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fair value measurements the company measures certain financial assets and liabilities at fair value based on the exchange price that would be received for an asset or paid to transfer a liability ( an exit price ) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants . where available , fair value is based on or derived from observable market prices or other observable inputs . where observable prices or inputs are not available , valuation techniques are applied . these valuation techniques involve some level of management estimation and judgement , the degree of which is dependent on the price transparency for the instruments or market and the instruments ' complexity . the carrying amounts of certain financial instruments , such as cash equivalents , short-term investments , accounts receivable , accounts payable and accrued liabilities , approximate fair value due to their relatively short maturities . the fair values of loans payable , convertible notes and credit facilities are based on the present value of expected future cash flows and assumptions about current interest rates and the creditworthiness of the company . the loans payable , convertible notes and credit facilities are carried on the consolidated balance sheet on a historical cost basis , because the company has not elected to recognize the fair value of these liabilities . however , the remaining notes subject to the maturity treatment agreement were revalued to fair value on july 29 , 2015 ; see note 4 , `` debt `` for details . changes in the inputs into these valuation models have a significant impact on the estimated fair value of the embedded and freestanding derivatives . for example , a decrease ( increase ) in the estimated credit spread for the company results in an increase ( decrease ) in the estimated fair value of the embedded derivatives . conversely , a decrease ( increase ) in the stock price results in a decrease ( increase ) in the estimated fair value of the embedded derivatives . the changes during 2017 , 2016 and 2015 in the fair values of the bifurcated compound embedded derivatives are primarily related to the change in price of the company 's common stock and are reflected in the consolidated statements of operations as “ gain from change in fair value of derivative instruments . ” derivatives the company has made limited use of derivative instruments , including cross-currency interest rate swap agreements , to manage the company 's exposure to foreign currency exchange rate fluctuations and interest rate fluctuations related to the company 's banco pine s.a. loan , which the company repaid in full in december 2017 ; see note 4 , `` debt `` . changes in the fair value of the cross-currency interest rate swap derivative were recognized in the consolidated statements of operations in `` gain ( loss ) from change in fair value of derivative instruments `` . as of december 31 , 2017 , the balances of the loan and the associated cross-currency interest rate swap were zero . 69 embedded derivatives that are required to be bifurcated from the underlying debt instrument ( i.e . , host ) are accounted for and valued as separate financial instruments . the company evaluated the terms and features of its convertible notes payable and convertible preferred stock and identified compound embedded derivatives requiring bifurcation and accounting at fair value because the economic and contractual characteristics of the embedded derivatives met the criteria for bifurcation and separate accounting due to the instruments containing conversion options , “ make-whole interest ” provisions , down round conversion price adjustment provisions and conversion rate adjustments . cash and anti-dilution warrants issued in conjunction with the convertible debt and equity financings are freestanding financial instruments which are also classified as derivative liabilities . noncontrolling interest noncontrolling interests represent the portion of the company 's net income ( loss ) , net assets and comprehensive income ( loss ) that is not allocable to the company , in situations where the company consolidates its equity investment in a joint venture for which there are other owners . the amount of noncontrolling interest is comprised of the amount of such interests at the date of the company 's original acquisition of an equity interest in a joint venture , plus the other shareholders ' share of changes in equity since the date the company made an investment in the joint venture . concentration of credit risk financial instruments that potentially subject the company to a concentration of credit risk consist primarily of cash and cash equivalents , short-term investments and accounts receivable . the company places its cash equivalents and investments ( primarily certificates of deposits ) with high credit quality financial institutions and , by policy , limits the amount of credit exposure with any one financial institution . deposits held with banks may exceed the amount of insurance provided on such deposits . the company has not experienced any losses on its deposits of cash and cash equivalents and short-term investments . the company performs ongoing credit evaluation of its customers , does not require collateral , and maintains allowances for potential credit losses on customer accounts when deemed necessary . customers representing 10 % or greater of accounts receivable were as follows : replace_table_token_18_th * * less than 10 % customers representing 10 % or greater of revenue were as follows : replace_table_token_19_th * not a customer * * less than 10 % 70 revenue recognition the company recognizes revenue from the sale of renewable products , licenses of and royalties from intellectual property , and grants and collaborative research and development services . story_separator_special_tag the company 's debt service obligations through april 17 , 2019 are $ 129.3 million , including $ 12.9 million of anticipated cash interest payments . our debt agreements contain various covenants , including certain restrictions on our business that could cause us to be at risk of defaults , such as restrictions on additional indebtedness , material adverse effect and cross default clauses . a failure to comply with the covenants and other provisions of our debt instruments , including any failure to make a payment when required , would generally result in events of default under such instruments , which could permit acceleration of a substantial portion of such indebtedness . if such indebtedness is accelerated , it would generally also constitute an event of default under our other outstanding indebtedness , resulting in acceleration of a substantial portion of such other outstanding indebtedness . 49 during the year ended december 31 , 2017 , we improved our liquidity as follows : in january , february and may 2017 , debt obligations totaling $ 21.0 million were extended to dates from november 2017 to april 2019 ; in may 2017 , we sold shares of series a 17.38 % convertible preferred stock , par value $ 0.0001 per share ( the series a preferred stock ) , shares of series b 17.38 % convertible preferred stock , par value $ 0.0001 per share ( the series b preferred stock ) , and warrants to purchase common stock for net proceeds of $ 50.7 million ; in april and may 2017 , convertible debt obligations totaling $ 35.8 million were converted into shares of common stock pursuant to their terms or exchanged for shares of series b preferred stock and warrants to purchase common stock ; in may 2017 , additional debt obligations totaling $ 29.0 million were exchanged for shares of series b preferred stock and warrants to purchase common stock ; in may 2017 , we made debt principal payments of $ 21.8 million , which in combination with the debt conversions and exchanges described above , reduced debt obligations by a total of $ 86.6 million ; in august 2017 , we sold shares of common stock , shares of series d convertible preferred stock , par value $ 0.0001 per share ( the series d preferred stock ) , and warrants to purchase common stock for net proceeds of $ 24.8 million ; and in august 2017 , we sold shares of series b preferred stock , warrants to purchase common stock , dilution warrants and a make-whole provision for net proceeds of $ 25.9 million ; and in december 2017 , we closed a transaction with dsm under which we sold our amyris brasil subsidiary which operated our brotas production facility and also included entering into a series of commercial transactions including , among others , a license agreement to dsm , a value share agreement under which we will receive royalties , a development agreement , and other arrangements . the cash proceeds in december were $ 75.5 million . the value share agreement includes guaranteed royalty minimums in 2018 and 2019 totaling $ 18.1 million . see note 4 , “ debt ” and note 7 , “ stockholders ' deficit ” to our unaudited condensed consolidated financial statements included in this report for more information regarding these transactions . our consolidated financial statements as of and for the year ended december 31 , 2017 have been prepared on the basis that we will continue as a going concern , which contemplates the realization of assets and satisfaction of liabilities in the normal course of business . due to the factors described above , there is substantial doubt about our ability to continue as a going concern within one year after the date that these financial statements are issued . our ability to continue as a going concern will depend , in large part , on our ability to achieve positive cash flows from operations during the 12 months from the date of this filing , to extend existing debt maturities , which is uncertain , and to convert certain debt obligations into equity , which conversion is within the control of the company . the financial statements do not include any adjustments that might result from the outcome of this uncertainty , which could have a material adverse effect on our financial condition . in addition , if we are unable to continue as a going concern , we may be unable to meet our obligations under our existing debt facilities , which could result in an acceleration of our obligation to repay all amounts outstanding under those facilities , and we may be forced to liquidate our assets . in such a scenario , the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements . our operating plan for 2018 contemplates a significant reduction in our net cash outflows , resulting from ( i ) revenue growth from sales of existing and new products with positive gross margins , ( ii ) significantly increased royalty revenues ( previously referred to as value share revenues ) ( iii ) reduced production costs as a result of manufacturing and technical developments , and ( iv ) cash inflows from grants and collaborations . in addition , in the first half of 2018 , we plan to restructure a majority of our convertible debt to extend maturities , and obtain project financing for brotas 2 facility construction . all of the factors noted above are expected to improve our liquidity . if we are unable to generate sufficient cash contributions from product sales , payments from existing and new collaboration partners , and draw sufficient funds from certain financing commitments due to contractual restrictions and covenants , we may need to obtain additional funding from equity or debt financings ,
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net non-cash charges of $ 113.8 million for the year ended december 31 , 2015 consisted primarily of a $ 58.6 million of amortization of debt discount and issuance costs , including a $ 36.6 million charge due to acceleration of accretion of debt discount on the total and temasek convertible notes converted to equity in july 2015 , $ 16.3 million of loss from the change in the fair value of derivative instruments related to the embedded derivative liabilities associated with our senior convertible promissory notes and cross-currency interest rate swap derivative liability , $ 12.9 million of depreciation and amortization expenses , $ 34.2 million of loss on purchase commitments and impairment of production assets , $ 9.1 million of stock-based compensation , $ 5.5 million of impairment of intangible assets , $ 4.7 million of withholding tax related to conversion of related party note , $ 4.2 million of loss from investment in affiliates , $ 1.1 million of loss from extinguishment of debt , $ 0.4 million of other non-cash expenses and $ 0.2 million on disposition of property , plant and equipment . net change in operating assets and liabilities of $ 19.1 million for the year ended december 31 , 2015 primarily consisted of a $ 15.3 million increase in accounts payable and accrued other liabilities and a $ 4.3 million decrease in accounts receivable and related party accounts receivable and a $ 4.5 million increase in inventory , partially offset by a $ 4.9 million decrease in prepaid expenses and other assets and deferred rent and $ 0.1 million decrease in deferred revenue related to the funds received under collaboration agreements . 52 cash flows from investing activities net cash provided from investing activities of $ 52.0 million for the year ended december 31 , 2017 , was primarily due to the sale of amyris brasil to dsm , which operated the company 's brotas 1 production facility , and the series of commercial agreements discussed above , partially offset by $ 4.4 million of purchase of property , plant and equipment . net cash provided from investing activities of $ 5.6 million for the year ended december 31 , 2016 , was primarily due to $ 10.0 million of proceeds on disposal of noncontrolling interest and $ 6.2 million of maturities of short-term investments ,
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Liquidity
| 14,543
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under the market approach , the fair value of each reporting unit is calculated by applying an average peer total invested capital ebitda ( defined as earnings before interest , income taxes and depreciation and amortization ) multiple to the upcoming fiscal year 's forecasted ebitda for each reporting unit . judgment is required when selecting peer companies that operate in the same or similar lines of business and are potentially subject to the same economic risks . we did not record any impairment of goodwill in 2009 based on our evaluations conducted throughout the year . we primarily focused our goodwill evaluations on our well ops sea pty story_separator_special_tag results of operations the following management 's discussion and analysis should be read in conjunction with our historical consolidated financial statements located in item 8 . “ financial statements and supplementary data ” of this annual report . any reference to notes in the following management 's discussion and analysis refers to the notes to consolidated financial statements located in item 8 . “ financial statements and supplementary data ” of this annual report . the results of operations reported and summarized below are not necessarily indicative of future operating results . this discussion also contains forward-looking statements that reflect our current views with respect to future events and financial performance . our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors , such as those set forth under item 1a . “ risk factors ” and located earlier in this annual report . executive summary our business we are an international offshore energy company that provides reservoir development solutions and other contracting services to the energy market as well as to our own oil and gas properties . our oil and gas business is a prospect generation , exploration , development and production company . employing our own key services and methodologies , we seek to lower finding and development costs , relative to industry norms . our strategy over the past three years , we have focused on improving our balance sheet by increasing our liquidity through dispositions of non-core business assets , decreasing our planned capital spending and reducing the amount of our debt outstanding . our focus is to shape the future direction of the company around our contracting services business that is comprised of our well operations , robotics and subsea construction services while supplementing these efforts with our production facilities business activities and the substantial cash flow associated with our oil and gas business through a combination of existing and or future production from our properties and the sale of all or a portion of our oil and gas assets . since the beginning of 2009 , we have generated approximately $ 600 million in pre-tax proceeds from dispositions of non-core business assets . these transactions included approximately $ 55 million from the sale of individual oil and gas properties , over $ 500 million from the sale of our stockholdings in cdi and $ 25 million for the sale of our former reservoir consulting business . economic outlook and industry influences demand for our contracting services operations is primarily influenced by the condition of the oil and gas industry , and in particular , the willingness of oil and gas companies to make capital expenditures for offshore exploration , drilling and production operations . generally , spending for our contracting services fluctuates directly with the direction of oil and natural gas prices . however , some of our contracting services , more specifically our subsea construction services , will often lag drilling operations by a period of 6 to 18 months , meaning that even if there were a sudden increase in deepwater permitting and subsequent drilling in the gulf of mexico , it probably would still be some time before we would start securing any awarded projects . the performance of our oil and gas operations is also largely dependent on the prevailing market prices for oil and natural gas , which are impacted by global economic conditions , hydrocarbon production and capacity , geopolitical issues , weather , and several other factors , including but not limited to : 46 worldwide economic activity , including available access to global capital and capital markets ; demand for oil and natural gas , especially in the united states , europe , china and india ; economic and political conditions in the middle east and other oil-producing regions ; the effect of regulations on offshore gulf of mexico oil and gas operations ; actions taken by opec ; the availability and discovery rate of new oil and natural gas reserves in offshore areas ; the cost of offshore exploration for and production and transportation of oil and gas ; the ability of oil and natural gas companies to generate funds or otherwise obtain external capital for exploration , development and production operations ; the sale and expiration dates of offshore leases in the united states and overseas ; technological advances affecting energy exploration production transportation and consumption ; weather conditions ; environmental and other governmental regulations ; and tax policies . oil prices increased significantly in 2011 ( the average price for west texas intermediate ( “ wti ” ) crude oil was $ 94.88 per barrel in 2011 compared to $ 79.48 per barrel in 2010 ) . commencing in the latter part of the first quarter of 2011 , the price that we received for the majority of our crude oil sales volumes increased significantly over the wti market price . historically the price we receive for most of our crude oil , as priced using a number of gulf coast crude oil price indexes , closely correlated with current market prices of wti crude oil ; however , because of a substantial increase in crude oil inventories at cushing , oklahoma the price of gulf coast crude is now substantially higher than wti . story_separator_special_tag on september 24 , 2009 , the underwriters sold an additional 2.6 million shares of cal dive common stock held by us pursuant to their overallotment option under the terms of the second offering . the price for the second offering was $ 10 per share , with resulting proceeds totaling approximately $ 221.5 million , net of underwriting fees . we recorded a $ 17.9 million gain associated with the second offering transaction , which was recorded as a component of “ gain ( loss ) on investment in cal dive common stock ” in the accompanying consolidated statement of operations . in march 2011 , we sold our remaining 0.5 million shares of cal dive common stock in open market transactions for $ 3.6 million in gross proceeds , which resulted in a pre-tax gain of approximately $ 0.8 million ( note 3 ) . for more information regarding the reduction in our ownership in cal dive see notes 1 , 2 and 3. results of operations our operations are conducted through two lines of business : contracting services and oil and gas . we have disaggregated our contracting services operations into two reportable business segments , which are contracting services and production facilities . our third business segment is oil and gas . in june 2009 , we ceased consolidating the results and operations of cal dive , our former shelf contracting business segment , following the sale of a substantial amount of our remaining ownership of cal dive ( note 3 ) . each line item within our consolidated statement of operations for the years ended december 31 , 2010 is impacted significantly when compared to the year ended december 31 , 2009 as a result of the deconsolidation of the cal dive results . our 2009 consolidated results include cal dive 's results through june 10 , 2009 and we recorded our approximate 26 % share of cal dive 's results for the period june 11 , 2009 through september 23 , 2009 to equity in earnings of investments as required under the equity method of accounting . we continued to disclose the operating results of the shelf contracting business as a segment through june 10 , 2009. all material intercompany transactions between the segments have been eliminated in our consolidated financial statements , including our consolidated results of operations . 49 contracting services operations we seek to provide services and methodologies that we believe are critical to developing offshore reservoirs and maximizing production economics . the contracting services segment includes our well operations , robotics and subsea construction services . our production facilities segment reflects the results associated with the operations of the hp i as well as our equity investments in two gulf of mexico production facilities ( note 7 ) . our contracting services business operates primarily in the gulf of mexico , north sea , asia pacific and west africa regions , with services that cover the lifecycle of an offshore oil or gas field . as of december 31 , 2011 , our contracting services had backlog of approximately $ 490.3 million , including $ 471.8 million expected to be performed in 2012. backlog for the hp i totaled approximately $ 49.4 million at december 31 , 2011 , including $ 33.3 million expected to be serviced in 2012. at december 31 , 2010 , our combined backlog for both contracting services and the hp i totaled $ 267.3 million . these backlog contracts are cancellable without penalty in many cases . backlog is not a reliable indicator of total annual revenue for our contracting services businesses as contracts may be added , cancelled and in many cases modified while in progress . oil and gas operations we began our oil and gas operations to achieve incremental returns , to expand our off-season utilization of our contracting services assets , and to provide a more efficient solution to offshore abandonment . we have evolved this business model to include not only mature oil and gas properties but also proved and unproved reserves yet to be developed and explored . by owning oil and gas reservoirs and prospects , we are able to utilize the services we otherwise provide to third parties to create value at key points in the life of our own reservoirs including during the exploration and development stages , the field management stage , and the abandonment stage . it is also a feature of our business model to opportunistically monetize part of the created reservoir value , through sales of working interests , in order to help fund field development and reduce gross profit deferrals from our contracting services operations . therefore the reservoir value we create is realized through oil and gas production and or monetization of working interest stakes . discontinued operations in april 2009 , we sold helix rds limited , our former reservoir technology consulting company , to a subsidiary of baker hughes incorporated for $ 25 million . we have presented the results of helix rds as discontinued operations in the accompanying consolidated financial statements ( note 1 ) . there were no material results from discontinued operations in the years ended december 31 , 2011 and 2010. helix rds was previously a component of our contracting services business . we recognized an $ 8.3 million gain on the sale of helix rds . comparison of years ended december 31 , 2011 and 2010 the following table details various financial and operational highlights for the periods presented : replace_table_token_16_th 50 replace_table_token_17_th ( 1 ) included a $ 6.6 million charge in 2011 to partially impair our subsea well intervention equipment located in australia ( note 2 ) . ( 2 ) included asset impairment charges of oil and gas properties totaling $ 132.6 million in 2011 and $ 181.1 million in 2010. these amounts also include exploration expenses totaling $ 10.9 million in 2011 and $ 8.3 million in 2010 , which primarily reflect the write off of expiring leasehold costs ( note 5 ) .
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business activity summary we have continued to evolve our business model by completing a variety of transactions and activities that we believe will continue to have significant impacts on our financial position , results of operations and cash flow . in 2005 and 2006 , we acquired the majority of our oil and gas operations , including in large part the july 2006 acquisition of remington oil and gas corporation , an exploration , development and production company , for approximately $ 1.4 billion paid with a combination of cash and helix common stock and the assumption of $ 358.4 million of liabilities . in march 2006 , we changed our name from cal dive international , inc. to helix energy solutions group , inc. , leaving the “ cal dive ” name to our former shelf contracting subsidiary ( see “ reduction in ownership of cal dive ” below ) , and in december 2006 completed a carve-out initial public offering of cal dive , selling a 26.5 % stake and receiving pre-tax net proceeds of $ 264.4 million and a pre-tax dividend of $ 200 million derived from borrowings under the cal dive revolving credit facility . during 2006 we committed to four capital projects that have expanded and will continue to expand our contracting services capabilities : · upgrading of the q4000 ; · construction of a multi-service dp dive support/well intervention vessel ( well enhancer ) .
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ROO
| 9,814
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prior to re-opening our resorts and sales centers , we introduced the hgv enhanced care guidelines , designed to provide owners , guests and team members with the highest level of cleaning protocols and safety standards recommended by the center for disease control and prevention and cleaning solutions approved by the environmental protection agency in response to the covid-19 pandemic . along with providing personal protective equipment to team members , these enhanced care guidelines include low-touch arrivals and departures , frequent and thorough cleaning , reduction of paper items , reduced capacity for our pool decks and fitness centers , and new technologies . while operations were suspended , essential resort personnel worked diligently maintaining the resorts for a safe reopening . annual deep cleanings , typically scheduled during slower seasons , were moved up and completed , allowing the resorts to be in top shape when owners and guests arrive . beginning in may 2020 , various states and counties started to allow gradual relaxation of restrictions on activities and a resumption of businesses . in response , we began a phased reopening of resorts and resumption of our business activities during the second quarter of 2020 , but under new operating guidelines and with safety measures . as of december 31 , 2020 , we have approximately 85 percent of our resorts and sales centers open and currently operating however , many of our resorts and sales centers are operating in markets with significant capacity constraints and various safety measures . in addition , ongoing strict travel and other restrictions in regions and locations where we have a significant number of resorts and concentration of units , particularly , hawaii and new york , are significantly impacting consumer demand for our resorts in those areas . while we plan to continue to reopen our resorts and resume our business as conditions permit , the pandemic continues to be unprecedented and rapidly changing , and has unknown duration and severity . further , various state and local government officials may issue new or revised orders that are different than current ones under which we are operating . accordingly , there remains significant uncertainty as to the degree of impact and duration of the conditions stemming from the ongoing pandemic on our revenues , net income and other operating results , as well as our business and operations generally . any significantly extended duration or worsening of the conditions associated with the pandemic may adversely impact our liquidity in the longer term , including our ability to finance our day-to-day business and operations , and may adversely affect our ability to comply with our financial covenants under our debt obligations notwithstanding the recent amendments discussed above . 82 summary of significant accounting policies revenue recognition on january 1 , 2018 , we adopted accounting standards update ( “ asu ” ) no . 2014-09 , revenue from contracts with customers ( commonly referred to as accounting standards codification ( “ asc ” ) topic 606 ( “ asc 606 ” ) . we adopted asc 606 using the modified retrospective method in which the cumulative effect of applying the new standard has been recognized at the date of initial application with an adjustment to our opening balance of retained earnings . this approach applies to all contracts as of january 1 , 2018. the new standard , as amended , replaces all current u.s. gaap guidance on this topic and eliminates all industry-specific guidance . the reported results as of and for the years ended december 31 , 2020 , 2019 and 2018 reflect the application of asc 606. in accordance with asc 606 , revenue is recognized upon the transfer of control of promised goods or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services . to achieve the core principle of the new guidance , we take the following steps : ( i ) identify the contract with the customer ; ( ii ) determine whether the promised goods or services are separate performance obligations in the contract ; ( iii ) determine the transaction price , including considering the constraint on variable consideration ; ( iv ) allocate the transaction price to the performance obligations in the contract based on the standalone selling price or estimated standalone selling price of the good or service ; and ( v ) recognize revenue when ( or as ) we satisfy each performance obligation . contracts with multiple performance obligations a performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in asc 606. for arrangements that contain multiple goods or services , we determine whether such goods or services are distinct performance obligations that should be accounted for separately in the arrangement . when allocating the transaction price in the arrangement , we may not have observable standalone sales for all of the performance obligations in these contracts ; therefore , we exercise significant judgement when determining the standalone selling price of certain performance obligations . in order to estimate the standalone selling prices , we primarily rely on the expected cost plus margin and adjusted market assessment approaches . we then recognize the revenue allocated to each performance obligation as the related performance obligation is satisfied as discussed below . sales of vois , net — customers who purchase vacation ownership products , whether paid in cash or financed , enter into multiple contracts , which we combine and account for as a single contract . story_separator_special_tag adjusted ebitda , presented herein , is calculated as ebitda , as previously defined , further adjusted to exclude certain items , including , but not limited to , gains , losses and expenses in connection with : ( i ) asset dispositions ; ( ii ) foreign currency transactions ; ( iii ) debt restructurings/retirements ; ( iv ) non-cash impairment losses ; ( v ) reorganization costs , including severance and relocation costs ; ( vi ) share-based and certain other compensation expenses ; ( vii ) costs related to the spin-off ; and ( viii ) other items . ebitda and adjusted ebitda are not recognized terms under u.s. gaap and should not be considered as alternatives to net income ( loss ) or other measures of financial performance or liquidity derived in accordance with u.s. gaap . in addition , our definitions of ebitda and adjusted ebitda may not be comparable to similarly titled measures of other companies . we believe that ebitda and adjusted ebitda provide useful information to investors about us and our financial condition and results of operations for the following reasons : ( i ) ebitda and adjusted ebitda are among the measures used by our management team to evaluate our operating performance and make day-to-day operating decisions ; and ( ii ) ebitda and adjusted ebitda are frequently used by securities analysts , investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in our industry . ebitda and adjusted ebitda have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income ( loss ) , cash flow or other methods of analyzing our results as reported under u.s. gaap . some of these limitations are : ebitda and adjusted ebitda do not reflect changes in , or cash requirements for , our working capital needs ; ebitda and adjusted ebitda do not reflect our interest expense ( excluding interest expense on non-recourse debt ) , or the cash requirements necessary to service interest or principal payments on our indebtedness ; ebitda and adjusted ebitda do not reflect our tax expense or the cash requirements to pay our taxes ; ebitda and adjusted ebitda do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments ; ebitda and adjusted ebitda do not reflect the effect on earnings or changes resulting from matters that we consider not to be indicative of our future operations ; ebitda and adjusted ebitda do not reflect any cash requirements for future replacements of assets that are being depreciated and amortized ; and ebitda and adjusted ebitda may be calculated differently from other companies in our industry limiting their usefulness as comparative measures . because of these limitations , ebitda and adjusted ebitda should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations . 52 recent events related to the covid-19 pandemic and impact on our results of operations , financial condition , and business during the year ended december 31 , 2020. in march 2020 , a national public health emergency was declared in response to the coronavirus , known as covid-19 . as a result , many local , county and state government officials have issued , and continue to issue , various mandates and orders to close non-essential businesses , impose travel restrictions , and require “ stay-at-home ” and or self-quarantine in certain cases , all in an effort to protect the health and safety of individuals and aimed at slowing and ultimately stopping the spread and transmission of the virus . accordingly , commencing in march 2020 , we started to temporarily close substantially all of our properties and suspended our u.s sales operations and closed such sales offices . we took a number of other actions to reduce our expenses and preserve liquidity , including workforce furlough , implementing salary reductions for the remaining active employees primarily during the second quarter of 2020 , implementing hiring freezes , eliminating all discretionary spending , and reducing our planned investment in new inventory by approximately $ 200 million . recently , we completed a workforce reduction plan that impacted approximately 1,500 team members in order to better align our workforce with the company 's needs in light of the environment , and approximately 1,800 of our team members remain furloughed . furthermore , we believe the following actions will provide adequate capital to meet our short-and long-term liquidity requirements for anticipated operating expenses and other expenditures , including payroll and related benefits , legal costs , and additional costs related to complying with various regulatory requirements and best practices for opening under the current environment resulting from the pandemic , and to finance our long-term growth plan and capital expenditures for the foreseeable future . in march 2020 , we drew down the substantial remainder of our borrowing capacity under our revolver facility through net borrowings of $ 445 million as a precautionary measure to ensure liquidity for a sustained period in the economic environment resulting from the covid-19 pandemic . we expect the proceeds would be used for general corporate and working capital purposes in the ordinary course of business . in april 2020 , we amended certain key definitions related to delinquency level calculations of underlying timeshare loans that are used as collateral for borrowings under our timeshare facility , and generated added flexibility to manage any potential increase in the rate of delinquency as a result of the impact of the covid-19 pandemic . in may 2020 , we amended our credit agreement which amended certain terms of the credit facilities ( “ senior secured credit facilities ” ) to provide us with both near-term and long-term flexibility with respect to satisfying certain negative and financial
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we have commitments from surety providers in the amount of $ 366 million as of december 31 , 2020 which primarily consist of escrow and construction related bonds . off-balance sheet arrangements our off-balance sheet arrangements as of december 31 , 2020 , consisted of $ 454 million of certain commitments with developers whereby we have committed to purchase vacation ownership units at a future date to be marketed and sold under our hilton grand vacations brand and $ 20 million of other commitments under the normal course of business . the ultimate amount and timing of the acquisitions is subject to change pursuant to the terms of the respective arrangements , which could also allow for cancellation in certain circumstances , see note 23 : commitments and contingencies in our consolidated financial statements included in item 8 of this annual report on form 10-k for additional information . guarantor financial information certain subsidiaries , which are listed on exhibit 22 of this annual report on form 10-k , have guaranteed our obligations related to our senior unsecured notes ( the “ notes ” ) . the notes were issued in november 2016 with an aggregate principal balance of $ 300 million , an interest rate of 6.125 percent , and maturity in december 2024. our senior unsecured notes were co-issued by hilton grand vacations borrower llc and hilton grand vacations borrower inc. ( the “ issuers ” ) and are fully and unconditionally guaranteed , jointly and severally , on a senior unsecured basis by hgv ( the “ parent ” ) , hilton grand vacations parent llc ( the “ intermediate parent ” ) , the issuers , and each of the issuer 's existing and future wholly owned domestic restricted subsidiaries ( all entities that guarantee the notes , collectively , the “ obligor group ” ) . the notes rank equally in right of payment with all of our existing and future senior unsecured obligations , are senior in right of payment to any of our guarantor 's subordinated indebtedness , and are subordinate to all existing and future liabilities of our entities that do not guarantee the notes and our secured indebtedness , including our senior secured credit facilities and securitized non-recourse debt . the guarantee of each guarantor subsidiary is limited to a maximum amount , subject to applicable u.s. and non-u.s. laws . the guarantees can also be
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Liquidity
| 10,406
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if either case is applicable , any previously recognized allowances are charged off and the debt security 's amortized cost is written down to fair value through income . if neither case is applicable , the debt security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors . in making this assessment , the company considers the extent to which fair value is less than amortized cost , any changes to the rating of the debt security by a rating agency and any adverse conditions specifically related to the debt security , among other factors . if this assessment indicates that a credit loss exists , the present value of cash flows expected to be collected from the debt security are compared to the amortized cost basis of the debt security . if the present value of cash flows expected to be collected is less than the amortized cost basis , a credit loss exists and an allowance for credit losses is recorded for the credit loss , limited by the amount by which the fair value is less than the amortized cost basis . any impairment that has not been recorded through allowance for credit losses is recognized in other comprehensive income , net of tax . adjustments to the allowance are reported in the income statement as a component of credit loss expense . available-for-sale debt securities are charged off against the allowance or , in the absence of any allowance , written down through income when deemed uncollectible by the company or when either of the aforementioned criteria regarding intent or requirement to sell is met . accrued interest receivable on available-for-sale debt securities is excluded from the estimate of credit losses . 73 allowance for credit losses – loans : for loans the allowance for credit losses is based on the company 's evaluation of the loan portfolios , past loan loss experience , current asset quality trends , known and inherent risks in the portfolio , adverse situations that may affect the borrower 's ability to repay ( including the timing of future payment ) , the estimated value of any underlying collateral , composition of the loan portfolio , economic conditions , industry and peer bank loan quality indications and other pertinent factors , including regulatory recommendations . the process is inherently subjective and subject to significant change as it requires material estimates . the allowance is increased by a provision for credit losses , which is charged to expense , and reduced by charge-offs , net of recoveries . in addition , various regulatory agencies , as an integral part of their examination process , periodically review the allowance for credit losses . such agencies may require the company to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination . loans with similar risk characteristics are evaluated in pools and , depending on the nature of each identified pool , the company utilizes a discounted cash flow ( “ dcf ” ) , probability of default / loss given default ( “ pd/lgd ” ) or remaining life method . the historical loss experience estimate by pool is then adjusted by forecast factors that are quantitatively related to the company 's historical credit loss experience , such as national unemployment rates and gross domestic product . losses are predicted over a period of time determined to be reasonable and supportable , and at the end of the reasonable and supportable period losses are reverted to long term historical averages . the reasonable and supportable period and reversion period are re-evaluated each quarter by the company and are dependent on the current economic environment among other factors . the estimated credit losses for each loan pool are then adjusted for changes in qualitative factors not inherently considered in the quantitative analyses . the qualitative adjustments either increase or decrease the quantitative model estimation . the company considers factors that are relevant within the qualitative framework which include the following : lending policy , changes in nature and volume of loans , staff experience , changes in volume and trends of problem loans , concentration risk , trends in underlying collateral values , external factors , quality of loan review system and other economic conditions . credit losses for loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and estimated on an individual basis . individual evaluations are performed for nonaccrual loans , loans rated substandard , and modified loans classified as troubled debt restructurings . specific allowances were estimated based on one of several methods , including the estimated fair value of the underlying collateral , observable market value of similar debt or the present value of expected cash flows . the company measures expected credit losses over the contractual term of a loan , adjusted for estimated prepayments . the contractual term excludes expected extensions , renewals and modifications unless there is a reasonable expectation that a troubled debt restructuring will be executed . credit losses are estimated on the amortized cost basis of loans , which includes the principal balance outstanding , purchase discounts and premiums and deferred loan fees and costs . accrued interest receivable on loans is excluded from the estimate of credit losses . allowance for credit losses – unfunded loan commitments : for unfunded loan commitments the allowance for credit losses is a liability account , calculated in accordance with asc 326 , representing expected credit losses over the contractual period for which the company is exposed to credit risk resulting from a contractual obligation to extend credit . no allowance is recognized if the company has the unconditional right to cancel the obligation . the allowance is reported as a component of other liabilities within the consolidated balance sheets . story_separator_special_tag the trusts are majority-owned subsidiaries of a trust holding company , which in turn is an indirect , wholly-owned subsidiary of the bank . the trusts earn interest income on the loans they hold and incur operating expenses related to their activities . they pay their net earnings , in the form of dividends , to the bank , which receives a deduction for state income taxes . financial condition assets total assets as of december 31 , 2020 , were $ 11.93 billion , an increase of $ 2.99 billion , or 33.4 % , over total assets of $ 8.95 billion as of december 31 , 2019. average assets for the year ended december 31 , 2020 were $ 10.64 billion , an increase of $ 2.01 billion , or 23.2 % , over average assets of $ 8.64 billion for the year ended december 31 , 2019. loan growth was the primary reason for the increase in ending and average total assets . year-end 2020 loans were $ 8.47 billion , up $ 1.20 billion , or 16.6 % , over year-end 2019 total loans of $ 7.26 billion . total paycheck protection program ( “ ppp ” ) loans at year-end 2020 were $ 900.5 million . during 2020 , we originated over 4,900 ppp loans for our customers . 48 earning assets include loans , securities , short-term investments and bank-owned life insurance contracts . we maintain a higher level of earning assets in our business model than do our peers because we allocate fewer of our resources to facilities , atms , and cash and due-from-bank accounts used for transaction processing . earning assets as of december 31 , 2020 were $ 11.76 billion , or 98.6 % of total assets of $ 11.93 billion . earning assets as of december 31 , 2019 were $ 8.79 billion , or 98.2 % of total assets of $ 8.95 billion . we believe this ratio is expected to generally continue at these levels , although it may be affected by economic factors beyond our control . investment portfolio we view the investment portfolio as a source of income and liquidity . our investment strategy is to accept a lower immediate yield in the investment portfolio by targeting shorter term investments . our investment policy provides that no more than 60 % of our total investment portfolio should be composed of municipal securities . at december 31 , 2020 , mortgage-backed securities represented 55.9 % of the investment portfolio , corporate debt represented 36.5 % of the investment portfolio , state and municipal securities represented 4.3 % of the investment portfolio , government agency securities represented 1.7 % , and u.s. treasury securities represented 1.6 % of the investment portfolio . all of our investments in mortgage-backed securities are pass-through mortgage-backed securities . we do not have currently , and did not have at december 31 , 2020 , any structured investment vehicles or any private-label mortgage-backed securities . the amortized cost of securities in our portfolio totaled $ 861.2 million at december 31 , 2020 , compared to $ 752.2 million at december 31 , 2019. the following table presents the amortized cost of securities available for sale and held to maturity by type at december 31 , 2020 , 2019 and 2018. replace_table_token_7_th the following table presents the amortized cost of our securities as of december 31 , 2020 by their stated maturities ( this maturity schedule excludes security prepayment and call features ) , as well as the taxable equivalent yields for each maturity range . maturity of debt securities - amortized cost less than one year one year through five years six years through ten years more than ten years total at december 31 , 2020 : ( in thousands ) securities available for sale : u.s. treasury securities $ 4,996 $ 8,997 $ - $ - $ 13,993 government agency securities 9,188 6,040 - - 15,228 mortgage-backed securities 53 6,310 88,229 382,815 477,407 state and municipal securities 16,613 13,082 5,854 2,122 37,671 corporate debt - 31,711 282,146 3,000 316,857 total $ 30,850 $ 66,140 $ 376,229 $ 387,937 $ 861,156 tax-equivalent yield ( 1 ) u.s. treasury securities 1.83 % 1.91 % - % - % 1.89 % government agency securities 2.04 2.11 - - 2.07 mortgage-backed securities 3.21 2.47 2.31 2.20 2.22 state and municipal securities 2.59 2.37 1.92 3.13 2.44 corporate debt - 3.70 4.88 4.50 4.76 weighted average yield 2.31 % 2.93 % 4.23 % 2.22 % 3.16 % securities held to maturity : state and municipal securities $ - $ 250 $ - $ - $ 250 total $ - $ 250 $ - $ - $ 250 tax-equivalent yield ( 1 ) state and municipal securities - % 3.21 % - % - % 3.21 % total - % 3.21 % - % - % 3.21 % ( 1 ) yields are presented on a fully-taxable equivalent basis using a tax rate of 21 % . 49 as of december 31 , 2020 , we had $ 1.8 million in federal funds sold , compared with $ 100.5 million at december 31 , 2019. at year-end 2020 , there were no holdings of securities of any issuer , other than the u.s. government and its agencies , in an amount greater than 10 % of stockholders ' equity . the objective of our investment policy is to invest funds not otherwise needed to meet our loan demand to earn the maximum return , yet still maintain sufficient liquidity to meet fluctuations in our loan demand and deposit structure . in doing so , we balance the market and credit risks against the potential investment return , make investments compatible with the pledge requirements of any deposits of public funds , maintain compliance with regulatory investment requirements , and assist certain public entities with their financial needs . the investment committee has full authority over the investment
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debt securities : taxable 801,134 22,122 2.76 588,082 17,008 2.89 473,259 12,654 2.67 tax-exempt ( 3 ) 34,975 870 2.49 68,805 1,563 2.27 108,938 2,723 2.50 total debt securities ( 4 ) 836,109 22,992 2.75 656,887 18,571 2.83 582,197 15,377 2.64 federal funds sold 61,712 332 0.54 267,327 6,038 2.26 141,518 3,103 2.19 interest-bearing balances with banks 1,170,095 3,165 0.27 536,765 12,020 2.24 148,907 3,094 2.08 total interest-earning assets $ 10,237,244 $ 389,364 < td style='width : 13px ; border-bottom : 1px rgb ( 0 , 0 , 0 ) ; font-family : `` times new roman '' , times , serif ; font-size : 10pt ; margin-left :
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Liquidity
| 5,942
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see note 7 for further details . story_separator_special_tag units . each unit consisted of one share of common stock and one warrant to purchase 0.75 of a share of common stock , sold at a public offering price of $ 1.40 per unit . at the time of the offering closing , we did not currently have a sufficient number of authorized common stock to cover shares of common stock issuable upon the exercise of the warrants . the sufficient number of authorized common stock became available on may 17 , 2017 when we received stockholder approval of the proposed amendment to our amended and restated articles of incorporation to increase the number of authorized shares of common stock ( the “ charter amendment ” ) and the charter amendment became effective . the warrants will expire five years from the date the warrants were exercisable , or may 17 , 2017 , and the exercise price of the warrants is $ 1.55 per share of common stock . in connection with this transaction , we issued to h.c. wainwright warrants to purchase up to 251,500 shares of common stock ( the “ underwriter warrants ” ) . the underwriter warrants have substantially the same terms as the warrants sold concurrently to the investors in the offering , except that the underwriter warrants have a term of five years from the effective date of the related prospectus , or april 20 , 2017 , and an exercise price of $ 1.75 per share . the common shares , warrants and warrant shares were issued and sold pursuant to an effective registration statement on form s-1 , which was previously filed with the securities and exchange commission ( “ sec ” ) and declared effective on april 20 , 2017 , and a related prospectus . on april 20 , 2017 , we entered into a warrant amendment with the holders of our warrants to purchase common stock , issued in a previous financing in september 2016 , pursuant to which , among other things , ( i ) the exercise price of the warrants was reduced to $ 1.55 per share ( the exercise price of the warrants sold in the april 2017 financing ) , and ( ii ) the date upon which such warrants become exercisable was changed to the effective date of the charter amendment , or may 17 , 2017. on march 8 , 2017 , we entered into the ferring asset purchase agreement , pursuant to which we sold to ferring our assets and rights related to vitaros outside of the united states for approximately $ 12.7 million , which consisted of an upfront payment of $ 11.5 million , approximately $ 0.7 million for the delivery of certain product-related inventory , and an aggregate of $ 0.5 million related to transition services . we used approximately $ 6.6 million of the proceeds from the sale to repay all outstanding amounts due and owed , including applicable termination fees , under the credit facility with the lenders . we currently have an effective shelf registration statement on form s-3 filed with the sec under which we may offer from time to time any combination of debt securities , common and preferred stock and warrants . as of february 26 , 2018 , we had approximately $ 100.0 million available under our form s-3 shelf registration statement . however , under current sec regulations , at any time during which the aggregate market value of our common stock held by non-affiliates ( “ public float ” ) is less than $ 75.0 million , the amount we can raise through primary public offerings of securities in any twelve-month period using shelf registration statements is limited to an aggregate of one-third of our public float . sec regulations permit us to use the highest closing sales price of our common stock ( or the average of the last bid and last ask prices of our common stock ) on any day within 60 days of sales under the shelf registration statement . as of february 26 , 2018 , our public float was approximately $ 46.9 million based on 14.7 million shares of our common stock outstanding at a price of $ 3.19 per share , which was the closing sale price of our common stock on february 15 , 2018 . since our public float is currently less than $ 75.0 million , as of february 26 , 2018 , we may only sell an aggregate of approximately $ 15.6 million of securities under our shelf registration statements on form s-3 . we still maintain the ability to raise funds through other means , such as through the filing of a registration statement on form s-1 or in private placements . the rules and regulations of the sec or any other regulatory agencies may restrict our ability to conduct certain types of financing activities , or may affect the timing of and amounts we can raise by undertaking such activities . the accompanying consolidated financial statements have been prepared assuming we will continue to operate as a going concern , which contemplates the realization of assets and settlement of liabilities in the normal course of business , and 36 do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to our ability to continue as a going concern . story_separator_special_tag management bases its estimates on historical experience , market and other conditions , and various other assumptions it believes to be reasonable . although these estimates are based on management 's best knowledge of current events and actions that may impact us in the future , the estimation process is , by its nature , uncertain given that estimates depend on events over which we may not have control . if market and other conditions change from those that we anticipate , our consolidated financial statements may be materially affected . in addition , if our assumptions change , we may need to revise our estimates , or take other corrective actions , either of which may also have a material effect in our consolidated financial statements . we review our estimates , judgments , and assumptions used in our accounting practices periodically and reflect the effects of revisions in the period in which they are deemed to be necessary . we believe that these estimates are reasonable ; however , our actual results may differ from these estimates . we believe that the following critical accounting policies and estimates have a higher degree of inherent uncertainty and require our most significant judgments : long-lived assets we review our long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable . an impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset and its eventual disposition are less than its carrying amount . if such asset is considered impaired , the amount of the impairment loss recognized is measured as the amount by which the carrying value of the asset exceeds the fair value of the asset , the fair value of which is determined based upon discounted cash flows or appraised values , depending on the nature of the asset . there were no impairment charges recorded in 2017 and 2016 related to our long-lived assets . stock based compensation stock based compensation expense includes charges related to options and restricted stock unit awards to employees and directors . the estimated grant date fair value of stock options granted to employees and directors is calculated based upon the closing stock price of our common stock on the date of the grant and recognized as stock-based compensation expense over the expected service period , which is typically approximated by the vesting period . we estimate the fair value of each option award on the date of grant using the black-scholes option pricing model . the black-scholes option pricing model requires us to estimate our dividend yield rate , expected volatility and risk free interest rate over the 38 life of the option . the use of estimates on these factors may cause the fair value of the option to be under or overestimated ( see note 8 to our consolidated financial statements for the current estimates used in the black-scholes option pricing model ) . we also issue performance-based shares which represent a right to receive a certain number of shares of common stock based on the achievement of corporate performance goals and continued employment during the vesting period . at each reporting period , we reassess the probability of the achievement of such corporate performance goals and adjusts expense as necessary . valuation of warrant liability our outstanding common stock warrants issued in connection with our february 2015 and january 2016 financings are classified as liabilities in the accompanying consolidated balance sheets as they contain provisions that are considered outside of our control , such as requiring us to maintain active registration of the shares underlying such warrants . the warrants were recorded at fair value using the black-scholes option pricing model . the fair value of these warrants is re-measured at each financial reporting period with any changes in fair value being recognized as a component of other income ( expense ) in the accompanying consolidated statements of operations . the warrants issued in connection with the september 2016 financing were reclassified from warrant liabilities to stockholders ' equity as a result of an amendment to such warrants executed as part of the april 2017 financing . the warrants issued in september 2016 were amended so that , under no circumstance or by any event outside of our control , can these awards be cash settled . as a result , such warrants are no longer accounted for as liabilities . we have issued other warrants that have similar terms whereas under no circumstance may the shares be settled in cash . as such , these warrants are equity-classified . see note 7 for further details . income taxes we recognize deferred taxes under the asset and liability method of accounting for income taxes by which deferred income taxes are recognized for differences between the financial statement and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse . the effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date . in addition , valuation allowances are established , when necessary , to reduce deferred tax assets to the amounts expected to be realized . in consideration of our accumulated losses and lack of historical ability to generate taxable income to utilize our deferred tax assets , we have determined it is not more likely than not we will be able to realize any benefit from our temporary differences and have recorded a full valuation allowance . if we become profitable in the future at levels which cause management to conclude that it is more likely than not that we will realize all or a portion of the net operating loss carry-forward , we would record the estimated net realized value of the deferred tax asset at that time and would then provide
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transition services , the payments of which were received in july 2017 and september 2017. we used approximately $ 6.6 million of the proceeds from the sale to repay all outstanding amounts due and owed , including applicable termination fees , under the credit facility with the lenders . 35 as a result of the ferring asset purchase agreement , all product sales revenue , royalty revenue , license fee revenue and cost of goods sold have been reflected as discontinued operations in the consolidated statement of operations for both periods presented . cost of sandoz rights represents the payments owed by us to sandoz as a condition under the termination agreement between the two parties related to vitaros outside of the united states . in addition , operating expenses , such as the transaction costs directly related to the ferring asset purchase agreement , have been presented as discontinued operations . liquidity , capital resources and financial condition we have experienced net losses and negative cash flows from operations each year since our inception . although we recorded net income of approximately $ 0.3 million for the year ended december 31 , 2017 , we had an accumulated deficit of approximately $ 316.0 million as of december 31 , 2017 . our cash balance was approximately $ 6.3 million as of december 31 , 2017 . our history and other factors raise substantial doubt about our ability to continue as a going concern .
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Liquidity
| 14,425
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41 c. investment valuations investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end-of-day net asset value ( “ nav ” ) per share . investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded . united states treasury obligations are fair valued using an evaluated quote provided by an independent pricing service . evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices , and may reflect appropriate factors such as developments related to specific securities , yield , quality , type of issue , coupon rate , maturity , individual trading characteristics and other market data . all debt obligations involve some risk of default with respect to interest and or principal payments . futures contracts are valued at the final settlement price set by an exchange on which they are principally traded . securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith following procedures approved by the managing owner . issuer-specific events , market trends , bid/asked quotes of brokers and information providers and other data may be reviewed in the course of making a good faith determination of a security 's fair value . valuations change in response to many factors including the historical and prospective earnings of the issuer , the value of the issuer 's assets , general market conditions which are not specifically related to the particular issuer , such as real or perceived adverse economic conditions , changes in the general outlook for revenues , changes in interest or currency rates , regional or global instability , natural or environmental disasters , widespread disease or other public health issues , war , acts of terrorism or adverse investor sentiment generally and market liquidity . because of the inherent uncertainties of valuation , the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments . d. investment transactions and investment income investment transactions are accounted for on a trade date basis . realized gains or losses from the sale or disposition of securities or derivatives are determined on a specific identification basis and recognized in the statements of income and expenses in the period in which the contract is closed or the sale or disposition occurs , respectively . interest income on united states treasury obligations is recognized on an accrual basis when earned . premiums and discounts are amortized or accreted over the life of the united states treasury obligations . dividend income ( net of withholding tax , if any ) is recorded on the ex-dividend date . e. profit and loss allocations and distributions pursuant to the trust agreement , income and expenses are allocated pro rata to the managing owner as holder of the general shares and to the shareholders monthly based on their respective percentage interests as of the close of the last trading day of the preceding month . distributions ( other than redemption of units ) may be made at the sole discretion of the managing owner on a pro rata basis in accordance with the respective capital balances of the shareholders . the managing owner has sole discretion in determining what distributions , if any , the fund will make to shareholders . no distributions were paid for the year ended december 31 , 2020. the table below shows distributions per general share and share and in total for the years presented : replace_table_token_15_th f. routine operational , administrative and other ordinary expenses the managing owner is responsible for all routine operational , administrative and other ordinary expenses of the fund , including , but not limited to , computer services , the fees and expenses of the trustee , legal and accounting fees and expenses , tax preparation expenses , filing fees and printing , mailing and duplication costs . the fund does not reimburse the managing owner for the routine operational , administrative and other ordinary expenses of the fund . accordingly , such expenses are not reflected in the statements of income and expenses of the fund . g. non-recurring fees and expenses the fund pays all non-recurring and unusual fees and expenses , if any , of itself , as determined by the managing owner . non-recurring and unusual fees and expenses include fees and expenses , such as legal claims and liabilities , litigation costs , 42 indemnification expenses or other non-routine expenses . non-recurring and unusual fees and expenses , by their nature , are unpredictable in terms of timing and amount . for the years ended december 31 , 2020 , 2019 and 2018 , the fund did not incur such expenses . h. brokerage commissions and fees the fund incurs all brokerage commissions , including applicable exchange fees , national futures association ( “ nfa ” ) fees , give-up fees , pit brokerage fees and other transaction related fees and expenses charged in connection with trading activities by the commodity broker ( as defined below ) . these costs are recorded as brokerage commissions and fees in the statements of income and expenses . the commodity broker 's brokerage commissions and trading fees are determined on a contract-by-contract basis . story_separator_special_tag for the year ended december 31 , 2019 , the nyse arca market value of each share increased from $ 23.03 per share to $ 25.63 per share . the share price high and low for the year ended december 31 , 2019 and related change from the share price on december 31 , 2018 was as follows : shares traded at a high of $ 28.60 per share ( +24.19 % ) on september 4 , 2019 and a low of $ 21.03 per share ( -8.69 % ) on may 28 , 2019. on december 31 , 2019 , the fund paid a distribution of $ 0.33358 for each general share and share to holders of record as of december 24 , 2019. therefore , the total return for the fund on a market value basis was +12.77 % . fund share net asset performance for the year ended december 31 , 2020 , the nav of each share increased from $ 25.66 per share to $ 37.16 per share . rising prices of silver futures contracts during the year ended december 31 , 2020 contributed to an overall 44.95 % increase in the level of the index and to a 45.49 % increase in the level of the dbiq-oy si tr . no distributions were paid to shareholders during the year ended december 31 , 2020. therefore , the total return for the fund on a nav basis was +44.82 % . 25 net income ( loss ) for the year ended december 31 , 2020 was $ 6.2 million , resulting from income of $ 0.1 million , net realized gain ( loss ) of $ 0.7 million , net change in unrealized gain ( loss ) of $ 5.5 million and net operating expenses of $ 0.1 million . for the year ended december 31 , 2019 , the nav of each share increased from $ 23.05 per share to $ 25.66 per share . rising prices of silver futures contracts during the year ended december 31 , 2019 contributed to an overall 11.29 % increase in the level of the index and to a 13.65 % increase in the level of the dbiq-oy si tr . on december 31 , 2019 , the fund paid a distribution of $ 0.33358 for each general share and share to holders of record as of december 24 , 2019. therefore , the total return for the fund on a nav basis was +12.81 % . net income ( loss ) for the year ended december 31 , 2019 was $ 1.8 million , resulting from income of $ 0.3 million , net realized gain ( loss ) of $ 0.3 million , net change in unrealized gain ( loss ) of $ 1.2 million and net operating expenses of $ 0.1 million . critical accounting policies the fund 's critical accounting policies are as follows : preparation of the financial statements and related disclosures in conformity with u.s. gaap requires the application of appropriate accounting rules and guidance , as well as the use of estimates , and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities , revenue and expense and related disclosure of contingent assets and liabilities during the reporting period of the financial statements and accompanying notes . the fund 's application of these policies involves judgments and actual results may differ from the estimates used . there were no significant estimates used in the preparation of these financial statements . commodity futures contracts , united states treasury obligations , t-bill etfs and money market mutual funds are recorded on a trade date basis and at fair value in the financial statements , with changes in fair value , if any , reported in the statements of income and expenses . the use of fair value to measure financial instruments , with related unrealized gains or losses recognized in earnings in each period , is fundamental to the fund 's financial statements . the fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date ( the exit price ) . united states treasury obligations are fair valued using an evaluated quote provided by an independent pricing service . futures contracts are valued at the final settlement price set by an exchange on which they are principally traded . investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day nav per share . investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded . financial accounting standards board ( “ fasb ” ) accounting standards codification for fair value measurement and disclosure guidance requires a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value . the objective of a fair value measurement is to determine the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date ( an exit price ) . the hierarchy gives the highest priority to unadjusted quoted prices for identical assets or liabilities ( level 1 measurements ) and the lowest priority to unobservable inputs ( level 3 measurements ) . assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement . see note 6 within the financial statements in item 8 for further information . securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith following procedures approved
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no distributions were paid to shareholders during the year ended december 31 , 2020. during the year ended december 31 , 2019 distributions paid to shareholders were $ 0.2 million . results of operations for the years ended december 31 , 2020 and 2019 the following graphs illustrate the percentage changes in ( i ) the market price of the shares ( as reflected by the line “ market ” ) , ( ii ) the fund 's nav ( as reflected by the line “ nav ” ) , and ( iii ) the closing levels of the index ( as reflected by the line “ dbiq opt yield silver index er ” ) . whenever the treasury income , money market income and t-bill etf income , if any , earned by the fund exceeds fund expenses , the price of the shares generally exceeds the level of the index primarily because the share price reflects treasury income , money market income and t-bill etf income , if any , from the fund 's collateral holdings whereas the index does not consider such income . there can be no assurance that the price of the shares or the fund 's nav will exceed the index levels . no representation is being made that the index will or is likely to achieve closing levels consistent with or similar to those set forth herein . similarly , no representation is being made that the fund will generate profits or losses similar to the fund 's past performance or changes in the index closing levels . 23 comparison of market , nav and dbiq opt yield silver index er for the years ended december 31 , 2020 and 2019 neither the past performance of the fund nor the prior index levels and changes , positive or negative , should be taken as an indication of the fund 's future performance . < p style= '' text-align : center ; margin-top:18pt ; margin-bottom:0pt ; text-indent:0 % ; font-weight : bold ; font-style : italic ; font-family : times
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Liquidity
| 3,522
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as a result of many factors , such as those set forth under the section entitled risk factors , cautionary note regarding forward-looking statements and elsewhere herein , our actual results may differ materially from those anticipated in these forward-looking statements . executive overview we are a global biopharmaceutical company on a mission to transform the lives of patients with serious and rare diseases . our first commercial product , arikayce , was approved in the us in september 2018 and in the eu in october 2020. our clinical-stage pipeline includes brensocatib and tpip . brensocatib is a small molecule , oral , reversible inhibitor of dipeptidyl peptidase 1 , which we are developing for the treatment of patients with bronchiectasis and other neutrophil-mediated diseases . tpip is an inhaled formulation of the treprostinil prodrug treprostinil palmitil which may offer a differentiated product profile for pulmonary arterial hypertension ( pah ) and other rare pulmonary disorders . we have legal entities in the us , france , germany , ireland , italy , the netherlands , switzerland , the united kingdom ( uk ) and japan . refer to part i , item 1 . `` business '' for a summary of our ongoing commercial and clinical programs for arikayce and our ongoing clinical programs for brensocatib and tpip . prior to 2019 , we had not generated significant revenue and through december 31 , 2020 , we had an accumulated deficit of $ 1.8 billion . we have financed our operations primarily through the public offerings of our equity securities and debt financings . although it is difficult to predict our future funding requirements , based upon our current operating plan , we anticipate that our cash and cash equivalents as of december 31 , 2020 will enable us to fund our operations for at least the next 12 months . our ability to reduce our operating loss and begin to generate positive cash flow from operations depends on the continued success in commercializing arikayce , including expanding the commercial sale of arikayce to additional territories , as well as achieving positive results from the arikayce frontline clinical trial program in order to potentially reach more patients . additionally , our continued success also depends on bringing additional clinical stage products to market , such as brensocatib and tpip . we expect to continue to incur substantial expenses related to our research and development activities as we continue the arikayce frontline clinical program , conduct the phase 3 aspen trial for brensocatib , and continue the required trials for tpip . we also expect to continue to incur significant costs related to the commercialization of arikayce , especially as we anticipate launching in new markets . our financial results may fluctuate from quarter to quarter and will depend on , among other factors , the net sales of arikayce ; the scope and progress of our research and development efforts ; and the timing of certain expenses . we can not predict whether or when new products or new indications for marketed products will receive regulatory approval or , if any such approval is received , whether we will be able to successfully commercialize such products and whether or when they may become profitable . key components of our results of operations product revenues , net product revenues , net , consist primarily of net sales of arikayce in the us and europe . in october 2018 , we began shipping arikayce to our customers in the us , which include specialty pharmacies and specialty distributors . in december 2020 , we began commercial sales of arikayce in germany . we recognize revenue for product received by our customers net of allowances for customer credits , including prompt pay discounts , service fees , estimated rebates , including government rebates , such as medicaid rebates and medicare part d coverage gap reimbursements in the us , chargebacks and returns . cost of product revenues ( excluding amortization of intangible assets ) cost of product revenues ( excluding amortization of intangible assets ) consist primarily of direct and indirect costs related to the manufacturing of arikayce sold , including third-party manufacturing costs , packaging services , freight , and allocation of overhead costs , in addition to royalty expenses and revenue-based milestones . we began capitalizing inventory upon fda approval of arikayce . all costs related to inventory for arikayce prior to fda approval were expensed as incurred and therefore not included in cost of product revenues . research and development ( r & d ) expenses r & d expenses consist primarily of salaries , benefits and other related costs , including stock-based compensation , for personnel serving in our research and development functions , including medical affairs and program management . r & d 60 expense also includes other internal operating expenses , the cost of manufacturing product candidates , including the medical devices for drug delivery , for clinical study , the cost of conducting clinical studies , and the cost of conducting preclinical and research activities . in addition , r & d expenses include payments to third parties for the license rights to products in development ( prior to marketing approval ) , such as brensocatib . our r & d expenses related to manufacturing our product candidates and medical devices for clinical study are primarily related to activities at contract manufacturing organizations ( cmos ) that manufacture brensocatib and tpip . our r & d expenses related to clinical trials are primarily related to activities at contract research organizations ( cros ) that conduct and manage clinical trials on our behalf . these contracts with cros set forth the scope of work to be completed at a fixed fee or amount per patient enrolled . payments under these contracts with cros primarily depend on performance criteria such as the successful enrollment of patients or the completion of clinical trial milestones as well as time-based fees . story_separator_special_tag interest expense interest expense was $ 29.6 million for the year ended december 31 , 2020 as compared to $ 27.7 million for 2019. the $ 1.9 million increase in interest expense in the year ended december 31 , 2020 as compared to the prior year period relates to finance lease interest expense for our corporate headquarters . provision for income taxes the income tax provision was $ 1.4 million and $ 0.8 million for the years ended december 31 , 2020 and 2019 , respectively . the income tax provision for the year ended december 31 , 2020 and december 31 , 2019 reflects the current income tax expense recorded as a result of taxable income in certain of our subsidiaries in europe and japan as well as a liability for certain state income taxes . comparison of the years ended december 31 , 2019 and 2018 please refer to the section titled `` management 's discussion and analysis of financial condition and results of operations '' in our annual report on form 10-k for the fiscal year ended december 31 , 2019 for a comparative discussion of our fiscal years ended december 31 , 2019 and december 31 , 2018. liquidity and capital resources overview there is considerable time and cost associated with developing potential pharmaceutical products to the point of regulatory approval and commercialization . we commenced commercial shipments of arikayce in october 2018. we expect to continue to incur operating losses at our us and certain international entities , as we plan to fund r & d for arikayce , brensocatib , tpip and our other pipeline programs , continue commercialization activities for arikayce in the us and europe , continue to invest in pre-commercial and regulatory activities for arikayce in japan , and other general and administrative activities . in the second quarter of 2020 , we completed an underwritten public offering of 11,155,000 shares of our common stock , including 1,455,000 shares issued pursuant to the exercise in full of the underwriters ' option to purchase additional shares , a t a public offering price of $ 23.25 per share . our net proceeds from the sale of the shares , after deducting the underwriting discounts and commissions and other offering expenses of $ 13.5 million , were $ 245.9 million . in the second quarter of 2019 , we comple ted an underwritten public offering of 10,657,692 shares of common stock , including 1,042,307 shares issued pursuant to the exercise in full of the underwriters ' option to purchase additional shares at a public offering price of $ 26.00. our net proceeds from the sale of the shares , after deducting underwriting discounts and commissions and other offering expenses of $ 16.0 million , were $ 261.1 million . the offering also included the sale of 400,000 shares from our chair and chief executive officer , from which we received no proceed s. in january 2018 , we completed an underwritten public offering of $ 450.0 million aggregate principal amount of convertible notes , including the exercise in full of the underwriter 's option to purchase additional convertible notes . our net proceeds from the offering , after deducting underwriting discounts and commissions and other offering expenses of $ 14.2 million , were $ 435.8 million . we may need to raise additional capital to fund our operations , including continued commercialization of arikayce and future clinical trials related to arikayce , to design and conduct ongoing and future clinical trials for brensocatib and tpip , and to develop , acquire , in-license or co-promote other products or product candidates , including those that address orphan or rare diseases . we believe we currently have sufficient funds to meet our financial needs for at least the next 12 months . we expect to opportunistically raise additional capital and may do so through equity or debt financing ( s ) , strategic transactions or otherwise . we expect such additional funding , if any , would be used to continue to commercialize arikayce , to conduct further trials of arikayce , to develop brensocatib , tpip and our other product candidates , or to pursue the license 64 or purchase of other technologies or products and product candidates . during 2021 , we plan to continue to support the commercialization of arikayce in the us and europe , to continue to fund further clinical development of arikayce , brensocatib and tpip , and to fund our global expansion efforts to support commercial launch activities in additional countries in europe and pre-commercial activities in japan including obtaining regulatory approvals for arikayce in japan . our cash requirements for the next 12 months will be impacted by a number of factors , the most significant of which we expect to be expenses related to our commercialization efforts and our arise and encore clinical trials for arikayce , expenses related to the aspen trial and other development activities for brensocatib , and to a lesser extent , expenses related to the clinical development of tpip . cash flows as of december 31 , 2020 , we had cash and cash equivalents of $ 532.8 million , as compared with $ 487.4 million as of december 31 , 2019. the $ 45.3 million increase was due to cash received from the underwritten public offering of our common stock in the second quarter of 2020 , partially offset by cash used in operating activities and , to a lesser extent , cash used in investing activities . our working capital was $ 504.1 million as of december 31 , 2020 as compared with $ 470.0 million as of december 31 , 2019. net cash used in operating activities was $ 219.3 million and $ 250.6 million for the years ended december 31 , 2020 and 2019 , respectively .
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results of operations covid-19 update we are committed to the safety and well-being of our workforce . in march 2020 , we implemented a number of corporate initiatives in response to the novel coronavirus ( sars-cov-2 ) global pandemic which manifests as covid-19 . these initiatives included a remote working policy for all employees in order to aid the global containment effort and allow infectious disease specialists and pulmonologists to focus exclusively on treating patients and containing the virus . the policy included all of the field-based therapeutic specialists and employees who support arikayce prescribers . beginning on june 1 , 2020 , certain of our field-based employees who support arikayce prescribers were permitted to return to the field . to date , access to prescribers has been limited with significant regional variability . our arikares ® trainers are continuing to offer remote training for patients who initiate treatment with arikayce . while we continue to see use of arikayce , including new patient adds and continued prescription renewals , there remains a general uncertainty regarding the impact of covid-19 on the arikayce patient population and physicians . patients suffering from refractory ntm lung disease are typically older individuals with underlying lung conditions , and are often treated by infectious disease specialists and pulmonologists . these treating physicians are on the front lines in addressing this global pandemic and must now , understandably , focus their attention on covid-19 . there are many uncertainties regarding the covid-19 pandemic , and we are closely monitoring the impact of the pandemic on all aspects of our business , including how it will impact our patients , employees , suppliers , vendors , business partners and distribution channels . while the pandemic did not materially affect our financial results and business operations through the year ended december 31 , 2020 , we are unable to predict the impact that covid-19 will have on our financial position and operating results in future periods due to numerous uncertainties .
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ROO
| 7,334
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our kingsville dome leases have a 6.25 % royalty and carry an additional 3.125 % royalty payment to certain land owners . our rosita leases contain a 11.25 % royalty . operating expenses . during 2011 and 2010 we incurred operating expenses related to our south texas projects of $ 648,000 and $ 395,000 , respectively . all such costs were from stand-by and or care and maintenance activities . during 2009 , operating expenses for kingsville dome , vasquez and rosita were $ 2.7 million which included $ 548,000 of stand-by and other operating costs at our south texas projects , which were charged to operations . depreciation and depletion . during 2011 and 2010 we incurred depreciation and depletion expense related to our south texas projects of $ 600,000 and $ 756,000 , respectively . all such costs were from stand-by and or care and maintenance activities . during 2009 , we incurred depreciation and depletion expense of $ 1.1 million . impairment of uranium properties . during 2011 , 2010 and 2009 , we determined the carrying value of our uranium project assets exceeded their fair value . in 2011 , this resulted in an impairment provision of $ 1,460,000 , and we reduced the carrying value of kingsville dome by $ 851,000 , rosita by $ 126,000 and vasquez by $ 483,000 at december 31 , 2011. in 2010 , we recorded an impairment provision of $ 961,000 , and we reduced the carrying value of kingsville dome by $ 590,000 , rosita by $ 58,000 and vasquez by $ 313,000 at december 31 , 2010. in 2009 our impairment provision totaled $ 3.5 million reducing the carrying value of kingsville dome by $ 2.5 million , rosita by $ 214,000 , vasquez by $ 263,000 and other south texas projects by $ 567,000 at december 31 , 2009. accretion and amortization of future restoration costs . during 2011 , 2010 and 2009 , the accretion and amortization of future restoration costs was $ 121,000 , $ 156,000 and $ 257,000 , respectively . general and administrative charges . we incurred general and administrative charges and corporate depreciation of $ 8.5 million , $ 8.4 million and $ 6.8 million in 2011 , 2010 and 2009 , respectively . 48 significant expenditures for general and administrative expenses for the years ended december 31 , 2011 , 2010 and 2009 were : replace_table_token_11_th the non-cash compensation expense recorded for the years ended december 31 , 2011 , 2010 and 2009 resulted from the recognition of expense related to the fair value of the company 's stock option and restricted common stock grants . the value of each option award is estimated on the date of grant using the black-scholes option-pricing model . the black-scholes option-pricing model requires the input of subjective assumptions , including the expected term of the option award and stock price volatility . the expected term of options granted was derived from historical data on our employee exercise and post-vesting employment termination experience . the expected volatility was based on the historical volatility of our stock . the increases in salary and payroll burden in 2010 resulted primarily from a change in executive level personnel in late 2009 , the reinstatement of the non-cash portion of executive level salaries in the 2 nd half of 2010 , the payment of performance related bonuses in 2010 and a 50 % increase in medical premium costs for the 2010 plan year . the company 's legal , accounting and public company expenses increased by $ 1.1 million in 2011 compared with 2010. the increase resulted primarily from costs incurred in connection with acquisition activity for the neutron energy , inc. transaction and legal fees related to the kleberg county litigation . the company 's legal , accounting and public company expenses increased by $ 308,000 in 2010 compared with 2009. these increases resulted from legal fees related to the saenz lawsuit , the recording of our regulatory fees as g & a costs in 2010 because of our no longer being in active uranium production during the year , increased board of director fees related to the addition of a board member in january 2010 and an increase in the number of meetings held during the year and higher accounting fees related to services performed for the audit of the company 's 401k plan . in september , 2010 , we recorded $ 1.375 million in settlement of the lawsuit titled , saenz v. uri inc. the payment of $ 1.375 million in cash included amounts for prior royalties that the plaintiffs had previously rejected . the payment was made in february 2011 , upon the execution of amendments to the leases and to documentation of other aspects of the settlement and dismissal of the suit . insurance costs increased in 2011 primarily because of an increase in general liability and umbrella insurance premiums realted to an under lying increase in the company 's payroll ( the basis for the premium determination ) and a $ 4 million increase in coverage to comply with the insurance requirements of the los finados project . insurance costs increased in 2010 primarily because of an increase in director 's and officer 's liability premiums in 2010 compared to 2009. consulting and professional service expenses in 2011 increased by $ 417,000 compared to 2010. this increase resulted primarily from costs incurred in connection with the preparation of the churchrock 49 section 8 feasibility study . consulting and professional service expenses in 2010 were lower than 2009 by $ 155,000. this reduction resulted primarily because fees incurred in 2009 for new mexico legacy and site and property characterization activities were not repeated in 2010. reduced office related costs in 2010 resulted from executive search fees and employee allowances paid in 2009 that were not incurred in 2010. net income ( loss ) . for the year ended december 31 , 2011 story_separator_special_tag our kingsville dome leases have a 6.25 % royalty and carry an additional 3.125 % royalty payment to certain land owners . our rosita leases contain a 11.25 % royalty . operating expenses . during 2011 and 2010 we incurred operating expenses related to our south texas projects of $ 648,000 and $ 395,000 , respectively . all such costs were from stand-by and or care and maintenance activities . during 2009 , operating expenses for kingsville dome , vasquez and rosita were $ 2.7 million which included $ 548,000 of stand-by and other operating costs at our south texas projects , which were charged to operations . depreciation and depletion . during 2011 and 2010 we incurred depreciation and depletion expense related to our south texas projects of $ 600,000 and $ 756,000 , respectively . all such costs were from stand-by and or care and maintenance activities . during 2009 , we incurred depreciation and depletion expense of $ 1.1 million . impairment of uranium properties . during 2011 , 2010 and 2009 , we determined the carrying value of our uranium project assets exceeded their fair value . in 2011 , this resulted in an impairment provision of $ 1,460,000 , and we reduced the carrying value of kingsville dome by $ 851,000 , rosita by $ 126,000 and vasquez by $ 483,000 at december 31 , 2011. in 2010 , we recorded an impairment provision of $ 961,000 , and we reduced the carrying value of kingsville dome by $ 590,000 , rosita by $ 58,000 and vasquez by $ 313,000 at december 31 , 2010. in 2009 our impairment provision totaled $ 3.5 million reducing the carrying value of kingsville dome by $ 2.5 million , rosita by $ 214,000 , vasquez by $ 263,000 and other south texas projects by $ 567,000 at december 31 , 2009. accretion and amortization of future restoration costs . during 2011 , 2010 and 2009 , the accretion and amortization of future restoration costs was $ 121,000 , $ 156,000 and $ 257,000 , respectively . general and administrative charges . we incurred general and administrative charges and corporate depreciation of $ 8.5 million , $ 8.4 million and $ 6.8 million in 2011 , 2010 and 2009 , respectively . 48 significant expenditures for general and administrative expenses for the years ended december 31 , 2011 , 2010 and 2009 were : replace_table_token_11_th the non-cash compensation expense recorded for the years ended december 31 , 2011 , 2010 and 2009 resulted from the recognition of expense related to the fair value of the company 's stock option and restricted common stock grants . the value of each option award is estimated on the date of grant using the black-scholes option-pricing model . the black-scholes option-pricing model requires the input of subjective assumptions , including the expected term of the option award and stock price volatility . the expected term of options granted was derived from historical data on our employee exercise and post-vesting employment termination experience . the expected volatility was based on the historical volatility of our stock . the increases in salary and payroll burden in 2010 resulted primarily from a change in executive level personnel in late 2009 , the reinstatement of the non-cash portion of executive level salaries in the 2 nd half of 2010 , the payment of performance related bonuses in 2010 and a 50 % increase in medical premium costs for the 2010 plan year . the company 's legal , accounting and public company expenses increased by $ 1.1 million in 2011 compared with 2010. the increase resulted primarily from costs incurred in connection with acquisition activity for the neutron energy , inc. transaction and legal fees related to the kleberg county litigation . the company 's legal , accounting and public company expenses increased by $ 308,000 in 2010 compared with 2009. these increases resulted from legal fees related to the saenz lawsuit , the recording of our regulatory fees as g & a costs in 2010 because of our no longer being in active uranium production during the year , increased board of director fees related to the addition of a board member in january 2010 and an increase in the number of meetings held during the year and higher accounting fees related to services performed for the audit of the company 's 401k plan . in september , 2010 , we recorded $ 1.375 million in settlement of the lawsuit titled , saenz v. uri inc. the payment of $ 1.375 million in cash included amounts for prior royalties that the plaintiffs had previously rejected . the payment was made in february 2011 , upon the execution of amendments to the leases and to documentation of other aspects of the settlement and dismissal of the suit . insurance costs increased in 2011 primarily because of an increase in general liability and umbrella insurance premiums realted to an under lying increase in the company 's payroll ( the basis for the premium determination ) and a $ 4 million increase in coverage to comply with the insurance requirements of the los finados project . insurance costs increased in 2010 primarily because of an increase in director 's and officer 's liability premiums in 2010 compared to 2009. consulting and professional service expenses in 2011 increased by $ 417,000 compared to 2010. this increase resulted primarily from costs incurred in connection with the preparation of the churchrock 49 section 8 feasibility study . consulting and professional service expenses in 2010 were lower than 2009 by $ 155,000. this reduction resulted primarily because fees incurred in 2009 for new mexico legacy and site and property characterization activities were not repeated in 2010. reduced office related costs in 2010 resulted from executive search fees and employee allowances paid in 2009 that were not incurred in 2010. net income ( loss ) . for the year ended december 31 , 2011
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the deferral of wellfield development activities resulted in our capital expenditures used in investing activities being reduced by approximately $ 10.2 million to $ 820,000 in 2009. liquiditycash sources and uses for 2012 as of december 31 , 2011 , the company had $ 2.9 million in cash and our cash balance at february 29 , 2012 was approximately $ 2.0 million . the company is not currently conducting uranium production activities and has no uranium inventory . the company is not projecting any sales revenue and related cash inflows for 2012. the company raised $ 10 million on march 9 , 2012 in a private placement of common stock with resource capital fund v l.p. ( `` rcf '' ) . in connection with the transaction we sold 10,259,567 shares of common stock at a price of $ 0.9747 per share . the capital raise was conducted as a part of an 50 acquisition bid for all of the outstanding shares of neutron energy , inc. see ( note 12 '' subsequent event '' ) for a description of this financing and additional funding commitments made by rcf to the company . on october 28 , 2011 , the company entered into an at-the-market sales agreement with btig , llc , allowing it to sell from time to time , its common shares having an aggregate offering price of up to $ 15.0 million , through an `` at-the-market '' equity offering program ( `` atm sales agreement '' ) . the company raised additional capital in november and december 2011 and in january 2012 through the sale of common stock of common stock under this program . during 2011 , a total of 476,644 shares of common stock were sold which resulted in net proceeds of approximately $ 469,000 pursuant to the atm sales agreement . in january 2012 , a total of 1,815,073 shares of common stock were sold which raised net proceeds of approximately $ 1,519,000. the company incurred approximately $ 144,000 in legal , accounting and other fees in connection with its shelf registration statement and the atm sales agreement .
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Liquidity
| 7,699
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pursuant to the company 's story_separator_special_tag the following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto included in part ii , item 8 , the risk factors included in part i , item 1a , and the “ forward-looking statements ” and other risks described herein and elsewhere in this annual report . overview we are a global company with manufacturing facilities in the united states , the philippines and thailand , and sales offices and design centers throughout the world . we design , develop , manufacture and market linear and mixed-signal integrated circuits , commonly referred to as analog circuits , for a large number of customers in diverse geographical locations . the analog market is fragmented and characterized by diverse applications , a great number of product variations and , with respect to many circuit types , relatively long product life cycles . the major end-markets in which we sell our products are the automotive , communications and data center , computing , consumer and industrial markets . we are incorporated in the state of delaware . critical accounting policies the methods , estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements . the securities and exchange commission ( “ sec ” ) has defined the most critical accounting policies as the ones that are most important to the presentation of our financial condition and results of operations , and that require us to make our most difficult and subjective accounting judgments , often as a result of the need to make estimates of matters that are inherently uncertain . based on this definition , our most critical accounting policies include revenue recognition , which impacts the recording of net revenues ; valuation of inventories , which impacts costs of goods sold and gross margins ; the assessment of recoverability of long-lived assets , which impacts impairment of long-lived assets ; assessment of recoverability of intangible assets and goodwill , which impacts impairment of goodwill and intangible assets ; accounting for stock-based compensation , which impacts cost of goods sold , gross margins and operating expenses ; accounting for income taxes , which impacts the income tax provision ; and assessment of litigation and contingencies , which impacts charges recorded in cost of goods sold , selling , general and administrative expenses and income taxes . these policies and the estimates and judgments involved are discussed further below . we have other significant accounting policies that either do not generally require estimates and judgments that are as difficult or subjective , or it is less likely that such accounting policies would have a material impact on our reported results of operations for a given period . our significant accounting policies are described in note 2 to the consolidated financial statements included in this annual report . revenue recognition the company recognizes revenue for sales to direct customers and sales to certain distributors upon shipment , provided that persuasive evidence of a sales arrangement exists , the price is fixed or determinable , title and risk of loss has transferred , collectability of the resulting receivable is reasonably assured , there are no customer acceptance requirements and we do not have any significant post-shipment obligations . the company estimates return for sales to direct customers and certain distributors based on historical returns rates applied against current period gross revenues . specific customer returns and allowances are considered within this estimate . sales to certain distributors are made pursuant to agreements allowing for the possibility of certain sales price rebates or price protection and for non-warranty product return privileges . the non-warranty product return privileges include allowing certain distributors to return a small portion of our products in their inventory based on their previous purchases . given the uncertainties associated with the levels of non-warranty product returns and sales price rebates or price protection that could be issued to certain distributors , the company defers recognition of such revenue and related cost of goods sold until receipt of notification from these distributors that product has been sold to their end-customers . accounts receivable from direct customers and distributors ( excluding those discussed in the immediately preceding paragraph ) are recognized and inventory is relieved upon shipment as title to inventories generally transfers upon shipment at which point the company has a legally enforceable right to collection under normal terms . accounts receivable related to consigned inventory is recognized when the customer takes title to such inventory from its consigned location at which point inventory is relieved , title transfers , and the company has a legally enforceable right to collection under the terms of our agreement with the related customers . the company estimates potential future returns and sales allowances related to current period product revenue . management analyzes historical returns , changes in customer demand and acceptance of products when evaluating the adequacy of returns and sales allowances . estimates made by us may differ from actual returns and sales allowances . these differences may materially 22 impact reported revenue and amounts ultimately collected on accounts receivable . historically , such differences have not been material . at june 28 , 2014 and june 29 , 2013 , the company had $ 16.2 million and $ 12.4 million accrued for returns and allowances against accounts receivable , respectively . during fiscal years 2014 and 2013 , the company recorded $ 75.3 million and $ 65.7 million for estimated returns and allowances against revenues , respectively . these amounts were offset by $ 71.6 million and $ 64.6 million for actual returns and allowances given during fiscal years 2014 and 2013 , respectively . inventories inventories are stated at the lower of ( i ) standard cost , which approximates actual cost on a first-in-first-out basis , or ( ii ) market value . our standard cost revision policy is to continuously monitor manufacturing variances and revise standard costs on a quarterly basis . story_separator_special_tag asc 718 also requires forfeitures to be estimated at the time of grant and revised if necessary in subsequent periods if actual forfeitures or vesting differ from those estimates . such revisions could have a material effect on our operating results . we use the black-scholes valuation model to measure the fair value of our stock options utilizing various assumptions with respect to expected holding period , risk-free interest rates , stock price volatility and dividend yield . the assumptions we use in the valuation model are based on subjective future expectations combined with management judgment . if any of the assumptions used in the black-scholes model changes significantly , stock-based compensation for future awards may differ materially compared to the awards granted previously . accounting for income taxes we must make certain estimates and judgments in the calculation of income tax expense , determination of uncertain tax positions , and in the determination of whether deferred tax assets are more likely than not to be realized . the calculation of our income tax expense and income tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations . asc 740-10 , income taxes ( “ asc 740-10 ” ) , prescribes a recognition threshold and measurement framework for financial statement reporting and disclosure of tax positions taken or expected to be taken on a tax return . under asc 740-10 , a tax position is recognized in the financial statements when it is more likely than not , based on the technical merits , that the position will be sustained upon examination , including resolution of any related appeals or litigation processes . a tax position that meets the recognition threshold is then measured to determine the largest amount of the benefit that has a greater than 50 % likelihood of being realized upon settlement . although we believe that the company 's computation of tax benefits to be recognized and realized are reasonable , no assurance can be given that the final outcome will not be different from what was reflected in our income tax provisions and accruals . such differences could have a material impact on our net income and operating results in the period in which such determination is made . see note 16 : “ income taxes ” in the notes to consolidated financial statements included in this annual report for further information related to asc 740-10. we evaluate our deferred tax asset balance and record a valuation allowance to reduce the net deferred tax assets to the amount that is more likely than not to be realized . in the event it is determined that the deferred tax assets to be realized in the future would be in excess of the net recorded amount , an adjustment to the deferred tax asset valuation allowance would be recorded . this adjustment would increase income , or additional paid in capital , as appropriate , in the period such determination was made . likewise , should it be determined that all or part of the net deferred tax asset would not be realized in the future , an adjustment to increase the deferred tax asset valuation allowance would be charged to income in the period such determination is made . in assessing the need for a valuation allowance , historical levels of income , expectations and risks associated with estimates of future taxable income and ongoing prudent and practicable tax planning strategies are considered . realization of our deferred tax asset is dependent primarily upon future u.s. taxable income . our judgments regarding future profitability may change due to future market conditions , changes in u.s. or international tax laws and other factors . these changes , if any , may require material adjustments to the net deferred tax asset and an accompanying reduction or increase in net income in the period in which such determinations are made . litigation and contingencies from time to time , we receive notices that our products or manufacturing processes may be infringing the patent or other intellectual property rights of others , notices of stockholder litigation or other lawsuits or claims against us . we periodically assess each matter in order to determine if a contingent liability in accordance with asc no . 450 , accounting for contingencies ( “ asc 450 ” ) , should be recorded . in making this determination , management may , depending on the nature of the matter , consult with internal and external legal counsel and technical experts . we expense legal fees associated with consultations and defense of lawsuits as incurred . based on the information obtained , combined with management 's judgment regarding all of the facts and circumstances of each matter , we determine whether a contingent loss is probable and whether the amount of such loss can be estimated . should a loss 24 be probable and estimable , we record a contingent loss in accordance with asc 450. in determining the amount of a contingent loss , we take into consideration advice received from experts in the specific matter , the current status of legal proceedings , settlement negotiations which may be ongoing , prior case history and other factors . should the judgments and estimates made by management be incorrect , we may need to record additional contingent losses that could materially adversely impact our results of operations . alternatively , if the judgments and estimates made by management are incorrect and a particular contingent loss does not occur , the contingent loss recorded would be reversed thereby favorably impacting our results of operations . story_separator_special_tag of net revenues , respectively . there were no significant fluctuations in any specific items making up the selling , general and administrative expenses . 26 the level of selling , general and administrative expenditures as a percentage of net revenues will vary from period to period , depending on the level of net revenues and our success in recruiting sales and administrative personnel needed to support our operations .
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results of operations the following table sets forth certain consolidated statements of income data expressed as a percentage of net revenues for the periods indicated : replace_table_token_5_th the following table shows pre-tax stock-based compensation included in the components of the consolidated statements of income reported above as a percentage of net revenues for the periods indicated : replace_table_token_6_th net revenues we reported net revenues of $ 2,453.7 million , $ 2,441.5 million and $ 2,403.5 million in fiscal years 2014 , 2013 and 2012 , respectively . our net revenues in fiscal year 2014 increased by 0.5 % compared to our net revenues in fiscal year 2013 . revenues from automotive , communications and data center , and industrial products were up 43 % , 20 % and 9 % , respectively , due to an increase in shipments of our products offered in the automotive end market with new design win ramps across multiple applications and customers , an increase in server revenues driven by the volterra acquisition and in demand driven by network and datacom , and cable infrastructure products in the communications and data center end market , and an increase in control and automation shipments in the industrial end market . this increase was offset by a decrease in net revenues in consumer and computing products 25 of 16 % and 4 % , respectively , mainly due to lower demand for products in the consumer end market primarily from smartphones . the decrease in net revenues in consumer products was primarily attributable to a weakness in demand for the products of our leading customer which we expect to continue through the first quarter of fiscal year 2015. our net revenues in fiscal year 2013 increased by 1.6 % , compared to our net revenues in fiscal year 2012 .
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ROO
| 8,893
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from time to time , our working capital will reflect a deficit , while at other times it will reflect a surplus . this fluctuation is not unusual . at december 31 , 2015 and 2014 , we had working capital deficits of $ 90.8 million and $ 85.6 million , respectively . we believe we have adequate availability under our revolving credit facility and liquidity available to meet our working capital requirements . net cash provided by operating activities in 2015 decrease d by $ 495.7 million when compared to 2014 . this decrease was primarily due to lower operating revenues and higher operating expenses ( excluding non-cash expenses ) , partially offset by favorable changes in working capital and other assets and liabilities . the decrease in operating revenues was primarily due to a decrease in realized natural gas and crude oil prices , partially offset by an increase in equivalent production . average realized natural gas and crude oil prices decrease d by 34 % and 48 % , respectively , for 2015 compared to 2014 . equivalent production volumes increase d by 13 % for 2015 over 2014 as a result of higher natural gas production in the marcellus shale and higher oil production in the eagle ford shale . net cash provided by operating activities in 2014 increased by $ 211.9 million over 2013. this increase was primarily due to higher operating revenues , partially offset by higher operating expenses ( excluding non-cash expenses ) and an increase in working capital . the increase in operating revenues was primarily due to an increase in equivalent production , partially offset by a decrease in realized natural gas and crude oil prices . equivalent production volumes increased by 29 % for 2014 compared to 2013 as a result of higher natural gas in the marcellus shale and oil production in the eagle ford shale . average realized natural gas and crude oil prices decreased by 8 % and 12 % , respectively , for 2014 compared to 2013. see `` results of operations `` for additional information relative to commodity price , production and operating expense fluctuations . we are unable to predict future commodity prices and , as a result , can not provide any assurance about future levels of net cash provided by operating activities . investing activities . story_separator_special_tag style= `` font-family : inherit ; font-size:10pt ; `` > 2015 was $ 145.6 million . see note 8 of the notes to the consolidated financial statements for further details . we have no off-balance sheet debt or other similar unrecorded obligations . potential impact of our critical accounting policies our significant accounting policies are described in note 1 to the consolidated financial statements . the preparation of the consolidated financial statements , which is in accordance with accounting principles generally accepted in the united states , requires management to make certain estimates and judgments that affect the amounts reported in our financial statements and the related disclosures of assets and liabilities . the following accounting policies are our most critical policies requiring more significant judgments and estimates . we evaluate our estimates and assumptions on a regular basis . actual results could differ from those estimates . successful efforts method of accounting we follow the successful efforts method of accounting for our oil and gas producing activities . acquisition costs for proved and unproved properties are capitalized when incurred . judgment is required to determine the proper classification of wells designated as developmental or exploratory , which will ultimately determine the proper accounting treatment of costs incurred . exploration costs , including geological and geophysical costs , the costs of carrying and retaining unproved properties and exploratory dry hole costs are expensed . development costs , including costs to drill and equip development wells and successful exploratory drilling costs to locate proved reserves are capitalized . 41 oil and gas reserves the process of estimating quantities of proved reserves is inherently imprecise , and the reserve data included in this document are only estimates . the process relies on interpretations and judgment of available geological , geophysical , engineering and production data . the extent , quality and reliability of this technical data can vary . the process also requires certain economic assumptions , some of which are mandated by the sec , such as natural gas and crude oil prices . additional assumptions include drilling and operating expenses , capital expenditures , taxes and availability of funds . any significant variance in the interpretations or assumptions could materially affect the estimated quantity and value of our reserves and can change substantially over time . periodic revisions to the estimated reserves and future cash flows may be necessary as a result of reservoir performance , drilling activity , commodity prices , fluctuations in operating expenses , technological advances , new geological or geophysical data or other economic factors . accordingly , reserve estimates are generally different from the quantities ultimately recovered . we can not predict the amounts or timing of such future revisions . our reserves have been prepared by our petroleum engineering staff and audited by miller and lents , independent petroleum engineers , who in their opinion determined the estimates presented to be reasonable in the aggregate . for more information regarding reserve estimation , including historical reserve revisions , refer to the supplemental oil and gas information to the consolidated financial statements included in item 8. our rate of recording depreciation , depletion and amortization ( dd & a ) expense is dependent upon our estimate of proved and proved developed reserves , which are utilized in our unit-of-production calculation . if the estimates of proved reserves were to be reduced , the rate at which we record dd & a expense would increase , reducing net income . story_separator_special_tag the amendments in this update require deferred tax liabilities and assets to be classified as noncurrent . the guidance is effective for interim and annual periods beginning after december 15 , 2016 , however early adoption is allowed . this update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented . we elected to early adopt this standard on a prospective basis and , as a result , there have been no adjustments made to prior periods . the adoption of this guidance only affected our financial position and did not have an impact on our results of operations or cash flows . recently issued accounting pronouncements in march 2015 , the fasb issued asu no . 2015-03 , simplifying the presentation of debt issuance costs . the amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability , consistent with debt discounts . the recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update . in august 2015 , the fasb issued asu no . 2015-15 , presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements . the update provides authoritative guidance for debt issuance costs related to line-of-credit arrangements , noting the sec staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement , regardless of whether there are any outstanding borrowings on the line-of-credit arrangement . the guidance is effective for interim and annual periods beginning after december 15 , 2015. we do not believe the adoption of this guidance will have a material effect on our financial position , results of operations or cash flows . in may 2014 , the fasb issued asu no . 2014-09 , revenue from contracts with customers , as a new topic , accounting standards codification topic 606. the new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized . the core principle of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services . in august 2015 , the fasb issued asu no . 2015-14 , revenue from contracts with customers ( topic 606 ) , which deferred the effective date of asu no . 2014-09 by one year , making the new standard effective for interim and annual periods beginning after december 15 , 2017. this asu can be adopted either retrospectively or as a cumulative-effect adjustment as of the date of adoption ; however , entities reporting under u.s. gaap are not permitted to adopt the standard earlier than the original effective date for public entities ( that is , no earlier than 2017 for calendar year-end entities ) . we are currently evaluating the effect that adopting this guidance will have on our financial position , results of operations or cash flows . 44 other issues and contingencies regulations . our operations are subject to various types of regulation by federal , state and local authorities . see `` regulation of oil and natural gas exploration and production , `` `` natural gas marketing , gathering and transportation , `` `` federal regulation of swap transactions , `` `` federal regulation of petroleum , `` `` pipeline safety regulation , `` and `` environmental and safety regulations `` in the `` other business matters `` section of item 1 for a discussion of these regulations . restrictive covenants . our ability to incur debt and to make certain types of investments is subject to certain restrictive covenants in our various debt instruments . due to the significant decrease in oil and natural gas prices during 2015 and the related impact on certain of our financial covenants , effective december 31 , 2015 , we amended the agreements governing our senior notes and revolving credit facility to adjust certain financial covenants and to include an additional financial covenant . among other requirements , our senior note agreements and our revolving credit agreement specify a minimum annual coverage ratio of consolidated cash flow to interest expense for the trailing four quarters of 2.8 to 1.0 , a minimum asset coverage ratio of the present value of proved reserves before income taxes plus adjusted cash to indebtedness and other liabilities of 1.25 to 1.0 , which increases back to the pre-amended ratio of 1.75 to 1.0 beginning on january 1 , 2018 , and a leverage ratio of debt to consolidated ebitdax of 4.75 to 1.0. through and including december 31 , 2016. under the terms of the respective agreements , the leverage ratio will be adjusted to 4.25 to 1.0 through and including december 31 , 2017 and 3.5 to 1.0 beginning on march 31 , 2018 or until we maintain a leverage ratio below 3.0 to 1.0 for two consecutive fiscal quarters on or after december 31 , 2017 or we receive an investment grade rating by standard & poor 's ratings services ( s & p ) or moody 's investor service , inc. ( moody 's ) , at which time we will no longer be subject to this covenant . our revolving credit agreement also requires us to maintain a minimum current ratio of 1.0 to 1.0. at december 31 , 2015 , we were in compliance with all restrictive financial covenants in both our senior note agreements and our revolving credit agreement . operating risks and insurance coverage . our business involves a variety of operating risks . see `` risk factors—we face a variety of hazards and risks
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cash flows provided by financing activities increased by $ 539.6 million from 2013 to 2014 due to $ 545.0 million of higher net borrowings and a decrease in share repurchases of $ 25.8 million , partially offset by a decrease of $ 20.3 million in tax benefits associated with our stock-based compensation , an $ 8.0 million increase in dividends paid and an increase in cash paid for capitalized debt issuance costs of $ 2.9 million . capitalization information about our capitalization is as follows : replace_table_token_11_th _ ( 1 ) includes $ 20.0 million of current portion of long-term debt at december 31 , 2015 and $ 413.0 million and $ 140.0 million of borrowings outstanding under our revolving credit facility at december 31 , 2015 and 2014 , respectively . in 2015 , we did not repurchase any shares of common stock . for the year ended december 31 , 2014 , we repurchased 4.3 million shares for a total cost of $ 138.9 million . during 2015 and 2014 , we also paid dividends of $ 33.1 million ( $ 0.08 per share ) and $ 33.3 million ( $ 0.08 per share ) on our common stock , respectively . capital and exploration expenditures on an annual basis , we generally fund most of our capital expenditures , excluding any significant property acquisitions , with cash generated from operations and , if required , borrowings under our revolving credit facility . we budget these expenditures based on our projected cash flows for the year . in 2015 , capital expenditures exceeded our cash flow from operations , requiring us to fund a portion of our capital expenditures through borrowings under our revolving credit facility .
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Liquidity
| 6,694
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the loss establishes a new basis in the goodwill and subsequent reversal of goodwill impairment losses is not permitted . fair value may be determined using market prices , comparison to similar assets , market multiples , discounted cash flow analysis and other determinants . estimated cash flows may extend far into the future and , by their nature , are difficult to determine over an extended timeframe . factors that may materially affect the estimates include , among others , competitive forces , customer behaviors and attrition , changes in revenue growth trends , cost structures and technology , and changes in discount rates , terminal values , and specific industry or market sector conditions . to assist in assessing the impact of potential goodwill or other intangible assets impairment charges at december 31 , 2018 , the impact of a five percent impairment charge on these intangible assets would result in a reduction in pre-tax income of approximately $ 58.1 million . see note 8 to the consolidated financial statements for additional information regarding goodwill and other intangible assets . income taxes . we are subject to the income tax laws of the u.s. , its states and municipalities . the income tax laws of the jurisdictions in which we operate are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities . in establishing a provision for income tax expense , we must make judgments and interpretations about the application of these inherently complex tax laws to our business activities , as well as the timing of when certain items may affect taxable income . our interpretations may be subject to review during examination by taxing authorities and disputes may arise over the respective tax positions . we attempt to resolve these disputes during the tax examination and audit process and ultimately through the court systems when applicable . we monitor relevant tax authorities and revise our estimate of accrued income taxes due to changes in income tax laws and their interpretation by the courts and regulatory authorities on a quarterly basis . revisions of our estimate of accrued income taxes also may result from our own income tax planning and from the resolution of income tax controversies . such revisions in our estimates may be material to our operating results for any given quarter . the provision for income taxes is composed of current and deferred taxes . deferred taxes arise from differences between assets and liabilities measured for financial reporting versus income tax return purposes . deferred tax assets are recognized if , in management 's judgment , their realizability is determined to be more likely than not . we perform regular reviews to ascertain the realizability of our deferred tax assets . these reviews include management 's estimates and assumptions regarding future taxable income , which also incorporate various tax planning strategies . in connection with these reviews , if we determine that a portion of the deferred tax asset is not realizable , a valuation allowance is established . as of december 31 , 2018 and 2017 , management determined it is more likely than not that valley will realize its net deferred tax assets , except for a valuation allowance of $ 733 thousand established at december 31 , 2018 . however , in the fourth quarter of 2017 we re-measured and reduced our deferred tax assets by $ 15.4 million for the estimated impact of the tax act , which decreased our federal income tax rate from 35 percent to 21 percent effective january 1 , 2018. during 2018 , we recognized a $ 2.3 million tax benefit related to the adjustment of the tax act provisional amounts in our final 2017 tax returns completed in the fourth quarter of 2018. during 2017 , we also reduced our state deferred tax assets by $ 4.5 million to reflect the effect of our organic and acquisition-based expansion primarily in florida on our existing state deferred tax assets . during 2018 and 2017 , the charge to our income tax expense related to the reduction of such deferred tax assets was immaterial . the $ 2.3 million and $ 19.9 million in total adjustments were reflected as credits and charges , respectively , to our income tax expense for 2018 and 2017 , respectively . historically , we maintained a reserve related to certain tax positions that management believes contain an element of uncertainty . an uncertain tax position is measured based on the largest amount of benefit that management believes is more likely than not to be realized . during the fourth quarter of 2018 , income tax expense included a net tax benefit of $ 3.3 million related replace_table_token_40_th to the elimination of our remaining reserve for unrecognized tax benefits caused by the expiration of the statute of limitations for certain tax positions . see notes 1 and 13 to the consolidated financial statements and the “ income taxes ” section in this md & a for an additional discussion on the accounting for income taxes . new authoritative accounting guidance . see note 1 of the consolidated financial statements for a description of recent accounting pronouncements including the dates of adoption and the anticipated effect on our results of operations and financial condition . executive summary company overview . at december 31 , 2018 , valley had consolidated total assets of $ 31.9 billion , total net loans of $ 24.9 billion , total deposits of $ 24.5 billion and total shareholders ' equity of $ 3.4 billion . our commercial bank operations after the acquisition of usameribancorp , inc ( see below ) include branch office locations in northern and central new jersey , the new york city boroughs of manhattan , brooklyn and queens , long island , florida and alabama . of our current 220 branch network , 56 percent , 17 percent , 20 percent and 7 percent of the branches story_separator_special_tag the loss establishes a new basis in the goodwill and subsequent reversal of goodwill impairment losses is not permitted . fair value may be determined using market prices , comparison to similar assets , market multiples , discounted cash flow analysis and other determinants . estimated cash flows may extend far into the future and , by their nature , are difficult to determine over an extended timeframe . factors that may materially affect the estimates include , among others , competitive forces , customer behaviors and attrition , changes in revenue growth trends , cost structures and technology , and changes in discount rates , terminal values , and specific industry or market sector conditions . to assist in assessing the impact of potential goodwill or other intangible assets impairment charges at december 31 , 2018 , the impact of a five percent impairment charge on these intangible assets would result in a reduction in pre-tax income of approximately $ 58.1 million . see note 8 to the consolidated financial statements for additional information regarding goodwill and other intangible assets . income taxes . we are subject to the income tax laws of the u.s. , its states and municipalities . the income tax laws of the jurisdictions in which we operate are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities . in establishing a provision for income tax expense , we must make judgments and interpretations about the application of these inherently complex tax laws to our business activities , as well as the timing of when certain items may affect taxable income . our interpretations may be subject to review during examination by taxing authorities and disputes may arise over the respective tax positions . we attempt to resolve these disputes during the tax examination and audit process and ultimately through the court systems when applicable . we monitor relevant tax authorities and revise our estimate of accrued income taxes due to changes in income tax laws and their interpretation by the courts and regulatory authorities on a quarterly basis . revisions of our estimate of accrued income taxes also may result from our own income tax planning and from the resolution of income tax controversies . such revisions in our estimates may be material to our operating results for any given quarter . the provision for income taxes is composed of current and deferred taxes . deferred taxes arise from differences between assets and liabilities measured for financial reporting versus income tax return purposes . deferred tax assets are recognized if , in management 's judgment , their realizability is determined to be more likely than not . we perform regular reviews to ascertain the realizability of our deferred tax assets . these reviews include management 's estimates and assumptions regarding future taxable income , which also incorporate various tax planning strategies . in connection with these reviews , if we determine that a portion of the deferred tax asset is not realizable , a valuation allowance is established . as of december 31 , 2018 and 2017 , management determined it is more likely than not that valley will realize its net deferred tax assets , except for a valuation allowance of $ 733 thousand established at december 31 , 2018 . however , in the fourth quarter of 2017 we re-measured and reduced our deferred tax assets by $ 15.4 million for the estimated impact of the tax act , which decreased our federal income tax rate from 35 percent to 21 percent effective january 1 , 2018. during 2018 , we recognized a $ 2.3 million tax benefit related to the adjustment of the tax act provisional amounts in our final 2017 tax returns completed in the fourth quarter of 2018. during 2017 , we also reduced our state deferred tax assets by $ 4.5 million to reflect the effect of our organic and acquisition-based expansion primarily in florida on our existing state deferred tax assets . during 2018 and 2017 , the charge to our income tax expense related to the reduction of such deferred tax assets was immaterial . the $ 2.3 million and $ 19.9 million in total adjustments were reflected as credits and charges , respectively , to our income tax expense for 2018 and 2017 , respectively . historically , we maintained a reserve related to certain tax positions that management believes contain an element of uncertainty . an uncertain tax position is measured based on the largest amount of benefit that management believes is more likely than not to be realized . during the fourth quarter of 2018 , income tax expense included a net tax benefit of $ 3.3 million related replace_table_token_40_th to the elimination of our remaining reserve for unrecognized tax benefits caused by the expiration of the statute of limitations for certain tax positions . see notes 1 and 13 to the consolidated financial statements and the “ income taxes ” section in this md & a for an additional discussion on the accounting for income taxes . new authoritative accounting guidance . see note 1 of the consolidated financial statements for a description of recent accounting pronouncements including the dates of adoption and the anticipated effect on our results of operations and financial condition . executive summary company overview . at december 31 , 2018 , valley had consolidated total assets of $ 31.9 billion , total net loans of $ 24.9 billion , total deposits of $ 24.5 billion and total shareholders ' equity of $ 3.4 billion . our commercial bank operations after the acquisition of usameribancorp , inc ( see below ) include branch office locations in northern and central new jersey , the new york city boroughs of manhattan , brooklyn and queens , long island , florida and alabama . of our current 220 branch network , 56 percent , 17 percent , 20 percent and 7 percent of the branches
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total loans increased by $ 6.7 billion to $ 25.0 billion at december 31 , 2018 from december 31 , 2017 , net of residential mortgage loans sold during 2018. adjusted for $ 3.7 billion of loans acquired from usab on january 1 , 2018 , total loans grew by 13.4 percent in 2018 due to strong demand in most loan categories . for 2019 , we have established a goal to grow our overall loan portfolio in the range of 6 to 8 percent . however , there can be no assurance that we will achieve such levels given the potential for unforeseen changes in the market and other conditions . see further details on our loan activities under the “ loan portfolio ” section below . asset quality . our past due loans and non-accrual loans , discussed further below , exclude pci loans . under u.s. gaap , the pci loans ( acquired at a discount that is due , in part , to credit quality ) are accounted for on a pool basis and are not subject to delinquency classification in the same manner as loans originated by valley . at december 31 , 2018 , our pci loan portfolio totaled $ 4.2 billion , or 16.7 percent of our total loan portfolio , and includes all of the loans acquired from usab on january 1 , 2018. total non-pci loan portfolio delinquencies ( including loans past due 30 days or more and non-accrual loans ) as a percentage of total loans were 0.62 percent and 0.70 percent at december 31 , 2018 and 2017 , respectively . total accruing past due loans decreased to $ 67.7 million at december 31 , 2018 from $ 80.5 million at december 31 , 2017 mostly due to normal period-end fluctuations in early stage delinquencies and a few large matured performing commercial real estate and construction loans in the normal process of renewal reported at december 31 , 2017 . non-accrual loans totaled $ 88.4 million , or 0.35 percent of our
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ROO
| 13,805
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all classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into noninterest income in proportion to , and over the period of , the estimated future net servicing income of the underlying loans . servicing assets are evaluated for impairment based upon the fair value of the rights as compared to carrying amount . impairment is determined by stratifying rights into groupings based on predominant risk characteristics , such as interest rate , loan type and investor type . impairment is recognized through a valuation allowance for an individual grouping , to the extent that fair value is less than the carrying amount . if the company later determines that all or a portion of the impairment no longer exists for a particular grouping , a reduction of the allowance may be recorded as an increase to income . changes in valuation allowances are reported with amortization and impairment of servicing assets on the statement of operations . the fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses . servicing fee income that is reported on the statement of operations as loan servicing fees is recorded for fees earned for servicing loans . the fees are based on a contractual percentage of the outstanding principal ; or a fixed amount per loan and are recorded as income when earned . late fees and ancillary fees related to loan servicing are not material . other real estate owned : real estate properties acquired in collection of a loan are initially recorded at fair value less cost to sell at acquisition , establishing a new cost basis . if fair value declines subsequent to foreclosure , a valuation allowance is recorded through expense . operating expenses , gains and losses on disposition , and changes in the valuation allowance are reported in noninterest expense as operations of other real estate owned ( `` oreo `` ) . premises and equipment : land is carried at cost . premises and equipment are stated at cost less accumulated depreciation . depreciation is included in noninterest expense and is computed on the straight-line method over the estimated useful lives of the assets . useful lives are estimated to be 25 to 40 years for buildings and improvements that extend the life of the original building , ten to 20 years for routine building improvements , five to 15 years for furniture and equipment , two to five years for computer hardware and software and no greater than four years on automobiles . the cost of maintenance and repairs is charged to expense as incurred and significant repairs are capitalized . goodwill and other intangible assets : goodwill represents the excess of cost over the fair value of the net assets of businesses acquired . goodwill and other intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized , but instead tested for impairment at least annually . the company has selected december 31 as the date to perform the annual impairment test . intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values . goodwill is the company 's only intangible asset with an indefinite life . the annual impairment analysis of goodwill includes identification of reporting units , the determination of the carrying value of each reporting unit , including the existing goodwill and intangible assets , and estimating the fair value of each reporting unit . the company identified one significant reporting unit—banking operations . the company determined the fair value of our reporting unit and 55 bankfinancial corporation notes to consolidated financial statements ( table amounts in thousands , except share and per share data ) note 1 – summary of significant accounting policies compared it to its carrying amount . if the carrying amount of a reporting unit exceeds its fair value , we are required to perform a second step to the impairment test . our annual impairment analysis as of december 31 , 2011 , indicated that the step two analysis was necessary . it was determined that the implied value of goodwill was less than the carrying amount , and the company reduced the full carrying amount of goodwill with a charge to earnings . step one of our annual impairment analysis performed in 2010 indicated that there was no impairment in our goodwill , as the fair value of the reporting unit exceeded the carrying amount . core deposit intangible assets ( “ cdi ” ) , are recognized apart from goodwill at the time of acquisition based on valuations prepared by independent third parties or other estimates of fair value . in preparing such valuations , variables such as deposit servicing costs , attrition rates , and market discount rates are considered . cdi assets are amortized to expense over their useful lives . bank owned life insurance : the company has purchased life insurance policies on certain key executives . the company owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date , which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement . long-term assets : premises and equipment , core deposit and other intangible assets , and other long-term assets are reviewed for impairment when events indicate that their carrying amount may not be recoverable from future undiscounted cash flows . if impaired , the assets are recorded at fair value . 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 . story_separator_special_tag “ as-stabilized ” or “ as-completed ” valuations may be subject to a present value adjustment for market conditions or the schedule of improvements . as part of the asset classification process , we develop an exit strategy for real estate collateral or oreo by assessing overall market conditions , the current use and condition of the asset , and its highest and best use . for most income–producing real estate , we believe that investors value most highly a stable income stream from the asset ; consequently , we perform a comparative evaluation to determine whether conducting a sale on an “ as–is ” , “ as–stabilized ” or “ as–improved ” basis is most likely to produce the highest net realizable value . if we determine that the “ as–stabilized ” or “ as–improved ” basis is appropriate , we then complete the necessary improvements or tenant stabilization tasks , with the applicable time value discount and improvement expenses incorporated into our estimates of the expected costs to sell . as of december 31 , 2012 , substantially all impaired real estate loan collateral and oreo were valued on an “ as–is basis . ” estimates of the net realizable value of real estate collateral also include a deduction for the expected costs to sell the collateral or such other deductions from the cash flows resulting from the operation and liquidation of the asset as are appropriate . for most real estate collateral subject to the judicial foreclosure process , we apply a 10.0 % deduction to the value of the asset to determine the expected costs to sell the asset . this estimate includes one year of real estate taxes , sales commissions and miscellaneous repair and closing costs . if we receive a purchase offer that requires unbudgeted repairs , or if the expected resolution period for the asset exceeds one year , we then include , on a case-by-case basis , the costs of the additional real estate taxes and repairs and any other material holding costs in the expected costs to sell the collateral . for oreo , we only apply a 7.0 % deduction to determine the expected costs to sell , as expenses for real estate taxes and repairs are expensed when incurred . 30 nonperforming assets summary the following table below sets forth the amounts and categories of our nonperforming loans and nonperforming assets . replace_table_token_12_th ( 1 ) these asset quality ratios exclude purchased impaired loans and purchased other real estate owned resulting from the downers grove national bank acquisition . 31 nonperforming assets nonperforming assets decreased by $ 60.3 million in 2012 , due in substantial part to the execution of the company 's plan to materially reduce future nonperforming asset expenses and accelerate the return to the company 's historical asset quality levels . the actions that were taken in 2012 in furtherance of the plan included : we completed two bulk sales of certain nonperforming assets with a total carrying value of $ 22.7 million , consisting of $ 22.0 million of nonperforming loans and $ 710,000 of oreo . we recorded a pre-tax charges of approximately $ 11.5 million on the completion of these sales in the fourth quarter 2012. we designated certain owner-occupied and investor-owned one-to-four family residential loans with a carrying value of $ 7.5 million as “ held for sale ” in preparation for a bulk sale . the loans generally involved properties that exhibited significant declines in collateral valuations and or presented limited resolution options . the designation resulted in a $ 5.9 million pre-tax charge to provision for loan losses in the consolidated statement of operations . on february 28 , 2013 , we completed the sale of these loans . the completion of this sale is expected to result in pre-tax gain on sale of loans of approximately $ 1.3 million . we engaged in split-note restructurings with four separate borrowers pursuant to applicable published regulatory and accounting guidance . the loans had an aggregate carrying value of $ 7.1 million prior to the completion of the restructurings . at the conclusion of the restructurings , $ 5.2 million remained on accrual status due to these actions and are expected to be eligible for favorable risk-rating classification in 2013 after a period of sustained performance . the remaining $ 1.9 million was charged against the provision for loan losses for the quarter ended december 31 , 2012. in 2012 , we closed $ 13.4 million in oreo sales , or 59.6 % of total oreo at december 31 , 2011. we also changed our disposition strategy on certain income-producing oreo assets from an ordinary-liquidation pricing model to an aggressive pricing model designed to stimulate market demand , and recorded related valuation adjustments . our evaluation methodology involved an assessment of the disposition strategy that was likely to provide the highest cash proceeds within a defined period of time . other real estate owned real estate that is acquired through foreclosure or a deed in lieu of foreclosure is classified as oreo until it is sold . when real estate is acquired through foreclosure or by deed in lieu of foreclosure , it is recorded at its fair value , less the estimated costs of disposal . if the fair value of the property is less than the loan balance , the difference is charged against the allowance for loan losses . the following represents the rollfoward of oreo and the composition of oreo properties . replace_table_token_13_th 32 replace_table_token_14_th activity in the valuation allowance : at and for the years ended december 31 , 2012 beginning of year $ — additions charged to expense 1,180 recoveries credited to expense — reductions from sales of other real estate owned — direct write downs — end of year $ 1,180 loan extensions and modifications maturing loans are subject to our standard loan underwriting policies and practices . due to the need to obtain
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at december 31 , 2012 our mortgage-backed securities and collateralized mortgage obligations ( “ cmos ” ) reflected in the following table were issued by u.s. government-sponsored enterprises and agencies , freddie mac , fannie mae and ginnie mae , and are obligations which the federal government has affirmed its commitment to support . all securities reflected in the table were classified as available-for-sale at december 31 , 2012 , 2011 and 2010 . we hold fhlbc common stock to qualify for membership in the federal home loan bank system and to be eligible to borrow funds under the fhlbc 's advance program . the aggregate cost of our fhlbc common stock as of december 31 , 2012 was $ 8.4 million based on its par value . there is no market for fhlbc common stock . due to our receipt of stock dividends in prior years and the amount of our outstanding fhlbc advances , we owned shares of fhlbc common stock at december 31 , 2012 with a par value that was $ 1.1 million more than we were required to own to maintain our membership in the federal home loan bank 26 system and to be eligible to obtain advances ( “ excess ” or “ voluntary ” capital stock ) . during 2012 , we redeemed $ 7.9 million of excess fhlbc stock . the following table sets forth the composition , amortized cost and fair value of our securities . replace_table_token_8_th the fair values of marketable equity securities are generally determined by quoted prices , in active markets , for each specific security . if quoted market prices are not available for a marketable equity security , we determine its fair value based on the quoted price of a similar security traded in an active market . the fair values of debt securities are generally determined by matrix pricing , which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities , but rather by relying on the securities ' relationship to other benchmark quoted securities . the fair value of a security is used to determine the amount of any unrealized losses that must be reflected in our other comprehensive income and the net book value of our securities . we evaluate marketable investment securities with significant declines in fair
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Liquidity
| 6,544
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management has elected the fair value option for these items to offset the corresponding change in fair value of related interest rate swap agreements . fair value is determined using discounted cash flows and credit quality indicators . changes in fair value are reported through the consolidated statements of income as a part of other noninterest income . interest income on securities includes amortization of purchase premiums and discounts . premiums and discounts on securities are generally amortized using the interest method with a constant effective yield without anticipating prepayments , except for mortgage-backed securities where prepayments are anticipated . premiums on callable securities are amortized to their earliest call date . a security is placed on nonaccrual status if ( i ) principal or interest has been in default for a period of 90 days or more or ( ii ) full payment of principal and interest is not expected . interest accrued but not received for a security placed on nonaccrual status is reversed against interest income . gains and losses on sales are recorded on the trade date , are derived from the amortized cost of the security sold and are determined using the specific identification method . prior to the adoption of asu 2016-13 , declines in the fair value of held-to-maturity and available-for-sale securities below their cost that were deemed to be other than temporary were reflected in earnings as realized losses . in estimating other-than-temporary impairment losses prior to january 1 , 2020 , management considered , among other things , ( i ) the length of time and the extent to which the fair value had been less than cost , ( ii ) the financial condition and near-term prospects of the issuer and ( iii ) the intent and our ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value . non-marketable equity securities held in other financial institutions . securities with limited marketability , such as stock in the federal reserve bank of dallas ( `` frb `` ) or the federal home loan bank of dallas ( `` fhlb `` ) , are carried at cost , less impairment , if any . these investments in stock do not have readily determinable fair values . the company 's remaining equity investments in other financial institutions , excluding frb and fhlb , totaling $ 12.1 million at december 31 , 2020 and 2019 , respectively , qualify for the practicability exception under accounting standards update ( `` asu `` ) 2016-01 due to having illiquid markets and are carried at cost , less impairment , plus or minus any observable price changes . the carrying value of these securities was evaluated and was determined not to be impaired for the years ended december 31 , 2020 , 2019 and 2018. loans held for sale . loans held for sale include mortgage loans and are carried at fair value , with unrealized gains and losses recorded in the consolidated statements of income . forward commitments to sell mortgage loans are acquired to reduce market risk on mortgage loans in the process of origination and mortgage loans held for sale . the forward commitments acquired by the company for mortgage loans in process of origination are mandatory forward commitments , and the company is required to substitute another loan or to buy back the commitment if the original loan does not fund . typically , the company delivers the mortgage loans within a few days after the loans are funded . these commitments are derivative instruments carried at fair value . 90 origin bancorp , inc. notes to consolidated financial statements gains and losses resulting from sales of mortgage loans are realized when the respective loans are sold to investors . gains and losses are determined by the difference between the selling price ( including the fair value of any items such as mortgage servicing rights ) and the carrying amount of the loans sold . fees received from borrowers to guarantee the funding of mortgage loans held for sale are recognized as income or expense when the loans are sold or when it becomes evident that the commitment will not be used . loans . loans that management has the intent and ability to hold for the foreseeable future , or until maturity or payoff , are reported at their outstanding unpaid principal balances adjusted for charge-offs , the allowance for credit losses , and any deferred fees or costs on originated loans . interest income is accrued on the unpaid principal balance . loan origination fees , and certain direct origination costs , are deferred and amortized as a yield adjustment over the lives of the related loans using the interest method . late fees are recognized as income when earned , assuming collectability is reasonably assured . the company has elected the fair value option on a small portion of its lhfi , with changes in fair value recorded in noninterest income . for these loans , the earned current contractual interest payment is recognized in interest income . loan origination costs and fees are recognized in earnings as incurred and not deferred . because these loans are recognized at fair value , the company 's allowance for credit losses policy does not apply to these loans . fair value is determined using discounted cash flows and credit quality indicators . in addition to loans issued in the normal course of business , the company considers overdrafts on customer deposit accounts to be loans and classifies these overdrafts as loans in its consolidated balance sheets . loans are placed on nonaccrual status when management believes that the borrower 's financial condition , after giving consideration to economic and business conditions and collection efforts , is such that collection of interest is doubtful , or generally when loans are 90 days or more past due . story_separator_special_tag at december 31 , 2020 , 74.9 % of the loan portfolio held for investment was comprised of commercial and industrial loans , including ppp loans , mortgage warehouse lines of credit and commercial real estate loans , which were primarily originated within our market areas of texas , north louisiana , and mississippi . 58 the following table presents the ending balance of our loan portfolio held for investment at the dates indicated . replace_table_token_9_th replace_table_token_10_th at december 31 , 2020 , total lhfi were $ 5.72 billion , an increase of $ 1.58 billion , or 38.2 % , compared to $ 4.14 billion at december 31 , 2019. the increase reflected growth in all significant loan categories except for commercial and industrial loans . the largest increases are primarily reflected in mortgage warehouse lines of credit and ppp loans , which increased $ 809.3 million and $ 546.5 million , respectively . the increase in mortgage warehouse lines of credit is primarily due to increased mortgage activity driven by the continued low interest rate environment , coupled with additional mortgage warehouse clients being onboarded and funding loans during 2020. this increased mortgage related activity , as well as market disruption following merger activity by our peers and competitors , has allowed us to add new customers in the warehouse lines of credit portfolio , and caused us to increase limits to support the record volume of loan purchase and refinance activity . our lending focus is on operating companies , including commercial loans and lines of credit as well as owner-occupied commercial real estate loans . we currently do not plan to significantly alter the real estate concentrations within our loan portfolio , however , we believe the volume within our mortgage warehouse lines of credit portfolio will decline over the next year . under the cares act , congress allocated funds to the ppp , which is designed to provide short-term loans to certain qualifying businesses who retain employees during the covid-19 pandemic . these loans , totaling $ 546.5 million for the company at december 31 , 2020 , have maximum maturity of two years , and we anticipate many of them will be forgiven by the small business administration under the terms of the ppp before their maturity date . as of february 18 , 2021 , $ 88.8 million of origin bank originated ppp loans have been forgiven under this program . the loans will bear a fixed rate of interest at one percent for the entire term . 59 loan portfolio maturity analysis the table below presents the maturity distribution of our lhfi at december 31 , 2020. the table also presents the portion of our loans that have fixed interest rates , rather than interest rates that fluctuate over the life of the loans based on changes in the interest rate environment . replace_table_token_11_th loan portfolio covid-19 impact the covid-19 pandemic has continued to have a severe impact on the u.s. economy leading to severe unemployment and a recession . consequently , the deteriorating economic outlook caused us to significantly increase the allowance for loan credit losses during the year ended december 31 , 2020 , resulting in additional provision expense and reduced earnings during the period . due to the ongoing economic impact of the covid-19 pandemic and governmental efforts to contain it , we believe that certain sectors of the u.s. economy may be more affected than others . some of the sectors in which we operate that may experience a more significant impact include hotel , energy , non-essential retail , restaurant and assisted living . at december 31 , 2020 , we had $ 538.6 million , or 10.4 % , of our lhfi , excluding ppp loans , invested in these sectors and , while we have recorded significant loss reserves , the reserves are an estimate and subject to change . nonperforming lhfi in the sectors impacted by covid-19 was $ 5.9 million at december 31 , 2020 , while past due lhfi , defined as loans 30 days or more past due , as a percentage of lhfi in these sectors , excluding ppp loans , was 1.0 % at december 31 , 2020. loans in covid-19 related forbearance totaled $ 97.7 million and represented 1.9 % of lhfi , excluding ppp loans , at december 31 , 2020. it is difficult to predict the future impact of the covid-19 pandemic as there is significant ongoing uncertainty surrounding the course of the covid-19 pandemic , including the possible implementation of new or additional restrictions on economic activity . 60 certain key data regarding the sectors that may experience a more significant impact due to covid-19 at december 31 , 2020 , is reflected in the table below . the information presented excludes ppp loans . replace_table_token_12_th nonperforming assets nonperforming assets consist of nonperforming loans and property acquired through foreclosures or repossession , as well as bank-owned property not currently in use and listed for sale . loans are considered past due when principal and interest payments have not been received at the date such payments are contractually due . we discontinue accruing interest on loans when we determine the borrower 's financial condition is such that collection of interest and principal payments in accordance with the terms of the loan are not reasonably assured . loans may be placed on nonaccrual status even if the contractual payments are not past due if information becomes available that causes substantial doubt about the borrower 's ability to meet the contractual obligations of the loan . all interest accrued but not collected for loans that are placed on nonaccrual status is reversed against interest income . interest income is subsequently recognized only to the extent cash payments are received in excess of principal outstanding . loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably
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securities in our investment portfolio are also used to secure certain deposit types , such as deposits from state and local municipalities , and can be pledged as collateral for other borrowing sources . other sources available for meeting liquidity needs include long- and short-term advances from the fhlb , and federal funds lines of credit . long-term funds obtained from the fhlb are primarily used as an alternative source to fund long-term growth of the balance sheet by supporting growth in loans and other long-term interest-earning assets . we typically rely on such funding when the cost of such borrowings compares favorably to the rates that we would be required to pay for other funding sources , including certain deposits . see note 11 - borrowings contained in item 8 of this report for additional borrowing capacity and outstanding advances at the fhlb . we also had unsecured federal funds lines of credit available to us , with no amounts outstanding at either december 31 , 2020 , or december 31 , 2019. these lines of credit primarily provide short-term liquidity and in order to ensure availability of these funds , we test these lines of credit at least annually . interest is charged at the prevailing market rate on federal funds purchased and fhlb advances . additionally , we had the ability to borrow at the discount window of the frb using our commercial and industrial loans as collateral . there were no borrowings against this line at december 31 , 2020 . 71 in february 2020 , origin bank completed an offering of $ 70.0 million in aggregate principal amount of 4.25 % fixed-to-floating rate subordinated notes due 2030 ( the “ notes ” ) to certain investors in a transaction exempt from registration under section 3 ( a ) ( 2 ) of the securities act of 1933 , as amended . the notes provided us with $ 68.8 million in additional liquidity . in october 2020 , we completed an offering of $ 80.0 million in aggregate principal amount of 4.50 % fixed-to floating rate subordinated notes due 2030 ( the “ 4.50 % notes ” ) . < span
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Liquidity
| 7,016
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proposed merger on february 22 , 2014 , we entered into the merger agreement with triquint providing for the combination of rfmd and triquint in a merger of equals under a new holding company currently named rocky holding , inc. we believe the combination will create a new leader in radio frequency solutions , with new growth opportunities and a broad portfolio of enabling technologies . upon completion of the mergers , rfmd shareholders will receive 0.2500 of a share of common stock of the new holding company for each share of rfmd common stock , and triquint stockholders will receive 0.4187 of a share of common stock of the new holding company for each share of triquint common stock . we anticipate that rfmd shareholders and triquint stockholders will each hold approximately 50 % of the shares of common stock of the new holding company issued and outstanding immediately after completion of the mergers . rocky holding , inc. intends to apply to list its 31 common stock on the nasdaq global select market , subject to official notice of issuance . prior to completion of the mergers , we anticipate that rocky holding , inc. will change its name , adopt a nasdaq symbol for its common stock , and register a new trade name and logo that reflect the key attributes of the combined company . consummation of the merger with triquint is subject to , among other things , the separate approvals of both rfmd shareholders and triquint stockholders and regulatory approvals . we currently anticipate the merger will be completed during the second half of calendar year 2014. business segments we design , develop , manufacture and market our products to both domestic and international original equipment manufacturers and original design manufacturers in both wireless and wired communications applications , in each of our following operating segments . cellular products group ( cpg ) is a leading global supplier of cellular rf solutions which perform various functions in the cellular front end section . the cellular front end section is located between the transceiver and the antenna . these rf solutions include power amplifier ( pa ) modules , transmit modules , pa duplexer modules , antenna control solutions , antenna switch modules , switch filter modules , switch duplexer modules , and rf power management solutions . cpg supplies its broad portfolio of cellular rf solutions into a variety of mobile devices , including smartphones , handsets , notebook computers and tablets . multi-market products group ( mpg ) is a leading global supplier of a broad array of rf solutions , such as pas , low noise amplifiers , variable gain amplifiers , high power gallium nitride transistors , attenuators , modulators , switches , vcos , phase locked loop modules , multi-chip modules , front end modules , and a range of military and space components ( amplifiers , mixers , vcos and power dividers ) . major communications applications include mobile wireless infrastructure , point-to-point and microwave radios , small cells , wifi ( routers , access points , mobile devices and customer premises equipment ) , and catv infrastructure . industrial applications include smart energy/ami , private mobile radio , and test and measurement equipment . aerospace and defense applications include military communications , radar and electronic warfare , as well as space communications . during fiscal 2013 , our foundry services were realigned from our compound semiconductor group to our mpg . compound semiconductor group ( csg ) is a business group that was established to leverage our compound semiconductor technologies and related expertise in rf and non-rf end markets and applications . as of march 29 , 2014 , our reportable segments are cpg and mpg . csg does not currently meet the quantitative threshold for an individually reportable segment under asc 280-10-50-12. 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 . fiscal 2014 management summary our revenue increased 19.1 % in fiscal 2014 to $ 1,148.2 million as compared to $ 964.1 million in fiscal 2013 , primarily due to increased demand for our cellular rf solutions for smartphones and our wifi products . our gross margin for fiscal 2014 increased to 35.3 % as compared to 31.7 % for fiscal 2013 . this increase was primarily due to manufacturing and sourcing-related cost reductions and increased demand , which were partially offset by average selling price erosion . our operating income was $ 27.3 million in fiscal 2014 as compared to an operating loss of $ 15.7 million in fiscal 2013 . this increase was primarily due to higher revenue and improved gross margin , which was partially offset by increased personnel expenses , impairment of iprd , increased consulting expenses , restructuring expenses associated with achieving both manufacturing efficiencies and operating expense reductions , expenses related to the proposed merger with triquint , and expenses related to the phase out of manufacturing and sale of our u.k-based gaas facility . our net income per diluted share was $ 0.04 for fiscal 2014 compared to net loss per diluted share of $ 0.19 for fiscal 2013 . 32 we generated positive cash flow from operations of $ 130.8 million for fiscal 2014 as compared to $ 71.3 million for fiscal 2013 . this year-over-year increase was primarily attributable to improved profitability resulting from higher revenue . capital expenditures totaled $ 66.8 million in fiscal 2014 as compared to $ 54.6 million in fiscal 2013 , primarily due to the addition of manufacturing capacity . story_separator_special_tag consequently , we determined that this represented significant negative evidence , and that it was no longer “ more likely than not ” that any u.k. deferred tax assets remaining at the end of fiscal 2014 would ultimately be realized . the valuation allowance against net deferred tax assets decreased in fiscal 2014 by $ 20.9 million . 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 amalfi acquisition and $ 2.8 million for 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 . 37 as of march 29 , 2014 , we had federal loss carryovers of approximately $ 118.9 million that expire in fiscal years 2020 to 2032 if unused and state losses of approximately $ 109.6 million that expire in fiscal years 2015 to 2032 if unused . federal research credits of $ 64.4 million , federal foreign tax credits of $ 6.2 million , and state credits of $ 22.5 million may expire in fiscal years 2015 to 2033 , 2018 to 2023 , and 2015 to 2028 , respectively . federal alternative minimum tax credits of $ 1.5 million carry forward indefinitely . included in the amounts above are certain net operating losses ( nols ) and other tax attribute assets acquired in conjunction with the filtronic , sirenza , silicon wave , inc. , and amalfi acquisitions . 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 $ 31.7 million as of march 31 , 2012 , $ 37.9 million as of march 30 , 2013 , and $ 39.4 million as of march 29 , 2014. of these amounts , $ 24.4 million ( net of federal benefit of state taxes ) , $ 29.7 million ( net of federal benefit of state taxes ) , and $ 30.9 million ( net of federal benefit of state taxes ) as of march 31 , 2012 , march 30 , 2013 , 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 the company 's policy to recognize interest and penalties related to uncertain tax positions as a component of income tax expense . as of march 29 , 2014 accrued interest and penalties related to unrecognized tax benefits totaled $ 2.3 million , of which $ 0.9 million was recognized in fiscal 2014. included in the balance of gross unrecognized tax benefits at march 29 , 2014 , is up to $ 0.5 million related to tax positions for which it is reasonably possible that the total amounts could significantly change in the next 12 months . this amount represents a potential decrease in gross unrecognized tax benefits related to reductions for tax positions in prior years . share-based compensation under fasb asc 718 , “ compensation – stock compensation ” ( asc 718 ) , share-based compensation cost is measured at the grant date , based on the estimated fair value of the award using an option pricing model ( black-scholes ) , and is recognized as expense over the employee 's requisite service period . as of march 29 , 2014 , total remaining unearned compensation cost related to nonvested restricted stock units and options was $ 22.8 million , which will be amortized over the weighted-average remaining service period of approximately 1.2 years . story_separator_special_tag style= `` line-height:120 % ; text-align : left ; font-size:10pt ; `` > contractual obligations the following table summarizes our significant contractual obligations and commitments ( in thousands ) as of march 29 , 2014 , and the effect such obligations are expected to have on our liquidity and cash flows in future periods . payments due by period total less than more than payments 1 year 1-3 years 3-5 years 5 years capital commitments $ 9,760 $ 9,221 $ 539 $ — $ — capital leases 91 73 18 — — operating leases 48,843 8,899 14,687 9,410 15,847 convertible debt ( including interest ) * 87,941 87,941 — — — purchase obligations 103,710 100,632 3,078 — — wafer supply agreement 7,166 7,166 — — — total $ 257,511 $ 213,932 $ 18,322 $ 9,410 $ 15,847 * the 2014 notes had a remaining principal balance of $ 87.5 million as of march 29 , 2014. the 2014 notes were subsequently retired on april 15 , 2014. capital commitments on march 29 , 2014 , we had capital commitments of approximately $ 9.8 million , primarily for increasing manufacturing capacity , as well as for equipment replacements , equipment for process improvements and general corporate requirements . capital leases we lease certain equipment and computer hardware and software under non-cancelable lease agreements that are accounted for as capital leases . interest rates on capital leases ranged from 6.0 % to 6.4 % as of march 29 , 2014 . equipment under capital lease arrangements is included in property and equipment and has a net cost of approximately $ 0.3 million as of both march 29 , 2014 and march 30 , 2013 . operating leases we lease the majority of our corporate , wafer fabrication and other facilities from several third-party real estate developers . the remaining terms of these operating leases range from approximately one year to 14 years . several have renewal
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liquidity and capital resources we have funded our operations to date through sales of equity and debt securities , bank borrowings , capital equipment leases and revenue from product sales . beginning in fiscal 1998 , we have raised approximately $ 1,053.3 million , net of offering expenses , from public and rule 144a securities offerings . as of march 29 , 2014 , we had working capital of approximately $ 317.4 million , including $ 171.9 million in cash and cash equivalents , compared to working capital at march 30 , 2013 , of $ 330.5 million , including $ 101.7 million in cash and cash equivalents . our total cash , cash equivalents and short-term investments were $ 244.0 million as of march 29 , 2014 . this balance includes approximately $ 49.6 million held by our foreign subsidiaries . if 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 . however , under our current plans , we expect to permanently reinvest these funds outside of the u.s. and do not expect to repatriate them to fund our u.s. operations . share repurchase on january 25 , 2011 , we announced that our board of directors authorized the repurchase of up to $ 200 million of our outstanding common stock , exclusive of related fees , commissions or other expenses , from time to time during a period commencing on january 28 , 2011 and expiring on january 27 , 2013. this share repurchase program authorizes the company to repurchase shares through solicited or unsolicited transactions in the open market or in privately negotiated transactions . on january 31 , 2013 , our board of directors authorized an extension of our 2011 share repurchase program to repurchase up to $ 200 million of our outstanding common stock through january 31 , 2015. during fiscal 2014 , we repurchased 2.5 million shares at an average price of $ 5.03 on the open market .
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Liquidity
| 8,837
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the followings are highlights of our operating results : total revenue was $ 1,363.3 million , up 12.9 % from fiscal 2012. license revenue was $ 279.6 million , down 4.8 % from fiscal 2012. gaap-based eps , diluted , was $ 2.51 compared to $ 2.13 in fiscal 2012. non-gaap-based eps , diluted , was $ 5.57 compared to $ 4.60 in fiscal 2012. gaap-based operating margin was 14.5 % compared to 12.4 % in fiscal 2012. non-gaap-based operating margin was 29.3 % compared to 27.3 % in fiscal 2012. operating cash flow was $ 318.5 million , up 19.5 % from fiscal 2012. cash and cash equivalents was $ 470.4 million as of june 30 , 2013 , compared to $ 559.7 million as of june 30 , 2012 . during fiscal 2013 we declared our first ever quarterly dividend at the rate of $ 0.30 per common share , equivalent to a cash payout of approximately $ 17 million . see `` use of non-gaap financial measures '' below for a reconciliation of non-gaap-based measures to gaap-based measures . acquisitions our competitive position in the marketplace requires us to maintain a complex and evolving array of technologies , products , services and capabilities . in light of the continually evolving marketplace in which we operate , we regularly evaluate various acquisition opportunities within the eim market . we made three acquisitions during fiscal 2013. on may 23 , 2013 , we acquired iccm professional services limited ( iccm ) , a provider of it service management software solutions , based in malmesbury , united kingdom , for $ 18.9 million . on march 5 , 2013 , we acquired resonate kt limited ( rkt ) , a company based in cardiff , united kingdom , for $ 20.0 million . rkt is a leading provider of software that enables organizations to visualize unstructured data , create new user experiences for ecm and xecm for sap , as well as build industry based applications that maximize unstructured data residing within content server , a key component of the opentext ecm suite . on july 2 , 2012 , we acquired easylink services international corporation ( easylink ) , a company based in georgia , usa and a global provider of cloud-based electronic messaging and business integration services for $ 342.3 million . we believe our acquisitions support our long-term strategic direction , strengthen our competitive position , expand our customer base , provide greater scale to accelerate innovation , grow our earnings and increase shareholder value . we expect to continue to strategically acquire companies , products , services and technologies to augment our existing business . see note 18 “ acquisitions ” to our consolidated financial statements for more details . outlook for fiscal 2014 we believe we have a strong position in the eim market . our goal is to build on our leadership in ecm , bpm , cem , and ix and to expand our position in discovery , while continuing to expand our leadership in eim . we continue to have approximately 50 % of our revenues from customer support revenues , which are generally a recurring source of income , and we expect this trend will continue . also , in fiscal 2013 we recognized cloud services revenue and we expect this service to be an important growth driver in the future . we also believe that our diversified geographic profile helps strengthen our position and helps to reduce our impact from a downturn in the economy that may occur in any one specific region . critical accounting policies and estimates the preparation of financial statements in conformity with u.s. gaap requires us to make estimates , judgments and assumptions that affect the amounts reported in the consolidated financial statements . these estimates , judgments and assumptions are evaluated on an ongoing basis . we base our estimates on historical experience and on various other assumptions that we believe are reasonable at that time , 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 materially from those estimates . the accounting policies that reflect our more significant estimates , judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following : ( i ) revenue recognition , ( ii ) goodwill , 28 ( iii ) acquired intangibles , ( iv ) restructuring charges , ( v ) business combinations , ( vi ) foreign currency , and ( vii ) income taxes . revenue recognition license revenues we recognize revenues in accordance with asc topic 985-605 , “ software revenue recognition ” ( topic 985-605 ) . we record product revenues from software licenses and products when persuasive evidence of an arrangement exists , the software product has been shipped , there are no significant uncertainties surrounding product acceptance by the customer , the fees are fixed and determinable , and collection is considered probable . we use the residual method to recognize revenues on delivered elements when a license agreement includes one or more elements to be delivered at a future date if evidence of the fair value of all undelivered elements exists . if an undelivered element for the arrangement exists under the license arrangement , revenues related to the undelivered element is deferred based on vendor-specific objective evidence ( vsoe ) of the fair value of the undelivered element . our multiple-element sales arrangements include arrangements where software licenses and the associated post contract customer support ( pcs ) are sold together . we have established vsoe of the fair value of the undelivered pcs element based on the contracted price for renewal pcs included in the original multiple element sales arrangement , as substantiated by contractual terms and our significant pcs renewal experience , from our existing worldwide base . story_separator_special_tag our multiple element sales arrangements generally include irrevocable rights for the customer to renew pcs after the bundled term ends . the customer is not subject to any economic or other penalty for failure to renew . further , the renewal pcs options are for services comparable to the bundled pcs and cover similar terms . it is our experience that customers generally exercise their renewal pcs option . in the renewal transaction , pcs is sold on a stand-alone basis to the licensees one year or more after the original multiple element sales arrangement . the exercised renewal pcs price is consistent with the renewal price in the original multiple element sales arrangement , although an adjustment to reflect consumer price changes is not uncommon . if vsoe of fair value does not exist for all undelivered elements , all revenues are deferred until sufficient evidence exists or all elements have been delivered . we assess whether payment terms are customary or extended in accordance with normal practice relative to the market in which the sale is occurring . our sales arrangements generally include standard payment terms . these terms effectively relate to all customers , products , and arrangements regardless of customer type , product mix or arrangement size . exceptions are only made to these standard terms for certain sales in parts of the world where local practice differs . in these jurisdictions , our customary payment terms are in line with local practice . cloud revenues cloud revenues consist of subscription revenues for our software as a service offering . the majority of the contracts for our software as a service offering are based on customers ' usage over a period and the revenue associated with those contracts are recognized once the usage has been measured , the fee fixed and determinable and collection is probable . some of the contracts for our software as a service offering have an established fixed periodic fee and the revenue associated with those contracts are recognized ratably over the term of the contract . the majority of our hosting services contracts have an established fixed periodic fee and the revenue associated with those are recognized ratably over the term of the contract . service revenues service revenues consist of revenues from consulting , implementation , training and integration services . these services are set forth separately in the contractual arrangements such that the total price of the customer arrangement is expected to vary as a result of the inclusion or exclusion of these services . for those contracts where the services are not essential to the functionality of any other element of the transaction , we determine vsoe of fair value for these services based upon normal pricing and discounting practices for these services when sold separately . these consulting and implementation services contracts are primarily time and materials based contracts that are , on average , less than six months in length . revenues from these services are recognized at the time such services are rendered . 29 we also enter into contracts that are primarily fixed fee arrangements wherein the services are not essential to the functionality of a software element . in such cases , the proportional performance method is applied to recognize revenues . revenues from training and integration services are recognized in the period in which these services are performed . customer support revenues customer support revenues consist of revenues derived from contracts to provide pcs to license holders . these revenues are recognized ratably over the term of the contract . advance billings of pcs are not recorded to the extent that the term of the pcs has not commenced and payment has not been received . deferred revenues deferred revenues primarily relate to support agreements which have been paid for by customers prior to the performance of those services . generally , the services will be provided in the twelve months after the signing of the agreement . long-term sales contracts we entered into certain long-term sales contracts involving the sale of integrated solutions that include the modification and customization of software and the provision of services that are essential to the functionality of the other elements in this arrangement . as prescribed by asc topic 985-605 , we recognize revenues from such arrangements in accordance with the contract accounting guidelines in asc topic 605-35 , “ construction-type and production-type contracts ” ( topic 605-35 ) , after evaluating for separation of any non-topic 605-35 elements in accordance with the provisions of asc topic 605-25 , “ multiple-element arrangements ” ( topic 605-25 ) . when circumstances exist that allow us to make reasonably dependable estimates of contract revenues , contract costs and the progress of the contract to completion , we account for sales under such long-term contracts using the percentage-of-completion ( poc ) method of accounting . under the poc method , progress towards completion of the contract is measured based upon either input measures or output measures . we measure progress towards completion based upon an input measure and calculate this as the proportion of the actual hours incurred compared to the total estimated hours . for training and integration services rendered under such contracts , revenues are recognized as the services are rendered . we will review , on a quarterly basis , the total estimated remaining costs to completion for each of these contracts and apply the impact of any changes on the poc prospectively . if at any time we anticipate that the estimated remaining costs to completion will exceed the value of the contract , the resulting loss will be recognized immediately . when circumstances exist that prevent us from making reasonably dependable estimates of contract revenues , we account for sales under such long-term contracts using the completed contract method . sales to resellers and channel partners we execute certain sales contracts through resellers and distributors ( collectively , resellers ) and also large , well-capitalized partners such as sap ag and accenture inc. ( collectively , channel partners ) .
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35 fiscal 2012 compared to fiscal 2011 : license revenues increased by $ 24.5 million , which was geographically attributable to an increase in americas of $ 5.7 million , an increase in emea of $ 10.1 million , and an increase in asia pacific of $ 8.7 million . overall in fiscal 2012 we experienced an increase in the number of deals greater than $ 1 million ( 24 deals in fiscal 2012 compared to 23 in fiscal 2011 ) along with an increase in the proportion of revenues that came from our partner program ( 45 % in fiscal 2012 compared to 41 % in fiscal 2011 ) . additionally , license revenue was favourably influenced by the impact of acquisitions . cost of license revenues decreased slightly by $ 0.3 million . the decrease in costs was primarily due to lower third party technology costs . overall gross margin percentage on cost of license revenues remained relatively stable . 2 ) cloud services : cloud services revenues consist of services arrangements primarily attributable to our acquisition of easylink . these arrangements allow our customers to make use of legacy easylink and opentext software , services and content over internet enabled networks supported by opentext data centers . these web applications allow customers to transmit a variety of content between various mediums and to securely manage enterprise information without the commitment of investing in related hardware infrastructure . revenues are generated on several transactional usage-based models , are typically billed monthly in arrears , and can therefore fluctuate from period to period . certain service fees are occasionally charged to customize hosted software for some customers and are either amortized over the expected economic life of the contract , in the case of setup fees , or recognized in the period they are provided . cost of cloud services revenues is comprised primarily of third party network usage fees , maintenance of in-house data hardware centers , technical support personnel-related costs and some third party royalty costs . replace_table_token_8_th fiscal 2013 compared to fiscal 2012 : as a result of our easylink acquisition on july 2 , 2012 , during the first quarter of fiscal 2013 we adopted
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ROO
| 13,657
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you should review the risk factors section for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis . introduction and overview of operations we are an integrated facilities-based communications services provider offering a portfolio of international and domestic voice , wireless , internet , voip , data and data center services to customers located primarily in australia , canada and the united states . our primary markets are australia and canada where we have deployed significant network infrastructure . we classify our services into three categories : growth services , traditional services and international carrier services . our focus is on expanding our growth services , which includes our broadband , sme voip , australian on-net local services , data , and data center services , to fulfill the demand for high quality , competitively priced communications services . this demand is being driven , in part , by the globalization of the world 's economies , the global trend toward telecommunications deregulation and the migration of communication traffic to the internet . we manage our traditional services , which includes our domestic and international long-distance voice , prepaid cards , dial-up internet services and australian off-network local services for cash flow generation that we reinvest to develop and market our growth services , particularly in our primary markets of australia and canada . we provide our international carrier services voice termination services to other telecommunications carriers and resellers requiring ip or time-division multiplexing access . generally , we price our services competitively with the major carriers and service providers operating in our principal service regions . we seek to generate net revenue through sales and marketing efforts focused on customers with significant communications needs , including small and medium enterprises ( smes ) , multinational corporations , residential customers , and other telecommunications carriers and resellers . industry trends have shown that the overall market for domestic and international long-distance voice , prepaid cards and dial-up internet services has declined in favor of internet-based , wireless and broadband communications . our challenge concerning net revenue in recent years has been to overcome declines in long-distance voice minutes of use per customer as more customers are using wireless devices and the internet as alternatives to the use of wireline phones . also , product substitution ( e.g. , wireless/internet for fixed line voice ) has resulted in revenue declines in our long-distance voice services . additionally , we believe that because deregulatory influences have begun to affect telecommunications markets outside the united states , the deregulatory trend is resulting in greater competition from the existing wireline and wireless competitors and from more recent entrants , such as cable companies and voip companies , which could continue to affect adversely our net revenue per minute , as well as minutes of use . more recently , adverse global economic conditions have resulted in a contraction of spending by business and residential customers generally which , we believe , has had an adverse effect on our net revenues . in order to manage our network transmission costs , we pursue a flexible approach with respect to the management of our network capacity . in most instances , we ( 1 ) optimize the cost of traffic by using the least expensive cost routing , ( 2 ) negotiate lower variable usage-based costs with domestic and foreign service providers , ( 3 ) negotiate additional and lower cost foreign carrier agreements with the foreign incumbent carriers and others , and ( 4 ) continue to expand/reduce the capacity of our network when traffic volumes justify such actions . 59 our overall margin may fluctuate based on the relative volumes of international versus domestic long-distance services ; international carrier services versus business and residential long-distance services ; prepaid services versus traditional post-paid voice services ; internet , voip and data services versus fixed line voice services ; the amount of services that are resold ; and the proportion of traffic carried on our network versus resale of other carriers ' services . our margin is also affected by customer transfer and migration fees . we generally pay a charge to install and transfer a new customer onto our network and to migrate broadband and local customers . however , installing and migrating customers to our network infrastructure enables us to increase our margin on such services as compared to resale of services using other carriers ' networks . selling , general and administrative expenses are comprised primarily of salaries and benefits , commissions , occupancy costs , sales and marketing expenses , advertising , professional fees , and other administrative costs . all selling , general and administrative expenses are expensed when incurred . emphasis on cost containment and the shift of expenditures from non-revenue producing expenses to sales and marketing expenses has been heightened since growth in net revenue has been under pressure . emergence from voluntary reorganization under chapter 11 proceedings on march 16 , 2009 , the holding companies filed chapter 11 cases in the bankruptcy court for reorganization relief under chapter 11 of the bankruptcy code . subsequently , the holding companies sought and received an order directing the joint administration of the chapter 11 cases under the caption in re : primus telecommunications group , incorporated , et al. , debtors , case no . 09-10867. on april 24 , 2009 , an unsecured creditors ' committee was appointed by the united states trustee . on april 27 , 2009 , the bankruptcy court approved the holding companies ' use of a disclosure statement dated april 27 , 2009 ( the disclosure statement ) to solicit votes on the plan of reorganization . the disclosure statement was distributed to holders of record ( as of april 27 , 2009 ) of claims against , and interests in , the holding companies who were entitled to vote on the plan of reorganization ( the record date ) . story_separator_special_tag as a result of the merger , arbinet became a wholly-owned subsidiary of the company . 61 in connection with the merger , each share of arbinet 's common stock , par value $ 0.001 per share , issued and outstanding immediately prior to the effective time of the merger was canceled and converted into the right to receive 0.5817 of a share of company common stock . the value of primus shares issued as merger consideration was based upon the closing price of primus common stock as of february 25 , 2011 of $ 15.60 per share . the exchange of 5,557,525 eligible arbinet shares for 3,232,812 primus common stock equivalents equated to a purchase value of approximately $ 50.6 million . this includes the issued and outstanding shares of arbinet and arbinet 's outstanding warrants , options , stock appreciation rights and other equity awards that were exercised prior to the effective date of the merger or subject to accelerated vesting features due to a change in control . the company is in the process of integrating arbinet 's operations into its international carrier services segment . the combined company is expected to be well positioned to capitalize on its long established experience in carrier telecom operations and to expand its global voice and data operations to meet the evolving demands of telecom operators worldwide . with its enhanced scale and market position , the combined company is expected to enable international carrier services customers to access additional networks and termination routes at competitive rates . the combined company is expected to have a diversified product portfolio of international voice and data services across all international carrier services customer segments . the combined company would become the only major global provider to offer international carrier services customers options to either acquire direct international connections through traditional interconnect arrangements or manage their access needs through the exchange . the arbinet acquisition is accounted for under the acquisition method of accounting in accordance with asc 805 , business combinations. under the acquisition method of accounting , assets acquired and liabilities assumed are measured at fair value as of february 28 , 2011. the fair value of the consideration transferred and the assets acquired and liabilities assumed were determined by the company and in doing so management relied in part upon a third-party valuation report to measure the identifiable intangible assets , property and equipment acquired . in accordance with asc no . 805 , the allocation of the consideration value is subject to additional adjustment until the company has completed its analysis . the company 's analysis and any additional adjustments are required to be made by february 28 , 2012 , the one year anniversary of the date of the acquisition , to provide the company with the time to complete the valuation of its assets and liabilities . the consolidated financial statements of the company issued after the merger will reflect only the operations of the combined business after the merger and will not be restated retroactively to reflect the historical financial position or results of operations of arbinet . the company 's acquisition of arbinet was an all stock transaction and the merger agreement was based upon a primus common stock per share price of $ 9.57. the exchange formula provided by the merger agreement established the number of common shares required to consummate the merger . the number of common shares established by the merger agreement remained constant from the execution of the merger agreement through the closing date , february 28 , 2011 , and as a result , increases in the market price of primus 's common stock had the effect of increasing the total fair value of the consideration and therefore increased the amount of the purchase price allocable to goodwill . on february 28 , 2011 , the final consideration to be allocated to arbinet 's net assets under asc no . 805 was valued at approximately $ 50.6 million and was based upon a primus common stock per share price of $ 15.60. the significant increase in the fair value of the consideration to be allocated to arbinet 's net assets as compared to the company 's initial valuation of arbinet triggered the requirement for the company to perform a goodwill impairment test upon completion of its acquisition accounting . the company recorded the preliminary purchase accounting during the first quarter of 2011. see note 5acquisitions and note 7goodwill and other intangible assets to the notes to our consolidated financial statements included elsewhere in this report . given the above , the company had goodwill arising from the acquisition of arbinet that was considered impaired upon implementing the purchase accounting of arbinet 's net assets . the company performed step 1 62 and step 2 testing for goodwill impairment during the first quarter 2011 and , as a result , recognized an impairment expense of $ 14.7 million during the first quarter 2011. recent developments involving existing notes that may impact future results and liquidity on july 7 , 2011 , holding in connection with the consummation of the exchange offers and the consent solicitation , issued $ 240.2 million aggregate principal amount of 10 % notes . the 10 % notes bear interest at a rate of 10.00 % per annum , payable semi-annually in arrears in cash on april 15 and october 15 of each year , commencing october 15 , 2011. the 10 % notes will mature on april 15 , 2017. the 10 % notes and related guarantees are secured by a pledge of and first lien security interest in ( subject to certain exceptions ) substantially all of the assets of holding and the guarantors of the 10 % notes , including group ( guarantors ) , including a first-priority pledge of all of the capital stock held by holding , the guarantors and each subsidiary of the group that is a foreign subsidiary holding company ( which pledge , in the case of the capital stock of each non-u.s. subsidiary and each subsidiary of the group that is a foreign
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results of operations the following information for the years ended december 31 , 2011 , 2010 and 2009 reflects all the items included in consolidated statements of operations as a percentage of net revenue : replace_table_token_13_th 72 the following information reflects net revenue by product line for the years ended december 31 , 2011 , 2010 and 2009 ( in thousands , except percentages ) and is provided for informational purposes and should be read in conjunction with the consolidated financial statements and notes . replace_table_token_14_th results of operations for the year ended december 31 , 2011 as compared to the year ended december 31 , 2010 net revenue : net revenue , exclusive of the currency effect , increased $ 199.2 million , or 27.0 % , to $ 936.5 million for the year ended december 31 , 2011 from $ 737.3 million for the year ended december 31 , 2010. inclusive of the currency effect which accounted for an increase of $ 52.8 million , net revenue increased $ 252.0 million to $ 989.3 million for the year ended december 31 , 2011 from $ 737.3 million for the year ended december 31 , 2010. replace_table_token_15_th canada : canada net revenue , exclusive of the currency effect , increased $ 5.2 million , or 2.3 % , to $ 236.4 million for the year ended december 31 , 2011 from $ 231.2 million for the year ended december 31 , 2010. the net revenue increase is primarily attributable to an increase of $ 9.3 million in retail voice services , an increase of $ 2.3 million in data and hosting services , an increase of $ 1.8 million in voip services , and an increase of $ 1.6 million in internet services offset , in part , by a decrease of $ 6.9 million in prepaid voice services , a decrease of $ 2.1 million in local services and a decrease of $ 0.8 million in wireless and other services .
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ROO
| 701
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upon exercise of the series a warrants , the series a holders received an aggregate of 11,329,461 series c warrants . the series c warrants have an exercise price of $ 3.19 per share and are exercisable six months from the date of issuance and will expire on october 16 , 2025. in connection with the amendment to the series a warrants , the series b warrant agreements were modified such that they no longer provide for resets to the number of shares of common stock underlying the series b warrants and the series b warrant holders were issued an additional 2,284,800 series b warrants with an exercise price of $ 0.0001 per warrant . as of december 8 , 2020 , 42,373 series b warrants remain outstanding . gem we entered into a common stock purchase agreement with gem global yield fund llc scs ( “ gem ” ) on august 6 , 2019 ( the “ purchase agreement ” ) . the gem agreement was further amended on september 25 , 2019 by an amendment to common stock purchase agreement ( the “ 2019 gem amendment ” ) , and subsequently amended again on january 31 , 2020 ( the “ 2020 gem amendment ” and , together with the purchase agreement and the 2019 gem amendment , the “ gem agreement ” ) . at the closing of the merger , we assumed all obligations and rights under the gem agreement . pursuant to the gem agreement , gem agreed to purchase up to $ 20,000,000 of common stock ( the “ aggregate limit ” ) over a three-year period commencing on the date the purchase agreement was executed ( the “ investment period ” ) ; provided that during any period when our public float is less than $ 75,000,000 , the aggregate limit will instead be equal to one-third of the amount of our public float over any consecutive 12-month period . under the gem agreement , during the investment period , we may , by delivering a draw down notice ( as defined in the gem agreement ) direct gem to purchase shares of common stock in an amount up to 400 % of the average daily trading volume for the ten ( 10 ) trading days immediately preceding the date the draw down notice is delivered . gem is not obligated to purchase any shares of common stock which would result in gem beneficially owning , directly or indirectly , at the time of the proposed issuance , more than 4.99 % of the number of common shares issued and outstanding . gem will pay a purchase price per share equal to 90 % of the average market closing price of the common stock during the ten consecutive trading days commencing with the first trading day on which a draw down notice is delivered ( the “ draw down pricing period ” ) . gem represented to us , among other things , that it was an “ accredited investor ” ( as such term is defined in rule 501 ( a ) of regulation d under the securities act ) , and we will rely upon an exemption from registration contained in section 4 ( a ) ( 2 ) of the securities act and regulation d promulgated thereunder when issuing shares of its common stock under the gem agreement . in order to utilize the gem agreement , we will need to file a registration statement with the sec to register the shares of common stock to be issued to gem pursuant to the gem agreement . we have not yet filed such registration statement . the gem agreement contains customary representations , warranties , agreements and conditions to completing future sale transactions , indemnification rights and obligations of the parties . we have the right to terminate the gem agreement at any time , at no cost or penalty . unless we inform gem of an event resulting in a materially adverse effect or material change in ownership ( all defined in the gem agreement ) gem does not have the right to terminate the gem agreement . contractual obligations and commitments the following table summarizes the company 's contractual obligations as of september 30 , 2020 and the effects that such obligations are expected to have on its liquidity and cash flows in future periods : replace_table_token_4_th ( 1 ) reflects obligations pursuant to the company 's office lease in princeton , new jersey . ( 2 ) reflects unsecured notes payable issued to various other related parties and a loan under the payroll protection program . in addition to the contracts with payment commitments that we have reflected in the table above , we have entered into other contracts in the normal course of business with certain cros , cmos and other third-parties for preclinical research studies and testing , clinical trials and manufacturing services . these contracts do not contain any minimum purchase commitments and are cancelable upon prior notice and as a result , are not included in the table of contractual obligations and commitments above . payments due upon cancellation consist only of payments for services provided and expenses incurred , including non-cancelable obligations to our service providers , up to the date of cancellation . - 84 - critical accounting policies our management 's discussion and analysis of financial condition and results of operations are based on our consolidated financial statements , which have been prepared in accordance with u.s. gaap . story_separator_special_tag the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements . on an ongoing basis , we evaluate our estimates and judgments , including those related to the accrual for research and development expenses . we base our estimates on historical experience , known trends and events , and various other factors that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . while the company 's significant accounting policies are described in more detail in the notes to the consolidated financial statements included elsewhere in this form 10-k. we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of the consolidated financial statements . research and development expenses research and development expense consist primarily of costs incurred in connection with the development of the our product candidates . we expense research and development costs as incurred . at the end of each reporting period , we compare payments made to third-party service providers to the estimated progress toward completion of the applicable research or development objectives . such estimates are subject to change as additional information becomes available . depending on the timing of payments to the service providers and the progress that we estimate has been made as a result of the service provided . we may record net prepaid or accrued expense relating to these costs . as of september 30 , 2020 , we did not make any material adjustments to our prior estimates of accrued research and development expenses . off-balance sheet arrangements we do not have any relationships with unconsolidated entities or financial partnerships , including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes . we do not engage in off-balance sheet financing arrangements . in addition , we do not engage in trading activities involving non-exchange traded contracts . we therefore believe that we are not materially exposed to any financing , liquidity , market or credit risk that could arise if it had engaged in these relationships . recently issued accounting pronouncements a description of recently issued accounting pronouncements that may potentially impact the our financial position and results of operations is disclosed in note 2 to the consolidated financial statements included elsewhere in this form 10-k. item 7a . qualitative and quantitative disclosures about market risk not applicable . - 85 - item 8. financial statements and supplementary data sonnet biotherapeutics holdings , inc. index to the consolidated financial statements consolidated financial report september 30 , 2020 page report of independent registered public accounting firm 87 consolidated balance sheets 88 consolidated statements of operations 89 consolidated statements of changes in stockholders ' equity ( deficit ) 90 consolidated statements of cash flows 91 notes to consolidated financial statements 92 - 86 - report of independent registered public accounting firm to the stockholders and board of directors sonnet biotherapeutics holdings , inc. : opinion on the consolidated financial statements we have audited the accompanying consolidated balance sheets of sonnet biotherapeutics holdings , inc. and subsidiaries ( the company ) as of september 30 , 2020 and 2019 , the related consolidated statements of operations , changes in stockholders ' equity ( deficit ) , and cash flows for the years then ended , and the related notes ( collectively , the consolidated financial statements ) . in our opinion , the consolidated financial statements present fairly , in all material respects , the financial position of the company as of september 30 , 2020 and 2019 , and the results of its operations and its cash flows for the years then ended , in conformity with u.s. generally accepted accounting principles . going concern the accompanying consolidated financial statements have been prepared assuming that the company will continue as a going concern . as discussed in note 1 to the consolidated financial statements , the company has incurred recurring losses and negative cash flows from operations since inception and will require substantial additional financing to continue to fund its research and development activities that raise substantial doubt about its ability to continue as a going concern . management 's plans in regard to these matters are also described in note 1. the consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty . basis for opinion these consolidated financial statements are the responsibility of the company 's management . our responsibility is to express an opinion on these consolidated financial statements based on our audits . we are a public accounting firm registered with the public company accounting oversight board ( united states ) ( pcaob ) and are required to be independent with respect to the company in accordance with the u.s. federal securities laws and the applicable rules and regulations of the securities and exchange commission and the pcaob . we conducted our audits in accordance with the standards of the pcaob . those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement , whether due to error or fraud . the company is not required to have , nor were we engaged to perform , an audit of its internal control over financial reporting . as part of our audits , we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the company
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liquidity and capital resources since inception , we have not generated any revenue from any sources , including from product sales , and have incurred recurring losses and negative cash flows from operations . we have funded operations to date primarily with proceeds from sales of common stock , warrants and proceeds from the issuance of convertible debt . the following table summarizes the company 's sources and uses of cash for each of the periods presented : replace_table_token_3_th operating activities during the year ended september 30 , 2020 , we used $ 15.6 million of cash in operating activities which was primarily attributable to our net loss of $ 24.3 million . this amount was offset by a $ 6.8 million write off of ipr & d related to the relief acquisition , a $ 1.4 million net increase in operating assets and liabilities and $ 0.4 million in share-based compensation expense . during the year ended september 30 , 2019 , we used $ 2.2 million of cash in operating activities . cash used in operating activities reflected our net loss of $ 4.9 million offset by common stock issued for consulting services of $ 0.4 million and $ 2.1 million increase in accounts payable and accruals primarily attributable increased research and development efforts . investing activities during the year ended september 30 , 2020 , we purchased $ 76,183 of office furniture and computer equipment .
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Liquidity
| 4,249
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core earnings also differs from gaap net income by excluding specified infrequent or unusual transactions that farmer mac believes are not indicative of future operating results and that may not reflect the trends and economic financial performance of the corporation 's core business . this non-gaap financial measure may not be comparable to similarly labeled non-gaap financial measures disclosed by other companies . farmer mac 's disclosure of this non-gaap measure is not intended to replace gaap information but , rather , to supplement it . further 63 discussion of farmer mac 's financial results and a reconciliation of farmer mac 's gaap net income attributable to common stockholders to core earnings is presented in `` —results of operations . `` the loans included in the farm & ranch and rural utilities lines of business continued to perform well during 2012 . as of december 31 , 2012 , farmer mac 's 90-day delinquencies in the farm & ranch line of business were $ 33.3 million ( 0.70 percent of the non-agvantage farm & ranch portfolio ) , down from $ 40.8 million ( 0.93 percent ) as of september 30 , 2012 , and $ 40.6 million ( 0.93 percent ) as of december 31 , 2011 . the drought conditions experienced in the midwest and great plains during 2012 caused significant deterioration in the yields of feed grains , although the higher prices for these commodities during the past year as well as the availability of crop insurance has significantly mitigated any negative effects that the drought may otherwise have had on feed grains producers . although farmer mac continues to monitor the drought 's effects , as of december 31 , 2012 , the drought has had no measurable impact on the credit quality of farmer mac 's portfolio . farmer mac believes that it generally remains well-collateralized on its exposures in drought areas and that there are no additional probable losses inherent in the portfolio as of december 31 , 2012 due to the drought conditions . when analyzing the overall risk profile of its eligible loan lines of business , farmer mac takes into account more than the loan delinquency percentages in its farm & ranch line of business . the total eligible loan lines of business includes agvantage securities and rural utilities loans , neither of which had any delinquencies as of december 31 , 2012 , and usda guaranteed securities , which are backed by the full faith and credit of the united states . across farmer mac 's entire eligible loan lines of business , 90-day delinquencies represented 0.26 percent of total eligible loan lines of business as of december 31 , 2012 , compared to 0.33 percent as of september 30 , 2012 , and 0.34 percent as of december 31 , 2011 . as of december 31 , 2012 , farmer mac 's core capital of $ 519.0 million exceeded its minimum capital requirement of $ 374.0 million by $ 145.0 million . as noted , farmer mac issued $ 60.0 million of non-cumulative perpetual preferred stock in january 2013 , and used the proceeds to redeem and retire all $ 57.6 million of its issued and outstanding series c preferred stock . this transaction furthers farmer mac 's ability to meet the financing needs of rural america as opportunities arise during 2013 and in the future . see `` —outlook `` for further discussion about the opportunities that farmer mac foresees for future business growth . critical accounting policies and estimates the preparation of farmer mac 's consolidated financial statements in conformity with gaap requires the use of estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes for the periods presented . actual results could differ from those estimates . the critical accounting policies that are both important to the portrayal of farmer mac 's financial condition and results of operations and require complex , subjective judgments are the accounting policies for : ( 1 ) the allowance for losses , ( 2 ) fair value measurement , and ( 3 ) other-than-temporary impairment . allowance for losses farmer mac maintains an allowance for losses to cover estimated probable losses incurred as of the balance sheet date on loans held ( `` allowance for loan losses `` ) and loans underlying ltspcs and farmer mac guaranteed securities ( `` reserve for losses `` ) based on available information . farmer mac 's methodology for determining the allowance for losses separately considers its portfolio segments – farm 64 & ranch , usda guarantees , and rural utilities , and disaggregates its analysis , where relevant , into classes of financing receivables , which currently include loans and agvantage securities . further disaggregation by commodity type is performed , where appropriate , in analyzing the need for an allowance for losses . the allowance for losses is increased through periodic provisions for loan losses that are charged against net interest income and provisions for losses that are charged to non-interest expense and is reduced by charge-offs for actual losses , net of recoveries . charge-offs represent losses on the outstanding principal balance , any interest payments previously accrued or advanced and expected costs of liquidation . negative provisions , or releases of allowance for losses , are recorded in the event that the estimate of probable losses as of the end of a period is lower than the estimate at the beginning of the period . the total allowance for losses consists of a general allowance for losses and a specific allowance for impaired loans . general allowance for losses farm & ranch farmer mac 's methodology for determining its general allowance for losses incorporates the corporation 's automated loan classification system . that system scores loans based on criteria such as historical repayment performance , indicators of current financial condition , loan seasoning , loan size and loan-to-value ratio . story_separator_special_tag 68 for debt securities , if management does not intend to sell the security and it is not more likely than not that it will be required to sell the security before anticipated recovery , farmer mac determines whether a credit loss exists . many factors considered in this determination involve significant judgment , including recent events specific to the issuer or the related industry , changes in external credit ratings , the severity and duration of the impairment , recoveries or additional declines in fair value subsequent to the balance sheet date , and other relevant information related to the collectability of the security . if farmer mac determines that the present value of the cash flows likely to be collected from the security is greater than the amortized cost basis of the security , the impairment is deemed to be temporary . conversely , if the present value of the cash flows likely to be collected is less than the amortized cost basis of the security , a credit loss has occurred and the security is deemed to be other-than-temporarily impaired and the amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings . the amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income , net of applicable taxes . results of operations farmer mac 's gaap net income attributable to common stockholders for 2012 was $ 43.9 million or $ 3.98 per diluted common share , compared to $ 13.8 million or $ 1.28 per diluted common share for 2011 , and $ 22.1 million or $ 2.08 per diluted common share for 2010 . farmer mac 's non-gaap core earnings were $ 49.6 million or $ 4.51 per diluted common share in 2012 , compared to $ 42.9 million or $ 3.97 per diluted common share in 2011 , and $ 25.4 million or $ 2.39 per diluted common share in 2010 . the adjustments required to reconcile from gaap net income attributable to common stockholders to farmer mac 's core earnings are related principally to the effects of fair value accounting guidance that may cause volatility in periodic gaap earnings but are not expected to have a cumulative net impact on gaap earnings if the financial instruments are held to maturity , as is generally expected . adjustments are also made to exclude specified infrequent or unusual transactions that farmer mac believes are not indicative of future operating results and that may not reflect the trends and economic financial performance of the corporation 's core business . 69 a reconciliation of farmer mac 's gaap net income attributable to common stockholders to core earnings is presented in the following table , and the adjustments are described in more detail below the table : replace_table_token_15_th derivatives are required to be recognized as either assets or liabilities on the consolidated balance sheet and measured at fair value . because farmer mac 's financial derivatives were not designated in hedge relationships for accounting purposes prior to third quarter 2012 , changes in the fair value of these instruments were recorded in earnings as they occurred , with no fair value adjustments on the corresponding hedged items . in an effort to mitigate volatility in gaap earnings caused from these fair value changes , farmer mac previously elected the fair value option for certain investment securities and farmer mac guaranteed securities that were funded or hedged principally with financial derivatives . farmer mac classifies these assets as trading and measures them at fair value , with changes in fair value recorded in earnings as they occur . effective july 1 , 2012 , farmer mac designated $ 950.0 million notional amount of interest rate swaps in fair value hedge relationships . beginning in third quarter 2012 , farmer mac recorded in earnings offsetting fair value adjustments on the hedged items attributable to the risk being hedged . any differences arising from fair value changes that are not offset result in hedge ineffectiveness and affect gaap earnings . farmer mac excludes the after-tax effect of unrealized gains and losses resulting from changes in the fair values of financial derivatives and hedging activities from core earnings . farmer mac recorded unrealized gains of $ 6.7 million ( $ 4.3 million after-tax ) for fair value changes on its financial derivatives and hedging activities for 2012 , compared to unrealized losses of $ 47.6 million ( $ 30.9 million after-tax ) in 2011 , and unrealized gains of $ 20.1 million ( $ 13.0 million after-tax ) in 2010 . unrealized fair value gains on trading assets totaled $ 0.3 million ( $ 0.2 million after-tax ) for 2012 , compared to $ 3.5 million ( $ 2.2 million after-tax ) for 2011 , and $ 5.3 million ( $ 3.4 million after-tax ) for 2010 . changes in the fair values of financial derivatives and trading assets have historically contributed 70 significant volatility to farmer mac 's periodic gaap earnings . because farmer mac expects its fair value hedge relationships to remain highly effective through maturity , a substantial portion of the volatility caused from changes in the fair values of financial derivatives is expected to be eliminated in future periods . as of december 31 , 2012 , the cumulative fair value of after-tax losses recorded on financial derivatives was $ 77.7 million . over time , farmer mac will realize in earnings the net effect of the cash settlements on its interest rate swap contracts , which will on its own produce either income or expense , but is expected to generate positive net effective spread when combined with the interest received and paid on the assets and liabilities farmer mac holds on its balance sheet . any positive net effective spread would continue to build retained earnings and capital over time . in 2010 , farmer mac consolidated certain variable interest entities ( `` vies
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farmer mac 's borrowing costs remained at favorable levels throughout 2012. farmer mac may use a combination of pay-fixed interest rate swaps and receive-fixed interest rate swaps to mitigate its exposure to interest rate risk and monitors the effects of actual and potential fair value changes on its regulatory capital surplus . from time to time , farmer mac uses pay-fixed interest rate swaps , combined with a planned series of discount note issuances , as an alternative source of effectively fixed rate funding . while 106 the swap market may provide favorable effectively fixed rates , interest rate swap transactions expose farmer mac to the risk of future variability of its own issuance spreads versus corresponding libor rates . if the spreads on the farmer mac discount notes were to deteriorate relative to libor , farmer mac would be exposed to a commensurate reduction on its net interest yield on the notional amount of its pay-fixed interest rate swaps and its libor-based floating rate assets . conversely , if the rates on the farmer mac discount notes were to improve relative to libor , farmer mac would benefit from a commensurate increase on its net interest yield on the notional amount of its pay-fixed interest rate swaps and its libor-based floating rate assets . further , the use of interest rate swaps that are not designated in hedge relationships for accounting purposes subject the corporation 's regulatory capital surplus to the potential adverse effects of a reduction in the fair values of those interest rate swaps . farmer mac maintains cash , cash equivalents ( including u.s. treasury securities and other short-term money market instruments ) , and other investment securities that can be drawn upon for liquidity needs .
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Liquidity
| 10,014
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in june 2016 , the fasb issued an accounting standards update asu 2016‑13 financial instruments—credit losses ( topic story_separator_special_tag the following discussion should be read in conjunction with the financial statements and accompanying notes and the information contained in other sections of this form 10-k. it contains forward‑looking statements that involve risks and uncertainties , and is based on the beliefs of our management , as well as assumptions made by , and information currently available to , our management . our actual results could differ materially from those anticipated by our management in these forward‑looking statements as a result of various factors , including those discussed in this form 10-k and in our registration statement on form s-1 , particularly under the heading “ risk factors. ” overview legacy housing corporation builds , sells and finances manufactured homes and “ tiny houses ” that are distributed through a network of independent retailers and company‑owned stores and are sold directly to manufactured housing communities . we are the fourth largest producer of manufactured homes in the united states as ranked by number of homes manufactured based on information available from the manufactured housing institute and ibts for 2019. with current operations focused primarily in the southern united states , we offer our customers an array of quality homes ranging in size from approximately 390 to 2,667 square feet consisting of 1 to 5 bedrooms , with 1 to 3 1 / 2 bathrooms . our homes range in price , at retail , from approximately $ 18,000 to $ 140,000. during 2019 , we sold 3,904 home sections ( which are entire homes or single floors that are combined to create complete homes ) and in 2018 , we sold 3,950 home sections . the company has one reportable segment . all of our activities are interrelated , and each activity is dependent and assessed based on how each of the activities of company supports the others . for example , the sale of manufactured homes includes providing transportation and consignment arrangements with dealers . we also provide financing options to the customers to facilitate such sale of homes . in addition , the sale of homes is directly related to financing provided by us . accordingly , all significant operating and strategic decisions by the chief operating decision‑maker , the executive chairman of the board , are based upon analyses of our company as one segment or unit . we believe our company is one of the most vertically integrated in the manufactured housing industry , allowing us to offer a complete solution to our customers , from manufacturing custom‑made homes using quality materials and distributing those homes through our expansive network of independent retailers and company‑owned distribution locations , to providing tailored financing solutions for our customers . our homes are constructed in the united states at one of our three manufacturing facilities in accordance with the construction and safety standards of the u.s. department of housing and urban development ( “ hud ” ) . our factories employ high‑volume production techniques that allow us to produce , on average , approximately 75 home sections , or 62 fully‑completed homes depending on product mix , in total per week . we use quality materials and operate our own component manufacturing facilities for many of the items used in the construction of our homes . each home can be configured according to a variety of floor plans and equipped with such features as fireplaces , central air conditioning and state‑of‑the‑art kitchens . our homes are marketed under our premier “ legacy ” brand name and currently are sold primarily across 15 states through a network of 90 independent retail locations , 13 company‑owned retail locations and through direct sales to owners of manufactured home communities . our 13 company‑owned retail locations , including 11 heritage housing stores and two tiny house outlet stores exclusively sell our homes . during 2019 , approximately 48 % of our manufactured homes were sold in texas , followed by 8 % in georgia , 6 % in kansas , 5 % in oklahoma and 5 % in florida . during 2018 , 56 % of our manufactured homes were sold in texas , followed by 13 % in georgia , 11 % in louisiana and 4 % in oklahoma . we plan to deepen our distribution channel by using a portion of the net proceeds from the ipo to expand our company‑owned retail locations in new and existing markets . we offer three types of financing solutions to our customers . we provide floor plan financing for our independent retailers , which takes the form of a consignment arrangement between the retailer and us . we also provide consumer financing for our products which are sold to end‑users through both independent and company‑owned retail locations , and we provide financing solutions to manufactured housing community owners that buy our products for use in their manufactured housing communities . our ability to offer competitive financing options at our retail locations 21 provides us with several competitive advantages and allows us to capture sales which may not have otherwise occurred without our ability to offer consumer financing . factors affecting our performance we believe that the growth of our business and our future success depend on various opportunities , challenges , trends and other factors , including the following : · consistent with our long‑term strategy of conservatively deploying our capital to achieve above average rates of return , we intend to expand our retail presence in the geographic markets we now serve , particularly in the southern united states . each retail center requires between $ 500,000 and $ 1,500,000 to acquire the location , situate an office , provide inventory , and provide the initial working capital . we expect to open 2 to 4 additional retail centers by the end of 2020 . · we have purchased several properties in our market area for the purpose of developing manufactured housing communities and subdivisions . story_separator_special_tag our policy is to place a loan on nonaccrual status when there is a clear indication that the borrower 's cash flow may not be sufficient to meet payments as they become due , which is normally when either principal or interest is past 23 due and remains unpaid for more than 90 days . management implemented this policy based on an analysis of historical data and performance of loans and the likelihood of recovery once principal or interest payments became delinquent and were aged more than 90 days . payments received on nonaccrual loans are accounted for on a cash basis , first to interest and then to principal , as long as the remaining book balance of the asset is deemed to be collectible . the accrual of interest resumes when the past due principal or interest payments are brought within 90 days of being current . impaired loans are those loans where it is probable we will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement , including scheduled principal and interest payments . impaired loans , or portions thereof , are charged-off when deemed uncollectible . a loan is generally deemed impaired if it is more than 90 days past due on principal or interest , is in bankruptcy proceedings , or is in the process of repossession . a specific reserve is created for impaired loans based on fair value of underlying collateral value , less estimated selling costs . we used certain factors to determine to the value of the underlying collateral for impaired loans . these factors were : ( 1 ) the length of time the unit was unsold after construction ; ( 2 ) the amount of time the house was occupied ; ( 3 ) the cooperation level of the borrowers , i.e. , loans requiring legal action or extensive field collection efforts will reduce the value ; ( 4 ) units located on private property present additional value loss because it tends to be more expensive to remove units from private property as opposed to a manufactured home park ; ( 5 ) the length of time the borrower has lived in the house without making payments ; ( 6 ) location and size , including market conditions ; and ( 7 ) the experience and expertise of the particular dealer assisting in collection efforts . collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home , less the costs to sell . at repossession , the fair value of the collateral is computed based on the historical recovery rates of previously charged‑off loans ; the loan is charged off and the loss is charged to the allowance for loan losses . at each reporting period , the fair value of the collateral is adjusted to the lower of the amount recorded at repossession or the estimated sales price less estimated costs to sell , based on current information . allowance for loan losses—mhp notes mhp notes are stated at amounts due from customers net of allowance for loan losses . we determine the allowance by considering several factors including the aging of the past due balance , the customer 's payment history , and our previous loss history . we establish an allowance reserve composed of specific and general reserve amounts that are deemed to be uncollectible . historically we have not experienced material losses on the mhp notes . inventories inventories consist of raw materials , work‑in‑process , and finished goods and are stated at the lower of cost or net realizable value . raw materials cost approximates the first‑in first‑out method . finished goods and work‑in‑process are based on a standard cost system that approximates actual costs using the specific identification method . estimates of the lower of cost and net realizable value of inventory are determined by comparing the actual cost of the product to the estimated selling prices in the ordinary course of business based on current market and economic conditions , less reasonably predictable costs of completion , disposal , and transportation of the inventory . we evaluate inventory based on historical experience to estimate our inventory not expected to be sold in less than a year . we classify our inventory not expected to be sold in one year as non‑current . property , plant and equipment property , plant and equipment are carried at cost less accumulated depreciation . depreciation expense is calculated using the straight‑line method over the estimated useful lives of each asset . estimated useful lives for significant classes of assets are as follows : buildings and improvements , 30 to 39 years ; vehicles , 5 years ; machinery and equipment , 7 years ; and furniture and fixtures , 7 years . repair and maintenance charges are expensed as incurred . expenditures for major renewals or betterments which extend the useful lives of existing property , plant , and equipment are capitalized and depreciated . we periodically evaluate the carrying value of long‑lived assets to be held and used and when events and circumstances warrant such a review . the carrying value of long‑lived assets is considered impaired 24 when the anticipated undiscounted cash flow from such assets is less than its carrying value . in that event , a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long‑lived assets . fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved . losses on long‑lived assets to be disposed of are determined in a similar manner , except that the fair values are based primarily on independent appraisals and preliminary or definitive contractual arrangements less costs to dispose .
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results of operations the following discussion should be read in conjunction with the information set forth in the financial statements and the accompanying notes appearing elsewhere in this form 10-k. comparison of years ended december 31 , 2019 and 2018 ( in thousands ) replace_table_token_5_th product sales primarily consist of direct sales , commercial sales , consignment sales and retail store sales . product sales increased $ 4.0 million , or 2.9 % , in 2019 as compared to 2018 even though the volume of homes sold remained flat . this change was driven by an increase in commercial sales and retail stores sales partially offset by a decline in direct sales , consignment sales and other product sales . the first quarter of 2018 included $ 8.9 million of sales as a subcontractor operating under a contract with fema to provide housing for victims of hurricane harvey . direct sales decreased $ 17.5 million to $ 15.2 million in 2019 from $ 32.7 million in 2018 primarily due to the nonrecurring sales to fema . commercial sales increased $ 31.3 million to $ 64.4 million in 2019 from $ 33.1 million in 2018 , and our company‑owned retail stores sales increased $ 3.0 million to $ 16.1 million in 2019 from $ 13.1 million in 2018. these increases were offset by a net $ 11.9 million decrease in consignment sales to $ 42.9 million from $ 54.8 million in 2018. other product sales decreased $ 0.8 million to $ 4.6 million in 2019 from $ 5.4 million in 2018 and is primarily due to a $ 1.3 million decline in direct freight related to the 2018 fema sales and a $ 0.9 million decline in used units partially offset by a $ 1.4 million increase in other miscellaneous product sales .
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ROO
| 6,112
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the fair value is amortized as a compensation cost on a straight‑line basis over the requisite service period of the award , which is generally the vesting period . the expected term of any options granted under our stock plans is based on the average of the contractual term ( generally , 10 years ) and the vesting period ( generally , 48 months ) . the risk‑free rate is based on the yield of a u.s. treasury security with a term consistent with the expected term of the option . see note 12 , “ stock options , ” in the notes to consolidated financial statements in item 8 of this annual report on form 10‑k for more information about the assumptions underlying these estimates . derivative instruments certain of our issued and outstanding warrants to purchase common stock contain anti‑dilution provisions . these warrants do not meet the requirements for classification as equity and are recorded as derivative warrant liabilities . we use valuation methods and assumptions that consider , among other factors , the fair value of the underlying stock , risk‑free interest rate , volatility , expected life and dividend rates consistent with those discussed in note 11 , “ derivative instruments ” , in the notes to consolidated financial statements in item 8 of this annual report on form 10‑k , in estimating the fair value for these warrants . such derivative warrant liabilities are initially recorded at fair value , with subsequent changes in fair value charged ( credited ) to operations in each reporting period . the fair value of such derivative warrant liabilities is most sensitive to changes in the fair value of the underlying common stock and the estimated volatility of our common stock . research and development expense our research and development expenses consist primarily of costs incurred for the development of our product candidates , which include : · employee related expenses , including salaries , benefits , travel , and stock based compensation expense ; · expenses incurred under agreements with contract research organization ( “ cros ” ) , and clinical sites 44 that conduct our clinical studies ; · facilities , depreciation , and other expenses , which include direct and allocated expenses for rent and maintenance of facilities , insurance , and other supplies ; · costs associated with our research platform and preclinical activities ; · costs associated with our regulatory , quality assurance , and quality control operations ; and · amortization of intangible assets . our research and development costs are expensed as incurred . we are required to estimate our accrued research and development expenses . this process involves reviewing open contracts and purchase orders , communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs . we make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time . if the actual timing of the performance of services or the level of effort varies from our estimate , we adjust the accrued expense accordingly . although we do not expect our estimates to be materially different from amounts actually incurred , our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low in any particular period . to date , we have not made any material adjustments to our prior estimates of accrued research and development expenses . 45 recent accounting pronouncements in march 2016 , the financial accounting standards board ( “ fasb ” ) issued accounting standards update ( “ asu ” ) no . 2016-09 , compensation – stock compensation ( topic 718 ) : improvements to employee share-based accounting ( “ asu 2016-09 ” ) to require changes to several areas of employee share-based payment accounting in an effort to simplify share-based reporting . the update revises requirements in the following areas : minimum statutory withholding , accounting for income taxes , forfeitures , and intrinsic value accounting for private entities . asu 2016-09 is effective for annual reporting periods beginning after december 15 , 2016 , including interim reporting periods within each annual reporting period . we adopted this standard on january 1 , 2017. prior to adoption , we recognized share-based compensation , net of estimated forfeitures , over the vesting period of the grant . upon adoption of asu 2016-09 , we elected to change our accounting policy to recognize forfeitures as they occur . we continue to recognize share-based compensation expense over the vesting period of the grant . the new forfeiture policy election was adopted using a modified retrospective approach with a cumulative effect adjustment of $ 155 recorded to accumulated deficit on the balance sheet as of january 1 , 2017. prior to january 1 , 2017 , we recognized the excess tax benefits of stock-based compensation expense as additional paid-in capital and tax deficiencies of stock-based compensation expense in the income tax provision or as additional paid-in capital to the extent that there were sufficient recognized excess tax benefits previously recognized . previously , the excess tax benefits reduced taxes payable prior to being recognized as an increase in additional paid-in capital , and therefore we had not recognized certain deferred tax assets that could be attributed to tax deductions . story_separator_special_tag in march 2016 , we closed an underwritten public offering of an aggregate of 4,293,333 shares of common stock and warrants to purchase an aggregate of 2,146,666 shares of common stock , at a price to the public of $ 7.49 per share of common stock and $ 0.01 per warrant . the underwriting discount was 6 % of the public offering price of the shares , or $ 0.45 per share and 0.0000006 per warrant . the warrants have an initial per share exercise price of $ 10.00 ( 133 % of public offering price of the common stock ) and will expire on march 18 , 2021. registered securities issued using this shelf may be used to raise additional capital to fund our working capital and other corporate needs , for future acquisitions of assets , programs or businesses , and for other corporate purposes . 49 on august 10 , 2017 , we entered into exchange agreements with certain holders of our warrants , dated may 9 , 2014 , to exchange such warrants for shares of common stock . we issued an aggregate of 2,021,419 shares of common stock to the warrant holders in exchange for their warrants to purchase an aggregate of 577,548 shares of common stock . the warrants exchanged in this transaction were subsequently cancelled and terminated . as a result of our issuance of common stock in exchange for certain of the warrants , the per share exercise price of the remaining warrants , dated may 9 , 2014 , was adjusted downwards from $ 3.87 per share to $ 0.83 per share and additional warrants were issued such that the remaining warrants were exercisable for an aggregate of 48,507 shares of common stock . we did not receive any cash proceeds from the warrant exchanges . in the fourth quarter of 2017 and first quarter of 2018 , we entered into warrant cancellation agreements with certain remaining holders of our warrants , dated may 9 , 2014 , to cancel and terminate such warrants for cash consideration . as of december 31 , 2017 , the remaining warrants were exercisable for an aggregate of 13,429 shares of common stock . the remaining warrants contain anti-dilution provisions that may be triggered by the future issuance by us of shares of our common stock or common stock equivalents at a price per share below the then-exercise price of the warrants , subject to some exceptions . in january 2018 , we entered into a purchase agreement and registration rights agreement with lincoln park capital fund , llc ( “ lincoln park ” ) . pursuant to the terms of the purchase agreement , lincoln park agreed to purchase from us up to $ 15,000 of our common stock ( subject to certain limitations ) from time to time during the term of the purchase agreement . at the time we signed the purchase agreement and the registration rights agreement , we issued 429,800 shares of common stock ( the “ commitment shares ” ) to lincoln park as consideration for its commitment to purchase shares of our common stock under the purchase agreement . as of march 12 , 2018 the company had drawn $ 2,252 against the purchase agreement and issued an aggregate of 3,344,769 shares exclusive of the commitment shares . in august 2017 , we announced a reduction in our workforce of approximately 39 % . all affected employees received severance pay and outplacement assistance . as a result of the reduction in force and associated costs , we estimate savings of approximately $ 7.3 million in annual operating expenses , with one-time severance and related costs of $ 857. of these one-time severance and related costs , approximately $ 509 was paid through december 31 , 2017. we may pursue various other dilutive and non‑dilutive funding alternatives depending upon our clinical path forward and the extent to which we require additional capital to proceed with development of some or all of our product candidates on expected timelines . the source , timing and availability of any future financing will depend principally upon market conditions and the status of our clinical development programs . funding may not be available when needed , at all , or on terms acceptable to us . lack of necessary funds may require us to , among other things , delay , scale back or eliminate some or all of our research and product development programs , planned clinical trials , and capital expenditures or to license our potential products or technologies to third parties . we may alternatively engage in cost-cutting measures in an attempt to extend our cash resources as long as possible . net cash used in operating activities is comprised of our net losses , adjusted for non-cash expenses , and working capital requirements . net cash used in operating activities for the year ended december 31 , 2017 was $ 19,683 , the most significant drivers of which were our net loss of $ 26,745 , offset by share-based compensation of $ 4,106 and derivative losses of $ 2,267. net cash from investing activities was $ 11,512 for the year ended december 31 , 2017 attributable to the purchases of marketable securities of $ 8,256 and capital equipment of $ 65 , offset by sales of marketable securities of $ 19,833. net cash used by financing activities was $ 383 for the year ended december 31 , 2017 consisting of proceeds from the exercises of stock options , exercises of warrants , and employee stock purchase plan issuances of $ 80. these proceeds were offset by the repayment of loan principal of $ 423 and payment of $ 40 due to repurchase of warrants . off balance sheet arrangements we do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition , changes in financial
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part ii of this guidance replaces the indefinite deferrals for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities . asu 2017-11 is effective for annual reporting periods beginning after december 15 , 2018 , including interim reporting periods within each annual reporting period . we have concluded that the adoption of this asu will not have a material impact on the financial statements . i n august 2017 , the fasb issued asu no . 2017-12 , derivatives and hedging ( topic 815 ) , which changes both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results , in order to better align an entity 's risk management activities and financial reporting for hedging relationships . the amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements . fasb asu no . 2017-12 is effective for annual reporting periods beginning after december 15 , 2018 , including interim periods within those annual reporting periods , with early adoption permitted . we are currently evaluating the impact of the adoption of this asu on the financial statements . in may 2014 , the fasb issued asu no . 2014-09 , revenue from contracts with customers ( “ asu 2014-09 ” ) to provide updated guidance on revenue recognition . asu 2014-09 requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services . in doing so , companies may need to use more judgment and make more estimates than under today 's guidance .
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Liquidity
| 4,235
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the company conducts business on a global basis , with sales in the following regions : americas , europe/middle east/africa ( emea ) and asia-pacific . the financial services segment consists of hdfs which provides wholesale and retail financing and insurance and insurance-related programs primarily to harley-davidson dealers and their retail customers . hdfs conducts business principally in the united states and canada . the “ % change ” figures included in the “ results of operations ” section were calculated using unrounded dollar amounts and may differ from calculations using the rounded dollar amounts presented . overview the company 's net income for 2015 was $ 752.2 million , or $ 3.69 per diluted share , compared to $ 844.6 million , or $ 3.88 per diluted share , in 2014 . operating income from the motorcycles segment was down $ 127.7 million compared to 2014 . motorcycles segment operating income was negatively impacted by unfavorable currency exchange rates , lower wholesale shipment volume , unfavorable product mix and higher selling , administrative and engineering expenses . these unfavorable impacts were partially offset by model-year price increases and lower raw material and manufacturing costs . operating income from the financial services segment was up modestly from the prior year , increasing $ 2.4 million , or 0.9 % , on higher net interest income partially offset by a higher provision for credit losses . worldwide independent dealer retail sales of new harley-davidson motorcycles decreased 1.3 % compared to 2014 . retail sales of new harley-davidson motorcycles decreased 1.7 % in the u.s. and 0.5 % in international markets . retail sales were below the company 's expectations in 2015. in 2015 , retail sales were adversely impacted by a significant increase in competitiveness behind currency-driven discounting and the introduction of new products by a number of our competitors as well as a challenging macro-economic environment . please refer to the “ results of operations 2015 compared to 2014 ” for additional details concerning the results for 2015 . ( 1 ) note regarding forward-looking statements the company intends that certain matters discussed in this report are “ forward-looking statements ” intended to qualify for the safe harbor from liability established by the private securities litigation reform act of 1995. these forward-looking statements can generally be identified as such by reference to this footnote or because the context of the statement will include words such as the company “ believes , ” “ anticipates , ” “ expects , ” “ plans , ” or “ estimates ” or words of similar meaning . similarly , statements that describe future plans , objectives , outlooks , targets , guidance or goals are also forward-looking statements . such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially , unfavorably or favorably , from those anticipated as of the date of this report . certain of such risks and uncertainties are described in close proximity to such statements or elsewhere in this report , including under the caption “ risk factors ” in item 1a and under “ cautionary statements ” in item 7 of this report . shareholders , potential investors , and other readers are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements . the forward-looking statements included in the outlook section are only made as of january 28 , 2016 and the remaining forward looking statements in this report are only made as the date of the filing of this report ( february 18 , 2016 ) , and the company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances . 24 outlook ( 1 ) in october 2015 , the company laid out its plans for how it intends to increase its focus , investment and resolve to drive demand in 2016 and beyond . the company has five clear objectives : l ead in every market by achieving and holding the number one market share of the 601+cc motorcycle segment . grow the sport of motorcycling in the u.s. , in part by growing the number of u.s. core customers and growing the u.s. outreach customers at a faster rate . grow u.s. retail sales and grow international retail sales at a faster rate . the company has a plan to grow its international dealer network by 150 to 200 new dealerships by 2020. grow revenue and grow earnings faster than revenue through 2020. outperform the s & p 500 for 2016 and beyond , the company plans to significantly increase its spending to drive demand . the company intends to offset this increased spending by reducing spending in other areas , primarily support functions and through a reorganization of its commercial operations aimed at being both leaner and stronger . in 2016 , the company expects to increase its spending on customer-facing marketing by approximately 65 % from 2015 levels and it expects to increase its spending on new product development by approximately 35 % from 2015 levels . this spending reallocation would represent an approximate $ 70 million increase in the company 's spending to drive demand compared to 2015. the company 's increased spending will be focused in four key areas : increase product and brand awareness . grow new ridership in the u.s. this includes the company 's target to more than double the number of riders trained annually through the harley-davidson riding academy to 100,000 globally by 2020 , with the majority in the u.s. increase and enhance brand access . the company intends to continue to expand and enhance its global dealer network , develop new retail formats for urban centers and urban tastes and expand ecommerce . accelerate the cadence and impact of new products and extend its leadership in features and technology that it believes matter to customers . on january 28 , 2016 the company announced the following expectations for 2016 . story_separator_special_tag the company anticipated some level of market share loss following the 13.4 percentage point increase in recent years ; however , the company 's market share over the first three quarters was more severely impacted than expected , which the company believes is a result of the intense competitive environment and the inclusion of autocycles in the industry numbers . international retail sales growth during 2015 in the asia pacific region was more than offset by declines in the emea region , latin america and canada . retail sales in the asia pacific region were driven by growth in emerging markets and in australia , partially offset by declines in japan . the company believes the retail sales decrease in the emea region was due to the introduction of several performance-oriented models by the competition . international retail sales as a percent of total retail sales in 2015 were 36.4 % compared to 36.2 % in 2014 . despite the volatility in global retail sales , the company believes it can continue to realize strong international growth opportunities by expanding its distribution network and increasing its brand relevance by delivering exceptional products that inspire riders . in 2015 , the company added 40 international dealerships , and it plans to add an additional 150 to 200 through 2020 . ( 1 ) harley-davidson motorcycle retail sales ( a ) the following table includes retail unit sales of harley-davidson motorcycles : replace_table_token_10_th ( a ) data source for retail sales figures shown above is new sales warranty and registration information provided by harley-davidson dealers and compiled by the company . the company must rely on information that its dealers supply concerning retail sales and this information is subject to revision . ( b ) data for europe include austria , belgium , denmark , finland , france , germany , greece , italy , luxembourg , netherlands , norway , portugal , spain , sweden , switzerland and the united kingdom . motorcycle registration data - 601+cc ( a ) the following table includes industry retail motorcycle registration data : replace_table_token_11_th 27 ( a ) data includes on-road 601+cc models . on-road 601+cc models include dual purpose models , three-wheeled motorcycles and autocycles . autocycles were included in the u.s. and europe data beginning in 2014 and 2015 , respectively . registration data for harley-davidson street 500 ® motorcycles is not included in this table . ( b ) united states industry data is derived from information provided by motorcycle industry council ( mic ) . this third party data is subject to revision and update . ( c ) europe data includes austria , belgium , denmark , finland , france , germany , greece , italy , luxembourg , netherlands , norway , portugal , spain , sweden , switzerland , and the united kingdom . industry retail motorcycle registration data includes 601+cc models derived from information provided by association des constructeurs europeens de motocycles ( acem ) , an independent agency . this third-party data is subject to revision and update . motorcycles and related products segment motorcycle unit shipments the following table includes wholesale motorcycle unit shipments for the motorcycles segment : replace_table_token_12_th ( a ) category previously referred to as `` custom '' motorcycle units , as used in this table , include dyna ® , softail ® , v-rod ® and cvo models . ( b ) initial shipments of street motorcycle units began during the first quarter of 2014. during 2015 , wholesale shipments of harley-davidson motorcycles were down 1.6 % compared to the prior year . international shipments as a percentage of the total were up slightly in 2015 as compared to 2014. in addition , shipments of sportster ® / street motorcycles as a percentage of total shipments increased in 2015 compared to the prior year driven by the strong acceptance of the street motorcycles as the company continued its global rollout of these models in 2015. touring motorcycle shipments were down in 2015 following a 14.2 % increase in shipments of touring motorcycles in 2014 driven by demand for the new rushmore models . as the company expected , dealer retail inventory of new harley-davidson motorcycles in the u.s. at the end of 2015 was approximately 2,600 units higher than at the end of 2014 , largely due to the initial dealer fill of its new 2016 model-year motorcycles . the company believes the u.s. year-end 2015 dealer retail inventory level is appropriate as the company aggressively manages supply in line with demand ( 1 ) . 28 segment results the following table includes the condensed statement of operations for the motorcycles segment ( in thousands ) : replace_table_token_13_th the following table includes the estimated impact of the significant factors affecting the comparability of net revenue , cost of goods sold and gross profit from 2014 to 2015 ( in millions ) : replace_table_token_14_th the following factors affected the comparability of net revenue , cost of goods sold and gross profit from 2014 to 2015 : on average , wholesale prices on the company 's 2015 and 2016 model-year motorcycles were higher than the prior model-years resulting in the favorable impact on revenue during the period . the impact of revenue favorability resulting from model-year price increases on gross profit was partially offset by increases in cost related to the additional content added to the 2015 and 2016 model-year motorcycles . gross profit was negatively impacted by changes in foreign currency exchange rates during 2015 compared to 2014. revenue was negatively impacted by a weighted-average devaluation in the euro , japanese yen , brazilian real and australian dollar of 17 % compared to 2014. the negative impact to revenue was partially offset by a positive impact to cost of goods sold as a result of natural hedges , benefits of foreign exchange contracts and a decrease in losses from the revaluation of foreign-denominated assets on the balance sheet .
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segment results the following table includes the condensed statements of operations for the financial services segment ( in thousands ) : replace_table_token_23_th interest income was favorable due to higher retail and wholesale outstanding finance receivables , partially offset by lower yields primarily on retail finance receivables due to increased competition . other income was favorable primarily due to increased credit card licensing and insurance revenue . other income now includes international income which had previously been reported in interest income . amounts for 2014 and 2013 , which were not material , have been adjusted for comparability . interest expense benefited from a more favorable cost of funds and a lower loss on the extinguishment of a portion of the company 's 6.80 % medium-term notes than in 2013 , partially offset by higher average outstanding debt . the provision for credit losses increased $ 20.9 million compared to 2013. the retail motorcycle provision increased $ 20.0 million during 2014 as a result of higher credit losses , an increase in the retail motorcycle reserve rate , and portfolio growth . credit losses were impacted by lower recovery values of repossessed motorcycles , the impact of changing consumer behavior , and lower recoveries as a result of fewer charge-offs in prior periods . annual losses on the company 's retail motorcycle loans were 1.22 % during 2014 compared to 1.09 % in 2013. the 30-day delinquency rate for retail motorcycle loans at december 31 , 2014 decreased to 3.61 % from 3.71 % at december 31 , 2013. changes in the allowance for credit losses on finance receivables were as follows ( in thousands ) : replace_table_token_24_th at december 31 , 2014 , the allowance for credit losses on finance receivables was $ 122.0 million for retail receivables and $ 5.3 million for wholesale receivables . at december 31 , 2013 , the allowance for credit losses on finance receivables was $ 106.1 million for retail receivables and $ 4.6 million for wholesale receivables .
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( b ) includes seven md-80 aircraft ( md-82/83/88s ) modified to a 166-seat configuration . ( c ) in december 2011 , we exercised purchase options on two md-80 aircraft and took ownership of these aircraft in january 2012. subsequent to taking ownership of these two aircraft in january 2012 , we no longer have any aircraft under operating leases . ( d ) in february 2010 , we exercised purchase options on two md-80 aircraft under operating leases . in october 2010 , we took ownership of these aircraft . ( e ) includes two md-80 aircraft subject to capital leases as of december 31 , 2009. in september 2010 , we exercised early purchase options and took ownership of these two aircraft . ( f ) used almost exclusively for fixed fee flying . md-80 aircraft not in service as of december 31 , 2011 , two of our md-80 aircraft previously in storage are being modified to a 166 seat reconfiguration and expected to enter revenue service in the first quarter of 2012. subsequent to these two md-80 aircraft being modified to 166 seats , the remaining aircraft in the seat reconfiguration program will be removed from aircraft in service . there is also one additional md-80 aircraft in storage which could be used for future growth opportunities . boeing 757-200 aircraft as of december 31 , 2011 , we owned four boeing 757-200 aircraft , of which three were leased out to third parties on a short-term basis , and one is in revenue service . the expected return dates of the leased out aircraft , under their respective leases , are through the third quarter of 2012. we expect these three aircraft to be added to revenue service through the first half of 2013. we obtained approval from the federal aviation administration ( “ faa ” ) to begin operating the boeing 757-200 aircraft type in our operating fleet and in july 2011 , initiated service with the aircraft on two of our routes to las vegas . two additional boeing 757-200 aircraft remain to be purchased under our previous contract . we expect to close on these aircraft during the first half of 2012 , with introduction of these aircraft into our fleet during the first half of 2012. we continue our efforts to gain flag carrier status and complete the etops certification process with the goal to launch service with our boeing 757-200 aircraft to hawaii in the second half of 2012 . 23 network we have increased the number of routes into our leisure destinations from 160 at december 31 , 2010 to 171 routes at december 31 , 2011. we now serve 76 cities in 39 states ( including small cities and destinations ) through our route network . the following shows the number of destinations and small cities served as of the dates indicated ( includes cities served seasonally ) : replace_table_token_7_th ( a ) from february 2010 until february 2011 , we served both orlando international airport and orlando sanford international airport . in february 2011 , we have consolidated our orlando operations back to our original operational base at orlando sanford international airport . trends and uncertainties oil prices have stabilized during the second half of 2011 , but at levels resulting in an increase of our system average cost per gallon to $ 3.07 , a 33.5 % increase from $ 2.30 in 2010. this system average cost per gallon for 2011 was higher than the $ 2.98 per gallon we experienced in 2008 when fuel reached peak levels . fuel availability is subject to periods of market surplus and shortage and is affected by demand for heating oil , gasoline and other petroleum products . the cost of fuel can not be predicted with any degree of certainty and further fuel cost volatility will most likely have a significant impact on our future results of operations . we will continue to try to offset these fuel prices through our continued focus on capacity management , driving additional ancillary revenues and the execution of our low fixed , high variable cost model . we remain pleased with the strength and flexibility of our model and believe it has proven successful to maintain profitability in a high fuel price environment . we continue to expand our route network and extend our national footprint with the focus on serving residents of small cities . our national footprint is well balanced and is not dependant on one particular market or geographic region . in january 2012 , we announced the establishment of an operational base and expansion of service at oakland international airport with seven new routes to serve the san francisco bay area starting in april 2012. we also anticipate service to hawaii in the second half of 2012 upon completion of our etops certification . in january 2012 , revisions and expansions to a variety of dot consumer-protection regulations became effective . among other changes , the new rules substantially reduce the flexibility concerning airline advertising and sales practices , including on websites . these new regulations curtail our ability to advertise , price and sell our services in the particular manner we have developed and found most advantageous , forcing a more homogenized industry approach to advertising and sales . future dot rulemaking in this regard may impose further restrictions on us . although we are taking steps to minimize the extent of any negative impact and we are challenging certain of the new rules in court , our revenues could be adversely affected in the long-term . we expect to transfer over to our new website in first quarter 2012 and continue to enhance our website offerings to our customers . we believe this will in time provide significant revenue opportunities on which we hope to capitalize . our operating revenue our operating revenue comprises of both air travel on a stand-alone basis and bundled with hotels , rental cars and other travel-related services . story_separator_special_tag we believe our diversified revenue streams distinguish us from other u.s. airlines and other travel companies . scheduled service revenue . scheduled service revenue consists of air fare for nonstop flights on our route network . ancillary revenue . our ancillary revenue is generated from air-related charges and third party products . air-related revenue is generated through charges for use of our website to purchase tickets , checked bags , advance seat assignments , priority boarding and other services provided in conjunction with our scheduled air service . we also generate revenue from third party products through the sale of hotel rooms , ground transportation ( rental cars and hotel shuttle products ) , attraction and show tickets and fees we receive from other merchants selling products through our website . we recognize our ancillary revenues net of amounts paid to wholesale providers , travel agent commissions and credit card processing fees . 24 fixed fee contract revenue . our fixed fee contract revenue is generated from fixed fee agreements and charter service on a seasonal and ad-hoc basis for other customers . the majority of our fixed fee contract revenue is under fixed fee agreements with affiliates of caesars entertainment inc. and peppermill resorts inc. other revenue . other revenue is primarily generated from aircraft and flight equipment leased to third parties . seasonality . our business is seasonal in nature with traffic demand historically being weaker in the third quarter and stronger in the first quarter . our operating revenue is largely driven by perceived product value , advertising and promotional activities and can be adversely impacted during periods with reduced leisure travel spending , such as the back-to-school season . our operating expenses a brief description of the items included in our operating expense line items follows . aircraft fuel expense . aircraft fuel expense includes the cost of aircraft fuel , fuel taxes , into plane fees and airport fuel flowage , storage or through-put fees . under the majority of our fixed fee contracts , our customer reimburses us for fuel costs . these amounts are netted against our fuel expense . salary and benefits expense . salary and benefits expense includes wages , salaries , and employee bonuses , sales commissions for in-flight personnel , as well as expenses associated with employee benefit plans and employer payroll taxes . station operations expense . station operations expense includes the fees charged by airports for the use or lease of airport facilities and fees charged by third party vendors for ground handling services , commissary expenses and other related services such as deicing of aircraft . maintenance and repairs expense . maintenance and repairs expense includes all parts , materials and spares required to maintain our aircraft . also included are fees for repairs performed by third party vendors . sales and marketing expense . sales and marketing expense includes all advertising , promotional expenses , travel agent commissions and credit card discount fees associated with the sale of scheduled service and air-related charges . aircraft lease rentals expense . aircraft lease rentals expense consists of the cost of leasing aircraft under operating leases with third parties . depreciation and amortization expense . depreciation and amortization expense includes the depreciation of all fixed assets , including aircraft that we own and amortization of aircraft that we operated under capital leases . other expense . other expense includes the cost of passenger liability insurance , aircraft hull insurance and all other insurance policies except for employee welfare insurance . additionally , this expense includes loss on disposals of aircraft and other equipment disposals , travel and training expenses for crews and ground personnel , facility lease expenses , professional fees , personal property taxes and all other administrative and operational overhead expenses not included in other line items above . story_separator_special_tag purchased options on these two aircraft under operating leases and took ownership of the aircraft in january 2012. upon taking ownership of these two aircraft in january 2012 , we no longer have any aircraft under operating leases . depreciation and amortization expense . depreciation and amortization expense increased to $ 42.0 million in 2011 from $ 35.0 million in 2010 , an increase of 20.0 % primarily driven by additional depreciation expense from boeing 757-200 and md-80 aircraft and engines . our boeing 757-200 aircraft include three aircraft leased to third parties during 2011 and one placed into revenue service in july 2011. we ended 2011 with 57 aircraft in service as compared to 52 aircraft at the end of 2010. other expense . other expense increased 6.2 % to $ 32.2 million in 2011 compared to $ 30.4 million in 2010. the increase was primarily driven by losses associated with one md-87 aircraft we permanently grounded during the second quarter of 2011 , the disposal of one engine , along with the write-down of engine values in our consignment program . in addition , we had an increase in our administrative expenses associated with our growth , such as property taxes and software support , which contributed to the overall increase in other operating expenses . other ( income ) expense other ( income ) expense increased from a net other expense of $ 1.3 million for 2010 , to a net other expense of $ 5.9 million for 2011. the increase is due to a $ 4.7 million increase in interest expense in 2011 primarily associated with our $ 125.0 million term loan borrowing in march 2011. income tax expense our effective income tax rate was 37.9 % for 2011 compared to 36.4 % for 2010. the higher effective tax rate for 2011 was largely due to the impact of apportionment factor adjustments to filed state income tax returns which contributed to an increase in our state income tax expense .
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third party products consist of revenue from the sale of hotel rooms , ground transportation ( rental cars and hotel shuttle products ) , attraction and show tickets and fees we receive from other merchants selling products through our website : replace_table_token_10_th during 2011 , we generated gross revenue of $ 106.4 million from third party products , which resulted in net revenue of $ 29.9 million . third party products increased on a per-passenger basis primarily as a result of increased hotel room bookings and margin expansion , when compared to the prior year . fixed fee contract revenue . fixed fee contract revenue increased 7.7 % to $ 43.7 million during 2011 from $ 40.6 million for 2010. the increase in fixed fee contract revenue was primarily attributable to flying under an agreement with peppermill resorts inc. ( flying began in january 2011 ) , which more than offset the reduction in fixed fee flying under the caesars entertainment inc. ( “ caesars ” ) agreement . block hours flown under our fixed fee flying agreement with caesars decreased from 6,893 block hours in 2010 to 5,605 in 2011. other revenue . we generated other revenue of $ 10.5 million for 2011 compared to $ 1.2 million for 2010 , primarily from lease revenue for aircraft and flight equipment . in the first quarter of 2011 , we leased three boeing 757-200 aircraft to third parties on a short term basis . the expected return dates of these aircraft , under their respective leases , are through the third quarter of 2012 . 26 operating expenses our operating expenses increased 24.1 % to $ 693.7 million for 2011 compared to $ 559.0 million in 2010. we primarily evaluate our expense management by comparing our costs per passenger and per asms across different periods which enable us to assess trends in each expense category . the following table presents operating expense per passenger for the indicated periods ( “ per-passenger costs ” ) . the table also presents operating expense per passenger , excluding fuel , which represents operating expenses , less aircraft fuel expense , divided by the number of passengers carried . this statistic provides management and investors the
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38 chemical products segment replace_table_token_15_th net revenue from our chemical products segment decreased from $ 41,212,494 for the fiscal year 2011 to $ 34,224,249 for the same period in 2012 , a decrease of approximately 17 % . the decrease was mainly attributable to the drop in demand for our oil and gas exploration additives and paper manufacturing additives . our oil and gas exploration chemicals are the most popular products within the chemical products segment , which contributed $ 18,721,374 ( or 55 % ) and $ 26,234,497 ( or 64 % ) of the segment revenue for the fiscal year 2012 and 2011 , respectively , with a decrease of $ 7,513,124 , or 29 % . net revenue from our paper manufacturing additives decreased from $ 4,762,221 for the fiscal year 2011 to $ 3,317,077 for the same period in 2012 , a decrease of approximately 30 % . we believe that as result of the recent macro-economic tightening policy imposed by the prc government to slow down the economy , the overall demand for chemical products was reduced , which resulted in a decrease in our volume of both oil and gas exploration additives and paper manufacturing additives sold , which decreased by 32 % and 22 % , respectively , for the fiscal year 2012 as compared with the same period in 2011. also , in june 2011 we stopped the production of our wastewater treatment chemical additives due to the profit margin lower than estimated by the management . however , the effect of the decrease in net revenue from our chemical products segment was partially offset by the increase in the average selling price of our pesticides manufacturing additives products due to the strong demand for such products . the average selling price per tonne for our pesticides manufacturing additives increased by 18 % for the fiscal year 2012 as compared with the same period in 2011. the prc government continued to support expansion of agricultural related products , which supported the growth in sales of our pesticides manufacturing additives . also , we successfully converted the production equipment from wastewater treatment chemical additive to pharmaceutical and agricultural chemical additives , which contributed higher profit margins as compared to other chemical products . the table below shows the changes in the average selling price and sales volume of major chemical products ( wastewater treatment chemical additives excluded ) for the fiscal year 2012 as compared to the same period in 2011. increase / ( decrease ) in net revenue of major chemical products , for fiscal year 2012 vs. 2011 , as a result of : oil and gas exploration additives paper manufacturing additives pesticides agricultural additives total increase / ( decrease ) in average selling price $ 1,004,880 $ ( 444,811 ) $ 1,779,352 $ 2,339,421 increase / ( decrease ) in sales volume $ ( 8,518,003 ) $ ( 1,000,333 ) $ 726,678 $ ( 8,791,658 ) total effect on net revenue of chemical products $ ( 7,513,123 ) $ ( 1,445,144 ) $ 2,506,030 $ ( 6,452,237 ) cost of net revenue replace_table_token_16_th 39 cost of net revenue reflects mainly the raw materials consumed and the direct salaries and benefits of staff engaged in the production process , electricity , depreciation and amortization of manufacturing plant and machinery and other manufacturing costs . our cost of net revenue was $ 73,439,341 for fiscal year 2012 , a decrease of $ 16,098,871 ( or approximately 18 % ) compared to fiscal year 2011. the decrease in overall cost of net revenue was mainly attributable to the decrease in volume of raw materials purchased as a result of the decrease in volume of products sold in fiscal year 2012 , as compared to fiscal year 2011 , which was partially offset by the increase in depreciation and amortization of manufacturing plant and machinery and increase in purchase price of raw materials . bromine production capacity and utilization of our factories the table below represents the annual capacity and utilization ratios for all of our bromine producing properties : replace_table_token_17_th ( i ) annual production capacity for the fiscal year was adjusted with the appraisal report carried out by an international appraisal firm , grant sherman appraisal limited , in october 2011 . ( ii ) utilization ratio is calculated based on the annualized actual production volume in tonnes for the periods divided by the annual production capacity in tonnes . ( iii ) the increase in 3,000 tonnes production capacity represents the management 's estimated capacity of factory no . 10 acquired in late december 2011. our utilization ratio decreased by 25 % for the fiscal year 2012 as compared with the same period in 2011. the decrease in utilization was mainly attributable to the drop in overall demand for bromine as a result of the macro-economic tightening policy imposed by the prc government to slow down the economy , which reduced our sales and production volume since mid-2011 . in view of the trend of a decrease in the bromine concentration of the brine water being extracted at our production facilities , and in order to reduce the leakage rate and attempt to recover the annual production capacity of bromine and crude salt to a higher level in the future , we decided to carry out large scale enhancement work to replace all the eroded protective shells within a four year timeframe , which commenced in the second quarter of 2011. from june through august 2012 , we resumed and completed the second phase enhancement works to our existing bromine extraction and crude salt production facilities . the total cost of the second phase enhancement work to the extraction wells and protective shells to transmission channels and ducts in factories no . 1 to 9 are approximately $ 12,786,791 and $ 8,125,659 , respectively , which are capitalized as building and plant and machinery . story_separator_special_tag as previously mentioned , the decrease in gross profit was a result of the macro-economic tightening policy imposed by the prc government to slow down the economy , which decreased the demand for crude salt for downstream production of chlorine alkali and use in chemical , food and beverage industries . chemical products segment the gross profit margin for our chemical products segment for the fiscal year 2012 was 29 % as compared to 31 % for the same period in 2011 , a decrease of 2 % . as previously mentioned , the decrease in gross profit margin was a result of the decrease in demand for our oil and gas exploration additives and paper manufacturing additives which in turn reduced the sales volume of these chemical products . as sales of oil and gas exploration additives contributed more than 55 % of our total chemical products segment 's net revenue , the decrease in demand largely reduced the gross profit margin of our chemical products segment . however , the selling price fluctuation of individual chemical products is not expected to have a significant impact on our gross profit margin for overall chemical products as our factory is capable of producing diversified chemical products , such as pesticides manufacturing additives with higher profit margin . research and development costs the total research and development costs incurred for the fiscal years 2012 and 2011 were $ 164,586 and $ 398,842 , respectively , with a decrease of 59 % . research and development costs for the fiscal year 2012 represented raw materials used by syci for testing the manufacturing routine and samples of the new chemical products production line . research and development costs for the fiscal year 2011 were mostly related to the co-op research and development center set up jointly with east china university of science and technology in june 2007 to develop new bromine-based chemical compounds and products to be utilized in the pharmaceutical industry , which amounted to $ 236,816. on june 7 , 2011 , syci and east china university of science and technology mutually agreed to terminate the co-op research agreement due to the successful completion of the cooperative research and development tasks related to the development of bromine-related chemical products for us . exploration cost . no exploration cost was incurred for the fiscal year 2012 as we are discussing and negotiating with the local government of daying county of the form of cooperation to further explore the brine water resources . in the fiscal year 2011 , the exploration cost was $ 7,034,153 , representing the drilling of exploratory wells and associated facilities by schc in sichuan province in order to confirm and measure the brine water resources in the province . we completed the drilling of the first exploratory well in december 2011 and announced in mid-january 2012 that we have discovered underground brine water resources in daying county , and provided preliminary concentration results after the testing by a third-party independent testing expert . 43 write-off/impairment on property , plant and equipment . write-off on property , plant and equipment of $ 1,042,138 for the fiscal year 2012 represented the write-off of ( i ) certain protective shells to transmission pipelines and ducts replaced of $ 911,995 during the second phase enhancement project that started in june 2012 and completed in august 2012 ; and ( ii ) certain machinery and equipment replaced during the enhancement work to our bromine production facilities in factory no . 2 of $ 130,143 that started in july 2012 and completed in september 2012. the write-off and impairment on property , plant and equipment for the fiscal year 2011 represented ( i ) the write-off on property , plant and equipment that could not be relocated to the new factory no . 4 in the amount of $ 1,384,443 ; ( ii ) the impairment loss on property , plant and equipment related to the conversion of our production line from wastewater treatment chemical additives to the production of pharmaceutical and agricultural chemical intermediates in the amount of $ 1,805,598 ; ( iii ) the impairment loss on property , plant and equipment under capital leases for idle plant and machinery in the amount of $ 683,046 ; and ( iv ) the write-off of certain crude salt field protective shells and transmission pipelines replaced during enhancement projects in the amounts of $ 1,632,004 and $ 2,065,475 , respectively . general and administrative expenses . general and administrative expenses were $ 6,792,110 for the fiscal year 2012 , a decrease of $ 11,082,186 ( or 62 % ) as compared to $ 17,874,296 for the same period in 2011. the significant decrease was primarily due to ( i ) non-cash expenses of $ 7,481,400 for the fiscal year 2011 related to options granted to our employees in the amount of $ 2,731,400 , recognition of non-vested options which were cancelled in late september 2011 in the amount of $ 4,298,000 , and a warrant issued to our investor relations firm in the amount of $ 452,000 related to a the service agreement signed in february 2011 ; ( ii ) the non-cash expenses related to options granted for the fiscal year 2012 amounted to $ 510,500 , which resulted in a decrease of $ 6,970,900 , or 93 % , as compared with the same period in 2011 ; ( iii ) $ 1,398,574 of unrealized exchange loss in relation to the translation difference of inter-company balances in usd and rmb recorded in fiscal year 2011 compared to $ 61,090 recorded in fiscal year 2012 ; and ( iv ) $ 3,154,400 of consultancy fee paid to an unrelated prc agent in fiscal year 2011 for the purpose of searching suitable crude salt fields and bromine properties for acquisition . the decrease in such general and administrative expenses was partially offset by the increase in land use right tax in the amount of
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the following table presents the aging analysis of our accounts receivable as of december 31 , 2012 and 2011. replace_table_token_23_th the overall accounts receivable balance as of december 31 , 2012 increased by $ 14,050,072 ( or 64 % ) , as compared to those as of december 31 , 2011. such increase is mainly attributable to the extended settlement days by customers due to the macro-economic tightening policy imposed by prc government to slow down the economy , which in turn lengthened the average turnover days of accounts receivable from customers from 48 days for the fiscal year 2011 to 104 days for the fiscal year 2012. normally , 90 to 180-days credit period is granted to customers with a good repayment history . we are not aware of any allowances for doubtful debts required for the fiscal year 2012 as we have policies in place to ensure that sales are made to customers with an appropriate credit history . for the balances of accounts receivable as of december 31 , 2012 aged more than 90 days , 100 % was settled in the two months ended february 28 , 2013. inventory our inventory consists of the following : replace_table_token_24_th the net inventory level as of december 31 , 2012 increased by $ 1,555,626 ( or 35 % ) , as compared to the net inventory level as of december 31 , 2011. raw materials slightly decreased by 9 % as of december 31 , 2012 as compared to december 31 , 2011. all of the raw materials are basic chemical industry materials , fewof which have a possibility of loss over time , or major fluctuations in their prices .
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Liquidity
| 1,980
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if we qualify as a reit for federal income tax purposes , we generally will not be subject to federal income tax on income that we distribute to our stockholders . if we fail to qualify as a reit in any taxable year , we will be subject to federal income tax on our taxable income at regular corporate rates and will not be permitted to qualify as a reit for four years following the year in which our qualification is denied . such an event could materially and adversely affect our net income and results of operations . we intend to continue to organize and operate in such a manner as to remain qualified as a reit . 16 our prior public offerings we raised capital in our continuous registered offering since our inception until september 9 , 2013 , when we terminated our continuous registered offering . on august 22 , 2008 , we filed a registration statement on form s-11 with the sec to offer a maximum of $ 1 billion in shares of our common stock in a primary offering , at an offering price of $ 10.00 per share , and $ 285 million in shares of our common stock pursuant to a distribution reinvestment program , at an offering price of $ 9.50 per share which registration statement was declared effective by the sec on october 15 , 2009 ( the “ initial public offering ” ) . on september 20 , 2012 , we filed a registration statement on form s-11 with the sec , to register $ 500 million in shares of our common stock ( exclusive of shares to be sold pursuant to our distribution reinvestment program ) at a price of $ 10.00 per share , and $ 50.0 million in shares of our common stock to be sold pursuant to our distribution reinvestment plan at $ 9.50 per share , pursuant to a follow-on offering to the initial public offering ( the “ follow-on offering , ” and together with the initial public offering , the “ prior public offerings ” ) . as of april 12 , 2013 , the date we terminated our initial public offering , we had accepted aggregate gross offering proceeds of $ 22.2 million . our total stockholders ' equity increased $ 1.0 million from $ 11.0 million as of december 31 , 2012 to $ 12.0 million as of december 31 , 2013. the increase in our total stockholders ' equity is primarily attributable to the cumulative gain of $ 3,699,367 , net of disposition fees , which we realized on the partial sale of our controlling indirect joint venture equity interest in the berry hill property , reflected in our additional paid-in capital , offset by our net loss of $ 2,971,001 for the period . from the date of effectiveness of our follow-on offering through september 9 , 2013 , we sold aggregate gross primary offering proceeds of approximately $ 330,251 under our follow-on offering . after consideration by our board of strategic alternatives to enhance the growth of our portfolio and the slow rate at which we raised funds in our prior public offerings , we terminated the follow-on offering on september 9 , 2013 , including the related distribution reinvestment program . we raised an aggregate of $ 22.6 million in gross proceeds from the sale of shares of our common stock in the prior public offerings . industry outlook bluerock real estate , l.l.c . , or bluerock , which provides us with our senior management team through our advisor , believes that the first wave of opportunity following the financial crisis provided investment-oriented , or ‘ ‘ financial , `` buyers the opportunity to earn significant returns simply by ‘ ‘ spread investing `` ( i.e . , taking advantage of historical spreads between higher acquisition cap rates and lower , long-term financing interest rates ) . we believe that as financial buyers enter their disposition periods , the next phase of recovery provides opportunity for real-estate-centric buyers ( i.e . , buyers who have real estate-specific investment expertise and deep intellectual capital in specific markets ) to create value using proven real estate investment strategies . in addition , bluerock believes that as the economy continues its recovery , private purchasers with greater capital constraints who have needed significant leverage to fund acquisitions will become less competitive in an environment of more traditional ( i.e . , higher ) interest rate levels and cap rate spreads . bluerock believes that both private institutional capital and public reits are mostly focused on investing in apartment properties in primary metropolitan , or ‘ ‘ gateway , `` markets , and that many demographically attractive growth markets are underinvested by institutional/public capital . as a result , we believe that our target markets provide the opportunity to source investments at capitalization rates that are at significant value to gateway markets , and which have the potential to provide not only significant current income , but also capital appreciation . bluerock additionally believes that select demographically attractive growth markets are underserved by newer institutional-quality class a apartment properties , especially as the wave of echo boomers moves into its prime rental years over the upcoming decade . as such , we believe there is opportunity in certain of our target markets for development and or redevelopment to deliver class a product and capture premium rental rates and value growth . we believe that demographic forces indicate strong growth for apartment demand in the foreseeable future due to the increasing number of echo boomer households , the propensity of these echo boomers to rent longer than previous generations , the increase in baby boomer renter households and trends in immigration and population growth . story_separator_special_tag on august 29 , 2013 , we extended the maturity date of the fund loc to april 2 , 2014 , and we may extend it for an additional six months . at december 31 , 2013 and 2012 , the outstanding balance on the fund loc was $ 7,571,223 and $ 11,935,830 , respectively , and no amount and $ 564,170 was available for borrowing , respectively . we may also utilize other credit facilities or loans from affiliates or unaffiliated parties when possible . to date , we have relied on borrowing from affiliates to help finance our business activities . however , there are no assurances that we will be able to continue to borrow from affiliates or extend the maturity date of the fund loc beyond the current maturity date . our charter prohibits us from incurring debt that would cause our borrowings to exceed 300 % of our net assets unless a majority of our independent directors approves the borrowing . our charter also requires that we disclose the justification for any borrowings in excess of the 300 % leverage guideline in the next quarterly report . as of december 31 , 2013 , the percentage of our borrowings to our net assets was below the 300 % guideline . our sponsor has agreed to provide financial support to us sufficient for us to satisfy in the ordinary course of business our obligations and debt service requirements , including those related to the filing of the registration statement to sell shares of our class a common stock in an underwritten public offering , if we are unable to satisfy those expenses as they ordinarily come due after we have expended best efforts to satisfy those expenses by means available to us , and satisfy all liabilities and obligations of our company that we are unable to satisfy when due , after we have expended best efforts to satisfy those expenses by means available to us through and including the earlier of ( 1 ) february 15 , 2015 or ( 2 ) the initial closing date of an underwritten public offering to sell shares of our class a common stock . our sponsor has deferred payment by us as needed of asset management fees , acquisition fees and organizational and offering costs incurred by us and has deferred current year reimbursable operating expenses , though the sponsor is not currently advancing cash on our behalf . 24 while our policy is generally to pay distributions from cash flow from operations , all of our distributions to date have been paid from proceeds from our public offering , and may in the future be paid from additional sources , such as from borrowings , the sale of assets , advances from our advisor and our advisor 's deferral of its fees and expense reimbursements . none of our distributions for the years ended december 31 , 2013 and 2012 were funded with our cash from ongoing operations . we expect to meet our long-term liquidity requirements , such as scheduled debt maturities , through additional asset sales or consummating other strategic alternatives . we can make no assurances any of these funding arrangements or strategic transactions will occur , be successful or result in net proceeds to help us meet our liquidity requirements . cash flows year ended december 31 , 2013 as compared to the year ended december 31 , 2012 cash flows from operating activities as of december 31 , 2013 , we owned indirect equity interests in six real estate properties ( five operating apartment properties and one development apartment property ) , five of which are consolidated for reporting purposes . during the year ended december 31 , 2013 , net cash provided by operating activities was $ 244,264. after the net loss of $ 4,413,553 was adjusted for $ 3,881,886 in non-cash items , net cash provided by operating activities consisted of the following : · increase in accounts payable and accrued liabilities of $ 2,015,017 ; · increase in accounts receivable and other assets of $ 1,006,554 ; and · decrease in our payables due to affiliates of $ 232,532. cash flows from investing activities during the year ended december 31 , 2013 , net cash used in investing activities was $ 16,544,289 , primarily due to asset additions at berry hill , our development property , offset by the cash proceeds received for the sale of a partial joint venture interest in the berry hill property and for the sale of our hillsboro property . cash flows from financing activities our cash flows from financing activities consist primarily of proceeds from our initial public offering and follow-on offering and repayments/proceeds from affiliate loans , less distributions paid to our stockholders . for the year ended december 31 , 2013 , net cash provided by financing activities was $ 16,494,647 , which was primarily due to the following : · $ 16,035,755 of draws on the berry hill property 's construction loan ; · increased noncontrolling equity in the berry hill and enders properties of $ 920,908 and $ 119,192 , respectively ; and · $ 1,449,763 of gross offering proceeds related to our initial public and follow-on offerings , net of ( 1 ) payments of commissions on sales of common stock and related dealer manager fees in the amount of $ 143,245 , and ( 2 ) offering costs paid by us directly in the amount of $ 287,288. this was offset by net cash distributions , after giving effect to distributions reinvested by our stockholders . 25 capital expenditures the following table summarizes our total capital expenditures for the years ended december 31 , 2013 and 2012. replace_table_token_6_th the majority of our capital expenditures during the year ended december 31 , 2013 relate to the berry hill property , our development project , which was acquired in october 2012. first move-ins began in november 2013 and total
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liquidity and capital resources we believe the properties underlying the company 's real estate investments are performing well and had a portfolio-wide debt service coverage ratio of 1.79x and an average occupancy of 91 % at december 31 , 2013. our primary short-term liquidity requirements relate to ( a ) our operating expenses , ( b ) our maturing short-term debt , ( c ) investments and capital requirements to fund development and renovations at existing properties and ( d ) distributions . our current cash resources are inadequate to meet these needs as our current corporate operating expenses exceed the cash flow received from our investments in real estate joint ventures . the primary reason for our negative operating cash flow is the amount of our general and administrative expenses relative to the size of our portfolio . our general and administrative expenses were $ 2,123,260 for the year ended december 31 , 2013. these costs include accounting and related fees to our independent auditors , legal fees , costs of being an sec reporting company , director compensation and directors and officers insurance premiums . we believe that the most important uses of our capital resources will be to provide working capital to enable us to cover our negative operating cash flow and meet our maturing short-term debt obligation . through september 9 , 2013 , we had sold shares of our common stock pursuant to our prior public offerings carried out in a manner consistent with offerings of non-listed reits . our board subsequently determined to terminate our follow-on offering . through september 9 , 2013 , the date we terminated our follow-on offering , we had raised $ 22.6 million in net proceeds from our prior public offerings . therefore , we must seek other sources of funding other than the follow-on offering to address short and long-term liquidity requirements . on april 3 , 2013 , we , through an affiliate , entered into a membership interest purchase agreement with an unaffiliated third party for the sale of our indirect equity investment in the estates at perimeter in augusta , georgia , ( the “ estates at perimeter property ” ) .
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Liquidity
| 15,770
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while we experienced total revenue growth during fiscal 2020 , much of it took place in the first nine months of the fiscal year as the effects of covid-19 impacted our revenue starting in the latter half of march and throughout the fourth quarter of fiscal 2020. during the fourth quarter of fiscal 2020 , total revenue growth was impacted by reductions in client employee counts , a more challenging environment for new sales and client starts and interest rate reductions as interest income on funds held for clients declined due to interest rate reductions enacted by the federal reserve . we expect covid-19 to continue to unfavorably impact our revenue growth rates in future periods as we anticipate the future potential for a lower client employee count environment , increases in client losses , less demand for new services , a continued low interest rate environment and a decrease in the growth of the overall market , among other factors . client count growth we believe there is a significant opportunity to grow our business by increasing our number of clients . excluding clients acquired through acquisitions , we have increased the number of clients using our payroll and hcm software solutions from approximately 16,700 as of june 30 , 2018 to approximately 24,450 as of june 30 , 2020 , representing a compound annual growth rate of approximately 21 % . the table below sets forth the total number of clients using our payroll and hcm software solutions for the periods indicated , rounded to the nearest fifty . replace_table_token_3_th the rate at which we add clients is highly variable period-to-period and highly seasonal as many clients switch solutions during the first calendar quarter of each year . although many clients have multiple divisions , segments or locations , we only count such clients once for these purposes . annual revenue retention rate our annual revenue retention rate has been in excess of 92 % during each of the past three fiscal years . we calculate our annual revenue retention rate as our total revenue for the preceding 12 months , less the annualized value of revenue lost during the preceding 12 months , divided by our total revenue for the preceding 12 months . we calculate the annualized value of revenue lost by summing the recurring fees paid by lost clients over the previous twelve months prior to their termination if they have been a client for a minimum of twelve months . for those lost clients who became clients within the last twelve months , we sum the recurring fees for the period that they have been a client and then annualize the amount . we exclude interest income on funds held for clients from the revenue retention calculation . we believe that our annual revenue retention rate is an important metric to measure overall client satisfaction and the general quality of our product and service offerings . adjusted gross profit and adjusted ebitda we use adjusted gross profit and adjusted ebitda to evaluate our operating results . we prepare adjusted gross profit and adjusted ebitda to eliminate the impact of items we do not consider indicative of our ongoing operating performance . however , adjusted gross profit and adjusted ebitda are not measurements of financial performance under generally accepted accounting principles in the united states , or gaap , and these metrics may not be comparable to similarly titled measures of other companies . we define adjusted gross profit as gross profit before amortization of capitalized internal-use software costs and stock-based compensation expense and employer payroll taxes related to stock releases and option exercises . we define adjusted ebitda as net income before interest expense , income tax expense ( benefit ) , depreciation and amortization expense , stock-based compensation expense and employer payroll taxes related to stock releases and option exercises , and other items as defined below . 40 we disclose adjusted gross profit and adjusted ebitda , which are non-gaap measures , because we believe these metrics assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance . we believe these metrics are commonly used in the financial community to aid in comparisons of similar companies , and we present them to enhance investors ' understanding of our operating performance and cash flows . adjusted gross profit and adjusted ebitda have limitations as analytical tools . some of these limitations include the following : ● adjusted ebitda does not reflect our ongoing or future requirements for capital expenditures ; ● adjusted ebitda does not reflect changes in , or cash requirements for , our working capital needs ; ● adjusted ebitda does not reflect our income tax expense or the cash requirement to pay our taxes ; ● although depreciation and amortization are non-cash charges , the assets being depreciated and amortized may have to be replaced in the future , and adjusted ebitda does not reflect any cash requirements for such replacements ; and ● other companies in our industry may calculate adjusted gross profit and adjusted ebitda differently than we do , limiting their usefulness as a comparative measure . additionally , stock-based compensation will continue to be an element of our overall compensation strategy , although we exclude it from adjusted gross profit and adjusted ebitda as an expense when evaluating our ongoing operating performance for a particular period . because of these limitations , you should not consider adjusted gross profit as an alternative to gross profit or adjusted ebitda as an alternative to net income or net cash provided by operating activities , in each case as determined in accordance with gaap . story_separator_special_tag interest income on funds held for clients for the year ended june 30 , 2019 increased by $ 10.8 million , or 119 % , to $ 19.9 million from $ 9.1 million for the year ended june 30 , 2018. interest income on funds held for clients increased primarily as a result of higher average interest rates , increased average daily balances for funds held due to the addition of new clients to our client base and interest income from investing a larger portion of our funds held for clients in marketable securities . cost of revenues ( $ in thousands ) replace_table_token_11_th cost of revenues for the year ended june 30 , 2020 increased by $ 28.2 million , or 18 % , to $ 182.0 million from $ 153.9 million for the year ended june 30 , 2019. cost of revenues increased primarily as a result of the continued growth of our business , in particular , $ 19.2 million in additional employee-related costs resulting from additional personnel necessary to provide services to new and existing clients , $ 4.0 million in delivery and other processing-related fees and $ 2.3 million in increased internal-use software amortization . gross margin increased from 67 % in fiscal 2019 to 68 % in fiscal 2020 . cost of revenues for the year ended june 30 , 2019 increased by $ 4.7 million , or 3 % , to $ 153.9 million from $ 149.2 million for the year ended june 30 , 2018. cost of revenues increased primarily as a result of the continued growth of our business , in particular , $ 7.5 million in delivery and other processing-related fees and $ 2.6 million in increased internal-use software amortization . these increases were partially offset by $ 7.0 million fewer net personnel costs primarily due to the deferral and amortization of certain implementation costs over a period of 7 years related to our proprietary products upon the adoption of topic 606 on july 1 , 2018. gross margin increased from 60 % in fiscal 2018 to 67 % for fiscal 2019 primarily due to the adoption of topic 606 as mentioned . operating expenses ( $ in thousands ) sales and marketing replace_table_token_12_th sales and marketing expenses for the year ended june 30 , 2020 increased by $ 32.5 million , or 29 % , to $ 145.1 million from $ 112.6 million for the year ended june 30 , 2019. the increase in sales and marketing expense was 46 primarily the result of $ 20.0 million of additional employee-related costs , including those incurred to expand our sales team , and $ 6.3 million of additional stock-based compensation associated with our equity plan . sales and marketing expenses for the year ended june 30 , 2019 increased by $ 17.1 million , or 18 % , to $ 112.6 million from $ 95.5 million for the year ended june 30 , 2018. the increase in sales and marketing expense was primarily the result of $ 14.2 million of additional employee-related costs from the expansion of our sales team net of the deferral and amortization of certain selling and commissions costs over a period of 7 years related to the adoption of topic 606 on july 1 , 2018 . research and development replace_table_token_13_th research and development expenses for the year ended june 30 , 2020 increased by $ 12.4 million , or 25 % , to $ 62.8 million from $ 50.3 million for the year ended june 30 , 2019. the increase in research and development expenses was primarily the result of $ 14.7 million of additional employee-related costs related to additional development personnel and $ 1.5 million of additional stock-based compensation associated with our equity incentive plan , partially offset by higher year-over-year capitalized internal-use software costs of $ 5.0 million . research and development expenses for the year ended june 30 , 2019 increased by $ 12.7 million , or 34 % , to $ 50.3 million from $ 37.6 million for the year ended june 30 , 2018. the increase in research and development expenses was primarily the result of $ 14.3 million of additional employee-related costs related to additional development personnel and $ 2.3 million of additional stock-based compensation associated with our equity incentive plan , partially offset by higher year-over-year capitalized internal-use software costs of $ 5.3 million . general and administrative replace_table_token_14_th general and administrative expenses for the year ended june 30 , 2020 increased by $ 10.6 million , or 11 % , to $ 105.2 million from $ 94.6 million for the year ended june 30 , 2019. the increase in general and administrative expense was primarily the result of $ 4.1 million of additional employee-related costs , $ 2.1 million in the settlement of a certain legal matter and related litigation costs , $ 1.6 million for certain lease exit and acquisition-related costs and $ 2.4 million in additional occupancy costs . general and administrative expenses for the year ended june 30 , 2019 increased by $ 15.4 million , or 19 % , to $ 94.6 million from $ 79.3 million for the year ended june 30 , 2018. the increase in general and administrative expense was primarily the result of $ 7.5 million of additional employee-related costs related to additional personnel and $ 5.7 million in additional stock-based compensation associated with our equity incentive plan . 47 other income replace_table_token_15_th other income for the fiscal years presented did not materially change on a year-over-year basis . income tax expense ( benefit ) replace_table_token_16_th * not meaningful the difference in income tax expense ( benefit ) for the year ended june 30 , 2020 as compared to the year ended june 30 , 2019 was primarily due to increased deductions related
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the net cash used in investing activities is significantly impacted by the timing of purchases and sales and maturities of investments as we invest a portion of our excess cash and cash equivalents and funds held for clients in highly liquid , investment-grade marketable securities . the amount of funds held for clients invested will vary based on timing of client funds collected and payments due to client employees and taxing and other regulatory authorities . the increase in net cash used in investing activities from fiscal 2019 to fiscal 2020 was primarily due to an increase in purchases of available-for-sale securities and other of $ 149.7 million during the year ended june 30 , 2020 as compared to the year ended june 30 , 2019 and $ 16.7 million in costs related to the acquisition of vidgrid , inc. during 52 the year ended june 30 , 2020. the aforementioned items were partially offset by an increase in proceeds from sales and maturities of available-for-sale securities of $ 164.4 million . the decrease in net cash used in investing activities from fiscal 2018 to fiscal 2019 was primarily due to an increase in proceeds from sales and maturities of available-for-sale securities of $ 173.2 million , partially offset by an increase in purchases of available-for-sale securities and other of $ 54.1 million during the year ended june 30 , 2019 as compared to the year ended june 30 , 2018. other changes in net cash used in investing activities were primarily due to $ 6.7 million in costs related to the acquisition of beneflex during the year ended june30 , 2018 and decreases in purchases of property and equipment and lease allowances used for tenant improvements of $ 10.4 million and $ 4.3 million , respectively .
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Liquidity
| 12,977
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concurrently , the proposition of home as more of an essential part of the way we live , not just a place to live , is becoming a way of life rather than a covid-driven reaction . our measured growth strategy in the current market is to focus on selling homes when we begin construction which improves our inventory turn , while being patient with longer-term sales . this enables price appreciation to offset future cost escalations to maximize margin . our deliveries are expected to grow faster in 2021 than they did in 2020. we expect continued price appreciation and leverage from field expenses throughout the year , somewhat offset by higher lumber prices and other anticipated cost increases . we anticipate that our community count will be growing through 2021 , and that our new communities will be larger than the communities that sold out during 2020. we are expecting strong margins for the foreseeable future and throughout 2021 , and we expect our bottom line to grow faster than our top line . we expect to deliver between 62,000 and 64,000 homes in 2021 with between a 23.75 % and 24 % gross margin as compared to the 22.8 % full year gross margin in 2020. our technology initiatives have contributed meaningfully to our readiness for current economic and structural shifts while helping to improve our core business and drive our sg & a to a historic low of 8.1 % for 2020. our results and our expectations for next year are solid in all respects , and they reflect our focused strategy to balance growth , margin , cash flow and returns . we have remained focused on our optioned versus owned land strategy and believe we are in an excellent position to achieve our target of 50 % owned land and 50 % land controlled through options or similar agreements by the end of 2021. at the end of fiscal 2020 , the portion of land we controlled through options or similar agreements was 39 % , up from 33 % at the start of the year . we ended fiscal 2020 with a 3.5 year supply of land owned , compared to a 4.1 year supply of land owned at the start of fiscal 2020 , which put us well on the way to our goal of a 3.0 year supply by the end of 2021. among other things , this has increased our cash flow , which enabled us to reduce debt , including prepaying all of our senior debt that was scheduled to become due in fiscal 2021 , such that our year-end homebuilding debt-to-total capital ratio improved to 24.9 % , the lowest in our history . we expect to be in a strong cash and liquidity position in 2021 , and plan to continue with our strategies of reducing our debt balances and leverage ratio , and focusing on total shareholder return . while we continue to refine and grow our ancillary business divisions , they are becoming a decidedly smaller part of the overall company picture . we continue to work on strategies to better position our multifamily platform , our emerging single-family home for rent platform , our strategic investment in fivepoint holdings entities and our growing technology investments platform . with a solid balance sheet , leading positions in almost all of our homebuilding markets and continued execution of our core operating strategies , we believe that we are well positioned to meet demand , drive strong margins and cash flow and continue to grow with the market . 22 results of operations overview our net earnings attributable to lennar were $ 2.5 billion , or $ 7.85 per diluted share ( $ 7.88 per basic share ) in 2020 and $ 1.8 billion , or $ 5.74 per diluted share ( $ 5.76 per basic share ) in 2019. financial information relating to our operations was as follows : replace_table_token_3_th replace_table_token_4_th 23 2020 versus 2019 revenues from home sales increased 1 % in the year ended november 30 , 2020 to $ 20.8 billion from $ 20.6 billion in the year ended november 30 , 2019. revenues were higher primarily due to a 3 % increase in the number of home deliveries , excluding unconsolidated entities , partially offset by a 1 % decrease in the average sales price of homes delivered . new home deliveries , excluding unconsolidated entities , increased to 52,813 homes in the year ended november 30 , 2020 from 51,412 homes in the year ended november 30 , 2019 , as a result of an increase in home deliveries in the texas and west segments . the average sales price of homes delivered , excluding unconsolidated entities , decreased to $ 395,000 in the year ended november 30 , 2020 from $ 400,000 in the year ended november 30 , 2019. the decrease in average sales price primarily resulted from continuing to shift to lower-priced communities and regional product mix . gross margins on home sales were $ 4.7 billion , or 22.8 % , in the year ended november 30 , 2020 , compared to $ 4.2 billion , or 20.6 % , in the year ended november 30 , 2019. the gross margin percentage on home sales increased primarily due to our continued focus on reducing construction costs combined with favorable market conditions . loss on land sales in the year ended november 30 , 2020 was $ 49.1 million , primarily due to a write-off of costs in the second quarter as a result of us not moving forward with a naval base development in concord , california , northeast of san francisco and a change in strategy with three land assets that resulted in impairments in the fourth quarter . story_separator_special_tag as of november 30 , 2020 and 2019 , our balance sheet had $ 452.9 million and $ 495.4 million , respectively , of assets in the lennar other segment , which included investments in unconsolidated entities of $ 387.0 million and $ 403.7 million , respectively . at november 30 , 2020 and 2019 , the carrying value of lennar other 's commercial mortgage-backed securities ( `` cmbs `` ) was $ 53.5 million and $ 54.1 million , respectively . these securities were purchased at discount rates ranging from 28 % to 55 % with coupon rates ranging from 2.8 % to 4.0 % , stated and assumed final distribution dates between november 2020 and october 2026 , and stated maturity dates between november 2049 and march 2059. we review changes in estimated cash flows periodically to determine if an other-than-temporary impairment has occurred on our cmbs . based on management 's assessment , no impairment charges were recorded during the years ended november 30 , 2020 and 2019. we classify these securities as held-for-sale at november 30 , 2020 and held-to-maturity at november 30 , 2019. we have financing agreements to finance cmbs that have been purchased as investments by the segment . at november 30 , 2020 and 2019 , the carrying amount , net of debt issuance costs , of outstanding debt in these agreements was $ 1.9 million and $ 13.3 million , respectively , and the interest is incurred at a rate of 3.0 % and 3.9 % , respectively . story_separator_special_tag new roman ' , sans-serif ; font-size:9pt ; font-weight:400 ; line-height:120 % `` > leverage employed in our homebuilding operations . however , because net homebuilding debt to total capital is not calculated in accordance with gaap , this financial measure should not be considered in isolation or as an alternative to financial measures prescribed by gaap . rather , this non-gaap financial measure should be used to supplement our gaap results . at november 30 , 2020 , homebuilding debt to total capital was lower compared to november 30 , 2019 , primarily as a result of a decrease in homebuilding debt and an increase in stockholders ' equity due to net earnings . we are continually exploring various types of transactions to manage our leverage and liquidity positions , take advantage of market opportunities and increase our revenues and earnings . these transactions may include the issuance of additional indebtedness , the repurchase of our outstanding indebtedness , the repurchase of our common stock , the acquisition of homebuilders and other companies , the purchase or sale of assets or lines of business , the issuance of common stock or securities convertible into shares of common stock , and or the pursuit of other financing alternatives . in connection with some of our non-homebuilding businesses , we are also considering other types of transactions such as sales , restructurings , joint ventures , spin-offs or initial public offerings as we continue to move back towards being a pure play homebuilding company . our homebuilding senior notes and other debts payable are summarized within note 4 of the notes to the consolidated financial statements . at november 30 , 2020 , we had an unsecured revolving credit facility ( the `` credit facility `` ) with maximum borrowings of $ 2.4 billion maturing in 2024. the credit agreement provides that up to $ 500 million in commitments may be used for letters of credit . subsequent to november 30 , 2020 , our credit facility maximum borrowings were increased by $ 100 million to $ 2.5 billion and included a $ 300 million accordion feature , subject to additional commitments , thus the maximum borrowings could be $ 2.8 billion . as of both november 30 , 2020 and 2019 , we had no outstanding borrowings under the credit facility . under the credit facility agreement , we are required to maintain a minimum consolidated tangible net worth , a maximum leverage ratio and either a liquidity or an interest coverage ratio . these ratios are calculated per the credit facility agreement , which involves adjustments to gaap financial measures . we believe we were in compliance with our debt covenants at november 30 , 2020. in addition to the credit facility , we have other letter of credit facilities with different financial institutions . our outstanding letters of credit and surety bonds are described below : replace_table_token_11_th currently , substantially all of our 100 % owned homebuilding subsidiaries are guaranteeing all our senior notes ( the `` guaranteed notes `` ) . the guarantees are full and unconditional . however , they will be suspended as to a subsidiary any time it is not directly or indirectly guaranteeing at least $ 75 million of lennar corporation debt ( other than senior notes ) and be released when the subsidiary is sold . these guarantees are outlined in the supplemental financial information below . our homebuilding average debt outstanding and the average rates of interest were as follows : replace_table_token_12_th under our credit facility agreement ( the `` credit agreement `` ) , we are required to maintain a minimum consolidated tangible net worth , a maximum leverage ratio and either a liquidity or an interest coverage ratio . these ratios are calculated per the credit agreement , which involves adjustments to gaap financial measures . as of the end of each fiscal quarter , we are required to maintain minimum consolidated tangible net worth of approximately $ 7.1 billion plus the sum of 50 % of the cumulative consolidated net income for each completed fiscal quarter subsequent to february 28 , 2019 , if positive , and 50 % of the net cash proceeds from any equity offerings from and after february 28 , 2019 , minus the lesser of 50 % of the amount paid after april 11 , 2019 to repurchase common stock and $ 375 million
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financial condition and capital resources at november 30 , 2020 , we had cash and cash equivalents and restricted cash related to our homebuilding , financial services , multifamily and other operations of $ 2.9 billion , compared to $ 1.5 billion at november 30 , 2019. we finance all of our activities including homebuilding , financial services , multifamily , other and general operating needs primarily with cash generated from our operations , debt issuances and investor funds as well as cash borrowed under our warehouse lines of credit and our unsecured revolving credit facility ( the `` credit facility '' ) . operating cash flow activities during 2020 and 2019 , cash provided by operating activities totaled $ 4.2 billion and $ 1.5 billion , respectively . during 28 2020 , cash provided by operating activities was positively impacted by our net earnings , a decrease in inventories of $ 781.4 million , an increase in accounts payable and other liabilities of $ 266.5 million and a decrease in loans held-for-sale of $ 154.9 million primarily related to the sale of loans originated by financial services . during 2019 , cash provided by operating activities was positively impacted by our net earnings and a decrease in receivables of $ 312.3 million , partially offset by an increase in inventories due to strategic land purchases , land development and construction costs of $ 623.6 million and an increase in financial services loans held-for-sale of $ 431.3 million . investing cash flow activities during 2020 and 2019 , cash ( used in ) provided by investing activities totaled ( $ 280.2 ) million and $ 19.6 million , respectively .
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Liquidity
| 13,664
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from 2012 to 2017 , mr. korangy served in various country general management roles for novartis group ag ( nyse : nvs ) , a global healthcare company , where he worked with medical device , pharmaceutical and consumer health product segments . prior to that , while part of novartis group ag from 2010 to 2012 , mr. korangy was the global head of corporate finance , where he was responsible for global m & a , strategy , integrations , bd & l and portfolio planning . he served on the novartis finance leadership team and the global deal committee . from 1996 to 2010 , mr. korangy worked in the private equity and restructuring advisory divisions of the blackstone group ( nyse : bx ) , where he most recently was a managing director . mr. korangy is a current member of the board of directors ( and chairman of the strategy committee and member of the audit committee ) of the hain celestial group ( nasdaq : hain ) , a leading organic and natural products company , and a senior advisor to sight sciences llc , a medical device growth stage business . mr. korangy has also served on the advisory board of the mcnulty center for leadership and change management at the wharton school of the university of pennsylvania , since january 2019. mr. korangy is a former member of the board of directors of pelican rouge , a consumer coffee manufacturer and vending business , ultra music , an electronic and dance music record label , graham packaging , a manufacturer and distributer of custom plastic containers for consumer product companies , pinnacle foods ( nyse : pf ) , a consumer packaged foods manufacturer and distributor and bayview financial , an asset manager and loan servicer . mr. korangy received his b.s . degree in economics at the wharton school of the university of pennsylvania . mr. korangy was selected as a director due to his board experience , his management experience with medical device , pharmaceutical and consumer health products , and his financial and accounting experience . 60 gary j. pruden , director mr. pruden has served on our board of directors since december 2017. prior to joining us , from 1985 until 2017 , mr. pruden held a number of senior commercial leadership positions across both the medical devices and pharmaceutical sectors of johnson & johnson ( nyse : jnj ) . in april 2004 , he became president of the johnson & johnson subsidiary , janssen-ortho inc. in canada . in january 2006 , mr. pruden was appointed worldwide president of ethicon , inc. , a johnson & johnson subsidiary , and in 2009 became the company group chairman of ethicon , inc. in 2012 , he was named worldwide chairman of johnson & johnson 's global surgery group and in 2015 he became worldwide chairman in the medical devices division . in april 2016 , mr. pruden became a member of the executive committee at johnson & johnson where his official title was executive vice president , worldwide chairman , medical devices . mr. pruden also served in several capacities with the advanced medical technology association ( advamed ) , a medical device trade association , where he participated in negotiations with the fda . while at advamed mr. pruden served as a member of the board of directors , as chair of the advamed regulatory committee , and as a member of the advamed executive committee . mr pruden serves as an independent board member for lantheus holdings , inc. ( nasdaq : lnth ) ( and serves as a member of its audit and compensation committees ) , ossio inc , ( and serves as a member of its audit committee ) and avisi technologies inc. mr. pruden received his b.s . degree in finance at rider university , where he later served on the board of trustees from 2011 until 2015. mr. pruden was selected as a director due to his global management and regulatory experience with medical device and pharmaceutical products and his financial experience in leading a large business . family relationships there are no family relationships among any of the members of our board of directors or executive officers . code of business conduct and ethics we have adopted a written code of business conduct and ethics that applies to our employees , officers and directors . a current copy of our code is posted on the corporate governance section of our website , which is located at www.motusgi.com . we intend to disclose future amendments to certain provisions of our code of business conduct and ethics , or waivers of such provisions applicable to any principal executive officer , principal financial officer , principal accounting officer or controller , or persons performing similar functions , and our directors , on our website identified above or in filings with the sec . committees of the board of directors our board of directors has established an audit committee , a compensation committee , and a nominating and corporate governance committee . our board of directors may establish other committees to facilitate the management of our business . the composition and functions of each committee are described below . members serve on these committees until their resignation or until otherwise determined by our board of directors . each of these committees operates under a charter that has been approved by our board of directors , which are available on our website . audit committee . our audit committee consists of mr. korangy , mr. pruden and mr. sherman , with mr. korangy serving as the chairman of the audit committee . story_separator_special_tag if adequate funds are not available to us on a timely basis , or at all , we may breach the liquidity covenant , in which case , we would be required to immediately pledge to the bank and thereafter maintain in a separate account , unrestricted and unencumbered cash in an amount equal to the amount then outstanding under the loan agreement . on september 1 , 2020 we entered into a securities purchase agreement ( the “ securities purchase agreement ” ) under which we sold and issued to an institutional investor ( the “ holder ” ) , in a registered direct offering , an aggregate of 3,200,000 shares of our common stock par value $ 0.0001 per share ( the “ common stock ” ) , and pre-funded warrants to purchase an aggregate of 5,533,625 shares of common stock ( the “ pre-funded warrants ” ) . the offering price was $ 1.145 for each share of common stock and $ 1.144 for each pre-funded warrant . the pre-funded warrants were immediately exercisable at a price of $ 0.001 per share of common stock . pursuant to the securities purchase agreement , in a concurrent private placement , we also agreed to issue to the holder warrants to purchase up to 8,733,625 shares of common stock ( the “ private placement warrants ” ) . these warrants were immediately exercisable at an exercise price of $ 1.30 per share and expire on the fifth anniversary of the date of issuance . in connection with the closing of the offering , we received gross proceeds of $ 10.0 million before deducting placement agent fees and other offering expenses of $ 0.8 million , from the issuance of the common stock , the pre-funded warrants and the private placement warrants . on january 27 , 2021 , we entered into a warrant exercise agreement ( the “ exercise agreement ” ) with the holder , at which time 8,000,000 of the private placement warrants remained outstanding , due to the prior exercise of 733,625 of the private placement warrants on january 22 , 2021. pursuant to the exercise agreement , in order to induce the holder to exercise all of its remaining outstanding 8,000,000 private placement warrants for cash , we agreed to issue to the holder , new warrants ( the “ new warrants ” ) to purchase 0.75 shares of common stock for each share of common stock issued upon such exercise of the remaining 8,000,000 private placement warrants pursuant to the exercise agreement , or an aggregate of 6,000,000 new warrants . the terms of the new warrants are substantially similar to those of the private placement warrants , except that the new warrants will have an exercise price of $ 2.12 , will be immediately exercisable and will expire five years from the date of the exercise agreement . in addition , the holder paid a cash payment of $ 0.10 for each new warrant issued to the holder , for an aggregate of $ 600,000 to the company . we received aggregate gross proceeds before expenses of approximately $ 11.0 million from the exercise of all of the remaining 8,000,000 outstanding private placement warrants held by the holder and the payment of the purchase price for the new warrants . in connection with the exercise agreement , we entered into a financial advisory agreement ( the “ letter agreement ” ) with a.g.p./alliance global partners ( “ a.g.p . ” ) , pursuant to which a.g.p . acted as exclusive financial advisor to us in this transaction and received a cash fee of $ 300,000 upon full cash exercise of the private placement warrants . as additional compensation , a.g.p . will receive a cash fee equal to $ 200,000 upon the cash exercise in full of the new warrants . since march 2020 , we have been evaluating the actual and potential business impacts related to the covid-19 pandemic . while the full impact of the pandemic continues to evolve , the financial markets have been subject to significant volatility that adversely impacts our ability to enter into , modify , and negotiate favorable terms and conditions relative to equity and debt financing initiatives . the uncertain financial markets , potential disruptions in supply chains , mobility restraints , and changing priorities could also affect our ability to enter into key agreements . the outbreak and government measures taken in response to the pandemic have also had a significant impact , both direct and indirect , on businesses and commerce , as worker shortages have occurred ; supply chains have been disrupted ; facilities and production have been suspended ; and demand for certain goods and services , such as medical services and supplies , have spiked , while demand for other goods and services have fallen . the future progression of the outbreak and its effects on our business and operations are uncertain . we and our third-party contract manufacturers , contract research organizations , and clinical sites may also face disruptions in procuring items that are essential to our research and development activities , including , for example , medical and laboratory supplies , in each case , that are sourced from abroad or for which there are shortages because of ongoing efforts to address the outbreak . at the end of the first quarter of 2020 , we adopted a cost reduction plan ( the “ 2020 plan ” ) in response to the ongoing disruptions from the covid-19 outbreak , and to better align our cost structure with the resources required to more efficiently and effectively execute on our commercial strategy of creating a strong foundation in the market by establishing national and regional hospital networks as pure vu reference centers . most significantly , the 2020 plan resulted in the reduction of our overall headcount by 50 % , including a significant reduction of our commercial team
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during the year ended december 30 , 2019 , net cash provided by financing activities was $ 28.0 million , consisting primarily of the proceeds received from public offerings and the exercise of over-allotment options of $ 21.9 million , proceeds obtained from debt financing of $ 8.0 million , partially offset by $ 1.9 million paid for financing fees . shelf registration statement on march 26 , 2019 , we filed a shelf registration statement with the securities and exchange commission , which was declared effective on april 24 , 2019 , that allows us to offer , issue and sell up to a maximum aggregate offering price of $ 75.0 million of any combination of our common stock , preferred stock , warrants , debt securities , subscription rights and or units from time to time , together or separately , in one or more offerings . each issuance under the shelf registration statement will require the filing of a prospectus supplement identifying the amount and terms of the securities to be issued . as of december 31 , 2020 , we have sold approximately $ 31.8 million of securities under our shelf registration statement . our ability to issue securities is subject to market conditions and other factors including , in the case of our debt securities , our credit ratings . contractual obligations and commitments for operating leases and other commitments for further information , refer to note 5 and note 7 of the notes to the consolidated financial statements included in pages f-15 through f-17 of this annual report of form 10-k. off-balance sheet arrangements as of december 31 , 2020 , we do not have any off-balance sheet arrangements , as defined under applicable sec rules . item
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Liquidity
| 10,560
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the company recognizes benefits of uncertain tax positions if it is more likely than not that such positions will be sustained upon examination based solely on their technical merits , as the largest amount of benefit that is more likely than not to be realized upon the ultimate settlement . the company 's policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit . to date , there have been no interest or penalties charged in relation to the unrecognized tax benefits . net loss per share basic net loss per share is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding during the period without consideration of common stock equivalents . since the company was in a loss position for all periods presented , basic net loss per share is the same as diluted net loss per share for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive . recent accounting pronouncements recently adopted accounting guidance in 2016 , the financial accounting standards board , or fasb , issued asu 842 , which is aimed at making leasing activities more transparent , and requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability . the asu was previously required to be applied with a modified retrospective approach to each prior reporting period presented . in july 2018 , the fasb issued asu no . 2018-11 , leases ( topic 842 ) : targeted improvements , or asu no . 2018-11. in issuing asu no . 2018-11 , the fasb is permitting another transition method for asu 2016-02 , which allows the transition to the new lease standard by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption . the company adopted the asu on january 1 , 2019 , using a modified retrospective approach , and elected the transition method , which allowed the company to record a cumulative adjustment to its accumulated deficit upon adoption . the consolidated financial statements for the year ended december 31 , 2019 , are presented under the new standard , while previous periods are not adjusted and continue to be reported in accordance with the company 's historical accounting policy . the company elected the practical expedients upon transition to not reassess prior conclusions related to contracts containing leases , lease classification and initial direct costs . the company also elected the practical expedient for lessees to combine lease and non-lease components for all asset classes , and elected the practical expedient to use hindsight in determining the lease term and in assessing impairment of the company 's right-of-use assets . upon adoption , the company recognized in the consolidated balance sheet an operating lease right-of-use asset and lease liability of approximately $ 8.6 million and $ 9.7 million , respectively , and eliminated the previously recorded deferred rent of $ 1.2 million , related to its facility lease . there was no impact to accumulated deficit upon adoption . refer to note 5 , commitments and contingencies , facilities lease , for more information . 68 in june 2018 , the fasb issued asu no . 2018-07 , compensation – stock compensation ( topic 718 ) : improvements to nonemployee share-based payment accounting , or asu 2018-07. the asu expands the scope of topic 718 to include share-based payment transactions for acquiring goods and services from non-employees . the asu also clarifies that topi c 718 does not apply to share-based payments used to effectively provide ( 1 ) financing to the issuer or ( 2 ) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under revenue from contracts with cust omers ( topic 606 ) . the company adopted the asu on january 1 , 2019. upon adoption , the company recorded a cumulative-effect adjustment of $ 71,000 to accumulated deficit in the consolidated statement of stockholders ' equity . in august 2018 , the sec adopted amendments to certain disclosure requirements in securities act release no . 33-10532 , disclosure update and simplification . these amendments eliminate , modify , or integrate into other sec requirements certain disclosure rules . among the amendments is the requirement to present an analysis of changes in stockholders ' equity in the interim financial statements included in quarterly reports on form 10-q . the analysis , which can be presented as a footnote or separate statement , is required for the current and comparative quarter and year-to-date interim periods . the amendments are effective for all filings made on or after november 5 , 2018. the company adopted this new guidance and included this information in its condensed consolidated statements of stockholders ' equity in its 2019 quarterly reports on form 10-q . accounting guidance not yet adopted in june 2016 , the fasb issued asu no . 2016-13 , financial instruments-credit losses ( topic 326 ) : measurement of credit losses on financial instruments , or asu 2016-13 . the updated accounting guidance requires changes to the recognition of credit losses on financial instruments not accounted for at fair value through net income . in may 2019 , the fasb issued asu no . 2019-05 , targeted transition relief , which provides transition guidance to entities that elect the fair value option for eligible instruments . story_separator_special_tag the combined transaction price of $ 57.0 million was recognized over the estimated period of performance under the incyte collaboration agreement based on the measure of progress toward completion for the combined performance obligation , which was satisfied as of june 2018. effective january 1 , 2018 , we adopted asc 606 using the modified retrospective approach . refer to item 8 , notes to consolidated financial statements , notes 2 and 11 , for further information on the adoption of asc 606 and the incyte collaboration agreement . research and development expenses research and development expenses represent costs incurred to conduct research , such as the discovery and development of our product candidates . we recognize all research and development costs as they are incurred . costs associated with co-development activities performed under our collaboration agreements with incyte , bristol-myers squibb , and pfizer are included in research and development expenses , with any reimbursement of costs reflected as a reduction of such expenses . research and development expenses consist primarily of the following : employee- related expenses , which include salaries , benefits and stock-based compensation ; expenses incurred under agreements with clinical trial sites that conduct research and development activities on our behalf ; laboratory and vendor expenses related to the execution of preclinical studies and clinical trials ; contract manufacturing expenses , primarily for the production of clinical supplies ; facilities and other allocated expenses , which include direct and allocated expenses for rent and maintenance of facilities , depreciation expense and other supplies ; and license fees and milestone payments related to our licensing agreements . the largest component of our total operating expenses has historically been our investment in research and development activities including the clinical development of our product candidates . we allocate to research and development expenses the salaries , benefits , stock-based compensation expense , and indirect costs of our clinical and preclinical programs on a program-specific basis , and we include these costs in the program-specific expenses . 52 the following table shows our research an d development expenses for 2019 and 2018 : replace_table_token_1_th we expect our research and development expenses will increase during the next few years as we advance our product candidates into and through clinical trials , and pursue regulatory approval of our product candidates , and as we begin our efforts in the potential commercial launch of telaglenastat for rcc , which will also require a significant investment in contract manufacturing and inventory build-up related costs . the process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming . we may never succeed in achieving marketing approval for our product candidates . the probability of success of our product candidates may be affected by numerous factors , including clinical data , competition , manufacturing capability and commercial viability . as a result , we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates . general and administrative expenses general and administrative expenses consist of personnel costs , allocated expenses and other expenses for outside professional services , including legal , audit and accounting services . personnel costs consist of salaries , benefits and stock-based compensation . allocated expenses consist of facilities and other allocated expenses , which include direct and allocated expenses for rent and maintenance of facilities , depreciation expense and other supplies . we have incurred and expect to continue to incur additional expenses as a result of operating as a public company , including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of the sec . in addition , we have incurred and expect to continue to incur increased expenses associated with being a public company , including additional legal , insurance , investor relations and other increases related to needs for additional human resources and professional services . results of operations comparison of the years ended december 31 , 2019 and 2018 replace_table_token_2_th 53 collaboration revenue collaboration revenue decreased from $ 22.3 million for 2018 , to $ 0 for 2019 , or 100 % . the decrease related to the satisfaction of our and incyte 's combined performance obligation under the incyte collaboration agreement , for which revenue recognized in each period was determined based on the measure of progress toward the completion of the manufacturing services and technology transfer to incyte , which occurred in june of 2018. refer to item 8 , notes to consolidated financial statements , notes 2 and 11 , for further information on the incyte collaboration agreement . research and development research and development expenses increased $ 10.1 million , or 15 % , from $ 66.2 million for 2018 to $ 76.3 million for 2019. the increase of $ 10.1 million was due to a $ 6.7 million increase in the telaglenastat program , including for our cantata trial where we completed enrollment in 2019 and expect top-line results in late third quarter or fourth quarter of 2020 , an increase of $ 3.1 million in the incb001158 program , an increase of $ 0.2 million in the cb-280 program , and an increase of $ 0.1 million for investment in our early stage research programs . general and administrative general and administrative expenses increased $ 3.3 million , or 24 % , from $ 13.3 million for 2018 to $ 16.6 million for 2019. the increase of $ 3.3 million was primarily related to $ 2.1 million higher professional services costs mainly for legal and accounting services , and $ 1.0 million in higher personnel-related costs , primarily from higher headcount , salary increases , as well as severance payments to a former employee . interest and
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we plan to continue to fund our operations and capital funding needs through reimbursement of expenses under our existing collaboration agreements and through equity and or debt financing . we may also consider further collaborations or selectively partnering for clinical development and commercialization . the sale of additional equity would result in additional dilution to our stockholders . the incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations . if we are not able to secure adequate additional funding we may be forced to make reductions in spending , extend payment terms with suppliers , liquidate assets where possible , and or suspend or curtail planned programs . any of these actions could harm our business , results of operations and future prospects . the following table summarizes our cash flows for the periods indicated : replace_table_token_3_th cash flows year ended 2019 compared with year ended 2018 cash used in operations was ( $ 78.7 ) million for 2019 , compared to ( $ 64.8 ) million for 2018. the increase of $ 13.9 million in cash used in operations mainly related to increased clinical trial research and development activities , primarily related to our teleglenastat , incb001158 and cb-280 programs . cash ( used in ) provided by investing activities was ( $ 10.8 ) million and $ 52.8 million in 2019 and 2018 , respectively , and for both years primarily related to the purchase and the sale and maturity of investments . cash provided by financing activities was $ 98.9 million and $ 14.6 million in 2019 and 2018 , respectively . in 2019 , we received $ 53.8 million in net proceeds from the sale and issuance of common stock related to our public offering , $ 43.9 million in net proceeds from the issuance of common stock through our at-the-market offering programs , and $ 1.2 million from the issuance of common stock upon the exercise of stock options and from employee stock plan purchases . in 2018 , cash provided by financing activities was related to $ 13.7 million in net proceeds from the issuance of common stock through our at-the-market offering program , and the issuance of common stock upon the exercise of stock options
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Liquidity
| 7,692
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cumulative story_separator_special_tag the following management 's discussion and analysis ( “ md & a ” ) is intended to help the reader understand our results of operations and financial condition . md & a is provided as a supplement to , and should be read in conjunction with , our audited financial statements and the accompanying notes to the financial statements and other disclosures included in this report ( including the “ cautionary note regarding forward-looking statements ” at the beginning of this report and the “ risk factors ” section in part i , item 1a of this report ) . overview we are a commercial-stage biotechnology company that discovers novel , oral , small-molecule medicines . we focus on oral treatments for rare diseases in which significant unmet medical needs exist and an enzyme plays the key role in the biological pathway of the disease . we integrate the disciplines of biology , crystallography , medicinal chemistry , and computer modeling to discover and develop small molecule pharmaceuticals through the process known as structure-guided drug design . in addition to these discovery and development efforts , our business strategy includes the efficient commercialization of these drugs in the u.s. and certain other regions upon regulatory approval . by focusing on rare disease markets , we believe that we can more effectively control the costs of , and our strategic allocation of financial resources toward , post-approval commercialization . our revenues are difficult to predict and depend on several factors , including those discussed in the “ risk factors ” section in part i , item 1a of this report . for example , our revenues depend , in part , on regulatory approval decisions for our products and product candidates , the effectiveness of our and our collaborative partners ' commercialization efforts , market acceptance of our products , particularly orladeyo , the resources dedicated to our products by us and our collaborative partners , and ongoing discussions with government agencies regarding contract awards for development and procurement , as well as entering into , or modifying , licensing agreements for our product candidates . furthermore , revenues related to our collaborative development activities are dependent upon the progress toward and the achievement of developmental milestones by us or our collaborative partners . 38 our operating expenses are also difficult to predict and depend on several factors , including research and development expenses ( and whether these expenses are reimbursable under government contracts ) , drug manufacturing , and clinical research activities , the ongoing requirements of our development programs , the availability of capital and direction from regulatory agencies , which are difficult to predict , and the factors discussed in the “ risk factors ” section in part i , item 1a of this report . management may be able to control the timing and level of research and development and selling , general and administrative expenses , but many of these expenditures will occur irrespective of our actions due to contractually committed activities and or payments . as a result of these factors , we believe that period-to-period comparisons are not necessarily meaningful and you should not rely on them as an indication of future performance . due to all of the foregoing factors , it is possible that our operating results will be below the expectations of market analysts and investors . in such event , the prevailing market price of our common stock could be materially adversely affected . critical accounting policies and estimates the accompanying discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements and the related disclosures , which have been prepared in accordance with u.s. gaap . the preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues , expenses and related disclosure of contingent assets and liabilities . we evaluate our estimates , judgments and the policies underlying these estimates on a periodic basis , as situations change , and regularly discuss financial events , policies , and issues with members of our audit committee and our independent registered public accounting firm . in particular , we routinely evaluate our estimates and policies regarding revenue recognition , administration , inventory and manufacturing , taxes , stock-based compensation , research and development , consulting and other expenses and any associated liabilities . our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances . the results of our estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . see “ critical accounting policies ” at the end of this “ management 's discussion and analysis of financial condition and results of operations ” for a description of accounting policies that we believe are the most critical to aid you in fully understanding and evaluating our reported financial results and that affect the more significant judgments and estimates that we use in the preparation of our financial statements . recent corporate highlights covid-19 the outbreak of covid-19 has severely impacted global economic activity and caused significant volatility in financial markets . to date , our financial condition , results of operations , and liquidity have not been materially impacted by the direct effects of the covid-19 pandemic . however , as discussed under “ risk factors-risks related to our business-risks related to covid-19 ” in part i , item 1a of this report , the acceleration of covid-19 slowed startup of the inadequate responder cohorts in our complement oral factor d inhibitor program . the covid-19 pandemic is constantly evolving , and its full impact to our business is uncertain . we are continuing to monitor developments with respect to the covid-19 pandemic and to make adjustments as needed to assist in protecting the safety of our employees and communities while continuing our business activities . story_separator_special_tag orphan drug designation qualifies bcx9930 for various development incentives , including tax credits for certain clinical costs , a waiver of the new drug application fee , and a designated period of market exclusivity following approval . on august 3 , 2020 , we announced that the fda granted fast track designation for bcx9930 in pnh . fop the goal of our alk2 inhibitor is to discover and develop orally administered kinase inhibitor drug candidates that are able to slow or prevent ho . on december 21 , 2020 , we announced that in a phase 1 clinical trial , bcx9250 , our lead compound , was safe and well tolerated at all doses studied , with linear and dose-proportional exposure supporting once-daily dosing . the randomized , double-blind , placebo-controlled dose-ranging trial evaluated safety , tolerability , and pk of sad and mad of bcx9250 in healthy subjects . the sad study was designed to randomize four cohorts of eight subjects each to receive oral bcx9250 ( n=6 ) or placebo ( n=2 ) at dose levels of 5 mg , 10 mg , 15 mg , and 25 mg. subjects in the 15 mg cohort also received a second single dose to evaluate food effect on absorption of bcx9250 . the mad study was designed to randomize 4 cohorts of 12 subjects each to receive oral bcx9250 ( n=10 ) or placebo ( n=2 ) at dose levels of 5 mg , 10 mg , 15 mg , and 20 mg once-daily for 7 days . drug exposure increased with dose in an approximately linear and dose-proportional manner . drug levels after a high fat meal were similar to those after dosing on an empty stomach . drug exposure at 20 mg once-daily in the mad was similar to that achieved with doses that suppressed ho in a nonclinical model of activity of orally dosed bcx9250 . in both the sad and the mad studies , oral bcx9250 was safe and well tolerated , with no serious adverse events , no study discontinuations due to adverse events , no grade 3 or 4 adverse events , and no clinically significant changes in vital signs , electrocardiograms , or safety laboratory parameters . no safety signals were seen . peramivir injection ( rapivab , alpivab , rapicacta , peramiflu ) on march 4 , 2020 , the icc tribunal delivered a partial arbitration award in the arbitration matter between the company and sul with respect to the sul agreement . in the partial arbitration award , the icc tribunal found that , during the term , sul materially breached and abandoned its core duties to us under the diligent efforts ( as defined in the sul agreement ) requirements of the sul agreement as applicable in the u.s. the icc tribunal granted a declaratory judgment in favor of us terminating the sul agreement and restoring all rights to peramivir to us . we agreed with sul on a transition process for the product , with a full transition of commercialization of the product in the u.s. and australia returned to us as of august 1 , 2020 and november 1 , 2020 , respectively . the icc tribunal also awarded us attorneys ' fees and expenses incurred in securing the declaratory judgment as well as the costs incurred by us in the arbitration . finally , the icc tribunal found that sul breached the sul agreement by failing to pay a milestone payment due to us within 30 days of the approval of peramivir for adult use in the eu and awarded us $ 5.0 million ( plus interest ) for this claim . the icc tribunal retained jurisdiction for further proceedings relating to the award of attorneys ' fees and for any dispute relating to the return to us of all rights to peramivir in the territory . 40 on september 3 , 2020 , we announced that hhs has exercised its option to purchase an additional 10,000 doses of our antiviral influenza therapy , rapivab ( peramivir injection ) , for $ 6.9 million . as a result , we expect to deliver at least one shipment of 10,000 doses in 2021. the order is part of a $ 34.7 million contract awarded to us in 2018 for the procurement of up to 50,000 doses of rapivab over a five-year period for the strategic national stockpile . galidesivir ( formerly bcx4430 ) in april 2020 , we agreed with niaid/hhs to add a group of covid-19 patients to an ongoing clinical trial in yellow fever . on april 9 , 2020 , we announced that we had opened a randomized , double-blind , placebo-controlled clinical trial in brazil to assess the safety , clinical impact , and antiviral effects of galidesivir in patients with covid-19 . niaid/hhs awarded us a new $ 43.9 million contract for the manufacture and evaluation of the safety , efficacy , and tolerability of galidesivir in august 2020 , and it also added $ 2.9 million to its existing contract with us to support the development of galidesivir . niaid/hhs made an initial award of $ 6.3 million under the new contract . on december 22 , 2020 , we announced that data from part 1 of the clinical trial in brazil showed that galidesivir was safe and generally well tolerated in patients infected with sars-cov-2 , the virus that causes covid-19 . the trial was not designed or sized to demonstrate clinical efficacy , and no clinical efficacy benefit with galidesivir treatment compared to placebo treatment was observed in the trial . based on our ongoing discussions with niaid/hhs , we expect niaid /hhs to continue its support for the development of galidesivir with a focus on biodefense threats , such as marburg virus disease , and to discontinue the pursuit of a covid-19 indication for galidesivir . financing transactions royalty monetization .
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results of operations the discussion below presents a summary of our results of operations for fiscal years 2020 and 2019. see part ii , item 7 , “ management 's discussion and analysis of financial condition and results of operations-results of operations ” of our annual report on form 10-k for the fiscal year ended december 31 , 2019 , filed with the securities and exchange commission on march 13 , 2020 , for a summary of our results of operations for the fiscal year ended december 31 , 2018 . 41 year ended december 31 , 20 20 compared to 201 9 total revenues in 2020 were $ 17.8 million , compared to $ 48.8 million in 2019. the decrease in revenue was primarily due to the recognition of $ 20.1 million of revenue related to a one-time $ 22.0 million upfront milestone payment we received in 2019 upon execution of the torii agreement , with the remaining amount of $ 1.9 million recognized in 2020. additionally , we recognized $ 13.9 million of rapivab product sales under our hhs contract in 2019. we did not have any rapivab product sales under our hhs contract in 2020. revenues in 2020 included $ 3.3 million of product revenue , the majority of which was from peramivir inventory sales to our commercial partners , $ 3.2 million of royalty revenue from shionogi , green cross and sul associated with sales of peramivir in japan , taiwan , korea and the united states , $ 1.9 million of deferred revenue amortization related to the torii agreement and $ 9.2 million of reimbursement of collaborative expenses from niaid/hhs and barda/hhs related to the development of galidesivir .
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ROO
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we expect to continue to pursue business and technology acquisition targets and strategic partnerships . revenues and operations to date , the majority of our revenues are derived from the sale of implants , biologics and disposables and we expect this trend to continue for the foreseeable future . additionally , with our acquisition of bnn holdings on july 1 , 2016 , we expect our iom service and support revenue to increase compared to previous periods . we loan our proprietary software-driven nerve monitoring systems and surgical instrument sets at no cost to surgeons and hospitals that purchase disposables and implants for use in individual procedures . in addition , we often place our proprietary software-driven nerve monitoring systems , maxcess and other mas instrument sets with hospitals for an extended period at no up-front cost to them . our implants , biologics and disposables are currently sold and shipped from our distribution and warehousing operations . we generally recognize revenue for implants , biologics and disposables upon receiving acknowledgement of a purchase order and upon completion of delivery . our service revenue is recognized in the period the service is performed for the amount of payment we expect to receive . we sell mas instrument sets , maxcess devices , and our proprietary software-driven nerve monitoring systems , however this does not make up a material part of our business . the majority of our operations are located and the majority of our sales have been generated in the united states . we sell our products in the united states through a sales force comprised primarily of exclusive independent sales agents and directly-employed sales representatives , both engaged to sell only nuvasive products . our sales force provides a delivery and consultative service to our surgeon and hospital customers and is compensated based on sales and product placements in their territories . sales force commissions are reflected in the sales , marketing and administrative operating expense line item within our statement of operations . we continue to invest in international expansion with the focus on european , asia-pacific and latin american markets . our international sales force is comprised of directly-employed sales personnel , independent sales agents , as well as exclusive and non-exclusive independent third-party distributors . as of december 31 , 2016 , we did not have any significant backlog . critical accounting policies our discussion and analysis of our financial condition and results of operations is based upon our audited consolidated financial statements , which have been prepared in accordance with generally accepted accounting principles in the united states ( gaap ) . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses . on an ongoing basis , we evaluate our estimates including those related to revenue recognition , bad debts , inventories , valuation of financial instruments , goodwill , intangibles , property and equipment , stock-based compensation , income taxes , and legal proceedings . we base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other sources . actual results may differ from these estimates . we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements . 42 revenue recognition in accordance with the commission 's guidance , we recognize revenue when all four of the following criteria are met : ( i ) persuasive evidence that an arrangement exists ; ( ii ) delivery of the products and or services has occurred ; ( iii ) the selling price is fixed or determinable ; and ( iv ) collectability is reasonably assured . specifically , revenue from the sale of implants and disposables is generally recognized upon acknowledgement of a purchase order from the hospital indicating product use or implantation or upon shipment to third-party customers who immediately accept title . revenue from our monitoring services is recognized in the period the service is performed for the amount of payment we expect to receive . revenue from the sale of our instrument sets is recognized upon receipt of a purchase order and the subsequent shipment to customers who immediately accept title . instrument sales account for an immaterial amount of annual sales . allowance for doubtful accounts and sales return reserve we maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments . the allowance for doubtful accounts is reviewed quarterly and is estimated based on the aging of account balances , collection history and known trends with current customers and in the economy in general . as a result of this review , the allowance is adjusted on a specific identification basis for significant accounts and a general reserve approach for non-significant accounts . we also review the overall quality and age of those invoices not specifically identified . in determining the provision for invoices not specifically reviewed , we analyze historical collection experience and current economic trends . an increase to the allowance for doubtful accounts results in a corresponding charge to sales , marketing and administrative expenses . if the historical data used to calculate the allowance provided for doubtful accounts does not reflect our future ability to collect outstanding receivables or if the financial condition of customers were to deteriorate , resulting in impairment of their ability to make payments , an increase in the provision for doubtful accounts may be required . we maintain a relatively large customer base that mitigates the risk of concentration with any one particular customer . historically , our reserves have been adequate to cover losses . in addition , we establish a reserve for estimated sales returns and pricing adjustments that is recorded as a reduction to revenue . story_separator_special_tag this reserve is maintained to account for future return of products or pricing adjustments on products sold in the current period . this reserve is reviewed quarterly and is estimated based on an analysis of our historical experience and expected future trends . historically , our reserves have been adequate to account for returns and pricing adjustments . inventory inventory consists primarily of purchased finished goods , which includes specialized implants and disposables , and is stated at the lower of cost or market determined by utilizing a standard cost method which approximates the weighted average cost . we review the components of our inventory on a periodic basis for excess and obsolescence and record a reserve for the identified items . excess and obsolete inventory we provide an inventory reserve for estimated obsolescence and excess inventory based upon historical turnover and assumptions about future demand for our products and market conditions . our allograft products have shelf lives ranging from two to five years and are subject to demand fluctuations based on the availability and demand for alternative products . our inventory , which consists primarily of disposables and specialized implants , is at risk of obsolescence following the introduction and development of new or enhanced products . our estimates and assumptions for excess and obsolete inventory are reviewed and updated on a quarterly basis . the estimates we use for demand are also used for near-term capacity planning and inventory purchasing and are consistent with our revenue forecasts . increases in the reserve for excess and obsolete inventory result in a corresponding charge to cost of goods sold . historically our reserves have been adequate to cover losses . a stated goal of our business is to focus on continual product innovation and to obsolete our own products . while we believe this provides a competitive edge , it also results in the risk that our products and related capital instruments will become obsolete prior to sale or to the end of their anticipated useful lives . fair value of financial instruments a sc topic 820 , fair value measurements and disclosures , defines fair value and requires us to establish a framework for measuring fair value and disclosure about fair value measurements . the framework requires the valuation of assets and liabilities subject to fair value measurements using a three tiered approach and fair value measurement be classified and disclosed in one of the following three categories . inputs to valuation techniques are observable or unobservable . observable inputs reflect market data obtained from independent sources , while unobservable inputs reflect our market assumptions . level 1 : quoted prices ( unadjusted ) in active markets that are accessible at the measurement date for assets or liabilities . level 2 : observable prices that are based on inputs not quoted on active markets , but corroborated by market data . level 3 : unobservable inputs are used when little or no market data is available . carrying value of the financial instruments measured and classified within level 1 is based on quoted prices . 43 the types of instruments that trade in markets that are not considered to be active , but are valued based on quoted market prices , broker or dealer quotations , or alternative pricing sources with reasonable levels of price transparency are generally classified within level 2 of the fair value hierarchy . certain contingent consideration liabilities are classified within level 3 of the fair value hierarchy because they use unobservable inputs . for those liabilities , fair value is determined using a probability-weighted discounted cash flow model , the significant inputs which are not observable in the market . valuation of goodwill and intangible assets with indefinite lives our goodwill represents the excess of the cost over the fair value of net assets acquired from our business combinations . the determination of the value of goodwill and intangible assets arising from business combinations and asset acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of the net tangible and intangible assets acquired , including capitalized in-process research and development , or ipr & d . intangible assets acquired in a business combination that are used for ipr & d activities are considered indefinite lived until the completion or abandonment of the associated research and development efforts . upon reaching the end of the relevant research and development project , we will amortize the acquired in-process research and development over its estimated useful life or expense the acquired in-process research and development should the research and development project be unsuccessful with no future alternative use . goodwill and ipr & d are not amortized ; however , they are assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstance warrant such a review . the goodwill or ipr & d are considered to be impaired if we determine that the carrying value of the reporting unit or ipr & d exceeds its respective fair value . we perform our goodwill impairment analysis at the reporting unit level , which aligns with our reporting structure and availability of discrete financial information . we perform our annual impairment analysis by either doing a qualitative assessment of a reporting unit 's fair value from the last quantitative assessment to determine if there is potential impairment , or comparing a reporting unit 's estimated fair value to its carrying amount . we may do a qualitative assessment when the results of the previous quantitative test indicated the reporting unit 's estimated fair value was significantly in excess of the carrying value of its net assets and we do not believe there have been significant changes in the reporting unit 's operations that would significantly decrease its estimated fair value or significantly increase its net assets .
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revenue from our spinal hardware product line offerings increased $ 114.7 million , or 20 % , in 2016 compared to 2015. revenue associated with our 2016 acquisitions accounted for approximately 11 % of the increase in spinal hardware revenue for the year ended december 31 , 2016 as compared to 2015 , which included a $ 4.8 million purchase order from an organization established by certain former stockholders of ellipse technologies . see note 4 to the consolidated financial statements included in this annual report for further discussion on the purchase order . product volume for our spinal hardware business , excluding 2016 acquisitions , increased our revenue by approximately 11 % , offset by unfavorable changes in price of approximately 2 % for the year ended december 31 , 2016 as compared to 2015. foreign currency fluctuation from 2015 to 2016 did not have a material impact on spinal hardware revenue . revenue from our spinal hardware product line offerings increased $ 36.7 million , or 7 % , in 2015 compared to 2014 as the result of increased product volume of approximately 11 % , offset by unfavorable changes of approximately 2 % in both price and foreign currency fluctuation , for the year ended december 31 , 2015 as compared to 2014. revenue from our surgical support product line offerings increased $ 36.3 million , or 14 % , in 2016 compared to 2015. revenue associated with our 2016 acquisitions accounted for approximately 11 % of the increase in surgical support revenue for the year ended december 31 , 2016 as compared to 2015. product and service volume for our surgical support business , excluding 2016 acquisitions , increased our revenue by approximately 4 % , offset by unfavorable changes in price of approximately 1 % compared to the same period in 2015. foreign currency fluctuation from 2015 to 2016 did not have a material impact on surgical support revenue . revenue from our surgical support product line offerings increased $ 12.0 million , or 5 % , in 2015 compared to 2014 as the result of increased product and service
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we refer to this transaction as the spin-off. on december 20 , 2011 , following the close of trading on the nasdaq global select market ( nasdaq ) , the spin-off was completed , and tripadvisor began trading as an independent 41 public company on december 21 , 2011. expedia effected the spin-off by means of a reclassification of its capital stock that resulted in the holders of expedia capital stock immediately prior to the time of effectiveness of the reclassification having the right to receive a proportionate amount of tripadvisor capital stock . in connection with the spin-off , expedia contributed or transferred all of the subsidiaries and assets relating to expedia 's tripadvisor media group to tripadvisor and tripadvisor assumed all of the liabilities relating to expedia 's tripadvisor media group . for purposes of governing certain of the ongoing relationships between us and expedia at and after the spin-off , and to provide for an orderly transition , we and expedia have entered into various agreements , including , among others , the separation agreement , the tax sharing agreement , the employee matters agreement and transition services agreement , and commercial agreements . the full texts of the separation agreement , the tax sharing agreement , the employee matters agreement and the transition services agreement are incorporated by reference in this annual report on form 10-k as exhibits 2.1 , 10.2 , 10.3 and 10.4. tripadvisor has satisfied its obligations under the separation agreement , the employee matters agreement and the transition services agreement . tripadvisor continues to be subject to certain post-spin obligations under the tax sharing agreement . segment we have one operating and reportable segment . the segment is determined based on how our chief operating decision maker manages our business , makes operating decisions , evaluates operating performance and allocates resources . the chief operating decision maker for the company is our chief executive officer . 42 results of operations selected financial data ( in thousands , except per share data ) replace_table_token_9_th ( 3 ) see adjusted ebitda discussion below for more information and for a reconciliation of adjusted ebitda to net income , the most directly comparable financial measure calculated and presented in accordance with gaap . 43 adjusted ebitda to provide investors with additional information regarding our financial results , we have disclosed adjusted ebitda in this annual report on form 10-k , a non-gaap financial measure . we have provided reconciliations below of adjusted ebitda to net income , the most directly comparable gaap financial measure . a non-gaap financial measure refers to a numerical measure of a company 's historical or future financial performance , financial position , or cash flows that excludes ( or includes ) amounts that are included in ( or excluded from ) the most directly comparable measure calculated and presented in accordance with gaap in such company 's financial statements . we define adjusted ebitda as net income ( loss ) plus : ( 1 ) provision for income taxes ; ( 2 ) other ( income ) expense , net ; ( 3 ) depreciation of property and equipment , including internal use software and website development ; ( 4 ) amortization of intangible assets ; ( 5 ) stock-based compensation ; and ( 6 ) non-recurring expenses . adjusted ebitda is the primary metric by which management evaluates the performance of its business and on which internal budgets are based . in particular , the exclusion of certain expenses in calculating adjusted ebitda facilitates operating performance comparisons on a period-to-period basis . adjusted ebitda eliminates items that are either not part of our core operations , such as non-recurring expenses , or those costs that do not require a cash outlay , such as stock-based compensation . adjusted ebitda also excludes depreciation and amortization expense , which is based on our estimates of the useful life of tangible and intangible assets . these estimates could vary from actual performance of the asset , are based on historical costs and other factors and may not be indicative of current or future capital expenditures . we believe that by excluding certain items , such as stock-based compensation and non-recurring expenses , adjusted ebitda corresponds more closely to the cash that operating income generated from our business and allows investors to gain an understanding of the factors and trends affecting the ongoing cash earnings capabilities of our business , from which capital investments are made and debt is serviced . 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 results reported in accordance with gaap . some of these limitations are : adjusted ebitda does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments ; adjusted ebitda does not reflect changes in , or cash requirements for , our working capital needs ; adjusted ebitda does not consider the potentially dilutive impact of stock-based compensation ; although depreciation and amortization 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 tax payments that may represent a reduction in cash available to us ; and other companies , including companies in our own industry , may calculate adjusted ebitda differently than we do , limiting its usefulness as a comparative measure . because of these limitations , you should consider adjusted ebitda alongside other financial performance measures , including various cash flow metrics , net income and our other gaap results . 44 the following table is a reconciliation of adjusted ebitda to net income , the most directly comparable financial measure calculated and presented in accordance with gaap , for the periods presented : replace_table_token_10_th ( 1 ) includes amortization of internal use software and website development costs . story_separator_special_tag reclassifications certain reclassifications have been made to conform the prior period 's data to the current format . these reclassifications had no net effect on our consolidated and combined financial statements and were not material . revenue we derive substantially all of our revenue through the sale of advertising , primarily through click-based advertising and , to a lesser extent , display-based advertising . in addition , we earn revenue through a combination of subscription-based offerings related to our business listings and vacation rentals products , transaction revenue from selling room nights on our transactional sites , and other revenue including content licensing . replace_table_token_11_th 2013 vs. 2012 revenue increased $ 182 million during the year ended december 31 , 2013 when compared to the same period in 2012 , primarily due to an increase in click-based advertising revenue of $ 108 million . the primary driver of the increase in click-based advertising revenue was an increase in hotel shoppers of 36 % for the year ended december 31 , 2013 , partially offset by lower revenue per hotel shopper of 13 % for the year ended december 31 , 2013 , primarily due to a combination of lower user conversion related to our transition to hotel metasearch , growth in hotel shoppers on smartphones , which have a lower monetization rate than desktops and tablets , and growth in emerging international markets that are currently monetizing at lower levels than our mature markets . display-based advertising increased by $ 25 million during the year ended december 31 , 2013 , primarily as a result of a 34 % increase in the number of impressions sold due to increased sales productivity coupled with our new delayed ad call product , and worldwide growth particularly in emerging markets when compared to the same period in 2012 , partially offset by a decrease in pricing by 5 % for the year ended december 31 , 2013. subscription , transaction and other revenue increased by $ 49 million during the year ended december 31 , 2013 , primarily due to growth in our business listings and vacation rentals products . 45 2012 vs. 2011 revenue increased $ 126 million during the year ended december 31 , 2012 when compared to the same period in 2011 , primarily due to an increase in click-based advertising revenue of $ 88 million . the primary driver of the increase in click-based advertising revenue was an increase in hotel shoppers during the year ended december 31 , 2012 , when compared to the same period for 2011 , of 32 % , partially offset by lower revenue per hotel shopper of 8 % for the year ended december 31 , 2012 , primarily due to lower clicks per hotel shopper due to our site redesign in september 2011. display-based advertising increased by $ 8 million during the year ended december 31 , 2012 , primarily as a result of a 6 % increase in the number of impressions sold when compared to the same period in 2011 , and an increase in pricing by 1 % for the year ended december 31 , 2012. subscription , transaction and other revenue increased by $ 30 million during the year ended december 31 , 2012 , primarily due to growth in our business listings and vacation rentals products . the following table presents our revenue by geographic region , which reflects how we measure our business internally . revenue by geography is based on the location of our websites : replace_table_token_12_th ( 1 ) united states and canada * ( 2 ) europe , middle east and africa ( 3 ) asia-pacific ( 4 ) latin america * included in international revenue for discussion purposes . international revenue increased $ 105 million and $ 88 million during the years ended december 31 , 2013 and 2012 , respectively , compared to the same periods in 2012 and 2011. international revenue represented 51 % , 49 % , and 45 % of total revenue during the years ended december 31 , 2013 , 2012 , and 2011 , respectively . the increase in international revenue , in absolute dollars and as a percentage of total revenue , is primarily due to additional investment in international expansion and growth in international hotel shoppers . in addition to the above product revenue discussion , revenue from expedia , which consists primarily of click-based advertising , is as follows : replace_table_token_13_th 2013 vs. 2012 revenue from expedia increased $ 13 million during the year ended december 31 , 2013 , respectively , when compared to the same period in 2012 , primarily due to lower click volume sent to expedia , primarily related to our transition to hotel metasearch which was more than offset by higher cpc pricing paid by expedia during this time period . for information on our relationship with expedia refer to note 15 related party transactions in the notes to our consolidated and combined financial statements . 46 2012 vs. 2011 revenue from expedia decreased $ 7 million during the year ended december 31 , 2012 when compared to the same period in 2011 , primarily due to lower cpc pricing paid by expedia , partially offset by higher click volume sent to expedia in 2012. cost of revenue cost of revenue consists of expenses that are closely correlated or directly related to revenue generation , including ad serving fees , flight search fees , credit card fees and data center costs . replace_table_token_14_th 2013 vs. 2012 cost of revenue increased $ 6 million during the year ended december 31 , 2013 when compared to the same period in 2012 , primarily due to increased data center costs , driven by higher site traffic and merchant credit card fees . 2012 vs. 2011 cost of revenue increased $ 1 million during the year ended december 31 , 2012 when compared to the same period in 2011 , primarily due to increased merchant credit card fees .
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revenue per hotel shopper : revenue per hotel shopper is a metric we use to analyze how effectively we are able to monetize hotel shoppers based on a combination of user conversion and pricing . user conversion is a measure of how many hotel shoppers ultimately click on a cpc link that generates revenue for us . user conversion on our site is primarily driven by three factors : merchandising , commerce coverage and choice . we define merchandising as the number and location of ads that are available on a page ; we define commerce coverage as whether we have a client who can take an online booking for a particular property ; and we define choice as the number of clients available for any given 39 property , allowing the user to shop for the best price . pricing is the effective cpc that online travel agencies and hoteliers are willing to pay us for a hotel shopper lead . revenue per hotel shopper decreased 13 % for the year ended december 31 , 2013 in comparison to 2012 , and decreased 8 % for the year ended december 31 , 2012 in comparison to 2011 , according to our log files . in summary , our cpc revenue depends on the number of hotel shoppers that are interested in a property , whether there is a commerce link available for that hotel shopper to click on for that property , whether there are several commerce choices available for that property so the hotel shopper has the benefit of pricing and availability from multiple sources and what our customers are willing to pay us for the lead . key drivers of display-based advertising revenue for the years ended december 31 , 2013 , 2012 and 2011 , 13 % , 12 % and 13 % , respectively , of our total revenue came from our display-based advertising product . the key drivers of our display-based advertising revenue include the growth in number of impressions , or the number of
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3.2 certificate of amendment of amended and restated certificate of incorporation of moneygram international , inc. , dated may 18 , 2011 ( incorporated by reference from exhibit 3.1 to registrant 's current report on form 8-k filed may 23 , 2011 ) . 3.3 certificate of amendment of amended and restated certificate of incorporation of moneygram international , inc. , filed with the secretary of state of the state of delaware on november 14 , 2011 ( incorporated by reference from exhibit 3.1 to registrant 's current report on form 8-k filed november 14 , 2011 ) . 3.4 bylaws of moneygram international , inc. , as amended and restated september 10 , 2009 ( incorporated by reference from exhibit 3.01 to registrant 's current report on form 8-k filed on september 16 , 2009 ) . 3.5 amendment to bylaws of moneygram international , inc. , dated as of january 25 , 2012 ( incorporated by reference from exhibit 3.1 to registrant 's current report on form 8-k filed january 27 , 2012 ) . 3.6 amended and restated certificate of designations , preferences and rights of series d participating convertible preferred stock of moneygram international , inc. , dated may 18 , 2011 ( incorporated by reference from exhibit 3.2 to registrant 's current report on form 8-k filed may 23 , 2011 ) . 4.1 form of specimen certificate for moneygram common stock ( incorporated by reference from exhibit 4.1 to amendment no . 4 to registrant 's form 10 filed on june 14 , 2004 ) . 4.2 indenture , dated as of march 25 , 2008 , by and among moneygram international , inc. , moneygram payment systems worldwide , inc. , the other guarantors party thereto and deutsche bank trust company americas , a new york banking corporation , as trustee and collateral agent ( incorporated by reference from exhibit 4.1 to registrant 's current report on form 8-k filed on march 28 , 2008 ) . 4.3 first supplemental indenture relating to the 13.25 % senior secured second lien notes due 2018 , dated as of august 6 , 2009 , among moneygram payment systems worldwide , inc. , as issuer , moneygram international , inc. and the other guarantors named therein and deutsche bank trust company americas , as trustee and collateral agent ( incorporated by reference from exhibit 4.3 to registrant 's annual report on form 10-k filed march 9 , 2012 ) . 4.4 second supplemental indenture relating to the 13.25 % senior secured second lien notes due 2018 , dated as of july 29 , 2010 , among moneygram payment systems worldwide , inc. , as issuer , moneygram international , inc. and the other guarantors named therein and deutsche bank trust company americas , as trustee and collateral agent ( incorporated by reference from exhibit 4.4 to registrant 's annual report on form 10-k filed march 9 , 2012 ) . 72 4.5 third supplemental indenture relating to the 13.25 % senior secured second lien notes due 2018 , dated as of april 19 , 2011 , among moneygram payment systems worldwide , inc. , as issuer , moneygram international , inc. and the other guarantors named therein and deutsche bank trust company americas , as trustee and collateral agent ( incorporated by reference from exhibit 4.1 to registrant 's current report on form 8-k filed on april 21 , 2011 ) . 4.6 fourth supplemental indenture relating to the 13.25 % senior secured second lien notes due 2018 , dated as of september 29 , 2011 , among moneygram payment systems worldwide , inc. , as issuer , moneygram international , inc. and the other guarantors named therein and deutsche bank trust company americas , as trustee and collateral agent ( incorporated by reference from exhibit 4.1 to registrant 's current report on form 8-k filed september 30 , 2011 ) . 4.7 fifth supplemental indenture relating to the 13.25 % senior secured second lien notes due 2018 , dated as of november 15 , 2011 , among moneygram payment systems worldwide , inc. , as issuer , moneygram international , inc. and the other guarantors named therein and deutsche bank trust company americas , as trustee and collateral agent ( incorporated by reference from exhibit 4.1 to registrant 's current report on form 8-k filed november 16 , 2011 ) . 4.8 sixth supplemental indenture relating to the 13.25 % senior secured second lien notes due 2018 , dated as of november 21 , 2011 , among moneygram payment systems worldwide , inc. , as issuer , moneygram international , inc. and the other guarantors named therein and deutsche bank trust company americas , as trustee and collateral agent ( incorporated by reference from exhibit 4.1 to registrant 's current report on form 8-k filed november 22 , 2011 ) . 4.9 seventh supplemental indenture relating to the 13.25 % senior secured second lien notes due 2018 , dated as of february 15 , 2013 , among moneygram payment systems worldwide , inc. , as issuer , moneygram international , inc. and the other guarantors named therein and deutsche bank trust company americas , as trustee and collateral agent ( incorporated by reference from exhibit 4.1 to registrant 's current report on form 8-k filed february 20 , 2013 ) . 4.10 registration rights agreement , dated as of march 25 , 2008 , by and among the several investor parties named therein and moneygram international , inc. ( incorporated by reference from exhibit 4.5 to registrant 's current report on form 8-k filed on march 28 , 2008 ) . 4.11 amendment no . 1 to registration rights agreement , dated as of may 18 , 2011 , by and among moneygram international , inc. , certain affiliates and co-investors of thomas h. lee partners , l.p. , and certain affiliates of goldman , sachs & co. ( incorporated by reference from exhibit 4.1 story_separator_special_tag in august 2012 , the irs also issued an examination report for 2008. the irs issued notices of deficiency disallowing among other items approximately $ 900.0 million of deductions on securities losses in the 2007 , 2008 and 2009 tax returns . as of december 31 , 2012 , the company has recognized a cumulative benefit of approximately $ 139.9 million relating to these deductions . the company continues to believe that the amounts recorded in its consolidated financial statements reflect its best estimate of the ultimate outcome of this matter . earnings before interest , taxes , depreciation and amortization ( ebitda ) and adjusted ebitda we believe that ebitda ( earnings before interest , taxes , depreciation and amortization , including agent signing bonus amortization ) and adjusted ebitda ( ebitda adjusted for significant items ) provide useful information to investors because they are an indicator of the strength and performance of ongoing business operations , including our ability to service debt and fund capital expenditures , acquisitions and operations . these calculations are commonly used as a basis for investors , analysts and credit rating agencies to evaluate and compare the operating performance and value of companies within our industry . in addition , our debt agreements require compliance with financial measures similar to adjusted ebitda . finally , ebitda and adjusted ebitda are financial measures used by management in reviewing results of operations , forecasting , assessing cash flow and capital , allocating resources and establishing employee incentive programs . although we believe that ebitda and adjusted ebitda enhance investors ' understanding of our business and performance , these non-gaap financial measures should not be considered an exclusive alternative to accompanying gaap financial measures . while we believe that these metrics enhance investors ' understanding of our business , these metrics are not necessarily comparable with similarly named metrics of other companies . the following table is a reconciliation of these non-gaap financial measures to the related gaap financial measures . 42 year ended december 31 , 2012 2011 2010 ( amounts in millions ) ( loss ) income before income taxes $ ( 8.9 ) $ 39.8 $ 58.4 interest expense 70.9 86.2 102.1 depreciation and amortization 44.3 46.0 48.1 amortization of agent signing bonuses 33.6 32.6 29.2 ebitda 139.9 204.6 237.8 significant items impacting ebitda : net securities gains ( 10.0 ) ( 32.8 ) ( 2.1 ) severance and related costs ( 1 ) 1.0 ( 0.3 ) reorganization and restructuring costs 19.3 23.5 5.9 capital transaction costs ( 2 ) 6.4 asset impairment charges ( 3 ) 3.4 1.8 contribution from investors ( 4 ) 0.3 debt extinguishment ( 5 ) 37.5 stock-based compensation expense 9.2 16.3 26.0 legal expenses ( 6 ) 119.2 4.8 ( 14.6 ) adjusted ebitda $ 278.9 $ 263.7 $ 254.5 ( 1 ) severance and related costs from executive terminations . ( 2 ) professional and legal fees related to the 2011 recapitalization . ( 3 ) impairments of assets in 2011 relate to the disposition of a business and software and intangible asset impairments . in 2010 , impairments relate to the sale of corporate aircraft , goodwill and intangible assets . ( 4 ) expense resulting from payment by an investor to walmart upon liquidation of such investor 's investment and as required by the participation agreement . ( 5 ) debt extinguishment loss relates to the termination of our former senior facility in connection with the 2011 recapitalization and the partial redemption of our second lien notes in november 2011 . ( 6 ) legal expenses for 2012 primarily include the forfeiture related to the settlement of the mdpa/us doj investigation and the settlement of the shareholder lawsuit , as well as legal expenses related to these matters . in 2011 , legal expenses relate primarily to settlements and related costs for securities litigation associated with our 2011 recapitalization . in 2010 , legal expenses reflect the reversal of a patent lawsuit accrual and settlements for the shareholder lawsuit related to the 2008 recapitalization . for 2012 , ebitda decreased $ 64.7 million , or 32 percent , to $ 139.9 million from $ 204.6 million in 2011 , primarily due to increased legal expenses of $ 111.6 million including the settlements of the mdpa/us doj investigation and the shareholder lawsuit , increased total commissions expense of $ 51.5 million and decreased net securities gains of $ 22.8 million , which are partially offset by increased total revenue of $ 93.4 million , a reduction in debt extinguishment cost of $ 37.5 million and decreased stock based compensation expense of $ 7.1 million . adjusted ebitda for 2012 increased $ 15.2 million , or six percent , from $ 263.7 million in 2011 to $ 278.9 million in 2012 , primarily due to increased total revenue of $ 93.4 million , partially offset by increased total commissions expenses of $ 51.5 million and consulting and outsourcing of $ 22.1 million . see additional descriptions of these changes in the results of operations section of item 7 of this report . for 2011 , ebitda decreased $ 33.2 million , or 14 percent , to $ 204.6 million from $ 237.8 million in 2010 , primarily due to increased total commissions expense of $ 46.5 million , increased debt extinguishment costs of $ 37.5 million , increased reorganization and restructuring costs of $ 17.6 million , increased other costs of $ 11.9 million , increased legal expense of $ 11.0 million , increased marketing expense of $ 10.9 million and increased consulting and outsourcing expenses of $ 10.3 million , partially offset by increased total revenue of $ 81.1 million and increased net securities gains of $ 30.7 million . adjusted ebitda for 2011 increased $ 9.2 million , or 43 four percent , from $ 254.5 million in 2010 to $ 263.7 million in 2011
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( 2 ) average yields and rates are calculated by dividing the applicable amount of net investment revenue by the applicable amount shown in the average balances section . average balances are calculated using an average of the monthly balances . the net investment margin is calculated by dividing net investment revenue by the cash equivalents and investments average balance . 37 investment revenue in 2012 decreased $ 4.3 million , or 25 percent , compared to 2011. lower yields earned on our investment portfolio , a decline in income received on our cost recovery securities and valuation adjustments related to private equity securities drove a decrease of $ 3.5 million , while lower average investment balances from the run-off of certain official check financial institution customers terminated in prior periods drove $ 0.8 million of the decrease . investment revenue in 2011 decreased $ 4.4 million , or 21 percent , compared to 2010. lower average investment balances from the run-off of certain official check financial institution customers terminated in prior periods drove $ 2.5 million of the decrease , while lower yields earned on our investment portfolio drove a decrease of $ 1.9 million . investment commissions expense in 2012 decreased $ 0.1 million , or 25 percent , compared to 2011 primarily from lower interest rates . due to the sustained low federal funds rate , most of our financial institution customers continue to be in a negative commission position as of december 31 , 2012 , meaning we do not owe any commissions to our customers . while the majority of our contracts require that the financial institution customers pay us for the negative commission amounts , we have opted at this time to impose certain per-item and other fees rather than require payment of the negative commission amounts . we continue to monitor the negative commissions and assess our current fee structure for possible further changes . investment commissions expense in 2011 decreased $ 0.3 million , or 43 percent , compared to 2010 primarily from lower interest rates . due to the sustained low federal funds rate , most of our financial institution customers were in a negative commission position as of december 31 , 2011 , meaning we did not owe any commissions to our customers . operating expenses the following discussion relates to operating expenses , excluding
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Liquidity
| 12,189
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the new code became effective january 1 , 2016. in november 2015 , the centers for medicare & medicaid services , or cms , issued a final determination for the 2016 clinical lab fee schedule , or clfs , to establish a national limitation amount for this new cpt code under the gapfill process through the regional macs during calendar year 2016. we recognized revenue of $ 49.5 million , $ 38.2 million and $ 21.9 million in the years ended december 31 , 2015 , 2014 and 2013 , respectively . revenue increased by 30 % , 75 % and 88 % for the years ended december 31 , 2015 , 2014 and 2013 , respectively over the respective prior year . we incurred a net loss of $ 33.7 million , $ 29.4 million and $ 25.6 million for the years ended december 31 , 2015 , 2014 and 2013 , respectively . as of december 31 , 2015 , we had an accumulated deficit of $ 148.7 million . factors affecting our performance the number of fnas we receive and test the growth in our business is tied to the number of fnas we receive and the number of gecs performed . approximately 87 % of fnas we receive are for the afirma solution , which consists of services related to rendering a cytopathology diagnosis , and if the cytopathology result is indeterminate , the gec is performed . the remaining approximate 13 % of fnas are received from customers performing cytopathology and when the cytopathology result is indeterminate , the fna is sent to us for the gec only . the rate at which adoption occurs in these two settings will cause these two percentages to fluctuate over time . less than 1 % of the fna samples we receive for cytopathology have insufficient cellular material from which to render a cytopathology diagnosis . we only bill the technical component , including slide preparation , for these tests . for results that are benign or suspicious/malignant by cytopathology , we bill for these services when we issue the report to the physician . if the cytopathology result is indeterminate , defined as atypia/follicular lesions of undetermined significance ( aus/flus ) or suspicious for fn/hcn , we perform the gec . historically , approximately 14 % -17 % of samples we have received for the afirma solution have yielded indeterminate results by cytopathology . approximately 5 % -10 % of the samples for gec testing have insufficient ribonucleic acid , or rna , from which to render a result . the gec can be reported as benign , suspicious or no result . we bill for the gec benign and gec suspicious results only . after the gec is completed , we issue the cytopathology report for the indeterminate results as well as the gec report , and then bill for both of these tests . we incur costs of collecting and shipping the fnas and a portion of the costs of performing tests where we can not ultimately issue a patient report . because we can not bill for all samples received , the number of fnas received does not directly correlate to the total number of patient reports issued and the amount billed . 69 continued adoption of and reimbursement for afirma to date , only a small number of payers have reimbursed us for afirma at full list price . revenue growth depends on both our ability to achieve broader reimbursement at increased levels from third-party payers and to expand our base of prescribing physicians and increase our penetration in existing accounts . because some payers consider the gec experimental and investigational , we may not receive payment for tests and payments we receive may not be at acceptable levels . we expect our revenue growth will increase as more payers make a positive coverage decision and as payers enter into contracts with us , which should enhance our accrued revenue and cash collections . to drive increased adoption of afirma , we increased our internal sales force in high-volume geographies domestically in 2014 and 2015 and plan to do so again in 2016 , along with increasing our marketing efforts . we have also hired institutional channel managers to focus on the institutional segment , which accounts generally send us only gecs . if we are unable to expand the base of prescribing physicians and penetration within these accounts at an acceptable rate , or if we are not able to execute our strategy for increasing reimbursement , we may not be able to effectively increase our revenue . our average reimbursement per gec was approximately $ 2,200 for the quarter ended december 31 , 2015 as compared with approximately $ 2,200 for the same period in 2014. the average quarterly reimbursement ranged from $ 2,200 to $ 2,300 in 2015 as compared to a range of $ 1,900 to $ 2,200 in 2014. the average gec reimbursement rate will change over time due to a number of factors , including medical coverage decisions by payers , the effects of contracts signed with payers , changes in allowed amounts by payers , our ability to successfully win appeals for payment , and our ability to collect cash payments from third-party payers and individual patients . historical average reimbursement is not necessarily indicative of future average reimbursement . we calculate the average gec reimbursement from all payers , whether they are on a cash or an accrual basis , for tests that are on average a year old , since it can take a significant period of time to collect from some payers . we use an average of reimbursement for tests provided over two quarters as it reduces the effects of temporary volatility and seasonal effects . thus the average reimbursement per gec represents the total cash collected to date against gec tests performed during the relevant period divided by the number of gec tests performed during that same period . story_separator_special_tag how we recognize revenue a significant portion of our revenue is recognized upon the earlier of receipt of third-party notification of payment or when cash is received . for medicare and certain other payers where we have an agreed upon reimbursement rate or we are able to make a reasonable estimate of reimbursement at the time delivery is complete , we recognize the related revenue on an accrual basis . in the first period in which revenue is accrued for a particular payer , there generally is a one-time increase in revenue . until we have contracts with or can estimate the amount that will ultimately be received from a larger number of payers , we will recognize a large portion of our revenue upon the earlier of notification of payment or when cash is received . additionally , as we commercialize new products , we will need to be able to make an estimate of the amount that will ultimately be received from each payer for each new product offering prior to being able to recognize the related revenue on an accrual basis . because the timing and amount of cash payments received from payers is difficult to predict , we expect that our revenue will fluctuate significantly in any given quarter . in addition , even if we begin to accrue larger amounts of revenue related to afirma , when we introduce new products , we do not expect we will be able to recognize revenue from new products on an accrual basis for some period of time . this may result in continued fluctuations in our revenue . as of december 31 , 2015 , cumulative amounts billed at list price for tests processed which were not recognized as revenue upon delivery of a patient report because our accrual revenue recognition criteria were not met and for which we have not received notification of payment , collected cash or written off as uncollectible , totaled approximately $ 134 million . 70 as of december 31 , 2014 , cumulative amounts billed at list price for tests processed which were not recognized as revenue upon delivery of a patient report because our accrual revenue recognition criteria were not met and for which we have not received notification of payment , collected cash or written off as uncollectible , totaled $ 86 million . of this amount , we recognized revenue of approximately $ 9 million in the year ended december 31 , 2015 , when cash was received . generally , cash we receive is collected within 12 months of the date the test is billed . we can not provide any assurance as to when , if ever , or to what extent any of these amounts will be collected . notwithstanding our efforts to obtain payment for these tests , payers may deny our claims , in whole or in part , and we may never receive revenue from previously performed but unpaid tests . revenue from these tests , if any , may not be equal to the billed amount due to a number of factors , including differences in reimbursement rates , the amounts of patient co-payments and co-insurance , the existence of secondary payers and claims denials . finally , when we increase our list price , as we did in july 2015 , it will increase the cumulative amounts billed . we incur expense for tests in the period in which the test is conducted and recognize revenue for tests in the period in which our revenue recognition criteria are met . accordingly , any revenue that we recognize as a result of cash collection in respect of previously performed but unpaid tests will favorably impact our liquidity and results of operations in future periods . impact of genzyme co-promotion agreement the $ 10.0 million up-front co-promotion fee we received from genzyme under the co-promotion agreement dated as of january 18 , 2012 is being amortized over the estimated useful life based on the provisions of the agreement as a reduction to selling and marketing expenses . we amortized $ 1.9 million , $ 2.3 million and $ 2.5 million of the $ 10.0 million in the years ended december 31 , 2015 , 2014 and 2013 , respectively . the agreement requires that we pay a certain percentage of our cash receipts from the sale of the afirma gec test to genzyme , which percentage decreased over time . the percentage was 40 % from january 2013 through february 2014 , 32 % from february 2014 through december 2014 , and decreased to 15 % in january 2015. our co-promotion fees , excluding the amortization of the up-front co-promotion fee , were $ 7.3 million , $ 12.0 million and $ 8.6 million in the years ended december 31 , 2015 , 2014 and 2013 , respectively , and are included in selling and marketing expenses in our statements of operations and comprehensive loss . in november 2014 , we signed the amended agreement with genzyme . under the amended agreement , the co-promotion fees genzyme will receive as a percentage of u.s. cash receipts from the sale of the afirma gec test were reduced from 32 % to 15 % beginning january 1 , 2015. either party may terminate the agreement for convenience with six months prior notice , however , neither party can terminate the agreement for convenience prior to june 30 , 2016. on march 9 , 2016 , we formalized the decision to conclude the amended agreement with genzyme effective september 9 , 2016. under the ex-u.s. agreement , or ex-u.s. agreement , we will pay genzyme 25 % of net revenue from the sale of the afirma gec test in brazil and singapore over a five-year period commencing january 1 , 2015. beginning in the fourth year of the agreement , which was effective in february 2015 , if we terminate the agreement for convenience , we may be required to pay a termination fee contingent on the number of gec billable results generated .
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revenue recognized when cash is received and on an accrual basis for the years ended december 31 , 2015 , 2014 and 2013 was as follows ( in thousands of dollars ) : replace_table_token_9_th 78 cost of revenue comparison of the years ended december 31 , 2015 , 2014 and 2013 is as follows ( in thousands of dollars , except percentages ) : replace_table_token_10_th cost of revenue increased $ 4.9 million , or 29 % , for the year ended december 31 , 2015 compared to the same period in 2014. given our corporate focus on gec growth and the adoption of the afirma test , gec tests increased by 38 % and cytopathology tests increased by 13 % . the increase in reagents , chips , consumables and related costs is associated primarily with increased gec test volume . the increase in cytopathology fees is related to the volume increase in fna samples processed . the increase in sample collection costs is primarily related to increased volume of samples . the increase in direct labor is associated with the increase in sample volume and the mix shift to relatively more gecs versus cytopathology tests as more labor hours are incurred on the gec tests compared to the cytopathology tests and at a higher average employee cost . other costs are primarily indirect costs , such as facilities allocation , depreciation and equipment maintenance , which increased as a result of increased allocable costs and increased allocation to cost of revenue due to an average headcount increase of 34 % . cost of revenue increased $ 4.0 million , or 32 % , for the year ended december 31 , 2014 compared to the same period in 2013. the increase was primarily due to an increase in variable costs that are directly related to the increase in the number of fnas , offset in part by continuing refinements in our testing process and economies of scale related to the increase in fnas samples processed . fnas received increased 16,178 , or 33 % , to 65,848 in the year ended december 31 , 2014. research and development comparison of the years ended december 31 , 2015 , 2014 and 2013 is as follows ( in thousands of dollars , except percentages ) : replace_table_token_11_th research and development expense increased $ 3.0 million , or 31 % , for the year ended december 31 , 2015 compared to the same period in 2014. the increase in personnel related expense was primarily due to increased accrued bonuses as a result of increased
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ROO
| 9,229
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we also entered into a five-year senior secured credit facility ( the “ credit agreement ” ) comprised of a $ 75.0 million five-year term loan ( the “ term loan ” ) and a $ 50.0 million senior secured revolving credit facility ( the “ revolving credit facility ” ) . during the 2017 year , we launched six products . in 2018 , our subsidiary , ani pharmaceuticals canada inc. ( “ ani canada ” ) , acquired all the issued and outstanding equity interests of wellspring pharma services inc. ( “ wellspring ” ) , a canadian company that performs contract development and manufacturing of pharmaceutical products . in conjunction with the transaction , we acquired wellspring 's pharmaceutical manufacturing facility , laboratory , and offices , its current book of commercial business , as well as an organized workforce . following the consummation of the transaction , wellspring was merged into ani canada with the resulting entity 's name being ani pharmaceuticals canada inc. in addition , we acquired the andas for three previously-commercialized generic products , the approved andas for two generic products that have yet to be commercialized , the development package for one generic product , a license , supply , and distribution agreement for a generic product with an anda that is pending approval , and certain manufacturing equipment required to manufacture one of the products . we also acquired the andas for 23 previously-marketed generic products and api for four of the acquired products . during the 2018 year , we launched 11 products . 42 in addition , in december 2018 , we refinanced our $ 125.0 million credit agreement by entering into an amended and restated senior secured credit facility ( the “ credit facility ” ) for up to $ 265.2 million . the principal new feature of the credit facility is a $ 118.0 million delayed draw term loan ( the “ ddtl ” ) , which can only be drawn on in order to pay down the company 's remaining 3.0 % convertible senior notes , which will mature in december 2019. the credit facility also extended the maturity of the $ 72.2 million secured term loan balance to december 2023. in addition , the credit facility increased the previous $ 50.0 million line of credit ( the “ revolver ” ) to $ 75.0 million . as of december 31 , 2018 , we had not drawn on the revolver or ddtl . recent developments acquisition of wellspring pharma services inc. on august 6 , 2018 , our subsidiary , ani canada , acquired all the issued and outstanding equity interests of wellspring , a canadian company that performs contract development and manufacturing of pharmaceutical products for a purchase price of $ 18.0 million , subject to certain customary adjustments . pursuant to these customary adjustments , the total purchase consideration was $ 16.7 million . the consideration was paid entirely from cash on hand . in conjunction with the transaction , we acquired wellspring 's pharmaceutical manufacturing facility , laboratory , and offices , its current book of commercial business , as well as an organized workforce . following the consummation of the transaction , wellspring was merged into ani canada with the resulting entity 's name being ani pharmaceuticals canada inc. we acquired wellspring to provide an additional tech transfer site in order to accelerate the re-commercialization of the previously-approved andas in our pipeline , to expand our contract manufacturing revenue base , and to broaden our manufacturing capabilities to three manufacturing facilities . asset acquisitions in april 2018 , we entered into an agreement with impax laboratories , inc. ( now amneal pharmaceuticals , inc. , or “ amneal ” ) to purchase the approved andas for three previously-commercialized generic drug products , the approved andas for two generic drug products that have not yet been commercialized , the development package for one generic drug product , a license , supply , and distribution agreement for a generic drug product with an anda that is pending approval , and certain manufacturing equipment required to manufacture one of the products , for $ 2.3 million in cash up front . the transaction closed in may 2018 and we made the $ 2.3 million payment using cash on hand . at the same time , we entered into a supply agreement with amneal under which we may elect to purchase the finished goods for one of the products for up to 17 months beginning october 1 , 2019 , under certain conditions . if we do elect to purchase the finished goods from amneal for this period , we may be required to pay a milestone payment of up to $ 10.0 million upon launch , depending on the number of competitors selling the product at the time of launch . in april 2018 , we entered into an agreement with idt australia , limited to purchase the andas for 23 previously-marketed generic drug products and active pharmaceutical ingredient ( “ api ” ) of four of the acquired products for $ 2.7 million in cash and a single-digit royalty on net profits from sales of one of the products . the transaction closed in april 2018 and we made the $ 2.7 million payment using cash on hand . amendment to teva pharmaceuticals asset purchase agreement in january 2019 , we entered into amendment no . 4 to our asset purchase agreement with teva pharmaceuticals usa , inc. ( “ teva ” ) . under the terms of the purchase agreement amendment , all royalty obligations of the company owed to teva with respect to products associated with ten andas under the asset purchase agreement shall cease effective as of december 31 , 2018. in consideration for the termination of such future royalty obligations , we paid teva a sum of $ 16.0 million . story_separator_special_tag provision for income taxes years ended december 31 , ( in thousands ) 2018 2017 change % change provision for income taxes $ ( 4,557 ) $ ( 17,425 ) $ 12,868 ( 73.8 ) % our provision for income taxes consists of current and deferred components , which include changes in our deferred tax assets , our deferred tax liabilities , and our valuation allowance . the tax cuts and jobs act , which was enacted on december 22 , 2017 , included a number of changes to existing u.s. tax laws , most notably the reduction of the u.s. corporate income tax rate from 35 % to 21 % , which began in 2018. we measure our deferred tax assets and liabilities using the tax rates that we believe will apply in the years in which the temporary differences are expected to be recovered or paid . see note 11. income taxes , in the notes to the consolidated financial statements in part ii . item 8. of this annual report on form 10-k for further information . for the year ended december 31 , 2018 , we recognized income tax expense of $ 4.6 million , versus $ 17.4 million in the prior year period , a provision decrease of $ 12.9 million . the effective tax rate for the year ended december 31 , 2018 was 22.7 % of pre-tax income reported in the period . our effective tax rate for the year ended december 31 , 2018 was impacted primarily by the tax cuts and jobs act of 2017 , which was enacted on december 22 , 2017 and lowered the u.s. corporate tax rate from 35 % to 21 % , which began in 2018. our effective tax rate was also impacted by the discrete impact of current period awards of stock-based compensation , stock option exercises , and disqualifying dispositions of incentive stock options , all of which impact the consolidated effective rate in the period in which they occur . the effective tax rate for the year ended december 31 , 2017 was 106.6 % of pre-tax income reported in the period . our effective tax rate for the year ended december 31 , 2017 was primarily impacted by the $ 13.4 million revaluation of our deferred tax assets and liabilities at the lower 21 % u.s. corporate income tax rate . our effective tax rate was also impacted by the domestic production activities deduction , as well as the impact of current period awards of stock-based compensation , stock option exercises , and disqualifying dispositions of incentive stock options , all of which impact the consolidated effective rate in the period in which they occur . 49 results of operations for the years ended december 31 , 2017 and 2016 net revenues replace_table_token_7_th net revenues for the year ended december 31 , 2017 were $ 176.8 million compared to $ 128.6 million for the same period in 2016 , an increase of $ 48.2 million , or 37.5 % , primarily as a result of the following factors : · net revenues for generic pharmaceutical products were $ 118.4 million during the year ended december 31 , 2017 , an increase of 24.4 % compared to $ 95.2 million for the same period in 2016. the primary reason for the increase was the annualization of 2016 launches , notably nilutamide , erythromycin ethylsuccinate , and fenofibrate , the impact of the third quarter 2017 launch of diphenoxylate hydrochloride and atropine sulfate , and increased unit sales of methazolamide and flecainide . these increases were tempered by volume decreases in eemt sales , driven by market contraction , and sales decreases for propranolol er driven by price . as described in item 1. business – government regulations – unapproved products , we market eemt and opium tincture without fda approved ndas . while we believe that , so long as we comply with applicable manufacturing standards , the fda will not take action against us under the current enforcement policy , we can offer no assurances that the fda will continue this policy or not take a contrary position with any individual product or group of products . our combined net revenues for these products for the years ended december 31 , 2017 and 2016 were $ 27.6 million and $ 34.3 million , respectively . · net revenues for branded pharmaceutical products were $ 50.9 million during the year ended december 31 , 2017 an increase of 92.6 % compared to the $ 26.4 million for the same period in 2016. the primary reason for the increase was sales of inderal xl and innopran xl , both of which were launched in first quarter of 2017 , as well as sales of inderal la , which was launched in the second quarter of 2016. these increases were partially offset by decreased unit sales for vancocin . we experience periodic larger orders for our vancocin product that relate to clinical trials . such orders constituted $ 2.4 million of our branded pharmaceutical product revenue for the year ended december 31 , 2016. we had no such orders in the year ended december 31 , 2017 . · contract manufacturing revenues were $ 7.0 million during the year ended december 31 , 2017 , an increase of 27.3 % compared to $ 5.5 million for the same period in 2016 , due to the timing and volume of orders from contract manufacturing customers in the period . as described in item 1. business – government regulations – unapproved products , we contract manufacture a group of products on behalf of a customer that are marketed by that customer without an fda-approved nda . if the fda took enforcement action against such customer , the customer may be required to seek fda approval for the group of products or withdraw them from the market . our contract manufacturing revenues for the group of unapproved
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net cash provided by operating activities net cash provided by operating activities was $ 67.1 million for the year ended december 31 , 2018 , compared to $ 39.4 million during the same period in 2017 , an increase of $ 27.7 million . this increase was principally due to changes in working capital , as well as increased sales volume and corresponding gross profit dollars . net cash provided by operating activities was $ 39.4 million for the year ended december 31 , 2017 , compared to $ 27.5 million during the same period in 2016 , an increase of $ 11.9 million between the periods . this increase was principally due to increased sales volume and corresponding gross profit dollars . net cash used in investing activities net cash used in investing activities for the year ended december 31 , 2018 was $ 27.4 million , principally due to the payment of $ 16.5 million of consideration , net of cash acquired , to acquire wellspring , the april and may 2018 asset acquisitions of andas for $ 5.2 million , and $ 5.7 million of capital expenditures during the period . net cash used in investing activities for the year ended december 31 , 2017 was $ 108.0 million , principally due to the february 2017 payment of $ 20.2 million for the asset acquisition of the product rights for inderal xl , the february 2017 payment of $ 30.6 million for the asset acquisition of the ndas for innopran xl , the december 2017 payment of $ 46.5 million for the asset acquisition of the product rights for atacand , atacand hct , arimidex , and casodex , and $ 10.4 million of capital expenditures during the period , primarily related to new equipment to expand our manufacturing capability .
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Liquidity
| 16,536
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subsequent to the restated lpg asset sale , transmontaigne continues to use the matamoros terminal facility for sales of lpg to pmi which are principally destined for consumption in the northeastern region of mexico , which includes the states of coahuila , nuevo leon and tamaulipas . sales of lpg to pmi have historically fluctuated in part based on the seasons . the demand for lpg is strongest during the winter season . rio vista does not anticipate that its existing business , the lpg transportation business ( see below ) , will generate sufficient cash flow to increase unitholder value . therefore the general partner of rio vista intends to use a portion of its available cash and credit to make strategic acquisitions . there can be no assurance , however , that rio vista will be able to complete such acquisitions or that , if completed , such acquisitions will increase unitholder value . see risk factors below . 22 all of rio vista 's lpg operations are conducted through , and rio vista 's lpg operating assets are owned by , rvop . the general partner is entitled to receive distributions from rio vista on its general partner interest and additional incentive distributions ( see liquidity and capital resources distributions of available cash ) as provided in rio vista 's partnership agreement . the general partner has sole responsibility for conducting rio vista 's business and for managing rio vista 's operations in accordance with the partnership agreement . the general partner does not receive a management fee in connection with its management of rio vista 's business , but is entitled to be reimbursed for all direct and indirect expenses incurred on rio vista 's behalf . lpg transportation agreement under the rio vista restated psa and the related transportation agreement between rio vista and transmontaigne dated august 22 , 2006 ( lpg transportation agreement ) , transmontaigne agreed to exclusively use the services and retained assets of rio vista on a fee basis for purposes of transportation of lpg to be delivered into northeastern mexico and or lpg sold pursuant to the existing pmi agreement . rio vista has agreed not to transport lpg through rio vista 's retained assets in mexico except on behalf of transmontaigne , subject to certain conditions . transmontaigne has agreed to use the retained assets pursuant to the lpg transportation agreement which began on august 22 , 2006 and runs for the term of the existing pmi agreement between transmontaigne and pmi , as extended from time to time thereafter . the existing pmi agreement between transmontaigne and pmi expired on march 31 , 2007. rio vista is currently not aware of any renewal or extension of the existing pmi agreement . rio vista receives a fee for all lpg product transported on behalf of transmontaigne through the retained assets . in addition , under the rio vista restated psa and the related pipeline services agreement between rio vista and transmontaigne dated august 22 , 2006 ( u.s. pipeline services agreement ) , transmontaigne agreed to provide routine and non-routine operation and maintenance services , as defined , for the u.s. portion only of rio vista 's pipelines between brownsville , texas and matamoros , mexico . transmontaigne agreed to provide the routine services at its sole cost and expense . for the non-routine services , rio vista agreed to reimburse transmontaigne for all costs actually incurred in performing the services and all materials and supplies provided in connection with such services , plus 15 % . rio vista has also granted transmontaigne certain rights of first offer with respect to a sale of the retained assets by rio vista to any third party . any changes in future contracts between pmi and transmontaigne for the sale of lpg will have an impact on the fees which rio vista will receive pursuant to the lpg transportation agreement . rio vista is also exploring potential opportunities which would increase the value of the retained assets . 23 the following table sets forth the minimum monthly volume of lpg that pmi committed to purchase from rio vista pursuant to the 2005 pmi agreement , the april 2006 monthly contracts and the 2006 pmi agreement and the actual volumes purchased by pmi for the months january 2006 through march 2007. replace_table_token_6_th for the period january 1 , 2006 through august 21 , 2006 , rio vista sold lpg to pmi . beginning on august 22 , 2006 , rio vista transported lpg pursuant to the lpg transportation agreement . the gallons transported by rio vista for the period august 22 , 2006 to august 31 , 2006 totaled 1,384,581 gallons . rio vista is entitled to fees for actual volumes delivered pursuant to the lpg transportation agreement . 24 potential factors affecting future demand for the retained assets : recent trends . pmi has historically used the matamoros terminal facility to load lpg by truck for product destined for the northeastern part of mexico . since april 2004 , through the date of the restated lpg asset sale , pmi contracted with either penn octane or rio vista ( subsequent to the spin-off ) , for lpg volumes which were significantly lower than amounts purchased by pmi in similar periods during previous years . the contract between transmontaigne and pmi which expired on march 31 , 2007 , provided for minimum volumes lower than historical amounts . rio vista believes that the reduction of volume commitments by pmi is based on additional lpg production by pemex being generated from the burgos basin field in reynosa , mexico , an area within the proximity of rio vista 's matamoros terminal facility and increased competition from u.s. suppliers ( see below ) . story_separator_special_tag 29 pursuant to the omnibus agreement , penn octane is entitled to reimbursement of costs incurred on behalf of rio vista , including an allocable share of overhead . rio vista can not be certain that future cash flows from its lpg transportation business and future investments , if any , will be adequate to cover all of its future working capital requirements including minimum distributions by rio vista . rio vista projects that monthly cash flows from its lpg transportation agreement during the months of july through september will be less than during the months of october through march as a result of seasonality . transmontaigne note . in connection with the purchase and sale agreement entered into between rio vista and transmontaigne on august 15 , 2005 ( see note d to the consolidated financial statements ) , transmontaigne loaned rio vista $ 1,300,000 ( transmontaigne note ) . the transmontaigne note was to be repaid , including interest , as a reduction of the total purchase price at the time of closing or 120 days following demand by transmontaigne . the transmontaigne note was secured by the tank farm and certain lpg storage tanks located at the brownsville terminal facility ( collateral ) . the transmontaigne note began to accrue interest on november 15 , 2005 at the prime rate plus 2 % . on august 22 , 2006 , in connection with the rio vista restated psa , the transmontaigne note was amended whereby rio vista paid $ 300,000 of principal and the transmontaigne note was extended to august 22 , 2007. the transmontaigne note was also amended to substitute as collateral the us portion of the eight-inch pipeline owned by rio vista . the transmontaigne note bears interest at the rate of prime ( 8.25 % as of december 31 , 2006 ) plus 2 % annually and interest is payable monthly . guarantees and assets pledged on certain of penn octane 's obligations . rio vista has agreed to guarantee penn octane 's obligations to rzb with respect to the rzb credit facility and certain of rio vista 's assets are pledged as collateral for those obligations of penn octane to rzb ( see below ) , except that rzb has agreed to subordinate certain of rio vista 's assets in connection with the transmontaigne note . in addition , rio vista has agreed to indemnify penn octane for a period of three years from the fiscal year end that includes the date of the spin-off for any federal income tax liabilities resulting from the spin-off in excess of $ 2.5 million . penn octane has filed its federal income tax return for the year of the spin-off and it did not incur a federal income tax liability in excess of $ 2.5 million . however , the internal revenue service ( irs ) may review penn octane 's federal income tax returns and challenge positions that penn octane has taken with respect to the spin-off . further , if penn octane is determined to have a federal income tax liability in excess of the amounts which were included in the federal income tax return related to the spin-off and if penn octane is unable to pay such liabilities or rio vista is unable to pay , then the internal revenue service may assert that the penn octane stockholders who received common units in the spin-off are liable for unpaid federal income taxes of penn octane , including interest and any penalties , up to the value of the rio vista common units received by each stockholder . as a result of the pledge of the collateral , rio vista may be unable to obtain financing using these pledged assets as collateral . rio vista may also be prohibited from making any distributions to unitholders if it would cause an event of default , or if an event of default exists , under penn octane 's revolving credit facilities , or any other covenant which may exist under any other credit arrangement or other regulatory requirement at the time . the following is a discussion of the guaranteed obligations : rzb obligation rio vista 's lpg purchases were financed entirely by penn octane . penn octane previously financed its purchases of lpg and continues to finance its purchases of fuel products through its credit facility with rzb finance , llc ( rzb ) . penn octane finances its purchases of fuel products through its credit facility with rzb finance , llc ( rzb ) . as of december 31 , 2006 , penn octane had a $ 15,000,000 credit facility with rzb for demand loans and standby letters of credit ( rzb credit facility ) to finance penn octane 's purchases of fuel products . the rzb credit facility is an uncommitted facility under which the letters of credit have an expiration date of no more than 90 days and the facility is reviewed annually at march 31. in connection with the spin-off , rio vista agreed to guarantee penn octane 's obligations with respect to the rzb credit facility . in connection with rio vista 's guaranty , rio vista granted rzb a security interest and assignment in any and all of rio vista 's accounts , real property , buildings , pipelines , fixtures and interests therein or relating thereto . rio vista 's guarantee and asset pledge continue under the existing rzb credit facility . in addition , rio vista may not permit to exist any lien , security interest , mortgage , charge or other encumbrance of any nature on any of its properties or assets , except in favor of rzb , without the consent of rzb . 30 under the rzb credit facility , penn octane pays a fee with respect to each letter of credit thereunder in an amount equal to the greater of ( i ) $ 500 , ( ii ) 2 % of the
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restricted cash $ 1.9 inventory $ 1.6 property , plant and equipment , net $ 10.9 rio vista 's assets that are included in the above amounts are as follows ( in millions ) : accounts receivable $ 0.5 property , plant and equipment , net $ 10.7 the following is a summary of rio vista 's estimated minimum contractual obligations as of december 31 , 2006. replace_table_token_9_th 31 the following is a summary of rio vista 's estimated minimum commercial obligations as of december 31 , 2006 , based on penn octane 's most recently filed annual report on form 10-k as of december 31 , 2006. amount of commitment expiration per period ( amounts in millions ) total amounts less than 1 - 3 4 - 5 over commercial commitments committed 1 year years years 5 years lines of credit $ $ $ $ $ standby letters of credit guarantees 5.2 5.2 standby repurchase obligations n/a n/a n/a n/a n/a other commercial commitments n/a n/a n/a n/a n/a total commercial commitments $ 5.2 $ 5.2 $ $ $ income taxes . rio vista has agreed to indemnify penn octane for a period of three years from the fiscal year end that includes the date of the spin-off for any federal income tax liabilities resulting from the spin-off in excess of $ 2.5 million . penn octane has filed its federal income tax return for the year of the spin-off and it did not incur a federal income tax liability in excess of $ 2.5 million . however , the internal revenue service ( irs ) may review penn octane 's federal income tax returns and challenge positions that penn octane has taken with respect to the spin-off .
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Liquidity
| 6,374
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the moody 's announcement commented that the company 's growing market presence , broad investment capabilities , multi-faceted distribution channels , and financial flexibility all support this conclusion . regulators in various jurisdictions have proposed or are exploring changes to the manner in which fund distributers are compensated for the services they provide . the u.k. financial conduct authority implemented its retail distribution review ( “ rdr ” ) , which is reshaping the manner in which retail investment funds are sold in the u.k. by changing how retail clients pay for investment advice given in respect of all retail investment products . invesco prepared for the rdr implementation by offering investment funds to u.k. investors which are priced at a reduced gross management fee , but which in turn do not result in the payment by the company of a distribution fee to the intermediary . these changes are not expected to have a significant impact on net revenues as investors move into these offerings . other countries have announced similar distribution fee reviews . in the u.s. , the sec has previously proposed and may repurpose significant changes to rule 12b-1 , and may propose other regulatory changes impacting distribution of investment funds . the markets in financial instruments directive ii ( “ mifid ii ” ) in the eu seeks to promote a single market for wholesale and retail transactions in financial instruments . 27 presentation of management 's discussion and analysis of financial condition and results of operations the company provides investment management services to , and has transactions with , various private equity , real estate , fund-of-funds , collateralized loan obligation products ( clos ) , and other investment entities sponsored by the company for the investment of client assets in the normal course of business . the company serves as the investment manager , making day-to-day investment decisions concerning the assets of the products . the company is required to consolidate certain managed funds from time-to-time , as discussed more fully in item 8 , financial statements and supplementary data , note 1 -- `` accounting policies -- basis of accounting and consolidation . '' investment products that are consolidated are referred to in this report as either consolidated sponsored investment products ( csip ) , which generally include investment products in which invesco holds the majority of the voting rights or partnerships in which the company has substantive equity at risk but in which the other investors lack removal or liquidation rights , or consolidated investment products ( cip ) , which includes consolidated nominally-held investment products . this distinction is important , as it differentiates the company 's economic risk associated with each type of consolidated managed fund . the company 's economic risk with respect to each investment in a csip and a cip is limited to its equity ownership and any uncollected management and performance fees . gains and losses arising from nominally-held cip do not have a significant impact on the company 's results of operations , liquidity , or capital resources . gains and losses arising from majority-held csip could have a significant impact on the company 's results of operations , as the company has greater economic risk associated with its investment . see item 8 , financial statements and supplementary data , - note 1 `` accounting policies , '' note 19 , `` consolidated sponsored investment products , '' and note 20 , `` consolidated investment products , '' for additional information regarding the impact of consolidation of managed funds . the majority of the company 's cip balances are clo-related . the collateral assets of the clos are held solely to satisfy the obligations of the clos . the company has no right to the benefits from , nor does it bear the risks associated with , the collateral assets held by the clos , beyond the company 's minimal direct investments in , and management and performance fees generated from , the clos . if the company were to liquidate , the collateral assets would not be available to the general creditors of the company , and as a result , the company does not consider them to be company assets . likewise , the investors in the clos have no recourse to the general credit of the company for the notes issued by the clos . the company therefore does not consider this debt to be a company liability . the impact of cip is so significant to the presentation of the company 's consolidated financial statements ( but not to the underlying financial condition or results of operations of the company ) that the company has elected to deconsolidate these products in its non-gaap disclosures . the following discussion therefore combines the results presented under u.s. generally accepted accounting principles ( u.s. gaap ) with the company 's non-gaap presentation . this management 's discussion and analysis of financial condition and results of operations contains four distinct sections , which follow after the assets under management discussion : results of operations ( years ended december 31 , 2014 compared to december 31 , 2013 compared to december 31 , 2012 ) ; schedule of non-gaap information ; balance sheet discussion ; and liquidity and capital resources . each of the consolidated financial statement summary sections ( results of operations , balance sheet discussion , and liquidity and capital resources ) begins with a table illustrating the impact of cip relative to the company 's consolidated totals . the impact is illustrated by a column which shows the dollar-value change in the consolidated figures , as caused by the consolidation of cip . for example , the impact of cip on operating revenues for the year ended december 31 , 2014 was a reduction of $ 35.2 million . this indicates that their consolidation reduced consolidated revenues by this amount , reflecting the elimination upon their consolidation of the operating revenues earned by invesco for managing these investment products . story_separator_special_tag the narrative in each of these sections separately provides discussion of the underlying financial statement activity for the company , before consolidation of cip , as well as of the financial statement activity of cip . additionally , wherever a non-gaap measure is referenced , a disclosure will follow in the narrative or in the note referring the reader to the schedule of non-gaap information , where additional details regarding the use of the non-gaap measure by the company are disclosed , along with reconciliations of the most directly comparable u.s. gaap measures to the non-gaap measures . to further enhance the readability of the results of operations section , separate tables for each of the revenue , expense , and other income and expenses ( non-operating income/expense ) sections of the income statement introduce the narrative that follows , providing a section-by-section review of the company 's income statements for the periods presented . 28 summary operating information summary operating information for 2014 , 2013 and 2012 is presented in the table below . replace_table_token_6_th _ ( 1 ) on december 31 , 2013 , the company completed the sale of atlantic trust . the company has adopted a discontinued operations presentation for atlantic trust . amounts presented represent continuing operations and exclude atlantic trust , with the exception of net income attributable to common shareholders and diluted earnings per share . ( 2 ) net revenues is a non-gaap financial measure . net revenues are operating revenues plus our proportional share of the net revenues of our joint venture investments , less third-party distribution , service and advisory expenses , plus management and performance fees earned from cip , less other revenue recorded by cip , plus other reconciling items . see `` schedule of non-gaap information '' for the reconciliation of operating revenues to net revenues . ( 3 ) adjusted operating income and adjusted operating margin are non-gaap financial measures . adjusted operating margin is adjusted operating income divided by net revenues . adjusted operating income includes operating income plus our proportional share of the net operating income of our joint venture investments , the operating income impact of the consolidation of investment products , acquisition/disposition related adjustments , compensation expense related to market valuation changes in deferred compensation plans , and other reconciling items . see `` schedule of non-gaap information , '' for the reconciliation of operating income to adjusted operating income . ( 4 ) adjusted net income attributable to common shareholders and adjusted diluted eps are non-gaap financial measures . adjusted net income attributable to common shareholders is net income attributable to common shareholders adjusted to exclude the net income of cip , add back acquisition/disposition related adjustments , the net income impact of deferred compensation plans and other reconciling items . adjustments made to net income attributable to common shareholders are tax-effected in arriving at adjusted net income attributable to common shareholders . by calculation , adjusted diluted eps is adjusted net income attributable to common shareholders divided by the weighted average number of shares outstanding ( for diluted eps ) . see `` schedule of non-gaap information , '' for the reconciliation of net income attributable to common shareholders to adjusted net income attributable to common shareholders . ( 5 ) the debt-to-equity ratio excluding cip is a non-gaap financial measure . see the `` liquidity and capital resources '' section for a recalculation of this ratio and other important disclosures . 29 investment capabilities performance overview invesco 's first strategic priority is to achieve strong investment performance over the long-term for our clients . the table below presents the one- , three- and five-year performance of our actively managed investment products measured by the percentage of aum ahead of benchmark and aum in the top half of peer group . ( 1 ) replace_table_token_7_th _ ( 1 ) aum measured in the one- , three- , and five-year peer group rankings represents 60 % , 60 % , and 60 % of total invesco aum , respectively , and aum measured versus benchmark on a one- , three- , and five-year basis represents 71 % , 70 % , and 69 % of total invesco aum , respectively , as of december 31 , 2014 . peer group rankings are sourced from a widely-used third party ranking agency in each fund 's market ( lipper , morningstar , ima , russell , mercer , evestment alliance , sitca , value research ) and are asset-weighted in usd . rankings are as of prior quarter-end for most institutional products and preceding month-end for australian retail funds due to their late release by third parties . rankings for the most representative fund in each global investment performance standard ( gips ) composite are applied to all products within each gips composite . excludes passive products , closed-end funds , private equity limited partnerships , non-discretionary direct real estate , unit investment trusts fund-of-funds with component funds managed by invesco , stable value building block funds and clos . certain funds and products were excluded from the analysis because of limited benchmark or peer group data . had these been available , results may have been different . these results are preliminary and subject to revision . performance assumes the reinvestment of dividends . past performance is not indicative of future results and may not reflect an investor 's experience . as of december 31 , 2014 , 67 % , 77 % and 81 % of ranked actively managed assets performed in the top half of peer groups on a one-year , three-year and five-year basis respectively . the u.k. , continental european and global ex u.s. and emerging markets equities have also had strong relative performance , with 97 % or more of ranked assets beating their benchmark over three- and five-year periods .
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additionally , cip represent less than 1 % of the company 's aum . therefore , the net gains or losses of cip are not indicative of the performance of the company 's aggregate assets under management . income before taxes total income before taxes includes income before taxes of cip . cip are taxed at the investor level and not at the product entity level ; therefore , there is no tax provision reflected in the net impact of cip . accordingly , the table included in item 8. financial statements and supplementary data , note 15 , `` taxation , '' illustrating the division of income/ ( losses ) before taxes between u.s. and foreign is formatted such that the income before taxes of cip is separately stated . the commentary below discusses disparities between u.s. and foreign income before taxes in the taxation footnote and u.s. and foreign operating revenues in item 8. financial statements and supplementary data , note 17 , `` geographic information . '' total u.s. income before taxes of $ 722.6 million for the year ended december 31 , 2014 includes income before taxes of cip of $ 63.0 million , which primarily consists of income from consolidated private equity partnerships . u.s. income before taxes from cip increased $ 17.8 million ( 39.4 % ) from 2013 due primarily to greater investment gains generated by these private equity partnerships . excluding cip , u.s. income before taxes in 2014 increased $ 106.5 million ( 19.3 % ) . income before taxes in 2014 increased due to a larger increase in u.s. operating revenues ( 9.1 % ) than operating expenses and other income and expenses ( 6.0 % ) . total foreign income before taxes of $ 672.5 million for the year ended december 31 , 2014 includes losses before taxes of cip of $ 51.9 million , which primarily consists of losses from consolidated clos . foreign cip pre-tax losses totaled $ 51.9 million in 2014 compared to pre-tax losses of
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ROO
| 5,647
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we also operate 213 dd 's discounts stores in 16 states as of february 3 , 2018 that feature a more moderately-priced assortment of first-quality , in-season , name brand apparel , accessories , footwear , and home fashions for the entire family at savings of 20 % to 70 % off moderate department and discount store regular prices every day . our primary objective is to pursue and refine our existing off-price strategies to maintain and improve both profitability and financial returns over the long term . in establishing appropriate growth targets for our business , we closely monitor market share trends for the off-price industry and believe our share gains over the past few years were driven mainly by continued focus on value by consumers . our sales and earnings gains in 2017 continued to benefit from efficient execution of our off-price model throughout all areas of our business . our merchandise and operational strategies are designed to take advantage of the expanding market share of the off-price industry as well as the ongoing customer demand for name brand fashions for the family and home at compelling discounts every day . we refer to our fiscal years ended february 3 , 2018 , january 28 , 2017 , and january 30 , 2016 as fiscal 2017 , fiscal 2016 , and fiscal 2015 , respectively . fiscal 2017 was a 53-week year . fiscal 2016 and 2015 were each 52-week years . results of operations the following table summarizes the financial results for fiscal 2017 , 2016 , and 2015 : replace_table_token_4_th 22 stores . total stores open at the end of fiscal 2017 , 2016 , and 2015 were 1,622 , 1,533 , and 1,446 , respectively . the number of stores at the end of fiscal 2017 , 2016 , and 2015 increased by 6 % , 6 % , and 6 % from the respective prior years . our expansion strategy is to open additional stores based on market penetration , local demographic characteristics , competition , expected store profitability , and the ability to leverage overhead expenses . we continually evaluate opportunistic real estate acquisitions and opportunities for potential new store locations . we also evaluate our current store locations and determine store closures based on similar criteria . replace_table_token_5_th sales . sales for fiscal 2017 increased $ 1.3 billion , or 9.9 % , compared to the prior year due to the opening of 89 net new stores during 2017 , a 4 % increase in comparable store sales ( defined as stores that have been open for more than 14 complete months ) , and the impact of the 53rd week . sales for fiscal 2016 increased $ 0.9 billion , or 7.8 % , compared to the prior year due to the opening of 87 net new stores during 2016 and a 4 % increase in sales from comparable stores . our sales mix is shown below for fiscal 2017 , 2016 , and 2015 : replace_table_token_6_th we intend to address the competitive climate for off-price apparel and home goods by pursuing and refining our existing strategies and by continuing to strengthen our organization , diversify our merchandise mix , and more fully develop our systems to improve regional and local merchandise offerings . although our strategies and store expansion program contributed to sales gains in fiscal 2017 , 2016 , and 2015 , we can not be sure that they will result in a continuation of sales growth or in an increase in net earnings . cost of goods sold . cost of goods sold in fiscal 2017 increased $ 868.9 million compared to the prior year mainly due to increased sales from the opening of 89 net new stores during the year , a 4 % increase in sales from comparable stores , and the impact of the 53rd week . cost of goods sold as a percentage of sales for fiscal 2017 decreased approximately 25 basis points from the prior year primarily due to a 25 basis point increase in merchandise gross margin , a 25 basis point decrease in occupancy costs , and a five basis point decrease in distribution expenses . these improvements were partially offset by a 25 basis point increase in freight costs and higher buying costs of five basis points . cost of goods sold in fiscal 2016 increased $ 596.8 million compared to the prior year mainly due to increased sales from the opening of 87 net new stores during the year and a 4 % increase in sales from comparable stores . cost of goods sold as a percentage of sales for fiscal 2016 decreased approximately 55 basis points from the prior year primarily due to a 35 basis point increase in merchandise gross margin , a 10 basis point decrease in buying expenses , and lower distribution and occupancy costs by five basis points each . 23 we can not be sure that the gross profit margins realized in fiscal 2017 , 2016 , and 2015 will continue in future years . selling , general and administrative expenses . for fiscal 2017 , selling , general and administrative expenses ( “ sg & a ” ) increased $ 153.3 million compared to the prior year , mainly due to increased store operating costs reflecting the opening of 89 net new stores during the year , and the impact of the 53rd week . sg & a as a percentage of sales for fiscal 2017 decreased by approximately 25 basis points compared to the prior year primarily due to leverage resulting from the 4 % increase in comparable store sales . story_separator_special_tag we account for our uncertain tax positions in accordance with accounting standards codification ( “ asc ” ) 740. we are required to make assumptions and judgments regarding our income tax exposures . our policy is to recognize interest and or penalties related to all tax positions in income tax expense . to the extent that accrued interest and penalties do not ultimately become payable , amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made . recently issued accounting standards . in may 2014 , the financial accounting standards board ( “ fasb ” ) issued accounting standards update ( asu ) 2014-09 , revenue from contracts with customers ( asc 606 ) . the guidance provides a five-step analysis of transactions to determine when and how revenue is recognized . the core principle of the guidance is that a company should recognize revenue when the customer obtains control of promised goods or services in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services . asc 606 is effective for our annual and interim reporting periods beginning in fiscal 2018. adoption will result in a change in the timing of recognizing revenue from breakage for stored value cards . breakage will be estimated and recognized based upon the historical pattern of redemption , rather than when redemption is considered remote . additionally , we will recognize allowances for estimated sales returns on a gross rather than net basis in our consolidated financial statements . the impact of recognizing sales returns on a gross basis is not expected to be material . we plan to adopt asc 606 under the modified retrospective method and will recognize a cumulative-effect adjustment to increase retained earnings by approximately $ 20 million , net of income taxes , as of february 4 , 2018 . 29 in february 2016 , the fasb issued asu 2016-02 , leases ( topic 842 ) . the asu requires balance sheet recognition for all leases with lease terms greater than one year including a lease liability , which is a lessee ‘ s obligation to make lease payments arising from a lease , measured on a discounted basis ; and a right-of-use asset , which is an asset that represents the lessee 's right to use , or control the use of , a specified asset for the lease term . asu 2016-02 is effective for our annual and interim reporting periods beginning in fiscal 2019. we are currently working on our adoption plan and evaluating the effect adoption of this new guidance will have on our consolidated financial statements . due to the substantial number of leases that we have , we believe this asu will increase assets and liabilities by the same material amount on our consolidated balance sheet . our current undiscounted minimum commitments under noncancelable operating leases is approximately $ 3.7 billion . we do not believe adoption of this asu will have a significant impact to our consolidated statements of earnings , stockholders ' equity , and cash flows . in november 2016 , the fasb issued asu 2016-18 , statement of cash flows ( topic 230 ) : restricted cash . asu 2016-18 requires restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts on the statement of cash flows . the standard also requires companies who report cash and restricted cash separately on the balance sheet to reconcile those amounts to the statement of cash flows . asu 2016-18 is effective for our annual and interim reporting periods beginning in fiscal 2018. we do not believe adoption of this asu will have a significant impact to our consolidated financial statements . recently adopted accounting standards . in march 2016 , the fasb issued asu 2016-09 , compensation - stock compensation ( topic 718 ) - improvements to employee share-based payment accounting . asu 2016-09 provides for changes to accounting for stock compensation including 1 ) excess tax benefits and tax deficiencies related to share based payment awards will be recognized as income tax benefit or expense in the reporting period in which they occur ( previously such amounts were recognized in additional paid-in capital ) ; 2 ) excess tax benefits will be classified as an operating activity in the statement of cash flows ; and 3 ) the option to elect to estimate forfeitures or account for them when they occur . the impact of recording excess tax benefits in income taxes in our consolidated statement of earnings may be material , depending upon our future stock price on vest date in relation to the fair value of awards on grant date and our future grants of stock-based compensation . we adopted asu 2016-09 in the first quarter of fiscal 2017 and elected to apply this adoption prospectively , except for forfeitures which we adopted on a modified retrospective basis . accordingly , prior periods have not been adjusted . as a result of adoption , for the fiscal year ended february 3 , 2018 , we recognized $ 16.3 million of excess tax benefits related to stock-based payments as a reduction to our provision for income taxes . these items were historically recorded in additional paid-in capital . we also presented cash flows related to excess tax benefits as an operating activity in the consolidated statement of cash flows and elected to account for forfeitures as incurred beginning on january 29 , 2017. the impact of this accounting policy election for forfeitures was a cumulative-effect adjustment to decrease retained earnings by $ 1.1 million , net of tax , as of january 29 , 2017. forward-looking statements our annual report on form 10-k for fiscal 2017 , and information we provide in our annual report to stockholders , press releases , and other investor
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net cash used in financing activities was $ 1,149.5 million , $ 916.1 million , and $ 898.7 million in fiscal 2017 , 2016 , and 2015 , respectively . during fiscal 2017 , 2016 , and 2015 , our liquidity and capital requirements were provided by available cash and cash flows from operations . we repurchased 13.5 million , 11.6 million , and 13.7 million shares of common stock for aggregate purchase prices of approximately $ 875 million , $ 700 million , and $ 700 million in fiscal 2017 , 2016 , and 2015 , respectively . we also acquired 0.7 million , 0.7 million , and 1.3 million shares in fiscal 2017 , 2016 , and 2015 , respectively , of treasury stock from our employee stock equity compensation programs , for aggregate purchase prices of approximately $ 45.4 million , $ 43.3 million , and $ 68.9 million during fiscal 2017 , 2016 , and 2015 , respectively . in february 2017 , our board of directors approved a two-year $ 1.75 billion stock repurchase program through fiscal 2018. in march 2018 , our board of directors approved an increase in the stock repurchase authorization for fiscal 2018 by $ 200 million to $ 1.075 billion , up from the previously available $ 875 million . on march 6 , 2018 , our board of directors declared a quarterly cash dividend of $ 0.2250 per common share , payable on march 30 , 2018 . our board of directors declared cash dividends of $ 0.1600 per common share in february , may , august , and november 2017 , cash dividends of $ 0.1350 per common share in march , may , august , and november 2016 , and cash dividends of $ 0.1175 per common share in february , may , august , and november 2015 . during fiscal 2017 , 2016 , and 2015 , we paid dividends of $ 247.5 million , $ 214.6 million , and $ 192.3 million , respectively . 26 short-term trade credit represents a significant source of financing for merchandise inventory .
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Liquidity
| 6,654
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percentage rents were $ 35,000 in 2011 and 2010. operating cost reimbursements decreased $ 34,000 , or 1 % , to $ 2,570,000 in 2011 , compared to $ 2,604,000 in 2010. operating cost reimbursements decreased due to the net decrease in recoverable property operating expenses as explained below . we earned development fee income of $ 895,000 in 2011 related to a project we have completed in berkeley , california . we recognized $ 590,000 of development fee income in 2010 related to a project that we completed in oakland , california . we do not have any additional anticipated development fee projects . other income increased $ 52,000 to $ 150,000 in 2011 , compared to $ 98,000 in 2010 due primarily to non-recurring fee income . real estate taxes increased $ 745,000 , or 39 % , to $ 2,658,000 in 2011 compared to $ 1,913,000 in 2010. an increase of $ 178,000 was the result of the acquisition of additional properties and an increase of $ 567,000 related to real estate taxes on former borders properties that were formerly paid directly by borders . property operating expenses ( shopping center maintenance , snow removal , insurance and utilities ) increased $ 73,000 , or 5 % , to $ 1,531,000 in 2011 compared to $ 1,458,000 in 2010. the increase was the result of an increase in utility costs of $ 100,000 including utilities for vacant space , an increase in insurance costs of $ 26,000 , offset by decreases in shopping center maintenance expenses of ( $ 35,000 ) and snow removal costs of ( $ 18,000 ) in 2011 versus 2010. land lease payments increased $ 245,000 , or 51 % , to $ 721,000 in 2011 compared to $ 477,000 for 2010. the increase is the result of underlying land leases for our properties in ann arbor , michigan and tallahassee , florida . general and administrative expenses increased $ 659,000 , or 13 % , to $ 5,662,000 in 2011 compared to $ 5,003,000 in 2010. the increase in general and administrative expenses was primarily the result of increased employee costs of $ 370,000 , increased income tax expenses in our trs entities of $ 141,000 , increased professional fees of $ 106,000 and an increase in other costs of $ 42,000. general and administrative expenses as a percentage of total rental income ( minimum and percentage rents ) increased to 16.4 % for 2011 from 14.0 % in 2010 without the impact of the deferred revenue recognition . 29 depreciation and amortization increased $ 1,221,000 , or 23 % , to $ 6,501,000 in 2011 compared to $ 5,280,000 in 2010. the increase was the result the acquisition of 10 properties in 2011 , the development of four properties in 2010 and the acquisition of nine properties in 2010. we incurred an impairment charge of $ 3,650,000 in 2011 for our continuing operations as a result of writing down the carrying value of our real estate assets to fair value for properties formerly leased to borders which were closed as part of the borders bankruptcy liquidation . we incurred an impairment charge of $ 7,700,000 in 2010 for our continuing operations as a result of writing down the carrying value of our real estate assets to fair value for four properties that borders had indicated they would close as part of their initial bankruptcy restructuring plan . interest expense increased $ 623,000 , or 15 % , to $ 4,727,000 in 2011 , from $ 4,104,000 in 2010. the increase in interest expense is a result of higher levels of borrowings for the acquisition of additional properties during 2011 , the impact of the new credit facility and the impact of default interest on various mortgage loans . we recognized a gain on extinguishment of debt of $ 2,360,000 related to the mortgage debt on the former borders property located in lawrence , kansas , that was released in 2011. we recognized a gain of $ 110,000 on the disposition of properties in 2011. we sold three properties , conveyed the former borders corporate headquarters to the lender , and terminated the ground lease on a property during 2011 and conveyed a portion of the property to the ground lessor . the properties were located in tulsa , oklahoma ( 2 ) , norman , oklahoma and ann arbor , michigan ( 2 ) . we recognized a gain on sale of assets of $ 4,738,000 that pertains to the sale of three properties during 2010. the properties we disposed were located in santa barbara , california , marion oaks , florida and aventura , florida . loss from discontinued operations was $ 3,451,000 in 2011 compared to income from discontinued operations of $ 3,143,000 in 2010. the loss from discontinued operations in 2011 was a result of impairment charges of $ 9,850,000 , offset by $ 5,697,000 due to the recognition of deferred revenue . there were impairment charges of $ 440,000 in 2010. we sold two properties in january 2011 , sold one property in december 2011 , conveyed the former borders corporate headquarters to the lender in december 2011 , and terminated the ground lease on a property in december 2011 and conveyed a portion of the property to the ground lessor . in 2010 , we sold one property in march 2010 , one property in october 2010 , and one property in october 2010. our net income decreased $ 5,738,000 , or 37 % , to $ 9,889,000 in 2011 , from $ 15,627,000 in 2010 as a result of the foregoing factors . story_separator_special_tag as of december 31 , 2011 , the net book value of the four mortgaged properties was approximately $ 9.1 million , and annualized base rent for the four mortgaged properties , one of which was currently occupied , was approximately $ .5 million , or 1.4 % of our annualized base rent as of december 31 , 2011. as previously disclosed , the lender declared all four crossed loans in default and accelerated our obligations thereunder . as a result of the borders liquidation program , we did not have sufficient cash flow from the properties to continue to pay the debt service on the crossed loans and elected not to pay the debt service . on march 6 , 2012 , we conveyed the four mortgaged properties , which were subject to the crossed loans , to the lender pursuant to a consensual deed-in-lieu-of-foreclosure process that satisfied the loans . 32 we paid off a note payable in the amount of $ 704,374 on march 31 , 2011. in august 2011 , we entered into a release agreement for the mortgage loan which was formerly secured by the mortgage on the leasehold interest in the former borders store in lawrence , kansas amounting to approximately $ 2.3 million . while the lender had a leasehold mortgage on the property , we owned the fee interest in the property . the underlying ground lease was in default subsequent to borders rejecting the lease and the lender did not cure the underlying default under the ground lease . the release agreement provided for the extinguishment of all liabilities due to the lender under the loan . the gain on extinguishment of $ 2.4 million has been reflected during 2011. in december 2011 , we conveyed the former borders corporate headquarters property in ann arbor , michigan , which was subject to a non-recourse mortgage loan in default , to the lender pursuant to a consensual deed-in-lieu-of-foreclosure process that satisfied the loan of approximately $ 5.5 million . capitalization as of december 31 , 2011 , our total market capitalization was approximately $ 368 million . market capitalization consisted of $ 119.3 million of debt ( including property related mortgages and the credit facility ) , and $ 248.7 million of shares of common stock ( based on the closing price on the nyse of $ 24.38 per share on december 31 , 2011 ) and op units at market value . our ratio of debt to total market capitalization was 32.4 % at december 31 , 2011. at december 31 , 2011 , the noncontrolling interest in the operating partnership represented a 3.41 % ownership in the operating partnership . the op units may , under certain circumstances , be exchanged for our shares of common stock on a one-for-one basis . we , as sole general partner of the operating partnership , have the option to settle exchanged op units held by others for cash based on the current trading price of our shares . assuming the exchange of all op units , there would have been 10,199,533 shares of common stock outstanding at december 31 , 2011 , with a market value of approximately $ 248.7 million . we completed a secondary offering of 1,495,000 shares of common stock in january/february of 2012. the offering , which included the full exercise of the overallotment option by the underwriters , raised net proceeds of approximately $ 35.1 million after deducting the underwriting discount and other expenses . the proceeds from the offering were used to pay down amounts outstanding under the credit facility and for general corporate purposes . 33 contractual obligations the following table outlines our contractual obligations ( in thousands ) , assuming no mortgage defaults , as of december 31 , 2011 : replace_table_token_12_th estimated interest payments are based on stated rates for mortgages payable , and for notes payable the interest rate in effect for the most recent quarter is assumed to be in effect through the respective maturity date . we plan to begin construction of additional pre-leased developments and may acquire additional properties , which will initially be financed by the credit facility . we will periodically refinance short-term construction and acquisition financing with long-term debt , medium term debt and or equity . off-balance sheet arrangements we do not engage in any off-balance sheet arrangements with unconsolidated entities or financial partnerships , such as structured finance or special purpose entities , that have or are reasonably likely to have a material effect on our financial condition , changes in financial condition , revenues or expenses , results of operations , liquidity , capital expenditure or capital resources . inflation our leases generally contain provisions designed to mitigate the adverse impact of inflation on net income . these provisions include clauses enabling us to pass through to our tenants certain operating costs , including real estate taxes , common area maintenance , utilities and insurance , thereby reducing our exposure to cost increases and operating expenses resulting from inflation . certain of our leases contain clauses enabling us to receive percentage rents based on tenants ' gross sales , which generally increase as prices rise , and , in certain cases , escalation clauses , which generally increase rental rates during the term of the leases . in addition , expiring tenant leases permit us to seek increased rents upon re-lease at market rates if rents are below the then existing market rates . funds from operations funds from operations ( “ ffo ” ) is defined by the national association of real estate investment trusts , inc. ( “ nareit ” ) to mean net income computed in accordance with u.s. generally accepted accounting principles ( “ gaap ” ) , excluding gains ( or losses ) from sales of property , plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures . in addition ,
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we intend to maintain a ratio of total indebtedness ( including construction or acquisition financing ) to total market capitalization of 65 % or less . nevertheless , we may operate with debt levels which are in excess of 65 % of total market capitalization for extended periods of time . at december 31 , 2011 , our ratio of indebtedness to total market capitalization was approximately 34.2 % . this ratio increased from 27.4 % as of december 31 , 2010 as a result of a decrease in the market value of our common stock and the increase in debt due to our 2011 property acquisitions . dividends during the quarter ended december 31 , 2011 , we declared a quarterly dividend of $ .40 per share . the cash dividend was paid on january 3 , 2012 to holders of record on december 19 , 2011. during the quarter ending march 31 , 2012 , we declared a quarterly dividend of $ .40 per share . the cash dividend will be paid on april 10 , 2012 to holders of record on march 30 , 2012. debt in october 2011 , we , through the operating partnership , closed on the $ 85 million unsecured revolving credit facility , which is guaranteed by our company . subject to customary conditions , at our option , total commitments under the credit facility may be increased up to an aggregate of $ 135 million . we intend to use borrowings under the credit facility for general corporate purposes , including working capital , capital expenditures , repayment of indebtedness or other corporate activities . the credit facility matures on october 26 , 2014 , and may be extended for two one-year terms to october 2016 , subject to certain conditions . borrowings under the credit facility bear interest at libor plus a spread of 175 to 260 basis points depending on our leverage ratio . as of december 31 , 2011 , we had approximately $ 56,444,000 in principal amount outstanding under the credit facility bearing a weighted average interest rate of 2.18 % . the credit facility replaced our $ 55 million and $ 5 million credit facilities .
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Liquidity
| 2,409
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a company 's internal control over financial reporting includes those policies and procedures that ( 1 ) pertain to the maintenance of records that , in reasonable detail , accurately and fairly reflect the transactions and dispositions of the assets of the company ; ( 2 ) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles , and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company ; and ( 3 ) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition , use or disposition of the company 's assets that could have a material effect on the financial statements . because of its inherent limitations , internal control over financial reporting may not prevent or detect misstatements . also , projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions , or that the degree of compliance with the policies or procedures may deteriorate . rsm us llp houston , texas november 16 , 2018 f-3 report of independent registered public accounting firm to the board of directors and stockholders geospace technologies corporation our audit of the consolidated financial statements and internal control over financial reporting referred to in our separate reports dated november 16 , 2018 , ( included elsewhere in this annual report on form 10-k ) also included the financial statement schedule of geospace technologies corporation and its subsidiaries , listed in item 15 ( a ) of this form 10-k. this schedule is the responsibility of geospace technologies corporation 's management . our responsibility is to express an opinion based on our audit of the consolidated financial statements . in our opinion , the financial statement schedule , when considered in relation to the basic consolidated financial statements taken as a whole , presents fairly , in all material respects , the information set forth therein . rsm us llp houston , texas november 16 , 2018 f-4 report of independent registered public accounting firm to the board of directors and stockholders of geospace technologies corporation houston , texas we have audited the accompanying consolidated balance sheet of geospace technologies corporation ( the “ company ” ) as of september 30 , 2017 , and the related consolidated statements of operations , comprehensive loss , stockholders ' equity , and cash flows for each of the two fiscal years in the period ended september 30 , 2017. in connection with our audits of the consolidated financial statements , we have also audited the financial statement schedule as of and for each of the two fiscal years in the period ended september 30 , 2017 listed in the accompanying index . these consolidated financial statements and schedule are the responsibility of the company 's management . our responsibility is to express an opinion on the company 's consolidated financial statements and schedule based on our audits . we conducted our audits in accordance with the standards of the public company accounting oversight board ( united states ) . those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement . an audit includes examining , on a test basis , evidence supporting the amounts and disclosures in the financial statements , assessing the accounting policies used and significant estimates made by management , as well as evaluating the overall presentation of the financial statements and schedule . we believe that our audits provide a reasonable basis for our opinion . in our opinion , the consolidated financial statements referred to above present fairly , in all material respects , the financial position of geospace technologies corporation as of september 30 , 2017 , and the result of its operations and its cash flows for each of the two fiscal years in the period ended september 30 , 2017 , in conformity with accounting principles generally accepted in the united states of america . also , in our opinion , the related financial statement schedule as of and for each of the two fiscal years in the period ended september 30 , 2017 , when considered in relation to the basic consolidated financial statements taken as a whole , presents fairly , in all material respects , the information set forth therein . bdo usa , llp houston , texas december 1 , 2017 f-5 geospace technologies corporation and subsidiaries consolidated balance sheets ( in thousands , except share amounts ) replace_table_token_7_th the accompanying notes are an integral part of the consolidated financial statements . f-6 geospace technologies corporation and subsidiaries consolidated statements of operations ( in thousands , except share and per share amounts ) replace_table_token_8_th the accompanying notes are an integral part of the consolidated financial statements . f-7 geospace technologies corporation and subsidiaries consolidated statements of comprehensive loss ( in thousands ) replace_table_token_9_th the accompanying notes are an integral part of the consolidated financial statements . f-8 geospace technologies corporation and subsidiaries consolidated statement of stockholders ' equity for the years ended september 30 , 2018 , 2017 and 2016 ( in thousands , except share amounts ) replace_table_token_10_th the accompanying notes are an integral part of the consolidated financial statements . f-9 geospace technologies corporation and subsidiaries consolidated statements of cash flows ( in thousands ) replace_table_token_11_th the accompanying notes are an integral part of the consolidated financial statements . f-10 geospace technologies corporation and subsidiaries notes to consolidated financial statements 1. summary of significant accounting policies : the company geospace technologies corporation ( “ geospace ” ) designs and manufactures instruments and equipment used by the oil and gas industry to acquire seismic data in order to locate , characterize and monitor hydrocarbon producing reservoirs . story_separator_special_tag these uses of cash included ( i ) our net loss of $ 46.0 million , ( ii ) a $ 3.4 million increase in trade accounts and notes receivable primarily due to amounts owed under the obx contract , ( iii ) a $ 1.9 million decrease in accounts payable primarily due to declining inventory purchases resulting from reduced product demand and ( iv ) a $ 2.1 million decrease in accrued and other expenses primarily due to settlements and reductions in expected warranty claims . these uses of cash were partially offset by ( i ) non-cash charges of $ 43.2 million from deferred income taxes , depreciation , accretion , stock-based compensation , inventory obsolescence , asset impairments and bad debts , ( ii ) a $ 4.1 million decrease in income tax receivable primarily resulting from an $ 18.3 million income tax refund received in fiscal year 2016 , ( iii ) a $ 5.2 million decrease in inventories caused by a drawdown of our excess levels of finished goods , and ( iv ) a $ 1.5 million decrease in prepaid income taxes . for the fiscal year ended september 30 , 2016 , we used cash of $ 10.2 million from investing activities . these uses of cash included ( i ) net disbursements of $ 9.4 million from the purchase and sale of short-term investments , ( ii ) $ 1.9 million for additions to our property , plant and equipment and ( iii ) $ 0.5 million to expand our rental equipment fleet , primarily for additional obx nodes . in addition , we made non-cash inventory transfers to our rental fleet of approximately $ 4.0 million . these uses of cash were partially offset by $ 1.6 million in proceeds from the sale of used rental equipment . for the fiscal year ended september 30 , 2016 , we had no cash flows from financing activities . we had no long-term debt outstanding at september 30 , 2016. off-balance sheet arrangements we do not have any obligations which meet the definition of an off-balance sheet arrangement and which have or are reasonably likely to have a current or future effect on our financial statements or the items contained therein that are material to investors . contractual obligations the company established an estimated initial contingent earn-out liability of $ 7.7 million in connection with the acquisition of quantum . contingent payments , if any , which may be paid in the form of cash or company stock , will be derived from certain eligible revenue that may be generated during the four-year earn-out period subsequent to the closing of the acquisition . the purchase agreement allows for the payment of a maximum contingent liability of up to $ 23.5 million over the four-year earn-out period . critical accounting policies the preparation of financial statements in conformity with accounting principles generally accepted in the united states requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes . we consider many factors in selecting appropriate operational and financial accounting policies and controls , and in developing the estimates and assumptions that are used in the preparation of these financial statements . we continually evaluate our estimates , including those related to revenue recognition , bad debt reserves , inventory obsolescence reserves , self-insurance reserves for medical 25 expenses , product warranty reserves , contingent earn-out liabilities , stock-based com pensation and deferred income tax assets . we base our estimates on historical experience and various other factors , including the impact from the current economic conditions that we believe to be reasonable under the circumstances . actual results may dif fer from these estimates under different conditions or assumptions . our normal credit terms for trade receivables are 30 days . in certain situations , credit terms for trade receivables may be extended to 60 days or longer and such receivables generally do not require collateral . additionally , we provide long-term financing in the form of promissory notes and sales-type leases when competitive conditions require such financing and , in such cases , we may require collateral . we perform ongoing credit evaluations of our accounts and financing receivables , and allowances are recognized for potential credit losses . our long-lived assets are reviewed for impairment whenever an event or change in circumstances indicates the carrying amount of an asset or group of assets may not be recoverable . the impairment review , if necessary , includes a comparison of expected future cash flows ( undiscounted and without interest charges ) to be generated by an asset group with the associated carrying value of the related assets . if the carrying value of the asset group exceeds the expected future cash flows , an impairment loss is recognized to the extent that the carrying value of the asset group exceeds its fair value . management makes judgments regarding the interpretation of tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability . in addition , we operate within multiple taxing jurisdictions and are subject to audit in these jurisdictions as well as by the internal revenue service . in management 's opinion , adequate provisions for income taxes have been made for all open tax years . the potential outcomes of examinations are regularly assessed in determining the adequacy of the provision for income taxes and income tax liabilities . management believes that adequate provisions have been made for reasonable and foreseeable outcomes related to uncertain tax matters . we record a write-down of our inventories when the cost basis of any manufactured product , including any estimated future costs to complete the manufacturing process , exceeds its net realizable value . inventories are stated at the lower of cost or net realizable value . cost is determined on a first-in , first-out method , except
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while we are seeing some signs of increased seismic activity around the world , the need for new seismic equipment remains restrained due to capital limitations affecting many of our customers along with excessive quantities of under-utilized equipment . we expect product sales of our oil and gas products , and in particular our land-based traditional and wireless products , to remain low until exploration-focused seismic activities increase , which we believe will result from the ongoing depletion of existing reservoirs prompting the need to find new sources of oil and gas . we expect these challenging industry conditions facing our land-based traditional and wireless products will continue into fiscal year 2019. our available cash , cash equivalents and short-term investments totaled $ 37.4 million at september 30 , 2018 , including $ 7.3 million of cash and cash equivalents held by our foreign subsidiaries and branch offices . the tax cuts and jobs act signed into law on december 22 , 2017 , creates new taxes on certain foreign earnings and also requires companies to pay a one-time transition tax on undistributed earnings of their foreign subsidiaries which were previously tax deferred . we have determined that we are not required to pay any transition tax on the undistributed earnings of our foreign subsidiaries since there were no accumulated earnings on a consolidated basis . our credit agreement allows for borrowings of up to $ 30.0 million with such amounts available for borrowing determined by a borrowing base . in october 2017 , we extended the maturity of the credit agreement from may 2018 to april 2019. at september 30 , 2018 , we had no outstanding borrowings under the credit agreement and , after consideration of $ 0.3 million of outstanding letters of credit , our borrowing availability under the credit facility was $ 21.5 million . at september 30 , 2018 , we were in compliance with all covenants under the credit agreement . we currently do not anticipate the need to borrow under the credit agreement ; however , we can make no assurance that we will not do so . on november 8 , 2018 , we further extended the maturity of the credit agreement from april 2019 to april 2020. in fiscal years 2016 , 2017 and 2018 , we received income tax refunds of $ 18.3 million , $ 12.8 million and $ 0.7 million , respectively , from the u.s. department of treasury . these refunds were a result of the significant tax losses we experienced in fiscal years 2016 and 2015 , which we elected to carryback and recoup taxes previously paid . for
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Liquidity
| 14,478
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in january , 2014 , each of the dividends for the u.s. insurance companies was approved by their respective departments of insurance in pennsylvania , indiana , wisconsin , and virginia . on january 23 , 2014 , the u.s. insurance companies paid an aggregate of $ 200 million to global indemnity group , inc. overview the company 's insurance operations distribute property and casualty insurance products through a group of approximately 110 professional general agencies that have limited quoting and binding authority , as well as a 49 number of wholesale insurance brokers who in turn sell the company 's insurance products to insureds through retail insurance brokers . the company operates predominantly in the excess and surplus lines marketplace . to manage its operations , the company differentiates them by product classification . these product classifications are : 1 ) penn-america , which includes property and general liability products for small commercial businesses distributed through a select network of wholesale general agents with specific binding authority ; 2 ) united national , which includes property , general liability , and professional lines products distributed through program administrators with specific binding authority ; and 3 ) diamond state , which includes property , casualty , and professional lines products distributed through wholesale brokers and program administrators with specific binding authority . currently , the company 's reinsurance operations segment , which consists solely of the operations of wind river reinsurance , provides reinsurance solutions through brokers and on a direct basis . in prior years , the company provided reinsurance solutions through program managers and primary writers , including regional insurance companies . wind river reinsurance is a bermuda based treaty reinsurer for specialty property and casualty insurance and reinsurance companies . wind river reinsurance conducts business in bermuda and is focused on using its capital capacity to write catastrophe-oriented placements and other niche or specialty-focused treaties meeting the company 's risk tolerance and return thresholds . given the current pricing environment , wind river reinsurance continues to cautiously deploy and manage its capital while seeking to position itself as a niche reinsurance solution provider . the company derives its revenues primarily from premiums paid on insurance policies that it writes and from income generated by its investment portfolio , net of fees paid for investment management services . the amount of insurance premiums that the company receives is a function of the amount and type of policies it writes , as well as of prevailing market prices . the company 's expenses include losses and loss adjustment expenses , acquisition costs and other underwriting expenses , corporate and other operating expenses , interest , investment expenses , and income taxes . losses and loss adjustment expenses are estimated by management and reflect the company 's best estimate of ultimate losses and costs arising during the reporting period and revisions of prior period estimates . the company records losses and loss adjustment expenses based on an actuarial analysis of the estimated losses the company expects to incur on the insurance policies it writes . the ultimate losses and loss adjustment expenses will depend on the actual costs to resolve claims . acquisition costs consist principally of commissions and premium taxes that are typically a percentage of the premiums on the insurance policies the company writes , net of ceding commissions earned from reinsurers . other underwriting expenses consist primarily of personnel expenses and general operating expenses . corporate and other operating expenses are comprised primarily of outside legal fees , other professional and accounting fees , directors ' fees , management fees , and salaries and benefits for company personnel whose services relate to the support of corporate activities . interest expense is primarily comprised of amounts due on outstanding debt . critical accounting estimates and policies the company 's consolidated financial statements are prepared in conformity with gaap , which require it to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods . see note 5 of the notes to consolidated financial statements contained in item 8 of part ii of this report . actual results could differ from those estimates and assumptions . the company believes that of the company 's significant accounting policies , the following may involve a higher degree of judgment and estimation . liability for unpaid losses and loss adjustment expenses although variability is inherent in estimates , the company believes that the liability for unpaid losses and loss adjustment expenses reflects its best estimate for future amounts needed to pay losses and related loss adjustment expenses and the impact of its reinsurance coverage with respect to insured events . 50 in developing loss and loss adjustment expense ( loss or losses ) reserve estimates for the company 's insurance operations , its actuaries perform detailed reserve analyses each quarter . to perform the analysis , the data is organized at a reserve category level . a reserve category can be a line of business such as commercial automobile liability , or it can be a particular type of claim such as construction defect . the reserves within a reserve category level are characterized as short-tail and long-tail . for long-tail business , it will generally be several years between the time the business is written and the time when all claims are settled . the company 's long-tail exposures include general liability , professional liability , products liability , commercial automobile liability , and excess and umbrella . short-tail exposures include property , commercial automobile physical damage , and equine mortality . to manage its insurance operations , the company differentiates by product classifications , which are penn-america , united national , and diamond state . story_separator_special_tag some of these assumptions are explicit assumptions that are required of a particular method , but most of the assumptions are implicit and can not be precisely quantified . an example of an explicit assumption is the pattern employed in the paid development method . however , the assumed pattern is itself based on several implicit assumptions such as the impact of inflation on medical costs and the rate at which claim professionals close claims . loss frequency is a measure of the number of claims per unit of insured exposure , and loss severity is a measure of the average size of claims . each reserve segment has an implicit frequency and severity for each accident year as a result of the various assumptions made . previous reserve analyses have resulted in the company 's identification of information and trends that have caused it to increase or decrease frequency and severity assumptions in prior periods and could lead to the identification of a need for additional material changes in loss and loss adjustment expense reserves , which could materially affect results of operations , equity , business and insurer financial strength and debt ratings . factors affecting loss frequency include , among other things , the effectiveness of loss controls and safety programs and changes in economic activity or weather patterns . factors affecting loss severity include , among other things , changes in policy limits and deductibles , rate of inflation and judicial interpretations . another factor affecting estimates of loss frequency and severity is the loss reporting lag , which is the period of time between the occurrence of a loss and the date the loss is reported to the company . the length of the loss reporting lag affects the company 's ability to accurately predict loss frequency ( loss frequencies are more predictable for short-tail lines ) as well as the amount of reserves needed for ibnr . if the actual levels of loss frequency and severity are higher or lower than expected , the ultimate losses will be different than management 's best estimate . for most of its reserving classes , the company believes that frequency can be predicted with greater accuracy than severity . therefore , the company believes management 's best estimate is more sensitive to changes in severity than frequency . the following table , which the company believes reflects a reasonable range of variability around its best estimate based on historical loss experience and management 's judgment , reflects the impact of changes ( which could be favorable or unfavorable ) in frequency and severity on the company 's current accident year net loss estimate of $ 140.9 million for claims occurring during the year ended december 31 , 2013 : replace_table_token_14_th 55 the company 's net reserves for losses and loss expenses of $ 587.0 million as of december 31 , 2013 relate to multiple accident years . therefore , the impact of changes in frequency and severity for more than one accident year could be higher or lower than the amounts reflected above . recoverability of reinsurance receivables the company regularly reviews the collectability of its reinsurance receivables , and includes adjustments resulting from this review in earnings in the period in which the adjustment arises . a.m. best ratings , financial history , available collateral , and payment history with the reinsurers are several of the factors that the company considers when judging collectability . changes in loss reserves can also affect the valuation of reinsurance receivables if the change is related to loss reserves that are ceded to reinsurers . certain amounts may be uncollectible if the company 's reinsurers dispute a loss or if the reinsurer is unable to pay . if its reinsurers do not pay , the company is still legally obligated to pay the loss . see note 10 of the notes to consolidated financial statements in item 8 of part ii of this report for further information surrounding the company 's reinsurance receivable balances and collectability as of december 31 , 2013 and 2012. for a listing of the ten reinsurers for which the company has the largest reinsurance asset amounts as of december 31 , 2013 , see reinsurance of underwriting risk in item 1 of part i of this report . investments the carrying amount of the company 's investments approximates their fair value . the company regularly performs various analytical valuation procedures with respect to investments , including reviewing each fixed maturity security in an unrealized loss position to determine the amount of unrealized loss related to credit loss and the amount related to all other factors , such as changes in interest rates . the credit loss represents the portion of the amortized book value in excess of the net present value of the projected future cash flows discounted at the effective interest rate implicit in the debt security prior to impairment . the credit loss component of the other than temporary impairment is recorded through earnings , whereas the amount relating to factors other than credit losses are recorded in other comprehensive income , net of taxes . during its review , the company considers credit rating , market price , and issuer specific financial information , among other factors , to assess the likelihood of collection of all principal and interest as contractually due . securities for which the company determines that a credit loss is likely are subjected to further analysis to estimate the credit loss to be recognized in earnings , if any . see note 5 of the notes to consolidated financial statements in item 8 of part ii of this report for the specific methodologies and significant assumptions used by asset class . upon identification of such securities and periodically thereafter , a detailed review is performed to determine whether the decline is considered other than temporary . this review includes an analysis of several factors , including but not
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cash flows sources of operating funds consist primarily of net premiums written and investment income . funds are used primarily to pay claims and operating expenses and to purchase investments . the company 's reconciliation of net income to cash provided from operations is generally influenced by the following : the fact that the company collect premiums , net of commission , in advance of losses paid ; the timing of the company 's settlements with its reinsurers ; and the timing of the company 's loss payments . net cash used for operating activities in 2013 , 2012 , and 2011 was $ 4.9 million , $ 35.0 million and $ 7.7 million , respectively . 79 in 2013 , the increase in operating cash flows of approximately $ 30.1 million from the prior year was primarily a net result of the following items : replace_table_token_25_th in 2012 , the decrease in operating cash flows of approximately $ 27.3 million from the prior year was primarily a net result of the following items replace_table_token_26_th see the consolidated statement of cash flows in the financial statements in item 8 of part ii of this report for details concerning the company 's investing and financing activities . liquidity currently , global indemnity believes each company in its insurance operations and reinsurance operations maintains sufficient liquidity to pay claims through cash generated by operations and investments in liquid investments . the holding companies also maintain sufficient liquidity to meet their obligations . at december 31 , 2013 , the company had cash and cash equivalents of $ 105.5 million . on december 31 , 2013 , diamond state insurance company sold all the outstanding shares of capital stock of one of its wholly owned subsidiaries , united national casualty insurance company , to an unrelated party . diamond state insurance company received a one-time payment of $ 26.6 million and recognized a pre-tax gain of $ 5.2 million .
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Liquidity
| 7,669
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however , management believes ffo and ffo per share to be supplemental measures of a reit 's performance because they provide an understanding of the operating performance of our properties without giving effect to certain significant non-cash items , primarily depreciation expense . historical cost accounting for real estate assets in accordance with gaap assumes that the value of real estate assets diminishes predictably over time . however , real estate values instead have historically risen or fallen with market conditions . we believe that by excluding the effect of depreciation , ffo and ffo per share can facilitate comparisons of operating performance between periods . we report ffo and ffo per share because these measures are observed by management to also be the predominant measures used by the reit industry and by industry analysts to evaluate reits and because ffo per share is consistently reported , discussed , and compared by research analysts in their notes and publications about reits . for these reasons , management has deemed it appropriate to disclose and discuss ffo and ffo per share . management believes that adjusted funds from operations ( “ affo ” ) and affo per share are also appropriate supplemental measures of a reit 's operating performance . we calculate affo by adding to ffo certain non-cash or infrequent or unpredictable expenses which may impact comparability , consisting of non-cash stock-based compensation expense and non-cash interest expense generally . for the three months ended december 31 , 2020 , ffo ( diluted ) , affo and ffo and affo per diluted share include the dilutive impact of the assumed full exchange of the exchangeable senior notes for shares of common stock . as a result , for purposes of calculating ffo ( diluted ) , cash and non-cash interest expense of the exchangeable senior notes was added back to ffo , and the total diluted weighted-average common shares outstanding increased by 2,158,837 shares for the period , which were the potentially issuable shares as if the exchangeable senior notes were exchanged at the beginning of the period . these adjustments applied only for the three months ended december 31 , 2020. the 63 exchangeable senior notes were anti-dilutive for purposes of calculating earnings per diluted share for all other periods presented , and as such , were treated as anti-dilutive for purposes of calculating ffo , affo and ffo and affo per diluted share for all fiscal years presented and the three months ended december 31 , 2019. our computation of ffo and affo may differ from the methodology for calculating ffo and affo utilized by other equity reits and , accordingly , may not be comparable to such reits . further , ffo and affo do not represent cash flow available for management 's discretionary use . ffo and affo should not be considered as an alternative to net income ( computed in accordance with gaap ) as an indicator of our financial performance or to cash flow from operating activities ( computed in accordance with gaap ) as an indicator of our liquidity , nor is it indicative of funds available to fund our cash needs , including our ability to pay dividends or make distributions . ffo and affo should be considered only as supplements to net income computed in accordance with gaap as measures of operations . the table below is a reconciliation of net income attributable to common stockholders to ffo and affo for the years ended december 31 , 2020 , 2019 and 2018 ( in thousands , except share and per share amounts ) : replace_table_token_8_th the table below is a reconciliation of quarterly net income attributable to common stockholders to ffo and affo for the years ended december 31 , 2020 and 2019 ( in thousands , except share and per share amounts ) : replace_table_token_9_th 64 replace_table_token_10_th ( 1 ) the sum of quarterly financial data may vary from annual data due to rounding and differences in the dilutive effect of potentially issuable shares of each reporting period . critical accounting policies our consolidated financial statements have been prepared in accordance with gaap , which require 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods . actual results could differ materially from those estimates and assumptions . set forth below is a summary of our accounting policies that we believe are critical to the preparation of our consolidated financial statements . our accounting policies are more fully discussed in note 2 to the consolidated financial statements . acquisition of rental property , depreciation and impairment upon acquisition of property , the tangible and intangible assets acquired and liabilities assumed are initially measured based upon their relative fair values . we estimate the fair value of land by reviewing comparable sales within the same submarket and or region , the fair value of buildings on an as-if vacant basis and may engage third-party valuation specialists . acquisition costs are capitalized as incurred since all of our acquisitions to date were recorded as asset acquisitions . we depreciate each of our buildings and improvements over its estimated remaining useful life , not to exceed 40 years . we depreciate tenant improvements at our buildings where we are considered the owner over the estimated useful lives of the improvements , not to exceed 40 years . we review current activities and changes in the business conditions of all of our properties to determine the existence of any triggering events or impairment indicators requiring an impairment analysis . if triggering events or impairment indicators are identified , we review an estimate of the future undiscounted cash flows for the properties , including , if necessary , a probability-weighted approach if multiple outcomes are under consideration . story_separator_special_tag however , management believes ffo and ffo per share to be supplemental measures of a reit 's performance because they provide an understanding of the operating performance of our properties without giving effect to certain significant non-cash items , primarily depreciation expense . historical cost accounting for real estate assets in accordance with gaap assumes that the value of real estate assets diminishes predictably over time . however , real estate values instead have historically risen or fallen with market conditions . we believe that by excluding the effect of depreciation , ffo and ffo per share can facilitate comparisons of operating performance between periods . we report ffo and ffo per share because these measures are observed by management to also be the predominant measures used by the reit industry and by industry analysts to evaluate reits and because ffo per share is consistently reported , discussed , and compared by research analysts in their notes and publications about reits . for these reasons , management has deemed it appropriate to disclose and discuss ffo and ffo per share . management believes that adjusted funds from operations ( “ affo ” ) and affo per share are also appropriate supplemental measures of a reit 's operating performance . we calculate affo by adding to ffo certain non-cash or infrequent or unpredictable expenses which may impact comparability , consisting of non-cash stock-based compensation expense and non-cash interest expense generally . for the three months ended december 31 , 2020 , ffo ( diluted ) , affo and ffo and affo per diluted share include the dilutive impact of the assumed full exchange of the exchangeable senior notes for shares of common stock . as a result , for purposes of calculating ffo ( diluted ) , cash and non-cash interest expense of the exchangeable senior notes was added back to ffo , and the total diluted weighted-average common shares outstanding increased by 2,158,837 shares for the period , which were the potentially issuable shares as if the exchangeable senior notes were exchanged at the beginning of the period . these adjustments applied only for the three months ended december 31 , 2020. the 63 exchangeable senior notes were anti-dilutive for purposes of calculating earnings per diluted share for all other periods presented , and as such , were treated as anti-dilutive for purposes of calculating ffo , affo and ffo and affo per diluted share for all fiscal years presented and the three months ended december 31 , 2019. our computation of ffo and affo may differ from the methodology for calculating ffo and affo utilized by other equity reits and , accordingly , may not be comparable to such reits . further , ffo and affo do not represent cash flow available for management 's discretionary use . ffo and affo should not be considered as an alternative to net income ( computed in accordance with gaap ) as an indicator of our financial performance or to cash flow from operating activities ( computed in accordance with gaap ) as an indicator of our liquidity , nor is it indicative of funds available to fund our cash needs , including our ability to pay dividends or make distributions . ffo and affo should be considered only as supplements to net income computed in accordance with gaap as measures of operations . the table below is a reconciliation of net income attributable to common stockholders to ffo and affo for the years ended december 31 , 2020 , 2019 and 2018 ( in thousands , except share and per share amounts ) : replace_table_token_8_th the table below is a reconciliation of quarterly net income attributable to common stockholders to ffo and affo for the years ended december 31 , 2020 and 2019 ( in thousands , except share and per share amounts ) : replace_table_token_9_th 64 replace_table_token_10_th ( 1 ) the sum of quarterly financial data may vary from annual data due to rounding and differences in the dilutive effect of potentially issuable shares of each reporting period . critical accounting policies our consolidated financial statements have been prepared in accordance with gaap , which require 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods . actual results could differ materially from those estimates and assumptions . set forth below is a summary of our accounting policies that we believe are critical to the preparation of our consolidated financial statements . our accounting policies are more fully discussed in note 2 to the consolidated financial statements . acquisition of rental property , depreciation and impairment upon acquisition of property , the tangible and intangible assets acquired and liabilities assumed are initially measured based upon their relative fair values . we estimate the fair value of land by reviewing comparable sales within the same submarket and or region , the fair value of buildings on an as-if vacant basis and may engage third-party valuation specialists . acquisition costs are capitalized as incurred since all of our acquisitions to date were recorded as asset acquisitions . we depreciate each of our buildings and improvements over its estimated remaining useful life , not to exceed 40 years . we depreciate tenant improvements at our buildings where we are considered the owner over the estimated useful lives of the improvements , not to exceed 40 years . we review current activities and changes in the business conditions of all of our properties to determine the existence of any triggering events or impairment indicators requiring an impairment analysis . if triggering events or impairment indicators are identified , we review an estimate of the future undiscounted cash flows for the properties , including , if necessary , a probability-weighted approach if multiple outcomes are under consideration .
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contractual rent due . rental revenues for the year ended december 31 , 2020 also included drawdown of part of the security deposits totaling approximately $ 940,000 at certain properties leased to three tenants to pay part of the rent and associated lease penalties in accordance with the rent deferral programs described in note 6 in the notes to the consolidated financial statements . 59 rental revenues for the year ended december 31 , 2019 increased by approximately $ 29.0 million , or 202 % , to approximately $ 43.4 million , compared to approximately $ 14.3 million for the year ended december 31 , 2018. the increase in rental revenue was attributable to : ● the 35 properties we acquired 2019 which generated approximately $ 15.7 million of rental revenue in 2019 ; ● the six properties we acquired in 2018 which generated approximately $ 14.7 million of rental revenue in 2019 , including related rents on the amendments which increased the tenant improvement allowances on five of the leases , compared to approximately $ 2.8 million in 2018 , an increase of approximately $ 11.9 million ; and ● the amendments to increase the tenant improvement allowances of two properties we acquired prior to 2018 and the annual rent escalations on the five properties we acquired prior to 2018 which resulted in approximately $ 1.4 million in additional rental revenue during the year ended december 31 , 2019. tenant reimbursements . tenant reimbursements related to reimbursements by tenants for property insurance premiums and real estate taxes paid at certain properties . tenant reimbursements for the year ended december 31 , 2020 included approximately $ 43,000 of reimbursements received through the drawdown of the remaining security deposit at our los angeles , california property . the increase in tenant reimbursements for each year primarily related to the additional properties that we acquired over the years . expenses property expenses . property expenses
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ROO
| 8,076
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the acquisition was funded through additional borrowings under the company 's amended and restated credit facility , the issuance of $ 6.5 million of additional senior subordinated notes and a $ 12.5 million equity contribution received from the company 's parent , acmi holdings , 12 inc. in addition to the folz acquisition , the company made a number of other asset acquisitions during the second quarter of 2003 in the aggregate amount of approximately $ 10.7 million , all funded through the company 's credit facility . for the year ended december 31 , 2003 , approximately 70 % of the company 's revenue was derived from shoppes and approximately 28 % of the company 's revenues was derived from the other amusement vending equipment . the company 's revenue and gross profit in a particular period is directly related to the number and type of machines in operation during the period . management believes that the company 's business is somewhat seasonal , with average revenue per machine per week historically higher during the easter and christmas periods . vending revenue represents cash receipts from customers using amusement vending equipment and is recognized when collected . the cost of vending revenue is comprised of the cost of vended products , location commissions , depreciation and direct service cost . franchise and other revenue are derived from the sale of shoppes , kiddie rides and goods to vend in shoppes sold to third parties and franchisees and royalties from franchisees . the company anticipates that franchise and other revenue will vary in the future based on demand and product availability . total franchise and other revenues account for approximately 2 % of total revenues . results of operations year ended december 31 , 2003 vs. year ended december 31 , 2002 revenue the company 's total revenue increased 39.5 % from $ 144.4 million in 2002 to $ 201.4 million in 2003. vending revenue increased $ 55.0 million or 38.7 % in 2003 to $ 197.1 million , primarily as a result of the folz , gameplan and other acquisitions completed during the quarter ended june 30 , 2003 and internal growth . franchise and other revenue increased 88.2 % from $ 2.3 million in 2002 to $ 4.3 million in 2003 , primarily due to increased sales of amusement vending equipment to third parties . cost of revenue and gross profit the cost of vending operations increased $ 43.1 million in 2003 to $ 150.0 million . the contribution to gross profit from vending operations was $ 47.1 million in 2003 and $ 35.2 million in 2002. the vending gross profit achieved in 2003 was 23.9 % of vending revenue , which represents a 0.9 percentage point decrease from the gross profit percentage achieved in 2002. the cash vending gross profit ( vending revenue minus cost of vended product , location commissions and direct service cost ) achieved in 2003 was 31.3 % of vending revenue , which is 2.4 percentage points lower than in 2002. the decrease in vending gross margin percentage and cash gross margin percentage is primarily attributable to the change in the company 's sales mix . the company now has a higher percentage of bulk vending revenues after the folz acquisition . bulk vending typically has a lower gross margin than the company 's other amusement vending offerings . gross profit on franchise and other revenue in 2003 increased to $ 1.2 million , or 27.7 % of franchise and other revenue compared to $ 1.2 million or 50.7 % in 2002. the decrease in gross margin percentage is a result of the increase in sales of amusement vending equipment to third parties , which occur at a lower gross margin percentage . operating expense general and administrative expenses ( including depreciation and amortization ) were 18.0 % of revenue , which is 0.6 percentage points lower than in 2002. general and administrative expenses for the year ended december 31 , 2002 include transaction related costs of approximately $ 2.2 million . the increase in general and administrative expenses for the year ended december 31 , 2003 as compared to 2002 , excluding the acmi holdings , inc. acquisition transaction expenses , was primarily due to the addition of personnel and facilities to support the acquired operations , additional personnel and facilities in the sales and marketing , logistics and support areas to better manage the company 's current and expected future operations and costs incurred to integrate acquired operations . restructuring charge in june 2003 , the company recorded a restructuring charge associated with the termination of certain administrative and sales employees that resulted from reorganizing certain functions after the acquisition of folz . as of december 31 , 2003 , $ 181,000 had 13 been charged against the $ 320,000 restructuring accrual . the restructuring accrual is included in other accrued expenses in the accompanying consolidated balance sheet . operating earnings operating earnings in 2003 were $ 11.8 million or 5.9 % of total revenue as compared to operating earnings of $ 7.8 million in 2002 or 5.4 % of total revenue . the 2002 operating results included $ 2.2 million of acmi holdings , inc. transaction related costs and the $ 1.7 million loss on debt refinancing . interest expense , net interest expense increased $ 3.0 million to $ 13.8 million in 2003 as compared to 2002. the company 's interest expense is directly related to a higher level of borrowings after the folz and other acquisitions during the second quarter of 2003 and changes in the underlying interest rates . story_separator_special_tag 46 is an interpretation of accounting research bulletin no . 51 , and addresses consolidation by business enterprises of variable interest entities . this interpretation requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved . variable interest entities that effectively 19 dispense risks will not be consolidated unless a single party holds an interest or combination of interests that effectively recombines risks that were previously dispersed . the company is required to apply the provision of interpretation no . 46 to variable interest entities created after july 1 , 2003. the adoption of this standard did not have an impact on the company 's financial position or results of its operations . risk factors this annual report contains forward-looking statements as defined in the private securities litigation reform act of 1995. all statements other than statements of historical fact , including , without limitation , the statements under management 's discussion and analysis of financial condition and results of operations are forward-looking statements. forward-looking statements may include the words believes , expects , plans , intends , anticipates , continues or other similar expressions . these statements are based on the company 's currents expectations of future events and are subject to a number of risks and uncertainties that may cause the company 's actual results to differ materially from those described in these forward- looking statements . should one or more of these risks or uncertainties materialize , or should underlying assumptions prove incorrect , actual results may vary materially from those anticipated , estimated or projected . these risks and uncertainties are disclosed from time to time in the company 's filings with the securities and exchange commission and in oral statements made by or with the approval of authorized personnel . the company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments . machine performance . a primary key to the financial success of the company is the weekly revenue generated per machine , which has a history of fluctuating . the company has attributed some of this fluctuation to the effectiveness of its product mix and continues to take steps to address this problem ; however , there can be no assurance that such efforts will continue to have a positive impact on the performance of the machines . the average weekly revenue generated per machine may decline or fluctuate in the future , which could have a material adverse effect on the company 's business , financial condition and results of operations . growth and management of growth . the company has recently experienced growth . there can be no assurance that the company will continue to grow at historical rates or at all . the company 's ability to generate increased revenue and achieve higher levels of profitability will depend upon its ability to place additional machines in retail accounts as well as to maintain or increase the average financial performance of the machines . the company 's ability to place additional machines depends on a number of factors beyond the company 's control , including general business and economic conditions . installation of additional machines will also depend , in part , upon the company 's ability to secure additional national and regional retail accounts and to obtain approval to place additional machines in individual locations of such accounts . the company may be unable to place and adequately service additional machines , which could have a material adverse effect on the company 's business , financial condition and results of operations . there can be no assurance that the company will be able to manage its expanding operations effectively or that it will be able to maintain or accelerate its growth . the company 's growth has placed , and is expected to continue to place significant demands on all aspects of the company 's business , including machine servicing , merchandising , financial and administrative personnel and systems . the company 's future operating results are substantially dependent upon the ability of the company 's officers and key personnel to manage anticipated growth and increased demand effectively ; to attract , train and retain additional qualified personnel ; and to implement and improve technical , service , administrative , financial control and reporting systems . either deterioration in machine performance or the company 's failure to manage growth effectively could adversely and materially affect the company 's business , financial condition and results of operations . integration of acquisitions . the company may acquire other businesses in the future . acquisitions are likely to place a significant strain on the company 's managerial , operating , financial and other resources . the company 's future performance will depend , in part , upon its ability to integrate its acquisitions effectively , which will require that the company implement additional management information systems capabilities , further develop its operating , administrative and financial and accounting systems and controls , improve coordination among accounting , finance , marketing and operations , and hire and train additional personnel . failure by the company to develop adequate operational and control systems or to attract and retain additional qualified management , financial , sales and marketing and customer care personnel could materially adversely affect the company 's ability to integrate the businesses it acquires . while the company anticipates that it will recognize various economies and efficiencies of scale as a result of its acquisitions and the integration of the businesses it has acquired , the process of consolidating the businesses and implementing integrations , even if successful , may take a significant period of time , will place a significant strain on the company 's resources and could subject the company to additional expenses during the integration process . furthermore , the company 's performance
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liquidity and capital resources the company 's primary sources of liquidity and capital resources historically have been cash flows from operations , borrowings under the company 's credit facilities , issuances of its equity and debt securities and equity contributions from its parent company . these sources of cash flows have been offset by cash used for acquisitions , investment in amusement vending equipment and payment of long-term borrowings . net cash provided by operating activities was $ 14.5 million , $ 5.2 million and $ 15.8 million in 2003 , 2002 and 2001 , respectively . the increase in 2003 net cash provided by operating activities results primarily from an increase in trade accounts payable and accrued expenses . the company anticipates that cash will continue to be provided by operations as additional machines and other amusement devices are placed in service . cash required in the future is expected to be funded by existing cash and cash provided by operations and borrowings under the company 's credit facility . net cash used in investing activities was $ 51.2 million , $ 12.1 million and $ 7.6 million in 2003 , 2002 and 2001 , respectively . capital expenditures amounted to $ 14.5 million , $ 8.0 million and $ 4.9 million in 2003 , 2002 and 2001 , respectively , of which $ 13.0 million , $ 7.3 million and $ 4.0 million were used for the acquisition of amusement vending equipment . the acquisition of franchisees and others used $ 34.1 million , $ 1.5 million and $ 273,000 in 2003 , 2002 and 2001 , respectively . net cash provided by financing activities was $ 37.1 million in 2003 and $ 7.0 million in 2002. net cash used in financing activities was $ 7.0 million in 2001. financing activities consisted primarily of borrowings and payments on the company 's credit facility and purchase of common stock in conjunction with the acquisition by acmi holdings , inc. , equity contributions from acmi holdings , inc. and the repayment of the company 's previous credit facility and other debt obligations .
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Liquidity
| 13,219
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while our business is performing well overall , we continue to face strong competition globally and economic challenges in certain countries . in particular , we are cautious of the continued decline in retail traffic primarily related to certain brick-and-mortar stores in the united states and the united kingdom as a result of the impact of shifts in consumer preferences as to where and how they shop . we are also cautious of foreign currency movements , including their impact on tourism . additionally , we continue to monitor the effects of the macroeconomic environments in certain countries such as brazil and in the middle east ; the united kingdom 's anticipated exit from the european union ; social and political issues ; regulatory matters , including the imposition of tariffs ; geopolitical tensions ; and global security issues . we believe we can , to some extent , offset the impact of these challenges by developing and pursuing a diversified strategy with multiple engines of growth and accelerating areas of strength among our geographic regions , product categories , brands and channels of distribution . however , if economic conditions or the degree of uncertainty or volatility worsen , or the adverse conditions previously described are further prolonged , there could be a negative effect on consumer confidence , demand , spending and willingness or ability to travel and , as a result , on our business . we will continue to monitor these and other risks that may affect our business . as disclosed in the company 's form 10-q for the fiscal 2018 third quarter , we learned that some of our testing related to certain product advertising claims did not meet our standards , necessitating further validation . as a result of this ongoing review , certain advertising claims are being modified . this is not a product safety issue and does not relate to the quality of the ingredients or the manufacturing of our products . based on our review to date , we do not believe this matter will be material to the company . we navigate through short-term volatility while focusing on our long-term strategy and using our multiple engines of growth that we believe will help promote sustainable results . we are increasing our presence in emerging markets , continuing efforts to revitalize and accelerate growth in our heritage brands , focusing on key demographics and seeking opportunities to add to our diverse brand portfolio . we are also strengthening our consumer engagement by leveraging digital marketing and enhancing our social media strategies and execution . we will continue to drive product , packaging , and conceptual innovation and creativity that we believe enable us to introduce products that resonate with consumers . some initiatives will involve new sub-categories , and others may expand key franchises . leading beauty forward in may 2016 , we announced a multi-year initiative ( leading beauty forward , or the program ) to build on our strengths and better leverage our cost structure to free resources for investment to continue our growth momentum . leading beauty forward is designed to enhance our go-to-market capabilities , reinforce our leadership in global prestige beauty and continue creating sustainable value . we plan to approve specific initiatives under leading beauty forward through fiscal 2019 related to the optimization of select corporate functions , supply chain activities , and corporate and regional market support structures , as well as the exit of underperforming businesses , and expect to complete those initiatives through fiscal 2021. we previously estimated that leading beauty forward would result in related restructuring and other charges totaling between $ 600 million and $ 700 million , before taxes . after reviewing additional potential initiatives and the progress of previously approved initiatives under leading beauty forward that are being implemented , we have revised our estimates for cost approvals under the program . inclusive of approvals from inception through june 30 , 2018 , we now estimate that leading beauty forward may result in related restructuring and other charges totaling between $ 900 million and $ 950 million , before taxes , consisting of employee-related costs , asset write-offs and other costs to implement these initiatives . as many of our previously approved leading beauty forward initiatives are progressing through their implementation stages and with the identification of potential new initiatives , we are revising our previous estimate of annual net benefits of between $ 200 million and $ 300 million , before taxes . after its full implementation , we now expect leading beauty forward to yield annual net benefits , primarily in selling , general and administrative expenses , of between $ 350 million and $ 450 million , before taxes . these savings can be used to improve margin , mitigate risk and invest in future growth initiatives . for additional information about restructuring and other charges , see item 8. financial statements and supplementary data note 7 charges associated with restructuring and other activities . 25 annual impairment testing we assess goodwill and other indefinite-lived intangible assets at least annually for impairment or more frequently if certain events or circumstances exist . during fiscal 2018 , no impairment charges were recognized as a result of our annual goodwill and other intangible asset impairment testing as of april 1 , 2018. the fair values of all reporting units with material goodwill were substantially in excess of their respective carrying values . with regard to trademarks , the fair value of the editions de parfums frédéric malle trademark was equal to its carrying value , and the fair value of the too faced trademark exceeded its carrying value by approximately 14 % . as of june 30 , 2018 , the carrying values of the editions de parfums frédéric malle and too faced trademarks were $ 33 million and $ 525 million , respectively . story_separator_special_tag the lower net sales of certain estée lauder fragrances were partially due to a decline in net sales of the modern muse franchise . lower net sales from certain designer fragrances reflected the expiration of our license agreement with coach . the fiscal 2017 net sales increase for fragrance was adversely affected by approximately $ 47 million of unfavorable foreign currency translation . hair care replace_table_token_10_th ( 1 ) see reconciliations of non-gaap financial measures beginning on page 39 for reconciliations between non-gaap financial measures and the most directly comparable u.s. gaap measures . reported hair care net sales increased in fiscal 2018 , reflecting growth from aveda primarily due to growth from salons in north america and higher net sales in the online and travel retail channels , as well as the launch of the invati advanced line of products . the category also benefited from the increase in net sales from bumble and bumble due to specialty-multi door openings , particularly in ulta . reported hair care net sales decreased in fiscal 2017 , primarily reflecting a difficult comparison with fiscal 2016 that featured greater launch activity . geographic regions the americas replace_table_token_11_th ( 1 ) see reconciliations of non-gaap financial measures beginning on page 39 for reconciliations between non-gaap financial measures and the most directly comparable u.s. gaap measures . 29 reported net sales in the americas increased in fiscal 2018 , reflecting higher net sales in the united states of approximately $ 141 million and increased net sales in latin america and canada of $ 55 million , combined . the higher net sales in the united states reflected incremental , and higher comparable , net sales from too faced and becca of approximately $ 217 million , combined . net sales increases from estée lauder and la mer skin care products were more than offset by lower net sales from our makeup artist brands , clinique and smashbox . the lower net sales from our makeup artist brands were a result of a softer retail environment impacting net sales in certain department stores and freestanding stores , partially offset by growth in the specialty-multi channel as a result of targeted expanded consumer reach from m a c. the decrease in net sales from smashbox was driven by a soft retail environment for our products in the specialty-multi and department store channels . the lower net sales of clinique products reflected the negative impact from the liquidation and closure of certain north america retailers and , to a lesser extent , an unfavorable comparison due to the higher level of expansion within the specialty-multi channel in the prior year . the increase in latin america and canada was driven by growth in most brands . fiscal 2018 net sales in the americas benefited from favorable foreign currency translation of approximately $ 15 million . reported net sales in the americas increased in fiscal 2017 , reflecting incremental sales , primarily in the united states , from our fiscal 2017 acquisitions of too faced and becca of approximately $ 220 million , combined . net sales growth from certain of our brands , including tom ford , smashbox , la mer and jo malone london , also contributed to the higher net sales in the region . higher net sales in chile and brazil contributed an additional increase of approximately $ 25 million , combined . net sales in the united states were adversely impacted by slower retail traffic in brick-and-mortar stores that particularly affected m a c and our heritage brands . this slower retail traffic reflected the impact of shifts in consumer preferences as to where and how they shop , as well as declines in tourism attributable , in part , to the strong u.s. dollar in relation to most currencies . europe , the middle east & africa replace_table_token_12_th ( 1 ) see reconciliations of non-gaap financial measures beginning on page 39 for reconciliations between non-gaap financial measures and the most directly comparable u.s. gaap measures . reported net sales in europe , the middle east & africa increased in fiscal 2018 , primarily reflecting higher sales from our travel retail business and , to a lesser extent , the united kingdom and italy of approximately $ 902 million , combined . in our global travel retail business , the sales growth reflected higher net sales from virtually all of our brands including estée lauder , la mer , tom ford , jo malone london and m a c , driven , in part , by an increase in international passenger traffic , particularly by chinese travelers , as well as targeted expanded consumer reach and new product offerings . the higher net sales in the united kingdom was primarily driven by the favorable impact of foreign currency translation . the net sales growth in italy was driven by m a c , partially reflecting targeted expanded consumer reach , and estée lauder , primarily due to higher net sales from the advanced night repair and double wear lines of products . partially offsetting the net sales increases were lower net sales in the middle east of approximately $ 86 million , primarily driven by the continuing rebalancing of inventory levels by certain of our distributors as a result of a general decrease in consumer purchases due to adverse macroeconomic conditions . fiscal 2018 net sales in europe , the middle east & africa benefited from approximately $ 222 million of favorable foreign currency translation . 30 reported net sales in europe , the middle east & africa increased in fiscal 2017 , reflecting higher net sales from our travel retail business , russia and italy of approximately $ 338 million , combined . the net sales growth in our travel retail business for fiscal 2017 reflected higher net sales from tom ford , jo malone london , la mer and m a
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based on past performance and current expectations , we believe that cash on hand , cash generated from operations , available-for-sale securities , available credit lines and access to credit markets will be adequate to support currently planned business operations , information technology enhancements , capital expenditures , acquisitions , dividends , stock repurchases , restructuring initiatives , commitments and other contractual obligations on both a near-term and long-term basis . the recently enacted tcja resulted in the transition tax on unrepatriated earnings of our foreign subsidiaries and changed the tax law in ways that present opportunities to repatriate cash without additional u.s. federal income tax . during fiscal 2018 , we changed our indefinite reinvestment assertion related to certain foreign earnings and continue to analyze the indefinite reinvestment assertion on our remaining applicable foreign earnings . our cash and cash equivalents and short- and long-term investment balances at june 30 , 2018 include $ 1,068 million of cash and short- and long-term investments in offshore jurisdictions associated with our permanent reinvestment strategy . we do not believe that continuing to reinvest our foreign earnings impairs our ability to meet our domestic debt or working capital obligations . if these reinvested earnings were repatriated into the united states as dividends , we would be subject to state income taxes and applicable foreign taxes in certain jurisdictions . the effects of inflation have not been significant to our overall operating results in recent years . generally , we have been able to introduce new products at higher prices , increase prices and implement other operating efficiencies to sufficiently offset cost increases , which have been moderate . 41 credit ratings changes in our credit ratings will likely result in changes in our borrowing costs . our credit ratings also impact the cost of our revolving credit facility .
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Liquidity
| 11,408
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and its wholly owned subsidiaries , blink therapeutics inc. , or blink , which is a delaware subsidiary that holds certain intellectual property related to rna base editing , and beam therapeutics securities corporation , which is a massachusetts subsidiary . all intercompany transactions and balances have been eliminated in consolidation . use of estimates the preparation of financial statements in conformity with gaap requires management to make estimates and assumptions that affect the reported amounts of assets , liabilities and expenses , and the disclosure of contingent assets and liabilities as of and during the reporting period . the company bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances . significant estimates and assumptions reflected in these consolidated financial statements include , but are not limited to , incremental borrowing rate used in the calculation of lease liabilities , the fair values of common stock , redeemable convertible preferred stock , stock-based compensation , and success payments . actual results could differ from these estimates . cash , and cash equivalents , and restricted cash cash and cash equivalents consist of standard checking accounts , money market accounts , and all highly liquid investments with a remaining maturity of three months or less at the date of purchase . restricted cash represents collateral provided for letters of credit issued as security deposits in connection with the company 's leases of its corporate and manufacturing facilities . the following table reconciles cash , cash equivalents , and restricted cash reported within the company 's consolidated balance sheets to the total of the amounts shown in the consolidated statements of cash flows ( in thousands ) : replace_table_token_9_th f-9 marketable securities the company classifies marketable securities with a remaining maturity when purchased of greater than three months as available-for-sale . available-for-sale securities are maintained by the company 's investment managers and consist of commercial paper , high-grade corporate notes , u.s. treasury securities and government securities . available-for-sale securities are carried at fair value with the unrealized gains and losses included in accumulated other comprehensive ( loss ) income as a component of stockholders ' equity until realized . any premium or discount arising at purchase is amortized and or accreted to interest income and or expense over the life of the instrument . realized gains and losses are determined using the specific identification method and are included in interest and other income ( expense ) , net . concentrations of credit risk financial instruments that are potentially subject to significant concentration of credit risk consist primarily of cash , cash equivalents , marketable securities , and restricted cash . the company attempts to minimize the risk related to marketable securities by working with highly rated financial institutions that invest in a broad and diverse range of financial instruments as defined the company . the company has established guidelines relative to credit ratings and maturities intended to safeguard principal balances and maintain liquidity . the company maintains its funds in accordance with its investment policy , which defines allowable investments , specifies credit quality standards and is designed to limit credit exposure to any single issuer . guarantees and indemnifications as permitted under delaware law , the company indemnifies its officers , directors , consultants , and employees for certain events or occurrences that happen by reason of the relationship with , or position held at , the company . for the twelve months ended december 31 , 2020 and 2019 , the company had not experienced any losses related to these indemnification obligations , and no claims were outstanding . the company does not expect significant claims related to these indemnification obligations and , consequently , concluded that the fair value of these obligations is negligible , and no related reserves were established . equity issuance costs the company capitalizes incremental legal , professional , accounting and other third-party fees that were directly associated with its stock offerings as other non-current assets until the offerings are consummated . upon consummation , these costs are recorded in stockholders ' equity ( deficit ) as a reduction of additional paid-in-capital generated as a result of the offerings . as of december 31 , 2020 , there were no deferred offering costs . as of december 31 , 2019 , equity issuance costs of $ 3.1 million related to the ipo were included in other assets in the accompanying consolidated balance sheets . fair value of financial instruments asc topic 820 , fair value measurement , or asc 820 , establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data ( observable inputs ) and the company 's own assumptions ( unobservable inputs ) . observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources . unobservable inputs are inputs that reflect the company 's assumptions about the inputs that market participants would use in pricing the assets or liability and are developed based on the best information available in the circumstances . asc 820 identifies fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date . as a basis for considering market participant assumptions in fair value measurements , asc 820 establishes a three-tiered value hierarchy that distinguishes between the following : level 1—quoted market prices in active markets for identical assets or liabilities . level 2—inputs other than level 1 inputs that are either directly or indirectly observable , such as quoted market prices , interest rates and yield curves . level 3—unobservable inputs for the asset or liability ( i.e . supported by little or no market activity ) . story_separator_special_tag we apply the straight-line method of expense recognition to all awards with service-based vesting and recognize stock-based compensation for performance-based awards over the service period using the accelerated attribution method to the extent achievement of the of performance condition is probable . we estimate the fair value of each stock option grant on the date of grant using the black-scholes option-pricing model , which uses inputs such as the fair value of our common stock , assumptions we make for the volatility of our common stock , the expected term of our stock options , the risk-free interest rate for a period that approximates the expected term of our stock options and our expected dividend yield . the fair value of our common stock is used to determine the fair value of restricted stock awards . prior to our ipo in february 2020 , there was no public market for our common stock . as a result , prior to our ipo , the estimated fair value of our common stock was determined by our board of directors as of the date of each option grant , with input from management , considering our most recently available third-party valuations of common stock and our board of directors ' assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant . following our ipo , the fair value of our common stock is determined based on the quoted market price of our common stock . 101 fair value measurements – success payments we are required to make success payments to harvard and broad institute based on increases in the per share fair market value of our series a-1 preferred stock and series a-2 preferred stock or , subsequent to our ipo , our common stock . any amounts due may be settled in cash or shares of our common stock , at our discretion . the success payments are accounted for under accounting standards codification 815 , derivatives and hedging and were initially recorded at fair value with a corresponding charge to research and development expense . the liabilities are marked to market at each balance sheet date with all changes in value recognized in interest and other income ( expense ) , net in the consolidated statement of operations and other comprehensive loss . we will continue to adjust the liability for changes in fair value until the earlier of the achievement or expiration of the success payment obligation . to determine the estimated fair value of the success payments , we used a monte carlo simulation model , which models the value of the liability based on several key variables , including probability of event occurrence , timing of event occurrence , as well as the price per share at the time of success payment . accrued research and development costs as part of the process of preparing our financial statements , we are required to estimate our accrued expenses . this process involves reviewing open contracts and purchase orders , communicating with our 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 the actual cost . the majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met . we make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time . examples of estimated accrued research and development expenses include fees paid to vendors in connection with preclinical development activities and vendors related to development , manufacturing and distribution of product candidate materials . we base our expenses related to preclinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple vendors that conduct and manage preclinical studies on our behalf . the financial terms of these agreements are subject to negotiation , vary from contract to contract and may result in uneven payment flows . there may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense . 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 and adjust accordingly . leases on january 1 , 2019 , we adopted asu no . 2016-02 , leases ( topic 842 ) , or asc 842 , which requires the recognition of the right-of-use assets and related operating and finance lease liabilities on the balance sheet . for contracts entered into on or after the effective date , at the inception of a contract , we assess whether the contract is , or contains , a lease . the assessment is based on : ( 1 ) whether the contract involves the use of a distinct identified asset , ( 2 ) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period , and ( 3 ) whether we have the right to direct the use of the asset . at inception of a lease , we allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments . leases are classified as either finance leases or operating leases . a lease is classified as a finance lease if any one of the following criteria are met : the lease transfers ownership of the asset by the end of the lease term , the lease contains an option to purchase the asset that is reasonably certain to be exercised , the lease term is for a major part
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million . net cash used in operating activities was also offset by non-cash charges consisting primarily of a change in the fair value of derivative liabilities of $ 63.4 million , stock-based compensation expense of $ 15.4 million , non-cash license expenses of $ 5.7 million , depreciation of $ 4.7 million , and non-cash lease expense of $ 4.7 million , offset by a $ 0.5 million non-cash change in the fair value of equity investments . net cash used in operating activities for the year ended december 31 , 2019 was $ 72.0 million , consisting primarily of our net loss of $ 78.3 million , a decrease in financing milestone liabilities of $ 13.8 million resulting from payment of these liabilities , a decrease in operating lease liabilities of $ 2.5 million , and an increase in prepaids and other assets of $ 1.9 million offset by cash provided by increases in accounts payable and accrued expenses of $ 7.7 million and non-cash charges consisting primarily of stock based compensation expense of $ 7.0 million , change in fair value of derivative liabilities of $ 5.4 million , depreciation of $ 3.5 million , and non-cash lease expense of $ 1.9 million , offset by amortization of investment premiums of $ 0.9 million . investing activities for the year ended december 31 , 2020 , cash used in investing activities was primarily the net result of purchases of marketable securities partially offset by maturities of marketable securities of $ 83.0 million , in addition to purchases of property and equipment of $ 16.4 million . for the year ended december 31 , 2019 , cash used in investing activities was primarily the net result of purchases of marketable securities partially offset by maturities of marketable securities of $ 53.7 million , in addition to purchases of property and equipment of $ 12.5 million . financing activities net cash provided by financing activities for the year ended december 31 , 2020 consisted primarily of proceeds from our ipo and follow on public offering of $ 319.5 million , net of underwriting discounts , net proceeds of $ 3.3 million from equipment financing , and proceeds
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Liquidity
| 15,125
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there is significant uncertainty around the breadth and duration of business disruptions related to covid-19 pandemic , as well as its impact on the u.s. economy , the ongoing business operations of our clients or our results of operations and financial condition . while our management team is actively monitoring the impacts of the covid-19 pandemic and may take further actions altering our business operations that we determine are in the best interests of our employees and clients or as required by federal , state , or local authorities , the full impact of the covid-19 pandemic on our results of operations , financial condition , or liquidity for fiscal year 2020 and beyond can not be estimated at this point . the following discussions are subject to the future effects of the covid-19 outbreak on our ongoing business operations . 31 sources of revenues we derive our revenues from services for clients in a variety of different markets . these markets include our two largest markets , healthcare and student lending , as well as our other markets which include but are not limited to outsourced call center services , delinquent state and federal taxes and federal treasury and other receivables . replace_table_token_3_th ( 1 ) includes $ 28.4 million related to the termination of the 2009 cms region a contract for the year ended december 31 , 2018 . ( 2 ) represents student lending , state and municipal tax authorities , irs and department of treasury markets , select financial institutions , as well as premiere credit of north america . healthcare we derive revenues from both commercial and government clients in the healthcare market . revenues earned under contracts in the healthcare market are driven by auditing , identifying , and sometimes recovering improperly paid claims through both automated and manual review of such claims . we are paid contingency fees by our clients based on a percentage of the dollar amount of improper claims recovered as a result of our efforts . the revenues we recognize are net of our estimate of claims that we believe will be overturned by appeal following payment by the provider . for our commercial healthcare business , our business strategy is focused on utilizing our technology-enabled services platform to provide audit , third-party liability recovery and analytical services for private healthcare payers . we have entered into contracts with several private payers , although these contracts are in the early stage of implementation . revenues from our commercial healthcare clients were $ 15.5 million for the year ended december 31 , 2019 compared to revenues of $ 12.6 million for the year ended december 31 , 2018. on october 5 , 2017 , we announced that we were awarded the msp crc contract by the cms . under this agreement , we are responsible for identifying and recovering payments in situations where medicare should not be the primary payer of healthcare claims because a beneficiary has other forms of insurance coverage , such as through an employer group health plan or certain other payers . on october 26 , 2016 , cms awarded two new rac contracts , for audit regions 1 and 5. the rac contract award for region 1 allows us to continue our audit of payments under medicare 's part a and part b for all provider types other than dmepos and home health and hospice within an 11 state region in the northeast and midwest . the region 5 rac contract provides for the post-payment review of dmepos and home health and hospice claims nationally . while audit and recovery activity under the new contracts commenced in april 2017 , the scope of audit permitted by cms under these rac contracts is limited to 0.5 % of claims . healthcare providers have the right to appeal a claim and may pursue additional appeals if the initial appeal is found in favor of the healthcare insurer . our total estimated liability for appeals was $ 1.0 million and $ 0.2 million as of december 31 , 2019 and december 31 , 2018 , respectively . this represents our best estimate of the amount probable of being refunded to our healthcare clients following successful appeals of claims for which commissions were previously collected . recovery recovery market revenues are derived from student lending , irs , state and municipal tax authorities , the department of treasury , select financial institutions and premiere credit of north america . in the spring of 2017 , the irs named us as one of four companies to perform recovery services under its private collection program . this program , authorized under a federal law , calls for the use of private companies to recover outstanding inactive tax receivables on the government 's behalf . 32 we also service the federal agency market , which consists of government debt subrogated to the department of the treasury by numerous different federal agencies , comprising a mix of commercial and individual obligations and a diverse range of receivables . these debts are managed by the bureau of the fiscal service ( formerly the department of financial management service ) , or fs , a bureau of the department of the treasury . for state and municipal tax authorities , we analyze a portfolio of delinquent tax and other receivables placed with us , develop a recovery plan and execute a recovery process designed to maximize the recovery of funds . in some instances , we have also run state tax amnesty programs , which provide one-time relief for delinquent tax obligations , and other debtor management services for our clients . we currently have relationships with numerous state and municipal governments . delinquent obligations are placed with us by our clients and we utilize a process that is similar to the student loan recovery process for recovering these obligations . student lending revenues are contract-based and consist primarily of contingency fees based on a specified percentage of the amount we enable our clients to recover . story_separator_special_tag our contingency fee percentage for a particular recovery depends on the type of recovery facilitated . our clients in the student loan recovery market mainly consist of several of the largest guaranty agencies , or gas . we believe the size and the composition of our student loan inventory at any point provides us with a significant degree of revenue visibility for our student loan revenues . based on data compiled from over two decades of experience with the recovery of defaulted student loans , at the time we receive a placement of student loans , we are able to make a reasonably accurate estimate of the recovery outcomes likely to be derived from such placement and the revenues we are likely able to generate based on the anticipated recovery outcomes . an important metric in evaluating our student lending business is placement volume . our placement volume represents the dollar volume of defaulted student loans first placed with us during the specified period by public and private clients for recovery . placement volume allows us to measure and track trends in the amount of inventory our clients in the student lending market are placing with us during any period . the revenues associated with the recovery of a portion of these loans may be recognized in subsequent accounting periods , which assists management in estimating future revenues and in allocating resources necessary to address current placement volumes . as a result of the department of education 's termination of our january 2018 contract and its last procurement in its entirety , all of our placement volume is currently coming from guaranty agencies . year ended december 31 , 2019 2018 ( in thousands ) student lending placement volume 2,547,364 2,571,700 there are five potential outcomes to the student loan recovery process from which we generate revenues . these outcomes include full repayment , recurring payments , rehabilitation , loan restructuring and wage garnishment . of these five potential outcomes , our ability to rehabilitate defaulted student loans is the most significant component of our revenues in this market . generally , a loan is considered successfully rehabilitated after the student loan borrower has made nine consecutive qualifying monthly payments and our client has notified us that it is recalling the loan . once we have structured and implemented a repayment program for a defaulted borrower , we ( i ) earn a percentage of each periodic payment collected up to and including the final periodic payment prior to the loan being considered “ rehabilitated ” by our clients , and ( ii ) if the loan is “ rehabilitated , ” then we are paid a one-time percentage of the total amount of the remaining unpaid balance for each rehabilitated loan . the fees we are paid vary by recovery outcome as well as by contract . for non-government-supported student loans we are generally only paid contingency fees on two outcomes : full repayment or recurring repayments . the table below describes our typical fee structure for each of these five outcomes . 33 student loan recovery outcomes full repayment recurring payments rehabilitation loan restructuring wage garnishment repayment in full of the loan regular structured payments , typically according to a renegotiated payment plan after a defaulted borrower has made nine consecutive recurring payments , the loan is eligible for rehabilitation restructure and consolidate a number of outstanding loans into a single loan , typically with one monthly payment and an extended maturity if we are unable to obtain voluntary repayment , payments may be obtained through wage garnishment after certain administrative requirements are met we are paid a percentage of the full payment that is made we are paid a percentage of each payment we are paid based on a percentage of the overall value of the rehabilitated loan we are paid based on a percentage of overall value of the restructured loan we are paid a percentage of each payment customer care / outsourced services we also derive revenues from default aversion and or first party call center services for certain clients and the licensing of hosted technology solutions to certain clients . for our hosted technology services , we license our system and integrate our technology into our clients ' operations , for which we are paid a licensing fee . our revenues for these services include contingency fees , fees based on dedicated headcount to our clients and hosted technology licensing fees . costs and expenses we generally report two categories of operating expenses : salaries and benefits and other operating expense . salaries and benefits expenses consist primarily of salaries and performance incentives paid and benefits provided to our employees . other operating expense includes expenses related to our use of subcontractors , other production related expenses , including costs associated with data processing , retrieval of medical records , printing and mailing services , amortization and other outside services , as well as general corporate and administrative expenses . factors affecting our operating results our results of operations are influenced by a number of factors , including costs associated with commencing contract operations , allocation of placement volume , claim recovery volume , contingency fees , regulatory matters , client retention and macroeconomic factors . costs associated with commencing new client contracts when we obtain an engagement with a new client or a new contract with an existing client , it typically takes a long period of time to plan our services in detail , which includes integrating our technology , processes and resources with the client 's operations and hiring new employees , before we receive any revenues from the new client or new contract . our clients may also experience delays in obtaining approvals or managing protests from unsuccessful bidders , such as the lengthy protests on the most recent contract procurement from the department of education , or delays associated with system implementations , such as the delays experienced with the implementation of our first rac contract with cms .
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for the year ended december 31 , 2018. salaries and benefits salaries and benefits expense were $ 115.2 million for the year ended december 31 , 2019 , an increase of $ 19.1 million , or 20 % , compared to salaries and benefits expense of $ 96.1 million for the year ended december 31 , 2018 . the increase in salaries and benefits expense was primarily due to the full year effect in 2019 of the increase in headcount as a result of the acquisition of premiere in the third quarter of 2018 . 38 other operating expense other operating expense was $ 47.7 million for the year ended december 31 , 2019 , a decrease of $ 10.6 million , or 18 % , compared to other operating expense of $ 58.3 million for the year ended december 31 , 2018 . the decrease in other operating expenses was primarily due to a $ 7.1 million derecognition of subcontractor receivable associated with the termination of the 2009 cms region a contract in 2018 , a $ 1.9 million allowance for doubtful accounts against subcontractor receivable in 2018 , and $ 3.5 million in lower third party fees in 2019 , offset by $ 1.9 million in higher communication and postage expenses in 2019. impairment of goodwill and intangible assets impairment of goodwill and intangible assets was $ 7.2 million for the year ended december 31 , 2019 , an increase of $ 4.2 million , compared to the year ended december 31 , 2018 . the increase was due to a non-cash impairment charge of $ 7.2 million recognized in 2019 related to goodwill , as compared to a non-cash impairment charge of $ 3.0 million recognized in 2018 related to the write-off of the great lakes customer relationship intangible asset . loss from operations as a result of the factors described above , loss from operations was $ 19.6 million
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ROO
| 10,002
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estimating the allowance for doubtful accounts and contract losses . we make estimates of our ability to collect accounts receivable and our unbilled but recognized work-in-process . in circumstances where we are aware of a specific customer 's inability to meet its financial obligations to us or for disputes with customers that affect our ability to fully collect our accounts receivable and unbilled work-in-process , we record a specific allowance to reduce the net recognized receivable to the amount we reasonably believe will be collected . for all other customers we recognize allowances for doubtful accounts and contract losses taking into consideration factors such as historical write-offs , customer concentration , customer credit-worthiness , current economic conditions , and aging of amounts due . 21 the following table sets forth , for the periods indicated , the percentage of revenues of certain items in our consolidated statements of income and the percentage increase ( decrease ) in the dollar amount of such items year to year : replace_table_token_3_th executive summary revenues for fiscal 2015 increased 3 % and revenues before reimbursements increased 2 % as compared to the prior year . the increase in revenues before reimbursements was due to an increase in billable hours and an increase in billing rates . we experienced demand for our consulting services from a diverse set of clients for both reactive and proactive projects . during fiscal 2015 , we experienced demand for our reactive services performing high profile accident and failure investigations and evaluating potentially significant product recalls . we also experienced demand for our proactive consulting services , performing design evaluations of consumer electronics and medical devices in addition to regulatory consulting for the chemical and food industries . during fiscal 2015 , we had notable performances in several practices including our materials & corrosion engineering , biomedical engineering , and polymer science & materials chemistry practices , as well as our infrastructure group . we experienced strong demand from the consumer electronics industry , as our clients broadened their product offerings and needed assistance with the use of new materials . we also continued to assist clients in the biomedical industry with regulatory approvals and assessing the field performance of their products . our infrastructure group benefited from increased commercial construction and infrastructure spending . the low growth rate in revenues was due to one of our major investigations in our environmental and health segment ending in july of 2015 and a continued step down in the level of activity in our technology development practice due to constraints on defense spending and the withdrawal of united states and united kingdom combat troops from afghanistan . the increase in revenues before reimbursements and low expense growth resulted in a 7 % increase in net income to $ 43,599,000 during fiscal 2015 as compared to $ 40,701,000 during the prior year . diluted earnings per share increased to $ 1.60 per share as compared to $ 1.47 during the prior year due to the increase in net income and the decrease to our share count from our ongoing share repurchase program . 22 we remain focused on selectively adding top talent and developing the skills necessary to expand upon our market position , providing clients with in-depth scientific research and analysis to determine what happened and how to prevent failures or exposures in the future , capitalizing on emerging growth areas , managing other operating expenses , generating cash from operations , maintaining a strong balance sheet and undertaking activities such as share repurchases and dividends to enhance shareholder value . overview of the year ended january 1 , 2016 our revenues consist of professional fees earned on consulting engagements , fees for use of our equipment and facilities , and reimbursements for outside direct expenses associated with the services performed that are billed to our clients . we operate on a 52-53 week fiscal year with each year ending on the friday closest to december 31 st . the fiscal years ended january 1 , 2016 and january 2 , 2015 included 52 weeks of activity . the fiscal year ended january 3 , 2014 included 53 weeks of activity . fiscal 2016 will end on friday , december 30 , 2016. during fiscal 2015 , billable hours increased 1.6 % to 1,125,000 as compared to 1,107,000 during fiscal 2014. the increase in billable hours was due to continued demand for our proactive and reactive consulting services . our utilization was 72 % for fiscal 2015 and 2014. technical full-time equivalent employees increased 1.3 % to 751 during fiscal 2015 as compared to 741 during fiscal 2014 due to our recruiting and retention efforts . we continue to selectively hire key talent to expand our capabilities . fiscal years ended january 1 , 2016 , and january 2 , 2015 revenues replace_table_token_4_th the increase in revenues for our engineering and other scientific segment was due to an increase in billable hours and an increase in billing rates . during fiscal 2015 , billable hours for this segment increased by 5.2 % to 835,000 as compared to 794,000 during fiscal 2014. the increase was due to demand for services in our materials & corrosion engineering , biomedical engineering , polymer science & materials chemistry practices , as well as our infrastructure group . utilization increased to 75 % for fiscal 2015 as compared to 74 % for fiscal 2014. technical full-time equivalents increased 3.5 % to 537 for fiscal 2015 from 519 for fiscal 2014 due to our recruiting and retention efforts . the decrease in revenues from our environmental and health segment was due to a decrease in billable hours . story_separator_special_tag 24 income taxes replace_table_token_5_th the decrease in our effective tax rate was due to an increase in foreign earnings in jurisdictions with lower income tax rates and a decrease in state income taxes . fiscal years ended january 2 , 2015 , and january 3 , 2014 revenues replace_table_token_6_th the increase in revenues for our engineering and other scientific segment was due to an increase in billable hours and an increase in billing rates partially offset by fiscal 2014 having one less week of activity than fiscal 2013. during fiscal 2014 , billable hours for this segment increased by 2.1 % to 794,000 as compared to 778,000 during fiscal 2013. the increase was due to demand for services in our materials & corrosion engineering , biomedical engineering , polymer science & materials chemistry , human factors , and construction consulting practices . utilization was 74 % for both fiscal 2014 and fiscal 2013. technical full-time equivalents increased 4.6 % to 519 for fiscal 2014 from 496 for fiscal 2013 due to our recruiting and retention efforts . the increase in revenues from our environmental and health segment was due to an increase in billable hours and an increase in billing rates partially offset by fiscal 2014 having one less week of activity than fiscal 2013. during fiscal 2014 , billable hours for this segment increased by 1.3 % to 313,000 as compared to 309,000 during fiscal 2013. utilization increased to 68 % for fiscal 2014 as compared to 65 % for fiscal 2013. the increase in billable hours and utilization was due to demand for our services in our environmental sciences and ecological sciences practices . technical full-time equivalents were 222 during fiscal 2014 as compared to 223 for fiscal 2013. compensation and related expenses fiscal years percent ( in thousands except percentages ) 2014 2013 change compensation and related expenses $ 183,533 $ 184,084 ( 0.3 ) % percentage of total revenues 60.2 % 62.2 % the decrease in compensation and related expenses during fiscal 2014 was due to a change in the value of assets associated with our deferred compensation plan partially offset by an increase in payroll and bonus expense . during fiscal 2014 , deferred compensation expense decreased $ 3,519,000 with a corresponding decrease to other income ( expense ) , net , as compared with the prior year due to the change in value of assets associated with our deferred compensation plan . this decrease consisted of an increase in the value of the plan assets of $ 2,525,000 during fiscal 2014 as compared to an increase in the value of the plan assets of $ 6,044,000 during fiscal 2013. payroll increased $ 1,657,000 due to a 3.1 % increase in technical full-time equivalent employees and the impact of our annual salary increases partially offset by fiscal 2014 having one less week of activity than fiscal 2013. bonuses increased $ 1,503,000 due to a corresponding increase in profitability . other operating expenses fiscal years percent ( in thousands except percentages ) 2014 2013 change other operating expenses $ 26,285 $ 25,299 3.9 % percentage of total revenues 8.6 % 8.5 % other operating expenses include facilities-related costs , technical materials , computer-related expenses and depreciation and amortization of property , equipment and leasehold improvements . the increase in other operating expenses was primarily due to an increase in occupancy expense of $ 514,000 and an increase in depreciation and amortization of $ 454,000. the increases in occupancy expense and depreciation and amortization were due to the continued expansion of our facilities to accommodate the increase in technical full-time equivalent employees . 25 reimbursable expenses fiscal years percent ( in thousands except percentages ) 2014 2013 change reimbursable expenses $ 15,495 $ 16,125 ( 3.9 ) % percentage of total revenues 5.1 % 5.4 % the decrease in reimbursable expenses was primarily due to a decrease in project-related costs in our technology development practice in our engineering and other scientific segment . the amount of reimbursable expenses will vary from year to year depending on the nature of our projects . general and administrative expenses fiscal years percent ( in thousands except percentages ) 2014 2013 change general and administrative expenses $ 15,842 $ 14,714 7.7 % percentage of total revenues 5.2 % 5.0 % the increase in general and administrative expenses during fiscal 2014 was primarily due to an increase in travel and meals of $ 561,000 and an increase in contributions of $ 506,000. the increase in travel and meals was due to a firm-wide managers ' meeting held during the third quarter of 2014. other income ( expense ) , net fiscal years percent ( in thousands except percentages ) 2014 2013 change other income and expense , net $ 4,416 $ 7,999 ( 44.8 ) % percentage of total revenues 1.4 % 2.7 % other income ( expense ) , net , consists primarily of interest income earned on available cash , cash equivalents and short-term investments , changes in the value of assets associated with our deferred compensation plan and rental income from leasing excess space in our silicon valley facility . the decrease in other income ( expense ) , net , was primarily due to the change in value of assets associated with our deferred compensation plan . this change consisted of an increase in the value of the plan assets of $ 2,525,000 during fiscal 2014 as compared to an increase in the value of the plan assets of $ 6,044,000 during fiscal 2013. income taxes replace_table_token_7_th the increase in income taxes was due to a corresponding increase in pre-tax income . the increase in our effective tax rate was due to manufacturing deductions claimed in fiscal 2013. these manufacturing deductions were non-recurring . story_separator_special_tag information . generally , a non-gaap financial measure is a numerical measure of a company 's performance , financial position or cash flow that either excludes or includes amounts that are not normally
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liquidity and capital resources replace_table_token_8_th we financed our business in fiscal 2015 through available cash and cash flows from operating activities . we invest our excess cash in cash equivalents and short-term investments . as of january 1 , 2016 , our cash , cash equivalents and short-term investments were $ 171,593,000 compared to $ 154,403,000 at january 2 , 2015. we believe our existing balances of cash , cash equivalents and short-term investments will be sufficient to satisfy our working capital needs , capital expenditures , outstanding commitments , stock repurchases , dividends and other liquidity requirements over at least the next 12 months . generally , our net cash provided by operating activities is used to fund our day-to-day operating activities . first quarter operating cash requirements are generally higher due to payment of our annual bonuses accrued during the prior year . our largest source of operating cash flows is cash collections from our clients . our primary uses of cash from operating activities are for employee-related expenditures , leased facilities , taxes , and general operating expenses including marketing and travel . net cash provided by operating activities was $ 60.5 million for fiscal 2015 as compared to $ 48.3 million and $ 61.8 million in fiscal 2014 and 2013 , respectively . the increase in net cash provided by operating activities during fiscal 2015 as compared to fiscal 2014 was primarily due to an increase in cash receipts from clients . the decrease in net cash provided by operating activities during fiscal 2014 , as compared to fiscal 2013 , was due to a decrease in cash receipts from clients . accounts receivable increased during fiscal 2014 as compared to a decrease during fiscal 2013 .
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Liquidity
| 2,634
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our predecessor means easterly partners , llc and its consolidated subsidiaries prior to the initial public offering and the formation transactions , including ( i ) all entities or interests in u.s. government properties income and growth fund l.p. , u.s. government properties income and growth fund reit , inc. and the related feeder and subsidiary entities , which we refer to , collectively , as easterly fund i , ( ii ) all entities or interests in u.s. government properties income and growth fund ii , lp , usgp ii reit lp , usgp ii ( parallel ) fund , lp and their related feeders and subsidiary entities , which we refer to , collectively , as easterly fund ii and , together with easterly fund i , we refer to as the easterly funds and ( iii ) the entities that managed the easterly funds , which we refer to as the management entities . our operating partnership holds substantially all of our assets and conducts substantially all of our business . we own approximately 84.4 % of the aggregate operating partnership units in our operating partnership . we believe that we have operated and have been organized in conformity with the requirements for qualification and taxation as a reit for u.s. federal income tax purposes commencing with our taxable year ended december 31 , 2015. since our initial public offering and the formation transactions occurred on february 11 , 2015 , the results of operations and financial condition for the entities acquired by us in connection with our initial public offering and the formation transactions are not included in certain historical financial statements . more specifically , our results of operations for the year ended december 31 , 2015 reflect the results of operation and financial condition for our predecessor together with the entities we acquired at and after the time of our initial public offering . the results of operations for each of these acquisitions are included in our consolidated statements of operations only from the date of acquisition . financial information analyzed below reflects the audited financial statements as of december 31 , 2017 , included in the f pages of this annual report on form 10-k. revision of previously reported consolidated financial statements in connection with the preparation of the company 's consolidated financial statements for the year ended december 31 , 2017 , the company identified an error in the estimated useful life utilized to amortize certain assets associated with three properties contributed at the time of the initial public offering in the first quarter of 2015. as a result of the error , depreciation and amortization expense had been overstated and thereby real estate properties , net , intangible assets , net and equity were understated . the company concluded that the amounts are not material to any of its previously issued consolidated financial statements . accordingly , the company has revised these balances in the accompanying consolidated financial statements as of december 31 , 2016 and for the years ended december 31 , 2016 and december 31 , 2015. for more information on this revision , see note 2 in the accompanying notes to consolidated financial statements , “ revision of previously reported consolidated financial statements ” included elsewhere in this annual report on form 10-k. results of operations prior to our initial public offering on february 11 , 2015 , the easterly funds , as controlled by our predecessor , qualified as investment companies pursuant to asc 946 financial services – investment companies and , as a result , our predecessor 's consolidated financial statements accounted for the easterly funds using investment company accounting based on fair value . subsequent to our initial public offering , as the properties contributed to us from the easterly funds are no longer held by funds that qualify for investment company accounting , we made a shift , in accordance with gaap to account for the properties contributed by the easterly funds and western devcon using historical cost accounting instead of investment company accounting , resulting in a significant change in the presentation of our consolidated financial statements following the formation transactions . the contribution 35 of the investments of the easterly funds controlled by our predecessor to our operating partnership pursuant to the forma tion transactions is accounted for as transactions among entities under common control . the contribution of the western devcon properties in the formation transactions has been accounted for as a business combination using the acquisition method of accounting and recognized at the estimated fair value of acquired assets and assumed liabilities on the date of such contribution . comparison of results of operations for the years ended december 31 , 2017 and december 31 , 2016 the financial information presented below summarizes the results of operations of the company for the years ended december 31 , 2017 and 2016. replace_table_token_11_th revenues total revenue consists primarily of rental income from our properties , tenant reimbursements for real estate taxes , projects and certain other expenses , and project management income . total revenue increased $ 26.1 million to $ 130.7 million for the year ended december 31 , 2017 compared to $ 104.6 million for the year ended december 31 , 2016. the increase was primarily attributable to an additional $ 24.2 million of revenue from the four operating properties acquired since december 31 , 2016 as well as a full period of operations from the seven operating properties acquired during the year ended december 31 , 2016 , a $ 1.6 million increase in rental income and other tenant reimbursements from properties owned in both periods , and a $ 0.2 million increase in tenant project reimbursements and the associated project management income . operating expenses total expenses increased by $ 17.0 million to $ 107.9 million for the year ended december 31 , 2017 compared to $ 90.9 million for the year ended december 31 , 2016 . story_separator_special_tag after the end of the performance period , the number of ltip units , both vested and unvested , that ltip award recipients have earned , if any , are entitled to receive dividends in an amount per ltip unit equal to dividends , both regular and special , payable per common unit of our operating partnership . story_separator_special_tag for the year ended december 31 , 2016 primarily includes $ 166.6 million in real estate acquisitions related to the purchase of seven operating properties and one property placed in development . net cash used for investing activities for the year ended december 31 , 2015 includes $ 170.2 million related to the purchase of seven new properties purchased subsequent to our initial public offering offset by $ 6.2 million in cash assumed in formation . financing activities the company generated $ 119.5 million and $ 111.3 million in cash from financing activities during the years ended december 31 , 2016 and 2015 , respectively . net cash provided by financing activities for the year ended december 31 , 2016 includes $ 110.0 million in proceeds from the issuance of shares of our common stock and $ 57.8 million in net draw downs on our senior unsecured 43 credit facility offset by $ 40.3 million in dividends and distributions paid , $ 4.2 million in offering costs , $ 2.9 million in mortgage debt repayment and $ 0.9 million in additional deferred financing costs associated with our senior unsecured term loan facility . net cash provided by financing activities for the year ended december 31 , 2015 incl udes $ 193.5 million net proceeds from our initial public offering , $ 75.6 million of contributions related to the private placement that occurred simultaneously with our initial public offering , and $ 154.4 million in credit facility draws offset by $ 293.4 m illion in debt repayment as part of the formation transaction , $ 5.4 million in distributions , $ 3.5 million in deferred financing costs paid , $ 21.5 million in dividends and $ 2.0 million of offering costs . additionally , we entered into $ 15.7 million of mort gage debt upon the acquisition of dea-pleasanton in the fourth quarter of 2015. non-gaap financial measures we use and present funds from operations , or ffo , and ffo , as adjusted as supplemental measures of our performance . the summary below describes our use of ffo and ffo , as adjusted , provides information regarding why we believe these measures are meaningful supplemental measures of our performance and reconciles these measures from net income ( loss ) , presented in accordance with gaap . funds from operations and funds from operations , as adjusted ffo , is a supplemental measure of our performance . we present ffo calculated in accordance with the current national association of real estate investment trusts , or nareit , definition . in addition , we present ffo , as adjusted for certain other adjustments that we believe enhance the comparability of our ffo across periods and to the ffo reported by other publicly traded reits . ffo is a supplemental performance measure that is commonly used in the real estate industry to assist investors and analysts in comparing results of reits . ffo is defined by nareit as net income ( loss ) , calculated in accordance with gaap , excluding gains or losses from sales of property and impairment losses on depreciable real estate , plus real estate depreciation and amortization , and after adjustments for unconsolidated partnerships and joint ventures . we present ffo because we consider it an important supplemental measure of our operating performance , and we believe it is frequently used by securities analysts , investors and other interested parties in the evaluation of reits , many of which present ffo when reporting results . we adjust ffo to present ffo , as adjusted as an alternative measure of our operating performance , which , when applicable , excludes the impact of acquisition costs , straight-line rent , above-/below-market leases , non-cash interest expense and non-cash compensation . by excluding income and expense items such as straight-line rent , above-/below-market leases , non-cash interest expense , non-cash compensation and other non-cash items including amortization of lease inducements from ffo , as adjusted , we believe we provide useful information as these items have no cash impact . in addition , by excluding acquisition related costs we believe ffo , as adjusted provides useful information that is comparable across periods and more accurately reflects the operating performance of our properties . ffo and ffo , as adjusted are presented as supplemental financial measures and do not fully represent our operating performance . other reits may use different methodologies for calculating ffo and ffo , as adjusted or use other definitions of ffo and ffo , as adjusted and , accordingly , our presentation of these measures may not be comparable to other reits . neither ffo nor ffo , as adjusted is intended to be a measure of cash flow or liquidity . please refer to our financial statements , prepared in accordance with gaap , for purposes of evaluating our financial condition , results of operations and cash flows . 44 the following table sets forth a reconciliation of our net income to ffo and ffo , as adjusted for the years ended december 31 , 2017 , 2016 , and 2015 ( in thousands ) : replace_table_token_19_th factors that may influence future results of operations formation transactions while the easterly funds , which were controlled by our predecessor , qualified for investment company accounting , following our initial public of fering , we have used historical cost accounting instead of investment company accounting to account for the properties owned by the easterly funds . moving from investment company accounting to historical cost accounting resulted in a significant change in the presentation of our consolidated financial statements following the
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cash flow as noted above , following the completion of our initial public offering , our predecessor no longer uses investment company accounting to account for the assets contributed from the private real estate funds that our predecessor controlled . instead , we now account for these assets using historical cost accounting . moving from investment company accounting to historical cost accounting has resulted in a significant change in the classification of our cash flows . we indirectly own all of the assets of the easterly funds acquired in the formation transaction s and we account for these assets using historical cost accounting . the classification of our cash flows following the formation transactions differs significantly from , and is not comparable with , the historical classification of our predecessor 's cash flows . for example , the purchase and sale of investments by the easterly funds historically was treated as an operating activity per investment company accounting and such purchases and sales were shown net of any related mortgage debt entered into upon acquisition or repaid upon sale . in addition , the net income for our predecessor historically reflected significant unrealized gains or losses relating to properties owned by these funds . any unrealized gains or losses are reversed to arrive at net cash flow provided by or used in operating activities . gains or losses arising from sales of properties owned by us directly or through our consolidated subsidiaries are only recognized by us when realized . once historical cost accounting is applied , the acquisition of investments and the proceeds of sales are reflected in net cash provided by investing activities .
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Liquidity
| 6,543
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the company 's effective tax rate was lower than the federal statutory rate of 35 % primarily due to pre-tax losses in the united states and corporate structure realignment initiatives in various non-us jurisdictions . since the date of the acquisition , as part of its corporate initiatives of integrating the enterprise business , the company has been executing its integration plan for the enterprise business ( the “ integration plan ” ) . the company anticipates completing the integration plan as soon as practicable and expects that the integration plan will allow the combined businesses to achieve further synergies and cost savings associated with the acquisition . as part of the integration plan , the company began realigning certain acquired assets of the enterprise business with and into the company 's corporate structure and business model . 2014 compared to 2013 net sales growth of 60.9 % for the twelve months ended december 31 , 2014 as compared to 2013 was primarily a result of the acquisition of the enterprise business and higher sales in all regions and product categories . the enterprise business contributed $ 476 million or 75.3 % of the increase in total net sales , increased gross profit by $ 180 million or 65.7 % , increased recurring operating expenses by $ 185 million or 83.1 % , and non-recurring operating expenses by $ 135 million or 108.5 % . included within the total recurring operating expenses were $ 47 million of amortization expense as a result of the acquisition . included within non-recurring operating expenses were $ 127 million of acquisition related costs also as a result of the acquisition and $ 6 million of exit and restructuring costs related to organizational redesign . included in the total enterprise impacts of 2014 are the following purchase accounting adjustments : $ 6 million reduction in revenue related to the valuation of service contracts acquired , $ 29 million increase to cost of sales related to a step up in value of inventory acquired , and $ 35 million increase in depreciation and amortization expenses . net sales , excluding the impact of the enterprise business , increased by $ 157 million or 15.1 % in 2014 versus 2013. the company experienced net sales growth across all regions and all product categories in 2014 with notable increases in supplies and service contracts , and sales of tabletop , desktop , and mobile printers . sales growth of $ 24 million was also derived from the december 2013 acquisition of hart systems , llc . gross margin as a percent of sales , excluding the effect of the enterprise business , was 50.0 % for the year ended december 31 , 2014 compared to 48.5 % in the comparable year ended december 31 , 2013. the improvement in gross margin reflected the favorable impact of higher sales , as well as product cost reductions on printers and supplies , and the december 2013 acquisition of hart systems llc . the gross profit increase in 2014 versus 2013 was primarily due to the higher sales , improved gross margin percentage , and the december 2013 acquisition of hart systems llc . operating expenses for the year ended december 31 , 2014 , excluding the effect of the enterprise business , were $ 369 million compared to $ 343 million in the prior year . as a percentage of sales , operating expenses , excluding the enterprise business , were 31.0 % for the year ended december 31 , 2014 compared to 33.1 % for the year ended december 31 , 2013 primarily due to a higher rate of sales growth than the rate of increase in expenses . operating income for the year ended december 31 , 2014 , excluding the effect of the enterprise business , increased $ 68 million or 42.0 % compared to the prior year . the increase is primarily due to higher sales and gross margin percentage improvement , which resulted in a gross profit increase of $ 94 million . this was partially offset by higher operating expenses to support business growth . the company recognized a foreign exchange loss of $ 9 million for 2014 as a result of changes in the value of non-us dollar assets and liabilities that were not hedged during the period . zebra did not hedge the enterprise monetary assets until the second quarter of 2015. interest expense was $ 62 million for the year ended 2014 compared to a minimal amount in 2013 mainly reflecting the indebtedness incurred related to the acquisition . there is also $ 5 million of forward swap loss included in interest expense in 2014. in 2014 , the company recognized a tax benefit of $ 15 million compared to tax expense of $ 30 million for 2013. the company 's effective tax rates were ( 95 ) % and 18.1 % as of december 31 , 2014 and december 31 , 2013 , respectively . the 2014 29 rate benefit is primarily driven by foreign earnings taxed at lower rates and a domestic pre-tax loss , which is attributable to third-party interest expense and acquisition expenses . results of operations by segment the following commentary should be read in conjunction with the financial results of each operating business segment as detailed in note 21 segment information and geographic data in the notes to the consolidated financial statements included in this form 10-k. the segment results exclude purchase accounting adjustments , amortization , acquisition , integration , and exit and restructuring costs . legacy zebra segment ( amounts in millions , except percentages ) replace_table_token_10_th 2015 compared to 2014 net sales for 2015 increased $ 92 million or 7.7 % compared to 2014. net sales growth compared to 2014 on a constant currency basis was $ 149 million or 12.5 % . story_separator_special_tag we believe that the estimates , judgments and assumptions we used are reasonable , based upon the information available at that time . our estimates and assumptions affect the reported amounts in our consolidated financial statements . see note 2 summary of significant accounting policies in the notes to consolidated financial statements included in this form 10-k. recently issued accounting pronouncements see note 2 summary of significant accounting policies in the notes to consolidated financial statements included in this form 10-k. 31 story_separator_special_tag term loan 2,035 less : debt issuance costs ( 26 ) less : unamortized discounts ( 47 ) total outstanding debt $ 3,012 private offering on october 15 , 2014 , the company completed a private offering of $ 1.05 billion in 7.25 % senior notes due october 15 , 2022. interest on the senior notes is payable in cash on april 15 and october 15 of each year . the indenture covering the senior notes contains certain covenants limiting among other things the ability of the company and its restricted subsidiaries , with certain exceptions as described in the indenture , to ; ( i ) incur indebtedness or issue certain preferred stock ; ( ii ) incur liens ; ( iii ) pay dividends or make distributions in respect of capital stock ; ( iv ) purchase or redeem capital stock ; ( v ) make investments or certain other restricted payments ; ( vi ) sell assets ; ( vii ) issue or sell stock of restricted subsidiaries ; ( viii ) enter into transactions with stockholders or affiliates ; or ( ix ) effect a consolidation or merger . on december 31 , 2015 , the company was in compliance with the covenants . credit facilities on october 27 , 2014 , the company entered into a credit agreement , which provides for a term loan of $ 2.2 billion ( `` term loan `` ) and a revolving credit facility of $ 250 million ( `` revolving credit facility `` ) . borrowings under the term loan bear interest at a variable rate plus an applicable margin , subject to an all-in floor of 4.75 % . as of december 31 2015 , the term loan interest rate was 4.75 % . interest payments are payable quarterly . the october 2012 revolving credit agreement for $ 250 million with a syndicate of banks was terminated upon execution of this credit agreement . the company has entered into interest rate swaps to manage interest rate risk on its long-term debt . see note 13 derivative instruments in the notes to consolidated financial statements in this form 10-k for further details . the credit agreement requires the company to prepay the term loan and revolving credit facility , under certain circumstances or transactions defined in the credit agreement . also , the company may voluntarily prepay its obligations under the term loan at any time in whole or in part , without premium or penalty . the company has made such optional principal prepayments of $ 165 million in 2015. in february 2016 , the company made additional optional principal prepayments of $ 80 million . unless satisfied by further optional prepayments , the company is required to make a scheduled principal payment of $ 1.99 billion due on october 27 , 2021. the revolving credit facility is available for working capital and other general corporate purposes including letters of credit . the amount ( including letters of credit ) shall not exceed $ 250 million . as of december 31 , 2015 , the company had established letters of credit totaling $ 3 million , which reduced funds available for other borrowings under the agreement to $ 247 million . the revolving credit facility will mature and the commitments thereunder will terminate on october 27 , 2019. borrowings under the revolving credit facility bear interest at a variable rate plus an applicable margin . the applicable margin for borrowings under the revolving credit facility ranges from 2.25 % to 2.75 % depending on the company 's consolidated total secured net leverage ratio , which is evaluated on a quarterly basis . interest payments are payable quarterly . as of december 31 2015 , the company did not have any borrowings against the revolving credit facility . the revolving credit facility contains certain covenants limiting among other things , the ability of the company and its restricted subsidiaries , with certain exceptions as described in the credit agreement , to : ( i ) incur indebtedness , make guarantees or issue certain equity securities ; ( ii ) pay dividends on its capital stock or redeem , repurchase or retire its capital stock ; ( iii ) make certain investments , loans and acquisitions ; ( iv ) sell certain assets or issue capital stock of restricted subsidiaries ; ( v ) create liens or engage in sale-leaseback transactions ; ( vi ) merge , consolidate or transfer or dispose of substantially all of their assets ; ( vii ) engage in certain transactions with affiliates ; ( viii ) alter the business it conducts ; ( ix ) amend , prepay , redeem 33 or purchase subordinated debt ; and ( x ) enter into agreements limiting subsidiary dividends and distributions . the revolving credit facility also requires the company to comply with a financial covenant consisting of a quarterly maximum consolidated total secured net leverage ratio , ( as defined in the credit agreement ) . this test is only required to be performed at the end of the fiscal quarter and when 20 % of the commitments under the revolving credit facility have been drawn and remain outstanding . the term loan and obligations under the revolving credit facility are collateralized by a security interest in substantially all of the company 's assets as defined in the security agreement and guaranteed by its direct and indirect wholly-owned existing and future domestic
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net cash used in investing activities during 2015 included additional consideration of $ 51 million paid to msi in relation to the opening cash balance and working capital adjustments . in addition , there were capital expenditures of $ 122 million in 2015 compared to $ 39 million in 2014. the increase in capital expenditures in 2015 as compared to 2014 consisted primarily of investments in it infrastructure , software applications , facilities , engineering , development , test equipment , and production and tooling equipment . reflecting the effect of the acquisition on the company 's capital structure , net cash used for investing activities during 2014 included $ 3.4 billion paid to msi and purchases of marketable securities of $ 651 million offset by $ 644 million and $ 336 million of proceeds from the sale and maturity of investments in marketable securities , respectively . net cash used in financing activities during 2015 consisted primarily of principal repayments of $ 165 million under the term loan compared to proceeds of $ 3.2 billion from the issuance of long-term debt to fund the acquisition during 2014. additionally , proceeds received from the exercise of stock options and employee stock purchase plan purchases ( `` espp '' ) were $ 17 million this year compared to $ 26 million in 2014 reflecting decreased option exercises and espp purchases . the taxes paid related to the net share settlement of equity awards were $ 13 million in 2015 compared to $ 5 million in 2014 reflecting increased restricted stock trading activity . 2014 vs. 2013 cash flows from operations increased $ 54 million during 2014 to $ 248 million .
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Liquidity
| 9,747
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the average balance of deposits increased by $ 26.6 million to $ 240.3 million for 2015 compared to $ 213.7 million for 2014. as mentioned above , the average cost of our deposits decreased during 2015. interest expense on borrowings was $ 2.0 million for the year ended december 31 , 2015 , a decrease of $ 188 thousand , or 9 % , from the interest expense on borrowings of $ 2.1 million incurred during the year ended december 31 , 2014. the decrease in interest expense on borrowings primarily reflected a decrease of $ 154 thousand in interest expense on fhlb advances and a decrease of $ 34 thousand in interest expense on the debentures as a result of a partial repayment in late 2014. the decrease of $ 154 thousand in interest expense on fhlb advances was primarily due to a decrease of 20 basis points in the average cost of fhlb advances . the average balance of fhlb advances was $ 80.9 million in 2015 compared to $ 80.3 million in 2014. analysis of net interest income net interest income is the difference between income on interest-earning assets and the expense on interest-bearing liabilities . net interest income depends upon the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them . the following table sets forth average balances , average yields and costs , and certain other information for the years indicated . all average balances are daily average balances . the yields set forth below include the effect of deferred loan fees , deferred origination costs , and discounts and premiums that are amortized or accreted to interest 31 income or expense . we do not accrue interest on loans that are on non-accrual status ; however , the balance of these loans is included in the total average balance , which has the effect of reducing average loan yields . replace_table_token_18_th ( 1 ) amount is net of deferred loan fees , loan discounts and loans in process , and includes deferred origination costs , loan premiums and loans receivable held for sale . 32 ( 2 ) includes non-accrual interest of $ 246 thousand , reflecting interest recoveries on non-accrual loans that were paid off , and deferred cost amortization of $ 288 thousand for the year ended december 31 , 2015 . ( 3 ) includes non-accrual interest of $ 260 thousand , reflecting interest recoveries on non-accrual loans that were paid off , and deferred cost amortization of $ 211 thousand for the year ended december 31 , 2014 . ( 4 ) includes compounding on past due interest . interest on the debentures was brought current in october 2014 . ( 5 ) includes default rate margin that was in effect up to august 22 , 2013 , when the senior debt was restructured . no interest expense was recognized on the senior debt post restructuring because the floating interest rate on the remaining modified loan did not exceed the floor rate of 6 % post modification . all remaining senior debt was paid off in october 2014 . ( 6 ) net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities . ( 7 ) net interest rate margin represents net interest income as a percentage of average interest-earning assets . 33 changes in our net interest income are a function of changes in both rates and volumes of interest-earning assets and interest-bearing liabilities . the following table sets forth information regarding changes in our interest income and expense for the years indicated . information is provided in each category with respect to ( i ) changes attributable to changes in volume ( changes in volume multiplied by prior rate ) , ( ii ) changes attributable to changes in rate ( changes in rate multiplied by prior volume ) , and ( iii ) the total change . the changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate . replace_table_token_19_th loan loss provision recapture for the year ended december 31 , 2015 , we recorded a loan loss provision recapture of $ 3.7 million compared to $ 2.9 million for the year ended december 31 , 2014. the loan loss provision recapture during 2015 was primarily due to the continued improvement in our loan loss experience , as well as the improved asset quality in our loan portfolio as a result of reductions in our problem loans and in the balances of certain loan classes that we believe bear higher risk , such as church and commercial real estate loans . see `` allowance for loan losses `` for additional information . non-interest income non-interest income for the year ended december 31 , 2015 totaled $ 2.9 million compared to $ 1.1 million for the year ended december 31 , 2014. the $ 1.8 million increase in non-interest income during 2015 was primarily due to a gain of $ 1.8 million on the sale of $ 164.1 million of loans in 2015 compared to a gain of $ 19 thousand on the sale of $ 3.3 million of loans in 2014. we also received a cdfi grant that was 34 $ 155 thousand larger than the grant that we received in 2014 and recorded $ 167 thousand of income from a settlement of a legal matter involving a customer . story_separator_special_tag at december 31 , 2015 , npls totaled $ 4.2 million , compared to $ 8.9 million at december 31 , 2014. the decrease of $ 4.7 million in npls was primarily due to payoffs of $ 1.4 million , transfers to reo of $ 1.2 million , a sale of $ 857 thousand , returns to accrual status of $ 886 thousand , repayments of $ 544 thousand and charge-offs of $ 89 thousand , which were partially offset by the placement of a church loan for $ 394 thousand into non-accrual status . in connection with our review of the adequacy of our alll , we track the amount and percentage of our npls that are paying currently , but nonetheless must be classified as npl for reasons unrelated to payments , such as lack of current financial information and an insufficient period of satisfactory performance . as of december 31 , 2015 , $ 3.2 million , or 76 % , of our total npls of $ 4.2 million were current in their payments . also , in determining the alll , we consider the ratio of the alll to npls , which increased to 114.22 % at december 31 , 2015 from 95.52 % at december 31 , 2014. when reviewing the adequacy of the alll , we also consider the impact of charge-offs , including the changes and trends in loan charge-offs . gross loan charge-offs during 2015 were $ 89 thousand compared to $ 693 thousand during 2014. the charge-offs during 2015 were primarily due to impairment losses on foreclosed church loans and a delinquent single-family residential real estate loan that was fully written off . in determining charge-offs , we update our estimates of collateral values on npls by obtaining new appraisals at least every nine months . if the estimated fair value of the loan collateral less estimated selling costs is less than the recorded investment in the loan , a charge-off for the difference is recorded to reduce the loan to its estimated fair value , less estimated selling costs . therefore , certain losses inherent in our total npls are recognized periodically through charge-offs . the impact of updating these estimates of collateral value and recognizing any required charge-offs is to increase charge-offs and reduce the alll required on these loans . as of december 31 , 2015 , we had written down 70 % of our npls to estimated fair value less estimated selling costs . the remaining 30 % of our npls at december 31 , 2015 were reported at cost because the fair value of collateral less estimated selling costs exceeded the recorded investment in the loan . 37 recoveries during 2015 totaled $ 152 thousand and were primarily related to the payoff of a non-accrual single family loan and repayments on b notes which had been fully written off as part of the restructured a/b notes . recoveries during 2014 totaled $ 1.9 million and were primarily due to payoffs of two non-accrual loans secured by church properties and two commercial loans that had been fully written off in late 2011 and a settlement of a loan , which had been previously written down , through an exchange for property received in foreclosure , the fair value of which exceeded the cost basis of the related loan . impaired loans at december 31 , 2015 were $ 15.8 million , compared to $ 23.5 million at december 31 , 2014. specific reserves for impaired loans were $ 995 thousand , or 6.30 % of the aggregate impaired loan amount at december 31 , 2015 , compared to $ 1.5 million , or 6.40 % , at december 31 , 2014. excluding specific reserves for impaired loans , our coverage ratio ( general allowance as a percentage of total non-impaired loans ) decreased to 1.31 % at december 31 , 2015 , from 2.66 % at december 31 , 2014. the decrease in our coverage ratio reflected a decline in our historical charge-offs and the continued improvements in our asset quality . we believe that the alll is adequate to cover probable incurred losses in the loan portfolio as of december 31 , 2015 , but there can be no assurance that actual losses will not exceed the estimated amounts . in addition , the occ and the fdic periodically review the alll as an integral part of their examination process . these agencies may require an increase in the alll based on their judgments of the information available to them at the time of their examinations . real estate owned reo decreased by $ 1.7 million to $ 360 thousand at december 31 , 2015 , from $ 2.1 million at december 31 , 2014. during 2015 , three church loans were foreclosed and the properties securing the loans were transferred to reo at fair values totaling $ 1.2 million . four reo properties were sold during 2015 for net proceeds of $ 2.9 million and a net loss of $ 45 thousand . at december 31 , 2015 , the bank 's reo consisted of one church building . deposits deposits totaled $ 272.6 million at december 31 , 2015 , up $ 54.7 million from december 31 , 2014. during 2015 , certificates of deposit increased by $ 46.2 million and represented 67 % and 62 % of total deposits at december 31 , 2015 and 2014 , respectively . core deposits ( now , demand , money market and passbook accounts ) increased by $ 8.5 million during 2015 and represented 33 % and 38 % of total deposits at december 31 , 2015 and 2014 , respectively . a long-time customer deposited $ 12.5 million in his money market and now accounts , and opened a $ 40.0 million two-year certificate of deposit during the third quarter of 2015. this relationship accounted for approximately 17 % of our deposits at december 31
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the bank 's liquid assets at december 31 , 2015 consisted of $ 67.8 million in cash and cash equivalents and $ 13.4 million in securities available-for-sale that were not pledged , compared to $ 20.8 million in cash and cash equivalents and $ 15.9 million in securities available-for-sale that were not pledged at december 31 , 2014. the high levels of liquid assets as of december 31 , 2015 primarily reflect the cash from new retail deposits . currently , we believe that the bank has sufficient liquidity to support growth over the foreseeable future . the company 's liquidity , separate from the bank , is based primarily on the proceeds from financing transactions , such as the private placements completed in august 2013 and october 2014. the company has not been able to obtain funds from the bank since 2010 as the order , prior to its termination in november 2015 , placed limitations on the bank , including prohibition of the payment of dividends by the bank without prior regulatory approval . the bank is currently under no prohibition to pay dividends , but is subject to restrictions as to the amount of the dividends based on normal regulatory guidelines . the company recorded consolidated net cash inflows from operating activities of $ 14.2 million and $ 1.3 million during the year ended december 31 , 2015 and 2014 , respectively . net cash inflows from operating activities during 2015 were primarily attributable to net proceeds from the sale of loans . the company recorded consolidated net cash outflows from investing activities of $ 7.9 million and $ 54.4 million during the year ended december 31 , 2015 and 2014 , respectively . net cash outflows from investing activities during 2015 were primarily attributable to the purchase of single-family loans during the fourth quarter . 39 the company recorded consolidated net cash inflows from financing activities of $ 40.7 million and $ 15.7 million during the year ended december 31 , 2015 and 2014 , respectively . net cash inflows from financing activities during 2015 were primarily attributable to the increase in deposits .
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Liquidity
| 10,631
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the average product selling price was $ 24.33 per pound in fiscal 2020 , an increase of 4.8 % , or $ 1.12 , from $ 23.21 per pound in fiscal 2019. the average product selling price per pound increased as a result of a higher value product mix and previous price increases as well as other pricing considerations ( such as customer mix , timing of customer agreement adjustors , etc . ) , which increased average selling price per pound by approximately $ 0.95 and $ 0.44 , respectively , partially offset by lower raw material market prices , which decreased the average selling price per pound by approximately $ 0.27. sales to the aerospace market were $ 192.0 million in fiscal 2020 , a decrease of 25.6 % from $ 258.1 million in fiscal 2019 , due to a 29.7 % decrease in volume , partially offset by a 5.8 % increase in the average selling price per pound . demand in the aerospace market declined primarily due to the covid-19 pandemic , but also due to the continued issues with the boeing 737 max . the airline industry and the commercial aerospace industry have been dramatically impacted by the pandemic . demand has also been impacted by the elevated amount of inventory throughout the aerospace supply chain , the significant number of undelivered new planes already built ( primarily the boeing 737 max ) and the significant number of planes taken out of service . aftermarket mro sales have also been significantly impacted . the average selling price per pound increase reflects a higher value product mix and other pricing considerations , which increased average selling price per pound by approximately $ 1.68 , partially offset by a change in market prices of raw materials , which decreased average selling price per pound by approximately $ 0.23 . 50 sales to the chemical processing market were $ 63.2 million in fiscal 2020 , a decrease of 29.5 % from $ 89.7 million in fiscal 2019 , due to a 34.0 % decrease in volume , partially offset by a 6.8 % , or $ 1.41 , increase in the average selling price per pound . volumes decreased in fiscal 2020 primarily due to decreased demand cause by covid-19 , low oil prices and a decrease in special projects . the average selling price per pound increase reflects a higher value product mix and other pricing considerations , which increased average selling price per pound by approximately $ 1.70 , partially offset by lower market raw material prices , which decreased average selling price per pound by approximately $ 0.29. sales to the industrial gas turbine market were $ 56.6 million in fiscal 2020 , a decrease of 4.8 % from $ 59.4 million in fiscal 2019 , due to a 2.1 % decrease in volume combined with a 2.8 % , or $ 0.48 , decrease in the average selling price per pound . the decrease in volume was primarily due to customers ' precautionary purchasing patterns relating to covid-19 , combined with small/medium frame engine builds declining due to the slow-down in the oil industry . the company 's share gain initiative continued , which partially offset these negative factors . however , given continued challenging economic conditions , shipments were not consistent quarter to quarter . the decrease in average selling price per pound primarily reflects lower market raw material prices and other pricing considerations which decreased the average selling price per pound by approximately $ 0.61 , partially offset by a higher-value product mix , which increased the average selling price per pound by approximately $ 0.13. sales to other markets were $ 45.1 million in fiscal 2020 , a decrease of 22.2 % from $ 57.9 million in fiscal 2019 , due to a 38.5 % decrease in volume , partially offset by a 26.5 % , or $ 7.50 , increase in average selling price per pound . the decrease in volume is due primarily to decreased demand resulting from the effects of the covid-19 pandemic and lower oil prices ; decreases were largest in the flue-gas desulfurization , automotive and oil and gas markets . the increase in average selling price reflects a higher-value product mix , which increased average selling price per pound by approximately $ 8.24 , partially offset by lower market raw material prices and other pricing considerations , which decreased average selling price per pound by approximately $ 0.74. other revenue . other revenue was $ 23.7 million in fiscal 2020 , a decrease of 5.5 % from $ 25.1 million in fiscal 2019. the decrease in other revenue is primarily attributable to decreased toll conversion services . cost of sales . cost of sales was $ 335.9 million , or 88.3 % of net revenues , in fiscal 2020 compared to $ 424.7 million , or 86.6 % of net revenues , in fiscal 2019. cost of sales in fiscal 2020 decreased by $ 88.8 million primarily due to lower volumes and lower raw material prices combined with the company 's actions taken to lower its breakeven point and lower costs in response to covid-19 . during the second half of fiscal 2020 , the company took safety measures to reduce the risk of spread of covid-19 , which actions included plant shutdowns during the month of april as well as voluntary and involuntary layoffs . the company also reduced its salaried and hourly workforce and incurred approximately $ 0.7 million in severance expenses . story_separator_special_tag however , despite these cost reduction measures , fixed costs did not decline in line with production volumes , which required directly expensing a portion of these fixed costs in the amount of approximately $ 11.4 million in fiscal 2020. gross profit . as a result of the above factors , gross margin was $ 44.6 million for fiscal 2020 , a decrease of $ 20.9 million from $ 65.5 million in fiscal 2019. gross margin as a percentage of net revenue decreased to 11.7 % in fiscal 2020 as compared to 13.4 % in fiscal 2019. this percentage decrease was primarily due to the above-mentioned $ 11.4 million direct charge to cost of goods sold and other period costs spread over lower volumes . selling , general and administrative expense . selling , general and administrative expense was $ 40.3 million for fiscal 2020 , a decrease of $ 3.9 million , or 8.8 % , from $ 44.2 million in fiscal 2019. this decrease is primarily attributable to lower management incentive expenses of $ 1.9 million along with cost saving measures taken in response to covid-19 , including salary reductions , temporary layoffs , and workforce reductions , partially offset by severance expenses of $ 0.2 million . selling , general and administrative expense as a percentage of net revenues increased to 10.6 % for fiscal 2020 compared to 9.0 % for the same period of fiscal 2019 due to lower revenue . research and technical expense . research and technical expense was $ 3.7 million , or 1.0 % of revenue , for fiscal 2020 , compared to $ 3.6 million , or 0.7 % of net revenue , in fiscal 2019 . 51 operating income/ ( loss ) . as a result of the above factors , operating income in fiscal 2020 was $ 0.6 million , compared to operating income of $ 17.7 million in fiscal 2019. nonoperating retirement benefit expense . nonoperating retirement benefit expense was $ 6.8 million in fiscal 2020 , compared to $ 3.4 million in the same period of fiscal 2019. the increase in expense was primarily driven by lower discount rates in the september 30 , 2019 valuation which resulted in higher retirement liabilities and ultimately higher expense for fiscal 2020 . income taxes . income tax benefit was $ 1.0 million during fiscal 2020 , a difference of $ 4.6 million from an expense of $ 3.6 million in the same period of fiscal 2019 , driven by a decrease in income before taxes of $ 20.9 million as well as a valuation allowance recorded during fiscal 2020 of $ 1.0 million on tax credits that are not expected to be realized prior to expiration . net income/ ( loss ) . as a result of the above factors , net loss for fiscal 2020 was $ ( 6.5 ) million , a decrease of $ 16.2 million from net income $ 9.7 million in fiscal 2019. liquidity and capital resources comparative cash flow analysis ( 2019 to 2020 ) the company had cash and cash equivalents of $ 47.2 million at september 30 , 2020 , inclusive of $ 11.0 million that was held by foreign subsidiaries in various currencies , compared to $ 31.0 million at september 30 , 2019. additionally , there were zero borrowings against the line of credit outstanding as of september 30 , 2020. during fiscal 2020 , the company 's primary sources of cash were cash on-hand and the revolving credit facility which was drawn against during the first six months of fiscal 2020 but repaid in full by september 30 , 2020. net cash provided by operating activities was $ 36.2 million in fiscal 2020 compared to net cash provided by operating activities of $ 43.0 million in fiscal 2019 , a decrease of $ 6.8 million . the decrease was primarily driven by a net loss of $ 6.5 million during fiscal 2020 compared to net income of $ 9.7 million during fiscal 2019 , partially offset by changes in working capital . during fiscal 2019 , changes in accounts receivable and accounts payable resulted in a net cash outflow of $ 5.2 million . during fiscal 2020 , changes in accounts receivable and accounts payable resulted in a net cash inflow of $ 5.5 million . net cash used in investing activities was $ 9.4 million in fiscal 2020 , which was lower than cash used in investing activities during the same period of fiscal 2019 of $ 10.0 million , driven by lower additions to property , plant and equipment . net cash used in financing activities was $ 11.1 million in fiscal 2020 , which was slightly lower than cash used in financing activities during fiscal 2019 of $ 11.3 million , as a result of , among other factors , higher proceeds received from the exercise of stock options during fiscal 2020 as compared to fiscal 2019. dividends paid of $ 11.1 million in fiscal 2020 , were comparable to the prior year . additionally , during fiscal 2020 , the company borrowed $ 30.0 million from the revolving credit facility , which was fully repaid by the end of the fiscal year . future sources of liquidity the company 's sources of liquidity for fiscal 2021 are expected to consist primarily of cash generated from operations ( including reduction of inventory ) , cash on-hand and , if needed , borrowings under our new u.s. revolving credit facility .
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in many cases , the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles , with no need for management 's judgment in their application . there are also areas in which management 's judgment in selecting any available alternative would not produce a materially different result . revenue recognition the company recognizes revenue when performance obligations under the terms of customer contracts are satisfied which occurs when control of the goods has been transferred to the customer and services have been performed . allowances for sales returns are recorded as a component of net sales in the periods in which the related sales are recognized . the company determines this allowance based on historical experience . additionally , the company recognizes revenue attributable to an up-front fee received from titanium metals corporation ( “ timet ” ) as a result of a twenty-year agreement , entered into on november 17 , 2006 to provide conversion services to timet . see note 15 deferred revenue for a description of accounting treatment relating to this up-front fee . pension and postretirement benefits the company has defined benefit pension and postretirement plans covering most of its current and former employees . significant elements in determining the assets or liabilities and related income or expense for these plans are the expected return on plan assets ( if any ) , the discount rate used to value future payment streams , expected trends in health care costs and other actuarial assumptions . annually , the company evaluates the significant assumptions to be used to value its pension and postretirement plan assets and liabilities based on current market conditions and expectations of future costs . if actual results are less favorable than those projected by management , additional expense may be required in future periods . the selection of the u.s. pension plan 's ( the plan ) assumption for the expected long-term rate of return on plan assets is based upon the plan 's target allocation of 60 % equities and 40 % bonds , and the expected rate of return for
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ROO
| 4,876
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given these risks and uncertainties , investors should not place undue reliance on forward-looking statements as a prediction of actual results . investors should also refer to our quarterly reports on form 10-q for future periods and current reports on form 8-k as we file them with the sec , and to other materials we may furnish to the public from time to time through forms 8-k or otherwise . overview we are an externally advised and managed real estate investment company that owns a diverse portfolio of income-producing properties and land held for development . the company 's portfolio of income-producing properties includes residential apartment communities , office buildings and other commercial properties . our investment strategy includes acquiring existing income-producing properties as well as developing new properties on land already owned or acquired for a specific development project . we acquire land primarily in in-fill locations or high-growth suburban markets . we are an active buyer and seller and during 2012 sold $ 95.4 million of land and income-producing properties . as of december 31 , 2012 , we owned 8,553 units in 47 residential apartment communities , 13 commercial properties comprising approximately 3.4 million rentable square feet . in addition , we own 4,133 acres of land held for development . the company currently owns income-producing properties and land in 10 states as well as in the u.s. virgin islands . we finance our acquisitions primarily through operating cash flow , proceeds from the sale of land and income-producing properties and debt financing primarily in the form of property-specific first-lien mortgage loans from commercial banks and institutional lenders . we finance our development projects principally with short-term , variable interest rate construction loans that are converted to long-term , fixed rate amortizing mortgages when the development project is completed and occupancy has been stabilized . the company will , from time to time , also enter into partnerships with various investors to acquire income-producing properties or land and to sell interests in certain of its wholly-owned properties . when the company sells assets , it may carry a portion of the sales price generally in the form of a short-term , interest bearing seller-financed note receivable . the company generates operating revenues primarily by leasing apartment units to residents and leasing office , retail and industrial space to commercial tenants . effective since april 30 , 2011 , pillar is the company 's external advisor and cash manager under a contractual arrangement that is reviewed annually by our board of directors . pillar 's duties include , but are not limited to , locating , evaluating and recommending real estate and real estate-related investment opportunities . pillar also arranges , for tci 's benefit , debt and equity financing with third party lenders and investors . pillar also serves as an advisor and cash manager to arl and iot . as the contractual advisor , pillar is compensated by tci under an advisory agreement that is more fully described in part iii , item 10 . “ directors , executive officers and corporate governance – the advisor ” . tci has no employees . employees of pillar render services to tci in accordance with the terms of the advisory agreement . prior to april 30 , 2011 , the company was advised by prime . effective since january 1 , 2011 , regis manages our commercial properties and provides brokerage services . regis is entitled to receive a fee for its property management and brokerage services . see part iii , item 10 . “ directors , executive officers and corporate governance – property management and real estate brokerage ” . prior to december 31 , 2010 , triad provided management services for our commercial properties . triad sub-contracted the property-level management and leasing of our commercial properties to regis i. the company contracts with third-party companies to lease and manage our apartment communities . 24 the company has historically engaged in and may continue to engage in certain business transactions with related parties , including but not limited to asset acquisition and dispositions . transactions involving related parties can not be presumed to be carried out on an arm 's length basis due to the absence of free market forces that naturally exist in business dealings between two or more unrelated entities . related party transactions may not always be favorable to our business and may include terms , conditions and agreements that are not necessarily beneficial to or in our best interest . critical accounting policies we present our financial statements in accordance with generally accepted accounting principles in the united states ( “ gaap ” ) . in june 2009 , the financial accounting standards board ( “ fasb ” ) completed its accounting guidance codification project . the fasb accounting standards codification ( “ asc ” ) became effective for our financial statements issued subsequent to june 30 , 2009 and is the single source of authoritative accounting principles recognized by the fasb to be applied by nongovernmental entities in the preparation of financial statements in conformity with gaap . as of the effective date , we no longer refer to the authoritative guidance dictating its accounting methodologies under the previous accounting standards hierarchy . instead , we refer to the asc codification as the sole source of authoritative literature . the accompanying consolidated financial statements include our accounts , our subsidiaries , generally all of which are wholly-owned , and all entities in which we have a controlling interest . story_separator_special_tag . results of operations the discussion of our results of operations is based on management 's review of operations , which is based on our segments . our segments consist of apartments , commercial buildings , land and other . for discussion purposes , we break these segments down into the following sub-categories ; same property portfolio , acquired properties , and developed properties in the lease-up phase . the same property portfolio consists of properties that were held by us for the entire period for both years being compared . the acquired property portfolio consists of properties that we acquired but have not held for the entire period for both periods being compared . developed properties in the lease-up phase consist of completed projects that are being leased-up . as we complete each phase of the project , we lease-up that phase and include those revenues in our continued operations . once a developed property becomes leased-up and is held the entire period for both years under comparison , it is considered to be included in the same property portfolio . income- producing properties that we have sold during the year are reclassified to discontinued operations for all periods presented the following discussion is based on our consolidated statements of operations for the twelve months ended december 31 , 2012 , 2011 , and 2010 as included in item 8 . “ financial statements and supplementary data ” . the prior year 's property portfolios have been adjusted for subsequent sales . continuing operations relates to income-producing properties that were held during those years as adjusted for sales in the subsequent years . at december 31 , 2012 , 2011 and 2010 , we owned or had interests in a portfolio of 60 , 66 and 72 income-producing properties , respectively . for discussion purposes , we broke this out between continuing operations and discontinued operations . the total property portfolio represents all income-producing properties held as of december 31 for the year end presented . sales subsequent to year end represent properties that were held as of year-end for the years presented , but sold in the next year . continuing operations represents all properties that have not been reclassed to discontinued operations as of december 31 , 2012 for the year presented . the table below shows the number of income-producing properties held by year : replace_table_token_7_th 28 comparison of the year ended december 31 , 2012 to the same period ended 2011 : for the twelve months ended december 31 , 2012 , we reported a net loss applicable to common shares of $ 9.4 million or $ 1.12 per diluted earnings per share , as compared to a net loss applicable to common shares of $ 47.4 million or $ 5.67 per diluted earnings per share for the same period ended 2011. the current year net loss applicable to common shares of $ 9.4 million includes gain on land sales of $ 6.9 million , $ 4.7 million of provisions on the impairment of notes receivable and real estate assets , and net income from discontinued operations of $ 2.5 million , as compared to the prior year net loss applicable to common shares of $ 47.4 million , which includes gain on land sales of $ 17.0 million , $ 37.0 million of provisions on the impairment of notes receivable and real estate assets , and net income from discontinued operations , of $ 4.1 million . revenues rental and other property revenues were $ 116.0 million for the twelve months ended december 31 , 2012. this represents an increase of $ 9.7 million , as compared to the prior year revenues of $ 106.3 million . this change , by segment , is an increase in the apartment portfolio of $ 7.4 million , an increase in the commercial portfolio of $ 2.6 million offset by a decrease in the land and other portfolios of $ 0.3 million . within the apartment portfolio , there was an increase of $ 6.1 million in the developed properties in the lease-up phase and an increase of $ 1.3 million in the same property portfolio . our apartment portfolio continues to thrive in the current economic conditions with occupancies averaging 95 % . our existing commercial portfolio increased by $ 2.6 million in the same store properties . this increase is due to a lease termination fee from a settlement agreement with a commercial tenant . we have directed our efforts to apartment development and put some additional land projects on hold until the economic conditions turn around . we are also continuing to market our properties aggressively to attract new tenants and strive for continuous improvement of our properties in order to maintain our existing tenants . expense depreciation and amortization expense was $ 21.6 million for the twelve months ended december 31 , 2012. this represents an increase of $ 2.6 million , as compared to the prior year expense of $ 19.0 million . this change , by segment , is an increase in the apartment portfolio of $ 1.0 million and an increase in the commercial portfolio of $ 1.6 million . within the commercial portfolio , there was an increase of $ 1.6 million for the same store properties . the developed properties in the apartment portfolio increased by $ 1.0 million as the buildings became substantially complete and depreciation began . general and administrative expenses were $ 5.4 million for the twelve months ended december 31 , 2012. this represents a decrease of $ 4.0 million as compared to the prior year expenses of $ 9.4 million . this change is primarily due to losses recorded in the prior period from investment write offs due to potential deals not realized along with a decrease in professional services by $ 1.1 million , a decrease in franchise taxes by $ 0.9 million and a decrease in costs reimbursements to our advisor
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liquidity and capital resources general our principal liquidity needs are : fund normal recurring expenses ; meet debt service and principal repayment obligations including balloon payments on maturing debt ; fund capital expenditures , including tenant improvements and leasing costs ; fund development costs not covered under construction loans ; and fund possible property acquisitions . our principal sources of cash have been and will continue to be : property operations ; proceeds from land and income-producing property sales ; collection of mortgage notes receivable ; 32 collections of receivables from related companies ; refinancing of existing mortgage notes payable ; and additional borrowings , including mortgage notes payable , and lines of credit . it is important to realize that the current status of the banking industry has had a significant effect on our industry . the banks ' willingness and or ability to originate loans affects our ability to buy and sell property , and refinance existing debt . we are unable to foresee the extent and length of this down-turn . a continued and extended decline could materially impact our cash flows . we draw on multiple financing sources to fund our long-term capital needs . we generally fund our development projects with construction loans , which are converted to traditional mortgages upon completion of the project . we may also issue additional equity securities , including common stock and preferred stock . management anticipates that our cash as of december 31 , 2012 , along with cash that will be generated in 2013 from property operations , may not be sufficient to meet all of our cash requirements . management intends to selectively sell land and income-producing assets , refinance or extend real estate debt and seek additional borrowings secured by real estate to meet its liquidity requirements . although history can not predict the future , historically , we have been successful at refinancing and extending a portion of the company 's current maturity obligations .
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Liquidity
| 9,009
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the following table sets forth , for the periods indicated , the selected statements of operations data as a percentage of total revenue : replace_table_token_4_th results for the year ended december 31 , 2014 compared to results for the year ended december 31 , 2013 revenue increased $ 2.3 million or 9 % to $ 29.2 million in 2014 compared to $ 26.9 million in 2013. this increase was due to an increase in volume from new and existing clients . the increase in volume was primarily driven by new customers which is a result of our recently expanded sales force and several sales initiatives . average revenue per sample remained the same between 2014 and 2013. gross profit decreased $ 256 thousand to $ 15.1 million in 2014 compared to $ 15.4 million in 2013. direct costs increased by 23 % from 2013 to 2014 , driven by the company 's capacity expansion project and higher volume . the capacity expansion costs within cost of sales was approximately $ 1.3 million and included ; $ 0.5 million for hiring and training of additional personnel , $ 0.5 million for building related costs , and $ 0.3 million for information technology and other one-time project costs . the gross profit margin decreased from 57 % in 2013 to 52 % in 2014. general and administrative ( “ g & a ” ) expenses were $ 4.5 million in 2014 compared to $ 4.2 in 2013 , an increase of 8 % . in 2014 , g & a costs included approximately $ 0.2 million related to the company 's capacity expansion project . as a percentage of revenue , g & a expenses were 15.3 % and 15.5 % for 2014 and 2013 , respectively . marketing and selling expenses were $ 4.6 million in 2014 , compared to $ 4.7 million in 2013 , a decrease of 2 % . total marketing and selling expenses represented 15.8 % and 17.5 % of revenue for 2014 and 2013 , respectively . 12 research and development ( “ r & d ” ) expenses were $ 1.3 million in 2014 compared to $ 0.8 million in 2013. r & d expenses increased from additional personnel and supplies used to develop new tests for drugs of abuse as well as process improvements . r & d expenses represented 4.6 % and 3.1 % of revenue for 2014 and 2013 , respectively . other income ( expense ) represented $ 57 thousand of other expenses for 2014 compared to $ 92 thousand of other income for 2013. the expense in 2014 was driven by interest expense related to long term debt incurred in 2014 , while the income in 2013 represented a one- time insurance reimbursement of legal expenses . during the year ended december 31 , 2014 , the company recorded a tax provision of $ 1.4 million , representing an effective tax rate of 30.8 % . during the year ended december 31 , 2013 , the company recorded a tax provision of $ 2.0 million , representing an effective tax rate of 34.4 % . the change in tax rate was driven by r & d tax credits from higher r & d spending and from a california r & d tax credit which was not previously taken . we expect the tax rate to be from 32 % to 34 % for the foreseeable future . results for the year ended december 31 , 2013 compared to results for the year ended december 31 , 2012 revenue increased $ 1.7 million or 7 % to $ 26.9 million in 2013 compared to $ 25.2 million in 2012. this increase was due to an increase in volume from new and existing clients . the increase in volume was primarily driven by new customers which is a result of our recently expanded sales force and several sales initiatives . average revenue per sample decreased 2 % between 2013 and 2012. the revenue per sample decrease was driven primarily from by the mix of customers , with a larger percentage of the business coming from lower priced customers . gross profit increased $ 1.1 million to $ 15.4 million in 2013 compared to $ 14.3 million in 2012. direct costs increased by 5 % from 2012 to 2013 , driven by the higher volume . the gross profit margin remained the same at 57 % in 2013 and 2012. general and administrative ( “ g & a ” ) expenses were $ 4.2 million in 2013 compared to $ 3.9 in 2012 , an increase of 5 % . as a percentage of revenue , g & a expenses were 15.5 % and 15.6 % for 2013 and 2012 , respectively . marketing and selling expenses were $ 4.7 million in 2013 , compared to $ 4.5 million in 2012 , an increase of 4 % . total marketing and selling expenses represented 17.5 % and 18.0 % of revenue for 2013 and 2012 , respectively . research and development ( “ r & d ” ) expenses were $ 0.8 million in 2013 and 2012. r & d expenses represented 3.1 % and 3.3 % of revenue for 2013 and 2012 , respectively . other income increased approximately $ 90 thousand to approximately $ 92 thousand for 2013 compared to $ 2 thousand for 2012. the increase was from an insurance reimbursement of legal expenses . during the year ended december 31 , 2013 , the company recorded a tax provision of $ 2.0 million , representing an effective tax rate of 34.4 % . during the year ended december 31 , 2012 , the company recorded a tax provision of $ 2.0 million , representing an effective tax rate of 39.7 story_separator_special_tag % . the change in tax rate was driven by a new allocation method for calculating income tax in california . this new calculation requires income tax to be paid only on the sales made within california . the old method taxed all income produced in california , and as the company has only one laboratory , which is located in california , 100 % of the income had been subject to california income tax . the rate also benefited from an r & d tax credit from 2012 which was recognized in 2013. we expect the tax rate to be approximately 34 % for the foreseeable future . story_separator_special_tag customer . the company recognizes revenue in accordance with accounting standards codification “ asc ” 605 , “ revenue recognition . ” in accordance with asc 605 , the company considers testing , training and storage elements as one unit of accounting for revenue recognition purposes , as the training and storage costs are de minimis and do not have stand-alone value to the customer . the company recognizes revenue as the service is performed and reported to the customer , since the predominant deliverable in each arrangement is the testing of the units . the company also provides expert testimony , when and if necessary , to support the results of the tests , which is generally billed separately and recognized as the services are provided . estimates the preparation of financial statements in conformity with accounting principles generally accepted in the united states requires management to make estimates , including bad debts , long-lived asset lives , income tax valuation and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period . actual results could differ from those estimates . 14 capitalized development costs we capitalize costs related to significant software projects developed or obtained for internal use in accordance with u.s. generally accepted accounting standards . costs incurred during the preliminary project work stage or conceptual stage , such as determining the performance requirements , system requirements and data conversion , are expensed as incurred . costs incurred in the application development phase , such as coding , testing for new software and upgrades that result in additional functionality , are capitalized and are amortized using the straight-line method over the useful life of the software for 5 years . costs incurred during the post-implementation/operation stage , including training costs and maintenance costs , are expensed as incurred . we capitalized internally developed software costs of approximately $ 403,000 , $ 715,000 and $ 794,000 during the years ended december 31 , 2014 , 2013 and 2012 , respectively . the software development is for primarily for two projects . determining whether particular costs incurred are more properly attributable to the preliminary or conceptual stage , and thus expensed , or to the application development phase , and thus capitalized and amortized , depends on subjective judgments about the nature of the development work , and our judgments in this regard may differ from those made by other companies . general and administrative costs related to developing or obtaining such software are expensed as incurred . allowance for doubtful accounts the allowance for doubtful accounts is based on management 's assessment of the ability to collect amounts owed to it by its customers . management reviews its accounts receivable aging for doubtful accounts and uses a methodology based on calculating the allowance using a combination of factors including the age of the receivable along with management 's judgment to identify accounts that may not be collectible . the company routinely assesses the financial strength of its customers and , as a consequence , believes that its accounts receivable credit risk exposure is limited . the company maintains an allowance for potential credit losses but historically has not experienced any significant losses related to individual customers or groups of customers in any particular industry or geographic area . bad debt expense has been within management 's expectations . income taxes the company accounts for income taxes using the liability method , which requires the company to recognize a current tax liability or asset for current taxes payable or refundable and a deferred tax liability or asset for the estimated future tax effects of temporary differences between the financial statement and tax reporting bases of assets and liabilities to the extent that they are realizable . deferred tax expense ( benefit ) results from the net change in deferred tax assets and liabilities during the year . a deferred tax valuation allowance is required if it is more likely than not that all or a portion of the recorded deferred tax assets will not be realized . the company had net deferred tax liabilities in the amount of $ 2.4 million at december 31 , 2014 , which primarily relate to timing differences . there was an increase of $ 1.4 million from 2013 which was primarily driven by bonus depreciation as part of the tax extender bill passed in december 2014 , for equipment purchases in 2014. in 2014 , the company 's tax rate was reduced as a result of two r & d tax credit items . the first was a california r & d tax credit which had not been previously taken and the company recognized the benefit of prior years as well as 2014 in the current year . the second impact came from the increase in spending in r & d which increased both the california and federal r & d tax credit . the company operates within multiple taxing jurisdictions and could be subject to audit in these jurisdictions . these audits may involve complex issues , which may require an extended period of time to resolve . the company has provided for its estimated taxes
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liquidity and capital resources at december 31 , 2014 , the company had $ 3.6 million of cash , compared to $ 4.0 million at december 31 , 2013. the company 's operating activities generated net cash of $ 4.5 million in 2014 , $ 6.0 million in 2013 and $ 3.1 million in 2012. investing activities used $ 7.8 million in 2014 , $ 1.8 million in 2013 and $ 2.3 million in 2012. financing activities generated $ 3.0 million in 2014 , used $ 3.3 million in 2013 and used $ 3.2 million in 2012. operating cash flow of $ 4.5 million in 2014 primarily reflected net income of $ 3.2 million adjusted for depreciation and amortization of $ 1.1 million , stock compensation expense of $ 0.6 million , and an increase in net deferred tax liabilities of $ 1.4 million . this was affected by the following changes in assets and liabilities : a decrease in accounts receivable of $ 0.3 million , an increase in accounts payable of $ 0.3 million , a decrease in accrued expenses of $ 1.2 million , and an increase in prepaid expenses ( and other current assets ) of $ 1.2 million . the decrease in accrued expenses was driven by a $ 1.2 million reduction in the liability for equipment purchases which were paid for in 2014. the change in deferred tax liabilities and other current assets was driven by bonus depreciation on new assets purchased as part of the tax extender bill passed in december 2014. operating cash flow of $ 6.0 million in 2013 primarily reflected net income of $ 3.8 million adjusted for depreciation and amortization of $ 0.9 million , stock compensation expense of $ 0.5 million , and an increase in net deferred tax liabilities of $ 0.4 million . this was affected by the following changes in assets and liabilities : a decrease in accounts receivable of $ 0.3 million , a decrease in accounts payable of $ 0.2 million , a decrease in accrued expenses of $ 0.1 million , and a decrease in prepaid expenses ( and other current assets ) of $ 0.4 million .
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Liquidity
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the company spends additional amounts for the development of machinery and equipment for story_separator_special_tag overview vishay intertechnology , inc. is a global manufacturer and supplier of semiconductors and passive components , including power mosfets , power integrated circuits , transistors , diodes , optoelectronic components , resistors , capacitors , and inductors . discrete semiconductors and passive components manufactured by vishay are used in virtually all types of electronic products , including those in the industrial , computing , automotive , consumer electronic products , telecommunications , power supplies , military/aerospace , and medical industries . we operate in five product segments , mosfets , diodes , optoelectronic components , resistors & inductors , and capacitors . since 1985 , we have pursued a business strategy of growth through focused research and development and acquisitions . through this strategy , we have grown to become one of the world 's largest manufacturers of discrete semiconductors and passive components . we expect to continue our strategy of acquisitions while also maintaining a prudent capital structure . we are focused on enhancing stockholder value and improving earnings per share . in addition to our growth plan , we also have opportunistically repurchased our stock . we have repurchased 44.3 million shares of our common stock since the fourth fiscal quarter of 2010 , representing 24 % of our shares outstanding before we began this initiative . the exchange of $ 56.4 million principal amount of our exchangeable unsecured notes by a holder of the notes in the third fiscal quarter of 2013 increased the number of our common shares outstanding by 3.7 million , but did not affect the number of weighted average shares outstanding used for computing diluted earnings per share because our earnings per share computation assumes that the exchangeable unsecured notes would be converted . on february 3 , 2014 , our board of directors instituted a quarterly dividend payment program and declared the first cash dividend in the history of vishay . the permitted capacity to repurchase shares of stock or pay cash dividends under our credit facility increases each quarter by an amount equal to 20 % of net income . at december 31 , 2014 , our total permitted capacity to repurchase shares of stock or pay dividends under our credit facility is $ 192.7 million . although we have no current plans , we will continue to evaluate attractive stock repurchase opportunities . our business and operating results have been and will continue to be impacted by worldwide economic conditions . our revenues are dependent on end markets that are impacted by consumer and industrial demand , and our operating results can be adversely affected by reduced demand in those global markets . we continue to monitor the current economic environment and its potential effects on our customers and the end markets that we serve . additionally , we continue to closely monitor our costs , inventory , and capital resources to respond to changing conditions and to ensure we have the management , business processes , and resources to meet our future needs . in response to the economic environment , we began implementing a targeted cost reduction program in the fourth fiscal quarter of 2013 to support our profitability without jeopardizing our growth plan . complete implementation of the targeted cost reduction programs is expected to occur before the end of the first fiscal quarter of 2016. see additional information regarding our competitive strengths and key challenges as disclosed in part 1. on july 11 , 2014 , we entered into an agreement to acquire capella microsystems ( taiwan ) inc. ( `` capella '' ) for approximately nt $ 6,051 million or $ 205 million at then-current exchange rates . capella is a fabless ic design company specializing in optoelectronic sensors . as a first step in the acquisition , we launched a tender offer for capella 's oustanding shares . a total of 38,703,705 shares of capella , or 88.95 % of outstanding shares , were tendered and accepted by us . the offer period expired on september 1 , 2014. pursuant to the terms of the tender offer , we paid nt $ 139 for each share tendered . the aggregate purchase price for the tendered shares was nt $ 5,400 million , or approximately $ 180 million . we acquired the remaining outstanding shares of capella pursuant to the merger agreement on december 31 , 2014. each remaining stockholder received the same nt $ 139 per share as merger consideration . the acquisition is expected to strengthen our position in optoelectronic sensors , a promising growth market . ( see further discussion in `` acquisition activity . '' ) during the third fiscal quarter of 2014 , we executed two partial-settlement transactions to reduce the risk associated with our u.s. qualified pension obligations . as a result of these transactions , the projected benefit obligation , plan assets , and funded status were remeasured on the dates of the respective settlements . these transactions reduced the u.s. projected benefit obligation by approximately $ 59.4 million , and were funded entirely with plan assets . these transactions also resulted in the recognition of non-cash settlement charges aggregating $ 15.6 million , representing previously unrecognized actuarial items . these non-cash charges are presented on a separate line in the accompanying consolidated statements of operations . we continue to evaluate options to further reduce the risk associated with our pension obligations . we utilize several financial metrics , including net revenues , gross profit margin , segment operating income , end-of-period backlog , book-to-bill ratio , inventory turnover , change in average selling prices , net cash and short-term investments ( debt ) , and free cash generation to evaluate the performance and assess the future direction of our business . ( see further discussion in `` financial metrics '' and `` financial condition , liquidity , and capital resources . '' ) net revenues decreased in the fourth fiscal quarter of 2014 versus the prior quarter and prior year quarter . story_separator_special_tag the erosion of average selling prices of established products is typical for semiconductor products . we attempt to offset this deterioration with ongoing cost reduction activities and new product introductions . our specialty passive components are more resistant to average selling price erosion . 32 the quarter-to-quarter trends in these financial metrics can also be an important indicator of the likely direction of our business . the following table shows net revenues , gross profit margin , operating margin , end-of-period backlog , book-to-bill ratio , inventory turnover , and changes in asp for our business as a whole during the five fiscal quarters beginning with the fourth fiscal quarter of 2013 through the fourth fiscal quarter of 2014 ( dollars in thousands ) : replace_table_token_7_th _ ( 1 ) operating margin for the fourth fiscal quarter of 2013 and the first , second , third , and fourth fiscal quarters of 2014 includes $ 2.8 million , $ 6.4 million , $ 9.0 million , $ 3.5 million and $ 2.0 million , respectively , of restructuring and severance expenses ( see note 4 to our consolidated financial statements ) . operating margin for the third fiscal quarter of 2014 includes $ 15.6 million of u.s. pension settlement charges ( see note 11 to our consolidated financial statements ) . ( 2 ) end of period backlog for the second fiscal quarter of 2014 reflects a total of $ 1.3 million related to the backlog of holy stone polytech co. , ltd. as of the date of acquisition . end of period backlog for the third fiscal quarter of 2014 reflects a total of $ 8.2 million related to the backlog of capella as of the date of acquisition . see `` financial metrics by segment '' below for net revenues , book-to-bill ratio , and gross profit margin broken out by segment . revenues decreased sequentially versus the third fiscal quarter of 2014. the order level through 2014 was higher than the level experienced in the latter half of 2013 , but decreased at the end of the third fiscal quarter of 2014 and continued to weaken in the fourth fiscal quarter of 2014 before showing signs of a possible recovery . the decrease in orders was primarily due to a decrease in demand from distributors , particularly in asia . currency effects also decreased fourth fiscal quarter of 2014 revenues by $ 12 million versus the third fiscal quarter of 2014. average selling prices continue to decline primarily due to our commodity semiconductor products and the effects of growing our resistors & inductors business in asia . gross margins decreased versus the third fiscal quarter of 2014 , but remain steady versus the prior year . the decrease versus the third fiscal quarter of 2014 is primarily due to the decrease in average selling prices and reduced volume . gross margins have been negatively impacted by additional depreciation associated with our cost reduction programs beginning with the fourth fiscal quarter of 2013 and will continue to be negatively impacted until the complete implementation of our cost reduction programs . the book-to-bill ratio increased to 0.95 in the fourth fiscal quarter of 2014 from 0.91 in the third fiscal quarter of 2014. the book-to-bill ratios for distributors and original equipment manufacturers ( `` oem '' ) were 0.93 and 0.96 , respectively , versus ratios of 0.86 and 0.97 , respectively , during the third fiscal quarter of 2014 . 33 financial metrics by segment the following table shows net revenues , book-to-bill ratio , gross profit margin , and segment operating margin broken out by segment for the five fiscal quarters beginning with the fourth fiscal quarter of 2013 through the fourth fiscal quarter of 2014 ( dollars in thousands ) : replace_table_token_8_th 34 acquisition and divestiture activity as part of our growth strategy , we seek to expand through targeted acquisitions of other manufacturers of electronic components that have established positions in major markets , reputations for product quality and reliability , and product lines with which we have substantial marketing and technical expertise . this includes exploring opportunities to acquire targets to gain market share , penetrate different geographic markets , enhance new product development , round out our existing product lines , or grow our high margin niche market businesses . acquisitions of passive components businesses would likely be made to strengthen and broaden our position as a specialty product supplier ; acquisitions of discrete semiconductor businesses would be made to increase market share and to generate synergies . to limit our financial exposure , we have implemented a policy not to pursue acquisitions if our post-acquisition debt would exceed 2.5x our pro forma earnings before interest , taxes , depreciation , and amortization ( `` ebitda '' ) . for these purposes , we calculate pro forma ebitda as the adjusted ebitda of vishay and the target for vishay 's four preceding fiscal quarters , with a pro forma adjustment for savings which management estimates would have been achieved had the target been acquired by vishay at the beginning of the four fiscal quarter period . our growth plan targets adding , through acquisitions , an average of approximately $ 100 million of revenues per year . depending on the opportunities available , we might make several smaller acquisitions or a few larger acquisitions . we intend to make such acquisitions using mainly cash , rather than debt or equity , although we do have capacity under our revolving credit facility if necessary . we are not currently targeting acquisitions with a purchase price larger than $ 500 million . there is no assurance that we will be able to identify and acquire additional suitable acquisition candidates at price levels and on terms and conditions we consider acceptable .
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results of operations statement of operations ' captions as a percentage of net revenues and the effective tax rates were as follows : replace_table_token_10_th net revenues net revenues were as follows ( dollars in thousands ) : replace_table_token_11_th changes in net revenues were attributable to the following : replace_table_token_12_th overall , the business conditions in 2014 were better than the 2013 conditions , but both years were below our expected run-rate . our revenue results for 2014 were positively affected by increased demand for our products and overall higher demand compared to the prior year periods . orders from distributors , particularly in asia , decreased at the end of the year before showing signs of a possible recovery . we deduct , from the sales that we record to distributors , allowances for future credits that we expect to provide for returns , scrapped product , and price adjustments under various programs made available to the distributors . we make deductions corresponding to particular sales in the period in which the sales are made , although the corresponding credits may not be issued until future periods . we estimate the deductions based on sales levels to distributors , inventory levels at the distributors , current and projected market trends and conditions , recent and historical activity under the relevant programs , changes in program policies , and open requests for credits . we recorded deductions from gross sales under our distributor incentive programs of $ 89.6 million , $ 84.3 million , and $ 72.7 million , for the years ended december 31 , 2014 , 2013 , and 2012 , respectively , or , as a percentage of gross sales , 3.5 % , 3.4 % , and 3.2 % , respectively . actual credits issued under the programs for the years ended december 31 , 2014 , 2013 , and 2012 were approximately $ 87.9 million , $ 83.2 million , and $ 76.9 million , respectively .
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we have also entered into an agreement with our strategic partner , rj resources , pursuant to which we have agreed , at the option of rj resources , to either ( a ) provide for the issuance of the share certificate representing the shares of capital stock due from asia sixth representing 51 % of the total issued and outstanding share capital of asia sixth which we have the right to purchase from asia sixth , to a delaware limited liability company to be formed by us and to convey to rj resources fifty percent ( 50 % ) of the limited liability company interests issued by such nominee or ( b ) provide for fifty percent ( 50 % ) of such asia sixth shares to be issued directly to rj resources or its designee . upon the closing and completion of these contemplated transactions , the company , through its ownership in asia sixth , will own an approximate 17 % beneficial interest in aral . we believe that the wattenberg , niobrara , and mississippian shale plays represent among the most promising unconventional oil and natural gas plays in the united states . we will continue to seek additional acreage proximate to our currently held core acreage . our strategy is to be the operator , directly or through our subsidiaries and joint ventures , in the majority of our acreage so we can dictate the pace of development in order to execute our business plan . the majority of our capital expenditure budget for 2014 will be focused on the acquisition , development and expansion of these formations . detailed information about our business plans and operations , including our core niobrara , eagle ford and mississippian assets , is contained under “ part 1 ” - “ item 1. business ” beginning on page 5 of this annual report . 72 how we conduct our business and evaluate our operations our use of capital for acquisitions and development allows us to direct our capital resources to what we believe to be the most attractive opportunities as market conditions evolve . we have historically acquired properties that we believe had significant appreciation potential . we intend to continue to acquire both operated and non-operated properties to the extent we believe they meet our return objectives . we will use a variety of financial and operational metrics to assess the performance of our oil and natural gas operations , including : ● production volumes ; ● realized prices on the sale of oil and natural gas , including the effects of our commodity derivative contracts ; ● oil and natural gas production and operating expenses ; ● capital expenditures ; ● general and administrative expenses ; ● net cash provided by operating activities ; and ● net income . production volumes production volumes will directly impact our results of operations . we currently have production from 11 gross operated wells and 14 gross non-operated wells in our recently acquired wattenberg asset , five gross wells in our niobrara asset , and two gross wells in our north sugar valley field , and we expect to increase production assuming drilling success in the future as we expand operations in our wattenberg , niobrara and mississippian assets . factors affecting the sales price of oil and natural gas we expect to market our crude oil and natural gas production to a variety of purchasers based on regional pricing . the relative prices of crude oil and natural gas are determined by the factors impacting global and regional supply and demand dynamics , such as economic conditions , production levels , weather cycles and other events . in addition , relative prices are heavily influenced by product quality and location relative to consuming and refining markets . oil . the new york mercantile exchange-west texas intermediate ( nymex-wti ) futures price is a widely used benchmark in the pricing of domestic crude oil in the u.s. the actual prices realized from the sale of crude oil differ from the quoted nymex-wti price as a result of quality and location differentials . quality differentials to nymex-wti prices result from the fact that crude oils differ from one another in their molecular makeup , which plays an important part in their refining and subsequent sale as petroleum products . among other things , there are two characteristics that commonly drive quality differentials : ( a ) the crude oil 's american petroleum institute , or api , gravity and ( b ) the crude oil 's percentage of sulfur content by weight . in general , lighter crude oil ( with higher api gravity ) produces a larger number of lighter products , such as gasoline , which have higher resale value and , therefore , normally sell at a higher price than heavier oil . crude oil with low sulfur content ( “ sweet ” crude oil ) is less expensive to refine and , as a result , normally sells at a higher price than high sulfur-content crude oil ( “ sour ” crude oil ) . location differentials to nymex-wti prices result from variances in transportation costs based on the produced crude oil 's proximity to the major consuming and refining markets to which it is ultimately delivered . crude oil that is produced close to major consuming and refining markets , such as near cushing , oklahoma , is in higher demand as compared to crude oil that is produced farther from such markets . consequently , crude oil that is produced close to major consuming and refining markets normally realizes a higher price ( i.e. , a lower location differential to nymex-wti ) . in the past , crude oil prices have been extremely volatile , and we expect this volatility to continue . for example , for the four years ended december 31 , 2013 , the nymex - wti oil price ranged from a high of $ 113.93 per bbl to a low of $ 68.01 per bbl . story_separator_special_tag these markets will likely continue to be volatile in the future . 73 natural gas . the nymex-henry hub price of natural gas is a widely used benchmark for the pricing of natural gas in the u.s. similar to crude oil , the actual prices realized from the sale of natural gas differ from the quoted nymex-henry hub price as a result of quality and location differentials . quality differentials to nymex-henry hub prices result from : ( a ) the british thermal unit ( btu ) content of natural gas , which measures its heating value , and ( b ) the percentage of sulfur , co2 and other inert content by volume . wet natural gas with a high btu content sells at a premium to low btu content dry natural gas because it yields a greater quantity of natural gas liquids ( ngls ) . natural gas with low sulfur and co2 content sells at a premium to natural gas with high sulfur and co2 content because of the added cost to separate the sulfur and co2 from the natural gas to render it marketable . wet natural gas is processed in third-party natural gas plants and residue natural gas as well as ngls are recovered and sold . dry natural gas residue from our properties is generally sold based on index prices in the region from which it is produced . location differentials to nymex-henry hub prices result from variances in transportation costs based on the natural gas ' proximity to the major consuming markets to which it is ultimately delivered . also affecting the differential is the processing fee deduction retained by the natural gas processing plant generally in the form of percentage of proceeds . generally , these index prices have historically been at a discount to nymex-henry hub natural gas prices . in the past , natural gas prices have been extremely volatile , and we expect this volatility to continue . for example , for the four years ended december 31 , 2013 , the nymex - henry hub natural gas price ranged from a high of $ 7.51 per mmbtu to a low of $ 1.82 per mmbtu . these markets will likely continue to be volatile in the future . commodity derivative contracts . we expect to adopt a commodity derivative policy designed to minimize volatility in our cash flows from changes in commodity prices . we have not determined the portion of our estimated production , if any , for which we will mitigate our risk through the use of commodity derivative instruments , but in no event will we maintain a commodity derivative position in an amount in excess of our estimated production . should we reduce our estimates of future production to amounts which are lower than our commodity derivative volumes , we will reduce our positions as soon as practical . if forward crude oil or natural gas prices increase to prices higher than the prices at which we have entered into commodity derivative positions , we may be required to make margin calls out of our working capital in the amounts those prices exceed the prices we have entered into commodity derivative positions . oil and natural gas production expenses . we will strive to increase our production levels to maximize our revenue . oil and natural gas production expenses are the costs incurred in the operation of producing properties and workover costs . we expect expenses for utilities , direct labor , water injection and disposal , and materials and supplies to comprise the most significant portion of our oil and natural gas production expenses . oil and natural gas production expenses do not include general and administrative costs or production and other taxes . certain items , such as direct labor and materials and supplies , generally remain relatively fixed across broad production volume ranges , but can fluctuate depending on activities performed during a specific period . for instance , repairs to our pumping equipment or surface facilities may result in increased oil and natural gas production expenses in periods during which they are performed . a majority of our operating cost components will be variable and increase or decrease as the level of produced hydrocarbons and water increases or decreases . for example , we will incur power costs in connection with various production related activities such as pumping to recover oil and natural gas and separation and treatment of water produced in connection with our oil and natural gas production . over the life of hydrocarbon fields , the amount of water produced may increase for a given volume of oil or natural gas production , and , as pressure declines in natural gas wells that also produce water , more power will be needed to provide energy to artificial lift systems that help to remove produced water from the wells . thus , production of a given volume of hydrocarbons may become more expensive each year as the cumulative oil and natural gas produced from a field increases until , at some point , additional production becomes uneconomic . production and ad valorem taxes . texas regulates the development , production , gathering and sale of oil and natural gas , including imposing production taxes and requirements for obtaining drilling permits . for oil production , texas currently imposes a production tax at 4.6 % of the market value of the oil produced and an additional regulatory fee of 3/16 of one cent per barrel of crude petroleum produced plus an oil cleanup fee of 5/16 of a cent per barrel of crude petroleum produced , and for natural gas , texas currently imposes a production tax at 7.5 % of the market value of the natural gas produced . colorado imposes production taxes ranging from 2 % to 5 % based on gross income and a conservation tax ranging from 0.07 % to 1.5 % based on the market value of oil and natural gas production .
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selling , general and administrative ( “ sg & a ” ) expenses increased by approximately $ 3,419,000 to approximately $ 7,149,000 for the year ended december 31 , 2013 compared to approximately $ 3,730,000 for the year ended december 31 , 2012. the increase was primarily due to increased stock compensation expense , professional service fees , and legal fees . replace_table_token_11_th impairment of goodwill . there were no impairment of goodwill in the year ended december 31 , 2013 compared to approximately $ 6,820,000 in the year ended december 31 , 2012. management evaluated the amount of goodwill associated with the merger with blast in 2102 following the allocation of fair value to the assets and liabilities acquired and determined that the goodwill should be fully impaired and has reflected the impairment on the statement of operations as of the date of the merger for the year ending december 31 , 2012. impairment of oil and gas properties . impairment costs for proved properties in the year ended december 31 , 2013 were approximately $ 3,303,000 compared to approximately $ 180,000 in the year ended december 31 , 2012. the company assessed the recoverability of the carrying value of the proved properties by estimating the future net undiscounted cash flows expected to result from the asset based on the reserve report prepared by the company 's independent reserve engineers , including eventual disposition . as the future net undiscounted cash flows were less than the carrying value of the asset , an impairment loss was recorded equal to the difference between the asset 's carrying value and estimated fair value of the future net discounted cash flows associated with the properties . the impairment in 2013 was primarily due to a reduction in proven reserves in the year ended december 31 , 2013. this decrease in proven reserves was due primarily to a change in our reserve engineer 's interpretation of applicable sec disclosure guidelines , such that puds could only be booked when
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