senior notes due 2013 and $ 655 million of 9.500 % senior notes due 2014 and to fund expenses related to the spin-off of the commercial and residential security businesses . related to this redemption , the company recorded $ 45.6 million of premium expense in interest expense . for additional information regarding the terms of the notes and the related guarantees , see notes 7 and 19 to the consolidated financial statements . 25 results of operations - for the years ended december 31 replace_table_token_6_th net revenues net revenues for the year ended december 31 , 2014 increased by 4.4 % , or $ 540.9 million , compared with the same period of 2013 , which primarily resulted from the following : volume/product mix 4.6 % pricing 0.5 % currency exchange rates ( 0.7 ) % total 4.4 % the increase in revenues was primarily driven by volume improvements within the climate and industrial segments . net revenues for the year ended december 31 , 2013 increased by 3.0 % , or $ 362.2 million , compared with the same period of 2012 , which primarily resulted from the following : volume/product mix 2.3 % pricing 0.7 % total 3.0 % the increase in revenues was primarily driven by higher volumes and improved pricing across both segments . operating income/margin operating margin improved to 10.9 % for the year ended december 31 , 2014 , compared to 8.9 % for the same period of 2013 . the increase was primarily due to productivity benefits in excess of other inflation ( 1.1 % ) , favorable product mix and volume ( 0.6 % ) , improved pricing net of material inflation ( 0.2 % ) and decreased restructuring spending ( 0.6 % ) , partially offset by increased investment ( 0.5 % ) . operating margin remained flat at 8.9 % for the years ended december 31 , 2013 , and 2012. during 2013 , we experienced improved pricing in excess of material inflation ( 0.5 % ) and productivity benefits in excess of other inflation ( 0.4 % ) , offset by increased investment and restructuring spending ( 0.9 % ) . during 2013 and 2012 , the company incurred costs of $ 82.3 million and $ 23.3 26 million , respectively , associated with ongoing restructuring actions . these actions included workforce reductions as well as the closure and consolidation of manufacturing facilities in an effort to improve the company 's cost structure .
| review of business segments the segment discussions that follow describe the significant factors contributing to the changes in results for each segment included in continuing operations . segment operating income is the measure of profit and loss that our chief operating decision maker uses to evaluate the financial performance of the business and as the basis for performance reviews , compensation and resource allocation . for these reasons , we believe that segment operating income represents the most relevant measure of segment profit and loss . we may exclude certain charges or gains from operating income to arrive at a segment operating income that is a more meaningful measure of 27 profit and loss upon which to base our operating decisions . we define segment operating margin as segment operating income as a percentage of net revenues . climate our climate segment delivers energy-efficient solutions globally and includes trane ® and american standard ® heating & air conditioning which provide heating , ventilation and air conditioning ( hvac ) systems , and commercial and residential building services , parts , support and controls ; and thermo king ® , the leader in transport temperature control solutions . climate segment results for the years ended december 31 were as follows : replace_table_token_8_th 2014 vs 2013 net revenues for the year ended december 31 , 2014 increased by 4.9 % or $ 465.7 million , compared with the same period of 2013 , which primarily resulted from the following : volume/product mix 5.0 % pricing 0.6 % currency exchange rates ( 0.7 ) % total 4.9 % commercial hvac net revenues increased due to improvements in equipment , parts , services and solutions markets . residential hvac net revenues increased due to increased volume in all major product categories . thermo king refrigerated transport revenues increases in north america were partially offset by declines overseas . segment operating margin improved to 12.1 % for the year ended december 31 , 2014 , compared to 9.9 % for the same period of 2013 .
| ROO | 829 |
these increases were partially offset by $ 39.9 million in lower sales for original equipment transit locomotives . favorable foreign exchange increased net sales $ 23.4 million . 27 cost of sales and gross profit the following table shows the major components of cost of sales for the periods indicated : replace_table_token_12_th cost of sales increased by $ 306.1 million to $ 2,108.5 million in 2014 from $ 1,802.4 million in 2013. cost of sales , as a percentage of sales was 69.3 % in 2014 and 70.2 % in 2013. raw material costs were approximately 43 % as a percentage of sales in 2014 and 2013. labor costs decreased to approximately 11 % as a percentage of sales in 2014 from 12 % in 2013. overhead costs as a percentage of sales decreased to approximately 14 % in 2014 from 15 % in 2013. freight segment raw material costs increased as a percentage of sales to approximately 42 % in 2014 from 40 % in 2013 due to the higher mix of revenue generated from freight and transit original equipment sales and aftermarket services , which have a higher raw material component as cost of sales . freight segment labor costs decreased from approximately 10 % as a percentage of sales in 2014 from 11 % in 2013 , and overhead costs as a percentage of sales were approximately 13 % in 2014 and 14 % in 2013. transit segment raw material costs decreased as a percentage of sales to approximately 45 % in 2014 from 46 % in 2013 , primarily due to lower original equipment locomotive sales , which have a higher raw material component . transit segment labor costs increased as a percentage of sales to approximately 13 % in 2014 from 12 % in 2013 , and overhead costs remained unchanged at 15 % for both 2014 and 2013. in general , overhead costs vary as a percentage of sales depending on product mix and changes in sales volume . included in cost of sales is warranty expense . the provision for warranty expense is generally established for specific losses , along with historical estimates of customer claims as a percentage of sales , which can cause variability in warranty expense between quarters . warranty expense was $ 11.1 million higher in 2014 compared to 2013 due to increased sales . as a percentage of sales , warranty expense was 0.6 % in 2014 and 0.9 % in 2013. gross profit increased to $ 936.0 million in 2014 compared to $ 764.0 million in 2013 , due to higher sales volume and the reasons discussed above . for 2014 and 2013 , gross profit , as a percentage of sales , was 30.7 % and 29.8 % , respectively . operating expenses the following table shows our operating expenses : replace_table_token_13_th total operating expenses were 13.4 % and 12.7 % of sales for the years ending december 31 2014 , and 2013 , respectively . selling , general , and administrative expenses increased $ 61.8 million , or 23.5 % , primarily due to $ 30.1 million of expenses from acquisitions and $ 9.2 million of expenses related to higher incentive and non-cash compensation expense . in addition , selling , general and administrative expenses increased to support higher sales volumes . engineering expense 28 increased by $ 15.6 million , or 33.7 % , primarily due to $ 7.5 million of expenses from acquisitions . the remainder of the increase can be attributed to the company concentrating resources on new product development , specifically in the electronics market . costs related to engineering for specific customer contracts are included in cost of sales . amortization expense increased $ 4.7 million due to amortization of intangibles associated with acquisitions . the following table shows our segment operating expenses : replace_table_token_14_th freight segment operating expenses increased $ 30.8 million , or 19.5 % , in 2014 but decreased 40 basis points to 10.9 % of sales . the increase primarily relates to $ 8.4 million of incremental operating expenses from acquisitions , $ 8.2 million in higher corporate allocations mainly due to increased incentive compensation expense , and $ 8.2 million for engineering attributable to the company concentrating resources on new product development . transit segment operating expenses increased $ 43.6 million , or 28.5 % , in 2014 and increased 190 basis points to 15.0 % of sales . the increase is primarily related to $ 33.9 million of incremental operating expenses related to acquisitions . in addition , transit segment engineering expenses increased to support new product development . corporate non-allocated operating expenses increased $ 7.7 million in 2014 primarily due to higher administrative costs associated with growing our business . income from operations income from operations totaled $ 527.1 million or 17.3 % of sales in 2014 compared to $ 437.3 million or 17.0 % of sales in 2013. income from operations increased due to higher sales volume , partially offset by increased operating expenses discussed above . interest expense , net overall interest expense , net , increased $ 2.2 million in 2014 due to due to higher debt balances resulting from acquisitions , partially offset by lower average interest rates . other expense , net other expense , net , increased $ 0.8 million to $ 1.7 million for 2014 , compared to 2013. income taxes the effective income tax rate was 30.8 % and 30.6 % in 2014 and 2013 , respectively . story_separator_special_tag ( 6 ) scheduled principal repayments of outstanding loan balances are disclosed in note 9 of the “ notes to consolidated financial statements ” included in part iv , item 15 of this report . ( 7 ) shareholder dividends are subject to approval by the company 's board of directors , currently at an annual rate of approximately $ 29.4 million . ( 8 ) the annual capital expenditure budget is subject to approval by the board of directors . the 2016 budget amount was approved at the december 2015 board of directors meeting . ( 9 ) the $ 54.3 million of standby letters of credit is comprised of $ 53.8 million in outstanding letters of credit for performance and bid bond purposes and $ 0.5 million in interest , which expire in various dates through 2050. amounts include interest payments based on contractual terms and the company 's current interest rate . the above table does not reflect uncertain tax positions of $ 10.6 million , the timing of which are uncertain except for $ 2.1 million that may become payable during 2016. refer to note 11 of the “ notes to consolidated financial statements ” for additional information on uncertain tax positions . 33 obligations for operating activities . the company has entered into $ 118.0 million of material long-term non-cancelable materials and supply purchase obligations . operating leases represent multi-year obligations for rental of facilities and equipment . estimated pension funding and post-retirement benefit payments are based on actuarial estimates using current assumptions for discount rates , expected return on long-term assets , rate of compensation increases and health care cost trend rates . benefits paid for pension obligations were $ 11.7 million and $ 12.7 million in 2015 and 2014 , respectively . benefits paid for post-retirement plans were $ 1.6 million and $ 1.0 million in 2015 and in 2014 , respectively . obligations for financing activities . cash requirements for financing activities consist primarily of long-term debt repayments , interest payments and dividend payments to shareholders . the company has historically paid quarterly dividends to shareholders , subject to quarterly approval by our board of directors , currently at a rate of approximately $ 29.4 million annually . the company arranges for performance bonds to be issued by third party insurance companies to support certain long term customer contracts . at december 31 , 2015 initial value of performance bonds issued on the company 's behalf is about $ 203.4 million . obligations for investing activities . the company typically spends approximately $ 50 million to $ 75 million a year for capital expenditures , primarily related to facility expansion efficiency and modernization , health and safety , and environmental control . the company expects annual capital expenditures in the future will be within this range . forward looking statements we believe that all statements other than statements of historical facts included in this report , including certain statements under “ business ” and “ management 's discussion and analysis of financial condition and results of operations , ” may constitute forward-looking statements . we have based these forward-looking statements on our current expectations and projections about future events . although we believe that our assumptions made in connection with the forward-looking statements are reasonable , we can not assure that our assumptions and expectations are correct . these forward-looking statements are subject to various risks , uncertainties and assumptions about us , including , among other things : economic and industry conditions prolonged unfavorable economic and industry conditions in the markets served by us , including north america , south america , europe , australia , asia , and south africa ; decline in demand for freight cars , locomotives , passenger transit cars , buses and related products and services ; reliance on major original equipment manufacturer customers ; original equipment manufacturers ' program delays ; demand for services in the freight and passenger rail industry ; demand for our products and services ; orders either being delayed , canceled , not returning to historical levels , or reduced or any combination of the foregoing ; consolidations in the rail industry ; continued outsourcing by our customers ; industry demand for faster and more efficient braking equipment ; fluctuations in interest rates and foreign currency exchange rates ; or availability of credit ; operating factors supply disruptions ; technical difficulties ; changes in operating conditions and costs ; increases in raw material costs ; successful introduction of new products ; performance under material long-term contracts ; labor relations ; completion and integration of acquisitions ; or the development and use of new technology ; 34 competitive factors the actions of competitors ; political/governmental factors political stability in relevant areas of the world ; future regulation/deregulation of our customers and or the rail industry ; levels of governmental funding on transit projects , including for some of our customers ; political developments and laws and regulations , including those related to positive train control ; federal and state income tax legislation ; or the outcome of our existing or any future legal proceedings , including litigation involving our principal customers and any litigation with respect to environmental , asbestos-related matters and pension liabilities ; and transaction or commercial factors the outcome of negotiations with partners , governments , suppliers , customers or others . statements in this 10-k apply only as of the date on which such statements are made , and we undertake no obligation to update any statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events . critical accounting estimates the preparation of the financial statements in accordance with generally accepted accounting principles requires management to make judgments , estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities , disclosure of contingent assets and liabilities and the reported amounts of
| the major components of the cash outflow in 2015 were planned additions to property , plant , and equipment of $ 49.4 million for continued investments in our facilities and manufacturing processes and $ 129.6 million in net cash paid for acquisitions . this compares to $ 47.7 million for property , plant , and equipment and $ 300.4 million in net cash paid for acquisitions in 2014 . refer to note 4 of the “ notes to condensed consolidated financial statements ” for additional information on acquisitions . financing activities . in 2015 , cash used for financing activities was $ 248.9 million , which included $ 787.4 million in proceeds from the revolving credit facility debt , $ 612.7 million of repayments of debt on the revolving credit facility , $ 27.0 million of dividend payments and $ 387.8 million of wabtec stock repurchases . in 2014 , cash provided by financing activities was $ 25.5 million , which included $ 563.4 million in proceeds from the revolving credit facility debt , $ 493.8 million of repayments of debt on the revolving credit facility , $ 19.2 million of dividend payments and $ 26.8 million of wabtec stock repurchases . the following table shows outstanding indebtedness at december 31 , 2015 and 2014 . replace_table_token_16_th cash balances at december 31 , 2015 and 2014 were $ 226.2 million and $ 425.8 million , respectively . 30 2013 refinancing credit agreement on december 19 , 2013 , the company amended its existing revolving credit facility with a consortium of commercial banks . this “ 2013 refinancing credit agreement ” provides the company with a $ 800.0 million , five - year revolving credit facility . the company incurred approximately $ 1.0 million of deferred financing cost related to the 2013 refinancing credit agreement . the facility expires on december 19 , 2018 . the 2013 refinancing credit agreement borrowings bear variable interest rates indexed as described below .
| Liquidity | 7,590 |
in phase 3 trials , heplisav-b demonstrated earlier protection with fewer doses than currently-licensed vaccines and an adverse event profile similar to a licensed hepatitis b vaccine . based on those data , we submitted a biologics license application ( “ bla ” ) to the u.s. food and drug administration ( “ fda ” ) in 2012. in 2013 the fda issued a complete response letter ( “ crl ” ) indicating that it would not approve the bla because hypothetical risks of the novel adjuvant warranted a larger safety database to assess the possibility of rare autoimmune side effects . in april , 2014 we initiated hbv-23 , a phase 3 study of heplisav-b , in order to provide a sufficiently-sized database for the fda to complete its review of our bla . hbv-23 was fully enrolled in september , 2014. we expect follow-up for the last patients to be complete in october , 2015. in the first quarter of 2016 , we intend to submit to fda our revised bla with answers to all questions raised and that submission is expected to be assigned a 6-month prescription drug user fee act ( pdufa ) review period . if approved , we expect to launch heplisav-b in the fourth quarter of 2016. through our expertise in tlr biology we have designed compounds that stimulate multiple innate mechanisms of tumor killing along with developing immune memory associated with antigens found in tumors . our lead cancer immunotherapy candidate is sd-101 , a c class cpg tlr9 agonist that was selected for characteristics optimal for treatment of cancer , including high interferon induction . in animal models , sd-101 demonstrated significant anti-tumor effects at both the injected site and at distant sites . two phase 1 clinical studies of sd-101 have been completed , establishing that it is safe and well-tolerated at a range of doses far exceeding the expected therapeutic level for oncology uses . we have begun a clinical program intended to assess the preliminary efficacy of sd-101 in a range of tumors and in combination with a range of treatments . dynavax has several clinical and preclinical programs focused on therapeutics for autoimmune and inflammatory diseases . our most advanced inflammatory disease candidate is azd1419 , which is partnered with astrazeneca ab ( “ astrazeneca ” ) . azd1419 is designed to change the basic immune response to environmental allergens , such as house dust and pollens , leading to prolonged reduction in asthma symptoms by converting the response from one primarily mediated by type-2 helper t cells ( “ th2 ” ) to type-1 helper t cells ( “ th1 ” ) . a phase 1a study of azd1419 demonstrated its safety and tolerability in healthy subjects . we are currently working with astrazeneca to design a phase 2 study , which astrazeneca will fully fund and we will conduct , beginning in the second half of 2015. there is also strong rationale for the use of tlr inhibitors to treat autoimmune disease . these conditions arise from dysfunction in the innate immune system resulting in the body seeing its own cells and tissues as pathogens and attacking them . various autoimmune diseases are characterized by over-stimulation of endosomal tlrs . promising programs based on this science include dv1179 , our tlr7/9 inhibitor for autoimmune or inflammatory conditions . in three clinical studies in both healthy subjects and patients with autoimmune disease , dv1179 was safe and well tolerated at a range of doses with up to 8 weekly injections . in a phase 2 study in systemic lupus , dv1179 did not meet prespecified pharmacodynamic endpoints related to reduction in interferon alpha-regulated genes . following conclusion of the study , our collaborator on this program , gsk , declined its option to license dv1179 and we regained global rights to continue the development of dv1179 and other tlr 7/9 inhibitors for all indications . data from the lupus trial and our preclinical work suggest that dv1179 was active but did not achieve systemic bioavailability at the levels necessary to reach all of the diverse body systems impacted by lupus . therefore , we believe that dv1179 remains an important therapeutic candidate in autoimmune and inflammatory indications that do not require systemic bioavailability . potential applications 27 include autoimmune pancreatitis , nonalcoholic steatohepatitis ( “ nash ” ) and autoimmune skin diseases such as scleroderma and dermatomyositis . our revenues consist of amounts earned from collaborations , grants and fees from services and licenses . product revenue will depend on our ability to receive regulatory approvals for , and successfully market , our drug candidates . we have yet to generate any revenues from product sales and have recorded an accumulated deficit of $ 592.9 million at december 31 , 2014. these losses have resulted principally from costs incurred in connection with research and development activities , compensation and other related personnel costs and general corporate expenses . research and development activities include costs of outside contracted services including clinical trial costs , manufacturing and process development costs , research costs and other consulting services . salaries and other personnel-related costs include non-cash stock-based compensation associated with options and other equity awards granted to employees . general corporate expenses include outside services such as accounting , consulting , business development , investor relations , insurance services and legal costs . our operating results may fluctuate substantially from period to period principally as a result of the timing of preclinical activities and other activities related to clinical trials for our drug candidates . as of december 31 , 2014 , we had $ 122.7 million in cash , cash equivalents and marketable securities . story_separator_special_tag compensation and related personnel costs decreased by $ 3.9 million for the year ended december 31 , 2014 , as the same period in 2013 included severance expense and other one-time compensation costs related to our former chief executive officer and certain other employees and executive officers . 2013 versus 2012 general and administrative expenses for the year ended december 31 , 2013 , decreased by $ 2.2 million , or 8 % , compared to the same period in 2012. outside services expense decreased $ 4.4 million due to reduced marketing expenses . compensation costs and non-cash stock-based compensation increased due to severance expense and other one-time compensation costs as well as accelerated vesting of stock options related to the transition of our former chief executive officer and certain other employees and executive officers . interest income , interest expense and other income ( expense ) interest income is reported net of amortization of premiums and discounts on marketable securities , realized gains and losses on investments , and fees related to investment portfolio management . interest expense in 2012 was related to the $ 15 million note payable held by symphony dynamo holdings llc ( “ holdings ” ) , which was paid in cash on december 31 , 2012. other expense includes gains and losses on foreign currency transactions as well as gains and losses on disposals of property and equipment . the following is a summary of our interest income , interest expense and other income ( expense ) ( in thousands , except for percentages ) : replace_table_token_8_th interest income for the year ended december 31 , 2014 , increased by $ 0.1 million , or 65 % , compared to the same period in 2013 due to higher average marketable securities balance in 2014 as compared to 2013 , resulting from the october 2013 common stock and preferred stock offerings which resulted in net proceeds of approximately $ 80.9 and $ 44.2 million , respectively . interest income for the year ended december 31 , 2013 , decreased by $ 0.2 million , or 60 % , compared to the same period in 2012 due to lower average marketable securities balance . interest expense for the year ended december 31 , 2014 increased over the same period in 2013 due to the accretion of interest expense related to the note payable to hercules technology growth capital , inc. ( “ hercules ” ) . interest expense for the year ended december 31 , 2013 decreased compared to the same period in 2012 due to the interest recorded for the note payable to holdings which was repaid in cash on december 31 , 2012 . 32 other income ( expense ) for the year ended december 31 , 2014 increased by $ 0.8 million or 224 % , compared to the same period in 2013 due to gain on foreign currency transactions in 2014 related to fluctuations in the value of the euro compared to the u.s. dollar . other income ( expense ) for the year ended december 31 , 2013 decreased by $ 0.1 million , or 19 % , compared to the same period in 2012 due to losses on foreign currency transactions in 2013 related to fluctuations in the value of the euro compared to the u.s. dollar . story_separator_special_tag to raise additional funds . this may occur through strategic alliance and licensing arrangements and or future public or private debt or equity financings . sufficient funding may not be available , or if available , may be on terms that significantly dilute or otherwise adversely affect the rights of existing stockholders . if adequate funds are not available in the future , we may need to delay , reduce the scope of or put on hold the heplisav-b program or other development programs while we seek strategic alternatives . contractual obligations the following summarizes our significant contractual obligations at december 31 , 2014 and the effect those obligations are expected to have on our liquidity and cash flows in future periods ( in thousands ) : replace_table_token_9_th ( 1 ) see note 10 : long-term debt , of notes to consolidated financial statements for further discussion of our debt obligations . we lease our facilities in berkeley , california ( the “ berkeley lease ” ) , and düsseldorf , germany ( the “ düsseldorf lease ” ) under operating leases that expire in june 2018 and march 2023 , respectively . during september 2013 , we decided not to occupy a portion of our facility in berkeley , california . as a result , we recorded an estimated unoccupied facility expense of $ 0.9 million during 2013 , representing the present value of the rent payments and other costs associated with the lease , net of estimated sublease income , for the remaining life of the operating lease . during the first three quarters of 2014 , we reassessed our timing and ability to sublet a portion of our facility and recorded a total unoccupied facility expense of $ 0.4 million for the year ended december 31 , 2014. in december 2014 , we decided to utilize the unoccupied portion of the facility and began to recognize rent expense under the terms noted in the operating lease agreement . during the fourth quarter of 2004 , we established a letter of credit with silicon valley bank as security for the berkeley lease in the amount of $ 0.4 million . the letter of credit remained outstanding as of december 31 , 2014 and is collateralized by a certificate of deposit for $ 0.4 million which has been included in restricted cash in the consolidated balance sheets as of december 31 , 2014 and 2013. under the terms of the berkeley lease , if the total amount of our cash , cash equivalents and marketable securities falls below $ 20 million for a period of more than 30 consecutive days
| liquidity and capital resources as of december 31 , 2014 , we had $ 122.7 million in cash , cash equivalents and marketable securities . since our inception , we have relied primarily on the proceeds from public and private sales of our equity securities and revenues from collaboration agreements to fund our operations . our funds are currently invested in short-term money market funds and u.s. government agency securities . in december 2014 , we entered into a loan and security agreement ( the “ loan agreement ” ) with hercules under which we may borrow up to $ 40.0 million in two tranches . we drew down the first tranche of $ 10.0 million upon closing of the transaction on december 23 , 2014. the second tranche , of $ 30.0 million , can be drawn at our option any time prior to september 30 , 2015 , but only if we have achieved certain milestones relating to the ongoing heplisav–b phase 3 study . the term loan accrues interest at e qual to the greater of either ( i ) 9.75 % plus the prime rate as reported from time to time in the wall street journal minus 5.25 % , and ( ii ) 9.75 % per annum and is secured by substantially all of our existing and after-acquired assets , excluding our intellectual property assets . on november 10 , 2014 , we entered into an at market issuance sales agreement ( the “ agreement ” ) with cowen and company , llc ( “ cowen ” ) under which we may offer and sell our common stock having aggregate sales proceeds of up to $ 50 million from time to time through cowen as our sales agent . sales of our common stock through cowen , if any , will be made by means of ordinary brokers ' transactions on the nasdaq capital market or otherwise at market prices prevailing at the time of sale , in block transactions , or as otherwise agreed upon by us and cowen .
| Liquidity | 3,784 |
the net operating losses begin to expire in 2018 . 66 deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes . the company has established a valuation allowance due to uncertainties regarding the realization of deferred tax assets based upon the company 's lack of earnings history . significant components of the company 's deferred tax assets and liabilities as of december 31 , 2015 , 2014 and 2013 as follows ( in thousands ) : replace_table_token_25_th the valuation allowance increased by approximately $ 10.3 and $ 9.4 million during the year ended december 31 , 2015 and 2014 respectively . the company applies the accounting guidance in asc 740 related to accounting for uncertainty in income taxes . the company 's reserves related to taxes are based on a determination of whether , and how much of , a tax benefit taken by the company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit . as of december 31 , 2015 and 2014 , the company had no unrecognized tax benefits . the company files federal income tax returns in canada , us , switzerland , germany , and japan . the company also files income tax returns in the state of texas in the us . the statute of limitations for assessment by local taxing authorities is open for tax years ended after december 2011. there are currently no federal or state income tax audits in progress . 9. related-party transactions legal fees of approximately $ 37,000 and $ 35,000 were incurred to a law firm for legal services rendered in which a former director of the company is a senior partner in 2014 and 2013 , respectively . the company had outstanding accounts payable to the same firm in the amount of approximately $ 37,000 at december 31 , 2014. no outstanding account payable to such law firm as of december 31 , 2013. there are no related-party transactions in 2015 . 67 10. commitments and contingencies on january 12 , 2008 , the company entered a lease agreement to lease its facility in austin , texas , u.s. on september 15 , 2010 , the company entered into a second lease agreement to lease additional space in austin , tx , u.s. both leases expired in 2013. on march 20 , 2013 , the company extended the lease for another 21 months with the same terms and rental rates as the current leases . on february 28 , 2015 , the company extended the leases for another four years with two years early termination right . rent expense was approximately $ 688,000 , $ 535,000 and $ 553,000 for the years ended december 31 , 2015 , 2014 and 2013 , respectively . the future minimum lease payments are as follows as of december 31 , 2015 ( in thousands ) : replace_table_token_26_th xbiotech corporate officers , queena han ( vp of finance ) and john simard ( president and ceo ) , along with xbiotech inc. were named defendants in securities class action civil suits filed in federal court at the u.s. district court for the western district of texas , in austin , texas and state court at the los angeles county superior court , in california . in the california action , the underwriter wr hambrecht & co. , llc is also named as a defendant . these civil suits were filed on december 1 , 2015. the foundation for both suits are similar in that the plaintiffs allege the officers of the company made false and misleading statements , violating the securities laws , in the ipo documents in april 2015. specifically , these alleged false statements in the ipo documents are in relation to the european phase iii clinical trial for xilonix . the allegations focus on a press release posted by xbiotech on november 23 , 2015 explaining certain issues with patient data . plaintiffs allege the company knew of these issues during the ipo and neglected to disclose them in supporting documentation filed with the sec . as a result of the news release , xbiotech ( traded on the nasdaq ) stock tumbled . the resulting securities class action lawsuits are seeking relief for plaintiffs who report financial losses due to the alleged false and misleading statements . both lawsuits are in the early procedural stages . as of february 2016 , a lead plaintiff was assigned in the texas case with the amended complaint scheduled to be filed with the court in april 2016. in california , motions to challenge venue and personal jurisdiction are due , by defendants , to the court in may 2016. financial statement schedules none item 9. changes in and disagreements with accountants on accounting and financial disclosure none . item 9a . controls and procedures . management 's evaluation of our disclosure controls and procedures as of the end of the year covered by this annual report on form 10-k , an evaluation was carried out by the company 's management , with the participation of the chief executive officer and principal financial officer , of the effectiveness of the company 's disclosure controls and procedures , as defined in rule 13a-15 ( e ) and 15d-15 ( e ) under the securities exchange act of 1934. based on such evaluation , the chief executive officer and principal financial officer concluded that the company 's disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports the company files or furnishes under the securities exchange act of 1934 is recorded , processed , summarized and reported within the time periods specified in the sec 's rules and regulations story_separator_special_tag 47 while our significant accounting policies are more fully described in the notes to our financial statements appearing in this annual report on form 10-k , we believe that the following accounting policies are the most critical to understanding and evaluating our reported financial results . stock-based compensation stock-based awards are measured at fair value at each grant date . we recognize stock-based compensation expenses ratably over the requisite service period of the option award . determination of the fair value of stock-based compensation grants the determination of the fair value of stock-based compensation arrangements is affected by a number of variables , including estimates of the expected stock price volatility , risk-free interest rate and the expected life of the award . we value stock options using the black-scholes option-pricing model , which was developed for use in estimating the fair value of traded options that are fully transferable and have no vesting restrictions . black-scholes and other option valuation models require the input of highly subjective assumptions , including the expected stock price volatility . if we made different assumptions , our stock-based compensation expenses , net loss , and net loss per common share could be significantly different . prior to our initial public offering in april 2015 , we issued common stock for cash consideration to new investors . we believe that such transactions represent the best evidence of fair value of our common stock . therefore , we used the sales price of our common stock during these periods as the fair value of our common stock . the following summarizes the assumptions used for estimating the fair value of stock options granted during the periods indicated : replace_table_token_5_th we have assumed no dividend yield because we do not expect to pay dividends in the foreseeable future , which is consistent with our past practice . the risk-free interest rate assumption is based on observed interest rates for u.s. treasury securities with maturities consistent with the expected life of our stock options . the expected life represents the period of time the stock options are expected to be outstanding and is based on the simplified method when the stock option includes “ plain vanilla ” terms . under the simplified method , the expected life of an option is presumed to be the midpoint between the vesting date and the end of the agreement term . we used the simplified method due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected life of the stock options . for stock options that did not include “ plain vanilla ” terms we used the contractual life of the stock option as the expected life . such stock options consisted primarily of options issued to our board of directors that were immediately vested at issuance . expected volatility is based on historical volatilities for publicly traded stock of comparable companies over the estimated expected life of the stock options . 48 results of operations revenue we did not record any revenue during the years ended december 31 , 2015 , 2014 and 2013. expenses research and development research and development costs are summarized as follows ( in thousands ) : replace_table_token_6_th we do not currently track our internal research and development costs or our personnel and related costs on an individual drug candidate basis . we use our research and development resources , including employees and our drug discovery technology , across multiple drug development programs . as a result , we can not state precisely the costs incurred for each of our research and development programs or our clinical and preclinical drug candidates . research and development expenses increased by 119 % to $ 31.3 million for year ended december 31 , 2015 compared to $ 14.3 million for the year ended december 31 , 2014. the increase in research and development expenses for the year ended december 31 , 2015 compared to the year ended december 31 , 2014 was due to a $ 10.7 million increase of clinical trial activities and sponsored research expense , which results primarily from the clinical trial started in europe and the us . the increase is also due to higher salaries and related expenses in 2015 due to the growing size of our workforce from 49 to 70 , salary increases for current employees and a $ 330,000 bonus payment to an executive officer in the second quarter of 2015. laboratory and manufacturing supplies also increased due to the increase of manufacturing processing development activities , research activities and quality control activities . stock–based compensation increased due the issuance of stock options to new employees . research and development expenses increased by $ 6.4 million to $ 14.3 million for the year ended december 31 , 2014 , compared to $ 7.9 million for the year ended december 31 , 2013. this increase was due to a $ 3.1 million increase in clinical trial activities in europe and the united states , a $ 1.6 million increase in research and development use of chemicals , reagents as well as laboratory materials ; a $ 0.8 million increase in salaries and up $ 0.7 million increase in stock-based compensation . 49 general and administrative general and administrative costs are summarized as follows ( in thousands ) : replace_table_token_7_th general and administrative expenses decreased by 17 % to $ 6.2 million for the year ended december 31 , 2015 compared to $ 7.4 million for the year ended december 31 , 2014. the decrease was primarily related to the stock–based compensation expenses of $ 5.7 million in 2014 resulting mainly from immediately-vested granted stock options granted to board members and employees in the second half of 2014. in addition , professional fees increased due to additional legal fees after the company became a public entity . the salary and related costs increased primarily due to new employees in the general
| the offering commenced as of april 14 , 2015 and did not terminate before all of the securities registered in the registration statement were sold . on april 17 , 2015 , we closed the sale of such shares , resulting in net proceeds to us of approximately $ 70.6 million after deducting underwriting discounts and commissions of $ 3.8 million and other offering expenses of approximately $ 1.6 million . no payments were made by us to directors , officers or persons owning ten percent or more of our common stock or to their associates , or to our affiliates . there has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the securities and exchange commission on april 16 , 2015 pursuant to rule 424 ( b ) . we expect to continue to incur substantial operating losses in the future . we will not receive any product revenue until a drug candidate has been approved by the fda or similar regulatory agencies in other countries and successfully commercialized . as of december 31 , 2015 , our principal sources of liquidity were our cash and cash equivalents , which totaled approximately $ 91.1 million . 51 contractual obligations and commitments on january 12 , 2008 , we entered a lease agreement to lease our facility in austin , texas . on september 15 , 2010 , we entered into a second lease agreement to lease additional space in austin , texas . on march 20 , 2014 , we extended the lease for an additional 21 months on the same terms and rental rates as the current lease . rent expense was approximately $ 688,000 , $ 535,000 and $ 553,000 for the years ended december 31 , 2015 , 2014 and 2013 , respectively . on february 28 , 2015 , we extended the lease for another 4 years . the future minimum lease payments are as follows as of december 31 , 2015 ( in thousands ) : replace_table_token_10_th off-balance sheet arrangements since inception , we have not engaged in any off-balance sheet activities , including the use of structured finance , special purpose entities or variable interest entities . item
| Liquidity | 11,817 |
3. as a consequence of seismic remapping , where does the mj # 1 well lie relative to the potential traps at the jurassic and triassic levels and was the well location too low on the structures and deeper than the potential hydrocarbons within those traps ? 26 zion has completed all of the land compensation for the 3-d survey in november 2019. all land parcels and the kibbutz approved the completion of the geophysical survey . subsequently , the contractor demobilized the equipment from israel to europe . all field data from acquisition was delivered to dallas , texas and the ministry of energy in israel . additionally , the final acquisition reports from the contractor and zion were delivered to the ministry of energy in december per the guidelines enacted in july 2019. zion and agile seismic processing services ( “ asps ” ) are continuing to process the data set with state-of-the-art technologies allowing for comprehensive imaging at depth . zion 's previous 2-d data sets have been added into the 3-d volume allowing for further verification . the estimated processing completion timeframe for the final data set is projected to be in april 2020. our questions from the mj # 1 well are being correlated with the 3-d data set to provide potential solutions on a go forward basis . in march 2020 , we purchased an onshore oil and gas drilling rig , drill pipe , related equipment and excess inventory for a purchase price of $ 5.6 million , of which $ 1 million is in escrow pending testing by us of the rig . we plan to have the rig imported into israel and set up at the mj # 1 well site during the second quarter 2020. however , the expected time frame is subject to israeli regulations intended to combat the coronavirus outbreak . zion received a multi-year license extension through december 2 , 2020. zion made its annual license fee payment on november 30 , 2019 , thereby confirming the company 's commitment to further exploration in the license area . zion 's ability to fully undertake all of these aforementioned activities is subject to its raising the needed capital from its continuing offerings through the issuance of our securities , and we anticipate we will continue to need to raise funds through the issuance of equity securities ( or securities convertible into or exchangeable for equity securities ) . no assurance can be provided that we will be successful in raising the needed equity on favorable terms ( or at all ) . our executive offices are located at 12655 n central expressway , suite 1000 , dallas , texas 75243 , and our telephone number is ( 214 ) 221-4610. our field office in israel is located at 9 halamish street , north industrial park , caesarea 3088900 , and the telephone number is +972-4-623-8500 . principal components of our cost structure our operating and other expenses primarily consist of the following : ● impairment of unproved oil and gas properties : impairment expense is recognized if a determination is made that a well will not be able to be commercially productive . the amounts include amounts paid in respect of the drilling operations as well as geological and geophysical costs and various amounts that were paid to israeli regulatory authorities . ● general and administrative expenses : overhead , including payroll and benefits for our corporate staff , costs of managing our exploratory operations , audit and other professional fees , and legal compliance is included in general and administrative expenses . general and administrative expenses also include non-cash stock-based compensation expense , investor relations related expenses , lease and insurance and related expenses . ● depreciation , depletion , amortization and accretion : the systematic expensing of the capital costs incurred to explore for natural gas and oil represents a principal component of our cost structure . as a full cost company , we capitalize all costs associated with our exploration , and apportion these costs to each unit of production , if any , through depreciation , depletion and amortization expense . as we have yet to have production , the costs of abandoned wells are written off immediately versus being included in this amortization pool . going concern basis since we have limited capital resources , no revenue to date and a loss from operations , our financial statements have been prepared on a going concern basis , which contemplates realization of assets and liquidation of liabilities in the ordinary course of business . the appropriateness of using the going concern basis is dependent upon our ability to obtain additional financing or equity capital and , ultimately , to achieve profitable operations . therefore , there is substantial doubt about our ability to continue as a going concern . the financial statements do not include any adjustments that might result from the outcome of this uncertainty . critical accounting policies management 's discussion and analysis of financial condition and results of operations is based upon our financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america . the preparation of these financial statements 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 date of the financial statements and the reported amounts of revenues and expense during the reporting period . we have identified the accounting principles which we believe are most critical to the reported financial status by considering accounting policies that involve the most complex of subjective decisions or assessment . 27 impairment of oil and gas properties we follow the full-cost method of accounting for oil and gas properties . accordingly , all costs associated with acquisition , exploration and development of oil and gas reserves , including directly related overhead costs , are capitalized . story_separator_special_tag all capitalized costs of oil and gas properties , including the estimated future costs to develop proved reserves , are amortized on the unit-of-production method using estimates of proved reserves . investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs . if the results of an assessment indicate that the properties are impaired , the amount of the impairment is included in income from continuing operations before income taxes , and the adjusted carrying amount of the unproved properties is amortized on the unit-of-production method . our oil and gas properties represent an investment in unproved properties . these costs are excluded from the amortized cost pool until proved reserves are found or until it is determined that the costs are impaired . all costs excluded are reviewed at least quarterly to determine if impairment has occurred . the amount of any impairment is charged to expense since a reserve base has not yet been established . a further impairment requiring a charge to expense may be indicated through evaluation of drilling results , relinquishing drilling rights or other information . abandonment of properties is accounted for as adjustments to capitalized costs . the net capitalized costs are subject to a “ ceiling test ” which limits such costs to the aggregate of the estimated present value of future net revenues from proved reserves discounted at ten percent based on current economic and operating conditions , plus the lower of cost or fair market value of unproved properties . the recoverability of amounts capitalized for oil and gas properties is dependent upon the identification of economically recoverable reserves , together with obtaining the necessary financing to exploit such reserves and the achievement of profitable operations . during the fourth quarter of 2018 , the company testing protocol was concluded at the mjl well . the test results confirmed that the mj # 1 well did not contain hydrocarbons in commercial quantities in the zones tested . as a result , in the year ended december 31 , 2018 , the company recorded a non-cash impairment charge to its unproved oil and gas properties of $ 30,906,000. the company recorded a post-impairment charge of $ 314,000 for the year ended december 31 , 2019. during the year ended december 31 , 2018 , the company did not record any post-impairment charges ( see note 4 ) . following the impairment charge noted above , the total net book value of our unproved oil and gas properties under the full cost method is $ 10,637,000 at december 31 , 2019. currency utilized although our oil & gas properties and our principal operations are in israel , we report all our transactions in united states dollars . certain dollar amounts in the financial statements may represent the dollar equivalent of other currencies . valuation of deferred taxes we record a valuation allowance to reduce our deferred tax asset to the amount that we believe is likely to be realized in the future . in assessing the need for the valuation allowance , we have considered not only future taxable income but also feasible and prudent tax planning strategies . in the event that we were to determine that it would be likely that we would , in the future , realize our deferred tax assets in excess of the net recorded amount , an adjustment to the deferred tax asset would be made . in the period that such a determination was made , the adjustment to the deferred tax asset would produce an increase in our net income . 28 asset retirement obligation we record a liability for asset retirement obligation at fair value in the period in which it is incurred and a corresponding increase in the carrying amount of the related long lived assets . fair value considerations we follow asc 820 , “ fair value measurements and disclosures , ” as amended by financial accounting standards board ( fasb ) financial staff position ( fsp ) no . 157 and related guidance . those provisions relate to the company 's financial assets and liabilities carried at fair value and the fair value disclosures related to financial assets and liabilities . asc 820 defines fair value , expands related disclosure requirements , and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair value measures . fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date , assuming the transaction occurs in the principal or most advantageous market for that asset or liability . there are three levels of inputs to fair value measurements - level 1 , meaning the use of quoted prices for identical instruments in active markets ; level 2 , meaning the use of quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable ; and level 3 , meaning the use of unobservable inputs . we use level 1 inputs for fair value measurements whenever there is an active market , with actual quotes , market prices , and observable inputs on the measurement date . we use level 2 inputs for fair value measurements whenever there are quoted prices for similar securities in an active market or quoted prices for identical securities in an inactive market . we use observable market data whenever available . we use level 3 inputs in the binomial model used for the valuation of the derivative liability . derivative liabilities in accordance with asc 815-40-25 and asc 815-10-15 derivatives and hedging and asc 480-10-25 liabilities-distinguishing liabilities from equity , the embedded derivatives associated with the convertible bonds are accounted for as liabilities during the term of the related convertible bonds .
| impairment of unproved oil and gas properties expenses during the year ended december 31 , 2019 was $ 314,000 compared to $ 30,906,000 for the year ended december 31 , 2018. the decrease in impairment of unproved oil and gas properties expenses in 2019 compared to 2018 is attributable to the impairment charge of $ 30,906,000 recorded during the year ended december 31 , 2018 related to the mj1 well . gain on derivative liability . gain on derivative liability during the year ended december 31 , 2019 was $ 216,000 compared to $ 1,521,000 for the year ended december 31 , 2018. an embedded derivative is contained within the valuation of zion 's $ 100 convertible bond offering which closed in march 2016. the decrease in the gain on derivative liability during the year ended december 31 , 2019 compared to the gain on derivative liability during the year ended december 31 , 2018 is primarily due to the decrease in the share price of our common stock that occurred during the year ended december 31 , 2019. other expense , net . other expense , net for the year ended december 31 , 2019 was $ 387,000 compared to $ 552,000 for the year ended december 31 , 2018. the decrease in other expense , net during the year ended december 31 , 2019 compared to 2018 is primarily attributable to exchange rate differences associated with the fluctuating exchange rates of the new israeli shekels ( “ nis ” ) with the u.s. dollar ( “ usd ” ) and to financial expenses related to the company 's convertible bonds . net loss . net loss for the year ended december 31 , 2019 was $ 6,693,000 compared to $ 38,511,000 for the year ended december 31 , 2018. the primary driver of the lower net loss in 2019 was the recognition of the $ 30,906,000 impairment on the mj # 1 well in 2018 . 30 liquidity and capital resources liquidity is a measure of a company 's ability to meet potential cash requirements . as discussed above , we have historically met our capital requirements through the issuance of common
| ROO | 4,256 |
the arrangement consideration that is fixed or determinable at the inception of the arrangement is allocated to the separate units of accounting based on their relative selling prices . we may exercise significant judgment in determining whether a deliverable is a separate unit of accounting , as well as in estimating the selling prices of such unit of accounting . a change in such judgment could result in a significant change in the period in which revenue is recognized . to determine the selling price of a separate deliverable , we use the hierarchy as prescribed in asc topic 605-25 based on vendor-specific objective evidence ( `` vsoe `` ) , third-party evidence ( `` tpe `` ) or best estimate of selling price ( `` besp `` ) . vsoe is based on the price charged when the element is sold separately and is the price actually charged for that deliverable . tpe is determined based on third party evidence for a similar deliverable when sold separately and besp is the estimated selling price at which we would transact a sale if the elements of collaboration and license arrangements were sold on a stand-alone basis to the buyer . we may not be able to establish vsoe or tpe for the deliverables within collaboration and license arrangements , as we may not have a history of entering into such arrangements or selling the individual deliverables within such arrangements separately . in addition , there may be significant differentiation in these arrangements , which indicates that comparable third party pricing may not be available . we may determine that the selling price for the deliverables within collaboration and license arrangements should be determined using besp . the process for determining besp involves significant judgment on our part and includes consideration of multiple factors such as estimated direct expenses and other costs , and available data . payments or full reimbursements resulting from our r & d efforts for those arrangements where such efforts are considered as deliverables are recognized as the services are performed and are presented on a gross basis so long as there is persuasive evidence of an arrangement , the fee is fixed or determinable , and collection of the related receivable is reasonably assured . however , such funding is recognized as a reduction of r & d expense when we engage in a r & d project jointly with another entity , with both entities participating in project activities and sharing costs and potential benefits of the project . accordingly , reimbursement of r & d expenses pursuant to the cost-sharing provisions of our agreements with roche is recognized as a reduction to r & d expense . milestone revenue we account for milestones under asu no . 2010-17 , `` milestone method of revenue recognition `` . under the milestone method , contingent consideration received from the achievement of a substantive milestone is recognized in its entirety in the period in which the milestone is achieved . a milestone is defined as an event ( i ) that can only be achieved based in whole or in part on either the entity 's performance or on the occurrence of a specific outcome resulting from the entity 's performance , ( ii ) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be achieved , and ( iii ) that would result in additional payments being due to the entity . at the inception of an agreement that includes milestone payments , we evaluate whether each milestone is substantive and at risk to both parties on the basis of the contingent nature of the milestone . this evaluation includes an assessment of whether ( a ) the consideration is commensurate with either ( 1 ) the entity 's performance to achieve the milestone , or ( 2 ) the enhancement of the value of the delivered item ( s ) as a result of a specific outcome resulting from the entity 's performance to achieve the milestone , ( b ) the consideration relates solely to past performance , and ( c ) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement . we evaluate factors such as the scientific , regulatory , commercial and other risks that must be overcome to achieve the respective milestone , the level of effort and investment required to achieve the respective milestone and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement in making this assessment . the conclusion as to whether milestone payments are substantive involves management judgment regarding the factors noted above . 45 we generally classify each of our milestones into one of three categories : ( i ) clinical milestones , ( ii ) regulatory and development milestones , and ( iii ) commercial milestones . clinical milestones are typically achieved when a product candidate advances or completes a defined phase of clinical research . for example , a milestone payment may be due to us upon the initiation of a clinical trial for a new indication . regulatory and development milestones are typically achieved upon acceptance of the submission for marketing approval of a product candidate or upon approval to market the product candidate by the fda or other regulatory authorities . for example , a milestone payment may be due to us upon filing of a biologics license application ( `` bla `` ) with the fda . commercial milestones are typically achieved when an approved pharmaceutical product reaches certain defined levels of net royalty sales by the licensee of a specified amount within a specified period . story_separator_special_tag prx002 cost include payments to roche for our share of the development expenses incurred by roche related to prx002 programs and is net of reimbursements from roche for development and supply services recorded as an offset to r & d expense and , in 2014 , net of $ 1.7 million in offset to r & d expenses for a portion of the $ 15.0 million milestone received from 48 roche . for the years ended december 31 , 2015 and 2014 , $ 4.9 million and $ 2.4 million , respectively , were recorded as an offset to r & d expenses . ( 3 ) cumulative r & d costs to date for prx003 include the costs incurred from the date when the program has been separately tracked in preclinical development . expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from this cumulative amount . ( 4 ) other r & d is comprised of preclinical development and discovery programs that have not progressed to first patient dosing in a phase 1 clinical trial , and for 2014 and 2013 also includes research costs we incurred in providing research services to elan . we expect our r & d expenses to continue to increase in 2016 primarily due to increased spending for the neod001 program in connection with the ongoing vital phase 3 clinical trial and the initiation of the pronto phase 2b clinical trial , and to a lesser extent increased spending for our attr preclinical program . general and administrative expenses our g & a expenses increased by $ 4.1 million , or 21 % , for the year ended december 31 , 2015 , compared to the prior year , primarily due to higher personnel costs , including share-based compensation expenses and legal fees associated with being a growing company . our g & a expenses increased by $ 4.0 million , or 27 % , for the year ended december 31 , 2014 compared to the prior year , primarily due to higher personnel costs , including share-based compensation expenses , and higher external consulting expenses . we expect our g & a expenses to continue to increase in 2016 in support of our anticipated r & d growth with increases in personnel , legal and other administrative expenses . other income ( expense ) replace_table_token_6_th interest income increased by $ 117,000 , or 148 % , for the year ended december 31 , 2015 , compared to the prior year , primarily due to higher balances in our cash and money market accounts . other income ( expense ) , net for the year ended december 31 , 2015 were primarily due to foreign exchange losses from transactions with vendors denominated in euros . interest income increased by $ 8,000 , or 11 % , for the year ended december 31 , 2014 compared to the prior year , primarily due to higher balances in our cash and money market accounts . other income ( expense ) , net for the year ended december 31 , 2014 was higher primarily due to foreign exchange income from transactions with vendors denominated in euros . provision for income taxes replace_table_token_7_th the tax provisions were $ 0.7 million , $ 0.8 million and $ 0.4 million for the years ended december 31 , 2015 , 2014 and 2013 . the tax provisions for all periods presented reflect u.s. federal taxes associated with recurring profits attributable to intercompany services that the company 's u.s. subsidiary performs for the company . no tax benefit has been recorded related to tax losses recognized in ireland and any deferred tax assets for those losses are offset by a valuation allowance . 49 liquidity and capital resources overview replace_table_token_8_th working capital was $ 355.2 million as of december 31 , 2015 , an increase of $ 68.1 million from working capital of $ 287.1 million as of december 31 , 2014 . this increase in working capital during the year ended december 31 , 2015 was principally attributable to a higher net cash and cash equivalents balance resulting from the net proceeds of $ 131.5 million from our public offering in the second quarter and to a lesser extent , from proceeds from issuance of ordinary shares upon exercise of stock options and from receivables collected from roche , partially offset by use of cash for operating expenses during the same period . as of december 31 , 2015 , we had $ 370.6 million in cash and cash equivalents . although we believe , based on our current business plans , that our existing cash and cash equivalents will be sufficient to meet our obligations for at least the next twelve months , we anticipate that we will require additional capital in the future in order to continue the research and development of our drug candidates . as of december 31 , 2015 , $ 34.0 million of our outstanding cash and cash equivalents related to u.s. operations that management asserts was permanently reinvested . we do not intend to repatriate these funds . however , if these funds were repatriated back to ireland we would incur a withholding tax from the dividend distribution . we have based this estimate on assumptions that may prove to be wrong , and we could use our available capital resources sooner than we currently expect . because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates , we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of our product candidates . our future capital requirements will depend on numerous factors , including , without limitation , the timing of initiation , progress , results and costs of our clinical trials ; the results of our research and preclinical studies ; the costs of clinical manufacturing and of establishing
| cash provided by financing activities net cash provided by financing activities was $ 140.8 million for the year ended december 31 , 2015 , primarily from the net proceeds of $ 131.5 million from our april 2015 public offering , proceeds from issuance of common stock upon exercise of stock options of $ 5.6 million and excess tax benefit from stock option exercises of $ 3.9 million . net cash provided by financing activities for the year ended december 31 , 2014 was $ 118.1 million , primarily from net proceeds from our june 2014 public offering and to a lesser extent from issuance of common stock upon exercise of stock options and excess tax benefit from stock option exercises . net cash provided by financing activities was $ 84.5 million for the year ended december 31 , 2013 primarily consisting of net proceeds from our october 2013 equity financing . off-balance sheet arrangements at december 31 , 2015 , we were not a party to any off-balance sheet arrangements that have , or are reasonably likely to have , a current or future effect on our financial condition , changes in financial condition , revenue or expenses , results of operations , liquidity , capital expenditures or capital resources .
| Liquidity | 1,975 |
the preparation of such financial statements requires management to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenues and expenses and related disclosure of contingent assets and liabilities . on an ongoing basis , management evaluates its estimates , including those related to the allowance for loan losses , goodwill , the valuation of mortgage servicing rights , and other-than-temporary impairment on securities . management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances , the results of which form the basis in making judgments about the carrying values of assets that are not readily apparent from other sources . actual results could differ from the amounts derived from management 's estimates and assumptions under different assumptions or conditions . the first bancorp - 2016 form 10-k - page 23 allowance for loan losses . management believes the allowance for loan losses requires the most significant estimates and assumptions used in the preparation of the consolidated financial statements . the allowance for loan losses is based on management 's evaluation of the level of the allowance required in relation to the estimated loss exposure in the loan portfolio . management believes the allowance for loan losses is a significant estimate and therefore regularly evaluates it to determine the appropriate level by taking into consideration factors such as prior loan loss experience , the character and size of the loan portfolio , business and economic conditions and management 's estimation of potential losses . the use of different estimates or assumptions could produce different provisions for loan losses . goodwill . management utilizes numerous techniques to estimate the value of various assets held by the company , including methods to determine the appropriate carrying value of goodwill as required under financial accounting standards board ( `` fasb '' ) accounting standards codification ( `` asc '' ) topic 350 `` intangibles – goodwill and other . '' goodwill from purchase acquisitions is subject to ongoing periodic evaluation for impairment . mortgage servicing rights . the valuation of mortgage servicing rights is a critical accounting policy which requires significant estimates and assumptions . the bank often sells mortgage loans it originates and retains the ongoing servicing of such loans , receiving a fee for these services , generally 0.25 % of the outstanding balance of the loan per annum . mortgage servicing rights are recognized at fair value when they are acquired through the sale of loans , and are reported in other assets . they are amortized into non-interest income in proportion to , and over the period of , the estimated future net servicing income of the underlying financial assets . the rights are subsequently carried at the lower of amortized cost or fair value . management uses an independent firm which specializes in the valuation of mortgage servicing rights to determine the fair value . the most important assumption is the anticipated loan prepayment rate , and increases in prepayment speed results in lower valuations of mortgage servicing rights . the valuation also includes an evaluation for impairment based upon the fair value of the rights , which can vary depending upon current interest rates and prepayment expectations , as compared to amortized cost . impairment is determined by stratifying rights by predominant characteristics , such as interest rates and terms . the use of different assumptions could produce a different valuation . all of the assumptions are based on standards the company believes would be utilized by market participants in valuing mortgage servicing rights and are consistently derived and or benchmarked against independent public sources . other-than-temporary impairment on securities . one of the significant estimates related to investment securities is the evaluation of other-than-temporary impairments . the evaluation of securities for other-than-temporary impairments is a quantitative and qualitative process , which is subject to risks and uncertainties and is intended to determine whether declines in the fair value of investments should be recognized in current period earnings . the risks and uncertainties include changes in general economic conditions , the issuer 's financial condition and or future prospects , the effects of changes in interest rates or credit spreads and the expected recovery period of unrealized losses . securities that are in an unrealized loss position are reviewed at least quarterly to determine if other-than-temporary impairment is present based on certain quantitative and qualitative factors and measures . the primary factors considered in evaluating whether a decline in value of securities is other-than-temporary include : ( a ) the length of time and extent to which the fair value has been less than cost or amortized cost and the expected recovery period of the security , ( b ) the financial condition , credit rating and future prospects of the issuer , ( c ) whether the debtor is current on contractually obligated interest and principal payments , ( d ) the volatility of the securities ' market price , ( e ) the intent and ability of the company to retain the investment for a period of time sufficient to allow for recovery , which may be at maturity and ( f ) any other information and observable data considered relevant in determining whether other-than-temporary impairment has occurred , including the expectation of receipt of all principal and interest when due . derivative financial instruments designated as hedges . the company recognizes all derivatives in the consolidated balance sheets at fair value . on the date the company enters into the derivative contract , the company designates the derivative as a hedge of either a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability ( “ cash flow hedge ” ) , a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment ( “ fair value hedge ” ) , or a held for trading instrument ( “ trading instrument ” ) . story_separator_special_tag the company formally documents relationships between hedging instruments and hedged items , as well as its risk management objectives and strategy for undertaking various hedge transactions . the company also assesses , both at the hedge 's inception and on an ongoing basis , whether the derivatives that are used in hedging transactions are effective in offsetting changes in cash flows or fair values of hedged items . changes in fair value of a derivative that is effective and that qualifies as a cash flow hedge are recorded in other comprehensive income ( loss ) and are reclassified into earnings when the forecasted transaction or related cash flows affect earnings . changes in fair value of a derivative that qualifies as a fair value hedge and the change in fair value of the hedged item are both recorded in earnings and offset each other when the transaction is effective . those derivatives that are classified as trading instruments are recorded at fair value with changes in fair value recorded in earnings . the company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the cash flows of the hedged item , that it is unlikely that the forecasted transaction will occur , or that the designation of the derivative as a hedging instrument is no longer appropriate . the first bancorp - 2016 form 10-k - page 24 use of non-gaap financial measures certain information in management 's discussion and analysis of financial condition and results of operations and elsewhere in this report contains financial information determined by methods other than in accordance with accounting principles generally accepted in the united states of america ( `` gaap '' ) . management uses these `` non-gaap '' measures in its analysis of the company 's performance and believes that these non-gaap financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods as well as demonstrating the effects of significant gains and charges in the current period . the company believes that a meaningful analysis of its financial performance requires an understanding of the factors underlying that performance . management believes that investors may use these non-gaap financial measures to analyze financial performance without the impact of unusual items that may obscure trends in the company 's underlying performance . these disclosures should not be viewed as a substitute for operating results determined in accordance with gaap , nor are they necessarily comparable to non-gaap performance measures that may be presented by other companies . in several places in this report , net interest income is presented on a fully taxable equivalent basis . specifically included in interest income was tax-exempt interest income from certain investment securities and loans . an amount equal to the tax benefit derived from this tax exempt income has been added back to the interest income total , which adjustments increased net interest income accordingly . management believes the disclosure of tax-equivalent net interest income information improves the clarity of financial analysis , and is particularly useful to investors in understanding and evaluating the changes and trends in the company 's results of operations . other financial institutions commonly present net interest income on a tax-equivalent basis . this adjustment is considered helpful in the comparison of one financial institution 's net interest income to that of another institution , as each will have a different proportion of tax-exempt interest from its earning assets . moreover , net interest income is a component of a second financial measure commonly used by financial institutions , net interest margin , which is the ratio of net interest income to average earning assets . for purposes of this measure as well , other financial institutions generally use tax-equivalent net interest income to provide a better basis of comparison from institution to institution . the company follows these practices . the following table provides a reconciliation of tax-equivalent financial information to the company 's consolidated financial statements , which have been prepared in accordance with gaap . a 35.0 % tax rate was used in 2016 , 2015 and 2014 . replace_table_token_4_th the company presents its efficiency ratio using non-gaap information which is most commonly used by financial institutions . the gaap-based efficiency ratio is noninterest expenses divided by net interest income plus noninterest income from the consolidated statements of income and comprehensive income . the non-gaap efficiency ratio excludes securities losses from noninterest expenses , excludes securities gains from noninterest income , and adds the tax-equivalent adjustment to net interest income . the following table provides a reconciliation between the gaap and non-gaap efficiency ratio : replace_table_token_5_th the first bancorp - 2016 form 10-k - page 25 the company presents certain information based upon average tangible common shareholders ' equity instead of total average shareholders ' equity . the difference between these two measures is the company 's intangible assets , specifically goodwill from prior acquisitions , and preferred stock . management , banking regulators and many stock analysts use the tangible common equity ratio and the tangible book value per common share in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets , typically stemming from the use of the purchase accounting method in accounting for mergers and acquisitions . the following table provides a reconciliation of tangible average shareholders ' equity to the company 's consolidated financial statements , which have been prepared in accordance with gaap : replace_table_token_6_th story_separator_special_tag style= '' font-family : inherit ; font-size:10pt ; '' > $ 10.8 million , an increase of $ 938,000 or 9.5 % from the $ 9.9 million posted by the company in 2015 . tax-exempt interest income amounted to $ 5.8 million for the year ended december 31 , 2016 , $ 5.7 million for the year ended december 31 , 2015 and $ 6.4 million for the year ended december 31 , 2014 . net interest income on a tax-equivalent basis increased 2.2 % or $ 956,000 to $ 44.0
| this was primarily due to a $ 634,000 increase in mortgage origination and servicing income and a $ 153,000 increase in first advisors income offsetting the strategic decision to not take gains from sale of securities at the level taken in 2015. non-interest expense for the year ended december 31 , 2016 was $ 29.4 million or 1.7 % lower than non-interest expense posted for the year ended december 31 , 2015 , primarily due to a reduction in other credit-related costs outside of the provision for loan losses . during 2016 , total assets increased $ 148.1 million or 9.5 % . the loan portfolio increased $ 82.9 million or 8.4 % in 2016 , ending the year at $ 1.07 billion . the investment portfolio was up $ 61.9 million or 13.0 % for the year . on the liability side of the balance sheet , low-cost deposits increased $ 61.6 million or 10.6 % , totaling $ 640.8 million as of december 31 , 2016. certificates of deposit increased $ 105.6 million or 28.5 % from the end of 2015 . local certificates of deposit ( cds ) increased $ 8.9 million and wholesale cds increased $ 96.7 million at december 31 , 2016 compared to december 31 , 2015. continued improvement in credit quality was another contributor to the company 's 2016 results . non-performing assets stood at 0.48 % of total assets as of december 31 , 2016 - well below the 0.57 % level of non-performing assets a year ago . this compares to non-performing loans at 0.66 % for our uniform bank performance report peer group ( `` ubpr peer group '' ) as of december 31 , 2016 . net chargeoffs were $ 1.4 million or 0.13 % of average loans in 2016 compared to net chargeoffs of $ 2.0 million or 0.21 % of average loans in 2015 . net chargeoffs for the ubpr peer group in 2016 were 0.10 % of average loans . the provision for loan losses in 2016 was $ 1.6 million , $ 50,000 or 3.2 % higher than in 2015 . the allowance as a percentage of loans outstanding stood at 0.95 % in 2016 , down from 1.00 % at december 31 , 2015 . remaining well capitalized remains a top priority for the first
| ROO | 384 |
loss contingencies : loss contingencies , including claims and legal actions arising in the ordinary course of business , are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated . management does not believe there now are such matters that will have a material effect on the consolidated financial statements . loan commitments and related financial instruments : financial instruments include off-balance sheet credit instruments , such as commitments to make loans and commercial letters of credit , issued to meet customer financing needs . the face amount for these items represents the exposure to loss , before considering customer collateral or ability to repay . such financial instruments are recorded when they are funded . fair value of financial instruments : fair values of financial instruments are estimated using relevant market information . changes in market conditions could significantly affect the estimates . for financial instruments where there is little or no relevant market information due to limited or no market activity , the company estimates the fair value of these instruments through the use of a discounted present value of estimated cash flows technique , which includes the company 's own assumptions as to the amounts and timing of cash flows , adjusted for risk factors related to nonperformance and liquidity . the company 's assumptions are based on an exit price strategy and take into consideration the assumptions that a willing market participant would use about nonperformance and liquidity risk . employee stock ownership plan : the cost of shares issued to the esop , but not yet allocated to participants , is shown as a reduction of shareholders ' equity . compensation expense is based on the market price of shares as they are committed to be released to participant accounts . dividends , when paid , on allocated esop shares reduce retained earnings ; dividends , when paid , on unearned esop shares reduce debt and accrued interest . retirement plans : profit sharing plan expense is the amount of the company 's contribution to participants of the plan . deferred compensation and supplemental retirement plan expense allocates the benefits over years of service . 69 oconee federal financial corp. notes to the consolidated financial statements ( continued ) as of and for the years ended june 30 , 2014 and 2013 ( amounts in thousands , except share and per share data ) note 1summary of significant accounting policies ( continued ) bank owned life insurance : the company has purchased life insurance policies on certain directors . accounting guidance requires bank owned life insurance to be recorded at the amount that can be realized under the insurance contract at the balance sheet date , which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement . reclassifications : some items in the prior year consolidated financial statements were reclassified to conform to the current presentation . earnings per share : basic eps is based on the weighted average number of common shares actually outstanding and is adjusted for esop shares not yet committed to be released . unvested restricted stock awards , which contain rights to non-forfeitable dividends , are considered participating securities and the two-class method of computing basic and diluted eps is applied . diluted eps reflects the potential dilution that could occur if securities or other contracts to issue common stock , such as outstanding stock options , were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the company . diluted eps is calculated by adjusting the weighted average number of shares of common stock outstanding to include the effect of contracts or securities exercisable ( such as stock options ) or which could be converted into common stock , if dilutive , using the treasury stock method . new accounting standards : in may 2014 , the fasb issued asu 2014-9 `` revenue from contracts with customers ( topic 606 ) . this guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services . this guidance is effective for annual reporting periods beginning after december 15 , 2016 and early adoption is not permitted . the adoption of this asu will not have a material impact on the company 's consolidated financial statements . in february 2013 , the financial accounting standards board ( `` fasb `` ) issued accounting standards update ( `` asu `` ) no . 2013-02 , comprehensive income ( topic 220 ) : reporting of amounts reclassified out of accumulated other comprehensive income . this asu requires that companies present either in a single note or parenthetically on the face of the financial statements , the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source ( e.g . the release due to cash flow hedges from interest rate contracts ) and the income statement line items affected by the reclassification ( e.g . , interest income or interest expense ) . if a component is not required to be reclassified to net income in its entirety , companies would instead cross reference to the related footnote for additional information . this asu is effective for fiscal and interim reporting periods beginning after december 15 , 2013. the adoption of this asu did not have a material impact on the company 's consolidated financial statements . story_separator_special_tag additionally , compensation expense associated with our esop increased by approximately $ 118 thousand , of which $ 91 thousand is related to additional discretionary contributions made to the esop during the year ended june 30 , 2014. the remaining increase is the result of increase in our stock price during the year , which results in higher compensation cost associated with the esop . the increase in professional and supervisory fees is a result of merger related costs including legal , consulting , accounting and due diligence fees and expenses incurred with the pending stephens federal bank merger . during the year ended june 30 , 2014 , we recognized $ 164 thousand in impairment related to real estate owned properties compared to an amount of $ 23 thousand for the year ended june 30 , 2013. this increase was the primary reason for the increase in the provision for real estate owned and related expenses . income tax expense . the provision for income taxes was $ 2.1 million for year ended june 30 , 2014 compared with $ 2.4 million at june 30 , 2013. our effective tax rates for the years ended june 30 , 2014 and 2013 were 36.0 % and 37.5 % , respectively . the decrease in our effective tax rates is primarily related to the increase income from bank owned life insurance , which is not taxable for income tax purposes . 51 analysis of net interest income net interest income represents the difference between the income we earn on interest-earning assets and the interest expense we pay on interest-bearing liabilities . net interest income also depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them . the following tables set forth average balance sheets , average yields and costs , and certain other information at the dates and for the periods indicated . all average balances are daily average balances . non-accrual loans were included in the computation of average balances , but have been reflected in the tables as loans carrying a zero yield . the yields set forth below include the effect of deferred fees , discounts and premiums that are amortized or accreted to interest income . replace_table_token_24_th 52 rate/volume analysis the following table presents the dollar amount of changes in interest income and interest expense for the major categories of our interest-earning assets and interest-bearing liabilities . information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to ( i ) changes attributable to changes in volume ( i.e . , changes in average balances multiplied by the prior-period average rate ) and ( ii ) changes attributable to rate ( i.e . , changes in average rate multiplied by prior-period average balances ) . for purposes of this table , changes attributable to both rate and volume , which can not be segregated , have been allocated proportionately to the change due to volume and the change due to rate . replace_table_token_25_th replace_table_token_26_th management of market risk our most significant form of market risk is interest rate risk because , as a financial institution , the majority of our assets and liabilities are sensitive to changes in interest rates . therefore , a principal part of our operations is to manage interest rate risk and limit the exposure of our net interest income to changes in market interest rates . our board of directors is responsible for the review and oversight of our asset/liability strategies . the asset/liability committee of our board of directors meets monthly and is charged with developing an asset/liability management plan . our board of directors has established an asset/liability management committee , consisting of senior management , which meets daily to review pricing and liquidity needs and to assess our interest rate risk . this committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities , for determining the level of risk that is appropriate , given our business strategy , operating environment , capital , liquidity and performance objectives , and for managing this risk consistent with the guidelines approved by our board of directors . 53 the techniques we are currently using to manage interest rate risk include : using pricing strategies in an effort to balance the proportions of 30-year and 15-year fixed rate loans in our portfolio ; maintaining a modest portfolio of adjustable-rate one-to-four family residential loans ; funding a portion of our operations with deposits with terms greater than one year ; focusing our business operations on local retail customers who value our community orientation and personal service and who may be somewhat less sensitive to interest rate changes than wholesale deposit customers ; and maintaining a strong capital position , which provides for a favorable level of interest-earning assets relative to interest-bearing liabilities . depending on market conditions , from time to time we place more emphasis on enhancing net interest margin rather than matching the interest rate sensitivity of our assets and liabilities . in particular , we believe that the increased net interest income resulting from a mismatch in the maturity of our assets and liabilities portfolios can , during periods of stable or declining interest rates , provide high enough returns to justify increased exposure to sudden and unexpected increases in interest rates . as a result of this philosophy , our results of operations and the economic value of our equity will remain vulnerable to increases in interest rates and to declines due to the difference between long- and short-term interest rates . an important measure of interest rate risk is the amount by which the net present value of ( `` npv `` ) an institution 's cash flow from assets , liabilities and off balance sheet items changes in the event of a range of assumed changes in market interest rates . we have prepared an analysis of estimated
| see `` supervision and regulationfederal banking regulationcapital requirements '' and note 12 of the notes to our consolidated financial statements . common stock dividend policy . the company paid a quarterly $ 0.10 per share dividend on august 29 , 2013 , november 21 , 2013 , february 27 , 2014 , and may 22 , 2014 for a total of $ 2.2 million in dividends paid during the year ended june 30 , 2014. on july 24 , 2014 , the board of directors of the company declared a quarterly cash dividend of $ 0.10 per share of the company 's common stock payable to stockholders of record as of august 7 , 2014 , which was paid on august 21 , 2014. off-balance sheet arrangements . in the normal course of operations , we engage in a variety of financial transactions that , in accordance with u.s. generally accepted accounting principles , are not recorded in our consolidated financial statements . these transactions involve , to varying degrees , elements of credit , interest rate and liquidity risk . such transactions are used primarily to manage customers ' requests for funding and take the form of loan commitments and lines of credit . for information about our loan commitments and unused lines of credit , see note 11 of the notes to our consolidated financial statements . for the fiscal year ended june 30 , 2014 , we did not engage in any off-balance-sheet transactions other than loan origination commitments in the normal course of our lending activities . recent accounting pronouncements for a discussion of the impact of recent accounting pronouncements , see note 1 of the notes to our consolidated financial statements . impact of inflation and changing prices the consolidated financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles in the united states of america , which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation . the primary impact of inflation on our operations is reflected in increased operating costs . unlike most industrial companies , virtually all of the assets and liabilities of a financial institution are monetary in nature . as a result , interest rates , generally , have a more significant impact on a financial institution 's performance
| Liquidity | 9,800 |
we have strong visibility into our business as the majority of our revenue is derived from recurring subscription fees and re-occurring payment processing fees . we market and sell our products and services to provider clients throughout the united states using a direct sales organization . our demand generation team develops content and identifies prospects that our sales development team researches and qualifies to generate high-grade , actionable sales programs . our direct sales force executes on these qualified sales programs , partnering with client services to ensure prospects are educated on the breadth of our capabilities and demonstrable value proposition , with the goal of attracting and retaining clients and expanding their use of our platform over time . most of our platform solutions are contracted pursuant to annual , auto-renewing agreements . our sales typically involve competitive processes and sales cycles have , on average , varied in duration from three months to six months , depending on the size of the potential client . in addition , through phreesia university ( phreesia 's in-house training program ) , events , client conferences and webinars , we help our provider clients optimize their businesses and , as a result , support client retention . we also sell products and services to pharmaceutical brands and advertising agencies through our direct sales and marketing teams . since our inception , we have not marketed or sold our products internationally . accordingly , all of our revenue from historical periods has come from the united states , and our current strategy is to continue to focus our sales efforts within the united states . our revenue growth has been primarily organic and reflects our significant addition of new provider clients and increased revenue from existing clients . new provider clients are defined as clients that go live in the applicable period and existing provider clients are defined as clients that go live in any period before the applicable period . recent developments covid-19 in march 2020 , the world health organization declared the ongoing outbreak of a novel strain of coronavirus ( covid-19 ) a pandemic and the united states declared a national emergency with respect to covid-19 . the impact of the covid-19 pandemic has been widespread and rapidly evolving , and has led to the implementation of various responses over the last year , including government-imposed quarantines , travel restrictions , business and school closures , and other public health safety measures . during the last few months , several vaccines for covid-19 received fda approval and are currently being administered across the country . despite growing vaccination rates , we believe covid-19 will continue to impact the normal operations of our clients , which are primarily healthcare providers . because our business relies , in part , on the growth and success of our clients , any disruption to our clients ' operations will impact our revenue as follows : subscription and related services : disruptions to provider operations impact our subscription and related services revenue because of disruptions to sales processes and client implementations . payment processing : any decline in non-essential and elective patient visits directly impacts the revenue we receive from payment processing tools . life sciences : because our life sciences revenue is driven by the number of patients receiving targeted messages , a decline in patient visits may impact our revenue earned through patient engagement . during the third quarter of fiscal 2021 , patient visits returned to pre-pandemic levels as restrictions were lifted . during the fourth quarter of fiscal 2021 , patient visits remained stable despite a surge in covid-19 cases . we have seen positive trends as a result of our ability to use our platform and solutions to assist our healthcare provider clients as they implement new safety protocols in order to continue to see patients , including minimizing contact during intake of patients , mobile check-in , transitioning patients to telehealth visits and enabling providers to screen patients for covid-19 risk factors . our covid-19 screening module was used in over 45 million patient screenings during fiscal 2021. in addition to patient screenings , health care provider clients are also using our covid-19 vaccination management solution to manage vaccine delivery and identify vaccine-hesitant patients . given the unknown timeline and the near-term uncertainty of covid-19 's impact on our business , there continues to be uncertainty as to the extent to which the global covid-19 pandemic may adversely impact our business operations , financial performance , and results of operations at this time . 55 acquisition of queuedr on january 8 , 2021 , we acquired queuedr inc. ( queuedr ) , a saas technology company . over time , we believe the underlying queuedr technology will enhance our appointments solutions and the overall value of the phreesia platform to healthcare providers . the total consideration for the acquisition consists of $ 5.8 million in cash , $ 2.1 million of liabilities incurred and $ 2.2 million in performance-related contingent payments . see note 17 - acquisitions in part ii - item 8 of this annual report on form 10-k for additional information regarding the acquisition of queuedr . key metrics we regularly review the following key metrics to measure our performance , identify trends affecting our business , formulate financial projections , make strategic business decisions and assess working capital needs . replace_table_token_1_th provider clients . we define provider clients as the average number of healthcare provider organizations that generate revenue each month during the applicable period . in cases where we act as a subcontractor providing white-label services to our partner 's clients , we treat the contractual relationship as a single provider client . story_separator_special_tag by a decrease in the company 's valuation allowance in connection with acquisitions , while the prior year benefit relates to a decrease in the valuation allowance for a portion of deferred tax assets and revision of tax positions from prior years that resulted in the elimination of tax liabilities . non-gaap financial measures adjusted ebitda is a supplemental measure of our performance that is not required by , or presented in accordance with , gaap . adjusted ebitda is not a measurement of our financial performance under gaap and should not be considered as an alternative to net income or loss or any other performance measure derived in accordance with gaap , or as an alternative to cash flows from operating activities as a measure of our liquidity . we define adjusted ebitda as net income or loss before interest expense ( income ) , net , provision for ( benefit from ) income taxes , depreciation and amortization , and before stock-based compensation expense , change in fair value of warrant liability , change in fair value of contingent consideration liabilities and other ( income ) expense , net . we have provided below a reconciliation of adjusted ebitda to net loss , the most directly comparable gaap financial measure . we have presented adjusted ebitda in this annual report on form 10-k because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends , to prepare and approve our annual budget , and to develop short and long-term operational plans . in particular , we believe that the exclusion of the amounts eliminated in calculating adjusted ebitda can provide a useful measure for period-to-period comparisons of our core business . accordingly , we believe that adjusted ebitda provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors . our use of adjusted ebitda has limitations as an analytical tool , and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under gaap . some of these limitations are as follows : although depreciation and amortization expense are non-cash charges , the assets being depreciated and amortized may have to be replaced in the future , and adjusted ebitda does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements ; adjusted ebitda does not reflect : ( 1 ) changes in , or cash requirements for , our working capital needs ; ( 2 ) the potentially dilutive impact of non-cash stock-based compensation ; ( 3 ) tax payments that may represent a reduction in cash available to us ; or ( 4 ) interest expense ( income ) , net ; and other companies , including companies in our industry , may calculate adjusted ebitda or similarly titled measures differently , which reduces its usefulness as a comparative measure . 63 because of these and other limitations , you should consider adjusted ebitda along with other gaap-based financial performance measures , including various cash flow metrics , net loss , and our gaap financial results . the following table presents a reconciliation of adjusted ebitda to net loss for each of the periods indicated : replace_table_token_5_th we calculate free cash flow as net cash provided by ( used in ) operating activities less capitalized internal-use software development costs and purchases of property and equipment . additionally , free cash flow is a supplemental measure of our performance that is not required by , or presented in accordance with , gaap . we consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities , including investing in our business , making strategic investments , partnerships and acquisitions and strengthening our financial position . the following table presents a reconciliation of free cash flow from net cash provided by operating activities , the most directly comparable gaap financial measure , for each of the periods indicated : replace_table_token_6_th story_separator_special_tag capitalized internal-use software costs of $ 7.3 million and $ 6.5 million used for the acquisition of queuedr , net of cash acquired . see note 17 - acquisitions in item 8 - consolidated financial statements and supplementary data for additional information regarding the queuedr acquisition . during the fiscal year ended january 31 , 2020 , cash used in investing activities was $ 12.3 million , principally resulting from capital expenditures of $ 7.0 million and capitalized internal-use software costs of $ 5.3 million . financing activities during the fiscal year ended january 31 , 2021 net cash provided by financing activities was $ 150.7 million , consisting of $ 174.8 million in proceeds from the october 2020 offering of our common stock , net of underwriters ' discounts and commissions , $ 4.4 million in proceeds from the issuance of common stock upon the exercise of stock options as well as $ 2.0 million in proceeds from an insurance financing arrangement , partially offset by $ 20.7 million used to repay the outstanding principal balance of the second svb facility , $ 5.0 million used to pay tax withholdings on stock compensation awards , $ 4.3 million used for principal payments on finance leases and financing arrangements , $ 0.4 million used for debt and equity issuance and offering costs and $ 0.2 million for loan facility fee payments . the lender fees incurred in connection with the second svb facility were transferred into the principal balance of the second svb facility . we have included the transfer of the balance of the first svb facility and the fees that were transferred in connection with the second svb facility within the supplemental non-cash investing and financing information on our consolidated statements
| liquidity and capital resources since our inception in 2005 and until the completion of our ipo , we financed our operations primarily through the private sale of preferred stock and from various debt arrangements . in july 2019 , we completed our ipo in which we and certain of our selling stockholders sold 10,681,423 shares of common stock at a public offering price of $ 18.00 per share , resulting in aggregate proceeds to us of approximately $ 130.8 million , net of underwriters ' discounts and commissions , and before deducting offering costs of approximately $ 6.4 million . 64 on october 23 , 2020 , we completed a follow-on offering of its common stock , in which we issued and sold 5,750,000 shares of common stock at an issuance price of $ 32.00 per share resulting in net proceeds of $ 174,800 , after deducting underwriting discounts and commissions , and before deducting third-party offering costs of $ 290. as of january 31 , 2021 and 2020 , we had cash and cash equivalents of $ 218,781 and $ 90,315 , respectively . cash and cash equivalents consist of money market accounts and cash on deposit . we believe that our existing cash and cash equivalents , along with our available financial resources from our credit facility , will be sufficient to meet our needs for at least the next 12 months . our future capital requirements and the adequacy of available funds will depend on many factors , including those set forth under “ risk factors. ” in the event that additional financing is required from outside sources , we may be unable to raise the funds on acceptable terms , if at all . if we are unable to raise additional capital when desired , our business , operating results and financial condition could be adversely affected . silicon valley bank facility in february 2019 , we entered into a loan and security agreement with silicon valley bank ( svb ) , or the first svb facility , which provided for a secured term loan facility and a revolving credit facility .
| Liquidity | 3,851 |
we entered into a clinical trial collaboration with pfizer to evaluate the safety and efficacy of the investigational combination of yescarta and pfizer 's utomilumab , a fully humanized 4-1bb agonist monoclonal antibody , in patients with refractory large b-cell lymphoma . inflammation programs we entered into a strategic collaboration with scholar rock holding corporation to discover and develop highly specific inhibitors of transforming growth factor beta activation for the treatment of fibrotic diseases . 30 we entered into a scientific collaboration with verily , using verily 's immunoscape platform to identify and better understand the immunological basis of three common and serious inflammatory diseases : rheumatoid arthritis , inflammatory bowel disease and lupus-related diseases . transition following 28 years of service , john f. milligan , ph.d. , stepped down from his role as president and chief executive officer ( ceo ) effective december 31 , 2018. our board announced the selection of daniel o'day to be our new chairman and ceo effective march 1 , 2019. mr. o'day brings more than 30 years of executive management , creative leadership and operational excellence . most recently , mr. o'day served as the ceo of roche pharmaceuticals , the pharma division of roche group . we had other leadership transitions throughout the year resulting from planned successions and normal industry turnover . 2018 financial highlights total revenues decreased to $ 22.1 billion and total product sales decreased to $ 21.7 billion in 2018 , compared to $ 26.1 billion and $ 25.7 billion in 2017 , respectively , primarily due to lower sales of our hcv products , partially offset by higher sales of our hiv products . in the united states , product sales were $ 16.2 billion in 2018 , compared to $ 18.1 billion in 2017 . in europe , product sales were $ 3.7 billion in 2018 , compared to $ 5.0 billion in 2017 . product sales in other international locations were $ 1.8 billion in 2018 , compared to $ 2.6 billion in 2017 . cost of goods sold increased to $ 4.9 billion in 2018 , compared to $ 4.4 billion in 2017 , primarily due to reserves for excess raw material inventory , and higher amortization related to intangible assets acquired in connection with our acquisition of kite pharma , inc. ( kite ) . in 2018 , inventory reserves of $ 440 million were recorded for excess raw materials primarily due to a sustained decrease in demand for harvoni as a result of a shift in the market from harvoni to epclusa . research and development ( r & d ) expenses increased to $ 5.0 billion in 2018 , compared to $ 3.7 billion in 2017 , primarily due to an $ 820 million impairment charge related to in-process r & d ( ipr & d ) for the kite-585 program ( an anti-bcma being evaluated for the treatment of multiple myeloma ) , an increase in up-front collaboration expenses to further enhance our pipeline , a full year of investments to support the growth of our business following the acquisition of kite and higher stock-based compensation expenses associated with the acquisition of kite . selling , general and administrative ( sg & a ) expenses increased to $ 4.1 billion for 2018 , compared to $ 3.9 billion in 2017 , primarily due to a full year of investments to support the growth of our business following the acquisition of kite , partially offset by lower acquisition-related costs associated with the acquisition of kite and lower branded prescription drug ( bpd ) fees . net income attributable to gilead was $ 5.5 billion or $ 4.17 per diluted share in 2018 , compared to $ 4.6 billion or $ 3.51 per diluted share in 2017 . the increase was primarily due to a $ 5.5 billion charge to income tax expense related to the enactment of the tax cuts and jobs act ( tax reform ) recorded in 2017 and higher hiv product sales in 2018 , partially offset by lower hcv product sales and higher operating expenses associated with advancement of our pipeline and investments to support the growth of our business following the acquisition of kite in 2018. as of december 31 , 2018 , we had $ 31.5 billion of cash , cash equivalents and marketable debt securities compared to $ 36.7 billion as of december 31 , 2017 . during 2018 , we generated $ 8.4 billion in operating cash flow , repaid $ 6.3 billion of principal amount of debt , paid cash dividends of $ 3.0 billion and repurchased a total of 40 million shares for $ 2.9 billion through open market transactions . outlook 2019 in 2019 , we expect to continue to maintain our strong focus on operational excellence and financial discipline . from an r & d perspective , we expect to continue to invest in new and ongoing clinical studies that support both our existing products and product candidates . we expect data read-outs in 2019 including selonsertib or stellar-3 for the treatment of nash , filgotinib for the treatment of rheumatoid arthritis , and descovy for prep indication . in order to further augment our product pipeline , we continue to pursue opportunities for collaborations , partnerships and strategic investments that fit into our long term strategic plan . from a commercial perspective , we expect to continue to promote biktarvy and other hiv regimens containing taf . in addition , we believe truvada for prep will continue to be an integral part of our growth in hiv in the united states as communities continue to embrace the public health benefits of prevention . story_separator_special_tag product sales in other international locations decreased by 45 % to $ 2.6 billion in 2017 , compared to $ 4.6 billion in 2016 , primarily due to lower sales in japan . sales of our hcv products in japan decreased to $ 692 million in 2017 , compared to $ 2.5 billion in 2016 , primarily due to lower sales volume as a result of lower total market patient starts and increased competition . 33 the following table summarizes the period-over-period changes in our product sales : replace_table_token_4_th notes : * percentage not meaningful ( 1 ) includes emtriva and tybost ( 2 ) represents our revenue from cobicistat ( c ) , ftc and taf in symtuza ® ( darunavir/c/ftc/taf ) , a fixed dose combination product commercialized by janssen ( 3 ) includes cayston , hepsera and sovaldi the following is additional discussion of our results on certain products : descovy ( ftc/taf ) -based products - biktarvy , descovy , genvoya and odefsey product sales of our descovy ( ftc/taf ) -based products were $ 9.0 billion , $ 6.0 billion and $ 2.1 billion , and were 41 % , 23 % and 7 % of our total product sales in 2018 , 2017 and 2016 , respectively . in 2018 , sales of our descovy ( ftc/taf ) -based products were $ 7.2 billion in the united states and $ 1.5 billion in europe , compared to $ 5.0 billion in the united states and $ 892 million in europe in 2017 and $ 1.8 billion in the united states and $ 256 million in europe in 2016 . the increase in 2018 compared to 2017 in all major markets was primarily driven by higher sales volume reflecting our launch of biktarvy in 2018 and the continued uptake of genvoya , odefsey and descovy . the increase in 2017 compared to 2016 in all major markets was primarily driven by higher sales volume as patients shifted away from truvada ( ftc/tdf ) -based regimens . truvada ( ftc/tdf ) -based products - atripla , complera/eviplera , stribild and truvada product sales of our truvada ( ftc/tdf ) -based products were $ 5.5 billion , $ 7.0 billion and $ 9.5 billion , and were 25 % , 27 % and 32 % of our total product sales in 2018 , 2017 and 2016 , respectively . in 2018 , sales of our truvada ( ftc/tdf ) -based products were $ 4.4 billion in the united states and $ 815 million in europe , compared to $ 4.8 billion in the united states and $ 1.7 billion in europe in 2017 and $ 6.6 billion in the united states and $ 2.3 billion in europe in 2016 . 34 in the united states , the decrease in 2018 compared to 2017 was primarily due to lower sales volume as a result of patients switching to newer regimens containing taf , partially offset by the increased usage of truvada for prep and higher average net selling price of certain of our truvada ( ftc/tdf ) -based products . in europe , the decrease in 2018 compared to 2017 was primarily due to lower sales volume as a result of the availability of generic versions of truvada and atripla and patients switching to newer regimens containing taf . in the united states , the decrease in 2017 compared to 2016 was primarily due to lower sales volume as a result of patients switching to newer regimens containing taf , partially offset by the increased usage of truvada for prep . in europe , the decreases in 2017 compared to 2016 was primarily due to lower sales volume as a result of the availability of generic versions of truvada in several countries and patients switching to newer regimens containing taf . hcv products - epclusa , harvoni , sovaldi and vosevi hcv product sales were $ 3.7 billion , $ 9.1 billion and $ 14.8 billion , and were 17 % , 36 % and 50 % of our total product sales in 2018 , 2017 and 2016 , respectively . in 2018 , sales of our hcv products were $ 2.0 billion in the united states , $ 896 million in europe and $ 767 million in other international locations . in 2017 , sales of our hcv products were $ 5.9 billion in the united states , $ 1.9 billion in europe and $ 1.4 billion in other international locations . in 2016 , sales of our hcv products were $ 8.4 billion in the united states , $ 2.8 billion in europe and $ 3.6 billion in other international locations . the decrease in 2018 compared to 2017 in all major markets was primarily due to lower sales volume and lower average net selling price as a result of increased competition and lower total market patient starts . harvoni and sovaldi product sales also decreased as a result of a shift in the market from harvoni and sovaldi to epclusa . the decrease in 2017 compared to 2016 in all major markets was primarily due to lower sales volume and lower average net selling price as a result of increased competition and lower total market patient starts . harvoni and sovaldi product sales also decreased as a result of a shift in the market from harvoni and sovaldi to epclusa . epclusa product sales increased in 2017 compared to 2016 primarily due to a full year of sales . epclusa was approved by fda and european commission in june and july 2016 , respectively . cost of goods sold and product gross margin the following table summarizes the period-over-period changes in our product sales , cost of goods sold and product gross margin : replace_table_token_5_th our cost of goods sold for 2018 increased by $ 482 million or 11 % , compared to 2017 , primarily due to higher inventory reserves . in 2018 ,
| the change in cash provided by ( used in ) financing activities was primarily due to higher repayment of debt and repurchases of our common stock in 2018. in addition , we had $ 9.0 billion net proceeds from debt issuances to partially fund our acquisition of kite in 2017 , whereas no debt was issued in 2018. cash provided by financing activities was $ 3.4 billion in 2017 , compared to cash used in financing activities of $ 9.7 billion in 2016 , primarily due to lower repurchases of our common stock and higher proceeds from the issuances of debt . debt and credit facilities long-term obligations the summary of our borrowings under various financing arrangements is included in note 12 , debt and credit facilities of the notes to consolidated financial statements included in item 8 of our annual report on form 10-k . senior unsecured notes in 2018 , we repaid at maturity $ 1.0 billion principal amount of senior unsecured notes that were issued in september 2015 and $ 750 million of principal amount of senior unsecured notes that were issued in september 2017. in 2017 , in connection with our acquisition of kite , we issued $ 3.0 billion aggregate principal amount of senior unsecured notes consisting of $ 750 million principal amount of floating rate notes due september 2018 , $ 750 million principal amount of floating rate notes due march 2019 , and $ 500 million principal amount of floating rate notes due september 2019 ( collectively , the floating rate notes ) and $ 1.0 billion principal amount of 1.85 % senior notes due september 2019 ( the fixed rate notes , and collectively with the floating rate notes , the 2017 notes ) .
| Liquidity | 11,755 |
on january 15 , 2015 , we completed two separate acquisitions . through our wholly-owned subsidiary , willdan energy solutions ( `` wes `` ) , we acquired all of the outstanding shares of abacus resource management company ( `` abacus `` ) , an oregon-based energy engineering company . in addition , we , through our wholly-owned subsidiary wes , also acquired substantially all of the assets of 360 energy engineers , llc ( `` 360 energy `` ) , a kansas-based energy and engineering energy management consulting company . pursuant to the terms of the stock purchase agreement , dated as of january 15 , 2015 ( the `` abacus agreement `` ) , by and among us , wes , abacus and mark kinzer and steve rubbert ( the `` abacus shareholders `` ) , wes will pay the abacus shareholders a maximum purchase price of $ 6,150,000 , consisting of ( i ) $ 2,500,000 in cash paid at closing ( subject to certain post-closing adjustments ) , ( ii ) 75,758 shares of common stock , par value $ 0.01 per share , of the company ( `` common stock `` ) equaling $ 1,000,000 based on the volume-weighted average price of shares of the common stock for the ten trading days immediately prior to , but not including , the closing date of the abacus acquisition , ( iii ) $ 1,250,000 aggregate principal amount of promissory notes issued to the abacus shareholders ( collectively , the `` abacus notes `` ) and ( iv ) up to $ 1,400,000 in cash , payable at the end of the company 's and wes 's 2015 and 2016 fiscal years , if certain financial targets of abacus are met during such fiscal years . the abacus notes were issued in an initial outstanding principal amount of $ 625,000 to each of the abacus shareholders . the abacus notes provide for a fixed interest rate of 4 % per annum and are fully amortizing and payable in equal monthly installments between january 15 , 2015 and their january 15 , 2017 maturity date . the abacus notes contain events of default provisions customary for documents of their nature . pursuant to the terms of the asset purchase agreement , dated as of january 15 , 2015 ( the `` 360 energy agreement `` ) , by and among us , wes and 360 energy , wes will pay 360 energy a maximum purchase price of $ 15,000,000 , consisting of ( i ) $ 4,875,000 in cash paid at closing , ( ii ) 47,348 shares of common stock equaling $ 625,000 based on the volume-weighted average price of shares of the common stock for the ten trading days immediately prior to , but not including , the closing date of the 360 energy acquisition , ( iii ) $ 3,000,000 aggregate principal amount of promissory note issued to 360 energy ( the `` 360 energy note `` and , together with the abacus notes , the `` notes `` ) and ( iv ) up to $ 6,500,000 in cash , payable at the end of the company 's and wes 's 2015 , 2016 and 2017 fiscal years , if certain financial targets of wes 's division made up of the assets acquired from , and former employees of , 360 energy are met during such fiscal years . the 360 energy note was issued in an initial outstanding principal amount of $ 3,000,000. the 360 energy note provides for a fixed interest rate of 4 % per annum and is fully amortizing and payable in equal monthly installments between january 15 , 2015 and their january 15 , 2018 maturity date . the 360 energy note contains events of default provisions customary for documents of its nature . we also provided a guaranty to 360 energy which guarantees wes 's obligations under the promissory note issued to 360 energy . 37 to finance the acquisitions of abacus and 360 energy , we borrowed $ 2,000,000 under our delayed draw term loan facility and used cash on hand to pay the remaining $ 5,375,000. amended credit facility . on january 14 , 2015 , we and our subsidiaries , as guarantors , entered into the second amendment ( the `` second amendment `` ) to the credit agreement ( as amended , the `` bmo credit agreement `` ) , dated as of march 24 , 2014 , by and between us , the guarantors listed therein and bmo harris bank national association ( `` bmo harris `` ) . the bmo credit agreement governs our credit facility that includes a revolving line of credit and a delayed draw term loan facility . the second amendment revised the bmo credit agreement to , among other things , permit the acquisitions of abacus and 360 energy , the incurrence of the notes and the 360 energy guaranty issued in connection with the acquisitions of abacus and 360 energy and to add abacus as a guarantor under the bmo credit agreement upon the closing of the acquisition of abacus . the second amendment also increased the amount available to us for borrowing under the delayed draw term loan facility from $ 2,500,000 to $ 3,000,000. in addition , the second amendment increased the interest rate under the delayed draw term loan facility by 25 basis points . giving effect to the second amendment , borrowings under the delayed draw term loan facility will now bear interest , at our option , at ( a ) the base rate plus an applicable margin ranging between 1.25 % and 1.75 % , or ( b ) the libor rate plus an applicable margin ranging between 2.25 % and 2.75 % . story_separator_special_tag income taxes income taxes are accounted for under the asset and liability method . deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the financial reporting basis and tax basis of our assets and liabilities , subject to a judgmental assessment of the recoverability of deferred tax assets . 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 . a valuation allowance is recorded when it is more likely than not that some of the deferred tax assets may not be realized . significant judgment is applied when assessing the need for valuation allowances . areas of estimation include our consideration of future taxable income and ongoing prudent and feasible tax planning strategies . should a change in circumstances lead to a change in judgment about the utilization of deferred tax assets in future years , we would adjust the related valuation allowances in the period that the change in circumstances occurs , along with a corresponding increase or charge to income . during fiscal year 2014 , management assessed the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets . based on this evaluation , as of january 2 , 2015 , we reversed the valuation allowance on our deferred tax assets . we will continue to assess the need for a valuation allowance in the future . the provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities . we recognize the tax benefit from uncertain tax positions if it is more likely than not that the tax positions will be sustained on examination by the tax authorities , based on the technical merits of the 42 position . the tax benefit is measured based on the largest benefit that has a greater than 50 % likelihood of being realized upon ultimate settlement . we recognize interest and penalties related to unrecognized tax benefits in income tax expense . results of operations the following table sets forth , for the periods indicated , certain information derived from our consolidated statements of operations expressed as a percentage of contract revenue . amounts may not add to the totals due to rounding . replace_table_token_8_th fiscal year 2014 compared to fiscal year 2013 contract revenue . our contract revenue was $ 108.1 million for fiscal year 2014 , with $ 52.9 million attributable to the energy efficiency services segment , $ 40.8 million attributable to the engineering services segment , $ 10.6 million attributable to the public finance services segment , and $ 3.7 million attributable to the homeland security services segment . consolidated contract revenue increased $ 22.6 million , or 26.4 % , to $ 108.1 million for fiscal year 2014 from $ 85.5 million for fiscal year 2013. this was primarily the result of increases of $ 16.9 million , or 46.9 % , and $ 5.6 million , or 15.8 % , in contract revenue from our energy efficiency services and engineering services segments , respectively . contract revenue for our public finance services increased $ 0.8 million , or 8.0 % to $ 10.6 million for fiscal year 2014 from $ 9.8 million for fiscal year 2013. contract revenue for our homeland security services segment decreased by $ 0.7 million , or 15.4 % , to $ 3.7 million for fiscal year 2014 from 43 $ 4.4 million for fiscal year 2013. contract revenue for the energy efficiency services segment increased primarily because of increased demand for energy efficiency services in the states of new york and california , largely due to a contract modification that expanded an existing small business direct install ( `` sbdi `` ) contract with consolidated edison . contract revenue for the engineering services segment increased primarily due to greater demand for our city engineering services in northern california , our building and safety services , and our construction management services . revenue in the homeland security services segment decreased due to slightly lower levels of activity in the traditional planning , training and exercise consulting services business . direct costs of contract revenue . direct costs of contract revenue were $ 63.8 million for fiscal year 2014 , with $ 34.9 million attributable to the energy efficiency services segment , $ 22.4 million attributable to the engineering services segment , $ 4.3 million attributable to the public finance services segment , and $ 2.2 million attributable to the homeland security services segment . overall , direct costs increased by $ 14.9 million , or 30.4 % , to $ 63.8 million for fiscal year 2014 from $ 48.9 million for fiscal 2013. the increase in direct costs was primarily attributable to an increase in direct costs within our energy efficiency services segment of $ 11.8 million , or 51.2 % for fiscal year 2014. direct costs of contract revenue also increased within our engineering services and public finance segments by $ 3.4 million , or 17.7 % , and $ 0.3 million , or 6.2 % , respectively . direct costs of contract revenue in our homeland security services segment decreased by $ 0.5 million , or 19.1 % to $ 2.2 million for fiscal year 2014 from $ 2.8 million for fiscal year 2013. direct costs increased as a result of increases in subcontractor services and other direct costs of $ 10.8 million and an increase in salaries and wages of $ 4.1 million . within direct costs of contract revenue , salaries and wages decreased to 26.1 % of contract revenue for fiscal year 2014
| cash flows from financing activities cash flows provided by financing activities were $ 0.1 million for fiscal year 2014 , as compared to cash flows used in financing activities of $ 3.1 million and cash flows provided by financing activities of $ 2.7 million for fiscal years 2013 and 2012 , respectively . the net cash flows provided by financing activities for fiscal year 2014 increased by $ 3.2 million from fiscal year 2013 primarily due to a decrease in repayments on our line of credit during fiscal year 2014. the net cash flows used in financing activities for fiscal year 2013 increased by $ 5.8 million from fiscal year 2012 primarily due to a decrease in net borrowings under our line of credit during fiscal year 2013. the net cash flows provided by financing activities in fiscal year 2012 were primarily attributable to borrowings under our revolving line of credit , partially offset by repayments of our revolving line of credit and changes in the excess of outstanding checks over bank balance . outstanding indebtedness on march 24 , 2014 , we entered into a credit agreement with bmo harris bank , n.a. , or bmo , that provides for a revolving line of credit of up to $ 7.5 million , subject to a borrowing base calculation , including a $ 5.0 million standby letter of credit sub-facility , and a delayed draw term loan facility of up to $ 2.5 million . all borrowings under the revolving line of credit are limited to a borrowing base equal to roughly 75 % of the eligible accounts receivable plus 50 % of the lower of cost or market value of our eligible inventory , each term as defined in the credit agreement . as of january 2 , 2015 , there were no outstanding borrowings under the revolving line of credit or term loan facility and all $ 7.5 million under the revolving line of credit and $ 2.5 million under the delayed draw term loan facility were available for borrowing . under the bmo credit agreement , as of january 2 , 2014 , no cash amounts are restricted .
| Liquidity | 4,089 |
other operating income , net increased $ 2.7 million as a result of business interruption recoveries related to downtime associated with the neches ship-loader insurance claim received in the first quarter of 2020. an additional $ 4.1 million increase is related to a net gain from the disposition of property , plant and equipment . gain on involuntary conversion of property , plant and equipment . the $ 4.8 million gain is primarily due to insurance proceeds received related to structural damage of our ship-loader assets during a weather incident at our neches terminal in may of 2019 . 55 natural gas liquids segment comparative results of operations for the years ended december 31 , 2020 and 2019 replace_table_token_11_th products revenues . our ngl average sales price per barrel decreased $ 10.51 , or 28 % , resulting in a decrease to products revenues of $ 103.2 million . the decrease in average sales price per barrel was a result of a decrease in market prices . product sales volumes decreased 6 % , decreasing revenues $ 15.8 million . cost of products sold . our average cost per barrel decreased $ 10.07 , or 29 % , decreasing cost of products sold by $ 98.9 million . the decrease in average cost per barrel was a result of a decrease in market prices . the decrease in sales volume of 6 % resulted in a $ 14.6 million decrease to cost of products sold . our margins decreased $ 0.44 per barrel , or 18 % during the period . operating expenses . operating expenses decreased $ 2.3 million related to the divestiture of assets and the elimination of the associated expenses . in addition , operating expenses decreased $ 1.0 million related to the settlement of an insurance claim for less than anticipated . selling , general and administrative expenses . selling , general and administrative expenses decreased $ 0.7 million as a result of decreased compensation expense . other operating income ( loss ) , net . other operating income ( loss ) , net represents the gains associated with the disposition of the east texas pipeline in 2019 . 56 interest expense comparative components of interest expense , net for the years ended december 31 , 2020 and 2019 replace_table_token_12_th indirect selling , general and administrative expenses year ended december 31 , variance percent change 2020 2019 ( in thousands ) indirect selling , general and administrative expenses $ 17,909 $ 17,981 $ ( 72 ) — % indirect selling , general and administrative expenses remained consistent from 2019 to 2020. martin resource management corporation allocates to us a portion of its indirect selling , general and administrative expenses for services such as accounting , treasury , clerical , engineering , legal , billing , information technology , administration of insurance , general office expenses and employee benefit plans and other general corporate overhead functions we share with martin resource management corporation 's retained businesses . this allocation is based on the percentage of time spent by martin resource management corporation personnel that provide such centralized services . gaap also permits other methods for allocation of these expenses , such as basing the allocation on the percentage of revenues contributed by a segment . the allocation of these expenses between martin resource management corporation and us is subject to a number of judgments and estimates , regardless of the method used . we can provide no assurances that our method of allocation , in the past or in the future , is or will be the most accurate or appropriate method of allocation for these expenses . other methods could result in a higher allocation of selling , general and administrative expense to us , which would reduce our net income . under the omnibus agreement , we are required to reimburse martin resource management corporation for indirect general and administrative and corporate overhead expenses . the board of directors of our general partner approved the following reimbursement amounts : year ended december 31 , variance percent change 2020 2019 ( in thousands ) board approved reimbursement amount $ 16,410 $ 16,657 $ ( 247 ) ( 1 ) % the amounts reflected above represent our allocable share of such expenses . the board of directors of our general partner will review and approve future adjustments in the reimbursement amount for indirect expenses , if any , annually . 57 liquidity and capital resources general our primary sources of liquidity to meet operating expenses , service our indebtedness , pay distributions to our unitholders and fund capital expenditures have historically been cash flows generated by our operations , borrowings under our revolving credit facility and access to debt and equity capital markets , both public and private . set forth below is a description of our cash flows for the periods indicated . cash flows - year ended december 31 , 2020 compared to year ended december 31 , 2019 the following table details the cash flow changes between the years ended december 31 , 2020 and 2019 : replace_table_token_13_th net cash provided by operating activities . the decrease in net cash provided by operating activities for the year ended december 31 , 2020 includes a $ 7.8 million decrease in net cash received from discontinued operating activities , a decrease in operating results of $ 11.3 million , and an unfavorable variance in other non-current assets and liabilities of $ 0.9 million . an additional $ 6.0 million decrease in other non-cash charges was primarily due to a $ 4.9 million gain on involuntary conversion of property , plant and equipment . offsetting this decrease was a favorable variance in working capital of $ 15.0 million . net cash provided by investing activities . net cash provided by investing activities for the year ended december 31 , 2020 decreased $ 172.2 million . cash received from discontinued investing activities decreased $ 209.2 million . offsetting story_separator_special_tag other operating income , net increased $ 2.7 million as a result of business interruption recoveries related to downtime associated with the neches ship-loader insurance claim received in the first quarter of 2020. an additional $ 4.1 million increase is related to a net gain from the disposition of property , plant and equipment . gain on involuntary conversion of property , plant and equipment . the $ 4.8 million gain is primarily due to insurance proceeds received related to structural damage of our ship-loader assets during a weather incident at our neches terminal in may of 2019 . 55 natural gas liquids segment comparative results of operations for the years ended december 31 , 2020 and 2019 replace_table_token_11_th products revenues . our ngl average sales price per barrel decreased $ 10.51 , or 28 % , resulting in a decrease to products revenues of $ 103.2 million . the decrease in average sales price per barrel was a result of a decrease in market prices . product sales volumes decreased 6 % , decreasing revenues $ 15.8 million . cost of products sold . our average cost per barrel decreased $ 10.07 , or 29 % , decreasing cost of products sold by $ 98.9 million . the decrease in average cost per barrel was a result of a decrease in market prices . the decrease in sales volume of 6 % resulted in a $ 14.6 million decrease to cost of products sold . our margins decreased $ 0.44 per barrel , or 18 % during the period . operating expenses . operating expenses decreased $ 2.3 million related to the divestiture of assets and the elimination of the associated expenses . in addition , operating expenses decreased $ 1.0 million related to the settlement of an insurance claim for less than anticipated . selling , general and administrative expenses . selling , general and administrative expenses decreased $ 0.7 million as a result of decreased compensation expense . other operating income ( loss ) , net . other operating income ( loss ) , net represents the gains associated with the disposition of the east texas pipeline in 2019 . 56 interest expense comparative components of interest expense , net for the years ended december 31 , 2020 and 2019 replace_table_token_12_th indirect selling , general and administrative expenses year ended december 31 , variance percent change 2020 2019 ( in thousands ) indirect selling , general and administrative expenses $ 17,909 $ 17,981 $ ( 72 ) — % indirect selling , general and administrative expenses remained consistent from 2019 to 2020. martin resource management corporation allocates to us a portion of its indirect selling , general and administrative expenses for services such as accounting , treasury , clerical , engineering , legal , billing , information technology , administration of insurance , general office expenses and employee benefit plans and other general corporate overhead functions we share with martin resource management corporation 's retained businesses . this allocation is based on the percentage of time spent by martin resource management corporation personnel that provide such centralized services . gaap also permits other methods for allocation of these expenses , such as basing the allocation on the percentage of revenues contributed by a segment . the allocation of these expenses between martin resource management corporation and us is subject to a number of judgments and estimates , regardless of the method used . we can provide no assurances that our method of allocation , in the past or in the future , is or will be the most accurate or appropriate method of allocation for these expenses . other methods could result in a higher allocation of selling , general and administrative expense to us , which would reduce our net income . under the omnibus agreement , we are required to reimburse martin resource management corporation for indirect general and administrative and corporate overhead expenses . the board of directors of our general partner approved the following reimbursement amounts : year ended december 31 , variance percent change 2020 2019 ( in thousands ) board approved reimbursement amount $ 16,410 $ 16,657 $ ( 247 ) ( 1 ) % the amounts reflected above represent our allocable share of such expenses . the board of directors of our general partner will review and approve future adjustments in the reimbursement amount for indirect expenses , if any , annually . 57 liquidity and capital resources general our primary sources of liquidity to meet operating expenses , service our indebtedness , pay distributions to our unitholders and fund capital expenditures have historically been cash flows generated by our operations , borrowings under our revolving credit facility and access to debt and equity capital markets , both public and private . set forth below is a description of our cash flows for the periods indicated . cash flows - year ended december 31 , 2020 compared to year ended december 31 , 2019 the following table details the cash flow changes between the years ended december 31 , 2020 and 2019 : replace_table_token_13_th net cash provided by operating activities . the decrease in net cash provided by operating activities for the year ended december 31 , 2020 includes a $ 7.8 million decrease in net cash received from discontinued operating activities , a decrease in operating results of $ 11.3 million , and an unfavorable variance in other non-current assets and liabilities of $ 0.9 million . an additional $ 6.0 million decrease in other non-cash charges was primarily due to a $ 4.9 million gain on involuntary conversion of property , plant and equipment . offsetting this decrease was a favorable variance in working capital of $ 15.0 million . net cash provided by investing activities . net cash provided by investing activities for the year ended december 31 , 2020 decreased $ 172.2 million . cash received from discontinued investing activities decreased $ 209.2 million . offsetting
| results of operations the results of operations for the years ended december 31 , 2020 , 2019 , and 2018 have been derived from our consolidated financial statements . discussions of the year ended december 31 , 2018 that are not included in this annual report on form 10-k and year-to-year comparisons of the year ended december 31 , 2019 and the year ended december 31 , 2018 can be found in “ management 's discussion and analysis of financial condition and the results of operations ” in part ii , item 7 of our annual report on form 10-k for the year ended december 31 , 2019. we evaluate segment performance on the basis of operating income , which is derived by subtracting cost of products sold , operating expenses , selling , general and administrative expenses , and depreciation and amortization expense from revenues . our consolidated results of operations are presented on a comparative basis below . there are certain items of income and expense which we do not allocate on a segment basis . these items , including interest expense , and indirect selling , general and administrative expenses , are discussed after the comparative discussion of our results within each segment . the natural gas liquids segment information below excludes the discontinued operations of the natural gas storage assets and wtlpg partnership interests disposed of on june 28 , 2019 and july 31 , 2018 , respectively , for the years ended december 31 , 2019 and 2018. see item 8 , note 5. the following table sets forth our operating revenues and operating income by segment for the years ended december 31 , 2020 , 2019 , and 2018 . 51 replace_table_token_7_th 52 terminalling and storage segment comparative results of operations for the years ended december 31 , 2020 and 2019 replace_table_token_8_th services revenues .
| ROO | 6,593 |
our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors , including , but not limited to , those set forth under “ risk factors ” under item 1a of part i of this annual report on form 10-k and elsewhere in this annual report on form 10-k. overview we are a specialty pharmaceutical company focused primarily on the development of drugs to treat gi disorders and diseases . we are developing evk-001 , a metoclopramide nasal spray for the relief of symptoms associated with acute and recurrent diabetic gastroparesis in women . diabetic gastroparesis is a gi disorder afflicting millions of sufferers worldwide in which the stomach takes too long to empty its contents resulting in serious digestive system symptoms . metoclopramide is the only product currently approved in the united states to treat gastroparesis , and is currently available only in oral and intravenous forms . evk-001 is a novel formulation of this drug , designed to provide systemic delivery of metoclopramide through intranasal administration . we have evaluated evk-001 in a multicenter , randomized , double-blind , placebo-controlled parallel-group , dose-ranging phase 2b clinical trial in 287 patients with diabetic gastroparesis where evk-001 was observed to be effective in improving the most prevalent and clinically relevant symptoms associated with gastroparesis in women while exhibiting a favorable safety profile . in april 2014 , we commenced a phase 3 clinical trial of evk-001 in female patients with symptoms associated with acute and recurrent diabetic gastroparesis . this phase 3 clinical trial is a multicenter , randomized , double-blind , placebo-controlled , parallel-group study evaluating the efficacy , safety and population pharmacokinetics of evk-001 in adult female subjects with diabetic gastroparesis when dosed four times a day for 28 days . the phase 3 trial is expected to enroll 200 patients at sites across the united states , and as of february 2 , 2015 , we had randomized 74 subjects , and we anticipate fully enrolling this trial in the second half of 2015. we will need to successfully complete this trial before we are able to submit an nda to the fda for evk-001 . on february 2 , 2015 , we disclosed the current recruitment status of the phase 3 trial . while the study is progressing according to plan at many of the clinical trial sites with previous gastroparesis study experience , overall enrollment has been slower than previously anticipated . as of february 2 , 2015 , we had randomized 74 subjects , and we anticipate fully enrolling this trial in the second half of 2015. although the trial sites have been screening significant numbers of subjects , patients with diabetic gastroparesis typically have symptoms that vary in timing and severity , unpredictable gastric emptying delays , and complex medical histories . this combination of factors creates a challenge for enrollment into diabetic gastroparesis trials . we commenced a thorough ecg ( qt ) study in august 2014 and reported positive results in december 2014. data from the thorough ecg ( qt ) study met the pre-specified primary endpoint , demonstrating that evk-001 , at therapeutic and supratherapeutic doses , did not prolong the qt/qtc interval in healthy subjects . fda approval of the nda is required in order for us to commercially market evk-001 in the united states . we are also conducting a companion clinical trial with evk-001 in male patients with symptoms associated with acute and recurrent diabetic gastroparesis to assess the safety and efficacy of evk-001 in men . the male companion trial was initiated in may 2014 and is designed similarly to the phase 3 trial in women . this trial was requested by the fda , but is not required for submission of the evk-001 nda for women , however , we expect to include safety data from this trial in the nda submission . we have no products approved for sale , and we have not generated any revenue from product sales or other arrangements . we have primarily funded our operations through the sale of our convertible preferred stock , borrowings under our loan and security agreements and the sale of shares of our common stock on the nasdaq capital market . we have incurred losses in each year since our inception . our net losses were $ 13.2 million and $ 2.8 million for the years ended december 31 , 2014 and 2013 , respectively . as of december 31 , 2014 and 2013 , we had an accumulated deficit of $ 35.9 million and $ 22.7 million , respectively . substantially all of our operating losses resulted from expenses incurred in connection with advancing evk-001 through development activities and general and administrative costs associated with our operations . we expect to continue to incur significant expenses and increasing operating losses for at least the next several years . we may never become profitable , or if we do , we may not be able to sustain profitability on a recurring basis . as more fully described below , on december 31 , 2014 we borrowed $ 4.5 million from square 1 to increase our cash balance at december 31 , 2014 to approximately $ 14.2 million . in addition , in january 2015 we sold 25,000 shares of our common stock pursuant to the sales agreement with mlv and received net proceeds of approximately $ 163,000 , net of commissions and fees . under the terms of the sales agreement , we may sell up to $ 6.6 million worth of common stock . though we have such capability , we may not be able to raise additional capital on terms acceptable to us , or at all . any failure to raise capital as and when needed could 44 have a material adverse effect on our results of operations , financial condition and our ability to execute on our business plan . story_separator_special_tag total other expense total other expense consists primarily of interest income we earn on interest-bearing accounts and money market funds for cash and cash equivalents , interest expense incurred on our outstanding debt and changes in the fair value of our warrant liability . critical accounting policies and significant judgments and estimates our management 's discussion and analysis of our financial condition and results of operations is based on our financial statements , which we have prepared in accordance with generally accepted accounting principles in the united states , or gaap . the preparation of these 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 materially from these estimates under different assumptions or conditions . while our significant accounting policies are more fully described in note 2 to our 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 . accrued research and development expenses as part of the process of preparing financial statements , we are required to estimate and accrue expenses , the largest of which are research and development expenses . this process involves the following : ● communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost ; ● estimating and accruing expenses in our financial statements as of each balance sheet date based on facts and circumstances known to us at the time ; and ● periodically confirming the accuracy of our estimates with selected service providers and making adjustments , if necessary . 46 examples of estimated research and development expenses that we accrue include : ● fees paid to cros in connection with toxicology studies and clinical studies ; ● fees paid to investigative sites in connection with clinical studies ; ● fees paid to cmos in connection with the production of clinical study materials ; and ● professional service fees for consulting and related services . we base our expense accruals related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and cros that conduct and manage clinical studies on our behalf . the financial terms of these agreements vary from contract to contract and may result in uneven payment flows . payments under some of these contracts depend on factors such as the successful enrollment of patients , site initiation and the completion of clinical study milestones . our service providers invoice us monthly in arrears for services performed . in accruing service fees , we estimate the time period over which services will be performed and the level of effort to be expended in each period . if we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services , our actual expenses could differ materially from our estimates . to date , we have not experienced significant changes in our estimates of accrued research and development expenses after a reporting period . however , due to the nature of estimates , we can not assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical studies and other research activities . stock-based compensation stock-based compensation expense is recorded at the estimated fair value of the award as of the grant date and is recognized as expense on a straight-line basis over the employee 's requisite service period , which is generally the vesting period of the award . stock-based compensation expense is based on awards ultimately expected to vest , and therefore , the recorded expense includes an estimate of future forfeitures . forfeitures are to be estimated at the time of grant and revised , if necessary , in subsequent periods if actual forfeitures differ from those estimates . prior to the ipo , we granted stock options to purchase common stock to employees with exercise prices equal to the value of the underlying stock , as determined by the board of directors on the date the equity award was granted . the board of directors determined the fair value of the underlying common stock by considering a number of factors , including historical and projected financial results , the risks we faced at the time , the preferences of our preferred stockholders and the lack of liquidity of our common stock . subsequent to the ipo , the exercise price of the stock options granted to our employees and members of our board of directors was determined by the closing market price of our stock on the date the stock options were granted . the fair value of each option award is estimated on the date of grant using the black-scholes valuation model using the appropriate risk-free interest rate , expected term and volatility assumptions . the expected life of options was calculated using the simplified method , which calculates the life as the average of the contractual term of the stock option and the vesting period of the option .
| results of operations comparison of years ended december 31 , 2014 and 2013 the following table summarizes the results of our operations for the fiscal years ended december 31 , 2014 and 2013 : replace_table_token_8_th research and development expenses . research and development expenses for the year ended december 31 , 2014 compared to the year ended december 31 , 2013 increased by approximately $ 9.0 million primarily due to research and development activities expanding subsequent to our ipo in september 2013. costs incurred in 2014 include approximately $ 7.1 million related to the ongoing clinical trials for evk-001 , $ 522,000 related to stability testing and preparation for the production of additional evk-001 , the payment of $ 500,000 to questcor for achieving a milestone associated with the acquisition of our technology , and approximately $ 1.9 million for wages , taxes and employee insurance , including $ 410,000 of stock-based compensation expense , as we added clinical personnel subsequent to our ipo . the allocation of time spent by our executive team related to research and development activities in 2014 also increased compared to the time allocated in 2013 when they were primarily preparing for our ipo . for 2013 , research and development costs primarily consisted of approximately $ 417,000 for wages , taxes and employee insurance , $ 342,000 related to the start-up of our phase 3 clinical trial and $ 144,000 related to stability testing of prior manufactured batches of evk-001 . in addition , during the first quarter of 2013 , the 2012 bonus accrual was reversed due to the election by our board of directors to not pay 2012 bonuses in order to conserve cash . included in research and development expenses were costs of approximately $ 255,000 and $ 1,200 for the years ended december 31 , 2014 and 2013 , respectively , for clinical trial services incurred by a related party of one of our officers .
| ROO | 16,108 |
the increase in revenues per buy was driven by the higher percentage of domestic buys , which generate a higher price per buy , as compared to the prior year . cost of revenues for pay-per-view increased by $ 7.2 million , primarily due to increases in production costs , talent expense and advertising expenses related to initiatives designed to increase revenue . the pay-per-view profit contribution margin decreased to 52 % in the current period from 57 % in the prior year . television rights fees increased by $ 4.5 million in the current year as compared to the prior year , primarily due to increases in international markets , partially offset by a decrease in overall domestic revenues . internationally , our television rights fees increased by $ 5.8 million , primarily due to a new agreement with a canadian television distributor , and renewals and contractual increases with other international television distributors . domestically , television rights fees decreased by $ 1.3 million , due primarily to the absence of rights fees for our nxt and wwe superstars programs , which moved to wwe.com in october 2010 and april 2011 , respectively . during the year , we made a strategic decision to withhold several hours of these programs so we could distribute the content on existing and future platforms . this decrease was partially offset by increased sponsorship revenues and contractual rights fee increases charged to our domestic television distributors for our raw and friday night smackdown programs . television rights cost of revenues increased by $ 5.9 million primarily due to increased television sponsorship costs of $ 2.7 million and increased production costs of $ 3.2 million due to increased staffing and three additional televised events in the current year as compared to the prior year . the television rights fee profit contribution margin decreased to 43 % from 45 % in the prior year period . consumer products the following chart provides performance results and key drivers for our consumer products segment ( dollars in millions ) : replace_table_token_8_th licensing revenues increased by $ 2.7 million in the current year as compared to the prior year , driven by the improved performance of our toy and video game categories . our toy category licensing revenues increased by $ 1.1 million driven by mattel 's increased product offerings . our video game category licensing revenues increased by $ 8.0 million , driven by the release of our wwe all stars video game , for which we did not have a corresponding release in the prior year . in addition , during the current year we increased the royalty rate we receive from our video game licensee . offsetting these increases was a $ 4.2 million decline in our novelties and collectibles categories , driven by softness in the international market and the absence of a successful product launch by a licensee that drove collectibles licensing revenues in the prior year . licensing cost of revenues increased by $ 0.8 million as compared to the prior year . the licensing profit contribution margin was 74 % in both the current and prior year . 22 table of content magazine publishing revenues decreased $ 3.3 million in the current year as compared to the prior year , driven by weaker newsstand demand as a result of an overall decline in the magazine publishing industry . net units sold decreased by 24 % , while sell-through rates improved slightly . we published 12 issues of wwe magazine in the current year as compared to 13 issues in the prior year , 10 issues of wwe kids magazine in both the current and prior years and 6 special issues in both the current and prior years . magazine publishing cost of revenues decreased by $ 2.8 million , primarily as a result of a 25 % decrease in production . publishing profit contribution decreased to a profit of $ 0.2 million in the current year from a profit of $ 0.7 million in the prior year . home video revenues decreased $ 1.7 million in the current year as compared to the prior year , driven by a 7 % decrease in units shipped . this decrease was offset by favorable sell-through rates experienced during the current year as compared to the prior year . we released 28 titles in the current period as compared to 29 in the prior year . home video cost of revenues decreased by $ 0.8 million due to decreased duplication costs . home video profit contribution margin was 50 % in both the current and prior years . digital media the following chart provides performance results for our digital media segment ( dollars in millions , except average revenues per order ) : replace_table_token_9_th wwe.com revenues decreased $ 2.4 million in the current year as compared to the prior year , primarily due to a decrease in online advertising of $ 2.9 million . wwe.com cost of revenues increased by $ 0.8 million in the current year , driven by increased expenses related to streaming and sponsorships , in addition to $ 0.3 million less benefit from production tax incentives as compared to the prior year . wwe.com profit contribution margin decreased to 52 % in the current period from 65 % in the prior year . wweshop revenues increased $ 1.6 million in the current year as compared to the prior year , driven by a 13 % increase in the number of orders processed . wweshop cost of revenues increased by $ 1.8 million in the current year , primarily due to increased material costs of $ 0.7 million and increased shipping charges of $ 0.6 million , both driven by the increased revenue and number of orders . wweshop profit contribution margin decreased to 19 % in the current year from 23 % in the prior year , primarily due to increased discounts and promotional offers . story_separator_special_tag as a result , wweshop revenues decreased by 13 % in 2010 as compared to 2009. the decrease in wweshop profit contribution margin was driven by $ 0.6 million of increased postage costs as a result of offering our customers promotional shipping during the holiday season and $ 0.1 million of increased advertising expenses . wwe studios the following chart provides performance results for our wwe studios segment ( dollars in millions ) : replace_table_token_20_th wwe studios released four feature films utilizing third-party distribution partners ( licensed films ) : see no evil , the marine , the condemned , and 12 rounds and two direct-to-dvd films , behind enemy lines : columbia and the marine 2. for these licensed films , we participate in revenues and expenses generated from the distribution of the films through all media on a net basis after the print and advertising and distribution costs incurred by our distribution partners have been recouped and the results are reported to us , typically in periods subsequent to the initial release . we recorded $ 10.8 million of revenue relating to these licensed films in 2010 as compared to $ 7.7 million in 2009. the increase in revenue for our licensed films is primarily driven by $ 3.5 million in revenue from our film , 12 rounds . the licensed films cost of revenues reflects the amortization of production costs for these films . wwe studios changed to a self-distribution model starting in the third quarter of 2010. under this model , we recognize revenues and expenses for our films on a gross basis upon release . during 2010 , we released two feature films under this model , legendary and knucklehead . in 2010 , we recorded $ 8.8 million in revenue and $ 11.5 million in cost of revenue related to these self-distributed films . we record distribution related expenses when incurred and amortize feature film production costs in the same proportion that a film 's revenue for the period relates to our ultimate revenue projections for such film . included in the cost of revenue is $ 5.3 million of amortization of production costs and $ 6.2 million of distribution related expenses . 31 table of content expenses the following chart reflects the amounts of certain significant overhead items ( dollars in millions ) : replace_table_token_21_th the decrease of $ 9.7 million in staff related expenses in 2010 as compared to 2009 is attributable to a $ 4.7 million decrease in accrued management incentive compensation and a $ 1.4 million decrease in employee benefit related costs , primarily as a result of changes to our healthcare administrator , decreased medical claims paid and decreased negotiated rates . in addition , $ 2.2 million in severance related costs related to a restructuring was recorded in 2009. legal , accounting and professional fees in 2010 benefited from a decrease in legal case activity . our bad debt expense in the prior year included a $ 7.4 million charge related to a former distribution partner . 2010 2009 depreciation and amortization $ 11.7 $ 14.4 the decrease in depreciation and amortization expense reflects a $ 1.7 million benefit from the recognition of an infrastructure tax credit received in 2010. this credit was used to reduce the carrying value of assets as of their in service date and consequently the adjustment to depreciation expense reflects the revised amount incurred to date . this credit was received in 2010 but related to assets placed in service in prior years . 2010 2009 investment income $ 2.0 $ 3.1 the decline in investment income in 2010 reflects lower realized gains from investment sales , as higher interest rates in the current year offset lower investment balances . replace_table_token_22_th other expense , net includes realized foreign exchange gains and losses , the revaluation of warrants held in certain licensees and certain non-income related taxes . in 2010 , we recorded realized foreign exchange losses of $ 1.3 million as compared to gains of $ 1.5 million in 2009. this was partially offset by the fluctuation relating to the revaluation of warrants . in 2010 we recorded income of $ 0.6 million relating to the revaluation of warrants as compared to a loss of $ 1.0 million in 2009. replace_table_token_23_th the 2010 effective tax rate was positively impacted by a $ 1.3 million increase in the irc section 199 deduction on qualified production activity income . the increased deduction in the current year was primarily due to the higher allowable deduction percentage as a result of the completion of the irs phase-in period relating to the section 199 deduction . the 2010 period also reflects a $ 1.3 million benefit from recognition of previously unrecognized tax benefits , primarily as a result of the statute of limitations expiring in jurisdictions in which the company had taken uncertain tax positions . these benefits to our effective tax rate were partially offset by increased unrecognized tax benefits for uncertain tax positions . 32 table of content story_separator_special_tag aforementioned remedies occurs . we will continue to assess the carrying value of our ars on each reporting date , based on the facts and circumstances surrounding our liquidity needs and developments in the ars markets . cash flows used in financing activities were $ 49.8 million $ 79.4 million and $ 79.8 million for the years ended december 31 , 2011 , 2010 and 2009 , respectively . the decrease in cash flows from financing activities was due primarily to a reduction in dividend payments . in 2011 , we paid one quarterly cash dividend of $ 0.36 on all class a common shares , and $ 0.24 on all class b common shares , and three quarterly cash dividends of $ 0.12 on all class a and class b common shares for an aggregate amount of $ 47.8 million . in 2010 and 2009 , we paid four quarterly cash dividends of $ 0.36 on
| liquidity and capital resources during the current year , we entered into a three year senior unsecured revolving credit facility with a syndicated group of banks , with jpmorgan chase acting as administrative agent . the revolving credit facility provides for a $ 200.0 million line of credit that expires in september 2014 , unless extended . as of december 31 , 2011 , we had no amounts outstanding under this credit facility . under the terms of the revolving credit facility , we are subject to certain financial covenants and restrictions , including limitations with respect to our indebtedness , liens , mergers and acquisitions , dispositions of assets , investments , capital expenditures , and transactions with affiliates . in addition , the revolving credit facility restricts our ability to pay dividends if a default or event of default has occurred and is continuing thereunder . as of december 31 , 2011 , we are in compliance with the provisions of the revolving credit facility and are not restricted from paying dividends to our stockholders . we have entered into the revolving credit facility during the current year because we believe that there is generally a favorable climate for borrowers for loans of this type in the capital markets . while we do not have specific plans to borrow under this credit facility in the near term , we have announced initiatives for which we may borrow going forward including , the expansion and update of our production facilities in order to support our emerging content and distribution strategy . in addition to the senior unsecured revolving credit facility , the company continually evaluates financing options that are cost effective and that will add to the company 's financial flexibility . to this end , as the company explores additional content distribution and production strategies , the company may seek additional sources of financing . we also regularly assess potential strategic acquisitions . we had cash and short-term investments of $ 155.8 million as of december 31 , 2011 , while our debt balance totaled $ 1.6 million .
| Liquidity | 1,658 |
the boyd 's acquisition is expected to add to our product portfolio , improve our growth potential , broaden our distribution footprint with a deeper penetration on the west coast of the united states , and increase our capacity utilization at our production facilities . the transaction is expected to close in the second quarter of fiscal 2018 , subject to certain 29 closing conditions . see note 26 , subsequent events—boyd 's purchase agreement , of the notes to consolidated financial statements included in part ii , item 8 of this report . dsd restructuring plan as a result of an ongoing operational review of various initiatives within our dsd selling organization , in the third quarter of fiscal 2017 , we commenced the dsd restructuring plan to reorganize our dsd operations in an effort to realign functions into a channel-based selling organization , streamline operations , acquire certain channel specific expertise , and improve selling effectiveness and financial results . see liquidity , capital resources and financial condition—liquidity—dsd restructuring plan , below , and note 4 , restructuring plans—dsd restructuring plan , of the notes to consolidated financial statements included in part ii , item 8 of this report . important factors affecting our results of operations we have identified factors that affect our industry and business which we expect to also play an important role in our future growth and profitability . some of these factors include : demographic and channel trends . our success is dependent upon our ability to develop new products in response to demographic and other trends to better compete in areas such as premium coffee and tea , including expansion of our product portfolio by investing resources in what we believe to be key growth categories , including the launch of our metropolitan single cup coffee , expanded seasonal coffee and specialty beverages , new shelf-stable coffee products , new hot teas , the introduction of collaborative coffee branded products into the retail grocery channel , and the packaging redesign and product portfolio optimization of our un momento ® retail branded product line . fluctuations in green coffee prices . our primary raw material is green coffee , an agricultural commodity traded on the commodities and futures exchange that is subject to price fluctuations . over the past five years , coffee “ c ” market price per pound ranged from approximately $ 1.02 to $ 2.22. the coffee “ c ” market price as of june 30 , 2017 and 2016 was $ 1.26 and $ 1.46 per pound , respectively . the price and availability of green coffee directly impacts our results of operations . for additional details , see risk factors in part i , item 1a of this report . hedging strategy . we are exposed to market risk of losses due to changes in coffee commodity prices . our business model strives to reduce the impact of green coffee price fluctuations on our financial results and to protect and stabilize our margins , principally through customer arrangements and derivative instruments , as further explained in note 7 , derivative instruments , of the notes to consolidated financial statements included in part ii , item 8 of this report . sustainability . with an increasing focus on sustainability across the coffee and foodservice industry , and particularly from the customers we serve , it is important for us to embrace sustainability across our operations , in the quality of our products , as well as , how we treat our coffee growers . we believe that our collective efforts in measuring our social and environmental impact , creating programs for waste , water and energy reduction , promoting partnerships in our supply chain that aim at supply chain stability and food security , and focusing on employee engagement place us in a unique position to help retailers and foodservice operators create differentiated coffee programs that can include sustainable supply chains , direct trade purchasing , training and technical assistance , recycling and composting networks , and packaging material reductions . supply chain efficiencies and competition . in order to compete effectively and capitalize on growth opportunities , we must continue to evaluate and undertake initiatives to reduce costs and streamline our supply chain . we undertook the corporate relocation plan , in part , to pursue improved production efficiency to allow us to provide a more cost-competitive offering of high-quality products . we continue to look for ways to deploy our personnel , systems , assets and infrastructure to create or enhance stockholder value . areas of focus have included corporate staffing and structure , methods of procurement , logistics , inventory management , supporting technology , and real estate assets . market opportunities . we have invested and in the future may invest in acquisitions that we believe will enhance long-term stockholder value and complement or enhance our product , equipment , service and or distribution offerings to existing and new customer bases . for example , in fiscal 2017 , we completed the china 30 mist acquisition to extend our tea product offerings and give us a greater presence in the high-growth premium tea industry , and the west coast coffee acquisition to broaden our reach in the northwestern united states . additionally , on august 18 , 2017 , we entered into an agreement to acquire boyd 's . the boyd 's acquisition is expected to add to our product portfolio , improve our growth potential , broaden our distribution footprint with a deeper penetration on the west coast of the united states , and increase our capacity utilization at our production facilities . the transaction is expected to close in the second quarter of fiscal 2018 , subject to certain closing conditions . additionally , in the first quarter of fiscal 2015 , we acquired substantially all of the assets of rae ' launo corporation ( “ rlc ” ) relating to its dsd and in-room distribution business in the southeastern united states . story_separator_special_tag for additional information on these acquisitions , see note 3 , acquisitions , of the notes to consolidated financial statements included in part ii , item 8 of this report . capacity utilization . we calculate our utilization for all of our coffee roasting facilities on an aggregate basis based on the number of product pounds manufactured during the actual number of production shifts worked during an average week , compared to the number of product pounds that could be manufactured based on the maximum number of production shifts that could be operated during the week ( assuming three shifts per day , five days per week ) , in each case , based on our current product mix . utilization rates for our coffee roasting facilities were approximately 93 % , 90 % and 66 % during the fiscal years ended june 30 , 2017 , 2016 and 2015 , respectively . the utilization rate in fiscal 2017 excludes the new facility where we began roasting coffee in the fourth quarter of fiscal 2017. the utilization rate in fiscal 2016 excludes the torrance facility due to the transition of coffee processing and packaging to our houston and portland production facilities in the fourth quarter of fiscal 2015. story_separator_special_tag style= '' line-height:120 % ; font-size:10pt ; '' > 32 green coffee commodity costs are passed on to the customer , as compared to $ ( 9.7 ) million in price decreases to customers utilizing such arrangements in fiscal 2016. in each of fiscal 2017 and 2016 , a lower percentage of our roast and ground coffee volume was based on a price schedule and a higher percentage was sold to customers under commodity-based pricing arrangements as compared to fiscal 2015. the change in net sales in fiscal 2017 compared to fiscal 2016 was due to the following : ( in millions ) year ended june 30 , 2017 vs. 2016 effect of change in unit sales $ ( 7.4 ) effect of pricing and product mix changes 4.5 total decrease in net sales $ ( 2.9 ) unit sales decreased ( 1.3 ) % in fiscal 2017 as compared to fiscal 2016 , but average unit price increased by 0.9 % resulting in a decrease in net sales of ( 0.5 ) % . the decrease in unit sales was primarily due to a ( 81.3 ) % decrease in unit sales of spice products which accounted for approximately 5 % of our total net sales , due to the sale of our institutional spice assets , partially offset by a 5.3 % increase in unit sales of roast and ground coffee products , which accounted for approximately 63 % of our total net sales . average unit price decreased primarily due to the lower average unit price of roast and ground coffee products primarily driven by the pass-through of lower green coffee commodity hedged costs to our customers . in fiscal 2017 , we processed and sold approximately 95.5 million pounds of green coffee as compared to approximately 90.7 million pounds of green coffee processed and sold in fiscal 2016. there were no new product category introductions in fiscal 2017 or 2016 which had a material impact on our net sales . the following table presents net sales aggregated by product category for the respective periods indicated : replace_table_token_3_th ( 1 ) spice product net sales in fiscal 2016 included $ 3.2 million in sale of inventory to harris at cost upon conclusion of the transition services provided by the company in connection with the sale of spice assets . ( 2 ) includes all beverages other than coffee and tea . cost of goods sold cost of goods sold in fiscal 2017 decreased $ ( 8.1 ) million , or ( 2.4 ) % , to $ 327.8 million , or 60.5 % of net sales , from $ 335.9 million , or 61.7 % of net sales , in fiscal 2016. the decrease in cost of goods sold as a percentage of net sales in fiscal 2017 was primarily due to lower conversion costs from supply chain improvements and lower hedged cost of green coffee as compared to the same period in the prior fiscal year , partially offset by startup costs associated with the production operations in the new facility and higher depreciation expense for the new facility . the average arabica “ c ” market price of green coffee increased 16.3 % in fiscal 2017. inventories were higher at the end of fiscal 2017 due to the commencement of the new facility 's manufacturing operations and incremental inventory from china mist and west coast coffee as compared to lower levels of inventory at 33 the torrance facility at the end of fiscal 2016 due to its anticipated closing . notwithstanding this increase in total inventories at the end of fiscal 2017 compared to fiscal 2016 levels , inventories of manufactured spice products decreased at the end of fiscal 2017 compared to fiscal 2016 levels , primarily due to the liquidation of spice inventories in connection with the sale of the spice assets . as a result , we recorded $ 3.4 million in beneficial effect of the liquidation of lifo inventory quantities in cost of goods sold in fiscal 2017 , which increased income before taxes in fiscal 2017 by $ 3.4 million . in fiscal 2016 , a beneficial effect of liquidation of lifo inventory quantities in the amount of $ 4.2 million was recorded . gross profit gross profit in fiscal 2017 increased $ 5.2 million , or 2.5 % , to $ 213.7 million from $ 208.5 million in fiscal 2016 and gross margin increased to 39.5 % in fiscal 2017 from 38.3 % in fiscal 2016. this increase in gross profit was primarily due to lower conversion costs and lower hedged cost of green coffee partially offset by the decrease in net sales , startup costs associated with the production operations in the new facility and higher depreciation expense for the new facility .
| see non-gaap financial measures in part ii , item 7 of this report for a reconciliation of these non-gaap measures to their corresponding gaap measures . ) 31 fiscal 2017 strategic initiatives in fiscal 2017 , we undertook initiatives to reduce costs , streamline our supply chain , improve the breadth of products and services we provide to our customers , and better position the company to attract new customers . these initiatives included the following : corporate relocation plan . we completed the corporate relocation plan that was initiated in the third quarter of fiscal 2015 by executing on the milestones described above under corporate relocation . we commenced distribution activities at the new facility during the second quarter of fiscal 2017 and initial production activities late in the third quarter of fiscal 2017. we began roasting coffee in the new facility in the fourth quarter of fiscal 2017. the roasting facility in the new facility has increased our capacity to support existing and future customers and accommodate volume growth . we are in the process of obtaining sqf certification under the global food safety initiative for the new facility . acquisition of china mist and west coast coffee . in fiscal 2017 , we completed the china mist acquisition to extend our tea product offerings and give us a greater presence in the high-growth premium tea industry , and the west coast coffee acquisition to broaden our reach in the northwestern united states . dsd restructuring plan . in the third quarter of fiscal 2017 , we commenced the dsd restructuring plan . the strategic decision to undertake the dsd restructuring plan resulted from an ongoing operational review of various initiatives within the dsd selling organization . we began recognizing cost benefits associated with the restructuring in the fourth quarter of fiscal 2017 and we anticipate annualized savings from the restructuring plan beginning in the second quarter of fiscal 2018. we expect to complete the dsd restructuring plan by the end of the second quarter of fiscal 2018. third-party logistics .
| ROO | 14,742 |
this represented a $ 7.3 million , or 19.0 % , increase from 2016 , and net interest income increased $ 2.8 million , or 8.0 % , for 2016 when compared to 2015. the increase in net interest income when comparing 2017 to 2016 was primarily the result of higher average balances on loans and lower rates paid on time deposits . although the yields on loans declined compared to 2016 , the funding of loan growth with lower yielding assets , coupled with higher yielding investment securities resulted in a higher overall yield on earning assets . the increase when comparing 2016 to 2015 was due to significant loan growth , which was funded by lower yielding assets and lower cost liabilities . when comparing 2017 to 2016 , interest income increased $ 7.2 million while interest expense decreased $ 130 thousand . when comparing 2016 to 2015 , interest income increased $ 1.9 million while interest expense decreased $ 943 thousand . our net interest margin ( i.e . , tax-equivalent net interest income divided by average earning assets ) represents the net yield on earning assets minus the cost of liabilities . the net interest margin is managed through loan and deposit pricing and asset/liability strategies . the net interest margin was 3.76 % for 2017 , 3.56 % for 2016 , and 3.43 % for 2015. the net interest margin increased when comparing 2017 to 2016 due to the significant increase in the average balance of loans , higher yields on investment securities and a decrease in rates paid on interest bearing deposits . the net interest margin increased when comparing 2016 to 2015 due to an increase in the average balance of loans and lower rates paid on interest-bearing deposits . the net interest spread , which is the difference between the average yield on earning assets and the rate paid for interest-bearing liabilities , was 3.67 % for 2017 , 3.46 % for 2016 and 3.31 % for 2015 . 33 the following table sets forth the major components of net interest income , on a tax-equivalent basis , for the years ended december 31 , 2017 , 2016 , and 2015. replace_table_token_12_th ( 1 ) all amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 35 % , exclusive of the alternative minimum tax rate and nondeductible interest expense . the tax-equivalent adjustment amounts used in the above table to compute yields aggregated $ 242 thousand in 2017 , $ 198 thousand in 2016 and $ 80 thousand in 2015 . ( 2 ) average loan balances include nonaccrual loans . ( 3 ) interest income on loans includes amortized loan fees , net of costs , and all are included in the yield calculations . on a tax-equivalent basis , total interest income was $ 48.0 million for 2017 compared to $ 40.9 million for 2016. the increase in interest income for 2017 compared to 2016 was primarily due to the increase in the average balance of loans coupled with a higher yield on taxable investment securities . interest income on taxable investment securities increased $ 652 thousand or 20.4 % in 2017 compared to 2016. in addition , interest-bearing deposits increased due to three fed fund rate hikes of 25bps during 2017. for 2017 compared to 2016 , average loans increased $ 158.0 million and the yield earned on loans decreased 6 basis points . the increased volume of loans and the higher yield on loans purchased in the branch acquisition during the second quarter of 2017 , outweighed the decline in the yield on originated loans resulting in an increase in tax-equivalent interest income of $ 6.5 million . also impacting interest income is the accretion of acquisition accounting adjustments from the branch acquisition for loans of $ 420 thousand which is accounted for using a level yield method . in addition , the accretion on certificates of deposits acquired from the branch purchase , decreased interest expense by $ 86 thousand . excluding average nonaccrual loans , the yield on loans would have been 4.49 % , 4.59 % and 4.79 % for 2017 , 2016 , and 2015 , respectively . 34 on a tax-equivalent basis , total interest income was $ 40.9 million for 2016 compared to $ 39.0 million for 2015. the increase in interest income for 2016 compared to 2015 was primarily due to the increase in the average balance of loans coupled with an increase in the fed funds rate at the end of 2016 of 25bps . interest income on taxable securities decreased $ 407 thousand or 11.3 % in 2016 compared to 2015 due to a decrease in the average balance of $ 35.9 million which was used to fund loan growth . for 2016 compared to 2015 , average loans increased $ 77.4 million and the yield earned on loans decreased 19 basis points . the increased volume of loans outweighed the decline in the yield resulting in an increase in interest income of $ 2.1 million . as a percentage of total average earning assets , loans , investment securities , and interest-bearing deposits were 80.9 % , 16.6 % , and 2.5 % , respectively , for 2017 which reflected an increase in higher-yielding earning assets when compared to 2016. the comparable percentages for 2016 were 76.4 % , 18.2 % , and 5.4 % , respectively , and for 2015 were 72.2 % , 22.4 % , and 5.4 % , respectively . when comparing 2017 to 2016 , the overall increase in average balances of earning assets produced $ 7.1 million more in interest income and the decrease in yields on loans were offset by higher yields on taxable investment securities and interest-bearing deposits which produced $ 129 thousand more in interest income , as seen in the rate/volume variance analysis below . story_separator_special_tag the decrease in average investment securities of $ 36.1 million in 2016 from 2015 was due to funding new loan growth during 2016. investment securities available for sale were $ 197.0 million at the end of 2017 and $ 163.8 million at the end of 2016. investment activity for 2017 included purchases of $ 53.5 million in mortgage-backed securities and $ 31.0 million in u.s. government agencies , while investment activity for 2016 included purchases of $ 9.1 million in mortgage-backed securities and $ 9.0 million in u.s. government agencies . at year-end 2017 , 22.3 % of the securities in the portfolio were u.s. government agencies and 74.3 % of the securities were mortgage-backed securities , compared to 20.9 % and 78.7 % , respectively , at year-end 2016. as seen in the table below , 38 % of the available-for-sale portfolio will mature in over one through five years and 57 % will mature in over ten years based on contractual maturities . the comparable amounts for 2016 were 10 % and 73 % , respectively . our investments in mortgage-backed securities are issued or guaranteed by u.s. government agencies or government-sponsored agencies . investment securities held to maturity totaled $ 6.2 million at december 31 , 2017. the comparable amount was $ 6.8 million at december 31 , 2016. the following table sets forth the maturities and weighted average yields of the bond investment portfolio as of december 31 , 2017. replace_table_token_17_th 1 yields have been adjusted to reflect a tax equivalent basis using the statutory federal tax rate of 35 % . loans the loan portfolio is the primary source of our income . loans totaled $ 1.1 billion at december 31 , 2017 , an increase of $ 222.0 million , or 25.5 % , from 2016. loans significantly increased in 2017 when compared to 2016 due to organic loan growth of $ 113.9 million , or 13.1 % and acquired loans from the branch acquisition which contributed $ 108.1 million , or 12.4 % at december 31 , 2017. most of our loans are secured by real estate and are classified as construction , residential or commercial real estate loans . the increase in loans was comprised of increases in commercial real estate loans of $ 82.2 million , or 21.5 % , residential real estate loans of $ 73.4 million , or 22.5 % , construction loans of $ 41.7 million , or 49.7 % and commercial loans , which include financial and agricultural loans , of $ 24.8 million , or 34.3 % . consumer loans , which consist of a small percentage of the overall loan portfolio , decreased $ 232 thousand , or 3.5 % , at december 31 , 2017 compared to december 31 , 2016 . 38 at december 31 , 2017 , the real estate loan portfolio was comprised of 11.5 % construction , 36.5 % residential real estate and 42.5 % commercial real estate . that compares to 9.6 % , 37.4 % and 43.9 % , respectively , at december 31 , 2016. commercial and consumer loans were 8.9 % and 0.6 % , respectively , of the portfolio at december 31 , 2017 and 8.3 % and 0.8 % , respectively , at december 31 , 2016. at december 31 , 2017 , 74.2 % of the loan portfolio had fixed interest rates and 25.8 % had adjustable interest rates , compared to 74.8 % and 25.2 % , respectively , at december 31 , 2016. see the discussion below under the caption “ asset quality - provision for credit losses and risk management ” and note 4 , “ loans and allowance for credit losses ” , in the notes to consolidated financial statements for additional information . at december 31 , 2017 and 2016 , the company did not have any loans held for sale . we do not engage in foreign or subprime lending activities . the table below sets forth trends in the composition of the loan portfolio over the past five years ( including net deferred loan fees/costs ) . replace_table_token_18_th the table below sets forth the maturities and interest rate sensitivity of the loan portfolio at december 31 , 2017. replace_table_token_19_th liabilities deposits we use deposits primarily to fund loans and to purchase investment securities . total deposits increased from $ 997.5 million at december 31 , 2016 to $ 1.2 billion at december 31 , 2017. the increase was the direct result of the deposits acquired in the branch purchase which had a balance of $ 187.0 million at december 31 , 2017. excluding the acquisition , deposits increased $ 18.3 million . these increases were reflected in noninterest-bearing deposits of $ 66.7 million as well as an increase in interest-bearing transaction accounts of $ 136.0 million and an increase in certificates of deposit and other time deposits of $ 2.6 million . average interest-bearing deposits increased $ 90.7 million , or 19.7 % , in 2017 , compared to an increase of $ 34.8 million , or 8.2 % in 2016. average certificates of deposit and other time deposits decreased $ 4.5 million , or 1.6 % in 2017 , compared to a decrease of $ 37.3 million , or 11.9 % in 2016. average noninterest-bearing deposits increased $ 54.9 million , or 22.8 % , in 2017 , compared to an increase of $ 30.2 million , or 14.3 % in 2016. deposits provided funding for approximately 91.9 % , 90.5 % and 91.5 % of average earning assets for 2017 , 2016 and 2015 , respectively . average deposits increased for 2016 primarily in noninterest-bearing deposits and interest-bearing transaction accounts which increased $ 65.0 million , or 10.2 % , partially offset by decreases in certificates of deposit and other time deposits of $ 37.3 million , or 11.9 % . the increase in noninterest-bearing and interest-bearing transaction accounts reflected continued growth in our
| the basel iii capital rules were effective for the company on january 1 , 2015 and will be fully phased in on january 1 , 2019. when fully phased in on january 1 , 2019 , the basel iii capital rules will require the company to maintain ( i ) a minimum ratio of cet1 to risk-weighted assets of at least 4.5 % , plus a 2.5 % “ capital conservation buffer , ” ( ii ) a minimum ratio of tier 1 capital to risk-weighted assets of at least 6.0 % , plus the capital conservation buffer , ( iii ) a minimum ratio of total capital to risk-weighted assets of at least 8.0 % , plus the capital conservation buffer and ( iv ) a minimum leverage ratio of 4 % , calculated as the ratio of tier 1 capital to average assets . the basel iii capital rules eliminate the inclusion of certain instruments , such as trust preferred securities , from tier 1 capital . instruments issued prior to may 19 , 2010 will be grandfathered for companies with consolidated assets of $ 15 billion or less . the capital conservation buffer is designed to absorb losses during periods of economic stress . banking institutions with a ratio of cet1 to risk-weighted assets above the minimum but below the conservation buffer will face constraints on dividends , equity repurchases and compensation based on the amount of the shortfall .
| Liquidity | 170 |
mir is the leading maker of collaborative autonomous mobile robots for industrial applications . the total purchase price was approximately $ 198 million , which included cash paid of approximately $ 145 million and $ 53 million in fair value of contingent consideration payable upon achievement of certain thresholds and targets for revenue and earnings before interest and taxes through 2020. at december 31 , 2018 , the maximum amount of contingent consideration that could be paid is $ 115 million . contingent consideration for 2018 was $ 31.0 million and is expected to be paid in march 2019. universal robots , mir and energid are included in our industrial automation segment . we believe our recent acquisitions have enhanced our opportunities for growth . we intend to continue to invest in our business , grow market share in our markets and expand further our addressable markets while tightly managing our costs . critical accounting policies and estimates we have identified the policies discussed below as critical to understanding our business and our results of operations and financial condition . the impact and any associated risks related to these policies on our business operations is discussed throughout management 's discussion and analysis of financial condition and results of operations where such policies affect our reported and expected financial results . revenue from contracts with customers we adopted accounting standards codification ( asc ) 606 , revenue from contracts with customers on january 1 , 2018 using the modified retrospective method for all contracts not completed as of the date of adoption . the reported results for 2018 reflect the application of asc 606 while the reported results for 2017 were prepared under the guidance of asc 605 , revenue recognition , which is also referred to herein as legacy gaap or the previous guidance. we recorded a net increase to retained earnings of $ 12.7 million as of january 1 , 2018 due to the cumulative impact of adopting asc 606. the adoption of asc 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of teradyne 's hardware and services and will provide financial statement readers with enhanced disclosures . in accordance with asc 606 , revenue is recognized when or as a customer obtains control of promised goods or services . the amount of revenue recognized reflects the consideration to which teradyne expects to be entitled to receive in exchange for fulfillment of the performance obligation . teradyne 's primary source of revenue will continue to be from the sale of systems , instruments , robots , and the delivery of services . 24 in accordance with asc 606 , we recognize revenues , when or as control is transferred to a customer . our determination of revenue is dependent upon a five step process outlined below . step 1 : identify the contract with the customer we account for a contract with a customer when there is written approval , the contract is committed , the rights of the parties , including payment terms , are identified , the contract has commercial substance and consideration is probable of collection . step 2 : identify the performance obligations in the contract we periodically enter into contracts with customers in which a customer may purchase a combination of goods and services , such as products with extended warranty obligations . we determine performance obligations by assessing whether the products or services are distinct from the other elements of the contract . in order to be distinct , the product or service must perform either on its own or with readily available resources and must be separate within the context of the contract . step 3 : determine the transaction price we consider the amount stated on the face of the purchase order to be the transaction price . we do not have variable consideration which could impact the stated purchase price agreed to by us and the customer . step 4 : allocate the transaction price to the performance obligations in the contract transaction price is allocated to each individual performance obligation based on the standalone selling price of that performance obligation . we use standalone transactions when available to value each performance obligation . if standalone transactions are not available , we will estimate the standalone selling price through market assessments or cost plus a reasonable margin analysis . any discounts from standalone selling price are spread proportionally to each performance obligation . step 5 : recognize revenue when ( or as ) the entity satisfies a performance obligation in order to determine the appropriate timing for revenue recognition , we first determine if the transaction meets any of three criteria for over time recognition . if the transaction meets the criteria for over time recognition , we recognize revenue as the good or service is delivered . we use input variables such as hours or months utilized or costs incurred to determine the amount of revenue to recognize in a given period . input variables are used as they best align consumption with benefit to the customer . for transactions that do not meet the criteria for over time recognition , we will recognize revenue at a point in time based on an assessment of the five criteria for transfer of control . we have concluded that revenue should be recognized when shipped or delivered based on contractual terms . typically acceptance of our products and services is a formality as we deliver similar systems , instruments and robots to standard specifications . in cases where acceptance is not deemed a formality , we will defer revenue recognition until customer acceptance . translation of non-u.s. currencies the functional currency for all non-u.s. subsidiaries is the u.s. dollar , except for the industrial automation segment for which the local currency is its functional currency . story_separator_special_tag as of december 31 , 2018 , we had inventory related reserves for amounts which had been written-down or written-off totaling $ 100.8 million . we have no pre-determined timeline to scrap the remaining inventory . 31 selling and administrative selling and administrative expenses were as follows : replace_table_token_11_th the increase of $ 41.8 million in selling and administrative expenses from 2017 to 2018 was due primarily to higher spending in industrial automation related to higher sales and marketing spending in universal robots and due to the acquisitions of mir and energid in 2018 , partially offset by lower variable compensation across all segments . the increase of $ 32.4 million in selling and administrative expenses from 2016 to 2017 was due primarily to higher variable compensation across all segments and higher spending in universal robots , partially offset by lower spending in wireless test . engineering and development engineering and development expenses were as follows : replace_table_token_12_th the decrease of $ 5.8 million in engineering and development expenses from 2017 to 2018 was due primarily to lower spending in system test and semiconductor test , and lower variable compensation , partially offset by higher spending in industrial automation . the increase of $ 15.1 million in engineering and development expenses from 2016 to 2017 was due primarily to higher variable compensation across all segments and higher spending in system test and industrial automation , partially offset by lower spending in wireless test and semiconductor test . acquired intangible assets amortization acquired intangible assets amortization expense was as follows : replace_table_token_13_th acquired intangible assets amortization expense increased from 2017 to 2018 primarily due to industrial automation segment acquisitions of mir and energid in 2018. acquired intangible assets amortization expense decreased from 2016 to 2017 primarily in the wireless test segment due to the impairment of acquired intangible assets in the second quarter of 2016 and in the industrial automation segment due to intangible assets that became fully amortized in june 2017 . 32 goodwill impairment we assess goodwill for impairment at least annually , in the fourth quarter , as of december 31 , or on an interim basis between annual tests when events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value . in the second quarter of 2016 , the wireless test reporting unit ( which is our wireless test operating and reportable segment ) reduced headcount by 11 % as a result of a sharp decline in projected demand attributable to an estimated smaller future wireless test market . the decrease in projected demand was due to lower forecasted buying from our largest wireless test segment customer ( which had contributed between 51 % and 73 % of annual wireless test sales since the litepoint acquisition in 2011 through 2015 ) as a result of the customer 's numerous operational efficiencies ; slower smartphone growth rates ; and a slowdown of new wireless technology adoption . we considered the headcount reduction and sharp decline in projected demand to be a triggering event for an interim goodwill impairment test . following the interim goodwill impairment test , we recorded a goodwill impairment charge of $ 254.9 million in the second quarter of 2016. the fourth quarter 2018 , 2017 and 2016 goodwill impairment tests did not identify any goodwill impairments . acquired intangible assets impairment we review long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate . if undiscounted cash flows for the asset are less than the carrying amount , the asset is written down to its estimated fair value based on a discounted cash flow analysis . the cash flow estimates used to determine the impairment contain management 's best estimates using appropriate assumptions and projections at that time . as a result of the wireless test segment goodwill impairment charge in the second quarter of 2016 , we performed an impairment test of the wireless test segment 's intangible and long-lived assets based on a comparison of the estimated undiscounted cash flows to the recorded value of the assets . as a result of the analysis , we recorded an $ 83.3 million impairment charge in the second quarter of 2016 in acquired intangible assets impairment on the statements of operations . restructuring and other during the year ended december 31 , 2018 , we recorded an expense of $ 17.7 million for the increase in the fair value of the mir contingent consideration liability , $ 8.7 million of severance charges related to headcount reductions primarily in semiconductor test , and $ 4.5 million for acquisition related expenses and compensation , partially offset by a gain of $ 16.7 million from the decrease in the fair value of the universal robots contingent consideration liability . during the year ended december 31 , 2017 , we recorded an expense of $ 7.8 million for the increase in the fair value of the universal robots contingent consideration liability , $ 3.8 million of severance charges related to headcount reductions primarily in semiconductor test , $ 1.1 million for an impairment of fixed assets in semiconductor test , $ 1.0 million for a lease impairment of a wireless test facility in sunnyvale , ca , which was terminated in september 2017 , and $ 0.8 million of expenses related to an earthquake in kumamoto , japan , partially offset by $ 5.1 million of property insurance recovery related to the japan earthquake . during the year ended december 31 , 2016 , we recorded an expense of $ 15.9 million for the increase in the fair value of the contingent consideration liability , of which $ 15.3 million was related to universal robots and $ 0.6 million was related to avionics interface technologies , llc
| liquidity and capital resources our cash , cash equivalents and marketable securities balance decreased by $ 699 million from 2017 to 2018 to $ 1,205 million . operating activities during 2018 provided cash of $ 476.9 million . changes in operating assets and liabilities used cash of $ 163.5 million . this was due to a $ 105.8 million increase in operating assets and a $ 57.7 million decrease in operating liabilities . the increase in operating assets was due to a $ 58.4 million increase in prepayments and other assets due primarily to payments to our contract manufacturers , a $ 29.5 million increase in inventories , and a $ 17.9 million increase in accounts receivable due to higher sales in the fourth quarter of 2018 comparing to 2017. the decrease in operating liabilities was due to a $ 80.4 million decrease in income taxes , primarily related to a decrease in our transitional tax liability associated with our accumulated foreign earnings under the u.s. tax reform act , a $ 5.5 million decrease in other accrued liabilities and $ 4.3 million of retirement plans contributions , partially offset by a $ 13.4 million increase in customer advance payments and deferred revenue , a $ 12.9 million increase in accounts payable , and a $ 6.3 million increase in accrued employee compensation due primarily to variable compensation . investing activities during 2018 provided cash of $ 923.0 million , due to $ 1,270.4 million and $ 846.1 million in proceeds from maturities and sales of marketable securities , respectively , proceeds from a government subsidy of $ 7.9 million for property , plant and equipment , and proceeds from life insurance of $ 1.1 million related to the cash surrender value from the cancellation of a teradyne owned life insurance policy , partially offset by $ 918.7 million used for purchase of marketable securities , $ 169.5 million used for acquisition of mir and energid , and $ 114.4 million used for purchases of property , plant and equipment . 36 financing activities during 2018 used cash of $ 903.4 million , due to $ 823.5
| Liquidity | 1,344 |
in one of the previously completed phase 3 trials , study 06 , we prospectively tested and confirmed that patients whose plasma levels rose above a predetermined threshold statistically separated from both those patients whose plasma levels were below the threshold and those patients who received placebo ; this threshold was established from data produced in earlier studies . as expected , the group of patients who took 1200 milligrams ( mg ) of mifepristone in study 06 developed higher drug plasma levels than did the groups of patients who received lower doses . further , there was no discernable difference in the incidence of adverse events between patients who received placebo in study 06 and those who received 300 mg , 600 mg or 1200 mg of mifepristone in that study . in august 2011 , we published our analysis of these data in the journal of clinical psychopharmacology . based on this information , we are testing a mifepristone dose of 1200 mg once per day for seven days in study 14. in addition , we are utilizing a third party centralized rating service to independently evaluate the patients for entry into the study as well as to evaluate their level of response throughout their participation in the study . we believe the centralization of this process will improve the consistency of rating across clinical trial sites and reduce the background statistical noise that was observed in earlier studies and is endemic to psychopharmacologic studies . we believe that this change in dose , as well as the other modifications to the protocol , should allow us to demonstrate the efficacy of mifepristone in the treatment of the psychotic symptoms of psychotic depression . in mid-2009 , to conserve financial resources , we reduced the number of clinical sites in this study to eight and extended the timeline for its completion . antipsychotic-induced weight gain mitigation . in 2005 , we announced the results of studies in rats that demonstrated that mifepristone both reversed the weight gain associated with the ongoing use of olanzapine and mitigated the weight gain associated with the initiation of treatment with olanzapine ( the active ingredient in zyprexa ) . the results from this study were published in the journal brain behavioral research in early 2006. this study was paid for by eli lilly and company ( eli lilly ) . during 2007 , we announced positive results from our clinical proof-of-concept study in lean healthy male volunteers evaluating the ability of mifepristone to mitigate weight gain associated with the use of zyprexa . the results showed a statistically significant reduction in weight gain in those subjects who took zyprexa plus mifepristone compared to those who took zyprexa plus placebo . also , the addition of mifepristone to treatment with zyprexa had a beneficial impact on secondary metabolic measures such as fasting insulin , triglycerides and abdominal fat , as indicated by waist circumference . eli lilly provided zyprexa and financial support for this study , the results of which were published in the journal advances in therapy in 2009. in january 2009 , we announced positive results from a similar proof-of-concept study evaluating the ability of mifepristone to mitigate weight gain associated with the use of johnson & johnson 's risperdal . this study confirmed and extended the earlier results seen with mifepristone and zyprexa , demonstrating a statistically significant reduction in weight gain and in the secondary metabolic endpoints of fasting insulin , triglycerides and abdominal fat , as indicated by waist circumference . the results from the study of mifepristone and risperdal were presented at several scientific conferences , including the american diabetes association meeting in june 2009 , and were published in the journal obesity in 2010 . 46 the combination of zyprexa or risperdal and mifepristone is not approved for any indication . the purpose of these studies was to explore the hypothesis that gr-ii antagonists , such as mifepristone and our next generation of selective gr-ii antagonists , would mitigate weight gain associated with antipsychotic medications . the group of medications known as second generation antipsychotic medication , including zyprexa , risperdal , clozaril and seroquel , are widely used to treat schizophrenia and bipolar disorder . all medications in this group are associated with treatment-emergent weight gain of varying degrees and carry a warning in their labels relating to treatment-emergent hyperglycemia and diabetes mellitus . selective gr-ii receptor antagonists . in 2003 , we initiated a discovery research program to identify and patent selective gr-ii antagonists with the intent of developing a pipeline of products for proprietary use . three distinct series of gr-ii antagonists were identified . these compounds , like our lead product candidate mifepristone , potently block the cortisol receptor ( gr-ii ) but , unlike mifepristone , they do not appear to block the pr ( progesterone ) , er ( estrogen ) , ar ( androgen ) or gr-i ( mineralocorticoid ) receptors . both the united states patent & trademark office ( uspto ) and the european patent office ( epo ) have issued to us composition of matter patents on all of the three series . a fourth composition of matter patent application is pending . several of our new compounds have demonstrated positive results in animal models for the prevention and reversal of anti-psychotic-induced weight gain . one of them , cort 108297 , is in phase 1b/2a clinical trial . see part i , item 1 , business next generation selective gr-ii antagonists for the prevention and reversal of anti-psychotic-induced weight gain . we have identified other selective gr-ii antagonists from our proprietary series that we believe may have utility as therapeutic agents in a variety of diseases . our intent is to continue our discovery research program with the goal of identifying new selective gr-ii antagonists and to perform manufacturing and pre-clinical development on one or more of these compounds and to submit inds with respect to the most promising of them , as we deem appropriate . story_separator_special_tag at the american diabetes association conference in june 2009 , there was also a presentation of preclinical data from another study of cort 108297 conducted at stanford university . this study demonstrated that cort 108297 suppresses body weight gain and improves insulin sensitivity in healthy mice fed a 60 % fat diet and high sucrose liquid . the results of these preclinical data were published in april 2011 in the journal nutrition and metabolism . the manufacturing and preclinical development of cort 108297 began late in 2008 and resulted in the submission of an ind to the fda in december 2009 for the prevention of weight gain induced by antipsychotic medication . phase 1b/2a studies of this drug are in progress . in addition , we are continuing research and pre-clinical efforts to identify additional selective gr-ii antagonists for clinical study . general our activities to date have included : product development , including designing , funding and overseeing clinical trials and conducting non-clinical activities such as toxicological testing ; discovery research ; regulatory affairs ; intellectual property prosecution and expansion ; and preparations for the commercialization of our lead product candidate . historically , we have financed our operations and internal growth primarily through private placements of our preferred and common stock and the public sale of common stock rather than through collaborative or partnership agreements . therefore , we have no research funding or collaborative payments payable to us . 47 our primary activities since incorporation have been raising capital , performing business and financial planning , establishing our offices , recruiting personnel , conducting research and development , overseeing clinical trials , and preparing for the commercialization of our product , korlym . accordingly , we are considered to be in the development stage . as of december 31 , 2011 , we had an accumulated deficit of $ 208.6 million . our historical operating losses have resulted principally from our research and development activities , including clinical trial activities for mifepristone and cort 108297 , discovery research , non-clinical activities such as toxicology and carcinogenicity studies , manufacturing process development and regulatory activities , as well as general and administrative expenses , including preparations for the commercial launch of korlym . we expect to continue to incur net losses over at least the next few years as we continue our mifepristone and other clinical development programs , apply for regulatory approvals , continue discovery and initiate development of other selective gr-ii antagonists for various indications , acquire and /or develop treatments in other therapeutic areas , establish sales and marketing capabilities and expand our operations . our business is subject to significant risks , including the risks inherent in our research and development efforts , the results of our mifepristone and other clinical trials , uncertainties associated with securing financing , uncertainties associated with obtaining and enforcing patents , our investment in manufacturing set-up , the lengthy and expensive regulatory approval process and competition from other products . our ability to successfully generate revenues in the foreseeable future is dependent upon our ability , alone or with others , to finance our operations and develop , obtain regulatory approval for , manufacture and market our lead product . story_separator_special_tag > replace_table_token_4_th we expect that research and development expenditures will decrease during 2012 as compared to 2011 as increases in costs associated with the continuation of our phase 3 study of mifepristone for the treatment of psychotic depression , and the continued development of our other proprietary selective gr-ii antagonists will be more than offset by decreases in the costs related to the completion of our phase 3 study in cushing 's syndrome . research and development expenses in 2012 and future years will be largely dependent on the availability of additional funds to finance clinical development plans . see also , liquidity and capital resources . in addition , as a result of the receipt from the fda of marketing approval of korlym in february 2012 ( discussed in overview above , ) research and development expenses for 2012 will also include compensation expense related to the award by the board of directors of bonuses to employees working in these functions of approximately $ 473,000 , including payroll taxes . many factors can affect the cost and timing of our trials including inconclusive results requiring additional clinical trials , slow patient enrollment , adverse side effects in study patients , insufficient supplies for our clinical trials and real or perceived lack of effectiveness or safety of the drug in our trials . the cost and timing of development of our selective gr-ii antagonists will be dependent on our success in the effort and any difficulties that may be encountered . in addition , the development of all of our product candidates will be subject to extensive governmental regulation . these factors make it difficult for us to predict the timing and costs of the further development and approval of our product candidates . general and administrative expenses general and administrative expenses consist primarily of the costs of administrative personnel and related facility costs along with legal , accounting and other professional fees and the costs of executing on our commercial plans related to korlym , including conducting market research and engaging third-party vendors to provide market analytics and to support distribution and other logistical needs related to our commercialization of korlym . for the year ended december 31 , 2011 , general and administrative expenses increased 33 % to $ 11.3 million from $ 8.5 million for the year ended december 31 , 2010. during 2010 , we had recorded an aggregate amount of $ 1.3 million related to bonuses awarded to our officers and employees working in general and administrative functions in recognition of significant company accomplishments during 2010. we did not award bonuses for 2011 performance to any officer or employee in these functions .
| research and development expenses increased 11 % to approximately $ 21.0 million for the year ended december 31 , 2011 from approximately $ 18.9 million for the comparable period in 2010. for the year ended december 31 , 2011 as compared to the corresponding period in 2010 , there were net increases of approximately $ 1.8 million in consultancy costs which included the following : a ) approximately $ 588,000 related to the development of the risk evaluation and mitigation system ( rems ) that was included in the korlym nda , b ) approximately $ 834,000 related to the preparation , submission and prosecution of the nda , c ) . approximately $ 114,000 related to the development of a medical safety program , d ) $ 187,000 related to manufacturing and quality control activities to prepare for commercialization and e ) approximately $ 192,000 in non-cash stock-based compensation costs related to a performance-based award to a consultant that vested in june 2011 upon the filing of our nda for korlym by the fda . these increases were partially offset by the decrease in consulting fees in other clinical activities of approximately $ 78,000. for the year ended december 31 , 2011 , as compared to the corresponding period in 2010 , there was also an increase of approximately $ 300,000 related to attendance of seminars in support of our cushing 's syndrome program . 48 korlym manufacturing costs increased approximately $ 4.2 million during the year ended december 31 , 2011 , as compared to the corresponding period in 2010 , due primarily to the acquisition of active pharmaceutical ingredient for korlym and the initiation of manufacturing development work at a potential back-up site for the manufacture of korlym that were only partially offset by a decrease in manufacturing activities related to our proprietary , selective new gr-ii antagonists . there were net decreases in clinical trial costs of approximately $ 4.3 million during the year ended december 31 , 2011 , as compared to the corresponding period of 2010. clinical trial cost decreases included ( a ) approximately $ 2.8 million related to drug-drug interaction and other nda-supportive studies with korlym that were substantially completed during 2010 , ( b ) approximately $ 727,000 related to the clinical trials with korlym for the treatment of cushing 's syndrome due to
| ROO | 10,334 |
management fees management fees declined by $ 947,000 million as we internalized certain services previously provided by cellectis including investor relations , information technology , human resources , legal , and communications . interest , net interest , net is the result of interest income resulting from investments of cash and cash equivalents , partially offset by interest expense on our financing lease obligations . it is also driven by balances , yields , and timing of our follow-on offering in 2018 and financing activities . interest , net decreased by $ 154,000 driven by lower yields on investments , less cash to invest , and higher financing lease obligation balances . net loss net loss increased by $ 11.7 million driven by $ 5.2 million of additional personnel costs , $ 4.9 million of higher non-cash stock compensation expenses and a $ 2.2 million negative change in gross margins following the launch of our soybean products , reflecting the early stage of commercialization of our business . adjusted earnings before interest , taxes , depreciation and amortization ( ebitda ) adjusted ebitda , a non-gaap measure , decreased by $ 11.0 million driven by the changes in r & d , s & sc and g & a expenses , and the increases in negative gross margins described above . see below under the heading “ use of non-gaap financial information ” for a discussion of adjusted ebitda and a reconciliation of such measure to net loss the most comparable measure calculated under united states gaap . 38 results of operations for year ended december 31 , 201 8 compared to the year ended december 31 , 2017 replace_table_token_3_th revenue in 2017 , we made a strategic decision to focus on in-house development of product candidates and to reduce the amount of subcontracted r & d that we were performing for third parties . as a result of the termination of certain agreements , all remaining deferred revenue was recognized in 2017 , thus driving a decline in 2018 as no new material agreements were entered . research and development expense r & d expenses decreased $ 1.2 million driven by a $ 5.4 million decline in non-cash stock compensation expenses , partially offset by $ 3.3 million higher grain costs expensed as r & d and $ 1.4 million of additional personnel costs . selling and supply chain expense s & sc expenses increased $ 1.1 million driven by $ 544,000 of additional personnel costs and $ 225,000 incremental allocated facilities and information technology expenses . general and administrative expense g & a expenses increased $ 1.8 million driven by additional expenses of $ 1.3 million for professional services , $ 1.0 million for personnel , and $ 700,000 for section 16 officer transitions , partially offset by a $ 2.1 million decline in non-cash stock compensation expenses . management fees management fees increased by $ 317,000 as a result of an increase in management fees charged by cellectis . interest , net interest , net is the result of interest income resulting from investments of cash and cash equivalents , partially offset by interest expense on our financing lease obligations . it is also driven by balances , yields , and timing of our initial public offering and follow-on offering and financing activities . interest , net decreased by $ 265,000 driven by higher yields on investments and a larger cash balance to invest . net loss net loss increased by $ 1.9 million driven by additional expenses of $ 3.0 million for professional services , $ 2.9 million for personnel , and $ 2.8 million of grain costs expensed as r & d , partially offset by $ 7.7 million of higher non-cash stock compensation expenses . 39 adjusted ebitda adjusted ebitda , a non-gaap measure , decreased by $ 5.5 million driven by the increases in r & d , s & sc and g & a expenses described above . see below under the heading “ use of non-gaap financial information ” for a discussion of adjusted ebitda and a reconciliation of such measure to net loss , the most comparable measure calculated under united states gaap . liquidity and capital resources liquidity on july 25 , 2017 , we completed our ipo of common stock . in the aggregate , we received net proceeds from the ipo of $ 58.0 million . on may 22 , 2018 , we completed a follow-on offering of our common stock . in the aggregate , we received net proceeds from the follow-on offering of $ 57.0 million . as of december 31 , 2019 , we had cash , cash equivalents and restricted cash of $ 60.0 million . all these amounts are convertible to cash within 90 days except for $ 1.4 million of restricted cash associated with our financing leases . current liabilities were $ 7.2 million at december 31 , 2019. accordingly , we have cash and cash equivalents sufficient to fund all short-term obligations as of that date . we incurred losses from operations of $ 39.6 million for the year ended december 31 , 2019 , $ 27.9 million for the year ended december 31 , 2018 , and $ 26.0 million for the year ended december 31 , 2017. as of december 31 , 2019 , we had an accumulated deficit of $ 122.1 million and expect to incur losses for the foreseeable future . cash flows from operating activities replace_table_token_4_th net cash used by operating activities increased by $ 11.7 million in 2019 driven by the increase in our net loss of $ 11.7 million and a net decrease in cash flows provided by operating assets and liabilities of $ 5.3 million , primarily from higher inventories and accounts receivable following the commercialization of our high oleic soybean products earlier in 2019 , and $ 1.6 million of cash payments made in 2019 to suppliers for services provided to us in 2018. these uses of cash were partially offset by additional non-cash stock compensation expenses of $ 4.6 million . story_separator_special_tag net cash used by operating activities increased by $ 7.5 million in 2018 driven by a $ 7.7 million reduction in non-cash stock compensation expenses . the increase in our net loss was offset by $ 1.6 million of cash payments made in 2019 to suppliers for services provided to us in 2018. we expect future changes in operating cash flows to be driven primarily by changes in our net losses and working capital as result of the commercialization of our high oleic soybean products and additional products . cash flows from investing activities replace_table_token_5_th 40 net ca sh used by investing activities increased by $ 1 . 2 million in 2019 driven by purchases of laboratory equipment following the build out of our new headquarters facility that was completed in 2018 as well as for equipment to support the expansion of our r & d p ipeline . net cash used by investing activities increased by $ 1.0 million in 2018 driven by an increase in purchases of fixtures and equipment , site improvements and architect fees for our new headquarters facility . we expect future capital expenditures to be focused on further building out our laboratory facilities and to invest in projects to optimize our supply chain . we expect these expenditures to remain relatively constant over time . cash flows from financing activities replace_table_token_6_th net cash provided by financing activities decreased by $ 61.0 million in 2019 reflecting the proceeds from our follow-on offering in 2018 , as well as lower proceeds from stock option exercises of $ 2.3 million . we also had $ 826,000 less proceeds from the sale and leaseback of equipment and we also made $ 583,000 more payments to satisfy statutory income tax withholding requirements relating to the net share settlement upon the vesting of restricted stock units in 2019. net cash provided by financing activities decreased by $ 4.5 million in 2018 due to lower net proceeds from sale and leaseback activity of $ 5.7 million . we also had $ 1.0 million less capital raising activity in 2018. these decreases were partially offset by higher proceeds from the exercise of stock options of $ 2.4 million . we expect to continue to finance our purchases of capital equipment and will also seek other sources of financing to support our business activities . capital resources considering our anticipated cash burn rate , we believe our cash , cash equivalents and restricted cash as of december 31 , 2019 will be enough to fund our operations for at least the next twelve months and into mid-2021 . the period through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties , and actual results could vary as a result of several factors , including those described in item 1a of this annual report on form 10-k. operating capital requirements for the year ended december 31 , 2019 , we had generated $ 7.3 million in revenues from product sales . we anticipate that we will continue to generate losses for the next several years before revenue is enough to support our operating capital requirements . until we can generate substantial cash flow , we expect to finance a portion of future cash needs through cash on hand and public or private equity or debt financings , government or other third-party funding and licensing arrangements . however , additional capital may not be available on reasonable terms , if at all . if we are unable to raise additional capital in enough amounts or on terms acceptable to us , we may have to significantly delay , scale back or discontinue the development or commercialization of one or more of our products . failure to receive additional funding could cause us to cease operations , in part or in full . if we raise additional funds through the issuance of additional debt or equity securities , it could result in dilution to our existing stockholders and increased fixed payment obligations , and these securities may have rights senior to those of our common shares . any of these events could significantly harm our business , financial condition and prospects . 41 contractual obligations , commitments and contingencies forward purchase contracts we enter into seed and grain production agreements ( forward purchase contracts ) with seed producers and growers . the seed contracts often require us to pay prices for the seed produced at commodity futures market prices plus a premium . the grower contracts are also linked to commodity futures market prices plus a premium . the grower has the option to fix their price with us throughout the term of the agreement . the grower contracts allow for delivery of grain to us at harvest if so specified when the agreement is executed , otherwise delivery occurs on a date that we elect through august 31 of the following year . in all periods prior to january 1 , 2019 , we considered forward purchase contracts to be derivatives and recorded the contracts at fair market value with changes in value reflected in earnings as r & d expense . effective january 1 , 2019 , we designated all forward purchase contracts as normal purchases and as a result no longer consider these agreements to be derivatives . as of that date any mark-to-market gains or losses associated with those contracts were fixed and were reflected in inventory upon our purchase of the underlying grain . as of december 31 , 2019 , we had purchased all the underlying grain and all previously recorded gains and losses had been reflected in inventory . sale-leaseback of headquarters and lab facility in september 2017 we consummated a sale-leaseback transaction with a third party for our corporate headquarters and lab facility . our headquarters facility is composed of a 40,000 square-foot office and lab building , with greenhouses and outdoor research plots . we are deemed the owner for accounting purposes .
| we expect that our losses will be driven by our : costs to commercialize products in our integrated business model ; conducting breeding and field trials for our current and future products , including any impact from the damage to our high fiber wheat trials ; continuing to advance the r & d of our current and future products ; seeking to identify and validate additional products ; acquiring or in-licensing other products , technologies , germplasm or other biological material ; seeking regulatory and marketing approvals for our products ; making royalty and other payments under any in-license agreements ; maintaining , protecting , expanding and defending our intellectual property portfolio ; seeking to attract and retain new and existing skilled personnel ; investing in our infrastructure to support the scale-up of the business ; and experiencing any delays or encounter issues with any of the above . our relationship with cellectis and comparability of our results we are a majority-owned subsidiary of cellectis . as of december 31 , 2019 , cellectis owned 68.9 % of our outstanding common stock . our historical financial information reflects expense allocations for certain support functions that were provided on a centralized basis pursuant to a management services agreement . as a result , such historical financial information may not reflect the financial condition , results of operations or cash flows we would have achieved as a stand-alone company and not a subsidiary of cellectis during such historical periods . effective with the end of the third quarter of 2019 , we have internalized nearly all the services cellectis previously provided . cellectis has also guaranteed the lease of our headquarters facility . cellectis has certain contractual rights as well as rights pursuant to our certificate of incorporation and bylaws , in each case , as long as it maintains threshold beneficial ownership levels in our shares . we hold an exclusive license from cellectis that broadly covers the use of engineered nucleases for plant gene editing . this intellectual property covers methods to edit plant genes using “ chimeric restriction endonucleases , ” which include talen ® , crispr/cas9 , zinc finger nucleases , and some types of meganucleases . financial operations overview revenue revenues are recognized as described in our accounting policies in the notes to consolidated financial statements . for the year ended december 31 , 2019 , we recognized
| ROO | 4,886 |
furthermore , our customers may delay scheduled delivery dates and or cancel orders within specified timeframes without significant penalty . we sell our products through our direct sales force , international and domestic sales representatives and distributors . sales to consignment warehouses , who purchase products from us for use by contract manufacturers , are recorded upon delivery to the contract manufacturer . prior to the implementation of asc 606 , sales to certain distributors were previously made under agreements allowing for returns or credits under certain circumstances . we therefore deferred recognition of revenue on sales to those distributors under these terms until products were resold by the distributor . during fiscal 2018 , we revised our distribution agreements to these distributors to eliminate ship from stock and debits and price protection . under these revised distribution agreements , selling prices were fixed and determinable on the date of shipment and revenue was recognized upon shipment . 31 historically , a small number of oem customers have accounted for a substantial portion of our net revenues , and we expect that significant customer concentration will continue for the foreseeable future . many of our oems use contract manufacturers to manufacture their equipment . accordingly , a significant percentage of our net revenues is derived from sales to these contract manufacturers and to consignment warehouses . in addition , a significant portion of our sales are made to foreign and domestic distributors who resell our products to oems , as well as their contract manufacturers . direct sales to contract manufacturers and consignment warehouses accounted for 41.3 % , 34.9 % and 39.0 % of our net revenues for fiscal 2019 , 2018 and 2017 , respectively . sales to foreign and domestic distributors accounted for 56.0 % , 62.5 % and 57.5 % of our net revenues for fiscal 2019 , 2018 and 2017 , respectively . the following direct customers accounted for 10 % or more of our net revenues in one or more of the following periods : replace_table_token_3_th nokia was our largest customer in fiscal 2019 , 2018 and 2017. nokia purchases products directly from us and through contract manufacturers and distributors . based on information provided to us by its contract manufacturers and our distributors , purchases by nokia represented approximately 45 % , 36 % and 41 % of our net revenues in fiscal 2019 , 2018 and 2017 , respectively . our revenues have been substantially impacted by significant fluctuations in sales to nokia , and we expect that future direct and indirect sales to nokia will continue to fluctuate substantially 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 2019 , 2018 or 2017 . 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 , powerchip 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 cost 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 32 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 . in particular , we are devoting substantial resources to the development of a new category of in-place associative computing products . accordingly , we expect that our research and development expenses will continue to be substantial in future periods and may lead to operating losses in some periods . such expenses as a percentage of net revenues may fluctuate from period to period . selling , general and administrative expenses . story_separator_special_tag because we recorded a cumulative three-year loss on a u.s. tax basis for the year ended march 31 , 2018 and the realization of our deferred tax assets is questionable , we recorded a tax provision reflecting a valuation allowance of $ 5.9 million in net deferred tax assets in fiscal 2018. reductions in uncertain tax benefits due to lapses in the statute of limitations were $ 0 and $ 71,000 in the years ended march 31 , 2018 and 2017 , respectively . net loss . net loss increased from $ 115,000 in fiscal 2017 to $ 4.5 million in fiscal 2018. this increase was primarily due to the changes in net revenues , gross profit and operating expenses discussed above . story_separator_special_tag style= `` margin-left:11.7647058823529 % ; margin-right:11.7647058823529 % ; `` > contractual obligations the following table describes our contractual obligations as of march 31 , 2019 : replace_table_token_5_th as of march 31 , 2019 , the current portion of our unrecognized tax benefits was $ 0 , and the long-term portion was $ 622,000. in connection with the acquisition of mikamonu on november 23 , 2015 , we are required to make contingent consideration payments to the former mikamonu shareholders conditioned upon the retention of mikamonu 's key employee and the achievement of certain product development milestones and revenue targets for products based on the mikamonu technology . as of march 31 , 2019 , the accrual for potential payment of contingent consideration was $ 4.2 million . critical accounting policies and estimates the preparation of our consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the united states ( “ gaap ” ) requires us 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 revenue and expenses during the reporting period . significant estimates are inherent in the preparation of the consolidated financial statements and include estimates affecting revenue recognition , obsolete and excess inventory , the valuation allowance on deferred tax assets , stock-based compensation , contingent consideration and the valuation of goodwill . we believe that we consistently apply these judgments and estimates and that our financial statements and accompanying notes fairly represent our financial results for all periods presented . however , any errors in these judgments and estimates may have a material impact on our balance sheet and statement of operations . critical accounting estimates , as defined by the securities and exchange commission , are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult and subjective judgments and estimates of matters that are inherently uncertain . our critical accounting estimates include those regarding revenue recognition , the valuation of inventories , taxes , stock-based compensation , contingent consideration and the valuation of goodwill . revenue recognition . on april 1 , 2018 , we adopted asu no . 2014-09 , `` revenue from contracts with customers ( topic 606 ) . `` this standard update outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers . we adopted using the modified retrospective method applied to all at the date of initial application ( i.e . , april 1 , 2018 ) . results for reporting periods after april 1 , 2018 are presented under topic 606 , while prior period amounts are not adjusted and continue to be reported in accordance with the our historic accounting under topic 605. we determine revenue recognition through the following steps : ( 1 ) identification of the contract with a customer ; ( 2 ) identification of the performance obligations in the contract ; ( 3 ) determination of the transaction price ; ( 4 ) allocation of the transaction price to the performance obligations in the contract ; and ( 5 ) recognition of revenue when , or as , we satisfy a performance obligation . the adoption of asc 606 was applied to all contracts and did not have a significant impact on our retained earnings as the timing of our revenue recognition under the new standard coincides with the way we previously 39 recognized revenue . there was no impact on the opening retained earnings balance as of april 1 , 2018 due to the adoption of asc 606. the majority of our customer contracts , which may be in the form of purchase orders , contracts or purchase agreements , contain performance obligations for delivery of agreed upon products . delivery of all performance obligations contained within a contract with a customer typically occurs at the same time ( or within the same accounting period ) . transfer of control typically occurs at the time of shipment or at the time the product is pulled from consignment as that is the point at which delivery has occurred , title and the risks and rewards of ownership have passed to the customer , and we have a right to payment . thus , we will generally recognize revenue upon shipment of the product . because all our performance obligations relate to contracts with a duration of less than one year , we elected to apply the optional exemption practical expedient provided in asc 606 and , therefore , are not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period . we adjust the transaction price for variable consideration . variable consideration is not typically significant and primarily results from stock rotation rights and quick pay discounts provided to our distributors . as a practical expedient , we recognize the incremental costs of obtaining a contract , specifically commission expenses that have a period of benefit of less than twelve months , as an expense
| liquidity and capital resources as of march 31 , 2019 , our principal sources of liquidity were cash , cash equivalents and short-term investments of $ 61.8 million compared to $ 58.4 million as of march 31 , 2018 . cash , cash equivalents and short-term investments totaling $ 32.0 million were held in foreign locations as of march 31 , 2019. net cash provided by operating activities was $ 3.0 million for fiscal 2019 compared to $ 1.1 million for fiscal 2018 and $ 2.1 million for fiscal 2017 . the primary sources of cash in fiscal 2019 were an increase in accrued expenses and other liabilities of $ 1.5 million and non-cash items including stock-based compensation of $ 2.3 million , depreciation and amortization expenses of $ 1.5 million and a provision for excess and obsolete inventories of $ 1.2 million . accrued expenses and other liabilities increased primarily due to increased levels of compensation related accruals in fiscal 2019 compared to the prior year . the primary uses of cash in fiscal 2019 were increases in accounts receivable of $ 2.1 million and inventory of $ 1.3 million . accounts receivable increased primarily due to the timing of payments received from customers and the increased level of shipments during fourth quarter of fiscal 2019 compared to the prior year . the primary sources of cash in fiscal 2018 were a reduction in inventory of $ 2.1 million , non-cash stock-based compensation expense of $ 2.1 million , a provision for excess and obsolete inventory of $ 1.6 million , depreciation and amortization expense of $ 1.3 million and a decrease in accounts receivable of $ 1.1 million . the primary uses of cash in fiscal 2018 were a net loss of $ 4.5 million , a decrease in deferred revenue of $ 1.7 million and a decrease in accrued expenses and other liabilities of $ 1.2 million .
| Liquidity | 8,229 |
proceeds from issuance of the senior notes were used to repay the balances outstanding under the clopay ames true temper holding corp. ( clopay ames ) secured term loan ( term loan ) and the clopay ames asset based lending agreement ( abl ) . on march 18 , 2011 , griffon entered into a $ 200,000 five-year revolving credit facility that refinanced and replaced the existing revolving credit facilities at each of telephonics and clopay ames . the senior notes , along with the revolving credit facility , completed the refinancing of substantially all of griffon 's domestic subsidiary debt with new debt at the parent company level . during 2011 , in connection with the termination of the term loan , abl and telephonics credit agreement ( tca ) , griffon recorded a $ 26,164 loss on extinguishment of debt consisting of $ 21,617 of deferred financing charges and original issuer discounts , a call premium of $ 3,703 on the term loan , and $ 844 of swap and other breakage costs . during 2010 , griffon recorded a $ 1,117 loss on extinguishment of debt resulting from the write-off of unamortized financing costs associated with the existing abl facility terminated upon the att acquisition . other income of $ 3,714 in 2011 and $ 4,121 in 2010 consists primarily of currency exchange transaction gains and losses from receivables and payables held in non functional currencies , and from net gains on investments . 33 griffon 's effective tax rate for continuing operations for 2011 was a benefit of 48.2 % compared to a 31.2 % provision in the prior year . the 2011 rate reflected net discrete benefits of $ 4,570 primarily from tax planning related to unremitted foreign earnings . the 2010 rate reflected net discrete tax benefits of $ 2,307 primarily from the resolution of foreign and domestic income tax audits . excluding the discrete tax items from both years , the 2011 tax benefit rate would have been 16.4 % and the 2010 tax provision rate would have been 47.9 % . the 2011 rate was also impacted $ 1,257 from increased tax reserves and the impact of permanent differences , and the 2010 rate was impacted $ 1,330 from permanent book to tax adjustments including non-deductible transaction costs of $ 3,800 related to the att acquisition . excluding the impact of the discrete and other period items noted above , the effective tax rate for continuing operations would have been a benefit of 25.1 % in 2011 compared to a provision of 38.3 % in 2010. loss from continuing operations was $ 7,431 , or $ 0.13 per share , for 2011 compared to income of $ 9,504 or $ 0.16 cents per share in the prior year . the current year results included the following : - charges of $ 26,164 ( $ 16,813 , net of tax , or $ 0.29 per share ) resulting from the refinancing of att acquisition related debt ; - $ 15,152 ( $ 9,849 , net of tax , or $ 0.17 per share ) of increased cost of goods related to the sale of inventory recorded at fair value in connection with acquisition accounting for att ; - restructuring charges of $ 7,543 ( $ 4,903 , net of tax , or $ 0.08 per share ) ; - acquisition costs of $ 446 ( $ 290 , net of tax , or $ 0.00 per share ) ; and - discrete tax benefits , net , of $ 4,570 , or $ 0.08 per share . the prior year results included the following : - att related acquisition costs of $ 9,805 ( $ 7,704 , net of tax , or $ 0.13 per share ) ; - restructuring charges of $ 4,180 ( $ 2,717 , net of tax , or $ 0.05 per share ) ; - charges of $ 1,117 ( $ 726 , net of tax , or $ 0.01 per share ) related to refinancing costs ; and - discrete tax benefits , net , of $ 2,307 , or $ 0.04 per share . excluding these items from both reporting periods , 2011 income from continuing operations would have been $ 19,854 , or $ 0.34 per share compared to $ 18,344 , or $ 0.31 per share , in 2010. income from discontinued operations for 2011 was nil , or $ 0.00 per share , compared to $ 88 , or $ 0.00 per share , in the prior year . net loss for 2011 was $ 7,431 , or $ 0.13 per share , compared to income of $ 9,592 , or $ 0.16 per share , in 2010. on a pro forma basis , as if att was purchased on october 1 , 2009 , loss from continuing operations was $ 7,431 , or $ 0.13 per share , in 2011 compared to income of $ 16,885 or $ 0.28 cents per share in 2010. the pro forma prior year results included the following : - acquisition and related costs of $ 21,075 ( $ 13,699 , net of tax , or $ 0.23 per share ) ; - restructuring charges of $ 6,570 ( $ 4,271 , net of tax , or $ 0.07 per share ) ; - charges of $ 1,117 ( $ 726 , net of tax , or $ 0.01 per share ) related to refinancing costs ; and - discrete tax benefits , net of $ 2,307 , or $ 0.04 per share . excluding these items from both reporting periods , 2011 income from continuing operations would have been $ 19,854 , or $ 0.34 per share compared to $ 33,274 , or $ 0.55 per share , as in 2010 . story_separator_special_tag operating margin benefited from the strong revenue growth , although such benefit was substantially offset by increased sg & a expenses , attributable to increased research and development , and marketing related expenses incurred in connection with business development initiatives to sustain revenue growth in future periods ; these expenditures were primarily focused on supporting mobile surveillance and unmanned aerial vehicle ( uav ) initiatives as well as air traffic management programs . administrative expenses increased to support the operations and higher sales . plastics replace_table_token_7_th 2011 compared to 2010 plastics revenue increased $ 65,599 , or 14 % , compared to the prior year primarily due to higher unit volumes ( 6 % ) in north america and europe , the pass through of higher resin costs in customer selling prices ( 5 % ) and the translation of european results into a weaker u.s. dollar ( 3 % ) . segment operating profit decreased $ 7,161 compared to the prior year , driven by start up costs , in both germany and brazil , related to expanding capacity and product offerings to meet increased customer demand ; such start up costs included higher than normal levels of scrap production . there were no significant disruptions in customer service in connection with the scaling up of production of newly installed assets . the decline was partially offset by higher volume and a timing benefit from resin pricing . plastics adjusts customer selling prices based on underlying resin costs , on a delayed basis . while improvement in operations in the newly expanded locations is occurring , the company expects that plastics is expected to continue to operate at below normal efficiency levels for the first half of fiscal 2012 . 2010 compared to 2009 plastics ' revenue increased $ 57,359 , or 14 % , compared to 2009 , mainly due to improved volumes , which increased in all geographic regions . the favorable translation benefit from a weaker u.s. dollar on foreign-currency denominated revenue added 2 % and the benefit of the pass-through of higher resin costs added 1 % . segment operating profit decreased $ 3,603 , or 15 % , and operating profit margin decreased 140 basis points primarily due to increases in the cost of resin ; such increased costs were not yet reflected in higher customer selling prices due to delays in passing on such cost increase , with a resultant unfavorable impact on margin . other factors contributing to the operating profit decline were increases in freight costs as well as product development costs . unallocated amounts for 2011 , unallocated amounts totaled $ 22,868 compared to $ 27,394 in 2010 , with the decrease primarily due to the absence of legal and consulting expenses incurred in connection with the due diligence of potential acquisition targets in 2010 . 40 for 2010 , unallocated amounts totaled $ 27,394 compared to $ 20,960 in 2009 , with the increase due to incurrence of legal and consulting expenses in connection with the due diligence of potential acquisition targets in 2010 , and higher compensation expenses . segment depreciation and amortization segment depreciation and amortization of $ 60,361 increased $ 20,258 in 2011 compared to 2010 , primarily due to the increased depreciation and amortization related to the att acquisition as well as the capital expansion at plastics . segment depreciation and amortization of $ 40,103 decreased $ 1,707 in 2010 compared to 2009 , primarily due to certain hbp assets having become fully depreciated . discontinued operations installation services in 2008 , as a result of the downturn in the residential housing market , griffon exited substantially all operating activities of its installation services segment which sold , installed and serviced garage doors and openers , fireplaces , floor coverings , cabinetry and a range of related building products , primarily for the new residential housing market . operating results of substantially all this segment has been reported as discontinued operations in the consolidated statements of operations for all periods presented ; the installation services segment is excluded from segment reporting . in may 2008 , griffon 's board of directors approved a plan to exit substantially all operating activities of the installation services segment in 2008. in the third quarter of 2008 , griffon sold nine units to one buyer , closed one unit and merged two units into cbp . in the fourth quarter of 2008 , griffon sold its two remaining units in phoenix and las vegas . griffon substantially concluded remaining disposal activities in 2009. there was no reported revenue in 2011 , 2010 and 2009. griffon does not expect to incur significant expenses in the future . future net cash outflows to satisfy liabilities related to disposal activities accrued as of september 30 , 2011 are estimated to be $ 3,794. substantially all such liabilities are expected to be paid during 2012. certain of griffon 's subsidiaries are also contingently liable for approximately $ 597 related to certain facilities leases with varying terms through 2012 that were assigned to the respective purchasers of certain of the installation services businesses . griffon does not believe it has a material exposure related to these contingencies . story_separator_special_tag or b ) the lender 's prime rate , at griffon 's option . in november 2011 , griffon converted the outstanding loan to a five-year term ; principal is payable in quarterly installments of $ 250 , beginning december 2011 , with the remainder due at maturity ( november 2016 ) . the loan is secured by shares purchased with the proceeds of the loan , and repayment is guaranteed by griffon . at september 30 , 2011 , 1,874,737 shares have been purchased and the outstanding balance was $ 19,973. in addition , the esop has a loan agreement , guaranteed by griffon , which requires quarterly principal payments of $ 156 and interest through the expiration date of september 2012 at
| a small number of customers account for , and are expected to continue to account for , a substantial portion of griffon 's consolidated revenue . for 2011 : a. the u.s. government and its agencies , through either prime or subcontractor relationships , represented 19 % of griffon 's consolidated revenue and 75 % of telephonics revenue . b. procter & gamble , co. represented 14 % of griffon 's consolidated revenue and 49 % of plastics revenue . c. home depot represented 12 % of griffon 's consolidated revenue and 25 % of hbp revenue . no other customer exceeded 9 % of consolidated revenue . future operating results will continue to substantially depend on the success of griffon 's largest customers and griffon 's relationships with them . orders from these customers are subject to fluctuation and may fluctuate materially . the loss of all or a portion of volume from any one of these customers could have a material adverse impact on griffon 's liquidity and operations . 42 at september 30 , 2011 , griffon had debt , net of cash and equivalents , as follows : replace_table_token_9_th on march 17 , 2011 , in an unregistered offering through a private placement under rule 144a , griffon issued , at par , $ 550,000 of 7.125 % senior notes due in 2018 ( senior notes ) ; interest on the senior notes is payable semi-annually . proceeds were used to pay down outstanding borrowings under a senior secured term loan facility and two senior secured revolving credit facilities of certain of the company 's subsidiaries . the senior notes are senior unsecured obligations of griffon guaranteed by certain domestic subsidiaries , and are subject to certain covenants , limitations and restrictions . the fair value of the senior notes approximated $ 518,000 on september 30 , 2011 based upon quoted market prices ( level 1 inputs ) . on august 9 , 2011 , griffon exchanged all of the senior notes for substantially identical senior notes registered under the securities act of 1933 , via an exchange offer .
| Liquidity | 13,723 |
$ 662 james mcgill 2008 129,804 $ .60 - $ 2.50 9/11/2014 james mcgill 2007 216,640 $ 0.60 9/11/2014 james mcgill 2006 236,640 $ 0.60 9/11/2014 james mcgill 2005 324,720 $ 0.43 9/11/2014 james mcgill 2004 337,360 $ 0.43 9/11/2014 james mcgill 2003 235,280 $ 0.43 9/11/2014 james mcgill 2002 145,340 $ 0.34 9/11/2014 kendall carpenter 2012 416,667 $ 0.125 5/18/2018 602,824 $ 12,056 kendall carpenter 2012 416,667 $ 0.25 5/18/2018 kendall carpenter 2012 416,666 $ 0.40 5/18/2018 kendall carpenter 2010 32,500 $ 650 kendall carpenter 2009 43,860 8,400 $ .53 - $ 2.21 9/11/2014 80,000 $ 1,600 kendall carpenter 2008 23,946 $ .60 - $ 2.50 9/11/2014 kendall carpenter 2007 14,400 $ 0.60 9/11/2014 kendall carpenter 2006 26,600 $ 0.60 9/11/2014 29 director compensation directors received compensation for their services for the fiscal year ended december 31 , 2012 as set forth below : replace_table_token_6_th ( 1 ) each director received $ 4,000 per quarter served on the board of directors , paid in restricted common stock based on a five day vwap at the end of each quarter . item 12 . security ownership of certain beneficial owners and management and related stockholder matters . the following table sets forth the number of and percent of the company 's common stock beneficially owned by : ● all directors and nominees , naming them , ● our executive officers , ● our directors and executive officers as a group , without naming them , and ● persons or groups known by us to own beneficially 5 % or more of our common stock or our preferred stock having voting rights : the business address of each of the beneficial owners listed below is c/o macrosolve , inc. 1717 south boulder ave. suite 700 , tulsa , ok 74119. replace_table_token_7_th ( 1 ) this column represents the total number of votes each named stockholder is entitled to vote upon matters presented to the shareholders for a vote . ( 2 ) the percentages in the table have been calculated on the basis of treating as outstanding for a particular person , all shares of our capital stock outstanding on february 28 , 2013. on february 28 , 2013 , there were 182,163,869 shares of our common stock outstanding . to calculate a stockholder 's percentage of beneficial ownership , we include in the numerator and denominator the common stock outstanding and all shares of our common stock issuable to that person in the event of the exercise of outstanding options and other derivative securities owned by that person which are exercisable within 60 days of february 28 , 2013. common stock options and derivative securities held by other stockholders are disregarded in this calculation . therefore , the denominator used in calculating beneficial ownership among our stockholders may differ . unless we have indicated otherwise , each person named in the table below has sole voting power and investment power for the shares listed opposite such person 's name . 30 ( 3 ) represents ( i ) 18,184,893 shares of common stock owned ; ( ii ) 4,237,532 shares of common stock that may be acquired within 60 days through the exercise of outstanding warrants ; ( iii ) 1,733,792 shares of common stock that may be acquired within 60 days through the exercise of outstanding options ; and ( iv ) 2,680,341 shares of common stock issued under restrictive stock grants with voting rights . ( 4 ) represents ( i ) 4,549,515 shares of common stock owned ; ( ii ) 131,546 shares of common stock that may be acquired within 60 days through the exercise of outstanding warrants ; ( iii ) 117,206 shares of common stock that may be acquired within 60 days through the exercise of outstanding options ; and ( iv ) 244,565 shares of common stock issued under restrictive stock grants with voting rights . ( 5 ) represents ( i ) 35,142,526 shares of common stock owned ; ( ii ) 15,261,234 shares of common stock that may be acquired within 60 days through the exercise of outstanding warrants ; and ( iii ) 280,000 shares of common stock that may be acquired within 60 days through the exercise of outstanding options . ( 6 ) represents ( i ) 4,256,064 shares of common stock owned ; ( ii ) 1,454,787 shares of common stock that may be acquired within 60 days through the exercise of outstanding warrants ; and ( iii ) 80,000 shares of common stock that may be acquired within 60 days through the exercise of outstanding options . item 13. certain relationships and related transactions , and director independence . other than as disclosed below , during the last two fiscal years , there have been no transactions , or proposed transactions , which have materially affected or will materially affect us in which any director , executive officer or beneficial holder of more than 5 % of the outstanding common or preferred stock , or any of their respective relatives , spouses , associates or affiliates , has had or will have any direct or material indirect interest . we have no policy regarding entering into transactions with affiliated parties . james mcgill , the company 's president , chief executive officer and chairman of the board of directors , made loans to the company during 2012 for operating capital . in january 2012 , mr. mcgill provided a short term loan of $ 100,000 . the note was secured by 10 % of net patent settlements and provided for interest of twelve percent ( 12 % ) . story_separator_special_tag 20 off-balance sheet arrangements we do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition , revenues , and results of operations , liquidity or capital expenditures . critical accounting policies and estimates the company 's accounting policies are more fully described in note 1 of the financial statements . as disclosed in note 1 , the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported n the financial statements and accompanying notes . actual results could differ significantly from those estimates . the company believes that the following discussion addresses the company 's most critical accounting policies , which are those that are most important to the portrayal of the company 's financial condition and results of operations and require management 's most difficult , subjective and complex judgments . revenue recognition : revenues from intellectual property licenses are recognized upon receipt . when intellectual property licenses are received under a contingent fee agreement with the law firm of antonelli , harrington & thompson llp , the applicable contingent legal expense is recorded as a cost of sale . in the event a non-exclusive intellectual property license is granted within the scope of a contracted project , ten percent ( 10 % ) of the contract amount is deemed to be payment for the license . revenue from software product licensing is recognized ratably over the license period . solution services revenues , including advisory services , consist primarily of professional services contracted to third party customers or clients under contract for specific projects . contracted projects that are fixed price are accounted for under the percentage-of-completion method of accounting . revenue from contracted projects that are for provision of services is recognized at the time the service is provided . the company no longer offers solutions services after the sale of illume mobile in july 2012. software development costs : the company accounts for software development costs in accordance with asc 985-10 , “ costs of computer software to be sold , leased , or otherwise marketed ” . costs incurred prior to the establishment of technological feasibility are expensed as incurred as research and development costs . costs incurred after establishing technological feasibility and before the product is released for sale to customers are capitalized . these costs are amortized over three years and are reviewed for impairment at each period end . the company is not presently developing software . stock-based compensation : the company accounts for stock-based compensation in accordance with asc 718 , “ compensation-compensation costs ” . asc 718 requires companies to measure the cost of employee services received in exchange for an award of equity instruments , including stock options , based on the grant-date fair value of the award and to recognize it as compensation expense over the period the employee is required to provide service in exchange for the award , usually the vesting period . the company issues restricted stock awards which vest over six month in the case of salary differential awards and over three years in the case of bonus plans to employees . if the employee elects 83 ( b ) tax treatment of the award , the fair market value is recognized as compensation in the month of the election . income taxes : the company currently has substantial net operating loss carryforwards . the company has recorded a 100 % valuation allowance against net deferred tax assets due to uncertainty of their ultimate realization . valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized . recently issued accounting pronouncements in october 2012 , the fasb issued accounting standards update no . 2012-04 , “ technical corrections and improvements ” which makes technical corrections and improvements to a variety of topics in the codification . the changes include source literature amendments , guidance clarification , reference corrections and relocated guidance . the asu also includes amendments to the codification to reflect asc 820 's fair value measurement and disclosure requirements . the company is currently evaluating the update which is effective for fiscal periods beginning after december 15 , 2012 , but does not expect it to have a material effect on our financial statements . 21 in december 2011 , the fasb issued accounting standards update no . 2011-11 , “ balance sheet ( topic 210 ) , disclosures about offsetting assets and liabilities . ” the boards initially proposed a joint model describing when it is appropriate to offset financial assets and liabilities on the balance sheet that would have been close to the more restrictive ifrs approach , but instead decided to focus on developing common disclosure requirements . new disclosures are required to enable users of financial statements to understand significant quantitative differences in balance sheets prepared under us gaap and ifrs related to the offsetting of financial instruments . the existing us gaap guidance allowing balance sheet offsetting , including industry-specific guidance , remains unchanged . the company does not offset financial instruments and therefore does not expect the adoption of asu 2011-11 to have a material effect on our financial statements . in january 2013 , asu 2013-013 , “ balance sheet ( topic 210 ) , “ clarifying the scope of disclosures about offsetting assets and liabilities ” was issued by the fasb . the asu addresses offsetting derivative assets and liabilities and will affect comparative financial statements as disclosures will be applied retrospectively . the asu is effective for fiscal years beginning on or after january 1 , 2013 with no early adoption . the company is currently evaluating the affect but does not anticipate it having a material effect on our financial statements . in june 2011 , the fasb issued accounting standards update no . 2011-05
| between september and october 2011 , the company sold convertible debentures series 2011 ( the “ 2011 class b debentures ” and together with the 2011 class a debentures , the “ 2011 debentures ” ) with class b warrants for gross proceeds of $ 700,000 and the conversion of $ 25,000 in accrued compensation . 18 the 2011 debentures , which mature on december 31 , 2016 , earn interest at an annual rate of 12 % , which will be paid quarterly exclusively from the debenture account which has been established with a financial institution for the deposit of 25 % of the net funds the company receives from licensing its intellectual property ( the “ debenture account ” ) . principal on the 2011 debentures will be paid quarterly as the debenture account permits . as of march 4 , 2013 , the debenture account has a balance of $ 150,000. the 2011 class a debentures may be converted into shares of common stock at the option of the holder . upon conversion , the holder will be entitled to receive the number of shares of common stock that equal to two hundred percent ( 200 % ) of the face amount of the 2011 class a debentures , together with accrued and unpaid interest , divided by the conversion price , which is the weighted average price for the five-day trading period preceding the 2011 class a debenture investment . any 2011 class a debentures that are outstanding on the maturity date that have not been repaid from the debenture account will be repaid by the issuance of shares of common stock at the conversion price . during 2012 , fifteen of the sixteen investors elected to convert a total of $ 1,575,000,000 debenture series 2011 plus series a warrants into 16,831,553 shares of common stock . a total of $ 179,312 in accrued interest on the converted debentures was settled , $ 16,167 in cash and $ 163,145 with 870,543 shares of common stock . accrued interest as of december 31 , 2012 is $ 18,396. as of march 4 , 2013 , there is one $ 100,000 2011 class a debentures outstanding that is convertible into 1,587,302 shares of common stock . < div
| Liquidity | 8,506 |
- 82 - we plan to ( i ) continue investing in our infrastructure , including but not limited to solution development , sales and marketing , implementation and support , ( ii ) continue efforts to make infrastructure investments within an overall context of maintaining reasonable expense discipline , ( iii ) add new clients through maintaining and expanding sales , marketing and solution development activities , ( iv ) expand our relationships with existing clients through delivery of add-on and complementary solutions and services and ( v ) continue our commitment of service in support of our client satisfaction programs . 2020 acquisition of the opennms group , inc. on july 22 , 2020 , we entered into an assignment agreement ( the “ assignment agreement ” ) with cambridge to acquire approximately 91 % of opennms for $ 5.6 million in cash . contemporaneously with the closing of the assignment agreement , opennms issued call options to the company consisting of , when exercised , cash payment of $ 0.3 million and issuance of 56,769 shares of the company 's common stock in exchange for the 9 % of the shares of opennms common stock held by the remaining shareholders . these call options expired unexercised on september 30 , 2020. covid-19 pandemic in march 2020 , the world health organization declared the novel coronavirus ( covid-19 ) a pandemic . in the same month , the president of the united states declared a state of national emergency due to the covid-19 outbreak . many jurisdictions , particularly in north america ( including the united states ) , europe and asia , as well as u.s. states in which we operate , including california , have adopted or are considering laws , rules , regulations or decrees intended to address the covid-19 outbreak , including implementing travel restrictions , closing non-essential businesses and or restricting daily activities . in addition , many communities have limited , and are considering to further limit , social mobility and gathering . to date , there has been no material adverse impact to our business from the covid-19 pandemic . given the unprecedented and evolving nature of the pandemic , the future impact of these changes and potential changes on the company and our contractors , consultants , customers , resellers and partners is unknown at this time . however , in light of the uncertainties regarding economic , business , social , health and geopolitical conditions , our revenues , earnings , liquidity , and cash flows could be adversely affected , whether on an annual or quarterly basis . continued impacts of the covid-19 pandemic could materially adversely affect our current and long-term account receivable collectibility , as our negatively impacted customers from the pandemic may request temporary relief , delay , or not make scheduled payments . in addition , the deployment of our solutions may represent a large portion of our customers ' investments in software technology . decisions to make such an investment are impacted by the economic environment in which the customers operate . uncertain global geopolitical , economic and health conditions and the lack of visibility or the lack of financial resources may cause some customers to reduce , postpone or terminate their investments , or to reduce or not renew ongoing paid services , adversely impacting our revenues or timing of revenue . health conditions in some geographic areas where our customers operate could impact the economic situation of those areas . these conditions , including the covid-19 pandemic , may present risks for health and limit the ability to travel for our employees , which could further lengthen our sales cycle and delay revenue and cash flows in the near-term . for information on the cares act , refer to note 15 to the accompanying consolidated financial statements . 2020 sale of the connected care business on january 13 , 2020 , we entered into an asset purchase agreement ( the “ purchase agreement ” ) with masimo corporation ( “ masimo ” ) , vccb holdings , inc. , a wholly owned subsidiary of masimo ( collectively with masimo , the “ purchaser ” ) , and , solely with respect to certain provisions of the purchase agreement , nantworks , llc , an affiliate of ours . pursuant to the purchase agreement , we agreed to sell to the purchaser certain of our assets related to our “ connected care ” business , including the products known as dcx ( formerly deviceconx ) , vcx ( formerly vitalsconx ) , hbox and shuttle cable ( collectively , the “ connected care business ” ) . on february 3 , 2020 , we completed the sale of the connected care business for $ 47.3 million of cash consideration in exchange for assets primarily related to the connected care business ( as defined under the terms of the purchase agreement ) . the cash consideration is subject to adjustment based upon the final amount of working capital as of the closing date . the sale of the connected care business qualified as a discontinued operation because it comprised operations and cash flows that could be distinguished , operationally and for financial reporting purposes , from the rest of the company . the disposal of the connected care business represented a strategic shift in our operations as the sale enables us to focus on molecular analysis , clinical decision support , payer engagement , and data analytics . - 83 - evolution of gps cancer test platform nanthealth and nantomics ( our technology partner for the gps cancer test ) are continually taking steps to optimize the utility and value of our tests for physicians and their patients . story_separator_special_tag molecular analysis revenue categories . total software-related revenue increased by $ 0.1 million , or 0.2 % , for the year ended december 31 , 2020 , compared to the prior year period . the increase is related to higher maintenance and professional services revenue due to the acquisition of opennms ( see note 19 to the accompanying consolidated financial statements ) and was partially offset by a decrease in saas revenue of $ 0.6 million . the decrease in saas revenue was driven by a $ 3.7 million decrease in navinet revenue related to lower membership , lower professional services implementation amortization , and promotional activities related to the covid-19 pandemic in the second quarter of 2020 , partially offset by higher revenues of $ 3.1 million from our eviti platform solutions due to a combination of new customers and increased covered lives on existing customers . one of our navinet customers representing approximately 14.9 % and 12.9 % of our total revenue for the years ended december 31 , 2020 and 2019 , respectively , did not renew its contract . while the contract expired in january 2021 , the customer has requested that we continue to provide our saas services and transition assistance through at least june 30 , 2021. further , we continue to engage in discussions with the customer regarding supplemental services and business opportunities that may extend beyond the service termination date . customer churn is a natural part of our business and , while there is no guarantee that we will be able to offset the loss of this customer in the short term , we continue to develop new product enhancements and offerings to help drive customer acquisition and expansion opportunities to replace this lost revenue in the long term . sequencing and molecular analysis revenue decreased $ 1.5 million , or 87.8 % , from $ 1.7 million for the year ended december 31 , 2019 to $ 0.2 million for the year ended december 31 , 2020. this decrease reflected lower volume of gps samples sequenced and recognized as we moved to a cash basis model until full cms billing can be established . currently , we recognize revenue from customers with executed contracts , and from customers without a contractual agreement where we recognize revenue on a cash basis given the uncertainty over reimbursement . as we gain additional insurance coverage , including coverage under government insurance programs , we expect to be able to reduce the portion of sequencing and molecular analysis revenue which is recognized on a cash basis . in may 2020 , we received notice of molecular diagnostic services coverage for omics core , which opens the path for us to receive coverage of advanced diagnostic laboratory testing at our full listing price . home health care services revenue decreased $ 2.9 million , or 100.0 % , for the year ended december 31 , 2020 as compared to the prior year period . this decrease was due to the sale of our home health care services business in june 2019. we believe that significant opportunities exist for expanded cross-selling across our products and across our existing customer base , including eviti , navinet , and opennms customer bases . we also believe that our customer base and our product solutions provide unique opportunities to expand the volume of gps cancer analysis reporting to our customer base . - 91 - cost of revenue replace_table_token_5_th comparison of the years ended december 31 , 2020 and 2019 cost of revenue decreased $ 4.9 million , or 14.4 % , from $ 34.1 million in the year ended december 31 , 2019 to $ 29.2 million for the year ended december 31 , 2020. the decrease is related to declines in the sequencing and molecular analysis and home health care services categories . total software-related cost of revenue was essentially flat from $ 28.1 million in the year ended december 31 , 2019 to $ 28.2 million for the year ended december 31 , 2020. saas related cost of revenue was flat due to higher personnel costs related to the timing of project implementations fully offset by lower capitalization of labor costs associated with development of internal-use software . amortization of developed technology increased by $ 0.1 million related to the acquisition of opennms ( see note 19 to the accompanying consolidated financial statements ) . sequencing and molecular analysis cost of revenue decreased $ 3.5 million , or 77.2 % , from $ 4.5 million in 2019 compared to $ 1.0 million in 2020. the decrease reflected the reduction in gps cost of revenue due to a lower volume of gps test deliveries as a result of lower orders . home health care services cost of revenue decreased $ 1.5 million , or 100.0 % , for the year ended december 31 , 2020 compared to the prior year period . this decrease was due to the sale of our home health care services business in june 2019. selling , general and administrative replace_table_token_6_th comparison of the years ended december 31 , 2020 and 2019 selling , general and administrative expenses decreased $ 7.1 million , or 12.7 % , from $ 55.6 million to $ 48.5 million for the years ended december 31 , 2019 and 2020 , respectively . the decrease was attributable to a $ 2.8 million decline in personnel related costs , a $ 1.2 million decrease from the sale of assisteo in june 2019 , a $ 1.5 million decrease in depreciation and amortization related to less fixed asset additions , a $ 1.5 million decrease in shared services costs , and a $ 0.1 million reduction in other costs related to various cost saving measures . - 92 - research and development replace_table_token_7_th comparison of the years ended december 31 , 2020 and 2019 research and development expenses increased $ 3.3 million , or 24.0 % , from $ 13.9
| cash flows the following table sets forth our primary sources and uses of cash for the periods indicated : replace_table_token_15_th - 98 - to date , our operations have been primarily financed through the proceeds from related party promissory notes , the convertible notes , the sale of components of our business , and through equity issuances , including net cash proceeds from our ipo . in june 2016 , we sold 6,900,000 shares of common stock at a price of $ 14.00 per share , which includes 400,000 shares sold to the underwriter upon exercise of their overallotment option to purchase additional shares of our company . we raised net proceeds of $ 83.6 million from our ipo , after underwriting fees , discounts and commissions of $ 4.9 million and other offering costs of $ 8.1 million . in december 2016 , we issued convertible notes to related party and others for aggregate net proceeds of $ 102.7 million , $ 9.9 million from cambridge , and $ 92.8 million from others , after deducting underwriting discounts and commissions and offering costs of $ 4.3 million . in february 2020 , we received $ 47.3 million in proceeds from the sale of our connected care business . operating activities our cash flows from operating activities have been driven by rate of revenue , billings , and collections , the timing and extent of spending to support product development efforts and enhancements to existing services , the timing of general and administrative expenses , and the continuing market acceptance of our solutions . in addition , our net loss in the year ended december 31 , 2020 has been greater than our use of cash for operating activities due to the inclusion of noncash charges . cash used in operating activities of $ 16.9 million in the year ended december 31 , 2020 was a result of our continued investments in enhancements to current products , research and development , sales and marketing , and expenses incurred as a public company , including costs associated with public company reporting and corporate governance requirements .
| Liquidity | 4,895 |
on an ongoing basis , we evaluate these estimates , including those related to health and workers ' compensation insurance claims experience , client bad debts , income taxes , property and equipment , goodwill and other intangibles , and contingent liabilities . we base these estimates on historical experience and on various other assumptions that management believes 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 . we believe the following accounting policies are critical and or require significant judgments and estimates used in the preparation of our consolidated financial statements : · benefits costs – we provide group health insurance coverage to our worksite employees through a national network of carriers including unitedhealthcare ( “ united ” ) , kaiser permanente , blue shield of california , hmsa bluecross blueshield of hawaii , unity health plan and tufts , all of which provide fully insured policies or service contracts . the health insurance contract with united provides the majority of our health insurance coverage . as a result of certain contractual terms , we have accounted for this plan since its inception using a partially self-funded insurance accounting model . accordingly , we record the costs of the united plan , including an estimate of the incurred claims , taxes and administrative fees ( collectively the “ plan costs ” ) , as benefits expense in the consolidated statements of operations . the estimated incurred claims are based upon : ( i ) the level of claims processed during the quarter ; ( ii ) estimated completion rates based upon recent claim development patterns under the plan ; and ( iii ) the number of participants in the plan , including both active and cobra enrollees . each reporting period , changes in the estimated ultimate costs resulting from claim trends , plan design and migration , participant demographics and other factors are incorporated into the benefits costs . additionally , since the plan 's inception , under the terms of the contract , united establishes cash funding rates 90 days in advance of the beginning of a reporting quarter . if the plan costs for a reporting quarter are greater than the premiums paid and owed to united , a deficit in the plan would be incurred and we would accrue a liability for the excess costs on our consolidated balance sheets . on the other hand , if the plan costs for the reporting quarter are less than the premiums paid and owed to united , a surplus in the plan would be incurred and we would record an asset for the excess premiums on our consolidated balance sheets . the terms of the arrangement with united require us to maintain an accumulated cash surplus in the plan of $ 9.0 million , which is reported as long-term prepaid insurance . as of december 31 , 2011 , plan costs were less than the premiums paid and owed to united by $ 24.0 million . as this amount is in excess of the agreed-upon $ 9.0 million surplus maintenance level , the $ 15.0 million balance is included in prepaid insurance , a current asset , on our consolidated balance sheets . the premiums owed to united at december 31 , 2011 , were $ 6.1 million , which is included in accrued health insurance costs , a current liability , on our consolidated balance sheets . - 32 - we believe the use of recent claims activity is representative of incurred and paid trends during the reporting period . the estimated completion rate used to compute incurred but not reported claims involves a significant level of judgment . accordingly , an increase ( or decrease ) in the completion rates used to estimate the incurred claims would result in an increase ( or decrease ) in benefits costs and net income would decrease ( or increase ) accordingly . the following table illustrates the sensitivity of changes in the completion rates on our estimate of total benefit costs of $ 862.1 million in 2011 : replace_table_token_8_th · workers ' compensation costs – since october 1 , 2007 , our workers ' compensation coverage has been provided through our arrangement with the ace group of companies ( “ ace ” ) . under our arrangement with ace ( the “ ace program ” ) , we bear the economic burden for the first $ 1 million layer of claims per occurrence , and effective october 1 , 2010 , we also bear the economic burden for a maximum aggregate amount of $ 5 million per policy year for claim amounts that exceed the first $ 1 million . ace bears the economic burden for all claims in excess of these levels . the ace program is a fully insured policy whereby ace has the responsibility to pay all claims incurred under the policy regardless of whether we satisfy our responsibilities . our coverage from september 1 , 2003 through september 30 , 2007 was provided through selected member insurance companies of american international group , inc. ( the “ aig program ” ) . because we bear the economic burden for claims up to the levels noted above , such claims , which are the primary component of our workers ' compensation costs , are recorded in the period incurred . workers ' compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury . accordingly , the accrual of related incurred costs in each reporting period includes estimates , which take into account the ongoing development of claims and therefore requires a significant level of judgment . story_separator_special_tag during 2011 , new client sales , client retention and the net change in existing clients all improved as compared to 2010. as a result , our average number of paid worksite employees increased 9.2 % in 2011 compared to 2010. gross profit gross profit increased 17.8 % to $ 351.8 million compared to 2010. the average gross profit per worksite employee increased 8.2 % to $ 251 per month in 2011 versus $ 232 in 2010. our pricing objectives attempt to maintain or improve the gross profit per worksite employee by increasing revenue per worksite employee to match or exceed changes in primary direct costs and operating expenses . while our revenues per worksite employee per month increased 5.3 % to $ 1,410 in 2011 versus 2010 , our direct costs , which primarily include payroll taxes , benefits and workers ' compensation expenses , increased 4.7 % to $ 1,159 per worksite employee per month . the primary direct cost components changed as follows : · benefits costs – the cost of group health insurance and related employee benefits increased $ 23 per worksite employee per month , or 4.8 % , on a per covered employee basis compared to 2010. these results were favorably impacted by a decrease in the number of cobra participants . the number of participants electing cobra coverage in the united plan declined from 5.5 % in the fourth quarter of 2010 to 3.2 % in the fourth quarter of 2011 , due primarily to the august 2011 expiration of the 65 % federal premium subsidy provided to cobra eligible participants under the arra . historically , the net costs of cobra claims per enrollee are approximately double the cost of claims associated with active enrollees . the percentage of worksite employees covered under our health insurance plan was 73.7 % in 2011 versus 74.3 % in 2010. please read “ —critical accounting policies and estimates – benefits costs ” for a discussion of our accounting for health insurance costs . · workers ' compensation costs – workers ' compensation costs increased 3.0 % , but decreased $ 2 per worksite employee per month compared to 2010. as a percentage of non-bonus payroll cost , workers ' compensation costs decreased to 0.54 % in 2011 from 0.60 % in 2010. during 2011 , we recorded reductions in workers ' compensation costs of $ 11.4 million , or 0.13 % of non-bonus payroll costs , for changes in estimated losses related to prior reporting periods , compared to $ 6.2 million , or 0.08 % of non-bonus payroll costs in 2010. the 2011 period costs include the impact of a 1.1 % discount rate used to accrue workers ' compensation loss claims , compared to a 1.4 % discount rate used in the 2010 period . please read “ —critical accounting policies and estimates – workers ' compensation costs ” for a discussion of our accounting for workers ' compensation costs . · payroll tax costs – payroll taxes increased 15.7 % , or $ 28 per worksite employee per month compared to 2010. payroll taxes as a percentage of payroll cost increased from 7.11 % in 2010 to 7.15 % in 2011. the increase in payroll tax costs was due primarily to a 15.1 % increase in total payroll cost in 2011 as compared to 2010. operating expenses the following table presents certain information related to our operating expenses : replace_table_token_12_th operating expenses increased 12.6 % to $ 294.5 million compared to 2010. the 2011 operating expenses included $ 11.8 million related to our rebranding initiative and $ 9.2 million associated with acquisitions completed in late 2010 and early 2011. operating expenses per worksite employee per month increased to $ 210 in 2011 versus $ 204 in 2010. the components of operating expenses changed as follows : - 37 - · salaries , wages and payroll taxes of corporate and sales staff increased 5.7 % , but decreased $ 4 per worksite employee per month compared to 2010. the overall increase was primarily due to a 7.4 % rise in headcount related to our abu strategy and associated acquisitions , offset by a decrease in incentive compensation . · stock-based compensation increased 5.8 % , but remained flat on a per worksite employee per month basis compared to 2010 , due primarily to an increase in the weighted average market value on the date of grant associated with restricted awards . the stock-based compensation expense represents amortization of restricted stock awards granted to employees and the annual stock grant made to non-employee directors . please read note 1 to the consolidated financial statements , “ accounting policies , ” for additional information . · commissions expense increased 13.2 % , or $ 1 per worksite employee per month compared to 2010 , primarily due to a 9 % increase in the average number of worksite employees paid per month and an $ 0.8 million increase in abu commissions . · advertising costs increased 61.8 % , or $ 6 per worksite employee per month compared to 2010 , primarily due to advertising and business promotions related to our rebranding initiative . · general and administrative expenses increased 19.2 % , or $ 4 per worksite employee per month , primarily due to increased travel and training , costs associated with our rebranding initiative , increased consulting and costs associated with acquisitions made in late 2010 and early 2011 . · depreciation and amortization expense increased 2.1 % , but decreased $ 1 per worksite employee per month compared to the 2010 period . other income ( expense ) other expense was $ 6.5 million in 2011 compared to other income of $ 961,000 in 2010 , primarily due to a $ 4.4 million loss related to the exchange of an aircraft and a $ 3.1 million loss related to a settlement with the edd in the third quarter of 2011. please read note
| · workers ' compensation plan funding – under our workers ' compensation insurance arrangements , we make monthly payments to the carriers comprised of premium costs and funds to be set aside for payment of future claims ( “ claim funds ” ) . these pre-determined amounts are stipulated in our agreements with the carriers , and are based primarily on anticipated worksite employee payroll levels and workers ' compensation loss rates during the policy year . changes in payroll levels from those that were anticipated in the arrangements can result in changes in the amount of the cash payments , which will impact our reporting of operating cash flows . our claim funds paid , based upon anticipated worksite employee payroll levels and workers ' compensation loss rates , were $ 41.5 million in 2011 and $ 40.3 million in 2010. however , our estimates of workers ' compensation loss costs were $ 35.3 million and $ 32.7 million in 2011 and 2010 , respectively . during 2011 and 2010 , we received $ 10.0 million and $ 15.6 million , respectively , for the return of excess claim funds related to the workers ' compensation program , which resulted in an increase to working capital . · medical plan funding – our health care contract with united establishes participant cash funding rates 90 days in advance of the beginning of a reporting quarter . therefore , changes in the participation level of the united plan have a direct impact on our operating cash flows .
| Liquidity | 10,209 |
f-6 esperion therapeutics , inc. notes to financial statements 1. the company and basis of presentation the company is the lipid management company , a late-stage pharmaceutical company focused on developing and commercializing complementary , cost-effective , convenient , once-daily , oral therapies for the treatment of patients with elevated low density lipoprotein cholesterol ( `` ldl-c `` ) . through scientific and clinical excellence , and a deep understanding of cholesterol biology , the experienced lipid management team at esperion is committed to developing new ldl-c lowering therapies that will make a substantial impact on reducing global cardiovascular disease ( `` cvd `` ) ; the leading cause of death around the world . bempedoic acid and the company 's lead product candidate , the bempedoic acid / ezetimibe combination tablet , are targeted therapies that have been shown to significantly lower elevated ldl-c levels in patients with hypercholesterolemia , including patients inadequately treated with current lipid-modifying therapies . the completed clinical development program for an ldl-c lowering indication for the bempedoic acid / ezetimibe combination tablet consisted of a single pivotal phase 3 clinical study ( 1002fdc-053 ) in patients with hypercholesterolemia and with atherosclerotic cardiovascular disease ( `` ascvd `` ) and or heterozygous familial hypercholesterolemia ( `` hefh `` ) , including high cvd risk primary prevention patients , whose ldl-c is not adequately controlled despite receiving maximally tolerated lipid-modifying background therapy . 1002fdc-053 initiated in november 2017 , fully enrolled 382 patients in march 2018 , and the company reported top-line results in august 2018. the completed global pivotal phase 3 clinical development program for an ldl-c lowering indication for bempedoic acid consisted of four clinical studies in 3,621 high cvd risk patients with hypercholesterolemia and ascvd and or hefh , or who are high cvd risk primary prevention , on optimized background lipid-modifying therapy and with elevated levels of ldl-c. these patients are on two distinct types of background lipid-modifying therapy : 1 ) patients on their maximally tolerated statin therapy , and 2 ) patients who are only able to tolerate less than the lowest approved daily starting dose of a statin , and can be considered stain intolerant . in march 2018 , the company reported top-line results from the first of the phase 3 studies , study 4 ( 1002-048 ) . in may 2018 , the company reported top-line results from the 52-week long-term safety study , study 1 ( 1002-040 ) , and from study 3 ( 1002-046 ) . in october 2018 , the company reported top-line results from study 2 ( 1002-047 ) . on february 20 , 2019 , the company submitted the new drug application ( `` nda `` ) for bempedoic acid and on february 26 , 2019 , the company submitted the nda for the bempedoic acid / ezetimibe combination tablet to the food and drug administration ( `` fda `` ) for ldl-c lowering indications . in addition , the european medicines agency ( `` ema `` ) completed formal validation of the marketing authorization applications ( `` maas `` ) for bempedoic acid and the bempedoic acid / ezetimibe combination tablet for ldl-c lowering indications . the maas for bempedoic acid and the bempedoic acid / ezetimibe combination tablet were submitted to the ema on february 11 , 2019. the company is also conducting a global cardiovascular outcomes trial ( `` cvot `` ) known as cholesterol lowering via bempedoic acid , an acl-inhibiting regimen ( clear ) outcomes , for bempedoic acid in 12,604 patients with hypercholesterolemia and high cvd risk and who can be considered statin intolerant . the company initiated the clear outcomes cvot in december 2016 and expects the study to be fully enrolled in 2019 , and intends to use positive results from this cvot to support submissions for a cv risk reduction indication in the u.s. and europe by 2022. the company 's primary activities since incorporation have been conducting research and development activities , including nonclinical , preclinical and clinical testing , performing business and financial planning , recruiting personnel , and raising capital . accordingly , the company has not f-7 esperion therapeutics , inc. notes to financial statements ( continued ) 1. the company and basis of presentation ( continued ) commenced principal operations and is subject to risks and uncertainties which include the need to research , develop , and clinically test potential therapeutic products ; obtain regulatory approvals for its products and commercialize them , if approved ; expand its management and scientific staff ; and finance its operations with an ultimate goal of achieving profitable operations . the company has sustained operating losses since inception and expects such losses to continue over the foreseeable future . while management believes current cash resources and future cash received from the company 's collaboration agreement with daiichi sankyo europe gmbh ( `` dse `` ) , entered into on january 2 , 2019 , will fund operations for the foreseeable future , management may continue to fund operations and advance the development of the company 's product candidates through a combination of collaborations with third parties , strategic alliances , licensing arrangements , debt financings , royalty-based financings , and private and public and equity offerings or through other sources . if adequate funds are not available , the company may not be able to continue the development of its current or future product candidates , or to commercialize its current or future product candidates , if approved . follow on offerings on august 15 , 2017 , the company completed an underwritten public offering of 3,100,000 shares of common stock . story_separator_special_tag we adopted asu 2017-09 effective january 1 , 2018. the adoption of the asu did not have a material impact on our balance sheets , statements of operations or statements of cash flows . in august 2018 , the fasb issued asu 2018-15 which includes provisions to clarify customer 's accounting for implementation costs incurred in a cloud computing arrangement . under the updated guidance , a customer in a cloud computing arrangement that is a service contract should follow the internal-use software guidance to determine how to account for costs incurred in implementation . the updated guidance also requires certain classification on the balance sheets , statements of operations and statements of cash flows as well as additional quantitative and qualitative disclosures . the standard is effective for public companies for fiscal years beginning after december 15 , 2019 , and interim periods within those years . early adoption is permitted and entities can choose to adopt the new guidance prospectively or retrospectively . we do not believe the adoption of this standard will have a material impact on our balance sheets , statements of operations or statements of cash flows . 87 results of operations comparison of the years ended december 31 , 2018 and 2017 the following table summarizes our results of operations for the years ended december 31 , 2018 and 2017 : replace_table_token_29_th research and development expenses research and development expenses for the year ended december 31 , 2018 , were $ 171.5 million compared to $ 147.6 million for the year ended december 31 , 2017 , an increase of $ 23.9 million . the increase in research and development expenses was primarily related to clinical development costs for the bempedoic acid / ezetimibe combination tablet and bempedoic acid , including continued costs to support the completion of four global pivotal phase 3 studies for bempedoic acid and the pivotal phase 3 study for the bempedoic acid / ezetimibe combination tablet , the ongoing clear outcomes cvot , and increases in our headcount and stock-based compensation expense . general and administrative expenses general and administrative expenses for the year ended december 31 , 2018 , were $ 33.1 million compared to $ 21.4 million for the year ended december 31 , 2017 , an increase of $ 11.7 million . the increase in general and administrative expenses was primarily attributable to costs to support public company operations , including costs to support pre-commercialization activities , further increases in our headcount and stock-based compensation expense , and other costs to support our growth . other income , net other income , net for the year ended december 31 , 2018 , was $ 2.8 million compared to $ 2.0 million for the year ended december 31 , 2017. this increase was primarily related to an increase in interest income earned on our cash , cash equivalents and investment securities and a reduction in expense for the amortization of premiums and discounts on our investments . 88 results of operations comparison of the years ended december 31 , 2017 and 2016 the following table summarizes our results of operations for the years ended december 31 , 2017 and 2016 : replace_table_token_30_th research and development expenses research and development expenses for the year ended december 31 , 2017 , were $ 147.6 million compared to $ 57.9 million for the year ended december 31 , 2016 , an increase of $ 89.7 million . the increase in research and development expenses was primarily related to the further clinical development of the bempedoic acid / ezetimibe combination tablet and bempedoic acid , including costs to support the global pivotal phase 3 studies , the clear outcomes cvot , and increases in our headcount and stock-based compensation expense . general and administrative expenses general and administrative expenses for the year ended december 31 , 2017 , were $ 21.4 million compared to $ 18.3 million for the year ended december 31 , 2016 , an increase of approximately $ 3.1 million . the increase in general and administrative expenses was primarily attributable to costs to support public company operations , further increases in our headcount and stock-based compensation expense , and other costs to support our growth . other income , net other income , net for the year ended december 31 , 2017 , was $ 2.0 million compared to $ 1.2 million for the year ended december 31 , 2016. this increase was primarily related to a reduction in expense for the amortization of premiums and discounts on our investments and a reduction in our interest expense related to our credit facility with oxford finance llc . story_separator_special_tag the costs of preparing , filing and prosecuting patent applications , maintaining and enforcing our intellectual property rights and defending intellectual property-related claims ; and the implementation of operational and financial information technology . until such time , if ever , as we can generate substantial product revenues , we may finance our future cash needs through a combination of collaborations with third parties , strategic alliances , licensing arrangements , debt financings and equity offerings or other sources . we do not have any committed external source of funds . to the extent that we raise additional capital through the sale of equity or convertible debt securities , the ownership interest of our stockholders will be diluted , and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder . debt financing , if available , may involve agreements that include covenants limiting or restricting our ability to take specific actions , such as incurring additional debt , making capital expenditures or declaring dividends . if we raise additional funds through collaborations , strategic alliances or licensing arrangements with pharmaceutical partners or royalty-based financing arrangements , such as the collaboration arrangement with dse , we may have to relinquish valuable rights to our technologies , future revenue streams
| pursuant to the license and collaboration agreement with dse , the consideration consists of an upfront cash payment of $ 150 million in 2019 from dse and we are eligible for substantial additional sales and regulatory milestone payments and royalties , including an 90 additional $ 150 million upon first commercial sale in the dse territory . we estimate that current cash resources , and proceeds to be received in the future under the dse collaboration agreement , are sufficient to fund operations through the expected approvals of the bempedoic acid / ezetimibe combination tablet and bempedoic acid and the commercialization of the bempedoic acid / ezetimibe combination tablet and bempedoic acid , if approved , by ldl-c lowering as a surrogate endpoint . we may , however , need to secure additional cash resources to continue to fund the commercialization and further development of the bempedoic acid / ezetimibe combination tablet and bempedoic acid . we have based these estimates on assumptions that may prove to be wrong , and we may use our available capital resources sooner than we currently expect . because of the numerous risks and uncertainties associated with the development and commercialization of the bempedoic acid / ezetimibe combination tablet and bempedoic acid and the extent to which we entered and may enter into collaborations with pharmaceutical partners regarding the development and commercialization of the bempedoic acid / ezetimibe combination tablet and bempedoic acid , we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development and commercialization of the bempedoic acid / ezetimibe combination tablet and bempedoic acid . our future funding requirements will depend on many factors , including , but not limited to : our ability to successfully develop and commercialize the bempedoic acid / ezetimibe combination tablet and bempedoic acid or other product candidates ; the costs , timing and outcomes of our clear outcomes cvot and other ongoing clinical studies of the bempedoic acid / ezetimibe combination tablet and bempedoic acid ; the time and cost necessary to obtain regulatory approvals for the bempedoic acid / ezetimibe combination tablet and bempedoic acid , if at all ; our ability to establish a sales , marketing and distribution infrastructure to commercialize the bempedoic acid / ezetimibe combination tablet and bempedoic acid or our ability to establish any future collaboration or commercialization arrangements on favorable terms , if at all ; our ability to realize the intended benefits of our existing and future collaboration and partnerships ;
| Liquidity | 7,186 |
for example , the epa issued an advanced notice of proposed rulemaking seeking comment on its intent to develop regulations under the toxic substances control act to require companies to disclose information regarding the chemicals used in hydraulic fracturing , and proposed effluent limitations for the disposal of wastewater from unconventional resources to publicly owned treatment works . in addition , the u.s. department of the interior ( “ doi ” ) published a rule that updates existing regulation of hydraulic fracturing activities on federal lands , including requirements for disclosure , well bore integrity and handling of flowback water . this rule has been stayed pending the resolution of various legal challenges . the epa is conducting a study of the potential impacts of hydraulic fracturing activities on drinking water . the epa released a draft report for peer review and public comment in 2015. as part of this study , the epa requested that certain companies provide them with information concerning the chemicals used in the hydraulic fracturing process . this study and other studies that may be undertaken by the epa or other governmental authorities , depending on their results , could spur initiatives to regulate hydraulic fracturing under the sdwa or otherwise . if new federal , state or local laws or regulations that significantly restrict hydraulic fracturing are adopted , such legal requirements could result in delays , eliminate certain drilling and injection activities and make it more difficult or costly for our customers to perform fracturing . any such regulations limiting or prohibiting hydraulic fracturing could reduce oil and natural gas exploration and production activities by our customers and , therefore , adversely affect our business . such laws or regulations could also materially increase our costs of compliance and doing business by more strictly regulating how hydraulic fracturing wastes are handled or disposed . oil and natural gas producers ' operations , especially those using hydraulic fracturing , are substantially dependent on the availability of water . restrictions on the ability to obtain water may incentivize water recycling efforts by oil and natural gas producers which would decrease the volume of saltwater delivered to our swd facilities . water is an essential component of oil and natural gas production during the drilling , and in particular , hydraulic fracturing , process . however , the availability of suitable water supplies may be limited for oil and natural gas producers due to reasons such as prolonged drought . for example , according to the lower colorado river authority , during 2011 , texas experienced the lowest inflows of water of any year in recorded history . as a result of this severe drought , some local water districts have begun restricting the use of water subject to their jurisdiction for hydraulic fracturing to protect local water supplies . in response to continuing drought conditions in 2015 , 2014 and 2013 , the texas legislature considered a number of bills that would have mandated recycling of flowback and produced water and or prohibits recyclable water from being disposed of in wells . if oil and natural gas producers in texas are unable to obtain water to use in their operations from local sources , they may be incentivized to recycle and reuse saltwater instead of delivering such saltwater to our texas swd facilities ( or in other states that adopt similar programs ) . similarly , mandatory recycling programs could reduce the amount of materials sent to us for treatment and disposal . any such limits or mandates could adversely affect our business and results of operations . 26 increased attention to seismic activity associated with hydraulic fracturing and underground disposal could result in additional regulations and ad versely impact demand for our services . there exists a growing concern that the underground injection of produced water into disposal wells has triggered seismic activity in certain areas . some states , including texas , have promulgated rules or guidance in response to these concerns . in texas , the texas railroad commission ( “ trc ” ) published a final rule in october 2014 governing permitting or re-permitting of disposal wells that will require , among other things , the submission of information on seismic events occurring within a specified radius of the disposal well location , as well as logs , geologic cross sections and structure maps relating to the disposal area in question . if the permittee or an applicant of a disposal well permit fails to demonstrate that the injected fluids are confined to the disposal zone or if scientific data indicates such a disposal well is likely to be or determined to be contributing to seismic activity , then the trc may deny , modify , suspend or terminate the permit application or existing operating permit for that well . these new seismic permitting requirements applicable to disposal wells impose more stringent permitting requirements and are likely to result in added costs to comply or , perhaps , may require alternative methods of disposing of salt water and other fluids , which could delay production schedules and also result in increased costs . additional regulatory measures designed to minimize or avoid damage to geologic formations may be imposed to address such concerns . we and our customers may incur significant liability under , or costs and expenditures to comply with , environmental regulations , which are complex and subject to frequent change . our and our customer 's operations are subject to stringent federal , state , provincial and local laws and regulations relating to , among other things , protection of natural resources , wetlands , endangered species , the environment , waste management , waste disposal , and transportation of waste and other materials . story_separator_special_tag any fines or third-party claims resulting from any such on-site accidents could have a material adverse effect on our business . in addition , while an inspector is performing pipeline inspection or integrity services for us , the inspector is considered our employee and is eligible for workers ' compensation claims if the inspector is injured or killed while working for us . as the inspectors generally travel to and from projects in their own vehicles , we may be responsible for workers compensation claims or third-party claims arising out of vehicle accidents , which could negatively affect our results of operations . unsatisfactory safety performance may negatively affect our customer relationships and , to the extent we fail to retain existing customers or attract new customers , adversely impact our revenues . our ability to retain existing customers and attract new business is dependent on many factors , including our ability to demonstrate that we can reliably and safely operate our business and stay current on constantly changing rules , regulations , training , and laws . existing and potential customers consider the safety record of their service providers to be of high importance in their decision to engage third-party servicers . if one or more accidents were to occur at one of our operating sites , or pipelines or gathering systems we inspect , the affected customer may seek to terminate or cancel its use of our facilities or services and may be less likely to continue to use our services , which could cause us to lose substantial revenues . further , our ability to attract new customers may be impaired if they elect not to purchase our third-party services because they view our safety record as unacceptable . in addition , it is possible that we will experience numerous or particularly severe accidents in the future , causing our safety record to deteriorate . this may be more likely as we continue to grow , if we experience high employee turnover or labor shortage , or add inexperienced personnel . in addition , we could be subject to liability for damages as a result of such accidents and could incur penalties or fines for violations of applicable safety laws and regulations . 29 our business involves many hazards , operational risks and regulatory uncertainties , some of which may not be fully covered by insurance . if a significant accident or event occurs for which we are not adequately insured or if we fail to recover all anticipated insurance proceeds for significant accidents or events for which we are insured , our operations and financial results could be adversely affected . risks inherent to our industry , such as equipment defects , vehicle accidents , explosions , earthquakes , lightning strikes and incidents related to the handling of fluids and wastes , can cause personal injury , loss of life , suspension of operations , damage to formations , damage to facilities , business interruption and damage to or destruction of property , equipment and the environment . we use fiberglass tanks at our swd facilities because fiberglass is less corrosive than other materials traditionally utilized . these tanks are , however , more prone to lighting strikes than traditional tanks , as a result of fiberglass ' tendency to store static electricity . the lightning protection systems we employ may not succeed in preventing lightning from damaging a facility . the risks associated with these types of accidents could expose us to substantial liability for personal injury , wrongful death , property damage , pollution and other environmental damages . the frequency and severity of such incidents will affect operating costs , insurability and relationships with employees and regulators . our insurance coverage may be inadequate to cover our liabilities . for instance , while our insurance policies apply to and cover costs imposed on us by retroactive changes in governmental regulations , the costs we incur as a result of such regulatory changes can not be known in advance and may exceed our coverage limitations . in addition , we may not be able to maintain adequate insurance in the future at rates we consider reasonable and commercially justifiable and insurance may not continue to be available on terms as favorable as our current arrangements . the occurrence of a significant uninsured claim , a claim in excess of the insurance coverage limits maintained by us or a claim at a time when we are not able to obtain liability insurance could have a material adverse effect on our ability to conduct normal business operations and on our financial condition , results of operations and cash flows . in some cases , electrical storms can damage facility motors or electronics , and it may not be possible to prove to the insurance carrier that such storm caused the damage . we do not carry business interruption insurance on our swd facilities and as a result , could suffer a significant loss in revenue that could impact our ability to pay distributions on our units . accidents or incidents related to the handling of hydraulic fracturing fluids , saltwater or other wastes are covered by our insurance against claims made for bodily injury , property damage or environmental damage and clean-up costs stemming from a sudden and accidental pollution event , provided that we report the event within 30 days after its commencement . the coverage applies to incidents the company is legally obligated to pay resulting from pollution conditions caused by covered operations . we may not have coverage if the operator is unaware of the pollution event and unable to report the “ occurrence ” to the insurance company within the required time frame . although we have coverage for gradual , long-term pollution events at certain locations , this coverage does not extend to all places where we may be located or where we may do business . we also may have
| during subordination period our partnership agreement requires that we make distributions of available cash from operating surplus for any quarter in the following manner during the subordination period : ● first , 100.0 % to the common unitholders , pro rata , until we distribute for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter ; ● second , 100.0 % to the common unitholders , pro rata , until we distribute for each outstanding common unit an amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period ; ● third , 100.0 % to the subordinated unitholders , pro rata , until we distribute for each subordinated unit an amount equal to the minimum quarterly distribution for that quarter ; and ● thereafter , in the manner described in “ general partner interest and incentive distribution rights ” below . 46 the preceding discussion is based on the assumptions that we do not issue additional classes of equity securities . unless earlier terminated pursuant to the terms of our partnership agreement , the subordination period will extend until the first business day of any quarter beginning after december 31 , 2016 , that the partnership meets the financial tests set forth in the partnership agreement , but may end sooner if the partnership meets additional financial tests .
| Liquidity | 4,135 |
in addition , we also sell our products through broadband service providers , such as multiple system operators ( “ msos ” ) , dsl , and other broadband technology operators domestically and internationally . some of these retailers and broadband service providers purchase directly from us , while others are fulfilled through wholesale distributors around the world . a substantial portion of our net revenue to date has been derived from a limited number of wholesale distributors and retailers , including ingram micro and best buy . we expect that these wholesale distributors and retailers will continue to contribute a significant percentage of our net revenue for the foreseeable future . in 2013 , we continued to grow the business . on april 2 , 2013 , we acquired the select assets and operations of the sierra wireless , inc. aircard business ( `` aircard `` ) , including customer relationships , certain intellectual property , inventory and property and equipment . we added 161 aircard employees as a result of the acquisition . we believe the aircard acquisition will accelerate the mobile initiative of our service provider business unit to become a global leader in providing the latest in lte data networking access devices . the acquisition qualified as a business combination and was accounted for using the acquisition method of accounting . on june 21 , 2013 , we acquired certain assets and operations of arada systems , inc. ( “ arada ” ) . we believe the arada acquisition will bolster our wireless product offerings in our commercial business unit and strengthen our market position in the small to medium size campus wireless lan market . the acquisition qualified as a business combination and was accounted for using the acquisition method of accounting . 37 during the fourth quarter of 2013 , we incurred a restructuring charge of appropriately $ 3.2 million related to the consolidation of certain teams and locations to drive efficiencies and realign resources to better focus on key growth markets . as always , we remain focused on long term growth driven by our mission to connect everyone to the high speed internet . we will continue to invest in the growth markets of the smart home , access networks for cloud computing and lte gateways . we experienced revenue growth of 7.7 % during fiscal year 2013 . the increase in net revenue was primarily attributable to increased sales of our mobile products acquired through our acquisition of aircard , home security monitoring and automation products , and switches , partially offset by a decrease in sales of our broadband gateways . on a geographic basis , net revenue increased in the americas and apac regions , and decreased in the emea region . on a segment basis , net revenues from all business units increased . the increase in service provider business unit net revenue was largely driven by our mobile products acquired through our acquisition of aircard . the increase in commercial business unit net revenue was primarily due to increased sales of our switches . the increase in retail business unit net revenue was primarily due to increased sales of our multimedia products . looking forward , we expect to see continued success in our retail business unit , driven by sales of our high-end ac wifi router , which will expand to both europe and asia , and our two new range extenders , which will be introduced worldwide in the first quarter of 2014. we also expect to see growth in our commercial business unit , driven by our 10gig and poe switches as well as high end storage products . in addition , we remain positive on the product opportunities from combining aircard 's engineering strength in lte and netgear 's strength in wifi . critical accounting policies and estimates our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the united states of america and pursuant to the rules and regulations of the sec . the preparation of these financial statements requires management to make assumptions , judgments and estimates that can have a significant impact on the reported amounts of assets , liabilities , revenues and expenses . we base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances . actual results could differ significantly from these estimates . these estimates may change as new events occur , as additional information is obtained and as our operating environment changes . on a regular basis we evaluate our assumptions , judgments and estimates and make changes accordingly . we also discuss our critical accounting estimates with the audit committee of the board of directors . note 1 , the company and summary of significant accounting policies , of the notes to consolidated financial statements of this annual report on form 10-k describes the significant accounting policies used in the preparation of the consolidated financial statements . we have listed below our critical accounting policies that we believe to have the greatest potential impact on our consolidated financial statements . historically , our assumptions , judgments and estimates relative to our critical accounting policies have not differed materially from actual results . revenue recognition refer to note 1 , the company and summary of significant accounting policies , of the notes to consolidated financial statements of this annual report on form 10-k for a discussion of our revenue recognition policies . revenue from product sales is generally recognized at the time the product is shipped , provided that persuasive evidence of an arrangement exists , title and risk of loss has transferred to the customer , the selling price is fixed or determinable and collection of the related receivable is reasonably assured . story_separator_special_tag the increase in net revenue was primarily attributable to increased sales of our mobile products acquired through our acquisition of aircard , home security monitoring and automation products , and switches , partially offset by a decrease in sales of our broadband gateways . we experienced an increase in revenues in the americas and apac regions , and a decrease in emea . in addition , our service provider , retail and commercial business increased year-over-year . 2012 vs 2011 net revenue increased $ 90.9 million , or 7.7 % , to $ 1.27 billion for the year ended december 31 , 2012 , from $ 1.18 billion for the year ended december 31 , 2011. the increase in net revenue was primarily attributable to increased sales of broadband gateway products and home wireless products , partially offset by a decrease in sales of our network storage products . refer to `` net revenue by geographic region `` and `` segment information `` for further discussion of net revenue by geographic region and segment respectively . net revenue by geographic region replace_table_token_12_th 2013 vs 2012 the increase in americas net revenue was primarily attributable to increased sales of our mobile products acquired through our acquisition of aircard , home security monitoring and automation products , and switches , partially offset by a decrease in sales of our broadband gateways . the decrease in emea net revenue was primarily attributable to a decrease in sales of our broadband gateways and home wireless products . the decrease in sales of our broadband gateways is partially due to the consolidation among cable operators in europe in the second half of 2013. the increase in apac was primarily attributable to increased sales of our mobile products acquired through our acquisition of aircard , home wireless products , and switches , partially offset by a decrease in sales of our broadband gateways . americas continues to represent the largest percentage of our net revenues , and apac increased as a percentage of revenue , primarily due to growth in the region . emea decreased as a percentage of revenues as we continued to see macroeconomic weakness in the european market . 43 2012 vs 2011 the increase in americas net revenue was primarily driven by our retail products and sales to our service provider customers . the decrease in emea net revenue was primarily attributable to a decrease in sales of our commercial products and , to a lesser extent , a decrease in sales of our retail products , primarily driven by a challenging economic environment in europe . the increase in apac net revenue was primarily attributable to increased sales to our service provider customers . cost of revenue and gross margin cost of revenue consists primarily of the following : the cost of finished products from our third party manufacturers ; overhead costs , including purchasing , product planning , inventory control , warehousing and distribution logistics ; third-party software licensing fees ; inbound freight ; warranty costs associated with returned goods ; write-downs for excess and obsolete inventory and amortization expense of certain acquired intangibles . we outsource our manufacturing , warehousing and distribution logistics . we believe this outsourcing strategy allows us to better manage our product costs and gross margin . our gross margin can be affected by a number of factors , including fluctuation in foreign exchange rates , sales returns , changes in average selling prices , end-user customer rebates and other sales incentives , and changes in our cost of goods sold due to fluctuations in prices paid for components , net of vendor rebates , warranty and overhead costs , inbound freight , conversion costs and charges for excess or obsolete inventory . the following table presents costs of revenue and gross margin , for the periods indicated : replace_table_token_13_th 2013 vs 2012 cost of revenue increased $ 87.7 million , or 9.9 % , to $ 976.0 million for the year ended december 31 , 2013 , from $ 888.4 million for the year ended december 31 , 2012 . our gross margin decreased to 28.7 % for the year ended december 31 , 2013 , from 30.2 % for the year ended december 31 , 2012 . the decrease in gross margin percentage was primarily attributable to relatively faster growth in revenue from service providers , which generally carries lower gross margins than our other products . sales to service providers increased as a percentage of net revenue to 40.0 % in the year ended december 31 , 2013 , compared to 36.1 % in the year ended december 31 , 2012 , which was primarily attributable to our acquisition of aircard . also contributing to the decrease in gross margin were increases of $ 4.0 million in intangibles amortization expense , primarily attributable to assets acquired from aircard and arada and $ 3.5 million increase in freight costs , as well as $ 3.3 million in excess and obsolete inventory charges . 2012 vs 2011 cost of revenue increased $ 76.8 million , or 9.5 % , to $ 888.4 million for the year ended december 31 , 2012 , from $ 811.6 million for the year ended december 31 , 2011. our gross margin decreased to 30.2 % for the year ended december 31 , 2012 , from 31.3 % for the year ended december 31 , 2011. the decrease in gross margin was primarily attributable to relatively faster growth in our revenue from service providers , which generally carries lower gross margins than our other products . sales to service providers increased as a percentage of net revenue to 36.1 % in the year ended december 31 , 2012 , compared to 31.1 % in the year ended december 31 , 2011 . 44 operating expenses research and development expense research and development expenses consist primarily of personnel expenses , payments to suppliers for design services , safety and regulatory
| liquidity and capital resources as of december 31 , 2013 , we had cash , cash equivalents and short-term investments totaling $ 248.2 million . our cash and cash equivalents balance decreased from $ 149.0 million as of december 31 , 2012 to $ 143.0 million as of december 31 , 2013 . our short-term investments , which represent the investment of funds available for current operations , decreased from $ 227.8 million as of december 31 , 2012 to $ 105.1 million as of december 31 , 2013 . the decrease in cash and cash equivalents and short-term investments are mainly attributable to the aircard and arada acquisitions in the second quarter of 2013 and repurchase of shares in the fourth quarter of 2013. operating activities during the year ended december 31 , 2013 , generated cash of $ 86.9 million . investing activities during the year ended december 31 , 2013 used $ 39.7 million , mainly due to the payments made in connection with business acquisitions of $ 147.2 million , primarily related to the aircard acquisition , and purchases of property and equipment of $ 18.1 million , offset by net proceeds of $ 121.9 million from maturities of short-term investments . during the year ended december 31 , 2013 , financing activities used $ 53.2 million , primarily due to the repurchase of common stock , partially offset by the issuance of our common stock upon exercise of stock options and our employee stock purchase program , as well as the excess tax benefit from exercises and cancellations of stock options . our days sales outstanding as of december 31 , 2013 was 69 days , a decrease from 76 days as of december 31 , 2012 , as a result of our continuous efforts to manage collections . our accounts payable increased from $ 87.3 million at december 31 , 2012 to $ 114.5 million at december 31 , 2013 , primarily as a result of timing of payments . inventory increased from $ 174.9 million at december 31 , 2012 to $ 224.5 million at december 31 , 2013 .
| Liquidity | 9,838 |
however , there is no assurance that we will prevail in any of these pending matters , and we could in the future incur judgments , enter into settlements of claims , or revise our expectations regarding the outcome of these matters , which could materially impact our liquidity and our results of operations . other commitments we enter into contracts which include customary indemnities that are standard for the industries in which we operate . such indemnities include , among other things , customer claims against builders for issues relating to our products and workmanship . in conjunction with divestitures and other transactions , we occasionally provide customary indemnities relating to various items including , among others : the enforceability of trademarks ; legal and environmental issues ; and asset valuations . we evaluate the probability that we may incur liabilities under these customary indemnities and appropriately record an estimated liability when deemed probable . we also maintain indemnification agreements with our directors and officers that may require us to indemnify them against liabilities that arise by reason of their status or service as directors or officers , except as prohibited by applicable law . we occasionally use performance bonds to ensure completion of our work on certain larger customer contracts that can span multiple accounting periods . performance bonds generally do not have stated expiration dates ; rather , we are released from the bonds as the contractual performance is completed . we also have bonds outstanding for license and insurance . for additional information see item 8. financial statements and supplementary data – note 11. other commitments and contingencies . 26 story_separator_special_tag most important to the portrayal of our financial condition and operating results and require our 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 . judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions . we consider the following policies to be most critical in understanding the judgments that are involved in preparing our consolidated financial statements . revenue recognition and receivables we recognize revenue for our installation segment over time as the related performance obligation is satisfied with respect to each particular order within a given customer 's contract . progress toward complete satisfaction of the performance obligation is measured using a cost-to-cost measure of progress method . the cost input is based on the amount of material installed at that customer 's location and the associated labor costs , as compared to the total expected cost for the particular order . revenue is recognized as the customer is able to receive and utilize the benefits provided by our services . each contract contains one or more individual orders , which are based on services delivered . when a contract modification is made , typically the remaining goods or services are considered distinct and we recognize revenue for the modification as a separate performance obligation . when material and installation services are bundled in a contract , we combine these items into one performance obligation as the overall promise is to transfer the combined item . revenue from our distribution segment is recognized when title to products and risk of loss transfers to our customers . this represents the point in time when the customer is able to direct the use of and obtain substantially all the benefits from the product . the determination of when control is deemed transferred depends on the shipping terms that are agreed upon in the contract . 28 at time of sale , we record estimated reductions to revenue for customer programs and incentive offerings , including special pricing and other volume-based incentives based on historical experience , which is continuously adjusted . the duration of our contracts with customers is relatively short , generally less than a 90-day period , and therefore there is not a significant financing component when considering the determination of the transaction price which gets allocated to the individual performance obligations , generally based on standalone selling prices . additionally , we consider shipping costs charged to a customer as a fulfillment cost rather than a promised service and expense as incurred . sales taxes , when incurred , are recorded as a liability and excluded from revenue on a net basis . we record a contract asset when we have satisfied our performance obligation prior to billing and a contract liability when a customer payment is received prior to the satisfaction of our performance obligation . the difference between the beginning and ending balances of our contract assets and liabilities primarily results from the timing of our performance and the customer 's payment . we maintain allowances for doubtful accounts receivable for estimated losses resulting from the inability of customers to make required payments . in addition , we monitor our customer receivable balances and the credit worthiness of our customers on an on-going basis . during downturns in our markets , declines in the financial condition and creditworthiness of customers impact the credit risk of the receivables involved and we have incurred additional bad debt expense related to customer defaults . goodwill and other intangible assets we have two reporting units , which are also our operating and reporting segments : installation and distribution . both reporting units contain goodwill . assets acquired and liabilities assumed are assigned to the applicable reporting unit based on whether the acquired assets and liabilities relate to the operations of and determination of the fair value of such unit . goodwill assigned to the reporting unit is the excess of the fair value of the acquired business over the fair value of the individual assets acquired and liabilities assumed for the reporting unit . story_separator_special_tag we perform our annual impairment testing of goodwill in the fourth quarter of each year , or as events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount . when assessing goodwill for impairment , we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount . if , after assessing the totality of events or circumstances , we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount , then we perform a two-step impairment test . if we conclude otherwise , then no further action is taken . we also have the option to bypass the qualitative assessment and only perform a quantitative assessment , which is the first step of the two-step impairment test . in completing the two-step impairment test , we complete the impairment testing utilizing a discounted cash flow method . we selected this methodology because we believe that it is comparable to what would be used by other market participants . our operating segments are reporting units that engage in business activities for which discrete financial information , including long range forecasts , is available . we have identified our segments as our reporting units and complete the impairment testing of goodwill at the operating segment level , as defined by accounting guidance . fair value for our reporting units is determined using a discounted cash flow method which includes significant unobservable inputs ( level 3 inputs ) . determining market values using a discounted cash flow method requires us to make significant estimates and assumptions , including long term projections of cash flows , market conditions , and appropriate discount rates . our judgments are based on historical experience , current market trends , consultations with external valuation specialists , and other information . while we believe that the estimates and assumptions underlying the valuation methodology are reasonable , changes to estimates and assumptions could result in different outcomes . in estimating future cash flows , we rely on internally generated long range forecasts for sales and operating profits , and generally a one to three percent long term assumed annual growth rate of cash flows for periods after the long range forecast . we generally develop these forecasts based upon , among other things , recent sales data for existing products , and estimated u.s. housing starts . 29 when necessary , an impairment loss is recognized to the extent that a reporting unit 's recorded goodwill exceeds its implied fair value . we did not recognize any impairment charges for goodwill for the years ended december 31 , 2019 , 2018 , and 2017. as of december 31 , 2019 , net goodwill reflected $ 762.0 million of accumulated impairment losses , relating primarily to impairment charges taken in 2008-2010 following the substantial decrease in u.s. housing starts after the financial crisis of 2007-2008 . in the fourth quarter of 2019 , we performed an assessment on our goodwill and determined that the estimated fair value of each reporting unit substantially exceeded its carrying value at december 31 , 2019 , and therefore the goodwill was not impaired . in the fourth quarter of 2018 , we performed an assessment on our goodwill and concluded that it was more-likely-than-not that goodwill was not impaired . intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful lives . we evaluate the remaining useful lives of amortizable identifiable intangible assets at each reporting period to determine whether events and circumstances warrant a revision to the remaining periods of amortization . income taxes if , based upon all available evidence , both positive and negative , it is more likely than not ( more than 50 percent likely ) such deferred tax assets will not be realized , a valuation allowance is recorded . significant weight is given to positive and negative evidence that is objectively verifiable . a company 's three year cumulative loss position is significant negative evidence in considering whether deferred tax assets are realizable and the accounting guidance restricts the amount of reliance we can place on projected taxable income to support the recovery of deferred tax assets . current accounting guidance allows the recognition of only those income tax positions that have a greater than 50 percent likelihood of being sustained upon examination by taxing authorities . we believe that there is an increased potential for volatility in our effective tax rate because this threshold allows changes in the income tax environment and the inherent complexities of income tax law in a substantial number of jurisdictions to affect the computation of the liability for uncertain tax positions to a greater extent . while we believe we have adequately assessed for our uncertain tax positions , amounts asserted by taxing authorities could vary from our assessment of uncertain tax positions . accordingly , provisions for tax-related matters , including interest and penalties , could be recorded in income tax expense in the period revised assessments are made . business combinations the purchase price for business combinations is allocated to the estimated fair values of acquired tangible and intangible assets , including goodwill , and assumed liabilities , where applicable . management uses significant judgments involving estimates and assumptions when determining the fair value of assets acquired and liabilities assumed . these estimates include , but are not limited to , discount rates , projected future revenue growth , cost synergies and expected cash flows , customer attrition rates , useful lives , and other prospective financial information . additionally , we recognize customer relationships
| net cash used in investing activities was $ 50.1 million for the year ended december 31 , 2019 , primarily comprised of $ 45.5 million for purchases of property and equipment , primarily vehicles , and $ 7.0 million for acquisitions , and partially offset by $ 2.3 million of proceeds from the sale of property and equipment . net cash used in investing activities was $ 551.8 million for the year ended december 31 , 2018 , primarily comprised of $ 500.2 million of net cash for the acquisition of usi and ado and substantially all of the assets of santa rosa , and $ 52.5 million for purchases of property and equipment primarily vehicles , partially offset by $ 0.8 million of proceeds from the sale of property and equipment . 27 net cash used in financing activities was $ 137.8 million for the year ended december 31 , 2019. we used $ 110.9 million for common stock repurchases related to our share repurchase programs , including $ 50.0 million under the 2019 asr agreement , $ 21.9 million for payments on our term loan , $ 13.0 million for purchases of common stock for tax withholding obligations related to the vesting and exercise of share-based incentive awards , $ 5.9 million for payments on our equipment financing notes , and $ 1.1 million for payments of contingent consideration for ecofoam and santa rosa . we received $ 15.0 million of proceeds from equipment financing notes .
| Liquidity | 5,214 |
as of the closing date of the russia and ukraine divestment , the fair value of the osg investment was approximately $ 18.0 million . as of the closing date of the russia and ukraine divestment , the carrying value of our businesses in russia and ukraine was a credit balance of $ 20.9 million , which consisted of ( i ) a credit balance of approximately $ 29.1 million of cumulative translation adjustment associated with our businesses in russia and ukraine that was reclassified from accumulated other comprehensive items , net , ( ii ) the carrying value of the net assets of our businesses in russia and ukraine , excluding goodwill , of $ 4.7 million and ( iii ) $ 3.5 million of goodwill associated with our northern and eastern europe reporting unit ( of which our businesses in russia and ukraine were a component of prior to the russia and ukraine divestment ) , which was allocated , on a relative fair value basis , to our businesses in russia and ukraine . transformation initiative during the third quarter of 2015 , we implemented a plan that calls for certain organizational realignments to reduce our overhead costs , particularly in our developed markets , in order to optimize our selling , general and administrative cost structure and to support investments to advance our growth strategy ( the “ transformation initiative ” ) . as a result of the transformation initiative , we recorded charges ( which are included within selling , general and administrative expenses ) of $ 10.2 million , $ 6.0 million and $ 0.5 million for the years ended december 31 , 2015 , 2016 and 2017 , respectively , primarily related to employee severance and associated benefits . costs recorded by segment associated with the transformation initiative are as follows ( in thousands ) : replace_table_token_12_th through december 31 , 2017 , we have recorded cumulative charges to our consolidated statements of operations associated with the transformation initiative of $ 16.7 million . 40 general our revenues consist of storage rental revenues as well as service revenues and are reflected net of sales and value added taxes . storage rental revenues , which are considered a key driver of financial performance for the storage and information management services industry , consist primarily of recurring periodic rental charges related to the storage of materials or data ( generally on a per unit basis ) that are typically retained by customers for many years , technology escrow services that protect and manage source code , data backup and storage on our proprietary cloud and revenues associated with our data center operations . service revenues include charges for related service activities , which include : ( 1 ) the handling of records , including the addition of new records , temporary removal of records from storage , refiling of removed records and the destruction of records ; ( 2 ) courier operations , consisting primarily of the pickup and delivery of records upon customer request ; ( 3 ) secure shredding of sensitive documents and the related sale of recycled paper , the price of which can fluctuate from period to period ; ( 4 ) other services , including the scanning , imaging and document conversion services of active and inactive records , or information governance and digital solutions , which relate to physical and digital records , and project revenues ; ( 5 ) customer termination and permanent removal fees ; ( 6 ) data restoration projects ; ( 7 ) special project work ; ( 8 ) the storage , assembly , reporting and delivery of customer marketing literature , or fulfillment services ; ( 9 ) consulting services ; ( 10 ) cloud-related data protection , preservation , restoration and recovery ; and ( 11 ) other technology services and product sales ( including specially designed storage containers and related supplies ) . our service revenue growth has been negatively impacted by declining activity rates as stored records are becoming less active . while customers continue to store their records and tapes with us , they are less likely than they have been in the past to retrieve records for research and other purposes , thereby reducing service activity levels . cost of sales ( excluding depreciation and amortization ) consists primarily of wages and benefits for field personnel , facility occupancy costs ( including rent and utilities ) , transportation expenses ( including vehicle leases and fuel ) , other product cost of sales and other equipment costs and supplies . of these , wages and benefits and facility occupancy costs are the most significant . selling , general and administrative expenses consist primarily of wages and benefits for management , administrative , it , sales , account management and marketing personnel , as well as expenses related to communications and data processing , travel , professional fees , bad debts , training , office equipment and supplies . trends in facility occupancy costs are impacted by the total number of facilities we occupy , the mix of properties we own versus properties we occupy under operating leases , fluctuations in per square foot occupancy costs , and the levels of utilization of these properties . trends in total wages and benefits in dollars and as a percentage of total consolidated revenue are influenced by changes in headcount and compensation levels , achievement of incentive compensation targets , workforce productivity and variability in costs associated with medical insurance and workers ' compensation . the expansion of our international businesses has impacted the major cost of sales components and selling , general and administrative expenses . our international operations are more labor intensive relative to revenue than our operations in north america and , therefore , labor costs are a higher percentage of international segment revenue . story_separator_special_tag our critical accounting policies include the following , which are listed in no particular order : revenue recognition we recognize revenue when the following criteria are met : persuasive evidence of an arrangement exists , services have been rendered , the sales price is fixed or determinable and collectability of the resulting receivable is reasonably assured . storage rental and service revenues are recognized in the month the respective storage rental or service is provided , and customers are generally billed on a monthly basis on contractually agreed-upon terms . amounts related to future storage rental or prepaid service contracts for customers where storage rental fees or services are billed in advance are accounted for as deferred revenue and recognized ratably over the period the applicable storage rental or service is provided or performed . revenues from the sales of products , which are included as a component of service revenues , are recognized when products are shipped and title has passed to the customer . revenues from the sales of products have historically not been significant . accounting for acquisitions part of our growth strategy has included the acquisition by us of numerous businesses . the purchase price of each acquisition has been determined after due diligence of the target business , market research , strategic planning and the forecasting of expected future results and synergies . estimated future results and expected synergies are subject to revisions as we integrate each acquisition and attempt to leverage resources . during the third quarter of 2017 , we adopted accounting standards update no . 2017-01 , business combinations ( topic 805 ) : clarifying the definition of a business ( `` asu 2017-01 `` ) . asu 2017-01 provides guidance for evaluating whether transactions should be accounted for as acquisitions of assets or businesses . the guidance provides a screen to determine when an integrated set of assets and activities does not qualify to be a business . the screen requires that when substantially all of the fair value of the gross assets acquired is concentrated in an identifiable asset or a group of similar identifiable assets , the acquisition should not be accounted for as the acquisition of a business , but rather the acquisition of an asset . if an acquisition is determined to be a business , goodwill is recognized as part of purchase accounting , whereas with the acquisition of an asset there is no goodwill recognized . each acquisition has been accounted for using the acquisition method of accounting as defined under the applicable accounting standards at the date of each acquisition . accounting for these acquisitions has resulted in the capitalization of the cost in excess of the estimated fair value of the net assets acquired in each of these acquisitions as goodwill . we estimate the fair values of the assets acquired in each acquisition as of the date of acquisition and these estimates are subject to adjustment based on the final assessments of the fair value of intangible assets ( primarily customer relationship and lease-based intangible assets ) , property , plant and equipment ( primarily building and racking structures ) , operating leases , contingencies and income taxes ( primarily deferred income taxes ) . we complete these assessments within one year of the date of acquisition , as we acquire additional information impacting our estimates as of the acquisition date . see note 6 to notes to consolidated financial statements included in this annual report for a description of recent acquisitions . determining the fair values of the net assets acquired requires management 's judgment and often involves the use of assumptions with respect to future cash inflows and outflows , discount rates and market data , among other items . due to the inherent uncertainty of future events , actual values of net assets acquired could be different from our estimated fair values and could have a material impact on our financial statements . 46 of the net assets acquired in our acquisitions , the fair value of owned buildings , customer relationship and lease-based intangible assets , racking structures and operating leases are generally the most common and most significant . for significant acquisitions or acquisitions involving new markets or new products , we generally use third parties to assist us in estimating the fair value of owned buildings , customer relationship and lease-based intangible assets and market rental rates for acquired operating leases . for acquisitions that are not significant or do not involve new markets or new products , we generally use third parties to assist us in estimating the fair value of acquired owned buildings and market rental rates for acquired operating leases . when not using third party appraisals of the fair value of acquired net assets , the fair value of acquired customer relationship and leased-based intangible assets and acquired racking structures is determined internally . the fair value of acquired racking structures is determined internally by taking current estimated replacement cost at the date of acquisition for the quantity of racking structures acquired , discounted to take into account the quality ( e.g . age , material and type ) of the racking structures . we use discounted cash flow models to determine the fair value of customer relationship and lease-based intangible assets , which requires a significant amount of judgment by management , including estimating expected lives of the relationships , expected future cash flows and discount rates . of the key assumptions that impact the estimated fair values of customer relationship intangible assets , the expected future cash flows and discount rate are among the most sensitive and are considered to be critical assumptions . to illustrate the sensitivity of changes in key assumptions used in determining the fair value of customer relationship intangible assets acquired in the bonded transaction ( one of our more significant acquisitions in fiscal year 2017 ) , a hypothetical increase of 10 % in the
| imi is the direct obligor on the parent notes , which are fully and unconditionally guaranteed , on a senior or senior subordinated basis , as the case may be , by its direct and indirect 100 % owned united states subsidiaries that represent the substantial majority of our united states operations ( the `` guarantors '' ) . these guarantees are joint and several obligations of the guarantors . canada company , iron mountain europe plc , im uk ( as defined below ) , the accounts receivable securitization special purpose subsidiaries ( as defined below ) , the mortgage securitization special purpose subsidiary ( as defined below ) and the remainder of our subsidiaries do not guarantee the parent notes . see note 5 to notes to consolidated financial statements included in this annual report . ( 4 ) the 4 3 / 8 % notes , the euro notes , the gbp notes due 2025 , the cad notes due 2023 , the 5 3 / 8 % notes , the 4 7 / 8 % notes and the 5 1 / 4 % notes ( collectively , the `` unregistered notes '' ) have not been registered under the securities act , or under the securities laws of any other jurisdiction . unless they are registered , the unregistered notes may be offered only in transactions that are exempt from registration under the securities act or the securities laws of any other jurisdiction . 76 ( 5 ) canada company is the direct obligor on the cad notes due 2023 , which are fully and unconditionally guaranteed , on a senior basis , by imi and the guarantors . these guarantees are joint and several obligations of imi and the guarantors . see note 5 to notes to consolidated financial statements included in this annual report . ( 6 ) iron mountain ( uk ) plc ( `` im uk '' ) is the direct obligor on the gbp notes due 2025 , which are fully and unconditionally guaranteed , on a senior basis , by imi and the guarantors . these guarantees are joint and several obligations of imi and the guarantors . see note 5 to notes to consolidated financial statements included in this annual report .
| Liquidity | 9,947 |
we also transport both ferrous and nonferrous metals by truck and rail in order to transfer scrap metal between our facilities for further processing , to load shipments at our export facilities and to meet regional domestic demand . key economic factors and trends affecting the industries in which we operate we sell recycled metals to the global steel industry for the production of finished steel . our financial results largely depend on supply of raw materials in the u.s. and demand for recycled metal in foreign and domestic markets and for finished steel products in the western u.s. fluctuating or volatile supply and demand conditions affect market prices for and volumes of recycled ferrous and nonferrous metal in global markets and for steel products in the western u.s. and can have a significant impact on the results of operations for all three reporting segments . in fiscal 2012 , our markets were significantly impacted by the european sovereign debt crisis which escalated in the fall of 2011 and led to a slowdown of economic activity globally . macroeconomic uncertainty resulted in deteriorating market conditions for global steel manufacturers and volatile pricing swings with an overall downward trend in commodity prices and export selling prices of recycled materials . the persistently low economic growth in the u.s. contributed to increasing market pressure on scrap flows in our mrb and apb domestic supply markets and margin compression . in addition , a relatively stronger u.s. dollar value increased competitive pressure on mrb 's export activity . 23 / schnitzer steel industries , inc. form 10-k 2012 strategic factors as we continue to closely monitor economic conditions , we remain focused on the following core strategies to meet our business objectives : use of our seven deep water ports to access customers directly around the world and to meet demand wherever it is greatest ; growth through acquisitions in existing and new geographic regions that generate attractive returns ; continued investment in and benefit from technologies and process improvements which increase the separation and recovery of recycled materials from our shredding process ; and increased internal synergies and continuous improvement initiatives which further integrate our operations , streamline corporate functions , reduce organizational layers and drive significant cost savings . we highly value the strategic synergies within our integrated operations . apb is a key supplier to mrb , and we opportunistically look to enhance the geographic proximity of operations within the two businesses . in fiscal 2011 , we acquired substantially all of the assets of two metals recycling businesses in canada , with a total of twelve metals collection and processing facilities , which marked mrb 's first expansion into canada . in fiscal 2012 , we acquired substantially all of the assets of an additional metals recycling business in canada . apb has three facilities in western canada that are able to supply these new mrb facilities in addition to shipping to our tacoma , wa metals recycling facility . also in fiscal 2011 , we acquired substantially all of the assets of a used auto parts business with three stores in seattle , wa , expanding apb 's presence in the northwestern u.s. mrb has an export facility in tacoma , wa , which benefits from the synergies of this enhanced access to supply . both mrb and apb also have a significant presence in northern california , and during fiscal 2012 we implemented further enhancements to the synergies between these businesses by integrating certain operational processes . executive overview of financial results we generated revenues of $ 3.3 billion in fiscal 2012 , a decrease of 3 % from the $ 3.5 billion of consolidated revenues in the prior year . the decrease was primarily due to lower volumes of ferrous sales as a result of soft global demand for recycled metal and constrained supply of raw materials . operating income for fiscal 2012 decreased by $ 132 million , or 71 % , to $ 54 million , including restructuring charges of $ 5 million , when compared with the prior year due to the deterioration in market conditions caused mainly by the escalation in the european sovereign debt crisis in the fall of 2011. this led to a slowdown of economic activity and resulted in weakening global demand and periods of volatile prices with an overall downward trend in export selling prices for recycled metals . this , combined with the constrained supply of raw materials and the adverse effect of average inventory costing on cost of goods sold during periods of sharp declines in selling prices that occurred in fiscal 2012 , led to a compression in operating margins . this contrasted with the prior fiscal year , which benefited from a stronger market environment and rising prices for recycled metals . net income attributable to ssi decreased by $ 91 million , or 77 % , to $ 27 million when compared with the prior year . diluted net income attributable to ssi was $ 0.99 per share for fiscal 2012 , including the adverse effect of $ 0.12 per share related to restructuring charges , compared to diluted net income attributable to ssi of $ 4.23 per share in fiscal 2011. the following items summarize our consolidated financial performance for fiscal 2012 : 24 / schnitzer steel industries , inc. form 10-k 2012 revenues of $ 3.3 billion , compared to $ 3.5 billion in the prior year ; operating income of $ 54 million , compared to $ 186 million in the prior year ; and adjusted net income attributable to ssi of $ 31 million , or $ 1.11 per diluted share , excluding restructuring charges , net of taxes , of $ 3 million or $ 0.12 per diluted share , compared to $ 118 million , or $ 4.23 per diluted share , in the prior year ( see the reconciliation of adjusted net income attributable to ssi story_separator_special_tag in addition , sg & a expense was lower in fiscal 2010 as it included $ 3 million in benefits from environmental expense reimbursements . 30 / schnitzer steel industries , inc. form 10-k 2012 auto parts business replace_table_token_14_th fiscal 2012 compared with fiscal 2011 revenues the decrease in revenues by $ 3 million , or 1 % , was driven by lower average commodity prices and decreased car volumes , both of which adversely impacted sales of ferrous and nonferrous material compared to the prior year . segment operating income operating income for fiscal 2012 decreased by $ 31 million , or 48 % , due to the compression in operating margins caused primarily by slightly higher average vehicle purchases costs coupled with a decrease in average selling prices for ferrous and nonferrous material compared to the prior year . the compression in operating margins was exacerbated by market volatility in an overall decreasing commodity price environment . periods of temporary but sharp declines in commodity prices due to softening global demand led to purchase prices for end-of-life vehicles decreasing at a slower pace than average net selling prices in those periods , causing an adverse effect of average inventory costing on cost of goods sold . in addition , operating income for fiscal 2012 reflected higher sg & a expenses of $ 2 million , or 4 % , primarily due to operating expenses related to fiscal 2011 acquisitions , increased legal expenses and higher advertising costs , which were partially offset by increased operational efficiencies and a reduction in incentive compensation expenses resulting from lower financial performance in fiscal 2012. fiscal 2011 compared with fiscal 2010 revenues the increase in revenues by $ 79 million , or 33 % , was driven by higher commodity prices , increased car volumes , further enhancement of production operating efficiencies , and an increase in the number of self-service store locations . in fiscal 2011 , apb did not benefit from the cash-for-clunkers government stimulus program that increased sales volumes in the prior year . segment operating income the increase in operating income for fiscal 2011 reflected the impact of higher commodity prices , increased volumes of ferrous and nonferrous material sales , and improved production operating efficiencies . the decrease in operating income as a percentage of revenues from 21.2 % in fiscal 2010 to 20.0 % in fiscal 2011 reflected an increase in car purchasing costs which outpaced the increase in selling prices and an increase in sg & a expense of $ 10 million for fiscal 2011 , primarily due to a $ 4 million increase in compensation expense as a result of additional headcount from acquisitions . 31 / schnitzer steel industries , inc. form 10-k 2012 steel manufacturing business replace_table_token_15_th _ st = short ton , which is 2,000 pounds nm = not meaningful ( 1 ) revenues include sales of semi-finished goods ( billets ) and finished steel products . ( 2 ) price information is shown after netting the cost of freight incurred to deliver the product to the customer . fiscal 2012 compared with fiscal 2011 revenues smb revenues increased as a result of higher average selling prices for finished steel products and higher volumes of finished steel product sold compared to the prior year . the rise in the average selling price for finished steel products compared to the prior year was primarily driven by the impact on selling prices of increased average purchase costs of raw materials and by changes in the product mix towards higher-valued products . segment operating income ( loss ) smb generated an operating loss for fiscal 2012 of $ 2 million , compared to operating income of $ 3 million in the prior year , in a continuing weak market environment in our u.s. west coast markets as a result of slow economic growth that has hampered recovery in construction spending . the decrease in operating results compared to the prior year was primarily due to higher average raw material purchase prices and the adverse impact of unscheduled production downtime . fiscal 2011 compared with fiscal 2010 revenues smb revenues increased primarily as a result of increased average selling prices for finished steel products , reflecting our ability to pass through higher purchase prices for scrap and other raw materials to end customers . the increase in average selling prices for finished steel products was driven by increased scrap metal purchase prices in global markets as a result of improved worldwide demand and was partially offset by a decrease in the volume of finished steel products sold for fiscal 2011 due to continuing weak demand in our west coast markets as a result of slow economic growth that hampers construction spending recovery . segment operating income ( loss ) the increase in operating income reflected the impact of increased average selling prices , which outpaced the increase in scrap and other raw material purchase costs . smb acquired its scrap metal requirements from mrb at rates that approximated export market prices for shipments from the west coast of the u.s. liquidity and capital resources we rely on cash provided by operating activities as a primary source of liquidity , supplemented by current cash on hand and borrowings under our existing credit facilities . story_separator_special_tag style= `` vertical-align : bottom ; padding-left:2px ; padding-top:2px ; padding-bottom:2px ; background-color : # cceeff ; border-top:1px solid # 000000 ; `` > $ — $ 25,000 bank unsecured revolving credit facility ( 1 ) $ 325,292 $ 370,214 tax-exempt economic development revenue bonds due january 2021 $ 7,700 n/a _ ( 1 ) remaining availability is net of $ 5 million of outstanding stand-by letters of credit . in april 2012 , we entered into an amendment to our unsecured committed bank credit agreement ( “ credit agreement ” ) with bank of america , n.a . as administrative agent , and other lenders party thereto . the amendment
| sources and uses of cash we had cash balances of $ 90 million and $ 49 million as of august 31 , 2012 and 2011 , respectively . cash balances are intended to be used primarily for working capital , capital expenditures , acquisitions , dividends and share repurchases . we also use excess cash on hand to reduce amounts outstanding under our credit facilities . as of august 31 , 2012 , debt , net of cash , was $ 245 million compared to $ 354 million as of august 31 , 2011 ( refer to non-gaap financial measures below ) , a decrease of $ 109 million 32 / schnitzer steel industries , inc. form 10-k 2012 primarily as a result of the use of cash generated from operating activities to repay debt . our cash balances as of august 31 , 2012 and 2011 includes $ 13 million and $ 11 million , respectively , which is indefinitely reinvested in puerto rico and canada . operating activities net cash provided by operating activities in fiscal 2012 was $ 245 million , compared to $ 140 million in fiscal 2011 and $ 89 million in fiscal 2010 . cash provided by operating activities in fiscal 2012 included a decrease in inventories of $ 94 million due to lower volumes of material purchases and a decrease of $ 82 million in accounts receivable due to lower sales volumes and the timing of collections . uses of cash included a decrease in accounts payable of $ 26 million due to lower levels of material purchases and timing of payments and a decrease in accrued income taxes of $ 20 million due to lower financial results compared to the prior fiscal year .
| Liquidity | 1,591 |
revenues generated by our undercar product line segment have not been sufficient to enable us to meet our operating expenses and otherwise implement our undercar product line turnaround plan . fenco has incurred net losses of $ 135,260,000 and $ 62,814,000 for the years ended march 31 , 2013 and 2012 , respectively , and has an accumulated deficit of approximately $ 198,074,000 at march 31 , 2013. fenco continues to face capital and liquidity concerns . the parent company financing agreement only permitted the company to invest up to an additional $ 20,000,000 in fenco , which it had done as of december 31 , 2012. as of march 31 , 2013 , the company had invested in fenco $ 4,946,000 of equity , $ 52,631,000 of debt , $ 27,382,000 of accounts receivable in connection with our march 2011 consignment arrangement to provide goods in order to maintain the service levels for fenco 's customers , and $ 1,782,000 of net inter-company balances . at march 31 , 2013 , the company has established a specific charge-off accrual for the debt , accounts receivable and inter-company balances . fenco has been unable to refinance its credit agreement or obtain additional sufficient capital to implement its turnaround plan . the report of our independent registered public accounting firm on our financial statements for the year ended march 31 , 2013 contains an explanatory paragraph raising substantial doubt as to our ability to continue as a going concern . during may 2013 , fenco appointed a new board of independent directors , hired an independent chief restructuring officer and all its previously existing officers resigned from fapl . as a result of the loss of control of fenco , we will likely deconsolidate the financial statements of fenco from our consolidated financial statements during the first quarter of fiscal 2014. on june 10 , 2013 , each of fapl , introcan and introcan 's subsidiaries , flo-pro inc. , lh distribution inc. , rafko logistics inc. , rafko holdings inc. and rafko enterprises inc. , filed a voluntary petition for relief under chapter 7 of the bankruptcy code in the u.s. bankruptcy court for the district of delaware . as of march 31 , 2013 , fenco 's financial statements are included in the consolidated financial statements of the company . our consolidated financial statements are prepared assuming we will continue as a going concern . the financial statements do not include any adjustments to reflect future adverse effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of this uncertainty . as a result of these challenges with fenco , management has adjusted its focus . going forward mpa 's focus will not include fenco but will continue to be on its rotating electrical business and evaluating other opportunities . the outlook for rotating electrical continues to be strong with over 240 million vehicles on the road with an average age of over 10 years . vehicles older than 7 years generally experience higher replacement rates for the alternators and starters . as such these metrics indicate an ongoing growth opportunity for rotating electrical . mpa 's rotating electrical business has continued to have strong liquidity which will be further enhanced by the tax benefits associated with the write-off of the fenco investments . 21 critical accounting policies we prepare our consolidated financial statements in accordance with generally accepted accounting principles , or gaap , in the united states . our significant accounting policies are discussed in detail below and in note 2 in the notes to consolidated financial statements . in preparing our consolidated financial statements , we use estimates and assumptions for matters that are inherently uncertain . we base our estimates on historical experiences and reasonable assumptions . our use of estimates and assumptions affect the reported amounts of assets , liabilities and the amount and timing of revenues and expenses we recognize for and during the reporting period . actual results may differ from our estimates . our remanufacturing operations require that we acquire used cores , a necessary raw material , from our customers and offer our customers marketing and other allowances that impact revenue recognition . these elements of our business give rise to accounting issues that are more complex than many businesses our size or larger . in addition , the relevant accounting standards and issues continue to evolve . segment reporting pursuant to the guidance provided under the financial accounting standards board ( “ fasb ” ) accounting standards codification ( “ asc ” ) , we have two reportable segments , rotating electrical and undercar product line , based on the way we manage , evaluate and internally report our business activities . inventory non-core inventory non-core inventory is comprised of non-core raw materials , the non-core value of work in process and the non-core value of finished goods . used cores , the used core value of work in process and the remanufactured core portion of finished goods are classified as long-term core inventory as described below under the caption “ long-term core inventory. ” non-core inventory is stated at the lower of cost or market . the cost of non-core inventory approximates average historical purchase prices paid , and is based upon the direct costs of material and an allocation of labor and variable and fixed overhead costs . the cost of non-core inventory is evaluated at least quarterly during the fiscal year and adjusted as necessary to reflect current lower of cost or market levels . these adjustments are determined for individual items of inventory within each of the three classifications of non-core inventory as follows : non-core raw materials are recorded at average cost , which is based on the actual purchase price of raw materials on hand . the average cost is updated quarterly . this average cost is used in the inventory costing process and is the basis for allocation of materials to finished goods during the production process . story_separator_special_tag non-core work in process is in various stages of production and is valued at the average cost of materials issued to the open work orders . historically , non-core work in process inventory has not been material compared to the total non-core inventory balance . finished goods cost includes the average cost of non-core raw materials and allocations of labor and variable and fixed overhead . the allocations of labor and variable and fixed overhead costs are determined based on the average actual use of the production facilities over the prior twelve months which approximates normal capacity . this method prevents the distortion in allocated labor and overhead costs that would occur during short periods of abnormally low or high production . in addition , we exclude certain unallocated overhead such as severance costs , duplicative facility overhead costs , and spoilage from the calculation and expense these unallocated overhead as period costs . for the fiscal years ended march 31 , 2013 , 2012 , and 2011 , costs of approximately $ 1,561,000 , $ 1,410,000 , and $ 1,378,000 , respectively , were considered unallocated overhead and thus excluded from the finished goods cost calculation and charged directly to cost of sales for our rotating electrical product line . 22 we record an allowance for potentially excess and obsolete inventory based upon recent sales history , the quantity of inventory on-hand , and a forecast of potential use of the inventory . we periodically review inventory to identify excess quantities and part numbers that are experiencing a reduction in demand . any part numbers with quantities identified during this process are reserved for at rates based upon management 's judgment , historical rates , and consideration of possible scrap and liquidation values which may be as high as 100 % of cost if no liquidation market exists for the part . the quantity thresholds and reserve rates are subjective and are based on management 's judgment and knowledge of current and projected industry demand . the reserve estimates may , therefore , be revised if there are changes in the overall market for our products or market changes that in management 's judgment , impact our ability to sell or liquidate potentially excess or obsolete inventory . we record vendor discounts as reductions of inventories that are recognized as reductions to cost of sales as the inventories are sold . inventory unreturned inventory unreturned represents our estimate , based on historical data and prospective information provided directly by the customer , of finished goods shipped to customers that we expect to be returned , under our general right of return policy , after the balance sheet date . because all cores are classified separately as long-term assets , the inventory unreturned balance includes only the added unit value of a finished good . the return rate is calculated based on expected returns within the normal operating cycle of one year . as such , the related amounts are classified in current assets . inventory unreturned is valued in the same manner as our finished goods inventory . long-term core inventory long-term core inventory consists of : used cores purchased from core brokers and held in inventory at our facilities , used cores returned by our customers and held in inventory at our facilities , used cores returned by end-users to customers but not yet returned to us which are classified as remanufactured cores until they are physically received by us , remanufactured cores held in finished goods inventory at our facilities ; and remanufactured cores held at customer locations as a part of the finished goods sold to the customer . for these remanufactured cores , we expect the finished good containing the remanufactured core to be returned under our general right of return policy or a similar used core to be returned to us by the customer , in each case , for credit . long-term core inventory is recorded at average historical purchase prices determined based on actual purchases of inventory on hand . the cost and market value of used cores for which sufficient recent purchases have occurred are deemed the same as the purchase price for purchases that are made in arm 's length transactions . long-term core inventory recorded at average historical purchase prices is primarily made up of used cores for newer products related to more recent automobile models or products for which there is a less liquid market . we must purchase these used cores from core brokers because our customers do not have a sufficient supply of these newer used cores available for the core exchange program . 23 used cores obtained in core broker transactions are valued based on average purchase price . the average purchase price of used cores for more recent automobile models is retained as the cost for these used cores in subsequent periods even as the source of these used cores shifts to our core exchange program . long-term core inventory is recorded at the lower of cost or market value . in the absence of sufficient recent purchases , we use core broker price lists to assess whether used core cost exceeds used core market value on an item by item basis . the primary reason for the insufficient recent purchases is that we obtain most of our used core inventory from the customer core exchange program . we classify all of our core inventories as long-term assets . the determination of the long-term classification is based on our view that the value of the cores is not consumed or realized in cash during our normal operating cycle , which is one year for most of the cores recorded in inventory . according to guidance provided under the fasb asc , current assets are defined as “ assets or resources commonly identified as those which are reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business.
| · rotating electrical product line the net sales in our rotating electrical product line segment increased by $ 34,600,000 or 19.4 % , to $ 213,151,000 for fiscal 2013 compared to net sales of $ 178,551,000 for fiscal 2012. the increase in net sales in our rotating electrical product line segment was the result of ( i ) new business awarded by one of our major customers , ( ii ) certain new customers acquired during fiscal 2013 , and ( iii ) overall increase in net sales to our other existing customers . · undercar product line the net sales in our undercar product line segment increased by $ 7,979,000 or 4.3 % , to $ 193,115,000 for fiscal 2013 compared to net sales of $ 185,136,000 for fiscal 2012. this increase in net sales was due entirely to the recognition of approximately $ 50,783,000 in revenue from the reduction in fenco 's obligation to provide a credit for a major customer 's remanufactured cores . this increase was offset by ( i ) decreased sales resulting from the transition out of a certain customer relationship , ( ii ) vendor support allowances of $ 1,145,000 , ( iii ) a $ 751,000 allowance fenco provided to one of its major customers , ( iv ) $ 665,000 in allowances granted to a major customer as fenco transitioned out of the relationship , and ( v ) a $ 355,000 allowance to a customer in connection with a return of certain products . we also posted an accrual for $ 4,244,000 to accommodate the additional expense required based on the agreement with certain customers to evaluate their inventory offerings and , in partnership with them , develop a new mix of products to be offered by these customers . in addition , during the fourth quarter of fiscal year 2013 , fenco net sales were favorably impacted by $ 1,854,000 in connection with our general right of return accruals due to the transition out of a certain customer relationship . fill rate penalties during fiscal 2013 and 2012 were $ 1,671,000 and $ 4,795,000 , respectively . the $ 1,671,000 fill rate penalty expense , however , was the result of actual fill rate fines of $ 3,212,000 offset by the reduction of $ 1,541,000 in the accrued fill rate fines related primarily to a major customer with whom fenco discontinued its relationship
| ROO | 135 |
factors that might cause future results to differ materially from those projected in the forward-looking statements include , but are not limited to , those discussed in item 1a , “ risk factors ” and elsewhere in this annual report on form 10-k. certain percentage changes may not recalculate due to rounding . overview we are a full service , early-stage contract research organization ( cro ) . for over 70 years , we have been in the business of providing the research models required in research and development of new drugs , devices , and therapies . over this time , we have built upon our original core competency of laboratory animal medicine and science ( research model technologies ) to develop a diverse portfolio of discovery and safety assessment services , both good laboratory practice ( glp ) and non-glp , that enable us to support our clients from target identification through non-clinical development . we also provide a suite of products and services to support our clients ' manufacturing activities . utilizing our broad portfolio of products and services enables our clients to create a more flexible drug development model , which reduces their costs , enhances their productivity and effectiveness , and increases speed to market . our client base includes all major global biopharmaceutical companies , many biotechnology companies , cros , agricultural and industrial chemical companies , life science companies , veterinary medicine companies , contract manufacturing companies , medical device companies , and diagnostic and other commercial entities , as well as leading hospitals , academic institutions , and government agencies around the world . we currently operate in over 80 facilities and in approximately 20 countries worldwide , which numbers exclude our insourcing solutions ( is ) sites . segment reporting our three reportable segments are research models and services ( rms ) , discovery and safety assessment ( dsa ) , and manufacturing support ( manufacturing ) . our rms reportable segment includes the research models and research model services businesses . research models includes the commercial production and sale of small research models , as well as the supply of large research models . research model services includes : genetically engineered models and services ( gems ) , which performs contract breeding and other services associated with genetically engineered research models ; research animal diagnostic services ( rads ) , which provides health monitoring and diagnostics services related to research models ; and insourcing solutions ( is ) , which provides colony management of our clients ' research operations ( including recruitment , training , staffing , and management services ) . our dsa reportable segment includes services required to take a drug through the early development process including discovery services , which are non-regulated services to assist clients with the identification , screening , and selection of a lead compound for drug development , and regulated and non-regulated ( glp and non-glp ) safety assessment services . our manufacturing reportable segment includes microbial solutions , which provides in vitro ( non-animal ) lot-release testing products , microbial detection products , and species identification services ; biologics testing services ( biologics ) , which performs specialized testing of biologics ; avian vaccine services ( avian ) , which supplies specific-pathogen-free chicken eggs and chickens ; and contract development and manufacturing ( cdmo ) services , which , until we divested this business on february 10 , 2017 , allowed us to provide formulation design and development , manufacturing , and analytical and stability testing for small molecules . recent acquisitions and divestiture our strategy is to augment internal growth of existing businesses with complementary acquisitions . we continued to make strategic acquisitions designed to expand our portfolio of services to support the drug discovery and development continuum and position us as a market leader in the outsourced discovery services market . our recent acquisitions and divestiture are described below . on february 13 , 2019 , we announced that we signed a binding offer to acquire citoxlab for 448 million in cash ( or approximately $ 510 million based on current exchange rates ) , subject to customary closing adjustments . citoxlab is a non-clinical cro , specializing in regulated safety assessment services , non-regulated discovery services , and medical device testing . with operations in europe and north america , the proposed acquisition of citoxlab would further strengthen our position as the leading , global , early-stage cro by expanding our scientific portfolio and geographic footprint , which would enhance our ability to partner with clients across the drug discovery and development continuum . the proposed transaction is expected to close in the second quarter of 2019 , subject to labor consultations , regulatory requirements , and customary closing 30 conditions . upon completion of the labor consultations , citoxlab 's shareholders are expected to enter into a definitive purchase agreement . the proposed acquisition and associated fees are expected to be financed through our existing revolving credit facility and cash . in the event the agreement is terminated under specified circumstances , we may be required to pay a termination fee of 18.2 million . this business is expected to be reported as part of our dsa reportable segment . on april 3 , 2018 , we acquired mpi research , a non-clinical cro providing comprehensive testing services to biopharmaceutical and medical device companies worldwide . the acquisition enhances our position as a leading global early-stage cro by strengthening our ability to partner with clients across the drug discovery and development continuum . the purchase price for mpi research was $ 829.7 million in cash , subject to certain post-closing adjustments . the acquisition was funded by borrowings on our $ 2.3 billion credit facility ( $ 2.3b credit facility ) as well as the issuance of $ 500.0 million of our senior notes . the mpi research business is reported as part of our dsa reportable segment . story_separator_special_tag demand for our products and services that support our clients ' manufacturing activities was also robust in fiscal year 2018. demand for our microbial solutions business remained strong as manufacturers continued to increase their use of our rapid microbial testing solutions . our biologics business continued to benefit from increased demand for services associated with the growing proportion of biologic drugs in the pipeline and on the market . to support this increased demand , we continue to expand the capacity of our biologics business . demand for our research models and services increased in fiscal year 2018 , driven by strong demand for research models in china , higher revenue for research model services , and improved pricing . demand for research models in china continued to be robust in fiscal year 2018 , as clients in this growing market continue to value our high-quality research models and we expanded our geographic footprint . demand for research models services also improved in fiscal year 2018 , particularly for our is and gems businesses . the is business further benefited from being awarded a five-year , $ 95.7 million contract from the national institute of allergy and infectious diseases , or niaid , which commenced in september 2018. the continued effect of the consolidation of internal infrastructure within our large biopharmaceutical clients and a longer-term trend towards more efficient use of research models has led to reduced demand for research models outside of china . we are confident that research models and services will remain essential tools for our clients ' drug discovery and early-stage development efforts , and the rms business will continue to be an important source of cash flow generation for us . overview of results of operations and liquidity revenue for fiscal year 2018 was $ 2.3 billion compared to $ 1.9 billion in fiscal year 2017 . the 2018 increase as compared to the corresponding period in 2017 was $ 408.5 million , or 22.0 % , and was primarily due to both growth in our dsa and manufacturing segments , as discussed in the above “ business trends ” section , as well as the recent acquisitions of mpi research , kws biotest , and brains on-line . the positive effect of changes in foreign currency exchange rates increased revenue by $ 23.7 million , or 1.3 % , when compared to the corresponding period in 2017. in fiscal year 2018 , our operating income and operating income margin were $ 331.4 million and 14.6 % , respectively , compared with $ 288.3 million and 15.5 % , respectively , in fiscal year 2017 . the increase in operating income was primarily due to our recent acquisitions and increased demand from biotechnology and global biopharmaceutical clients . the decrease in operating income margin was primarily due to increased amortization expense and costs related to our recent acquisitions ; as well as continued investments to support future growth of the company , which includes increased investments in personnel ( staffing levels and hourly wage increase ) , facility expansions ( primarily in the rms , microbial solutions , and biologics businesses ) , and company-wide it and infrastructure projects . offsetting the decreases in operating income margin were the realization of improved volume , mix , and pricing across our products and services portfolio as well as the impact of recent productivity initiatives across all businesses . net income attributable to common shareholders increased to $ 226.4 million in fiscal year 2018 , from $ 123.4 million in the corresponding period of 2017 . the increase in net income attributable to common shareholders of $ 103.0 million was primarily due to the increase in operating income discussed above and a lower effective tax rate driven primarily by net benefits of u.s. tax reform ; partially offset by lower gains on our venture capital and life insurance policy investments , higher interest expense related to higher debt balances to support our recent acquisitions , and the absence of a gain recorded in other income , net on the cdmo divestiture in 2017. during fiscal year 2018 , our cash flows from operations was $ 441.1 million compared with $ 318.1 million for fiscal year 2017 . the increase was primarily driven by an increase in income from continuing operations and positive changes in operating assets 32 and liabilities resulting from an increase in our deferred revenue and customer contract deposits as well as improved collections of our receivables . on march 26 , 2018 , we amended and restated our credit facility creating a $ 2.3b credit facility . the $ 2.3b credit facility provides for a $ 750.0 million term loan and a $ 1.55 billion multi-currency revolving facility . the term loan facility matures in 19 quarterly installments with the last installment due march 26 , 2023. the revolving facility matures on march 26 , 2023 , and requires no scheduled payment before that date . under specified circumstances , we have the ability to increase the term loan and or revolving facility by up to $ 1.0 billion in the aggregate . on april 3 , 2018 , we issued $ 500.0 million of 5.5 % senior notes ( senior notes ) due in 2026 in an unregistered offering . interest on the senior notes is payable semi-annually on april 1 and october 1 of each year , beginning on october 1 , 2018. critical accounting policies and estimates our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements prepared in accordance with generally accepted accounting principles in the united states ( u.s. ) . the preparation of these financial statements requires us to make certain estimates and assumptions that may affect the reported amounts of assets and liabilities , the reported amounts of revenues and expenses during the reported periods and related disclosures . these estimates and assumptions are monitored and analyzed by us for changes in facts and circumstances , and material changes in these estimates could occur in the future .
| results of operations fiscal year 2018 compared to fiscal year 2017 revenue and operating income the following tables present consolidated revenue by type and by reportable segment : replace_table_token_3_th replace_table_token_4_th the following table presents operating income by reportable segment : replace_table_token_5_th the following presents the results from operating income by each of our reportable segments : rms replace_table_token_6_th rms revenue increased $ 26.1 million due primarily to higher research model product revenue in china and higher revenue for research model services . research model services benefited from a large government contract in the is business and strong client demand in the gems business resulting from increased research and development activity conducted across biotechnology , global biopharmaceutical , and academic institutional clients , and the effect of changes in foreign currency exchange rates ; partially offset by lower research model product revenue outside of china . rms operating income increased $ 21.9 million compared to the corresponding period in 2017 . rms operating income as a percentage of revenue for fiscal year 2018 was 26.3 % , an increase of 3.1 % from 23.2 % for the corresponding period in 2017 . operating income and operating income as a percentage of revenue increased due primarily to lower amount of costs associated 38 with the realignment of our research model production site in maryland in 2018 compared to 2017. restructuring costs ( recorded primarily within cost of revenue ) incurred during 2017 were $ 18.1 million , which primarily related to non-cash asset impairments and accelerated depreciation charges . restructuring costs incurred during 2018 were $ 2.0 million , which primarily related to cash payments for severance and transition costs .
| ROO | 13,549 |
the company provides one of the broadest product offerings in the electronic components and enterprise computing solutions distribution industries and a wide range of value-added services to help 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 through its global ecs business segment . for 2015 , approximately 62 % of the company 's sales were from the global components business segment and approximately 38 % 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 2015 increased 0.6 % , compared with the year-earlier period primarily driven by increased demand in the emea regions and the impact of recently acquired businesses , offset in part , by the impact of changes in foreign currencies . adjusted for the impact of changes in foreign currencies and acquisitions , the company 's global components business segment sales increased by 1.3 % in 2015 , compared with the year-earlier period . in the global ecs business segment , sales for 2015 increased 5.0 % primarily driven by increased demand in the emea regions and the impact of recently acquired businesses , offset in part , by the impact of changes in foreign currencies . adjusted for the impact of changes in foreign currencies and acquisitions , the company 's global ecs business segment sales increased by 5.6 % in 2015 , compared with the year-earlier period . 22 following is an analysis of net sales by business segment for the years ended december 31 ( in millions ) : replace_table_token_6_th consolidated sales for 2014 increased by $ 1.41 billion , or 6.6 % , compared with the year-earlier period . the increase in 2014 was driven by an increase in global components business segment sales of $ 817.3 million , or 6.1 % , and an increase in global ecs business segment sales of $ 594.1 million , or 7.6 % , compared with the year-earlier period . adjusted for the impact of changes in foreign currencies and acquisitions , the company 's consolidated sales increased by 2.5 % in 2014 , compared with the year-earlier period . in the global components business segment , sales for 2014 increased 6.1 % compared with the year-earlier period primarily due to an increase in demand for products worldwide 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 4.2 % in 2014 , compared with the year-earlier period . in the global ecs business segment , sales for 2014 increased 7.6 % primarily driven by growth in software , services , storage and industry standard servers , offset , in part , by a decrease in demand for proprietary servers in the north america and emea regions . adjusted for the impact of changes in foreign currencies and acquisitions , the company 's global ecs business segment sales were flat in 2014 , 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_7_th the company recorded gross profit of $ 3.04 billion and $ 3.00 billion for 2015 and 2014 , respectively . the increase in gross profit was primarily due to the aforementioned 2.3 % increase in sales during 2015 . gross profit margins for 2015 decreased by approximately 20 basis points , compared with the year-earlier period primarily due to competitive pricing pressure in the ecs 23 business . adjusted for the impact of changes in foreign currencies and acquisitions , the company 's consolidated gross profit margin decreased approximately 10 basis points in 2015 , compared with the year-earlier period . following is an analysis of gross profit for the years ended december 31 ( in millions ) : replace_table_token_8_th the company recorded gross profit of $ 3.00 billion and $ 2.79 billion for 2014 and 2013 , respectively . gross profit margins for 2014 increased by approximately 10 basis points , compared with the year-earlier period primarily due to a more favorable product mix in the global ecs business segment as compared with the year-earlier period , offset , in part , by competitive pricing pressure . adjusted for the impact of changes in foreign currencies and acquisitions , the company 's consolidated gross profit margin decreased approximately 10 basis points in 2014 , 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_9_th * the sum of the components for operating expenses , as adjusted may not agree to totals , as presented , due to rounding . selling , general , and administrative expenses increased by $ 26.5 million , or 1.4 % , in 2015 , on a sales increase of 2.3 % , compared with the year-earlier period . selling , general , and administrative expenses , as a percentage of sales , was 8.5 % and 8.6 % for 2015 and 2014 , respectively . story_separator_special_tag during the fourth quarter of 2014 , in connection with the company 's global re-branding initiative to brand certain of its businesses under the arrow name , the company made the decision to discontinue the use of a trade name of one of its businesses within the global ecs business segment . as no future cash flows will be attributed to the impacted trade name , the entire book value was written-off , resulting in a non-cash impairment charge of $ 78.0 million ( $ 47.9 million net of related taxes or $ .49 and $ .48 per share on a basic and diluted basis , respectively ) as of december 31 , 2014 in the company 's consolidated statements of operations . fair value was determined using unobservable ( level 3 ) inputs . the impairment charge did not impact the company 's consolidated cash flows , liquidity , capital resources , and covenants under its existing revolving credit facility , asset securitization program , and other outstanding borrowings . no impairment existed as of december 31 , 2014 with respect to the company 's other identifiable intangible assets . operating income following is an analysis of operating income for the years ended december 31 ( in millions ) : replace_table_token_11_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 $ 824.5 million , or 3.5 % of sales , in 2015 compared with operating income of $ 762.3 million , or 3.3 % of sales , in 2014 . included in operating income for 2015 and 2014 were the previously discussed identifiable intangible asset amortization of $ 51.0 million and $ 44.1 million , respectively , restructuring , integration , and other charges of $ 68.8 million and $ 39.8 million , respectively , and impairment charge of $ 78.0 million in 2014. excluding these items operating income , as adjusted was $ 944.3 million , or 4.1 % of sales , in 2015 compared with operating income , as adjusted of $ 924.2 million , or 4.1 % of sales , in 2014 . 26 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 $ 762.3 million , or 3.3 % of sales , in 2014 compared with operating income of $ 693.5 million , or 3.2 % of sales , in 2013 . included in operating income for 2014 and 2013 were the previously discussed identifiable intangible asset amortization of $ 44.1 million and $ 36.8 million , respectively , and restructuring , integration , and other charges of $ 39.8 million and $ 92.7 million , respectively , and impairment charge of $ 78.0 million . excluding these items operating income , as adjusted was $ 924.2 million , or 4.1 % of sales , in 2014 compared with operating income , as adjusted of $ 822.9 million , or 3.9 % of sales , in 2013 . gain on sale of investment during 2015 , the company recorded a gain on sale of investment of $ 2.0 million ( $ 1.7 million net of related taxes or $ .02 per share on both a basic and diluted basis ) . during 2014 , the company sold its 1.9 % equity ownership interest in wpg holdings co. , ltd. for proceeds of $ 40.5 million and accordingly recorded a gain on sale of investment of $ 29.7 million ( $ 18.3 million net of related taxes or $ .19 and $ .18 per share on a basic and diluted basis ) . loss on prepayment of debt during 2015 , the company recorded a loss on prepayment of debt of $ 2.9 million ( $ 1.8 million net of related taxes or $ .02 per share on both a basic and diluted basis ) , related to the redemption of $ 250.0 million principal amount of its 3.375 % notes due november 2015. during 2013 , the company recorded a loss on prepayment of debt of $ 4.3 million ( $ 2.6 million net of related taxes or $ .03 per share on both a basic and diluted basis ) , related to the redemption of $ 332.1 million principal amount of its 6.875 % senior notes due july 2013. interest and other financing expense , net net interest and other financing expense increased by 16.7 % in 2015 to $ 135.4 million , compared with $ 116.0 million in 2014 , primarily due to higher average debt outstanding that was used to refinance the company 's 3.375 % notes due november 1 , 2015 before maturity and for general corporate purposes . net interest and other financing expense increased by 1.4 % in 2014 to $ 116.0 million , relatively consistent compared with $ 114.4 million in 2013 . income taxes the company recorded a provision for income taxes of $ 191.7 million ( an effective tax rate of 27.7 % ) for 2015 . the company 's provision for income taxes and effective tax rate for 2015 were impacted by the previously discussed restructuring , integration , and other charges , loss on prepayment of debt , gain on sale of investment , and loss on investment . excluding the impact of the aforementioned items , the company 's effective tax rate for 2015 was 27.6 % . 27 the company recorded a provision for income taxes of $ 184.9 million ( an effective tax rate of 27.1 % ) for 2014 . the company 's provision for income taxes and effective tax rate for 2014 were impacted by the previously discussed restructuring , integration , and other charges , gain on sale of investment , and trade name impairment charge .
| executive summary consolidated sales for 2015 increased by 2.3 % , compared with the year-earlier period , due to a 0.6 % increase in the global components business segment sales and a 5.0 % increase in the global ecs business segment sales . the translation of the company 's international financial statements into u.s. dollars resulted in a decrease in consolidated sales of 5.4 % for 2015 compared with the year-earlier period , due to a stronger u.s. dollar . adjusted for the change in foreign currencies and acquisitions , consolidated sales increased 2.9 % compared with the year-earlier period . net income attributable to shareholders for 2015 of $ 497.7 million was relatively flat compared with net income attributable to shareholders of $ 498.0 million in the year-earlier period . the following items impacted the comparability of the company 's results for the years ended december 31 , 2015 and 2014 : restructuring , integration , and other charges of $ 68.8 million ( $ 51.3 million net of related taxes ) in 2015 and $ 39.8 million ( $ 29.3 million net of related taxes ) in 2014 ; identifiable intangible asset amortization of $ 51.0 million ( $ 41.3 million net of related taxes ) in 2015 and $ 44.1 million ( $ 36.0 million net of related taxes ) in 2014 ; a gain on sale of investment of $ 2.0 million ( $ 1.7 million net of related taxes ) in 2015 and $ 29.7 million ( $ 18.3 million net of related taxes ) in 2014 ; a loss on investment of $ 3.0 million ( $ 1.8 million net of related taxes ) in 2015 ; a loss on prepayment of debt of $ 2.9 million ( $ 1.8 million net of related taxes ) in 2015 ; and a non-cash impairment charge associated with discontinuing the use of a trade name of $ 78.0 million ( $ 47.9 million net of related taxes ) in 2014. excluding the aforementioned items
| ROO | 1,483 |
net sales-fueling systems fueling systems sales were $ 167.0 million in 2011 and increased $ 36.5 million or about 28 percent from 2010. the incremental impact of sales from acquired businesses was $ 24.4 million or about 19 percent . foreign currency translation rate changes increased sales $ 1.0 million , or less than 1 percent , compared to sales in 2010. the sales change in 2011 , excluding acquisitions and foreign currency translation , was an increase of $ 11.1 million or about 9 percent . fueling systems achieved solid organic sales gains . pumping systems sales grew by 15 percent during 2011 as station owners worldwide continue their conversion from suction to pressure pumping technology for dispensing gasoline . pipe and containment sales grew by 16 percent , excluding the petrotechnik acquisition , and by 70 percent including the acquisition . cost of sales cost of sales as a percent of net sales for 2011 and 2010 was 66.8 percent and 67.8 percent , respectively . correspondingly , the gross profit margin increased to 33.2 percent from 32.2 percent , a 100 basis point improvement . the gross profit margin improvement was due to leveraging fixed costs on higher sales , lower labor and burden costs , partially offset by higher material costs . direct materials as a percentage of sales increased by 150 basis points compared to last year . the company 's consolidated gross profit was $ 272.3 million for 2011 , up $ 42.1 million from 2010. selling , general and administrative ( “ sg & a ” ) selling , general , and administrative ( sg & a ) expenses were $ 177.3 million in 2011 and increased by $ 16.4 million or about 10 percent in 2011 compared to last year . during 2010 , fueling systems incurred $ 4.3 million in sg & a expenses for various legal matters . also in 2010 , sg & a was reduced by a $ 1.2 million gain on the sale of land and building in south africa . in 2011 , increases in sg & a attributable to acquisitions were $ 8.3 million . additional increases in sg & a costs during 2011 resulted from information technology ( `` it `` ) related expenditures for acquisition integrations , higher research , development , and engineering ( `` rd & e `` ) expenses , and increased costs for marketing and selling-related expenses . there were also additional fueling systems legal matters expenses in 2011 of $ 0.7 million . restructuring expenses restructuring expenses for 2011 were $ 1.6 million and reduced diluted earnings per share by approximately $ 0.05. restructuring expenses in 2011 included $ 1.1 million in phase iii costs primarily related to the closing of the siloam springs facility and $ 0.5 million in costs related to phase iv of the global manufacturing realignment program announced in the second quarter of 2011. restructuring expenses in 2011 included asset write-down , severance cost and manufacturing equipment relocation costs . in total , the company had previously estimated the cost for phase iii to be between $ 10.0 million and $ 12.8 million . the company actually incurred $ 12.9 million in phase iii expenses , from december 2008 through the third quarter of 2011. approximately $ 9.1 million of the $ 12.9 million was for non-cash items . 15 the company has estimated the pretax charge for phase iv to be between $ 2.6 million and $ 5.2 million , of which $ 1.2 million to $ 3.5 million is for closing the oklahoma city manufacturing facility . the charges began in the second quarter of 2011 and will substantially end in the fourth quarter 2012 and include severance , pension curtailments , asset write-offs , and equipment relocation . the company incurred $ 0.5 million in phase iv , none of which was related to non-cash items . restructuring expenses in 2010 were $ 5.3 million and reduced diluted earnings per share by approximately $ 0.15. restructuring expenses last year included asset write-down expenses , severance expenses , pension curtailment and manufacturing equipment relocation costs primarily related to the closing of the siloam springs facility . operating income operating income was $ 93.4 million in 2011 , up $ 29.4 million from $ 64.0 million in 2010. replace_table_token_7_th there were specific items in 2011 and 2010 that impacted operating income that were not operational in nature . 2011 included $ 1.6 million of restructuring charges and $ 0.7 million for certain legal matters . in 2010 there were three such items : a pre-tax expense of $ 5.3 million in restructuring charges ; $ 4.3 million of expenses for certain legal matters ; and a reduction in sg & a of $ 1.2 million in expenses from the gain on sale of land and building in south africa . the company refers to these items as “ non-gaap adjustments ” for purposes of presenting the non-gaap financial measures of operating income after non-gaap adjustments and percent operating income to net sales after non-gaap adjustments to net sales ( operating income margin after non-gaap adjustments ) . the company believes this information helps investors understand underlying trends in the company 's business more easily . the differences between these non-gaap financial measures and the most comparable gaap measures are reconciled in the following tables : 16 replace_table_token_8_th operating income-water systems water systems operating income , after non-gaap adjustments , was $ 106.8 million in 2011 , an increase of 21 percent versus 2010. the 2011 operating income margin after non-gaap adjustments was 16.3 percent and increased by 120 basis points compared to 2010. this increased profitability was the result of operating leverage , increases in pricing , and productivity improvements . story_separator_special_tag the redesign was completed in order to increase standardization of retirement plans among u.s. salaried employees and to reduce the expected cash funding volatility of retirement plans , while at the same time keeping in place a competitive retirement plan offering to attract and retain talent . the company achieved this by freezing both the basic pension plan and the cash balance plan as of january 1 , 2012 , with the exception of a certain limited number of basic pension plan participants who will still accrue benefits over a limited sunset period . also effective january 1 , 2012 , the cash balance plan was closed ( the basic pension plan was previously closed ) . as of january 1 , 2012 , the company instituted a new service-based contribution , supplemental to the existing company match for employees , into the defined contribution retirement plan offering . 22 aggregate contractual obligations the majority of the company 's contractual obligations to third parties relate to debt obligations . in addition , the company has certain contractual obligations for future lease payments , contingency payments , and purchase obligations . the payment schedule for these contractual obligations is as follows : replace_table_token_11_th the calculated interest was based on the fixed rate of 5.79 percent for the company 's $ 150.0 million long-term insurance company debt , six month euro interbank offered rate ( “ euribor ” ) plus one percent paid on subsidiary debt of 0.2 million , $ 0.2 million at then current exchange rates , maturing in 2012 , and $ 13.5 million of subsidiary debt with interest rates ranging from 3 % to 6 % with maturity dates ending in 2012. the impo motor pompa sanayi ve ticaret a.s. stock purchase agreement provided for additional contingent payments resulting from an earn-out provision if certain performance criteria are achieved in any year from 2011 to 2013. purchase obligations include commitments primarily for the purchase of machinery and equipment , and building expansions . the company has pension and other post-retirement benefit obligations not included in the table above which will result in future payments of $ 7.9 million in 2012. the company also has unrecognized tax benefits , none of which are included in the table above . the unrecognized tax benefits of approximately $ 5.6 million have been recorded as liabilities and the company is uncertain as to if or when such amounts may be settled . related to the unrecognized tax benefits , the company has also recorded a liability for potential penalties and interest of $ 0.5 million . accounting pronouncements in december 2011 , the financial accounting standards board ( `` fasb `` ) issued accounting standards update ( `` asu `` ) 2011-12 comprehensive income . the new guidance indefinitely defers certain provisions of asu 2011-5 statement of comprehensive income that required companies to present reclassification adjustments for each component of accumulated other comprehensive income in both net income and the statement in which other comprehensive income is presented . the deferral does not change the primary provisions of asu 2011-5 , as described below . asu 2011-12 shares the same effective dates as asu 2011-5 and will impact the financial statement presentation of the company in the first quarter 2012. as the asu addresses only disclosure requirements , adoption of asu 2011-12 is not expected to impact the company 's financial position , results of operations or cash flows . in september 2011 , the fasb issued asu 2011-8 testing goodwill for impairment . the new guidance gives companies the option of performing a qualitative assessment before calculating the fair value of the reporting unit . if the results of the qualitative assessment conclude that the fair value of the reporting unit is more likely than not less than the applicable carrying amount , the two-step impairment test would be required . otherwise , further testing would not be required . asu 2011-8 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after december 15 , 2011 , with early adoption permitted . as the asu addresses only the assessment of impairment , adoption of asu 2011-8 is not expected to impact the company 's financial position , results of operations or cash flows . in june 2011 , the fasb issued asu 2011-5 statement of comprehensive income . the new statement gives companies the option of presenting net income and comprehensive income in one continuous statement of comprehensive income or in two separate but consecutive statements . currently companies report other comprehensive income and its components in stockholders ' equity . asu 2011-5 is effective for fiscal years , and interim periods within those years , beginning after december 15 , 2011 and will impact the financial statement presentation of the company in the first quarter 2012. as the asu addresses only disclosure requirements , adoption of asu 2011-5 is not expected to impact the company 's financial position , 23 results of operations or cash flows . in may 2011 , the fasb issued asu 2011-4 fair value measurement and disclosure . the new guidance requires additional disclosures for level 3 measurements including quantitative information about the significant unobservable inputs used in estimating fair value , a discussion of the sensitivity of the measurement to these inputs , and a description of the company 's valuation process . asu 2011-4 is effective for fiscal years , and interim periods within those years , beginning after december 15 , 2011. as the asu addresses only disclosure requirements , adoption of asu 2011-4 is not expected to impact the company 's financial position , results of operations or cash flows . critical accounting estimates management 's discussion and analysis of its financial condition and results of operations are based upon the company 's consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america . the preparation
| capital resources and liquidity the company 's primary sources of liquidity are cash on hand , cash flows from operations and funds available under its committed , unsecured , revolving credit agreement maturing on december 14 , 2016 ( the “ agreement ” ) in the amount of $ 150.0 million , and its amended and restated uncommitted note purchase and private shelf agreement ( the “ prudential agreement ” ) in the amount of $ 200.0 million , with $ 150.0 million of notes issued thereunder beginning to mature in 2015. the company recently renewed the agreement with an increased borrowing capacity and also an increased allowable leverage ratio , but with otherwise similar terms and conditions that reflected market conditions at the time of renewal . to achieve consistency with the increased allowable leverage ratio under the renewed agreement , the company simultaneously amended the comparable provision of the prudential agreement . the company has no scheduled principal payments under the prudential agreement until 2015 at which time it amortizes for 5 years at an amount of $ 30.0 million per year . as of december 31 , 2011 , the company had $ 147.0 million borrowing capacity under the agreement as $ 3.0 million in letters of credit were outstanding , and $ 50.0 million borrowing capacity under the prudential agreement . the agreement contains customary affirmative and negative covenants . the affirmative covenants include financial statements , notices of material events , conduct of business , inspection of property , maintenance of insurance , compliance with laws and most favored lender obligations . the affirmative covenants also include financial covenants with a maximum leverage ratio of 3.50 to 1.00 and an interest coverage ratio equal to or greater than 3.00 to 1.00. the negative covenants include limitations on loans or advances , investments , and the granting of liens by the company or its subsidiaries , as well as prohibitions on certain consolidations , mergers , sales and transfers of assets . as of december 31 , 2011 , the company was in compliance with all covenants .
| Liquidity | 5,275 |
and deliver effective , convenient cutting-edge dental treatment options to their patients . align technology was founded in march 1997 and is headquartered in san jose , california with offices worldwide . our international headquarters are located in amsterdam , the netherlands . we have two operating segments : ( 1 ) clear aligner , known as the invisalign system ; and ( 2 ) scanners and cad/cam services , known as itero and ioc intra-oral scanners and orthocad services . we received fda clearance in 1998 and began our first commercial sales of invisalign to u.s. orthodontists in 1999. in 2000 , we launched our first u.s. national consumer advertising campaign and a year later introduced invisalign to the european market , launching the first phase of international expansion . in 2002 , invisalign was made available to gps and in mid-2003 , leading dental schools began adding invisalign to their curriculum . over the next several years , we introduced several new products including invisalign express 10 , invisalign teen , invisalign assist and vivera retainers , launched invisalign in japan , and added three distribution partners for smaller non-core country markets in the asia pacific , emea , and latin america regions . by 2011 , we had launched invisalign g3 and invisalign g4 , which includes significant new aligner and software features across all invisalign products that make it easier for doctors to use invisalign on more complex cases , and launched invisalign in the people 's republic of china . in 2011 , we acquired cadent holdings , inc. , a leading provider of 3d digital scanning solutions for orthodontics and dentistry , and makers of the itero and ioc intra-oral scanners and orthocad services . we believe that the combination of align 's and cadent 's technologies and capabilities creates greater growth opportunities for align by bringing innovative new invisalign treatment tools to customers and by extending the value of intra-oral scanning in dental practices . intra-oral scanners provide a dental chair-side platform for accessing valuable digital diagnosis and treatment tools , with potential for enhancing accuracy of records , treatment efficiency , and the overall patient experience . we believe there are numerous benefits for customers and the opportunity to accelerate the adoption of invisalign through interoperability with our intra-oral scanners . the use of digital technologies such as cad/cam for restorative dentistry or in-office restorations has been growing rapidly and intra-oral scanning is a critical part of enabling these new digital technologies and procedures in dental practices . our business has grown over the past five years , driven by numerous product introductions , expansion of our international markets , penetration into the teenager segment , and by evolving consumer demand programs while increasing operational efficiencies . between fiscal year 2007 and 2011 , north american revenues increased from approximately $ 224.8 million to approximately $ 339.3 while international revenues have increased from $ 46.6 million to $ 115.6 million . for fiscal 2011 , revenues increased 24 % year over year driven by invisalign adoption by all customer channels and geographies despite continuing challenges in the global economy as well as the introduction of sales of itero and ioc intra-oral scanners and orthocad services . the invisalign system is offered in more than 45 countries and has been used to treat more than 1.7 million patients . our itero and ioc intra-oral scanners are available in over 25 countries and provide dental professionals with an open choice to send digital impressions to any laboratory-based cad/cam system or to any of the more than 1,800 dental labs worldwide . 37 our goal is to establish the invisalign system as the standard method for treating malocclusion and to establish our intra-oral scanning platform as the preferred scanning protocol for 3d digital scans , ultimately driving increased product adoption by dental professionals . we intend to achieve this by focusing on the following key strategic initiatives : product innovation and clinical effectiveness . we believe that product performance and innovation is a cornerstone to our future long-term goal to drive and sustain product adoption , which includes introducing new products along with significant evolution in features and functionality . in the past four years , we have announced new invisalign products and significant feature enhancements that make it easier for doctors to use invisalign on more patients . for example , invisalign teen ( launched in 2008 ) addresses the larger teenage segment most commonly treated by orthodontists . in addition , new features and enhancements introduced with invisalign g3 and invisalign g4 , are engineered to address some of the most significant treatment challenges doctors encounter . through the acquisition of cadent , we now have a leading intra-oral scanner which provides unique chair-side digital tools for a range of procedures including invisalign digital case submission . following the acquisition , we announced invisalign interoperability on the ioc and itero intra-oral scanners , which enable our customers to better integrate their technologies and invisalign treatment process while enhancing the patient experience through digital scanning instead of taking traditional pvs impressions . we also launched new and enhanced software features for the ioc and itero intra-oral scanners , which include improved digital workflows for both the straumann ® and biomet 3i ® fixture level implant integrations with new detailed implant prescription options . finally , the new itero dual scanner ( launched in january 2012 ) allows multiple-specialty practices to utilize one intra-oral scanner to service all their scanning needs including crown and bridge , implants , and orthodontic treatment . an upgrade is also available for existing itero customers who would like to add ioc orthodontic software functionality to their scanner . we believe continuing to introduce new products and product features will keep us at the forefront of the market and increase adoption and frequency of use , however , we expect that adoption of these new products will increase gradually over a number of years . 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 .
| results of operations net revenues comparison of years ended december 31 , 2011 , 2010 and 2009 : net revenues by channel and product invisalign , scanners , and cad/cam service revenues by channel for the years ended december 31 , 2011 , 2010 and 2009 are as follows ( in millions ) : replace_table_token_4_th invisalign , intra-oral scanner , and cad/cam revenues by product and other invisalign non-case revenues , which represents training , retainer and ancillary products , for the years ended december 31 , 2011 , 2010 and 2009 are as follows ( in millions ) : replace_table_token_5_th 42 ( 1 ) net revenues for the year ended december 31 , 2010 includes a $ 14.3 million release of previously deferred revenue for invisalign teen replacement aligners . excluding the $ 14.3 million for the invisalign teen replacement aligners , the percentage change from 2010 to 2011 and 2009 to 2010 was approximately 41.6 % and 48.6 % , respectively . ( 2 ) as the acquisition of cadent closed on april 29 , 2011 , the year ended december 31 , 2011 balances for scanners and cad/cam services only reflect eight months of revenues . invisalign case volume by channel and product case volume data which represents invisalign case shipments by channel and product , for the years ended december 31 , 2011 , 2010 , and 2009 are as follows ( in thousands ) : replace_table_token_6_th fiscal year 2011 compared to fiscal year 2010 total net revenues increased $ 92.6 million in 2011 as a result of worldwide volume growth across all customer channels and the inclusion of our scanner and cad/cam services segment . geographically , both north america and international revenue increased by $ 102.3 million due to an 18.6 % growth in case volume , favorable foreign exchange rates , and the inclusion of eight months of scanner and cad/cam service revenues .
| ROO | 10,620 |
the tax act , among other changes , reduced the u.s. corporate income tax rate from 35 % to 21 % , effective january 1 , 2018 , and also required a one-time deemed repatriation of foreign earnings at specified rates . the company provisionally recognized a $ 591 income tax benefit in the 2017 consolidated financial statements that was primarily comprised of the revaluation of deferred tax assets and liabilities partially offset by a one-time u.s. tax on the mandatory deemed repatriation of the company 's post-1986 foreign earnings . the company did not record any material measurement period adjustment in 2018. the company 's accounting for the income tax effects of the tax act was completed in 2018 . 58 westlake chemical corporation notes to consolidated financial statements— ( continued ) ( in millions of dollars , except share amounts and per share data ) in february 2018 , the fasb issued an accounting standards update , income statement — reporting comprehensive income , to ( 1 ) allow reclassification from accumulated other comprehensive income ( loss ) to retained earnings for stranded tax effects resulting from the tax act ; and ( 2 ) require certain disclosures about stranded tax effects . certain tax effects become stranded in accumulated other comprehensive income ( loss ) when deferred tax balances originally recorded at the historical income tax rate are adjusted in income from operations based on the lower , newly-enacted income tax rate . the company adopted the accounting standard effective october 1 , 2018 and reclassified $ 13 of stranded tax effects relating to its pension benefits liability and cumulative effect of foreign exchange from accumulated other comprehensive income ( loss ) to retained earnings . as a result of the tax act , the financial accounting standards board ( `` fasb `` ) concluded that global intangible low-taxed income tax ( `` gilti tax `` ) can be recognized in the financial statements , no later than december 22 , 2018 , per an accounting policy choice , by : ( 1 ) recording a period cost ( permanent item ) or ( 2 ) providing deferred income taxes stemming from certain basis differences that are expected to result in gilti tax . the company elected to record gilti tax as a period cost . the gilti tax recognized in 2019 and 2018 were not material to the consolidated financial statements . foreign currency translation assets and liabilities of foreign subsidiaries are translated to u.s. dollars at the exchange rate as of the end of the year . statement of operations items are translated at the average exchange rate for the year . the resulting translation adjustment is recorded as a separate component of stockholders ' equity . revenue recognition revenue is recognized when the company transfers control of inventories to its customers . amounts recognized as revenues reflect the consideration to which the company expects to be entitled in exchange for those inventories . provisions for discounts , rebates and returns are incorporated in the estimate of variable consideration and reflected as reduction to revenue in the same period as the related sales . control of inventories generally transfers upon shipment for domestic sales . the company excludes taxes collected on behalf of customers from the estimated contract price . for export contracts , the point at which control passes to the customer varies depending on the terms specified in the customer contract . the company generally invoices customers and recognizes revenue and accounts receivable upon transferring control of inventories . in limited circumstances , the company transfers control of inventories shortly before it has an unconditional right to receive consideration , resulting in recognition of contract assets . the company also receives advance payments from certain customers , resulting in recognition of contract liabilities . contract assets and liabilities are generally settled within the period and are not material to the consolidated balance sheets . the company expenses sales commissions when incurred . these costs are recorded within selling , general and administrative expenses . aside from the amounts disclosed within note 9 , the company does not disclose the value of unsatisfied performance obligations because its contracts with customers ( 1 ) have an original expected duration of one year or less or ( 2 ) have only variable consideration that is calculated based on market prices at specified dates and is allocated to wholly unsatisfied performance obligations . the company adopted asu no . 2014-09 , revenue from contracts with customers ( `` asc 606 `` ) , effective january 1 , 2018. the company applied the modified retrospective transition method to all contracts that were not completed as of the adoption date . periods prior to january 1 , 2018 were not adjusted and are reported under the accounting standards that were in place during those periods . the cumulative effects of changes to the company 's consolidated january 1 , 2018 balance sheet for the adoption of this accounting standard were immaterial . the impact of asc 606 adoption on the financial statements for the year ended december 31 , 2018 as compared with the guidance that was in effect prior to january 1 , 2018 was immaterial . asc 606 requires disclosure of disaggregated revenue into categories that depict the nature of how the company 's revenue and cash flows are affected by economic factors . the company discloses revenues by product and segment in note 23. prior to the adoption of asc 606 , the revenue was recognized when persuasive evidence of an arrangement existed , products were delivered to the customer , the sales price was fixed or determinable and collectability was reasonably assured . for domestic contracts , title and risk of loss had passed to the customer upon delivery under executed customer purchase orders or contracts . story_separator_special_tag changes in components of working capital , which we define for purposes of this cash flow discussion as accounts receivable , inventories , prepaid expenses and other current assets , less accounts payable and accrued liabilities used cash of $ 290 million in 2018 , compared to $ 155 million of cash provided in 2017 , an unfavorable change of $ 445 million . the change was mainly driven by unfavorable changes in inventories , accounts payable and accrued liabilities . unfavorable changes in inventories were primarily the result of higher feedstock costs in 2018 compared to 2017 , and the changes in accounts payable and accrued liabilities were primarily due to the timing of purchases and payments to suppliers as well as due to a lower income tax accrual as a result of the lower tax rate under the tax act . investing activities story_separator_special_tag style= `` line-height:120 % ; padding-top:12px ; text-align : left ; text-indent:30px ; font-size:10pt ; `` > our ability to make payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future , which is subject to general economic , financial , competitive , legislative , regulatory and other factors that are beyond our control . based on our current level of operations and unless we were to undertake a new expansion or large acquisition , we believe our cash flows from operations , available cash and available borrowings under the credit agreement will be adequate to meet our normal operating needs for the foreseeable future . credit agreement on july 24 , 2018 , we entered into a new $ 1 billion revolving credit facility that is scheduled to mature on july 24 , 2023 ( the `` credit agreement `` ) and , in connection therewith , terminated the existing $ 1 billion revolving credit facility that was scheduled to mature on august 23 , 2021 ( the `` prior credit agreement `` ) . the credit agreement bears interest at either ( a ) libor plus a spread ranging from 1.00 % to 1.75 % or ( b ) alternate base rate plus a spread ranging from 0.00 % to 0.75 % in each case depending on the credit rating of the company . at december 31 , 2019 , we had no borrowings outstanding under the credit agreement . as of december 31 , 2019 , we had no outstanding letters of credit and had borrowing availability of $ 1 billion under the credit agreement . the credit agreement contains certain affirmative and negative covenants , including a quarterly total leverage ratio financial maintenance covenant . as of december 31 , 2019 , we were in compliance with the total leverage ratio financial maintenance covenant . the credit agreement also contains certain events of default and if and for so long as certain events of default have occurred and are continuing , any overdue amounts outstanding under the credit agreement will accrue interest at an increased rate , the lenders can terminate their commitments thereunder and payments of any outstanding amounts could be accelerated by the lenders . none of our subsidiaries are required to guarantee our obligations under the credit agreement . the credit agreement includes a $ 150 million sub-limit for letters of credit , and any outstanding letters of credit will be deducted from availability under the facility . the credit agreement also provides for a discretionary $ 50 million commitment for swingline loans to be provided on a same-day basis . we may also increase the size of the facility , in increments of at least $ 25 million , up to a maximum of $ 500 million , subject to certain conditions and if certain lenders agree to commit to such an increase . in connection with our entry into the credit agreement and termination of the prior credit agreement on july 24 , 2018 , all guarantees by our subsidiaries of our payment obligations under the 4.375 % 2047 senior notes , the 3.60 % 2022 senior notes , the 3.60 % 2026 senior notes and the 5.0 % 2046 senior notes were released . 38 go zone bonds and ike zone bonds in november 2017 , the louisiana local government environmental facility and development authority ( the `` authority `` ) completed the offering of $ 250 million aggregate principal amount of 3.50 % tax-exempt revenue refunding bonds due november 1 , 2032 ( the `` refunding bonds `` ) , the net proceeds of which were used to redeem $ 250 million aggregate principal amount of the authority 's 6 ¾ % tax-exempt revenue bonds due november 1 , 2032 issued by the authority under the gulf opportunity zone act of 2005 ( the `` go zone act `` ) in december 2007. in connection with the issuance of the refunding bonds , we issued $ 250 million of the 3.5 % 2032 go zone refunding senior notes . the refunding bonds are subject to optional redemption by the authority upon the direction of the company at any time on or after november 1 , 2027 , for 100 % of the principal plus accrued interest . in july 2010 , the authority completed the reoffering of $ 100 million of the 6 ½ % 2029 go zone bonds . in connection with the reoffering of the 6 ½ % 2029 go zone bonds , we issued $ 100 million of the 6 ½ % 2029 go zone senior notes . in december 2010 , the authority issued $ 89 million of the 6 ½ % 2035 go zone bonds . in connection with the issuance of the 6 ½ % 2035 go zone bonds , we issued $ 89 million of the 6 ½ % 2035 go zone senior notes . in december 2010 , the authority completed the offering of $ 65 million of the 6 ½ % 2035 ike
| the remaining activities in 2018 were primarily related to the $ 120 million payment of cash dividends , the $ 45 million payment of cash distributions to noncontrolling interests , treasury stock repurchases of $ 106 million and proceeds of $ 14 million from the issuance of short-term notes payable . the 2017 activity was mainly related to the issuance of notes , drawdown under the credit agreement and issuance of westlake partners common units , partially offset by repayment of borrowings under the credit agreement , the payment of cash dividends , the payment of cash distributions to noncontrolling interests and the payment of debt issuance costs . liquidity and capital resources liquidity and financing arrangements our principal sources of liquidity are from cash and cash equivalents , cash from operations , short-term borrowings under the credit agreement and our long-term financing . in november 2014 , our board of directors authorized a $ 250 million stock repurchase program ( the `` 2014 program '' ) . in november 2015 , our board of directors approved the expansion of the 2014 program by an additional $ 150 million . in august 2018 , our board of directors approved the further expansion of the existing 2014 program by an additional $ 150 million . as of december 31 , 2019 , we had repurchased 6,080,191 shares of our common stock for an aggregate purchase price of approximately $ 365 million under the 2014 program . during the year ended december 31 , 2019 , 517,712 shares of our common stock were repurchased under the 2014 program . purchases under the 2014 program may be made either through the open market or in privately negotiated transactions . decisions regarding the amount and the timing of purchases under the 2014 program will be influenced by our cash on hand , our cash flow from operations , general market conditions and other factors . the 2014 program may be discontinued by our board of directors at any time . on january 2 , 2019 , we acquired nakan and paid approximately $ 249 million as the purchase price . on july 17 , 2019 , we closed the public offering of 700 million aggregate principal amount of the 1.625 % 2029 senior notes . 37 in 2015 , eagle , a wholly-owned subsidiary of the company , and lotte formed a joint
| Liquidity | 3,945 |
the gain reflects the amount of financial support and indemnification against loan losses that m & t bank obtained from the fdic . the operations obtained in the k bank acquisition transaction did not have a material impact on the company 's consolidated financial position or results of operations . net acquisition and integration-related gains and expenses ( included herein as merger-related expenses ) associated with the wilmington trust acquisition incurred during 2012 totaled $ 6 million after tax-effect , or $ .05 of diluted earnings per common share . net merger-related expenses incurred during 2011 totaled to a net gain of $ 13 million after tax-effect , or $ .10 of diluted earnings per common share . reflected in that amount are the $ 65 million non-taxable gain ( $ .52 of diluted earnings per common share ) on the wilmington trust acquisition and $ 84 million of expenses ( $ 52 million after tax-effect , or $ .42 of diluted earnings per common share ) associated with the acquisition of wilmington trust and to a much lesser extent , the k bank transaction . net merger-related expenses incurred during 2010 totaled to a net gain of $ 27 million ( $ 16 million after tax-effect , or $ .14 of diluted earnings per common share ) . reflected in that amount are the 40 $ 28 million gain ( $ 17 million after tax-effect , or $ .14 of diluted earnings per common share ) on the k bank transaction and $ 771 thousand ( $ 469 thousand after tax-effect ) of expenses . the expenses in 2012 , 2011 and 2010 related to systems conversions and other costs of integrating and conforming acquired operations with and into the company . these expenses consisted largely of professional services and other temporary help fees associated with the conversion of systems and or integration of operations ; costs related to branch and office consolidations ; costs related to termination of existing contractual arrangements to purchase various services ; initial marketing and promotion expenses designed to introduce m & t bank to its new customers ; severance for former employees ; incentive compensation costs ; travel costs ; and printing , supplies and other costs of completing the transactions and commencing operations in new markets and offices . the condition of the domestic and global economy over the last several years has significantly impacted the financial services industry as a whole , and specifically , the financial results of the company . in particular , high unemployment levels and significantly depressed residential real estate valuations have led to increased loan charge-offs experienced by financial institutions throughout that time period . since the official end of the recession in the united states sometime in the latter half of 2009 , the recovery of the economy has been very slow . as a result , many financial institutions , including the company , experienced loan charge-offs at higher than historical levels and unrealized losses related to investment securities backed by residential and commercial real estate due to a lack of liquidity in the financial markets and anticipated credit losses that led to the recognition of other-than-temporary impairment charges . also negatively impacting the financial results of financial institutions during 2011 and 2012 , including the company , has been a series of new regulations , resulting in higher assessments by the fdic and lower fee income . recent legislative developments the dodd-frank wall street reform and consumer protection act ( dodd-frank act ) was signed into law on july 21 , 2010. that law has and will continue to significantly change the bank regulatory structure and affect the lending , deposit , investment , trading and operating activities of financial institutions and their holding companies , and the system of regulatory oversight of the company . the dodd-frank act requires various federal agencies to adopt a broad range of new implementing rules and regulations , and to prepare numerous studies and reports for congress . the dodd-frank act could have a material adverse impact on the financial services industry as a whole , as well as on m & t 's business , results of operations , financial condition and liquidity . the dodd-frank act broadened the base for fdic insurance assessments . beginning in the second quarter of 2011 , assessments are based on average consolidated total assets less average tier 1 capital and certain allowable deductions of a financial institution . the dodd-frank act also permanently increased the maximum amount of deposit insurance for banks , savings institutions and credit unions to $ 250,000 per depositor , retroactive to january 1 , 2009. noninterest-bearing transaction accounts had unlimited deposit insurance through december 31 , 2012 , when that coverage expired . the legislation also requires that publicly traded companies give shareholders a non-binding vote on executive compensation and golden parachute payments , and authorizes the securities and exchange commission to promulgate rules that would allow shareholders to nominate their own candidates using a company 's proxy materials . the dodd-frank act also directs the federal reserve board to promulgate rules prohibiting excessive compensation paid to bank holding company executives , regardless of whether the company is publicly traded . the dodd-frank act established a new bureau of consumer financial protection with broad powers to supervise and enforce consumer protection laws . the bureau of consumer financial protection has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions , including the authority to prohibit unfair , deceptive or abusive acts and practices . the bureau of consumer financial protection has examination and enforcement authority over all banks and savings institutions with more than $ 10 billion in assets . story_separator_special_tag the higher average earning assets and the decline in the net interest margin were each largely attributable to the may 2011 acquisition of wilmington trust . the provision for credit losses in 2012 declined 24 % to $ 204 million from $ 270 million in the prior year . net charge-offs of $ 186 million in 2012 were down from $ 265 million in 2011. net charge-offs as a percentage of average loans and leases were .30 % and .47 % in 2012 and 2011 , respectively . the company experienced improvement in credit quality during 2012 , although real estate valuations continued to be depressed . the provision for credit losses in 2011 was $ 98 million or 27 % below $ 368 million in 2010. net charge-offs in 2011 declined $ 81 million from $ 346 million , or .67 % of average loans and leases , in 2010. other income aggregated $ 1.67 billion in 2012 , 5 % above $ 1.58 billion in 2011. that improvement was led by mortgage banking revenues , which rose $ 183 million or 110 % , and trust income , which increased $ 139 million or 42 % , from 2011. gains and losses on bank investment securities totaled to net losses of $ 48 million in 2012 , compared with net gains of $ 73 million in 2011. reflected in those gains or losses were other-than-temporary impairment charges of $ 48 million and $ 77 million in 2012 and 2011 , respectively , on certain privately issued collateralized mortgage obligations ( cmos ) backed by residential and commercial real estate loans , and gains of $ 150 million in 2011 from the sale of investment securities available for sale . those sold securities were predominantly mortgage-backed securities guaranteed by government-sponsored entities that were sold in connection with the wilmington trust acquisition in order to manage the company 's balance sheet composition and resultant capital ratios . also reflected in other income in 2011 was $ 55 million of cash received in full settlement of a lawsuit initiated by m & t in 2008 under which m & t sought damages arising from a 2007 investment in collateralized debt obligations ( cdos ) and alleged that the quality of the investment was not as represented . the $ 65 million non-taxable gain associated with the acquisition of wilmington trust was also included in other income in 2011. other income rose 43 % or $ 475 million in 2011 from $ 1.11 billion in 2010. in addition to the gains from the sale of investment securities , the cdo litigation settlement and the merger-related gain from the wilmington trust transaction ( all recorded in 2011 ) , a $ 210 million rise in trust income associated with the wilmington trust acquisition was the predominant factor in the growth in other income from 2010 to 2011. also contributing to the higher level of other income in 2011 were increased revenues from letter of credit and credit-related fees and merchant discount and credit card fees . partially offsetting the favorable factors noted were declines in mortgage banking revenues and service charges on deposit accounts , and the $ 28 million gain recorded in 2010 associated with the k bank acquisition transaction . other expense increased 1 % to $ 2.51 billion in 2012 from $ 2.48 billion in 2011. other expense totaled $ 1.91 billion in 2010. included in those amounts are expenses considered by m & t to be nonoperating in nature , consisting of amortization of core deposit and other intangible assets of $ 61 million , $ 62 million and $ 58 million in 2012 , 2011 and 2010 , respectively , and merger-related expenses of $ 10 million in 2012 , $ 84 million in 2011 and $ 771 thousand in 2010. exclusive of those nonoperating expenses , noninterest operating expenses aggregated $ 2.44 billion in 2012 , compared with $ 2.33 billion in 2011 and $ 1.86 billion in 2010. reflected in 2011 's noninterest operating expenses were a $ 79 million other-than-temporary impairment charge related to m & t 's 20 % investment in bayview lending group llc ( blg ) and a $ 30 million tax-deductible cash contribution to the m & t charitable foundation in the fourth quarter . after considering those items , the increase in noninterest operating expenses from 2011 to 2012 was largely the result of the full-year impact of the operations obtained in the may 2011 acquisition of wilmington trust . in addition to the two items noted above that impacted 2011 expenses , contributing to the rise in noninterest operating expenses from 2010 to 2011 were the impact of the operations obtained in the wilmington trust acquisition and higher fdic assessments . the efficiency ratio expresses the relationship of operating expenses to revenues . the company 's efficiency ratio , or noninterest operating expenses ( as previously defined ) divided by the sum of taxable-equivalent net interest income and noninterest income ( exclusive of gains and losses from bank investment securities and gains on merger transactions ) , was 56.2 % in 2012 , compared with 60.4 % in 2011 and 53.7 % in 2010. the calculations of the efficiency ratio are presented in table 2 . 44 table 1 earnings summary dollars in millions replace_table_token_8_th ( a ) changes were calculated from unrounded amounts . ( b ) interest income data are on a taxable-equivalent basis . the taxable-equivalent adjustment represents additional income taxes that would be due if all interest income were subject to income taxes . this adjustment , which is related to interest received on qualified municipal securities , industrial revenue financings and preferred equity securities , is based on a composite income tax rate of approximately 39 % . ( c ) includes other-than-temporary impairment losses , if any . supplemental reporting of non-gaap results of operations as a result of business combinations and other
| table 18 summarizes the company 's other commitments as of december 31 , 2012 and the timing of the expiration of such commitments . table 18 contractual obligations and other commitments replace_table_token_25_th m & t 's primary source of funds to pay for operating expenses , shareholder dividends and treasury stock repurchases has historically been the receipt of dividends from its banking subsidiaries , which are subject to various regulatory limitations . dividends from any banking subsidiary to m & t are limited by the amount of earnings of the banking subsidiary in the current year and the two preceding years . for purposes of that test , at december 31 , 2012 approximately $ 944 million was available for payment of dividends to m & t from banking subsidiaries . these historic sources of cash flow have been augmented in the past by the issuance of trust preferred securities and senior notes payable . information regarding trust preferred securities and the related junior subordinated debentures is included in note 9 of notes to financial statements . the $ 300 million of 5.375 % senior notes of m & t that were issued in 2007 matured and were repaid in 2012. m & t also maintains a $ 30 million line of credit with an unaffiliated commercial bank , of which there were no borrowings outstanding at december 31 , 2012. a similar $ 30 million line of credit was entirely available for borrowing at december 31 , 2011 . 81 table 19 maturity and taxable-equivalent yield of investment securities replace_table_token_26_th ( a ) investment securities available for sale are presented at estimated fair value . yields on such securities are based on amortized cost . ( b ) maturities are reflected based upon contractual payments due . actual maturities are expected to be significantly shorter as a result of loan repayments in the underlying mortgage pools .
| Liquidity | 6,983 |
in addition , the spa , as amended , provided for interim efficacy and safety analyses by the study 's dmc at approximately 60 % and at approximately 80 % of the target aggregate number of primary cardiovascular events . the periodic safety reviews and interim efficacy and safety analyses were conducted confidentially by the study 's dmc . we remain blinded to all data from the study . until the study is completed or the study is halted due to a patient safety concern ( not expected ) , amarin personnel will remain blinded to the efficacy and safety data from the reduce-it study . since patient enrollment commenced in 2011 , over 33,000 patient years of study experience have been accumulated in the reduce-it study . following each periodic review of safety data to date , which have occurred quarterly since 2013 , and following each of two interim efficacy and safety analyses , the dmc has communicated to us that we should continue the study as planned . the p-value used to assess the primary endpoint in reduce-it at completion , assuming 1,612 aggregate primary cardiovascular events , is p < 0.0436 . in january 2018 , we announced that more than 90 % of the 1,612 targeted aggregate number of primary cardiovascular events have been reported and documented . 63 our scientific rationale for the reduce-it study is supported by ( i ) epidemiological data that suggests elevated triglyceride levels correlate with increased cardiovascular disease risk , ( ii ) genetic data that suggests triglyceride and or triglyceride-rich lipoproteins ( as well as low-density lipoprotein cholesterol ( ldl cholesterol ) , known as bad cholesterol ) are independently in the causal pathway for cardiovascular disease and ( iii ) clinical data that suggest substantial triglyceride reduction in patients with elevated baseline triglyceride levels correlates with reduced cardiovascular risk . our scientific rationale for the reduce-it study is also supported by research on the putative cardioprotective effects of epa as presented in scientific literature . it is possible that the effects of epa may be due not to a single mode of action , such as triglyceride lowering , but rather to multiple mechanisms working together . studies in the scientific literature explore potentially beneficial effects of epa on multiple atherosclerosis processes , including endothelial function , oxidative stress , foam cell formation , inflammation/cytokines , plaque formation/progression , platelet aggregation , thrombus formation , and plaque rupture . the reduce-it study is needed to determine the clinical benefit , if any , of epa therapy in statin-treated patients with elevated triglyceride levels . in the successful phase 3 marine and anchor clinical trials , vascepa was studied at a daily dose of 2 grams and 4 grams . we sought approval of vascepa at the more efficacious 4-gram dose for use in each patient population . these trials demonstrated favorable results in their respective patient populations , particularly with the 4-gram dose of vascepa , in reducing triglyceride levels without increasing ldl-c levels in the marine trial and with a statistically significant decrease in ldl-c levels in the anchor trial , in each case , relative to placebo . these trials also showed favorable results , particularly with the 4-gram dose of vascepa , in other important lipid and inflammation biomarkers , including apolipoprotein b ( apo b ) , non-high-density lipoprotein cholesterol ( non-hdl-c ) , total-cholesterol ( tc ) , very low-density lipoprotein cholesterol ( vldl-c ) , lipoprotein-associated phospholipase a2 ( lp-pla2 ) , and high sensitivity c-reactive protein ( hs-crp ) . in these trials , the most commonly reported adverse reaction ( incidence > 2 % and greater than placebo ) in vascepa-treated patients was arthralgia ( joint pain ) ( 2.3 % for vascepa vs. 1.0 % for placebo ) . in april 2015 , we received a complete response letter , or crl , from the fda in response to our supplemental new drug application , or snda , that sought approval of vascepa for use in patients with mixed dyslipidemia , based on the successful anchor study . the crl followed an october 2013 rescission by the fda of a special protocol assessment , or spa , agreement and three failed attempts by us to appeal that rescission at fda . the fda has acknowledged the success of the anchor study , which met all primary and secondary endpoints . however , fda determined that there were insufficient data to conclude that drug-induced changes in serum triglycerides could be recognized by the fda as a valid surrogate for reducing cardiovascular risk in the anchor population for the purpose of regulatory approval of a drug targeted at a triglyceride-lowering indication in this population . the fda has acknowledged that the standard of proof required by the fda for approval of a new drug indication is higher than that generally used to inform patient treatment guidelines and that used by physicians in clinical practice . the fda did not determine that the drug-induced effects of vascepa , which go beyond triglyceride-lowering , would not actually reduce cardiovascular risk in this population and the fda has encouraged us to complete the reduce-it outcomes study . based on our communications with the fda , we expect that final positive results from the reduce-it outcomes study will be required for label expansion for vascepa . in may 2015 , we and a group of independent physicians filed a lawsuit in federal court to permit us to promote to healthcare professionals the use of vascepa in patients with mixed dyslipidemia so long as the promotion is truthful and non-misleading . this use reflects recognized medical practice but is not covered by current fda-approved labeling for the drug . historically , fda has considered promotion of drug uses not covered by fda-approved labeling to be illegal off-label promotion , even if such promotion is truthful and non-misleading . story_separator_special_tag under the terms of the distribution agreement , we granted to biologix a non-exclusive license to use our trademarks in connection with the importation , distribution , promotion , marketing and sale of vascepa in the middle east and north africa territory . upon closing of the agreement , we received a non-refundable up-front payment , which will be recognized as revenue over 10 years commencing upon first marketing approval of vascepa in the territory . we receive all payments based on total product sales and pay biologix a service fee in exchange for its services , whereby the service fee represents a percentage of gross selling price which is subject to a minimum floor price . in september 2017 , we entered into an agreement with hls to register , commercialize and distribute vascepa in canada . under the agreement , hls will be responsible for regulatory and commercialization activities and associated costs . we will be responsible for providing assistance towards local filings , supplying finished product under negotiated supply terms , maintaining intellectual property , and continuing the development and funding of reduce-it . terms of the agreement include up-front and milestone payments to us of up to $ 65.0 million . these payments include a non-refundable $ 5.0 million up-front payment to be received in two equal installments , the first of which was received at closing with the second to be received upon the six-month anniversary of the closing . in addition to the non-refundable , up-front payment , we are entitled to receive certain regulatory and sales-based milestone payments of up to an additional $ 60.0 million , the timing and achievability of which can not be determined at least until discussions with canadian regulatory authorities have commenced , as well as tiered double-digit royalties on net sales of vascepa in canada . we continue to assess other partnership opportunities for licensing vascepa to partners outside of the united states . research and development reduce-it is the first prospective cardiovascular outcomes study of any drug in a population of patients who , despite stable statin therapy , have elevated triglyceride levels . reduce-it is a multinational , prospective , randomized , double-blind , placebo-controlled study designed to assess the cumulative effect on the rate of cardiovascular events for patients treated with vascepa as an add-on to statin therapy compared to the corresponding rate of cardiovascular events for patients treated with placebo on top of statin therapy . reduce-it is not designed to demonstrate that lowering triglycerides alone in the study population is sufficient to lower the rate of major adverse cardiovascular events compared to placebo . rather , it is designed to test the hypothesis that the clinical effects of vascepa , including its impact on triglyceride lowering , are effective in lowering the rate of major adverse cardiovascular events compared to placebo in patients who despite statin therapy have risk factors for cardiovascular disease , including elevated triglyceride levels . based on the results of reduce-it , we may seek additional indications for vascepa beyond the indications studied in the anchor or marine trials . 66 in 2016 , we completed patient enrollment and randomization of 8,175 individual patients into the reduce-it study , exceeding the 8,000 patients targeted for the trial . the reduce-it study is designed to be completed after reaching 1,612 aggregate primary cardiovascular events . based on projected event rates , we estimate the onset of the target aggregate number of primary cardiovascular events to be reached near the end of the first quarter of 2018 with study results then expected to be available and made public before the end of the third quarter of 2018 , followed by publication of the results . between reaching the estimated onset of the target 1,612 aggregate primary cardiovascular events and study data being unblinded and disclosed , vital data will be collected from all remaining living patients in the study and data in the study will be rolled-up for evaluation by the dmc and creation of a final study report . we have instructed clinical sites to schedule patients enrolled in the study for their final site visits commencing march 1 , 2018. the reduce-it study , since its inception in 2011 , has been conducted under a spa agreement with the fda . this spa , as amended , provides for periodic safety reviews by the study 's dmc . in addition , the spa , as amended , provided for interim efficacy and safety analyses by the study 's dmc at approximately 60 % and at approximately 80 % of the target aggregate number of primary cardiovascular events . the periodic safety reviews and interim efficacy and safety analyses were conducted confidentially by the study 's dmc . we remain blinded to all data from the study . until the study is completed or the study is halted due to a patient safety concern ( not expected ) , amarin personnel will remain blinded to the efficacy and safety data from the reduce-it study . since patient enrollment commenced in 2011 , over 33,000 patient years of study experience have been accumulated in the reduce-it study . following each periodic review of safety data to date , which have occurred quarterly since 2013 , and following each of two interim efficacy and safety analyses , the dmc has communicated to us that we should continue the study as planned . the p-value used to assess the primary endpoint in reduce-it at completion , assuming 1,612 aggregate primary cardiovascular events , is p < 0.0436. in january 2018 , we announced that more than 90 % of the 1,612 targeted aggregate number of primary cardiovascular events have been reported and documented . our scientific rationale for the reduce-it study is supported by ( i ) epidemiological data that suggests elevated triglyceride levels correlate with increased cardiovascular disease risk , ( ii ) genetic data that suggests triglyceride and or triglyceride-rich
| net interest expense for the years ended december 31 , 2016 and 2015 is summarized in the table below : replace_table_token_12_th ( 1 ) cash and non-cash interest expense related to the exchangeable senior notes for the years ended december 31 , 2016 and 2015 was $ 9.9 million and $ 11.7 million , respectively . ( 2 ) cash and non-cash interest expense related to the december 2012 royalty-bearing instrument for the years ended december 31 , 2016 and 2015 , held by biopharma during such years , was $ 8.8 million and $ 8.5 million , respectively . these amounts reflect the assumption that our vascepa net revenue levels will not be high enough to support repayment to biopharma in accordance with the contractual repayment schedule without the optional reduction which is allowed to be elected by us if the threshold revenue levels are not achieved . to date , our revenues have been below the contractual threshold amount each quarter such that each payment reflects the calculated optional reduction amount as opposed to the contractual threshold payments for each quarterly period . ( 3 ) interest income for the years ended december 31 , 2016 and 2015 was $ 0.2 million and $ 0.1 million , respectively . interest income represents income earned on cash balances . other income ( expense ) , net . other income ( expense ) , net , for the year ended december 31 , 2016 was expense of $ 0.5 million versus expense of $ 0.2 million in the prior year period . other income ( expense ) , net , in the years ended december 31 , 2016 and 2015 primarily consists of gains and losses on foreign exchange transactions . ( provision for ) benefit from income taxes .
| Liquidity | 12,365 |
the increase in automotive sales was primarily due to an incremental $ 41.9 million in sales related to business acquisitions in 2013 , strong worldwide growth in passenger vehicle fuses , growth in commercial vehicle products and favorable currency effects . currency effects increased sales by $ 2.6 million in 2013 compared to 2012 primarily due to the euro . excluding incremental sales from acquisitions and currency effects , automotive sales increased $ 16.5 million or 8 % year over year . the increase in electronics sales reflected incremental sales from hamlin of $ 24.1 million , improving demand across all geographies and a slightly more favorable macroeconomic outlook . in addition , sales were negatively impacted by net unfavorable currency effects of $ 0.2 million , primarily from sales denominated in japanese yen . excluding incremental sales from acquisitions and currency effects , electronics sales increased $ 13.7 million or 4 % year over year . 25 the decrease in electrical sales was primarily due to slowing demand for protection relays and custom products as a result of reduced potash mine expansion activity as well as the global downturn in the broader mining market . the decline was partially offset by stronger power fuse sales which increased 13 % year-over-year primarily reflecting strength in the solar and hvac markets as well as distributor conversions . the electrical segment experienced net unfavorable currency effects of $ 1.0 million primarily from sales denominated in canadian dollars . excluding incremental sales from currency effects , electrical sales decreased $ 7.6 million or 6 % year over year . on a geographic basis , sales in the americas increased $ 38.8 million or 13 % in 2013 as compared to 2012 primarily due to incremental sales from business acquisitions of $ 32.4 million offset by $ 1.2 million in unfavorable currency effects resulting from sales denominated in canadian dollars . excluding incremental sales and currency effects , americas ' sales increased $ 7.6 million or 3 % . this increase resulted from an increase in the company 's automotive and electronics business segments offset by a decline in the electrical business segment . automotive sales increased $ 31.3 million or 33 % primarily reflecting incremental sales from acquisitions of $ 25.9 million , strong growth in the passenger vehicle market and growth in the commercial vehicle market . electronics sales increased $ 14.4 million or 16 % primarily reflecting incremental sales from hamlin of $ 6.5 million and higher demand . electrical sales decreased $ 7.0 million or 6 % resulting from decreases in demand for protection relays and custom products due to continued weakness in the mining segment . european sales increased $ 29.3 million or 27 % in 2013 compared to 2012 primarily due to incremental sales from business acquisitions of $ 15.7 million and favorable currency effects of $ 3.8 million primarily from sales denominated in euros . excluding incremental sales and currency effects , european sales increased $ 9.8 million or 9 % . this resulted from increases in the company 's electronics and automotive business segments offset by a decrease in the electrical business segment . automotive sales increased $ 20.2 million or 30 % in 2013 primarily reflecting incremental sales from business acquisitions of $ 11.7 million and higher sales in the passenger vehicle markets driven by increased content . excluding the impact of incremental sales from acquisitions and unfavorable currency effects , primarily from a weaker euro , automotive sales increased $ 6.2 million or 9 % . electronics sales increased $ 10.6 million or 33 % reflecting incremental sales from hamlin of $ 4.0 million and higher demand in 2013. electrical sales decreased $ 1.6 million or 18 % in 2013 primarily from decreased demand for nautical relays . asia-pacific sales increased $ 21.9 million or 9 % in 2013 compared to 2012 primarily due to incremental sales from business acquisitions of $ 17.9 million offset by unfavorable currency effects of $ 1.2 million primarily from sales denominated in japanese yen . excluding the impact of incremental sales and currency effects , asia-pacific sales increased $ 5.2 million or 2 % . electronics sales increased $ 12.5 million or 6 % reflecting incremental sales from hamlin of $ 13.4 million and increased sales in china offset by weakness in the taiwan , japan and korea markets . automotive sales increased $ 9.5 million or 22 % reflecting incremental sales from acquisitions of $ 4.5 million and continued increased demand for passenger vehicles in china as well as gains in market share . gross profit was $ 296.2 million or 39.1 % of sales in 2013 , compared to $ 258.5 million or 38.7 % of sales in 2012. gross profit in both 2013 and 2012 were negatively impacted by purchase accounting adjustments in cost of sales of $ 1.5 million and $ 0.6 million , respectively . these charges were the additional cost of goods sold for hamlin , accel and selco inventories which had been stepped up to fair value at the acquisition dates as required by purchase accounting rules . excluding the impact of these charges , gross profit was $ 297.7 million or 39.3 % of sales as compared to $ 259.1 million or 38.8 % of sales in 2012. the increase in gross margin was primarily attributable to operating leverage on higher sales . 26 total operating expense was $ 166.4 million or 22.0 % of net sales for 2013 compared to $ 151.6 million or 22.7 % of net sales for 2012. the increase in operating expenses primarily reflects incremental operating expenses of $ 12.5 million from business acquisitions and the increased cost of company incentive programs driven by improved financial performance in 2013 . 2012 operating expense included $ 5.1 million of charges related to the settlement of pension liabilities for certain former employees . story_separator_special_tag 29 other expense ( income ) , net , consisting of interest income , royalties , non-operating income and foreign currency items was $ 2.2 million of income in 2012 compared to $ 2.9 million of income in 2011 .the year-over-year decrease in income primarily reflects the impact of unfavorable currency translation effects ( primarily due to the weakening of the euro against the u.s. dollar ) in 2012. income before income taxes was $ 100.1 million in 2012 compared to $ 115.1 million in 2011. income tax expense was $ 24.7 million in 2012 compared to $ 28.1 million in 2011. the 2012 effective income tax rate was 24.7 % compared to 24.4 % in 2011. the 2012 effective tax rate is lower than the statutory tax rate primarily due to the result of more income earned in low tax jurisdictions . liquidity and capital resources as of december 28 , 2013 , $ 297.1 million of the $ 305.2 million of the company 's cash and cash equivalents was held by foreign subsidiaries . of the $ 297.1 million held by foreign subsidiaries , approximately $ 13.6 million could be repatriated with minimal tax consequences . the company expects to maintain its foreign cash balances ( other than the aforementioned $ 13.6 million ) for local operating requirements , to provide funds for future capital expenditures and for potential acquisitions . the company does not expect to repatriate these funds to the u.s. the company historically has financed capital expenditures through cash flows from operations . management expects that cash flows from operations and available lines of credit will be sufficient to support both the company 's operations and its debt obligations for the foreseeable future . term loan and revolving credit facilities on may 31 , 2013 , the company entered into a new credit agreement with j.p. morgan securities llc for up to $ 325.0 million which consists of an unsecured revolving credit facility of $ 225.0 million and an unsecured term loan of $ 100.0 million . the new credit agreement is for a five year period . at december 28 , 2013 , the company had available $ 103.4 million of borrowing capacity under the revolving credit agreement at an interest rate of libor plus 1.25 % ( 1.42 % as of december 28 , 2013 ) . the credit agreement replaces the company 's previous credit agreement dated june 13 , 2011 which was terminated on may 31 , 2013. on january 30 , 2014 , the company increased the unsecured revolving credit facility entered into on may 31 , 2013 , by $ 50.0 million thereby increasing the total revolver borrowing capacity from $ 225.0 million to $ 275.0 million . this arrangement contains covenants that , among other matters , impose limitations on the incurrence of additional indebtedness , future mergers , sales of assets , payment of dividends , and changes in control , as defined in the agreement . in addition , the company is required to satisfy certain financial covenants and tests relating to , among other matters , interest coverage and leverage . at december 28 , 2013 , the company was in compliance with all covenants under the credit agreement . 30 other obligations for the fiscal year ended december 28 , 2013 , the company had $ 0.8 million available in letters of credit . no amounts were drawn under these letters of credit at december 28 , 2013. for the fiscal year ended december 29 , 2012 , the company had $ 0.8 million outstanding in letters of credit . no amounts were drawn under these letters of credit at december 29 , 2012. story_separator_special_tag times , serif ; font-size : 10pt `` > the company withheld 32,671 shares of stock in lieu of withholding taxes on behalf of employees who became vested in restricted stock option grants during 2013. contractual obligations and commitments the following table summarizes contractual obligations and commitments as of december 28 , 2013 : replace_table_token_8_th off-balance sheet arrangements as of december 28 , 2013 , the company did not have any off-balance sheet arrangements , as defined under sec rules . specifically , the company was not liable for guarantees of indebtedness owed by third parties ; the company was not directly liable for the debt of any unconsolidated entity , and the company did not have any retained or contingent interest in assets ; and the company does not participate in transactions that generate relationships with unconsolidated entities or financial partnerships , such as entities often referred to as structured finance or special purpose entities . 32 recent accounting pronouncements in may 2011 , the financial accounting standards board ( “ fasb ” ) issued authoritative guidance that provides a consistent definition of fair value and ensures that the fair value measurement and disclosure requirements are similar between u.s. gaap and international financial reporting standards . the new guidance changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3 fair value measurements . the company adopted the new guidance on january 1 , 2012. there was no significant impact on its consolidated financial statements upon adoption . in june 2011 , the fasb issued authoritative guidance that will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements . it eliminates the option to present components of other comprehensive income as part of the statement of changes in equity . the guidance does not change the items which must be reported in other comprehensive income , how such items are measured or when they must be reclassified to net income . this guidance is effective for interim and annual periods beginning after december 15 , 2011. the company adopted the new guidance on january 1 , 2012 , which resulted in a different presentation in its consolidated financial statements .
| net cash provided by financing activities in 2013 was approximately $ 142.2 million , which included $ 135.8 million in net proceeds from borrowing , $ 4.1 million in excess tax benefits on share-based compensation and $ 22.0 million in cash proceeds from the exercise of stock options . additionally the company paid cash dividends of $ 18.7 million during the year and incurred $ 0.8 million in debt issuance costs . information regarding the company 's debt is provided in note 7 of the notes to consolidated financial statements included in this report . the effect of exchange rate changes decreased cash by $ 4.2 million in 2013. the net cash provided by operating activities less net cash used in financing and provided by investing activities plus the effect of exchange rate changes , resulted in a $ 69.8 million increase in cash and cash equivalents in 2013. this left the company with a cash balance of $ 305.2 million at december 28 , 2013. days sales outstanding ( dso ) in accounts receivable was 59 days at year-end 2013 compared to 58 days at year-end 2012 and 57 days at year-end 2011. days inventory outstanding was 70 days at year-end 2013 , compared to 69 days at year-end 2012 and 73 days at year-end 2011 . 31 the ratio of current assets to current liabilities was 2.7 to 1 at year-end 2013 , compared to 2.9 to 1 at year-end 2012 and 2.5 to 1 at year-end 2011. the change in the current ratio at the end of 2013 compared to the prior year reflected increased current liabilities in 2013 , primarily related to higher current portion of long-term debt balance .
| Liquidity | 3,579 |
we did not incur any material additional expenses related to this restructuring and strategic program in fiscal 2017 or fiscal 2018. provision for income taxes our effective tax rate was 17.8 % , 29.7 % and 34.2 % , for fiscal 2018 , 2017 and 2016 , respectively . the fiscal 2018 effective tax rate reflects benefits from the tax act which include the lower federal statutory rate of 21 % compared to a fiscal 2017 blended federal tax rate of 33.8 % due to the timing of the effective date of the tax act . the fiscal 2018 effective tax rate also reflects approximately $ 5 million of transitional tax reform benefits related to fiscal 2017 , partially offset by an approximate $ 1 million increase in tax expense related to the accounting for employee share-based awards . the fiscal 2017 effective tax rate reflects an approximate $ 10 million benefit related to the tax act , partially offset by the recognition of the tax impact of deficiencies resulting from our adoption of the new accounting guidance related to employee share-based payment transactions . the fiscal 2016 effective tax rate reflects the impact of the disposition of boston proper 's stock and goodwill impairment charges , partially offset by an outside basis difference realized upon the sale and subsequent liquidation of the boston proper business , which the company liquidated in fiscal 2015. excluding the aforementioned favorable and unfavorable impacts to the effective tax rates , the fiscal 2018 , 2017 and 2016 effective rates would have been 25.8 % , 36.4 % and 37.2 % , respectively . 24 net income and earnings per diluted share net income for fiscal 2018 was $ 36 million , or $ 0.28 per diluted share , compared to net income for fiscal 2017 of $ 101 million , or $ 0.79 per diluted share . the change in earnings per share reflects a decrease in net income partially offset by the impact of share repurchases in fiscal 2018 . fiscal 2018 net income includes the unfavorable impact of impairment and accelerated depreciation charges of approximately $ 8 million , after-tax , related to our retail fleet optimization plan , partially offset by the favorable tax benefit of approximately $ 5 million related to the tax act . net income for fiscal 2017 was $ 101 million , or $ 0.79 per diluted share , compared to net income for fiscal 2016 of $ 91 million , or $ 0.69 per diluted share . the change in earnings per share primarily reflects the increase in fiscal 2017 net income . fiscal 2017 net income includes the favorable impact of the tax act of approximately $ 10 million when compared to fiscal 2016 and the benefit of the fifty-third week of approximately $ 4 million , after-tax , partially offset by the unfavorable impact of the hurricanes of approximately $ 5 million , after-tax , recorded in the third quarter of fiscal 2017. fiscal 2016 results include the impact of restructuring and strategic charges primarily related to outside services , severance costs and proxy solicitation costs of approximately $ 19 million , after-tax , partially offset by the favorable tax benefit of approximately $ 4 million related to the disposition of the boston proper direct-to-consumer business . cash , marketable securities and debt at the end of fiscal 2018 , cash and marketable securities totaled $ 186 million , a decrease of $ 34 million compared to the end of fiscal 2017 , while debt totaled $ 58 million , a decrease of $ 11 million compared to the end of fiscal 2017 . this $ 34 million decrease in cash and marketable securities includes $ 124 million in return of cash to shareholders through dividends and our share repurchase program . inventories at the end of fiscal 2018 , inventories totaled $ 235 million compared to $ 234 million at the end of fiscal 2017 . this $ 1 million increase , or 0.6 % , primarily reflects accelerated in-transits in fiscal 2018 due to the timing of the chinese new year , partially offset by a 7 % decrease in on-hand inventory compared to the end of fiscal 2017 . story_separator_special_tag approximately 2 million shares related to employee stock ownership plans and stock option exercises . store and franchise activity during fiscal 2018 , we had 42 net store closures , consisting of 12 chico 's stores , 18 whbm stores and 12 soma stores . as part of our retail fleet optimization plan , the company expects to close approximately 100 chico 's , 90 white house black market and 60 soma locations over the next three years , with the majority of the closings occurring in years two and three . we continuously evaluate the appropriate store base in light of economic conditions and our business strategy and may adjust the openings and closures as conditions require or as opportunities arise . as of february 2 , 2019 , the company 's franchise operations consisted of 83 international retail locations in mexico . contractual obligations the following table summarizes our contractual obligations at february 2 , 2019 : replace_table_token_12_th as of february 2 , 2019 , our contractual obligations consisted of : 1 ) amounts outstanding under operating leases , 2 ) open purchase orders for inventory and other operating expenses , in the normal course of business , 3 ) contractual commitments for fiscal 2019 capital expenditures , 4 ) long-term debt obligations and 5 ) interest payments on long-term debt . 26 until formal resolutions are reached between us and the relevant taxing authorities , we are unable to estimate a final determination related to our uncertain tax positions and therefore , we have excluded the uncertain tax positions , totaling approximately $ 2 million at february 2 , 2019 from the above table . story_separator_special_tag tenant improvement allowances are recorded as a deferred lease credit within deferred liabilities and amortized as a reduction of rent expense over the term of the lease . income taxes income taxes are accounted for in accordance with authoritative guidance , which requires the use of the asset and liability method . deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases . inherent in the measurement of deferred balances are certain judgments and interpretations of existing tax law and published guidance as applicable to our operations . deferred tax assets are reduced , if necessary , by a valuation allowance to the extent future realization of those tax benefits are uncertain . our effective tax rate considers management 's judgment of expected tax liabilities within the various taxing jurisdictions in which we are subject to tax . we record amounts for uncertain tax positions that management believes are supportable , but are potentially subject to successful challenge by the applicable taxing authority . consequently , changes in our assumptions and judgments could affect amounts recognized related to income tax uncertainties and may affect our consolidated results of operations or financial position . we believe our assumptions for estimates continue to be reasonable , although actual results may have a positive or negative material impact on the balances of such tax positions . historically , the variation of estimates to actual results is immaterial and material variation is not expected in the future . share-based compensation expense share-based compensation expense for all awards is based on the grant date fair value of the award , net of estimated forfeitures , and is recognized over the requisite service period of the awards . compensation expense for restricted stock awards and stock options with a service condition is recognized on a straight-line basis over the requisite service period . compensation expense for performance-based awards with a service condition is recognized ratably for each vesting tranche based on our estimate of the level and likelihood of meeting certain company-specific performance goals . the calculation of share-based compensation expense involves estimates that require management 's judgment . we have elected to estimate the expected forfeiture rate for all share-based awards , and only recognize expense for those shares expected to vest . in determining the portion of the share-based payment award that is ultimately expected to be earned , we derive forfeiture rates based on historical data . in accordance with the authoritative guidance , we revise our forfeiture rates , when necessary , in subsequent periods if actual forfeitures differ from those originally estimated . as a result , in the event that a grant 's actual forfeiture rate is materially different from its estimate at the completion of the vesting period , the share-based compensation expense could be significantly different from what we recorded in current and prior periods . for performance-based awards , estimates include the probable number of shares that will ultimately be issued based on the likelihood of meeting the respective performance condition . we estimate the probable vesting based on current financial performance forecasts for the relevant performance metrics . the assumptions used in calculating the fair value of share-based payment awards represent management 's best estimates , but these estimates involve inherent uncertainties and the application of management 's judgment . 29 recently issued accounting pronouncements see note 1 to the accompanying consolidated financial statements for a description of certain newly issued accounting pronouncements which may impact our financial statements in future reporting periods . forward-looking statements this form 10-k may contain certain “ forward-looking statements ” within the meaning of section 27a of the securities act of 1933 , as amended , and section 21e of the securities exchange act of 1934 , as amended , which reflect our current views with respect to certain events that could have an effect on our future financial performance , including but without limitation , statements regarding our plans , objectives , and the future success of our store concepts and business initiatives . these statements may address items such as future sales and sales initiatives , strategic initiatives , customer traffic , gross margin expectations , sg & a expectations , including expected savings , operating margin expectations , earnings per share expectations , planned store openings , closings and expansions , proposed business ventures , new channels of sales or distribution , expected impact of ongoing litigation , future stock repurchase plans , future plans to pay dividends , future comparable sales , future product sourcing plans , future inventory levels , including the ability to leverage inventory management and targeted promotions , planned marketing expenditures , planned capital expenditures and future cash needs . these statements relate to expectations concerning matters that are not historical fact and may include the words or phrases such as “ will , ” “ should , ” “ expects , ” “ believes , ” “ anticipates , ” “ plans , ” “ intends , ” “ estimates , ” “ approximately , ” “ our planning assumptions , ” “ future outlook ” and similar expressions . except for historical information , matters discussed in this form 10-k are forward-looking statements . these forward-looking statements are based largely on information currently available to our management and on our current expectations , assumptions , plans , estimates , judgments and projections about our business and our industry , and are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those currently anticipated . although we believe our expectations are based on reasonable estimates and assumptions , they are not guarantees of performance and there are a number of known and unknown risks , uncertainties , contingencies and other factors ( many of which are outside our control ) that could cause actual results
| 25 net cash provided by operating activities in fiscal 2017 was $ 167 million , a decrease of approximately $ 64 million from fiscal 2016. this decrease primarily results from the settlement of fiscal 2016 accruals for outside services and severance , the timing of tax payments and the impact of a decrease in the incentive compensation accrual , partially offset by the timing of vendor payments . investing activities net cash used in investing activities for fiscal 2018 was $ 56 million compared to $ 58 million for fiscal 2017 . the change in net cash used in investing activities reflects an $ 8 million net decrease in marketable securities activity as a result of the timing of securities purchases and sales , partially offset by an increase in purchases of property and equipment . net cash used in investing activities for fiscal 2017 was $ 58 million compared to $ 32 million for fiscal 2016. the change in net cash used in investing activities primarily reflects a $ 10 million net increase in marketable securities related to the investment of cash from operations in fiscal 2017 and the impact of $ 16 million in proceeds from the sale of land in fiscal 2016. financing activities net cash used in financing activities for fiscal 2018 was $ 138 million compared to $ 91 million in fiscal 2017.
| Liquidity | 14,185 |
all significant inter-company transactions and balances have been eliminated in consolidation . the consolidated financial statements of the company are prepared in conformity with accounting principles generally accepted in the united states of america ( “ gaap ” ) and general practices within the banking industry . organization and background . the business activities of the bancorp consist primarily of the operations of the bank , which owns 100 % of the common securities of the following subsidiaries : gbc real estate investments , inc. , cathay holdings llc , cathay holdings 2 , llc , cathay holdings 3 , llc , cathay community development corporation , and its wholly owned subsidiary , cathay new asia community development corporation . there are limited operating business activities currently at the bancorp . the bank is a commercial bank , servicing primarily the individuals , professionals , and small to medium-sized businesses in the local markets in which its branches are located . its operations include the acceptance of checking , savings , and time deposits , and the making of commercial , real estate , and consumer loans . the bank also offers trade financing , letters of credit , wire transfer , foreign currency spot and forward contracts , internet banking , investment services , and other customary banking services to its customers . use of estimates . the preparation of the consolidated financial story_separator_special_tag . general the following discussion is intended to provide information to facilitate the understanding and assessment of the consolidated financial condition and results of operations of the bancorp and its subsidiaries . it should be read in conjunction with the audited consolidated financial statements and notes appearing elsewhere in this annual report on form 10-k. the bank offers a wide range of financial services . it currently operates 21 branches in southern california , 12 branches in northern california , 12 branches in new york state , one branch in massachusetts , two branches in texas , three branches in washington state , three branches in illinois , one branch in new jersey , one branch in maryland , one branch in nevada , one branch in hong kong and two representative offices ( one in shanghai , china , and one in taipei , taiwan ) . the bank is a commercial bank , servicing primarily individuals , professionals , and small to medium-sized businesses in the local markets in which its branches are located . the financial information presented herein includes the accounts of the bancorp , its subsidiaries , including the bank , and the bank 's consolidated subsidiaries . all material transactions between these entities are eliminated . critical accounting policies the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the united states of america . the preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities , revenues and expenses , and related disclosures of contingent assets and liabilities at the date of our consolidated financial statements . actual results may differ from these estimates under different assumptions or conditions . 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 such 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 . management believes the following are critical accounting policies that require the most significant judgments and estimates used in the preparation of the consolidated financial statements : a llowance for credit l osses the determination of the amount of the provision for credit losses charged to operations reflects management 's current judgment about the credit quality of the loan portfolio and takes into consideration changes in lending policies and procedures , changes in economic and business conditions , changes in the nature and volume of the portfolio and in the terms of loans , changes in the experience , ability , and depth of lending management , changes in the volume and severity of past due , non-accrual , and adversely classified or graded loans , changes in the quality of the loan review system , changes in the value of underlying collateral for collateral-dependent loans , the existence and effect of any concentrations of credit and the effect of competition , legal and regulatory requirements , and other external factors . the nature of the process by which we determine the appropriate allowance for loan losses requires the exercise of considerable judgment . the allowance is increased by the provision for loan losses and decreased by charge-offs when management believes the uncollectibility of a loan is confirmed . subsequent recoveries , if any , are credited to the allowance . a weakening of the economy or other factors that adversely affect asset quality could result in an increase in the number of delinquencies , bankruptcies , or defaults , and a higher level of non-performing assets , net charge-offs , and provision for loan losses in future periods . 40 the total allowance for credit losses consists of two components : specific allowances and general allowances . to determine the adequacy of the allowance in each of these two components , we employ two primary methodologies , the individual loan review analysis methodology and the classification migration methodology . these methodologies support the basis for determining allocations between the various loan categories and the overall adequacy of our allowance to provide for probable losses inherent in the loan portfolio . story_separator_special_tag the company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in asc topic 350. the two-step impairment testing process conducted by us , if needed , begins by assigning net assets and goodwill to our reporting units . we then complete “ step one ” of the impairment test by comparing the fair value of each reporting unit ( as determined in note 1 to the consolidated financial statements ) with the recorded book value ( or “ carrying amount ” ) of its net assets , with goodwill included in the computation of the carrying amount . if the fair value of a reporting unit exceeds its carrying amount , goodwill of that reporting unit is not considered impaired , and “ step two ” of the impairment test is not necessary . if the carrying amount of a reporting unit exceeds its fair value , step two of the impairment test is performed to determine the amount of impairment . step two of the impairment test compares the carrying amount of the reporting unit 's goodwill to the “ implied fair value ” of that goodwill . the implied fair value of goodwill is computed by assuming all assets and liabilities of the reporting unit would be adjusted to the current fair value , with the offset as an adjustment to goodwill . this adjusted goodwill balance is the implied fair value used in step two . an impairment charge is recognized for the amount by which the carrying amount of goodwill exceeds its implied fair value . valuation of other real estate owned ( oreo ) real estate acquired in the settlement of loans is initially recorded at fair value , less estimated costs to sell . specific valuation allowances on other real estate owned are recorded through charges to operations to recognize declines in fair value subsequent to foreclosure . gains on sales are recognized when certain criteria relating to the buyer 's initial and continuing investment in the property are met . story_separator_special_tag serif '' > ● change in the mix of interest-bearing liabilities : average interest bearing deposits of $ 7.80 billion increased to 92.6 % of total interest-bearing liabilities in 2015 compared to 88.5 % in 2014. offsetting the increase , average securities sold under agreements to repurchase decreased to 4.8 % of total interest-bearing liabilities in 2015 compared to 8.1 % in 2014. net interest margin , defined as net interest income to average interest-earning assets , increased to 3.39 % in 2015 from 3.35 % in 2014. the increase in the net interest margin was primarily due to the impact from the increase in loans and the decrease in securities sold under agreements to repurchase offset by the increase in time deposits and money market deposits . 44 net interest income increased $ 18.1 million , or 5.6 % , from $ 324.7 million in 2013 to $ 342.8 million in 2014. interest income on tax-exempt securities was zero in 2014 compared to $ 1.0 million , or $ 1.5 million on a tax-equivalent basis , in 2013. the increase in net interest income was due primarily to the increase in loan interest income and the decrease in interest expense from securities sold under agreements to repurchase , offset by the decrease in interest income from available-for-sale securities . average loans for 2014 were $ 8.53 billion , a $ 901.7 million , or 11.8 % , increase from $ 7.63 billion in 2013. compared with 2013 , average commercial mortgage loans increased $ 411.4 million , or 10.6 % , average residential mortgage loans increased $ 222.8 million , or 15.7 % , average commercial loans increased $ 173.8 million , or 8.1 % , and average real estate construction loans increased $ 95.4 million , or 53.9 % . average investment securities were $ 1.42 billion in 2014 , a decrease of $ 515.6 million , or 26.7 % , from 2013 , due primarily to decreases in agency mortgage-backed securities of $ 483.4 million , or 38.6 % . average interest bearing deposits were $ 6.92 billion in 2014 , an increase of $ 586.1 million , or 9.3 % , from $ 6.33 billion in 2013 , primarily due to increases of $ 264.2 million , or 6.6 % , in time deposits , $ 191.7 million , or 15.8 % , in money market deposits , $ 86.9 million , or 13.7 % , in interest bearing demand deposits , and $ 43.3 million , or 8.9 % , in savings deposits . average securities sold under agreements to repurchase decreased $ 343.0 million , or 35.3 % , to $ 629.3 million in 2014 from $ 972.3 million in 2013 , primarily due to maturities and prepayments of securities sold under agreements to repurchase in 2014. average other borrowings increased $ 73.4 million , or 101 % , to $ 146.1 million in 2014 from $ 72.7 million in 2013 , primarily due to increases in fhlb advances . average long term debt decreased $ 49.7 million , or 29.3 % , to $ 119.8 million in 2014 from $ 169.5 million in 2013. taxable-equivalent interest income increased $ 11.1 million , or 2.7 % , to $ 418.6 million in 2014 from $ 407.5 million in 2013 , primarily due to increases in volume of loans offset by a decline in volume of investment securities and by a change in the mix of interest-earning assets as discussed below : ● changes in volume : average interest-earning assets increased $ 439.5 million , or 4.5 % , to $ 10.22 billion in 2014 , compared with average interest-earning assets of $ 9.78 billion in 2013. the increase in average loans of $ 901.7 million in 2014 offset by a decrease in average investment securities of $ 515.6 million primarily contributed
| results of operations overview for the year ended december 31 , 2015 , we reported net income attributable to common stockholders of $ 161.1 million , or $ 1.98 per diluted share , compared to net income attributable to common stockholders of $ 137.8 million , or $ 1.72 per share , in 2014 , and net income attributable to common stockholders of $ 113.5 million , or $ 1.43 per share , in 2013. the $ 23.3 million increase in net income from 2014 to 2015 was primarily the result of increases in net interest income , and decreases in costs associated with debt redemption , partially offset by decreases in securities gains , increases in operation expenses from amortization of investments in affordable housing and alternative energy partnerships and in occupancy expenses and professional expenses . the return on average assets in 2015 was 1.34 % , compared to 1.26 % in 2014 , and to 1.17 % in 2013. the return on average stockholders ' equity was 9.52 % in 2015 , compared to 8.95 % in 2014 , and to 8.00 % in 2013 . 42 highlights ● diluted earnings per share increased 15.1 % to $ 1.98 per share for the year ended december 31 , 2015 compared to $ 1.72 per share for the year ended december 31 , 2014 .
| ROO | 5,030 |
we sell our products globally to a diverse array of customers that include the fortune 500 as well as start-ups , design houses , original design manufacturers , oems and universities . our technology has been deployed in the consumer electronics , industrial automation , automotive and medical markets . our global presence in the united states , china , hong kong , singapore and japan , allows us to provide local sales and engineering support services to our existing and future customers . our products are manufactured by our wholly-owned subsidiary in a state-of-the-art facility in shenzhen , china . we control 100 % of the manufacturing and shipping process which enables us to respond quickly to customer product demand and design requirements . we have invested significantly in the expansion of our technology platforms through our own internal development to ensure we provide the market with leading-edge hmi solutions that are seamless to deploy and perform flawlessly . we spent the last three years building a research and development ( r & d ) organization in singapore to develop new product offerings that will meet the market 's growing demand for touch technology and smart surfaces . we are now shifting a majority of r & d and product development efforts to camarillo , california , where we are establishing a global product development and materials science center . we believe an increased presence in the u.s. will allow us to grow our business and be more closely aligned with current and future large-tier customers . we also plan to explore potential strategic relationships with companies and technology institutes that will support our growth initiatives . 26 story_separator_special_tag our china subsidiary . our effective tax rate is directly affected by the relative proportions of revenue and income before taxes in the jurisdictions in which we operate . based on the expected mix of domestic and foreign earnings , we anticipate our effective tax rate to remain similar to the newly stated u.s. statutory rate of 21 % primarily due to a significant portion of our earnings originating in the higher rate china jurisdiction ( 25 % ) , offset by lower rate jurisdictions in singapore ( 17 % ) and hong kong ( 16.5 % ) . state income taxes also have an impact in the u.s. discrete tax events may cause our effective rate to fluctuate on a quarterly basis . certain events , including , for example , acquisitions and other business changes , which are difficult to predict , may also cause our effective tax rate to fluctuate . we are subject to changing tax laws , regulations , and interpretations in multiple jurisdictions . corporate tax reform continues to be a priority in the u.s. and other jurisdictions . additional changes to the tax system in the u.s. could have significant effects , positive and negative , on our effective tax rate , and on our deferred tax assets and liabilities . liquidity and capital resources cash requirements for working capital and capital expenditures have been funded from cash balances on hand and cash generated from operations . as of december 31 , 2020 , we had cash and cash equivalents of $ 6.125 million , working capital of $ 7.454 million and no indebtedness except for a loan of $ 0.186 million we received from silicon valley bank pursuant to the paycheck protection program . cash and cash equivalents consist of cash and money market funds . we did not have any short-term or long-term investments as of december 31 , 2020. of the $ 6.125 million of cash balances on hand , $ 1.754 million was held by foreign subsidiaries . if these funds are needed for our operations in the u.s. , we have several methods to repatriate the funds without significant tax effects , including repayment of intercompany loans or distributions of previously taxed income . other distributions may require us to incur u.s. or foreign taxes to repatriate these funds . however , our intent is to permanently reinvest these funds outside the u.s. and our current plans do not demonstrate a need to repatriate cash to fund our u.s. operations . the company received a loan from silicon valley bank in the aggregate principal amount of $ 0.186 million pursuant to the paycheck protection program ( the “ ppp ” ) under the coronavirus aid , relief , and economic security act ( the “ cares act ” ) , which was enacted in march 2020. the loan is evidenced by a promissory note , dated april 21 , 2020 , issued by us to the lender , which matures on april 20 , 2022 , and bears interest at a rate of 1.00 % per annum , payable monthly following an initial deferral period as specified under the ppp . we may prepay the note at any time prior to maturity with no prepayment penalties . proceeds from the loan were used to fund designated expenses , including certain payroll costs , group health care benefits and other permitted expenses , in accordance with the ppp . under the terms of the ppp , up to the entire amount of principal and accrued interest may be forgiven to the extent loan proceeds are used for qualifying expenses as described in the cares act and applicable implementing guidance issued by the u.s. small business administration under the ppp . the full amount of the loan principal and interest was forgiven in february 2021. we believe that our existing cash and cash equivalents balance will be sufficient to maintain our current operations considering our current financial condition , obligations , the proceeds of the ppp loan and other expected cash flows . if our circumstances change , however , we may require additional cash . story_separator_special_tag if we require additional cash , we may attempt to raise additional capital through equity , equity-linked or debt financing arrangements . if we raise additional funds by issuing equity or equity-linked securities , the ownership of our existing stockholders will be diluted . if we raise additional financing by the incurrence of indebtedness , we could be subject to fixed payment obligations and could also be subject to restrictive covenants , such as limitations on our ability to incur additional debt , and other operating restrictions that could adversely impact our ability to conduct our business . if we are unable to raise additional needed funds , we may also take measures to reduce expenses to offset any shortfall . 29 cash flow analysis our cash flows from operating , investing and financing activities are summarized as follows : replace_table_token_7_th net cash provided by operating activities for the year ended december 31 , 2020 , the $ 39 thousand in net cash provided by operating activities was attributable to net income of $ 113 thousand , adjusted for non-cash charges of $ 532 thousand , and cash used in changes in operating assets and liabilities of $ 606 thousand . for the year ended december 31 , 2019 , the $ 2 thousand in net cash provided by operating activities was primarily attributable to non-cash charges and cash used in changes in operating assets and liabilities that offset the net loss . net loss of $ 457 thousand , plus adjustments for non-cash charges of $ 518 thousand , including the non-cash charges related to lease accounting , resulted in a net increase in cash of $ 61 thousand . net changes in operating assets and liabilities of $ 59 thousand that decreased cash was primarily due to the timing of shipments and payments during the period . accounts receivable increased from $ 730 thousand at december 31 , 2019 to $ 1,113 thousand at december 31 , 2020 due to higher shipments during the fourth quarter of 2020 compared to the fourth quarter of 2019. many of our customers pay promptly and accounts receivable is generally related to the most recent shipments . inventories decreased from $ 927 thousand at december 31 , 2019 to $ 866 thousand at december 31 , 2020. inventory balances fluctuate depending on the timing of materials purchases and product shipments . prepaid expenses and other current assets increased from $ 330 thousand at december 31 , 2019 to $ 392 thousand at december 31 , 2020. accounts payable and accrued liabilities increased from $ 520 thousand at december 31 , 2019 to $ 578 thousand at december 31 , 2020 primarily due to the timing of payment for purchases of materials and other services provided . net cash used in investing activities net cash used in investing activities of $ 90 thousand for the year ended december 31 , 2020 consisted primarily of legal costs related to securing patents on new products and processes developed thereunder . net cash used in investing activities of $ 233 thousand for the year ended december 31 , 2019 consisted of $ 141 thousand for capital expenditures for the expansion of our r & d center in singapore and $ 92 thousand related to securing patents . net cash provided by ( used in ) financing activities net cash provided by financing activities of $ 186 thousand for the year ended december 31 , 2020 related to our ppp loan . net cash used in financing activities of $ 6 thousand for the year ended december 31 , 2019 related to repurchase of shares of our common stock . 30 transactions with related parties for a discussion of transactions with related parties , see note 9 , related party transactions , of the notes to the consolidated financial statements appearing elsewhere in this annual report on form 10-k. off-balance sheet arrangements as of december 31 , 2020 and 2019 , we did not 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 . as such , we are not exposed to any financing , liquidity , market or credit risk that could arise if we had engaged in such relationships . critical accounting policies and estimates we prepare our consolidated financial statements in accordance with generally accepted accounting principles in the united states ( “ gaap ” ) . the preparation of 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 . we evaluate our estimates and assumptions on an ongoing basis . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances . actual results could differ significantly from the estimates made by our management . to the extent that there are differences between our estimates and actual results , our future financial statements presentation , financial condition , results of operations , and cash flows will be affected . we believe that the assumptions and estimates associated with revenue recognition , inventory valuation , accounts receivable , stock-based compensation expense and income taxes have the greatest potential impact on our consolidated financial statements . therefore , we consider these to be our critical accounting policies and estimates . for further information on all of our significant accounting policies , see the notes to our consolidated financial statements .
| comparison of the years ended december 31 , 2020 and 2019 revenue , net by the markets we serve is as follows : replace_table_token_2_th 27 we sell our custom products into the industrial , medical and consumer markets . we previously sold custom products in the automotive market and continue to pursue opportunities in that sector . we sell our standard products through various distribution networks . the ultimate customer for standard products may come from different markets which are often unknown to us at the time of sale . each market has different product design cycles . products with longer design cycles often have much longer product life-cycles . industrial and medical products generally have longer design and life-cycles than consumer products . we currently have products with life-cycles that have exceeded twenty years and are ongoing . revenues were down in 2020 compared to 2019 in the industrial and medical markets , and were up in the consumer market and for our standard products . the decrease in revenue from our industrial market customers is due to decreased purchasing volume by these customers for use in their ongoing product lines resulting from changes in demand by their customers . the decrease in revenue from our medical market customers is primarily due to significant reduction of shipments to our largest medical customer , which could not install the devices that use our products in hospitals due to covid-19 restrictions . the increase in revenue from our consumer market customers is due to an increase in purchase levels on corresponding products and programs . the increase in revenue on our standard products is due to cyclical purchasing pattern of some of our larger customers who took delivery of bulk quantities during 2020. in the normal cycle , some of our larger customers purchase in bulk quantities and absorption of these products can straddle several financial reporting periods . in all markets , the timing of orders from our customers is not always predictable and can be concentrated in varying periods during the
| ROO | 191 |
the company did not pay income taxes in 2012 , 2011 and 2010. the company received a refund of $ 290,000 in 2010 related to taxes paid in 2009. comprehensive income comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners . total comprehensive income ( loss ) consists of net income ( loss ) and other comprehensive income ( loss ) . the company 's other comprehensive income ( loss ) and accumulated other comprehensive income ( loss ) are comprised of unrealized gains and losses on investment securities available for sale and amortization of the unfunded pension liability . at december 31 , 2012 the accumulated other comprehensive income was comprised of unrealized losses on securities available for sale of $ 72,222 and unfunded pension liability of $ 94,327 . at december 31 , 2011 the accumulated other comprehensive income was comprised of unrealized gains on securities available for sale of $ 95,458 and unfunded pension liability of $ 102,907 . earnings per common share basic earnings ( loss ) per common share represent net income available to common stockholders , which represents net income ( loss ) less dividends paid or payable to preferred stock shareholders , divided by the weighted-average number of common shares outstanding during the period . for diluted earnings per common share , net income available to common shareholders is divided by the 71 weighted average number of common shares issued and outstanding for each period plus amounts representing the dilutive effect of stock options and warrants , as well as any adjustment to income that would result from the assumed issuance . the effects of stock options and warrants are excluded from the computation of diluted earnings per common share in periods in which the effect would be antidilutive . stock options and warrants are antidilutive if the underlying average market price of the stock that can be purchased for the period is less than the exercise price of the option or warrant . potential common shares that may be issued by the company relate solely to outstanding stock options and warrants and are determined using the treasury stock method . stock incentive plan the company 's shareholders approved the company 's 2000 stock incentive plan which authorizes the issuance of up to 455,000 shares of common stock ( increased from 255,000 shares by amendment to the incentive plan approved by the company 's shareholders ) to assist the company in recruiting and retaining key personnel . the incentive plan includes issuances of stock options and awards of 444,590 common shares . the expiration date on options granted is ten years with a three year vesting schedule . see note 14 for more information on the stock incentive plan . fair values of financial instruments the fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction between market participants . a fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or , in the absence of a principal market , the most advantageous market for the asset or liability . the price in the principal ( or most advantageous ) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs . an orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities ; it is not a forced transaction . market participants are buyers and sellers in the principal market that are independent , knowledgeable , able to transact and willing to transact . see note 18 for the methods and assumptions the bank uses in estimating fair values of financial instruments : new accounting pronouncements in february 2013 , the financial accounting standards board ( fasb ) issued asu 2013-02 , reporting of amounts reclassified out of accumulated other comprehensive income , which is intended to improve the reporting of reclassifications out of accumulated other comprehensive income . the asu requires an entity to report , either on the face of the income statement or in the notes to the financial statements , the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in the income statement if the amount being reclassified is required to be reclassified in its entirety to net income . for other amounts that are not required to be reclassified in their entirety to net income in the same reporting period , an entity is required to cross-reference other required disclosures that provide additional detail about those amounts . this asu is effective prospectively in the first quarter of 2013 , and is not expected to have a material effect on the company 's consolidated financial statements . in june 2011 , the fasb issued asu no . 2011-05 , presentation of comprehensive income ( `` asu 2011-05 `` ) . asu 2011-05 requires an entity to present the total of comprehensive income , the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements . asu 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity . asu 2011-05 became effective for the company on january 1 , 2012. in connection with the application of asu 2011-05 , the company 's financial statements now include separate statements of comprehensive income . in may 2011 , the fasb issued asu no . 2011-04 , amendments to achieve common fair value measurement and disclosure requirements in u.s. gaap and ifrss . story_separator_special_tag 1-4 assets generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral ; · risk rated 5 loans are defined as having potential weaknesses that deserve management 's close attention ; · risk rated 6 loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledge , if any , and ; · risk rated 7 loans have all the weaknesses inherent in substandard loans , with the added characteristics that the weaknesses make collection or liquidation in full , on the basis of currently existing facts , conditions and values , highly questionable and improbable . loans are considered impaired when , based on current information and events it is probable the company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement , including scheduled principal and interest payments . impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans . if a loan is impaired , a specific valuation allowance is allocated , if necessary , so that the loan is reported net , at the present value of estimated future cash flows using the loan 's existing rate or at the fair value of collateral if repayment is expected solely from the collateral . interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured , in which case interest is recognized on a cash basis . impaired loans , or portions thereof , are charged off when deemed uncollectible . allowance for loan losses we monitor and maintain an allowance for loan losses to absorb an estimate of probable losses inherent in the loan portfolio . we maintain policies and procedures that address the systems of controls over the following areas of maintenance of the allowance : the systematic methodology used to determine the appropriate level of the allowance to provide assurance they are maintained in accordance with accounting principles generally accepted in the united states of america ; the accounting policies for loan charge-offs and recoveries ; the assessment and measurement of impairment in the loan portfolio ; and the loan grading system . 44 the allowance reflects management 's best estimate of probable losses within the existing loan portfolio and of the risk inherent in various components of the loan portfolio , including loans identified as impaired as required by fasb codification topic 310 : receivables . loans evaluated individually for impairment include non-performing loans , such as loans on non-accrual , loans past due by 90 days or more , restructured loans and other loans selected by management . the evaluations are based upon discounted expected cash flows or collateral valuations . if the evaluation shows that a loan is individually impaired , then a specific reserve is established for the amount of impairment . loans are grouped by similar characteristics , including the type of loan , the assigned loan classification and the general collateral type . a loss rate reflecting the expected loss inherent in a group of loans is derived based upon historical net charge-off rates , the predominant collateral type for the group and the terms of the loan . the resulting estimate of losses for groups of loans is adjusted for relevant environmental factors and other conditions of the portfolio of loans and leases , including : borrower and industry concentrations ; levels and trends in delinquencies , charge-offs and recoveries ; changes in underwriting standards and risk selection ; level of experience , ability and depth of lending management ; and national and local economic conditions . the amounts of estimated impairment for individually evaluated loans and groups of loans are added together for a total estimate of loan losses . this estimate of losses is compared to our allowance for loan losses as of the evaluation date and , if the estimate of losses is greater than the allowance , an additional provision to the allowance would be made . if the estimate of losses is less than the allowance , the degree to which the allowance exceeds the estimate is evaluated to determine whether the allowance falls outside a range of estimates . we recognize the inherent imprecision in estimates of losses due to various uncertainties and variability related to the factors used , and therefore a reasonable range around the estimate of losses is derived and used to ascertain whether the allowance is too high . if different assumptions or conditions were to prevail and it is determined that the allowance is not adequate to absorb the new estimate of probable losses , an additional provision for loan losses would be made , which amount may be material to the financial statements . the allowance for loan losses was $ 10,808,000 , $ 16,071,000 and $ 7,312,000 at december 31 , 2012 , 2011 and 2010 , respectively . the ratio of the allowance for loan losses to gross loans was 3.04 % at december 31 , 2012 , 3.75 % at december 31 , 2011 , and 1.61 % december 31 , 2010. the allowance for loan losses as a percentage of net loans decreased in 2012 to 3.04 % primarily as a result of significant charge-offs recognized during the year for which specific provisions for loan losses had been previously provided . the increase in the allowance for loan losses in 2011 was primarily a result of a decline in asset quality caused by the continued recessionary economy . we believe the amount of the allowance for loan losses at december 31 , 2012 is adequate to absorb the losses that can reasonably be anticipated from the loan portfolio at that date . 45 the following table presents an analysis of the changes in the allowance for loan losses
| the company has deferred seven dividend payments as of december 31 , 2012. however , treasury has not indicated at this time it will nominate two directors to our board . the company is currently evaluating potential sources of additional capital , with the objective to become compliant with the capital requirements of the consent order as soon as practically possible . in addition , the company is considering various alternatives for the repayment of the preferred stock issued under the tarp program . however , no assurance can be given that sources of new capital will be received . 52 the following table presents the composition of regulatory capital and the capital ratios for the company at the dates indicated ( dollars in thousands ) . replace_table_token_16_th 53 the following table presents the composition of regulatory capital and the capital ratios for the bank at the dates indicated ( dollars in thousands ) . replace_table_token_17_th federal regulatory agencies are required by law to adopt regulations defining five capital tiers : well capitalized , adequately capitalized , under capitalized , significantly under capitalized , and critically under capitalized . the bank met the ratio requirements to be categorized as a “ well capitalized ” institution as of december 31 , 2012 , 2011 and 2010. however , due to the minimum capital ratios required by the consent order , the bank currently is considered adequately capitalized . the consent order requires the bank to maintain a leverage ratio of at least 8 % and a total capital to risk-weighted assets ratio of at least 11 % . at december 31 , 2012 , the bank 's leverage ratio was 6.52 % and the total capital to risk-weighted assets ratio was 10.04 % . as
| Liquidity | 10,693 |
as of f-7 biodel inc. notes to consolidated financial statements ( continued ) ( in thousands , except share and per share amounts ) september 30 , 2014 and 2015 , the company had cash and cash equivalents of $ 24,588 and $ 40,845 , respectively , which are primarily held in a premium commercial money market account . fair value of financial instruments the carrying amounts of the company 's financial instruments , which include cash and cash equivalents and accounts payable , approximate their fair values due to their short term maturities . warrant liability is recorded at fair value . pre-launch inventory inventory costs associated with product candidates that have not yet received regulatory approval are capitalized if the company believes there is probable future commercial use and future economic benefit . if the probability of future commercial use and future economic benefit can not be reasonably determined , then pre-launch inventory costs associated with such product candidates are expensed as research and development expense during the period the costs are incurred . because all of its product candidates are in early stages of preclinical or clinical development , the company currently expenses all purchases of pre-launch inventory as research and development , and expects to continue to do so until it can determine the probability of regulatory approval for the applicable product candidate . for the years ended september 30 , 2014 and 2015 , the company expensed $ 3 and $ 103 , respectively , of costs associated with the purchase of rhi and glucagon as research and development expense after such materials passed quality control inspection by the company and transfer of title occurred . intellectual property intangible assets consist primarily of capitalized costs associated with the company 's ultra-rapid-acting insulin patents and the purchase of two domain addresses . they are amortized using the straight-line method over twenty years . if the company determines that a patent will not result in future revenues , the cost related to such patent will be expensed in full on the date of that determination . intellectual property amortization expense was $ 3 for each of the years ended september 30 , 2014 and 2015. property and equipment property and equipment are stated at cost , net of accumulated depreciation or amortization . major improvements are capitalized , while maintenance and repairs are expensed in the period the cost is incurred . property and equipment are depreciated over their estimated useful lives using the straight-line method . leasehold improvements are amortized using the straight-line method over their estimated useful lives , or the remaining term of the lease , whichever is shorter . when assets are retired or otherwise disposed of , the assets and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in other income ( expense ) in the statement of operations . estimated useful lives for each asset category are as follows : furniture and fixtures 7 years ; leasehold improvements estimated useful life or remaining term of lease , whichever is shorter ; laboratory equipment 7 years ; manufacturing equipment 5 years ; device development 5 years ; facility equipment 3 years and 7 years ; computer equipment 5 years ; and computer software 3 years . impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amounts of a long-lived asset may not be recoverable , the company reviews these assets for impairment and determines whether adjustments are needed to carrying values . there were no adjustments to the carrying value of long-lived assets at september 30 , 2014 and 2015. f-8 biodel inc. notes to consolidated financial statements ( continued ) ( in thousands , except share and per share amounts ) warrant liability the company applies the provisions of accounting standards codification topic 480 ( `` asc 480 `` ) ( formerly fasb staff position 150-5 ( fsp 15-5 ) ) , issuers accounting under fasb statement no . 150 for freestanding warrants and other similar instruments on shares that are redeemable or distinguishing liabilities from equities . pursuant to asc 480 , a freestanding financial instrument ( other than outstanding share ) that , at inception , embodies an obligation to repurchase the issuer 's shares and `` requires or may require `` the obligation to be settled by transferring assets , qualifies as a liability ( if the obligation is conditional , the number of conditions is irrelevant ) . the company issued warrants in may 2011 and june 2012 and recorded a liability determined by the black-scholes valuation model . the black-scholes valuation model was used because the warrants do not contain a repricing provision . the black-scholes valuation model takes into account , as of the valuation date , factors including the current exercise price , the expected life of the warrant , the current price of the underlying stock and its expected volatility , expected dividends on the stock , and the risk-free interest rate for the term of the warrant . these warrants will be revalued at each reporting period and changes in fair value are recognized currently in the statements of operations under the caption `` adjustments to fair value of common stock warrant liability . `` income taxes the company uses the asset and liability method of accounting for deferred income taxes . the provision for income taxes includes income taxes currently payable and those deferred as a result of temporary differences between the financial statement and tax bases of assets and liabilities . a valuation allowance is provided to reduce deferred tax assets to the amount of future tax benefit when it is more likely than not that some portion of the deferred tax assets will not be realized . projected future taxable income and ongoing tax planning strategies are considered and evaluated when assessing the need for a valuation allowance . story_separator_special_tag for example , rsus awarded in december 2010 vest annually over three years , with 50 % vesting on the first anniversary of the date of grant and the remainder vesting in two equal installments on each anniversary thereafter , and therefore are expensed 50 % in the first year and 25 % each year in the next two years . each year following the annual vesting date , between january 1st and march 15th , we will issue common stock for each vested rsu . during the period when the rsu is vested but not distributed , the rsus can not be transferred and the grantee has no voting rights . if we declare a dividend , rsu recipients will receive payment based upon the percentage of rsus that have vested prior to the date of declaration . for the year ended september 30 , 2015 , the share-based compensation expense , including expenses associated with stock options and rsus , was $ 0.9 million , of which $ 0.3 million is reflected in research and development expenses and $ 0.6 million is reflected in general and administrative expenses . for the year ended september 30 , 2014 , the share-based compensation expense , including expenses associated with stock options and rsus , was $ 0.8 million , of which $ 0.3 million is reflected in research and development expenses and $ 0.5 million is reflected in general and administrative expenses . 51 income taxes as part of the process of preparing our 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 expense together with assessing temporary differences resulting from differing treatments of items for tax and accounting purposes . these differences result in deferred tax assets and liabilities . at september 30 , 2014 and 2015 , we recorded a 100 % valuation allowance against our net deferred tax asset of approximately $ 62.4 million and $ 53.3 million , respectively , as our management believes it is uncertain that it will be fully realized . if we determine in the future that we will be able to realize all or a portion of our net deferred tax asset , an adjustment to the deferred tax valuation allowance would increase net income in the period in which we make such a determination . as of september 30 , 2015 , we had net operating loss carry-forwards of approximately $ 31.1 million for u.s. federal tax purposes and $ 133.5 million for state tax purposes . these loss carry-forwards expire in the period 2025 to 2035. to the extent these net operating loss carry-forwards are available , we intend to use them to reduce the corporate income tax liability associated with our operations . section 382 of the u.s. internal revenue code generally imposes an annual limitation on the amount of net operating loss carry-forwards that might be used to offset taxable income when a corporation has undergone significant changes in stock ownership . based on a section 382 analysis review , we determined that an ownership change under section 382 occurred on december 31 , 2013. we believe that approximately $ 103.7 million of the $ 134.8 million federal losses will expire unused as a result of section 382 limitations . the maximum annual limitation under section 382 is approximately $ 0.7 million for 20 years . to the extent our use of net operating loss carry-forwards is limited , future income could be subject to corporate income tax earlier than it would if we were able to use net operating loss carry-forwards , which could result in decreased net income . we also have state research and development credit carry-forwards of approximately $ 0.2 million , which expire commencing in fiscal 2022. results of operations year ended september 30 , 2015 compared to year ended september 30 , 2014 revenue . we did not recognize any revenue during the years ended september 30 , 2015 or 2014. research and development expenses . replace_table_token_4_th research and development expenses were $ 13.4 million for the year ended september 30 , 2015 , a decrease of $ 0.8 million , or approximately 5.8 % , from $ 14.2 million for the year ended september 30 , 2014. this decrease was primarily attributable to decreases of $ 0.6 million in expenses associated with payments to unilife and other external contract manufacturers for the development of our gem product candidate , a decrease of $ 0.5 million in animal studies , a decrease in manufacturing costs , including the purchase of active pharmaceutical ingredients , of $ 0.4 million offset by an increase of $ 0.7 million in external expenses associated with our clinical trials . research and development expenses for each of the years ended september 30 , 2015 and 2014 included $ 0.3 million in stock-based compensation expense related to options granted to employees . in july and september 2012 , we received two national institutes of health awards for the development of a concentrated ultra-rapid-acting insulin formulation and glucagon formulation for use in an artificial pancreas . the july 2012 award was intended to fund research to develop a proprietary ultra-rapid-insulin 52 product candidate at high concentrations suited to provide sufficient quantities of insulin in an external artificial pancreas pump device that has limited volume capacity . the july award was for two years and totaled $ 582 thousand . the september 2012 award was intended to fund research to develop a proprietary glucagon product candidate optimized to algorithmically deliver glucagon as part of a bi-hormonal closed loop system to mitigate hypoglycemic events . the september 2012 award was for two years and totaled $ 583 thousand . for the year ended september 30 , 2014 , we reported $ 167 thousand in government grants for the high concentration ultra-rapid-insulin product candidate and $ 364 thousand for the glucagon
| in may 2013 , we entered into the sales agreement with mlv , under which we may initially issue and sell up to $ 14 million in shares of our common stock from time to time through mlv as our sales agent . on july 2 , 2014 we began selling shares pursuant to this agreement . as of september 30 , 2015 we sold an aggregate of 2,607,535 shares of common stock pursuant to the sales agreement and received proceeds , net of sales commissions , of $ 4.7 million . funding requirements we believe that our existing cash and cash equivalents will be sufficient to fund our anticipated operating expenses and capital expenditures at least until the first calendar quarter of 2017. we have based this estimate upon assumptions that may prove to be wrong and we could use our available capital resources sooner than we currently expect . our existing capital resources are not sufficient to complete our clinical development program for an ultra-rapid-acting insulin product candidate . because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates , and to the extent that we may or may not enter into collaborations with third parties to participate in their development and commercialization , we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current anticipated clinical trials . our future capital requirements will depend on many factors , including : the exploration of various strategic alternatives with the assistance of an advisor , and possible execution of one such alternative ; the progress , timing or success of our research and development and clinical programs for our product candidates , particularly our gem and biod-531 product candidates ; our ability to conduct the development work necessary to finalize the formulation and presentation of our gem product candidate , as well as the preclinical studies , clinical trials , human factor studies and manufacturing activities necessary to support the submission of an nda to the fda for that product candidate ; the ability and willingness of our existing strategic partners , service providers and suppliers , upon which we rely in the advancement of our product
| Liquidity | 12,550 |
the fdic restricts the amount of medallion loans that the bank may finance to three times tier 1 capital , although it is less than one times tier 1 capital as of december 31 , 2019. msc earns referral and servicing fees for these activities . the assets of taxi medallion loan trust iii , or trust iii , are not available to pay obligations of its affiliates or any other party . trust iii 's loans are serviced by medallion funding llc , or mfc . on november 8 , 2018 , a limited guaranty in favor of dz bank was terminated in exchange for a $ 1.4 million note , payable in quarterly installments over five years . as a result of such restructuring , effective as of such date , trust iii is no longer consolidated in our financial statements . the current covid-19 outbreak , its broad impact and preventive measures taken to contain or mitigate the outbreak have had , and are likely to continue to have , significant negative effects on the us and global economy , employment levels , employee productivity , and financial market conditions , which , in turn , may increasingly have negative effects the ability of our borrowers to repay outstanding loans , the value of collateral securing loans , demand for loans and other financial services products and consumer discretionary spending . as a result of these or other consequences , the outbreak has adversely affected our business , results of operations and financial condition , likely materially . the effects of the outbreak on us could be exacerbated given that our business model is largely consumer and small business directed , which are more severely affected by covid-19 , and the outbreak , and preventative measures taken to contain or mitigate the outbreak , have had and may increasingly have a significant negative effects on consumer discretionary spending . the extent to which the outbreak will impact our operations will depend on future developments , which are highly uncertain and can not be predicted at this time , and include the duration , severity and scope of the outbreak and the actions taken to contain or mitigate the outbreak . we have taken steps to operate through this crisis , for example , by having employees work remotely and negotiating with borrowers and lenders alike as to payment terms . see “ risk factors -- the ongoing coronavirus pandemic and any other future outbreak of disease or similar public health threat could have a material adverse impact on our business , operating results and financial condition. ” critical accounting policies we follow financial accounting and reporting policies that are in accordance with gaap . some of these significant accounting policies require management to make difficult , subjective or complex judgments . the policies noted below , however , are deemed to be our “ critical accounting policies ” under the definition given to this term by the sec . according to the sec , “ critical accounting policies ” mean those policies that are most important to the presentation of a company 's financial condition and results of operations , and require 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 . the judgments used by management in applying the critical accounting policies may be affected by deterioration in the economic environment , which may result in changes to future financial results . specifically , subsequent evaluations of the loan portfolio , in light of the factors then prevailing , may result in significant changes to the allowance for loan losses in future periods , and the inability to collect on outstanding loans could result in increased loan losses . allowance for loan losses in analyzing the adequacy of the allowance for loan losses , the company uses historical delinquency and actual loss rates with a three-year look-back period for medallion loans and a one-year look-back period for recreation and home improvement loans , and uses historical loss experience and other projections for commercial loans . the allowance is evaluated on a regular basis by management and is based upon management 's periodic review of the collectability of the loans in light of historical experience , the nature and size of the loan portfolio , adverse situations that may affect the borrower 's ability to repay , estimated value of any underlying collateral , prevailing economic conditions , and excess concentration risks . this evaluation is inherently subjective , as it requires estimates that are susceptible to significant revision as more information becomes available . 40 our methodology to calculate the general reserve portion of the allowance includes the use of quantitative and qualitative factors . we initially de termine an allowance based on quantitative loss factors for loans evaluated collectively for impairment . the quantitative loss factors are based primarily on historical loss rates , after considering loan type , historical loss and delinquency experience . th e quantitative loss factors applied in the methodology are periodically re-evaluated and adjusted to reflect changes in historical loss levels or other risks . qualitative loss factors are used to modify the reserve determined by the quantitative factors an d are designed to account for losses that may not be included in the quantitative calculation according to management 's best judgment . performing loans are recorded at book value and the general reserve maintained to absorb expected losses consistent with gaap . all medallion loans that reach 90 days or more delinquent require a specific allowance for those loans , which is determined on an individual basis . story_separator_special_tag we charge-off loans in the period that such loans are deemed uncollectible or when they reach 120 days delinquent regardless of whether the loan is a recreation , home improvement , or medallion loan . the methodology used in the periodic review of reserve adequacy , which is performed at least quarterly , is designed to be responsive to changes in portfolio credit quality and inherent credit losses . the changes are reflected in both the pooled formula reserve and in specific reserves as the collectability of larger classified loans is regularly recalculated with new information as it becomes available . management is primarily responsible for the overall adequacy of the allowance . medallion loan collateral valuation due to the low volume of market transfer activity as medallion values declined in recent years , the determination of taxi medallion collateral fair value has been derived quarterly for each jurisdiction taking into consideration recent market transfer activity , to the extent it is available , as well as a discounted cash flow model when trading activity alone was deemed insufficient or unreliable . in general , recent market transfers published by each jurisdiction have been analyzed to derive the median transfer activity value . however , depending on the circumstances , when analyzing transfer activity , transactions which management determined from available information not to be arms-length have been excluded from the calculation of the median transfer value . when discounted cash flow models have been used , significant inputs typically include the discount rate , taxi fare/lease revenue , and associated expenses such as vehicle costs , fuel , credit card processing fees , repair costs , and insurance premiums . a higher discount rate , lower taxi fare/lease revenue and higher associated expenses would each produce a lower fair value . at period end , the transfer activity and , if applicable , discounted cash flow values , are taken into consideration to arrive at a fair value of the medallion collateral in each jurisdiction . 41 average balances and rates ( bank holding company accounting ) the following table shows the company 's consolidated average balance sheets , interest income and expense , and the average interest earning/bearing assets and liabilities , and which reflect the average yield on assets and average costs on liabilities as of and for the twelve months ended december 31 , 2019 and nine months ended december 31 , 2018. replace_table_token_6_th ( 1 ) includes financed sales of this collateral to third parties reported separately from the loan portfolio , and that are conducted by the bank of $ 8,163 and $ 3,134 as of december 31 , 2019 and 2018 . ( 2 ) includes deferred financing costs of $ 5,105 as of december 31 , 2019 . 42 during the twelve months ended december 31 , 2019 , our net loans yield ed 12.49 % , which was up 6 % from 11.73 % for the nine months ended december 31 , 2018 , mainly driven by the overall increase in the higher yielding recreation loan balance and the decrease in the lower yielding medallion loan balance . interest bearing liabiliti es , mainly certificates of deposit , fund the growing consumer loan business , and as market rates have increased , so has the average cost of borrowing . in addition , we iss ued new privat ely placed note s during 201 9 which also led to an increase in the cost of borrowings . in addition , due to the restructuring of the dz loan in the fourth quarter of 2018 , the overall borrowings decline d . rate/volume analysis ( bank holding company accounting ) the following table presents the change in interest income and expense due to changes in the average balances ( volume ) and average rates , calculated for the twelve months ended december 31 , 2019 and the nine months ended december 31 , 2018. replace_table_token_7_th during the twelve months ended december 31 , 2019 , interest income increased primarily due to the increase in our consumer loan portfolios even as the average rate decreased . additionally , we saw a decline in our overall medallion portfolio as loans continued to age 90 days or more past due and be charged-off to loans in process of foreclosure . interest expense increased for the twelve months primarily driven by the overall increase in borrowing rates . our interest expense is driven by the interest rates payable on our bank certificates of deposit , short-term credit facilities with banks , fixed-rate , long-term debentures issued to the sba , and other short-term notes payable . the bank issues brokered bank certificates of deposit , which are our lowest borrowing costs . the bank is able to bid on these deposits at a wide variety of maturity levels which allows for improved interest rate management strategies . our cost of funds is primarily driven by the rates paid on our various debt instruments and their relative mix , and changes in the levels of average borrowings outstanding . see note 7 to the consolidated financial statements for details on the terms of our outstanding debt . our debentures issued to the sba typically have terms of ten years . 43 we measure our borrowing cos ts as our aggregate interest expense for all of our interest-bearing liabilities divided by the average amount of such liabilities outstanding during the period .
| the company had an allowance for loan losses as of december 31 , 2018 of $ 36,395,000 , which was attributable to the medallion ( 76 % ) , recreation ( 19 % ) , and home improvement ( 5 % ) loan portfolios . loans increased $ 142,973,000 , or 14 % , from the prior year end primarily due to $ 462,093,000 of loan originations mostly in the consumer segments , offset partly by principal payments , transfer to loans in process of foreclosure , and net charge-offs . the provision for loan losses was $ 47,386,000 for the twelve months ended december 31 , 2019 , compared to $ 59,008,000 for the nine months ended december 31 , 2018. the improvement was reflective of lower net charge-offs on the medallion portfolio , along with taxi medallion values remaining relatively consistent during 2019. the charge off ratios on the loan portfolio increased to 3.60 % for the twelve months ended december 31 , 2019 compared to 2.73 % for the nine months ended december 31 , 2018 , driven by the recreation segment . see note 4 for additional information on loans and the allowance for loan losses . interest expense was $ 35,045,000 for the twelve months ended december 31 , 2019 , compared to $ 24,816,000 for the nine months ended december 31 , 2018. the average cost of borrowed funds was 3.08 % , compared to 2.79 % , mainly driven by new borrowings at higher rates and the roll off of lower cost borrowings . average debt outstanding was $ 1,138,746,000 for the twelve months ended december 31 , 2019 , compared to $ 1,181,323,000 for the nine months ended december 31 , 2018. see page 42 for a table which shows average balances and cost of funds for our funding sources . net interest income was $ 97,517,000 for the twelve months ended december 31 , 2019 , compared to $ 71,987,000 for the nine months ended december 31 , 2018 , and the net interest margin was 8.64 % , compared to 8.19 % , reflecting the above . noninterest income , which is comprised of sponsorship and race winnings , prepayment fees , servicing fee income , late charges , write-downs of loan collateral , impairment of equity investments , and
| ROO | 7,873 |
it removes the incurred loss approach 's threshold that delayed the recognition of a credit loss until it was “ probable ” a loss event was “ incurred . ” the estimate of expected credit losses under the cecl approach is based on relevant information about past events , current conditions , and reasonable and supportable forecasts that affect the collectability of the reported amounts . historical loss experience is generally the starting point for estimating expected credit losses . we then consider whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used . finally , we consider forecasts about future economic conditions that are reasonable and supportable . management 's evaluation of the appropriateness of the allowance for credit losses is often the most critical of accounting estimates for a financial institution . our determination of the amount of the acll is a critical accounting estimate as it requires significant reliance on the use of estimates and significant judgment as to the amount and timing of expected future cash flows on criticized loans , significant reliance on historical loss rates , consideration of our quantitative and qualitative evaluation of economic factors , and the reliance on reasonable and supportable forecasts . 65 the allowance for credit losses attributable to each portfolio segment considers relevant available information from internal and external sources , relating to past events and current conditions . adjustments to historical loss information are made for differences in current loan-specific risk characteristics and environmental conditions such as concentrations of credit risk ( geographic , large borrower , and industry ) , economic conditions , changes in underwriting standards , experience and depth of lending staff , trends in delinquencies , and the level of criticized loans . going forward , the impact of utilizing the cecl approach to calculate the reserve for credit losses will be significantly influenced by the composition , characteristics and quality of our loan portfolio , and the prevailing economic conditions and forecasts utilized . material changes to these and other relevant factors may result in greater volatility to the reserve for credit losses , and therefore , greater volatility to our reported earnings . see note 4 to the consolidated financial statements and the “ credit quality and performance ” and “ allowance for credit losses on loans ” sections for more information on the allowance . executive summary this summary is intended to identify the most important matters on which management focuses when it evaluates the financial condition and performance of the company . when evaluating financial condition and performance management looks at certain key metrics and measures . the company 's evaluation includes comparisons with peer group financial institutions and its own performance objectives established in the internal planning process . the primary activity of the company is commercial banking . the company 's operations are located in the general san francisco bay area of california in the counties of alameda , contra costa , marin , san benito , san francisco , san mateo , and santa clara . the company 's market includes the cities of oakland , san francisco and san jose and the headquarters of a number of technology based companies in the region known commonly as silicon valley . the company 's customers are primarily closely held businesses and professionals . performance overview for the year ended december 31 , 2020 , net income was $ 35.3 million , or $ 0.59 per average diluted common share , compared to $ 40.5 million , or $ 0.84 per average diluted common share , for the year ended december 31 , 2019 , and $ 35.3 million , or $ 0.84 per average diluted common share for the year ended december 31 , 2018. the company 's annualized return on average tangible assets was 0.83 % and annualized return on average tangible equity was 9.04 % for the year ended december 31 , 2020 , compared to 1.25 % and 13.09 % , respectively , for the year ended december 31 , 2019 , and 1.19 % and 14.41 % , respectively , for the year ended december 31 , 2018. earnings for the year ended december 31 , 2020 were impacted by the effect of our $ 13.3 million pre-tax cecl related provision for credit losses on loans for the first quarter of 2020 , driven by forecasted effects on economic activity from the covid-19 pandemic , and $ 2.6 million of pre-tax merger-related costs resulting from the merger with presidio . earnings for the year ended december 31 , 2019 were reduced by pre-tax merger-related costs of $ 11.1 million , related to the merger with presidio . pre-tax earnings for the year ended december 31 , 2019 were further reduced by an additional $ 2.0 million of provision for loan losses for certain non-impaired loans acquired at a premium from presidio . earnings for the years ended december 31 , 2018 were reduced by pre-tax merger-related costs of $ 9.2 million , for the mergers with tri-valley and united american . coronavirus ( covid-19 ) in response to two economic stimulus laws passed by congress in the first half of the 2020 , the bank funded 1,105 u.s. small business administration ( “ sba ” ) paycheck protection program ( “ ppp ” ) loans , with total principal balances of $ 333.4 million . through 2020 , ppp loan payoffs totaled $ 9.1 million while sba loan forgiveness totaled $ 33.7 million and the bank ended the fourth quarter of 2020 with $ 290.7 million in outstanding ppp loan balances . story_separator_special_tag volume variances are equal to the increase or decrease in the average balance multiplied by prior period rates and rate variances are equal to the increase or decrease in the average rate multiplied by the prior period average balance . variances attributable to both rate and volume changes are equal to the change in rate multiplied by the change in average balance and are included below in the average volume column . replace_table_token_10_th ( 1 ) reflects tax equivalent adjustment for federal tax exempt income based on a 21 % tax rate for the years ended december 31 , 2020 , 2019 and 2018. the company 's net interest margin ( fte ) , expressed as a percentage of average earning assets , contracted 78 basis points to 3.50 % for the year ended december 31 , 2020 , compared to 4.28 % for the year ended december 31 , 2019 , primarily due to a decline in the average yield on loans , investment securities , and overnight funds , and an increase in the average balance of lower yielding overnight funds , partially offset by a decline in the cost of interest-bearing liabilities . the company 's net interest margin ( fte ) , expressed as a percentage of average earning assets , contracted three basis points to 4.28 % for the year ended december 31 , 2019 , compared to 4.31 % for the year ended december 31 , 2018 , primarily due to a higher cost of deposits , and a decrease in the average balance of bay view funding 's factored receivables , partially offset by an increase in the average balance of loans and securities and an increase in the accretion of the loan purchase discount into loan interest income from a merger during the year ended december 31 , 2019 . 74 the following tables present the average balance of loans outstanding , interest income , and the average yield for the periods indicated : replace_table_token_11_th the average yield on the total loan portfolio decreased to 5.06 % for the year ended december 31 , 2020 , compared to 5.86 % for the year ended december 31 , 2019 , primarily due to decreases in the prime rate on loans and new average balances of lower yielding ppp loans , partially offset by higher ppp loan fees and an increase in the accretion of the loan purchase discount into loan interest income from the acquisitions . the average yield on the total loan portfolio decreased to 5.86 % for the year ended december 31 , 2019 , compared to 5.87 % for the year ended december 31 , 2018 , primarily due to a decrease in the average balance of bay view funding 's factored receivables , partially offset by the impact of the increasing prime rate on loans over the course of 2018 ( prior to the prime rate decreasing in the latter part of 2019 ) , and an increase in the accretion of the loan purchase discount into loan interest income from the acquisitions . in aggregate , the original total net purchase discount on loans from the focus , tri-valley , united american , and presidio loan portfolio was $ 25.2 million . in aggregate , the remaining net purchase discount on total loans acquired was $ 12.1 million at december 31 , 2020 . the average cost of deposits was 0.17 % for the year ended december 31 , 2020 , compared to 0.29 % for the year ended december 31 , 2019 , and 0.21 % for the year ended december 31 , 2018 . net interest income , before provision for credit losses on loans , for the year ended december 31 , 2020 increased 8 % to $ 141.9 million , compared to $ 131.8 million for the year ended december 31 , 2019 , primarily due to an increase in the average balance of loans resulting from the presidio merger , additional interest and fee income from ppp loans , and an increase in the accretion of the loan discount into loan interest income from our merger with presidio , partially offset by decreases in the prime rate , and decreases in the yield on investment securities and overnight funds . net interest income , before provision for loan losses , for the year ended december 31 , 2019 increased 8 % to $ 131.8 million , compared to $ 122.0 million for the year ended december 31 , 2018 , primarily due to the impact of the increase in loans and deposits from the presidio merger , in addition to the full year impact of the tri-valley and united american mergers . provision for credit losses on loans credit risk is inherent in the business of making loans . the company establishes an allowance for credit losses on loans through charges to earnings , which are presented in the statements of income as the provision for credit losses on loans . specifically identifiable and quantifiable known losses are promptly charged off against the allowance . the provision for credit losses on loans is determined by conducting a quarterly evaluation of the adequacy of the company 's allowance for credit losses on loans and charging the shortfall or excess , if any , to the current quarter 's expense . this has the effect of creating variability in the amount and frequency of charges to the company 's earnings . the provision for credit losses on loans and level of allowance for each period are dependent upon many factors , including loan growth , net charge offs , changes in the composition of the loan portfolio , delinquencies , management 's assessment of the quality of the loan portfolio , the valuation of problem loans and the general economic conditions in the company 's market area . the provision for credit losses on loans and level of
| capital resources the company uses a variety of measures to evaluate capital adequacy . management reviews various capital measurements on a regular basis and takes appropriate action to ensure that such measurements are within established internal and external guidelines . the external guidelines , which are issued by the federal reserve and the fdic , establish a risk-adjusted ratio relating capital to different categories of assets and off-balance sheet exposures . on may 26 , 2017 , the company completed an underwritten public offering of $ 40.0 million aggregate principal amount of its fixed-to-floating rate subordinated notes ( “ subordinated debt ” ) due june 1 , 2027. the subordinated debt 94 initially bears a fixed interest rate of 5.25 % per year . commencing on june 1 , 2022 , the interest rate on the subordinated debt resets quarterly to the three-month libor rate plus a spread of 336.5 basis points , payable quarterly in arrears . interest on the subordinated debt is payable semi-annually on june 1st and december 1st of each year through june 1 , 2022 and quarterly thereafter on march 1st , june 1st , september 1st and december 1st of each year through the maturity date or early redemption date . the company , at its option , may redeem the subordinated debt , in whole or in part , on any interest payment date on or after june 1 , 2022 without a premium . it is anticipated that the libor index will be phased-out by the end of 2021 and the federal reserve bank of new york has established the secured overnight financing rate ( “ sofr ” ) as its recommended alternative to libor . we have created a sub-committee of our asset liability management committee to address libor transition and phase-out issues . we are currently reviewing loan documentation , technology systems and procedures we will need to implement for the transition . the company acquired $ 10.0 million of subordinated debt from the presidio transaction , which was redeemed on december 19 , 2019. as a result of the redemption of the presidio subordinated debt , the company paid a pre-payment penalty of $ 300,000 during the fourth quarter of 2019 .
| Liquidity | 13,120 |
we experience fluctuations in orders and sales due to seasonal variations and customer sales cycles , such as the seasonal pattern of contracting by the united states and certain foreign governments , the desire of customers to take delivery of equipment prior to fiscal year ends due to funding considerations , and the tendency of commercial enterprises to fully utilize annual capital budgets prior to expiration . such events have resulted and could continue to result in fluctuations in quarterly results in the future . as a result of such quarterly fluctuations in operating results , we believe that quarter-to-quarter comparisons of our results of operations are not necessarily meaningful and should not be relied upon as indicators of future performance . we expect that the challenging world-wide economic conditions that impacted revenue performance in 2012 will continue to impact our business going forward . more specifically , reduced spending by united states and middle east government agencies , the continuing eurozone crisis , the impact in the united states of the year-end 2012 expiration of income and payroll tax cuts , and , in the absence of action by the united states congress to the contrary , potential material reductions in federal spending resulting from the budget control act of 2011 , among other global economic developments , all present challenges for us and render predictions regarding future performance difficult to make . critical accounting policies and estimates this discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements , which have been prepared in accordance with united states generally accepted accounting principles . 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 . we evaluate our estimates , including those related to revenue recognition , bad debts , inventories , goodwill , warranty obligations , contingencies and income taxes on an on-going basis . we base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying 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 . senior management has discussed the development , selection and disclosure of these estimates with the audit committee of our 27 board of directors . we believe the following critical accounting policies and the related judgments and estimates affect the preparation of our consolidated financial statements . revenue recognition . the majority of our revenue is recognized upon shipment of the product to the customer at a fixed or determinable price and with a reasonable assurance of collection , passage of title to the customer as indicated by the shipping terms and fulfillment of all significant obligations . we design , market and sell our products primarily as commercial , off-the-shelf products . certain customers request different system configurations , generally based on standard options or accessories that we offer . in general , our revenue arrangements do not involve acceptance provisions based upon customer specified acceptance criteria . in those limited circumstances when customer specified acceptance criteria exist , revenue is deferred until customer acceptance if we can not demonstrate that the system meets those specifications prior to shipment . for any contracts with multiple elements ( i.e . , training , installation , additional parts , etc . ) we allocate revenue among the deliverables primarily based upon objective and reliable evidence of fair value of each element in the arrangement . if objective and reliable evidence of fair value of any element is not available , we use an estimated selling price for purposes of allocating the total arrangement consideration among the elements . in addition , judgments are required in evaluating the credit worthiness of our customers . credit is not extended to customers and revenue is not recognized until we have determined that collectability is reasonably assured . allowance for doubtful accounts . our policy is to maintain allowances for estimated losses resulting from the inability of our customers to make required payments . credit limits are established through a process of reviewing the financial history and stability of each customer . where appropriate , we obtain credit rating reports and financial statements of the customer when determining or modifying their credit limits . we regularly evaluate the collectability of our trade receivable balances based on a combination of factors . when a customer 's account balance becomes past due , we initiate dialogue with the customer to determine the cause . if it is determined that the customer will be unable to meet its financial obligation to us , such as in the case of a bankruptcy filing , deterioration in the customer 's operating results or financial position or other material events impacting their business , we record a specific allowance to reduce the related receivable to the amount we expect to recover given all information presently available . actual write-offs during the past three years have not been material to our results of operations . we also record an allowance for all other customers based on certain other factors including the length of time the receivables are past due and historical collection experience with individual customers . as of december 31 , 2012 , our accounts receivable balance of $ 335.2 million is reported net of allowances for doubtful accounts of $ 6.6 million . we believe our reported allowances at december 31 , 2012 , are adequate . story_separator_special_tag 31 segment operating results as of january 1 , 2011 , we merged the thermography and commercial vision systems operating segments into the thermal vision and measurement operating segment . raymarine was acquired on may 14 , 2010 , creating the raymarine operating segment . finally , icx was acquired on october 4 , 2010 and the icx operating results for the period from acquisition through december 31 , 2010 was reported as a separate segment . effective as of january 1 , 2011 , icx results are reported as our detection and integrated system segments , and a portion is reported in our surveillance segment . beginning january 1 , 2011 , the former government systems operating segment is also included in the surveillance operating segment . thermal vision and measurement thermal vision and measurement operating results are as follows ( in millions ) : replace_table_token_5_th thermal vision and measurement revenue decreased by 4.9 percent in 2012 compared to 2011 , primarily due to lower revenues in the cores and components product line and the premium thermography product lines . revenue declined in all geographies due to world-wide economic weaknesses which were particularly significant in our europe , middle east and africa regions . united states revenue was adversely impacted by lower revenue from cores and components customers . earnings from operations decreased by 12.0 percent due to the flow through of lower revenues and lower absorption of factory costs partially offset by a 5.5 percent reduction in operating expenses . revenue increased by 14.9 percent in 2011 compared to 2010 primarily due to increased unit deliveries from several of the segment 's product lines including thermography , cores and components , and maritime . earnings from operations increased by 18.9 percent due to the increase in revenue and manufacturing efficiencies resulting from higher production volumes and lower material costs on new products . raymarine raymarine operating results are as follows ( in millions ) : replace_table_token_6_th raymarine segment revenue for the year ended december 31 , 2012 decreased by 7.8 percent , compared to 2011 , primarily due to weak market conditions in europe . earnings from operations in 2012 decreased by 5.9 percent compared to 2011 primarily due to lower revenue resulting in lower gross profit , largely offset by a 9.9 percent reduction in operating expenses . operating results for 2010 are for the period from may 14 , 2010 through december 31 , 2010. raymarine earnings from operations include the impact of the amortization of intangible assets of $ 3.5 million in 2012 , $ 3.8 million in 2011 and $ 2.1 million in 2010. surveillance surveillance operating results are as follows ( in millions ) : replace_table_token_7_th 32 surveillance segment revenue decreased by 15.8 percent in 2012 compared to 2011 , primarily due to a 26.6 percent decrease in revenue from us government customers . earnings from operations declined by 23.2 percent due to lower revenues , lower gross margins resulting from a change in segment product mix , partially offset by a 10.5 percent decrease in operating expenses . revenue decreased by 14.0 percent in 2011 compared to 2010 , primarily due to decreases in revenue from u.s. government agencies , partially offset by revenue of $ 8.8 million from icx business units , which were acquired on october 4 , 2010. lower revenue and increased segment operating expenses caused the decline in earnings from operations and operating margin from 2010 to 2011. the decline in backlog from 2010 to 2011 was primarily due to the reduction in procurement activity by our u.s. government customers . detection detection operating results are as follows ( in millions ) : replace_table_token_8_th detection segment revenue for the year ended december 31 , 2012 decreased by 20.8 percent compared to the same period of 2011 , primarily due to two significant program deliveries in 2011 and to lower research and development contract revenues pursuant to the segment 's strategy to reduce its customer-paid research and development activity . the loss from operations in 2011included the amortization of fair value adjustments on inventory of $ 4.2 million . the elimination of the fair value inventory adjustment and a 27.9 percent reduction in operating expenses partially offset by lower revenues were the main factors contributing to the improvement in operating results for 2012 compared to 2011. operating results for 2010 are for the period from october 4 , 2010 through december 31 , 2010. the earnings from operations include the impact of the amortization of fair value adjustments on inventory of $ 4.2 million and $ 2.1 million in 2011 and 2010 , respectively . the fair value adjustment on inventory related to purchase price accounting and the adjustment was fully amortized in 2011. integrated systems integrated systems operating results are as follows ( in millions ) : replace_table_token_9_th integrated systems segment revenue for the year ended december 31 , 2012 increased by 26.7 percent over 2011 , primarily due to an increase in large program revenue recognized year over year . backlog at december 31 , 2012 reflects an increase due to several large program contracts booked during 2012. operating results for 2010 are for the period from october 4 , 2010 through december 31 , 2010. the earnings from operations include the impact of the amortization of fair value adjustments on inventory of $ 0.5 million and $ 0.2 million in 2011 and 2010 , respectively . the fair value adjustment on inventory related to purchase price accounting and the adjustment was fully amortized in 2011 . 33 story_separator_special_tag style= `` font-family : times new roman ; font-size:10pt ; color : # 000000 ; text-decoration : none ; `` > 0.25 percent . we had $ 10.6 million and $ 15.8 million of letters of credit outstanding at december 31 , 2012 and 2011 , respectively , which reduced the total available credit under the credit agreement . on august 19 , 2011 , the company issued
| liquidity and capital resources at december 31 , 2012 , we had a total of $ 321.7 million in cash and cash equivalents , $ 150.3 million of which was in the united states and $ 171.4 million at our foreign subsidiaries , compared to cash and cash equivalents at december 31 , 2011 of $ 440.8 million , of which $ 263.6 million was in the united states and $ 177.3 million at our foreign subsidiaries . the decrease in cash and cash equivalents in 2012 was primarily due to the repurchase of 10.5 million shares of our common stock for $ 214.2 million , business acquisitions of $ 105.9 million , capital expenditures of $ 58.1 million and dividends paid of $ 42.5 million , partially offset by cash provided from operations . cash provided by operating activities in 2012 totaled $ 285.5 million compared to $ 243.9 million in 2011 and $ 255.3 million in 2010 . the increase in cash provided from operating activities in 2012 compared to 2011 was primarily due to a year over year reduction in cash used for certain working capital components , particularly inventories and income tax related assets and liabilities . the decrease in cash provided from operating activities in 2011 compared to 2010 was primarily due to the decrease in net earnings partially offset by a year over year reduction in cash used for certain working capital components . cash used for investing activities for the year ended december 31 , 2012 totaled $ 167.0 million , primarily consisting of the acquisition of lorex technology inc. for $ 61.2 million and traficon international nv for $ 46.3
| Liquidity | 6,831 |
new aera 's patented and fda- cleared tidal assist ventilator ( tav ) system is designed to deliver increased air flow and pressure from an approximately 4-ounce pocket-size unit , features a state-of-the-art nasal pillow interface , and is compatible with certain oxygen concentrators , oxygen cylinders , wall gas , and certain medical air sources . tav therapy with oxygen has been clinically demonstrated during periods of exercise to reduce breathlessness , increase exercise endurance , and improve oxygen saturation for patients suffering from certain chronic lung disease compared to oxygen therapy alone . we began a limited launch of the tav product in december 2019 , and we plan to integrate this product across our domestic direct-to-consumer channel and in our domestic business-to-business channel in 2020 , although we expect limited contributions to revenue in 2020. we plan to incorporate the tav technology directly into our inogen one portable oxygen concentrators and make the tav product compatible with our inogen at home stationary concentrators to continue to advance patient preference and maintain our technology leadership position in the long-term oxygen therapy market . 63 in addition , we plan to use this technology as a platform to expand our total addressable market into the high-growth non-invasive ventilation ( niv ) market , where we believe there is a significant worldwide untreated market opportunity . we believe this market could undergo disruption similar to oxygen given the pending reimbursement changes due to the inclusion of this category in competitive bidding r ound 2021 and the immobile nature of legacy niv product offerings . the monthly medicare reimbursement rate is significantly higher for niv products than oxygen therapy at a minimum of $ 934 a month . also , effective january 1 , 2019 , a new medicare h ealthcare c ommon p rocedure c oding s ystem ( hcpcs ) code has been added to allow billing for a multi-function ventilator that includes both ventilation and oxygen . we are targeting to launch a product for this purpose in 2021. it is uncertain if the tav product acquired from new aera will be reimbursable in its current configuration under hcpcs code e0466 . we requested confirmation on the assigned hcpcs codes for the tav system from the pricing , data analysis , and coding ( pdac ) contractor in august 2019 following the closing of the new aera transaction . in august 2019 , we received positive confirmation that this product was assigned hcpcs code e0466 . however , in september 2019 , we received a revised communication that the product was assigned hcpcs code e1390 and e1352 , which was then revoked at our request in december 2019. in september 2019 , we appealed to the centers for medicare and medicaid services , and in january 2020 our appeal was denied . we are currently pursuing additional appeal opportunities . if we do not receive revised coding , it could limit this product 's adoption by home medical equipment providers and also our direct rentals until revisions are made to the product to meet the coding requirements . for a discussion of certain significant risks relating to the tav reimbursement and the upcoming round of competitive bidding , please see the risk factor entitled “ the competitive bidding process under medicare could negatively affect our business and financial condition . ” we have been developing and refining the manufacturing of our inogen one systems since 2004. while nearly all of our manufacturing and assembly processes were originally outsourced , assembly of the compressors , sieve beds , concentrators and certain manifolds were brought in-house in order to improve quality control and reduce cost . in support of our european sales , we have an office in the netherlands for sales , customer service , and repairs , and use a contract manufacturer located in the czech republic to manufacture high volume products to improve delivery to our european accounts . we expect to maintain our assembly operations for our products at our facilities in richardson , texas and goleta , california . in 2020 , we are focused on reducing the cost of our inogen one g5 product , expanding manufacturing of the tav product , and increasing the robustness of our supply chain to reduce potential component constraints as we grow our business . we also use lean manufacturing practices to maximize manufacturing efficiency . we rely on third-party manufacturers to supply several components of our products . we typically enter into master service agreements for these components that specify quantity and quality requirements and delivery terms . in certain cases , these agreements can be terminated by either party upon relatively short notice . we have elected to source certain key components from single sources of supply , including our batteries , motors , valves , columns , and some molded plastic components . we believe that maintaining a single source of supply allows us to control production costs and inventory levels and to manage component quality . in order to mitigate against the risks related to a single source of supply , for certain components we qualify alternative suppliers and develop contingency plans for responding to disruptions . however , any reduction or halt in supply from one of these single-source suppliers could limit our ability to manufacture our products or devices until a replacement supplier is found and qualified . for additional discussion of potential risks related our manufacturing and raw materials , please see the risk factor entitled “ we obtain some of the components , subassemblies and completed products included in our products from a single source or a limited group of manufacturers or suppliers , and the partial or complete loss of one or more of these manufacturers or suppliers could cause significant production delays , an inability to meet customer demand , substantial loss in revenue , and an adverse effect on our financial condition and results of operations . story_separator_special_tag basis of presentation the following describes the line items set forth in our consolidated statements of comprehensive income . 66 revenue we classify our revenue in two main categories : sales revenue and rental revenue . there will be fluctuations in mix between business-to-business sales , direct-to-consumer sales and rental revenue from period-to-period . product selling prices and gross margins may fluctuate as we introduce new products , reduce our product costs , have changes in purchase volumes , and as currency variations occur . for example , the gross margin for our inogen one g4 system is higher than our inogen one g3 system due to lower manufacturing costs and similar average selling prices . thus , to the extent our sales of our inogen one g4 systems are higher than sales of our inogen one g3 systems , our overall gross margins should improve and , conversely , to the extent our sales of our inogen one g3 systems are higher than sales of our inogen one g4 systems , our overall gross margins should decline . quarter-over-quarter results may vary due to seasonality in both the international and domestic markets , as discussed in item 1. seasonality and elsewhere in this annual report on form 10-k. sales revenue our sales revenue is primarily derived from the sale of our inogen one systems , inogen at home systems , tav systems , and related accessories to individual consumers , our private label partner , hme providers , distributors and resellers worldwide . sales revenue is classified into two areas : business-to-business sales and direct-to-consumer sales . generally , our direct-to-consumer sales have higher gross margins than our business-to-business sales . rental revenue our rental revenue is primarily derived from the rental of our inogen one and inogen at home systems to patients through reimbursement from medicare , private payors and medicaid , which typically also includes a patient responsibility component for patient co-insurance and deductibles . rental revenue decreased slightly in 2019 in spite of the minor change that we made in the second quarter of 2019 to loosen our intake criteria for new rental patients that we made in the second half of 2019 , primarily due to lower net rental setups due to reduced sales capacity , an additional 3.9 % reduction in medicare reimbursement rates for our products effective january 1 , 2019 and the adoption of asu no . 2018-19 that required reclassification of rental bad debt expense to be charged against rental revenue . we expect our rental revenue to modestly increase in 2020 as we scale the rental intake team , increase new rental setups , and benefit from the medicare reimbursement rates for oxygen therapy increasing 1.5 % to 3.5 % , effective january 1 , 2020. we also expect that our rental revenue will be impacted by the number of sales representatives , the number of rental intake representatives , reimbursement rate changes including the impact of round 2021 competitive bidding , the level of and response from potential customers to direct-to-consumer marketing spend , product launches , and other uncontrollable factors such as changes in the market and competition . cost of revenue cost of sales revenue cost of sales revenue consists primarily of costs incurred in the production process , including component materials , assembly labor and overhead , warranty , provisions for slow-moving and obsolete inventory , rework and delivery costs for items sold . labor and overhead expenses consist primarily of personnel-related expenses , including wages , bonuses , benefits , and stock-based compensation for manufacturing , logistics , repair , manufacturing engineering , and quality assurance employees , and temporary labor . cost of sales revenue also includes manufacturing freight in , depreciation expense , facilities costs and materials . we provide a 3-year , 5-year or lifetime warranty on inogen one systems sold and a 3-year and lifetime warranty on inogen at home systems sold . the tav system has a 1-year and a 3-year warranty . we establish a reserve for the cost of future warranty repairs based on historical warranty repair costs incurred as well as historical failure rates . provisions for warranty obligations , which are included in cost of sales revenue , are provided for at the time of revenue recognition . we continue to make progress towards reducing the average unit costs of our products as a result of our ongoing efforts to develop lower-cost systems , negotiate with our suppliers , improve our manufacturing processes , and increase production volume and yields . at the same time , recent united states policies related to global trade and tariffs may also increase our average unit cost . the current economic environment has introduced greater uncertainty with respect to potential trade regulations , including changes to united states policies related to global trade and tariffs . we continue to monitor the section 301 tariffs being imposed by the united states on certain imported chinese materials and products in addition to potential retaliatory responses from other nations . in 2019 , the impact of the china tariffs on our financial results was minimal as we have received some exemptions , negotiated cost sharing and price reductions with suppliers , and re-allocated purchases . assuming the chinese tariffs stay at the current levels , we currently expect the overall financial impact to our business to be minimal to the average unit cost for 2020 . 67 we expect the tav system to have a higher sales gross margin than our existing oxygen therapy products . for these reasons , we expect sales gross margin percentage to fluctuate over time based on the sales channel mix , product mix , and changes in average selling prices and cost per unit . cost of rental revenue cost of rental revenue consists primarily of depreciation expense ; service costs for rental patients , including rework costs , material , labor , freight , and consumable
| our future funding requirements will depend on many factors , including market acceptance of our products ; the cost of our research and development activities ; payments from customers ; the cost , timing , and outcome of litigation or disputes involving intellectual property rights , our products , employee relations , cyber security incidents , or otherwise ; the cost and timing of acquisitions ; the cost and timing of regulatory clearances or approvals ; the cost and timing of establishing additional sales , marketing , and distribution capabilities ; and the effect of competing technological and market developments . in the future , we may acquire businesses or technologies from third parties , and we may decide to raise additional capital through debt or equity financing to the extent we believe this is necessary to successfully complete these acquisitions . our future capital requirements will also depend on many additional factors , including those set forth in the section of this annual report on form 10-k entitled “ risk factors. ” if we require additional funds in the future , we may not be able to obtain such funds on acceptable terms , or at all . in the future , we may also attempt to raise additional capital through the sale of equity securities or through equity-linked or debt financing arrangements . if we raise additional funds by issuing equity or equity-linked securities , the ownership of our existing stockholders will be diluted . if we raise additional financing by the incurrence of indebtedness , we will be subject to increased fixed payment obligations and could also be subject to restrictive covenants , such as limitations on our ability to incur additional debt , and other operating restrictions that could adversely impact our ability to conduct our business . any future indebtedness we incur may result in terms that could be unfavorable to equity investors . there can be no assurances that we will be able to raise additional capital , which would adversely affect our ability to achieve our business objectives .
| Liquidity | 12,566 |
november 2019 follow-on offering on november 22 , 2019 , we completed a follow-on offering by issuing 5,345,000 shares of common stock , at an offering price of $ 22.00 per share , inclusive of 750,000 shares of our common stock issued upon the exercise by the underwriters of their option to purchase additional shares . the gross proceeds to us from this follow-on offering were $ 117.6 million and the net proceeds were approximately $ 110.4 million , after deducting underwriting discounts , commissions and offering expenses payable by us . may 2020 follow-on offering on may 12 , 2020 , we completed a follow-on offering by issuing 4,600,000 shares of common stock , at an offering price of $ 32.50 per share , inclusive of 600,000 shares of our common stock issued upon the exercise by the underwriters of their option to purchase additional shares . the gross proceeds to us from this follow-on offering were $ 149.5 million and the net proceeds were approximately $ 140.5 million , after deducting underwriting discounts , commissions and offering expenses payable by us . impact of covid-19 the covid-19 pandemic negatively impacted our sales , primarily in the second quarter of 2020 , by significantly decreasing and delaying the number of procedures performed using our r-snm system , and we expect that the pandemic could negatively impact our business , financial condition and results of operations . similar to the general trend in elective and other surgical procedures , the number of procedures performed using our r-snm system decreased significantly as healthcare organizations in the united states and globally , including in europe and canada , have prioritized the treatment of patients with covid-19 or have altered their operations to prepare for and respond to the pandemic . specifically , substantially all of the procedures using our r-snm system were postponed or cancelled from middle of march 2020 through may 2020 , but order flow began a gradual recovery in may 2020 and continued to improve in the second half of 2020. to protect the health of our employees , their families , and our communities , we have restricted access to our offices to personnel who must perform critical activities that must be completed on-site , limited the number of such personnel that can be present at our facilities at any one time , requested that many of our employees work remotely , and implemented strict travel restrictions . these restrictions and precautionary measures have not adversely affected our operations . the full extent of covid-19 's effect on our operational and financial performance will depend on future developments , including the duration , spread and intensity of the pandemic , and additional protective measures implemented by the governmental authorities , all of which are uncertain and difficult to predict considering the rapidly evolving landscape . however , if the pandemic continues to evolve into a long-term severe worldwide health crisis , there could be a material adverse effect on our business , results of operations , financial condition , and cash flows . amf license agreement on october 1 , 2013 , we entered into the license agreement , pursuant to which amf granted us the amf ip relating to amf licensed products . under the license agreement , for each calendar year beginning in 2018 , we are obligated to pay amf a royalty on an amf licensed product-by-amf licensed product basis if one of the following conditions applies : ( i ) one or more valid claims within any of the patents licensed to us by amf covers such amf licensed products or the manufacture of such amf licensed products or ( ii ) for a period of 12 years from the first commercial sale 80 anywhere in the world of such amf licensed product , in each case . the foregoing royalty is calculated as the greater of ( a ) 4 % of all net revenue derived from the amf licensed products , and ( b ) the minimum royalty , payable quarterly . the minimum royalty automatically increases each year , subject to a maximum amount of $ 200,000 per year . during the years ended december 31 , 2020 , 2019 , and 2018 , we have recorded royalties of $ 4.4 million , $ 0.6 million , and $ 0.1 million , respectively . we have 60 days to pay amf the royalty amount due under the license agreement , and if we fail to pay amf within such 60-day period , amf may , at its election , convert the exclusive license to a non-exclusive license or terminate the license agreement . 81 components of our results of operations net revenue revenue in 2020 from u.s. operations was $ 107.5 million . revenue in 2020 from international operations in the netherlands , england , canada , switzerland , norway and germany , was approximately $ 4.0 million . cost of goods sold and gross margin cost of goods sold consists primarily of acquisition costs of the components of our r-snm system , third-party contract labor costs , overhead costs , as well as distribution-related expenses such as logistics and shipping costs . the overhead costs include the cost of material procurement and operations supervision and management personnel . we expect overhead costs as a percentage of revenue to decrease as our sales volume increases . cost of goods sold also include other expenses such as scrap and inventory obsolescence . we expect cost of goods sold to increase in absolute dollars primarily as , and to the extent , our revenue grows . we expect gross margin to vary based on regional differences in pricing and discounts negotiated by customers . we calculate gross margin as gross profit divided by revenue . story_separator_special_tag the loan and security agreement contains customary events of default that include , among others , non-payment defaults , covenant defaults , a default in the event a material adverse change occurs , defaults in the event our assets are attached or we are enjoined from doing business , bankruptcy and insolvency defaults , cross-defaults to certain other material indebtedness , material judgment defaults , and inaccuracy of representations and warranties . the occurrence of an event of default could result in an increase to the applicable interest rate of 5.00 % , acceleration of and present occurrence of the maturity date , and the consequent obligation for us to repay in full in cash all amounts outstanding under the loan and security agreement , and a right by the lenders to exercise all remedies available under the loan and security agreement and related agreements , including the right to dispose of the collateral as permitted under applicable law . we may need to raise additional financing in the future to facilitate our business operations . if we raise additional funds by issuing equity securities , our stockholders could experience dilution . debt financing , if available , may involve covenants further restricting our operations or our ability to incur additional debt . any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders . additional financing may not be available at all , or in amounts or on terms acceptable to us . if we are unable to obtain additional financing when needed to satisfy our liquidity requirements , we may be required to scale back our operations . story_separator_special_tag href= `` https : //www.sec.gov/archives/edgar/data/0001603756/000160375621000014/ # id71b78c8dd4641e0a2e1393b007d5311_7 `` style= `` color : # 0000ff ; font-family : 'times new roman ' , sans-serif ; font-size:10pt ; font-weight:400 ; line-height:120 % ; text-decoration : underline `` > ( 2 ) purchase obligations represent open purchase orders primarily for component materials and third-party contract labor costs at the end of the fiscal year . these purchase orders can be impacted by various factors , including the timing of issuing orders , the timing of the shipment of orders , and currency fluctuations . ( 3 ) represents the minimum royalty due under the license agreement . ( 4 ) includes interest payments at the prime rate plus 1.75 % , prepayment fees , and the minimum final payment , consisting of a 7.5 % premium principal amount paid off under the loan agreement , all of which were repaid in full in january 2021. fees or payments under the loan and security agreement are not included . from time to time we enter into certain types of contracts that contingently require us to indemnify parties against third-party claims , including the license agreement , the loan agreement , the loan and security agreement and certain real estate leases , supply purchase agreements , and agreements with directors and officers . the terms of such obligations vary by contract and in most instances a maximum dollar amount is not explicitly stated therein . generally , amounts under these contracts can not be reasonably estimated until a specific claim is asserted , thus no liabilities have been recorded for these obligations on our balance sheets for any of the periods presented . critical accounting policies and estimates the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the united states ( gaap ) requires our management to make estimates and judgments that affect the amounts reported in our consolidated financial statements and accompanying notes . we base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances . the results of this evaluation then 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 , and such differences may be material to our consolidated financial statements . while our significant accounting policies are more fully described in note 1 to the consolidated financial statements in part ii , item 8 of this annual report on form 10-k , we believe the following discussion addresses our most critical accounting policies , which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult , subjective and complex judgments . revenue recognition revenue recognized during the years ended december 31 , 2020 , 2019 , and 2018 relates entirely to the sale of our r-snm system . we have revenue arrangements that consist of a single performance obligation . we recognize revenue at the point in time when it transfers control of promised goods to its customers . revenue is measured as the amount of consideration it expects to receive in exchange for transferring goods . the amount of revenue that is recognized is based on the transaction price , which represents the invoiced amount and includes estimates of variable consideration such as discounts , where applicable . we do not offer rights of return or price protection . the amount of variable consideration included in the transaction price may be constrained and is included only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under the contract will not occur in a future period . payment terms , typically less than three months , are offered to our customers and do not include a significant financing component . we extend credit to our customers based upon an evaluation of the customer 's financial condition and credit history and generally require no collateral . we do not have any contract balances related to product sales . we also do not have significant contract acquisition costs related to product sales . shipping and handling costs incurred for
| non-cash charges consisted primarily of forgiveness of receivables for stock subscriptions , depreciation and amortization , and stock-based compensation . net cash provided by ( used in ) investing activities net cash provided by investing activities was $ 9.7 million in fiscal year 2020 and consisted primarily of sales and maturities of short-term investments , partially offset by purchases of property and equipment . not included is the approximately $ 141.3 million in cash paid and 1,096,583 shares of our common stock issued from the acquisition of contura and its bulkamid product . net cash provided by investing activities was $ 45.3 million in fiscal year 2019 and consisted primarily of sales and maturities of short-term investments , partially offset by purchases of short-term investments . net cash used in investing activities was $ 60.1 million in fiscal year 2018 and consisted primarily of purchases and sales of short-term investments . net cash provided by financing activities net cash provided by financing activities was $ 144.2 million in fiscal year 2020 and consisted primarily of $ 140.5 million in net proceeds received in the follow-on offering . not included is the $ 75 million in proceeds from the loan and security agreement . net cash provided by financing activities was $ 111.0 million in fiscal year 2019 and consisted primarily of $ 110.4 million in net proceeds received in the follow-on offering .
| Liquidity | 924 |
a discussion regarding our financial condition and results of operations for 2018 compared with 2017 can be found in item 7 of our annual report on form 10-k for the year ended december 31 , 2018. for an overview of our operating segments , including a discussion of our major products and services , see the business discussion contained in item 1. the following discussion should be read in conjunction with our consolidated financial statements included in item 8. business environment with approximately 65 % of our revenue from the u.s. government , government spending levels , particularly defense spending , influence our financial performance . over the past several years , u.s. defense spending has been mandated by the budget control act of 2011 ( bca ) . the bca establishes spending caps over a 10-year period through 2021 , including a sequester mechanism that would impose additional defense cuts if an annual defense appropriations bill is enacted above the spending cap . on august 2 , 2019 , the bipartisan budget act of 2019 ( bba ) was signed into law , which raised discretionary spending limits established by the bca for fiscal year ( fy ) 2020 and fy 2021. on december 20 , 2019 , the fy 2020 defense appropriations bill was signed into law . it totaled $ 691 billion and included $ 619 billion in the base budget in compliance with the bba spending caps and $ 72 billion for overseas contingency operations , representing an increase of approximately 3 % over the total fy 2019 spending level . the long-term outlook for our u.s. defense business is influenced by the u.s. military 's funding priorities , the diversity of our programs and customers , our insight into customer requirements stemming from our incumbency on core programs , our ability to evolve our products to address a fast-changing threat environment and our proven track record of successful contract execution . international demand for military equipment and information technologies presents opportunities for our non-u.s. operations and exports from our north american businesses . while the revenue potential can be significant , there are risks to doing business in foreign countries , including changing budget priorities and overall spending pressures unique to each country . in our aerospace segment , we continue to experience strong demand across our product portfolio . we expect our investment in the development of new aircraft products and technologies to support the aerospace segment 's long-term growth . similarly , we believe the aircraft services business will be a source of steady revenue growth as the global business-jet fleet continues to grow . 28 results of operations introduction an understanding of our accounting practices is necessary in the evaluation of our financial statements and operating results . the following paragraphs explain how we recognize revenue and operating costs in our operating segments and the terminology we use to describe our operating results . in the aerospace segment , we record revenue on contracts for new aircraft when the customer obtains control of the asset , which is generally upon delivery and acceptance by the customer of the fully outfitted aircraft . revenue associated with the segment 's custom completions of narrow-body and wide-body aircraft and the segment 's services businesses is recognized as work progresses or upon delivery of services . fluctuations in revenue from period to period result from the number and mix of new aircraft deliveries , progress on aircraft completions , and the level and type of aircraft services performed during the period . the majority of the aerospace segment 's operating costs relates to new aircraft production on firm orders and consists of labor , material , subcontractor and overhead costs . the costs are accumulated in production lots , recorded in inventory and recognized as operating costs at aircraft delivery based on the estimated average unit cost in a production lot . while changes in the estimated average unit cost for a production lot impact the level of operating costs , the amount of operating costs reported in a given period is based largely on the number and type of aircraft delivered . operating costs in the aerospace segment 's completions and services businesses are recognized generally as incurred . for new aircraft , operating earnings and margin are a function of the prices of our aircraft , our operational efficiency in manufacturing and outfitting the aircraft , and the mix of ultra-large-cabin , large-cabin and mid-cabin aircraft deliveries . aircraft mix can also refer to the stage of program maturity for our aircraft models . a new aircraft model typically has lower margins in its initial production lots , and then margins generally increase as we realize efficiencies in the production process . additional factors affecting the segment 's earnings and margin include the volume , mix and profitability of completions and services work performed , the volume of and market for pre-owned aircraft , and the level of general and administrative ( g & a ) and net research and development ( r & d ) costs incurred by the segment . in the defense segments , revenue on long-term government contracts is recognized generally over time as the work progresses , either as products are produced or as services are rendered . typically , revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations . incurred cost represents work performed , which corresponds with , and thereby best depicts , the transfer of control to the customer . contract costs include labor , material , overhead and , when appropriate , g & a expenses . variances in costs recognized from period to period reflect primarily increases and decreases in production or activity levels on individual contracts . because costs are used as a measure of progress , year-over-year variances in cost result in corresponding variances in revenue , which we generally refer to as volume . story_separator_special_tag military vehicle production revenue increased due primarily to higher volume on the u.s. army 's abrams sepv3 tank and new mpf vehicle programs . c4isr products revenue was up due primarily to increased volume on combat and seaframe control systems for u.s. navy surface ships and computing and communications equipment . product operating costs increased at a higher rate than revenue due primarily to mix changes from mature programs to new production programs . the increase in service revenue in 2019 consisted of the following : it services $ 153 other , net 23 total increase $ 176 it services revenue increased due to the csra acquisition in the second quarter of 2018 , offset partially by the sale of a public-facing contact-center business in our information technology segment in the fourth quarter of 2018. service operating costs increased consistent with the change in volume described above . g & a expenses as a percentage of revenue , g & a expenses were 6.1 % in 2019 and 6.2 % in 2018 . we expect g & a expenses as a percentage of revenue in 2020 to be generally consistent with 2019 . 35 interest , net net interest expense was $ 460 in 2019 and $ 356 in 2018 . the increase was due primarily to the impact of financing the csra acquisition , including the issuance of $ 7.5 billion of fixed- and floating-rate notes in the second quarter of 2018. see note k to the consolidated financial statements in item 8 for additional information regarding our debt obligations , including interest rates . we expect 2020 net interest expense to be approximately $ 410 , reflecting our next scheduled debt maturity of $ 2.5 billion in the second quarter of 2020. other , net net other income was $ 14 in 2019 compared with expense of $ 16 in 2018 . the 2018 expense included approximately $ 30 of transaction costs associated with the csra acquisition . excluding these transaction costs , other represents primarily the non-service cost components of pension and other post-retirement benefits , which were net income items in both periods . provision for income tax , net our effective tax rate was 17.1 % in 2019 and 17.8 % in 2018 . the decrease in our effective tax rate in 2019 is due primarily to increased r & d tax credits and favorable 2019 regulatory developments associated with implementing the tax cuts and jobs act ( tax reform ) , which was enacted on december 22 , 2017 , and was generally effective in 2018. for further discussion , including a reconciliation of our effective tax rate from the statutory federal rate , see note f to the consolidated financial statements in item 8. for 2020 , we anticipate a full-year effective tax rate of approximately 17.5 % . backlog and estimated potential contract value our total backlog , including funded and unfunded portions , was $ 86.9 billion on december 31 , 2019 , up 28.1 % from $ 67.9 billion at the end of 2018 . our total backlog is equal to our remaining performance obligations under contracts with customers as discussed in note c to the consolidated financial statements in item 8. our total estimated contract value , which combines total backlog with estimated potential contract value , was $ 126.2 billion on december 31 , 2019 , up 22.1 % from $ 103.4 billion at the end of 2018 . 36 aerospace aerospace funded backlog represents new aircraft and custom completion orders for which we have definitive purchase contracts and deposits from customers . unfunded backlog consists of agreements to provide future aircraft maintenance and support services . the aerospace segment ended 2019 with backlog of $ 13.3 billion compared with $ 11.4 billion at year-end 2018 . orders in 2019 reflected strong demand across our product and services portfolio . we received orders for all models of gulfstream aircraft , including additional orders for the g500 , g600 and g650 aircraft and strong order activity for the new g700 aircraft , which is scheduled to enter service in 2022. the segment 's book-to-bill ratio ( orders divided by revenue ) was 1.23-to-1 in 2019. beyond total backlog , estimated potential contract value represents primarily options and other agreements with existing customers to purchase new aircraft and long-term aircraft services agreements . on december 31 , 2019 , estimated potential contract value in the aerospace segment was $ 3 billion compared with $ 3.1 billion at year-end 2018. demand for gulfstream aircraft remains strong across customer types and geographic regions , generating orders from public and privately held companies , individuals , and governments around the world . geographically , u.s. customers represented more than 50 % of the segment 's orders in 2019 and approximately 45 % of the segment 's backlog on december 31 , 2019 , demonstrating continued strong domestic demand . defense segments our total estimated contract value in our defense segments is comprised of the following components : total backlog represents the estimated remaining sales value of work to be performed under firm contracts . ◦ the funded portion of total backlog includes items that have been authorized and appropriated by the u.s. congress and funded by customers , as well as commitments by international customers that are approved and funded similarly by their governments . 37 ◦ the unfunded portion of total backlog includes the amounts that we believe are likely to be funded , but there is no guarantee that future budgets and appropriations will provide the same funding level currently anticipated for a given program . estimated potential contract value includes unexercised options associated with existing firm contracts and unfunded work on indefinite delivery , indefinite quantity ( idiq ) contracts . contract options represent agreements to perform additional work under existing contracts at the election of the customer . we recognize options in backlog when the customer exercises the option and establishes a firm order .
| operating results the increase in the aerospace segment 's revenue in 2019 consisted of the following : aircraft manufacturing $ 1,120 aircraft services and completions 67 pre-owned aircraft 159 total increase $ 1,346 aircraft manufacturing revenue increased primarily from the initial deliveries of the new large-cabin g600 aircraft , which entered into service in the third quarter of 2019 , and additional deliveries of the large-cabin g500 aircraft , which entered into service in the third quarter of 2018. the increase in aircraft services and completions revenue was driven by higher demand for maintenance work and the acquisition in the second quarter of 2018 of hawker pacific , a leading provider of aircraft services across the asia-pacific region and the middle east . additionally , we had fifteen pre-owned aircraft sales in 2019 compared with seven in 2018 . the increase in the segment 's operating earnings in 2019 consisted of the following : aircraft manufacturing $ 50 aircraft services and completions 38 pre-owned aircraft ( 13 ) g & a/other expenses ( 33 ) total increase $ 42 aircraft manufacturing operating earnings were up due to additional deliveries in 2019 , driven by the introduction into service of the g600 and increased production of the g500 . the growth in revenue outpaced the earnings growth due to lower margins associated with the g500 , which are typical of a new aircraft model . we expect the operating margins associated with both the g500 and g600 to increase over time as manufacturing learning curve improvements are achieved . net g & a/other expenses were up in 2019 due to nonrecurring costs associated with a reduction in our employee workforce in the fourth quarter of 2019 related primarily to streamlining support and administrative functions .
| ROO | 12,249 |
maintenance and repair costs are expensed as incurred . the company reviews its property and equipment whenever events or changes in circumstances indicate that the carrying value of certain assets might not be recoverable and recognizes an impairment loss when it is probable that the estimated cash flows are less than the carrying value of the asset . f- 9 eyegate pharmaceuticals , inc. notes to consolidated financial statements december 31 , 2020 2. summary of significant accounting policies - ( continued ) impairment of long-lived assets the company evaluates potential impairment of long-lived assets and long-lived assets to be disposed of and considers whether long-lived assets held for use have been impaired whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable , or that the period of their recovery may have changed . management makes significant estimates and assumptions regarding future sales , cost trends , productivity and market maturity in order to test for impairment . management reports those long-lived assets to be disposed of and assets held for sale at the lower of carrying amount or fair value less cost to sell . based on current facts , estimates and assumptions , management believes that no assets are impaired at december 31 , 2020. there is no assurance that management 's estimates and assumptions will not change in future periods . research and development expenses the company expenses research and development ( “ r & d ” ) expenditures as incurred . r & d expenses are comprised of costs incurred in performing r & d activities , including salaries , benefits , facilities , research-related overhead , sponsored research costs , contracted services , license fees , expenses related to generating , filing , and maintaining intellectual property and other external costs . because the company believes that , under its current process for developing its products , the viability of the products is essentially concurrent with the establishment of technological feasibility , no costs have been capitalized to date . goodwill goodwill is the excess of the acquisition cost of a business over the fair value of the identifiable net assets acquired . goodwill at december 31 , 2020 and 2019 was $ 3,484,607 and $ 1,525,896 , respectively . in 2020 , this consists of the goodwill of the company 's subsidiaries jade and panoptes . in 2019 , this solely consists of the goodwill of the company 's subsidiary jade . goodwill is not amortized and is tested for impairment on an annual basis in the fourth quarter of each fiscal year and whenever events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount . the company performed qualitative impairment evaluations on its goodwill as of december 31 , 2020 and determined that there were no indications that goodwill was impaired . in-process research and development the company records in-process r & d projects acquired in asset acquisitions that have not reached technological feasibility and which have no alternative future use . for in-process r & d projects acquired in business combinations , the company capitalizes the in-process r & d project and periodically evaluates this asset for impairment until the r & d process has been completed . once the r & d process is complete , the company amortizes the r & d asset over its remaining useful life . at december 31 , 2020 and 2019 there is $ 9,536,414 and $ 3,912,314 , respectively , of in-process r & d as part of intangible asset and in-process r & d on the consolidated balance sheets . intangible assets the company records intangible assets acquired in asset acquisitions of proprietary technology . the company capitalizes intangible assets , amortizes them over the estimated useful life , and periodically evaluates the assets for impairment . at december 31 , 2020 and 2019 there is $ 193,750 and $ 218,750 , respectively , of net intangible assets , as part of intangible assets and in-process r & d , net on the consolidated balance sheets . accrued clinical expenses as part of the company 's process of preparing the consolidated financial statements , the company is required to estimate its accrued expenses . this process includes reviewing open contracts and purchase orders , communicating with its applicable personnel to identify services that have been performed on its behalf and estimating the level of service performed and the associated costs incurred for the service when the company has not yet been invoiced or otherwise notified of actual costs . the majority of the company 's service providers invoice monthly in arrears for services performed . the company makes estimates of its accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known at the time . the company periodically confirms the accuracy of these estimates with the service providers and makes adjustments if necessary . f- 10 eyegate pharmaceuticals , inc. notes to consolidated financial statements december 31 , 2020 2. summary of significant accounting policies - ( continued ) business segment and geographical information the company identifies operating segments as components of the enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker , or decision-making group , in making decisions on how to allocate resources and assess performance . the company views its operations and manages its business as fully integrated and operating in one business segment ( research and development ) , and the company operates in two geographic segments . story_separator_special_tag as a result , if we generate taxable income , our ability to use our pre-change net operating loss and tax credits carryforwards to reduce u.s. federal and state taxable income may be subject to limitations , which could result in increased future tax liability to us . in addition , the tcja enacted on december 22 , 2017 limits the amount of nols that we are permitted to deduct in any taxable year to 80 % of our taxable income in such year . the tcja also eliminates the ability to carry back nols to prior years but allows nols generated after 2017 to be carried forward indefinitely . as such , there is a risk that due to such items , our existing nols could expire or be unavailable to offset future income . jobs act effective december 31 , 2020 , we are no longer considered an “ emerging growth company ” under the jumpstart our business startups act of 2012 . 60 results of operations comparison of years ended december 31 , 2020 and 2019 the following table summarizes the results of our operations for the years ended december 31 , 2020 and 2019 : replace_table_token_1_th collaboration revenue . collaboration revenue was $ 0.012 million for the year ended december 31 , 2020 , compared to $ 2.686 million for the year ended december 31 , 2019. the revenue recognized for the year ended december 31 , 2020 related to the panoptes acquisition and the accompanying revenue we now generate from government funds from the date of its acquisition . the revenue recognized in the year ended december 31 , 2019 was a result of the termination of the license agreements with bhc and no further revenue will be recognized related to these agreements . research and development expenses . research and development expenses were $ 3.566 million for the year ended december 31 , 2020 compared to $ 5.389 million for the year ended december 31 , 2019. the decrease of $ 1.823 million was primarily due to a decrease in obg clinical activities following the completion of the prk pivotal study in 2019 , as well as the $ 0.500 million adjustment recorded in 2019 to the present value of the jade earn-out payment due upon fda approval of obg . these decreases were partially offset by increases in obg manufacturing and the expiration of a prepaid agreement in 2020 with a research vendor . general and administrative expenses . general and administrative expenses were $ 4.659 million for the year ended december 31 , 2020 , compared to $ 4.406 million for the year ended december 31 , 2019. the increase of $ 0.253 million was mainly due to increases in professional fees and acquisition costs as a result of the panoptes acquisition . these increases were partially offset by a decrease in personnel-related costs . other income , net . other income , net was $ 0.133 million for the year ended december 31 , 2020 , compared to $ 0.108 million for the year ended december 31 , 2019. the increase of $ 0.025 million was mainly due to a gain recognized on the dissolution of eyegate pharma s.a.s . in 2020 , partially offset by less interest earned on our cash balances . income tax expense . income tax expense was $ 0.012 million for the year ended december 31 , 2020 , compared to $ 0.095 million for the year ended december 31 , 2019. the 2020 and 2019 tax expense was a result of an increase in the state blended tax rate , which was applied to the deferred tax liability balance . 61 story_separator_special_tag pharmaceutical partners , we may have to relinquish valuable rights to our technologies , future revenue streams , research programs or product candidates , including our pp-001 and modified ha-based products , on terms that may not be favorable to us . if we are unable to raise additional funds through equity or debt financings when needed , we may be required to delay , limit , reduce or terminate our product development or future commercialization efforts or grant rights to develop and market pp-001 and modified ha-based products , or any other products that we would otherwise prefer to develop and market ourselves . based on our cash on hand at december 31 , 2020 and the approximately $ 8.0 million in net proceeds received from a private placement that closed on january 6 , 2021 , we believe we will have sufficient cash to fund planned operations through august 31 , 2021. however , the acceleration or reduction of cash outflows by management can significantly impact the timing for raising additional capital to complete development of its products . to continue development , we will need to raise additional capital through debt and or equity financing , or access additional funding through u.s. and or foreign grants . although we successfully completed our ipo and several subsequent registered offerings and private placements of our securities , additional capital may not be available on terms favorable to us , if at all . on may 13 , 2019 , the sec declared effective our registration statement on form s-3 , registering a total of $ 50,000,000 of our securities for sale to the public from time to time in what is known as a “ shelf offering ” . we do not know if our future offerings , including offerings pursuant to our shelf registration statement , will succeed . accordingly , no assurances can be given that management will be successful in these endeavors . our recurring losses from operations have caused management to determine there is substantial doubt about our ability to continue as a going concern . our consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities or any other
| we received $ 4.998 million in cash from financing activities for the year ended december 31 , 2020 , compared to $ 3.921 million for the year ended december 31 , 2019. during the year ended december 31 , 2020 , we received net proceeds of $ 4.501 million from the completion of a registered direct stock offering , $ 0.278 from the loan under the ppp , and $ 0.218 million from the exercise of warrants . during the year ended december 31 , 2019 , we received net proceeds of $ 1.8 million from the private placement with an affiliate of armistice capital , llc and $ 2.150 million from the exercise of warrants . 63 funding requirements and other liquidity matters our pp-001 and modified ha-based product pipeline is still in various stages of clinical development . we expect to continue to incur significant expenses and increasing operating losses for the foreseeable future . we anticipate that our expenses will increase substantially if and as we : seek marketing approval for our pp-001 or modified ha-based products or any other products that we successfully develop ; establish a sales and marketing infrastructure to commercialize our pp-001 or modified ha-based products in the united states , if approved ; and add operational , financial and management information systems and personnel , including personnel to support our product development and future commercialization efforts . until such time , if ever , as we can generate substantial product revenue , we expect to finance our cash needs through a combination of equity offerings , debt financings , collaborations , strategic alliances and licensing arrangements . we do not have any committed external source of funds . to the extent that we raise additional capital through the sale of equity or convertible debt securities , the ownership interest of our stockholders will be diluted , and the terms of these securities may include liquidation or other preferences that adversely affect the rights of a common stockholder . debt financing , if available , may involve agreements that include covenants limiting or restricting our ability to take specific actions , such as incurring additional debt , making capital expenditures or declaring dividends . if we raise additional funds through collaborations , strategic alliances or licensing arrangements with
| Liquidity | 2,039 |
in august , 2015 , the fasb issued an amendment ( asu 2015-14 ) which defers the effective date of this new guidance by one year . more detailed implementation guidance on topic 606 was issued in march 2016 ( asu 2016-08 ) , april 2016 ( asu 2016-10 ) and may 2016 ( asu 2016-12 ) , and the effective date and transition requirements for these asus are the same as the effective date and transition requirements of asu 2014-09. the amendments in asu 2014-09 are effective for public business entities for annual periods , beginning after december 15 , 2017. the company has not yet determined the effect of the standard on its ongoing financial reporting . in august 2014 , the fasb issued an amendment ( asu 2014-14 ) to its guidance on “ receivables – troubled debt restructurings by creditors ( subtopic 310-40 ) ” . the objective of the asu is to reduce the diversity in how creditors classify government-guaranteed mortgage loans , including fha or va guaranteed loans , upon foreclosure , to provide more decision-useful information about a creditor 's foreclosed mortgage loans that are expected to be recovered , at least in part , through government guarantees . the amendments in this update are effective for public business entities for annual periods , and interim periods within those annual periods , beginning after december 15 , 2017. public entities would be permitted to elect to early adopt for annual reporting periods beginning after december 15 , 2016. the adoption of this guidance is not expected to have a material impact on our consolidated results of operations or financial position . in january 2015 , the fasb issued an update ( asu 2015-01 ) to its guidance on “ income statement-extraordinary and unusual items ( subtopic 225-20 ) ” . the objective of the asu is to simplify the income statement presentation by eliminating the concept of extraordinary items , and will align gaap more closely with international accounting standards which prohibits the presentation and disclosure of extraordinary items . the amendments in this update are effective for fiscal years , and interim periods within those fiscal years , beginning after december 15 , 2015. the adoption of this guidance is not expected to have a material impact on our consolidated results of operations or financial position . in january 2016 , the fasb issued an update ( asu 2016-01 ) to its guidance on “ financial instruments ( subtopic 825-10 ) ” . this amendment addresses certain aspects of recognition , measurement , presentation , and disclosure of financial instruments . these amendments require equity securities to be measured at fair value with changes in the fair value to be recognized through net income . the amendments also simplify the impairment assessment of equity investments without readily determinable fair values by requiring assessment for impairment qualitatively at each reporting period . for public business entities , the amendments in this update are effective for fiscal years beginning after december 15 , 2017 , including interim periods within those fiscal years . early adoption of the amendments in this update is not permitted . the adoption of this guidance is not expected to have a material impact on our consolidated results of operations or financial position . in february 2016 , the fasb issued an update ( asu 2016-02 ) to its guidance on “ leases ( topic 842 ) ” . the new leases standard applies a right-of-use ( rou ) model that requires a lessee to record , for all leases with a lease term of more than 12 months , an asset representing its right to use the underlying asset and a liability to make lease payments . for leases with a term of 12 months or less , a practical expedient is available whereby a lessee may elect , by class of underlying asset , not to recognize an rou asset or lease liability . the new leases standard requires a lessor to classify leases as either sales-type , direct financing or operating , similar to existing u.s. gaap . classification depends on the same five criteria used by lessees plus certain additional factors . the subsequent accounting treatment for all three lease types is substantially equivalent to existing u.s. gaap for sales-type leases , direct financing leases , and operating leases . however , the new standard updates certain aspects of the lessor accounting model to align it with the new lessee accounting model , as well as with the new revenue standard under topic 606. lessees and lessors are required to provide certain qualitative and quantitative disclosures to enable users of financial statements to assess the amount , timing , and uncertainty of cash flows arising from leases . the amendments are effective for public business entities for fiscal years beginning after december 15 , 2018 , including interim periods within those fiscal years . early adoption is permitted . the company is currently evaluating the potential impact on our consolidated results of operations or financial position . in march 2016 , the fasb issued an update ( asu 2016-09 ) to its guidance on “ compensation – stock compensation ( topic 718 ) : improvements to employee share-based payment accounting ” . this amendment is intended to simplify the accounting for stock compensation . the areas for simplification in this update involve several aspects of the accounting for share-based payment transactions , including the income tax consequences , classification of awards as either equity or liabilities , and classification on the statement of cash flows . for public business entities , the amendments in this update are effective for annual periods beginning after december 15 , 2016 , and interim periods within those annual periods . early adoption is permitted for any entity in any interim or annual period . story_separator_special_tag `` for further discussion regarding how management determines when a loan should be classified see part ii , item 8 financial statements and supplemental data , note 4 , loans of this report . at june 30 , 2016 , the bank of greene county had $ 4.8 million of loans classified as substandard , and $ 644,600 of loans designated as special mention . no loans were classified as either doubtful or loss at june 30 , 2016. nonaccrual loans and nonperforming assets loans are reviewed on a regular basis to assess collectability of all principal and interest payments due . management determines that a loan is impaired or nonperforming when it is probable at least a portion of the principal or interest will not be collected in accordance with contractual terms of the note . when a loan is determined to be impaired , the measurement of the loan is based on present value of estimated future cash flows , except that all collateral-dependent loans are measured for impairment based on the fair value of the collateral . generally , management places loans on nonaccrual status once the loans have become 90 days or more delinquent or sooner if there is a significant reason for management to believe the collectability is questionable and , therefore , interest on the loan will no longer be recognized on an accrual basis . the company identifies impaired loans and measures the impairment in accordance with fasb asc subtopic “ receivables – loan impairment . ” management may consider a loan impaired once it is classified as nonaccrual and when it is probable that the borrower will be unable to repay the loan according to the original contractual terms of the loan agreement or the loan is restructured in a troubled debt restructuring . it should be noted that management does not evaluate all loans individually for impairment . generally , the bank of greene county considers residential mortgages , home equity loans and installment loans as small , homogeneous loans , which are evaluated for impairment collectively based on historical loan experience and other factors . in contrast , large commercial mortgage , construction , multi-family , business loans and select larger balance residential mortgage loans are viewed individually and considered impaired if it is probable that the bank of greene county will not be able to collect scheduled payments of principal and interest when due , according to the contractual terms of the loan agreement . the measurement of impaired loans is generally based on the fair value of the underlying collateral . the majority of the bank of greene county loans , including most nonaccrual loans , are small homogenous loan types adequately supported by collateral . management considers the payment status of loans in the process of evaluating the adequacy of the allowance for loan losses among other factors . based on this evaluation , a delinquent loan 's risk rating may be downgraded to either pass-watch , special mention , or substandard , and the allocation of the allowance for loan loss is based upon the risk associated with such designation . for further discussion and detail regarding the allowance for loan losses and impaired loans please refer to part ii , item 8 financial statements and supplemental data , note 4 loans of this report . a loan does not have to be 90 days delinquent in order to be classified as nonperforming . foreclosed real estate is considered to be a nonperforming asset . 32 index analysis of nonaccrual loans , nonperforming assets and restructured loans the table below details additional information related to nonaccrual loans for the periods indicated : replace_table_token_9_th the table below details additional information related to nonaccrual loans : replace_table_token_10_th 33 index the table below details additional information on impaired loans as of the dates indicated : replace_table_token_11_th nonperforming assets amounted to $ 3.8 million at june 30 , 2016 and $ 5.5 million at june 30 , 2015 , a decrease of $ 1.7 million , or 30.9 % , and total impaired loans amounted to $ 3.2 million at june 30 , 2016 compared to $ 4.2 million at june 30 , 2015 , a decrease of $ 1.0 million , or 23.8 % . loans on nonaccrual status totaled $ 3.3 million at june 30 , 2016 of which $ 1.4 million were in the process of foreclosure . included in nonaccrual loans were $ 1.9 million of loans which were less than 90 days past due at june 30 , 2016 , but have a recent history of delinquency greater than 90 days past due . these loans will be returned to accrual status once they have demonstrated a history of timely payments . included in total loans past due were $ 77,000 of loans which were making payments pursuant to forbearance agreements . under the forbearance agreements , the customers have made arrangements with the bank of greene county to bring the loans current over a specified period of time ( resulting in an insignificant delay in repayment ) . during this term of the forbearance agreement , the bank of greene county has agreed not to continue foreclosure proceedings . loans on nonaccrual status totaled $ 4.6 million at june 30 , 2015 of which $ 1.2 million were in the process of foreclosure . included in nonaccrual loans were $ 2.6 million of loans which were less than 90 days past due at june 30 , 2015 , but have a recent history of delinquency greater than 90 days past due . allowance for loan losses the allowance for loan losses is established through a provision for loan losses based on management 's evaluation of the risk inherent in the loan portfolio , the composition of the loan portfolio , specific impaired loans and current economic conditions . such evaluation , which includes a review of certain identified loans on which full collectability may
| greene county bancorp , inc. 's most liquid assets are cash and cash equivalent accounts . the levels of these assets are dependent on greene county bancorp , inc. 's operating , financing , lending and investing activities during any given period . at june 30 , 2016 , cash and cash equivalents totaled $ 15.9 million , or 1.8 % of total assets . 42 index impact of inflation and changing prices the consolidated financial statements of greene county bancorp , inc. and notes thereto , presented elsewhere herein , have been prepared in accordance with u.s. generally accepted accounting principles , which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time and due to inflation . the impact of inflation is reflected in the increased cost of greene county bancorp , inc. 's operations . unlike most industrial companies , nearly all the assets and liabilities of greene county bancorp , inc. are monetary . as a result , interest rates have a greater impact on greene county bancorp , inc. 's performance than do the effects of general levels of inflation . interest rates do not necessarily move in the same direction or to the same extent as the price of goods and services . impact of recent accounting pronouncements recent accounting pronouncements which may impact the company 's financial statements are discussed within part ii , item 8 financial statements and supplementary data , note 1 summary of significant accounting policies of this report . 43 index unaudited quarterly financial data the following table sets forth a summary of selected financial data at and for the years ended june 30 , 2016 and 2015 and quarter ends within those years . replace_table_token_23_th 1 amounts in period during the year ended june 30 , 2015 and the six months ended december 31 , 2015 have been restated for comparability to reflect the 2-for-1 stock split effective march 15 , 2016. item
| Liquidity | 6,912 |
consistent with our original study design ) had much better outcomes compared to placebo patients as measured by recovery in each of the key secondary endpoints : mrs £ 2 , nihss d ³ 75 % and bi ³ 95. specifically , 41.9 % of the multistem-treated patients achieved good or excellent recovery in all three clinical scales , compared to only 24.6 % of all patients receiving placebo , a difference of 17.3 % ( p = 0.08 ) . additionally , multistem subjects had a significantly lower rate of secondary infections than placebo subjects ( 16.1 % v. 47.5 % , p < 0.01 ) and of average initial hospital days ( 6.8 v. 9.8 , p=0.02 ) . at one year , such early-treated multistem patients had a significantly higher rate of excellent outcome than all placebo subjects ( 29.0 % v. 8.2 % , p < 0.01 ) 37 furthermore , we evaluated the recovery at 90 days of patients who received treatment with multistem within 24 to 36 hours post stroke versus all patients receiving placebo , excluding in both groups patients who received both tpa and mechanical reperfusion ( and who were excluded in the original trial design ) . in this post-hoc analysis , patients in the multistem group were more than two times as likely as the placebo group to achieve global recovery based on the global test statistic the primary endpoint ( p=0.06 ) , demonstrated substantially better performance in the three component secondary endpoints , and also exhibited accelerated improvement in comparison to patients receiving placebo . these multistem-treated patients were also much more likely to achieve recovery in each of the key secondary endpoints , with 44.4 % of these patients achieving such recovery on all three scales , compared to just 17.3 % for the placebo group , a difference of 27.1 % ( p < 0.01 ) . additionally , these multistem patients achieved significantly higher rates of excellent outcome ( p=0.03 ) , and patients in the multistem group showed improvement on the cochran-mantel-haenszel shift analysis ( p=0.03 ) , which compares performance for the patient groups across the spectrum of mrs outcomes . hospitalization duration was significantly reduced for the multistem-treated patients ( 35 % lower than the average for placebo patients ) and the average intensive care unit stay was also meaningfully reduced . one-year follow-up data demonstrates that multistem-treated subjects , on average , continued to improve relative to placebo with significant differences in excellent outcome , the shift analysis and barthel index . analysis of biomarker data obtained from samples of study subjects indicated that multistem treatment reduces post-stroke inflammation compared to placebo , and it appears that this effect is more pronounced for subjects receiving multistem earlier than 36 hours post-stroke . this effect is consistent with our hypothesis regarding mechanisms of action and related preclinical data , and with the clinical data suggesting faster recovery for multistem-treated patients . if the multistem therapy is proven effective in a registrational study , this would represent a substantial increase in the time window for treatment for ischemic stroke victims , which currently is limited to several hours . further analyses are being undertaken , and we are preparing for the next stage of clinical development of this program . acute myocardial infarction : we recently initiated a phase 2 clinical study in the united states for the administration of multistem cell therapy to patients that have suffered an ami . we previously evaluated the administration of multistem to patients that suffered an ami in a phase 1 clinical study . the results of this study demonstrated a favorable safety profile and encouraging signs of improvement in heart function among patients that exhibited severely compromised heart function prior to treatment . this data was published in a leading peer reviewed scientific journal , and one-year follow-up data suggested that the benefit observed was sustained over time . we were awarded a grant for up to $ 2.8 million in funding to support the advancement of this clinical program , and we are currently enrolling patients in our phase 2 clinical study , evaluating the safety and efficacy of multistem treatment in subjects who have a non-st elevated myocardial infarction . the study is double-blind , sham-controlled and is being conducted at leading cardiovascular centers in the united states . acute respiratory distress syndrome : we have also initiated a clinical study for the treatment of ards in the uk and in the united states . in 2015 , we were awarded a grant from innovate uk for up to approximately £2.0 million in support of a phase 2a clinical study evaluating the administration of multistem cell therapy to ards patients . ards is a serious immunological and inflammatory condition characterized by widespread inflammation in the lungs . ards can be triggered by pneumonia , sepsis , or other trauma and represents a major cause of morbidity and mortality in the critical care setting . the medical need for a safe and effective treatment of ards is significant due to its high mortality rate , and it annually affects approximately 400,000 to 500,000 patients in europe , the united states and japan , together . the phase 2a clinical trial is being conducted with the assistance of catapult and is currently enrolling patients . hematopoietic stem cell transplant / gvhd : we completed a phase 1 clinical study of the administration of multistem cell therapy to patients suffering from leukemia or certain other blood-borne cancers in which patients undergo radiation therapy and then receive a hematopoietic stem cell transplant . such patients are at significant risk for serious complications , including gvhd , an imbalance of immune system function caused by transplanted immune cells that attack various tissues and organs in the patient . story_separator_special_tag data from the study demonstrated the safety of multistem cell therapy in this indication and suggested that the treatment may have a beneficial effect in reducing the incidence and severity of gvhd , as well as providing other benefits . the multistem product has been designated as an orphan drug for the gvhd prophylaxis indication by both the fda and the ema , which may provide market exclusivity and other substantial incentives and benefits . we have interacted with both the fda and the ema to finalize the design of a single registration study . in february 2015 , the multistem product was granted fast track designation by the fda for prophylaxis therapy against gvhd following hematopoietic cell transplantation . subsequently , our registration study design received a positive opinion from the ema through the protocol assessment/scientific advice procedure . furthermore , in december 2015 , the proposed registration study received special protocol assessment designation from the fda , meaning that the trial is adequately designed to support a bla submission for registration if it is successful . currently , we are staging this program for future registration-directed development dependent on the achievement of certain business development and financial objectives . 38 inflammatory bowel disease : multistem therapy has been evaluated in a phase 2 clinical study involving administration of multistem to patients suffering from uc , the most common form of ibd , which was conducted by a collaborative partner , pfizer . overall , the study results released in 2014 were disappointing , in that a single administration of multistem to a patient population with longstanding , chronic advanced disease failed to show a meaningful clinical effect at the eight-week evaluation period . despite not showing a significant improvement compared to placebo in the primary efficacy endpoints , the multistem therapy demonstrated favorable safety and tolerability in the eight weeks following treatment . furthermore , at four weeks , patients getting multistem treatment had a significantly higher proportion of rectal bleeding responders than placebo patients , suggesting the possibility of a transient effect from the single multistem dose . subsequent analyses suggest that multistem treatment has an impact on relevant biomarkers shortly after treatment compared to placebo , suggesting the possibility of improved benefit from a different treatment regime . taking these results into account and following an internal portfolio review of its ibd programs , pfizer determined that it would not invest further in this program as required by the collaboration and notified us of its decision to terminate the license agreement effective in the third quarter of 2015. in connection with the termination , all rights to the program reverted to us , and we are free to use preclinical and clinical data for development in this area and in other areas , including immunology and inflammatory conditions . we are also conducting or supporting clinical activity in other areas , such as solid organ transplant , which is an investigator-initiated study being conducted at a leading transplant center in europe . we are also engaged in the preparation stages for translational and clinical studies in other targeted areas . in addition to our current and anticipated clinical development activities , we are engaged in preclinical development and evaluation of multistem therapy in other neurological , cardiovascular and inflammatory and immune disease areas , as well as certain other indications . we conduct such work both through our own internal research efforts and through a broad global network of collaborators . we are routinely in discussions with third parties about collaborating in the development of multistem therapy for various programs and may enter into one or more business partnerships to advance these programs over time . in january 2016 , we entered into a license agreement with healios to develop and commercialize multistem cell therapy for ischemic stroke in japan , and to provide healios with access to our proprietary mapc , for use in healios ' proprietary organ bud program , initially for transplantation to treat liver disease or dysfunction . under the agreement , healios also obtained a right to expand the scope of the collaboration to include the exclusive rights to develop and commercialize multistem for the treatment of two additional indications in japan , which include ards and another indication in the orthopedic area , as well as all indications for the organ bud program . healios will develop and commercialize the multistem product in japan , and we will provide the manufactured product to healios . we had entered into a similar arrangement with chugai early in 2015 for the development and commercialization of multistem therapy for stroke in japan , but we terminated the license agreement in october 2015 when the parties were unable to reach an agreement on a potential modification of the financial terms of the agreement and on the development strategy in japan as proposed by chugai following the initial results from our phase 2 clinical study . 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 , we have been earning royalty revenue from product sales since 2014 and may receive other payments upon the successful achievement of certain commercial milestones . financial in connection with our january 2016 license agreement with healios , we received an up-front cash payment of $ 15 million from healios , and the collaboration can be expanded at healios ' election . if healios expands the collaboration , we will be entitled to receive an additional cash payment of $ 10 million . healios may exercise its option to expand the collaboration by the date that is the later of ( i ) december 31 , 2016 and ( ii ) the receipt of the initial results from athersys ' ongoing ards clinical trial .
| our grant revenues fluctuate from period-to-period based on new grant awards , completed grants and the timing of grant-related activities . research and development expenses . research and development expenses decreased to $ 21.3 million for the year ended december 31 , 2015 from $ 23.4 million for the year ended december 31 , 2014. the decrease of $ 2.1 million related primarily to a decrease in clinical and preclinical development costs of $ 1.5 million , a decrease in sponsored research costs of $ 0.5 million , a decrease in legal and professional fees of $ 0.2 million , and a decrease in travel costs of $ 0.2 million , with such decreases partially offset by an increase of $ 0.2 million in license fees and a $ 0.1 million increase in personnel costs for the year ended december 31 , 2015 from 2014. our clinical and preclinical development costs primarily reflect costs associated with our multistem clinical trials and include contract research organization costs , clinical manufacturing costs , manufacturing process development costs , and clinical and regulatory consulting costs . the decrease in our preclinical and clinical development costs is primarily due to decreased manufacturing costs , clinical study costs and regulatory costs . sponsored research costs decreased primarily due to the timing of costs incurred by certain academic research institutions under our grant-funded programs . the decrease in legal fees was a result of decreased patent expenses associated with patent prosecution , national filings , and interparty proceedings and related filings . based on our planned clinical development and manufacturing process development activities , we expect our 2016 annual research and development expenses to be similar to 2015 , and such costs will vary over time based on clinical manufacturing campaigns , the timing and stage of clinical trials underway , and manufacturing process development activities . other than external expenses for our clinical and preclinical programs , we do not track our research expenses by project ;
| ROO | 16,772 |
impact of acquisitions in order to provide a more meaningful period-over-period discussion of our operating results , we may discuss amounts generated or incurred ( revenues , gross profit , selling , general and administrative expenses and operating income ) from companies acquired . the amounts discussed reflect the acquired companies ' operating results in the current reported period only for the time period these entities were not owned by emcor in the comparable prior reported period . 21 2017 versus 2016 overview the following table presents selected financial data for the fiscal years ended december 31 , 2017 and 2016 ( in thousands , except percentages and per share data ) : replace_table_token_6_th the results of our operations for 2017 set new company records in terms of revenues , operating income , net income attributable to emcor group , inc. and diluted earnings per common share from continuing operations , despite the challenges faced by our united states industrial services segment during 2017. the increase in revenues for 2017 was primarily attributable to incremental revenues of $ 192.4 million generated by companies acquired in 2017 and 2016 , which are reported in our united states electrical construction and facilities services segment , our united states mechanical construction and facilities services segment and our united states building services segment . excluding the effect of these acquisitions , revenues for 2017 decreased due to lower revenues from : ( a ) our united states industrial services segment , due to : ( i ) a decrease in large project activity from our specialty services offerings within our field services operations , ( ii ) the negative impact of hurricane harvey , which resulted in the deferral of , and may lead to the potential cancellation of , previously scheduled turnaround projects , and ( iii ) our industrial shop services operations and ( b ) our united states building services segment , primarily attributable to : ( i ) the loss of certain contracts not renewed pursuant to rebid within our commercial and government site-based services operations and ( ii ) a reduction in large project activity within their energy services operations . these decreases in revenues were partially offset by by an increase in revenues from both of our domestic construction segments and our united kingdom building services segment . despite a recent increase in crude oil prices , we continue to experience a decrease in demand for new heat exchangers due to a prolonged curtailment in capital spending from customers within our united states industrial services segment . in addition , adverse market conditions and an increasingly competitive business environment within both our shop services operations and our field services operations have resulted in a decrease in our billing rates and related gross profit margins . consequently , we have tempered our expectations regarding the strength of a near-term recovery within the united states industrial services segment and recorded a non-cash goodwill impairment charge of $ 57.5 million during the fourth quarter of 2017. operating income and operating margin ( operating income as a percentage of revenues ) increased within all of our reportable segments , except for our united states industrial services segment . the overall increase in operating income and operating margin was mainly attributable to the results of our domestic construction segments , which were favorably impacted by an increase in gross profit within the majority of the market sectors in which we operate . in addition , our 2016 operating results were negatively impacted by : ( a ) $ 27.9 million of aggregate losses incurred on two construction projects reported within our united states mechanical construction and facilities services segment and ( b ) $ 19.4 million of losses incurred on a transportation construction project in the northeastern region of the united states reported within our united states electrical construction and facilities services segment . companies acquired in 2017 and 2016 contributed incremental operating income of $ 3.5 million , inclusive of $ 10.7 million of amortization expense associated with identifiable intangible assets . we acquired three companies during 2017. one company provides fire protection and alarm services primarily in the southern region of the united states . the second company provides millwright services for manufacturing companies throughout the united states . both of their results have been included in our united states mechanical construction and facilities services segment . the third company provides mobile mechanical services within the western region of the united states , and its results have been included in our united states building services segment . we completed the acquisition of ardent services , l.l.c . and rabalais constructors , llc ( collectively , “ ardent ” ) during 2016. this acquisition has been included in our united states electrical construction and facilities services segment . ardent provides 22 electrical and instrumentation services to the energy infrastructure market in north america , and this acquisition further strengthens our position in electrical construction and services and broadens our capabilities across the industrial and energy sectors , especially in the gulf coast , midwest and western regions of the united states . additionally during 2016 , we acquired another company for an immaterial amount . this company provides mobile mechanical services within the southeastern region of the united states , and its results have been included in our united states building services segment . we acquired three companies in 2015 , each for an immaterial amount . two of the companies acquired primarily provide mechanical construction services , and their results of operations have been included in our united states mechanical construction and facilities services segment . the results of operations for the other company acquired have been included in our united states building services segment . story_separator_special_tag from january 1 , 2017 to april 15 , 2017 , ardent incurred an operating loss of $ 1.8 million , inclusive of $ 0.9 million of amortization expense associated with identifiable intangible assets . as previously discussed under “ impact of acquisitions ” , these amounts represent ardent 's operating results in the current reported period only for the time period ardent was not owned by emcor in the comparable prior reported period . our united states mechanical construction and facilities services segment operating income for the year ended december 31 , 2017 was $ 212.3 million , a $ 79.7 million increase compared to operating income of $ 132.7 million for the year ended december 31 , 2016. the increase in operating income for the year ended december 31 , 2017 was attributable to an increase in gross profit from the majority of the market sectors in which we operate . additionally , this segment 's operating income benefited from the recovery of certain contract costs previously disputed on a project completed in 2016 , which resulted in $ 18.1 million of gross profit . companies acquired in 2017 contributed incremental operating income of $ 2.7 million , inclusive of $ 8.3 million of amortization expense associated with identifiable intangible assets . the increase in operating margin for the year ended december 31 , 2017 was attributable to an increase in gross profit margin . the recovery of the previously disputed contract costs discussed above favorably impacted this segment 's operating margin by 0.6 % for the year ended december 31 , 2017. operating income of our united states building services segment was $ 81.5 million and $ 76.8 million in 2017 and 2016 , respectively . the increase in operating income for the year ended december 31 , 2017 was due to increases in operating income from : ( a ) our mobile mechanical services operations , as a result of increases in gross profit from project , service and control activities , and ( b ) our energy services operations . the increase in operating income for our energy services operations primarily resulted from improved project execution , as the results for the year ended december 31 , 2016 included a loss incurred on a large project . additionally , companies acquired in 2017 and 2016 within our mobile mechanical services operations , contributed incremental operating income of $ 2.6 million , inclusive of $ 1.5 million of amortization expense associated with identifiable intangible assets , for the year ended december 31 , 2017. the increase in operating income for the year ended december 31 , 2017 was partially offset by a decrease in gross profit from our commercial site-based services operations partially due to : ( a ) the loss of certain contracts not renewed pursuant to rebid and ( b ) a reduction in snow removal activities . the increase in operating margin for the year ended december 31 , 2017 was attributable to an increase in gross profit margin . operating income of our united states industrial services segment for the year ended december 31 , 2017 was $ 19.1 million , a $ 58.8 million decrease compared to operating income of $ 77.8 million for the year ended december 31 , 2016. the decrease in operating income for the year ended december 31 , 2017 was attributable to a decrease in gross profit from : ( a ) our specialty services offerings within our field services operations , as a result of reduced large project activity , ( b ) a decrease in turnaround activity from our field services operations , partially due to hurricane harvey , which resulted in the deferral of , and may lead to the potential cancellation of , previously scheduled turnaround projects , and ( c ) the mix of work in our industrial shop services operations , which included fewer repair projects that generate higher gross profit margins . the decrease in operating margin was attributable to a decrease in gross profit margin and an increase in the ratio of selling , general and administrative expenses to revenues . the increase in sg & a margin for the year ended december 31 , 2017 was partially the result of unabsorbed overhead costs as a result of the project deferrals due to hurricane harvey and lower specialty services revenues . our united kingdom building services segment 's operating income for the year ended december 31 , 2017 was $ 14.8 million compared to operating income of $ 11.9 million for the year ended december 31 , 2016. operating income increased primarily due to an increase in gross profit from new contract awards , partially offset by a decrease in gross profit from project activity . this segment 's results included a decrease in operating income of $ 0.3 million relating to the effect of unfavorable exchange rates for the british pound versus the united states dollar . the increase in operating margin for the year ended december 31 , 2017 was attributable to an increase in gross profit margin and a decrease in sg & a margin . our corporate administration operating loss was $ 87.8 million for 2017 compared to $ 88.7 million in 2016. the decrease in corporate administration expenses for the year ended december 31 , 2017 was primarily due to a decrease in professional fees , as the prior year included $ 3.8 million of transaction costs associated with the acquisition of ardent . the decrease was partially offset by an increase in software licensing costs and incentive compensation expense . non-operating items interest expense was $ 12.8 million and $ 12.6 million for 2017 and 2016 , respectively . the increase in interest expense was primarily due to increased average outstanding borrowings in 2017 and a higher united states dollar libor rate . interest income was $ 1.0 million and $ 0.7 million for 2017 and 2016 , respectively . 27 for
| liquidity and capital resources the following table presents net cash provided by ( used in ) operating activities , investing activities and financing activities for the years ended december 31 , 2017 , 2016 and 2015 ( in thousands ) : replace_table_token_18_th our consolidated cash balance increased by approximately $ 2.8 million from $ 464.6 million at december 31 , 2016 to $ 467.4 million at december 31 , 2017. net cash provided by operating activities for 2017 was $ 366.1 million compared to $ 264.6 million of net cash provided by operating activities for 2016. the increase in cash provided by operating activities was primarily due to a $ 45.0 million increase in net income and improved cash flows from accounts payable . net cash used in investing activities was $ 138.1 million for 2017 compared to net cash used in investing activities of $ 270.7 million for 2016. the decrease in net cash used in investing activities was primarily due to a reduction in payments for acquisitions of businesses . net cash flows from financing activities for 2017 decreased by approximately $ 219.0 million compared to 2016 primarily as a result of net borrowings made under our credit agreements in 2016. cash flows from discontinued operations were immaterial and are not expected to significantly affect future liquidity .
| Liquidity | 4,360 |
our actual results , performance or achievements , or industry results , could differ materially from those we express in the following discussion as a result of a variety of factors , including the risks and uncertainties we have referred to under the headings `` cautionary statement concerning forward-looking statements '' and `` risk factors '' in part i of this report . organization main street capital corporation ( `` mscc '' ) is a principal investment firm primarily focused on providing customized debt and equity financing to lower middle market ( `` lmm '' ) companies and debt capital to middle market ( `` middle market '' ) companies . the portfolio investments of mscc and its consolidated subsidiaries are typically made to support management buyouts , recapitalizations , growth financings , refinancings and acquisitions of companies that operate in diverse industry sectors . mscc seeks to partner with entrepreneurs , business owners and management teams and generally provides `` one stop '' financing alternatives within its lmm portfolio . mscc and its consolidated subsidiaries invest primarily in secured debt investments , equity investments , warrants and other securities of lmm companies based in the united states and in secured debt investments of middle market companies generally headquartered in the united states . mscc was formed in march 2007 to operate as an internally managed business development company ( `` bdc '' ) under the investment company act of 1940 , as amended ( the `` 1940 act '' ) . mscc wholly owns several investment funds , including main street mezzanine fund , lp ( `` msmf '' ) , main street capital ii , lp ( `` msc ii '' ) and main street capital iii , lp ( `` msc iii '' and , collectively with msmf and msc ii , the `` funds '' ) , and each of their general partners . the funds are each licensed as a small business investment company ( `` sbic '' ) by the united states small business administration ( `` sba '' ) . because mscc is internally managed , all of the executive officers and other employees are employed by mscc . therefore , mscc does not pay any external investment advisory fees , but instead directly incurs the operating costs associated with employing investment and portfolio management professionals . msc adviser i , llc ( the `` external investment manager '' ) was formed in november 2013 as a wholly owned subsidiary of mscc to provide investment management and other services to parties other than mscc and its subsidiaries or their portfolio companies ( `` external parties '' ) and receive fee income for such services . mscc has been granted no-action relief by the securities and exchange commission ( `` sec '' ) to allow the external investment manager to register as a registered investment adviser under investment advisers act of 1940 , as amended . since the external investment manager conducts all of its investment management activities for external parties , it is accounted for as a portfolio investment of mscc and is not included as a consolidated subsidiary of mscc in mscc 's consolidated financial statements . mscc has elected to be treated for u.s. federal income tax purposes as a regulated investment company ( `` ric '' ) under subchapter m of the internal revenue code of 1986 , as amended ( the `` code '' ) . as a result , mscc generally will not pay corporate-level u.s. federal income taxes on any net ordinary taxable income or capital gains that it distributes to its stockholders . mscc has certain direct and indirect wholly owned subsidiaries that have elected to be taxable entities ( the `` taxable subsidiaries '' ) . the primary purpose of the taxable subsidiaries is to permit mscc to hold equity investments in portfolio companies which are `` pass-through '' entities for tax purposes . the external investment manager is also a direct wholly owned subsidiary that has elected to be a taxable entity . the taxable subsidiaries and the external investment manager are each taxed at their normal corporate tax rates based on their taxable income . 56 unless otherwise noted or the context otherwise indicates , the terms `` we , '' `` us , '' `` our , '' the `` company '' and `` main street '' refer to mscc and its consolidated subsidiaries , which include the funds and the taxable subsidiaries . overview our principal investment objective is to maximize our portfolio 's total return by generating current income from our debt investments and capital appreciation from our equity and equity-related investments , including warrants , convertible securities and other rights to acquire equity securities in a portfolio company . our lmm companies generally have annual revenues between $ 10 million and $ 150 million , and our lmm portfolio investments generally range in size from $ 5 million to $ 50 million . our middle market investments are made in businesses that are generally larger in size than our lmm portfolio companies , with annual revenues typically between $ 150 million and $ 1.5 billion , and our middle market investments generally range in size from $ 3 million to $ 15 million . our private loan ( `` private loan '' ) portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis . private loan investments are typically similar in size , structure , terms and conditions to investments we hold in our lmm portfolio and middle market portfolio . we seek to fill the financing gap for lmm businesses , which , historically , have had more limited access to financing from commercial banks and other traditional sources . the underserved nature of the lmm creates the opportunity for us to meet the financing needs of lmm companies while also negotiating favorable transaction terms and equity participations . story_separator_special_tag as of december 31 , 2016 , we had other portfolio investments in ten companies , collectively totaling approximately $ 100.3 million in fair value and approximately $ 107.1 million in cost basis and which comprised approximately 5.0 % of our investment portfolio ( as defined in `` critical accounting policies basis of presentation '' below ) at fair value . as of december 31 , 2015 , we had other portfolio investments in ten companies , collectively totaling approximately $ 74.8 million in fair value and approximately $ 75.2 million in cost basis and which comprised approximately 4.2 % of our investment portfolio at fair value . as previously discussed , the external investment manager is a wholly owned subsidiary that is treated as a portfolio investment . as of december 31 , 2016 , there was no cost basis in this investment and the investment had a fair value of approximately $ 30.6 million , which comprised approximately 1.5 % of our investment portfolio at fair value . as of december 31 , 2015 , there was no cost basis in this investment and the investment had a fair value of approximately $ 27.3 million , which comprised approximately 1.5 % of our investment portfolio at fair value . our portfolio investments are generally made through mscc and the funds . mscc and the funds share the same investment strategies and criteria , although they are subject to different regulatory regimes . an investor 's return in mscc will depend , in part , on the funds ' investment returns as they are wholly owned subsidiaries of mscc . the level of new portfolio investment activity will fluctuate from period to period based upon our view of the current economic fundamentals , our ability to identify new investment opportunities that meet our investment criteria , and our ability to consummate the identified opportunities . the level of new investment activity , and associated interest and fee income , will directly impact future investment income . in addition , the level of dividends paid by portfolio companies and the portion of our portfolio debt investments on non-accrual status will directly impact future investment income . while we intend to grow our portfolio and 59 our investment income over the long term , our growth and our operating results may be more limited during depressed economic periods . however , we intend to appropriately manage our cost structure and liquidity position based on applicable economic conditions and our investment outlook . the level of realized gains or losses and unrealized appreciation or depreciation on our investments will also fluctuate depending upon portfolio activity , economic conditions and the performance of our individual portfolio companies . the changes in realized gains and losses and unrealized appreciation or depreciation could have a material impact on our operating results . because we are internally managed , we do not pay any external investment advisory fees , but instead directly incur the operating costs associated with employing investment and portfolio management professionals . we believe that our internally managed structure provides us with a beneficial operating expense structure when compared to other publicly traded and privately held investment firms which are externally managed , and our internally managed structure allows us the opportunity to leverage our non-interest operating expenses as we grow our investment portfolio . for the years ended december 31 , 2016 and 2015 , the ratio of our total operating expenses , excluding interest expense , as a percentage of our quarterly average total assets was 1.5 % and 1.4 % , respectively . during may 2012 , we entered into an investment sub-advisory agreement with hms adviser , lp ( `` hms adviser '' ) , which is the investment advisor to hms income , a non-listed bdc , to provide certain investment advisory services to hms adviser . in december 2013 , after obtaining required no-action relief from the sec to allow us to own a registered investment adviser , we assigned the sub-advisory agreement to the external investment manager since the fees received from such arrangement could otherwise have negative consequences on our ability to meet the source-of-income requirement necessary for us to maintain our ric tax treatment . under the investment sub-advisory agreement , the external investment manager is entitled to 50 % of the base management fee and the incentive fees earned by hms adviser under its advisory agreement with hms income . based upon several fee waiver agreements with hms income and hms adviser , the external investment manager did not begin accruing the base management fee and incentive fees , if any , until january 1 , 2014. the external investment manager has conditionally agreed to waive a limited amount of the incentive fees otherwise earned . during the years ended december 31 , 2016 , 2015 and 2014 , the external investment manager earned $ 9.5 million , $ 7.8 million and $ 2.8 million , respectively , of management fees ( net of fees waived , if any ) under the sub-advisory agreement with hms adviser . during april 2014 , we received an exemptive order from the sec permitting co-investments by us and hms income in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 act . we have made , and in the future intend to continue to make , such co-investments with hms income in accordance with the conditions of the order . the order requires , among other things , that we and the external investment manager consider whether each such investment opportunity is appropriate for hms income and , if it is appropriate , to propose an allocation of the investment opportunity between us and hms income . because the external investment manager may receive performance-based fee compensation from hms income , this may provide it an incentive to allocate opportunities to hms income instead of us . however , both we and the external investment manager have policies and procedures in place to manage this conflict .
| discussion and analysis of results of operations comparison of the year ended december 31 , 2016 and 2015 replace_table_token_14_th replace_table_token_15_th ( a ) distributable net investment income is net investment income as determined in accordance with u.s. gaap , excluding the impact of share-based compensation expense which is non-cash in nature . we believe presenting distributable net investment income and related per share amounts is useful and appropriate supplemental disclosure of information for analyzing our financial performance since share-based compensation does not require settlement in cash . however , distributable net investment income is a non-u.s. gaap measure and should not be considered as a replacement to net investment income and 66 other earnings measures presented in accordance with u.s. gaap . instead , distributable net investment income should be reviewed only in connection with such u.s. gaap measures in analyzing our financial performance . a reconciliation of net investment income in accordance with u.s. gaap to distributable net investment income is presented in the table above . investment income for the year ended december 31 , 2016 , total investment income was $ 178.3 million , an 8 % increase over the $ 164.6 million of total investment income for the corresponding period of 2015. this comparable period increase was principally attributable to ( i ) a $ 7.4 million increase in interest income primarily related to higher average levels of portfolio debt investments and ( ii ) a $ 7.9 million increase in dividend income from investment portfolio equity investments , partially offset by ( i ) a $ 0.7 million decrease in fee income and ( ii ) a $ 0.8 million decrease in investment income from marketable securities and idle funds investments .
| ROO | 9,807 |
the investment funds ' aggregate return was 30.8 % for 2013 primarily due to gains in their long exposure , primarily in a few of the largest core holdings . these gains were partially offset by losses in their short equity exposure , including broad market hedges as equity markets rallied in 2013. since inception in november 2004 , the investment funds ' gross return is 171.1 % , representing an annualized rate of return of 9.3 % through december 31 , 2015 . 102 automotive replace_table_token_11_th we conduct our automotive segment through our majority ownership in federal-mogul holdings corporation ( `` federal-mogul '' ) and through our wholly owned subsidiary , ieh auto parts holding llc ( `` ieh auto '' ) , which acquired substantially all of the auto parts assets in the united states of uni-select , inc. through an acquisition that was consummated during the second quarter of 2015. see note 3 , `` operating units - automotive , '' to the consolidated financial statements for further discussion of this acquisition . intercompany transactions between federal-mogul and ieh auto have been eliminated in consolidation and the discussion below is net of eliminations . on february 3 , 2016 , pursuant to a tender offer , icahn enterprises acquired a majority of the outstanding shares of pep boys - manny , moe & jack ( `` pep boys '' ) , a leading aftermarket provider of automotive service , tires , parts and accessories across the united states and puerto rico . on february 4 , 2016 , icahn enterprises completed the acquisition of the remaining outstanding shares of pep boys and our wholly owned subsidiary , iep parts acquisition llc , merged with and into pep boys , with pep boys surviving the merger as a wholly owned subsidiary of icahn enterprises holdings . the total value for the acquisition of pep boys was approximately $ 1.2 billion , including the fair value of our equity interest in pep-boys just prior to our acquisition of a controlling interest . pep boys ' operations will comprise a portion of our automotive segment and will be operated independently of federal-mogul and ieh auto . federal-mogul is a leading global supplier of a broad range of components , accessories and systems to the automotive , small engine , heavy-duty , marine , railroad , agricultural , off-road , aerospace and energy , industrial and transport markets , including customers in both the original equipment manufacturers and servicers ( “ oe ” ) market and the replacement market ( “ aftermarket ” ) . federal-mogul 's customers include the world 's largest automotive oes and major distributors and retailers in the independent aftermarket . federal-mogul operates with two end-customer focused businesses . the powertrain business focuses on original equipment products for automotive , heavy duty and industrial applications . powertrain operates manufacturing facilities in 19 countries and derived 35 % of its 2015 oe sales in north america , 46 % in europe , the middle-east and africa ( `` emea '' ) , and 19 % in the rest of the world ( `` row '' ) . the motorparts business sells and distributes a broad portfolio of products in the global aftermarket , while also serving original equipment manufacturers with products including braking , chassis , wipers , and other vehicle components . motorparts operates manufacturing sites in 15 countries and distribution centers and warehouses in 14 countries . motorparts derived 56 % of its sales through north america , 37 % in emea , and 7 % in row . federal-mogul 's annual report on form 10-k contains a detailed description of its business , products , industry , operating strategy and associated risks . federal-mogul 's filings with the sec are available on the sec 's website at www.sec.gov . ieh auto is a leading automotive parts distributor for domestic and imported vehicles and has 34 distribution centers and satellite locations and 264 corporate-owned parts stores in the united states and supports a network of more than 2,000 independent parts stores . through its locations , ieh auto sells predominantly to commercial aftermarket customers in the do-it-for-me market as well as retail and do-it-yourself customers . ieh auto operates independently of federal-mogul . major influences impacting results of operations our automotive segment is affected by the following trends and market conditions : global vehicle production levels global vehicle production increased by 1.3 % in 2015. european vehicle production rose 4.1 % from 2014 levels . north american vehicle production increased 3.6 % , with positive growth in mexico and the united states . vehicle production in the asia-pacific region increased just under 1 % in 2015 , reaching another record high . among the major regions , only south america posted a decline in 2015 , down 19.3 % . global vehicle sales levels global vehicle sales increased by 1.8 % in 2015. european vehicle sales rose 3.5 % from 2014 levels . north american vehicles sales increased 6.3 % , with positive growth in canada , mexico and the united states . vehicle sales in the asia-pacific 103 region increased 1.5 % in 2015 , reaching another record high . among the major regions , only south america posted a decline in 2015 which was down 21.1 % . part replacement trends the strength of the aftermarket business is influenced by several key drivers . these include the vehicle population ( or `` parc '' ) , average vehicle age , fuel prices and vehicle distance traveled . the vehicle parc is estimated to have expanded in most major markets , including the united states , japan , china , and germany . average vehicle ages also increased , despite growth in new vehicle sales , in most regions . recent decline in oil prices the recent decline in oil prices results in lower fuel prices for consumers . lower fuel prices provide consumers with more discretionary income for vehicle repairs and tends to encourage more driving miles , which in turn accelerates wear on vehicle components , accelerating the need for replacements . story_separator_special_tag low fuel prices also encourage more vehicle sales , which increases demand for parts from oems . foreign currencies given the global nature of our operations , we are subject to fluctuations in foreign exchanges rates . during 2015 , foreign currency fluctuations had a considerable effect on our reported earnings in u.s. dollars compared to 2014. year ended december 31 , 2015 compared to the year ended december 31 , 2014 consolidated net sales increased for the year ended december 31 , 2015 compared to the prior year by $ 472 million ( 6 % ) ( net of certain intercompany activity ) , of which $ 396 million is attributable to the acquisition of ieh auto during 2015 and $ 76 million is attributable to federal-mogul . federal-mogul 's net sales were negatively impacted by the strengthening of the u.s. dollar against several global currencies which resulted in an unfavorable foreign currency impact of $ 642 million . excluding the impact of foreign currency , federal-mogul 's sales volumes increased by $ 718 million . this sales growth is comprised of an increase in the powertrain business ' external sales of $ 427 million , reflecting the inclusion of the acquisition of certain engine components business of trw automotive holdings corp. 's ( `` trw '' ) as well as an increase in volume for the quarter . external sales in the motorparts business increased by $ 291 million ( net of intercompany eliminations ) , driven primarily by the acquisitions of affinia group inc. ( `` affinia '' ) and honeywell international inc. 's ( `` honeywell '' ) brake component business . the powertrain business generated approximately 63 % of its sales outside of the united states and the resulting currency movements decreased sales by $ 407 million . on a constant dollar basis , powertrain external sales increased 12 % compared to the same period in 2014. the increase in powertrain 's sales reflects the inclusion of the acquisition of certain assets of the trw engine components business , as well as increases in volume which , together , increased sales by $ 427 million . this figure includes the impact of customer price decreases of $ 28 million . including the impact of sales from acquisitions , the powertrain business ' sales in north america , emea and row grew by 3.3 % , 6.3 % and 1 % , respectively . excluding the unfavorable currency impact of $ 235 million , motorparts ' external sales increased by $ 291 million ( net of intercompany eliminations ) . this increase was primarily due to additional sales related to the honeywell braking and affinia chassis component acquisitions . including the impact of sales from acquisitions , the motorparts business ' sales in north america , emea and row grew by 1.4 % , 4.8 % and 1.6 % , respectively . the ieh auto acquisition contributed $ 396 million in net sales for the period june 1 , 2015 through december 31 , 2015. ieh auto is a service organization engaged in the distribution of automotive aftermarket parts . through its locations , ieh auto sells predominantly to commercial aftermarket customers in the `` do-it-for-me '' market as well as `` do-it-yourself '' customers . cost of goods sold for the year ended december 31 , 2015 increased by $ 317 million ( 5 % ) as compared to the prior year ( net of certain intercompany activity ) . the increase attributable to federal-mogul was primarily due to an increase in sales volumes in both the powertrain and motorparts businesses , reflecting an inclusion of the acquisitions of the trw engine component business , the affinia chasis business as well as the honeywell brake component business . in addition , cost of goods sold increased due to the ieh auto acquisition . gross margin for the year ended december 31 , 2015 increased by $ 155 million ( 15 % ) compared to the prior year ( net of certain intercompany activity ) . gross margin was 16 % and 14 % of net sales for the years ended december 31 , 2015 and 2014 , respectively . the improvement in gross margin percentage over the respective periods was primarily attributable to the acquisition of ieh auto during 2015 whose product sales margins are higher than those of federal-mogul 's . 104 year ended december 31 , 2014 compared to the year ended december 31 , 2013 consolidated net sales increased for the year ended december 31 , 2014 by $ 412 million ( 6 % ) as compared to the corresponding prior year period . excluding dispositions of $ 119 million and unfavorable foreign currency impacts of $ 51 million , sales organically increased by $ 582 million or 9 % on a constant dollar basis . this increase is driven by sales growth in the powertrain business of $ 301 million ( 8 % ) and an increase in sales in the motorparts business of $ 281 million ( 10 % ) , driven by the affinia chassis and the honeywell brake component business acquisitions . the powertrain business ' sales increase of $ 301 million is driven by an increase in sales volumes of $ 330 million , offset by customer price reductions of $ 29 million . this increase is attributable to higher sales volumes and market share gains across all regions of the world . including the impact of sales from acquisitions , the powertrain business ' sales in north america , emea and row grew by 3.0 % , 3.0 % and 1.9 % , respectively . net sales in the motorparts business increased by $ 281 million primarily due to the affinia chassis and the honeywell brake component acquisitions . including the impact of sales from acquisitions , the motorparts business ' sales in north america , emea and row grew by 3.0 % , 5.0 % and 1.1 % , respectively .
| included in our consolidated other income ( loss ) , net was a loss on extinguishment of debt of $ 162 million for the year ended december 31 , 2014. see note 7 , `` financial instruments , '' and note 16 , `` other income , net , '' to the consolidated financial statements for further discussion . selling , general and administrative year ended december 31 , 2015 compared to the year ended december 31 , 2014 our consolidated selling , general and administrative expenses ( `` sg & a '' ) for the year ended december 31 , 2015 increased by $ 283 million ( 17 % ) as compared to the comparable prior year period . the increase was primarily due to an increase of $ 70 million from our investment segment was largely attributable to higher compensation expense related to certain investment related performance , an increase of $ 176 million from our automotive segment primarily due to the inclusion of the acquisition of affinia group inc. , the acquisition of certain business assets of honeywell international inc. , and the ieh auto acquisition , an increase of $ 11 million from our gaming segment primarily due to the inclusion of the lumière acquisition , and an increase of $ 12 million from our mining segment primarily due to the inclusion of the acquisition of ferrous resources effective june 1 , 2015. in addition , there was a a net increase in our other segments and holding company of $ 14 million . year ended december 31 , 2014 compared to the year ended december 31 , 2013 our consolidated sg & a for the year ended december 31 , 2014 increased by $ 208 million ( 15 % ) as compared to the comparable prior year period . the increase was primarily due to an increase of $ 89 million from our gaming segment primarily due to inclusion of the lumière acquisition during the second quarter of 2014 , $ 76 million from our automotive segment primarily due to the recognition of an opeb curtailment gain during the second quarter of 2013 ( which reduced sg & a in 2013 ) , and the inclusion of the affinia and honeywell acquisitions during the second quarter and third quarter of 2014 , respectively , and an increase of $ 48 million from our investment
| ROO | 6,784 |
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