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professional services revenues are recognized over time as services are rendered . most of our projects are performed on a time and materials basis , while a portion of our revenues is derived from projects performed on a fixed fee or fixed fee percent complete basis . for time and material projects , revenues are recognized and billed by multiplying the number of hours our professionals expend in the performance of the project by the hourly rates . for fixed fee contracts , revenues are recognized and billed by multiplying the established fixed rate per time period by the number of time periods elapsed . for fixed fee percent complete projects , revenues are generally recognized using an input method based on the ratio of hours expended to total estimated hours . fixed fee percent complete engagements represented 8 % of our services revenues for the year ended december 31 , 2020 compared to 7 % and 8 % for the years ended december 31 , 2019 and 2018 , respectively . on most projects , we are reimbursed for out-of-pocket expenses including travel and other project-related expenses . these reimbursements are included as a component of the transaction price of the respective professional services contract . the aggregate amount of reimbursed expenses will fluctuate depending on the location of our clients , the total number of our projects that require travel , the impact of travel restrictions imposed as a result of the covid-19 pandemic , and whether our arrangements with our clients provide for the reimbursement of such expenses . in conjunction with services provided , we occasionally receive referral fees under partner programs . these referral fees are recognized at a point in time when earned and recorded within services revenues . 21 software and hardware revenues software and hardware revenues are derived from sales of third-party software and hardware resales , in which we are considered the agent , and sales of internally developed software , in which we are considered the principal . revenues from sales of third-party software and hardware are recorded on a net basis , while revenues from internally developed software sales are recorded on a gross basis . software and hardware revenues are expected to fluctuate depending on our clients ' demand for these products , which may be impacted by the covid-19 pandemic . there are no significant cancellation or termination-type provisions for our software and hardware sales . contracts for our professional services provide for a general right , to the client or us , to cancel or terminate the contract within a given period of time ( generally 10 to 30 days ' notice is required ) . the client is responsible for any time and expenses incurred up to the date of cancellation or termination of the contract . cost of revenues cost of revenues consists of cost of services , primarily related to cash and non-cash compensation and benefits ( including bonuses and non-cash compensation related to equity awards ) , costs associated with subcontractors , reimbursable expenses and other project-related expenses . cost of revenues does not include depreciation of assets used in the production of revenues which are primarily personal computers , servers , and other information technology related equipment . in accordance with asc topic 606 , sales of third-party software and hardware are presented on a net basis , and as such , third-party software and hardware costs are not presented within cost of revenues . our cost of services as a percentage of services revenues is affected by the utilization rates of our professionals ( defined as the percentage of our professionals ' time billed to clients divided by the total available hours in the respective period ) , the salaries we pay our professionals , and the average billing rate we receive from our clients . if a project ends earlier than scheduled , we retain professionals in advance of receiving project assignments , or demand for our services declines , our utilization rate will decline and adversely affect our cost of services as a percentage of services revenues . selling , general , and administrative expenses selling , general and administrative ( “ sg & a ” ) expenses are primarily composed of sales-related costs , general and administrative salaries , stock compensation expense , office costs , recruiting expense , variable compensation costs , marketing costs and other miscellaneous expenses . we have access to sales leads generated by our software vendors whose products we use to design and implement solutions for our clients . these relationships enable us to optimize our selling costs and sales cycle times and increase win rates through leveraging our partners ' marketing efforts and endorsements . plans for growth and acquisitions our goal is to continue to build one of the leading information technology consulting firms by expanding our relationships with existing and new clients and through the continuation of our disciplined acquisition strategy . our future growth plan includes expanding our business with a primary focus on customers in the united states , both organically and through acquisitions . we also intend to further leverage our existing offshore and nearshore capabilities to support our future growth and provide our clients flexible options for project delivery . our ability to continue to implement our growth plan may be negatively affected by the impact of the covid-19 pandemic on our operations , and our ability to evaluate potential acquisitions . when analyzing revenue growth by base business compared to acquired companies in the results of operations section below , revenue attributable to base business includes revenue from an acquired company that has been owned for a full four quarters after the date of acquisition . acquisition of psl on june 17 , 2020 , a wholly-owned subsidiary of the company acquired psl pursuant to the terms of a stock purchase agreement . story_separator_special_tag the company estimates variable consideration based on historical experience and forecasted sales and includes the variable consideration in the transaction price . other services revenues are comprised of hosting fees , partner referral fees , maintenance agreements , training and internally developed software-as-a-service ( “ saas ” ) sales . revenues from hosting fees , maintenance agreements , training and internally developed saas sales are generally recognized over time using a time-based measure of progress as services are rendered . partner referral fees are recorded at a point in time upon meeting specified requirements to earn the respective fee . on many professional service projects , the company is also reimbursed for out-of-pocket expenses including travel and other project-related expenses . these reimbursements are included as a component of the transaction price of the respective professional services contract and are invoiced as the expenses are incurred . the company structures its professional services arrangements to recover the cost of reimbursable expenses without a markup . software and hardware revenues are comprised of third-party software and hardware resales , in which the company is considered the agent , and sales of internally developed software , in which the company is considered the principal . third-party software and hardware revenues are recognized and invoiced when the company fulfills its obligation to arrange the sale , which occurs when the purchase order with the vendor is executed and the customer has access to the software or the hardware has been shipped to the customer . internally developed software revenues are recognized and invoiced when control is transferred to the customer , which occurs when the software has been made available to the customer and the license term has commenced . revenues from third-party software and hardware sales are recorded on a net basis , while revenues from internally developed 28 software sales are recorded on a gross basis . there are no significant cancellation or termination-type provisions for the company 's software and hardware sales , and the term between invoicing and payment due date is not significant . arrangements with clients may contain multiple promises such as delivery of software , hardware , professional services or post-contract support services . these promises are accounted for as separate performance obligations if they are distinct . for arrangements with clients that contain multiple performance obligations , the transaction price is allocated to the separate performance obligations based on estimated relative standalone selling price , which is estimated by the expected cost plus a margin approach , taking into consideration market conditions and competitive factors . because contracts that contain multiple performance obligations are typically short term due to the contract cancellation provisions , the allocation of the transaction price to the separate performance obligations is not considered a significant estimate . revenues are presented net of taxes assessed by governmental authorities . sales taxes are generally collected and subsequently remitted on all software and hardware sales and certain services transactions as appropriate . purchase accounting and related fair value measurements the company allocates the purchase price , including contingent consideration , of our acquisitions to the assets and liabilities acquired , including identifiable intangible assets , based on their respective fair values at the date of acquisition . such fair market value assessments are primarily based on third-party valuations using assumptions developed by management that require significant judgments and estimates that can change materially as additional information becomes available . the purchase price allocated to intangibles is based on unobservable factors , including but not limited to , projected revenues , expenses , customer attrition rates , royalty rates , a weighted average cost of capital , among others . the weighted average cost of capital uses a market participant 's cost of equity and after-tax cost of debt and reflects the risks inherent in the cash flows . the approach to valuing the initial contingent consideration associated with the purchase price also uses similar unobservable factors such as projected revenues and expenses over the term of the contingent earn-out period , discounted for the period over which the contingent consideration is measured , and volatility rates . based upon these assumptions , the initial contingent consideration is then valued using a monte carlo simulation . the company finalizes the purchase price allocation once certain initial accounting valuation estimates are finalized , and no later than 12 months following the acquisition date . convertible debt in accordance with accounting for debt with conversion and other options , the company bifurcated the principal amount of the notes into liability and equity components . the initial liability component of the notes was valued based on the contractual cash flows discounted at an appropriate comparable market non-convertible debt borrowing rate at the date of issuance . the equity component representing the conversion option and calculated as the residual amount of the proceeds was recorded as an increase in additional paid-in capital within stockholders ' equity , partially offset by the associated deferred tax effect . the amount recorded within additional paid-in capital is not to be remeasured as long as it continues to meet the conditions for equity classification . the resulting debt discount is being amortized to interest expense using the effective interest method over the period from the issuance date through the contractual maturity date . the company utilizes the treasury stock method to calculate the effects of the notes on diluted earnings per share . in connection with the issuance of the notes , the company entered into the notes hedges with the option counterparties . the notes hedges provide the company with the option to acquire , on a net settlement basis , shares of common stock equal to the number of shares of common stock that notionally underlie the notes and corresponds to the conversion price of the notes . if the company elects cash settlement and exercises the notes hedges , the aggregate amount of cash received from the option counterparties
| liquidity and capital resources selected measures of liquidity and capital resources are as follows ( in millions ) : replace_table_token_6_th ( 1 ) the balance at december 31 , 2020 includes $ 5.1 million held by certain foreign subsidiaries which is not available to fund domestic operations unless deemed repatriated . we currently do not plan or foresee a need to repatriate such funds . the balance also includes $ 5.7 million and $ 2.2 million in cash held in our colombian and chinese subsidiaries , respectively . the balance at december 31 , 2019 includes $ 1.1 million held by our chinese subsidiary . ( 2 ) working capital is total current assets less total current liabilities . net cash provided by operating activities net cash provided by operating activities for the year ended december 31 , 2020 was $ 118.0 million compared to $ 78.0 million for the year ended december 31 , 2019. for the year ended december 31 , 2020 , the components of operating cash flows were net income of $ 30.2 million plus net non-cash charges of $ 66.8 million and reductions in net operating assets of $ 21.0 25 million . the primary components of operating cash flows for the year ended december 31 , 2019 were net income of $ 37.1 million plus net non-cash charges of $ 45.0 million and investments in net operating assets of $ 4.2 million . net cash used in investing activities during the year ended december 31 , 2020 , we used $ 91.9 million for acquisitions and $ 6.7 million to purchase property and equipment and to develop software . during the year ended december 31 , 2019 , we used $ 11.1 million for acquisitions and $ 9.3 million to purchase property and equipment and to develop software .
| 1 |
in the fourth quarter of 2020 , we acquired panoptes , transforming our pipeline with the addition of pp-001 . pp-001 , is a next-generation , non-steroidal , immuno-modulatory and small-molecule inhibitor of dhodh with what we believe to be best-in-class picomolar potency and a validated immune modulating mechanism designed to overcome the off-target side effects and safety issues associated with dhodh inhibitors . pp-001 has been developed in two clinical-stage ophthalmic formulations : paniject , an intravitreal injection for inflammatory diseases of the eye including posterior uveitis , and panidrop , a novel nano carrier technology eye drop for ocular surface diseases such as conjunctivitis , dry eye disease and others . other administration routes are also in development and ind enabling studies are underway for conditions outside the ocular space . in addition , we are developing ocular bandage gel ( “ obg ” ) , a modified form of the natural polymer hyaluronic acid , designed to protect the ocular surface to permit re-epithelialization of the cornea and improve ocular surface integrity . obg , with unique properties that help hydrate and protect the ocular surface , is in clinical evaluation for patients undergoing prk surgery for corneal wound repair after refractive surgery and patients with pe as a result of dry eye . we are currently developing obg as a device but are evaluating the potential to reclassify obg as a drug . we attended a type-b meeting with the fda 's cder division during the first quarter of 2021 to discuss obg 's path forward as a drug and will continue to evaluate this feedback in reaching a decision . 54 in may 2020 , we were granted a loan ( the “ loan ” ) from silicon valley bank in the amount of approximately $ 0.278 million pursuant to the paycheck protection program ( the “ ppp ” ) under division a , title i of the coronavirus aid , relief , and economic security act ( “ cares act ” ) , which was enacted in march 2020. the loan may be prepaid by the company at any time prior to maturity with no prepayment penalties . funds from the loan may only be used for payroll costs , costs used to continue group health care benefits , mortgage payments , rent , utilities , and interest on other debt obligations incurred before february 15 , 2020 ( “ qualifying expenses ” ) . we used the entire loan amount for qualifying expenses . under the terms of the ppp , certain amounts of the loan may be forgiven if they are used for qualifying expenses as described in the cares act . if the loan is not forgiven , the loan will mature in may 2022 and bear interest at a rate of 1.0 % per annum , payable monthly commencing in september 2021. throughout our history , we have not generated significant revenue . we have never been profitable , and from inception through december 31 , 2020 , our losses from operations have aggregated $ 108.3 million . our net loss was approximately $ 8.1 million and $ 7.1 million for the twelve months ended december 31 , 2020 and 2019 , respectively . we expect to incur significant expenses and increasing operating losses for the foreseeable future as we continue the development and clinical trials of and seek regulatory approval for our pp-001 and obg product candidates , and any other product candidates we advance to clinical development . if we obtain regulatory approval for pp-001 and obg , we expect to incur significant expenses to create an infrastructure to support the commercialization of pp-001 and obg including sales , marketing and distribution functions . the continued spread of the covid-19 pandemic could adversely impact our clinical studies . in addition , covid-19 has resulted in significant governmental measures being implemented to control the spread of the virus , including quarantines , travel restrictions , and business shutdowns . covid-19 has also caused volatility in the global financial markets and threatened a slowdown in the global economy , which could negatively affect our ability to raise additional capital on attractive terms or at all . see “ item 1a . risk factors ” beginning on page 24 of this annual report on form 10-k. the extent to which covid-19 may impact our business will depend on future developments , which are highly uncertain and can not be predicted with confidence , such as the duration of the outbreak , the emergence of new variants , and the effectiveness of actions to contain and treat covid-19 . we can not presently predict the scope and severity of any potential disruptions to our business , including to our ongoing and planned clinical studies . any such shutdowns or other business interruptions could result in material and negative effects to our ability to conduct our business in the manner and on the timelines presently planned , which could have a material adverse impact on our business , results of operation , and financial condition . as of the date of this report , there have been no material adverse effects to our ongoing business operations from covid-19 . we will need additional financing to support our continuing operations . we will seek to fund our operations through public or private equity , debt financings , license and development agreements , or other sources , which may include collaborations with third parties . adequate additional financing may not be available to us on acceptable terms , or at all . our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy . story_separator_special_tag as a result , if we generate taxable income , our ability to use our pre-change net operating loss and tax credits carryforwards to reduce u.s. federal and state taxable income may be subject to limitations , which could result in increased future tax liability to us . in addition , the tcja enacted on december 22 , 2017 limits the amount of nols that we are permitted to deduct in any taxable year to 80 % of our taxable income in such year . the tcja also eliminates the ability to carry back nols to prior years but allows nols generated after 2017 to be carried forward indefinitely . as such , there is a risk that due to such items , our existing nols could expire or be unavailable to offset future income . jobs act effective december 31 , 2020 , we are no longer considered an “ emerging growth company ” under the jumpstart our business startups act of 2012 . 60 results of operations comparison of years ended december 31 , 2020 and 2019 the following table summarizes the results of our operations for the years ended december 31 , 2020 and 2019 : replace_table_token_1_th collaboration revenue . collaboration revenue was $ 0.012 million for the year ended december 31 , 2020 , compared to $ 2.686 million for the year ended december 31 , 2019. the revenue recognized for the year ended december 31 , 2020 related to the panoptes acquisition and the accompanying revenue we now generate from government funds from the date of its acquisition . the revenue recognized in the year ended december 31 , 2019 was a result of the termination of the license agreements with bhc and no further revenue will be recognized related to these agreements . research and development expenses . research and development expenses were $ 3.566 million for the year ended december 31 , 2020 compared to $ 5.389 million for the year ended december 31 , 2019. the decrease of $ 1.823 million was primarily due to a decrease in obg clinical activities following the completion of the prk pivotal study in 2019 , as well as the $ 0.500 million adjustment recorded in 2019 to the present value of the jade earn-out payment due upon fda approval of obg . these decreases were partially offset by increases in obg manufacturing and the expiration of a prepaid agreement in 2020 with a research vendor . general and administrative expenses . general and administrative expenses were $ 4.659 million for the year ended december 31 , 2020 , compared to $ 4.406 million for the year ended december 31 , 2019. the increase of $ 0.253 million was mainly due to increases in professional fees and acquisition costs as a result of the panoptes acquisition . these increases were partially offset by a decrease in personnel-related costs . other income , net . other income , net was $ 0.133 million for the year ended december 31 , 2020 , compared to $ 0.108 million for the year ended december 31 , 2019. the increase of $ 0.025 million was mainly due to a gain recognized on the dissolution of eyegate pharma s.a.s . in 2020 , partially offset by less interest earned on our cash balances . income tax expense . income tax expense was $ 0.012 million for the year ended december 31 , 2020 , compared to $ 0.095 million for the year ended december 31 , 2019. the 2020 and 2019 tax expense was a result of an increase in the state blended tax rate , which was applied to the deferred tax liability balance . 61 story_separator_special_tag pharmaceutical partners , we may have to relinquish valuable rights to our technologies , future revenue streams , research programs or product candidates , including our pp-001 and modified ha-based products , on terms that may not be favorable to us . if we are unable to raise additional funds through equity or debt financings when needed , we may be required to delay , limit , reduce or terminate our product development or future commercialization efforts or grant rights to develop and market pp-001 and modified ha-based products , or any other products that we would otherwise prefer to develop and market ourselves . based on our cash on hand at december 31 , 2020 and the approximately $ 8.0 million in net proceeds received from a private placement that closed on january 6 , 2021 , we believe we will have sufficient cash to fund planned operations through august 31 , 2021. however , the acceleration or reduction of cash outflows by management can significantly impact the timing for raising additional capital to complete development of its products . to continue development , we will need to raise additional capital through debt and or equity financing , or access additional funding through u.s. and or foreign grants . although we successfully completed our ipo and several subsequent registered offerings and private placements of our securities , additional capital may not be available on terms favorable to us , if at all . on may 13 , 2019 , the sec declared effective our registration statement on form s-3 , registering a total of $ 50,000,000 of our securities for sale to the public from time to time in what is known as a “ shelf offering ” . we do not know if our future offerings , including offerings pursuant to our shelf registration statement , will succeed . accordingly , no assurances can be given that management will be successful in these endeavors . our recurring losses from operations have caused management to determine there is substantial doubt about our ability to continue as a going concern . our consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities or any other
| liquidity and capital resources selected measures of liquidity and capital resources are as follows ( in millions ) : replace_table_token_6_th ( 1 ) the balance at december 31 , 2020 includes $ 5.1 million held by certain foreign subsidiaries which is not available to fund domestic operations unless deemed repatriated . we currently do not plan or foresee a need to repatriate such funds . the balance also includes $ 5.7 million and $ 2.2 million in cash held in our colombian and chinese subsidiaries , respectively . the balance at december 31 , 2019 includes $ 1.1 million held by our chinese subsidiary . ( 2 ) working capital is total current assets less total current liabilities . net cash provided by operating activities net cash provided by operating activities for the year ended december 31 , 2020 was $ 118.0 million compared to $ 78.0 million for the year ended december 31 , 2019. for the year ended december 31 , 2020 , the components of operating cash flows were net income of $ 30.2 million plus net non-cash charges of $ 66.8 million and reductions in net operating assets of $ 21.0 25 million . the primary components of operating cash flows for the year ended december 31 , 2019 were net income of $ 37.1 million plus net non-cash charges of $ 45.0 million and investments in net operating assets of $ 4.2 million . net cash used in investing activities during the year ended december 31 , 2020 , we used $ 91.9 million for acquisitions and $ 6.7 million to purchase property and equipment and to develop software . during the year ended december 31 , 2019 , we used $ 11.1 million for acquisitions and $ 9.3 million to purchase property and equipment and to develop software .
| 0 |
in the fourth quarter of 2020 , we acquired panoptes , transforming our pipeline with the addition of pp-001 . pp-001 , is a next-generation , non-steroidal , immuno-modulatory and small-molecule inhibitor of dhodh with what we believe to be best-in-class picomolar potency and a validated immune modulating mechanism designed to overcome the off-target side effects and safety issues associated with dhodh inhibitors . pp-001 has been developed in two clinical-stage ophthalmic formulations : paniject , an intravitreal injection for inflammatory diseases of the eye including posterior uveitis , and panidrop , a novel nano carrier technology eye drop for ocular surface diseases such as conjunctivitis , dry eye disease and others . other administration routes are also in development and ind enabling studies are underway for conditions outside the ocular space . in addition , we are developing ocular bandage gel ( “ obg ” ) , a modified form of the natural polymer hyaluronic acid , designed to protect the ocular surface to permit re-epithelialization of the cornea and improve ocular surface integrity . obg , with unique properties that help hydrate and protect the ocular surface , is in clinical evaluation for patients undergoing prk surgery for corneal wound repair after refractive surgery and patients with pe as a result of dry eye . we are currently developing obg as a device but are evaluating the potential to reclassify obg as a drug . we attended a type-b meeting with the fda 's cder division during the first quarter of 2021 to discuss obg 's path forward as a drug and will continue to evaluate this feedback in reaching a decision . 54 in may 2020 , we were granted a loan ( the “ loan ” ) from silicon valley bank in the amount of approximately $ 0.278 million pursuant to the paycheck protection program ( the “ ppp ” ) under division a , title i of the coronavirus aid , relief , and economic security act ( “ cares act ” ) , which was enacted in march 2020. the loan may be prepaid by the company at any time prior to maturity with no prepayment penalties . funds from the loan may only be used for payroll costs , costs used to continue group health care benefits , mortgage payments , rent , utilities , and interest on other debt obligations incurred before february 15 , 2020 ( “ qualifying expenses ” ) . we used the entire loan amount for qualifying expenses . under the terms of the ppp , certain amounts of the loan may be forgiven if they are used for qualifying expenses as described in the cares act . if the loan is not forgiven , the loan will mature in may 2022 and bear interest at a rate of 1.0 % per annum , payable monthly commencing in september 2021. throughout our history , we have not generated significant revenue . we have never been profitable , and from inception through december 31 , 2020 , our losses from operations have aggregated $ 108.3 million . our net loss was approximately $ 8.1 million and $ 7.1 million for the twelve months ended december 31 , 2020 and 2019 , respectively . we expect to incur significant expenses and increasing operating losses for the foreseeable future as we continue the development and clinical trials of and seek regulatory approval for our pp-001 and obg product candidates , and any other product candidates we advance to clinical development . if we obtain regulatory approval for pp-001 and obg , we expect to incur significant expenses to create an infrastructure to support the commercialization of pp-001 and obg including sales , marketing and distribution functions . the continued spread of the covid-19 pandemic could adversely impact our clinical studies . in addition , covid-19 has resulted in significant governmental measures being implemented to control the spread of the virus , including quarantines , travel restrictions , and business shutdowns . covid-19 has also caused volatility in the global financial markets and threatened a slowdown in the global economy , which could negatively affect our ability to raise additional capital on attractive terms or at all . see “ item 1a . risk factors ” beginning on page 24 of this annual report on form 10-k. the extent to which covid-19 may impact our business will depend on future developments , which are highly uncertain and can not be predicted with confidence , such as the duration of the outbreak , the emergence of new variants , and the effectiveness of actions to contain and treat covid-19 . we can not presently predict the scope and severity of any potential disruptions to our business , including to our ongoing and planned clinical studies . any such shutdowns or other business interruptions could result in material and negative effects to our ability to conduct our business in the manner and on the timelines presently planned , which could have a material adverse impact on our business , results of operation , and financial condition . as of the date of this report , there have been no material adverse effects to our ongoing business operations from covid-19 . we will need additional financing to support our continuing operations . we will seek to fund our operations through public or private equity , debt financings , license and development agreements , or other sources , which may include collaborations with third parties . adequate additional financing may not be available to us on acceptable terms , or at all . our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy . story_separator_special_tag as a result , if we generate taxable income , our ability to use our pre-change net operating loss and tax credits carryforwards to reduce u.s. federal and state taxable income may be subject to limitations , which could result in increased future tax liability to us . in addition , the tcja enacted on december 22 , 2017 limits the amount of nols that we are permitted to deduct in any taxable year to 80 % of our taxable income in such year . the tcja also eliminates the ability to carry back nols to prior years but allows nols generated after 2017 to be carried forward indefinitely . as such , there is a risk that due to such items , our existing nols could expire or be unavailable to offset future income . jobs act effective december 31 , 2020 , we are no longer considered an “ emerging growth company ” under the jumpstart our business startups act of 2012 . 60 results of operations comparison of years ended december 31 , 2020 and 2019 the following table summarizes the results of our operations for the years ended december 31 , 2020 and 2019 : replace_table_token_1_th collaboration revenue . collaboration revenue was $ 0.012 million for the year ended december 31 , 2020 , compared to $ 2.686 million for the year ended december 31 , 2019. the revenue recognized for the year ended december 31 , 2020 related to the panoptes acquisition and the accompanying revenue we now generate from government funds from the date of its acquisition . the revenue recognized in the year ended december 31 , 2019 was a result of the termination of the license agreements with bhc and no further revenue will be recognized related to these agreements . research and development expenses . research and development expenses were $ 3.566 million for the year ended december 31 , 2020 compared to $ 5.389 million for the year ended december 31 , 2019. the decrease of $ 1.823 million was primarily due to a decrease in obg clinical activities following the completion of the prk pivotal study in 2019 , as well as the $ 0.500 million adjustment recorded in 2019 to the present value of the jade earn-out payment due upon fda approval of obg . these decreases were partially offset by increases in obg manufacturing and the expiration of a prepaid agreement in 2020 with a research vendor . general and administrative expenses . general and administrative expenses were $ 4.659 million for the year ended december 31 , 2020 , compared to $ 4.406 million for the year ended december 31 , 2019. the increase of $ 0.253 million was mainly due to increases in professional fees and acquisition costs as a result of the panoptes acquisition . these increases were partially offset by a decrease in personnel-related costs . other income , net . other income , net was $ 0.133 million for the year ended december 31 , 2020 , compared to $ 0.108 million for the year ended december 31 , 2019. the increase of $ 0.025 million was mainly due to a gain recognized on the dissolution of eyegate pharma s.a.s . in 2020 , partially offset by less interest earned on our cash balances . income tax expense . income tax expense was $ 0.012 million for the year ended december 31 , 2020 , compared to $ 0.095 million for the year ended december 31 , 2019. the 2020 and 2019 tax expense was a result of an increase in the state blended tax rate , which was applied to the deferred tax liability balance . 61 story_separator_special_tag pharmaceutical partners , we may have to relinquish valuable rights to our technologies , future revenue streams , research programs or product candidates , including our pp-001 and modified ha-based products , on terms that may not be favorable to us . if we are unable to raise additional funds through equity or debt financings when needed , we may be required to delay , limit , reduce or terminate our product development or future commercialization efforts or grant rights to develop and market pp-001 and modified ha-based products , or any other products that we would otherwise prefer to develop and market ourselves . based on our cash on hand at december 31 , 2020 and the approximately $ 8.0 million in net proceeds received from a private placement that closed on january 6 , 2021 , we believe we will have sufficient cash to fund planned operations through august 31 , 2021. however , the acceleration or reduction of cash outflows by management can significantly impact the timing for raising additional capital to complete development of its products . to continue development , we will need to raise additional capital through debt and or equity financing , or access additional funding through u.s. and or foreign grants . although we successfully completed our ipo and several subsequent registered offerings and private placements of our securities , additional capital may not be available on terms favorable to us , if at all . on may 13 , 2019 , the sec declared effective our registration statement on form s-3 , registering a total of $ 50,000,000 of our securities for sale to the public from time to time in what is known as a “ shelf offering ” . we do not know if our future offerings , including offerings pursuant to our shelf registration statement , will succeed . accordingly , no assurances can be given that management will be successful in these endeavors . our recurring losses from operations have caused management to determine there is substantial doubt about our ability to continue as a going concern . our consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities or any other
| liquidity and capital resources since becoming a public company in 2015 , we have financed our operations from several registered offerings and private placements of our securities , payments from license agreements , and u.s. and foreign government grants . from inception through march 25 , 2021 , we have raised a total of approximately $ 108.9 million from such sales of our equity and debt securities , both as a public company and prior to our ipo , as well as approximately $ 14.9 million in payments received under our license agreements and government grants and $ 0.278 million received pursuant to the loan under the ppp . on october 2 , 2019 , we completed a private placement of 600,000 shares of common stock and warrants to purchase up to 600,000 shares of common stock to an affiliate of armistice capital , llc , with a combined purchase price per share and warrant of $ 3.125. the total net proceeds from the private placement were approximately $ 1.8 million . the warrants have an exercise price of $ 3.125 per share , subject to adjustments as provided under the terms of the warrants , and will be exercisable on the six-month anniversary of their issuance date . the warrants are exercisable for five years from the issuance date . on january 3 , 2020 , we completed a registered direct offering for 500,000 shares of common stock with a purchase price of $ 10.00 per share . the total net proceeds to the company from the offering were approximately $ 4.5 million . on january 6 , 2021 , we completed a private placement of 1,531,101 shares of common stock and warrants to purchase up to 1,531,101 shares of common stock to an affiliate of armistice capital , llc , with a combined purchase price per share and warrant of $ 5.225. the total net proceeds from the private placement were approximately $ 8.0 million .
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( 2 ) the assets and liabilities of the resecuritization we engaged in during the third quarter of 2011 are included in real estate securities at redwood residential and asset-backed securities issued resecuritization , respectively , although these assets and liabilities are owned by the resecuritization entity and are legally not ours and we own only the securities and interests that we acquired from the resecuritization entity . at december 31 , 2011 , the resecuritization accounted for $ 325 million of real estate securities and $ 220 million of asset-backed securities issued and our investment in this resecuritization equals the difference between these assets and liabilities . changes in book value and estimated non-gaap economic value during the fourth quarter of 2011 , our gaap book value decreased by $ 0.86 per share to $ 11.36 per share . the net decrease resulted from $ 0.03 per share from our reported net loss , $ 0.56 per share in net valuation decreases on securities not reflected in earnings , $ 0.03 per share in net valuation decreases on derivative hedges related to long-term debt not reflected in earnings , and $ 0.25 per share from dividends paid to shareholders , offset by $ 0.01 per share from other net positive items . at december 31 , 2011 , our estimate of non-gaap economic value was $ 12.45 per share , or $ 1.09 per share higher than our reported gaap book value . this $ 1.09 per share difference is reconciled as follows : ( i ) approximately $ 1.06 of this per share difference relates to an economic valuation of our long-term debt of $ 57 million , which was $ 83 million below the amortized cost basis used to determine gaap book value ; 52 ( ii ) an additional $ 0.07 per share relates to an economic valuation of our net investments in new sequoia entities and other consolidated entities of $ 96 million , which was $ 6 million above the amortized cost basis used to determine gaap book value ; and ( iii ) there is an offset of approximately $ 0.04 per share relating to an economic valuation of the asset-backed securities issued from the resecuritization of $ 220 million , that was $ 3 million above the amortized cost basis used to determine gaap book value . a further discussion of our estimate of non-gaap economic value is set forth below under investments in securitization entities and factors affecting management 's estimate of economic book value . story_separator_special_tag justify ; font-family : serif ; font-size : 10pt ; line-height : 12pt ; font-style : normal ; font-variant : normal ; font-weight : normal ; text-transform : none ; padding-top : 3pt ; padding-right : 0pt ; padding-left : 4px ; padding-bottom : 3pt ; margin-top : 0pt ; margin-right : 0pt ; margin-left : 0pt ; margin-bottom : 0pt `` > our investments in new sequoia entities , as reported for gaap , totaled $ 49 million at december 31 , 2011 and consisted of ios and subordinate securities . management 's estimate of the non-gaap economic value of our investments in these entities was $ 39 million . of this amount , $ 3 million consisted of ios and $ 36 million consisted of subordinate securities at new sequoia entities . our investments in the other consolidated entities , as reported for gaap , totaled $ 41 million at december 31 , 2011. this amount consisted of ios and senior and subordinate securities at legacy sequoia entities as well as our equity at the acacia entities . management 's estimate of the non-gaap economic value of our investments in these entities was $ 57 million . of this amount , $ 50 million consisted of ios and $ 6 million consisted of senior and subordinate securities at legacy sequoia entities . the remaining $ 1 million consisted of the value of anticipated management fee income at the acacia entities . factors affecting management 's estimate of economic book value in reviewing our non-gaap estimate of economic value , there are a number of important factors and limitations to consider . the estimated economic value of our stockholders ' equity is calculated as of a particular point in time based on our existing assets and liabilities or , in certain cases , our estimate of economic value of our existing assets and liabilities , and does not incorporate other factors that may have a significant impact on that value , most notably the impact of future business activities and cash flows . as a result , the estimated economic value of our stockholders ' equity does not necessarily represent an estimate of our net realizable value , liquidation value , or our market value as a whole . amounts we ultimately realize from the disposition of assets or settlement of liabilities may vary significantly from the estimated economic values of those assets and liabilities . because temporary changes in market conditions can substantially affect our estimate of the economic value of our stockholders ' equity , we do not believe that short-term fluctuations in the economic value of our assets and liabilities are necessarily representative of the effectiveness of our investment strategy or the long-term underlying value of our business . our estimated non-gaap economic value is calculated using bid-side asset marks ( or estimated bid-side values ) and offer-side marks for our financial liabilities ( or estimated offered-side values ) , when available , to determine fair value under gaap . when quoted market prices or observable market data are not available to estimate fair value , we rely on level 3 inputs . because assets and liabilities classified as level 3 are generally based on unobservable inputs , the process of calculating economic value is generally subjective and involves a high degree of management judgment and assumptions . story_separator_special_tag the following table provides real estate securities activity at redwood for the years ended december 31 , 2011 and 2010. table 19 real estate securities activity at redwood ( parent ) year ended december 31 , 2011 replace_table_token_29_th year ended december 31 , 2010 replace_table_token_30_th 67 the following tables present the carrying value ( which equals fair value ) as a percent of principal balance for securities owned at redwood at december 31 , 2011 and 2010. table 20 fair value as percent of principal balance for real estate securities at redwood ( parent ) replace_table_token_31_th replace_table_token_32_th 68 residential securities at december 31 , 2011 , the residential securities held at redwood ( as a percentage of current market value ) consisted of fixed-rate assets ( 36 % ) , adjustable-rate assets ( 16 % ) , hybrid assets that reset within the next year ( 21 % ) , hybrid assets that reset between 12 and 36 months ( 3 % ) , and hybrid assets that reset after 36 months ( 24 % ) . the following tables present the components of carrying value at december 31 , 2011 and 2010 for our residential securities . table 21 carrying value of residential securities at redwood ( parent ) replace_table_token_33_th replace_table_token_34_th senior securities the fair value of our senior afs securities was equal to 77 % of their principal balance at december 31 , 2011 , while our amortized cost was equal to 74 % of the principal balance . the fair value of our senior securities accounted for as trading securities was $ 21 million . volatility in income recognition for these securities is most affected by changes in prepayment rates and , to a lesser extent , credit results and interest rates . the loans underlying all of our residential senior securities totaled $ 18 billion at december 31 , 2011 , consisting of $ 10 billion prime and $ 8 billion non-prime . these loans are located nationwide with a large concentration in california ( 43 % ) . serious delinquencies ( 90+ days , in foreclosure or reo ) at december 31 , 2011 were 12.38 % of current balances . serious delinquencies were 9.94 % of current balances for loans in prime pools and 15.43 % of current balances for loans in non-prime pools . 69 re-remic securities our re-remic portfolio consists of prime residential senior securities that were pooled and re-securitized in 2009 and 2010 by third parties to create two-tranche structures ; we own support ( or subordinate ) securities within those structures . there were less than $ 1 thousand of credit losses in our re-remic portfolio during 2011. we anticipate losses , which were included in our acquisition assumptions , and have provided for $ 61 million of credit reserves on the $ 221 million principal balance of those securities . the fair value of our re-remic afs securities was equal to 54 % of the principal balance of the portfolio at december 31 , 2011 , while our amortized cost was equal to 37 % of the principal balance . the loans underlying all of our residential re-remic securities totaled $ 8 billion at december 31 , 2011 , and were all prime credit quality at time of origination . these loans are located nationwide with a large concentration in california ( 43 % ) . serious delinquencies ( 90+ days , in foreclosure or reo ) at december 31 , 2011 were 9.67 % of current balances . subordinate securities the fair value of our subordinate afs securities was equal to 29 % of the principal balance at december 31 , 2011 , while our amortized cost was equal to 32 % of the principal balance . credit losses totaled $ 92 million in our residential subordinate portfolio during 2011 , as compared to $ 151 million of losses during 2010. we expect future losses will extinguish the majority of the outstanding principal of these securities , as reflected by the $ 137 million of credit reserves we have provided for on the $ 237 million principal balance of those securities . the loans underlying all of our residential subordinate securities totaled $ 23 billion at december 31 , 2011 , consisting of $ 22 billion prime and $ 1 billion non-prime ( at origination ) . these loans are located nationwide with a large concentration in california ( 41 % ) . serious delinquencies ( 90+ days , in foreclosure or reo ) at december 31 , 2011 were 5.81 % of current balances . serious delinquencies were 5.18 % of current balances for loans in prime pools and 14.23 % of current balances for loans in non-prime pools . commercial securities at december 31 , 2011 , all of our commercial securities at redwood were subordinate securities predominantly issued in 2004 and 2005. the fair value of these securities totaled $ 6 million and $ 8 million at december 31 , 2011 and 2010 , respectively . these securities provided credit enhancement on $ 18 billion of underlying loans on office , retail , multifamily , industrial , and other income-producing properties nationwide . seriously delinquent loans ( 60+ days delinquent , in foreclosure or reo ) underlying commercial subordinate securities were $ 1.1 billion at december 31 , 2011 , a decrease of $ 109 million from december 31 , 2010. our credit reserve of $ 43 million on the current principal balance of $ 50 million at december 31 , 2011 , reflects our expectation that we will only receive a small amount of principal over the remaining life of these securities . credit losses in excess of our investments in each securitization will be borne by senior securities once losses extinguish our subordinate investments . accordingly , most of the remaining expected cash flow from commercial securities will come from coupon interest payments . realized credit losses on our commercial securities were $
| liquidity and capital resources since becoming a public company in 2015 , we have financed our operations from several registered offerings and private placements of our securities , payments from license agreements , and u.s. and foreign government grants . from inception through march 25 , 2021 , we have raised a total of approximately $ 108.9 million from such sales of our equity and debt securities , both as a public company and prior to our ipo , as well as approximately $ 14.9 million in payments received under our license agreements and government grants and $ 0.278 million received pursuant to the loan under the ppp . on october 2 , 2019 , we completed a private placement of 600,000 shares of common stock and warrants to purchase up to 600,000 shares of common stock to an affiliate of armistice capital , llc , with a combined purchase price per share and warrant of $ 3.125. the total net proceeds from the private placement were approximately $ 1.8 million . the warrants have an exercise price of $ 3.125 per share , subject to adjustments as provided under the terms of the warrants , and will be exercisable on the six-month anniversary of their issuance date . the warrants are exercisable for five years from the issuance date . on january 3 , 2020 , we completed a registered direct offering for 500,000 shares of common stock with a purchase price of $ 10.00 per share . the total net proceeds to the company from the offering were approximately $ 4.5 million . on january 6 , 2021 , we completed a private placement of 1,531,101 shares of common stock and warrants to purchase up to 1,531,101 shares of common stock to an affiliate of armistice capital , llc , with a combined purchase price per share and warrant of $ 5.225. the total net proceeds from the private placement were approximately $ 8.0 million .
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( 2 ) the assets and liabilities of the resecuritization we engaged in during the third quarter of 2011 are included in real estate securities at redwood residential and asset-backed securities issued resecuritization , respectively , although these assets and liabilities are owned by the resecuritization entity and are legally not ours and we own only the securities and interests that we acquired from the resecuritization entity . at december 31 , 2011 , the resecuritization accounted for $ 325 million of real estate securities and $ 220 million of asset-backed securities issued and our investment in this resecuritization equals the difference between these assets and liabilities . changes in book value and estimated non-gaap economic value during the fourth quarter of 2011 , our gaap book value decreased by $ 0.86 per share to $ 11.36 per share . the net decrease resulted from $ 0.03 per share from our reported net loss , $ 0.56 per share in net valuation decreases on securities not reflected in earnings , $ 0.03 per share in net valuation decreases on derivative hedges related to long-term debt not reflected in earnings , and $ 0.25 per share from dividends paid to shareholders , offset by $ 0.01 per share from other net positive items . at december 31 , 2011 , our estimate of non-gaap economic value was $ 12.45 per share , or $ 1.09 per share higher than our reported gaap book value . this $ 1.09 per share difference is reconciled as follows : ( i ) approximately $ 1.06 of this per share difference relates to an economic valuation of our long-term debt of $ 57 million , which was $ 83 million below the amortized cost basis used to determine gaap book value ; 52 ( ii ) an additional $ 0.07 per share relates to an economic valuation of our net investments in new sequoia entities and other consolidated entities of $ 96 million , which was $ 6 million above the amortized cost basis used to determine gaap book value ; and ( iii ) there is an offset of approximately $ 0.04 per share relating to an economic valuation of the asset-backed securities issued from the resecuritization of $ 220 million , that was $ 3 million above the amortized cost basis used to determine gaap book value . a further discussion of our estimate of non-gaap economic value is set forth below under investments in securitization entities and factors affecting management 's estimate of economic book value . story_separator_special_tag justify ; font-family : serif ; font-size : 10pt ; line-height : 12pt ; font-style : normal ; font-variant : normal ; font-weight : normal ; text-transform : none ; padding-top : 3pt ; padding-right : 0pt ; padding-left : 4px ; padding-bottom : 3pt ; margin-top : 0pt ; margin-right : 0pt ; margin-left : 0pt ; margin-bottom : 0pt `` > our investments in new sequoia entities , as reported for gaap , totaled $ 49 million at december 31 , 2011 and consisted of ios and subordinate securities . management 's estimate of the non-gaap economic value of our investments in these entities was $ 39 million . of this amount , $ 3 million consisted of ios and $ 36 million consisted of subordinate securities at new sequoia entities . our investments in the other consolidated entities , as reported for gaap , totaled $ 41 million at december 31 , 2011. this amount consisted of ios and senior and subordinate securities at legacy sequoia entities as well as our equity at the acacia entities . management 's estimate of the non-gaap economic value of our investments in these entities was $ 57 million . of this amount , $ 50 million consisted of ios and $ 6 million consisted of senior and subordinate securities at legacy sequoia entities . the remaining $ 1 million consisted of the value of anticipated management fee income at the acacia entities . factors affecting management 's estimate of economic book value in reviewing our non-gaap estimate of economic value , there are a number of important factors and limitations to consider . the estimated economic value of our stockholders ' equity is calculated as of a particular point in time based on our existing assets and liabilities or , in certain cases , our estimate of economic value of our existing assets and liabilities , and does not incorporate other factors that may have a significant impact on that value , most notably the impact of future business activities and cash flows . as a result , the estimated economic value of our stockholders ' equity does not necessarily represent an estimate of our net realizable value , liquidation value , or our market value as a whole . amounts we ultimately realize from the disposition of assets or settlement of liabilities may vary significantly from the estimated economic values of those assets and liabilities . because temporary changes in market conditions can substantially affect our estimate of the economic value of our stockholders ' equity , we do not believe that short-term fluctuations in the economic value of our assets and liabilities are necessarily representative of the effectiveness of our investment strategy or the long-term underlying value of our business . our estimated non-gaap economic value is calculated using bid-side asset marks ( or estimated bid-side values ) and offer-side marks for our financial liabilities ( or estimated offered-side values ) , when available , to determine fair value under gaap . when quoted market prices or observable market data are not available to estimate fair value , we rely on level 3 inputs . because assets and liabilities classified as level 3 are generally based on unobservable inputs , the process of calculating economic value is generally subjective and involves a high degree of management judgment and assumptions . story_separator_special_tag the following table provides real estate securities activity at redwood for the years ended december 31 , 2011 and 2010. table 19 real estate securities activity at redwood ( parent ) year ended december 31 , 2011 replace_table_token_29_th year ended december 31 , 2010 replace_table_token_30_th 67 the following tables present the carrying value ( which equals fair value ) as a percent of principal balance for securities owned at redwood at december 31 , 2011 and 2010. table 20 fair value as percent of principal balance for real estate securities at redwood ( parent ) replace_table_token_31_th replace_table_token_32_th 68 residential securities at december 31 , 2011 , the residential securities held at redwood ( as a percentage of current market value ) consisted of fixed-rate assets ( 36 % ) , adjustable-rate assets ( 16 % ) , hybrid assets that reset within the next year ( 21 % ) , hybrid assets that reset between 12 and 36 months ( 3 % ) , and hybrid assets that reset after 36 months ( 24 % ) . the following tables present the components of carrying value at december 31 , 2011 and 2010 for our residential securities . table 21 carrying value of residential securities at redwood ( parent ) replace_table_token_33_th replace_table_token_34_th senior securities the fair value of our senior afs securities was equal to 77 % of their principal balance at december 31 , 2011 , while our amortized cost was equal to 74 % of the principal balance . the fair value of our senior securities accounted for as trading securities was $ 21 million . volatility in income recognition for these securities is most affected by changes in prepayment rates and , to a lesser extent , credit results and interest rates . the loans underlying all of our residential senior securities totaled $ 18 billion at december 31 , 2011 , consisting of $ 10 billion prime and $ 8 billion non-prime . these loans are located nationwide with a large concentration in california ( 43 % ) . serious delinquencies ( 90+ days , in foreclosure or reo ) at december 31 , 2011 were 12.38 % of current balances . serious delinquencies were 9.94 % of current balances for loans in prime pools and 15.43 % of current balances for loans in non-prime pools . 69 re-remic securities our re-remic portfolio consists of prime residential senior securities that were pooled and re-securitized in 2009 and 2010 by third parties to create two-tranche structures ; we own support ( or subordinate ) securities within those structures . there were less than $ 1 thousand of credit losses in our re-remic portfolio during 2011. we anticipate losses , which were included in our acquisition assumptions , and have provided for $ 61 million of credit reserves on the $ 221 million principal balance of those securities . the fair value of our re-remic afs securities was equal to 54 % of the principal balance of the portfolio at december 31 , 2011 , while our amortized cost was equal to 37 % of the principal balance . the loans underlying all of our residential re-remic securities totaled $ 8 billion at december 31 , 2011 , and were all prime credit quality at time of origination . these loans are located nationwide with a large concentration in california ( 43 % ) . serious delinquencies ( 90+ days , in foreclosure or reo ) at december 31 , 2011 were 9.67 % of current balances . subordinate securities the fair value of our subordinate afs securities was equal to 29 % of the principal balance at december 31 , 2011 , while our amortized cost was equal to 32 % of the principal balance . credit losses totaled $ 92 million in our residential subordinate portfolio during 2011 , as compared to $ 151 million of losses during 2010. we expect future losses will extinguish the majority of the outstanding principal of these securities , as reflected by the $ 137 million of credit reserves we have provided for on the $ 237 million principal balance of those securities . the loans underlying all of our residential subordinate securities totaled $ 23 billion at december 31 , 2011 , consisting of $ 22 billion prime and $ 1 billion non-prime ( at origination ) . these loans are located nationwide with a large concentration in california ( 41 % ) . serious delinquencies ( 90+ days , in foreclosure or reo ) at december 31 , 2011 were 5.81 % of current balances . serious delinquencies were 5.18 % of current balances for loans in prime pools and 14.23 % of current balances for loans in non-prime pools . commercial securities at december 31 , 2011 , all of our commercial securities at redwood were subordinate securities predominantly issued in 2004 and 2005. the fair value of these securities totaled $ 6 million and $ 8 million at december 31 , 2011 and 2010 , respectively . these securities provided credit enhancement on $ 18 billion of underlying loans on office , retail , multifamily , industrial , and other income-producing properties nationwide . seriously delinquent loans ( 60+ days delinquent , in foreclosure or reo ) underlying commercial subordinate securities were $ 1.1 billion at december 31 , 2011 , a decrease of $ 109 million from december 31 , 2010. our credit reserve of $ 43 million on the current principal balance of $ 50 million at december 31 , 2011 , reflects our expectation that we will only receive a small amount of principal over the remaining life of these securities . credit losses in excess of our investments in each securitization will be borne by senior securities once losses extinguish our subordinate investments . accordingly , most of the remaining expected cash flow from commercial securities will come from coupon interest payments . realized credit losses on our commercial securities were $
| cash and cash equivalents at december 31 , 2011 , we had $ 267 million in cash and cash equivalents , as compared to $ 133 million at september 30 , 2011 , an increase of $ 134 million . the increase was primarily attributable to cash received during the fourth quarter of 2011 from our increased utilization of short-term debt facilities , offset by the acquisition of residential mortgage loans and securities , originations of commercial loans , and posting of margin with our various derivative and lending counterparties as required to satisfy the minimum margin requirements . as a supplement to the consolidated statements of cash flows included in this annual report on form 10-k , the following table details our sources and uses of cash for the year ended december 31 , 2011 , in a manner consistent with the way management analyzes them . this table illustrates our cash balances at december 31 , 2011 , september 30 , 2011 , and december 31 , 2010 ( each a gaap amount ) , and organizes the components of sources and uses of cash ( non-gaap amounts ) by aggregating and netting all items within our gaap consolidated statements of cash flows that were attributable to the periods presented . table 5 sources and uses of cash replace_table_token_8_th ( 1 ) cash flow from loans , securities , and investments can be volatile from quarter to quarter depending on the level of invested capital , the timing of credit losses , acquisitions , sales , and changes in prepayments 53 and interest rates . therefore , ( i ) cash flow generated by these investments in a given period is not necessarily reflective of the long-term economic return we will earn on the investments and ( ii ) it is difficult to determine what portion of the cash received from an investment is a return of principal and what portion is a return on principal in a given period .
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unless required by law , the company does not undertake , and specifically disclaims any obligations to , publicly release any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements . general the financial review that follows focuses on the factors affecting the consolidated financial condition and results of operations of the company and its wholly-owned subsidiaries , the bank , nbt financial services and nbt holdings during 2018 and , in summary form , the preceding two years . collectively , the registrant and its subsidiaries are referred to herein as “ the company . ” net interest margin is presented in this discussion on a fully taxable equivalent ( `` fte `` ) basis . average balances discussed are daily averages unless otherwise described . the audited consolidated financial statements and related notes as of december 31 , 2018 and 2017 and for each of the years in the three-year period ended december 31 , 2018 should be read in conjunction with this review . amounts in prior period consolidated financial statements are reclassified whenever necessary to conform to the 2018 presentation . critical accounting policies the company has identified policies as being critical because they require management to make particularly difficult , subjective and or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions . these policies relate to the allowance for loan losses , pension accounting and provision for income taxes . management of the company considers the accounting policy relating to the allowance for loan losses to be a critical accounting policy given the uncertainty in evaluating the level of the allowance required to cover credit losses inherent in the loan portfolio and the material effect that such judgments can have on the results of operations . while management 's current evaluation of the allowance for loan losses indicates that the allowance is appropriate , the allowance may need to be increased under adversely different conditions or assumptions . for example , if historical loan loss experience significantly worsened or if current economic conditions significantly deteriorated , additional provision for loan losses would be required to increase the allowance . in addition , the assumptions and estimates used in the internal reviews of the company 's nonperforming loans and potential problem loans have a significant impact on the overall analysis of the adequacy of the allowance for loan losses . while management has concluded that the current evaluation of collateral values is reasonable , if collateral values were significantly lower , the company 's allowance for loan loss policy would also require additional provision for loan losses . 30 management is required to make various assumptions in valuing the company 's pension assets and liabilities . these assumptions include the expected rate of return on plan assets , the discount rate and the rate of increase in future compensation levels . changes to these assumptions could impact earnings in future periods . the company takes into account the plan asset mix , funding obligations and expert opinions in determining the various rates used to estimate pension expense . the company also considers the citigroup pension liability index , market interest rates and discounted cash flows in setting the appropriate discount rate . in addition , the company reviews expected inflationary and merit increases to compensation in determining the rate of increase in future compensation levels . the company is subject to examinations from various taxing authorities . such examinations may result in challenges to the tax return treatment applied by the company to specific transactions . management believes that the assumptions and judgments used to record tax-related assets or liabilities have been appropriate . should tax laws change or the taxing authorities determine that management 's assumptions were inappropriate , an adjustment may be required which could have a material effect on the company 's results of operations . the company 's policies on the allowance for loan losses , pension accounting and provision for income taxes are disclosed in note 1 to the consolidated financial statements . a more detailed description of the allowance for loan losses is included in the section captioned “ risk management – credit risk ” in item 7. management 's discussion and analysis of financial condition and results of operations of this form 10-k. all significant pension accounting assumptions and income tax assumptions are disclosed in notes 13 and 12 to the consolidated financial statements , respectively . all accounting policies are important and as such , the company encourages the reader to review each of the policies included in note 1 to obtain a better understanding of how the company 's financial performance is reported . non-gaap measures this annual report on form 10-k contains financial information determined by methods other than in accordance with accounting principles generally accepted in the united states of america ( `` gaap `` ) . these measures adjust gaap measures to exclude the effects of acquisition-related intangible amortization expense on earnings and equity as well as providing a fte yield on securities and loans . where non-gaap disclosures are used in this annual report on form 10-k , the comparable gaap measure , as well as a reconciliation to the comparable gaap measure , is provided in the accompanying tables . management believes that these non-gaap measures provide useful information that is important to an understanding of the results of the company 's core business as well as provide information standard in the financial institution industry . non-gaap measures should not be considered a substitute for financial measures determined in accordance with gaap and investors should consider the company 's performance and financial condition as reported under gaap and all other relevant information when assessing the performance or financial condition of the company . story_separator_special_tag other noninterest income in 2018 increased compared to 2017 due to non-recurring gains recognized in 2018. excluding net securities ( losses ) gains , noninterest income for the year ended december 31 , 2018 would have been $ 131.1 million , up $ 11.7 million , or 9.8 % , from the year ended december 31 , 2017. noninterest expense noninterest expenses are also an important factor in the company 's results of operations . the following table sets forth the major components of noninterest expense for the years indicated : replace_table_token_14_th noninterest expense for the year ended december 31 , 2018 was $ 264.6 million , up $ 18.9 million , or 7.7 % , from the year ended december 31 , 2017. the increase from the prior year was driven by higher salaries and employee benefits due to the retirement plan services acquisitions in 2018 and 2017 , higher incentive compensation and wage increases for over 60 % of our employees from the company 's commitment to invest a portion of the tax reform benefit in our employees . 37 income taxes we calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the subsequent year . adjustments based on filed returns are recorded when identified , which is generally in the fourth quarter of the subsequent year for u.s. federal and state provisions . the amount of income taxes the company pays is subject at times to ongoing audits by federal and state tax authorities , which may result in proposed assessments . future results may include favorable or unfavorable adjustments to the estimated tax liabilities in the period the assessments are proposed or resolved or when statutes of limitation on potential assessments expire . as a result , the company 's effective tax rate may fluctuate significantly on a quarterly or annual basis . on december 22 , 2017 , the u.s. government enacted the t ax cuts and jobs act ( “ tcja ” ) . the tcja includes significant changes to the u.s. corporate income tax system including : a federal corporate rate reduction from 35 % to 21 % and establishing other tax laws affecting years subsequent to 2017. in connection with the analysis of the impact of the tcja , the company recorded a $ 4.4 million adjustment in the year ended december 31 , 2017 for remeasurement of deferred tax assets and liabilities for the corporate rate reduction . income tax expense for the year ended december 31 , 2018 was $ 24.4 million , down $ 21.6 million , or 46.9 % , from the year ended december 31 , 2017. the effective tax rate of 17.8 % in 2018 was down from 35.9 % in 2017. the decrease in income tax expense from the prior year was due to the lower effective tax rate resulting from the tcja , a $ 5.5 million tax benefit recorded in the fourth quarter of 2018 primarily related to one-time income tax return accounting method changes during the fourth quarter of 2018 , combined with the $ 4.4 million non-cash charge related to the enactment of the tcja in 2017 for the company 's deferred tax assets due to the tax rate reduction . this was partially offset by a higher level of taxable income and lower tax benefit from equity-based transactions . excluding the tax benefit from equity-based transactions , the tax benefit in the fourth quarter of 2018 and the tcja charge in 2017 , the effective tax rate was 22.2 % and 33.8 % for the years ending december 31 , 2018 and 2017 , respectively . the adjusted income tax expense on the company 's income was different from the income tax expense at the federal statutory rate of 21 % for 2018 and 35 % for 2017 due primarily to tax-exempt income and , to a lesser extent , the effect of state income taxes and federal low income housing credits . risk management – credit risk credit risk is managed through a network of loan officers , credit committees , loan policies and oversight from senior credit officers and board of directors . management follows a policy of continually identifying , analyzing and grading credit risk inherent in each loan portfolio . an ongoing independent review of individual credits in the commercial loan portfolio is performed by the independent loan review function . these components of the company 's underwriting and monitoring functions are critical to the timely identification , classification and resolution of problem credits . 38 nonperforming assets replace_table_token_15_th total nonperforming assets were $ 33.0 million at december 31 , 2018 , compared to $ 35.6 million at december 31 , 2017. nonperforming loans at december 31 , 2018 were $ 30.6 million or 0.44 % of total loans compared with $ 31.1 million or 0.47 % of total loans at december 31 , 2017. included in nonperforming loans are $ 2.1 million and $ 2.4 million of nonaccrual loans in the acquired loan portfolio at december 31 , 2018 and 2017 , respectively . excluding nonaccrual acquired loans , originated nonperforming loans to originated loans was 0.43 % and 0.46 % at december 31 , 2018 and 2017 , respectively . the company recorded a provision for loan losses of $ 28.8 million for the year ended december 31 , 2018 compared with $ 31.0 million for the year ended december 31 , 2017. net charge-offs to average loans for the year ended december 31 , 2018 were 0.38 % , compared with 0.42 % for the year ended december 31 , 2017. the allowance for loan losses was 237.16 % of nonperforming loans at december 31 , 2018 as compared to 223.34 % at december 31 , 2017. the allowance for loan losses as a percentage of loans was 1.05 % ( 1.10 % excluding acquired loans
| cash and cash equivalents at december 31 , 2011 , we had $ 267 million in cash and cash equivalents , as compared to $ 133 million at september 30 , 2011 , an increase of $ 134 million . the increase was primarily attributable to cash received during the fourth quarter of 2011 from our increased utilization of short-term debt facilities , offset by the acquisition of residential mortgage loans and securities , originations of commercial loans , and posting of margin with our various derivative and lending counterparties as required to satisfy the minimum margin requirements . as a supplement to the consolidated statements of cash flows included in this annual report on form 10-k , the following table details our sources and uses of cash for the year ended december 31 , 2011 , in a manner consistent with the way management analyzes them . this table illustrates our cash balances at december 31 , 2011 , september 30 , 2011 , and december 31 , 2010 ( each a gaap amount ) , and organizes the components of sources and uses of cash ( non-gaap amounts ) by aggregating and netting all items within our gaap consolidated statements of cash flows that were attributable to the periods presented . table 5 sources and uses of cash replace_table_token_8_th ( 1 ) cash flow from loans , securities , and investments can be volatile from quarter to quarter depending on the level of invested capital , the timing of credit losses , acquisitions , sales , and changes in prepayments 53 and interest rates . therefore , ( i ) cash flow generated by these investments in a given period is not necessarily reflective of the long-term economic return we will earn on the investments and ( ii ) it is difficult to determine what portion of the cash received from an investment is a return of principal and what portion is a return on principal in a given period .
| 0 |
unless required by law , the company does not undertake , and specifically disclaims any obligations to , publicly release any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements . general the financial review that follows focuses on the factors affecting the consolidated financial condition and results of operations of the company and its wholly-owned subsidiaries , the bank , nbt financial services and nbt holdings during 2018 and , in summary form , the preceding two years . collectively , the registrant and its subsidiaries are referred to herein as “ the company . ” net interest margin is presented in this discussion on a fully taxable equivalent ( `` fte `` ) basis . average balances discussed are daily averages unless otherwise described . the audited consolidated financial statements and related notes as of december 31 , 2018 and 2017 and for each of the years in the three-year period ended december 31 , 2018 should be read in conjunction with this review . amounts in prior period consolidated financial statements are reclassified whenever necessary to conform to the 2018 presentation . critical accounting policies the company has identified policies as being critical because they require management to make particularly difficult , subjective and or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions . these policies relate to the allowance for loan losses , pension accounting and provision for income taxes . management of the company considers the accounting policy relating to the allowance for loan losses to be a critical accounting policy given the uncertainty in evaluating the level of the allowance required to cover credit losses inherent in the loan portfolio and the material effect that such judgments can have on the results of operations . while management 's current evaluation of the allowance for loan losses indicates that the allowance is appropriate , the allowance may need to be increased under adversely different conditions or assumptions . for example , if historical loan loss experience significantly worsened or if current economic conditions significantly deteriorated , additional provision for loan losses would be required to increase the allowance . in addition , the assumptions and estimates used in the internal reviews of the company 's nonperforming loans and potential problem loans have a significant impact on the overall analysis of the adequacy of the allowance for loan losses . while management has concluded that the current evaluation of collateral values is reasonable , if collateral values were significantly lower , the company 's allowance for loan loss policy would also require additional provision for loan losses . 30 management is required to make various assumptions in valuing the company 's pension assets and liabilities . these assumptions include the expected rate of return on plan assets , the discount rate and the rate of increase in future compensation levels . changes to these assumptions could impact earnings in future periods . the company takes into account the plan asset mix , funding obligations and expert opinions in determining the various rates used to estimate pension expense . the company also considers the citigroup pension liability index , market interest rates and discounted cash flows in setting the appropriate discount rate . in addition , the company reviews expected inflationary and merit increases to compensation in determining the rate of increase in future compensation levels . the company is subject to examinations from various taxing authorities . such examinations may result in challenges to the tax return treatment applied by the company to specific transactions . management believes that the assumptions and judgments used to record tax-related assets or liabilities have been appropriate . should tax laws change or the taxing authorities determine that management 's assumptions were inappropriate , an adjustment may be required which could have a material effect on the company 's results of operations . the company 's policies on the allowance for loan losses , pension accounting and provision for income taxes are disclosed in note 1 to the consolidated financial statements . a more detailed description of the allowance for loan losses is included in the section captioned “ risk management – credit risk ” in item 7. management 's discussion and analysis of financial condition and results of operations of this form 10-k. all significant pension accounting assumptions and income tax assumptions are disclosed in notes 13 and 12 to the consolidated financial statements , respectively . all accounting policies are important and as such , the company encourages the reader to review each of the policies included in note 1 to obtain a better understanding of how the company 's financial performance is reported . non-gaap measures this annual report on form 10-k contains financial information determined by methods other than in accordance with accounting principles generally accepted in the united states of america ( `` gaap `` ) . these measures adjust gaap measures to exclude the effects of acquisition-related intangible amortization expense on earnings and equity as well as providing a fte yield on securities and loans . where non-gaap disclosures are used in this annual report on form 10-k , the comparable gaap measure , as well as a reconciliation to the comparable gaap measure , is provided in the accompanying tables . management believes that these non-gaap measures provide useful information that is important to an understanding of the results of the company 's core business as well as provide information standard in the financial institution industry . non-gaap measures should not be considered a substitute for financial measures determined in accordance with gaap and investors should consider the company 's performance and financial condition as reported under gaap and all other relevant information when assessing the performance or financial condition of the company . story_separator_special_tag other noninterest income in 2018 increased compared to 2017 due to non-recurring gains recognized in 2018. excluding net securities ( losses ) gains , noninterest income for the year ended december 31 , 2018 would have been $ 131.1 million , up $ 11.7 million , or 9.8 % , from the year ended december 31 , 2017. noninterest expense noninterest expenses are also an important factor in the company 's results of operations . the following table sets forth the major components of noninterest expense for the years indicated : replace_table_token_14_th noninterest expense for the year ended december 31 , 2018 was $ 264.6 million , up $ 18.9 million , or 7.7 % , from the year ended december 31 , 2017. the increase from the prior year was driven by higher salaries and employee benefits due to the retirement plan services acquisitions in 2018 and 2017 , higher incentive compensation and wage increases for over 60 % of our employees from the company 's commitment to invest a portion of the tax reform benefit in our employees . 37 income taxes we calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the subsequent year . adjustments based on filed returns are recorded when identified , which is generally in the fourth quarter of the subsequent year for u.s. federal and state provisions . the amount of income taxes the company pays is subject at times to ongoing audits by federal and state tax authorities , which may result in proposed assessments . future results may include favorable or unfavorable adjustments to the estimated tax liabilities in the period the assessments are proposed or resolved or when statutes of limitation on potential assessments expire . as a result , the company 's effective tax rate may fluctuate significantly on a quarterly or annual basis . on december 22 , 2017 , the u.s. government enacted the t ax cuts and jobs act ( “ tcja ” ) . the tcja includes significant changes to the u.s. corporate income tax system including : a federal corporate rate reduction from 35 % to 21 % and establishing other tax laws affecting years subsequent to 2017. in connection with the analysis of the impact of the tcja , the company recorded a $ 4.4 million adjustment in the year ended december 31 , 2017 for remeasurement of deferred tax assets and liabilities for the corporate rate reduction . income tax expense for the year ended december 31 , 2018 was $ 24.4 million , down $ 21.6 million , or 46.9 % , from the year ended december 31 , 2017. the effective tax rate of 17.8 % in 2018 was down from 35.9 % in 2017. the decrease in income tax expense from the prior year was due to the lower effective tax rate resulting from the tcja , a $ 5.5 million tax benefit recorded in the fourth quarter of 2018 primarily related to one-time income tax return accounting method changes during the fourth quarter of 2018 , combined with the $ 4.4 million non-cash charge related to the enactment of the tcja in 2017 for the company 's deferred tax assets due to the tax rate reduction . this was partially offset by a higher level of taxable income and lower tax benefit from equity-based transactions . excluding the tax benefit from equity-based transactions , the tax benefit in the fourth quarter of 2018 and the tcja charge in 2017 , the effective tax rate was 22.2 % and 33.8 % for the years ending december 31 , 2018 and 2017 , respectively . the adjusted income tax expense on the company 's income was different from the income tax expense at the federal statutory rate of 21 % for 2018 and 35 % for 2017 due primarily to tax-exempt income and , to a lesser extent , the effect of state income taxes and federal low income housing credits . risk management – credit risk credit risk is managed through a network of loan officers , credit committees , loan policies and oversight from senior credit officers and board of directors . management follows a policy of continually identifying , analyzing and grading credit risk inherent in each loan portfolio . an ongoing independent review of individual credits in the commercial loan portfolio is performed by the independent loan review function . these components of the company 's underwriting and monitoring functions are critical to the timely identification , classification and resolution of problem credits . 38 nonperforming assets replace_table_token_15_th total nonperforming assets were $ 33.0 million at december 31 , 2018 , compared to $ 35.6 million at december 31 , 2017. nonperforming loans at december 31 , 2018 were $ 30.6 million or 0.44 % of total loans compared with $ 31.1 million or 0.47 % of total loans at december 31 , 2017. included in nonperforming loans are $ 2.1 million and $ 2.4 million of nonaccrual loans in the acquired loan portfolio at december 31 , 2018 and 2017 , respectively . excluding nonaccrual acquired loans , originated nonperforming loans to originated loans was 0.43 % and 0.46 % at december 31 , 2018 and 2017 , respectively . the company recorded a provision for loan losses of $ 28.8 million for the year ended december 31 , 2018 compared with $ 31.0 million for the year ended december 31 , 2017. net charge-offs to average loans for the year ended december 31 , 2018 were 0.38 % , compared with 0.42 % for the year ended december 31 , 2017. the allowance for loan losses was 237.16 % of nonperforming loans at december 31 , 2018 as compared to 223.34 % at december 31 , 2017. the allowance for loan losses as a percentage of loans was 1.05 % ( 1.10 % excluding acquired loans
| capital resources consistent with its goal to operate a sound and profitable financial institution , the company actively seeks to maintain a “ well-capitalized ” institution in accordance with regulatory standards . the principal source of capital to the company is earnings retention . the company 's capital measurements are in excess of both regulatory minimum guidelines and meet the requirements to be considered well-capitalized . the company 's primary source of funds to pay interest on trust preferred debentures and pay cash dividends to its shareholders are dividends from its subsidiaries . various laws and regulations restrict the ability of banks to pay dividends to their shareholders . generally , the payment of dividends by the company in the future as well as the payment of interest on the capital securities will require the generation of sufficient future earnings by its subsidiaries . the bank also is subject to substantial regulatory restrictions on its ability to pay dividends to the company . under occ regulations , the bank may not pay a dividend , without prior occ approval , if the total amount of all dividends declared during the calendar year , including the proposed dividend , exceeds the sum of its retained net income to date during the calendar year and its retained net income over the preceding two years . at december 31 , 2018 and 2017 , approximately $ 174.1 million and $ 107.5 million , respectively , of the total stockholders ' equity of the bank was available for payment of dividends to the company without approval by the occ . the bank 's ability to pay dividends also is subject to the bank being in compliance with regulatory capital requirements . the bank is currently in compliance with these requirements .
| 1 |
revenue from ip licensing and royalties represented the majority of our revenues for 2012 , and we expect revenue from ip licensing and royalties to represent a significant portion of our revenues in 2013. due to the shift in our engineering and research and development focus and the decline in major consumer electronics applications utilizing customized versions of our 1t-sram technology , our competitiveness and the demand for our ip have declined since the beginning of 2011. as a result of our reduced licensing activities , we expect our licensing and royalty revenue to decrease in future periods . our expectation is that our revenue will transition from primarily licensing and royalty to predominately ic product sales . to date , we have substantially completed our performance obligations under our existing agreements , and we expect licensing revenues to decline in 2013. we have also been focused on monetizing our ip portfolio to fund the change in our business . towards this end , we have completed asset sales for proceeds of approximately $ 39.3 million , including our december 2011 patent sale and march 2012 serdes technology sale . 30 the 1t-sram is our high-density , high-performance patented memory solution that represents an alternative to traditional volatile embedded memory . our i/o ip includes physical layer ( phy ) circuitry that allows ics to communicate with one another in the networking , storage , computer and consumer market segments . our phy ip supports serial interface technologies , such as 10 gbps base kr , xaui , pci express and sata , as well as parallel interfaces like ddr3 . our ip customers typically include fabless semiconductor companies , integrated device manufacturers ( idms ) and foundries . critical accounting policies and use of estimates our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the united states of america . note 1 to the consolidated financial statements in item 15 of this report describes the significant accounting policies and methods used in the preparation of our consolidated financial statements . we have identified the accounting policies below as some of the more critical to our business and the understanding of our results of operations . these policies may involve estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses . although we believe our judgments and estimates are appropriate , actual future results may differ from our estimates , and if different assumptions or conditions were to prevail , the results could be materially different from our reported results . revenue recognition licensing licensing revenue consists of fees earned from license agreements , development services and support and maintenance . license fees generally range from $ 100,000 to several million dollars per contract , depending on the scope and complexity of the development project , and the extent of the licensee 's rights . the vast majority of our contracts allow for milestone billing based on work performed . fees billed prior to revenue recognition are recorded as deferred revenue . we recognize revenue when persuasive evidence of an arrangement exists , delivery or performance has occurred , the sales price is fixed or determinable , and collectibility is reasonably assured . evidence of an arrangement generally consists of signed agreements . when sales arrangements contain multiple elements ( e.g . , license and services ) , we review each element to determine the separate units of accounting that exist within the agreement . if more than one unit of accounting exists , the consideration payable to us under the agreement is allocated to each unit of accounting using the relative fair value method . revenue is recognized for each unit of accounting when the revenue recognition criteria have been met for that unit of accounting . for stand-alone license agreements or license deliverables in multi-deliverable arrangements that do not require significant development , modification or customization , revenue is recognized when all revenue recognition criteria have been met . delivery of the licensed technology is typically the final revenue recognition criterion met , at which time revenue is recognized . if any of the criteria are not met , revenue recognition is deferred until such time as all criteria have been met . for license agreements that include deliverables requiring significant production , modification or customization , and where we have significant experience in meeting the design specifications involved in the contract and the direct labor hours related to services under the contract can be reasonably estimated , we recognize revenue over the period in which the contract services are performed . for these arrangements , we recognize revenue using the percentage of completion method . revenue recognized in any period is dependent on our progress toward completion of projects in progress . significant management judgment and discretion are used to estimate total direct labor hours . these judgmental elements include determining that we have the experience to meet the design specifications and estimating the total direct labor hours . we follow this method because we can obtain reasonably 31 dependable estimates of the direct labor hours to perform the contract services . the direct labor hours for the development of the licensee 's design are estimated at the beginning of the contract . as these direct labor hours are incurred , they are used as a measure of progress towards completion . we have the ability to reasonably estimate the direct labor hours on a contract-by-contract basis based on our experience in developing prior licensees ' designs . during the contract performance period , we review estimates of direct labor hours to complete the contracts as the contract progresses to completion and will revise our estimates of revenue and gross profit under the contract if we revise the estimations of the direct labor hours to complete . story_separator_special_tag royalty revenue decreased $ 1.0 million in 2011 primarily due to a decrease in shipments by an idm licensee whose product is used in the nintendo wii® game console , although we did experience an increase in royalties received from tsmc and from another licensee due to higher manufacturing volumes for their products . cost of net revenue and gross profit . replace_table_token_7_th replace_table_token_8_th cost of net revenue consists of personnel and related overhead allocation costs for engineers assigned to revenue-generating licensing arrangements and direct and indirect costs related to the sale of ic products . cost of net revenue decreased in 2012 , primarily due to the lack of new licensing agreements and reduced requirements for engineering services on existing contracts . cost of net revenue in 2012 included stock-based compensation expense of $ 0.1 million , a decrease of $ 0.3 million compared with 2011. total gross profit decreased to $ 5.7 million in 2012 primarily due to the decrease in license and royalty revenues . we expect that the cost of licensing revenue will decrease in absolute dollars in the future because we anticipate entering into few , if any , license agreements . this decrease will be offset by increased ic cost of net revenue from sales of our bandwidth engine ics . we expect cost as a percentage of total net revenue to increase as we generate additional revenue from the sale of ics rather than the licensing of ip . cost of net revenue increased in 2011 primarily due to two 1t-sram projects that were substantially completed in the fourth quarter of 2011 in which we expensed $ 1.2 million of previously capitalized deferred costs . cost of net revenue in 2011 included stock-based compensation expense of $ 0.4 million , an increase of $ 0.1 million compared with 2010. total gross profit decreased to 35 $ 10.8 million in 2011 primarily due to the lower margin contribution from the two 1t-sram projects and the decrease in royalty revenues . research and development . replace_table_token_9_th our research and development expenses include costs related to the development of our ic products and amortization of technology-based intangible assets . we expense research and development costs as they are incurred . the $ 2.3 million increase in 2012 was primarily due to increases in our mask tooling and other fabrication costs and stock-based compensation charges , partially offset by decreases in personnel-related costs resulting from lower headcount and lower amortization costs related to acquired intangible assets . the $ 0.7 million increase in 2011 was primarily due to increases in license costs for our cad software tools , costs related to the development of our bandwidth engine ic and stock-based compensation charges , offset by a decrease in acquisition-related contingent compensation charges . research and development expenses included stock-based compensation expense of $ 2.7 million , $ 2.0 million and $ 1.5 million for the years ended december 31 , 2012 , 2011 and 2010 , respectively . we expect that research and development expenses will remain flat or decrease slightly in absolute dollars and as a percentage of total revenue as our average headcount and related personnel costs are expected to be lower in 2013 as compared to 2012. the primary driver of research and development expense will be our continued investment in our current and next generation ic products . selling , general and administrative . replace_table_token_10_th selling , general and administrative expenses consist primarily of personnel and related overhead costs for sales , marketing , finance , human resources and general management . the $ 0.7 million decrease for 2012 was primarily due to a decrease in personnel-related , legal and stock-based compensation costs . the $ 1.5 million decrease for 2011 was primarily due to a decrease in personnel-related , acquisition-related and consulting costs . selling , general and administrative expenses included stock-based compensation expense of $ 1.1 million , $ 1.4 million and $ 1.5 million for the years ended december 31 , 2012 , 2011 and 2010 , respectively . we expect total selling , general and administrative expenses to remain flat or slightly decrease in absolute dollars . 36 gain on sale of assets . replace_table_token_11_th in march 2012 , we entered into an asset purchase agreement for an exclusive license of a portion of our intellectual property pertaining to our high-speed serial i/o technology for approximately $ 4.3 million . as part of the agreement , we provided certain technology transfer support services , and 15 employees of our india subsidiary accepted employment with the purchaser . in 2012 , we received approximately $ 3.4 million in cash , net of transaction costs , from this agreement , and we expect to receive an additional $ 0.6 million in march 2013. in december 2011 , we entered into a patent purchase agreement for the sale of 43 united states and 30 related foreign memory technology patents for $ 35.0 million in cash . we recognized a $ 35.6 million gain on this transaction . the gain was comprised of the $ 35.0 million of proceeds , plus $ 0.8 million , which we determined to be the value of our retained license to these patents , net of transaction costs . other income and expense , net . replace_table_token_12_th other income and expense , net primarily consisted of interest income on our investments , which was $ 0.2 million , $ 0.1 million and $ 0.3 million for the years ended december 31 , 2012 , 2011 and 2010 , respectively . interest income increased by $ 28,000 in 2012 due to a higher average investment balance and declined by $ 129,000 in 2011 primarily due to lower average investment balances and lower interest rates earned . the increase in interest income was offset by increases in other expenses . income tax provision . replace_table_token_13_th our 2012 and 2010 income tax provisions were primarily attributable to foreign jurisdictions .
| capital resources consistent with its goal to operate a sound and profitable financial institution , the company actively seeks to maintain a “ well-capitalized ” institution in accordance with regulatory standards . the principal source of capital to the company is earnings retention . the company 's capital measurements are in excess of both regulatory minimum guidelines and meet the requirements to be considered well-capitalized . the company 's primary source of funds to pay interest on trust preferred debentures and pay cash dividends to its shareholders are dividends from its subsidiaries . various laws and regulations restrict the ability of banks to pay dividends to their shareholders . generally , the payment of dividends by the company in the future as well as the payment of interest on the capital securities will require the generation of sufficient future earnings by its subsidiaries . the bank also is subject to substantial regulatory restrictions on its ability to pay dividends to the company . under occ regulations , the bank may not pay a dividend , without prior occ approval , if the total amount of all dividends declared during the calendar year , including the proposed dividend , exceeds the sum of its retained net income to date during the calendar year and its retained net income over the preceding two years . at december 31 , 2018 and 2017 , approximately $ 174.1 million and $ 107.5 million , respectively , of the total stockholders ' equity of the bank was available for payment of dividends to the company without approval by the occ . the bank 's ability to pay dividends also is subject to the bank being in compliance with regulatory capital requirements . the bank is currently in compliance with these requirements .
| 0 |
revenue from ip licensing and royalties represented the majority of our revenues for 2012 , and we expect revenue from ip licensing and royalties to represent a significant portion of our revenues in 2013. due to the shift in our engineering and research and development focus and the decline in major consumer electronics applications utilizing customized versions of our 1t-sram technology , our competitiveness and the demand for our ip have declined since the beginning of 2011. as a result of our reduced licensing activities , we expect our licensing and royalty revenue to decrease in future periods . our expectation is that our revenue will transition from primarily licensing and royalty to predominately ic product sales . to date , we have substantially completed our performance obligations under our existing agreements , and we expect licensing revenues to decline in 2013. we have also been focused on monetizing our ip portfolio to fund the change in our business . towards this end , we have completed asset sales for proceeds of approximately $ 39.3 million , including our december 2011 patent sale and march 2012 serdes technology sale . 30 the 1t-sram is our high-density , high-performance patented memory solution that represents an alternative to traditional volatile embedded memory . our i/o ip includes physical layer ( phy ) circuitry that allows ics to communicate with one another in the networking , storage , computer and consumer market segments . our phy ip supports serial interface technologies , such as 10 gbps base kr , xaui , pci express and sata , as well as parallel interfaces like ddr3 . our ip customers typically include fabless semiconductor companies , integrated device manufacturers ( idms ) and foundries . critical accounting policies and use of estimates our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the united states of america . note 1 to the consolidated financial statements in item 15 of this report describes the significant accounting policies and methods used in the preparation of our consolidated financial statements . we have identified the accounting policies below as some of the more critical to our business and the understanding of our results of operations . these policies may involve estimates and judgments that affect the reported amounts of assets , liabilities , revenues and expenses . although we believe our judgments and estimates are appropriate , actual future results may differ from our estimates , and if different assumptions or conditions were to prevail , the results could be materially different from our reported results . revenue recognition licensing licensing revenue consists of fees earned from license agreements , development services and support and maintenance . license fees generally range from $ 100,000 to several million dollars per contract , depending on the scope and complexity of the development project , and the extent of the licensee 's rights . the vast majority of our contracts allow for milestone billing based on work performed . fees billed prior to revenue recognition are recorded as deferred revenue . we recognize revenue when persuasive evidence of an arrangement exists , delivery or performance has occurred , the sales price is fixed or determinable , and collectibility is reasonably assured . evidence of an arrangement generally consists of signed agreements . when sales arrangements contain multiple elements ( e.g . , license and services ) , we review each element to determine the separate units of accounting that exist within the agreement . if more than one unit of accounting exists , the consideration payable to us under the agreement is allocated to each unit of accounting using the relative fair value method . revenue is recognized for each unit of accounting when the revenue recognition criteria have been met for that unit of accounting . for stand-alone license agreements or license deliverables in multi-deliverable arrangements that do not require significant development , modification or customization , revenue is recognized when all revenue recognition criteria have been met . delivery of the licensed technology is typically the final revenue recognition criterion met , at which time revenue is recognized . if any of the criteria are not met , revenue recognition is deferred until such time as all criteria have been met . for license agreements that include deliverables requiring significant production , modification or customization , and where we have significant experience in meeting the design specifications involved in the contract and the direct labor hours related to services under the contract can be reasonably estimated , we recognize revenue over the period in which the contract services are performed . for these arrangements , we recognize revenue using the percentage of completion method . revenue recognized in any period is dependent on our progress toward completion of projects in progress . significant management judgment and discretion are used to estimate total direct labor hours . these judgmental elements include determining that we have the experience to meet the design specifications and estimating the total direct labor hours . we follow this method because we can obtain reasonably 31 dependable estimates of the direct labor hours to perform the contract services . the direct labor hours for the development of the licensee 's design are estimated at the beginning of the contract . as these direct labor hours are incurred , they are used as a measure of progress towards completion . we have the ability to reasonably estimate the direct labor hours on a contract-by-contract basis based on our experience in developing prior licensees ' designs . during the contract performance period , we review estimates of direct labor hours to complete the contracts as the contract progresses to completion and will revise our estimates of revenue and gross profit under the contract if we revise the estimations of the direct labor hours to complete . story_separator_special_tag royalty revenue decreased $ 1.0 million in 2011 primarily due to a decrease in shipments by an idm licensee whose product is used in the nintendo wii® game console , although we did experience an increase in royalties received from tsmc and from another licensee due to higher manufacturing volumes for their products . cost of net revenue and gross profit . replace_table_token_7_th replace_table_token_8_th cost of net revenue consists of personnel and related overhead allocation costs for engineers assigned to revenue-generating licensing arrangements and direct and indirect costs related to the sale of ic products . cost of net revenue decreased in 2012 , primarily due to the lack of new licensing agreements and reduced requirements for engineering services on existing contracts . cost of net revenue in 2012 included stock-based compensation expense of $ 0.1 million , a decrease of $ 0.3 million compared with 2011. total gross profit decreased to $ 5.7 million in 2012 primarily due to the decrease in license and royalty revenues . we expect that the cost of licensing revenue will decrease in absolute dollars in the future because we anticipate entering into few , if any , license agreements . this decrease will be offset by increased ic cost of net revenue from sales of our bandwidth engine ics . we expect cost as a percentage of total net revenue to increase as we generate additional revenue from the sale of ics rather than the licensing of ip . cost of net revenue increased in 2011 primarily due to two 1t-sram projects that were substantially completed in the fourth quarter of 2011 in which we expensed $ 1.2 million of previously capitalized deferred costs . cost of net revenue in 2011 included stock-based compensation expense of $ 0.4 million , an increase of $ 0.1 million compared with 2010. total gross profit decreased to 35 $ 10.8 million in 2011 primarily due to the lower margin contribution from the two 1t-sram projects and the decrease in royalty revenues . research and development . replace_table_token_9_th our research and development expenses include costs related to the development of our ic products and amortization of technology-based intangible assets . we expense research and development costs as they are incurred . the $ 2.3 million increase in 2012 was primarily due to increases in our mask tooling and other fabrication costs and stock-based compensation charges , partially offset by decreases in personnel-related costs resulting from lower headcount and lower amortization costs related to acquired intangible assets . the $ 0.7 million increase in 2011 was primarily due to increases in license costs for our cad software tools , costs related to the development of our bandwidth engine ic and stock-based compensation charges , offset by a decrease in acquisition-related contingent compensation charges . research and development expenses included stock-based compensation expense of $ 2.7 million , $ 2.0 million and $ 1.5 million for the years ended december 31 , 2012 , 2011 and 2010 , respectively . we expect that research and development expenses will remain flat or decrease slightly in absolute dollars and as a percentage of total revenue as our average headcount and related personnel costs are expected to be lower in 2013 as compared to 2012. the primary driver of research and development expense will be our continued investment in our current and next generation ic products . selling , general and administrative . replace_table_token_10_th selling , general and administrative expenses consist primarily of personnel and related overhead costs for sales , marketing , finance , human resources and general management . the $ 0.7 million decrease for 2012 was primarily due to a decrease in personnel-related , legal and stock-based compensation costs . the $ 1.5 million decrease for 2011 was primarily due to a decrease in personnel-related , acquisition-related and consulting costs . selling , general and administrative expenses included stock-based compensation expense of $ 1.1 million , $ 1.4 million and $ 1.5 million for the years ended december 31 , 2012 , 2011 and 2010 , respectively . we expect total selling , general and administrative expenses to remain flat or slightly decrease in absolute dollars . 36 gain on sale of assets . replace_table_token_11_th in march 2012 , we entered into an asset purchase agreement for an exclusive license of a portion of our intellectual property pertaining to our high-speed serial i/o technology for approximately $ 4.3 million . as part of the agreement , we provided certain technology transfer support services , and 15 employees of our india subsidiary accepted employment with the purchaser . in 2012 , we received approximately $ 3.4 million in cash , net of transaction costs , from this agreement , and we expect to receive an additional $ 0.6 million in march 2013. in december 2011 , we entered into a patent purchase agreement for the sale of 43 united states and 30 related foreign memory technology patents for $ 35.0 million in cash . we recognized a $ 35.6 million gain on this transaction . the gain was comprised of the $ 35.0 million of proceeds , plus $ 0.8 million , which we determined to be the value of our retained license to these patents , net of transaction costs . other income and expense , net . replace_table_token_12_th other income and expense , net primarily consisted of interest income on our investments , which was $ 0.2 million , $ 0.1 million and $ 0.3 million for the years ended december 31 , 2012 , 2011 and 2010 , respectively . interest income increased by $ 28,000 in 2012 due to a higher average investment balance and declined by $ 129,000 in 2011 primarily due to lower average investment balances and lower interest rates earned . the increase in interest income was offset by increases in other expenses . income tax provision . replace_table_token_13_th our 2012 and 2010 income tax provisions were primarily attributable to foreign jurisdictions .
| liquidity and capital resources as of december 31 , 2012 , we had cash , cash equivalents and investments totaling $ 40.7 million compared with a combined balance of $ 58.0 million at december 31 , 2011. our principal source of cash in 2011 was the sale of patents for $ 35 million in december 2011. in december 2010 , we sold approximately 5 million shares of common stock in a registered direct equity offering , raising approximately $ 20 million , net of transaction expenses of approximately $ 0.1 million . the offering was made under our $ 50 million shelf registration statement that became effective in november 2010. our primary capital requirements are to fund working capital , including development of our ic products , and any acquisitions that we make that require cash consideration or expenditures . in 2012 , we used $ 22.0 million in operating activities , which primarily resulted from the net loss of $ 27.6 million and the $ 3.3 million gain on the sale of assets , adjusted for non-cash charges consisting of stock-based compensation of $ 3.8 million , depreciation and amortization of $ 2.7 million and $ 2.4 million generated from changes in operating assets and liabilities . the changes in assets and liabilities primarily related to the timing of billing our customers , collection of receivables , recognition of revenue related to deferred revenues and payments to vendors . in 2011 , we used $ 15.7 million in operating activities , which primarily resulted from the net income of $ 11.3 million and $ 1.3 million generated from changes in operating assets and liabilities , reduced by the $ 35.6 million gain on the sale of patents and adjusted for non-cash charges consisting of stock-based compensation of $ 3.8 million and depreciation and amortization of $ 3.7 million . the changes in assets and liabilities primarily related to the timing of billing our customers , collection of receivables and payments to vendors .
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in response to these budgetary pressures , schools typically elect to retain teachers and spend less on repairs , maintenance and replacement furniture , which in turn reduces the demand for , and sales of , the company 's products . in recent years there has been an improvement in state and local tax collections , and most state and local governments have seen their tax receipts return to the pre-2008 levels . in response to the 2008 recession , passage of new bond issuances declined , and the related bond funded project completions decreased materially for several years . in recent years the completions of bond funded projects have recovered from the low point subsequent to 2008 , but projects remain well below the pre-2008 levels . in the recent elections we observed an increase in bond passages . due to the time requirement to plan and construct a new school or major remodel , there is a time lag frequently ranging from one to three years between bond passage and when the bond funding translates into furniture sales . sales of product for completions of new schools , additions and renovations improved in the year ended january 31 , 2019 , and is anticipated to be favorable for the year ending january 31 , 2020 ( `` fiscal 2020 `` ) . while the current operating environment continues to show moderate year-over-year improvement , under-funding of our education system continues to be an on-going concern . a 2016 report from the national council on school facilities estimates that on every school day , approximately 50 million students and six million adults use publicly funded k-12 facilities . for state and local governments , spending on these facilities is the largest capital expenditure outside of highways . it was estimated that public schools spend approximately $ 99 billion per year on maintenance , operations and capital spending . the study estimates that a desirable level of spending would be $ 145 billion , leaving an annual shortfall of $ 46 billion . the significant budgetary challenges faced by the education industry have had an impact on the company 's business model over this time frame and have created opportunities as well . in the 1990 's , the company 's primary customers were the school business officials at a school district , and deliveries of furniture typically were to a district warehouse . in response to their budgetary challenges , many school districts closed warehouses and reduced janitorial and support staff in order to retain 22 accredited teachers . selling efforts must now reach school principals and administrative staff in addition to the district business offices . sales priced under national contracts or buying groups are displacing competitive bids administered by professional purchasing departments . distribution has become a more meaningful component of our business as most deliveries are to school sites , and often include inside delivery to the classroom . this evolution adds to the seasonal challenges of our business , but also creates opportunities to suppliers that can execute during the short summer delivery window . the furniture industry in general , including the market for school furniture , has been significantly impacted by low cost competition from manufacturers based in china . competition from china increased dramatically after admission of china to the world trade organization in 2001. subsequent to this date , many of our domestic manufacturing competitors closed their factories and sourced product from china . to our knowledge , no new factories or significant manufacturing enhancements were constructed to support the school furniture market during this period . virco pursued a different strategy which exacerbated operating challenges following these events , but now leave us with what we believe to be a significant competitive advantage . during a period of robust education spending during the 1990 's , the company expanded and modernized its manufacturing and distribution facilities at the torrance , ca and conway , ar locations . during the last fifteen years , the company has worked continuously to significantly reduce and control its cost structure while concurrently expanding its product offering , expanding manufacturing process capabilities and more fully automating its facilities . for example , headcount of permanent employees as of january 31 , 2019 , was approximately 840 compared to a peak of nearly 2,950 in august 2000. factory overhead in fiscal 2019 declined by more than 50 % compared to fiscal 2001. the company accomplished this without closing a factory and while continuing to add new production processes , including flat metal forming , and other capabilities to support its ambitious product development program . our domestic fabrication allowed the company to develop significant product variety , color choices and custom products that are very difficult to replicate with a supply chain extending to china . finally , many education furniture products are bulky , with a large cube relative to the selling price . the cost of ocean freight from overseas for these bulky items offsets the cost advantages for overseas production . the company 's operating results can be impacted significantly by cost and volatility of commodities , especially steel , plastic , wood and energy . because a majority of the company 's sales are generated under annual contracts in which the company has limited ability to raise the price of its products during the term of the contract , if the costs of the company 's raw materials increase suddenly or unexpectedly , the company can not be certain that it will be able to implement corresponding increases in its sales prices in order to offset such increased costs . the company moderates this exposure by building significant quantities of finished goods and component parts during the first and second quarters . story_separator_special_tag in 2017 , congress passed the tax cuts and jobs act ( tcja ) on december 22 , 2017 which , among other changes , reduced the federal income tax rate effective january 1 , 2018 to 21 % . because virco 's fiscal year ended january 31 , 2018 , 11 of the 12 months were subject to the 34 % graduated rate and one month at the 21 % rate , for an effective federal rate of 32.9 % . as a result of the reduction in the federal tax rate , the value of the company 's deferred tax assets decreased by $ 4,438,000 as of january 31 , 2018. it is expected the effective tax rate for fiscal 2020 will be approximately 27 % . inflation and future change in prices we commit to annual contracts that determine selling prices for goods and services for periods of one year and occasionally longer . though the company has negotiated flexibility under many of these contracts that may allow the company to increase prices on future orders , the company does not have the ability to raise prices on orders received prior to any announced price increase . due to the intensely seasonal nature of our business , the company may receive significant orders during the first and second quarters for delivery in the second and third quarters . with respect to any of the contracts described above , if the costs of providing our products or services increase between the date the orders are received and the shipping date , we may not be able to implement corresponding increases in our sales prices for such products or services to offset the related increased costs . in fiscal 2017 , the cost of steel increased significantly , but the increase did not occur until after the company had sourced the majority of its steel for the summer delivery season . in fiscal 2018 , the cost of commodities increased over the course of the year but did not spike as suddenly as in some prior periods . in fiscal 2019 , the company incurred severe and sudden increase is material and component costs . in the first quarter , the federal government imposed a 25 % tariff on imported steel . the company purchases the majority of its steel from domestic sources , but the cost of domestic steel increased concurrently with the effective date of the tariffs on foreign steel . during the summer , the cost of imported components increased by as much as 15 % , primarily due to increased costs incurred by chinese suppliers . in october , a 10 % tariff was imposed on chinese furniture and components . 26 for fiscal 2020 , the company anticipates continued volatility in costs , particularly with respect to certain raw materials , transportation , and energy . anticipated adverse volatility for fiscal 2020 could be severe in light of tariffs imposed or threatened on imported commodities . there is continued uncertainty with respect to steel and other raw material costs , including plastics , that are affected by the price of oil . transportation costs may be adversely affected by increased oil prices , in the form of increased operation costs for our fleet , and surcharges on freight paid to third-party carriers . virco depends upon third party carriers for more than 90 % of customer deliveries . subsequent to 2010 , many carriers went out of business or were required to reduce the size of their fleets due to economic conditions and have not increased their fleets as the economy has improved . recent regulation and more stringent enforcement of federal regulations governing the transportation industry ( especially regarding drivers ) have adversely impacted the cost and availability of freight services . virco expects to incur continued pressure on employee benefit costs . the company has renewed health insurance contracts for its employees through december 2019 but costs after that date may be adversely impacted by current legislation , claim costs and industry consolidation . virco has aggressively addressed these costs by controlling headcount , freezing pension benefits and passing on a portion of increased medical costs to employees . to recover the cumulative impact of increased costs , the company has increased published list prices for fiscal 2020. due to current economic conditions , the company anticipates continued significant price competition in fiscal 2020 and may not be able to raise prices without risk of losing market share . as a significant portion of virco 's business is obtained through competitive bids , the company is carefully considering material and transportation costs as part of the bidding process . total material costs for fiscal 2020 , as a percentage of sales , could be higher than in fiscal 2019. the company is working to control and reduce costs by improving production and distribution methodologies , investigating new packaging and shipping materials and searching for new sources of purchased components and raw materials . story_separator_special_tag 1.75 % to 2.25 % , in each case based on the ebitda of the borrowers at the end of each fiscal quarter and may be increased at pnc 's option by 2.0 % during the continuance of an event of default . accrued interest with respect to principal amounts outstanding under the credit agreement is payable in arrears on a monthly basis for alternative base rate loans , and at the end of the applicable interest period but at most every three months for eurodollar currency rate loans . the interest rate at january 31 , 2019 was 6.25 % . for the fiscal year ended january 31 , 2016 , the credit agreement contained a covenant that forbade the company from issuing dividends or making payments with respect to the company 's capital stock . on april 4 , 2016 the company entered into an amendment allowing the company to pay dividends or conduct stock repurchases
| liquidity and capital resources as of december 31 , 2012 , we had cash , cash equivalents and investments totaling $ 40.7 million compared with a combined balance of $ 58.0 million at december 31 , 2011. our principal source of cash in 2011 was the sale of patents for $ 35 million in december 2011. in december 2010 , we sold approximately 5 million shares of common stock in a registered direct equity offering , raising approximately $ 20 million , net of transaction expenses of approximately $ 0.1 million . the offering was made under our $ 50 million shelf registration statement that became effective in november 2010. our primary capital requirements are to fund working capital , including development of our ic products , and any acquisitions that we make that require cash consideration or expenditures . in 2012 , we used $ 22.0 million in operating activities , which primarily resulted from the net loss of $ 27.6 million and the $ 3.3 million gain on the sale of assets , adjusted for non-cash charges consisting of stock-based compensation of $ 3.8 million , depreciation and amortization of $ 2.7 million and $ 2.4 million generated from changes in operating assets and liabilities . the changes in assets and liabilities primarily related to the timing of billing our customers , collection of receivables , recognition of revenue related to deferred revenues and payments to vendors . in 2011 , we used $ 15.7 million in operating activities , which primarily resulted from the net income of $ 11.3 million and $ 1.3 million generated from changes in operating assets and liabilities , reduced by the $ 35.6 million gain on the sale of patents and adjusted for non-cash charges consisting of stock-based compensation of $ 3.8 million and depreciation and amortization of $ 3.7 million . the changes in assets and liabilities primarily related to the timing of billing our customers , collection of receivables and payments to vendors .
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in response to these budgetary pressures , schools typically elect to retain teachers and spend less on repairs , maintenance and replacement furniture , which in turn reduces the demand for , and sales of , the company 's products . in recent years there has been an improvement in state and local tax collections , and most state and local governments have seen their tax receipts return to the pre-2008 levels . in response to the 2008 recession , passage of new bond issuances declined , and the related bond funded project completions decreased materially for several years . in recent years the completions of bond funded projects have recovered from the low point subsequent to 2008 , but projects remain well below the pre-2008 levels . in the recent elections we observed an increase in bond passages . due to the time requirement to plan and construct a new school or major remodel , there is a time lag frequently ranging from one to three years between bond passage and when the bond funding translates into furniture sales . sales of product for completions of new schools , additions and renovations improved in the year ended january 31 , 2019 , and is anticipated to be favorable for the year ending january 31 , 2020 ( `` fiscal 2020 `` ) . while the current operating environment continues to show moderate year-over-year improvement , under-funding of our education system continues to be an on-going concern . a 2016 report from the national council on school facilities estimates that on every school day , approximately 50 million students and six million adults use publicly funded k-12 facilities . for state and local governments , spending on these facilities is the largest capital expenditure outside of highways . it was estimated that public schools spend approximately $ 99 billion per year on maintenance , operations and capital spending . the study estimates that a desirable level of spending would be $ 145 billion , leaving an annual shortfall of $ 46 billion . the significant budgetary challenges faced by the education industry have had an impact on the company 's business model over this time frame and have created opportunities as well . in the 1990 's , the company 's primary customers were the school business officials at a school district , and deliveries of furniture typically were to a district warehouse . in response to their budgetary challenges , many school districts closed warehouses and reduced janitorial and support staff in order to retain 22 accredited teachers . selling efforts must now reach school principals and administrative staff in addition to the district business offices . sales priced under national contracts or buying groups are displacing competitive bids administered by professional purchasing departments . distribution has become a more meaningful component of our business as most deliveries are to school sites , and often include inside delivery to the classroom . this evolution adds to the seasonal challenges of our business , but also creates opportunities to suppliers that can execute during the short summer delivery window . the furniture industry in general , including the market for school furniture , has been significantly impacted by low cost competition from manufacturers based in china . competition from china increased dramatically after admission of china to the world trade organization in 2001. subsequent to this date , many of our domestic manufacturing competitors closed their factories and sourced product from china . to our knowledge , no new factories or significant manufacturing enhancements were constructed to support the school furniture market during this period . virco pursued a different strategy which exacerbated operating challenges following these events , but now leave us with what we believe to be a significant competitive advantage . during a period of robust education spending during the 1990 's , the company expanded and modernized its manufacturing and distribution facilities at the torrance , ca and conway , ar locations . during the last fifteen years , the company has worked continuously to significantly reduce and control its cost structure while concurrently expanding its product offering , expanding manufacturing process capabilities and more fully automating its facilities . for example , headcount of permanent employees as of january 31 , 2019 , was approximately 840 compared to a peak of nearly 2,950 in august 2000. factory overhead in fiscal 2019 declined by more than 50 % compared to fiscal 2001. the company accomplished this without closing a factory and while continuing to add new production processes , including flat metal forming , and other capabilities to support its ambitious product development program . our domestic fabrication allowed the company to develop significant product variety , color choices and custom products that are very difficult to replicate with a supply chain extending to china . finally , many education furniture products are bulky , with a large cube relative to the selling price . the cost of ocean freight from overseas for these bulky items offsets the cost advantages for overseas production . the company 's operating results can be impacted significantly by cost and volatility of commodities , especially steel , plastic , wood and energy . because a majority of the company 's sales are generated under annual contracts in which the company has limited ability to raise the price of its products during the term of the contract , if the costs of the company 's raw materials increase suddenly or unexpectedly , the company can not be certain that it will be able to implement corresponding increases in its sales prices in order to offset such increased costs . the company moderates this exposure by building significant quantities of finished goods and component parts during the first and second quarters . story_separator_special_tag in 2017 , congress passed the tax cuts and jobs act ( tcja ) on december 22 , 2017 which , among other changes , reduced the federal income tax rate effective january 1 , 2018 to 21 % . because virco 's fiscal year ended january 31 , 2018 , 11 of the 12 months were subject to the 34 % graduated rate and one month at the 21 % rate , for an effective federal rate of 32.9 % . as a result of the reduction in the federal tax rate , the value of the company 's deferred tax assets decreased by $ 4,438,000 as of january 31 , 2018. it is expected the effective tax rate for fiscal 2020 will be approximately 27 % . inflation and future change in prices we commit to annual contracts that determine selling prices for goods and services for periods of one year and occasionally longer . though the company has negotiated flexibility under many of these contracts that may allow the company to increase prices on future orders , the company does not have the ability to raise prices on orders received prior to any announced price increase . due to the intensely seasonal nature of our business , the company may receive significant orders during the first and second quarters for delivery in the second and third quarters . with respect to any of the contracts described above , if the costs of providing our products or services increase between the date the orders are received and the shipping date , we may not be able to implement corresponding increases in our sales prices for such products or services to offset the related increased costs . in fiscal 2017 , the cost of steel increased significantly , but the increase did not occur until after the company had sourced the majority of its steel for the summer delivery season . in fiscal 2018 , the cost of commodities increased over the course of the year but did not spike as suddenly as in some prior periods . in fiscal 2019 , the company incurred severe and sudden increase is material and component costs . in the first quarter , the federal government imposed a 25 % tariff on imported steel . the company purchases the majority of its steel from domestic sources , but the cost of domestic steel increased concurrently with the effective date of the tariffs on foreign steel . during the summer , the cost of imported components increased by as much as 15 % , primarily due to increased costs incurred by chinese suppliers . in october , a 10 % tariff was imposed on chinese furniture and components . 26 for fiscal 2020 , the company anticipates continued volatility in costs , particularly with respect to certain raw materials , transportation , and energy . anticipated adverse volatility for fiscal 2020 could be severe in light of tariffs imposed or threatened on imported commodities . there is continued uncertainty with respect to steel and other raw material costs , including plastics , that are affected by the price of oil . transportation costs may be adversely affected by increased oil prices , in the form of increased operation costs for our fleet , and surcharges on freight paid to third-party carriers . virco depends upon third party carriers for more than 90 % of customer deliveries . subsequent to 2010 , many carriers went out of business or were required to reduce the size of their fleets due to economic conditions and have not increased their fleets as the economy has improved . recent regulation and more stringent enforcement of federal regulations governing the transportation industry ( especially regarding drivers ) have adversely impacted the cost and availability of freight services . virco expects to incur continued pressure on employee benefit costs . the company has renewed health insurance contracts for its employees through december 2019 but costs after that date may be adversely impacted by current legislation , claim costs and industry consolidation . virco has aggressively addressed these costs by controlling headcount , freezing pension benefits and passing on a portion of increased medical costs to employees . to recover the cumulative impact of increased costs , the company has increased published list prices for fiscal 2020. due to current economic conditions , the company anticipates continued significant price competition in fiscal 2020 and may not be able to raise prices without risk of losing market share . as a significant portion of virco 's business is obtained through competitive bids , the company is carefully considering material and transportation costs as part of the bidding process . total material costs for fiscal 2020 , as a percentage of sales , could be higher than in fiscal 2019. the company is working to control and reduce costs by improving production and distribution methodologies , investigating new packaging and shipping materials and searching for new sources of purchased components and raw materials . story_separator_special_tag 1.75 % to 2.25 % , in each case based on the ebitda of the borrowers at the end of each fiscal quarter and may be increased at pnc 's option by 2.0 % during the continuance of an event of default . accrued interest with respect to principal amounts outstanding under the credit agreement is payable in arrears on a monthly basis for alternative base rate loans , and at the end of the applicable interest period but at most every three months for eurodollar currency rate loans . the interest rate at january 31 , 2019 was 6.25 % . for the fiscal year ended january 31 , 2016 , the credit agreement contained a covenant that forbade the company from issuing dividends or making payments with respect to the company 's capital stock . on april 4 , 2016 the company entered into an amendment allowing the company to pay dividends or conduct stock repurchases
| liquidity and capital resources working capital requirements virco addresses liquidity and working capital requirements in the context of short-term seasonal requirements and long-term capital requirements of the business . the company 's core business of selling furniture to publicly funded educational institutions is extremely seasonal . the seasonal nature of this business permeates most of virco 's operational , capital and financing decisions . the company 's working capital requirements during and in anticipation of the peak summer season oblige management to make estimates and judgments that affect virco 's assets , liabilities , revenues and expenses . management expends a significant amount of time during the year , and especially in the fourth quarter of the prior year and first quarter , developing a stocking plan and estimating the number of employees , the amount of raw materials and the types of components and products that will be required during the peak season . if management underestimates any of these requirements , virco 's ability to fill customer orders on a timely basis or to provide adequate customer service may be diminished . if management overestimates any of these requirements , the company may be required to absorb higher storage , labor and related costs , each of which may affect profitability . on an ongoing basis , management evaluates such estimates , including those related to market demand , labor costs and inventory levels , and continually strives to improve virco 's ability to correctly forecast business requirements during the peak season each year . as part of virco 's efforts to address seasonality , financial performance and quality without sacrificing service or market share , management has been refining the company 's ats operating model . ats is virco 's version of mass-customization , which assembles standard , stocked components into customized configurations before shipment . the company 's ats program reduces the total amount of inventory and working capital needed to support a given level of sales . it does this by increasing the inventory 's versatility , delaying assembly until the last moment and reducing the amount of warehouse space needed to store finished goods .
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most of our foundry services group customers are fabless , while some are idm customers . a customer will often have more than one supplier of manufacturing services . in any given period , our net sales depend heavily upon the end-market demand for the goods in which the products we manufacture for customers are used , the inventory levels maintained by our customers and in some cases , allocation of demand for manufacturing services among selected qualified suppliers . within our standard products group , net sales are driven by design wins in which we are selected by an electronics original equipment manufacturer ( oem ) or other potential customer to supply its demand for a particular product . a customer will often have more than one supplier designed in to multi-source components for a particular product line . once we have design wins and the products enter into mass production , we often specify the pricing of a particular product for a set period of time , with periodic discussions and renegotiations of pricing with our customers . in any given period , our net sales depend heavily upon the end-market demand for the goods in which our products are used , the inventory levels maintained by our customers and in some cases , allocation of demand for components for a particular product among selected qualified suppliers . in contrast to completely fabless semiconductor companies , our internal manufacturing capacity provides us with greater control over manufacturing costs and the ability to implement process and production improvements for our internally manufactured products , which can favorably impact gross profit margins . our internal manufacturing capacity also allows for better control over delivery schedules , improved consistency over product quality and reliability and improved ability to protect intellectual property from misappropriation on these products . however , having internal manufacturing capacity exposes us to the risk of under-utilization of manufacturing capacity that results in lower gross profit margins , particularly during downturns in the semiconductor industry . our products and services require investments in capital equipment . analog and mixed-signal manufacturing facilities and processes are typically distinguished by the design and process implementation expertise rather than the use of the most advanced equipment . many of these processes also tend to migrate more slowly to smaller geometries due to technological barriers and increased costs . for example , some of our products use high-voltage technology that requires larger geometries and that may not migrate to smaller geometries for several years , if at all . as a result , our manufacturing base and strategy do not require substantial investment in leading edge process equipment for those products , allowing us to utilize our facilities and equipment over an extended period of time with moderate required capital investments . in addition , we are less likely to experience significant industry overcapacity , which can cause product prices to decline significantly . in general , we seek to invest in manufacturing capacity that can be used for multiple high-value applications over an extended period of time . in addition , we outsource manufacturing of those products which do require advanced technology and 12-inch wafer capacity . we believe this capital investment strategy enables us to optimize our capital investments and facilitates more diversified product and service offerings . since 2007 , we have designed and manufactured organic light emitting diodes ( oled ) display driver ics in our internal manufacturing facilities . as we expanded our design capabilities to products that require lower geometries unavailable at our existing manufacturing facilities , we began outsourcing manufacturing of certain oled display driver ics to an external foundry from the second half of 2015. this additional source of manufacturing is an increasingly important part of our supply chain management . by outsourcing manufacturing of advanced oled products to external foundries , we are able to dynamically adapt to the changing customer requirements and address growing markets without substantial capital investments by us . both at the internal manufacturing facilities and external foundries , we apply our unique oled process patents as well as other intellectual property , proprietary process design kits and custom design-flow methodologies . 43 in our previous public filings , we had used a term active matrix organic light emitting diodes ( amoled ) that described a display technology used in certain display driver ics that we had designed and manufactured in our internal and external foundries . beginning in the second quarter of 2017 , we have used the term oled instead of the term amoled in our public filings in order to be consistent with commonly accepted industry naming practices for this product category . there is no change to the products that we previously referred to as amoled display driver ics . our success going forward will depend upon our ability to adapt to future challenges such as the emergence of new competitors for our products and services or the consolidation of current competitors . additionally , we must innovate to remain ahead of , or at least rapidly adapt to , technological breakthroughs that may lead to a significant change in the technology necessary to deliver our products and services . we believe that our established relationships and close collaboration with leading customers enhance our awareness of new product opportunities , market and technology trends and improve our ability to adapt and grow successfully . in our foundry services group , we strive to maintain competitiveness by offering high-value added processes , high-flexibility and excellent service by tailoring existing standard processes to meet customers ' design needs and porting customers ' own process technologies into our fabrication facilities . story_separator_special_tag adjusted ebitda is not a measure defined in accordance with us gaap and should not be construed as an alternative to income from continuing operations , cash flows from operating activities or net income , as determined in accordance with us gaap . a reconciliation of net income to adjusted ebitda is as follows : replace_table_token_5_th ( a ) for the year ended december 31 , 2017 , this adjustment eliminates the $ 16.6 million restructuring gain on sale of a building in connection with the closure of our 6-inch fab and the $ 0.4 million gain on sale of our sensor business . for the year ended december 31 , 2016 , this adjustment eliminates the $ 7.8 million restructuring gain on sale of machinery in connection with the closure of our 6-inch fab , net of $ 2.3 million training and transition costs related to our 6-inch fab employees . ( b ) this adjustment eliminates the charges related to the reduction of workforce through the headcount reduction plan in the first half of 2017 and the program in the second quarter of 2016. as these termination related charges are recorded as a result of implementing the company-wide headcount reduction and are not expected to represent ongoing operating expenses to us , we believe our operating performance results are more usefully compared if these expenses are excluded . ( c ) this adjustment eliminates the impact of non-cash equity-based compensation expenses . although we expect to incur non-cash equity-based compensation expenses in the future , these expenses do not generally require cash settlement , and , therefore , are not used by us to assess the profitability of our operations . we 48 believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information . ( d ) this adjustment mainly eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables , as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables . although we expect to incur foreign currency translation gains or losses in the future , we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarily non-cash gains or losses , which we can not control . additionally , we believe the isolation of this adjustment provides investors with enhanced comparability to prior and future periods of our operating performance results . ( e ) this adjustment eliminates the impact of gain or loss recognized in income on derivatives , which represents hedge ineffectiveness or derivatives value changes excluded from the risk being hedged . we enter into derivative transactions to mitigate foreign exchange risks . as our derivative transactions are limited to a certain portion of our expected cash flows denominated in u.s. dollars , and we do not enter into derivative transactions for trading or speculative purposes , we do not believe that these charges or gains are indicative of our core operating performance . ( f ) this adjustment eliminates expenses in connection with the audit committee 's independent investigation and related restatement and litigation , primarily comprised of legal , audit and consulting fees , and certain other expenses . for 2017 , this adjustment includes the $ 3.0 million civil penalty imposed by the sec and the $ 4.3 million of the additional tax assessment and associated penalties , primarily related to non-income-based vat transactions in the restatement periods , administrative fine and related legal fees . as these expenses meaningfully impacted our operating results and are not expected to represent an ongoing operating expense to us , we believe our operating performance results are more usefully compared if these expenses are excluded . ( g ) this adjustment eliminates expenses incurred for the secondary offering by the selling stockholders primarily in the third quarter of 2017. 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 as reported under us 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 reflect the interest expense , or the cash requirements necessary to service interest or principal payments , on our debt ; although depreciation and amortization are non-cash charges , the assets being depreciated and amortized will often need to be replaced in the future , and adjusted ebitda does not reflect any cash requirements for such replacements ; adjusted ebitda does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees ; adjusted ebitda does not reflect the costs of holding certain assets and liabilities in foreign currencies ; and other companies in our industry may calculate adjusted ebitda differently than we do , limiting its usefulness as a comparative measure . because of these limitations , adjusted ebitda should not be considered as a measure of discretionary cash available to us to invest in the growth of our business . we compensate for these limitations by relying primarily on our us gaap results and using adjusted ebitda only supplementally . we present adjusted net income ( loss ) as a further supplemental measure of our performance . we prepare adjusted net income ( loss ) by adjusting net income ( loss ) to eliminate the impact of a number of non-cash 49 expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance . we believe that adjusted net income ( loss ) is
| liquidity and capital resources working capital requirements virco addresses liquidity and working capital requirements in the context of short-term seasonal requirements and long-term capital requirements of the business . the company 's core business of selling furniture to publicly funded educational institutions is extremely seasonal . the seasonal nature of this business permeates most of virco 's operational , capital and financing decisions . the company 's working capital requirements during and in anticipation of the peak summer season oblige management to make estimates and judgments that affect virco 's assets , liabilities , revenues and expenses . management expends a significant amount of time during the year , and especially in the fourth quarter of the prior year and first quarter , developing a stocking plan and estimating the number of employees , the amount of raw materials and the types of components and products that will be required during the peak season . if management underestimates any of these requirements , virco 's ability to fill customer orders on a timely basis or to provide adequate customer service may be diminished . if management overestimates any of these requirements , the company may be required to absorb higher storage , labor and related costs , each of which may affect profitability . on an ongoing basis , management evaluates such estimates , including those related to market demand , labor costs and inventory levels , and continually strives to improve virco 's ability to correctly forecast business requirements during the peak season each year . as part of virco 's efforts to address seasonality , financial performance and quality without sacrificing service or market share , management has been refining the company 's ats operating model . ats is virco 's version of mass-customization , which assembles standard , stocked components into customized configurations before shipment . the company 's ats program reduces the total amount of inventory and working capital needed to support a given level of sales . it does this by increasing the inventory 's versatility , delaying assembly until the last moment and reducing the amount of warehouse space needed to store finished goods .
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most of our foundry services group customers are fabless , while some are idm customers . a customer will often have more than one supplier of manufacturing services . in any given period , our net sales depend heavily upon the end-market demand for the goods in which the products we manufacture for customers are used , the inventory levels maintained by our customers and in some cases , allocation of demand for manufacturing services among selected qualified suppliers . within our standard products group , net sales are driven by design wins in which we are selected by an electronics original equipment manufacturer ( oem ) or other potential customer to supply its demand for a particular product . a customer will often have more than one supplier designed in to multi-source components for a particular product line . once we have design wins and the products enter into mass production , we often specify the pricing of a particular product for a set period of time , with periodic discussions and renegotiations of pricing with our customers . in any given period , our net sales depend heavily upon the end-market demand for the goods in which our products are used , the inventory levels maintained by our customers and in some cases , allocation of demand for components for a particular product among selected qualified suppliers . in contrast to completely fabless semiconductor companies , our internal manufacturing capacity provides us with greater control over manufacturing costs and the ability to implement process and production improvements for our internally manufactured products , which can favorably impact gross profit margins . our internal manufacturing capacity also allows for better control over delivery schedules , improved consistency over product quality and reliability and improved ability to protect intellectual property from misappropriation on these products . however , having internal manufacturing capacity exposes us to the risk of under-utilization of manufacturing capacity that results in lower gross profit margins , particularly during downturns in the semiconductor industry . our products and services require investments in capital equipment . analog and mixed-signal manufacturing facilities and processes are typically distinguished by the design and process implementation expertise rather than the use of the most advanced equipment . many of these processes also tend to migrate more slowly to smaller geometries due to technological barriers and increased costs . for example , some of our products use high-voltage technology that requires larger geometries and that may not migrate to smaller geometries for several years , if at all . as a result , our manufacturing base and strategy do not require substantial investment in leading edge process equipment for those products , allowing us to utilize our facilities and equipment over an extended period of time with moderate required capital investments . in addition , we are less likely to experience significant industry overcapacity , which can cause product prices to decline significantly . in general , we seek to invest in manufacturing capacity that can be used for multiple high-value applications over an extended period of time . in addition , we outsource manufacturing of those products which do require advanced technology and 12-inch wafer capacity . we believe this capital investment strategy enables us to optimize our capital investments and facilitates more diversified product and service offerings . since 2007 , we have designed and manufactured organic light emitting diodes ( oled ) display driver ics in our internal manufacturing facilities . as we expanded our design capabilities to products that require lower geometries unavailable at our existing manufacturing facilities , we began outsourcing manufacturing of certain oled display driver ics to an external foundry from the second half of 2015. this additional source of manufacturing is an increasingly important part of our supply chain management . by outsourcing manufacturing of advanced oled products to external foundries , we are able to dynamically adapt to the changing customer requirements and address growing markets without substantial capital investments by us . both at the internal manufacturing facilities and external foundries , we apply our unique oled process patents as well as other intellectual property , proprietary process design kits and custom design-flow methodologies . 43 in our previous public filings , we had used a term active matrix organic light emitting diodes ( amoled ) that described a display technology used in certain display driver ics that we had designed and manufactured in our internal and external foundries . beginning in the second quarter of 2017 , we have used the term oled instead of the term amoled in our public filings in order to be consistent with commonly accepted industry naming practices for this product category . there is no change to the products that we previously referred to as amoled display driver ics . our success going forward will depend upon our ability to adapt to future challenges such as the emergence of new competitors for our products and services or the consolidation of current competitors . additionally , we must innovate to remain ahead of , or at least rapidly adapt to , technological breakthroughs that may lead to a significant change in the technology necessary to deliver our products and services . we believe that our established relationships and close collaboration with leading customers enhance our awareness of new product opportunities , market and technology trends and improve our ability to adapt and grow successfully . in our foundry services group , we strive to maintain competitiveness by offering high-value added processes , high-flexibility and excellent service by tailoring existing standard processes to meet customers ' design needs and porting customers ' own process technologies into our fabrication facilities . story_separator_special_tag adjusted ebitda is not a measure defined in accordance with us gaap and should not be construed as an alternative to income from continuing operations , cash flows from operating activities or net income , as determined in accordance with us gaap . a reconciliation of net income to adjusted ebitda is as follows : replace_table_token_5_th ( a ) for the year ended december 31 , 2017 , this adjustment eliminates the $ 16.6 million restructuring gain on sale of a building in connection with the closure of our 6-inch fab and the $ 0.4 million gain on sale of our sensor business . for the year ended december 31 , 2016 , this adjustment eliminates the $ 7.8 million restructuring gain on sale of machinery in connection with the closure of our 6-inch fab , net of $ 2.3 million training and transition costs related to our 6-inch fab employees . ( b ) this adjustment eliminates the charges related to the reduction of workforce through the headcount reduction plan in the first half of 2017 and the program in the second quarter of 2016. as these termination related charges are recorded as a result of implementing the company-wide headcount reduction and are not expected to represent ongoing operating expenses to us , we believe our operating performance results are more usefully compared if these expenses are excluded . ( c ) this adjustment eliminates the impact of non-cash equity-based compensation expenses . although we expect to incur non-cash equity-based compensation expenses in the future , these expenses do not generally require cash settlement , and , therefore , are not used by us to assess the profitability of our operations . we 48 believe that analysts and investors will find it helpful to review our operating performance without the effects of these non-cash expenses as supplemental information . ( d ) this adjustment mainly eliminates the impact of non-cash foreign currency translation associated with intercompany debt obligations and foreign currency denominated receivables and payables , as well as the cash impact of foreign currency transaction gains or losses on collection of such receivables and payment of such payables . although we expect to incur foreign currency translation gains or losses in the future , we believe that analysts and investors will find it helpful to review our operating performance without the effects of these primarily non-cash gains or losses , which we can not control . additionally , we believe the isolation of this adjustment provides investors with enhanced comparability to prior and future periods of our operating performance results . ( e ) this adjustment eliminates the impact of gain or loss recognized in income on derivatives , which represents hedge ineffectiveness or derivatives value changes excluded from the risk being hedged . we enter into derivative transactions to mitigate foreign exchange risks . as our derivative transactions are limited to a certain portion of our expected cash flows denominated in u.s. dollars , and we do not enter into derivative transactions for trading or speculative purposes , we do not believe that these charges or gains are indicative of our core operating performance . ( f ) this adjustment eliminates expenses in connection with the audit committee 's independent investigation and related restatement and litigation , primarily comprised of legal , audit and consulting fees , and certain other expenses . for 2017 , this adjustment includes the $ 3.0 million civil penalty imposed by the sec and the $ 4.3 million of the additional tax assessment and associated penalties , primarily related to non-income-based vat transactions in the restatement periods , administrative fine and related legal fees . as these expenses meaningfully impacted our operating results and are not expected to represent an ongoing operating expense to us , we believe our operating performance results are more usefully compared if these expenses are excluded . ( g ) this adjustment eliminates expenses incurred for the secondary offering by the selling stockholders primarily in the third quarter of 2017. 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 as reported under us 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 reflect the interest expense , or the cash requirements necessary to service interest or principal payments , on our debt ; although depreciation and amortization are non-cash charges , the assets being depreciated and amortized will often need to be replaced in the future , and adjusted ebitda does not reflect any cash requirements for such replacements ; adjusted ebitda does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees ; adjusted ebitda does not reflect the costs of holding certain assets and liabilities in foreign currencies ; and other companies in our industry may calculate adjusted ebitda differently than we do , limiting its usefulness as a comparative measure . because of these limitations , adjusted ebitda should not be considered as a measure of discretionary cash available to us to invest in the growth of our business . we compensate for these limitations by relying primarily on our us gaap results and using adjusted ebitda only supplementally . we present adjusted net income ( loss ) as a further supplemental measure of our performance . we prepare adjusted net income ( loss ) by adjusting net income ( loss ) to eliminate the impact of a number of non-cash 49 expenses and other items that may be either one time or recurring that we do not consider to be indicative of our core ongoing operating performance . we believe that adjusted net income ( loss ) is
| liquidity and capital resources our principal capital requirements are to fund sales and marketing , invest in research and development and capital equipment , to make debt service payments and to fund working capital needs . we calculate working capital as current assets less current liabilities . our principal sources of liquidity are our cash , cash equivalents , our cash flows from operations and our financing activities . our ability to manage cash and cash equivalents may be limited , as our primary cash flows are dictated by the terms of our sales and supply agreements , contractual obligations , debt instruments and legal and regulatory requirements . from time to time , we may sell accounts receivable to third parties under factoring agreements or engage in accounts receivable discounting to facilitate the collection of cash . for a description of our factoring arrangements and accounts receivable discounting , please see item 8. financial statements and supplementary datanotes to consolidated financial statementsnote 3. accounts receivable included elsewhere in this report . in addition , from time to time , we may make payments to our vendors on extended terms with their consent . as of december 31 , 2017 , we do not have any accounts payable on extended terms or payment deferment with our vendors . 66 on january 17 , 2017 , magnachip semiconductor s.a. , our luxembourg subsidiary , closed the exchangeable notes offering of $ 86.25 million aggregate principal amount of our exchangeable notes , reflecting the full exercise of the initial purchasers ' option to purchase additional exchangeable notes . we used a portion of the net proceeds from the exchangeable notes offering to repurchase approximately $ 11.4 million of our common stock as part of our stock repurchase program . we currently believe that we will have sufficient cash reserves from cash on hand and expected cash from operations to fund our operations as well as capital expenditures for the next twelve months and the foreseeable future .
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pending completion of this work , we expect to commence work directed toward filing an investigational new drug application , or ind . we were incorporated under the laws of the state of delaware on september 24 , 2012. since our incorporation , we have devoted substantially all of our efforts to raising capital , building infrastructure and obtaining the worldwide rights to certain technology , including vk5211 , vk2809 and vk0214 , pursuant to an exclusive license agreement with ligand pharmaceuticals incorporated , or ligand . the terms of this license agreement are detailed in the master license agreement which we entered into on may 21 , 2014 with ligand , as amended , or the master license agreement . a summary of the master license agreement can be found under the heading “ agreements with ligand— master license agreement ” under part i , “ item 1. business ” of this annual report on form 10-k. 60 on may 4 , 2015 , we completed our initial public offering of our common stock , or the ipo , pursuant to a registration statement on form s-1 t hat was declared effective on april 28 , 2015. in the ipo , we sold 3,000,000 shares of our common stock at an initial public offering price of $ 8.00 per share . the underwriters for the ipo had 30 days to exercise an over-allotment option to purchase up to a n additional 450,000 shares at the initial public offering price , less the underwriting discount . upon the closing of the ipo , on may 4 , 2015 , we raised a total of $ 19,100,500 in net proceeds after deducting underwriting discounts , commissions and other of fering expenses of $ 4,899,500 . on may 26 , 2015 , the underwriters of the ipo exercised their full over-allotment option to purchase an additional 450,000 shares of our common stock . on may 28 , 2015 , we sold the 450,000 shares to the underwriters pursuant to the over-allotment option and received additional net proceeds of $ 3,225,866 after deducting underwriting discounts , commissions and other offering expenses of $ 374,134. on april 13 , 2016 , we completed an underwritten public offering of our common stock and warrants to purchase shares of our common stock , or the offering , pursuant to a registration statement on form s-1 ( file no . 333-208182 ) that was declared effective on april 7 , 2016 , and a registration statement on form s-1mef ( file no . 333-210650 ) filed pursuant to rule 462 ( b ) of the securities act . in the offering , we sold 7,500,000 shares of our common stock and warrants to purchase up to 7,500,000 shares of our common stock at a public offering price of $ 1.25 per share of common stock and related warrant . the warrants have an exercise price of $ 1.50 per share of common stock , were immediately exercisable upon issuance and will expire on april 13 , 2021. we granted the underwriters for the offering a 45-day option to purchase up to an additional 1,125,000 shares of our common stock and or warrants to purchase up to an additional 1,125,000 shares of our common stock to cover over-allotments , if any . on april 13 , 2016 , the underwriters partially exercised the over-allotment option for warrants to purchase an additional 1,125,000 shares of our common stock at a public offering price of $ 0.01 per warrant to purchase a share of our common stock . upon the closing of the offering on april 13 , 2016 , we received net proceeds of $ 7,754,286 , after deducting underwriting discounts , commissions and other offering expenses of $ 1,631,964. on april 27 , 2016 , the underwriters for the offering exercised their over-allotment option to purchase 1,125,000 shares of our common stock at a public offering price of $ 1.24 per share . on april 29 , 2016 , we sold the 1,125,000 shares to the underwriters pursuant to the over-allotment option and received additional net proceeds of $ 1,283,400 , after deducting underwriting discounts , commissions and other offering expenses of $ 111,600. on april 13 , 2016 , pursuant to the terms of the loan and security agreement , we repaid $ 1,500,000 of the secured convertible promissory note issued to ligand on may 21 , 2014 , or the ligand note , with $ 300,000 paid in cash and $ 1,200,000 paid in the form of 960,000 shares of our common stock and a warrant to purchase up to 960,000 shares of company 's common stock , or the ligand warrant . the ligand warrant has an exercise price of $ 1.50 per share of common stock , was immediately exercisable upon issuance and will expire on april 13 , 2021. on june 20 , 2016 , we entered into an equity distribution agreement , or the distribution agreement , with maxim group llc , as sales agent , or maxim , pursuant to which we may offer and sell , from time to time , through maxim , or the maxim offering , up to 3,748,726 shares of our common stock . any shares of our common stock offered and sold in the maxim offering will be issued pursuant to our registration statement on form s-3 ( file no . 333-212134 ) filed with the sec on june 20 , 2016 and the prospectus relating to the maxim offering that forms a part of the registration statement on form s-3 . the registration statement on form s-3 was declared effective by the sec on july 26 , 2016. the number of shares of our common stock eligible for sale under the distribution agreement will be subject to the limitations of general instruction i.b.6 of form s-3 . story_separator_special_tag in may 2014 , we entered into the master license agreement , pursuant to which we acquired certain rights to a number of research and development programs from ligand . in doing so , we updated our policy on research and development to include the purchase of rights to intangible assets . in accordance with asc topic 730 , research and development , intangible assets that are acquired and have an alternative future use , as defined , should be capitalized and reported as an intangible asset ; however , the cost of acquired intangible assets that do not have alternative future uses should be reported as research and development expense as incurred . we note that intangible assets acquired that are in the preclinical or clinical stages of development when acquired , and not approved by the u.s. food and drug administration , are deemed to have not satisfied the definition of having an alternative future use , as defined . accordingly , assets acquired in the preclinical and clinical stages of development are expensed as incurred in our statement of operations . 64 patent costs costs related to filing and pursuing patent applications are expensed as incurred to general and administrative expense , as recoverability of such expenditures is uncertain . stock-based compensation we generally use the straight-line or graded vesting method to allocate compensation cost to reporting periods over each optionee 's requisite service period , which is generally the vesting period , and estimates the fair value of stock-based awards or restricted stock units to employees and directors using the black-scholes option-valuation model . for options with a graded vesting schedule , we use the graded vesting schedule to allocate compensation cost to reporting periods . the black-scholes model requires the input of subjective assumptions , including volatility , the expected term and the fair value of the underlying common stock on the date of grant , among other inputs . stock options granted to non-employees are accounted for using the fair value approach . stock options granted to non-employees are subject to periodic revaluation over their vesting terms . for restricted stock and restricted stock unit awards , we generally use the straight-line or graded vesting method to allocate compensation cost to reporting periods over the holder 's requisite service period , which is generally the vesting period , and uses the fair value at grant date to value the awards . for restricted stock that vests upon the satisfaction of certain performance conditions , we recognize stock-based compensation expense when it becomes probable that the performance conditions will be met . at the point that it becomes probable that the performance conditions will be met , we record a cumulative catch-up of the expense from the grant date to the current date , and we then amortize the remainder of the expense over the remaining service period . prior to the ipo , we accounted for stock-based compensation by measuring and recognizing compensation expense for all stock-based payments made to employees and directors based on estimated award date fair values , which estimates were highly complex and subjective in nature . we used the straight-line or graded vesting method to allocate compensation cost to reporting periods over each restricted award 's requisite service period , which was generally the vesting period , and estimated the fair value of restricted stock-based awards to employees and consultants using a monte carlo market approach simulation method and performed an allocation of value to common stock based on the estimated time to a liquidity event . in addition , we accounted for performance-based restricted stock awards to employees by determining the fair value of the restricted stock award at the date of issuance by using the probability weighted expected return method , or pwerm , and then assessing at each balance sheet date the probability of the performance criteria being met . if the probability of achieving the criteria was deemed less-than-probable , then no expense was recorded . at the point where the criteria were deemed probable of being met , we then began recording stock-based compensation with a cumulative catch-up expense in the period first recognized and then on a straight-line basis over the remaining period for which the performance criteria were expected to be completed . income taxes we account for our income taxes using the liability method whereby deferred tax assets and liabilities are determined based on temporary differences between the basis used for financial reporting and income tax reporting purposes . deferred income taxes are provided based on the enacted tax rates in effect at the time such temporary differences are expected to reverse . a valuation allowance is provided for deferred tax assets if it is more likely than not that we will not realize those tax assets through future operations . asc topic 740-10 , income taxes , clarifies the accounting for uncertainty in income taxes recognized in our financial statements in accordance with accounting principles generally accepted in the united states of america , or gaap . income tax positions must meet a more-likely-than-not recognition threshold to be recognized . income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met . previously recognized tax positions that no longer meet the more-likely-than-not threshold are derecognized in the first subsequent financial reporting period in which that threshold is no longer met . our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense . net loss per common share basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period , without consideration for common stock equivalents . diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common
| liquidity and capital resources our principal capital requirements are to fund sales and marketing , invest in research and development and capital equipment , to make debt service payments and to fund working capital needs . we calculate working capital as current assets less current liabilities . our principal sources of liquidity are our cash , cash equivalents , our cash flows from operations and our financing activities . our ability to manage cash and cash equivalents may be limited , as our primary cash flows are dictated by the terms of our sales and supply agreements , contractual obligations , debt instruments and legal and regulatory requirements . from time to time , we may sell accounts receivable to third parties under factoring agreements or engage in accounts receivable discounting to facilitate the collection of cash . for a description of our factoring arrangements and accounts receivable discounting , please see item 8. financial statements and supplementary datanotes to consolidated financial statementsnote 3. accounts receivable included elsewhere in this report . in addition , from time to time , we may make payments to our vendors on extended terms with their consent . as of december 31 , 2017 , we do not have any accounts payable on extended terms or payment deferment with our vendors . 66 on january 17 , 2017 , magnachip semiconductor s.a. , our luxembourg subsidiary , closed the exchangeable notes offering of $ 86.25 million aggregate principal amount of our exchangeable notes , reflecting the full exercise of the initial purchasers ' option to purchase additional exchangeable notes . we used a portion of the net proceeds from the exchangeable notes offering to repurchase approximately $ 11.4 million of our common stock as part of our stock repurchase program . we currently believe that we will have sufficient cash reserves from cash on hand and expected cash from operations to fund our operations as well as capital expenditures for the next twelve months and the foreseeable future .
| 0 |
pending completion of this work , we expect to commence work directed toward filing an investigational new drug application , or ind . we were incorporated under the laws of the state of delaware on september 24 , 2012. since our incorporation , we have devoted substantially all of our efforts to raising capital , building infrastructure and obtaining the worldwide rights to certain technology , including vk5211 , vk2809 and vk0214 , pursuant to an exclusive license agreement with ligand pharmaceuticals incorporated , or ligand . the terms of this license agreement are detailed in the master license agreement which we entered into on may 21 , 2014 with ligand , as amended , or the master license agreement . a summary of the master license agreement can be found under the heading “ agreements with ligand— master license agreement ” under part i , “ item 1. business ” of this annual report on form 10-k. 60 on may 4 , 2015 , we completed our initial public offering of our common stock , or the ipo , pursuant to a registration statement on form s-1 t hat was declared effective on april 28 , 2015. in the ipo , we sold 3,000,000 shares of our common stock at an initial public offering price of $ 8.00 per share . the underwriters for the ipo had 30 days to exercise an over-allotment option to purchase up to a n additional 450,000 shares at the initial public offering price , less the underwriting discount . upon the closing of the ipo , on may 4 , 2015 , we raised a total of $ 19,100,500 in net proceeds after deducting underwriting discounts , commissions and other of fering expenses of $ 4,899,500 . on may 26 , 2015 , the underwriters of the ipo exercised their full over-allotment option to purchase an additional 450,000 shares of our common stock . on may 28 , 2015 , we sold the 450,000 shares to the underwriters pursuant to the over-allotment option and received additional net proceeds of $ 3,225,866 after deducting underwriting discounts , commissions and other offering expenses of $ 374,134. on april 13 , 2016 , we completed an underwritten public offering of our common stock and warrants to purchase shares of our common stock , or the offering , pursuant to a registration statement on form s-1 ( file no . 333-208182 ) that was declared effective on april 7 , 2016 , and a registration statement on form s-1mef ( file no . 333-210650 ) filed pursuant to rule 462 ( b ) of the securities act . in the offering , we sold 7,500,000 shares of our common stock and warrants to purchase up to 7,500,000 shares of our common stock at a public offering price of $ 1.25 per share of common stock and related warrant . the warrants have an exercise price of $ 1.50 per share of common stock , were immediately exercisable upon issuance and will expire on april 13 , 2021. we granted the underwriters for the offering a 45-day option to purchase up to an additional 1,125,000 shares of our common stock and or warrants to purchase up to an additional 1,125,000 shares of our common stock to cover over-allotments , if any . on april 13 , 2016 , the underwriters partially exercised the over-allotment option for warrants to purchase an additional 1,125,000 shares of our common stock at a public offering price of $ 0.01 per warrant to purchase a share of our common stock . upon the closing of the offering on april 13 , 2016 , we received net proceeds of $ 7,754,286 , after deducting underwriting discounts , commissions and other offering expenses of $ 1,631,964. on april 27 , 2016 , the underwriters for the offering exercised their over-allotment option to purchase 1,125,000 shares of our common stock at a public offering price of $ 1.24 per share . on april 29 , 2016 , we sold the 1,125,000 shares to the underwriters pursuant to the over-allotment option and received additional net proceeds of $ 1,283,400 , after deducting underwriting discounts , commissions and other offering expenses of $ 111,600. on april 13 , 2016 , pursuant to the terms of the loan and security agreement , we repaid $ 1,500,000 of the secured convertible promissory note issued to ligand on may 21 , 2014 , or the ligand note , with $ 300,000 paid in cash and $ 1,200,000 paid in the form of 960,000 shares of our common stock and a warrant to purchase up to 960,000 shares of company 's common stock , or the ligand warrant . the ligand warrant has an exercise price of $ 1.50 per share of common stock , was immediately exercisable upon issuance and will expire on april 13 , 2021. on june 20 , 2016 , we entered into an equity distribution agreement , or the distribution agreement , with maxim group llc , as sales agent , or maxim , pursuant to which we may offer and sell , from time to time , through maxim , or the maxim offering , up to 3,748,726 shares of our common stock . any shares of our common stock offered and sold in the maxim offering will be issued pursuant to our registration statement on form s-3 ( file no . 333-212134 ) filed with the sec on june 20 , 2016 and the prospectus relating to the maxim offering that forms a part of the registration statement on form s-3 . the registration statement on form s-3 was declared effective by the sec on july 26 , 2016. the number of shares of our common stock eligible for sale under the distribution agreement will be subject to the limitations of general instruction i.b.6 of form s-3 . story_separator_special_tag in may 2014 , we entered into the master license agreement , pursuant to which we acquired certain rights to a number of research and development programs from ligand . in doing so , we updated our policy on research and development to include the purchase of rights to intangible assets . in accordance with asc topic 730 , research and development , intangible assets that are acquired and have an alternative future use , as defined , should be capitalized and reported as an intangible asset ; however , the cost of acquired intangible assets that do not have alternative future uses should be reported as research and development expense as incurred . we note that intangible assets acquired that are in the preclinical or clinical stages of development when acquired , and not approved by the u.s. food and drug administration , are deemed to have not satisfied the definition of having an alternative future use , as defined . accordingly , assets acquired in the preclinical and clinical stages of development are expensed as incurred in our statement of operations . 64 patent costs costs related to filing and pursuing patent applications are expensed as incurred to general and administrative expense , as recoverability of such expenditures is uncertain . stock-based compensation we generally use the straight-line or graded vesting method to allocate compensation cost to reporting periods over each optionee 's requisite service period , which is generally the vesting period , and estimates the fair value of stock-based awards or restricted stock units to employees and directors using the black-scholes option-valuation model . for options with a graded vesting schedule , we use the graded vesting schedule to allocate compensation cost to reporting periods . the black-scholes model requires the input of subjective assumptions , including volatility , the expected term and the fair value of the underlying common stock on the date of grant , among other inputs . stock options granted to non-employees are accounted for using the fair value approach . stock options granted to non-employees are subject to periodic revaluation over their vesting terms . for restricted stock and restricted stock unit awards , we generally use the straight-line or graded vesting method to allocate compensation cost to reporting periods over the holder 's requisite service period , which is generally the vesting period , and uses the fair value at grant date to value the awards . for restricted stock that vests upon the satisfaction of certain performance conditions , we recognize stock-based compensation expense when it becomes probable that the performance conditions will be met . at the point that it becomes probable that the performance conditions will be met , we record a cumulative catch-up of the expense from the grant date to the current date , and we then amortize the remainder of the expense over the remaining service period . prior to the ipo , we accounted for stock-based compensation by measuring and recognizing compensation expense for all stock-based payments made to employees and directors based on estimated award date fair values , which estimates were highly complex and subjective in nature . we used the straight-line or graded vesting method to allocate compensation cost to reporting periods over each restricted award 's requisite service period , which was generally the vesting period , and estimated the fair value of restricted stock-based awards to employees and consultants using a monte carlo market approach simulation method and performed an allocation of value to common stock based on the estimated time to a liquidity event . in addition , we accounted for performance-based restricted stock awards to employees by determining the fair value of the restricted stock award at the date of issuance by using the probability weighted expected return method , or pwerm , and then assessing at each balance sheet date the probability of the performance criteria being met . if the probability of achieving the criteria was deemed less-than-probable , then no expense was recorded . at the point where the criteria were deemed probable of being met , we then began recording stock-based compensation with a cumulative catch-up expense in the period first recognized and then on a straight-line basis over the remaining period for which the performance criteria were expected to be completed . income taxes we account for our income taxes using the liability method whereby deferred tax assets and liabilities are determined based on temporary differences between the basis used for financial reporting and income tax reporting purposes . deferred income taxes are provided based on the enacted tax rates in effect at the time such temporary differences are expected to reverse . a valuation allowance is provided for deferred tax assets if it is more likely than not that we will not realize those tax assets through future operations . asc topic 740-10 , income taxes , clarifies the accounting for uncertainty in income taxes recognized in our financial statements in accordance with accounting principles generally accepted in the united states of america , or gaap . income tax positions must meet a more-likely-than-not recognition threshold to be recognized . income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met . previously recognized tax positions that no longer meet the more-likely-than-not threshold are derecognized in the first subsequent financial reporting period in which that threshold is no longer met . our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense . net loss per common share basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period , without consideration for common stock equivalents . diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common
| liquidity and capital resources we have incurred losses and negative cash flows from operations and have not generated any revenues since our inception . the audit report issued by our independent registered public accounting firm for our financial statements for the fiscal year ended december 31 , 2016 included in this annual report on form 10-k states that our independent registered public accounting firm has substantial doubt in our ability to continue as a going concern due to the risk that we may not have sufficient cash and liquid assets at december 31 , 66 201 6 to cover our operating a nd capital requirements for the next 12 month s following the issuance of the financial statements . in the event we can not obtain sufficient funding , we may have to substantially alter , or possibly even discontinue , operations . our financial statements and related notes thereto included elsewhere in this annual report on form 10-k do not include any adjustments that might result from t he outcome of this uncertainty . our primary use of cash is to fund operating expenses , which to date have consisted of the cost to obtain the license of intellectual property from ligand , certain research and development expenses related to furthering the development of vk5211 , vk2089 and vk0214 efforts and general and administrative expenses . since we have not generated any revenues to date , we have incurred operating losses since our inception . cash used to fund operating expenses is impacted by the timing of payment of these expenses , as reflected in the change in our outstanding accounts payable and accrued expenses . on april 13 , 2016 , we completed the offering pursuant to a registration statement on form s-1 ( file no . 333-208182 ) that was declared effective on april 7 , 2016 , and a registration statement on form s-1mef ( file no .
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we continue to focus on our four key initiatives designed to allow us to drive profitable growth and to maximize value for shareholders , and thus better position ourselves to operate successfully in the current and future business environment . these four initiatives are : improving the consolidated operating margin . we continue to aggressively manage our cost structure and drive operating efficiencies which are expected to generate improving operating margins . we have already implemented significant actions to reduce costs during the last two years to manage challenging industry-wide preclinical market conditions . these actions have favorably impacted our margins in 2011. in the fourth quarter of 2011 , we implemented a headcount reduction of approximately 2 % , primarily in the preclinical services ( pcs ) business . this action is expected to generate annual savings of approximately $ 7.5 million beginning in 2012. improving free cash flow generation . we believe we have adequate capacity to support revenue growth in both business segments without significant additional investment for expansion . improved operating margins , elimination of operating losses with the sale of our phase i clinical business in 2011 and the closure of our pcs china facility in 2011 , and minimal requirements for capital expansion , should contribute to strong cash flow generation . we expect capital expenditures to be approximately $ 50 million in 2012 . 29 disciplined investment in growth businesses . we continue to maintain a disciplined focus on deployment of capital , investing in those areas of our existing business which will generate the greatest sales growth and profitability , such as genetically engineered models and services ( gems ) , discovery services ( ds ) , in vitro products and biopharmaceutical services . returning value to shareholders . we are repurchasing our stock with the intent to drive immediate shareholder value and earnings per share accretion . during 2011 , we repurchased 8.4 million shares . our weighted average shares outstanding for 2011 has decreased to 51.3 million shares from 62.6 million shares for 2010. as of december 31 , 2011 , we had $ 116.3 million remaining on our $ 750.0 million stock repurchase authorization . total net sales in 2011 were $ 1,142.6 million , an increase of 0.8 % from $ 1,133.4 million in 2010. the sales increase was due primarily to increased sales for rms partially offset by lower pcs sales . the effect of foreign currency translation had a positive impact on sales of 2.2 % . due to the timing of our fiscal year end , we periodically recognize a `` 53rd week `` in a fiscal year . the 53 rd week in 2011 contributed approximately 1.0 % to reported 2011 sales . our gross margin increased to 35.2 % of net sales in 2011 compared to 33.9 % of net sales in 2010 , due primarily to cost savings actions and the impact of increased rms sales . our operating income was $ 174.3 million for 2011 compared to an operating loss of $ 298.5 million for 2010. income from continuing operations , net of tax , was $ 115.5 million for 2011 compared to an operating loss of $ 334.1 million for 2010. the increase in operating income was primarily due to prior year items which include a goodwill impairment , asset impairments and the $ 30.0 million acquisition termination fee . for 2011 , diluted earnings per share attributable to common shareowners was $ 2.14 compared to a diluted loss per share of $ 5.38 in 2010. our capital expenditures totaled $ 49.1 million for 2011 , compared to $ 42.9 million for 2010. our planned capital expenditures in 2012 are approximately $ 50.0 million . net income attributable to common shareowners was $ 109.6 million in 2011 , compared to a net loss of $ 336.7 million in 2010. we report two segments : research models and services ( rms ) and preclinical services ( pcs ) , which reflects the manner in which our operating units are managed . our rms segment , which represented 61.7 % of net sales in 2011 , includes three categories : production of research models , research model services , and other products . research model services include four business units : genetically engineered models and services ( gems ) , research animal diagnostics ( rads ) , discovery services ( ds ) , and insourcing solutions ( is ) . other products includes our in vitro business and avian vaccine services . net sales for the rms segment increased 5.8 % compared to 2010 , primarily driven by higher sales of other products and research model services . the effect of foreign currency translation has a positive impact on sales of 2.7 % . we experienced increases in both the rms gross margin , to 42.1 % from 41.7 % , and operating margin to 29.2 % from 27.7 % last year , due mainly to the impact of cost savings and our fixed cost leverage with increased sales . our pcs segment , which represented 38.3 % of net sales in 2011 , includes services required to take a drug through the development process including discovery support , safety assessment and biopharmaceutical services . sales for this segment decreased 6.3 % from 2010 , driven by slower demand for preclinical services partially offset by favorable foreign currency , which increased sales growth by 1.5 % . we experienced an increase in the pcs gross margin to 24.0 % from 22.8 % in 2010 , due mainly to impairments in 2010 and cost savings in 2011 partially offset by the impact of sales mix and continued pricing pressure . story_separator_special_tag 33 as of december 31 , 2011 , earnings of non-u.s. subsidiaries considered to be indefinitely reinvested totaled $ 106.5 million . no provision for u.s. income taxes has been provided thereon . upon distribution of those earnings in the form of dividends or otherwise , we would be subject to both u.s. federal and state taxes and withholding taxes payable to the various foreign countries . it is our policy to indefinitely reinvest the earnings of our non-u.s. subsidiaries unless they can be repatriated in a manner that generates a tax benefit or an unforeseen cash need arises in the united states and the earnings can be repatriated in a manner that is substantially free of income taxes . it is not practicable to estimate the amount of additional income taxes payable on the earnings that are indefinitely reinvested in foreign operations . we are a worldwide business and operate in various tax jurisdictions where tax laws and tax rates are subject to change given the political and economic climate in these countries . we report and pay income taxes based upon operational results and applicable law . our current and deferred tax provision is based upon enacted tax rates in effect for the current and future periods . any significant fluctuation in tax rates or changes in tax laws and regulations or changes to interpretation of existing tax laws and regulations could cause our estimate of taxes to change resulting in either increases or decreases in our effective tax rate . we recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the tax position . the tax benefits recognized in our financial statements from such positions are measured based upon the largest benefit that has a greater than 50 % likelihood of being realized upon ultimate resolution . due to our size and the number of tax jurisdictions within which we conduct our global business operations , we are subject to income tax audits on a regular basis . as a result , we have tax reserves which are attributable to potential tax obligations around the world . we believe we have sufficiently provided for all audit exposures and assessments . resolutions of these audits or the expiration of the statute of limitations on the assessment of income taxes for any tax year may result in an increase or decrease to our effective tax rate . results of operations the following table summarizes historical results of operations as a percentage of net sales for the periods shown : replace_table_token_5_th 34 segment operations the following tables show the net sales and the percentage contribution of each of our reportable segments for the past three years . they also show cost of products sold and services provided , selling , general and administrative expenses , amortization of goodwill and intangibles and operating income by segment and as percentages of their respective segment net sales . replace_table_token_6_th 35 replace_table_token_7_th in our consolidated statements of income , we provide a breakdown of net sales and cost of sales between net products and services . such information is reported irrespective of the business segment from which the sales were generated . fiscal 2011 compared to fiscal 2010 net sales . net sales for the year ending december 31 , 2011 were $ 1,142.6 million , an increase of $ 9.2 million , or 0.8 % , from $ 1,133 million for the year ending december 25 , 2010 , due primarily to increased sales for rms and favorable foreign currency translation of 2.2 % partially offset by lower pcs sales . research models and services . for the year ending december 31 , 2011 , net sales for our rms segment were $ 705.4 million , an increase of $ 38.4 million , or 5.8 % , from $ 667.0 million for the year ending december 25 , 2010 , due primarily to higher other product sales , which include our avian and in vitro businesses , as well as research model services . the effect of favorable foreign currency translation increased sales by 2.7 % . preclinical services . for the year ending december 31 , 2011 , net sales for our pcs segment were $ 437.2 million , a decrease of $ 29.2 million , or 6.3 % , from $ 466.4 million for the year ending december 25 , 2010. the sales decrease was driven by reduced biopharmaceutical spending , which resulted in lower demand for our services and a shift in study mix , offset by favorable foreign currency translation of 1.5 % . cost of products sold and services provided . cost of products sold and services provided during 2011 was $ 740.4 million , a decrease of $ 8.3 million , or 1.1 % , from $ 748.7 million during 2010. cost of products sold and services provided during the year ending december 31 , 2011 was 64.8 % of net sales , compared to 66.1 % during the year ending december 25 , 2010. research models and services . cost of products sold and services provided for rms during 2011 was $ 408.1 million , an increase of $ 19.5 million , or 5.0 % , compared to $ 388.6 million in 2010. cost of products sold and services provided for the year ending december 31 , 2011 decreased to 57.9 % of net sales compared to 58.3 % of net sales for the year ending december 25 , 2010. the decrease in cost as a percentage of sales was due primarily to the impact of our cost-savings actions partially 36 offset by the large model inventory write-off . preclinical services . cost of services provided for the pcs segment during 2011 was $ 332.3 million , a decrease of $ 27.7 million , compared to $ 360.1 million
| liquidity and capital resources we have incurred losses and negative cash flows from operations and have not generated any revenues since our inception . the audit report issued by our independent registered public accounting firm for our financial statements for the fiscal year ended december 31 , 2016 included in this annual report on form 10-k states that our independent registered public accounting firm has substantial doubt in our ability to continue as a going concern due to the risk that we may not have sufficient cash and liquid assets at december 31 , 66 201 6 to cover our operating a nd capital requirements for the next 12 month s following the issuance of the financial statements . in the event we can not obtain sufficient funding , we may have to substantially alter , or possibly even discontinue , operations . our financial statements and related notes thereto included elsewhere in this annual report on form 10-k do not include any adjustments that might result from t he outcome of this uncertainty . our primary use of cash is to fund operating expenses , which to date have consisted of the cost to obtain the license of intellectual property from ligand , certain research and development expenses related to furthering the development of vk5211 , vk2089 and vk0214 efforts and general and administrative expenses . since we have not generated any revenues to date , we have incurred operating losses since our inception . cash used to fund operating expenses is impacted by the timing of payment of these expenses , as reflected in the change in our outstanding accounts payable and accrued expenses . on april 13 , 2016 , we completed the offering pursuant to a registration statement on form s-1 ( file no . 333-208182 ) that was declared effective on april 7 , 2016 , and a registration statement on form s-1mef ( file no .
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we continue to focus on our four key initiatives designed to allow us to drive profitable growth and to maximize value for shareholders , and thus better position ourselves to operate successfully in the current and future business environment . these four initiatives are : improving the consolidated operating margin . we continue to aggressively manage our cost structure and drive operating efficiencies which are expected to generate improving operating margins . we have already implemented significant actions to reduce costs during the last two years to manage challenging industry-wide preclinical market conditions . these actions have favorably impacted our margins in 2011. in the fourth quarter of 2011 , we implemented a headcount reduction of approximately 2 % , primarily in the preclinical services ( pcs ) business . this action is expected to generate annual savings of approximately $ 7.5 million beginning in 2012. improving free cash flow generation . we believe we have adequate capacity to support revenue growth in both business segments without significant additional investment for expansion . improved operating margins , elimination of operating losses with the sale of our phase i clinical business in 2011 and the closure of our pcs china facility in 2011 , and minimal requirements for capital expansion , should contribute to strong cash flow generation . we expect capital expenditures to be approximately $ 50 million in 2012 . 29 disciplined investment in growth businesses . we continue to maintain a disciplined focus on deployment of capital , investing in those areas of our existing business which will generate the greatest sales growth and profitability , such as genetically engineered models and services ( gems ) , discovery services ( ds ) , in vitro products and biopharmaceutical services . returning value to shareholders . we are repurchasing our stock with the intent to drive immediate shareholder value and earnings per share accretion . during 2011 , we repurchased 8.4 million shares . our weighted average shares outstanding for 2011 has decreased to 51.3 million shares from 62.6 million shares for 2010. as of december 31 , 2011 , we had $ 116.3 million remaining on our $ 750.0 million stock repurchase authorization . total net sales in 2011 were $ 1,142.6 million , an increase of 0.8 % from $ 1,133.4 million in 2010. the sales increase was due primarily to increased sales for rms partially offset by lower pcs sales . the effect of foreign currency translation had a positive impact on sales of 2.2 % . due to the timing of our fiscal year end , we periodically recognize a `` 53rd week `` in a fiscal year . the 53 rd week in 2011 contributed approximately 1.0 % to reported 2011 sales . our gross margin increased to 35.2 % of net sales in 2011 compared to 33.9 % of net sales in 2010 , due primarily to cost savings actions and the impact of increased rms sales . our operating income was $ 174.3 million for 2011 compared to an operating loss of $ 298.5 million for 2010. income from continuing operations , net of tax , was $ 115.5 million for 2011 compared to an operating loss of $ 334.1 million for 2010. the increase in operating income was primarily due to prior year items which include a goodwill impairment , asset impairments and the $ 30.0 million acquisition termination fee . for 2011 , diluted earnings per share attributable to common shareowners was $ 2.14 compared to a diluted loss per share of $ 5.38 in 2010. our capital expenditures totaled $ 49.1 million for 2011 , compared to $ 42.9 million for 2010. our planned capital expenditures in 2012 are approximately $ 50.0 million . net income attributable to common shareowners was $ 109.6 million in 2011 , compared to a net loss of $ 336.7 million in 2010. we report two segments : research models and services ( rms ) and preclinical services ( pcs ) , which reflects the manner in which our operating units are managed . our rms segment , which represented 61.7 % of net sales in 2011 , includes three categories : production of research models , research model services , and other products . research model services include four business units : genetically engineered models and services ( gems ) , research animal diagnostics ( rads ) , discovery services ( ds ) , and insourcing solutions ( is ) . other products includes our in vitro business and avian vaccine services . net sales for the rms segment increased 5.8 % compared to 2010 , primarily driven by higher sales of other products and research model services . the effect of foreign currency translation has a positive impact on sales of 2.7 % . we experienced increases in both the rms gross margin , to 42.1 % from 41.7 % , and operating margin to 29.2 % from 27.7 % last year , due mainly to the impact of cost savings and our fixed cost leverage with increased sales . our pcs segment , which represented 38.3 % of net sales in 2011 , includes services required to take a drug through the development process including discovery support , safety assessment and biopharmaceutical services . sales for this segment decreased 6.3 % from 2010 , driven by slower demand for preclinical services partially offset by favorable foreign currency , which increased sales growth by 1.5 % . we experienced an increase in the pcs gross margin to 24.0 % from 22.8 % in 2010 , due mainly to impairments in 2010 and cost savings in 2011 partially offset by the impact of sales mix and continued pricing pressure . story_separator_special_tag 33 as of december 31 , 2011 , earnings of non-u.s. subsidiaries considered to be indefinitely reinvested totaled $ 106.5 million . no provision for u.s. income taxes has been provided thereon . upon distribution of those earnings in the form of dividends or otherwise , we would be subject to both u.s. federal and state taxes and withholding taxes payable to the various foreign countries . it is our policy to indefinitely reinvest the earnings of our non-u.s. subsidiaries unless they can be repatriated in a manner that generates a tax benefit or an unforeseen cash need arises in the united states and the earnings can be repatriated in a manner that is substantially free of income taxes . it is not practicable to estimate the amount of additional income taxes payable on the earnings that are indefinitely reinvested in foreign operations . we are a worldwide business and operate in various tax jurisdictions where tax laws and tax rates are subject to change given the political and economic climate in these countries . we report and pay income taxes based upon operational results and applicable law . our current and deferred tax provision is based upon enacted tax rates in effect for the current and future periods . any significant fluctuation in tax rates or changes in tax laws and regulations or changes to interpretation of existing tax laws and regulations could cause our estimate of taxes to change resulting in either increases or decreases in our effective tax rate . we recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the tax position . the tax benefits recognized in our financial statements from such positions are measured based upon the largest benefit that has a greater than 50 % likelihood of being realized upon ultimate resolution . due to our size and the number of tax jurisdictions within which we conduct our global business operations , we are subject to income tax audits on a regular basis . as a result , we have tax reserves which are attributable to potential tax obligations around the world . we believe we have sufficiently provided for all audit exposures and assessments . resolutions of these audits or the expiration of the statute of limitations on the assessment of income taxes for any tax year may result in an increase or decrease to our effective tax rate . results of operations the following table summarizes historical results of operations as a percentage of net sales for the periods shown : replace_table_token_5_th 34 segment operations the following tables show the net sales and the percentage contribution of each of our reportable segments for the past three years . they also show cost of products sold and services provided , selling , general and administrative expenses , amortization of goodwill and intangibles and operating income by segment and as percentages of their respective segment net sales . replace_table_token_6_th 35 replace_table_token_7_th in our consolidated statements of income , we provide a breakdown of net sales and cost of sales between net products and services . such information is reported irrespective of the business segment from which the sales were generated . fiscal 2011 compared to fiscal 2010 net sales . net sales for the year ending december 31 , 2011 were $ 1,142.6 million , an increase of $ 9.2 million , or 0.8 % , from $ 1,133 million for the year ending december 25 , 2010 , due primarily to increased sales for rms and favorable foreign currency translation of 2.2 % partially offset by lower pcs sales . research models and services . for the year ending december 31 , 2011 , net sales for our rms segment were $ 705.4 million , an increase of $ 38.4 million , or 5.8 % , from $ 667.0 million for the year ending december 25 , 2010 , due primarily to higher other product sales , which include our avian and in vitro businesses , as well as research model services . the effect of favorable foreign currency translation increased sales by 2.7 % . preclinical services . for the year ending december 31 , 2011 , net sales for our pcs segment were $ 437.2 million , a decrease of $ 29.2 million , or 6.3 % , from $ 466.4 million for the year ending december 25 , 2010. the sales decrease was driven by reduced biopharmaceutical spending , which resulted in lower demand for our services and a shift in study mix , offset by favorable foreign currency translation of 1.5 % . cost of products sold and services provided . cost of products sold and services provided during 2011 was $ 740.4 million , a decrease of $ 8.3 million , or 1.1 % , from $ 748.7 million during 2010. cost of products sold and services provided during the year ending december 31 , 2011 was 64.8 % of net sales , compared to 66.1 % during the year ending december 25 , 2010. research models and services . cost of products sold and services provided for rms during 2011 was $ 408.1 million , an increase of $ 19.5 million , or 5.0 % , compared to $ 388.6 million in 2010. cost of products sold and services provided for the year ending december 31 , 2011 decreased to 57.9 % of net sales compared to 58.3 % of net sales for the year ending december 25 , 2010. the decrease in cost as a percentage of sales was due primarily to the impact of our cost-savings actions partially 36 offset by the large model inventory write-off . preclinical services . cost of services provided for the pcs segment during 2011 was $ 332.3 million , a decrease of $ 27.7 million , compared to $ 360.1 million
| liquidity and capital resources the following discussion analyzes liquidity and capital resources by operating , investing and financing activities as presented in our consolidated statements of cash flows . our principal sources of liquidity have been our cash flow from operations , our marketable securities and our revolving line of credit arrangements . on december 25 , 2010 , we had a $ 750 million credit agreement , which had a maturity date of august 26 , 2015 and provided for a $ 230 million term loan , a 133.8 million euro term loan and a $ 350 million revolving credit facility . on february 24 , 2011 , we amended the credit agreement , primarily to provide for an incremental $ 150 million term loan and to modify the leverage ratio used in calculating the interest rate applicable to amounts outstanding . on september 23 , 2011 , we amended and restated the credit agreement primarily to reduce the interest rate margin applicable to the term loans and the revolving loans based on our leverage ratio and extend the maturity date by approximately one year to september 2016. the current credit agreement provides for a $ 299.8 million term loan , a 69.4 million euro term loan and a $ 350 million revolving credit facility . under specified circumstances , we have the ability to increase the term loans and or revolving line of credit by up to $ 250 million in the aggregate . the term loans mature in 20 quarterly installments with the last installment due september 23 , 2016. the $ 350 million revolving facility also matures on september 23 , 2016 and requires no scheduled payment before that date . the book value of our term and revolving loans approximates fair value .
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as of december 31 , 2020 , we raised an aggregate of $ 168.2 million through the issuance of our redeemable convertible preferred stock , net of issuance costs , $ 24.6 million from our term loan facility with hercules , net of issuance costs , and received $ 66.0 million in payments from our collaborations with jazz and sarepta . on october 16 , 2020 , we completed our initial public offering , or ipo , pursuant to which we issued and sold 5,500,000 shares of our common stock at a public offering price of $ 15.00 per share , resulting in net proceeds of $ 74.4 million , after deducting underwriting discounts and commissions and other offering expenses . on february 17 , 2021 , we completed a follow-on public offering , pursuant to which we issued and sold 3,162,500 shares of our common stock ( inclusive of the exercise of the underwriter 's option to purchase 412,500 additional shares of common stock ) at a public offering price of $ 21.00 per share , resulting in aggregate net proceeds of $ 62.0 million , after deducting underwriting discounts and commissions and other offering expenses . we have not generated any revenue from product sales and do not expect to do so for several years , and may never do so . we advanced our first two engex product candidates , exosting and exoil-12 , into clinical 140 trials in september 2020. all of our other engex exosomes are still in preclinical development . our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our engex product candidates . since our inception , we have incurred significant losses , including net losses of $ 91 . 7 million and $ 7 8 . 0 million for the years ended december 31 , 20 20 and 2019 , respectively . as of december 3 1 , 2020 , we had an accumulated deficit of $ 2 88 . 1 million . we expect to incur substantial additional losses in the future as we expand our research and development activities . we anticipate that our expenses will increase significantly in connection with our ongoing activities , as we : initiate and conduct clinical trials for exosting , exoil-12 and any other engex product candidates we identify and choose to develop ; continue our current research programs and preclinical development of exoaso-stat6 and our potential engex product candidates ; seek to identify additional research programs and additional engex product candidates ; further develop and expand the capabilities of our engex platform ; establish , operate and maintain in-house manufacturing capabilities , including of our own phase 1/2 clinical manufacturing facility , and secure supply chain capacity sufficient to support our planned preclinical studies and early-stage clinical trials ; maintain , expand and protect our intellectual property portfolio ; hire additional clinical , scientific , manufacturing and business development personnel ; acquire or in-license other biologically active molecules , potential engex product candidates or technologies ; seek regulatory approvals for any engex product candidates that successfully complete clinical trials ; establish a sales , marketing and distribution infrastructure to commercialize any engex products for which we may obtain regulatory approval ; add operational , financial and management information systems and personnel , including personnel to support our product development and any future commercialization efforts , as well as to support our continued operations as a public company ; and take temporary precautionary measures to minimize the risk of covid-19 to our employees , contractors and those who may participate in our studies . we do not anticipate generating revenue from product sales for the foreseeable future , if ever , unless and until we successfully complete clinical development and obtain marketing approvals for our engex product candidates . in addition , if we obtain marketing approval for any of our engex product candidates , we expect to incur significant commercialization expenses related to product manufacturing , marketing , sales and distribution . as a result , we will need substantial additional funding to support our continuing operations and pursue our growth strategy . until such time as we can generate significant revenue from product sales , if ever , we expect to finance our operations through the sale of equity , debt financings or other capital sources , including collaborations with other companies or other strategic transactions . we may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms , or at all . if we fail to raise capital or enter into such agreements as , and when , needed , we may have to significantly delay , scale back or discontinue the development and commercialization of one or more of our engex product candidates or delay our pursuit of potential in-licenses or acquisitions . further , business interruptions resulting from the covid-19 pandemic or similar public health crises could cause a significant disruption in the development of our engex product candidates and our business operations . securing the necessary approvals for new drugs requires the expenditure of substantial time and resources and any delay or failure to obtain such approvals could materially adversely affect our development efforts . because of the numerous risks and uncertainties associated with product development , we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability . even if we are 141 able to generate product sales , we may not become profitable . if we fail to become profitable or are unable to sustain profitability on a continuing basis , then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations . story_separator_special_tag million , partially offset by $ 56.0 million of cash received related to the jazz collaboration agreement , and non-cash charges including $ 7.2 million for stock-based compensation , $ 2.8 million for depreciation and $ 0.3 million for redeemable convertible preferred stock earned by university of texas md anderson cancer center ( mdacc ) in connection with the sponsored research agreement ; these non-cash charges were offset by $ 1.1 million for accretion on investments . additionally , changes in our operating assets and liabilities primarily consisted of an $ 8.2 million increase in prepaid expenses and other current assets and an offsetting $ 9.8 million increase in accounts payable and accrued expenses and a $ 9.6 million increase in deferred rent . the increase in our prepaid expenses and other current assets was primarily due to deposits made on planned manufacturing activities and a receivable from our landlord for lease incentives under our new office lease executed in march 2019. the offsetting net increase in accounts payable and accrued expenses was due to an increase in payroll-related costs and an increase in amounts for external services in connection with preclinical activities while the increase in deferred rent was primarily related to the execution of two new office and laboratory leases in march 2019 . 149 investing activities during the year ended december 31 , 2020 , net cash provided by investing activities was $ 52.0 million , consisting of maturities of short-term investments of $ 73.1 million , partially offset by $ 21.1 million of purchases of property and equipment . during the year ended december 31 , 2019 , net cash used in investing activities was $ 11.7 million , consisting of $ 10.5 million for purchases of property and equipment and $ 130.7 million for purchases of short-term investments , partially offset by maturities of short-term investments of $ 129.5 million . financing activities during the year ended december 31 , 2020 , net cash provided by financing activities was $ 89.6 million , consisting of $ 74.4 million in net proceeds from the issuance of common stock upon completion of our initial public offering , $ 15.0 million in proceeds from a drawn down on our long-term debt and $ 0.2 million for proceeds from the issuance of common stock in connection with the exercise of stock options . during the year ended december 31 , 2019 , net cash provided by financing activities was $ 9.8 million consisting of $ 9.5 million from proceeds for long-term debt , net of issuance costs , and $ 0.3 million for proceeds from the issuance of cstock in connection with the exercise of stock options . plan of operation and future funding requirements we expect our expenses to increase substantially in connection with our ongoing research and development activities , particularly as we advance our clinical trials of exosting and exoil-12 and our preclinical activities for our engex development programs . in addition , we expect to incur additional costs associated with operating as a public company now that we have completed our ipo . as a result , we expect to incur substantial operating losses and negative operating cash flows for the foreseeable future . based on our current operating plan , we expect our cash and cash equivalents as of december 31 , 2020 , and together with the net proceeds from the follow-on offering completed on february 17 , 2021 , will enable us to fund our operating expenses and capital expenditure requirements through at least the next 12 months . however , we have based this estimate on assumptions that may prove to be wrong and we could exhaust our capital resources sooner than we expect . because of the numerous risks and uncertainties associated with the development of our engex platform , exosting , exoil-12 , exoaso-stat6 and other engex development programs , and because the extent to which we may receive payments under our existing collaboration agreements or enter into collaborations with third parties for development of our product candidates is unknown , we may incorrectly estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates . our funding requirements and timing and amount of our operating expenditures will depend on many factors , including , but not limited to : the rate of progress in the development of our engex platform , engex product candidates and development programs ; the scope , progress , results and costs of preclinical studies and clinical trials for any engex product candidates and development programs ; the number and characteristics of programs and technologies that we develop or may in-license ; the costs and timing of future commercialization activities , including manufacturing , marketing , sales and distribution , for any of our product candidates for which we receive marketing approval ; the costs necessary to obtain regulatory approvals , if any , for any approved products in the us and other jurisdictions , and the costs of post-marketing studies that could be required by regulatory authorities in jurisdictions where any such approval is obtained ; the costs and timing of preparing , filing and prosecuting patent applications , maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims ; the continuation of our existing strategic collaborations and licensing arrangements and entry into new collaborations and licensing arrangements ; 150 the costs we incur in maintaining business operations ; the costs associated with being a public company ; the revenue , if any , received from commercial sales of our engex product candidates for which we receive marketing approval ; the effect of competing technological and market developments ; and the extent to which we acquire or invest in businesses , products and technologies , including entering into licensing or collaboration arrangements for product candidates . identifying potential product candidates and conducting preclinical studies and clinical trials is
| liquidity and capital resources the following discussion analyzes liquidity and capital resources by operating , investing and financing activities as presented in our consolidated statements of cash flows . our principal sources of liquidity have been our cash flow from operations , our marketable securities and our revolving line of credit arrangements . on december 25 , 2010 , we had a $ 750 million credit agreement , which had a maturity date of august 26 , 2015 and provided for a $ 230 million term loan , a 133.8 million euro term loan and a $ 350 million revolving credit facility . on february 24 , 2011 , we amended the credit agreement , primarily to provide for an incremental $ 150 million term loan and to modify the leverage ratio used in calculating the interest rate applicable to amounts outstanding . on september 23 , 2011 , we amended and restated the credit agreement primarily to reduce the interest rate margin applicable to the term loans and the revolving loans based on our leverage ratio and extend the maturity date by approximately one year to september 2016. the current credit agreement provides for a $ 299.8 million term loan , a 69.4 million euro term loan and a $ 350 million revolving credit facility . under specified circumstances , we have the ability to increase the term loans and or revolving line of credit by up to $ 250 million in the aggregate . the term loans mature in 20 quarterly installments with the last installment due september 23 , 2016. the $ 350 million revolving facility also matures on september 23 , 2016 and requires no scheduled payment before that date . the book value of our term and revolving loans approximates fair value .
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as of december 31 , 2020 , we raised an aggregate of $ 168.2 million through the issuance of our redeemable convertible preferred stock , net of issuance costs , $ 24.6 million from our term loan facility with hercules , net of issuance costs , and received $ 66.0 million in payments from our collaborations with jazz and sarepta . on october 16 , 2020 , we completed our initial public offering , or ipo , pursuant to which we issued and sold 5,500,000 shares of our common stock at a public offering price of $ 15.00 per share , resulting in net proceeds of $ 74.4 million , after deducting underwriting discounts and commissions and other offering expenses . on february 17 , 2021 , we completed a follow-on public offering , pursuant to which we issued and sold 3,162,500 shares of our common stock ( inclusive of the exercise of the underwriter 's option to purchase 412,500 additional shares of common stock ) at a public offering price of $ 21.00 per share , resulting in aggregate net proceeds of $ 62.0 million , after deducting underwriting discounts and commissions and other offering expenses . we have not generated any revenue from product sales and do not expect to do so for several years , and may never do so . we advanced our first two engex product candidates , exosting and exoil-12 , into clinical 140 trials in september 2020. all of our other engex exosomes are still in preclinical development . our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our engex product candidates . since our inception , we have incurred significant losses , including net losses of $ 91 . 7 million and $ 7 8 . 0 million for the years ended december 31 , 20 20 and 2019 , respectively . as of december 3 1 , 2020 , we had an accumulated deficit of $ 2 88 . 1 million . we expect to incur substantial additional losses in the future as we expand our research and development activities . we anticipate that our expenses will increase significantly in connection with our ongoing activities , as we : initiate and conduct clinical trials for exosting , exoil-12 and any other engex product candidates we identify and choose to develop ; continue our current research programs and preclinical development of exoaso-stat6 and our potential engex product candidates ; seek to identify additional research programs and additional engex product candidates ; further develop and expand the capabilities of our engex platform ; establish , operate and maintain in-house manufacturing capabilities , including of our own phase 1/2 clinical manufacturing facility , and secure supply chain capacity sufficient to support our planned preclinical studies and early-stage clinical trials ; maintain , expand and protect our intellectual property portfolio ; hire additional clinical , scientific , manufacturing and business development personnel ; acquire or in-license other biologically active molecules , potential engex product candidates or technologies ; seek regulatory approvals for any engex product candidates that successfully complete clinical trials ; establish a sales , marketing and distribution infrastructure to commercialize any engex products for which we may obtain regulatory approval ; add operational , financial and management information systems and personnel , including personnel to support our product development and any future commercialization efforts , as well as to support our continued operations as a public company ; and take temporary precautionary measures to minimize the risk of covid-19 to our employees , contractors and those who may participate in our studies . we do not anticipate generating revenue from product sales for the foreseeable future , if ever , unless and until we successfully complete clinical development and obtain marketing approvals for our engex product candidates . in addition , if we obtain marketing approval for any of our engex product candidates , we expect to incur significant commercialization expenses related to product manufacturing , marketing , sales and distribution . as a result , we will need substantial additional funding to support our continuing operations and pursue our growth strategy . until such time as we can generate significant revenue from product sales , if ever , we expect to finance our operations through the sale of equity , debt financings or other capital sources , including collaborations with other companies or other strategic transactions . we may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms , or at all . if we fail to raise capital or enter into such agreements as , and when , needed , we may have to significantly delay , scale back or discontinue the development and commercialization of one or more of our engex product candidates or delay our pursuit of potential in-licenses or acquisitions . further , business interruptions resulting from the covid-19 pandemic or similar public health crises could cause a significant disruption in the development of our engex product candidates and our business operations . securing the necessary approvals for new drugs requires the expenditure of substantial time and resources and any delay or failure to obtain such approvals could materially adversely affect our development efforts . because of the numerous risks and uncertainties associated with product development , we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability . even if we are 141 able to generate product sales , we may not become profitable . if we fail to become profitable or are unable to sustain profitability on a continuing basis , then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations . story_separator_special_tag million , partially offset by $ 56.0 million of cash received related to the jazz collaboration agreement , and non-cash charges including $ 7.2 million for stock-based compensation , $ 2.8 million for depreciation and $ 0.3 million for redeemable convertible preferred stock earned by university of texas md anderson cancer center ( mdacc ) in connection with the sponsored research agreement ; these non-cash charges were offset by $ 1.1 million for accretion on investments . additionally , changes in our operating assets and liabilities primarily consisted of an $ 8.2 million increase in prepaid expenses and other current assets and an offsetting $ 9.8 million increase in accounts payable and accrued expenses and a $ 9.6 million increase in deferred rent . the increase in our prepaid expenses and other current assets was primarily due to deposits made on planned manufacturing activities and a receivable from our landlord for lease incentives under our new office lease executed in march 2019. the offsetting net increase in accounts payable and accrued expenses was due to an increase in payroll-related costs and an increase in amounts for external services in connection with preclinical activities while the increase in deferred rent was primarily related to the execution of two new office and laboratory leases in march 2019 . 149 investing activities during the year ended december 31 , 2020 , net cash provided by investing activities was $ 52.0 million , consisting of maturities of short-term investments of $ 73.1 million , partially offset by $ 21.1 million of purchases of property and equipment . during the year ended december 31 , 2019 , net cash used in investing activities was $ 11.7 million , consisting of $ 10.5 million for purchases of property and equipment and $ 130.7 million for purchases of short-term investments , partially offset by maturities of short-term investments of $ 129.5 million . financing activities during the year ended december 31 , 2020 , net cash provided by financing activities was $ 89.6 million , consisting of $ 74.4 million in net proceeds from the issuance of common stock upon completion of our initial public offering , $ 15.0 million in proceeds from a drawn down on our long-term debt and $ 0.2 million for proceeds from the issuance of common stock in connection with the exercise of stock options . during the year ended december 31 , 2019 , net cash provided by financing activities was $ 9.8 million consisting of $ 9.5 million from proceeds for long-term debt , net of issuance costs , and $ 0.3 million for proceeds from the issuance of cstock in connection with the exercise of stock options . plan of operation and future funding requirements we expect our expenses to increase substantially in connection with our ongoing research and development activities , particularly as we advance our clinical trials of exosting and exoil-12 and our preclinical activities for our engex development programs . in addition , we expect to incur additional costs associated with operating as a public company now that we have completed our ipo . as a result , we expect to incur substantial operating losses and negative operating cash flows for the foreseeable future . based on our current operating plan , we expect our cash and cash equivalents as of december 31 , 2020 , and together with the net proceeds from the follow-on offering completed on february 17 , 2021 , will enable us to fund our operating expenses and capital expenditure requirements through at least the next 12 months . however , we have based this estimate on assumptions that may prove to be wrong and we could exhaust our capital resources sooner than we expect . because of the numerous risks and uncertainties associated with the development of our engex platform , exosting , exoil-12 , exoaso-stat6 and other engex development programs , and because the extent to which we may receive payments under our existing collaboration agreements or enter into collaborations with third parties for development of our product candidates is unknown , we may incorrectly estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates . our funding requirements and timing and amount of our operating expenditures will depend on many factors , including , but not limited to : the rate of progress in the development of our engex platform , engex product candidates and development programs ; the scope , progress , results and costs of preclinical studies and clinical trials for any engex product candidates and development programs ; the number and characteristics of programs and technologies that we develop or may in-license ; the costs and timing of future commercialization activities , including manufacturing , marketing , sales and distribution , for any of our product candidates for which we receive marketing approval ; the costs necessary to obtain regulatory approvals , if any , for any approved products in the us and other jurisdictions , and the costs of post-marketing studies that could be required by regulatory authorities in jurisdictions where any such approval is obtained ; the costs and timing of preparing , filing and prosecuting patent applications , maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims ; the continuation of our existing strategic collaborations and licensing arrangements and entry into new collaborations and licensing arrangements ; 150 the costs we incur in maintaining business operations ; the costs associated with being a public company ; the revenue , if any , received from commercial sales of our engex product candidates for which we receive marketing approval ; the effect of competing technological and market developments ; and the extent to which we acquire or invest in businesses , products and technologies , including entering into licensing or collaboration arrangements for product candidates . identifying potential product candidates and conducting preclinical studies and clinical trials is
| sources of liquidity since our inception , we have incurred significant losses in each period and on an aggregate basis . we have not yet commercialized any of our engex product candidates , which are in various phases of early-stage and clinical development , and we do not expect to generate revenue from sales of any products for several years , if at all . we have funded our operations through december 31 , 2020 with aggregate net proceeds of $ 168.2 million from sales of our redeemable convertible preferred stock , $ 24.6 million from our term loan facility hercules , net of issuance costs , and $ 66.0 million received from our collaborations with jazz and sarepta . on october 16 , 2020 , we completed our ipo for net proceeds of $ 74.4 million , after deducting underwriting discounts and commissions and other offering expenses . as of december 30 , 2020 , we had cash and cash equivalents of $ 88.9 million . on february 17 , 2021 , we completed a follow-on public offering for net proceeds of $ 62.0 million , after deducting underwriting discounts and commissions and other offering expenses . hercules loan agreement on september 30 , 2019 , or the closing date , we entered into a loan and security agreement , or the loan agreement , with hercules pursuant to which a term loan in an aggregate principal amount of up to $ 75.0 million , or the term loan facility , is available to us in four tranches , subject to certain terms and conditions .
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we believe that our pipeline of planned projects , as evidenced by our growing backlog of signed purchase orders , provides us with strong visibility into our future revenue , as historically we have experienced few order cancellations , and the cancellations that have occurred in the past have not been material compared to our total contract volume or total backlog . the small number of order cancellations is attributable in part to the fact that a large portion of our solutions are ordered and installed toward the end of greenfield project construction . our backlog at march 31 , 2012 was $ 117.7 million . the timing of recognition of revenue out of backlog is not always certain , as it is subject to a variety of factors that may cause delays , many of which are beyond our control ( such 26 as customers ' delivery schedules and levels of capital and maintenance expenditures ) . when delays occur , the recognition of revenue associated with the delayed project is likewise deferred . cost of sales . our cost of revenues includes primarily the cost of raw material items used in the manufacture of our products , cost of ancillary products that are sourced from external suppliers and construction labor cost . additional costs of revenue include contract engineering cost directly associated to projects , direct labor cost , external sales commissions , and other costs associated with our manufacturing/fabrication shops . the other costs associated with our manufacturing/fabrication shops are mainly indirect production costs , including depreciation , indirect labor costs , and the costs of manufacturing support functions such as logistics and quality assurance . key raw material costs include polymers , copper , stainless steel , insulating material , and other miscellaneous parts related to products manufactured or assembled as part of our heat tracing solutions . historically , the costs of our primary raw materials have been stable and readily available from multiple suppliers , and we have been generally successful with passing along raw material cost increases to our customers . therefore , increases in the cost of key raw materials of our products have not generally affected our gross margins . we can not provide any assurance that we may be able to pass along such cost increases to our customers in the future , and if we are unable to do so , our results of operations may be adversely affected . operating expenses . our marketing , general and administrative and engineering expenses are primarily comprised of compensation and related costs for sales , marketing , pre-sales engineering and administrative personnel , as well as other sales related expenses and other costs related to research and development , insurance , professional fees , the global integrated business information system , provisions for bad debts and warranty . key drivers affecting our results of operations . our results of operations and financial condition are affected by numerous factors , including those described above under item 1a , risk factors and elsewhere in this annual report and those described below : · timing of greenfield projects . our results of operations in recent years have been impacted by the various construction phases of large greenfield projects . on very large projects , we are typically designated as the heat tracing provider of choice by the project owner . we then engage with multiple contractors to address incorporating various heat tracing solutions throughout the overall project . our largest greenfield projects may generate revenue for several quarters . in the early stages of a greenfield project , our revenues are typically realized from the provision of engineering services . in the middle stages , or the material requirements phase , we typically experience the greatest demand for our heat tracing cable , at which point our revenues tend to accelerate . revenues tend to decrease gradually in the final stages of a project and are generally derived from installation services and demand for electrical panels and other miscellaneous electronic components used in the final installation of heat tracing cable , which we frequently outsource from third-party manufacturers . therefore , we typically provide a mix of products and services during each phase of a greenfield project , and our margins fluctuate accordingly . · cyclicality of end-users ' markets . demand for our products and services depends in large part upon the level of capital and maintenance expenditures of our customers and end users , in particular those in the energy , chemical processing and power generation industries , and firms that design and construct facilities for these industries . these customers ' expenditures historically have been cyclical in nature and vulnerable to economic downturns . greenfield projects , and in particular large greenfield projects ( i.e . , new facility construction projects generating in excess of $ 5 million in annual sales ) , have been a substantial source of revenue growth in recent years , and greenfield revenues tend to be more cyclical than mro/ue revenues . in recent years we have noted particular cyclicality in capital spending for new facilities in asia , eastern europe and the middle east . revenues derived from europe ( including the middle east , which have historically comprised a relatively minor portion of such revenues ) accounted for 24 % and 26 % of our total revenues during fiscal 2012 and fiscal 2011 , respectively , and revenues derived from the asia-pacific region accounted for 11 % and 11 % of our total revenues during fiscal 2012 and fiscal 2011 , respectively . a sustained decrease in capital and maintenance spending or in new facility construction by our customers could have a material adverse effect on the demand for our products and services and our business , financial condition and results of operations . · impact of product mix . story_separator_special_tag after taking into account this adjustment , gross margin would have been 46.4 % in fiscal 2010. adjusted gross margin decreased marginally by 0.2 % in fiscal 2011 as compared to fiscal 2010. these adjusted gross margins of 46.2 % and 46.4 % for fiscal 2011 and fiscal 2010 , respectively , are within our expected range of gross margins based on our historical results . no discernible series of events or factors were responsible for the negligible decline in gross margin over such period . marketing , general and administrative and engineering . marketing , general and administrative and engineering costs were $ 58.9 million in fiscal 2011 , compared to $ 47.3 million in fiscal 2010 , an increase of $ 11.6 million , or 24.5 % . the overall increase is primarily related to an increase in expenses to address personnel needs to meet growing customer demand . the expenses contributing to this increase are mostly attributable to an increase in salaries and benefits of $ 8.7 million to support our growing business . in addition , there is an increase of $ 1.1 million in management fees paid to our private equity sponsors in fiscal 2011 as compared to the predecessors management fees in fiscal 2010. as a percentage of revenues , marketing , general and administrative and engineering expenses were comparable across periods ( 24.7 % in fiscal 2011 and 24.6 % in fiscal 2010 ) . amortization of intangible assets . amortization of intangible assets was $ 18.2 million in fiscal 2011 , compared to $ 2.4 million in fiscal 2010 , an increase of $ 15.8 million , due to the amortization of certain intangible assets associated with the chs transactions . interest expense . interest expense was $ 29.0 million in fiscal 2011 , compared to $ 7.4 million in fiscal 2010 , an increase of $ 21.6 million , which is primarily attributable to the increased levels of indebtedness incurred in connection with the issuance of $ 210.0 million aggregate principal amount of our senior secured notes and the higher interest rate on our senior secured notes as compared to our long-term debt prior to the chs transactions . also included in interest expense are one-time financing costs associated with the chs transactions , including $ 2.0 million in full amortization of our bridge loan fee , $ 2.6 million in accelerated amortization of deferred debt costs associated with repaid debt and $ 3.1 million in prepayment penalties . miscellaneous expense . miscellaneous expense was $ 14.1 million in fiscal 2011 , compared to miscellaneous expense of $ 1.3 million in fiscal 2010 , an increase of $ 12.8 million . miscellaneous expense in fiscal 2011 consisted primarily of $ 15.0 million of professional fees and expenses related to the chs transactions and partially offset by $ 0.6 million income related to adjustment of compliance liabilities . miscellaneous expense in fiscal 2010 consisted primarily of legal , financial and other advisory and consulting fees and expenses incurred when audax commenced an auction process to sell their controlling interest in us and foreign exchange transaction losses , partially offset by a small gain in sales of fixed assets . income taxes . income taxes were a benefit of $ 11.3 million in fiscal 2011 , compared to a $ 14.0 million tax expense in fiscal 2010 , a decrease of $ 25.3 million from fiscal 2010. the effective tax rates were ( 42.6 ) % in fiscal 2011 and 42.4 % in fiscal 2010. the fiscal 2011 amounts combine the effects of the chs transactions for the one month period ended april 30 , 2010 ( for which we filed a separate us federal income tax return ) and the eleven month period ended march 31 , 2011. for the one month ended april 30 , 2010 , we recorded a tax benefit of $ 17.4 million as our former owners were able to deduct costs related to the chs transactions . for the eleven month period ended march 31 , 2011 , our tax expense was $ 6.2 million despite a pre-tax loss of $ 8.8 million . the tax expense was due primarily to dividends of $ 33.4 million that were repatriated into the u.s. from certain of our foreign subsidiaries during the fourth quarter of fiscal 2011. after taking into account the effect of credits for foreign taxes paid , these dividends increased our tax expense by approximately $ 4.2 million . the other significant component of the tax expense in the eleven months ended march 31 , 2011 was from earnings at our foreign subsidiaries . see note 15 , income taxes to our consolidated financial statements for tgh for fiscal 2011 , included elsewhere in this annual report , for further detail on income taxes . 31 net income ( loss ) . net loss was $ 15.2 million in fiscal 2011 as compared to net income of $ 18.9 million in fiscal 2010 , a decrease of $ 34.1 million . the decrease in net income was primarily attributable to the expenses incurred in fiscal 2011 in connection with the chs transactions , including an increase in amortization of intangible assets of $ 15.8 million ( including $ 7.6 million in purchase accounting adjustments that had a non-cash negative impact to cost of sales and , consequently , gross profit ) over the prior year . in addition , interest expense increased by $ 21.6 million as compared to fiscal 2010 due to increased levels of indebtedness at a higher interest rate incurred in connection with the chs transactions , as described above . during fiscal 2011 , we also incurred $ 22.7 million in transaction costs directly related to the chs transactions . in total , the increases in amortization of intangible assets , interest expense and transaction costs related to the chs transactions comprise $ 60.1 million in increased expenses over fiscal 2010 ,
| sources of liquidity since our inception , we have incurred significant losses in each period and on an aggregate basis . we have not yet commercialized any of our engex product candidates , which are in various phases of early-stage and clinical development , and we do not expect to generate revenue from sales of any products for several years , if at all . we have funded our operations through december 31 , 2020 with aggregate net proceeds of $ 168.2 million from sales of our redeemable convertible preferred stock , $ 24.6 million from our term loan facility hercules , net of issuance costs , and $ 66.0 million received from our collaborations with jazz and sarepta . on october 16 , 2020 , we completed our ipo for net proceeds of $ 74.4 million , after deducting underwriting discounts and commissions and other offering expenses . as of december 30 , 2020 , we had cash and cash equivalents of $ 88.9 million . on february 17 , 2021 , we completed a follow-on public offering for net proceeds of $ 62.0 million , after deducting underwriting discounts and commissions and other offering expenses . hercules loan agreement on september 30 , 2019 , or the closing date , we entered into a loan and security agreement , or the loan agreement , with hercules pursuant to which a term loan in an aggregate principal amount of up to $ 75.0 million , or the term loan facility , is available to us in four tranches , subject to certain terms and conditions .
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we believe that our pipeline of planned projects , as evidenced by our growing backlog of signed purchase orders , provides us with strong visibility into our future revenue , as historically we have experienced few order cancellations , and the cancellations that have occurred in the past have not been material compared to our total contract volume or total backlog . the small number of order cancellations is attributable in part to the fact that a large portion of our solutions are ordered and installed toward the end of greenfield project construction . our backlog at march 31 , 2012 was $ 117.7 million . the timing of recognition of revenue out of backlog is not always certain , as it is subject to a variety of factors that may cause delays , many of which are beyond our control ( such 26 as customers ' delivery schedules and levels of capital and maintenance expenditures ) . when delays occur , the recognition of revenue associated with the delayed project is likewise deferred . cost of sales . our cost of revenues includes primarily the cost of raw material items used in the manufacture of our products , cost of ancillary products that are sourced from external suppliers and construction labor cost . additional costs of revenue include contract engineering cost directly associated to projects , direct labor cost , external sales commissions , and other costs associated with our manufacturing/fabrication shops . the other costs associated with our manufacturing/fabrication shops are mainly indirect production costs , including depreciation , indirect labor costs , and the costs of manufacturing support functions such as logistics and quality assurance . key raw material costs include polymers , copper , stainless steel , insulating material , and other miscellaneous parts related to products manufactured or assembled as part of our heat tracing solutions . historically , the costs of our primary raw materials have been stable and readily available from multiple suppliers , and we have been generally successful with passing along raw material cost increases to our customers . therefore , increases in the cost of key raw materials of our products have not generally affected our gross margins . we can not provide any assurance that we may be able to pass along such cost increases to our customers in the future , and if we are unable to do so , our results of operations may be adversely affected . operating expenses . our marketing , general and administrative and engineering expenses are primarily comprised of compensation and related costs for sales , marketing , pre-sales engineering and administrative personnel , as well as other sales related expenses and other costs related to research and development , insurance , professional fees , the global integrated business information system , provisions for bad debts and warranty . key drivers affecting our results of operations . our results of operations and financial condition are affected by numerous factors , including those described above under item 1a , risk factors and elsewhere in this annual report and those described below : · timing of greenfield projects . our results of operations in recent years have been impacted by the various construction phases of large greenfield projects . on very large projects , we are typically designated as the heat tracing provider of choice by the project owner . we then engage with multiple contractors to address incorporating various heat tracing solutions throughout the overall project . our largest greenfield projects may generate revenue for several quarters . in the early stages of a greenfield project , our revenues are typically realized from the provision of engineering services . in the middle stages , or the material requirements phase , we typically experience the greatest demand for our heat tracing cable , at which point our revenues tend to accelerate . revenues tend to decrease gradually in the final stages of a project and are generally derived from installation services and demand for electrical panels and other miscellaneous electronic components used in the final installation of heat tracing cable , which we frequently outsource from third-party manufacturers . therefore , we typically provide a mix of products and services during each phase of a greenfield project , and our margins fluctuate accordingly . · cyclicality of end-users ' markets . demand for our products and services depends in large part upon the level of capital and maintenance expenditures of our customers and end users , in particular those in the energy , chemical processing and power generation industries , and firms that design and construct facilities for these industries . these customers ' expenditures historically have been cyclical in nature and vulnerable to economic downturns . greenfield projects , and in particular large greenfield projects ( i.e . , new facility construction projects generating in excess of $ 5 million in annual sales ) , have been a substantial source of revenue growth in recent years , and greenfield revenues tend to be more cyclical than mro/ue revenues . in recent years we have noted particular cyclicality in capital spending for new facilities in asia , eastern europe and the middle east . revenues derived from europe ( including the middle east , which have historically comprised a relatively minor portion of such revenues ) accounted for 24 % and 26 % of our total revenues during fiscal 2012 and fiscal 2011 , respectively , and revenues derived from the asia-pacific region accounted for 11 % and 11 % of our total revenues during fiscal 2012 and fiscal 2011 , respectively . a sustained decrease in capital and maintenance spending or in new facility construction by our customers could have a material adverse effect on the demand for our products and services and our business , financial condition and results of operations . · impact of product mix . story_separator_special_tag after taking into account this adjustment , gross margin would have been 46.4 % in fiscal 2010. adjusted gross margin decreased marginally by 0.2 % in fiscal 2011 as compared to fiscal 2010. these adjusted gross margins of 46.2 % and 46.4 % for fiscal 2011 and fiscal 2010 , respectively , are within our expected range of gross margins based on our historical results . no discernible series of events or factors were responsible for the negligible decline in gross margin over such period . marketing , general and administrative and engineering . marketing , general and administrative and engineering costs were $ 58.9 million in fiscal 2011 , compared to $ 47.3 million in fiscal 2010 , an increase of $ 11.6 million , or 24.5 % . the overall increase is primarily related to an increase in expenses to address personnel needs to meet growing customer demand . the expenses contributing to this increase are mostly attributable to an increase in salaries and benefits of $ 8.7 million to support our growing business . in addition , there is an increase of $ 1.1 million in management fees paid to our private equity sponsors in fiscal 2011 as compared to the predecessors management fees in fiscal 2010. as a percentage of revenues , marketing , general and administrative and engineering expenses were comparable across periods ( 24.7 % in fiscal 2011 and 24.6 % in fiscal 2010 ) . amortization of intangible assets . amortization of intangible assets was $ 18.2 million in fiscal 2011 , compared to $ 2.4 million in fiscal 2010 , an increase of $ 15.8 million , due to the amortization of certain intangible assets associated with the chs transactions . interest expense . interest expense was $ 29.0 million in fiscal 2011 , compared to $ 7.4 million in fiscal 2010 , an increase of $ 21.6 million , which is primarily attributable to the increased levels of indebtedness incurred in connection with the issuance of $ 210.0 million aggregate principal amount of our senior secured notes and the higher interest rate on our senior secured notes as compared to our long-term debt prior to the chs transactions . also included in interest expense are one-time financing costs associated with the chs transactions , including $ 2.0 million in full amortization of our bridge loan fee , $ 2.6 million in accelerated amortization of deferred debt costs associated with repaid debt and $ 3.1 million in prepayment penalties . miscellaneous expense . miscellaneous expense was $ 14.1 million in fiscal 2011 , compared to miscellaneous expense of $ 1.3 million in fiscal 2010 , an increase of $ 12.8 million . miscellaneous expense in fiscal 2011 consisted primarily of $ 15.0 million of professional fees and expenses related to the chs transactions and partially offset by $ 0.6 million income related to adjustment of compliance liabilities . miscellaneous expense in fiscal 2010 consisted primarily of legal , financial and other advisory and consulting fees and expenses incurred when audax commenced an auction process to sell their controlling interest in us and foreign exchange transaction losses , partially offset by a small gain in sales of fixed assets . income taxes . income taxes were a benefit of $ 11.3 million in fiscal 2011 , compared to a $ 14.0 million tax expense in fiscal 2010 , a decrease of $ 25.3 million from fiscal 2010. the effective tax rates were ( 42.6 ) % in fiscal 2011 and 42.4 % in fiscal 2010. the fiscal 2011 amounts combine the effects of the chs transactions for the one month period ended april 30 , 2010 ( for which we filed a separate us federal income tax return ) and the eleven month period ended march 31 , 2011. for the one month ended april 30 , 2010 , we recorded a tax benefit of $ 17.4 million as our former owners were able to deduct costs related to the chs transactions . for the eleven month period ended march 31 , 2011 , our tax expense was $ 6.2 million despite a pre-tax loss of $ 8.8 million . the tax expense was due primarily to dividends of $ 33.4 million that were repatriated into the u.s. from certain of our foreign subsidiaries during the fourth quarter of fiscal 2011. after taking into account the effect of credits for foreign taxes paid , these dividends increased our tax expense by approximately $ 4.2 million . the other significant component of the tax expense in the eleven months ended march 31 , 2011 was from earnings at our foreign subsidiaries . see note 15 , income taxes to our consolidated financial statements for tgh for fiscal 2011 , included elsewhere in this annual report , for further detail on income taxes . 31 net income ( loss ) . net loss was $ 15.2 million in fiscal 2011 as compared to net income of $ 18.9 million in fiscal 2010 , a decrease of $ 34.1 million . the decrease in net income was primarily attributable to the expenses incurred in fiscal 2011 in connection with the chs transactions , including an increase in amortization of intangible assets of $ 15.8 million ( including $ 7.6 million in purchase accounting adjustments that had a non-cash negative impact to cost of sales and , consequently , gross profit ) over the prior year . in addition , interest expense increased by $ 21.6 million as compared to fiscal 2010 due to increased levels of indebtedness at a higher interest rate incurred in connection with the chs transactions , as described above . during fiscal 2011 , we also incurred $ 22.7 million in transaction costs directly related to the chs transactions . in total , the increases in amortization of intangible assets , interest expense and transaction costs related to the chs transactions comprise $ 60.1 million in increased expenses over fiscal 2010 ,
| net cash provided by operating activities totaled $ 5.3 million for fiscal 2012 , compared to $ 32.6 million for the combined periods in fiscal 2011 , a decrease of $ 27.3 million . in fiscal 2012 , our operations improved from a loss of $ 15.2 million in fiscal 2011 to net income of $ 12.0 million in fiscal 2012. while this improvement amounted to an increase to cash flows of $ 27.2 million , the overall decrease in cash flows from operating activities was primarily due to the reduction of liabilities during fiscal 2012. during fiscal 2011 , our cash flow from operations reflected the increase in accounts payable , interest payable , customer prepayments and taxes payable that totaled $ 42.8 million . in fiscal 2012 , these same liabilities , as a group , decreased and therefore reflect a use of cash of $ 13.9 million . this change is mostly due to the reduction in taxes payable of $ 16.1 million . with the additional debt from the chs transactions , fiscal 2011 reflected an $ 8.8 million increase in interest payable . in total the change in liabilities as presented in our cash flow from operations amounted to a decrease of $ 56.7 million . during fiscal 2012 , our receivables grew due to higher sales and our inventory increased as we maintained higher stock levels for higher demand . the change from all current assets resulted in a decrease in cash flows from operations of $ 9.5 million . also , the change in non-cash items such as depreciation , amortization , stock compensation expense and deferred taxes resulted in an increase in cash flow from operations of $ 11.7 million . net cash used in investing activities totaled $ 9.6 million for fiscal 2012 compared to $ 318.1 million for fiscal 2011. the significant increase in cash flows used in investing activities in 2011 was attributable to the $ 314.4 million purchase price in the chs transactions .
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these policies , along with the disclosures presented in the financial statement notes and in this financial review , provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined . based on the valuation techniques used and the sensitivity of financial statement amounts to the methods , assumptions , and estimates underlying those amounts , management has identified the determination of the allowance for credit losses , the valuation of investment securities and the related other-than-temporary impairment analysis , and the calculation of the income tax provision to be the accounting areas that require the most subjective or complex judgments , and as such could be most subject to revision as new information becomes available . the most significant accounting policies followed by united are presented in note a , notes to consolidated financial statements . allowance for credit losses the allowance for credit losses represents management 's estimate of the probable credit losses inherent in the lending portfolio . determining the allowance for credit losses requires management to make forecasts of losses that are highly uncertain and require a high degree of judgment . at december 31 , 2011 , the allowance for loan losses was $ 73.9 million and is subject to periodic adjustment based on management 's assessment of current probable losses in the loan portfolio . such adjustment from period to period can have a significant impact on united 's consolidated financial statements . to illustrate the potential effect on the financial statements of our estimates of the allowance for loan losses , a 10 % increase in the allowance for loan losses would have required $ 7.4 million in additional allowance ( funded by additional provision for credit losses ) , which would have negatively impacted the year of 2011 net income by approximately $ 4.8 million , or $ 0.10 diluted per common share . management 's evaluation of the adequacy of the allowance for credit losses and the appropriate provision for credit losses is based upon a quarterly evaluation of the loan portfolio and lending related commitments . this evaluation is inherently subjective and requires significant estimates , including estimates related to the amounts and timing of future cash 24 flows , value of collateral , losses on pools of homogeneous loans based on historical loss experience , and consideration of current economic trends , all of which are susceptible to constant and significant change . the allowance allocated to specific credits and loan pools grouped by similar risk characteristics is reviewed on a quarterly basis and adjusted as necessary based upon subsequent changes in circumstances . in determining the components of the allowance for credit losses , management considers the risk arising in part from , but not limited to , charge-off and delinquency trends , current economic and business conditions , lending policies and procedures , the size and risk characteristics of the loan portfolio , concentrations of credit , and other various factors . the methodology used to determine the allowance for credit losses is described in note a , notes to consolidated financial statements . a discussion of the factors leading to changes in the amount of the allowance for credit losses is included in the provision for credit losses section of this management 's discussion and analysis of financial condition and results of operations ( md & a ) . for a discussion of concentrations of credit risk , see item 1 , under the caption of loan concentrations in this form 10-k. investment securities accounting estimates are used in the presentation of the investment portfolio and these estimates impact the presentation of united 's financial condition and results of operations . united classifies its investments in debt and equity securities as either held to maturity or available for sale . securities held to maturity are accounted for using historical costs , adjusted for amortization of premiums and accretion of discounts . securities available for sale are accounted for at fair value , with the net unrealized gains and losses , net of income tax effects , presented as a separate component of stockholders ' equity . when available , fair values of securities are based on quoted prices or prices obtained from third party vendors . third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data . prices obtained from third party vendors that do not reflect forced liquidation or distressed sales are not adjusted by management . where prices reflect forced liquidation or distressed sales , as is the case with united 's portfolio of pooled trust preferred securities , management estimates fair value based on a discounted cash flow methodology using appropriately adjusted discount rates reflecting nonperformance and liquidity risks . due to the subjective nature of this valuation process , it is possible that the actual fair values of these securities could differ from the estimated amounts , thereby affecting united 's financial position , results of operations and cash flows . the potential impact to united 's financial position , results of operations or cash flows for changes in the valuation process can not be reasonably estimated . if the estimated value of investments is less than the cost or amortized cost , the investment is considered impaired and management evaluates whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment . if such an event or change has occurred , management must exercise judgment to determine the nature of the potential impairment ( i.e . , temporary or other-than-temporary ) in order to apply the appropriate accounting treatment . story_separator_special_tag the increase in interest-bearing deposits was due mainly to the centra merger as all major categories of interest-bearing deposits , except interest-bearing checking accounts , increased from year-end 2010. interest-bearing money market accounts ( mmdas ) increased $ 461.73 million or 27.35 % , time deposits over $ 100,000 increased $ 87.21 million or 8.81 % , time deposits under $ 100,000 increased $ 60.63 million or 5.26 % , and regular savings balances increased $ 85.49 million or 22.01 % . the $ 461.73 million increase in interest-bearing mmdas is due to a $ 325.38 million and a $ 177.32 million increase in personal mmdas and commercial mmdas , respectively . public funds mmdas , on the other hand , decreased $ 40.97 million . the $ 87.21 million increase in time deposits over $ 100,000 is the result of a $ 119.25 million increase in fixed rate certificates of deposits ( cds ) . partially offsetting this increase in fixed rate cds was a $ 28.97 million decrease in certificate of deposit account registry service ( cdars ) balances . the $ 60.63 million increase in time deposits under $ 100,000 was due to fixed rate cds increasing $ 89.27 million while variable rate cds decreased $ 25.70 million and cdars balances under $ 100,000 decreased $ 16.12 million . partially offsetting these increases in interest-bearing deposits was a decrease of $ 5.48 million or 1.89 % in interest-bearing checking deposits mainly due to a $ 22.06 million decrease in commercial interest-bearing checking accounts which was partially offset by a $ 14.57 million increase in personal interest-bearing checking accounts and a $ 2.01 million increase in state and municipal interest-bearing checking accounts . the table below summarizes the changes by deposit category since year-end 2010 : replace_table_token_10_th at december 31 , 2011 , the scheduled maturities of time deposits are as follows : replace_table_token_11_th maturities of time certificates of deposit of $ 100,000 or more outstanding at december 31 , 2011 are summarized as follows : replace_table_token_12_th 30 the average daily amount of deposits and rates paid on such deposits is summarized for the years ended december 31 : replace_table_token_13_th more information relating to deposits is presented in note i , notes to consolidated financial statements . borrowings total borrowings at december 31 , 2011 increased $ 20.46 million or 3.53 % during the year of 2011. centra added approximately $ 48 million upon the merger . since year-end 2010 , short-term borrowings increased $ 61.55 million or 31.86 % due to a $ 64.55 million increase in securities sold under agreements to repurchase . centra added approximately $ 28.57 million in short-term borrowings at merger . long-term borrowings decreased $ 41.09 million or 10.63 % since year-end 2010 as long-term fhlb advances decreased $ 60.37 million or 29.86 % due to repayments . partially offsetting this decrease in long-term fhlb advances , united assumed $ 20 million of junior subordinated debt securities in the centra merger . the table below summarizes the changes by borrowing category since year-end 2010 : replace_table_token_14_th for a further discussion of borrowings see notes j and k , notes to consolidated financial statements . accrued expenses and other liabilities accrued expenses and other liabilities at december 31 , 2011 decreased $ 5.86 million or 8.69 % from year-end 2010. the majority of the decrease was due to a $ 9.08 million decrease in income taxes payable due to a timing difference in payments . partially offsetting this decrease was an increase of $ 2.48 million in dividends payable . centra added approximately $ 3.27 million upon the merger . shareholders ' equity shareholders ' equity at december 31 , 2011 increased $ 175.83 million or 22.17 % from december 31 , 2010 mainly as a result of the centra acquisition . the centra transaction added approximately $ 161 million as 6,548,473 shares were issued from 31 united 's authorized but unissued shares for the merger at a cost of $ 170 million . earnings net of dividends for the year of 2011 were $ 18.78 million . accumulated other comprehensive income decreased $ 6.10 million due mainly due to an after tax-adjustment to united 's pension asset resulting in a decline of $ 13.38 million . partially offsetting this decrease was an increase of $ 6.17 million , net of deferred income tax , in the fair value of united 's available for sale investment portfolio . in addition , the accretion of pension costs for the year of 2011 was $ 1.46 million while the after-tax non-credit portion of otti losses for the year of 2011 was $ 354 thousand . earnings summary net income for the year 2011 was $ 75.61 million or $ 1.61 per diluted share compared to $ 71.95 million or $ 1.65 per diluted share for the year of 2010. united 's return on average assets for the year of 2011 was 0.97 % and return on average shareholders ' equity was 8.50 % as compared to 0.95 % and 9.19 % for the year of 2010. united 's most recently reported federal reserve peer group 's ( bank holding companies with total assets between $ 3 and $ 10 billion ) average return on assets was 0.79 % and average return on equity was 7.37 % for the first nine months of 2011. as previously mentioned , united completed its acquisition of centra during the third quarter of 2011. the financial results of centra are included in united 's results from the july 8 , 2011 acquisition date . as a result , comparisons for the fourth quarter and year of 2011 to the same time periods of 2010 are impacted by increased levels of average balances , income , expense , and asset quality results due to the acquisition . at consummation , centra had assets of approximately $ 1.3 billion , loans of $ 1.0 billion , deposits of $ 1.1 billion and
| net cash provided by operating activities totaled $ 5.3 million for fiscal 2012 , compared to $ 32.6 million for the combined periods in fiscal 2011 , a decrease of $ 27.3 million . in fiscal 2012 , our operations improved from a loss of $ 15.2 million in fiscal 2011 to net income of $ 12.0 million in fiscal 2012. while this improvement amounted to an increase to cash flows of $ 27.2 million , the overall decrease in cash flows from operating activities was primarily due to the reduction of liabilities during fiscal 2012. during fiscal 2011 , our cash flow from operations reflected the increase in accounts payable , interest payable , customer prepayments and taxes payable that totaled $ 42.8 million . in fiscal 2012 , these same liabilities , as a group , decreased and therefore reflect a use of cash of $ 13.9 million . this change is mostly due to the reduction in taxes payable of $ 16.1 million . with the additional debt from the chs transactions , fiscal 2011 reflected an $ 8.8 million increase in interest payable . in total the change in liabilities as presented in our cash flow from operations amounted to a decrease of $ 56.7 million . during fiscal 2012 , our receivables grew due to higher sales and our inventory increased as we maintained higher stock levels for higher demand . the change from all current assets resulted in a decrease in cash flows from operations of $ 9.5 million . also , the change in non-cash items such as depreciation , amortization , stock compensation expense and deferred taxes resulted in an increase in cash flow from operations of $ 11.7 million . net cash used in investing activities totaled $ 9.6 million for fiscal 2012 compared to $ 318.1 million for fiscal 2011. the significant increase in cash flows used in investing activities in 2011 was attributable to the $ 314.4 million purchase price in the chs transactions .
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these policies , along with the disclosures presented in the financial statement notes and in this financial review , provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined . based on the valuation techniques used and the sensitivity of financial statement amounts to the methods , assumptions , and estimates underlying those amounts , management has identified the determination of the allowance for credit losses , the valuation of investment securities and the related other-than-temporary impairment analysis , and the calculation of the income tax provision to be the accounting areas that require the most subjective or complex judgments , and as such could be most subject to revision as new information becomes available . the most significant accounting policies followed by united are presented in note a , notes to consolidated financial statements . allowance for credit losses the allowance for credit losses represents management 's estimate of the probable credit losses inherent in the lending portfolio . determining the allowance for credit losses requires management to make forecasts of losses that are highly uncertain and require a high degree of judgment . at december 31 , 2011 , the allowance for loan losses was $ 73.9 million and is subject to periodic adjustment based on management 's assessment of current probable losses in the loan portfolio . such adjustment from period to period can have a significant impact on united 's consolidated financial statements . to illustrate the potential effect on the financial statements of our estimates of the allowance for loan losses , a 10 % increase in the allowance for loan losses would have required $ 7.4 million in additional allowance ( funded by additional provision for credit losses ) , which would have negatively impacted the year of 2011 net income by approximately $ 4.8 million , or $ 0.10 diluted per common share . management 's evaluation of the adequacy of the allowance for credit losses and the appropriate provision for credit losses is based upon a quarterly evaluation of the loan portfolio and lending related commitments . this evaluation is inherently subjective and requires significant estimates , including estimates related to the amounts and timing of future cash 24 flows , value of collateral , losses on pools of homogeneous loans based on historical loss experience , and consideration of current economic trends , all of which are susceptible to constant and significant change . the allowance allocated to specific credits and loan pools grouped by similar risk characteristics is reviewed on a quarterly basis and adjusted as necessary based upon subsequent changes in circumstances . in determining the components of the allowance for credit losses , management considers the risk arising in part from , but not limited to , charge-off and delinquency trends , current economic and business conditions , lending policies and procedures , the size and risk characteristics of the loan portfolio , concentrations of credit , and other various factors . the methodology used to determine the allowance for credit losses is described in note a , notes to consolidated financial statements . a discussion of the factors leading to changes in the amount of the allowance for credit losses is included in the provision for credit losses section of this management 's discussion and analysis of financial condition and results of operations ( md & a ) . for a discussion of concentrations of credit risk , see item 1 , under the caption of loan concentrations in this form 10-k. investment securities accounting estimates are used in the presentation of the investment portfolio and these estimates impact the presentation of united 's financial condition and results of operations . united classifies its investments in debt and equity securities as either held to maturity or available for sale . securities held to maturity are accounted for using historical costs , adjusted for amortization of premiums and accretion of discounts . securities available for sale are accounted for at fair value , with the net unrealized gains and losses , net of income tax effects , presented as a separate component of stockholders ' equity . when available , fair values of securities are based on quoted prices or prices obtained from third party vendors . third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data . prices obtained from third party vendors that do not reflect forced liquidation or distressed sales are not adjusted by management . where prices reflect forced liquidation or distressed sales , as is the case with united 's portfolio of pooled trust preferred securities , management estimates fair value based on a discounted cash flow methodology using appropriately adjusted discount rates reflecting nonperformance and liquidity risks . due to the subjective nature of this valuation process , it is possible that the actual fair values of these securities could differ from the estimated amounts , thereby affecting united 's financial position , results of operations and cash flows . the potential impact to united 's financial position , results of operations or cash flows for changes in the valuation process can not be reasonably estimated . if the estimated value of investments is less than the cost or amortized cost , the investment is considered impaired and management evaluates whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment . if such an event or change has occurred , management must exercise judgment to determine the nature of the potential impairment ( i.e . , temporary or other-than-temporary ) in order to apply the appropriate accounting treatment . story_separator_special_tag the increase in interest-bearing deposits was due mainly to the centra merger as all major categories of interest-bearing deposits , except interest-bearing checking accounts , increased from year-end 2010. interest-bearing money market accounts ( mmdas ) increased $ 461.73 million or 27.35 % , time deposits over $ 100,000 increased $ 87.21 million or 8.81 % , time deposits under $ 100,000 increased $ 60.63 million or 5.26 % , and regular savings balances increased $ 85.49 million or 22.01 % . the $ 461.73 million increase in interest-bearing mmdas is due to a $ 325.38 million and a $ 177.32 million increase in personal mmdas and commercial mmdas , respectively . public funds mmdas , on the other hand , decreased $ 40.97 million . the $ 87.21 million increase in time deposits over $ 100,000 is the result of a $ 119.25 million increase in fixed rate certificates of deposits ( cds ) . partially offsetting this increase in fixed rate cds was a $ 28.97 million decrease in certificate of deposit account registry service ( cdars ) balances . the $ 60.63 million increase in time deposits under $ 100,000 was due to fixed rate cds increasing $ 89.27 million while variable rate cds decreased $ 25.70 million and cdars balances under $ 100,000 decreased $ 16.12 million . partially offsetting these increases in interest-bearing deposits was a decrease of $ 5.48 million or 1.89 % in interest-bearing checking deposits mainly due to a $ 22.06 million decrease in commercial interest-bearing checking accounts which was partially offset by a $ 14.57 million increase in personal interest-bearing checking accounts and a $ 2.01 million increase in state and municipal interest-bearing checking accounts . the table below summarizes the changes by deposit category since year-end 2010 : replace_table_token_10_th at december 31 , 2011 , the scheduled maturities of time deposits are as follows : replace_table_token_11_th maturities of time certificates of deposit of $ 100,000 or more outstanding at december 31 , 2011 are summarized as follows : replace_table_token_12_th 30 the average daily amount of deposits and rates paid on such deposits is summarized for the years ended december 31 : replace_table_token_13_th more information relating to deposits is presented in note i , notes to consolidated financial statements . borrowings total borrowings at december 31 , 2011 increased $ 20.46 million or 3.53 % during the year of 2011. centra added approximately $ 48 million upon the merger . since year-end 2010 , short-term borrowings increased $ 61.55 million or 31.86 % due to a $ 64.55 million increase in securities sold under agreements to repurchase . centra added approximately $ 28.57 million in short-term borrowings at merger . long-term borrowings decreased $ 41.09 million or 10.63 % since year-end 2010 as long-term fhlb advances decreased $ 60.37 million or 29.86 % due to repayments . partially offsetting this decrease in long-term fhlb advances , united assumed $ 20 million of junior subordinated debt securities in the centra merger . the table below summarizes the changes by borrowing category since year-end 2010 : replace_table_token_14_th for a further discussion of borrowings see notes j and k , notes to consolidated financial statements . accrued expenses and other liabilities accrued expenses and other liabilities at december 31 , 2011 decreased $ 5.86 million or 8.69 % from year-end 2010. the majority of the decrease was due to a $ 9.08 million decrease in income taxes payable due to a timing difference in payments . partially offsetting this decrease was an increase of $ 2.48 million in dividends payable . centra added approximately $ 3.27 million upon the merger . shareholders ' equity shareholders ' equity at december 31 , 2011 increased $ 175.83 million or 22.17 % from december 31 , 2010 mainly as a result of the centra acquisition . the centra transaction added approximately $ 161 million as 6,548,473 shares were issued from 31 united 's authorized but unissued shares for the merger at a cost of $ 170 million . earnings net of dividends for the year of 2011 were $ 18.78 million . accumulated other comprehensive income decreased $ 6.10 million due mainly due to an after tax-adjustment to united 's pension asset resulting in a decline of $ 13.38 million . partially offsetting this decrease was an increase of $ 6.17 million , net of deferred income tax , in the fair value of united 's available for sale investment portfolio . in addition , the accretion of pension costs for the year of 2011 was $ 1.46 million while the after-tax non-credit portion of otti losses for the year of 2011 was $ 354 thousand . earnings summary net income for the year 2011 was $ 75.61 million or $ 1.61 per diluted share compared to $ 71.95 million or $ 1.65 per diluted share for the year of 2010. united 's return on average assets for the year of 2011 was 0.97 % and return on average shareholders ' equity was 8.50 % as compared to 0.95 % and 9.19 % for the year of 2010. united 's most recently reported federal reserve peer group 's ( bank holding companies with total assets between $ 3 and $ 10 billion ) average return on assets was 0.79 % and average return on equity was 7.37 % for the first nine months of 2011. as previously mentioned , united completed its acquisition of centra during the third quarter of 2011. the financial results of centra are included in united 's results from the july 8 , 2011 acquisition date . as a result , comparisons for the fourth quarter and year of 2011 to the same time periods of 2010 are impacted by increased levels of average balances , income , expense , and asset quality results due to the acquisition . at consummation , centra had assets of approximately $ 1.3 billion , loans of $ 1.0 billion , deposits of $ 1.1 billion and
| capital resources united 's capital position is financially sound . united seeks to maintain a proper relationship between capital and total assets to support growth and sustain earnings . united has historically generated attractive returns on shareholders ' equity . based on regulatory requirements , united and its banking subsidiaries are categorized as well capitalized institutions . united 's risk-based capital ratios of 13.83 % at december 31 , 2011 and 13.65 % at december 31 , 2010 , were both significantly higher than the minimum regulatory requirements . united 's tier i capital and leverage ratios of 12.57 % and 10.22 % , respectively , at december 31 , 2011 , are also well above minimum regulatory requirements . being classified as a well-capitalized institution allows united to have special regulatory consideration in various areas . see note s , notes to consolidated financial statements . 45 total year-end 2011 shareholders ' equity increased $ 175.83 million or 22.17 % to $ 968.84 million from $ 793.01 million at december 31 , 2010 primarily due to the centra merger and the retention of earnings . united 's equity to assets ratio was 11.46 % at december 31 , 2011 as compared to 11.08 % at december 31 , 2010. the primary capital ratio , capital and reserves to total assets and reserves , was 12.25 % at december 31 , 2011 , as compared to 12.00 % at december 31 , 2010. united 's average equity to average asset ratio was 11.44 % and 10.39 % for the years ended december 31 , 2011 and 2010 , respectively . all these financial measurements reflect a financially sound position . during the fourth quarter of 2011 , united 's board of directors declared a cash dividend of $ 0.31 per share . dividends per share of $ 1.21 for the year of 2011 represented an increase over the $ 1.20 per share paid for 2010. total cash dividends declared to common shareholders were approximately $ 56.83 million for the year of 2011 as compared to $ 52.30 million for the year of 2010. the year 2011 was the thirty-eighth consecutive year of dividend increases to united shareholders .
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on february 16 , 2018 , the company completed the acquisition of dunmore corporation in the u.s. , and the share purchase of dunmore europe gmbh in germany ( collectively , `` dunmore `` ) for a purchase price of $ 66,000 , subject to a working capital adjustment and an earn-out based on future earnings during the period from january 1 , 2018 through december 31 , 2019. in no case shall the purchase price , including the potential earn-out , exceed $ 80,000. dunmore is a global provider of specialty coated , laminated and metallized films for the aircraft , spacecraft , photovoltaic , graphic arts , packaging , insulation , surfacing and fashion industries . results of operations comparison of the years ended december 31 , 2017 and 2016 replace_table_token_4_th revenue revenue in 2017 increased $ 208,478 , or 17.9 % , when compared to 2016 . excluding growth from the acquisitions of sli ( including eme ) , hazen and amp in the diversified industrial segment , and basin in the energy segment totaling 12.9 % and a negative foreign exchange impact of ( 0.8 ) % , revenue increased by 5.7 % . the net revenue increase of 5.7 % was due to increases across all of our segments . cost of goods sold cost of goods sold in 2017 increased $ 142,914 , or 17.5 % , when compared to 2016 primarily due to the impact of our recent acquisitions and higher sales volume discussed above . cost of goods sold in 2016 was negatively impacted by higher duties 21 paid on certain imports , amortization related to the fair value adjustment to acquisition-date inventories associated with the sli ( including eme ) acquisition and certain inventory write-downs due to the planned closure of two facilities from the diversified industrial segment . selling , general and administrative expenses selling , general and administrative expenses ( `` sg & a `` ) in 2017 increased $ 55,421 , or 19.6 % , when compared to 2016 primarily due to the company 's recent acquisitions , higher personnel costs at webbank to support the increase in their business , as well as pension obligations and severance charges recorded as a result of the planned closure of api 's rahway facility . the increase in the corporate and other segment was primarily due to higher non-cash incentive unit expense recorded in 2017. no incentive unit expense was recorded in 2016. interest expense interest expense for the years ended december 31 , 2017 and 2016 was $ 22,804 and $ 11,052 , respectively . the higher interest expense was primarily due to higher borrowing levels in 2017 , primarily to fund the company 's acquisitions made during 2016 , and interest expense from the splp preferred units , which are classified as liabilities , issued in 2017. goodwill impairment charges the company recognized goodwill impairment charges of $ 24,254 in 2016. the 2016 impairment charge related to the diversified industrial segment and resulted from a decline in market conditions and lower demand for certain product lines in the performance materials business . asset impairment charges the asset impairment charge of $ 2,028 in 2017 is primarily due to recognizing an other-than-temporary decline in the fair value of one of steel excel 's investments . the asset impairment charges of $ 17,259 in 2016 were primarily due to the planned closure of two facilities within the diversified industrial segment and an other-than-temporary decline in the fair value of certain marketable securities and other investments . all other expense ( income ) , net all other expense ( income ) , net was unfavorable by $ 19,891 in 2017 , when compared to 2016 , primarily due to net losses , as compared to net gains in 2016 on investment activity , and higher finance interest expense and higher provisions for loan losses recorded in 2017. income taxes as a limited partnership , we are generally not responsible for federal and state income taxes , and our profits and losses are passed directly to our limited partners for inclusion in their respective income tax returns . the company 's tax provision represents the income tax expense or benefit of its consolidated corporate subsidiaries . for the year ended december 31 , 2017 , a tax provision of $ 51,299 was recorded , as compared to $ 23,952 in 2016. the company recorded an income tax provision of approximately $ 58,717 resulting from the transition tax and the revaluation of our u.s. deferred tax assets and liabilities to reflect the recently enacted 21 % federal corporate tax rate under the tax cuts and jobs act . the company also recorded tax benefits of approximately $ 44,681 during 2017 associated with the reversal of its deferred tax valuation allowances at certain subsidiaries . the remaining increase in tax expense was driven primarily by the increase in income from continuing operations and the mix of taxable income between the partnership and its consolidated corporate subsidiaries . income of associated companies and other investments held at fair value , net of taxes income of associated companies and other investments held at fair value , net of taxes in 2017 increased by $ 12,803 , compared to 2016 . the year-over-year change represents the impact of unrealized mark-to-market adjustments for various investments that are accounted for at fair value . for the details of each of these investments and the related mark-to-market adjustments in both periods , see note 9 - `` investments `` to the splp consolidated financial statements found elsewhere in this form 10-k. 22 segment analysis replace_table_token_5_th diversified industrial net sales in 2017 increased by $ 157,631 , or 15.8 % , when compared to 2016 . story_separator_special_tag excluding the impact of the sli ( including eme ) , jps and api acquisitions and the change in silver prices , net sales decreased by approximately $ 8,700 due to lower volume of $ 6,200 , primarily from the performance materials business , partially offset by growth from the building materials business , and lower revenue of approximately $ 2,500 at api due to the negative impact of foreign exchange rates . the average silver market price was approximately $ 17.11 per troy ounce in 2016 , as compared to $ 15.70 per troy ounce in 2015. segment operating income in 2016 decreased by $ 23,106 , or 54.6 % , when compared to 2015 , primarily due to the goodwill and asset impairment charges recorded in 2016 of $ 35,711 discussed above , of which $ 1,400 unfavorably impacted gross profit , as well as higher sg & a of $ 59,522 , principally due to the segment 's recent acquisitions . these declines in segment operating income were partially offset by higher gross profit of $ 62,322 and higher income of $ 9,330 recorded from equity method investments . the higher gross profit and sg & a in 2016 were primarily driven by the sli ( including eme ) , jps and api acquisitions . gross profit was also favorably impacted by an increase of approximately $ 2,800 from its building materials business due to higher sales volume , partially offset by its joining materials business due to lower sales volume . energy weakness in the oil services industry had an adverse effect on the results of operations of the company 's energy segment in 2016. the decline in energy prices that began in late 2014 , particularly the significant decline in oil prices , has resulted in the energy segment 's customers , the oil & gas exploration and production companies ( `` e & p companies `` ) , cutting back on their capital expenditures , which resulted in reduced drilling , completion and work over activity . in addition , the e & p companies sought price concessions from their service providers to offset their drop in revenue . such actions on the part of the e & p companies had an adverse effect on the operations of the energy segment in 2016. steel excel undertook certain actions and instituted cost-reduction measures in an effort to mitigate these adverse effects . in 2016 , net revenue decreased $ 38,625 , or 29.1 % , when compared to 2015. the decrease in net revenue in 2016 was primarily due to a decrease of approximately $ 36,100 in steel energy 's business due to the decline in rig utilization and the decline in prices that resulted from the adverse effects the decline in energy prices had on the oil services industry . net revenue from steel sports ' businesses decreased by $ 2,600 in 2016 , when compared to 2015. segment operating loss in 2016 decreased $ 83,653 , or 88.0 % , when compared to 2015. significant changes in the 2016 period were lower impairment charges of $ 52,579 related to marketable securities , lower goodwill impairment charges of $ 19,571 , lower sg & a of $ 3,438 , due to the receipt of a litigation settlement , net of higher corporate overhead costs , and higher income from equity method investments of $ 26,046. these changes were partially offset by a decrease in gross profit of $ 11,105 and lower gains on sales of investments of $ 7,787 in the year ended december 31 , 2016 , when compared to 2015. the decrease in gross profit was primarily due to the decline in revenue in the energy business . financial services revenue in 2016 increased $ 1,568 , or 2.3 % , when compared to 2015. the net increase was due to higher non-interest income of approximately $ 1,700 in 2016 , compared to 2015 , as a result of the restructuring of programs , which created a gain on sale of certain loans , partially offset by lower interest income of approximately $ 200 in 2016 , compared to 2015 , due to declines in a number of webbank 's key programs caused by capital market disruptions and the restructuring of some arrangements . segment operating income in 2016 decreased $ 3,802 , or 8.2 % , when compared to 2015. the higher revenue was more than offset by higher costs and expenses including higher sg & a of $ 3,401 driven by higher personnel expenses due to growth in the number of webbank 's programs , supporting new initiatives , and the continued expansion of webbank 's compliance and oversight group to meet increasing regulatory expectations . in addition , finance interest expense and the provision for loan losses increased $ 1,145 and $ 824 , respectively , in the year ended december 31 , 2016 , when compared to 2015. the higher finance interest expense was due to a larger deposit balance to support loan growth and an increase in interest rates , and the increase in the provision for loan losses was due to the addition of a loan portfolio of held-to-maturity consumer loans . corporate and other segment operating loss increased $ 21,820 in 2016 , when compared to 2015 , primarily as a result of higher net investment gains of $ 36,355 recorded in the 2015 period . the gains in 2015 were primarily due to a gain on the sale of an available-for-sale 30 security of approximately $ 25,400 and a gain on our investment in cosine of approximately $ 6,900 resulting from the re-measurement of our investment upon the acquisition of a majority interest in cosine in january 2015. this reduction to segment operating income was partially offset by the non-recurrence of $ 6,913 of impairment charges recorded in 2015 , which included a charge of $ 1,400 to adjust an asset held for sale
| capital resources united 's capital position is financially sound . united seeks to maintain a proper relationship between capital and total assets to support growth and sustain earnings . united has historically generated attractive returns on shareholders ' equity . based on regulatory requirements , united and its banking subsidiaries are categorized as well capitalized institutions . united 's risk-based capital ratios of 13.83 % at december 31 , 2011 and 13.65 % at december 31 , 2010 , were both significantly higher than the minimum regulatory requirements . united 's tier i capital and leverage ratios of 12.57 % and 10.22 % , respectively , at december 31 , 2011 , are also well above minimum regulatory requirements . being classified as a well-capitalized institution allows united to have special regulatory consideration in various areas . see note s , notes to consolidated financial statements . 45 total year-end 2011 shareholders ' equity increased $ 175.83 million or 22.17 % to $ 968.84 million from $ 793.01 million at december 31 , 2010 primarily due to the centra merger and the retention of earnings . united 's equity to assets ratio was 11.46 % at december 31 , 2011 as compared to 11.08 % at december 31 , 2010. the primary capital ratio , capital and reserves to total assets and reserves , was 12.25 % at december 31 , 2011 , as compared to 12.00 % at december 31 , 2010. united 's average equity to average asset ratio was 11.44 % and 10.39 % for the years ended december 31 , 2011 and 2010 , respectively . all these financial measurements reflect a financially sound position . during the fourth quarter of 2011 , united 's board of directors declared a cash dividend of $ 0.31 per share . dividends per share of $ 1.21 for the year of 2011 represented an increase over the $ 1.20 per share paid for 2010. total cash dividends declared to common shareholders were approximately $ 56.83 million for the year of 2011 as compared to $ 52.30 million for the year of 2010. the year 2011 was the thirty-eighth consecutive year of dividend increases to united shareholders .
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on february 16 , 2018 , the company completed the acquisition of dunmore corporation in the u.s. , and the share purchase of dunmore europe gmbh in germany ( collectively , `` dunmore `` ) for a purchase price of $ 66,000 , subject to a working capital adjustment and an earn-out based on future earnings during the period from january 1 , 2018 through december 31 , 2019. in no case shall the purchase price , including the potential earn-out , exceed $ 80,000. dunmore is a global provider of specialty coated , laminated and metallized films for the aircraft , spacecraft , photovoltaic , graphic arts , packaging , insulation , surfacing and fashion industries . results of operations comparison of the years ended december 31 , 2017 and 2016 replace_table_token_4_th revenue revenue in 2017 increased $ 208,478 , or 17.9 % , when compared to 2016 . excluding growth from the acquisitions of sli ( including eme ) , hazen and amp in the diversified industrial segment , and basin in the energy segment totaling 12.9 % and a negative foreign exchange impact of ( 0.8 ) % , revenue increased by 5.7 % . the net revenue increase of 5.7 % was due to increases across all of our segments . cost of goods sold cost of goods sold in 2017 increased $ 142,914 , or 17.5 % , when compared to 2016 primarily due to the impact of our recent acquisitions and higher sales volume discussed above . cost of goods sold in 2016 was negatively impacted by higher duties 21 paid on certain imports , amortization related to the fair value adjustment to acquisition-date inventories associated with the sli ( including eme ) acquisition and certain inventory write-downs due to the planned closure of two facilities from the diversified industrial segment . selling , general and administrative expenses selling , general and administrative expenses ( `` sg & a `` ) in 2017 increased $ 55,421 , or 19.6 % , when compared to 2016 primarily due to the company 's recent acquisitions , higher personnel costs at webbank to support the increase in their business , as well as pension obligations and severance charges recorded as a result of the planned closure of api 's rahway facility . the increase in the corporate and other segment was primarily due to higher non-cash incentive unit expense recorded in 2017. no incentive unit expense was recorded in 2016. interest expense interest expense for the years ended december 31 , 2017 and 2016 was $ 22,804 and $ 11,052 , respectively . the higher interest expense was primarily due to higher borrowing levels in 2017 , primarily to fund the company 's acquisitions made during 2016 , and interest expense from the splp preferred units , which are classified as liabilities , issued in 2017. goodwill impairment charges the company recognized goodwill impairment charges of $ 24,254 in 2016. the 2016 impairment charge related to the diversified industrial segment and resulted from a decline in market conditions and lower demand for certain product lines in the performance materials business . asset impairment charges the asset impairment charge of $ 2,028 in 2017 is primarily due to recognizing an other-than-temporary decline in the fair value of one of steel excel 's investments . the asset impairment charges of $ 17,259 in 2016 were primarily due to the planned closure of two facilities within the diversified industrial segment and an other-than-temporary decline in the fair value of certain marketable securities and other investments . all other expense ( income ) , net all other expense ( income ) , net was unfavorable by $ 19,891 in 2017 , when compared to 2016 , primarily due to net losses , as compared to net gains in 2016 on investment activity , and higher finance interest expense and higher provisions for loan losses recorded in 2017. income taxes as a limited partnership , we are generally not responsible for federal and state income taxes , and our profits and losses are passed directly to our limited partners for inclusion in their respective income tax returns . the company 's tax provision represents the income tax expense or benefit of its consolidated corporate subsidiaries . for the year ended december 31 , 2017 , a tax provision of $ 51,299 was recorded , as compared to $ 23,952 in 2016. the company recorded an income tax provision of approximately $ 58,717 resulting from the transition tax and the revaluation of our u.s. deferred tax assets and liabilities to reflect the recently enacted 21 % federal corporate tax rate under the tax cuts and jobs act . the company also recorded tax benefits of approximately $ 44,681 during 2017 associated with the reversal of its deferred tax valuation allowances at certain subsidiaries . the remaining increase in tax expense was driven primarily by the increase in income from continuing operations and the mix of taxable income between the partnership and its consolidated corporate subsidiaries . income of associated companies and other investments held at fair value , net of taxes income of associated companies and other investments held at fair value , net of taxes in 2017 increased by $ 12,803 , compared to 2016 . the year-over-year change represents the impact of unrealized mark-to-market adjustments for various investments that are accounted for at fair value . for the details of each of these investments and the related mark-to-market adjustments in both periods , see note 9 - `` investments `` to the splp consolidated financial statements found elsewhere in this form 10-k. 22 segment analysis replace_table_token_5_th diversified industrial net sales in 2017 increased by $ 157,631 , or 15.8 % , when compared to 2016 . story_separator_special_tag excluding the impact of the sli ( including eme ) , jps and api acquisitions and the change in silver prices , net sales decreased by approximately $ 8,700 due to lower volume of $ 6,200 , primarily from the performance materials business , partially offset by growth from the building materials business , and lower revenue of approximately $ 2,500 at api due to the negative impact of foreign exchange rates . the average silver market price was approximately $ 17.11 per troy ounce in 2016 , as compared to $ 15.70 per troy ounce in 2015. segment operating income in 2016 decreased by $ 23,106 , or 54.6 % , when compared to 2015 , primarily due to the goodwill and asset impairment charges recorded in 2016 of $ 35,711 discussed above , of which $ 1,400 unfavorably impacted gross profit , as well as higher sg & a of $ 59,522 , principally due to the segment 's recent acquisitions . these declines in segment operating income were partially offset by higher gross profit of $ 62,322 and higher income of $ 9,330 recorded from equity method investments . the higher gross profit and sg & a in 2016 were primarily driven by the sli ( including eme ) , jps and api acquisitions . gross profit was also favorably impacted by an increase of approximately $ 2,800 from its building materials business due to higher sales volume , partially offset by its joining materials business due to lower sales volume . energy weakness in the oil services industry had an adverse effect on the results of operations of the company 's energy segment in 2016. the decline in energy prices that began in late 2014 , particularly the significant decline in oil prices , has resulted in the energy segment 's customers , the oil & gas exploration and production companies ( `` e & p companies `` ) , cutting back on their capital expenditures , which resulted in reduced drilling , completion and work over activity . in addition , the e & p companies sought price concessions from their service providers to offset their drop in revenue . such actions on the part of the e & p companies had an adverse effect on the operations of the energy segment in 2016. steel excel undertook certain actions and instituted cost-reduction measures in an effort to mitigate these adverse effects . in 2016 , net revenue decreased $ 38,625 , or 29.1 % , when compared to 2015. the decrease in net revenue in 2016 was primarily due to a decrease of approximately $ 36,100 in steel energy 's business due to the decline in rig utilization and the decline in prices that resulted from the adverse effects the decline in energy prices had on the oil services industry . net revenue from steel sports ' businesses decreased by $ 2,600 in 2016 , when compared to 2015. segment operating loss in 2016 decreased $ 83,653 , or 88.0 % , when compared to 2015. significant changes in the 2016 period were lower impairment charges of $ 52,579 related to marketable securities , lower goodwill impairment charges of $ 19,571 , lower sg & a of $ 3,438 , due to the receipt of a litigation settlement , net of higher corporate overhead costs , and higher income from equity method investments of $ 26,046. these changes were partially offset by a decrease in gross profit of $ 11,105 and lower gains on sales of investments of $ 7,787 in the year ended december 31 , 2016 , when compared to 2015. the decrease in gross profit was primarily due to the decline in revenue in the energy business . financial services revenue in 2016 increased $ 1,568 , or 2.3 % , when compared to 2015. the net increase was due to higher non-interest income of approximately $ 1,700 in 2016 , compared to 2015 , as a result of the restructuring of programs , which created a gain on sale of certain loans , partially offset by lower interest income of approximately $ 200 in 2016 , compared to 2015 , due to declines in a number of webbank 's key programs caused by capital market disruptions and the restructuring of some arrangements . segment operating income in 2016 decreased $ 3,802 , or 8.2 % , when compared to 2015. the higher revenue was more than offset by higher costs and expenses including higher sg & a of $ 3,401 driven by higher personnel expenses due to growth in the number of webbank 's programs , supporting new initiatives , and the continued expansion of webbank 's compliance and oversight group to meet increasing regulatory expectations . in addition , finance interest expense and the provision for loan losses increased $ 1,145 and $ 824 , respectively , in the year ended december 31 , 2016 , when compared to 2015. the higher finance interest expense was due to a larger deposit balance to support loan growth and an increase in interest rates , and the increase in the provision for loan losses was due to the addition of a loan portfolio of held-to-maturity consumer loans . corporate and other segment operating loss increased $ 21,820 in 2016 , when compared to 2015 , primarily as a result of higher net investment gains of $ 36,355 recorded in the 2015 period . the gains in 2015 were primarily due to a gain on the sale of an available-for-sale 30 security of approximately $ 25,400 and a gain on our investment in cosine of approximately $ 6,900 resulting from the re-measurement of our investment upon the acquisition of a majority interest in cosine in january 2015. this reduction to segment operating income was partially offset by the non-recurrence of $ 6,913 of impairment charges recorded in 2015 , which included a charge of $ 1,400 to adjust an asset held for sale
| cash flows from investing activities net cash used in investing activities for the year ended december 31 , 2017 was $ 172,617 . significant items included purchases of property , plant and equipment of $ 54,737 , an increase in loan originations , net of collections , of $ 93,390 , net payments related to investment activities of $ 26,690 , as well as the purchase of stcn convertible preferred stock for $ 35,000 , partially offset by proceeds from sale of assets of $ 42,204 , principally proceeds from sales of loans by webbank . net cash used in investing activities for the year ended december 31 , 2016 was $ 160,502. significant items included net cash paid for the acquisitions of sli ( including eme ) , hazen , and amp , which totaled an aggregate of $ 200,137 , purchases of property , plant and equipment of $ 34,183 , an increase in loan originations , net of collections , of $ 26,895 , and investments in stcn of $ 2,440 , partially offset by net proceeds from sales of investments of $ 61,641 and proceeds from sale of assets of $ 32,247 , principally sales of loans by webbank and the sale of api 's security holographics business .
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a decrease in sales volume led to a sales decrease of $ 17.9 million , a decrease in selling price led to a sales decrease of $ 4.9 million , and the effect of foreign currency translation of the rmb against the u.s. dollar led to a sales increase of $ 1.1 million . — net sales for jiulong were $ 100.8 million for the year ended december 31 , 2017 , compared with $ 77.0 million for the year ended december 31 , 2016 , representing an increase of $ 23.8 million , or 30.9 % . an increase in sales volume led to a sales increase of $ 22.9 million , a decrease in selling price led to a sales decrease of $ 0.5 million , and the effect of foreign currency translation of the rmb against the u.s. dollar led to a sales increase of $ 1.4 million . — net sales for shenyang were $ 40.2 million for the year ended december 31 , 2017 , compared with $ 35.2 million for the year ended december 31 , 2016 , representing an increase of $ 5.0 million , or 14.2 % . the products of shenyang are mainly sold to shenyang brilliance jinbei automobile co. , ltd. , “ jinbei ” . an increase in sales volumes led to a sales increase of $ 4.5 million , a decrease in selling price led to a sales decrease of $ 0.1 million , and the effect of foreign currency translation of the rmb against the u.s. dollar led to a sales increase of $ 0.6 million . — net sales for wuhu were $ 25.6 million for the year ended december 31 , 2017 , compared with $ 24.0 million for the year ended december 31 , 2016 , representing an increase of $ 1.6 million , or 6.7 % . the products of wuhu are mainly sold to chery automobile co. , ltd. , “ chery ” . an increase in sales volumes led to a sales increase of $ 4.6 million , a decrease in selling prices led to a sales decrease of $ 3.3 million and the effect of foreign currency translation of the rmb against the u.s. dollar led to a sales increase of $ 0.3 million . — net sales for hubei henglong were $ 92.3 million for the year ended december 31 , 2017 , compared with $ 57.3 million for the year ended december 31 , 2016 , representing an increase of $ 35.0 million , or 61.1 % . hubei henglong 's products are mainly sold to chrysler and ford . the significant increase in the sales of hubei henglong was mainly due to the new products developed for chrysler and ford that began mass production at the end of 2016. an increase in sales volumes led to a sales increase of $ 34.8 million , a decrease in selling price led to a sales decrease of $ 0.9 million , and the effect of foreign currency translation of the rmb against the u.s. dollar led to a sales increase of $ 1.1 million . — net sales for other sectors were $ 59.1 million for the year ended december 31 , 2017 , compared with $ 46.9 million for the year ended december 31 , 2016 , representing an increase of $ 12.2 million , or 26.0 % , primarily due to an increase in sales volumes of jielong , which manufactures automobile steering columns for both hps and eps . cost of sales for the year ended december 31 , 2017 , the cost of sales was $ 414.4 million , compared with $ 381.1 million for the year ended december 31 , 2016 , representing an increase of $ 33.3 million , or 8.7 % . the increase in cost of sales was mainly due to an increase in sales volumes with a cost of sales increase of $ 24.1 million , an increase in unit cost with a cost of sales increase of $ 2.6 million and the appreciation of the rmb against the u.s. dollar with a cost of sales increase of $ 6.6 million . the increase in the unit cost of sales was primarily due to an increase in the costs of raw materials , such as steel . further analysis is as follows : — cost of sales for henglong was $ 250.5 million for the year ended december 31 , 2017 , compared with $ 263.1 million for the year ended december 31 , 2016 , representing a decrease of $ 12.6 million , or 4.8 % . a decrease in sales volumes resulted in a cost of sales decrease of $ 14.8 million , an increase in unit material and subcomponents costs led to a cost of sales increase of $ 1.1 million and the effect of foreign currency translation of the rmb against the u.s. dollar led to a cost of sales increase of $ 1.1 million . — cost of sales for jiulong was $ 87.7 million for the year ended december 31 , 2017 , compared with $ 66.9 million for the year ended december 31 , 2016 , representing an increase of $ 20.8 million , or 31.1 % . the increase in cost of sales was mainly due to an increase in sales volumes resulting in a cost of sales increase of $ 18.8 million , an increase in unit cost resulting in a cost of sales increase of $ 1.0 million , and the effect of foreign currency translation of the rmb against the u.s. dollar resulting in a cost of sales increase of $ 1.0 million . — cost of sales for shenyang was $ 34.8 million for the year ended december 31 , 2017 , compared with $ 30.1 million for the year ended december 31 , 2016 , representing an increase of $ 4.7 million , or 15.6 % . story_separator_special_tag the company expects that the reduction in bank loans will not have a material adverse effect on its liquidity . bank arrangements as of december 31 , 2017 , the principal outstanding under the company 's credit facilities and lines of credit was as follows ( figures are in thousands of usd ) replace_table_token_10_th ( 1 ) each of hubei henglong 's comprehensive credit facilities with shanghai pudong development bank is required to be guaranteed by jielong and hubei henglong in addition to the above pledged assets . each of hubei henglong , henglong , jiulong , jielong , chuguanjie and usai 's comprehensive credit facilities with china citic bank is required to be guaranteed by henglong and hubei henglong , in addition to the above pledged assets . each of hubei henglong , henglong , jiulong , jielong 's comprehensive credit facilities with bank of china is required to be guaranteed by hubei henglong and henglong , and henglong 's comprehensive credit facilities with china merchants bank are required to be guaranteed by hubei henglong . ( 2 ) “ amount used ” represents the credit facilities used by the company for the purpose of bank loans or notes payable during the facility contract period . the loans or notes payable under the credit facilities will remain outstanding regardless of the expiration of the relevant credit facilities until the separate loans or notes payable expire . the amount used includes bank loans of $ 69.6 million and notes payable of $ 48.2 million as of december 31 , 2017. the remainder of $ 3.4 million of government loans and $ 35.6 million of notes payable was secured by bank notes or time deposits without utilization of credit lines . ( 3 ) in order to obtain lines of credit , the company needs to pledge certain assets to banks . as of december 31 , 2017 , the pledged assets included $ 36.5 million accounts and notes receivable , $ 1.5 million of time deposits and other pledged assets with assessed value of $ 115.3 million . ( 4 ) the “ amount available ” is used for the drawdown of bank loans and issuance of bank notes . for the drawdown of bank loans , this amount represents the amount that the company can borrow immediately ; for issuance of bank notes , the company needs to pledge additional collateral in order to utilize these bank facilities . ( 5 ) the comprehensive credit facility provided by bank of china ( brazil ) expired in february 2018 and the bank loan under this facility was repaid in january 2018. page 38 of 114 the company may request the banks to issue notes payable or bank loans within its credit line using a 365-day revolving line . the company renewed its existing short-term bank loans and borrowed new bank loans during 2017 at annual interest rates ranging from 1.5 % to 5.2 % , and the company 's loan terms range from 11 months to 36 months . the large spread in interest rates was due to the different currencies ( interest rates of loans in foreign currencies are normally lower than loans in rmb ) and lenders ( interest rates for government loans are normally lower than for commercial bank loans ) . pursuant to the comprehensive credit line arrangement , the company pledged and guaranteed : 1. equipment with an assessed value of approximately $ 57.8 million as security for its revolving comprehensive credit facility with hubei bank . 2. land use rights and buildings with an assessed value of approximately $ 10.8 million as security for its revolving comprehensive credit facility with china construction bank . 3. land use rights and buildings with an assessed value of approximately $ 17.9 million as security for its revolving comprehensive credit facility with shanghai pudong development bank . 4. land use rights and buildings with an assessed value of approximately $ 15.2 million as security for its comprehensive credit facility with china citic bank wuhan branch . 5. land use rights and buildings with an assessed value of approximately $ 5.8 million as security for its comprehensive credit facility with china citic bank shenyang branch . page 39 of 114 6. land use rights and buildings with an assessed value of approximately $ 7.8 million as security for its comprehensive credit facility with china everbright bank . 7. on april 20 , 2017 , the company entered into a credit agreement with icbc macau to obtain the credit facility . the interest rate of the credit facility is calculated based on a three-month libor plus 1.30 % per annum , subject to the availability of funds and fluctuation at icbc macau 's discretion . interest is calculated daily on a 360-day basis and it is to be fixed one day before the first day of each interest period . the interest period is defined as three months from the date of drawdown . as security for the credit facility , the company was required to provide icbc macau with the henglong standby letter of credit for a total amount of not less than $ 24.3 million if the credit facility is fully drawn . on may 5 , 2017 , the company drew down the full amount of $ 20.0 million under the credit facility and provided the henglong standby letter of credit for an amount of $ 24.3 million in favor of icbc macau . the henglong standby letter of credit issued by icbc jingzhou is collateralized by henglong 's notes receivable of rmb 159.0 million , equivalent to approximately $ 24.3 million . the company also paid an arrangement fee of $ 0.04 million to icbc jingzhou . the maturity date of the credit facility is may 12 , 2018 . 8. on august 26 , 2016 , brazil henglong entered into a credit facility agreement with bank of china ( brazil ) to obtain a credit
| cash flows from investing activities net cash used in investing activities for the year ended december 31 , 2017 was $ 172,617 . significant items included purchases of property , plant and equipment of $ 54,737 , an increase in loan originations , net of collections , of $ 93,390 , net payments related to investment activities of $ 26,690 , as well as the purchase of stcn convertible preferred stock for $ 35,000 , partially offset by proceeds from sale of assets of $ 42,204 , principally proceeds from sales of loans by webbank . net cash used in investing activities for the year ended december 31 , 2016 was $ 160,502. significant items included net cash paid for the acquisitions of sli ( including eme ) , hazen , and amp , which totaled an aggregate of $ 200,137 , purchases of property , plant and equipment of $ 34,183 , an increase in loan originations , net of collections , of $ 26,895 , and investments in stcn of $ 2,440 , partially offset by net proceeds from sales of investments of $ 61,641 and proceeds from sale of assets of $ 32,247 , principally sales of loans by webbank and the sale of api 's security holographics business .
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a decrease in sales volume led to a sales decrease of $ 17.9 million , a decrease in selling price led to a sales decrease of $ 4.9 million , and the effect of foreign currency translation of the rmb against the u.s. dollar led to a sales increase of $ 1.1 million . — net sales for jiulong were $ 100.8 million for the year ended december 31 , 2017 , compared with $ 77.0 million for the year ended december 31 , 2016 , representing an increase of $ 23.8 million , or 30.9 % . an increase in sales volume led to a sales increase of $ 22.9 million , a decrease in selling price led to a sales decrease of $ 0.5 million , and the effect of foreign currency translation of the rmb against the u.s. dollar led to a sales increase of $ 1.4 million . — net sales for shenyang were $ 40.2 million for the year ended december 31 , 2017 , compared with $ 35.2 million for the year ended december 31 , 2016 , representing an increase of $ 5.0 million , or 14.2 % . the products of shenyang are mainly sold to shenyang brilliance jinbei automobile co. , ltd. , “ jinbei ” . an increase in sales volumes led to a sales increase of $ 4.5 million , a decrease in selling price led to a sales decrease of $ 0.1 million , and the effect of foreign currency translation of the rmb against the u.s. dollar led to a sales increase of $ 0.6 million . — net sales for wuhu were $ 25.6 million for the year ended december 31 , 2017 , compared with $ 24.0 million for the year ended december 31 , 2016 , representing an increase of $ 1.6 million , or 6.7 % . the products of wuhu are mainly sold to chery automobile co. , ltd. , “ chery ” . an increase in sales volumes led to a sales increase of $ 4.6 million , a decrease in selling prices led to a sales decrease of $ 3.3 million and the effect of foreign currency translation of the rmb against the u.s. dollar led to a sales increase of $ 0.3 million . — net sales for hubei henglong were $ 92.3 million for the year ended december 31 , 2017 , compared with $ 57.3 million for the year ended december 31 , 2016 , representing an increase of $ 35.0 million , or 61.1 % . hubei henglong 's products are mainly sold to chrysler and ford . the significant increase in the sales of hubei henglong was mainly due to the new products developed for chrysler and ford that began mass production at the end of 2016. an increase in sales volumes led to a sales increase of $ 34.8 million , a decrease in selling price led to a sales decrease of $ 0.9 million , and the effect of foreign currency translation of the rmb against the u.s. dollar led to a sales increase of $ 1.1 million . — net sales for other sectors were $ 59.1 million for the year ended december 31 , 2017 , compared with $ 46.9 million for the year ended december 31 , 2016 , representing an increase of $ 12.2 million , or 26.0 % , primarily due to an increase in sales volumes of jielong , which manufactures automobile steering columns for both hps and eps . cost of sales for the year ended december 31 , 2017 , the cost of sales was $ 414.4 million , compared with $ 381.1 million for the year ended december 31 , 2016 , representing an increase of $ 33.3 million , or 8.7 % . the increase in cost of sales was mainly due to an increase in sales volumes with a cost of sales increase of $ 24.1 million , an increase in unit cost with a cost of sales increase of $ 2.6 million and the appreciation of the rmb against the u.s. dollar with a cost of sales increase of $ 6.6 million . the increase in the unit cost of sales was primarily due to an increase in the costs of raw materials , such as steel . further analysis is as follows : — cost of sales for henglong was $ 250.5 million for the year ended december 31 , 2017 , compared with $ 263.1 million for the year ended december 31 , 2016 , representing a decrease of $ 12.6 million , or 4.8 % . a decrease in sales volumes resulted in a cost of sales decrease of $ 14.8 million , an increase in unit material and subcomponents costs led to a cost of sales increase of $ 1.1 million and the effect of foreign currency translation of the rmb against the u.s. dollar led to a cost of sales increase of $ 1.1 million . — cost of sales for jiulong was $ 87.7 million for the year ended december 31 , 2017 , compared with $ 66.9 million for the year ended december 31 , 2016 , representing an increase of $ 20.8 million , or 31.1 % . the increase in cost of sales was mainly due to an increase in sales volumes resulting in a cost of sales increase of $ 18.8 million , an increase in unit cost resulting in a cost of sales increase of $ 1.0 million , and the effect of foreign currency translation of the rmb against the u.s. dollar resulting in a cost of sales increase of $ 1.0 million . — cost of sales for shenyang was $ 34.8 million for the year ended december 31 , 2017 , compared with $ 30.1 million for the year ended december 31 , 2016 , representing an increase of $ 4.7 million , or 15.6 % . story_separator_special_tag the company expects that the reduction in bank loans will not have a material adverse effect on its liquidity . bank arrangements as of december 31 , 2017 , the principal outstanding under the company 's credit facilities and lines of credit was as follows ( figures are in thousands of usd ) replace_table_token_10_th ( 1 ) each of hubei henglong 's comprehensive credit facilities with shanghai pudong development bank is required to be guaranteed by jielong and hubei henglong in addition to the above pledged assets . each of hubei henglong , henglong , jiulong , jielong , chuguanjie and usai 's comprehensive credit facilities with china citic bank is required to be guaranteed by henglong and hubei henglong , in addition to the above pledged assets . each of hubei henglong , henglong , jiulong , jielong 's comprehensive credit facilities with bank of china is required to be guaranteed by hubei henglong and henglong , and henglong 's comprehensive credit facilities with china merchants bank are required to be guaranteed by hubei henglong . ( 2 ) “ amount used ” represents the credit facilities used by the company for the purpose of bank loans or notes payable during the facility contract period . the loans or notes payable under the credit facilities will remain outstanding regardless of the expiration of the relevant credit facilities until the separate loans or notes payable expire . the amount used includes bank loans of $ 69.6 million and notes payable of $ 48.2 million as of december 31 , 2017. the remainder of $ 3.4 million of government loans and $ 35.6 million of notes payable was secured by bank notes or time deposits without utilization of credit lines . ( 3 ) in order to obtain lines of credit , the company needs to pledge certain assets to banks . as of december 31 , 2017 , the pledged assets included $ 36.5 million accounts and notes receivable , $ 1.5 million of time deposits and other pledged assets with assessed value of $ 115.3 million . ( 4 ) the “ amount available ” is used for the drawdown of bank loans and issuance of bank notes . for the drawdown of bank loans , this amount represents the amount that the company can borrow immediately ; for issuance of bank notes , the company needs to pledge additional collateral in order to utilize these bank facilities . ( 5 ) the comprehensive credit facility provided by bank of china ( brazil ) expired in february 2018 and the bank loan under this facility was repaid in january 2018. page 38 of 114 the company may request the banks to issue notes payable or bank loans within its credit line using a 365-day revolving line . the company renewed its existing short-term bank loans and borrowed new bank loans during 2017 at annual interest rates ranging from 1.5 % to 5.2 % , and the company 's loan terms range from 11 months to 36 months . the large spread in interest rates was due to the different currencies ( interest rates of loans in foreign currencies are normally lower than loans in rmb ) and lenders ( interest rates for government loans are normally lower than for commercial bank loans ) . pursuant to the comprehensive credit line arrangement , the company pledged and guaranteed : 1. equipment with an assessed value of approximately $ 57.8 million as security for its revolving comprehensive credit facility with hubei bank . 2. land use rights and buildings with an assessed value of approximately $ 10.8 million as security for its revolving comprehensive credit facility with china construction bank . 3. land use rights and buildings with an assessed value of approximately $ 17.9 million as security for its revolving comprehensive credit facility with shanghai pudong development bank . 4. land use rights and buildings with an assessed value of approximately $ 15.2 million as security for its comprehensive credit facility with china citic bank wuhan branch . 5. land use rights and buildings with an assessed value of approximately $ 5.8 million as security for its comprehensive credit facility with china citic bank shenyang branch . page 39 of 114 6. land use rights and buildings with an assessed value of approximately $ 7.8 million as security for its comprehensive credit facility with china everbright bank . 7. on april 20 , 2017 , the company entered into a credit agreement with icbc macau to obtain the credit facility . the interest rate of the credit facility is calculated based on a three-month libor plus 1.30 % per annum , subject to the availability of funds and fluctuation at icbc macau 's discretion . interest is calculated daily on a 360-day basis and it is to be fixed one day before the first day of each interest period . the interest period is defined as three months from the date of drawdown . as security for the credit facility , the company was required to provide icbc macau with the henglong standby letter of credit for a total amount of not less than $ 24.3 million if the credit facility is fully drawn . on may 5 , 2017 , the company drew down the full amount of $ 20.0 million under the credit facility and provided the henglong standby letter of credit for an amount of $ 24.3 million in favor of icbc macau . the henglong standby letter of credit issued by icbc jingzhou is collateralized by henglong 's notes receivable of rmb 159.0 million , equivalent to approximately $ 24.3 million . the company also paid an arrangement fee of $ 0.04 million to icbc jingzhou . the maturity date of the credit facility is may 12 , 2018 . 8. on august 26 , 2016 , brazil henglong entered into a credit facility agreement with bank of china ( brazil ) to obtain a credit
| cash flows ( a ) operating activities net cash provided by operating activities for the year ended december 31 , 2017 was $ 50.2 million , compared with net cash provided of $ 11.8 million for the year ended december 31 , 2016 , representing an increase of $ 38.4 million , which was mainly due to the net effect of ( 1 ) the decrease in net income excluding non-cash items by $ 35.2 million primarily because of the one-time transition tax of $ 35.6 million recognized in the fourth quarter of 2017 and ( 2 ) the increase in cash inflows from movements of operating assets and liabilities by $ 73.6 million . the increase in cash inflows was primarily due to the net effect of ( 1 ) the increase in cash inflows due to the movement of accounts and notes receivable by $ 87.2 million compared to 2016 as the company strengthened the collection of accounts receivable , ( 2 ) the decrease in cash outflows due to the movement of advance payments and others by $ 1.8 million , ( 3 ) the decrease in cash outflows due to the movement of inventories by $ 3.3 million , ( 4 ) the increase in cash inflows due to the movement of pledged deposits by $ 2.1 million , ( 5 ) the increase of cash inflows due to the movement of customer deposits by $ 1.1 million , ( 6 ) the increase in cash inflows due to the movement of long-term taxes payable by $ 35.6 million , ( 7 ) the decrease in cash inflows due to the movement of accounts and notes payable by $ 32.9 million , ( 8 ) the increase of cash outflows due to the movement of tax payable by $ 11.7 million and ( 9 ) the decrease of cash inflows due to the movement of accrued expenses and other payables by $ 10.0
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this efficient supply chain enables us to provide quality products at competitive prices for all of our brands . we seek to drive sustainable and profitable growth in this segment by leveraging our brands ' leading market positions and heritage to expand our product offering and distribution channels . we believe that growth in yoga participation , greater awareness of health and wellness , and the success of our retail and online partners is increasing consumer interest in our brands and products , and creates new opportunities for us to expand our offering . recent examples of our brand extension include the 2012 launch of gaiam restore and spri dynamic recovery brands , our at-home rehabilitative and restorative products , and the 2013 launch of our spri cross train line of high-intensity fitness accessories . we anticipate launching a yoga apparel line in the spring of 2015. we recently launched or updated certain websites , evolving our e-commerce experience to focus on engaging customers through digital content , and social and mobile marketing across various devices . with the acquisition of yoga studio , the leading yoga app for mobile and tablet devices , in the fourth quarter of 2014 , we launched our interactive digital strategy , which we will continue to develop and leverage as a point of brand engagement . we plan to invest in our online branding and digital offerings , develop emerging talent , utilize social media , and sponsor local events . additionally , we will significantly reduce the circulation of our catalogs going forward as the direct-to-consumer business has shifted online . 16 gaiam tv segment gaiam tv is a global digital video subscription service with approximately 7,000 titles which caters to an underserved subscriber base . gaiam tv 's digital content is available to subscribers on virtually any internet connected device anytime , anywhere commercial free . the subscription also allows subscribers to download and view files from the library without being actively connected to the internet . through gaiam tv subscriptions , customers have unlimited access to a vast library of inspiring films , personal growth related content , cutting edge documentaries , interviews , yoga classes , and more 90 % of which is available exclusively to subscribers for digital streaming . the streaming video market is currently booming : in august 2014 , 196.5 million internet users watched online videos in the united states alone , according to comscore . the first quarter of 2014 set a new record with 35.6 billion global online video starts , representing a 43 % increase compared to the first quarter of 2013 , according to the u.s. digital video benchmark report from adobe . more and more , people are augmenting their use of , or veering away from broadcast television and turning to , streaming video to watch their favorite content on services like netflix , amazon prime , hulu plus , hbo go and gaiam tv . gaiam tv 's position in the streaming video landscape is firmly supported by a wide variety of exclusive and unique content , which provides a complementary offering to entertainment-based streaming video services . gaiam tv 's original content is developed and produced in-house in state-of-the-art production studios near boulder , colorado . by offering exclusive and unique content over a streaming service , we believe we will be able to significantly expand our target subscriber base . in october 2013 , gaiam tv acquired my yoga online , the largest on-line yoga video streaming subscription business in canada . with this acquisition we grew our content library by approximately 1,300 video titles and expanded our international subscriber base . we plan to continue investing in international expansion , both in terms of subscribers and content . gaiam 's board of directors previously approved the separation of gaiam tv and gaiam brand into two separate publicly traded companies . we currently expect the separation to take the form of a tax-free spin-off to shareholders . our board of directors has the right and ability , in its sole discretion , to abandon the proposed separation at any time before the distribution date . as a result , there can be no assurance that the separation will occur . results of operations year ended december 31 , 2014 compared to year ended december 31 , 2013 net revenue . net revenue increased $ 11.2 million , or 7.2 % , to $ 166.7 million during 2014 from $ 155.5 million during 2013. net revenue in our gaiam brand segment increased $ 7.0 million , or 4.7 % , to $ 156.8 million during 2014 from $ 149.8 million during 2013 , due to the addition of a new major customer account and growth in our gaiam restore and spri product lines . growth in the gaiam brand segment was moderated by a few factors . first , revenues from our largest customer declined as the result of a data breach at the customer 's stores . second , we made a strategic decision early in the year to reduce catalog circulation and focus our direct-to-consumer operations on a consumer engagement digital strategy . third , the continued contraction in the physical dvd market reduced our media sales . finally , we decided during the year to not renew a license we held to manufacture fitness accessories under a third-party brand . this decision resulted in lower revenues , but allowed us to focus more on our gaiam and spri brands . our eco-travel business , which is part of the gaiam brand segment , grew during the year as a result of improved economic conditions . story_separator_special_tag media library our media library asset represents the fair value of libraries of media acquired through business combinations , the purchase price of media rights to both video and audio titles , and the capitalized cost to produce media products , all of which we market to retailers and to e-commerce and subscription customers . we amortize the fair value of acquired or purchased media titles and content on a straight-line basis over succeeding periods on the basis of their estimated useful lives . we defer capitalized production costs for financial reporting purposes until the media is released , and then amortize these costs over succeeding periods on the basis of estimated sales . historical sales statistics are the principal factor used in estimating the amortization rate . if the actual useful life or the actual sales of our media are significantly different from our estimates that could adversely impact our operating results . revenue we recognize revenue in our gaiam brand segment when the goods are shipped to the customer and collection is either probable or has occurred . the amount of revenue recognized is net of estimated returns and other chargebacks ( or channel credits ) , which are estimated using historical return and credit rates . if the actual amount of returns and chargebacks were to vary significantly from our estimates , it could materially impact our results of operations in subsequent periods . we recognize amounts billed to customers for postage and handling as revenue at the same time we recognize the revenue arising from the product sale . travel revenues are recognized in the period which the trip begins . we recognize revenue in our gaiam tv segment ratably over the subscription period after collection has occurred . we present revenue net of taxes collected from customers . share-based compensation we measure compensation cost at the grant date based on the fair value of the award and recognize compensation cost upon the probable attainment of a specified performance condition over the estimated performance period or for time based awards over the service period . we use the black-scholes option valuation model to estimate the grant date fair value . in estimating this fair value , there are certain assumptions that we use , as disclosed in note 11. share-based compensation , consisting of the expected life of the option , risk-free interest rate , dividend yield , and volatility . the use of a different estimate for any one of these components could have a material impact on the amount of calculated compensation expense . long-lived assets we evaluate the carrying value of long-lived assets held and used , other than goodwill , when events or changes in circumstances indicate the carrying value may not be recoverable . we consider the carrying value of a long-lived asset impaired when the total projected undiscounted cash flows from the asset are separately identifiable and are less than the carrying value . we recognize a loss based on the amount by which the carrying value exceeds the estimated fair value of the long-lived asset . we determine the estimated fair value primarily using the projected cash flows from the asset discounted at a rate commensurate with the risk involved . deferred tax assets due to historical operating losses , we recorded a full valuation allowance on our deferred tax assets at the end of 2013 and therefore recorded an associated tax expense of $ 23.2 million . we have continued to maintain a full valuation allowance during 2014. we continue to be optimistic about our future , and expect to return to operating profitability . when that happens , we expect to reverse the valuation allowance and record the related tax benefit for future use of our net operation loss carryforwards we expect to realize . 21 liquidity and capital resources our capital needs arise from working capital required to fund operations , capital expenditures related to acquisition and development of media content , development and marketing of our e-commerce and digital platforms and new products , acquisitions of new businesses , replacements , expansions and improvements to our infrastructure , and future growth . these capital requirements depend on numerous factors , including the rate of market acceptance of our product offerings , our ability to expand our customer base , the cost of ongoing upgrades to our product offerings , the level of expenditures for sales and marketing , the level of investment in distribution systems and facilities and other factors . the timing and amount of these capital requirements are variable and we can not accurately predict them . additionally , we will continue to pursue opportunities to expand our media libraries , evaluate possible investments in businesses , products and technologies , and increase our sales and marketing programs and brand promotions as needed . at december 31 , 2014 , our cash balance was $ 15.8 million . including our investment in gaiam tv , we estimate that our capital expenditures will total approximately $ 6.0 million for 2015 , which will be funded through cash flow from operations . we currently have a shelf registration with the securities and exchange commission for 5,000,000 shares of our class a common stock and to date no shares have been issued under this shelf registration . in the normal course of our business , we investigate , evaluate and discuss acquisition , joint venture , minority investment , strategic relationship and other business combination opportunities in our market . for any future investment , acquisition or joint venture opportunities , we may consider using then-available liquidity , issuing equity securities or incurring additional indebtedness . while there can be no assurances , we believe our cash on hand , cash expected to be generated from future operations , cash that could be raised by the sale of our shelf registration stock or from new credit facilities would be sufficient to fund our operations on both
| cash flows ( a ) operating activities net cash provided by operating activities for the year ended december 31 , 2017 was $ 50.2 million , compared with net cash provided of $ 11.8 million for the year ended december 31 , 2016 , representing an increase of $ 38.4 million , which was mainly due to the net effect of ( 1 ) the decrease in net income excluding non-cash items by $ 35.2 million primarily because of the one-time transition tax of $ 35.6 million recognized in the fourth quarter of 2017 and ( 2 ) the increase in cash inflows from movements of operating assets and liabilities by $ 73.6 million . the increase in cash inflows was primarily due to the net effect of ( 1 ) the increase in cash inflows due to the movement of accounts and notes receivable by $ 87.2 million compared to 2016 as the company strengthened the collection of accounts receivable , ( 2 ) the decrease in cash outflows due to the movement of advance payments and others by $ 1.8 million , ( 3 ) the decrease in cash outflows due to the movement of inventories by $ 3.3 million , ( 4 ) the increase in cash inflows due to the movement of pledged deposits by $ 2.1 million , ( 5 ) the increase of cash inflows due to the movement of customer deposits by $ 1.1 million , ( 6 ) the increase in cash inflows due to the movement of long-term taxes payable by $ 35.6 million , ( 7 ) the decrease in cash inflows due to the movement of accounts and notes payable by $ 32.9 million , ( 8 ) the increase of cash outflows due to the movement of tax payable by $ 11.7 million and ( 9 ) the decrease of cash inflows due to the movement of accrued expenses and other payables by $ 10.0
| 0 |
this efficient supply chain enables us to provide quality products at competitive prices for all of our brands . we seek to drive sustainable and profitable growth in this segment by leveraging our brands ' leading market positions and heritage to expand our product offering and distribution channels . we believe that growth in yoga participation , greater awareness of health and wellness , and the success of our retail and online partners is increasing consumer interest in our brands and products , and creates new opportunities for us to expand our offering . recent examples of our brand extension include the 2012 launch of gaiam restore and spri dynamic recovery brands , our at-home rehabilitative and restorative products , and the 2013 launch of our spri cross train line of high-intensity fitness accessories . we anticipate launching a yoga apparel line in the spring of 2015. we recently launched or updated certain websites , evolving our e-commerce experience to focus on engaging customers through digital content , and social and mobile marketing across various devices . with the acquisition of yoga studio , the leading yoga app for mobile and tablet devices , in the fourth quarter of 2014 , we launched our interactive digital strategy , which we will continue to develop and leverage as a point of brand engagement . we plan to invest in our online branding and digital offerings , develop emerging talent , utilize social media , and sponsor local events . additionally , we will significantly reduce the circulation of our catalogs going forward as the direct-to-consumer business has shifted online . 16 gaiam tv segment gaiam tv is a global digital video subscription service with approximately 7,000 titles which caters to an underserved subscriber base . gaiam tv 's digital content is available to subscribers on virtually any internet connected device anytime , anywhere commercial free . the subscription also allows subscribers to download and view files from the library without being actively connected to the internet . through gaiam tv subscriptions , customers have unlimited access to a vast library of inspiring films , personal growth related content , cutting edge documentaries , interviews , yoga classes , and more 90 % of which is available exclusively to subscribers for digital streaming . the streaming video market is currently booming : in august 2014 , 196.5 million internet users watched online videos in the united states alone , according to comscore . the first quarter of 2014 set a new record with 35.6 billion global online video starts , representing a 43 % increase compared to the first quarter of 2013 , according to the u.s. digital video benchmark report from adobe . more and more , people are augmenting their use of , or veering away from broadcast television and turning to , streaming video to watch their favorite content on services like netflix , amazon prime , hulu plus , hbo go and gaiam tv . gaiam tv 's position in the streaming video landscape is firmly supported by a wide variety of exclusive and unique content , which provides a complementary offering to entertainment-based streaming video services . gaiam tv 's original content is developed and produced in-house in state-of-the-art production studios near boulder , colorado . by offering exclusive and unique content over a streaming service , we believe we will be able to significantly expand our target subscriber base . in october 2013 , gaiam tv acquired my yoga online , the largest on-line yoga video streaming subscription business in canada . with this acquisition we grew our content library by approximately 1,300 video titles and expanded our international subscriber base . we plan to continue investing in international expansion , both in terms of subscribers and content . gaiam 's board of directors previously approved the separation of gaiam tv and gaiam brand into two separate publicly traded companies . we currently expect the separation to take the form of a tax-free spin-off to shareholders . our board of directors has the right and ability , in its sole discretion , to abandon the proposed separation at any time before the distribution date . as a result , there can be no assurance that the separation will occur . results of operations year ended december 31 , 2014 compared to year ended december 31 , 2013 net revenue . net revenue increased $ 11.2 million , or 7.2 % , to $ 166.7 million during 2014 from $ 155.5 million during 2013. net revenue in our gaiam brand segment increased $ 7.0 million , or 4.7 % , to $ 156.8 million during 2014 from $ 149.8 million during 2013 , due to the addition of a new major customer account and growth in our gaiam restore and spri product lines . growth in the gaiam brand segment was moderated by a few factors . first , revenues from our largest customer declined as the result of a data breach at the customer 's stores . second , we made a strategic decision early in the year to reduce catalog circulation and focus our direct-to-consumer operations on a consumer engagement digital strategy . third , the continued contraction in the physical dvd market reduced our media sales . finally , we decided during the year to not renew a license we held to manufacture fitness accessories under a third-party brand . this decision resulted in lower revenues , but allowed us to focus more on our gaiam and spri brands . our eco-travel business , which is part of the gaiam brand segment , grew during the year as a result of improved economic conditions . story_separator_special_tag media library our media library asset represents the fair value of libraries of media acquired through business combinations , the purchase price of media rights to both video and audio titles , and the capitalized cost to produce media products , all of which we market to retailers and to e-commerce and subscription customers . we amortize the fair value of acquired or purchased media titles and content on a straight-line basis over succeeding periods on the basis of their estimated useful lives . we defer capitalized production costs for financial reporting purposes until the media is released , and then amortize these costs over succeeding periods on the basis of estimated sales . historical sales statistics are the principal factor used in estimating the amortization rate . if the actual useful life or the actual sales of our media are significantly different from our estimates that could adversely impact our operating results . revenue we recognize revenue in our gaiam brand segment when the goods are shipped to the customer and collection is either probable or has occurred . the amount of revenue recognized is net of estimated returns and other chargebacks ( or channel credits ) , which are estimated using historical return and credit rates . if the actual amount of returns and chargebacks were to vary significantly from our estimates , it could materially impact our results of operations in subsequent periods . we recognize amounts billed to customers for postage and handling as revenue at the same time we recognize the revenue arising from the product sale . travel revenues are recognized in the period which the trip begins . we recognize revenue in our gaiam tv segment ratably over the subscription period after collection has occurred . we present revenue net of taxes collected from customers . share-based compensation we measure compensation cost at the grant date based on the fair value of the award and recognize compensation cost upon the probable attainment of a specified performance condition over the estimated performance period or for time based awards over the service period . we use the black-scholes option valuation model to estimate the grant date fair value . in estimating this fair value , there are certain assumptions that we use , as disclosed in note 11. share-based compensation , consisting of the expected life of the option , risk-free interest rate , dividend yield , and volatility . the use of a different estimate for any one of these components could have a material impact on the amount of calculated compensation expense . long-lived assets we evaluate the carrying value of long-lived assets held and used , other than goodwill , when events or changes in circumstances indicate the carrying value may not be recoverable . we consider the carrying value of a long-lived asset impaired when the total projected undiscounted cash flows from the asset are separately identifiable and are less than the carrying value . we recognize a loss based on the amount by which the carrying value exceeds the estimated fair value of the long-lived asset . we determine the estimated fair value primarily using the projected cash flows from the asset discounted at a rate commensurate with the risk involved . deferred tax assets due to historical operating losses , we recorded a full valuation allowance on our deferred tax assets at the end of 2013 and therefore recorded an associated tax expense of $ 23.2 million . we have continued to maintain a full valuation allowance during 2014. we continue to be optimistic about our future , and expect to return to operating profitability . when that happens , we expect to reverse the valuation allowance and record the related tax benefit for future use of our net operation loss carryforwards we expect to realize . 21 liquidity and capital resources our capital needs arise from working capital required to fund operations , capital expenditures related to acquisition and development of media content , development and marketing of our e-commerce and digital platforms and new products , acquisitions of new businesses , replacements , expansions and improvements to our infrastructure , and future growth . these capital requirements depend on numerous factors , including the rate of market acceptance of our product offerings , our ability to expand our customer base , the cost of ongoing upgrades to our product offerings , the level of expenditures for sales and marketing , the level of investment in distribution systems and facilities and other factors . the timing and amount of these capital requirements are variable and we can not accurately predict them . additionally , we will continue to pursue opportunities to expand our media libraries , evaluate possible investments in businesses , products and technologies , and increase our sales and marketing programs and brand promotions as needed . at december 31 , 2014 , our cash balance was $ 15.8 million . including our investment in gaiam tv , we estimate that our capital expenditures will total approximately $ 6.0 million for 2015 , which will be funded through cash flow from operations . we currently have a shelf registration with the securities and exchange commission for 5,000,000 shares of our class a common stock and to date no shares have been issued under this shelf registration . in the normal course of our business , we investigate , evaluate and discuss acquisition , joint venture , minority investment , strategic relationship and other business combination opportunities in our market . for any future investment , acquisition or joint venture opportunities , we may consider using then-available liquidity , issuing equity securities or incurring additional indebtedness . while there can be no assurances , we believe our cash on hand , cash expected to be generated from future operations , cash that could be raised by the sale of our shelf registration stock or from new credit facilities would be sufficient to fund our operations on both
| cash flows the following table summarizes our primary sources ( uses ) of cash during the periods presented : replace_table_token_5_th 22 ( a ) net cash provided by operating activities for discontinued operations during 2012 includes approximately $ 18.7 million of net cash provided by purchased working capital associated with vivendi entertainment , which was used to partially fund the acquisition of vivendi . excluding the net cash flows from the purchased vivendi entertainment working capital , net cash used by operating activities for discontinued operations would have been zero during 2012. additionally , the net cash provided by operating activities for discontinued operations during 2012 does not include participations payments for vivendi entertainment sales during the fourth quarter of 2011 as we did n't acquire vivendi entertainment until march 28 , 2012. the fourth quarter is our seasonably largest sales quarter and participations payable resulting from such sales are normally not paid until the following quarter . also , net cash used in operating activities for discontinued operations during 2013 includes certain participation payments that were due in december 2012 , but not paid until january 2013 . 2014 compared to 2013 continuing operations operating activities . our operating activities for continuing operations used net cash of $ 8.8 million and $ 15.6 million during 2014 and 2013 , respectively . the net cash used by operating activities for continuing operations during 2014 was primarily attributable to continuing investment in gaiam tv , decreased participations payable of $ 3.5 million and increased receivables of $ 3.9 million , partially offset by increased accounts payable of $ 5.5 million . the net cash used by operating activities for continuing operations during 2013 was also primarily attributable to investment in gaiam tv , decreased accounts payable of $ 4.4 million , partially offset by decreased inventory of $ 1.1 million . investing activities . our investing activities for continuing operations used net cash of $ 8.4 million and generated net cash of $ 65.0 million during 2014 and 2013 , respectively . the net cash used in investing activities for continuing operations during 2014 was due to $ 5.5
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these multi-port instruments are generally robotically controlled and provide end effectors ( tips ) that are similar to those used in either open or laparoscopic surgery . we offer advanced instrumentation for the da vinci xi and da vinci x platforms , including da vinci energy and da vinci stapler products , to provide surgeons with sophisticated , computer-aided tools to precisely and efficiently interact with tissue . da vinci x and da vinci xi surgical systems share the same instruments whereas the da vinci si surgical system uses instruments that are not compatible with da vinci x or da vinci xi systems . we currently offer nine core instruments on our da vinci sp surgical system . we plan to expand the sp instrument offering over time . training technologies include our intuitive simulation products , our intuitive telepresence remote case observation and telementoring tools , and our dual console for use in surgeon proctoring and collaborative surgery . during the first quarter of 2019 , the fda cleared our ion endoluminal system to enable minimally invasive biopsies in the lung . our ion system extends our commercial offering beyond surgery into diagnostic procedures with this first application . we are introducing the ion system in the u.s. in a measured fashion while we optimize training pathways and our supply chain and collect additional clinical data . we are early in the launch and have placed 36 ion systems for commercial use as of december 31 , 2020. ion systems are not included in our da vinci surgical system installed base . we currently have 3 ion systems placed with hospitals for gathering clinical data in addition to the systems placed for commercial use . the success of new product introductions depends on a number of factors including , but not limited to , pricing , competition , market and consumer acceptance , the effective forecasting and management of product demand , inventory levels , the management of manufacturing and supply costs , and the risk that new products may have quality or other defects in the early stages of introduction . 52 table of contents covid-19 pandemic procedures prior to the spread of covid-19 in the first quarter of 2020 , we experienced procedure growth trends consistent with those experienced in the fourth quarter of 2019 , including strength in general surgery , growth in mature procedures in the u.s. , and growth in ous urology . beginning in january 2020 , we saw a substantial reduction in da vinci procedures in china and , by early february 2020 , procedures per week in china had declined by approximately 90 % compared to the weekly procedure rates experienced in early january 2020. as the covid-19 pandemic subsided in china in march 2020 , da vinci procedure volume began to recover and , by the end of the first quarter of 2020 , china procedures per week were approximately 70 % of the early january 2020 weekly procedure rate . as the covid-19 pandemic spread to western europe and the u.s. , we experienced a significant decline in da vinci procedures in the last half of march 2020 , and procedures per week in the u.s. declined to approximately 65 % of the weekly procedure rate experienced earlier in the first quarter of 2020. in april 2020 , procedures per week in the u.s. continued to decline , reaching approximately 30 % of pre-covid-19 levels . in may and june , u.s. procedures began a recovery phase , as covid-19 cases dropped and elective procedures were permitted , and , by the middle of june , had grown to nearly the same level as that measured in the first two weeks of the first quarter of 2020. however , in the last two weeks of june and into july , with the resurgence of covid-19 cases , some regions postponed elective procedures , and we experienced a corresponding decline in da vinci procedures . the impact of covid-19 in europe during the second quarter varied by country with procedures in italy , france , and the uk declining more steeply , while germany experienced a year-over-year increase in procedures . during the second quarter of 2020 , china procedures per week continued to increase to a level consistent with the early january 2020 weekly procedure rate . in the third quarter of 2020 , procedures recovered slowly in the u.s. , leveling off near pre-covid-19 levels towards the end of the quarter . outside of the u.s. , da vinci procedures varied in the third quarter of 2020 , depending on the spread and or resurgence of covid-19 . for example , covid-19 had a less significant impact in germany where da vinci procedures grew at mid-single digits relative to the third quarter of 2019 , while it had a more significant impact in the u.k. where da vinci procedures declined year over year . procedures in china grew significantly year over year in the third quarter of 2020 , while regional covid-19 outbreaks resulted in year-over-year procedure growth rates in japan slowing somewhat relative to earlier in the year . the covid-19 pandemic has also affected the volumes of certain procedure types differently . for example , patient concerns over exposure to covid-19 and the fact that prostate cancer can be slow growing , combined with lower prostate diagnoses and treatments , have caused the number of dvp procedures to decline in the third quarter of 2020 relative to the third quarter of 2019. da vinci bariatric procedures grew significantly year over year in the third quarter of 2020 due to our optimized instrument set and focus by our sales organization and may also have benefited from certain patients prioritizing weight loss as obesity is a significant covid-19 risk factor . story_separator_special_tag as of december 31 , 2020 , a total of 901 da vinci surgical systems were installed at customers under operating lease or usage-based arrangements . our system leasing and usage-based models provide customers with flexibility regarding how they acquire or obtain access to our systems . we believe that these alternative financing structures have been effective and well-received , and we are willing to expand the proportion of these structures based on customer demand . as revenue for operating leases and usage-based systems is recognized over time , total systems revenue growth is reduced in a period when the number of operating lease and usage-based placements increases as a proportion of total system placements . our exposure to the credit risks relating to our lease financing arrangements may increase if our customers are adversely affected by changes in healthcare laws , coverage and reimbursement , economic pressures or uncertainty , or other customer-specific factors . in addition , as customers divert significant resources to the treatment of or the preparation to treat patients with covid-19 , we may be exposed to defaults under our lease financing arrangements . moreover , usage-based arrangements generally contain no minimum payments ; therefore , customers may exit such arrangements without paying a financial penalty to us . as a result of the covid-19 pandemic , we anticipate that some customers will exit such arrangements or seek to amend the terms of our operating lease and usage-based arrangements with them . for some operating lease arrangements , our customers are provided with the right to purchase the leased system at certain points during and or at the end of the lease term . revenue generated from customer purchases of systems under operating lease arrangements ( “ lease buyouts ” ) was $ 52.2 million , $ 92.8 million , and $ 48.8 million for the years ended december 31 , 2020 , 2019 , and 2018 , respectively . we expect that revenue recognized from customer exercises of the buyout options will fluctuate based on the timing of when , and if , customers choose to exercise their buyout options . systems revenue system placements are driven by procedure growth in most markets . in geographies where da vinci procedure adoption is in an early stage or system placements are constrained by regulation , system sales will precede procedure growth . system placements also vary due to seasonality largely aligned with hospital budgeting cycles . we typically place a higher proportion of annual system placements in the fourth quarter and a lower proportion in the first quarter as customer budgets are reset . systems revenue is also affected by the proportion of system placements under operating lease and usage-based arrangements , recurring operating lease and usage-based revenue , operating lease buyouts , product mix , asps , trade-in activities , and customer mix . systems revenue declined 12 % to $ 1.18 billion in 2020. systems revenue grew 19 % to $ 1.35 billion in 2019 and 21 % to $ 1.13 billion in 2018. based on the factors outlined in the covid-19 pandemic section above , the ability to forecast 56 table of contents future system shipments has been significantly disrupted and , therefore , we believe that historical system shipment trends may not be a good indicator of future system shipments . procedure mix / products our da vinci surgical systems are generally used for soft tissue surgery for areas of the body between the pelvis and the neck , primarily in general surgery , gynecologic surgery , urologic surgery , cardiothoracic surgery , and head and neck surgery . within these categories , procedures range in complexity from cancer and other highly complex procedures to less complex procedures for benign conditions . cancer and other highly complex procedures tend to be reimbursed at higher rates than less complex procedures for benign conditions . thus , hospitals are more sensitive to the costs associated with treating less complex , benign conditions . our strategy is to provide hospitals with attractive clinical and economic solutions across the spectrum of procedure complexity . our fully featured da vinci xi surgical system with advanced instruments ( including da vinci energy and endowrist and sureform stapler products ) and our integrated table motion product targets the more complex procedure segment . our da vinci x surgical system is targeted towards price sensitive markets and procedures . our da vinci sp surgical system complements the da vinci xi and x surgical systems by enabling surgeons to access narrow workspaces . procedure seasonality more than half of da vinci procedures performed are for benign conditions , most notably hernia repairs , hysterectomies , and cholecystectomies . these benign procedures and other short-term elective procedures tend to be more seasonal than cancer operations and surgeries for other life-threatening conditions . seasonality in the u.s. for procedures for benign conditions typically results in higher fourth quarter procedure volume when more patients have met annual deductibles and lower first quarter procedure volume when deductibles are reset . seasonality outside the u.s. varies and is more pronounced around local holidays and vacation periods . as a result of the factors outlined in the covid-19 pandemic section above , including the recommendations of authorities to defer elective procedures , historical procedure patterns may be disrupted . distribution channels we provide our products through direct sales organizations in the u.s. , europe ( excluding spain , portugal , italy , greece , and most eastern european countries ) , china , japan , south korea , india , and taiwan . in 2018 , we began direct operations in india and taiwan . in january 2019 , our intuitive-fosun joint venture began direct sales for da vinci products and services in china . in the remainder of our ous markets , we provide our products through distributors . regulatory activities overview our products must meet the requirements of a large and growing body of
| cash flows the following table summarizes our primary sources ( uses ) of cash during the periods presented : replace_table_token_5_th 22 ( a ) net cash provided by operating activities for discontinued operations during 2012 includes approximately $ 18.7 million of net cash provided by purchased working capital associated with vivendi entertainment , which was used to partially fund the acquisition of vivendi . excluding the net cash flows from the purchased vivendi entertainment working capital , net cash used by operating activities for discontinued operations would have been zero during 2012. additionally , the net cash provided by operating activities for discontinued operations during 2012 does not include participations payments for vivendi entertainment sales during the fourth quarter of 2011 as we did n't acquire vivendi entertainment until march 28 , 2012. the fourth quarter is our seasonably largest sales quarter and participations payable resulting from such sales are normally not paid until the following quarter . also , net cash used in operating activities for discontinued operations during 2013 includes certain participation payments that were due in december 2012 , but not paid until january 2013 . 2014 compared to 2013 continuing operations operating activities . our operating activities for continuing operations used net cash of $ 8.8 million and $ 15.6 million during 2014 and 2013 , respectively . the net cash used by operating activities for continuing operations during 2014 was primarily attributable to continuing investment in gaiam tv , decreased participations payable of $ 3.5 million and increased receivables of $ 3.9 million , partially offset by increased accounts payable of $ 5.5 million . the net cash used by operating activities for continuing operations during 2013 was also primarily attributable to investment in gaiam tv , decreased accounts payable of $ 4.4 million , partially offset by decreased inventory of $ 1.1 million . investing activities . our investing activities for continuing operations used net cash of $ 8.4 million and generated net cash of $ 65.0 million during 2014 and 2013 , respectively . the net cash used in investing activities for continuing operations during 2014 was due to $ 5.5
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these multi-port instruments are generally robotically controlled and provide end effectors ( tips ) that are similar to those used in either open or laparoscopic surgery . we offer advanced instrumentation for the da vinci xi and da vinci x platforms , including da vinci energy and da vinci stapler products , to provide surgeons with sophisticated , computer-aided tools to precisely and efficiently interact with tissue . da vinci x and da vinci xi surgical systems share the same instruments whereas the da vinci si surgical system uses instruments that are not compatible with da vinci x or da vinci xi systems . we currently offer nine core instruments on our da vinci sp surgical system . we plan to expand the sp instrument offering over time . training technologies include our intuitive simulation products , our intuitive telepresence remote case observation and telementoring tools , and our dual console for use in surgeon proctoring and collaborative surgery . during the first quarter of 2019 , the fda cleared our ion endoluminal system to enable minimally invasive biopsies in the lung . our ion system extends our commercial offering beyond surgery into diagnostic procedures with this first application . we are introducing the ion system in the u.s. in a measured fashion while we optimize training pathways and our supply chain and collect additional clinical data . we are early in the launch and have placed 36 ion systems for commercial use as of december 31 , 2020. ion systems are not included in our da vinci surgical system installed base . we currently have 3 ion systems placed with hospitals for gathering clinical data in addition to the systems placed for commercial use . the success of new product introductions depends on a number of factors including , but not limited to , pricing , competition , market and consumer acceptance , the effective forecasting and management of product demand , inventory levels , the management of manufacturing and supply costs , and the risk that new products may have quality or other defects in the early stages of introduction . 52 table of contents covid-19 pandemic procedures prior to the spread of covid-19 in the first quarter of 2020 , we experienced procedure growth trends consistent with those experienced in the fourth quarter of 2019 , including strength in general surgery , growth in mature procedures in the u.s. , and growth in ous urology . beginning in january 2020 , we saw a substantial reduction in da vinci procedures in china and , by early february 2020 , procedures per week in china had declined by approximately 90 % compared to the weekly procedure rates experienced in early january 2020. as the covid-19 pandemic subsided in china in march 2020 , da vinci procedure volume began to recover and , by the end of the first quarter of 2020 , china procedures per week were approximately 70 % of the early january 2020 weekly procedure rate . as the covid-19 pandemic spread to western europe and the u.s. , we experienced a significant decline in da vinci procedures in the last half of march 2020 , and procedures per week in the u.s. declined to approximately 65 % of the weekly procedure rate experienced earlier in the first quarter of 2020. in april 2020 , procedures per week in the u.s. continued to decline , reaching approximately 30 % of pre-covid-19 levels . in may and june , u.s. procedures began a recovery phase , as covid-19 cases dropped and elective procedures were permitted , and , by the middle of june , had grown to nearly the same level as that measured in the first two weeks of the first quarter of 2020. however , in the last two weeks of june and into july , with the resurgence of covid-19 cases , some regions postponed elective procedures , and we experienced a corresponding decline in da vinci procedures . the impact of covid-19 in europe during the second quarter varied by country with procedures in italy , france , and the uk declining more steeply , while germany experienced a year-over-year increase in procedures . during the second quarter of 2020 , china procedures per week continued to increase to a level consistent with the early january 2020 weekly procedure rate . in the third quarter of 2020 , procedures recovered slowly in the u.s. , leveling off near pre-covid-19 levels towards the end of the quarter . outside of the u.s. , da vinci procedures varied in the third quarter of 2020 , depending on the spread and or resurgence of covid-19 . for example , covid-19 had a less significant impact in germany where da vinci procedures grew at mid-single digits relative to the third quarter of 2019 , while it had a more significant impact in the u.k. where da vinci procedures declined year over year . procedures in china grew significantly year over year in the third quarter of 2020 , while regional covid-19 outbreaks resulted in year-over-year procedure growth rates in japan slowing somewhat relative to earlier in the year . the covid-19 pandemic has also affected the volumes of certain procedure types differently . for example , patient concerns over exposure to covid-19 and the fact that prostate cancer can be slow growing , combined with lower prostate diagnoses and treatments , have caused the number of dvp procedures to decline in the third quarter of 2020 relative to the third quarter of 2019. da vinci bariatric procedures grew significantly year over year in the third quarter of 2020 due to our optimized instrument set and focus by our sales organization and may also have benefited from certain patients prioritizing weight loss as obesity is a significant covid-19 risk factor . story_separator_special_tag as of december 31 , 2020 , a total of 901 da vinci surgical systems were installed at customers under operating lease or usage-based arrangements . our system leasing and usage-based models provide customers with flexibility regarding how they acquire or obtain access to our systems . we believe that these alternative financing structures have been effective and well-received , and we are willing to expand the proportion of these structures based on customer demand . as revenue for operating leases and usage-based systems is recognized over time , total systems revenue growth is reduced in a period when the number of operating lease and usage-based placements increases as a proportion of total system placements . our exposure to the credit risks relating to our lease financing arrangements may increase if our customers are adversely affected by changes in healthcare laws , coverage and reimbursement , economic pressures or uncertainty , or other customer-specific factors . in addition , as customers divert significant resources to the treatment of or the preparation to treat patients with covid-19 , we may be exposed to defaults under our lease financing arrangements . moreover , usage-based arrangements generally contain no minimum payments ; therefore , customers may exit such arrangements without paying a financial penalty to us . as a result of the covid-19 pandemic , we anticipate that some customers will exit such arrangements or seek to amend the terms of our operating lease and usage-based arrangements with them . for some operating lease arrangements , our customers are provided with the right to purchase the leased system at certain points during and or at the end of the lease term . revenue generated from customer purchases of systems under operating lease arrangements ( “ lease buyouts ” ) was $ 52.2 million , $ 92.8 million , and $ 48.8 million for the years ended december 31 , 2020 , 2019 , and 2018 , respectively . we expect that revenue recognized from customer exercises of the buyout options will fluctuate based on the timing of when , and if , customers choose to exercise their buyout options . systems revenue system placements are driven by procedure growth in most markets . in geographies where da vinci procedure adoption is in an early stage or system placements are constrained by regulation , system sales will precede procedure growth . system placements also vary due to seasonality largely aligned with hospital budgeting cycles . we typically place a higher proportion of annual system placements in the fourth quarter and a lower proportion in the first quarter as customer budgets are reset . systems revenue is also affected by the proportion of system placements under operating lease and usage-based arrangements , recurring operating lease and usage-based revenue , operating lease buyouts , product mix , asps , trade-in activities , and customer mix . systems revenue declined 12 % to $ 1.18 billion in 2020. systems revenue grew 19 % to $ 1.35 billion in 2019 and 21 % to $ 1.13 billion in 2018. based on the factors outlined in the covid-19 pandemic section above , the ability to forecast 56 table of contents future system shipments has been significantly disrupted and , therefore , we believe that historical system shipment trends may not be a good indicator of future system shipments . procedure mix / products our da vinci surgical systems are generally used for soft tissue surgery for areas of the body between the pelvis and the neck , primarily in general surgery , gynecologic surgery , urologic surgery , cardiothoracic surgery , and head and neck surgery . within these categories , procedures range in complexity from cancer and other highly complex procedures to less complex procedures for benign conditions . cancer and other highly complex procedures tend to be reimbursed at higher rates than less complex procedures for benign conditions . thus , hospitals are more sensitive to the costs associated with treating less complex , benign conditions . our strategy is to provide hospitals with attractive clinical and economic solutions across the spectrum of procedure complexity . our fully featured da vinci xi surgical system with advanced instruments ( including da vinci energy and endowrist and sureform stapler products ) and our integrated table motion product targets the more complex procedure segment . our da vinci x surgical system is targeted towards price sensitive markets and procedures . our da vinci sp surgical system complements the da vinci xi and x surgical systems by enabling surgeons to access narrow workspaces . procedure seasonality more than half of da vinci procedures performed are for benign conditions , most notably hernia repairs , hysterectomies , and cholecystectomies . these benign procedures and other short-term elective procedures tend to be more seasonal than cancer operations and surgeries for other life-threatening conditions . seasonality in the u.s. for procedures for benign conditions typically results in higher fourth quarter procedure volume when more patients have met annual deductibles and lower first quarter procedure volume when deductibles are reset . seasonality outside the u.s. varies and is more pronounced around local holidays and vacation periods . as a result of the factors outlined in the covid-19 pandemic section above , including the recommendations of authorities to defer elective procedures , historical procedure patterns may be disrupted . distribution channels we provide our products through direct sales organizations in the u.s. , europe ( excluding spain , portugal , italy , greece , and most eastern european countries ) , china , japan , south korea , india , and taiwan . in 2018 , we began direct operations in india and taiwan . in january 2019 , our intuitive-fosun joint venture began direct sales for da vinci products and services in china . in the remainder of our ous markets , we provide our products through distributors . regulatory activities overview our products must meet the requirements of a large and growing body of
| sources and uses of cash our principal source of liquidity is cash provided by operations and by the issuance of common stock through the exercise of stock options and our employee stock purchase program . cash and cash equivalents plus short- and long-term investments increased by $ 1.02 billion to $ 6.87 billion as of december 31 , 2020 , from $ 5.85 billion as of december 31 , 2019 , primarily from cash provided by our operations and proceeds from stock option exercises and employee stock purchases , partially offset by capital expenditures , taxes paid related to net share settlements of equity awards , and share repurchases . cash and cash equivalents plus short- and long-term investments increased by $ 1.02 billion to $ 5.85 billion as of december 31 , 2019 , from $ 4.83 billion as of december 31 , 2018 , primarily from cash provided by our operations , partially offset by capital expenditures and share repurchases . our cash requirements depend on numerous factors , including market acceptance of our products , the resources we devote to developing and supporting our products , and other factors . we expect to continue to devote substantial resources to expand procedure adoption and acceptance of our products . we have made substantial investments in our commercial operations , product development activities , facilities , and intellectual property . based upon our business model , we anticipate that we will continue to be able to fund future growth through cash provided by our operations . we believe that our current cash , cash equivalents , and investment balances , together with income to be derived from the sale of our products , will be sufficient to meet our liquidity requirements for the foreseeable future .
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we were among the initial pioneers in developing automated , finger identification technology that can be used without the aid of non-automated methods of identification such as a personal identification , password , token , smart card , id card , credit card , passport , driver 's license or other form of possession or knowledge based identification . this advanced bio-key identification technology improves both the accuracy and speed of finger-based biometrics . through partnerships with oems , integrators , and solution providers , we provide biometric software solutions to private and public sector customers . bio-key provides the ability to positively identify individuals in seconds before granting access to valuable corporate resources , web portals or applications . powered by our patented vector segment technology our vst , web-key® and bsp development kits are fingerprint biometric solutions that provide true interoperability with all major reader manufacturers , enabling application developers and integrators to seamlessly integrate fingerprint biometrics into virtually any application . while our growth has been sluggish due to market acceptance , and lengthy processes involved with building relationships with large integrators , we believe that due to current market conditions , specifically identity theft , we are well-positioned for growth as solutions empower users to take control of their identities in a way that can not be replicated , stolen or mistaken for unauthorized use . organizations that employ bio-key 's solutions to authenticate employees and protect company data also experience a measurable return on investment . 12 results of operations consolidated results of operations two year % trend replace_table_token_3_th revenues and costs of goods sold replace_table_token_4_th revenues for the years ended december 31 , 2012 and 2011 , service revenues included approximately $ 688,000 and $ 680,000 , respectively , of recurring maintenance and support revenue , and approximately $ 407,000 and $ 168,000 , respectively , of non-recurring custom services revenue . non-recurring service revenue increased 142 % from 2011 to 2012 as the company completed services for a large custom contract and continued to provide custom services deployed to different sites from a legacy customer . for the year ended december 31 , 2012 , license and other revenue ( comprised of third party hardware and royalty income ) increased as a result of several contributing factors . the company realized an approximate $ 441,000 increase ( 27 % ) from 2011 to 2012 in its core software license revenue from both new and existing customers . the percentage of license and other revenue as a proportion of total revenue decreased from 76 % to 71 % , due to the relative increase in service revenue from 24 % to 29 % of total revenue . third-party hardware sales decreased by approximately $ 381,000 ( 41 % ) from 2011 to 2012 primarily as a result of smaller deployments from new customers in the healthcare industry , who required initial start-up investments in hardware , in addition to expanding deployments from existing customers and other oem requirements . depending on the size and the timing requirements of the customers ' software deployment roadmap , hardware purchases may be solely within the initial software order , or , as with our oem partners in the healthcare industry , a recurring activity . mckesson continued their deployment of our identification technology in their accudose® product line , and our partners allscripts , medflow , choicepoint/lexisnexis , educational biometric technology and identimetrics all continued expansion of biometric id deployments . the company 's royalty income for the year ended december 31 , 2012 was derived from a december 2009 oem agreement , and resulted in a 22 % increase in revenue of approximately $ 94,000 to $ 116,000 from 2011 to 2012. the company expects this revenue stream to be recurring . 13 costs of goods sold for the year ended december 31 , 2012 , cost of services increased from 2011 due to costs associated with the increased non-recurring custom services , as well as customer support , as needed for the expanding customer base . the company expects these costs will increase in future periods as additional biometric customers are added and non-recurring custom services increase with diversification of markets . for the year ended december 31 , 2012 , cost of license and other decreased from 2011 due to the decrease in third party hardware costs commensurate with the decrease in hardware orders discussed in the “ revenues ” section above . this was the main reason behind the increase in the company 's gross margin to 85 % from 77 % over the two year period . selling , general and administrative replace_table_token_5_th selling , general and administrative costs decreased 25 % for the year ended december 31 , 2012 as compared to the same period 2011. reductions included a reversal of a bad debt expense related to a contract whose payments were behind schedule for $ 377,000 in 2012 , which was expensed in 2011 , a decrease in personnel fees of approximately $ 233,000 and marketing related expenses of $ 50,000. the decreases were offset by an increase in legal and settlement fees for litigation filed by blue spike , llc of approximately $ 208,000. research , development and engineering replace_table_token_6_th for the year ended december 31 , 2012 , r & d costs decreased as compared to 2011 , primarily related to consultant expenses for the development of a new software application completed in 2011 , and not continued into 2012. the company expects to continue to devote similar funding to its r & d function as it further develops new features to its product suite . story_separator_special_tag ” the company generally warrants that its products are free from defects in material and workmanship for a period of one year from the date of initial delivery to our customers . the warranty does not cover any losses or damage that occurs as a result of improper installation , misuse or neglect or repair or modification by anyone other than the company or its authorized repair agent . the company 's policy is to accrue anticipated warranty costs based upon historical percentages of items returned for repair within one year of the initial sale . the company 's repair rate of products under warranty has been minimal , and a historical percentage has not been established . the company 's software license agreements generally include certain provisions for indemnifying customers against liabilities if the company 's software products infringe upon a third party 's intellectual property rights . the company has not provided for any reserves for warranty liabilities as it was determined to be immaterial . 17 2. impairment or disposal of long lived assets , including intangible assets we review our long-lived assets , including intangible assets subject to amortization , whenever events or changes in circumstances indicate that the carrying amount of such an asset may not be recoverable . recoverability of these assets is measured by comparison of their carrying amount to the future undiscounted cash flows the assets are expected to generate . if such assets are considered impaired , the impairment to be recognized is equal to the amount by which the carrying value of the assets exceeds their fair value determined by either a quoted market price , if any , or a value determined by utilizing a discounted cash flow technique . in assessing recoverability , we must make assumptions regarding estimated future cash flows and discount factors . if these estimates or related assumptions change in the future , we may be required to record impairment charges . intangible assets with determinable lives are amortized over their estimated useful lives , based upon the pattern in which the expected benefits will be realized , or on a straight-line basis , whichever is greater . we did not record any impairment charges in any of the years presented . 3.research and development expenditures research and development expenses include costs directly attributable to the conduct of research and development programs primarily related to the development of our software products and improving the efficiency and capabilities of our existing software . such costs include salaries , payroll taxes , employee benefit costs , materials , supplies , depreciation on research equipment , services provided by outside contractors , and the allocable portions of facility costs , such as rent , utilities , insurance , repairs and maintenance , depreciation and general support services . all costs associated with research and development are expensed as incurred . 4. income taxes the provision for , or benefit from , income taxes includes deferred taxes resulting from the temporary differences in income for financial and tax purposes using the liability method . such temporary differences result primarily from the differences in the carrying value of assets and liabilities . future realization of deferred income tax assets requires sufficient taxable income within the carryback , carryforward period available under tax law . the company evaluates , on a quarterly basis whether , based on all available evidence , if it is probable that the deferred income tax assets are realizable . valuation allowances are established when it is more likely than not that the tax benefit of the deferred tax asset will not be realized . the evaluation , as prescribed by asc 740-10 , “ income taxes , ” includes the consideration of all available evidence , both positive and negative , regarding historical operating results including recent years with reported losses , the estimated timing of future reversals of existing taxable temporary differences , estimated future taxable income exclusive of reversing temporary differences and carryforwards , and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused . because of the companies historical performance and estimated future taxable income a full valuation allowance has been established . 5. accounting for stock-based compensation the company accounts for share based compensation in accordance with the provisions of asc 718-10 , “ compensation — stock compensation , ” which requires measurement of compensation cost for all stock awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest . the majority of our share-based compensation arrangements vest over either a three or four year vesting schedule . the company expenses its share-based compensation under the ratable method , which treats each vesting tranche as if it were an individual grant . the fair value of stock options is determined using the black-scholes valuation model , and requires the input of highly subjective assumptions . these assumptions include estimating the length of time employees will retain their vested stock options before exercising them ( the “ expected option term ” ) , the estimated volatility of our common stock price over the option 's expected term , the risk-free interest rate over the option 's expected term , and the company 's expected annual dividend yield . changes in these subjective assumptions can materially affect the estimate of fair value of stock-based compensation and consequently , the related amount recognized as an expense in the consolidated statements of operations . as required under the accounting rules , we review our valuation assumptions at each grant date and , as a result , are likely to change our valuation assumptions used to value employee stock-based awards granted in future periods . the values derived from using the black-scholes model are recognized as expense over the service period , net of estimated forfeitures ( the number of individuals that will ultimately
| sources and uses of cash our principal source of liquidity is cash provided by operations and by the issuance of common stock through the exercise of stock options and our employee stock purchase program . cash and cash equivalents plus short- and long-term investments increased by $ 1.02 billion to $ 6.87 billion as of december 31 , 2020 , from $ 5.85 billion as of december 31 , 2019 , primarily from cash provided by our operations and proceeds from stock option exercises and employee stock purchases , partially offset by capital expenditures , taxes paid related to net share settlements of equity awards , and share repurchases . cash and cash equivalents plus short- and long-term investments increased by $ 1.02 billion to $ 5.85 billion as of december 31 , 2019 , from $ 4.83 billion as of december 31 , 2018 , primarily from cash provided by our operations , partially offset by capital expenditures and share repurchases . our cash requirements depend on numerous factors , including market acceptance of our products , the resources we devote to developing and supporting our products , and other factors . we expect to continue to devote substantial resources to expand procedure adoption and acceptance of our products . we have made substantial investments in our commercial operations , product development activities , facilities , and intellectual property . based upon our business model , we anticipate that we will continue to be able to fund future growth through cash provided by our operations . we believe that our current cash , cash equivalents , and investment balances , together with income to be derived from the sale of our products , will be sufficient to meet our liquidity requirements for the foreseeable future .
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we were among the initial pioneers in developing automated , finger identification technology that can be used without the aid of non-automated methods of identification such as a personal identification , password , token , smart card , id card , credit card , passport , driver 's license or other form of possession or knowledge based identification . this advanced bio-key identification technology improves both the accuracy and speed of finger-based biometrics . through partnerships with oems , integrators , and solution providers , we provide biometric software solutions to private and public sector customers . bio-key provides the ability to positively identify individuals in seconds before granting access to valuable corporate resources , web portals or applications . powered by our patented vector segment technology our vst , web-key® and bsp development kits are fingerprint biometric solutions that provide true interoperability with all major reader manufacturers , enabling application developers and integrators to seamlessly integrate fingerprint biometrics into virtually any application . while our growth has been sluggish due to market acceptance , and lengthy processes involved with building relationships with large integrators , we believe that due to current market conditions , specifically identity theft , we are well-positioned for growth as solutions empower users to take control of their identities in a way that can not be replicated , stolen or mistaken for unauthorized use . organizations that employ bio-key 's solutions to authenticate employees and protect company data also experience a measurable return on investment . 12 results of operations consolidated results of operations two year % trend replace_table_token_3_th revenues and costs of goods sold replace_table_token_4_th revenues for the years ended december 31 , 2012 and 2011 , service revenues included approximately $ 688,000 and $ 680,000 , respectively , of recurring maintenance and support revenue , and approximately $ 407,000 and $ 168,000 , respectively , of non-recurring custom services revenue . non-recurring service revenue increased 142 % from 2011 to 2012 as the company completed services for a large custom contract and continued to provide custom services deployed to different sites from a legacy customer . for the year ended december 31 , 2012 , license and other revenue ( comprised of third party hardware and royalty income ) increased as a result of several contributing factors . the company realized an approximate $ 441,000 increase ( 27 % ) from 2011 to 2012 in its core software license revenue from both new and existing customers . the percentage of license and other revenue as a proportion of total revenue decreased from 76 % to 71 % , due to the relative increase in service revenue from 24 % to 29 % of total revenue . third-party hardware sales decreased by approximately $ 381,000 ( 41 % ) from 2011 to 2012 primarily as a result of smaller deployments from new customers in the healthcare industry , who required initial start-up investments in hardware , in addition to expanding deployments from existing customers and other oem requirements . depending on the size and the timing requirements of the customers ' software deployment roadmap , hardware purchases may be solely within the initial software order , or , as with our oem partners in the healthcare industry , a recurring activity . mckesson continued their deployment of our identification technology in their accudose® product line , and our partners allscripts , medflow , choicepoint/lexisnexis , educational biometric technology and identimetrics all continued expansion of biometric id deployments . the company 's royalty income for the year ended december 31 , 2012 was derived from a december 2009 oem agreement , and resulted in a 22 % increase in revenue of approximately $ 94,000 to $ 116,000 from 2011 to 2012. the company expects this revenue stream to be recurring . 13 costs of goods sold for the year ended december 31 , 2012 , cost of services increased from 2011 due to costs associated with the increased non-recurring custom services , as well as customer support , as needed for the expanding customer base . the company expects these costs will increase in future periods as additional biometric customers are added and non-recurring custom services increase with diversification of markets . for the year ended december 31 , 2012 , cost of license and other decreased from 2011 due to the decrease in third party hardware costs commensurate with the decrease in hardware orders discussed in the “ revenues ” section above . this was the main reason behind the increase in the company 's gross margin to 85 % from 77 % over the two year period . selling , general and administrative replace_table_token_5_th selling , general and administrative costs decreased 25 % for the year ended december 31 , 2012 as compared to the same period 2011. reductions included a reversal of a bad debt expense related to a contract whose payments were behind schedule for $ 377,000 in 2012 , which was expensed in 2011 , a decrease in personnel fees of approximately $ 233,000 and marketing related expenses of $ 50,000. the decreases were offset by an increase in legal and settlement fees for litigation filed by blue spike , llc of approximately $ 208,000. research , development and engineering replace_table_token_6_th for the year ended december 31 , 2012 , r & d costs decreased as compared to 2011 , primarily related to consultant expenses for the development of a new software application completed in 2011 , and not continued into 2012. the company expects to continue to devote similar funding to its r & d function as it further develops new features to its product suite . story_separator_special_tag ” the company generally warrants that its products are free from defects in material and workmanship for a period of one year from the date of initial delivery to our customers . the warranty does not cover any losses or damage that occurs as a result of improper installation , misuse or neglect or repair or modification by anyone other than the company or its authorized repair agent . the company 's policy is to accrue anticipated warranty costs based upon historical percentages of items returned for repair within one year of the initial sale . the company 's repair rate of products under warranty has been minimal , and a historical percentage has not been established . the company 's software license agreements generally include certain provisions for indemnifying customers against liabilities if the company 's software products infringe upon a third party 's intellectual property rights . the company has not provided for any reserves for warranty liabilities as it was determined to be immaterial . 17 2. impairment or disposal of long lived assets , including intangible assets we review our long-lived assets , including intangible assets subject to amortization , whenever events or changes in circumstances indicate that the carrying amount of such an asset may not be recoverable . recoverability of these assets is measured by comparison of their carrying amount to the future undiscounted cash flows the assets are expected to generate . if such assets are considered impaired , the impairment to be recognized is equal to the amount by which the carrying value of the assets exceeds their fair value determined by either a quoted market price , if any , or a value determined by utilizing a discounted cash flow technique . in assessing recoverability , we must make assumptions regarding estimated future cash flows and discount factors . if these estimates or related assumptions change in the future , we may be required to record impairment charges . intangible assets with determinable lives are amortized over their estimated useful lives , based upon the pattern in which the expected benefits will be realized , or on a straight-line basis , whichever is greater . we did not record any impairment charges in any of the years presented . 3.research and development expenditures research and development expenses include costs directly attributable to the conduct of research and development programs primarily related to the development of our software products and improving the efficiency and capabilities of our existing software . such costs include salaries , payroll taxes , employee benefit costs , materials , supplies , depreciation on research equipment , services provided by outside contractors , and the allocable portions of facility costs , such as rent , utilities , insurance , repairs and maintenance , depreciation and general support services . all costs associated with research and development are expensed as incurred . 4. income taxes the provision for , or benefit from , income taxes includes deferred taxes resulting from the temporary differences in income for financial and tax purposes using the liability method . such temporary differences result primarily from the differences in the carrying value of assets and liabilities . future realization of deferred income tax assets requires sufficient taxable income within the carryback , carryforward period available under tax law . the company evaluates , on a quarterly basis whether , based on all available evidence , if it is probable that the deferred income tax assets are realizable . valuation allowances are established when it is more likely than not that the tax benefit of the deferred tax asset will not be realized . the evaluation , as prescribed by asc 740-10 , “ income taxes , ” includes the consideration of all available evidence , both positive and negative , regarding historical operating results including recent years with reported losses , the estimated timing of future reversals of existing taxable temporary differences , estimated future taxable income exclusive of reversing temporary differences and carryforwards , and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused . because of the companies historical performance and estimated future taxable income a full valuation allowance has been established . 5. accounting for stock-based compensation the company accounts for share based compensation in accordance with the provisions of asc 718-10 , “ compensation — stock compensation , ” which requires measurement of compensation cost for all stock awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest . the majority of our share-based compensation arrangements vest over either a three or four year vesting schedule . the company expenses its share-based compensation under the ratable method , which treats each vesting tranche as if it were an individual grant . the fair value of stock options is determined using the black-scholes valuation model , and requires the input of highly subjective assumptions . these assumptions include estimating the length of time employees will retain their vested stock options before exercising them ( the “ expected option term ” ) , the estimated volatility of our common stock price over the option 's expected term , the risk-free interest rate over the option 's expected term , and the company 's expected annual dividend yield . changes in these subjective assumptions can materially affect the estimate of fair value of stock-based compensation and consequently , the related amount recognized as an expense in the consolidated statements of operations . as required under the accounting rules , we review our valuation assumptions at each grant date and , as a result , are likely to change our valuation assumptions used to value employee stock-based awards granted in future periods . the values derived from using the black-scholes model are recognized as expense over the service period , net of estimated forfeitures ( the number of individuals that will ultimately
| liquidity and capital resources operating activities overview net cash provided by operations during the year ended december 31 , 2012 was approximately $ 66,000. the cash provided by operating activities of continuing operations was primarily used to fund operations . other items of note were as follows : · positive cash flows related to a decrease in accounts receivable of approximately $ 360,000 , due to a large payment received in the third quarter of 2012 , offset by a non-cash reduction in the allowance for doubtful accounts for this customer . during 2012 , the company also established a receivable balance of approximately $ 190,000 due from the factor ( see below ) , which was received in early 2013 . · positive cash flows from an increase of approximately $ 161,000 in accounts payable and accrued liabilities , comprising of obligations for third party hardware shipped , delayed vendor payments due to cash management strategies and unpaid accrued commissions . · the company recorded approximately $ 50,000 of charges in 2012 for the expense of issuing options to employees for services . investing activities overview there were no cash flows under investing activities during the year . financing activities overview net cash used for financing activities of $ 25,000 was due to a principal payment against the secured note . net working deficit at december 31 , 2012 was approximately $ 1,447,000 as compared to a deficit of approximately $ 1,540,000 at december 31 , 2011. the change was due to the steady improvement in the operations of the business . since january 7 , 1993 ( date of inception ) , our capital needs have been principally met through proceeds from the sale of equity and debt securities . we do not expect any material capital expenditures during the next twelve months . we do not currently maintain a line of credit or term loan with any commercial bank or other financial institution . as of december 2011 , the company entered into a 24-month accounts receivable factoring arrangement with a financial institution ( the “ factor ” ) .
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results of operations of richardson rfpd , nu horizons , pansystem , c1s , flection , intechra , converge , verical , transim , etg , and petsche are included within the company 's global components business segment , and the results of operations of shared , cross , inscope , lwp , sphinx , and diasa are included within the company 's global ecs business segment . consolidated sales for 2011 increased by 14.1 % , compared with the year-earlier period , due to a 12.8 % increase in the global components business segment sales and a 17.2 % increase in the global ecs business segment sales . the translation of the company 's international financial statements into u.s. dollars resulted in an increase in consolidated sales of $ 486.1 million for 2011 , compared with the year-earlier period , due to a weaker u.s. dollar . excluding the impact of foreign currency and pro forma for acquisitions , the company 's consolidated sales increased by 2.0 % in 2011 . net income attributable to shareholders increased to $ 598.8 million in 2011 , compared with net income attributable to shareholders of $ 479.6 million in the year-earlier period . the following items impacted the comparability of the company 's results for the years ended december 31 , 2011 and 2010 : restructuring , integration , and other charges of $ 37.8 million ( $ 28.1 million net of related taxes ) in 2011 and $ 33.5 million ( $ 24.6 million net of related taxes ) in 2010 ; a charge of $ 5.9 million ( $ 3.6 million net of related taxes ) related to the settlement of a legal matter in 2011 ; a gain on bargain purchase of $ 1.1 million ( $ .7 million net of related taxes ) in 2011 ; a loss on prepayment of debt of $ .9 million ( $ .5 million net of related taxes ) in 2011 and $ 1.6 million ( $ 1.0 million net of related taxes ) in 2010 ; a net reduction in the provision for income taxes of $ 28.9 million principally due to a reversal of a valuation allowance on certain international deferred tax assets in 2011 ; and a net reduction of the provision for income taxes of $ 9.4 million and a reduction in interest expense of $ 3.8 million ( $ 2.3 million net of related taxes ) primarily related to the settlement of certain income tax matters in 2010 covering multiple years . 23 excluding the above-mentioned items , the increase in net income attributable to shareholders for 2011 was primarily the result of the sales increases in both the global components business segment and the global ecs business segment and increased gross profit margins . this was offset , in part , by increased selling , general and administrative expenses primarily attributable to acquisitions and the increase in sales , increased interest expense due to higher average debt outstanding primarily to fund acquisitions , and increased depreciation and amortization expense due primarily to increased acquisition activity . substantially all of the company 's sales are made on an order-by-order basis , rather than through long-term sales contracts . as such , the nature of the company 's business does not provide for the visibility of material forward-looking information from its customers and suppliers beyond a few months . sales following is an analysis of net sales ( in millions ) by reportable segment for the years ended december 31 : replace_table_token_5_th consolidated sales for 2011 increased by $ 2.65 billion , or 14.1 % , compared with the year-earlier period . the increase in 2011 was driven by an increase in global components business segment sales of $ 1.69 billion , or 12.8 % , and an increase in global ecs business segment sales of $ 960.1 million , or 17.2 % , compared with the year-earlier period . the translation of the company 's international financial statements into u.s. dollars resulted in an increase in consolidated sales of $ 486.1 million in 2011 , compared with the year-earlier period , due to a weaker u.s. dollar . excluding the impact of foreign currency and pro forma for acquisitions , the company 's consolidated sales increased by 2.0 % in 2011 . the growth in the global components business segment for 2011 was primarily driven by increased demand for the company 's products in the emea region and the americas region , as well as the impact of acquisitions . pro forma for acquisitions , the sales increase for 2011 in emea and the americas was 15.5 % and 3.0 % , respectively , offset by a sales decrease in the asia pacific region of 10.0 % . the decline in sales in asia pacific was primarily due to weakness in low-end mobile handset components offset , in part , by increased demand in the vertical markets led by lighting and transportation . excluding the impact of foreign currency and pro forma for acquisitions , the company 's global components business segment sales remained flat in 2011 , compared with the year-earlier period . in the global ecs business segment , the sales for 2011 increased due to higher demand for products in both north america and emea . the increase in sales for 2011 was due to growth in storage , software , services , industry standard servers , and proprietary servers . excluding the impact of foreign currency and pro forma for acquisitions , the company 's global ecs business segment sales increased by 6.9 % for 2011 . following is an analysis of net sales ( in millions ) by reportable segment for the years ended december 31 : replace_table_token_6_th consolidated sales for 2010 increased by $ 4.06 billion , or 27.7 % , compared with the year-earlier period . story_separator_special_tag the company recorded a provision for income taxes of $ 65.4 million ( an effective tax rate of 34.6 % ) for 2009 . the company 's provision and effective tax rate for 2009 were impacted by the previously discussed restructuring , integration , and other charges and a loss on prepayment of debt . excluding the impact of the above-mentioned items , the company 's effective tax rate was 32.5 % for 2009 . the company 's provision for income taxes and effective tax rate are impacted by , among other factors , the statutory tax rates in the countries in which it operates and the related level of income generated by these operations . net income attributable to shareholders the company recorded net income attributable to shareholders of $ 598.8 million in 2011 compared with net income attributable to shareholders of $ 479.6 million in the year-earlier period . included in net income attributable to shareholders for 2011 were the previously discussed restructuring , integration , and other charges of $ 28.1 million , a charge of $ 3.6 million related to the settlement of a legal matter , a gain on bargain purchase of $ .7 million , a loss on prepayment of debt of $ .5 million , and a net reduction of the provision for income taxes of $ 28.9 million principally due to a reversal of a valuation allowance on certain international deferred tax assets . included in net income attributable to shareholders for 2010 were the previously discussed restructuring , integration , and other charges of $ 24.6 million , and a loss on prepayment of debt of $ 1.0 million , as well as a net reduction of the provision for income taxes of $ 9.4 million and a reduction of interest expense , net of related taxes , of $ 2.3 million primarily related to the settlement of certain income tax matters covering multiple years . excluding the above-mentioned items , the increase in net income attributable to shareholders for 2011 was primarily the result of the sales increases in both the global components business segment and the global ecs business segment and increased gross profit margins . this was offset , in part , by increased selling , general and administrative expenses primarily attributable to acquisitions and the increase in sales , increased interest expense due to higher average debt outstanding primarily to fund acquisitions , and increased depreciation and amortization expense due primarily to increased acquisition activity . the company recorded net income attributable to shareholders of $ 479.6 million for 2010 , compared with net income attributable to shareholders of $ 123.5 million in the year-earlier period . included in net income attributable to shareholders for 2010 were the previously discussed restructuring , integration , and other charges of $ 24.6 million , and a loss on prepayment of debt of $ 1.0 million , as well as a net reduction of the provision for income taxes of $ 9.4 million and a reduction of interest expense , net of related taxes , of $ 2.3 million primarily related to the settlement of certain income tax matters covering multiple years . included in net income attributable to shareholders for 2009 were the previously discussed restructuring , integration , and other charges of $ 75.7 million and a loss on prepayment of debt of $ 3.2 million . excluding the above-mentioned items , the increase in net income attributable to shareholders was primarily the result of the sales increases in both the global components business segment and the global ecs business segment , increased gross profit margins , reduced selling , general and administrative expenses as a percentage of sales due to the company 's continuing efforts to streamline and simplify processes , and a lower effective income tax rate . this was offset , in part , by increased depreciation and amortization expense due primarily to increased acquisition activity . liquidity and capital resources at december 31 , 2011 and 2010 , the company had cash and cash equivalents of $ 396.9 million and $ 926.3 million , respectively , of which $ 361.5 million and $ 592.2 million , respectively , were held outside the united states . liquidity is affected by many factors , some of which are based on normal ongoing operations of the company 's business and some of which arise from fluctuations related to global economics and markets . cash balances are generated and held in many locations throughout the world . it is the company 's current intent to permanently reinvest these funds outside the united states , and its current plans do not demonstrate a need to repatriate them to fund its united states operations . if these funds were to be needed for the company 's operations in the united states , it would be required to record and pay significant united states income taxes to repatriate these funds . additionally , local government regulations may restrict the company 's ability to move cash balances to meet cash needs under certain circumstances . the company currently does not expect such regulations and restrictions to impact its ability to make acquisitions or to pay vendors and conduct operations throughout the global organization . during 2011 , the net amount of cash provided by the company 's operating activities was $ 120.9 million , the net amount of cash used for investing activities was $ 646.5 million , and the net amount of cash used for financing activities was $ 13.9 million . the effect of exchange rate changes on cash was an increase of $ 10.1 million . 28 during 2010 , the net amount of cash provided by the company 's operating activities was $ 220.8 million , the net amount of cash used for investing activities was $ 682.4 million , and the net amount of cash provided by financing activities was $ 270.9 million . the effect of
| liquidity and capital resources operating activities overview net cash provided by operations during the year ended december 31 , 2012 was approximately $ 66,000. the cash provided by operating activities of continuing operations was primarily used to fund operations . other items of note were as follows : · positive cash flows related to a decrease in accounts receivable of approximately $ 360,000 , due to a large payment received in the third quarter of 2012 , offset by a non-cash reduction in the allowance for doubtful accounts for this customer . during 2012 , the company also established a receivable balance of approximately $ 190,000 due from the factor ( see below ) , which was received in early 2013 . · positive cash flows from an increase of approximately $ 161,000 in accounts payable and accrued liabilities , comprising of obligations for third party hardware shipped , delayed vendor payments due to cash management strategies and unpaid accrued commissions . · the company recorded approximately $ 50,000 of charges in 2012 for the expense of issuing options to employees for services . investing activities overview there were no cash flows under investing activities during the year . financing activities overview net cash used for financing activities of $ 25,000 was due to a principal payment against the secured note . net working deficit at december 31 , 2012 was approximately $ 1,447,000 as compared to a deficit of approximately $ 1,540,000 at december 31 , 2011. the change was due to the steady improvement in the operations of the business . since january 7 , 1993 ( date of inception ) , our capital needs have been principally met through proceeds from the sale of equity and debt securities . we do not expect any material capital expenditures during the next twelve months . we do not currently maintain a line of credit or term loan with any commercial bank or other financial institution . as of december 2011 , the company entered into a 24-month accounts receivable factoring arrangement with a financial institution ( the “ factor ” ) .
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results of operations of richardson rfpd , nu horizons , pansystem , c1s , flection , intechra , converge , verical , transim , etg , and petsche are included within the company 's global components business segment , and the results of operations of shared , cross , inscope , lwp , sphinx , and diasa are included within the company 's global ecs business segment . consolidated sales for 2011 increased by 14.1 % , compared with the year-earlier period , due to a 12.8 % increase in the global components business segment sales and a 17.2 % increase in the global ecs business segment sales . the translation of the company 's international financial statements into u.s. dollars resulted in an increase in consolidated sales of $ 486.1 million for 2011 , compared with the year-earlier period , due to a weaker u.s. dollar . excluding the impact of foreign currency and pro forma for acquisitions , the company 's consolidated sales increased by 2.0 % in 2011 . net income attributable to shareholders increased to $ 598.8 million in 2011 , compared with net income attributable to shareholders of $ 479.6 million in the year-earlier period . the following items impacted the comparability of the company 's results for the years ended december 31 , 2011 and 2010 : restructuring , integration , and other charges of $ 37.8 million ( $ 28.1 million net of related taxes ) in 2011 and $ 33.5 million ( $ 24.6 million net of related taxes ) in 2010 ; a charge of $ 5.9 million ( $ 3.6 million net of related taxes ) related to the settlement of a legal matter in 2011 ; a gain on bargain purchase of $ 1.1 million ( $ .7 million net of related taxes ) in 2011 ; a loss on prepayment of debt of $ .9 million ( $ .5 million net of related taxes ) in 2011 and $ 1.6 million ( $ 1.0 million net of related taxes ) in 2010 ; a net reduction in the provision for income taxes of $ 28.9 million principally due to a reversal of a valuation allowance on certain international deferred tax assets in 2011 ; and a net reduction of the provision for income taxes of $ 9.4 million and a reduction in interest expense of $ 3.8 million ( $ 2.3 million net of related taxes ) primarily related to the settlement of certain income tax matters in 2010 covering multiple years . 23 excluding the above-mentioned items , the increase in net income attributable to shareholders for 2011 was primarily the result of the sales increases in both the global components business segment and the global ecs business segment and increased gross profit margins . this was offset , in part , by increased selling , general and administrative expenses primarily attributable to acquisitions and the increase in sales , increased interest expense due to higher average debt outstanding primarily to fund acquisitions , and increased depreciation and amortization expense due primarily to increased acquisition activity . substantially all of the company 's sales are made on an order-by-order basis , rather than through long-term sales contracts . as such , the nature of the company 's business does not provide for the visibility of material forward-looking information from its customers and suppliers beyond a few months . sales following is an analysis of net sales ( in millions ) by reportable segment for the years ended december 31 : replace_table_token_5_th consolidated sales for 2011 increased by $ 2.65 billion , or 14.1 % , compared with the year-earlier period . the increase in 2011 was driven by an increase in global components business segment sales of $ 1.69 billion , or 12.8 % , and an increase in global ecs business segment sales of $ 960.1 million , or 17.2 % , compared with the year-earlier period . the translation of the company 's international financial statements into u.s. dollars resulted in an increase in consolidated sales of $ 486.1 million in 2011 , compared with the year-earlier period , due to a weaker u.s. dollar . excluding the impact of foreign currency and pro forma for acquisitions , the company 's consolidated sales increased by 2.0 % in 2011 . the growth in the global components business segment for 2011 was primarily driven by increased demand for the company 's products in the emea region and the americas region , as well as the impact of acquisitions . pro forma for acquisitions , the sales increase for 2011 in emea and the americas was 15.5 % and 3.0 % , respectively , offset by a sales decrease in the asia pacific region of 10.0 % . the decline in sales in asia pacific was primarily due to weakness in low-end mobile handset components offset , in part , by increased demand in the vertical markets led by lighting and transportation . excluding the impact of foreign currency and pro forma for acquisitions , the company 's global components business segment sales remained flat in 2011 , compared with the year-earlier period . in the global ecs business segment , the sales for 2011 increased due to higher demand for products in both north america and emea . the increase in sales for 2011 was due to growth in storage , software , services , industry standard servers , and proprietary servers . excluding the impact of foreign currency and pro forma for acquisitions , the company 's global ecs business segment sales increased by 6.9 % for 2011 . following is an analysis of net sales ( in millions ) by reportable segment for the years ended december 31 : replace_table_token_6_th consolidated sales for 2010 increased by $ 4.06 billion , or 27.7 % , compared with the year-earlier period . story_separator_special_tag the company recorded a provision for income taxes of $ 65.4 million ( an effective tax rate of 34.6 % ) for 2009 . the company 's provision and effective tax rate for 2009 were impacted by the previously discussed restructuring , integration , and other charges and a loss on prepayment of debt . excluding the impact of the above-mentioned items , the company 's effective tax rate was 32.5 % for 2009 . the company 's provision for income taxes and effective tax rate are impacted by , among other factors , the statutory tax rates in the countries in which it operates and the related level of income generated by these operations . net income attributable to shareholders the company recorded net income attributable to shareholders of $ 598.8 million in 2011 compared with net income attributable to shareholders of $ 479.6 million in the year-earlier period . included in net income attributable to shareholders for 2011 were the previously discussed restructuring , integration , and other charges of $ 28.1 million , a charge of $ 3.6 million related to the settlement of a legal matter , a gain on bargain purchase of $ .7 million , a loss on prepayment of debt of $ .5 million , and a net reduction of the provision for income taxes of $ 28.9 million principally due to a reversal of a valuation allowance on certain international deferred tax assets . included in net income attributable to shareholders for 2010 were the previously discussed restructuring , integration , and other charges of $ 24.6 million , and a loss on prepayment of debt of $ 1.0 million , as well as a net reduction of the provision for income taxes of $ 9.4 million and a reduction of interest expense , net of related taxes , of $ 2.3 million primarily related to the settlement of certain income tax matters covering multiple years . excluding the above-mentioned items , the increase in net income attributable to shareholders for 2011 was primarily the result of the sales increases in both the global components business segment and the global ecs business segment and increased gross profit margins . this was offset , in part , by increased selling , general and administrative expenses primarily attributable to acquisitions and the increase in sales , increased interest expense due to higher average debt outstanding primarily to fund acquisitions , and increased depreciation and amortization expense due primarily to increased acquisition activity . the company recorded net income attributable to shareholders of $ 479.6 million for 2010 , compared with net income attributable to shareholders of $ 123.5 million in the year-earlier period . included in net income attributable to shareholders for 2010 were the previously discussed restructuring , integration , and other charges of $ 24.6 million , and a loss on prepayment of debt of $ 1.0 million , as well as a net reduction of the provision for income taxes of $ 9.4 million and a reduction of interest expense , net of related taxes , of $ 2.3 million primarily related to the settlement of certain income tax matters covering multiple years . included in net income attributable to shareholders for 2009 were the previously discussed restructuring , integration , and other charges of $ 75.7 million and a loss on prepayment of debt of $ 3.2 million . excluding the above-mentioned items , the increase in net income attributable to shareholders was primarily the result of the sales increases in both the global components business segment and the global ecs business segment , increased gross profit margins , reduced selling , general and administrative expenses as a percentage of sales due to the company 's continuing efforts to streamline and simplify processes , and a lower effective income tax rate . this was offset , in part , by increased depreciation and amortization expense due primarily to increased acquisition activity . liquidity and capital resources at december 31 , 2011 and 2010 , the company had cash and cash equivalents of $ 396.9 million and $ 926.3 million , respectively , of which $ 361.5 million and $ 592.2 million , respectively , were held outside the united states . liquidity is affected by many factors , some of which are based on normal ongoing operations of the company 's business and some of which arise from fluctuations related to global economics and markets . cash balances are generated and held in many locations throughout the world . it is the company 's current intent to permanently reinvest these funds outside the united states , and its current plans do not demonstrate a need to repatriate them to fund its united states operations . if these funds were to be needed for the company 's operations in the united states , it would be required to record and pay significant united states income taxes to repatriate these funds . additionally , local government regulations may restrict the company 's ability to move cash balances to meet cash needs under certain circumstances . the company currently does not expect such regulations and restrictions to impact its ability to make acquisitions or to pay vendors and conduct operations throughout the global organization . during 2011 , the net amount of cash provided by the company 's operating activities was $ 120.9 million , the net amount of cash used for investing activities was $ 646.5 million , and the net amount of cash used for financing activities was $ 13.9 million . the effect of exchange rate changes on cash was an increase of $ 10.1 million . 28 during 2010 , the net amount of cash provided by the company 's operating activities was $ 220.8 million , the net amount of cash used for investing activities was $ 682.4 million , and the net amount of cash provided by financing activities was $ 270.9 million . the effect of
| cash flows from financing activities the net amount of cash used for financing activities during 2011 was $ 13.9 million . the primary sources of cash from financing activities were $ 354.0 million of proceeds from long-term bank borrowings , $ 46.7 million of proceeds from the exercise of stock options , and $ 8.0 million related to excess tax benefits from stock-based compensation arrangements . the primary use of cash for financing activities included a $ 200.0 million repayment of bank term loan , $ 197.0 million of repurchases of common stock , $ 19.3 million of repurchases of 6.875 % senior notes , and a $ 6.2 million decrease in short-term and other borrowings . during the fourth quarter of 2011 , the company repurchased $ 17.9 million principal amount of its 6.875 % senior notes due in 2013. the related loss on the repurchase aggregated $ .9 million ( $ .5 million net of related taxes ) and was recognized as a loss on prepayment of debt . the net amount of cash provided by financing activities during 2010 was $ 270.9 million . the primary sources of cash from financing activities were $ 494.3 million of net proceeds from a note offering , $ 9.8 million increase in short-term and other borrowings , $ 8.1 million of proceeds from the exercise of stock options , and $ 1.9 million related to excess tax benefits from stock-based compensation arrangements . the primary use of cash for financing activities included $ 173.7 million of repurchases of common stock and a $ 69.5 million repayment of the company 's 9.15 % senior notes . during 2010 , the company completed the sale of $ 250.0 million principal amount of 3.375 % notes due in 2015 and $ 250.0 million principal amount of 5.125 % notes due in 2021. the net proceeds of the offering of $ 494.3 million were used for general corporate purposes . the net amount of cash provided by financing activities during 2009 was $ 113.7 million .
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the reinsurance agreements significantly decreased premium income and benefit payments for group life during 2013 and also reduced volatility in this line of business . the decline in the benefit ratio for unum uk to 74.3 percent in 2013 from 77.9 percent , in 2012 was due primarily to improved risk results in the group life product line . unum uk sales in 2013 decreased 18.7 percent , in local currency , in 2013 compared to 2012 due primarily to lower group life sales as we continued to execute our plans to improve new business pricing and reposition our group life business for better margins and greater stability . persistency declined , as expected , primarily as a result of pursuing rate increases on renewing business . 32 our colonial life segment reported a decrease in operating income , including the 2013 reserve increase related to unclaimed death benefits , of 3.5 percent in 2013 compared to 2012. operating income excluding this reserve adjustment increased 3.9 percent in 2013 , with higher operating revenue and stable risk results . premium income grew 3.2 percent in 2013 compared to 2012. the 2013 benefit ratio for colonial life was 54.1 percent , and excluding the reserve increase was 52.5 percent , consistent with the level of 2012. colonial life sales increased 1.6 percent in 2013 compared to 2012 , driven by higher large case commercial market sales . persistency in 2013 declined slightly but remains strong for all lines of business . our closed block segment reported an increase in operating income of 14.6 percent in 2013 relative to 2012. net investment income increased 3.4 percent in 2013 compared to 2012 due to higher invested asset levels . risk results in 2013 were slightly favorable for both individual disability and long-term care relative to the prior year . our investment portfolio continues to perform well , and our invested asset quality remains strong . the net unrealized gain on our fixed maturity securities was $ 4.1 billion at december 31 , 2013 compared to $ 7.2 billion at december 31 , 2012 , with the decline due primarily to an increase in u.s. treasury rates during 2013. we believe our capital and financial positions are strong . at december 31 , 2013 , the risk-based capital ( rbc ) ratio for our traditional u.s. insurance subsidiaries , calculated on a weighted average basis using the naic company action level formula , was approximately 405 percent , compared to 396 percent at december 31 , 2012. during 2013 , we repurchased 11.2 million shares of unum group common stock at a cost of $ 318.6 million under our share repurchase program . cash equivalents and marketable securities held at unum group and our other intermediate holding companies are a significant source of liquidity for us and were approximately $ 514 million at december 31 , 2013 , relative to $ 805 million at december 31 , 2012. the decline was due primarily to repurchases of our common stock and a capital contribution related to our 2013 re-domestication of a captive reinsurance subsidiary . 2013 unclaimed death benefits reserve increase beginning in 2011 , a number of state regulators began requiring insurers to cross-check specified insurance policies with the social security administration 's death master file to identify potential matches . if a potential match was identified , insurers were requested to determine if benefits were due , locate beneficiaries , and make payments where appropriate . we initiated this process where requested , and in 2012 we began implementing this process in all states on a forward-looking basis . we believe adopting this process , which reflects an evolving regulatory and industry practice , is in the best interest of our customers . therefore , in addition to implementing this on a forward-looking basis , in 2013 we began an initiative to search for potential claims from previous years . during the fourth quarter of 2013 , we completed our assessment of benefits which we estimate will be paid under this initiative , and as such , established additional reserves for payment of these benefits . claim reserves were increased $ 49.1 million for unum us group life , $ 26.3 million for unum us voluntary life , and $ 20.1 million for colonial life voluntary life , for a total reserve increase of $ 95.5 million . these reserve adjustments decreased net income $ 62.1 million . although the legal and regulatory environment continues to evolve , we believe our decision to adopt this claims practice and establish additional reserves is in the best interests of our customers . 2013 group life waiver of premium benefit reserve reduction within our unum us segment , we offer group life insurance coverage which consists primarily of renewable term life insurance and includes a provision for waiver of premium , if disabled . the group life waiver of premium benefit ( group life waiver ) provides for continuation of life insurance coverage when an insured , or the employer on behalf of the insured , is no longer paying premium because the employee is not actively at work due to a disability . the group life waiver claim reserve is the present value of future anticipated death benefits reflecting the probability of death while remaining disabled . claim reserves are calculated using assumptions based on past experience adjusted for current trends and any other factors that would modify past experience and are subject to revision as current claim experience emerges and alters our view of future expectations . the two fundamental assumptions in the development of the group life waiver reserve are mortality and recovery . our emerging experience and that which continues to emerge within the industry indicate an increase in life expectancies , which decreases the ultimate anticipated death benefits to be paid under the group life waiver benefit . story_separator_special_tag if we believe , based on our actual experience and our view of future events , that our long-term assumptions need to be modified , we adjust our reserves accordingly with a charge or credit to our current period income . multiple estimation methods exist to establish claim reserve liabilities , with each method having its own advantages and disadvantages . available reserving methods utilized to calculate claim reserves include the tabular reserve method , the paid development method , the incurred loss development method , the count and severity method , and the expected claim cost method . no single method is better than the others in all situations and for all product lines . the estimation methods we have chosen are those that we believe produce the most reliable reserves . claim reserves supporting our unum us group and individual disability product lines and our closed block individual disability and individual and group long-term care product lines represent approximately 35.3 percent and 47.2 percent , respectively , of our total claim reserves at december 31 , 2013. we use a tabular reserve methodology for group and individual long-term disability and group and individual long-term care claims that have been reported . under the tabular reserve methodology , reserves for reported claims are based on certain characteristics of the actual reported claimants , such as age , length of time disabled , and medical diagnosis . we believe the tabular reserve method is the most accurate to calculate long-term liabilities and allows us to use the most available known facts about each claim . ibnr claim reserves for our long-term products are calculated using the count and severity method using historical patterns of the claims to be reported and the associated claim costs . for unum us group short-term disability products , an estimate of the value of future payments to be made on claims already submitted , as well as ibnr claims , is determined in aggregate rather than on the individual claimant basis that we use for our long-term products , using historical patterns of claim incidence as well as historical patterns of aggregate claim resolution rates . the average length of time between the event triggering a claim under a policy and the final resolution of those claims is much shorter for these products than for our long-term liabilities and results in less estimation variability . claim reserves supporting the unum us group life and accidental death and dismemberment products represent approximately 3.7 percent of our total claim reserves at december 31 , 2013. claim reserves for these products are related primarily to death claims reported but not yet paid , ibnr death claims , and a liability for waiver of premium benefits . the death claim reserve is based on the actual face amount to be paid , the ibnr reserve is calculated using the count and severity method , and the waiver of premium benefits reserve is calculated using the tabular reserve methodology . claim reserves supporting our unum uk segment represent approximately 10.0 percent of our total claim reserves at december 31 , 2013 , and are calculated using generally the same methodology that we use for unum us disability and group life reserves . the assumptions used in calculating claim reserves for this line of business are based on standard united kingdom industry experience , adjusted for unum uk 's own experience . the majority of the colonial life segment lines of business have short-term benefits , which generally have less estimation variability than our long-term products because of the shorter claim payout period . our claim reserves for colonial life 's lines of business , which approximate 1.7 percent of our total claim reserves at december 31 , 2013 , are predominantly determined using the incurred loss development method based on our own experience . the incurred loss development method uses the historical patterns of payments by loss date to predict future claim payments for each loss date . where the incurred loss development method may not be appropriate , we estimate the incurred claims using an expected claim cost per policy or other measure of exposure . the key assumptions for claim reserves for the colonial life lines of business are : ( 1 ) the timing , rate , and amount of estimated future claim payments ; and ( 2 ) the estimated expenses associated with the payment of claims . 37 the following table displays policy reserves , incurred claim reserves , and ibnr claim reserves by major product line , with the summation of the policy reserves and claim reserves shown both gross and net of the associated reinsurance recoverable . incurred claim reserves represent reserves determined for each incurred claim and also include estimated amounts for litigation expenses and other expenses associated with the payment of the claims as well as provisions for claims which we estimate will be reopened for our long-term care products . ibnr claim reserves include provisions for incurred but not reported claims and a provision for reopened claims for our disability products . the ibnr and reopened claim reserves for our disability products are developed and maintained in aggregate based on historical monitoring that has only been on a combined basis . impacting year ov er year comparability of claim reserves in the following chart are the 2013 reserve adjustments for unclaimed death benefits and group life waiver of premium benefits . see `` executive summary `` contained in this item 7 and note 6 of the `` notes to consolidated financial statements `` contained herein in item 8 for further discussion of these reserve adjustments . replace_table_token_4_th 38 replace_table_token_5_th key assumptions the calculation of policy and claim reserves involves numerous assumptions , but the primary assumptions used to calculate reserves are ( 1 ) the discount rate , ( 2 ) the claim resolution rate , and ( 3 ) the claim incidence rate for policy reserves and ibnr claim
| cash flows from financing activities the net amount of cash used for financing activities during 2011 was $ 13.9 million . the primary sources of cash from financing activities were $ 354.0 million of proceeds from long-term bank borrowings , $ 46.7 million of proceeds from the exercise of stock options , and $ 8.0 million related to excess tax benefits from stock-based compensation arrangements . the primary use of cash for financing activities included a $ 200.0 million repayment of bank term loan , $ 197.0 million of repurchases of common stock , $ 19.3 million of repurchases of 6.875 % senior notes , and a $ 6.2 million decrease in short-term and other borrowings . during the fourth quarter of 2011 , the company repurchased $ 17.9 million principal amount of its 6.875 % senior notes due in 2013. the related loss on the repurchase aggregated $ .9 million ( $ .5 million net of related taxes ) and was recognized as a loss on prepayment of debt . the net amount of cash provided by financing activities during 2010 was $ 270.9 million . the primary sources of cash from financing activities were $ 494.3 million of net proceeds from a note offering , $ 9.8 million increase in short-term and other borrowings , $ 8.1 million of proceeds from the exercise of stock options , and $ 1.9 million related to excess tax benefits from stock-based compensation arrangements . the primary use of cash for financing activities included $ 173.7 million of repurchases of common stock and a $ 69.5 million repayment of the company 's 9.15 % senior notes . during 2010 , the company completed the sale of $ 250.0 million principal amount of 3.375 % notes due in 2015 and $ 250.0 million principal amount of 5.125 % notes due in 2021. the net proceeds of the offering of $ 494.3 million were used for general corporate purposes . the net amount of cash provided by financing activities during 2009 was $ 113.7 million .
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the reinsurance agreements significantly decreased premium income and benefit payments for group life during 2013 and also reduced volatility in this line of business . the decline in the benefit ratio for unum uk to 74.3 percent in 2013 from 77.9 percent , in 2012 was due primarily to improved risk results in the group life product line . unum uk sales in 2013 decreased 18.7 percent , in local currency , in 2013 compared to 2012 due primarily to lower group life sales as we continued to execute our plans to improve new business pricing and reposition our group life business for better margins and greater stability . persistency declined , as expected , primarily as a result of pursuing rate increases on renewing business . 32 our colonial life segment reported a decrease in operating income , including the 2013 reserve increase related to unclaimed death benefits , of 3.5 percent in 2013 compared to 2012. operating income excluding this reserve adjustment increased 3.9 percent in 2013 , with higher operating revenue and stable risk results . premium income grew 3.2 percent in 2013 compared to 2012. the 2013 benefit ratio for colonial life was 54.1 percent , and excluding the reserve increase was 52.5 percent , consistent with the level of 2012. colonial life sales increased 1.6 percent in 2013 compared to 2012 , driven by higher large case commercial market sales . persistency in 2013 declined slightly but remains strong for all lines of business . our closed block segment reported an increase in operating income of 14.6 percent in 2013 relative to 2012. net investment income increased 3.4 percent in 2013 compared to 2012 due to higher invested asset levels . risk results in 2013 were slightly favorable for both individual disability and long-term care relative to the prior year . our investment portfolio continues to perform well , and our invested asset quality remains strong . the net unrealized gain on our fixed maturity securities was $ 4.1 billion at december 31 , 2013 compared to $ 7.2 billion at december 31 , 2012 , with the decline due primarily to an increase in u.s. treasury rates during 2013. we believe our capital and financial positions are strong . at december 31 , 2013 , the risk-based capital ( rbc ) ratio for our traditional u.s. insurance subsidiaries , calculated on a weighted average basis using the naic company action level formula , was approximately 405 percent , compared to 396 percent at december 31 , 2012. during 2013 , we repurchased 11.2 million shares of unum group common stock at a cost of $ 318.6 million under our share repurchase program . cash equivalents and marketable securities held at unum group and our other intermediate holding companies are a significant source of liquidity for us and were approximately $ 514 million at december 31 , 2013 , relative to $ 805 million at december 31 , 2012. the decline was due primarily to repurchases of our common stock and a capital contribution related to our 2013 re-domestication of a captive reinsurance subsidiary . 2013 unclaimed death benefits reserve increase beginning in 2011 , a number of state regulators began requiring insurers to cross-check specified insurance policies with the social security administration 's death master file to identify potential matches . if a potential match was identified , insurers were requested to determine if benefits were due , locate beneficiaries , and make payments where appropriate . we initiated this process where requested , and in 2012 we began implementing this process in all states on a forward-looking basis . we believe adopting this process , which reflects an evolving regulatory and industry practice , is in the best interest of our customers . therefore , in addition to implementing this on a forward-looking basis , in 2013 we began an initiative to search for potential claims from previous years . during the fourth quarter of 2013 , we completed our assessment of benefits which we estimate will be paid under this initiative , and as such , established additional reserves for payment of these benefits . claim reserves were increased $ 49.1 million for unum us group life , $ 26.3 million for unum us voluntary life , and $ 20.1 million for colonial life voluntary life , for a total reserve increase of $ 95.5 million . these reserve adjustments decreased net income $ 62.1 million . although the legal and regulatory environment continues to evolve , we believe our decision to adopt this claims practice and establish additional reserves is in the best interests of our customers . 2013 group life waiver of premium benefit reserve reduction within our unum us segment , we offer group life insurance coverage which consists primarily of renewable term life insurance and includes a provision for waiver of premium , if disabled . the group life waiver of premium benefit ( group life waiver ) provides for continuation of life insurance coverage when an insured , or the employer on behalf of the insured , is no longer paying premium because the employee is not actively at work due to a disability . the group life waiver claim reserve is the present value of future anticipated death benefits reflecting the probability of death while remaining disabled . claim reserves are calculated using assumptions based on past experience adjusted for current trends and any other factors that would modify past experience and are subject to revision as current claim experience emerges and alters our view of future expectations . the two fundamental assumptions in the development of the group life waiver reserve are mortality and recovery . our emerging experience and that which continues to emerge within the industry indicate an increase in life expectancies , which decreases the ultimate anticipated death benefits to be paid under the group life waiver benefit . story_separator_special_tag if we believe , based on our actual experience and our view of future events , that our long-term assumptions need to be modified , we adjust our reserves accordingly with a charge or credit to our current period income . multiple estimation methods exist to establish claim reserve liabilities , with each method having its own advantages and disadvantages . available reserving methods utilized to calculate claim reserves include the tabular reserve method , the paid development method , the incurred loss development method , the count and severity method , and the expected claim cost method . no single method is better than the others in all situations and for all product lines . the estimation methods we have chosen are those that we believe produce the most reliable reserves . claim reserves supporting our unum us group and individual disability product lines and our closed block individual disability and individual and group long-term care product lines represent approximately 35.3 percent and 47.2 percent , respectively , of our total claim reserves at december 31 , 2013. we use a tabular reserve methodology for group and individual long-term disability and group and individual long-term care claims that have been reported . under the tabular reserve methodology , reserves for reported claims are based on certain characteristics of the actual reported claimants , such as age , length of time disabled , and medical diagnosis . we believe the tabular reserve method is the most accurate to calculate long-term liabilities and allows us to use the most available known facts about each claim . ibnr claim reserves for our long-term products are calculated using the count and severity method using historical patterns of the claims to be reported and the associated claim costs . for unum us group short-term disability products , an estimate of the value of future payments to be made on claims already submitted , as well as ibnr claims , is determined in aggregate rather than on the individual claimant basis that we use for our long-term products , using historical patterns of claim incidence as well as historical patterns of aggregate claim resolution rates . the average length of time between the event triggering a claim under a policy and the final resolution of those claims is much shorter for these products than for our long-term liabilities and results in less estimation variability . claim reserves supporting the unum us group life and accidental death and dismemberment products represent approximately 3.7 percent of our total claim reserves at december 31 , 2013. claim reserves for these products are related primarily to death claims reported but not yet paid , ibnr death claims , and a liability for waiver of premium benefits . the death claim reserve is based on the actual face amount to be paid , the ibnr reserve is calculated using the count and severity method , and the waiver of premium benefits reserve is calculated using the tabular reserve methodology . claim reserves supporting our unum uk segment represent approximately 10.0 percent of our total claim reserves at december 31 , 2013 , and are calculated using generally the same methodology that we use for unum us disability and group life reserves . the assumptions used in calculating claim reserves for this line of business are based on standard united kingdom industry experience , adjusted for unum uk 's own experience . the majority of the colonial life segment lines of business have short-term benefits , which generally have less estimation variability than our long-term products because of the shorter claim payout period . our claim reserves for colonial life 's lines of business , which approximate 1.7 percent of our total claim reserves at december 31 , 2013 , are predominantly determined using the incurred loss development method based on our own experience . the incurred loss development method uses the historical patterns of payments by loss date to predict future claim payments for each loss date . where the incurred loss development method may not be appropriate , we estimate the incurred claims using an expected claim cost per policy or other measure of exposure . the key assumptions for claim reserves for the colonial life lines of business are : ( 1 ) the timing , rate , and amount of estimated future claim payments ; and ( 2 ) the estimated expenses associated with the payment of claims . 37 the following table displays policy reserves , incurred claim reserves , and ibnr claim reserves by major product line , with the summation of the policy reserves and claim reserves shown both gross and net of the associated reinsurance recoverable . incurred claim reserves represent reserves determined for each incurred claim and also include estimated amounts for litigation expenses and other expenses associated with the payment of the claims as well as provisions for claims which we estimate will be reopened for our long-term care products . ibnr claim reserves include provisions for incurred but not reported claims and a provision for reopened claims for our disability products . the ibnr and reopened claim reserves for our disability products are developed and maintained in aggregate based on historical monitoring that has only been on a combined basis . impacting year ov er year comparability of claim reserves in the following chart are the 2013 reserve adjustments for unclaimed death benefits and group life waiver of premium benefits . see `` executive summary `` contained in this item 7 and note 6 of the `` notes to consolidated financial statements `` contained herein in item 8 for further discussion of these reserve adjustments . replace_table_token_4_th 38 replace_table_token_5_th key assumptions the calculation of policy and claim reserves involves numerous assumptions , but the primary assumptions used to calculate reserves are ( 1 ) the discount rate , ( 2 ) the claim resolution rate , and ( 3 ) the claim incidence rate for policy reserves and ibnr claim
| issuance of debt in august 2012 , we issued $ 250.0 million of unsecured senior notes in a public offering . these notes , due 2042 , bear interest at a fixed rate of 5.75 % and are payable semi-annually . the notes are callable at or above par and rank equally in right of payment with all of our other unsecured and unsubordinated debt . the balance outstanding on these notes was $ 250.0 million at december 31 , 2013 . in 2010 , we issued $ 400.0 million of unsecured senior notes in a public offering . these notes , due in 2020 , bear interest at a fixed rate of 5.625 % and are payable semi-annually . the notes are callable at or above par and rank equally in right of payment with all of our other unsecured and unsubordinated debt . in addition , these notes are effectively subordinated to any indebtedness of our subsidiaries . the balance outstanding on these notes was $ 400.0 million at december 31 , 2013 . in 2009 , we issued $ 350.0 million of unsecured senior notes in a public offering . these notes , due in 2016 , bear interest at a fixed rate of 7.125 % and are payable semi-annually . the notes are callable at or above par and rank equally in right of payment with all of our other unsecured and unsubordinated debt . the balance outstanding on these notes was $ 350.0 million at december 31 , 2013 . in 2007 , northwind holdings issued $ 800.0 million floating rate , insured , senior , secured notes , due 2037 , in a private offering .
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because we defaulted on repayment of loans from bank of china , we are experiencing and , we believe , will continue to experience significant difficulties to renew our credit facilities or refinance loans from banks . upon request of bank of china , shenzhen municipal intermediate court has ordered to freeze all of our properties in shenzhen bak industrial park and tianjin industrial park zone near the end of fiscal year 2013 whereby we may not transfer these assets or pledge these assets for any other borrowings . in order to extend the bank loans to various dates through may 2014 , we were required by bank of china to pledge 100 % equity interest in shenzhen bak and almost all of our assets in shenzhen and tianjin , including land use rights and property rights , equipment , accounts receivable and inventories . we repaid our defaulted loans from bank of china on january 9 , 2014 and we expect that our frozen properties will be released by the court shortly . as of september 30 , 2013 , we had access to $ 163.5 million in short-term credit facilities and $ 29.2 million in other lines of credit , all of which were utilized to the extent of short-term bank loans of $ 151.4 million and bills payable of $ 41.4 million . these factors raise substantial doubts about our ability to continue as a going concern . we intend to sell part of our low efficiency assets and appreciating land and properties to repay our short term debts and to provide cash for the development of more promising products such as high power batteries and electric vehicle batteries . we transferred our 100 % equity interest in tianjin meicai to an unrelated party on august 27 , 2013. we also have intention to sell 100 % equity interest in bak international and its subsidiaries ( including all their assets and liabilities ) , and the properties in tianjin . we are in negotiation with the potential buyers about contract terms and clauses . we intend to obtain the approval of our shareholders before we close the transactions . prior to the completion of these disposals , the potential buyers preliminarily agreed in november and december 2013 that they would lend sufficient money to us to help us repay past due and maturing bank loans , on the condition that we make certain pledges and guarantees , including pledging our 100 % equity interest in bak international . on december 17 , 2013 , shenzhen bak entered into a loan agreement , or the loan agreement , with mr. jinghui wang , the sole shareholder of a potential buyer , pursuant to which , mr. wang agreed to lend us in the aggregate amount of rmb370 million ( approximately $ 60.4 million ) initially . on january 14 , 2014 , bak international entered into a corporate guarantee with mr. wang , or bak international corporate guarantee , under which , bak international irrevocably and unconditionally guarantees to the lender timely performance by shenzhen bak of all its obligations under the loan agreement . on the same date , china bak battery , inc. entered into a corporate guarantee with mr. wang , or china bak corporate guarantee , to irrevocably and unconditionally guarantee timely performance by shenzhen bak of all its obligations under the loan agreement . in addition , on january 14 , 2014 , china bak battery , inc. and bak international entered into a share mortgage with mr. wang , or share mortgage , under which , china bak battery , inc. pledges 100 % equity interest in bak international to the lender as security for the performance of shenzhen bak 's obligations under the loan agreement . if shenzhen bak defaults on its repayment obligation under or in connection with the loan agreement , the lender , as the pledgee , will be entitled to dispose of the pledged equity interests . bak international corporate guarantee , china bak corporate guarantee and share mortgage are attached hereto as exhibits 10.13 , 10.14 and 10.15 , and are hereby incorporated by reference . up to the date of this form 10-k , we have received rmb370 million ( approximately $ 60.4 million ) pursuant to the loan agreement and an additional rmb150 million ( approximately $ 24.6 million ) from mr. wang . we also repaid rmb85 million ( approximately $ 13.9 million ) and renewed short term bank loans of rmb71 million ( approximately $ 11.6 million ) with ping an bank and repaid an amount of rmb445.9 million ( approximately of $ 72.8 million ) of bank loans of bank of china and agricultural bank of china and bills payable of rmb49.2 million ( approximately of $ 8.1 million ) to bank of china . in addition , we have entered a letter of intent with a potential buyer of bak tianjin for a consideration of rmb150 million , pursuant to which , we have received rmb50 million ( approximately $ 8.2 million ) in advance on november 19 , 2013 to repay the same amount of loan from bank of dalian matured on november 20 , 2013. after the disposal of these assets , we will retain bak asia and its subsidiary , bak dalian . it is our understanding that the dalian government will grant certain government subsidies to us , including but not limited to land use rights at a favorable price . as of september 30 , 2013 , we received a subsidy of rmb150 million ( approximately $ 24.5 million ) from the management committee of dalian economic zone , to finance our removal of operating assets from tianjin to dalian . story_separator_special_tag we repaid the $ 8.2 million loans on november 20 , 2013. on february 1 , 2013 , we entered into a comprehensive credit facility with bank of dalian , tianjin branch to provide a maximum loan amount of rmb 120.0 million ( approximately $ 19.6 million ) . loans may be drawn at any time over the period from january 28 , 2013 to january 27 , 2014 and will be due based on each loan agreement . this credit facility agreement was guaranteed by mr. xiangqian li and his wife ms. xiaoqiu yu . as of september 30 , 2013 , we had a loan of approximately $ 6.6 million , including a loan agreement that we obtained the loan on february 1 , 2013 in the amount of rmb 40,000,000 ( approximately $ 6.5 million ) , bearing annual interest at 115 % of the benchmark rate of the pboc on the date of the loan agreement and will be adjusted in line with any adjustment of the benchmark rate , repayable on january 27 , 2014. we had also borrowed $ 7.9 million of notes payable under this credit facility agreement . we have a comprehensive credit facility agreement with ping an bank ( previously known as shenzhen development bank ) , longgang branch to provide a maximum loan amount of rmb 180 million ( approximately $ 29.4 million ) . loans may be drawn at any time from june 5 , 2012 to may 31 , 2013 and will be due based on each loan agreement . this credit facility agreement was guaranteed by bak international , bak tianjin and mr. xiangqian li , and also was secured by $ 24.5 million of inventory and $ 22.4 million of equipment at cost with a carrying amount of $ 2.4 million as of september 30 , 2013. as of september 30 , 2013 , we had three outstanding loans of approximately $ 13.9 million . the first loan was obtained on april 10 , 2013 for a period of six months in the amount of approximately $ 5.7 million , of which $ 3.3 million had been paid as of september 30 , 2013. the second loan was obtained on april 19 , 2013 for a period of six months in the amount of approximately $ 6.5 million . the third loan was obtained april 25 , 2013 for a period of six months in the amount of approximately $ 4.9 million . each loan , carries an annual interest at 110 % of the benchmark rate of the pboc on the date of the loan agreement and is adjusted semi-annually , and is repayable on november 30 , 2013. we repaid $ 1.1 million on october 17 , 2013 and another $ 1.2 million on november 20 , 2013. we paid the remaining $ 11.6 million on december 2 , 2013 and renewed the same amount on december 20 , 2013 from ping an bank . 43 we have a comprehensive credit facility agreement with china citic bank , shenzhen branch to provide a maximum loan amount of rmb 75 million ( approximately $ 12.3 million ) . loans may be drawn at any time from june 20 , 2012 to june 20 , 2013 and will be due based on each loan agreement . this credit facility was guaranteed by bak international and mr. xiangqian li . as of september 30 , 2013 , we borrowed $ 5.6 million of notes payable under the other credit line . we have a six-year long-term loan agreement expiring on february 9 , 2016 of rmb 150 million ( approximately $ 24.4 million ) with shenzhen branch , china development bank . the loan proceeds must be used for the construction of our research and development test centre in shenzhen . the long-term loan is secured by shenzhen bak 's pledge of its land use rights certificates , property ownership and equipment built-up by use of this long-term loan pursuant to the loan agreement . the obligations of shenzhen bak under this loan agreement are guaranteed by mr. xiangqian li . as of june 30 , 2013 , we had borrowed approximately rmb118.7 million ( or approximately $ 19.3 million ) in ten loans under this agreement , and bearing annual interest of 6.878 % , adjusted monthly . as of september 30 , 2013 , we had repaid all of those loans to china development bank . as of september 30 , 2013 , we had also borrowed $ 5.3 million , $ 0.8 million , $ 0.5 million of notes payable and other lines of credit outside any credit facility from bank of east asia , bank of china , tianjin branch and icbc , respectively . we have established long-term relationships with our suppliers and we can pay them within 90-360 days from the respective invoice dates . as we have been suffering severe cash flow deficiencies , we intend to sell part of our low efficiency assets and appreciating land and properties to repay our short term debts and to provide cash for the development of more promising products such as high power batteries and electric vehicle batteries . we transferred our 100 % equity interest in tianjin meicai to an unrelated party on august 27 , 2013. we also have intention to sell 100 % equity interest in bak international and its subsidiaries ( including all their assets and liabilities ) , and the properties in tianjin . we are in negotiation with the potential buyers about contract terms and clauses . we intend to obtain the approval of our shareholders before we close the transaction . after the disposal of these assets , we will retain bak asia and its subsidiary , bak dalian . it is our understanding that the dalian government will grant certain government subsidies to us , including but not limited to land use rights at a
| issuance of debt in august 2012 , we issued $ 250.0 million of unsecured senior notes in a public offering . these notes , due 2042 , bear interest at a fixed rate of 5.75 % and are payable semi-annually . the notes are callable at or above par and rank equally in right of payment with all of our other unsecured and unsubordinated debt . the balance outstanding on these notes was $ 250.0 million at december 31 , 2013 . in 2010 , we issued $ 400.0 million of unsecured senior notes in a public offering . these notes , due in 2020 , bear interest at a fixed rate of 5.625 % and are payable semi-annually . the notes are callable at or above par and rank equally in right of payment with all of our other unsecured and unsubordinated debt . in addition , these notes are effectively subordinated to any indebtedness of our subsidiaries . the balance outstanding on these notes was $ 400.0 million at december 31 , 2013 . in 2009 , we issued $ 350.0 million of unsecured senior notes in a public offering . these notes , due in 2016 , bear interest at a fixed rate of 7.125 % and are payable semi-annually . the notes are callable at or above par and rank equally in right of payment with all of our other unsecured and unsubordinated debt . the balance outstanding on these notes was $ 350.0 million at december 31 , 2013 . in 2007 , northwind holdings issued $ 800.0 million floating rate , insured , senior , secured notes , due 2037 , in a private offering .
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because we defaulted on repayment of loans from bank of china , we are experiencing and , we believe , will continue to experience significant difficulties to renew our credit facilities or refinance loans from banks . upon request of bank of china , shenzhen municipal intermediate court has ordered to freeze all of our properties in shenzhen bak industrial park and tianjin industrial park zone near the end of fiscal year 2013 whereby we may not transfer these assets or pledge these assets for any other borrowings . in order to extend the bank loans to various dates through may 2014 , we were required by bank of china to pledge 100 % equity interest in shenzhen bak and almost all of our assets in shenzhen and tianjin , including land use rights and property rights , equipment , accounts receivable and inventories . we repaid our defaulted loans from bank of china on january 9 , 2014 and we expect that our frozen properties will be released by the court shortly . as of september 30 , 2013 , we had access to $ 163.5 million in short-term credit facilities and $ 29.2 million in other lines of credit , all of which were utilized to the extent of short-term bank loans of $ 151.4 million and bills payable of $ 41.4 million . these factors raise substantial doubts about our ability to continue as a going concern . we intend to sell part of our low efficiency assets and appreciating land and properties to repay our short term debts and to provide cash for the development of more promising products such as high power batteries and electric vehicle batteries . we transferred our 100 % equity interest in tianjin meicai to an unrelated party on august 27 , 2013. we also have intention to sell 100 % equity interest in bak international and its subsidiaries ( including all their assets and liabilities ) , and the properties in tianjin . we are in negotiation with the potential buyers about contract terms and clauses . we intend to obtain the approval of our shareholders before we close the transactions . prior to the completion of these disposals , the potential buyers preliminarily agreed in november and december 2013 that they would lend sufficient money to us to help us repay past due and maturing bank loans , on the condition that we make certain pledges and guarantees , including pledging our 100 % equity interest in bak international . on december 17 , 2013 , shenzhen bak entered into a loan agreement , or the loan agreement , with mr. jinghui wang , the sole shareholder of a potential buyer , pursuant to which , mr. wang agreed to lend us in the aggregate amount of rmb370 million ( approximately $ 60.4 million ) initially . on january 14 , 2014 , bak international entered into a corporate guarantee with mr. wang , or bak international corporate guarantee , under which , bak international irrevocably and unconditionally guarantees to the lender timely performance by shenzhen bak of all its obligations under the loan agreement . on the same date , china bak battery , inc. entered into a corporate guarantee with mr. wang , or china bak corporate guarantee , to irrevocably and unconditionally guarantee timely performance by shenzhen bak of all its obligations under the loan agreement . in addition , on january 14 , 2014 , china bak battery , inc. and bak international entered into a share mortgage with mr. wang , or share mortgage , under which , china bak battery , inc. pledges 100 % equity interest in bak international to the lender as security for the performance of shenzhen bak 's obligations under the loan agreement . if shenzhen bak defaults on its repayment obligation under or in connection with the loan agreement , the lender , as the pledgee , will be entitled to dispose of the pledged equity interests . bak international corporate guarantee , china bak corporate guarantee and share mortgage are attached hereto as exhibits 10.13 , 10.14 and 10.15 , and are hereby incorporated by reference . up to the date of this form 10-k , we have received rmb370 million ( approximately $ 60.4 million ) pursuant to the loan agreement and an additional rmb150 million ( approximately $ 24.6 million ) from mr. wang . we also repaid rmb85 million ( approximately $ 13.9 million ) and renewed short term bank loans of rmb71 million ( approximately $ 11.6 million ) with ping an bank and repaid an amount of rmb445.9 million ( approximately of $ 72.8 million ) of bank loans of bank of china and agricultural bank of china and bills payable of rmb49.2 million ( approximately of $ 8.1 million ) to bank of china . in addition , we have entered a letter of intent with a potential buyer of bak tianjin for a consideration of rmb150 million , pursuant to which , we have received rmb50 million ( approximately $ 8.2 million ) in advance on november 19 , 2013 to repay the same amount of loan from bank of dalian matured on november 20 , 2013. after the disposal of these assets , we will retain bak asia and its subsidiary , bak dalian . it is our understanding that the dalian government will grant certain government subsidies to us , including but not limited to land use rights at a favorable price . as of september 30 , 2013 , we received a subsidy of rmb150 million ( approximately $ 24.5 million ) from the management committee of dalian economic zone , to finance our removal of operating assets from tianjin to dalian . story_separator_special_tag we repaid the $ 8.2 million loans on november 20 , 2013. on february 1 , 2013 , we entered into a comprehensive credit facility with bank of dalian , tianjin branch to provide a maximum loan amount of rmb 120.0 million ( approximately $ 19.6 million ) . loans may be drawn at any time over the period from january 28 , 2013 to january 27 , 2014 and will be due based on each loan agreement . this credit facility agreement was guaranteed by mr. xiangqian li and his wife ms. xiaoqiu yu . as of september 30 , 2013 , we had a loan of approximately $ 6.6 million , including a loan agreement that we obtained the loan on february 1 , 2013 in the amount of rmb 40,000,000 ( approximately $ 6.5 million ) , bearing annual interest at 115 % of the benchmark rate of the pboc on the date of the loan agreement and will be adjusted in line with any adjustment of the benchmark rate , repayable on january 27 , 2014. we had also borrowed $ 7.9 million of notes payable under this credit facility agreement . we have a comprehensive credit facility agreement with ping an bank ( previously known as shenzhen development bank ) , longgang branch to provide a maximum loan amount of rmb 180 million ( approximately $ 29.4 million ) . loans may be drawn at any time from june 5 , 2012 to may 31 , 2013 and will be due based on each loan agreement . this credit facility agreement was guaranteed by bak international , bak tianjin and mr. xiangqian li , and also was secured by $ 24.5 million of inventory and $ 22.4 million of equipment at cost with a carrying amount of $ 2.4 million as of september 30 , 2013. as of september 30 , 2013 , we had three outstanding loans of approximately $ 13.9 million . the first loan was obtained on april 10 , 2013 for a period of six months in the amount of approximately $ 5.7 million , of which $ 3.3 million had been paid as of september 30 , 2013. the second loan was obtained on april 19 , 2013 for a period of six months in the amount of approximately $ 6.5 million . the third loan was obtained april 25 , 2013 for a period of six months in the amount of approximately $ 4.9 million . each loan , carries an annual interest at 110 % of the benchmark rate of the pboc on the date of the loan agreement and is adjusted semi-annually , and is repayable on november 30 , 2013. we repaid $ 1.1 million on october 17 , 2013 and another $ 1.2 million on november 20 , 2013. we paid the remaining $ 11.6 million on december 2 , 2013 and renewed the same amount on december 20 , 2013 from ping an bank . 43 we have a comprehensive credit facility agreement with china citic bank , shenzhen branch to provide a maximum loan amount of rmb 75 million ( approximately $ 12.3 million ) . loans may be drawn at any time from june 20 , 2012 to june 20 , 2013 and will be due based on each loan agreement . this credit facility was guaranteed by bak international and mr. xiangqian li . as of september 30 , 2013 , we borrowed $ 5.6 million of notes payable under the other credit line . we have a six-year long-term loan agreement expiring on february 9 , 2016 of rmb 150 million ( approximately $ 24.4 million ) with shenzhen branch , china development bank . the loan proceeds must be used for the construction of our research and development test centre in shenzhen . the long-term loan is secured by shenzhen bak 's pledge of its land use rights certificates , property ownership and equipment built-up by use of this long-term loan pursuant to the loan agreement . the obligations of shenzhen bak under this loan agreement are guaranteed by mr. xiangqian li . as of june 30 , 2013 , we had borrowed approximately rmb118.7 million ( or approximately $ 19.3 million ) in ten loans under this agreement , and bearing annual interest of 6.878 % , adjusted monthly . as of september 30 , 2013 , we had repaid all of those loans to china development bank . as of september 30 , 2013 , we had also borrowed $ 5.3 million , $ 0.8 million , $ 0.5 million of notes payable and other lines of credit outside any credit facility from bank of east asia , bank of china , tianjin branch and icbc , respectively . we have established long-term relationships with our suppliers and we can pay them within 90-360 days from the respective invoice dates . as we have been suffering severe cash flow deficiencies , we intend to sell part of our low efficiency assets and appreciating land and properties to repay our short term debts and to provide cash for the development of more promising products such as high power batteries and electric vehicle batteries . we transferred our 100 % equity interest in tianjin meicai to an unrelated party on august 27 , 2013. we also have intention to sell 100 % equity interest in bak international and its subsidiaries ( including all their assets and liabilities ) , and the properties in tianjin . we are in negotiation with the potential buyers about contract terms and clauses . we intend to obtain the approval of our shareholders before we close the transaction . after the disposal of these assets , we will retain bak asia and its subsidiary , bak dalian . it is our understanding that the dalian government will grant certain government subsidies to us , including but not limited to land use rights at a
| liquidity and capital resources we have historically financed our liquidity requirements from a variety of sources , including short-term bank loans , other short-term loans , long-term bank loans and bills payable under bank credit agreements , factoring of bills receivable to banks and issuance of capital stock . due to the weak economic environment in china and stricter lending policy the chinese government placed on the china finance system , it is becoming more difficult for us to obtain new financing from banks . as of september 30 , 2013 , we had cash and cash equivalents of $ 14.0 million . in addition , we had pledged deposits amounting to $ 8.1 million . typically , banks will require borrowers to maintain deposits of approximately 18 % to 52 % of the outstanding bills payable . the individual bills have maturities ranging from six to twelve months which coincide with the periods the cash remains pledged to the banks . as of september 30 , 2013 , we had access to $ 163.5 million in short-term credit facilities and $ 29.2 million in other lines of credit , all of which were utilized . the following table sets forth a summary of our cash flows for the periods indicated : ( all amounts in thousands of u.s. dollars ) replace_table_token_8_th operating activities net cash provided by operating activities was $ 23.6 million in the year ended september 30 , 2013 , as compared with $ 5.2 million in fiscal year 2012. the increase of $ 18.4 million in net cash provided by operating activities was mainly attributable to a subsidy of $ 24.5 million from the management committee of dalian economic zone to finance moving of our production facilities from tianjin to dalian .
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these declines were the result of overall softness in freight within the truckload segment , resulting in a slight decline in miles per tractor per week and a 3.9 % decrease in the average tractor count , even considering a 5.3 % increase in the number of team tractors , and average rates per total mile declining 2.2 cents per mile . cost in the truckload segment increased 8.3 cents per mile , primarily as a result of increased capital cost , resulting from the significant decline in used equipment values and related increase in depreciation . on the contrary , our non-truckload operations experienced growth in both revenue and profitability as we were able to take advantage of the market dynamics and realize the full year effect of several business model changes and new customers added in 2015. our consolidated financial results are summarized as follows : ● total revenue was $ 670.7 million , compared with $ 724.2 million for 2015 , and freight revenue ( excludes revenue from fuel surcharge ) was $ 610.8 million , compared with $ 640.1 million for 2015 ; ● operating income was $ 32.4 million , compared with operating income of $ 67.8 million for 2015 ; 36 ● net income was $ 16.8 million , or $ 0.92 per diluted share , compared with net income of $ 42.1 million , or $ 2.30 per diluted share , for 2015. net income for 2015 includes a one-time federal income tax credit of approximately $ 4.7 million , or $ 0.26 per diluted share and an insurance policy commutation credit of approximately $ 2.2 million , or $ 0.12 per diluted share ; ● our equity investment in tel provided $ 3.0 million of pre-tax earnings in 2016 compared to $ 4.6 million for 2015 ; and ● stockholders ' equity and tangible book value at december 31 , 2016 , were $ 236.4 million , or $ 12.95 per basic share . although 2016 was not what we had hoped , we are still encouraged by the trend line over the last several years . our turnaround efforts at srt were fully engaged in 2016 , including a new management team , and we have established a roadmap that we believe will be successful in returning srt 's results to levels where they produce an acceptable return . we continue to focus on deleveraging the balance sheet resulting in total indebtedness , net of cash and including the present value of off-balance sheet lease obligations decreasing by approximately $ 37.5 million to $ 226.7 million , since december 31 , 2015. additionally , earnings and the reduced impact of fuel hedges have increased tangible book value per basic share 16.1 % to $ 12.95 from $ 11.15 at december 31 , 2015. in addition to operating ratio , we use `` adjusted operating ratio `` as a key measure of profitability . adjusted operating ratio is not a substitute for operating ratio measured in accordance with gaap . there are limitations to using non-gaap financial measures . adjusted operating ratio means operating expenses , net of fuel surcharge revenue , expressed as a percentage of revenue , excluding fuel surcharge revenue . we believe the use of adjusted operating ratio allows us to more effectively compare periods , while excluding the potentially volatile effect of changes in fuel prices . our board and management focus on our adjusted operating ratio as an indicator of our performance from period to period . we believe our presentation of adjusted operating ratio is useful because it provides investors and securities analysts the same information that we use internally to assess our core operating performance . although we believe that adjusted operating ratio improves comparability in analyzing our period-to-period performance , it could limit comparability to other companies in our industry , if those companies define adjusted operating ratio differently . because of these limitations , adjusted operating ratio should not be considered a measure of income generated by our business or discretionary cash available to us to invest in the growth of our business . management compensates for these limitations by primarily relying on gaap results and using non-gaap financial measures on a supplemental basis . operating ratio replace_table_token_6_th 37 outlook we are forecasting sequential improvement for 2017. in the first half of 2017 we do not expect to match the earnings per share levels we generated for the first and second quarters of 2016. however , we believe the combination of an improving economy , growth of time-sensitive e-commerce freight , industry regulatory changes , retail inventory declines , year-over-year net fuel expense savings from our improved fuel hedge positions , and operational progress at srt should deliver earnings improvement that result in higher earnings for the second half and potentially the full year of 2017. the largest variable we foresee is the pace and magnitude of improvement at srt , which we believe could contribute up to $ 10.0 million of pre-tax income in improved results as compared with 2016. the pace and amount of change will depend , in large part , on our ability to enhance the freight network , which depends on internally re-engineering lanes and a stronger refrigerated freight market . with net capital expenditures scheduled to be below normal due to the timing of our expected replacement cycle , along with anticipated positive operating cash flows , we expect to further reduce balance sheet and off-balance sheet debt over the course of fiscal 2017. our 2017 plans also include growing our dedicated service line and investing in personnel and trailer tracking equipment that will allow more cross-border freight opportunities . story_separator_special_tag for the year ended december 31 , 2015 , operations and maintenance decreased $ 0.8 million , or 1.7 % , compared with 2014. as a percentage of total revenue , operations and maintenance remained relatively even at 6.4 % of total revenue in 2015 , compared with 6.6 % in 2014. as a percentage of freight revenue , operations and maintenance decreased to 7.3 % of freight revenue for 2015 , from 8.2 % in 2014 due to a decrease in our average age of equipment partially offset by increased driver recruiting costs . 41 going forward , we believe this category will fluctuate based on several factors , including our continued ability to maintain a relatively young fleet , accident severity and frequency , weather , and the reliability of new and untested revenue equipment models . revenue equipment rentals and purchased transportation replace_table_token_12_th revenue equipment rentals and purchased transportation decreased approximately $ 1.1 million , or 0.9 % , for the year ended december 31 , 2016 , compared with 2015. as a percentage of total revenue , revenue equipment rentals and purchased transportation increased to 17.5 % of total revenue for the year ended december 31 , 2016 , from 16.4 % in 2015. as a percentage of freight revenue , revenue equipment rentals and purchased transportation increased to 19.2 % of freight revenue for the year ended december 31 , 2016 , from 18.5 % in 2015. these changes were primarily the result of a $ 0.7 million increase in payments to third-party transportation providers related to increased revenues at our solutions subsidiary and growth of our temperature-controlled intermodal service offering . these increases were partially offset by a decrease in leased equipment rental payments due to a reduction in our trailers under operating leases from 2,239 at december 31 , 2105 to 1,695 at december 31 , 2016. for the year ended december 31 , 2015 , revenue equipment rentals and purchased transportation increased approximately $ 6.8 million , or 6.1 % , for the year ended december 31 , 2015 , compared with 2014. as a percentage of total revenue , revenue equipment rentals and purchased transportation increased to 16.4 % of total revenue for the year ended december 31 , 2015 , from 15.5 % in 2014. as a percentage of freight revenue , revenue equipment rentals and purchased transportation decreased to 18.5 % of freight revenue for the year ended december 31 , 2015 , from 19.3 % in 2014. these changes were primarily the result of a $ 14.4 million increase in payments to third-party transportation providers related to increased revenues at our solutions subsidiary , growth of our temperature-controlled intermodal service offering and an increase in payments to independent contractors , which comprised a larger percentage of our total fleet . these increases were partially offset by a decrease in leased equipment rental payments and by lower fuel surcharge pass-through payments to independent contractors and third party carriers . for the year ended december 31 , 2015 , miles run by independent contractors increased to 9.0 % of our total miles from 8.2 % for 2014 , and tractors under operating leases decreased to 115 units from 150 units in 2014. we expect revenue equipment rentals to decrease going forward as a result of our increase in acquisition of revenue equipment through financed purchases or capital leases rather than operating leases . as discussed below , this decrease may be partially or fully offset by an increase in purchased transportation as we expect to continue to grow our solutions and intermodal service offerings . we expect purchased transportation to increase as we seek to grow our solutions subsidiary and if fuel prices continue to increase , which would result in an increase in what we pay third party carriers and independent contractors . however , this expense category will fluctuate with the number and percentage of loads hauled by independent contractors , loads handled by solutions , and tractors , trailers , and other assets financed with operating leases . in addition , factors such as the cost to obtain third party transportation services , and growth of our intermodal service offerings , and the amount of fuel surcharge revenue passed through to the third party carriers and independent contractors will affect this expense category . if industry-wide trucking capacity were to tighten in relation to freight demand , we may need to increase the amounts we pay to third-party transportation providers , independent contractors , and intermodal transportation providers , which could increase this expense category on an absolute basis and as a percentage of freight revenue absent an offsetting increase in revenue . we continue to actively recruit independent contractors and , if we are successful , we would expect this line item to increase as a percentage of revenue . operating taxes and licenses replace_table_token_13_th for the periods presented , the change in operating taxes and licenses was not significant as either a percentage of total revenue or freight revenue . 42 insurance and claims replace_table_token_14_th insurance and claims , consisting primarily of premiums and deductible amounts for liability , physical damage , and cargo damage insurance and claims , increased approximately $ 0.7 million , or 2.2 % , for year ended december 31 , 2016 , compared to 2015. as a percentage of total revenue , insurance and claims increased to 4.9 % of total revenue for the year ended december 31 , 2016 , from 4.4 % in 2015. as a percentage of freight revenue , insurance and claims increased to 5.3 % of freight revenue for the year ended december 31 , 2016 , from 5.0 % in 2015. these increases are primarily related to the non-recurring $ 3.6 million benefit in the second quarter of 2015 from commutation of our auto liability policy for the period from april 1 , 2013 , through september 30 , 2014. these increases also resulted
| liquidity and capital resources we have historically financed our liquidity requirements from a variety of sources , including short-term bank loans , other short-term loans , long-term bank loans and bills payable under bank credit agreements , factoring of bills receivable to banks and issuance of capital stock . due to the weak economic environment in china and stricter lending policy the chinese government placed on the china finance system , it is becoming more difficult for us to obtain new financing from banks . as of september 30 , 2013 , we had cash and cash equivalents of $ 14.0 million . in addition , we had pledged deposits amounting to $ 8.1 million . typically , banks will require borrowers to maintain deposits of approximately 18 % to 52 % of the outstanding bills payable . the individual bills have maturities ranging from six to twelve months which coincide with the periods the cash remains pledged to the banks . as of september 30 , 2013 , we had access to $ 163.5 million in short-term credit facilities and $ 29.2 million in other lines of credit , all of which were utilized . the following table sets forth a summary of our cash flows for the periods indicated : ( all amounts in thousands of u.s. dollars ) replace_table_token_8_th operating activities net cash provided by operating activities was $ 23.6 million in the year ended september 30 , 2013 , as compared with $ 5.2 million in fiscal year 2012. the increase of $ 18.4 million in net cash provided by operating activities was mainly attributable to a subsidy of $ 24.5 million from the management committee of dalian economic zone to finance moving of our production facilities from tianjin to dalian .
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these declines were the result of overall softness in freight within the truckload segment , resulting in a slight decline in miles per tractor per week and a 3.9 % decrease in the average tractor count , even considering a 5.3 % increase in the number of team tractors , and average rates per total mile declining 2.2 cents per mile . cost in the truckload segment increased 8.3 cents per mile , primarily as a result of increased capital cost , resulting from the significant decline in used equipment values and related increase in depreciation . on the contrary , our non-truckload operations experienced growth in both revenue and profitability as we were able to take advantage of the market dynamics and realize the full year effect of several business model changes and new customers added in 2015. our consolidated financial results are summarized as follows : ● total revenue was $ 670.7 million , compared with $ 724.2 million for 2015 , and freight revenue ( excludes revenue from fuel surcharge ) was $ 610.8 million , compared with $ 640.1 million for 2015 ; ● operating income was $ 32.4 million , compared with operating income of $ 67.8 million for 2015 ; 36 ● net income was $ 16.8 million , or $ 0.92 per diluted share , compared with net income of $ 42.1 million , or $ 2.30 per diluted share , for 2015. net income for 2015 includes a one-time federal income tax credit of approximately $ 4.7 million , or $ 0.26 per diluted share and an insurance policy commutation credit of approximately $ 2.2 million , or $ 0.12 per diluted share ; ● our equity investment in tel provided $ 3.0 million of pre-tax earnings in 2016 compared to $ 4.6 million for 2015 ; and ● stockholders ' equity and tangible book value at december 31 , 2016 , were $ 236.4 million , or $ 12.95 per basic share . although 2016 was not what we had hoped , we are still encouraged by the trend line over the last several years . our turnaround efforts at srt were fully engaged in 2016 , including a new management team , and we have established a roadmap that we believe will be successful in returning srt 's results to levels where they produce an acceptable return . we continue to focus on deleveraging the balance sheet resulting in total indebtedness , net of cash and including the present value of off-balance sheet lease obligations decreasing by approximately $ 37.5 million to $ 226.7 million , since december 31 , 2015. additionally , earnings and the reduced impact of fuel hedges have increased tangible book value per basic share 16.1 % to $ 12.95 from $ 11.15 at december 31 , 2015. in addition to operating ratio , we use `` adjusted operating ratio `` as a key measure of profitability . adjusted operating ratio is not a substitute for operating ratio measured in accordance with gaap . there are limitations to using non-gaap financial measures . adjusted operating ratio means operating expenses , net of fuel surcharge revenue , expressed as a percentage of revenue , excluding fuel surcharge revenue . we believe the use of adjusted operating ratio allows us to more effectively compare periods , while excluding the potentially volatile effect of changes in fuel prices . our board and management focus on our adjusted operating ratio as an indicator of our performance from period to period . we believe our presentation of adjusted operating ratio is useful because it provides investors and securities analysts the same information that we use internally to assess our core operating performance . although we believe that adjusted operating ratio improves comparability in analyzing our period-to-period performance , it could limit comparability to other companies in our industry , if those companies define adjusted operating ratio differently . because of these limitations , adjusted operating ratio should not be considered a measure of income generated by our business or discretionary cash available to us to invest in the growth of our business . management compensates for these limitations by primarily relying on gaap results and using non-gaap financial measures on a supplemental basis . operating ratio replace_table_token_6_th 37 outlook we are forecasting sequential improvement for 2017. in the first half of 2017 we do not expect to match the earnings per share levels we generated for the first and second quarters of 2016. however , we believe the combination of an improving economy , growth of time-sensitive e-commerce freight , industry regulatory changes , retail inventory declines , year-over-year net fuel expense savings from our improved fuel hedge positions , and operational progress at srt should deliver earnings improvement that result in higher earnings for the second half and potentially the full year of 2017. the largest variable we foresee is the pace and magnitude of improvement at srt , which we believe could contribute up to $ 10.0 million of pre-tax income in improved results as compared with 2016. the pace and amount of change will depend , in large part , on our ability to enhance the freight network , which depends on internally re-engineering lanes and a stronger refrigerated freight market . with net capital expenditures scheduled to be below normal due to the timing of our expected replacement cycle , along with anticipated positive operating cash flows , we expect to further reduce balance sheet and off-balance sheet debt over the course of fiscal 2017. our 2017 plans also include growing our dedicated service line and investing in personnel and trailer tracking equipment that will allow more cross-border freight opportunities . story_separator_special_tag for the year ended december 31 , 2015 , operations and maintenance decreased $ 0.8 million , or 1.7 % , compared with 2014. as a percentage of total revenue , operations and maintenance remained relatively even at 6.4 % of total revenue in 2015 , compared with 6.6 % in 2014. as a percentage of freight revenue , operations and maintenance decreased to 7.3 % of freight revenue for 2015 , from 8.2 % in 2014 due to a decrease in our average age of equipment partially offset by increased driver recruiting costs . 41 going forward , we believe this category will fluctuate based on several factors , including our continued ability to maintain a relatively young fleet , accident severity and frequency , weather , and the reliability of new and untested revenue equipment models . revenue equipment rentals and purchased transportation replace_table_token_12_th revenue equipment rentals and purchased transportation decreased approximately $ 1.1 million , or 0.9 % , for the year ended december 31 , 2016 , compared with 2015. as a percentage of total revenue , revenue equipment rentals and purchased transportation increased to 17.5 % of total revenue for the year ended december 31 , 2016 , from 16.4 % in 2015. as a percentage of freight revenue , revenue equipment rentals and purchased transportation increased to 19.2 % of freight revenue for the year ended december 31 , 2016 , from 18.5 % in 2015. these changes were primarily the result of a $ 0.7 million increase in payments to third-party transportation providers related to increased revenues at our solutions subsidiary and growth of our temperature-controlled intermodal service offering . these increases were partially offset by a decrease in leased equipment rental payments due to a reduction in our trailers under operating leases from 2,239 at december 31 , 2105 to 1,695 at december 31 , 2016. for the year ended december 31 , 2015 , revenue equipment rentals and purchased transportation increased approximately $ 6.8 million , or 6.1 % , for the year ended december 31 , 2015 , compared with 2014. as a percentage of total revenue , revenue equipment rentals and purchased transportation increased to 16.4 % of total revenue for the year ended december 31 , 2015 , from 15.5 % in 2014. as a percentage of freight revenue , revenue equipment rentals and purchased transportation decreased to 18.5 % of freight revenue for the year ended december 31 , 2015 , from 19.3 % in 2014. these changes were primarily the result of a $ 14.4 million increase in payments to third-party transportation providers related to increased revenues at our solutions subsidiary , growth of our temperature-controlled intermodal service offering and an increase in payments to independent contractors , which comprised a larger percentage of our total fleet . these increases were partially offset by a decrease in leased equipment rental payments and by lower fuel surcharge pass-through payments to independent contractors and third party carriers . for the year ended december 31 , 2015 , miles run by independent contractors increased to 9.0 % of our total miles from 8.2 % for 2014 , and tractors under operating leases decreased to 115 units from 150 units in 2014. we expect revenue equipment rentals to decrease going forward as a result of our increase in acquisition of revenue equipment through financed purchases or capital leases rather than operating leases . as discussed below , this decrease may be partially or fully offset by an increase in purchased transportation as we expect to continue to grow our solutions and intermodal service offerings . we expect purchased transportation to increase as we seek to grow our solutions subsidiary and if fuel prices continue to increase , which would result in an increase in what we pay third party carriers and independent contractors . however , this expense category will fluctuate with the number and percentage of loads hauled by independent contractors , loads handled by solutions , and tractors , trailers , and other assets financed with operating leases . in addition , factors such as the cost to obtain third party transportation services , and growth of our intermodal service offerings , and the amount of fuel surcharge revenue passed through to the third party carriers and independent contractors will affect this expense category . if industry-wide trucking capacity were to tighten in relation to freight demand , we may need to increase the amounts we pay to third-party transportation providers , independent contractors , and intermodal transportation providers , which could increase this expense category on an absolute basis and as a percentage of freight revenue absent an offsetting increase in revenue . we continue to actively recruit independent contractors and , if we are successful , we would expect this line item to increase as a percentage of revenue . operating taxes and licenses replace_table_token_13_th for the periods presented , the change in operating taxes and licenses was not significant as either a percentage of total revenue or freight revenue . 42 insurance and claims replace_table_token_14_th insurance and claims , consisting primarily of premiums and deductible amounts for liability , physical damage , and cargo damage insurance and claims , increased approximately $ 0.7 million , or 2.2 % , for year ended december 31 , 2016 , compared to 2015. as a percentage of total revenue , insurance and claims increased to 4.9 % of total revenue for the year ended december 31 , 2016 , from 4.4 % in 2015. as a percentage of freight revenue , insurance and claims increased to 5.3 % of freight revenue for the year ended december 31 , 2016 , from 5.0 % in 2015. these increases are primarily related to the non-recurring $ 3.6 million benefit in the second quarter of 2015 from commutation of our auto liability policy for the period from april 1 , 2013 , through september 30 , 2014. these increases also resulted
| cash flows net cash flows provided by operating activities were $ 102.4 million in 2016 compared with $ 85.5 million in 2015 primarily due to the change in receivables and advances as a result of increased cash collected during 2016 related to increased 2015 year-end revenues , and the fluctuation in tax benefit/expense due to the reversal of deferred tax effects on amounts in other comprehensive income . this improvement is partially offset by net income of $ 16.8 million in 2016 compared to net income of $ 42.1 million in 2015 , depreciation and amortization increasing $ 9.6 million in 2016 , primarily as the result of the reduced residual revenue equipment value projections due to the softened used equipment market and the 2015 purchase of our previously leased chattanooga headquarters property , and the 2015 return of $ 5.0 million which was previously provided by us to certain of our derivative counterparties related to the net liability position of certain of our fuel derivative instruments . the fluctuations in cash flows from accounts payable and accrued expenses primarily related to the timing of payments on our accrued expenses and trade accounts in the 2016 period compared to the 2015 period . 47 net cash flows used by investing activities were $ 47.3 million in 2016 compared with $ 147.7 million in 2015. the $ 100.4 million decrease in net investing activities was attributable primarily to the purchase of our corporate headquarters property in chattanooga , tennessee during 2015 for approximately $ 35.5 million , as well as a $ 22.9 million decrease in assets held for sale due to the timing of dispositions of used revenue equipment . during 2017 we plan to take delivery of approximately 485 new company tractors and dispose of approximately 460 used tractors . this compares to the approximately 650 new company tractors we took delivery of and the approximately 1,074 used tractors we disposed of during 2016 , including 365 recorded as assets held for sale at december 31 , 2015. going forward , cash flows from disposals of equipment could be more volatile given the weakness in the used tractor market .
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in 2019 , the performance coatings group opened 3 new branches and closed 4 locations decreasing the total from 282 to 281 branches open in the united states , canada , mexico , south america , europe and asia at 22 year-end . in 2020 , the performance coatings group plans to continue expanding its worldwide presence and improving its customer base . net sales in the administrative segment , which primarily consists of external leasing revenue of excess headquarters space and leasing of facilities no longer used by the company in its primary business , decreased by an insignificant amount in 2019 . consolidated gross profit increased $ 617.5 million in 2019 compared to the same period in 2018. consolidated gross profit as a percent to consolidated net sales increased to 44.9 % in 2019 from 42.3 % in 2018 . consolidated gross profit dollars and percent improved as a result of higher paint sales volume in north american stores , selling price increases , improved supply chain efficiencies , moderating raw material costs , and lower acquisition-related amortization expense , partially offset by unfavorable currency translation rate changes . the americas group 's gross profit for 2019 increased $ 384.2 million compared to the same period in 2018 . the americas group 's gross profit dollars and margin improved as a result of higher paint sales volume , selling price increases and moderating raw material costs . the consumer brands group 's gross profit increased $ 125.5 million in 2019 compared to the same period in 2018 . the consumer brands group 's gross profit dollars and margin improved due primarily to improved supply chain efficiencies , synergies , moderating raw material costs , and lower acquisition-related depreciation expense , partially offset by lower paint sales volume . the performance coatings group 's gross profit for 2019 increased $ 51.3 million compared to the same period in 2018 . the performance coatings group 's gross profit dollars and margin improved due primarily to selling price increases and moderating raw material costs , partially offset by unfavorable currency translation rate changes . consolidated sg & a increased by $ 241.1 million due primarily to increased expenses to support higher sales levels and net new store openings , partially offset by good cost control . sg & a increased as a percent of sales to 29.5 % in 2019 from 28.7 % in 2018 as a result of softer sales outside of north america . the americas group 's sg & a increased $ 196.7 million for the year due primarily to increased spending due to the number of new store openings and general comparable store expenses to support higher sales levels . the consumer brands group 's sg & a increased by $ 12.7 million for the year primarily due to increased expenses to support new customer programs . the performance coatings group 's sg & a decreased by $ 0.9 million for the year related to softer sales outside of north america . the administrative segment 's sg & a increased $ 32.6 million primarily due to increased investments in information systems and increased compensation , including stock-based compensation . other general expense - net decreased $ 150.0 million in 2019 compared to 2018 . the decrease was mainly caused by a decrease of $ 147.6 million in the administrative segment , which was primarily attributable to a decrease in expense recognized related to provisions for environmental matters . the expense recognized related to environmental provisions decreased $ 153.3 million from the prior year . this decrease was the result of the company reaching a series of agreements in 2018 with the environmental protection agency for remediation plans with cost estimates at one of the company 's four major sites which required significant environmental provisions to be recorded . see notes 10 and 18 to the consolidated financial statements in item 8 for additional information concerning environmental matters and other general expense - net , respectively . as required by the goodwill and other intangibles topic of the asc , management performed an annual impairment test of goodwill and indefinite-lived intangible assets as of october 1 , 2019 . during the fourth quarter of 2019 , the company recognized non-cash pre-tax impairment charges totaling $ 122.1 million related to recently acquired trademarks . these charges included impairments totaling $ 117.0 million in the performance coatings group and $ 5.1 million in the consumer brands group . in the performance coatings group , $ 75.6 million related to trademarks in north america directly associated with strategic decisions made to rebrand industrial products to the sherwin-williams® brand name , $ 25.7 million related to trademarks in the asia pacific region as a direct result of recent performance which reduced the long-term forecasted net sales and $ 15.7 million related to other recently acquired trademarks in various regions . the impairment tests in 2018 did not result in any impairment . see note 6 to the consolidated financial statements in item 8 for additional information . interest expense decreased $ 17.4 million in 2019 primarily due to lower average debt levels . interest and net investment income increased $ 20.7 million in 2019 including an $ 18.8 million gain recognized during the fourth quarter of 2019 after the company received a favorable court decision in brazil related to the recovery of certain indirect taxes previously paid over gross sales . see note 18 to the consolidated financial statements in item 8 for additional information on the brazil indirect tax matter . during 2019 , the company recognized a $ 34.7 million benefit from the resolution of the california public nuisance litigation as a result of the final court approved agreement issued during the third quarter of 2019. during the third quarter of 2018 , the company recognized expense of $ 136.3 million related to the california litigation . story_separator_special_tag see note 19 to the consolidated financial statements in item 8 for more information on deferred taxes . other long-term liabilities other long-term liabilities increased $ 187.4 million during 2019 due primarily to the final court approved agreement to resolve the california public nuisance litigation , which impacted the timing and amount of expected payments , and an increase related to the reversal of net tax benefits recognized in previous tax years from federal renewable energy tax credit funds . see notes 10 and 11 , and 19 to the consolidated financial statements in item 8 for additional information on litigation and income tax matters , respectively . environmental-related liabilities the operations of the company , like those of other companies in the same industry , are subject to various federal , state and local environmental laws and regulations . these laws and regulations not only govern current operations and products , but also impose potential liability on the company for past operations . management expects environmental laws and regulations to impose increasingly stringent requirements upon the company and the industry in the future . management believes that the company conducts its operations in compliance with applicable environmental laws and regulations and has implemented various programs designed to protect the environment and promote continued compliance . depreciation of capital expenditures and other expenses related to ongoing environmental compliance measures were included in the normal operating expenses of conducting business . the company 's capital expenditures , depreciation and other expenses related to ongoing environmental compliance measures were not material to the company 's financial condition , liquidity , cash flow or results of operations during 2019 . management does not expect that such capital expenditures , depreciation and other expenses will be material to the company 's financial condition , liquidity , cash flow or results of operations in 2020 . see note 10 to the consolidated financial statements in item 8 for further information on environmental-related long-term liabilities . contractual obligations and commercial commitments the company has certain obligations and commitments to make future payments under contractual obligations and commercial commitments . the following tables summarize such obligations and commitments as of december 31 , 2019 . 27 replace_table_token_16_th ( 1 ) relate to open purchase orders for raw materials at december 31 , 2019 . ( 2 ) relate primarily to estimated future capital contributions to investments in the u.s. affordable housing and historic renovation real estate partnerships and various other contractual obligations . replace_table_token_17_th warranties the company offers product warranties for certain products . the specific terms and conditions of such warranties vary depending on the product or customer contract requirements . management estimated the costs of unsettled product warranty claims based on historical results and experience and included an amount in other accruals . management periodically assesses the adequacy of the accrual for product warranty claims and adjusts the accrual as necessary . changes in the company 's accrual for product warranty claims during 2019 , 2018 and 2017 , including customer satisfaction settlements during the year , were as follows : replace_table_token_18_th warranty accruals acquired in connection with the valspar acquisition in 2017 include warranties for certain products under extended furniture protection plans . the decrease in the accrual in 2018 was primarily due to the divestiture of the furniture protection plan business during the third quarter of 2018 for an immaterial amount that approximated net book value . shareholders ' equity shareholders ' equity increased $ 392.6 million to $ 4.123 billion at december 31 , 2019 from $ 3.731 billion last year primarily due to an increase in retained earnings of $ 1.120 billion and an increase in other capital of $ 256.6 million , partially offset by purchases of treasury stock and treasury stock received from stock option exercises totaling $ 935.8 million and an increase in accumulated other comprehensive loss of $ 49.6 million . retained earnings increased $ 1.120 billion during 2019 due to net income of $ 1.541 billion , partially offset by $ 420.8 million in cash dividends paid . the increase in other capital of $ 256.6 million was due primarily to the recognition of stock-based compensation expense and stock option exercises . the increase in accumulated other comprehensive loss of $ 49.6 million was due primarily to unfavorable foreign currency translation effects of $ 49.8 million . see the statements of consolidated shareholders equity and statements of consolidated comprehensive income in item 8 for additional information . 28 the company purchased 1.675 million shares of its common stock for treasury during 2019 . the company acquires its common stock for general corporate purposes , and depending on its cash position and market conditions , it may acquire shares in the future . the company had remaining authorization from its board of directors at december 31 , 2019 to purchase 8.45 million shares of its common stock . the company 's 2019 annual cash dividend of $ 4.52 per share represented 38.7 % of 2018 diluted net income per share . the 2019 annual dividend represented the 41 st consecutive year of increased dividend payments since the dividend was suspended in 1978. at a meeting held on february 19 , 2020 , the board of directors increased the quarterly cash dividend to $ 1.34 per share . this quarterly dividend , if approved in each of the remaining quarters of 2020 , would result in an annual dividend for 2020 of $ 5.36 per share or a 32.5 % payout of 2019 diluted net income per share . see the statements of consolidated shareholders ' equity in item 8 for more information concerning shareholders ' equity . cash flow net operating cash increased $ 377.6 million in 2019 to a cash source of $ 2.321 billion from a cash source of $ 1.944 billion in 2018 due primarily to an increase in net income and favorable changes in non-cash items , partially offset by changes in working
| cash flows net cash flows provided by operating activities were $ 102.4 million in 2016 compared with $ 85.5 million in 2015 primarily due to the change in receivables and advances as a result of increased cash collected during 2016 related to increased 2015 year-end revenues , and the fluctuation in tax benefit/expense due to the reversal of deferred tax effects on amounts in other comprehensive income . this improvement is partially offset by net income of $ 16.8 million in 2016 compared to net income of $ 42.1 million in 2015 , depreciation and amortization increasing $ 9.6 million in 2016 , primarily as the result of the reduced residual revenue equipment value projections due to the softened used equipment market and the 2015 purchase of our previously leased chattanooga headquarters property , and the 2015 return of $ 5.0 million which was previously provided by us to certain of our derivative counterparties related to the net liability position of certain of our fuel derivative instruments . the fluctuations in cash flows from accounts payable and accrued expenses primarily related to the timing of payments on our accrued expenses and trade accounts in the 2016 period compared to the 2015 period . 47 net cash flows used by investing activities were $ 47.3 million in 2016 compared with $ 147.7 million in 2015. the $ 100.4 million decrease in net investing activities was attributable primarily to the purchase of our corporate headquarters property in chattanooga , tennessee during 2015 for approximately $ 35.5 million , as well as a $ 22.9 million decrease in assets held for sale due to the timing of dispositions of used revenue equipment . during 2017 we plan to take delivery of approximately 485 new company tractors and dispose of approximately 460 used tractors . this compares to the approximately 650 new company tractors we took delivery of and the approximately 1,074 used tractors we disposed of during 2016 , including 365 recorded as assets held for sale at december 31 , 2015. going forward , cash flows from disposals of equipment could be more volatile given the weakness in the used tractor market .
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in 2019 , the performance coatings group opened 3 new branches and closed 4 locations decreasing the total from 282 to 281 branches open in the united states , canada , mexico , south america , europe and asia at 22 year-end . in 2020 , the performance coatings group plans to continue expanding its worldwide presence and improving its customer base . net sales in the administrative segment , which primarily consists of external leasing revenue of excess headquarters space and leasing of facilities no longer used by the company in its primary business , decreased by an insignificant amount in 2019 . consolidated gross profit increased $ 617.5 million in 2019 compared to the same period in 2018. consolidated gross profit as a percent to consolidated net sales increased to 44.9 % in 2019 from 42.3 % in 2018 . consolidated gross profit dollars and percent improved as a result of higher paint sales volume in north american stores , selling price increases , improved supply chain efficiencies , moderating raw material costs , and lower acquisition-related amortization expense , partially offset by unfavorable currency translation rate changes . the americas group 's gross profit for 2019 increased $ 384.2 million compared to the same period in 2018 . the americas group 's gross profit dollars and margin improved as a result of higher paint sales volume , selling price increases and moderating raw material costs . the consumer brands group 's gross profit increased $ 125.5 million in 2019 compared to the same period in 2018 . the consumer brands group 's gross profit dollars and margin improved due primarily to improved supply chain efficiencies , synergies , moderating raw material costs , and lower acquisition-related depreciation expense , partially offset by lower paint sales volume . the performance coatings group 's gross profit for 2019 increased $ 51.3 million compared to the same period in 2018 . the performance coatings group 's gross profit dollars and margin improved due primarily to selling price increases and moderating raw material costs , partially offset by unfavorable currency translation rate changes . consolidated sg & a increased by $ 241.1 million due primarily to increased expenses to support higher sales levels and net new store openings , partially offset by good cost control . sg & a increased as a percent of sales to 29.5 % in 2019 from 28.7 % in 2018 as a result of softer sales outside of north america . the americas group 's sg & a increased $ 196.7 million for the year due primarily to increased spending due to the number of new store openings and general comparable store expenses to support higher sales levels . the consumer brands group 's sg & a increased by $ 12.7 million for the year primarily due to increased expenses to support new customer programs . the performance coatings group 's sg & a decreased by $ 0.9 million for the year related to softer sales outside of north america . the administrative segment 's sg & a increased $ 32.6 million primarily due to increased investments in information systems and increased compensation , including stock-based compensation . other general expense - net decreased $ 150.0 million in 2019 compared to 2018 . the decrease was mainly caused by a decrease of $ 147.6 million in the administrative segment , which was primarily attributable to a decrease in expense recognized related to provisions for environmental matters . the expense recognized related to environmental provisions decreased $ 153.3 million from the prior year . this decrease was the result of the company reaching a series of agreements in 2018 with the environmental protection agency for remediation plans with cost estimates at one of the company 's four major sites which required significant environmental provisions to be recorded . see notes 10 and 18 to the consolidated financial statements in item 8 for additional information concerning environmental matters and other general expense - net , respectively . as required by the goodwill and other intangibles topic of the asc , management performed an annual impairment test of goodwill and indefinite-lived intangible assets as of october 1 , 2019 . during the fourth quarter of 2019 , the company recognized non-cash pre-tax impairment charges totaling $ 122.1 million related to recently acquired trademarks . these charges included impairments totaling $ 117.0 million in the performance coatings group and $ 5.1 million in the consumer brands group . in the performance coatings group , $ 75.6 million related to trademarks in north america directly associated with strategic decisions made to rebrand industrial products to the sherwin-williams® brand name , $ 25.7 million related to trademarks in the asia pacific region as a direct result of recent performance which reduced the long-term forecasted net sales and $ 15.7 million related to other recently acquired trademarks in various regions . the impairment tests in 2018 did not result in any impairment . see note 6 to the consolidated financial statements in item 8 for additional information . interest expense decreased $ 17.4 million in 2019 primarily due to lower average debt levels . interest and net investment income increased $ 20.7 million in 2019 including an $ 18.8 million gain recognized during the fourth quarter of 2019 after the company received a favorable court decision in brazil related to the recovery of certain indirect taxes previously paid over gross sales . see note 18 to the consolidated financial statements in item 8 for additional information on the brazil indirect tax matter . during 2019 , the company recognized a $ 34.7 million benefit from the resolution of the california public nuisance litigation as a result of the final court approved agreement issued during the third quarter of 2019. during the third quarter of 2018 , the company recognized expense of $ 136.3 million related to the california litigation . story_separator_special_tag see note 19 to the consolidated financial statements in item 8 for more information on deferred taxes . other long-term liabilities other long-term liabilities increased $ 187.4 million during 2019 due primarily to the final court approved agreement to resolve the california public nuisance litigation , which impacted the timing and amount of expected payments , and an increase related to the reversal of net tax benefits recognized in previous tax years from federal renewable energy tax credit funds . see notes 10 and 11 , and 19 to the consolidated financial statements in item 8 for additional information on litigation and income tax matters , respectively . environmental-related liabilities the operations of the company , like those of other companies in the same industry , are subject to various federal , state and local environmental laws and regulations . these laws and regulations not only govern current operations and products , but also impose potential liability on the company for past operations . management expects environmental laws and regulations to impose increasingly stringent requirements upon the company and the industry in the future . management believes that the company conducts its operations in compliance with applicable environmental laws and regulations and has implemented various programs designed to protect the environment and promote continued compliance . depreciation of capital expenditures and other expenses related to ongoing environmental compliance measures were included in the normal operating expenses of conducting business . the company 's capital expenditures , depreciation and other expenses related to ongoing environmental compliance measures were not material to the company 's financial condition , liquidity , cash flow or results of operations during 2019 . management does not expect that such capital expenditures , depreciation and other expenses will be material to the company 's financial condition , liquidity , cash flow or results of operations in 2020 . see note 10 to the consolidated financial statements in item 8 for further information on environmental-related long-term liabilities . contractual obligations and commercial commitments the company has certain obligations and commitments to make future payments under contractual obligations and commercial commitments . the following tables summarize such obligations and commitments as of december 31 , 2019 . 27 replace_table_token_16_th ( 1 ) relate to open purchase orders for raw materials at december 31 , 2019 . ( 2 ) relate primarily to estimated future capital contributions to investments in the u.s. affordable housing and historic renovation real estate partnerships and various other contractual obligations . replace_table_token_17_th warranties the company offers product warranties for certain products . the specific terms and conditions of such warranties vary depending on the product or customer contract requirements . management estimated the costs of unsettled product warranty claims based on historical results and experience and included an amount in other accruals . management periodically assesses the adequacy of the accrual for product warranty claims and adjusts the accrual as necessary . changes in the company 's accrual for product warranty claims during 2019 , 2018 and 2017 , including customer satisfaction settlements during the year , were as follows : replace_table_token_18_th warranty accruals acquired in connection with the valspar acquisition in 2017 include warranties for certain products under extended furniture protection plans . the decrease in the accrual in 2018 was primarily due to the divestiture of the furniture protection plan business during the third quarter of 2018 for an immaterial amount that approximated net book value . shareholders ' equity shareholders ' equity increased $ 392.6 million to $ 4.123 billion at december 31 , 2019 from $ 3.731 billion last year primarily due to an increase in retained earnings of $ 1.120 billion and an increase in other capital of $ 256.6 million , partially offset by purchases of treasury stock and treasury stock received from stock option exercises totaling $ 935.8 million and an increase in accumulated other comprehensive loss of $ 49.6 million . retained earnings increased $ 1.120 billion during 2019 due to net income of $ 1.541 billion , partially offset by $ 420.8 million in cash dividends paid . the increase in other capital of $ 256.6 million was due primarily to the recognition of stock-based compensation expense and stock option exercises . the increase in accumulated other comprehensive loss of $ 49.6 million was due primarily to unfavorable foreign currency translation effects of $ 49.8 million . see the statements of consolidated shareholders equity and statements of consolidated comprehensive income in item 8 for additional information . 28 the company purchased 1.675 million shares of its common stock for treasury during 2019 . the company acquires its common stock for general corporate purposes , and depending on its cash position and market conditions , it may acquire shares in the future . the company had remaining authorization from its board of directors at december 31 , 2019 to purchase 8.45 million shares of its common stock . the company 's 2019 annual cash dividend of $ 4.52 per share represented 38.7 % of 2018 diluted net income per share . the 2019 annual dividend represented the 41 st consecutive year of increased dividend payments since the dividend was suspended in 1978. at a meeting held on february 19 , 2020 , the board of directors increased the quarterly cash dividend to $ 1.34 per share . this quarterly dividend , if approved in each of the remaining quarters of 2020 , would result in an annual dividend for 2020 of $ 5.36 per share or a 32.5 % payout of 2019 diluted net income per share . see the statements of consolidated shareholders ' equity in item 8 for more information concerning shareholders ' equity . cash flow net operating cash increased $ 377.6 million in 2019 to a cash source of $ 2.321 billion from a cash source of $ 1.944 billion in 2018 due primarily to an increase in net income and favorable changes in non-cash items , partially offset by changes in working
| debt total debt including short-term borrowings decreased by $ 658.5 million to $ 8.685 billion in 2019 . this was primarily attributable to the company repurchasing $ 1.071 billion of its 2.25 % senior notes due may 2020 and $ 490.0 million of its 2.75 % senior notes due june 2022 , partially offset by the company issuing $ 800.0 million of 2.95 % senior notes due 2029 and $ 550.0 million of 3.80 % senior notes due 2049 ( collectively the `` new notes '' ) in a public offering during the third quarter of 2019. the net proceeds from the issuance of the new notes will be used for general corporate purposes . the repurchases of senior notes above resulted in a loss of $ 14.8 million recorded in other expense ( income ) - net . see note 18 to the consolidated financial statements in item 8 for additional information . on may 9 , 2019 , the company entered into a u.s. dollar to euro cross currency swap contract with a total notional amount of $ 400.0 million to hedge the company 's net investment in its european operations . this contract has been designated as a net investment hedge and will mature on january 15 , 2022. during the term of the contract , the company will pay fixed-rate interest in euros and receive fixed-rate interest in u.s. dollars , thereby effectively converting a portion of the company's u.s. dollar denominated fixed-rate debt to euro denominated fixed-rate debt .
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the review is now in its initial stages and the first execution steps are anticipated to be announced in the first half of 2021. in 2021 and beyond , we expect that our financial results will be affected by several factors , including : market prices , contract transitions , new contracts , new project development and construction , acquisitions , potential divestitures , potential non-renewal of certain contracts and the organic growth of earnings and cash flow generated by our existing assets . in 2021 , the following specific factors are expected to impact our financial results as compared to 2020 : positive factors include : waste markets are modestly improving given the lessening impact of the pandemic on waste volumes , as well as the ongoing secular trends of increasing demand for sustainable waste disposal and decreasing landfill capacity in certain of our core markets ; and the market prices for ferrous and non-ferrous metals increased in the latter part of 2020 , and to the extent that these higher price continue , they would lead to improvement in recycled metals revenue in 2021. negative factors include : the cessation of temporary pandemic-related cost reduction initiatives , which generated approximately $ 24 million in savings during 2020 , is expected to result in higher year-over-year operating costs ; and higher insurance costs . 45 table of contents liquidity and capital resources our principal sources of liquidity are our unrestricted cash and cash equivalents , cash flow generated from our ongoing operations , and unutilized capacity under our $ 1.3 billion senior secured credit facilities , consisting of a $ 400 million term loan ( `` term loan `` ) and a $ 900 million revolving credit facility ( the “ revolving credit facility ” ) ( collectively referred to as the `` credit facilities `` ) , which we believe will allow us to meet our liquidity needs . our business is capital intensive and our ability to successfully implement our strategy is , in part , dependent on the continued availability of capital on desirable terms . for additional information regarding our credit facilities and other debt , see item 8. financial statements and supplementary data — note 16. consolidated debt . in 2021 , we expect to generate net cash from operating activities that will be sufficient to meet our cash requirements including funding capital expenditures to maintain our existing assets and paying our ongoing dividends to stockholders . if there were any shortfalls , we have available liquidity under our revolving credit facility . see results of operations — business outlook above for discussion of the factors impacting our 2021 business outlook . we generally intend to refinance our debt instruments prior to maturity with like-kind financing in the bank and or debt capital markets in order to maintain a capital structure comprised primarily of long-term debt , which we believe appropriately matches the long-term nature of our assets and contracts . the loan documentation governing the credit facilities contains various affirmative and negative covenants , as well as financial maintenance covenants ( financial ratios ) , that limit our ability to engage in certain types of transactions . we were in compliance with all of the covenants under the credit facilities as of december 31 , 2020. further , we do not anticipate our existing debt covenants to restrict our ability to meet future liquidity needs . as of december 31 , 2020 , our potential sources of near-term liquidity included ( in millions ) : as of december 31 , 2020 story_separator_special_tag id= `` i2edf8caece16418ab0522238000bc88a_94 `` > supplementary financial information — free cash flow ( non-gaap discussion ) to supplement our results prepared in accordance with gaap , we use the measure of free cash flow which is a non-gaap measure as defined by the sec . this non-gaap financial measure is not intended as a substitute and should not be considered in isolation from measures of liquidity prepared in accordance with gaap . in addition , our use of free cash flow may be different from similarly identified non-gaap measures used by other companies , limiting its usefulness for comparison purposes . the presentation of free cash flow is intended to enhance the usefulness of our financial information by providing a measure which management internally uses to assess and evaluate the overall performance of its business and those of possible acquisition candidates , and highlight trends in the overall business . we use the non-gaap financial measures of free cash flow as criteria of liquidity and performance-based components of employee compensation . free cash flow is defined as cash flow provided by operating activities , less maintenance capital expenditures , which are capital expenditures primarily to maintain our existing facilities . we use free cash flow as a measure of liquidity to determine amounts we can reinvest in our core businesses , such as amounts available to make acquisitions , invest in construction of new projects , make principal payments on debt , or return capital to our stockholders through dividends and or stock repurchases . for additional discussion related to management 's use of non-gaap measures , see results of operations — supplementary financial information — adjusted ebitda ( non-gaap discussion ) above . in order to provide a meaningful basis for comparison , we are providing information with respect to our free cash flow for the years ended december 31 , 2020 and 2019 , reconciled for each such period to cash flow provided by operating activities , which we believe to be the most directly comparable measure under gaap . story_separator_special_tag the total estimated project cost is £210 million ( $ 277 million ) of which £147 million ( $ 194 million ) will be financed through non-recourse project-based debt . ( 3 ) we have a 40 % indirect ownership of rookery through our 50/50 joint venture with gig , covanta green . the total estimated project cost is £457 million ( $ 603 million ) of which £310 million ( $ 409 million ) will be financed through non-recourse project-based debt . ( 4 ) we have a 26 % interest in zhao county through our venture with longking energy development co. ltd. the total estimated project cost is rmb 650 million ( $ 93 million ) , of which rmb 488 million ( $ 75 million ) will be financed through non-recourse project debt . covanta energy asia pacific holdings ltd. , a wholly owned covanta entity , issued a parent guarantee for $ 15 million of the total debt . the fair market value of the guarantee liability is deemed to be immaterial . ( 5 ) we have a 25 % indirect ownership of newhurst through our 50/50 joint venture with gig , covanta green . the total estimated project cost is £341 million ( $ 422 million ) of which £251 million ( $ 311 million ) will be financed through non-recourse project-based debt . ( 6 ) we have a 37.5 % indirect ownership of protos through our 50/50 joint venture with gig , covanta green protos holding ltd. the total estimated project cost is £400 million ( $ 546 million ) of which £277 million ( $ 378 million ) will be financed through non-recourse project-based debt . for additional information on our unconsolidated equity investments , see item 8. financial statements and supplementary data — note 3. new business and asset management and note 13. equity method investments . 52 table of contents discussion of critical accounting policies and estimates in preparing our consolidated financial statements in accordance with gaap , we are required to use judgment in making estimates and assumptions that affect the amounts reported in our consolidated financial statements and related notes . we base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances . these estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . many of our critical accounting policies are subject to significant judgments and uncertainties that could potentially result in materially different results under different conditions and assumptions . future events rarely develop exactly as forecast , and the best estimates routinely require adjustment . policy judgments and estimates effect if actual results differ from assumptions revenue and expense recognition the company recognizes revenue in accordance with the asc 606 , revenue from contracts with customers . the core principle of asc 606 is that an entity will recognize revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer . revenue is recognized by applying the five steps described below : step 1 : identify the contract ( s ) with a customer . step 2 : identify the performance obligations in the contract . step 3 : determine the transaction price . step 4 : allocate the transaction price to the performance obligation in the contract . step 5 : recognize revenue when ( or as ) the entity satisfies a performance obligation . when a performance obligation is satisfied over time , the output or input method may be used to determine an appropriate method of progress . the output method recognizes revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract . the input method utilizes the entities inputs towards the satisfaction of a performance obligation ( for example , costs incurred ) . both methods may include estimates within the transaction price , contracts with customers may contain different types of variable consideration that we estimate through probability based approaches . there are certain constraining factors relating to variable consideration that may preclude us from booking revenue in order to prevent over estimating revenue . determining whether a factor is constrained requires judgment . there is a degree of uncertainty that exists in determining the variable component of consideration in a contract . a significant revenue reversal is not expected but amounts recognized for revenue are adjusted based on actual performance obligations delivered which will cause fluctuations in operating income recognized . further estimates may change on long term construction contracts based on better information becoming available which can cause fluctuations in revenue and operating income . equity method investments we evaluate our equity investments to determine if we have the ability to exercise significant influence over the entity but not control , generally assumed to be 20 % -50 % ownership . under the equity method , original investments are recorded at cost and adjusted by our share of earnings or losses of these companies . distributions received from the investee reduce our carrying value of the investment and are recorded in the consolidated statements of cash flows using the cumulative earnings approach . the determination and degree of our ability to control , or exert significant influence over , an entity involves the use of judgment . the consolidation guidance requires qualitative and quantitative analysis to determine whether our involvement , through holding interests directly or indirectly in an entity , would give us the ability to exercise significant influence over an entity but not control . subsequent changes to the interests of the entity through equity ownership levels or otherwise may require a reassessment of our conclusions of whether we have the ability to exercise significant
| debt total debt including short-term borrowings decreased by $ 658.5 million to $ 8.685 billion in 2019 . this was primarily attributable to the company repurchasing $ 1.071 billion of its 2.25 % senior notes due may 2020 and $ 490.0 million of its 2.75 % senior notes due june 2022 , partially offset by the company issuing $ 800.0 million of 2.95 % senior notes due 2029 and $ 550.0 million of 3.80 % senior notes due 2049 ( collectively the `` new notes '' ) in a public offering during the third quarter of 2019. the net proceeds from the issuance of the new notes will be used for general corporate purposes . the repurchases of senior notes above resulted in a loss of $ 14.8 million recorded in other expense ( income ) - net . see note 18 to the consolidated financial statements in item 8 for additional information . on may 9 , 2019 , the company entered into a u.s. dollar to euro cross currency swap contract with a total notional amount of $ 400.0 million to hedge the company 's net investment in its european operations . this contract has been designated as a net investment hedge and will mature on january 15 , 2022. during the term of the contract , the company will pay fixed-rate interest in euros and receive fixed-rate interest in u.s. dollars , thereby effectively converting a portion of the company's u.s. dollar denominated fixed-rate debt to euro denominated fixed-rate debt .
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the review is now in its initial stages and the first execution steps are anticipated to be announced in the first half of 2021. in 2021 and beyond , we expect that our financial results will be affected by several factors , including : market prices , contract transitions , new contracts , new project development and construction , acquisitions , potential divestitures , potential non-renewal of certain contracts and the organic growth of earnings and cash flow generated by our existing assets . in 2021 , the following specific factors are expected to impact our financial results as compared to 2020 : positive factors include : waste markets are modestly improving given the lessening impact of the pandemic on waste volumes , as well as the ongoing secular trends of increasing demand for sustainable waste disposal and decreasing landfill capacity in certain of our core markets ; and the market prices for ferrous and non-ferrous metals increased in the latter part of 2020 , and to the extent that these higher price continue , they would lead to improvement in recycled metals revenue in 2021. negative factors include : the cessation of temporary pandemic-related cost reduction initiatives , which generated approximately $ 24 million in savings during 2020 , is expected to result in higher year-over-year operating costs ; and higher insurance costs . 45 table of contents liquidity and capital resources our principal sources of liquidity are our unrestricted cash and cash equivalents , cash flow generated from our ongoing operations , and unutilized capacity under our $ 1.3 billion senior secured credit facilities , consisting of a $ 400 million term loan ( `` term loan `` ) and a $ 900 million revolving credit facility ( the “ revolving credit facility ” ) ( collectively referred to as the `` credit facilities `` ) , which we believe will allow us to meet our liquidity needs . our business is capital intensive and our ability to successfully implement our strategy is , in part , dependent on the continued availability of capital on desirable terms . for additional information regarding our credit facilities and other debt , see item 8. financial statements and supplementary data — note 16. consolidated debt . in 2021 , we expect to generate net cash from operating activities that will be sufficient to meet our cash requirements including funding capital expenditures to maintain our existing assets and paying our ongoing dividends to stockholders . if there were any shortfalls , we have available liquidity under our revolving credit facility . see results of operations — business outlook above for discussion of the factors impacting our 2021 business outlook . we generally intend to refinance our debt instruments prior to maturity with like-kind financing in the bank and or debt capital markets in order to maintain a capital structure comprised primarily of long-term debt , which we believe appropriately matches the long-term nature of our assets and contracts . the loan documentation governing the credit facilities contains various affirmative and negative covenants , as well as financial maintenance covenants ( financial ratios ) , that limit our ability to engage in certain types of transactions . we were in compliance with all of the covenants under the credit facilities as of december 31 , 2020. further , we do not anticipate our existing debt covenants to restrict our ability to meet future liquidity needs . as of december 31 , 2020 , our potential sources of near-term liquidity included ( in millions ) : as of december 31 , 2020 story_separator_special_tag id= `` i2edf8caece16418ab0522238000bc88a_94 `` > supplementary financial information — free cash flow ( non-gaap discussion ) to supplement our results prepared in accordance with gaap , we use the measure of free cash flow which is a non-gaap measure as defined by the sec . this non-gaap financial measure is not intended as a substitute and should not be considered in isolation from measures of liquidity prepared in accordance with gaap . in addition , our use of free cash flow may be different from similarly identified non-gaap measures used by other companies , limiting its usefulness for comparison purposes . the presentation of free cash flow is intended to enhance the usefulness of our financial information by providing a measure which management internally uses to assess and evaluate the overall performance of its business and those of possible acquisition candidates , and highlight trends in the overall business . we use the non-gaap financial measures of free cash flow as criteria of liquidity and performance-based components of employee compensation . free cash flow is defined as cash flow provided by operating activities , less maintenance capital expenditures , which are capital expenditures primarily to maintain our existing facilities . we use free cash flow as a measure of liquidity to determine amounts we can reinvest in our core businesses , such as amounts available to make acquisitions , invest in construction of new projects , make principal payments on debt , or return capital to our stockholders through dividends and or stock repurchases . for additional discussion related to management 's use of non-gaap measures , see results of operations — supplementary financial information — adjusted ebitda ( non-gaap discussion ) above . in order to provide a meaningful basis for comparison , we are providing information with respect to our free cash flow for the years ended december 31 , 2020 and 2019 , reconciled for each such period to cash flow provided by operating activities , which we believe to be the most directly comparable measure under gaap . story_separator_special_tag the total estimated project cost is £210 million ( $ 277 million ) of which £147 million ( $ 194 million ) will be financed through non-recourse project-based debt . ( 3 ) we have a 40 % indirect ownership of rookery through our 50/50 joint venture with gig , covanta green . the total estimated project cost is £457 million ( $ 603 million ) of which £310 million ( $ 409 million ) will be financed through non-recourse project-based debt . ( 4 ) we have a 26 % interest in zhao county through our venture with longking energy development co. ltd. the total estimated project cost is rmb 650 million ( $ 93 million ) , of which rmb 488 million ( $ 75 million ) will be financed through non-recourse project debt . covanta energy asia pacific holdings ltd. , a wholly owned covanta entity , issued a parent guarantee for $ 15 million of the total debt . the fair market value of the guarantee liability is deemed to be immaterial . ( 5 ) we have a 25 % indirect ownership of newhurst through our 50/50 joint venture with gig , covanta green . the total estimated project cost is £341 million ( $ 422 million ) of which £251 million ( $ 311 million ) will be financed through non-recourse project-based debt . ( 6 ) we have a 37.5 % indirect ownership of protos through our 50/50 joint venture with gig , covanta green protos holding ltd. the total estimated project cost is £400 million ( $ 546 million ) of which £277 million ( $ 378 million ) will be financed through non-recourse project-based debt . for additional information on our unconsolidated equity investments , see item 8. financial statements and supplementary data — note 3. new business and asset management and note 13. equity method investments . 52 table of contents discussion of critical accounting policies and estimates in preparing our consolidated financial statements in accordance with gaap , we are required to use judgment in making estimates and assumptions that affect the amounts reported in our consolidated financial statements and related notes . we base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances . these estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources . many of our critical accounting policies are subject to significant judgments and uncertainties that could potentially result in materially different results under different conditions and assumptions . future events rarely develop exactly as forecast , and the best estimates routinely require adjustment . policy judgments and estimates effect if actual results differ from assumptions revenue and expense recognition the company recognizes revenue in accordance with the asc 606 , revenue from contracts with customers . the core principle of asc 606 is that an entity will recognize revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer . revenue is recognized by applying the five steps described below : step 1 : identify the contract ( s ) with a customer . step 2 : identify the performance obligations in the contract . step 3 : determine the transaction price . step 4 : allocate the transaction price to the performance obligation in the contract . step 5 : recognize revenue when ( or as ) the entity satisfies a performance obligation . when a performance obligation is satisfied over time , the output or input method may be used to determine an appropriate method of progress . the output method recognizes revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract . the input method utilizes the entities inputs towards the satisfaction of a performance obligation ( for example , costs incurred ) . both methods may include estimates within the transaction price , contracts with customers may contain different types of variable consideration that we estimate through probability based approaches . there are certain constraining factors relating to variable consideration that may preclude us from booking revenue in order to prevent over estimating revenue . determining whether a factor is constrained requires judgment . there is a degree of uncertainty that exists in determining the variable component of consideration in a contract . a significant revenue reversal is not expected but amounts recognized for revenue are adjusted based on actual performance obligations delivered which will cause fluctuations in operating income recognized . further estimates may change on long term construction contracts based on better information becoming available which can cause fluctuations in revenue and operating income . equity method investments we evaluate our equity investments to determine if we have the ability to exercise significant influence over the entity but not control , generally assumed to be 20 % -50 % ownership . under the equity method , original investments are recorded at cost and adjusted by our share of earnings or losses of these companies . distributions received from the investee reduce our carrying value of the investment and are recorded in the consolidated statements of cash flows using the cumulative earnings approach . the determination and degree of our ability to control , or exert significant influence over , an entity involves the use of judgment . the consolidation guidance requires qualitative and quantitative analysis to determine whether our involvement , through holding interests directly or indirectly in an entity , would give us the ability to exercise significant influence over an entity but not control . subsequent changes to the interests of the entity through equity ownership levels or otherwise may require a reassessment of our conclusions of whether we have the ability to exercise significant
| cash $ 55 unutilized capacity under the revolving credit facility 443 total cash and unutilized capacity under the revolving credit facility $ 498 as of december 31 , 2020 , we held unrestricted cash balances of $ 55 million , of which $ 48 million was held by international subsidiaries and not generally available for near-term liquidity in our domestic operations . in addition , as of december 31 , 2020 , we held restricted cash balances of $ 17 million . restricted funds held in trust are generally amounts received and held by third-party trustees relating to certain projects we own . we generally do not control these accounts and these funds may be used only for specified purposes . for additional information on restricted funds held in trust , see item 8. financial statements and supplementary data — note 1. organization and summary of significant accounting policies — restricted funds held in trust . our primary future cash requirements will be to fund capital expenditures to maintain our existing businesses , service our debt , invest in the growth of our business , and return capital to our stockholders . we believe that our liquidity position and ongoing cash flow from operations will be sufficient to finance these requirements for at least the next twelve months . the following summarizes our key financing activities completed during the year ended december 31 , 2020 : in december 2020 , we amended our existing receivables purchase agreement ( “ rpa ” ) to , among other things , increase the aggregate purchase limit from $ 100 million to $ 120 million . for additional information , see item 8. financial statements and supplementary data — note 10. accounts receivable securitization for further information .
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although we believe that the assumptions on which these forward-looking statements are based are reasonable , any of those assumptions could prove to be inaccurate , and as a result , the forward-looking statements based on those assumptions also could be inaccurate . important assumptions include our ability to originate new loans and investments , certain margins and levels of profitability and the availability of additional capital . in light of these and other uncertainties , the inclusion of a projection or forward-looking statement in this annual report on form 10-k should not be regarded as a representation by us that our plans and objectives will be achieved . these risks and uncertainties include those described in “ risk factors ” in this annual report on form 10-k under part 1a . you should not place undue reliance on these forward-looking statements , which apply only as of the date of this annual report on form 10-k. overview we are an externally managed , closed-end , non-diversified management investment company that has elected to be regulated as a bdc under the 1940 act . we have elected to be treated , and intend to qualify annually thereafter , as a ric under subchapter m of the code for u.s. federal income tax purposes beginning with our taxable year ending december 31 , 2014. our shares are currently listed on the new york stock exchange ( the “ nyse ” ) under the symbol “ tpvg ” . our 6.75 % notes due 2020 ( the `` 2020 notes `` ) are currently listed on the nyse under the symbol “ tpvz ” . our investment objective is to maximize our total return to stockholders primarily in the form of current income and , to a lesser extent , capital appreciation by primarily lending with warrants to venture growth stage companies focused in technology , life sciences and other high growth industries which are backed by tpc 's select group of leading venture capital investors . we were formed to expand the venture growth stage business segment of tpc 's global investment platform and are the primary vehicle through which tpc focuses its venture growth stage business . tpc is widely recognized as a leading global financing provider devoted to serving venture capital-backed companies with creative , flexible and customized debt financing , equity capital and complementary services throughout their lifespan . tpc is located on sand hill road in silicon valley and has a primary focus in technology , life sciences and other high growth industries . we commenced investment activities on march 5 , 2014. in order to expedite the ramp-up of our investment activities and further our ability to meet our investment objectives , on march 5 , 2014 , we acquired our initial portfolio . the net consideration paid was approximately $ 121.7 million which reflected approximately $ 123.7 million of investments less approximately $ 2.0 million of prepaid interest and the fair value of unfunded commitments . we financed the acquisition of our initial portfolio by using a portion of a $ 200.0 million credit facility ( the “ bridge facility ” ) provided by deutsche bank ag , new york branch ( “ deutsche bank ” ) . on march 11 , 2014 , we completed our initial public offering and sold 9,840,665 shares of common stock ( including 1,250,000 shares of common stock through the underwriters ' exercise of their overallotment option and the concurrent private placement of 257,332 shares of common stock to our adviser 's senior team and other persons associated with tpc ) of our common stock at an offering price of $ 15.00 per share . we received $ 141.6 million of net proceeds in connection with the initial public offering and concurrent private placement , net of the portion of the underwriting sales load and offering costs we paid . we used a portion of these net proceeds to pay down all amounts outstanding under the bridge facility and terminated the bridge facility in conjunction with such repayment . in february 2014 , we entered into a credit agreement with deutsche bank acting as administrative agent and a lender , and keybank national association , everbank commercial lender finance , inc. , and alostar bank of commerce , as other lenders , which provided us with a $ 150.0 million commitment , subject to borrowing base 71 requirements ( “ credit facility ” ) . in august 2014 , we amended the credit facility to increase the total commitments by $ 50.0 million to $ 200.0 million in aggregate . effective as of a january 2016 amendment to the credit facility , borrowings under the credit facility bear interest at the sum of ( i ) the commercial paper rate for certain specified lenders and 30-day libor for other lenders or , if libor is unavailable , the higher of deutsche bank 's commercial lending rate or the federal funds rate plus 0.50 % plus ( ii ) a margin of 3.0 % during the credit facility 's revolving period . the revolving period under the amended credit facility expires in february 2018. on march 27 , 2015 , we priced a public offering of 6,500,000 shares of our common stock , raising approximately $ 93.7 million after offering costs . on april 29 , 2015 , we received an additional approximately $ 2.2 million through the issuance of 154,018 shares of our common stock as the result of the underwriters ' partial exercise of their overallotment option . on august 4 , 2015 , we completed a public offering of $ 50.0 million in aggregate principal amount of our 2020 notes and received net proceeds of $ 48.3 million after the payment of fees and offering costs . story_separator_special_tag the yield on our portfolio , excluding the impact of prepayments was approximately 15.4 % and 14.5 % , respectively , for the year ended december 31 , 2015 and for the period from march 5 , 2014 ( commencement of 80 operations ) to december 31 , 2014. the yields on our portfolio are dependent on fundings and the performance of our loans including prepayments . for the year ended december 31 , 2015 , we recognized approximately $ 2.2 million in other income consisting of approximately $ 1.8 million due to the termination or expiration of unfunded commitments and approximately $ 0.4 million from the realization of certain fees paid by companies and miscellaneous income . for the period from march 5 , 2014 ( commencement of operations ) to december 31 , 2014 , we recognized approximately $ 0.7 million in other income consisting of approximately $ 0.4 million due to the termination or expiration of unfunded commitments and approximately $ 0.3 million from the realization of certain fees paid by companies and miscellaneous income . for the year ended december 31 , 2015 , total operating expenses were approximately $ 20.1 million , comprising of approximately $ 9.5 million in base management and incentive fees , approximately $ 6.3 million in interest expense , approximately $ 1.5 million in administrative agreement expenses , and approximately $ 2.8 million in general and administrative expenses . for the period from march 5 , 2014 ( commencement of operations ) to december 31 , 2014 , total operating expenses were approximately $ 12.5 million , comprising of approximately $ 5.6 million in base management and incentive fees , approximately $ 3.9 million in interest expense , approximately $ 1.1 million in administrative agreement expenses , and approximately $ 1.9 million in general and administrative expenses . in determining the base management fee , our adviser had agreed to exclude the u.s. treasury bill assets acquired at the end of the applicable quarters in 2015 and 2014 in the calculation of the gross assets . we anticipate operating expenses will increase over time as our portfolio continues to grow . however , we anticipate operating expenses , as a percentage of totals assets and net assets , will decrease over time as our portfolio and capital base grow . we expect base management and income incentive fees will increase as we grow our asset base and our earnings . capital gains incentive fee will depend on realized and unrealized gains and losses . interest expense will increase as we utilize more of our credit facility , and we expect fees per the administrative agreement and general and administrative agreements will increase to meet the additional requirements associated with servicing a larger portfolio . there were $ 0.3 million of realized losses during the year ended december 31 , 2015 and no realized gains or losses for the period from march 5 , 2014 ( commencement of operations ) to december 31 , 2014. the table below summarizes our net change in unrealized gains ( losses ) on investments , which was primarily due to changes discount rates used to determine fair value . net change in unrealized gains ( losses ) in subsequent periods may be volatile as it depends on changes in the market , changes in the underlying performance of our portfolio companies and their respective industries , and many other factors . replace_table_token_16_th the tables below summarize the unrealized gains and losses in our investments in portfolio companies as of december 31 , 2015 and december 31 , 2014. replace_table_token_17_th 81 replace_table_token_18_th in addition to the unrealized gains and losses in our investments in portfolio companies summarized in the table above , there were unrealized losses of approximately $ 3 thousand , on u.s. treasury bills as of both december 31 , 2015 and december 31 , 2014. the table below summarizes our return on average total assets and return on average net asset value for the year ended december 31 , 2015 and for the period from march 5 , 2014 ( commencement of operations ) to december 31 , 2014. replace_table_token_19_th ( 1 ) percentage is presented on an annualized basis . the average net asset values and the average total assets are computed based on daily balances . critical accounting policies the preparation of our financial statements in accordance with gaap requires us to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenues and expenses . changes in the economic environment , financial markets and any other parameters used in determining such estimates could cause actual results to differ . in addition to the discussion below , we describe our critical accounting policies in the notes to our consolidated financial statements included elsewhere in this annual report on form 10-k. valuation of investments we measure the value of our investments at fair value in accordance with accounting standards codification topic 820 , fair value measurements and disclosure , or “ asc topic 820 , ” issued by the financial accounting standards board , or “ fasb . ” fair value is 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 . the valuation committee of the board is responsible for assisting the board in valuing investments that are not publicly traded or for which current market values are not readily available . investments for which market quotations are readily available are valued using market quotations , which are generally obtained from independent pricing services , broker-dealers or market makers . with respect to portfolio investments for which market quotations 82 are not readily available , the board , with the assistance of the adviser and its senior investment team and independent valuation agents , is responsible for determining , in good faith , the fair value in accordance with the
| cash $ 55 unutilized capacity under the revolving credit facility 443 total cash and unutilized capacity under the revolving credit facility $ 498 as of december 31 , 2020 , we held unrestricted cash balances of $ 55 million , of which $ 48 million was held by international subsidiaries and not generally available for near-term liquidity in our domestic operations . in addition , as of december 31 , 2020 , we held restricted cash balances of $ 17 million . restricted funds held in trust are generally amounts received and held by third-party trustees relating to certain projects we own . we generally do not control these accounts and these funds may be used only for specified purposes . for additional information on restricted funds held in trust , see item 8. financial statements and supplementary data — note 1. organization and summary of significant accounting policies — restricted funds held in trust . our primary future cash requirements will be to fund capital expenditures to maintain our existing businesses , service our debt , invest in the growth of our business , and return capital to our stockholders . we believe that our liquidity position and ongoing cash flow from operations will be sufficient to finance these requirements for at least the next twelve months . the following summarizes our key financing activities completed during the year ended december 31 , 2020 : in december 2020 , we amended our existing receivables purchase agreement ( “ rpa ” ) to , among other things , increase the aggregate purchase limit from $ 100 million to $ 120 million . for additional information , see item 8. financial statements and supplementary data — note 10. accounts receivable securitization for further information .
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although we believe that the assumptions on which these forward-looking statements are based are reasonable , any of those assumptions could prove to be inaccurate , and as a result , the forward-looking statements based on those assumptions also could be inaccurate . important assumptions include our ability to originate new loans and investments , certain margins and levels of profitability and the availability of additional capital . in light of these and other uncertainties , the inclusion of a projection or forward-looking statement in this annual report on form 10-k should not be regarded as a representation by us that our plans and objectives will be achieved . these risks and uncertainties include those described in “ risk factors ” in this annual report on form 10-k under part 1a . you should not place undue reliance on these forward-looking statements , which apply only as of the date of this annual report on form 10-k. overview we are an externally managed , closed-end , non-diversified management investment company that has elected to be regulated as a bdc under the 1940 act . we have elected to be treated , and intend to qualify annually thereafter , as a ric under subchapter m of the code for u.s. federal income tax purposes beginning with our taxable year ending december 31 , 2014. our shares are currently listed on the new york stock exchange ( the “ nyse ” ) under the symbol “ tpvg ” . our 6.75 % notes due 2020 ( the `` 2020 notes `` ) are currently listed on the nyse under the symbol “ tpvz ” . our investment objective is to maximize our total return to stockholders primarily in the form of current income and , to a lesser extent , capital appreciation by primarily lending with warrants to venture growth stage companies focused in technology , life sciences and other high growth industries which are backed by tpc 's select group of leading venture capital investors . we were formed to expand the venture growth stage business segment of tpc 's global investment platform and are the primary vehicle through which tpc focuses its venture growth stage business . tpc is widely recognized as a leading global financing provider devoted to serving venture capital-backed companies with creative , flexible and customized debt financing , equity capital and complementary services throughout their lifespan . tpc is located on sand hill road in silicon valley and has a primary focus in technology , life sciences and other high growth industries . we commenced investment activities on march 5 , 2014. in order to expedite the ramp-up of our investment activities and further our ability to meet our investment objectives , on march 5 , 2014 , we acquired our initial portfolio . the net consideration paid was approximately $ 121.7 million which reflected approximately $ 123.7 million of investments less approximately $ 2.0 million of prepaid interest and the fair value of unfunded commitments . we financed the acquisition of our initial portfolio by using a portion of a $ 200.0 million credit facility ( the “ bridge facility ” ) provided by deutsche bank ag , new york branch ( “ deutsche bank ” ) . on march 11 , 2014 , we completed our initial public offering and sold 9,840,665 shares of common stock ( including 1,250,000 shares of common stock through the underwriters ' exercise of their overallotment option and the concurrent private placement of 257,332 shares of common stock to our adviser 's senior team and other persons associated with tpc ) of our common stock at an offering price of $ 15.00 per share . we received $ 141.6 million of net proceeds in connection with the initial public offering and concurrent private placement , net of the portion of the underwriting sales load and offering costs we paid . we used a portion of these net proceeds to pay down all amounts outstanding under the bridge facility and terminated the bridge facility in conjunction with such repayment . in february 2014 , we entered into a credit agreement with deutsche bank acting as administrative agent and a lender , and keybank national association , everbank commercial lender finance , inc. , and alostar bank of commerce , as other lenders , which provided us with a $ 150.0 million commitment , subject to borrowing base 71 requirements ( “ credit facility ” ) . in august 2014 , we amended the credit facility to increase the total commitments by $ 50.0 million to $ 200.0 million in aggregate . effective as of a january 2016 amendment to the credit facility , borrowings under the credit facility bear interest at the sum of ( i ) the commercial paper rate for certain specified lenders and 30-day libor for other lenders or , if libor is unavailable , the higher of deutsche bank 's commercial lending rate or the federal funds rate plus 0.50 % plus ( ii ) a margin of 3.0 % during the credit facility 's revolving period . the revolving period under the amended credit facility expires in february 2018. on march 27 , 2015 , we priced a public offering of 6,500,000 shares of our common stock , raising approximately $ 93.7 million after offering costs . on april 29 , 2015 , we received an additional approximately $ 2.2 million through the issuance of 154,018 shares of our common stock as the result of the underwriters ' partial exercise of their overallotment option . on august 4 , 2015 , we completed a public offering of $ 50.0 million in aggregate principal amount of our 2020 notes and received net proceeds of $ 48.3 million after the payment of fees and offering costs . story_separator_special_tag the yield on our portfolio , excluding the impact of prepayments was approximately 15.4 % and 14.5 % , respectively , for the year ended december 31 , 2015 and for the period from march 5 , 2014 ( commencement of 80 operations ) to december 31 , 2014. the yields on our portfolio are dependent on fundings and the performance of our loans including prepayments . for the year ended december 31 , 2015 , we recognized approximately $ 2.2 million in other income consisting of approximately $ 1.8 million due to the termination or expiration of unfunded commitments and approximately $ 0.4 million from the realization of certain fees paid by companies and miscellaneous income . for the period from march 5 , 2014 ( commencement of operations ) to december 31 , 2014 , we recognized approximately $ 0.7 million in other income consisting of approximately $ 0.4 million due to the termination or expiration of unfunded commitments and approximately $ 0.3 million from the realization of certain fees paid by companies and miscellaneous income . for the year ended december 31 , 2015 , total operating expenses were approximately $ 20.1 million , comprising of approximately $ 9.5 million in base management and incentive fees , approximately $ 6.3 million in interest expense , approximately $ 1.5 million in administrative agreement expenses , and approximately $ 2.8 million in general and administrative expenses . for the period from march 5 , 2014 ( commencement of operations ) to december 31 , 2014 , total operating expenses were approximately $ 12.5 million , comprising of approximately $ 5.6 million in base management and incentive fees , approximately $ 3.9 million in interest expense , approximately $ 1.1 million in administrative agreement expenses , and approximately $ 1.9 million in general and administrative expenses . in determining the base management fee , our adviser had agreed to exclude the u.s. treasury bill assets acquired at the end of the applicable quarters in 2015 and 2014 in the calculation of the gross assets . we anticipate operating expenses will increase over time as our portfolio continues to grow . however , we anticipate operating expenses , as a percentage of totals assets and net assets , will decrease over time as our portfolio and capital base grow . we expect base management and income incentive fees will increase as we grow our asset base and our earnings . capital gains incentive fee will depend on realized and unrealized gains and losses . interest expense will increase as we utilize more of our credit facility , and we expect fees per the administrative agreement and general and administrative agreements will increase to meet the additional requirements associated with servicing a larger portfolio . there were $ 0.3 million of realized losses during the year ended december 31 , 2015 and no realized gains or losses for the period from march 5 , 2014 ( commencement of operations ) to december 31 , 2014. the table below summarizes our net change in unrealized gains ( losses ) on investments , which was primarily due to changes discount rates used to determine fair value . net change in unrealized gains ( losses ) in subsequent periods may be volatile as it depends on changes in the market , changes in the underlying performance of our portfolio companies and their respective industries , and many other factors . replace_table_token_16_th the tables below summarize the unrealized gains and losses in our investments in portfolio companies as of december 31 , 2015 and december 31 , 2014. replace_table_token_17_th 81 replace_table_token_18_th in addition to the unrealized gains and losses in our investments in portfolio companies summarized in the table above , there were unrealized losses of approximately $ 3 thousand , on u.s. treasury bills as of both december 31 , 2015 and december 31 , 2014. the table below summarizes our return on average total assets and return on average net asset value for the year ended december 31 , 2015 and for the period from march 5 , 2014 ( commencement of operations ) to december 31 , 2014. replace_table_token_19_th ( 1 ) percentage is presented on an annualized basis . the average net asset values and the average total assets are computed based on daily balances . critical accounting policies the preparation of our financial statements in accordance with gaap requires us to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenues and expenses . changes in the economic environment , financial markets and any other parameters used in determining such estimates could cause actual results to differ . in addition to the discussion below , we describe our critical accounting policies in the notes to our consolidated financial statements included elsewhere in this annual report on form 10-k. valuation of investments we measure the value of our investments at fair value in accordance with accounting standards codification topic 820 , fair value measurements and disclosure , or “ asc topic 820 , ” issued by the financial accounting standards board , or “ fasb . ” fair value is 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 . the valuation committee of the board is responsible for assisting the board in valuing investments that are not publicly traded or for which current market values are not readily available . investments for which market quotations are readily available are valued using market quotations , which are generally obtained from independent pricing services , broker-dealers or market makers . with respect to portfolio investments for which market quotations 82 are not readily available , the board , with the assistance of the adviser and its senior investment team and independent valuation agents , is responsible for determining , in good faith , the fair value in accordance with the
| debt investments by financing product ( dollars in thousands ) fair value percentage of total debt investments growth capital loans $ 246,311 99.5 % equipment financings 1,298 0.5 total debt investments $ 247,609 100.0 % approximately 18.0 % and 20.5 % of the debt investments in our portfolio as of december 31 , 2015 and december 31 , 2014 , respectively , based on the aggregate fair value , consisted of growth capital loans where the borrower has a term loan facility , with or without an accompanying revolving loan , in priority to our senior lien . investment activity during the year ended december 31 , 2015 , we entered into fifteen new commitments with eight new customers , six existing customers and one previous customer totaling $ 213.8 million , funded seventeen debt investments for approximately $ 101.3 million in principal value , acquired warrants representing approximately $ 1.8 74 million of value and exercised warrants into equity with a cost basis of approximately $ 0.2 million in one company , and made two equity investments of approximately $ 0.7 million . during the period from march 5 , 2014 ( commencement of operations ) to december 31 , 2014 , we entered into fifteen new commitments with eleven new customers and four existing customers totaling $ 269.5 million , we funded 32 debt investments for approximately $ 159.4 million in principal balance , acquired warrants representing approximately $ 3.5 million of value , and made two equity investments totaling approximately $ 0.5 million . during the year ended december 31 , 2015 , we had prepayments from six of our portfolio companies for approximately $ 73.4 million in principal value . during the period from march 5 , 2014 ( commencement of operations ) to december 31 , 2014 , we had prepayments from two of our portfolio companies for approximately $ 27.7 million in principal value .
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the reliable and safe operation of our power plants , electric distribution system and natural gas infrastructure in our communities is foundational to our customers , our financial results and our credibility with stakeholders . our regulated generation fleet performance was strong throughout the year . all of our nuclear sites have achieved the industry 's highest distinction rating . our electric distribution system performed well throughout the year , with outage durations down when adjusted for storms . the safety of our workforce is a core value . our employees delivered strong safety results in 2019 , and we are at or near the top of our industry . storm response and system restoration . the 2019 atlantic hurricane season was the fourth consecutive year of above-average damaging storms . our ability to effectively handle all facets of the 2019 storm response efforts is a testament to our team 's extensive preparation and coordination , applying lessons learned from previous storms , and to on-the-ground management throughout the restoration efforts . notably in 2019 duke energy earned eei 's emergency recovery award , our 22nd eei award since 1998 and a strong affirmation of the work of our employees to support customers when they need us most . customer satisfaction . duke energy continues to transform the customer experience through our use of customer data to better inform operational priorities and performance levels . this data-driven approach allows us to identify the investments that are the most important to the customer experience . in 2019 , we instituted billing and payment-related communications and options , and we continue to enhance outage-related communications to customers . constructive regulatory and legislative outcomes . one of our long-term strategic goals is to achieve modernized regulatory constructs in our jurisdictions . modernized constructs provide benefits , which include improved earnings and cash flows through more timely recovery of investments , as well as stable pricing for customers . in 2019 , duke energy , north carolina regulators and environmentalists reached an agreement to permanently close all remaining coal ash basins in north carolina . this agreement reduces the cost to close our coal ash basins for our carolinas customers in comparison to the initial ncdeq closure order . in 2019 we achieved constructive rate case outcomes driving earnings growth through rate base increases in south carolina ( electric ) , north carolina ( natural gas ) , ohio ( electric distribution ) and kentucky ( natural gas ) . in addition , we have a multiyear rate plan in florida and grid investment riders in the midwest which enable more timely cost recovery and earnings growth . digital transformation . duke energy has a demonstrated track record of driving efficiencies and productivity into the business . we continue to leverage new technology , digital tools and data analytics across the business in response to a transforming landscape . in 2019 , we created a team dedicated to developing applications and other solutions to deliver productivity gains and improvements to the customer experience . modernizing the power grid . our grid improvement programs continue to be a key component of our growth strategy . modernization of the electric grid , including smart meters , storm hardening , self-healing and targeted undergrounding helps to ensure the system is better prepared for severe weather , improves the system 's reliability and flexibility , and provides better information and services for customers . in 2019 , 79 % of our jurisdictions were equipped with smart meters and we remain on track to be fully deployed across all regions by 2021. we continue to expand our self-optimizing grid capabilities , and in 2019 that saved over a half million customer interruptions . generating cleaner energy . overall , we have lowered our carbon emissions by 39 % since 2005 , consistent with our new goal to reduce carbon emissions by at least 50 % by 2030 and to achieve net-zero carbon emissions by 2050. our commitment for 2030 includes retiring plants , operating our existing carbon-free resources and investing in natural gas infrastructure , renewables and our energy delivery system . as we look beyond 2030 , we will need additional tools to continue our progress . we will work actively to advocate for research and development of carbon-free , dispatchable resources . that includes longer-term energy storage , advanced nuclear technologies , carbon capture and zero-carbon fuels . expanding the natural gas platform . we continue to pursue natural gas infrastructure investments . while the judicial and administrative challenges to date have been substantial , we are committed to the construction of the acp pipeline to bring low-cost gas supply and economic development opportunities to the southeast u.s. construction is underway on a liquefied natural gas facility in robeson county , north carolina , on property piedmont owns . this investment will help piedmont provide a reliable gas supply to customers during peak usage periods and protect customers from price volatility when there is a higher-than-normal demand for natural gas . dividend growth . in 2019 , duke energy continued to grow the dividend payment to shareholders . 2019 represented the 93rd consecutive year duke energy paid a cash dividend on its common stock . 41 md & a duke energy duke energy objectives – 2020 and beyond duke energy will continue to deliver exceptional value to customers , be an integral part of the communities in which we do business and provide attractive returns to investors . we have an achievable , long-term strategy in place , and it is producing tangible results , yet the industry in which we operate is becoming more and more dynamic . we are adjusting , where necessary , and accelerating our focus in key areas to ensure the company is well positioned to be successful for many decades into the future . story_separator_special_tag given legal challenges and ongoing discussions with customers , acp expects mechanical completion of the full project in late 2021 with in-service likely in the first half of 2022. the delays resulting from legal challenges have also impacted the cost for the project . project cost is approximately $ 8 billion , excluding financing costs . this estimate is based on the current facts available around construction costs and timelines , and is subject to future changes as those facts develop . abnormal weather , work delays ( including delays due to judicial or regulatory action ) and other conditions may result in cost or schedule modifications , a suspension of afudc for acp and or impairment charges potentially material to duke energy 's cash flows , financial position and results of operations . acp and duke energy will continue to consider their options with respect to the foregoing given their existing contractual and legal obligations . see notes 4 and 18 to the consolidated financial statements , `` regulatory matters `` and `` variable interest entities , `` respectively , for additional information . on november 13 , 2013 , the puco issued an order authorizing recovery of mgp costs at certain sites in ohio with a deadline to complete the mgp environmental investigation and remediation work prior to december 31 , 2016. this deadline was subsequently extended to december 31 , 2019. duke energy ohio has filed a request for extension of the deadline . a hearing on that request has not been scheduled . disallowance of costs incurred , failure to complete the work by the deadline or failure to obtain an extension from the puco could result in an adverse impact on gas utilities and infrastructure 's results of operations , financial position and cash flows . see note 4 to the consolidated financial statements , “ regulatory matters , ” for additional information . within this item 7 , see liquidity and capital resources for discussion of risks associated with the tax act . commercial renewables replace_table_token_21_th ( a ) certain projects are included in tax-equity structures where investors have differing interests in the project 's economic attributes . in the table above , 100 % of the tax-equity project 's capacity is included . year ended december 31 , 2019 , as compared to 2018 commercial renewables ' results were favorable primarily due to new tax equity solar projects in the current year and a prior year goodwill impairment charge . the following is a detailed discussion of the variance drivers by line item . operating revenues . the increase was primarily due to new solar projects placed in service and higher irradiance . operating expenses . the decrease was primarily due to a goodwill impairment charge in the prior year , partially offset by increased depreciation due to new solar projects placed in service . other income and expenses , net . the decrease was primarily due to income from the fes settlement agreement in the prior year . income tax benefit . the decrease in the tax benefit was primarily driven by taxes associated with duke energy 's interest in tax equity solar projects recorded during 2019 and a reduction in ptcs generated . 47 md & a segment results - commercial renewables loss attributable to noncontrolling interests . the variance was primarily due to an increase in solar projects with tax equity investors . hlbv accounting was utilized , resulting in allocation of losses to the noncontrolling interest partners . see note 1 to the consolidated financial statements , `` summary of significant accounting policies `` for more information . matters impacting future commercial renewables results commercial renewables continues to experience growth with tax equity projects ; however , the future expiration of federal tax incentives could result in adverse impacts to future results of operations , financial position and cash flows . during 2019 , duke energy evaluated recoverability of its renewable merchant plants principally in the electric reliability council of texas west market , due to declining market pricing and declining long-term forecasted energy prices , primarily driven by lower forecasted natural gas prices . these assets were not impaired ; however , a continued decline in energy market pricing would likely result in a future impairment . impairment of these assets could result in adverse impacts to the future results of operations , financial position and cash flows of commercial renewables . see note 11 to the consolidated financial statements , `` property , plant and equipment , `` for additional information . within this item 7 , see liquidity and capital resources for discussion of risks associated with the tax act . other replace_table_token_22_th year ended december 31 , 2019 , as compared to 2018 the variance was driven by the prior year severance charges related to a corporate initiative , prior year loss on sale of the retired beckjord station , and the absence in the current year of costs related to the piedmont acquisition , offset by obligations to the duke energy foundation in 2019. the following is a detailed discussion of the variance drivers by line item . operating expenses . the variance was primarily due to prior year severance charges related to a corporate initiative as well as costs associated with the piedmont acquisition , partially offset by obligations to the duke energy foundation in 2019. losses on sales of other assets and other , net . the variance was driven by the prior year loss on sale of the retired beckjord station , including the transfer of coal ash basins and other real property and indemnification from all potential future claims related to the property , whether arising under environmental laws or otherwise . other income and expenses , net . the variance was primarily due to higher returns on investments that fund certain employee benefit obligations and bison investment income . interest expense . the variance was primarily due to higher
| debt investments by financing product ( dollars in thousands ) fair value percentage of total debt investments growth capital loans $ 246,311 99.5 % equipment financings 1,298 0.5 total debt investments $ 247,609 100.0 % approximately 18.0 % and 20.5 % of the debt investments in our portfolio as of december 31 , 2015 and december 31 , 2014 , respectively , based on the aggregate fair value , consisted of growth capital loans where the borrower has a term loan facility , with or without an accompanying revolving loan , in priority to our senior lien . investment activity during the year ended december 31 , 2015 , we entered into fifteen new commitments with eight new customers , six existing customers and one previous customer totaling $ 213.8 million , funded seventeen debt investments for approximately $ 101.3 million in principal value , acquired warrants representing approximately $ 1.8 74 million of value and exercised warrants into equity with a cost basis of approximately $ 0.2 million in one company , and made two equity investments of approximately $ 0.7 million . during the period from march 5 , 2014 ( commencement of operations ) to december 31 , 2014 , we entered into fifteen new commitments with eleven new customers and four existing customers totaling $ 269.5 million , we funded 32 debt investments for approximately $ 159.4 million in principal balance , acquired warrants representing approximately $ 3.5 million of value , and made two equity investments totaling approximately $ 0.5 million . during the year ended december 31 , 2015 , we had prepayments from six of our portfolio companies for approximately $ 73.4 million in principal value . during the period from march 5 , 2014 ( commencement of operations ) to december 31 , 2014 , we had prepayments from two of our portfolio companies for approximately $ 27.7 million in principal value .
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the reliable and safe operation of our power plants , electric distribution system and natural gas infrastructure in our communities is foundational to our customers , our financial results and our credibility with stakeholders . our regulated generation fleet performance was strong throughout the year . all of our nuclear sites have achieved the industry 's highest distinction rating . our electric distribution system performed well throughout the year , with outage durations down when adjusted for storms . the safety of our workforce is a core value . our employees delivered strong safety results in 2019 , and we are at or near the top of our industry . storm response and system restoration . the 2019 atlantic hurricane season was the fourth consecutive year of above-average damaging storms . our ability to effectively handle all facets of the 2019 storm response efforts is a testament to our team 's extensive preparation and coordination , applying lessons learned from previous storms , and to on-the-ground management throughout the restoration efforts . notably in 2019 duke energy earned eei 's emergency recovery award , our 22nd eei award since 1998 and a strong affirmation of the work of our employees to support customers when they need us most . customer satisfaction . duke energy continues to transform the customer experience through our use of customer data to better inform operational priorities and performance levels . this data-driven approach allows us to identify the investments that are the most important to the customer experience . in 2019 , we instituted billing and payment-related communications and options , and we continue to enhance outage-related communications to customers . constructive regulatory and legislative outcomes . one of our long-term strategic goals is to achieve modernized regulatory constructs in our jurisdictions . modernized constructs provide benefits , which include improved earnings and cash flows through more timely recovery of investments , as well as stable pricing for customers . in 2019 , duke energy , north carolina regulators and environmentalists reached an agreement to permanently close all remaining coal ash basins in north carolina . this agreement reduces the cost to close our coal ash basins for our carolinas customers in comparison to the initial ncdeq closure order . in 2019 we achieved constructive rate case outcomes driving earnings growth through rate base increases in south carolina ( electric ) , north carolina ( natural gas ) , ohio ( electric distribution ) and kentucky ( natural gas ) . in addition , we have a multiyear rate plan in florida and grid investment riders in the midwest which enable more timely cost recovery and earnings growth . digital transformation . duke energy has a demonstrated track record of driving efficiencies and productivity into the business . we continue to leverage new technology , digital tools and data analytics across the business in response to a transforming landscape . in 2019 , we created a team dedicated to developing applications and other solutions to deliver productivity gains and improvements to the customer experience . modernizing the power grid . our grid improvement programs continue to be a key component of our growth strategy . modernization of the electric grid , including smart meters , storm hardening , self-healing and targeted undergrounding helps to ensure the system is better prepared for severe weather , improves the system 's reliability and flexibility , and provides better information and services for customers . in 2019 , 79 % of our jurisdictions were equipped with smart meters and we remain on track to be fully deployed across all regions by 2021. we continue to expand our self-optimizing grid capabilities , and in 2019 that saved over a half million customer interruptions . generating cleaner energy . overall , we have lowered our carbon emissions by 39 % since 2005 , consistent with our new goal to reduce carbon emissions by at least 50 % by 2030 and to achieve net-zero carbon emissions by 2050. our commitment for 2030 includes retiring plants , operating our existing carbon-free resources and investing in natural gas infrastructure , renewables and our energy delivery system . as we look beyond 2030 , we will need additional tools to continue our progress . we will work actively to advocate for research and development of carbon-free , dispatchable resources . that includes longer-term energy storage , advanced nuclear technologies , carbon capture and zero-carbon fuels . expanding the natural gas platform . we continue to pursue natural gas infrastructure investments . while the judicial and administrative challenges to date have been substantial , we are committed to the construction of the acp pipeline to bring low-cost gas supply and economic development opportunities to the southeast u.s. construction is underway on a liquefied natural gas facility in robeson county , north carolina , on property piedmont owns . this investment will help piedmont provide a reliable gas supply to customers during peak usage periods and protect customers from price volatility when there is a higher-than-normal demand for natural gas . dividend growth . in 2019 , duke energy continued to grow the dividend payment to shareholders . 2019 represented the 93rd consecutive year duke energy paid a cash dividend on its common stock . 41 md & a duke energy duke energy objectives – 2020 and beyond duke energy will continue to deliver exceptional value to customers , be an integral part of the communities in which we do business and provide attractive returns to investors . we have an achievable , long-term strategy in place , and it is producing tangible results , yet the industry in which we operate is becoming more and more dynamic . we are adjusting , where necessary , and accelerating our focus in key areas to ensure the company is well positioned to be successful for many decades into the future . story_separator_special_tag given legal challenges and ongoing discussions with customers , acp expects mechanical completion of the full project in late 2021 with in-service likely in the first half of 2022. the delays resulting from legal challenges have also impacted the cost for the project . project cost is approximately $ 8 billion , excluding financing costs . this estimate is based on the current facts available around construction costs and timelines , and is subject to future changes as those facts develop . abnormal weather , work delays ( including delays due to judicial or regulatory action ) and other conditions may result in cost or schedule modifications , a suspension of afudc for acp and or impairment charges potentially material to duke energy 's cash flows , financial position and results of operations . acp and duke energy will continue to consider their options with respect to the foregoing given their existing contractual and legal obligations . see notes 4 and 18 to the consolidated financial statements , `` regulatory matters `` and `` variable interest entities , `` respectively , for additional information . on november 13 , 2013 , the puco issued an order authorizing recovery of mgp costs at certain sites in ohio with a deadline to complete the mgp environmental investigation and remediation work prior to december 31 , 2016. this deadline was subsequently extended to december 31 , 2019. duke energy ohio has filed a request for extension of the deadline . a hearing on that request has not been scheduled . disallowance of costs incurred , failure to complete the work by the deadline or failure to obtain an extension from the puco could result in an adverse impact on gas utilities and infrastructure 's results of operations , financial position and cash flows . see note 4 to the consolidated financial statements , “ regulatory matters , ” for additional information . within this item 7 , see liquidity and capital resources for discussion of risks associated with the tax act . commercial renewables replace_table_token_21_th ( a ) certain projects are included in tax-equity structures where investors have differing interests in the project 's economic attributes . in the table above , 100 % of the tax-equity project 's capacity is included . year ended december 31 , 2019 , as compared to 2018 commercial renewables ' results were favorable primarily due to new tax equity solar projects in the current year and a prior year goodwill impairment charge . the following is a detailed discussion of the variance drivers by line item . operating revenues . the increase was primarily due to new solar projects placed in service and higher irradiance . operating expenses . the decrease was primarily due to a goodwill impairment charge in the prior year , partially offset by increased depreciation due to new solar projects placed in service . other income and expenses , net . the decrease was primarily due to income from the fes settlement agreement in the prior year . income tax benefit . the decrease in the tax benefit was primarily driven by taxes associated with duke energy 's interest in tax equity solar projects recorded during 2019 and a reduction in ptcs generated . 47 md & a segment results - commercial renewables loss attributable to noncontrolling interests . the variance was primarily due to an increase in solar projects with tax equity investors . hlbv accounting was utilized , resulting in allocation of losses to the noncontrolling interest partners . see note 1 to the consolidated financial statements , `` summary of significant accounting policies `` for more information . matters impacting future commercial renewables results commercial renewables continues to experience growth with tax equity projects ; however , the future expiration of federal tax incentives could result in adverse impacts to future results of operations , financial position and cash flows . during 2019 , duke energy evaluated recoverability of its renewable merchant plants principally in the electric reliability council of texas west market , due to declining market pricing and declining long-term forecasted energy prices , primarily driven by lower forecasted natural gas prices . these assets were not impaired ; however , a continued decline in energy market pricing would likely result in a future impairment . impairment of these assets could result in adverse impacts to the future results of operations , financial position and cash flows of commercial renewables . see note 11 to the consolidated financial statements , `` property , plant and equipment , `` for additional information . within this item 7 , see liquidity and capital resources for discussion of risks associated with the tax act . other replace_table_token_22_th year ended december 31 , 2019 , as compared to 2018 the variance was driven by the prior year severance charges related to a corporate initiative , prior year loss on sale of the retired beckjord station , and the absence in the current year of costs related to the piedmont acquisition , offset by obligations to the duke energy foundation in 2019. the following is a detailed discussion of the variance drivers by line item . operating expenses . the variance was primarily due to prior year severance charges related to a corporate initiative as well as costs associated with the piedmont acquisition , partially offset by obligations to the duke energy foundation in 2019. losses on sales of other assets and other , net . the variance was driven by the prior year loss on sale of the retired beckjord station , including the transfer of coal ash basins and other real property and indemnification from all potential future claims related to the property , whether arising under environmental laws or otherwise . other income and expenses , net . the variance was primarily due to higher returns on investments that fund certain employee benefit obligations and bison investment income . interest expense . the variance was primarily due to higher
| senior unsecured debt a2 a- duke energy kentucky stable stable senior unsecured debt baa1 a- piedmont natural gas stable stable senior unsecured a3 a- credit ratings are intended to provide credit lenders a framework for comparing the credit quality of securities and are not a recommendation to buy , sell or hold . the duke energy registrants ' credit ratings are dependent on the rating agencies ' assessments of their ability to meet their debt principal and interest obligations when they come due . if , as a result of market conditions or other factors , the duke energy registrants are unable to maintain current balance sheet strength , or if earnings and cash flow outlook materially deteriorates , credit ratings could be negatively impacted . cash flow information the following table summarizes duke energy 's cash flows for the two most recently completed fiscal years . replace_table_token_39_th 66 md & a liquidity and capital resources operating cash flows the following table summarizes key components of duke energy 's operating cash flows for the two most recently completed fiscal years . replace_table_token_40_th the variance was driven primarily by : a $ 241 million increase in net income after adjustment for non-cash items primarily due to increases in revenues as a result of rate increases in the current year , partially offset by decreases in current year non-cash adjustments ; a $ 573 million refund of amt credit carryforwards ; a $ 253 million decrease in cash outflows from working capital primarily due to fluctuations in accounts receivable balances , including a prior year increase for amt refunds , and prior year increases in regulatory assets related to fuel costs , partially offset by fluctuations in inventory levels and current year decreases in property tax and severance accruals ; and a $ 105 million payment in the prior year for disposal of beckjord . partially offset by : a $ 213 million increase in payments for aros . investing cash flows the following table summarizes key components of duke energy 's investing cash flows for the two most recently completed fiscal years .
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we believe that cpi-0209 has the potential to be a best-in-class ezh2 inhibitor for use in a broad range of cancer types and to expand the addressable patient populations beyond those that have been targeted by first-generation ezh2 inhibitors . we are currently conducting the phase 1 dose escalation portion of a phase 1/2 clinical trial of cpi-0209 in solid tumors . after determining the recommended phase 2 dose as monotherapy , we intend to pursue monotherapy expansion arms in selected solid tumor and hematologic indications with a biomarker enrichment strategy . 78 cpi-1205 cpi-1205 is our first-generation ezh2 inhibitor . in june 2020 , we announced that we plan to discontinue development of cpi-1205 after completion of prostar and to prioritize further clinical development of cpi-0209 . prostar is a phase 1b/2 clinical study evaluating cpi-1205 combined with enzalutamide or abiraterone in patients with metastatic castration-resistant prostate cancer ( mcrpc ) . the decision was based on a recent review of prostar data , which did not demonstrate the definitive signal of activity necessary to advance the program into pivotal studies in mcrpc . we intend to present a full data set from prostar at a future medical meeting . covid-19 pandemic the ongoing covid-19 pandemic has affected and will continue to affect our business and operations . the section below provides an update of the impact of the covid-19 pandemic on our business and operations . clinical trial execution . patient safety remains paramount in the execution of our clinical trials . patient enrollment in manifest began to slow toward the end of first quarter of 2020 , and several sites informed us that they temporarily halted enrollment due to the pandemic . we have utilized recent regulatory guidance and provisions of the clinical trial protocol that provide potential flexibility in the time and place of data collection . we have had incidences of incomplete data collection in the manifest clinical trial . to date , we have not seen a substantial impact due to covid-19 pandemic on manifest-2 or our phase 1 clinical trial for cpi-0209 . we will continue to monitor the effects of the covid-19 pandemic on all of our ongoing clinical trials . manufacturing and supply . we have experienced some disruption in our supply chain from our suppliers due to covid-19 . we experienced a brief delay in the third quarter in the manufacturing of pelabresib tablets at a manufacturer in the united states due to covid-19 safety policies at the manufacturing site . we are not currently experiencing supply chain disruptions in manufacturing for any of our product candidates . our laboratory kit supplier is experiencing , and may continue to experience , supply chain issues due to the increased demand for kits associated with the pandemic . offices . our laboratory facilities are currently operating at reduced capacity , and mandated safety protocols are in place . the majority of our non-laboratory personnel currently work remotely . financial overview to date , we have financed our operations primarily through sales of our preferred stock , payments received in connection with collaboration and research agreements , borrowings under loan agreements , and sales of our common stock in public and private offerings . since our inception , we have incurred significant operating losses . our ability to generate product revenue sufficient to achieve profitability , if ever , will depend heavily on the successful development and eventual commercialization of one or more of our product candidates . for the years ended december 31 , 2020 , 2019 , and 2018 , we reported a net loss of $ 126.4 million , $ 85.6 million and $ 59.9 million , respectively . as of december 31 , 2020 , we had an accumulated deficit of $ 445.7 million . we expect to continue to incur significant expenses and increasing operating losses for at least the next several years . we expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities , particularly if and as we : conduct our manifest-2 trial and continue our manifest trial , and conduct our phase 1/2 clinical trial of cpi-0209 ; advance our clinical-stage product candidates from mid-stage into later-stage trials ; continue the research and development of our other product candidates ; seek to discover and develop additional product candidates ; seek regulatory approvals for any product candidates that successfully complete clinical trials ; establish a sales , marketing and distribution infrastructure to commercialize any products for which we may obtain regulatory approval ; scale up our manufacturing processes and capabilities , or arrange for a third party to do so on our behalf , to support our clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval ; 79 acquire or in-license products , product candidates or technologies ; maintain , expand , enforce , defend and protect our intellectual property portfolio ; hire additional clinical , quality control and scientific personnel ; and add operational , financial and administrative personnel , including personnel to support our product development and planned future commercialization efforts and our operations as a public company . we will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates . if we obtain regulatory approval for any of our product candidates , we expect to incur significant expenses related to developing our commercialization capability to support product sales , marketing and distribution . further , we expect to incur additional costs associated with operating as a public company . as a result , we will need substantial additional funding to support our continuing operations and pursue our growth strategy . story_separator_special_tag , license or other arrangement , including the terms and timing of any milestone payments thereunder . 86 as of december 31 , 2020 , we had cash , cash equivalents and marketable securities of $ 421.4 million . we believe that our cash , cash equivalents and marketable securities , will enable us to fund our operating expenses and capital expenditure requirements into mid-2023 . we have based this estimate on assumptions that may prove to be wrong , and we could utilize our available capital resources sooner than we expect . until such time as we can generate substantial product revenue , if ever , we expect to finance our operations through a combination of equity offerings , debt financings , collaborations , strategic alliances and marketing , distribution or licensing arrangements . to the extent that we raise additional capital through the sale of equity or convertible debt securities , ownership interest will be diluted , and the terms of these securities may include liquidation or other preferences that adversely affect rights as a common stockholder . debt financing and preferred equity financing , if available , may involve agreements that include covenants limiting or restricting our ability to take specific actions , such as incurring additional debt , making acquisitions or capital expenditures or declaring dividends . if we raise additional funds through collaborations , strategic alliances or marketing , distribution or licensing arrangements with third parties , we may have to relinquish valuable rights to our technologies , future revenue streams , research programs or drug candidates , or grant licenses on terms that may not be favorable to us . if we are unable to raise additional funds through equity or debt financings or other arrangements when needed , we may be required to delay , limit , reduce or terminate our research , product development or future commercialization efforts , or grant rights to develop and market drug candidates that we would otherwise prefer to develop and market ourselves . contractual obligations and commitments the following table summarizes our contractual obligations as of december 31 , 2020 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods : replace_table_token_7_th ( 1 ) amounts in table reflect payments due for our current lease of office and laboratory space in cambridge , massachusetts under an amendment of operating lease agreement that expires in february 2021. in november 2020 , we executed a lease for a ten-year term to move our cambridge , massachusetts operations to a new facility in watertown , massachusetts , commencing in december 2021. the table above includes the lease payments associated with our current lease but no future lease payments associated with the new facility as the commencement date of the new lease is not anticipated until december 2021. we enter into contracts in the normal course of business with cros , cmos and other third parties for clinical trials , preclinical research studies and testing and manufacturing services . these contracts do not contain minimum purchase commitments and are cancelable by us upon prior written notice . payments due upon cancellation consist only of payments for services provided or expenses incurred , including noncancelable obligations of our service providers , up to the date of cancellation . these payments are not included in the preceding table as the amount and timing of such payments are unknown or uncertain at december 31 , 2020. the lls agreement requires us to make certain milestone payments to lls , that could total up to $ 25.0 million in aggregate , upon our receipt of payments associated with the licensing or transfer of rights to the related compound ( or a product ) to a third party , upon first regulatory approval of a product in the u.s. , or upon the first regulatory approval of a product in europe or japan . we have not included future payments under this agreement in the table of contractual obligations above as the achievement of these milestones is currently not probable . we have also entered into license agreements with third parties , which are in the normal course of business . we have not included future payments under these agreements in the table of contractual obligations above since obligations under these agreements are contingent upon future events such as our achievement of specified development , regulatory and commercial milestones , or royalties on net product sales . as of december 31 , 2020 , we do not include liabilities with respect to these agreements as the company has not yet generated product sales and the achievement of certain milestones is not probable . critical accounting policies and significant judgments and estimates our management 's discussion and analysis of financial condition and results of operations are based on our consolidated financial statements which are prepared in accordance with generally accepted accounting principles , or gaap , in the united states . the preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets , liabilities , revenue , costs and expenses , and related disclosures . we 87 believe that the estimates and assumptions involved in the accounting policies described below may have the greatest potential impact on our consolidated financial statements and , therefore , consider these to be our critical accounting policies . we evaluate our estimates and assumptions on an ongoing basis using 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 . our actual results may differ from these estimates under different assumptions and conditions . accrued and prepaid research and development expenses as part of the process of preparing our financial statements
| senior unsecured debt a2 a- duke energy kentucky stable stable senior unsecured debt baa1 a- piedmont natural gas stable stable senior unsecured a3 a- credit ratings are intended to provide credit lenders a framework for comparing the credit quality of securities and are not a recommendation to buy , sell or hold . the duke energy registrants ' credit ratings are dependent on the rating agencies ' assessments of their ability to meet their debt principal and interest obligations when they come due . if , as a result of market conditions or other factors , the duke energy registrants are unable to maintain current balance sheet strength , or if earnings and cash flow outlook materially deteriorates , credit ratings could be negatively impacted . cash flow information the following table summarizes duke energy 's cash flows for the two most recently completed fiscal years . replace_table_token_39_th 66 md & a liquidity and capital resources operating cash flows the following table summarizes key components of duke energy 's operating cash flows for the two most recently completed fiscal years . replace_table_token_40_th the variance was driven primarily by : a $ 241 million increase in net income after adjustment for non-cash items primarily due to increases in revenues as a result of rate increases in the current year , partially offset by decreases in current year non-cash adjustments ; a $ 573 million refund of amt credit carryforwards ; a $ 253 million decrease in cash outflows from working capital primarily due to fluctuations in accounts receivable balances , including a prior year increase for amt refunds , and prior year increases in regulatory assets related to fuel costs , partially offset by fluctuations in inventory levels and current year decreases in property tax and severance accruals ; and a $ 105 million payment in the prior year for disposal of beckjord . partially offset by : a $ 213 million increase in payments for aros . investing cash flows the following table summarizes key components of duke energy 's investing cash flows for the two most recently completed fiscal years .
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we believe that cpi-0209 has the potential to be a best-in-class ezh2 inhibitor for use in a broad range of cancer types and to expand the addressable patient populations beyond those that have been targeted by first-generation ezh2 inhibitors . we are currently conducting the phase 1 dose escalation portion of a phase 1/2 clinical trial of cpi-0209 in solid tumors . after determining the recommended phase 2 dose as monotherapy , we intend to pursue monotherapy expansion arms in selected solid tumor and hematologic indications with a biomarker enrichment strategy . 78 cpi-1205 cpi-1205 is our first-generation ezh2 inhibitor . in june 2020 , we announced that we plan to discontinue development of cpi-1205 after completion of prostar and to prioritize further clinical development of cpi-0209 . prostar is a phase 1b/2 clinical study evaluating cpi-1205 combined with enzalutamide or abiraterone in patients with metastatic castration-resistant prostate cancer ( mcrpc ) . the decision was based on a recent review of prostar data , which did not demonstrate the definitive signal of activity necessary to advance the program into pivotal studies in mcrpc . we intend to present a full data set from prostar at a future medical meeting . covid-19 pandemic the ongoing covid-19 pandemic has affected and will continue to affect our business and operations . the section below provides an update of the impact of the covid-19 pandemic on our business and operations . clinical trial execution . patient safety remains paramount in the execution of our clinical trials . patient enrollment in manifest began to slow toward the end of first quarter of 2020 , and several sites informed us that they temporarily halted enrollment due to the pandemic . we have utilized recent regulatory guidance and provisions of the clinical trial protocol that provide potential flexibility in the time and place of data collection . we have had incidences of incomplete data collection in the manifest clinical trial . to date , we have not seen a substantial impact due to covid-19 pandemic on manifest-2 or our phase 1 clinical trial for cpi-0209 . we will continue to monitor the effects of the covid-19 pandemic on all of our ongoing clinical trials . manufacturing and supply . we have experienced some disruption in our supply chain from our suppliers due to covid-19 . we experienced a brief delay in the third quarter in the manufacturing of pelabresib tablets at a manufacturer in the united states due to covid-19 safety policies at the manufacturing site . we are not currently experiencing supply chain disruptions in manufacturing for any of our product candidates . our laboratory kit supplier is experiencing , and may continue to experience , supply chain issues due to the increased demand for kits associated with the pandemic . offices . our laboratory facilities are currently operating at reduced capacity , and mandated safety protocols are in place . the majority of our non-laboratory personnel currently work remotely . financial overview to date , we have financed our operations primarily through sales of our preferred stock , payments received in connection with collaboration and research agreements , borrowings under loan agreements , and sales of our common stock in public and private offerings . since our inception , we have incurred significant operating losses . our ability to generate product revenue sufficient to achieve profitability , if ever , will depend heavily on the successful development and eventual commercialization of one or more of our product candidates . for the years ended december 31 , 2020 , 2019 , and 2018 , we reported a net loss of $ 126.4 million , $ 85.6 million and $ 59.9 million , respectively . as of december 31 , 2020 , we had an accumulated deficit of $ 445.7 million . we expect to continue to incur significant expenses and increasing operating losses for at least the next several years . we expect that our expenses and capital requirements will increase substantially in connection with our ongoing activities , particularly if and as we : conduct our manifest-2 trial and continue our manifest trial , and conduct our phase 1/2 clinical trial of cpi-0209 ; advance our clinical-stage product candidates from mid-stage into later-stage trials ; continue the research and development of our other product candidates ; seek to discover and develop additional product candidates ; seek regulatory approvals for any product candidates that successfully complete clinical trials ; establish a sales , marketing and distribution infrastructure to commercialize any products for which we may obtain regulatory approval ; scale up our manufacturing processes and capabilities , or arrange for a third party to do so on our behalf , to support our clinical trials of our product candidates and commercialization of any of our product candidates for which we obtain marketing approval ; 79 acquire or in-license products , product candidates or technologies ; maintain , expand , enforce , defend and protect our intellectual property portfolio ; hire additional clinical , quality control and scientific personnel ; and add operational , financial and administrative personnel , including personnel to support our product development and planned future commercialization efforts and our operations as a public company . we will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates . if we obtain regulatory approval for any of our product candidates , we expect to incur significant expenses related to developing our commercialization capability to support product sales , marketing and distribution . further , we expect to incur additional costs associated with operating as a public company . as a result , we will need substantial additional funding to support our continuing operations and pursue our growth strategy . story_separator_special_tag , license or other arrangement , including the terms and timing of any milestone payments thereunder . 86 as of december 31 , 2020 , we had cash , cash equivalents and marketable securities of $ 421.4 million . we believe that our cash , cash equivalents and marketable securities , will enable us to fund our operating expenses and capital expenditure requirements into mid-2023 . we have based this estimate on assumptions that may prove to be wrong , and we could utilize our available capital resources sooner than we expect . until such time as we can generate substantial product revenue , if ever , we expect to finance our operations through a combination of equity offerings , debt financings , collaborations , strategic alliances and marketing , distribution or licensing arrangements . to the extent that we raise additional capital through the sale of equity or convertible debt securities , ownership interest will be diluted , and the terms of these securities may include liquidation or other preferences that adversely affect rights as a common stockholder . debt financing and preferred equity financing , if available , may involve agreements that include covenants limiting or restricting our ability to take specific actions , such as incurring additional debt , making acquisitions or capital expenditures or declaring dividends . if we raise additional funds through collaborations , strategic alliances or marketing , distribution or licensing arrangements with third parties , we may have to relinquish valuable rights to our technologies , future revenue streams , research programs or drug candidates , or grant licenses on terms that may not be favorable to us . if we are unable to raise additional funds through equity or debt financings or other arrangements when needed , we may be required to delay , limit , reduce or terminate our research , product development or future commercialization efforts , or grant rights to develop and market drug candidates that we would otherwise prefer to develop and market ourselves . contractual obligations and commitments the following table summarizes our contractual obligations as of december 31 , 2020 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods : replace_table_token_7_th ( 1 ) amounts in table reflect payments due for our current lease of office and laboratory space in cambridge , massachusetts under an amendment of operating lease agreement that expires in february 2021. in november 2020 , we executed a lease for a ten-year term to move our cambridge , massachusetts operations to a new facility in watertown , massachusetts , commencing in december 2021. the table above includes the lease payments associated with our current lease but no future lease payments associated with the new facility as the commencement date of the new lease is not anticipated until december 2021. we enter into contracts in the normal course of business with cros , cmos and other third parties for clinical trials , preclinical research studies and testing and manufacturing services . these contracts do not contain minimum purchase commitments and are cancelable by us upon prior written notice . payments due upon cancellation consist only of payments for services provided or expenses incurred , including noncancelable obligations of our service providers , up to the date of cancellation . these payments are not included in the preceding table as the amount and timing of such payments are unknown or uncertain at december 31 , 2020. the lls agreement requires us to make certain milestone payments to lls , that could total up to $ 25.0 million in aggregate , upon our receipt of payments associated with the licensing or transfer of rights to the related compound ( or a product ) to a third party , upon first regulatory approval of a product in the u.s. , or upon the first regulatory approval of a product in europe or japan . we have not included future payments under this agreement in the table of contractual obligations above as the achievement of these milestones is currently not probable . we have also entered into license agreements with third parties , which are in the normal course of business . we have not included future payments under these agreements in the table of contractual obligations above since obligations under these agreements are contingent upon future events such as our achievement of specified development , regulatory and commercial milestones , or royalties on net product sales . as of december 31 , 2020 , we do not include liabilities with respect to these agreements as the company has not yet generated product sales and the achievement of certain milestones is not probable . critical accounting policies and significant judgments and estimates our management 's discussion and analysis of financial condition and results of operations are based on our consolidated financial statements which are prepared in accordance with generally accepted accounting principles , or gaap , in the united states . the preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets , liabilities , revenue , costs and expenses , and related disclosures . we 87 believe that the estimates and assumptions involved in the accounting policies described below may have the greatest potential impact on our consolidated financial statements and , therefore , consider these to be our critical accounting policies . we evaluate our estimates and assumptions on an ongoing basis using 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 . our actual results may differ from these estimates under different assumptions and conditions . accrued and prepaid research and development expenses as part of the process of preparing our financial statements
| cash flows the following table summarizes our sources and uses of cash for each of the periods presented : replace_table_token_6_th operating activities during the year ended december 31 , 2020 , operating activities used $ 111.4 million of cash , primarily resulting from our net loss of $ 126.4 million and changes in operating assets and liabilities of $ 2.4 million , partially offset by net non-cash expenses of $ 17.4 million . net cash used by changes in operating assets and liabilities for the year ended december 31 , 2020 consisted primarily of a $ 4.9 million increase in other assets and a $ 4.1 million increase in prepaid expenses and other current assets , partially offset by a $ 4.1 million increase in accrued expenses and other current liabilities , and a $ 2.5 million increase in accounts payable . during the year ended december 31 , 2019 , operating activities used $ 72.2 million of cash , primarily resulting from our net loss of $ 85.6 million , partially offset by net non-cash expense of $ 7.5 million and net cash provided by changes in our operating assets and liabilities of $ 5.8 million . net cash provided by changes in our operating assets and liabilities for the year ended december 31 , 2019 consisted primarily of a $ 5.9 million increase in accounts payable and accrued expenses and other current liabilities , $ 0.1 million net increase in operating lease , right-of-use assets and liabilities , partially offset by a $ 0.2 million increase in prepaid expenses and other current assets . during the year ended december 31 , 2018 , operating activities used $ 48.8 million of cash , primarily resulting from our net loss of $ 59.9 million , partially offset by net non-cash expense of $ 4.7 million and net cash provided by changes in our operating assets and liabilities of $ 6.4 million .
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however , actual results may differ from these estimates and assumptions . if our judgment or interpretation of the facts and circumstances relating to the various transactions had been different , it is possible that different accounting policies would have been applied , thus resulting in a different presentation of the financial statements . additionally , other companies may utilize different assumptions or estimates that may impact comparability of our results of operations to those of companies in similar businesses . we believe the following critical accounting policies govern the significant judgments and estimates used in the preparation of our financial statements , which should be read in conjunction with the more complete discussion of our accounting policies and procedures included in “ note 2 – summary of significant accounting policies ” to our consolidated financial statements . 33 goodwill impairment we evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable . we adopted asu 2017-04 , intangibles – goodwill and others ( topic 350 ) : simplifying the test for goodwill impairment ( “ asu 2017-04 ” ) , which simplifies the measurement of goodwill impairment by eliminating step 2 from the goodwill impairment test ( comparing the implied fair value of goodwill with the carrying amount of goodwill ) . the risks and uncertainties involved in applying the principles related to goodwill impairment include , but are not limited to , the following : we estimate the fair value using discounted cash flows and relevant competitor multiples . we monitor factors that may impact the fair value including market comparable company multiples , interest rates and global economic conditions . we use a combined income and market approach in evaluations for potential impairment , which requires management to make key assumptions related to revenue growth rate , cash flow assumptions , discount rate and selection of comparable companies . see “ note 9 – fair value measures ” for discussion regarding our sensitivity analysis performed around these assumptions . real estate investment impairment we invest in real estate assets and subsequently monitor those investments quarterly for impairment , including the review of real estate properties subject to direct financing leases . additionally , we record depreciation and amortization related to our investments . the risks and uncertainties involved in applying the principles related to real estate investments include , but are not limited to , the following : the estimated useful lives of our depreciable assets affect the amount of depreciation and amortization recognized on our investments . the review of impairment indicators and subsequent determination of the undiscounted future cash flows could require us to reduce the value of assets and recognize an impairment loss . the fair value of held for sale assets is estimated by management . this estimated value could result in a reduction of the carrying value of the asset . changes in assumptions based on actual results may have a material impact on the company 's financial results . loans held for investment impairment we evaluate loans held for investment on a quarterly basis . as a first step in the notes receivable impairment process , we must determine , based on current information and events , if it is probable that we will be unable to collect the amounts due in accordance with the loan agreement . the risks and uncertainties involved in applying the principles related to notes receivable include , but are not limited to , the following : evaluating the financial condition and other current obligations of the borrower involves judgment in assessing their liquidity and financial stability . allocation of purchase price of real estate assets in connection with our acquisition of properties , we allocate the purchase price to the tangible and intangible assets and liabilities acquired based on their respective estimated fair values . tangible assets consist of land , buildings , fixtures and tenant improvements . intangible assets consist of above- and below- market lease values and the value of in-place leases . our purchase price allocations are developed utilizing third-party appraisal reports , industry standards and management experience . the risks and uncertainties involved in applying the principles related to purchase price allocations include , but are not limited to , the following : the value allocated to land as opposed to buildings , fixtures and tenant improvements affects the amount of depreciation expense we record . if more value is attributed to land , depreciation expense is lower than if more value is attributed to buildings , fixtures and tenant improvements ; intangible lease assets and liabilities can be significantly affected by estimates , including market rent , lease term including renewal options at rental rates below estimated market rental rates , carrying costs of the property during a hypothetical expected lease-up period , and current market conditions and costs , including tenant improvement allowances and rent concessions ; and we determine whether any financing assumed is above- or below- market based upon comparison to similar financing terms for similar investment properties . 34 income taxes as a reit , the general partner generally is not subject to federal income tax on taxable income that it distributes to its shareholders as long as it distributes at least 90 % of its annual taxable income ( computed without regard to the deduction for dividends paid and excluding net capital gains ) , with the exception of its trs entities . however , the general partner , including its trs entities , and the operating partnership are still subject to certain state and local income and franchise taxes in the various jurisdictions in which they operate . we provide for income taxes in accordance with current authoritative accounting and tax guidance . the tax provision or benefit related to significant or unusual items is recognized in the quarter in which those items occur . story_separator_special_tag during the year ended december 31 , 2015 , the company recorded a gain on forgiveness of debt of $ 4.8 million related to the foreclosure of one property . 42 other income , net 2017 vs 2016 – the increase of $ 1.0 million during the year ended december 31 , 2017 as compared to the same period in 2016 was primarily due to post-closing adjustments , of $ 1.6 million , recorded in accordance with the purchase and sale agreement during the year ended december 31 , 2016 related to a multi-tenant asset portfolio sale completed in 2014 , offset by a decrease in interest income related to the company 's investment securities and mortgage notes receivable of $ 0.6 million . 2016 vs 2015 – the decrease of $ 4.1 million during the year ended december 31 , 2016 as compared to the same period in 2015 was primarily a result of a decrease in disposition fees earned from 1031 real estate programs of $ 3.8 million . reserve for loan loss the reserve for loan loss of $ 15.3 million for the year ended december 31 , 2015 related to an unsecured note from rcs capital corporation in connection with the unconsummated sale of cole capital . during the three months ended december 31 , 2015 , the company assessed the collectability of the note , determined it was unlikely to be repaid and recorded the reserve equal to the carrying value of the note . equity in income and gain on disposition of unconsolidated entities 2017 vs 2016 – the decrease of $ 7.0 million during the year ended december 31 , 2017 as compared to the same period in 2016 was primarily the result of a gain of $ 10.2 million recognized on the disposition of one unconsolidated joint venture owning one property in 2016 , with no comparable gain in 2017 . 2016 vs 2015 – equity in income ( loss ) and gain on disposition of unconsolidated entities increased $ 0.7 million during the year ended december 31 , 2016 as compared to 2015 . during the year ended december 31 , 2016 , the company recorded a gain of $ 10.2 million related to the disposition of one property , comprising 343 million square feet of office space , owned by an unconsolidated joint venture . during the year ended december 31 , 2015 , the company recorded a gain of $ 6.7 million related to the disposition of its interest in one consolidated joint venture , whose only assets consisted of investments in three unconsolidated joint ventures that owned three properties , comprising 752 million square feet of retail space . during the years ended december 31 , 2016 and 2015 , the company recognized $ 0.9 million and $ 2.3 million of net income , respectively , from the unconsolidated joint ventures . the company recorded equity in loss related to its investments in the cole reits of $ 1.3 million during the year ended december 31 , 2016 , as compared to equity in income of $ 0.1 million during the year ended december 31 , 2015 . gain ( loss ) on derivative instruments , net 2017 vs 2016 – the $ 4.2 million increase during the year ended december 31 , 2017 as compared to the same period in 2016 , was primarily a result of the termination of six interest rate swaps in connection with the early repayment of the outstanding borrowings under our credit facility term loan , as discussed in note 11 – derivatives and hedging activities to our consolidated financial statements , which resulted in a gain of $ 1.1 million as compared to a loss of $ 3.3 million in 2016 . 2016 vs 2015 – the decrease during the year ended december 31 , 2016 , is due to the termination of two interest rate swaps in connection with the early repayment of a portion of the credit facility term loan , which resulted in a loss of $ 3.3 million , offset by an increase in the fair value of the company 's interest rate swaps . gain ( loss ) on disposition of real estate and real estate assets held for sale , net 2017 vs 2016 – the increase in gain on disposition of real estate and held for sale assets , net of $ 16.0 million during the year ended december 31 , 2017 as compared to the same period in 2016 , was due to the company 's disposition of 131 properties , excluding six properties transferred to the lender in either a deed-in-lieu of foreclosure or foreclosure sale transaction , for an aggregate sales price of $ 594.9 million which resulted in a gain of $ 64.7 million during the year ended december 31 , 2017 , as compared to the disposal of 301 properties for an aggregate sales price of $ 1.1 billion during the same period in 2016 for a gain of $ 50.6 million , which included $ 28.8 million of goodwill allocation related to the sales . during the year ended december 31 , 2017 , the company also recognized a loss of $ 3.1 million related to assets classified as held for sale , as compared to a loss of $ 5.1 million during the same period in 2016 . 2016 vs 2015 – during the year ended december 31 , 2016 , the change of $ 117.8 million from a net loss on dispositions of real estate to a net gain was due to the company 's disposition of 301 properties for an aggregate sales price of $ 1.1 billion , which resulted in an aggregate gain of $ 50.6 million , as compared to the disposal of 228 properties for an aggregate sales price of $ 1.4 billion during the same period in 2015 for a loss of $ 69.1 million . during the year ended december
| cash flows the following table summarizes our sources and uses of cash for each of the periods presented : replace_table_token_6_th operating activities during the year ended december 31 , 2020 , operating activities used $ 111.4 million of cash , primarily resulting from our net loss of $ 126.4 million and changes in operating assets and liabilities of $ 2.4 million , partially offset by net non-cash expenses of $ 17.4 million . net cash used by changes in operating assets and liabilities for the year ended december 31 , 2020 consisted primarily of a $ 4.9 million increase in other assets and a $ 4.1 million increase in prepaid expenses and other current assets , partially offset by a $ 4.1 million increase in accrued expenses and other current liabilities , and a $ 2.5 million increase in accounts payable . during the year ended december 31 , 2019 , operating activities used $ 72.2 million of cash , primarily resulting from our net loss of $ 85.6 million , partially offset by net non-cash expense of $ 7.5 million and net cash provided by changes in our operating assets and liabilities of $ 5.8 million . net cash provided by changes in our operating assets and liabilities for the year ended december 31 , 2019 consisted primarily of a $ 5.9 million increase in accounts payable and accrued expenses and other current liabilities , $ 0.1 million net increase in operating lease , right-of-use assets and liabilities , partially offset by a $ 0.2 million increase in prepaid expenses and other current assets . during the year ended december 31 , 2018 , operating activities used $ 48.8 million of cash , primarily resulting from our net loss of $ 59.9 million , partially offset by net non-cash expense of $ 4.7 million and net cash provided by changes in our operating assets and liabilities of $ 6.4 million .
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however , actual results may differ from these estimates and assumptions . if our judgment or interpretation of the facts and circumstances relating to the various transactions had been different , it is possible that different accounting policies would have been applied , thus resulting in a different presentation of the financial statements . additionally , other companies may utilize different assumptions or estimates that may impact comparability of our results of operations to those of companies in similar businesses . we believe the following critical accounting policies govern the significant judgments and estimates used in the preparation of our financial statements , which should be read in conjunction with the more complete discussion of our accounting policies and procedures included in “ note 2 – summary of significant accounting policies ” to our consolidated financial statements . 33 goodwill impairment we evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable . we adopted asu 2017-04 , intangibles – goodwill and others ( topic 350 ) : simplifying the test for goodwill impairment ( “ asu 2017-04 ” ) , which simplifies the measurement of goodwill impairment by eliminating step 2 from the goodwill impairment test ( comparing the implied fair value of goodwill with the carrying amount of goodwill ) . the risks and uncertainties involved in applying the principles related to goodwill impairment include , but are not limited to , the following : we estimate the fair value using discounted cash flows and relevant competitor multiples . we monitor factors that may impact the fair value including market comparable company multiples , interest rates and global economic conditions . we use a combined income and market approach in evaluations for potential impairment , which requires management to make key assumptions related to revenue growth rate , cash flow assumptions , discount rate and selection of comparable companies . see “ note 9 – fair value measures ” for discussion regarding our sensitivity analysis performed around these assumptions . real estate investment impairment we invest in real estate assets and subsequently monitor those investments quarterly for impairment , including the review of real estate properties subject to direct financing leases . additionally , we record depreciation and amortization related to our investments . the risks and uncertainties involved in applying the principles related to real estate investments include , but are not limited to , the following : the estimated useful lives of our depreciable assets affect the amount of depreciation and amortization recognized on our investments . the review of impairment indicators and subsequent determination of the undiscounted future cash flows could require us to reduce the value of assets and recognize an impairment loss . the fair value of held for sale assets is estimated by management . this estimated value could result in a reduction of the carrying value of the asset . changes in assumptions based on actual results may have a material impact on the company 's financial results . loans held for investment impairment we evaluate loans held for investment on a quarterly basis . as a first step in the notes receivable impairment process , we must determine , based on current information and events , if it is probable that we will be unable to collect the amounts due in accordance with the loan agreement . the risks and uncertainties involved in applying the principles related to notes receivable include , but are not limited to , the following : evaluating the financial condition and other current obligations of the borrower involves judgment in assessing their liquidity and financial stability . allocation of purchase price of real estate assets in connection with our acquisition of properties , we allocate the purchase price to the tangible and intangible assets and liabilities acquired based on their respective estimated fair values . tangible assets consist of land , buildings , fixtures and tenant improvements . intangible assets consist of above- and below- market lease values and the value of in-place leases . our purchase price allocations are developed utilizing third-party appraisal reports , industry standards and management experience . the risks and uncertainties involved in applying the principles related to purchase price allocations include , but are not limited to , the following : the value allocated to land as opposed to buildings , fixtures and tenant improvements affects the amount of depreciation expense we record . if more value is attributed to land , depreciation expense is lower than if more value is attributed to buildings , fixtures and tenant improvements ; intangible lease assets and liabilities can be significantly affected by estimates , including market rent , lease term including renewal options at rental rates below estimated market rental rates , carrying costs of the property during a hypothetical expected lease-up period , and current market conditions and costs , including tenant improvement allowances and rent concessions ; and we determine whether any financing assumed is above- or below- market based upon comparison to similar financing terms for similar investment properties . 34 income taxes as a reit , the general partner generally is not subject to federal income tax on taxable income that it distributes to its shareholders as long as it distributes at least 90 % of its annual taxable income ( computed without regard to the deduction for dividends paid and excluding net capital gains ) , with the exception of its trs entities . however , the general partner , including its trs entities , and the operating partnership are still subject to certain state and local income and franchise taxes in the various jurisdictions in which they operate . we provide for income taxes in accordance with current authoritative accounting and tax guidance . the tax provision or benefit related to significant or unusual items is recognized in the quarter in which those items occur . story_separator_special_tag during the year ended december 31 , 2015 , the company recorded a gain on forgiveness of debt of $ 4.8 million related to the foreclosure of one property . 42 other income , net 2017 vs 2016 – the increase of $ 1.0 million during the year ended december 31 , 2017 as compared to the same period in 2016 was primarily due to post-closing adjustments , of $ 1.6 million , recorded in accordance with the purchase and sale agreement during the year ended december 31 , 2016 related to a multi-tenant asset portfolio sale completed in 2014 , offset by a decrease in interest income related to the company 's investment securities and mortgage notes receivable of $ 0.6 million . 2016 vs 2015 – the decrease of $ 4.1 million during the year ended december 31 , 2016 as compared to the same period in 2015 was primarily a result of a decrease in disposition fees earned from 1031 real estate programs of $ 3.8 million . reserve for loan loss the reserve for loan loss of $ 15.3 million for the year ended december 31 , 2015 related to an unsecured note from rcs capital corporation in connection with the unconsummated sale of cole capital . during the three months ended december 31 , 2015 , the company assessed the collectability of the note , determined it was unlikely to be repaid and recorded the reserve equal to the carrying value of the note . equity in income and gain on disposition of unconsolidated entities 2017 vs 2016 – the decrease of $ 7.0 million during the year ended december 31 , 2017 as compared to the same period in 2016 was primarily the result of a gain of $ 10.2 million recognized on the disposition of one unconsolidated joint venture owning one property in 2016 , with no comparable gain in 2017 . 2016 vs 2015 – equity in income ( loss ) and gain on disposition of unconsolidated entities increased $ 0.7 million during the year ended december 31 , 2016 as compared to 2015 . during the year ended december 31 , 2016 , the company recorded a gain of $ 10.2 million related to the disposition of one property , comprising 343 million square feet of office space , owned by an unconsolidated joint venture . during the year ended december 31 , 2015 , the company recorded a gain of $ 6.7 million related to the disposition of its interest in one consolidated joint venture , whose only assets consisted of investments in three unconsolidated joint ventures that owned three properties , comprising 752 million square feet of retail space . during the years ended december 31 , 2016 and 2015 , the company recognized $ 0.9 million and $ 2.3 million of net income , respectively , from the unconsolidated joint ventures . the company recorded equity in loss related to its investments in the cole reits of $ 1.3 million during the year ended december 31 , 2016 , as compared to equity in income of $ 0.1 million during the year ended december 31 , 2015 . gain ( loss ) on derivative instruments , net 2017 vs 2016 – the $ 4.2 million increase during the year ended december 31 , 2017 as compared to the same period in 2016 , was primarily a result of the termination of six interest rate swaps in connection with the early repayment of the outstanding borrowings under our credit facility term loan , as discussed in note 11 – derivatives and hedging activities to our consolidated financial statements , which resulted in a gain of $ 1.1 million as compared to a loss of $ 3.3 million in 2016 . 2016 vs 2015 – the decrease during the year ended december 31 , 2016 , is due to the termination of two interest rate swaps in connection with the early repayment of a portion of the credit facility term loan , which resulted in a loss of $ 3.3 million , offset by an increase in the fair value of the company 's interest rate swaps . gain ( loss ) on disposition of real estate and real estate assets held for sale , net 2017 vs 2016 – the increase in gain on disposition of real estate and held for sale assets , net of $ 16.0 million during the year ended december 31 , 2017 as compared to the same period in 2016 , was due to the company 's disposition of 131 properties , excluding six properties transferred to the lender in either a deed-in-lieu of foreclosure or foreclosure sale transaction , for an aggregate sales price of $ 594.9 million which resulted in a gain of $ 64.7 million during the year ended december 31 , 2017 , as compared to the disposal of 301 properties for an aggregate sales price of $ 1.1 billion during the same period in 2016 for a gain of $ 50.6 million , which included $ 28.8 million of goodwill allocation related to the sales . during the year ended december 31 , 2017 , the company also recognized a loss of $ 3.1 million related to assets classified as held for sale , as compared to a loss of $ 5.1 million during the same period in 2016 . 2016 vs 2015 – during the year ended december 31 , 2016 , the change of $ 117.8 million from a net loss on dispositions of real estate to a net gain was due to the company 's disposition of 301 properties for an aggregate sales price of $ 1.1 billion , which resulted in an aggregate gain of $ 50.6 million , as compared to the disposal of 228 properties for an aggregate sales price of $ 1.4 billion during the same period in 2015 for a loss of $ 69.1 million . during the year ended december
| other debt during the fourth quarter of 2017 , the company repaid the remaining outstanding principal balance on the secured term loan from kbc bank , n.v. ( the “ kbc loan ” ) . dividends on november 7 , 2017 , the company 's board of directors declared a quarterly cash dividend of $ 0.1375 per share of common stock ( equaling an annualized dividend rate of $ 0.55 per share ) for the fourth quarter of 2017 to stockholders of record as of december 29 , 2017 , which was paid on january 16 , 2018 . an equivalent distribution by the operating partnership is applicable per op unit . 49 our series f preferred stock , as discussed in “ note 15 – equity ” to our consolidated financial statements , will pay cumulative cash dividends at the rate of 6.70 % per annum on their liquidation preference of $ 25.00 per share ( equivalent to $ 1.675 per share on an annual basis ) . as of december 31 , 2017 , there were approximately 42.8 million shares of series f preferred stock ( and approximately 42.8 million corresponding series f preferred units that were issued to the general partner ) and 86,874 limited partner series f preferred units that were issued and outstanding . contractual obligations the following is a summary of our contractual obligations as of december 31 , 2017 ( in thousands ) : replace_table_token_12_th ( 1 ) for the loan in maturity default , as discussed in note 10 – debt , the payment obligations for future periods are based on an estimated extension of maturity to january 1 , 2018 . ( 2 ) as of december 31 , 2017 , we had $ 78.9 million of variable rate mortgage notes effectively fixed through the use of interest rate swap agreements .
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gross profit margins related to sales in our europe and asia businesses are historically higher than our americas business , primarily due to the following factors : ( i ) premiums charged in comparison to retail prices on products sold in the u.s. ; ( ii ) the product sales mix in our international businesses , in comparison to our americas business , is comprised more predominantly of watches and jewelry that generally produce higher gross profit margins than leather goods ; and ( iii ) the watch sales mix in our europe and asia businesses , in comparison to our americas business , are comprised more predominantly of higher priced licensed brands . our business is subject to the risks inherent in global sourcing supply . certain key components in our products come from limited sources of supply , which exposes us to potential supply shortages that could disrupt the manufacture and sale of our products . any interruption or delay in the supply of key components could significantly harm our ability to meet scheduled product deliveries to our customers and cause us to lose sales . interruptions or delays in supply may be caused by a number of factors that are outside of our and our contractor manufacturers ' control . effective for the fourth quarter of fiscal year 2018 , we made changes to the presentation of reportable segments to reflect changes in the way our chief operating decision maker evaluates the performance of our operations , develops strategy , and allocates capital resources . certain peripheral revenue generating activities related to our factories and intellectual property previously recorded within the americas , asia and europe segments have been reclassified to corporate . for comparison purposes , our historical segment disclosures have been recast to be consistent with the current presentation . this discussion should be read in conjunction with our consolidated financial statements and the related notes included therewith . 26 critical accounting policies and estimates the preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the u.s. requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period . on an ongoing basis , we evaluate our estimates and judgments , including those related to product returns , bad debt , inventories , long-lived asset impairment , impairment of goodwill and trade names , income taxes , warranty costs and litigation liabilities . we base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances . our estimates 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 . we believe the following critical accounting policies require the most significant estimates and judgments . product returns . we accept limited returns and may request that a customer return a product if we feel the customer has an excess of any style that we have identified as being a poor performer for that customer or geographic location . we monitor returns and maintain a provision for estimated returns based upon historical experience and any specific issues identified . while returns have historically been within our expectations and the provisions established , future return rates may differ from those experienced in the past . in the event that our products are performing poorly in the retail market and or we experience product damages or defects at a rate significantly higher than our historical rate , the resulting returns could have an adverse impact on the operating results for the period or periods in which such returns occur . if our allowance for product returns were to change by 10 % , the impact , excluding taxes , would have been an approximate $ 3.5 million change to net income ( loss ) . inventories . inventories are stated at the lower of cost and net realizable value , including any applicable duty and freight charges . we account for estimated obsolescence or unmarketable inventory equal to the difference between the average cost of inventory and the estimated net realizable value based upon assumptions about future demand , market conditions and available liquidation channels . if actual future demand or market conditions are less favorable than those projected by management , or if liquidation channels are not readily available , additional inventory valuation reductions may be required . we assess our off-price sales on an ongoing basis and update our estimates accordingly . revenue from sales of our products that are subject to inventory consignment agreements is recognized when title and risk of loss transfers , delivery has occurred and in an amount that reflects the consideration we expect to be entitled in exchange for the product . impairment of goodwill and trade names . in fiscal year 2017 , we determined goodwill was fully impaired and recognized a pre-tax impairment charge in operations of $ 202.3 million , $ 114.3 million and $ 42.9 million in the americas , europe and asia segments , respectively . we evaluate indefinite-lived trade names by comparing the fair value of the asset to its recorded value annually as of the end of the fiscal year and whenever events or conditions indicate that the carrying value of the trade name may not be recoverable . the fair value of the asset is estimated using discounted cash flow methodologies . for fiscal year 2018 , a discount rate of 12 % and a royalty rate of 3 % were used to estimate the skagen trade name fair value . story_separator_special_tag during fiscal year 2017 , our financial performance resulted in a loss of $ 9.87 per diluted share , including non-cash intangible asset impairment charges of $ 7.07 per diluted share , tax charges resulting from the tax act and valuation allowances of $ 2.20 per diluted share and restructuring charges of $ 0.65 per diluted share . currencies , including both the translation impact on operating earnings and the impact of foreign currency hedging contracts , favorably impacted the earnings comparison for fiscal year 2018 by $ 0.09 per diluted share . as we look at 2019 , our focus and priorities will remain consistent with the past year ; however , we will pivot appropriately to address the changing landscape . one priority that will not change is our focus on improving our profitability as well as strengthening our financial position to ensure the long-term success of the company . also , product innovation and differentiation are more important than ever , in both connected and traditional products . we will endeavor to maximize sales growth across multiple channels by adapting to the evolving shopping habits of our customers . while we are focused on driving sales through product innovation and sales channel optimization , we need to further transform our business model . part of that transformation has already taken place in our connected watch business . during the fourth quarter of fiscal year 2018 , we announced a strategic partnership with citizen watch co. , ltd. ( `` citizen `` ) to grow and expand the hybrid smartwatch category , an innovative product in our connected watch portfolio . under a licensing agreement , we provide citizen with our proprietary hybrid technology for use in both their brands and third-party watch brands . in january 2019 , we announced an agreement to transfer intellectual property related to smartwatch technology to google . both of these agreements are expected to drive innovation and reduce costs in our wearables business . we made significant progress on all fronts this year , but we continue to have further work ahead of us to address the structural changes in our categories and channels . we remain confident in our strategies and believe we have the talent , operating platform and balance sheet strength to achieve our goals . constant currency financial information as a multinational enterprise , we are exposed to changes in foreign currency exchange rates . the translation of the operations of our foreign-based entities from their local currencies into u.s. dollars is sensitive to changes in foreign currency exchange rates and can have a significant impact on our reported financial results . in general , our overall financial results are affected positively by a weaker u.s. dollar and are affected negatively by a stronger u.s. dollar as compared to the foreign currencies in which we conduct our business . as a result , in addition to presenting financial measures in accordance with accounting principles generally accepted in the united states of america ( “ gaap ” ) , our discussion contains references to constant currency financial information , which is a non-gaap financial measure . to calculate net sales on a constant currency basis , net sales for the current fiscal year for entities reporting in currencies other than the u.s. dollar are translated into u.s. dollars at the average rates during the comparable period of the prior fiscal year . we present constant currency information to provide investors with a basis to evaluate how our underlying business performed excluding the effects of foreign currency exchange rate fluctuations . the constant currency financial information presented herein should not be considered a substitute for , or superior to , the measures 30 of financial performance prepared in accordance with gaap . reconciliations between constant currency financial information and the most directly comparable gaap measure are included where applicable . fiscal year 2018 compared to fiscal year 2017 consolidated net sales . net sales decreased $ 246.7 million or 8.8 % ( 9.6 % in constant currency ) for fiscal year 2018 , as compared to fiscal year 2017 . global watch sales decreased $ 166.0 million or 7.5 % ( 8.2 % in constant currency ) , with increases in emporio armani and armani exchange more than offset by declines in most other brands in our portfolio . our jewelry category decreased $ 43.9 million or 20.7 % ( 22.3 % in constant currency ) , mostly as a result of a decrease in sales of michael kors and fossil branded products during fiscal year 2018 as compared to fiscal year 2017 . our leathers business decreased $ 36.1 million or 11.1 % ( 11.9 % in constant currency ) . net sales information by product category is summarized on a reported and constant currency basis as follows ( dollars in millions ) : replace_table_token_5_th the following table sets forth consolidated net sales by segment on a reported and constant currency basis ( dollars in millions ) : replace_table_token_6_th americas net sales . americas net sales decreased $ 139.9 million or 10.6 % ( 10.5 % in constant currency ) , largely driven by decreases in watches . during fiscal year 2018 , our multi-brand watch portfolio decreased $ 93.2 million or 9.0 % ( 8.9 % in constant currency ) , with declines across nearly all brands . the business exits of burberry and adidas , as well as store closures negatively impacted our watch performance . within fossil brand watches , connected watches nearly offset the declines in traditional watches . our leathers category decreased $ 26.4 million or 13.3 % ( 13.2 % in constant currency ) , mainly driven by fossil branded products and our jewelry business decreased $ 20.3 million or 28.8 % ( 28.9 % in constant currency ) , mostly driven by michael kors branded product . within the region , sales declined in the u.s. and canada , while sales
| other debt during the fourth quarter of 2017 , the company repaid the remaining outstanding principal balance on the secured term loan from kbc bank , n.v. ( the “ kbc loan ” ) . dividends on november 7 , 2017 , the company 's board of directors declared a quarterly cash dividend of $ 0.1375 per share of common stock ( equaling an annualized dividend rate of $ 0.55 per share ) for the fourth quarter of 2017 to stockholders of record as of december 29 , 2017 , which was paid on january 16 , 2018 . an equivalent distribution by the operating partnership is applicable per op unit . 49 our series f preferred stock , as discussed in “ note 15 – equity ” to our consolidated financial statements , will pay cumulative cash dividends at the rate of 6.70 % per annum on their liquidation preference of $ 25.00 per share ( equivalent to $ 1.675 per share on an annual basis ) . as of december 31 , 2017 , there were approximately 42.8 million shares of series f preferred stock ( and approximately 42.8 million corresponding series f preferred units that were issued to the general partner ) and 86,874 limited partner series f preferred units that were issued and outstanding . contractual obligations the following is a summary of our contractual obligations as of december 31 , 2017 ( in thousands ) : replace_table_token_12_th ( 1 ) for the loan in maturity default , as discussed in note 10 – debt , the payment obligations for future periods are based on an estimated extension of maturity to january 1 , 2018 . ( 2 ) as of december 31 , 2017 , we had $ 78.9 million of variable rate mortgage notes effectively fixed through the use of interest rate swap agreements .
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gross profit margins related to sales in our europe and asia businesses are historically higher than our americas business , primarily due to the following factors : ( i ) premiums charged in comparison to retail prices on products sold in the u.s. ; ( ii ) the product sales mix in our international businesses , in comparison to our americas business , is comprised more predominantly of watches and jewelry that generally produce higher gross profit margins than leather goods ; and ( iii ) the watch sales mix in our europe and asia businesses , in comparison to our americas business , are comprised more predominantly of higher priced licensed brands . our business is subject to the risks inherent in global sourcing supply . certain key components in our products come from limited sources of supply , which exposes us to potential supply shortages that could disrupt the manufacture and sale of our products . any interruption or delay in the supply of key components could significantly harm our ability to meet scheduled product deliveries to our customers and cause us to lose sales . interruptions or delays in supply may be caused by a number of factors that are outside of our and our contractor manufacturers ' control . effective for the fourth quarter of fiscal year 2018 , we made changes to the presentation of reportable segments to reflect changes in the way our chief operating decision maker evaluates the performance of our operations , develops strategy , and allocates capital resources . certain peripheral revenue generating activities related to our factories and intellectual property previously recorded within the americas , asia and europe segments have been reclassified to corporate . for comparison purposes , our historical segment disclosures have been recast to be consistent with the current presentation . this discussion should be read in conjunction with our consolidated financial statements and the related notes included therewith . 26 critical accounting policies and estimates the preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the u.s. requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period . on an ongoing basis , we evaluate our estimates and judgments , including those related to product returns , bad debt , inventories , long-lived asset impairment , impairment of goodwill and trade names , income taxes , warranty costs and litigation liabilities . we base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances . our estimates 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 . we believe the following critical accounting policies require the most significant estimates and judgments . product returns . we accept limited returns and may request that a customer return a product if we feel the customer has an excess of any style that we have identified as being a poor performer for that customer or geographic location . we monitor returns and maintain a provision for estimated returns based upon historical experience and any specific issues identified . while returns have historically been within our expectations and the provisions established , future return rates may differ from those experienced in the past . in the event that our products are performing poorly in the retail market and or we experience product damages or defects at a rate significantly higher than our historical rate , the resulting returns could have an adverse impact on the operating results for the period or periods in which such returns occur . if our allowance for product returns were to change by 10 % , the impact , excluding taxes , would have been an approximate $ 3.5 million change to net income ( loss ) . inventories . inventories are stated at the lower of cost and net realizable value , including any applicable duty and freight charges . we account for estimated obsolescence or unmarketable inventory equal to the difference between the average cost of inventory and the estimated net realizable value based upon assumptions about future demand , market conditions and available liquidation channels . if actual future demand or market conditions are less favorable than those projected by management , or if liquidation channels are not readily available , additional inventory valuation reductions may be required . we assess our off-price sales on an ongoing basis and update our estimates accordingly . revenue from sales of our products that are subject to inventory consignment agreements is recognized when title and risk of loss transfers , delivery has occurred and in an amount that reflects the consideration we expect to be entitled in exchange for the product . impairment of goodwill and trade names . in fiscal year 2017 , we determined goodwill was fully impaired and recognized a pre-tax impairment charge in operations of $ 202.3 million , $ 114.3 million and $ 42.9 million in the americas , europe and asia segments , respectively . we evaluate indefinite-lived trade names by comparing the fair value of the asset to its recorded value annually as of the end of the fiscal year and whenever events or conditions indicate that the carrying value of the trade name may not be recoverable . the fair value of the asset is estimated using discounted cash flow methodologies . for fiscal year 2018 , a discount rate of 12 % and a royalty rate of 3 % were used to estimate the skagen trade name fair value . story_separator_special_tag during fiscal year 2017 , our financial performance resulted in a loss of $ 9.87 per diluted share , including non-cash intangible asset impairment charges of $ 7.07 per diluted share , tax charges resulting from the tax act and valuation allowances of $ 2.20 per diluted share and restructuring charges of $ 0.65 per diluted share . currencies , including both the translation impact on operating earnings and the impact of foreign currency hedging contracts , favorably impacted the earnings comparison for fiscal year 2018 by $ 0.09 per diluted share . as we look at 2019 , our focus and priorities will remain consistent with the past year ; however , we will pivot appropriately to address the changing landscape . one priority that will not change is our focus on improving our profitability as well as strengthening our financial position to ensure the long-term success of the company . also , product innovation and differentiation are more important than ever , in both connected and traditional products . we will endeavor to maximize sales growth across multiple channels by adapting to the evolving shopping habits of our customers . while we are focused on driving sales through product innovation and sales channel optimization , we need to further transform our business model . part of that transformation has already taken place in our connected watch business . during the fourth quarter of fiscal year 2018 , we announced a strategic partnership with citizen watch co. , ltd. ( `` citizen `` ) to grow and expand the hybrid smartwatch category , an innovative product in our connected watch portfolio . under a licensing agreement , we provide citizen with our proprietary hybrid technology for use in both their brands and third-party watch brands . in january 2019 , we announced an agreement to transfer intellectual property related to smartwatch technology to google . both of these agreements are expected to drive innovation and reduce costs in our wearables business . we made significant progress on all fronts this year , but we continue to have further work ahead of us to address the structural changes in our categories and channels . we remain confident in our strategies and believe we have the talent , operating platform and balance sheet strength to achieve our goals . constant currency financial information as a multinational enterprise , we are exposed to changes in foreign currency exchange rates . the translation of the operations of our foreign-based entities from their local currencies into u.s. dollars is sensitive to changes in foreign currency exchange rates and can have a significant impact on our reported financial results . in general , our overall financial results are affected positively by a weaker u.s. dollar and are affected negatively by a stronger u.s. dollar as compared to the foreign currencies in which we conduct our business . as a result , in addition to presenting financial measures in accordance with accounting principles generally accepted in the united states of america ( “ gaap ” ) , our discussion contains references to constant currency financial information , which is a non-gaap financial measure . to calculate net sales on a constant currency basis , net sales for the current fiscal year for entities reporting in currencies other than the u.s. dollar are translated into u.s. dollars at the average rates during the comparable period of the prior fiscal year . we present constant currency information to provide investors with a basis to evaluate how our underlying business performed excluding the effects of foreign currency exchange rate fluctuations . the constant currency financial information presented herein should not be considered a substitute for , or superior to , the measures 30 of financial performance prepared in accordance with gaap . reconciliations between constant currency financial information and the most directly comparable gaap measure are included where applicable . fiscal year 2018 compared to fiscal year 2017 consolidated net sales . net sales decreased $ 246.7 million or 8.8 % ( 9.6 % in constant currency ) for fiscal year 2018 , as compared to fiscal year 2017 . global watch sales decreased $ 166.0 million or 7.5 % ( 8.2 % in constant currency ) , with increases in emporio armani and armani exchange more than offset by declines in most other brands in our portfolio . our jewelry category decreased $ 43.9 million or 20.7 % ( 22.3 % in constant currency ) , mostly as a result of a decrease in sales of michael kors and fossil branded products during fiscal year 2018 as compared to fiscal year 2017 . our leathers business decreased $ 36.1 million or 11.1 % ( 11.9 % in constant currency ) . net sales information by product category is summarized on a reported and constant currency basis as follows ( dollars in millions ) : replace_table_token_5_th the following table sets forth consolidated net sales by segment on a reported and constant currency basis ( dollars in millions ) : replace_table_token_6_th americas net sales . americas net sales decreased $ 139.9 million or 10.6 % ( 10.5 % in constant currency ) , largely driven by decreases in watches . during fiscal year 2018 , our multi-brand watch portfolio decreased $ 93.2 million or 9.0 % ( 8.9 % in constant currency ) , with declines across nearly all brands . the business exits of burberry and adidas , as well as store closures negatively impacted our watch performance . within fossil brand watches , connected watches nearly offset the declines in traditional watches . our leathers category decreased $ 26.4 million or 13.3 % ( 13.2 % in constant currency ) , mainly driven by fossil branded products and our jewelry business decreased $ 20.3 million or 28.8 % ( 28.9 % in constant currency ) , mostly driven by michael kors branded product . within the region , sales declined in the u.s. and canada , while sales
| debt facilities on january 29 , 2018 , we and certain of our foreign subsidiaries entered into a second amended and restated credit agreement ( the `` credit agreement '' ) . the credit agreement provides for ( i ) revolving credit loans in the amount of $ 325 million , subject to a borrowing base ( as described below ) ( the `` revolving credit facility '' ) , with an up to $ 45.0 million subfacility for letters of credit , and ( ii ) a term loan in the amount of $ 425 million ( the `` term loan facility '' ) . the credit agreement expires and is due and payable on december 31 , 2020. availability under the revolving credit facility and any letters of credit are subject to a borrowing base equal to , ( a ) with respect to fossil group , inc. , the sum of ( i ) 85 % of eligible u.s. accounts receivable and 90 % of net u.s. credit card receivables ( less any dilution reserve ) , and ( ii ) the lesser of ( a ) 65 % of the lower of cost or market value of eligible u.s. finished good inventory and ( b ) 85 % of the appraised net orderly liquidation value of eligible u.s. finished goods inventory , minus ( iii ) the aggregate amount of reserves , if any , established by the administrative agent in good faith and in the exercise of reasonable business judgment from the perspective of a secured asset-based lender ; and ( b ) with respect to each non-u.s. borrower , the sum of ( i ) 85 % of eligible accounts receivable of the non-u.s. borrowers ( less any dilution reserve ) and ( ii ) the least of ( a ) 65 % of the lower of cost or market value of eligible foreign finished goods inventory of the non-u.s. borrowers , ( b ) 85 % of the appraised net orderly liquidation value of eligible foreign finished goods inventory of the non-u.s. borrowers , and ( c ) $ 185,000,000 minus ( iii ) the aggregate amount of reserves , if any , established by the administrative agent in good faith and in the exercise of reasonable business judgment from the perspective of a
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we will refer to adjusted ebitda throughout the remainder of management 's discussion and analysis of financial condition and results of operations . the table in “ selected financial data ” reconciles net income and income from operations to adjusted ebitda and should be referenced when we discuss adjusted ebitda . 49 summary financial results year ended december 31 , 2017 for the year ended december 31 , 2017 , our net operating revenues increased 3.7 % to $ 4,443.6 million , compared to $ 4,286.0 million for the year ended december 31 , 2016 . income from operations increased 18.7 % to $ 355.9 million for the year ended december 31 , 2017 , compared to $ 299.8 million for the year ended december 31 , 2016 . our adjusted ebitda increased $ 72.2 million , or 15.5 % , to $ 538.0 million for the year ended december 31 , 2017 , compared to $ 465.8 million for the year ended december 31 , 2016 . our adjusted ebitda margin improved to 12.1 % for the year ended december 31 , 2017 , compared to 10.9 % for the year ended december 31 , 2016 . the following table provides a reconciliation of our segment performance measures to our consolidated operating results for the year ended december 31 , 2017 . replace_table_token_11_th _ n/m — not meaningful . the following table provides the change in segment performance measures for the year ended december 31 , 2017 , compared to the year ended december 31 , 2016 . replace_table_token_12_th _ n/m—not meaningful . long term acute care segment . we operated 100 ltchs at december 31 , 2017 , compared to 103 ltchs at december 31 , 2016 . while our bed counts , admissions , and patient days decreased during the year ended december 31 , 2017 due to a decline in the number of hospitals we operated , our revenue per patient day and occupancy rate improved . since fully transitioning to operating under the new medicare patient criteria regulations , our ltchs have experienced improvements in income from operations and adjusted ebitda as a result of increases in net revenue per patient day and lower relative operating expenses . our long term acute care segment contributed to increases in consolidated income from operations of $ 26.2 million and adjusted ebitda of $ 28.1 million for the year ended december 31 , 2017 , compared to the year ended december 31 , 2016 . our adjusted ebitda margin improved to 14.4 % for the year ended december 31 , 2017 , compared to 12.6 % for the year ended december 31 , 2016 . 50 inpatient rehabilitation segment . we operated 24 irfs at december 31 , 2017 , compared to 20 irfs at december 31 , 2016 . our admissions , patient days , net revenue per patient day , and occupancy rate increased during the year ended december 31 , 2017 . these increases are principally due to several of our new inpatient rehabilitation facilities which commenced operations during 2016 and 2017. our inpatient rehabilitation segment contributed to increases in our consolidated net operating revenues of $ 127.5 million , income from operations of $ 25.7 million , and adjusted ebitda of $ 33.1 million for the year ended december 31 , 2017 , compared to the year ended december 31 , 2016 . our adjusted ebitda margin improved to 14.3 % for the year ended december 31 , 2017 , compared to 11.3 % for the year ended december 31 , 2016 . outpatient rehabilitation segment . we operated 1,616 clinics at december 31 , 2017 , compared to 1,611 clinics at december 31 , 2016 . we acquired physiotherapy on march 4 , 2016 , and sold our contract therapy business on march 31 , 2016 , which affects our year-to-year comparisons as of the date for each of these events . our visits and net revenue per visit increased during the year ended december 31 , 2017 , resulting in increases of $ 25.5 million in our consolidated net operating revenues compared to the year ended december 31 , 2016 . our relative operating expenses also increased for the year ended december 31 , 2017 compared to the year ended december 31 , 2016 , resulting in nominal increases in income from operations and adjusted ebitda during the year ended december 31 , 2017 . our adjusted ebitda margin was 13.0 % for both the years ended december 31 , 2017 and december 31 , 2016 . concentra segment . we operated 312 centers at december 31 , 2017 , compared to 300 centers at december 31 , 2016 . visits in our centers increased during the year ended december 31 , 2017 , which contributed to increases in our consolidated net operating revenues of $ 33.4 million , and our relative operating expenses also improved . this resulted in increases to our consolidated income from operations of $ 10.3 million and adjusted ebitda of $ 14.6 million for the year ended december 31 , 2017 , compared to the year ended december 31 , 2016. our adjusted ebitda margin improved to 15.2 % for the year ended december 31 , 2017 , compared to 14.3 % for the year ended december 31 , 2016 . our consolidated net income increased $ 95.4 million , or 76.1 % , to $ 220.6 million for the year ended december 31 , 2017 , compared to $ 125.3 million for the year ended december 31 , 2016 . the increase in our net income is principally due to an increase in income from operations for the year ended december 31 , 2017 , compared to the year ended december 31 , 2016 and the recognition of an income tax benefit for the year ended december 31 , 2017 . story_separator_special_tag the standard federal rate was set at $ 42,476 , an increase from the standard federal rate applicable during fiscal year 2016 of $ 41,763. the update to the standard federal rate for fiscal year 2017 included a market basket increase of 2.8 % , less a productivity adjustment of 0.3 % , and less a reduction of 0.75 % mandated by the aca . the fixed‑loss amount for high cost outlier cases paid under ltch‑pps was set at $ 21,943 , an increase from the fixed‑loss amount in the 2016 fiscal year of $ 16,423. the fixed‑loss amount for high cost outlier cases paid under the site‑neutral payment rate was set at $ 23,573 , an increase from the fixed‑loss amount in the 2016 fiscal year of $ 22,538. fiscal year 2018 . on august 14 , 2017 , cms published the final rule updating policies and payment rates for the ltch-pps for fiscal year 2018 ( affecting discharges and cost reporting periods beginning on or after october 1 , 2017 through september 30 , 2018 ) . certain errors in the final rule were corrected in a final rule published october 4 , 2017. the standard federal rate was set at $ 41,415 , a decrease from the standard federal rate applicable during fiscal year 2017 of $ 42,476. the update to the standard federal rate for fiscal year 2018 included a market basket increase of 2.7 % , less a productivity adjustment of 0.6 % , and less a reduction of 0.75 % mandated by the aca . the update to the standard federal rate for fiscal year 2018 is impacted further by the medicare access and chip reauthorization act of 2015 , which limits the update for fiscal year 2018 to 1.0 % . the fixed-loss amount for high cost outlier cases paid under ltch-pps was set at $ 27,381 , an increase from the fixed-loss amount in the 2017 fiscal year of $ 21,943. the fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate was set at $ 26,537 , an increase from the fixed-loss amount in the 2017 fiscal year of $ 23,573 . 56 patient criteria the bba of 2013 , enacted december 26 , 2013 , establishes a dual‑rate ltch-pps for medicare patients discharged from an ltch . specifically , for medicare patients discharged in cost reporting periods beginning on or after october 1 , 2015 , ltchs will be reimbursed at the ltch-pps standard federal payment rate only if , immediately preceding the patient 's ltch admission , the patient was discharged from a “ subsection ( d ) hospital ” ( generally , a short‑term acute care hospital paid under ipps ) and either the patient 's stay included at least three days in an intensive care unit ( icu ) or coronary care unit ( ccu ) at the subsection ( d ) hospital , or the patient was assigned to an ms-ltc-drg for cases receiving at least 96 hours of ventilator services in the ltch . in addition , to be paid at the ltch-pps standard federal payment rate , the patient 's discharge from the ltch may not include a principal diagnosis relating to psychiatric or rehabilitation services . for any medicare patient who does not meet these criteria , the ltch will be paid a lower “ site neutral ” payment rate , which will be the lower of : ( i ) the ipps comparable per diem payment rate capped at the ms-drg payment rate plus any outlier payments ; or ( ii ) 100 percent of the estimated costs for services . the site neutral payment rate for those patients not paid at the ltch-pps standard federal payment rate is subject to a transition period . during the transition period ( applicable to hospital cost reporting periods beginning on or after october 1 , 2015 through september 30 , 2019 ) , a blended rate will be paid for medicare patients not meeting the new criteria that is equal to 50 % of the site neutral payment rate amount and 50 % of the standard federal payment rate amount . for discharges in cost reporting periods beginning on or after october 1 , 2019 , only the site neutral payment rate will apply for medicare patients not meeting the new criteria . for hospital cost reporting periods beginning on or after october 1 , 2017 through september 30 , 2026 , the ipps comparable per diem payment amount ( including any applicable outlier payment ) used to determine the site neutral payment rate will be reduced by 4.6 % after any annual payment rate update . in addition , for cost reporting periods beginning on or after october 1 , 2019 , qualifying discharges from an ltch will continue to be paid at the ltch-pps standard federal payment rate , unless the number of discharges for which payment is made under the site‑neutral payment rate is greater than 50 % of the total number of discharges from the ltch for that period . if the number of discharges for which payment is made under the site‑neutral payment rate is greater than 50 % , then beginning in the next cost reporting period all discharges from the ltch will be reimbursed at the site‑neutral payment rate . the bba of 2013 requires cms to establish a process for an ltch subject to only the site‑neutral payment rate to be reinstated for payment under the dual-rate ltch‑pps . payment adjustments , including the interrupted stay policy and the 25 percent rule ( discussed below ) , apply to ltch discharges regardless of whether the case is paid at the standard federal payment rate or the site‑neutral payment rate . however , short stay outlier payment adjustments do not apply to cases paid at the site‑neutral payment rate . cms calculates the annual recalibration of the ms-ltc-drg relative payment weighting factors using only
| debt facilities on january 29 , 2018 , we and certain of our foreign subsidiaries entered into a second amended and restated credit agreement ( the `` credit agreement '' ) . the credit agreement provides for ( i ) revolving credit loans in the amount of $ 325 million , subject to a borrowing base ( as described below ) ( the `` revolving credit facility '' ) , with an up to $ 45.0 million subfacility for letters of credit , and ( ii ) a term loan in the amount of $ 425 million ( the `` term loan facility '' ) . the credit agreement expires and is due and payable on december 31 , 2020. availability under the revolving credit facility and any letters of credit are subject to a borrowing base equal to , ( a ) with respect to fossil group , inc. , the sum of ( i ) 85 % of eligible u.s. accounts receivable and 90 % of net u.s. credit card receivables ( less any dilution reserve ) , and ( ii ) the lesser of ( a ) 65 % of the lower of cost or market value of eligible u.s. finished good inventory and ( b ) 85 % of the appraised net orderly liquidation value of eligible u.s. finished goods inventory , minus ( iii ) the aggregate amount of reserves , if any , established by the administrative agent in good faith and in the exercise of reasonable business judgment from the perspective of a secured asset-based lender ; and ( b ) with respect to each non-u.s. borrower , the sum of ( i ) 85 % of eligible accounts receivable of the non-u.s. borrowers ( less any dilution reserve ) and ( ii ) the least of ( a ) 65 % of the lower of cost or market value of eligible foreign finished goods inventory of the non-u.s. borrowers , ( b ) 85 % of the appraised net orderly liquidation value of eligible foreign finished goods inventory of the non-u.s. borrowers , and ( c ) $ 185,000,000 minus ( iii ) the aggregate amount of reserves , if any , established by the administrative agent in good faith and in the exercise of reasonable business judgment from the perspective of a
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we will refer to adjusted ebitda throughout the remainder of management 's discussion and analysis of financial condition and results of operations . the table in “ selected financial data ” reconciles net income and income from operations to adjusted ebitda and should be referenced when we discuss adjusted ebitda . 49 summary financial results year ended december 31 , 2017 for the year ended december 31 , 2017 , our net operating revenues increased 3.7 % to $ 4,443.6 million , compared to $ 4,286.0 million for the year ended december 31 , 2016 . income from operations increased 18.7 % to $ 355.9 million for the year ended december 31 , 2017 , compared to $ 299.8 million for the year ended december 31 , 2016 . our adjusted ebitda increased $ 72.2 million , or 15.5 % , to $ 538.0 million for the year ended december 31 , 2017 , compared to $ 465.8 million for the year ended december 31 , 2016 . our adjusted ebitda margin improved to 12.1 % for the year ended december 31 , 2017 , compared to 10.9 % for the year ended december 31 , 2016 . the following table provides a reconciliation of our segment performance measures to our consolidated operating results for the year ended december 31 , 2017 . replace_table_token_11_th _ n/m — not meaningful . the following table provides the change in segment performance measures for the year ended december 31 , 2017 , compared to the year ended december 31 , 2016 . replace_table_token_12_th _ n/m—not meaningful . long term acute care segment . we operated 100 ltchs at december 31 , 2017 , compared to 103 ltchs at december 31 , 2016 . while our bed counts , admissions , and patient days decreased during the year ended december 31 , 2017 due to a decline in the number of hospitals we operated , our revenue per patient day and occupancy rate improved . since fully transitioning to operating under the new medicare patient criteria regulations , our ltchs have experienced improvements in income from operations and adjusted ebitda as a result of increases in net revenue per patient day and lower relative operating expenses . our long term acute care segment contributed to increases in consolidated income from operations of $ 26.2 million and adjusted ebitda of $ 28.1 million for the year ended december 31 , 2017 , compared to the year ended december 31 , 2016 . our adjusted ebitda margin improved to 14.4 % for the year ended december 31 , 2017 , compared to 12.6 % for the year ended december 31 , 2016 . 50 inpatient rehabilitation segment . we operated 24 irfs at december 31 , 2017 , compared to 20 irfs at december 31 , 2016 . our admissions , patient days , net revenue per patient day , and occupancy rate increased during the year ended december 31 , 2017 . these increases are principally due to several of our new inpatient rehabilitation facilities which commenced operations during 2016 and 2017. our inpatient rehabilitation segment contributed to increases in our consolidated net operating revenues of $ 127.5 million , income from operations of $ 25.7 million , and adjusted ebitda of $ 33.1 million for the year ended december 31 , 2017 , compared to the year ended december 31 , 2016 . our adjusted ebitda margin improved to 14.3 % for the year ended december 31 , 2017 , compared to 11.3 % for the year ended december 31 , 2016 . outpatient rehabilitation segment . we operated 1,616 clinics at december 31 , 2017 , compared to 1,611 clinics at december 31 , 2016 . we acquired physiotherapy on march 4 , 2016 , and sold our contract therapy business on march 31 , 2016 , which affects our year-to-year comparisons as of the date for each of these events . our visits and net revenue per visit increased during the year ended december 31 , 2017 , resulting in increases of $ 25.5 million in our consolidated net operating revenues compared to the year ended december 31 , 2016 . our relative operating expenses also increased for the year ended december 31 , 2017 compared to the year ended december 31 , 2016 , resulting in nominal increases in income from operations and adjusted ebitda during the year ended december 31 , 2017 . our adjusted ebitda margin was 13.0 % for both the years ended december 31 , 2017 and december 31 , 2016 . concentra segment . we operated 312 centers at december 31 , 2017 , compared to 300 centers at december 31 , 2016 . visits in our centers increased during the year ended december 31 , 2017 , which contributed to increases in our consolidated net operating revenues of $ 33.4 million , and our relative operating expenses also improved . this resulted in increases to our consolidated income from operations of $ 10.3 million and adjusted ebitda of $ 14.6 million for the year ended december 31 , 2017 , compared to the year ended december 31 , 2016. our adjusted ebitda margin improved to 15.2 % for the year ended december 31 , 2017 , compared to 14.3 % for the year ended december 31 , 2016 . our consolidated net income increased $ 95.4 million , or 76.1 % , to $ 220.6 million for the year ended december 31 , 2017 , compared to $ 125.3 million for the year ended december 31 , 2016 . the increase in our net income is principally due to an increase in income from operations for the year ended december 31 , 2017 , compared to the year ended december 31 , 2016 and the recognition of an income tax benefit for the year ended december 31 , 2017 . story_separator_special_tag the standard federal rate was set at $ 42,476 , an increase from the standard federal rate applicable during fiscal year 2016 of $ 41,763. the update to the standard federal rate for fiscal year 2017 included a market basket increase of 2.8 % , less a productivity adjustment of 0.3 % , and less a reduction of 0.75 % mandated by the aca . the fixed‑loss amount for high cost outlier cases paid under ltch‑pps was set at $ 21,943 , an increase from the fixed‑loss amount in the 2016 fiscal year of $ 16,423. the fixed‑loss amount for high cost outlier cases paid under the site‑neutral payment rate was set at $ 23,573 , an increase from the fixed‑loss amount in the 2016 fiscal year of $ 22,538. fiscal year 2018 . on august 14 , 2017 , cms published the final rule updating policies and payment rates for the ltch-pps for fiscal year 2018 ( affecting discharges and cost reporting periods beginning on or after october 1 , 2017 through september 30 , 2018 ) . certain errors in the final rule were corrected in a final rule published october 4 , 2017. the standard federal rate was set at $ 41,415 , a decrease from the standard federal rate applicable during fiscal year 2017 of $ 42,476. the update to the standard federal rate for fiscal year 2018 included a market basket increase of 2.7 % , less a productivity adjustment of 0.6 % , and less a reduction of 0.75 % mandated by the aca . the update to the standard federal rate for fiscal year 2018 is impacted further by the medicare access and chip reauthorization act of 2015 , which limits the update for fiscal year 2018 to 1.0 % . the fixed-loss amount for high cost outlier cases paid under ltch-pps was set at $ 27,381 , an increase from the fixed-loss amount in the 2017 fiscal year of $ 21,943. the fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate was set at $ 26,537 , an increase from the fixed-loss amount in the 2017 fiscal year of $ 23,573 . 56 patient criteria the bba of 2013 , enacted december 26 , 2013 , establishes a dual‑rate ltch-pps for medicare patients discharged from an ltch . specifically , for medicare patients discharged in cost reporting periods beginning on or after october 1 , 2015 , ltchs will be reimbursed at the ltch-pps standard federal payment rate only if , immediately preceding the patient 's ltch admission , the patient was discharged from a “ subsection ( d ) hospital ” ( generally , a short‑term acute care hospital paid under ipps ) and either the patient 's stay included at least three days in an intensive care unit ( icu ) or coronary care unit ( ccu ) at the subsection ( d ) hospital , or the patient was assigned to an ms-ltc-drg for cases receiving at least 96 hours of ventilator services in the ltch . in addition , to be paid at the ltch-pps standard federal payment rate , the patient 's discharge from the ltch may not include a principal diagnosis relating to psychiatric or rehabilitation services . for any medicare patient who does not meet these criteria , the ltch will be paid a lower “ site neutral ” payment rate , which will be the lower of : ( i ) the ipps comparable per diem payment rate capped at the ms-drg payment rate plus any outlier payments ; or ( ii ) 100 percent of the estimated costs for services . the site neutral payment rate for those patients not paid at the ltch-pps standard federal payment rate is subject to a transition period . during the transition period ( applicable to hospital cost reporting periods beginning on or after october 1 , 2015 through september 30 , 2019 ) , a blended rate will be paid for medicare patients not meeting the new criteria that is equal to 50 % of the site neutral payment rate amount and 50 % of the standard federal payment rate amount . for discharges in cost reporting periods beginning on or after october 1 , 2019 , only the site neutral payment rate will apply for medicare patients not meeting the new criteria . for hospital cost reporting periods beginning on or after october 1 , 2017 through september 30 , 2026 , the ipps comparable per diem payment amount ( including any applicable outlier payment ) used to determine the site neutral payment rate will be reduced by 4.6 % after any annual payment rate update . in addition , for cost reporting periods beginning on or after october 1 , 2019 , qualifying discharges from an ltch will continue to be paid at the ltch-pps standard federal payment rate , unless the number of discharges for which payment is made under the site‑neutral payment rate is greater than 50 % of the total number of discharges from the ltch for that period . if the number of discharges for which payment is made under the site‑neutral payment rate is greater than 50 % , then beginning in the next cost reporting period all discharges from the ltch will be reimbursed at the site‑neutral payment rate . the bba of 2013 requires cms to establish a process for an ltch subject to only the site‑neutral payment rate to be reinstated for payment under the dual-rate ltch‑pps . payment adjustments , including the interrupted stay policy and the 25 percent rule ( discussed below ) , apply to ltch discharges regardless of whether the case is paid at the standard federal payment rate or the site‑neutral payment rate . however , short stay outlier payment adjustments do not apply to cases paid at the site‑neutral payment rate . cms calculates the annual recalibration of the ms-ltc-drg relative payment weighting factors using only
| loss on early retirement of debt on march 6 , 2017 , we refinanced select 's 2011 senior secured credit facility which resulted in losses on early retirement of debt of $ 19.7 million during the year ended december 31 , 2017 . on march 4 , 2016 , we refinanced a portion of our term loans under select 's 2011 senior secured credit facility which resulted in a loss on early retirement of debt of $ 0.8 million . on september 26 , 2016 , concentra prepaid the second lien term loan under the concentra credit facilities , resulting in a loss on early retirement of debt of approximately $ 10.9 million . equity in earnings of unconsolidated subsidiaries for the year ended december 31 , 2017 , we had equity in earnings of unconsolidated subsidiaries of $ 21.1 million , compared to $ 19.9 million for the year ended december 31 , 2016 . the increase in our equity in earnings of unconsolidated subsidiaries resulted principally from the improved performance of rehabilitation businesses in which we own a minority interest . non-operating gain we recognized a non-operating gain of $ 42.7 million for the year ended december 31 , 2016 , principally due to the sale of our contract therapy businesses for $ 65.0 million , which resulted in a non-operating gain of $ 33.9 million . interest expense interest expense was $ 154.7 million for the year ended december 31 , 2017 , compared to $ 170.1 million for the year ended december 31 , 2016 . the decrease in interest expense was principally the result of decreases in our interest rates associated with the refinancing of select 's 2011 senior secured credit facility during the quarter ended march 31 , 2017 and the concentra credit facilities during the quarter ended september 30 , 2016. income taxes we recorded an income tax benefit of $ 18.2 million for the year ended december 31 , 2017 . we recorded income tax expense of $ 55.5 million for the year ended december 31 , 2016 , which represented an effective tax rate of 30.7 % .
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we are developing rhopressa as the first of a new class of compounds that is designed to lower iop in patients through novel moas . we believe that , if approved , rhopressa will represent the first new moas for lowering iop in patients with glaucoma in over 20 years . based on preclinical studies and clinical data to date , we expect that rhopressa , if approved , will have the potential to compete with non-pga ( prostaglandin analog ) products as a preferred adjunctive therapy to pgas , due to its targeting of the diseased tissue known as the trabecular meshwork , or tm , its demonstrated iop-lowering ability at consistent levels across tested baselines with once-daily dosing relative to currently marketed non-pga products , its potential synergistic effect with pga products , its once daily dosing and its lack of serious drug related adverse events . in addition , if approved , we believe that rhopressa may also potentially become a preferred therapy where pgas are contraindicated , for patients who do not respond to pgas , for patients who have lower iops but nevertheless present with glaucomatous damage to 66 the optic nerve , which is commonly referred to as “ low-tension ” or “ normal tension ” glaucoma , as well as for patients who choose to avoid the cosmetic issues associated with pga products . our second product candidate , once-daily roclatan ophthalmic solution ( netarsudil/latanoprost ophthalmic solution ) 0.02 % /0.005 % ( “ roclatan ” ) , is a fixed-dose combination of rhopressa and latanoprost , the most commonly prescribed drug for the treatment of patients with open-angle glaucoma . the first phase 3 registration trial for roclatan , named “ mercury 1 , ” which is a 12-month safety trial with a 90-day efficacy readout , commenced in september 2015 and , in september 2016 , we announced that mercury 1 achieved its primary efficacy endpoint of demonstrating superiority of roclatan to each of its components . the trial is designed to evaluate patients with maximum baseline iops ranging from above 20 mmhg to below 36 mmhg at nine measured time points over the 90-day efficacy period . in the 90-day efficacy results , the iop-lowering effect of roclatan exceeded that of the latanoprost monotherapy in a range of 1.3 mmhg to 2.5 mmhg and that of the rhopressa monotherapy in a range of 1.8 mmhg to 3.0 mmhg . roclatan reduced mean diurnal iops to 16 mmhg or lower in 61 % of patients , a significantly higher percentage than observed in the comparator arms in the study . the safety and tolerability results for roclatan tm from the 90-day efficacy period of mercury 1 showed no drug-related serious adverse events . the most common adverse event observed in the roclatan tm arm was conjunctival hyperemia , or eye redness , which was reported in approximately 50 % of patients , approximately 80 % of which was reported as mild . there were no drug-related serious adverse events for any of the comparators in the trial . we expect to report mercury 1 topline 12-month safety data in the third quarter of 2017. the second phase 3 registration trial for roclatan , named “ mercury 2 , ” commenced in march 2016. mercury 2 is a 90-day efficacy and safety trial designed to demonstrate superiority of roclatan to each of its components . we expect to report the topline 90-day efficacy data for mercury 2 in the second quarter of 2017. if both mercury 1 and mercury 2 are successful , we expect to submit an nda for roclatan in late 2017 or early 2018 , which may be prior to obtaining approval for rhopressa . we are permitted to submit the roclatan nda while the rhopressa is still being reviewed by the fda . mercury 1 and mercury 2 will also be used for european approval of roclatan , and we plan to initiate a third phase 3 registration trial for roclatan , named “ mercury 3 , ” in europe in mid-2017 . mercury 3 will be designed to compare roclatan to ganfort® , a fixed-dose combination product of bimatoprost and timolol marketed in europe , which if successful , should improve our commercialization prospects in that region . we believe , based on our preclinical studies and clinical trials to date , that roclatan , if approved , will be the only glaucoma product that covers the full spectrum of currently known iop-lowering moas , giving it the potential to provide a greater iop-lowering effect than any currently marketed glaucoma product . therefore , we believe that roclatan tm , if approved , could compete with both pga and non-pga therapies for patients requiring maximal iop lowering , including those with higher iops and those who present with significant disease progression despite currently available therapies . our stated objective is to build a major ophthalmic pharmaceutical company . in addition to our primary product candidates , rhopressa and roclatan , we continue to explore the impact of rhopressa on the diseased tm . we have issued several research updates on preclinical results demonstrating that rhopressa may have the potential for disease modification , including stopping and potentially reversing fibrosis in the tm , and also increasing perfusion in the trabecular outflow pathway thus increasing both drainage and the delivery of nutrients to the diseased tissue . we are also conducting ongoing research to evaluate injectable sustained release formulation technologies with the potential capability of delivering rhopressa internally in the eye over several months for the treatment of glaucoma . we are also evaluating possible uses of our existing proprietary portfolio of rho kinase inhibitors beyond glaucoma . story_separator_special_tag fair value measurements we record 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 . the fair value of our financial instruments , including cash and cash equivalents , short-term investments , other current assets , accounts payable and accrued expenses approximate their respective carrying values due to the short-term nature of these instruments . the carrying amounts of long-term investments represent their estimated fair values . the estimated fair value of the 2014 convertible notes was $ 209.6 million and $ 140.1 million as of december 31 , 2016 and 2015 , respectively . the increase in the estimated fair value of the 2014 convertible notes was primarily attributable to the change in the closing price of our common stock on december 31 , 2016 as compared to december 31 , 2015. stock-based compensation we recognize compensation costs related to stock options granted to employees ratably over the requisite service period , which in most cases is the vesting period of the award for employees , based on the estimated fair value of the awards on the date of grant . compensation expense for options granted to non-employees is determined as the fair value of consideration received or the fair value of the equity instruments issued , whichever is more reliably measured . the fair value of the awards granted to non-employees is re-measured each period until the related service is complete . compensation expense related to restricted stock awards is based on the market value of our common stock on the grant date and is expensed ratably over the vesting period . compensation expense for stock purchase rights under our employee stock purchase plan is measured and recognized on the date that we become obligated to issue shares of our common stock and is based on the difference between the fair value of our common stock and the purchase price on such date . stock-based compensation expense was $ 16.8 million , $ 12.9 million and $ 9.2 million for the years ended december 31 , 2016 , 2015 and 2014 , respectively . as of december 31 , 2016 , we had $ 29.0 million of unrecognized compensation expense . the intrinsic value of all stock options outstanding as of december 31 , 2016 was $ 123.6 million , of which $ 88.7 million and $ 34.9 million related to stock options that were vested and unvested , respectively , at that date . significant factors , assumptions and methodologies used in determining fair value determining the appropriate fair value measurement of stock-based awards requires the use of subjective assumptions . in the absence of a public trading market for our common stock prior to the completion of our ipo , we conducted periodic assessments of the valuation of our common stock . the determination of the fair value measurement of options using the black-scholes option pricing model is affected by our estimated common stock fair values as well as assumptions regarding a number of other subjective variables . these other variables include the expected term of the options , our expected stock price volatility over the expected term of the options , stock option exercise and cancellation behaviors , risk-free interest rates and expected dividends . we estimated the fair value of stock options at the grant date using the following assumptions : fair value of our common stock . for all stock options granted after the completion of our ipo , the fair value for our underlying common stock is determined using the closing price on the date of grant as reported on the nasdaq global market . for all stock options granted prior to the completion of our ipo , the fair value for our underlying common stock was determined by our board of directors in its sole discretion based on recommendations from management and taking into account advice and assistance provided by third-party valuation consultants engaged to assist us in connection with such valuations . volatility . we calculate expected volatility based on our historical volatility in combination with reported data for a selected group of similar publicly traded companies , or guideline peer group , for which the relevant historical information is available . we selected representative companies from the pharmaceutical industry with similar characteristics to us , including stage of product development and therapeutic focus . we will continue to use a combination of our historical volatility and the guideline peer group volatility information for the foreseeable future . expected term . we used the simplified method as prescribed by the sec staff accounting bulletin no . 107 , share-based payment , as we do not have sufficient historical exercise and post-vesting termination data to 72 provide a reasonable basis upon which to estimate the expected term of stock options granted to employees . the simplified method is based on the vesting period and the contractual term for each grant , or for each vesting-tranche for awards with graded vesting . the midpoint between the vesting date and the maximum contractual expiration date is used as the expected term under this method . risk-free rate . the risk-free interest rate is based on the yields of u.s. treasury securities with maturities similar to the expected time to exercise . forfeiture . forfeitures are estimated such that we only recognize expense for the shares expected to vest , and adjustments are made if actual forfeitures differ from those estimates . we estimate our annual forfeiture rates based on our historical analysis of actual stock option forfeitures and our future expectations . dividend yield . except for a one-time cash dividend related to the spin-off of certain non-core intellectual property that occurred in 2012 , we have never declared or paid any
| loss on early retirement of debt on march 6 , 2017 , we refinanced select 's 2011 senior secured credit facility which resulted in losses on early retirement of debt of $ 19.7 million during the year ended december 31 , 2017 . on march 4 , 2016 , we refinanced a portion of our term loans under select 's 2011 senior secured credit facility which resulted in a loss on early retirement of debt of $ 0.8 million . on september 26 , 2016 , concentra prepaid the second lien term loan under the concentra credit facilities , resulting in a loss on early retirement of debt of approximately $ 10.9 million . equity in earnings of unconsolidated subsidiaries for the year ended december 31 , 2017 , we had equity in earnings of unconsolidated subsidiaries of $ 21.1 million , compared to $ 19.9 million for the year ended december 31 , 2016 . the increase in our equity in earnings of unconsolidated subsidiaries resulted principally from the improved performance of rehabilitation businesses in which we own a minority interest . non-operating gain we recognized a non-operating gain of $ 42.7 million for the year ended december 31 , 2016 , principally due to the sale of our contract therapy businesses for $ 65.0 million , which resulted in a non-operating gain of $ 33.9 million . interest expense interest expense was $ 154.7 million for the year ended december 31 , 2017 , compared to $ 170.1 million for the year ended december 31 , 2016 . the decrease in interest expense was principally the result of decreases in our interest rates associated with the refinancing of select 's 2011 senior secured credit facility during the quarter ended march 31 , 2017 and the concentra credit facilities during the quarter ended september 30 , 2016. income taxes we recorded an income tax benefit of $ 18.2 million for the year ended december 31 , 2017 . we recorded income tax expense of $ 55.5 million for the year ended december 31 , 2016 , which represented an effective tax rate of 30.7 % .
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we are developing rhopressa as the first of a new class of compounds that is designed to lower iop in patients through novel moas . we believe that , if approved , rhopressa will represent the first new moas for lowering iop in patients with glaucoma in over 20 years . based on preclinical studies and clinical data to date , we expect that rhopressa , if approved , will have the potential to compete with non-pga ( prostaglandin analog ) products as a preferred adjunctive therapy to pgas , due to its targeting of the diseased tissue known as the trabecular meshwork , or tm , its demonstrated iop-lowering ability at consistent levels across tested baselines with once-daily dosing relative to currently marketed non-pga products , its potential synergistic effect with pga products , its once daily dosing and its lack of serious drug related adverse events . in addition , if approved , we believe that rhopressa may also potentially become a preferred therapy where pgas are contraindicated , for patients who do not respond to pgas , for patients who have lower iops but nevertheless present with glaucomatous damage to 66 the optic nerve , which is commonly referred to as “ low-tension ” or “ normal tension ” glaucoma , as well as for patients who choose to avoid the cosmetic issues associated with pga products . our second product candidate , once-daily roclatan ophthalmic solution ( netarsudil/latanoprost ophthalmic solution ) 0.02 % /0.005 % ( “ roclatan ” ) , is a fixed-dose combination of rhopressa and latanoprost , the most commonly prescribed drug for the treatment of patients with open-angle glaucoma . the first phase 3 registration trial for roclatan , named “ mercury 1 , ” which is a 12-month safety trial with a 90-day efficacy readout , commenced in september 2015 and , in september 2016 , we announced that mercury 1 achieved its primary efficacy endpoint of demonstrating superiority of roclatan to each of its components . the trial is designed to evaluate patients with maximum baseline iops ranging from above 20 mmhg to below 36 mmhg at nine measured time points over the 90-day efficacy period . in the 90-day efficacy results , the iop-lowering effect of roclatan exceeded that of the latanoprost monotherapy in a range of 1.3 mmhg to 2.5 mmhg and that of the rhopressa monotherapy in a range of 1.8 mmhg to 3.0 mmhg . roclatan reduced mean diurnal iops to 16 mmhg or lower in 61 % of patients , a significantly higher percentage than observed in the comparator arms in the study . the safety and tolerability results for roclatan tm from the 90-day efficacy period of mercury 1 showed no drug-related serious adverse events . the most common adverse event observed in the roclatan tm arm was conjunctival hyperemia , or eye redness , which was reported in approximately 50 % of patients , approximately 80 % of which was reported as mild . there were no drug-related serious adverse events for any of the comparators in the trial . we expect to report mercury 1 topline 12-month safety data in the third quarter of 2017. the second phase 3 registration trial for roclatan , named “ mercury 2 , ” commenced in march 2016. mercury 2 is a 90-day efficacy and safety trial designed to demonstrate superiority of roclatan to each of its components . we expect to report the topline 90-day efficacy data for mercury 2 in the second quarter of 2017. if both mercury 1 and mercury 2 are successful , we expect to submit an nda for roclatan in late 2017 or early 2018 , which may be prior to obtaining approval for rhopressa . we are permitted to submit the roclatan nda while the rhopressa is still being reviewed by the fda . mercury 1 and mercury 2 will also be used for european approval of roclatan , and we plan to initiate a third phase 3 registration trial for roclatan , named “ mercury 3 , ” in europe in mid-2017 . mercury 3 will be designed to compare roclatan to ganfort® , a fixed-dose combination product of bimatoprost and timolol marketed in europe , which if successful , should improve our commercialization prospects in that region . we believe , based on our preclinical studies and clinical trials to date , that roclatan , if approved , will be the only glaucoma product that covers the full spectrum of currently known iop-lowering moas , giving it the potential to provide a greater iop-lowering effect than any currently marketed glaucoma product . therefore , we believe that roclatan tm , if approved , could compete with both pga and non-pga therapies for patients requiring maximal iop lowering , including those with higher iops and those who present with significant disease progression despite currently available therapies . our stated objective is to build a major ophthalmic pharmaceutical company . in addition to our primary product candidates , rhopressa and roclatan , we continue to explore the impact of rhopressa on the diseased tm . we have issued several research updates on preclinical results demonstrating that rhopressa may have the potential for disease modification , including stopping and potentially reversing fibrosis in the tm , and also increasing perfusion in the trabecular outflow pathway thus increasing both drainage and the delivery of nutrients to the diseased tissue . we are also conducting ongoing research to evaluate injectable sustained release formulation technologies with the potential capability of delivering rhopressa internally in the eye over several months for the treatment of glaucoma . we are also evaluating possible uses of our existing proprietary portfolio of rho kinase inhibitors beyond glaucoma . story_separator_special_tag fair value measurements we record 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 . the fair value of our financial instruments , including cash and cash equivalents , short-term investments , other current assets , accounts payable and accrued expenses approximate their respective carrying values due to the short-term nature of these instruments . the carrying amounts of long-term investments represent their estimated fair values . the estimated fair value of the 2014 convertible notes was $ 209.6 million and $ 140.1 million as of december 31 , 2016 and 2015 , respectively . the increase in the estimated fair value of the 2014 convertible notes was primarily attributable to the change in the closing price of our common stock on december 31 , 2016 as compared to december 31 , 2015. stock-based compensation we recognize compensation costs related to stock options granted to employees ratably over the requisite service period , which in most cases is the vesting period of the award for employees , based on the estimated fair value of the awards on the date of grant . compensation expense for options granted to non-employees is determined as the fair value of consideration received or the fair value of the equity instruments issued , whichever is more reliably measured . the fair value of the awards granted to non-employees is re-measured each period until the related service is complete . compensation expense related to restricted stock awards is based on the market value of our common stock on the grant date and is expensed ratably over the vesting period . compensation expense for stock purchase rights under our employee stock purchase plan is measured and recognized on the date that we become obligated to issue shares of our common stock and is based on the difference between the fair value of our common stock and the purchase price on such date . stock-based compensation expense was $ 16.8 million , $ 12.9 million and $ 9.2 million for the years ended december 31 , 2016 , 2015 and 2014 , respectively . as of december 31 , 2016 , we had $ 29.0 million of unrecognized compensation expense . the intrinsic value of all stock options outstanding as of december 31 , 2016 was $ 123.6 million , of which $ 88.7 million and $ 34.9 million related to stock options that were vested and unvested , respectively , at that date . significant factors , assumptions and methodologies used in determining fair value determining the appropriate fair value measurement of stock-based awards requires the use of subjective assumptions . in the absence of a public trading market for our common stock prior to the completion of our ipo , we conducted periodic assessments of the valuation of our common stock . the determination of the fair value measurement of options using the black-scholes option pricing model is affected by our estimated common stock fair values as well as assumptions regarding a number of other subjective variables . these other variables include the expected term of the options , our expected stock price volatility over the expected term of the options , stock option exercise and cancellation behaviors , risk-free interest rates and expected dividends . we estimated the fair value of stock options at the grant date using the following assumptions : fair value of our common stock . for all stock options granted after the completion of our ipo , the fair value for our underlying common stock is determined using the closing price on the date of grant as reported on the nasdaq global market . for all stock options granted prior to the completion of our ipo , the fair value for our underlying common stock was determined by our board of directors in its sole discretion based on recommendations from management and taking into account advice and assistance provided by third-party valuation consultants engaged to assist us in connection with such valuations . volatility . we calculate expected volatility based on our historical volatility in combination with reported data for a selected group of similar publicly traded companies , or guideline peer group , for which the relevant historical information is available . we selected representative companies from the pharmaceutical industry with similar characteristics to us , including stage of product development and therapeutic focus . we will continue to use a combination of our historical volatility and the guideline peer group volatility information for the foreseeable future . expected term . we used the simplified method as prescribed by the sec staff accounting bulletin no . 107 , share-based payment , as we do not have sufficient historical exercise and post-vesting termination data to 72 provide a reasonable basis upon which to estimate the expected term of stock options granted to employees . the simplified method is based on the vesting period and the contractual term for each grant , or for each vesting-tranche for awards with graded vesting . the midpoint between the vesting date and the maximum contractual expiration date is used as the expected term under this method . risk-free rate . the risk-free interest rate is based on the yields of u.s. treasury securities with maturities similar to the expected time to exercise . forfeiture . forfeitures are estimated such that we only recognize expense for the shares expected to vest , and adjustments are made if actual forfeitures differ from those estimates . we estimate our annual forfeiture rates based on our historical analysis of actual stock option forfeitures and our future expectations . dividend yield . except for a one-time cash dividend related to the spin-off of certain non-core intellectual property that occurred in 2012 , we have never declared or paid any
| liquidity and capital resources since our inception , we have funded operations primarily through the sale of equity securities and the issuance of convertible notes . we have incurred losses and experienced negative operating cash flows since our inception and anticipate that we will continue to incur losses until such a time when our product candidates are commercially successful , if at all . prior to our ipo , we raised net cash proceeds of $ 78.6 million from the private placement of convertible preferred stock and convertible notes . prior to and in connection with our ipo , all outstanding shares of convertible preferred stock and all convertible notes were converted into shares of common stock . on october 30 , 2013 , we completed our ipo and issued 7,728,000 shares of our common stock at an ipo price of $ 10.00 per share . we received net proceeds from the ipo of approximately $ 68.3 million . on september 30 , 2014 , we issued $ 125.0 million aggregate principal amount of the 2014 convertible notes , of which we received net proceeds of approximately $ 122.9 million . on november 3 , 2014 , we filed a shelf registration statement on form s-3 ( “ the 2014 registration statement ” ) that permitted the offering , issuance and sale by us of up to a maximum aggregate offering price of $150.0 million of our common stock and permits sales of common stock by certain selling stockholders .
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the preparation of these consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . on a regular basis , we evaluate these estimates , including investment impairment . these estimates are based on management 's historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances . actual results may differ from these estimates . accounts and notes receivable trade accounts receivable for the nightclub operation is primarily comprised of credit card charges , which are generally converted to cash in two to five days after a purchase is made . the media division 's accounts receivable is primarily comprised of receivables for advertising sales and expo registration . the company 's accounts receivable , other is comprised of employee advances and other miscellaneous receivables . the long-term portion of notes receivable are included in other assets in the accompanying consolidated balance sheets . the company recognizes interest income on notes receivable based on the terms of the agreement and based upon management 's evaluation that the notes receivable and interest income will be collected . the company recognizes allowances for doubtful accounts or notes when , based on management judgment , circumstances indicate that accounts or notes receivable will not be collected . inventories inventories include alcoholic beverages , food , and company merchandise . inventories are carried at the lower of cost , average cost , which approximates actual cost determined on a first-in , first-out ( “ fifo ” ) basis , or market . 19 property and equipment property and equipment are stated at cost . provisions for depreciation and amortization are made using straight-line rates over the estimated useful lives of the related assets and the shorter of useful lives or terms of the applicable leases for leasehold improvements . buildings have estimated useful lives ranging from 29 to 40 years . furniture , equipment and leasehold improvements have estimated useful lives between five and 40 years . expenditures for major renewals and betterments that extend the useful lives are capitalized . expenditures for normal maintenance and repairs are expensed as incurred . the cost of assets sold or abandoned and the related accumulated depreciation are eliminated from the accounts and any gains or losses are charged or credited in the accompanying consolidated statement of income of the respective period . goodwill and intangible assets fasb asc 350 , intangibles - goodwill and other addresses the accounting for goodwill and other intangible assets . under fasb asc 350 , goodwill and intangible assets with indefinite lives are no longer amortized , but reviewed on an annual basis for impairment . definite lived intangible assets are amortized on a straight-line basis over their estimated lives . fully amortized assets are written-off against accumulated amortization . impairment of long-lived assets the company reviews property and equipment and intangible assets with definite lives for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable . recoverability of these assets is measured by comparison of its carrying amounts to future undiscounted cash flows the assets are expected to generate . if property and equipment and intangible assets with definite lives are considered to be impaired , the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair value . assets are grouped at the lowest level for which there are identifiable cash flows , principally at the club level , when assessing impairment . cash flows for our club assets are identified at the individual club level . the company 's annual evaluation was performed as of september 30 , 2012 , based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model . certain of our recent acquisitions , specifically las vegas , philadelphia and the original rick 's cabaret in austin ( now a 40 % -owned investment ) , have been underperforming , principally due to the recent general economic downturn , especially in las vegas , but also due to certain specific operational issues , such as the change of concept in philadelphia and the cab fare marketing issues in las vegas . we had determined that there is a net asset impairment at september 30 , 2010 , relating to these three nightclub operations . the las vegas club was closed during the year ended september 30 , 2011. see notes to consolidated financial statements . none of our other reporting units were at risk of failing step one of the impairment test ( i.e . that fair value was not substantially in excess of carrying value ) in either year . fair value of financial instruments the company calculates the fair value of its assets and liabilities which qualify as financial instruments and includes this additional information in the notes to consolidated financial statements when the fair value is different than the carrying value of these financial instruments . the estimated fair value of accounts receivable , accounts payable and accrued liabilities approximate their carrying amounts due to the relatively short maturity of these instruments . the carrying value of short and long-term debt also approximates fair value since these instruments bear market rates of interest . none of these instruments are held for trading purposes . derivative financial instruments the company accounts for financial instruments that are indexed to and potentially settled in , its own stock , including stock put options , in accordance with the provisions of fasb asc 815-40 , derivatives and hedging – contracts in entity 's own equity . story_separator_special_tag our operating margin ( income from operations divided by total revenues ) was 22.5 % for the year ended september 30 , 2011 compared to 15.4 % for the prior year . the increase was principally due to an impairment charge of $ 3.6 million in 2010. our net income was $ 7.8 million for the fiscal year ended september 30 , 2011 compared to a loss of $ 8.0 million for the previous year . the increase in our net income was primarily a result of the impairment of three clubs in 2010. following is a comparison of the company 's income statement for the years ended september 30 , 2011 and 2010 with percentages compared to total revenue : replace_table_token_10_th 26 other revenues include atm commissions earned , video games and other vending and certain promotion fees charged to our entertainers . the company recognizes revenue from other revenues and services at the point-of-sale upon receipt of cash , check , or credit card charge . cost of goods sold includes cost of alcoholic and non-alcoholic beverages , food , cigars and cigarettes , merchandise , media printing/binding and media . our cost of goods sold for the nightclub operations for the year ended september 30 , 2011 was 12.4 % of our total revenues from club operations compared to 12.3 % for the year ended september 30 , 2010. cost of goods sold for same-location-same-period decreased to 12.1 % for the year ended september 30 , 2011 compared to 12.2 % for the year ended september 30 , 2010. we continued our efforts to achieve reductions in cost of goods sold of the club operations through improved inventory management . we are continuing a program to improve margins from liquor and food sales and food service efficiency . the increase in payroll and related costs , stated as “ salaries & wages ” above , was primarily due to the addition of the new clubs in 2010 and 2011. payroll for same-location-same-period of club continuing operations increased to $ 13.0 million for the year ended september 30 , 2011 from $ 12.6 million for the previous year . management currently believes that its labor and management staff levels are appropriate . the decrease in stock-based compensation in 2011 results from the issuance of 465,000 options at september 30 , 2010 to employees and board of directors . these options were exercisable immediately , resulting in the related cost being recognized entirely during the 2010 fiscal year . taxes and permits consists principally of payroll taxes , property taxes , sales and alcohol taxes , licenses and permits and the patron tax in our nightclubs in texas . patron taxes amounted to $ 2.8 million and $ 1.8 million for the years ended september 30 , 2011 and 2010 , respectively . rent expense increased principally due to new leases in two new clubs in fort worth . legal and professional expenses decreased principally due to a decrease in the costs related to litigation involving claims under the fair labor standards act . we incurred approximately $ 100,000 and $ 88,000 in legal fees related to new acquisitions in 2011 and 2010 , respectively . depreciation and amortization increased approximately $ 679,000 from the year ended september 30 , 2010 , due to the new clubs purchased . utilities increased due to new clubs and the heat and drought in texas in 2011. the decrease in interest expense was attributable to the continued decrease in debt as we amortize the loans . also included in interest expense in 2010 is the write off of the unamortized portion of certain loan origination costs relating to our redeemed convertible debt , amounting to $ 274,425. as of september 30 , 2011 , the balance of long-term debt was $ 35.6 million compared to $ 42.7 million a year earlier . gain on settlement of debt in 2011 represents the gain from settlement of certain cross-litigation with the former sellers of the las vegas club . see “ derivative financial instrument ” above for information on the company 's derivative financial instrument at september 30 , 2011 . 27 liquidity and capital resources we believe our ability to generate cash from operating activities is one of our fundamental financial strengths . refer to the heading `` cash flows from operating activities `` below . the near-term outlook for our business remains strong , and we expect to generate substantial cash flows from operations in 2013. as a result of our expected cash flows from operations , we have significant flexibility to meet our financial commitments . the company has not recently raised capital through the issuance of equity securities . instead , we use debt financing to lower our overall cost of capital and increase our return on shareowners ' equity . refer to the heading `` cash flows from financing activities `` below . we have a history of borrowing funds in private transactions and from sellers in acquisition transactions and continue to have the ability to borrow funds at reasonable interest rates in that manner . we have historically utilized these cash flows to invest in property and equipment and adult nightclubs . refer to the heading “ cash flows from investing activities ” below . as of september 30 , 2012 , we had a working capital deficit of $ 8.1 million compared to working capital of $ 2.0 million as of september 30 , 2011. the decrease is principally due to the acquisitions and real estate purchases we made during 2012 , utilizing $ 6.9 million in cash and an increase in current debt . because of the large volume of cash we handle , stringent cash controls have been implemented . at september 30 , 2012 , our cash and cash equivalents were $ 5.5 million compared to $ 9.7 million at september 30 , 2011. our depreciation for the year ended september 30 , 2012
| liquidity and capital resources since our inception , we have funded operations primarily through the sale of equity securities and the issuance of convertible notes . we have incurred losses and experienced negative operating cash flows since our inception and anticipate that we will continue to incur losses until such a time when our product candidates are commercially successful , if at all . prior to our ipo , we raised net cash proceeds of $ 78.6 million from the private placement of convertible preferred stock and convertible notes . prior to and in connection with our ipo , all outstanding shares of convertible preferred stock and all convertible notes were converted into shares of common stock . on october 30 , 2013 , we completed our ipo and issued 7,728,000 shares of our common stock at an ipo price of $ 10.00 per share . we received net proceeds from the ipo of approximately $ 68.3 million . on september 30 , 2014 , we issued $ 125.0 million aggregate principal amount of the 2014 convertible notes , of which we received net proceeds of approximately $ 122.9 million . on november 3 , 2014 , we filed a shelf registration statement on form s-3 ( “ the 2014 registration statement ” ) that permitted the offering , issuance and sale by us of up to a maximum aggregate offering price of $150.0 million of our common stock and permits sales of common stock by certain selling stockholders .
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the preparation of these consolidated financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenues and expenses , and related disclosure of contingent assets and liabilities . on a regular basis , we evaluate these estimates , including investment impairment . these estimates are based on management 's historical industry experience and on various other assumptions that are believed to be reasonable under the circumstances . actual results may differ from these estimates . accounts and notes receivable trade accounts receivable for the nightclub operation is primarily comprised of credit card charges , which are generally converted to cash in two to five days after a purchase is made . the media division 's accounts receivable is primarily comprised of receivables for advertising sales and expo registration . the company 's accounts receivable , other is comprised of employee advances and other miscellaneous receivables . the long-term portion of notes receivable are included in other assets in the accompanying consolidated balance sheets . the company recognizes interest income on notes receivable based on the terms of the agreement and based upon management 's evaluation that the notes receivable and interest income will be collected . the company recognizes allowances for doubtful accounts or notes when , based on management judgment , circumstances indicate that accounts or notes receivable will not be collected . inventories inventories include alcoholic beverages , food , and company merchandise . inventories are carried at the lower of cost , average cost , which approximates actual cost determined on a first-in , first-out ( “ fifo ” ) basis , or market . 19 property and equipment property and equipment are stated at cost . provisions for depreciation and amortization are made using straight-line rates over the estimated useful lives of the related assets and the shorter of useful lives or terms of the applicable leases for leasehold improvements . buildings have estimated useful lives ranging from 29 to 40 years . furniture , equipment and leasehold improvements have estimated useful lives between five and 40 years . expenditures for major renewals and betterments that extend the useful lives are capitalized . expenditures for normal maintenance and repairs are expensed as incurred . the cost of assets sold or abandoned and the related accumulated depreciation are eliminated from the accounts and any gains or losses are charged or credited in the accompanying consolidated statement of income of the respective period . goodwill and intangible assets fasb asc 350 , intangibles - goodwill and other addresses the accounting for goodwill and other intangible assets . under fasb asc 350 , goodwill and intangible assets with indefinite lives are no longer amortized , but reviewed on an annual basis for impairment . definite lived intangible assets are amortized on a straight-line basis over their estimated lives . fully amortized assets are written-off against accumulated amortization . impairment of long-lived assets the company reviews property and equipment and intangible assets with definite lives for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable . recoverability of these assets is measured by comparison of its carrying amounts to future undiscounted cash flows the assets are expected to generate . if property and equipment and intangible assets with definite lives are considered to be impaired , the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair value . assets are grouped at the lowest level for which there are identifiable cash flows , principally at the club level , when assessing impairment . cash flows for our club assets are identified at the individual club level . the company 's annual evaluation was performed as of september 30 , 2012 , based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model . certain of our recent acquisitions , specifically las vegas , philadelphia and the original rick 's cabaret in austin ( now a 40 % -owned investment ) , have been underperforming , principally due to the recent general economic downturn , especially in las vegas , but also due to certain specific operational issues , such as the change of concept in philadelphia and the cab fare marketing issues in las vegas . we had determined that there is a net asset impairment at september 30 , 2010 , relating to these three nightclub operations . the las vegas club was closed during the year ended september 30 , 2011. see notes to consolidated financial statements . none of our other reporting units were at risk of failing step one of the impairment test ( i.e . that fair value was not substantially in excess of carrying value ) in either year . fair value of financial instruments the company calculates the fair value of its assets and liabilities which qualify as financial instruments and includes this additional information in the notes to consolidated financial statements when the fair value is different than the carrying value of these financial instruments . the estimated fair value of accounts receivable , accounts payable and accrued liabilities approximate their carrying amounts due to the relatively short maturity of these instruments . the carrying value of short and long-term debt also approximates fair value since these instruments bear market rates of interest . none of these instruments are held for trading purposes . derivative financial instruments the company accounts for financial instruments that are indexed to and potentially settled in , its own stock , including stock put options , in accordance with the provisions of fasb asc 815-40 , derivatives and hedging – contracts in entity 's own equity . story_separator_special_tag our operating margin ( income from operations divided by total revenues ) was 22.5 % for the year ended september 30 , 2011 compared to 15.4 % for the prior year . the increase was principally due to an impairment charge of $ 3.6 million in 2010. our net income was $ 7.8 million for the fiscal year ended september 30 , 2011 compared to a loss of $ 8.0 million for the previous year . the increase in our net income was primarily a result of the impairment of three clubs in 2010. following is a comparison of the company 's income statement for the years ended september 30 , 2011 and 2010 with percentages compared to total revenue : replace_table_token_10_th 26 other revenues include atm commissions earned , video games and other vending and certain promotion fees charged to our entertainers . the company recognizes revenue from other revenues and services at the point-of-sale upon receipt of cash , check , or credit card charge . cost of goods sold includes cost of alcoholic and non-alcoholic beverages , food , cigars and cigarettes , merchandise , media printing/binding and media . our cost of goods sold for the nightclub operations for the year ended september 30 , 2011 was 12.4 % of our total revenues from club operations compared to 12.3 % for the year ended september 30 , 2010. cost of goods sold for same-location-same-period decreased to 12.1 % for the year ended september 30 , 2011 compared to 12.2 % for the year ended september 30 , 2010. we continued our efforts to achieve reductions in cost of goods sold of the club operations through improved inventory management . we are continuing a program to improve margins from liquor and food sales and food service efficiency . the increase in payroll and related costs , stated as “ salaries & wages ” above , was primarily due to the addition of the new clubs in 2010 and 2011. payroll for same-location-same-period of club continuing operations increased to $ 13.0 million for the year ended september 30 , 2011 from $ 12.6 million for the previous year . management currently believes that its labor and management staff levels are appropriate . the decrease in stock-based compensation in 2011 results from the issuance of 465,000 options at september 30 , 2010 to employees and board of directors . these options were exercisable immediately , resulting in the related cost being recognized entirely during the 2010 fiscal year . taxes and permits consists principally of payroll taxes , property taxes , sales and alcohol taxes , licenses and permits and the patron tax in our nightclubs in texas . patron taxes amounted to $ 2.8 million and $ 1.8 million for the years ended september 30 , 2011 and 2010 , respectively . rent expense increased principally due to new leases in two new clubs in fort worth . legal and professional expenses decreased principally due to a decrease in the costs related to litigation involving claims under the fair labor standards act . we incurred approximately $ 100,000 and $ 88,000 in legal fees related to new acquisitions in 2011 and 2010 , respectively . depreciation and amortization increased approximately $ 679,000 from the year ended september 30 , 2010 , due to the new clubs purchased . utilities increased due to new clubs and the heat and drought in texas in 2011. the decrease in interest expense was attributable to the continued decrease in debt as we amortize the loans . also included in interest expense in 2010 is the write off of the unamortized portion of certain loan origination costs relating to our redeemed convertible debt , amounting to $ 274,425. as of september 30 , 2011 , the balance of long-term debt was $ 35.6 million compared to $ 42.7 million a year earlier . gain on settlement of debt in 2011 represents the gain from settlement of certain cross-litigation with the former sellers of the las vegas club . see “ derivative financial instrument ” above for information on the company 's derivative financial instrument at september 30 , 2011 . 27 liquidity and capital resources we believe our ability to generate cash from operating activities is one of our fundamental financial strengths . refer to the heading `` cash flows from operating activities `` below . the near-term outlook for our business remains strong , and we expect to generate substantial cash flows from operations in 2013. as a result of our expected cash flows from operations , we have significant flexibility to meet our financial commitments . the company has not recently raised capital through the issuance of equity securities . instead , we use debt financing to lower our overall cost of capital and increase our return on shareowners ' equity . refer to the heading `` cash flows from financing activities `` below . we have a history of borrowing funds in private transactions and from sellers in acquisition transactions and continue to have the ability to borrow funds at reasonable interest rates in that manner . we have historically utilized these cash flows to invest in property and equipment and adult nightclubs . refer to the heading “ cash flows from investing activities ” below . as of september 30 , 2012 , we had a working capital deficit of $ 8.1 million compared to working capital of $ 2.0 million as of september 30 , 2011. the decrease is principally due to the acquisitions and real estate purchases we made during 2012 , utilizing $ 6.9 million in cash and an increase in current debt . because of the large volume of cash we handle , stringent cash controls have been implemented . at september 30 , 2012 , our cash and cash equivalents were $ 5.5 million compared to $ 9.7 million at september 30 , 2011. our depreciation for the year ended september 30 , 2012
| debt financing : on august 6 , 2009 , we completed the sale of an aggregate of $ 7.2 million in 10 % convertible debentures ( the “ debentures ” ) to certain accredited investors ( the “ holders ” ) . the debentures bear interest at the rate of 10 % per annum and mature on august 4 , 2012. the debentures were payable with one initial payment of interest only due february 4 , 2010 , and , thereafter in ten equal quarterly principal payments , plus accrued interest thereon . at the option of the holders , the debentures could be converted into shares of the company 's common stock at $ 8.75 per share . the debentures were redeemable by us at any time if the closing price of its common stock for 20 consecutive trading days is at least $ 11.50 per share . the debentures provide that an event of default would occur if : we should fail to pay any principal or interest when due ; we should fail to convert any debenture when required ; we should fail to observe or perform any covenant or agreement contained within the debenture ; there are cross defaults to other indebtedness in excess of $ 1,000,000 ; there is a reorganization , liquidation , voluntary or involuntary bankruptcy or insolvency proceedings or other bankruptcy default ; or a final unsatisfied judgment not covered by insurance aggregating an excess of $ 1 million occurs against us and is not stayed , bonded or discharged within seventy-five days . in connection with the sale of the debentures , we also issued an aggregate of 164,569 warrants ( the “ warrants ” ) to the holders , on a pro-rata basis . we issued each holder a number of warrants equal to 20 % of the number of shares of common stock into which each holder 's debenture is convertible . the warrants have an exercise price of $ 8.75 and expire on august 5 , 2012. the warrants provide that we had the right to require exercise of the warrants if the closing price of our common stock for 20 consecutive trading days was at least $ 12.25 .
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for the year ended december 31 , 2019 , we made a net investment in our lease fleet of approximately $ 916.5 million , which primarily includes new railcar additions and railcar modifications , net of deferred profit , and secondary market purchases ; and is net of proceeds from the sales of leased railcars owned more than one year at the time of sale . the leasing group 's lease fleet of 103,705 company-owned railcars was 96.0 % utilized as of december 31 , 2019 , in comparison to a lease fleet utilization of 98.5 % on 99,215 company-owned railcars as of december 31 , 2018 . our company-owned railcars include wholly-owned , partially-owned , and railcars under sale-leaseback arrangements . the total value of the railcar backlog at december 31 , 2019 was $ 1.8 billion , compared to $ 3.6 billion at december 31 , 2018 . the rail products group received orders for 10,220 railcars and delivered 21,960 railcars in 2019 , in comparison to orders for 28,795 railcars and deliveries of 20,105 railcars in 2018 . for the year ended december 31 , 2019 , our return on equity ( `` roe `` ) and pre-tax roe were 5.6 % and 9.0 % ( 1 ) , respectively , in comparison to 4.3 % and 6.3 % ( 1 ) , respectively , for the year ended december 31 , 2018 . for the year ended december 31 , 2019 , we generated operating cash flows from continuing operations and free cash flow of $ 396.7 million and $ 423.3 million ( 1 ) , respectively , in comparison to $ 274.2 million and $ 390.0 million ( 1 ) , respectively , for the year ended december 31 , 2018 . ( 1 ) non-gaap financial measure . see the non-gaap financial measures section within this form 10-k for a reconciliation to the most directly comparable gaap measure and why management believes this measure is useful to management and investors . see `` consolidated results of operations `` and `` segment discussion `` below for additional information regarding our operating results for the year ended december 31 , 2019. see part ii , item 7 of our 2018 annual report on form 10-k for a discussion of our results of operations and liquidity and capital resources as of and for the year ended december 31 , 2018 , including a comparison to the year ended december 31 , 2017 . 28 returns of capital to shareholders for the year ended december 31 , 2019 , returns of capital to shareholders in the form of dividends and share repurchases are summarized below : capital structure updates in connection with the company 's ongoing efforts to optimize its capital structure , in april 2019 , trinity rail leasing 2019 llc ( `` trl-2019 `` ) , a delaware limited liability company and a limited purpose , indirect wholly-owned subsidiary of the company owned through tilc , issued $ 528.3 million of trl-2019 secured railcar equipment notes . in october 2019 , trl-2019 issued an additional $ 386.5 million of trl-2019 secured railcar equipment notes , consisting of two classes of notes . these notes have a stated final maturity date of 2049. see `` liquidity and capital resources `` below for further information regarding these activities . litigation updates see note 15 of the consolidated financial statements for an update on the status of our highway products litigation . cyclical and seasonal trends impacting our business the industries in which we operate are cyclical in nature . weaknesses in certain sectors of the north american and global economy may make it more difficult to sell or lease certain types of railcars . additionally , adverse changes in commodity prices or lower demand for certain commodities could result in a decline in customer demand for various types of railcars . we continuously assess demand for our products and services and take steps to rationalize and diversify our leased railcar portfolio and align our manufacturing capacity appropriately . we diligently evaluate the creditworthiness of our customers and monitor performance of relevant market sectors ; however , weaknesses in any of these market sectors could affect the financial viability of our underlying leasing group customers , which could negatively impact our recurring leasing revenues and operating profits . due to their transactional nature , railcar sales from the lease fleet are the primary driver of fluctuations in results in the leasing group . results in our all other group are affected by seasonal fluctuations , with the second and third quarters historically being the quarters with the highest revenues . 29 recent market developments demand for railcars weakened in 2019 due to uncertainty associated with global tariffs and trade policies and declining industrial production . these economic factors , combined with declining railcar loading volumes and a growing supply of underutilized railcar assets in north america , are pressuring railcar lease rates and utilization , as well as orders for new railcar equipment . we currently expect this trend to continue in the near term . we believe that our integrated rail platform is designed to respond to cyclical changes in demand and perform throughout the railcar cycle . restructuring activities in the fourth quarter of 2019 , we implemented the initial phase of efforts to streamline certain functions to support our rail-focused strategy and to begin disposing of underutilized assets and facilities . in connection with our assessment of future needs to support our go-forward business strategy , we recognized a restructuring charge of approximately $ 14.7 million , primarily from write-downs related to underutilized assets associated with our non-operational facilities , and employee transition costs . we estimate that these actions will generate future annualized cost savings of approximately $ 8 million to $ 10 million . we expect to identify additional streamlining and cost savings opportunities in 2020 . story_separator_special_tag replace_table_token_20_th the changes in our operating assets and liabilities resulted in a net use of $ 79.0 million for the year ended december 31 , 2019 , compared to a net use of $ 142.5 million for the year ended december 31 , 2018 , primarily as a result of improved working capital management . investing activities . net cash used in investing activities from continuing operations for the year ended december 31 , 2019 was $ 993.3 million compared to $ 412.3 million for the year ended december 31 , 2018 . significant investing activities are as follows : we made a net investment in the lease fleet of $ 916.5 million during the year ended december 31 , 2019 , compared to $ 717.8 million in the prior year period . our net investment in the lease fleet primarily includes new railcar additions and railcar modifications , net of deferred profit , and secondary market purchases ; and is net of proceeds from the sales of leased railcars owned more than one year at the time of sale . short-term marketable securities decreased by $ 319.5 million for the year ended december 31 , 2018 . there were no investing activities related to short-term marketable securities during the year ended december 31 , 2019 . financing activities . story_separator_special_tag through tilc , tilc 's warehouse loan facility , and our revolving credit facility . after libor is phased out , the interest rates for these obligations might be subject to change . the replacement of libor with an alternative benchmark reference rate may adversely affect interest rates and result in higher borrowing costs under these agreements and any future agreements . 41 contractual obligation and commercial commitments as of december 31 , 2019 , we had the following contractual obligations and commercial commitments : replace_table_token_21_th ( 1 ) excludes unamortized discount and debt issuance costs . ( 2 ) includes fixed rate interest obligations and interest on variable rate debt based on the outstanding balances and the applicable rates at december 31 , 2019 . ( 3 ) includes $ 483.8 million in purchase obligations for raw materials and components , primarily by the rail products group . as of december 31 , 2019 and 2018 , we had $ 5.0 million and $ 11.8 million , respectively , of tax liabilities , including interest and penalties , related to uncertain tax positions . because of the high degree of uncertainty regarding the timing of future cash outflows associated with these liabilities , we are unable to estimate the years in which settlement will occur with the respective taxing authorities , and , accordingly , such amounts are excluded from the table above . see note 9 of the consolidated financial statements . on september 4 , 2019 , our board of directors approved the termination of the pension plan , effective december 31 , 2019. the pension plan is expected to be settled between late 2020 and early 2021 , subject to required governmental approvals . any potential cash contribution that may be required to settle all of the pension plan 's obligations , is not expected to exceed $ 15.0 million and is excluded from the table above . see note 10 of the consolidated financial statements . 42 critical accounting policies and estimates management 's discussion and analysis of financial condition and results of operations discusses our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the u.s. the preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities , the disclosure of contingent assets and liabilities at the date of the financial statements , and the reported amounts of revenues and expenses during the reporting period . management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . we believe the following critical accounting policies , among others , affect our more significant judgments and estimates used in the preparation of our consolidated financial statements . estimate description judgment and or uncertainty potential impact if results differ income taxes we account for income taxes under the asset and liability method prescribed by asc 740. deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and other tax attributes using currently enacted tax rates . the effect of a change in tax rates on deferred tax assets and liabilities is recognized in the provision for income taxes in the period that includes the enactment date . our net deferred tax liabilities totaled $ 780.1 million as of december 31 , 2019 , which includes valuation allowances of $ 19.5 million . for further information regarding income taxes , see note 9 of the consolidated financial statements . management is required to estimate the timing of the recognition of deferred tax assets and liabilities , make assumptions about the future deductibility of deferred tax assets and assess deferred tax liabilities based on enacted law and tax rates for the appropriate tax jurisdictions to determine the amount of such deferred tax assets and liabilities . we assess whether a valuation allowance should be established against deferred tax assets based on consideration of all available evidence , both positive and negative , using a more likely than not standard . this assessment considers , among other matters : the nature , frequency and severity of recent losses ; a forecast of future profitability ; the duration of statutory carryback and carryforward periods ; our
| debt financing : on august 6 , 2009 , we completed the sale of an aggregate of $ 7.2 million in 10 % convertible debentures ( the “ debentures ” ) to certain accredited investors ( the “ holders ” ) . the debentures bear interest at the rate of 10 % per annum and mature on august 4 , 2012. the debentures were payable with one initial payment of interest only due february 4 , 2010 , and , thereafter in ten equal quarterly principal payments , plus accrued interest thereon . at the option of the holders , the debentures could be converted into shares of the company 's common stock at $ 8.75 per share . the debentures were redeemable by us at any time if the closing price of its common stock for 20 consecutive trading days is at least $ 11.50 per share . the debentures provide that an event of default would occur if : we should fail to pay any principal or interest when due ; we should fail to convert any debenture when required ; we should fail to observe or perform any covenant or agreement contained within the debenture ; there are cross defaults to other indebtedness in excess of $ 1,000,000 ; there is a reorganization , liquidation , voluntary or involuntary bankruptcy or insolvency proceedings or other bankruptcy default ; or a final unsatisfied judgment not covered by insurance aggregating an excess of $ 1 million occurs against us and is not stayed , bonded or discharged within seventy-five days . in connection with the sale of the debentures , we also issued an aggregate of 164,569 warrants ( the “ warrants ” ) to the holders , on a pro-rata basis . we issued each holder a number of warrants equal to 20 % of the number of shares of common stock into which each holder 's debenture is convertible . the warrants have an exercise price of $ 8.75 and expire on august 5 , 2012. the warrants provide that we had the right to require exercise of the warrants if the closing price of our common stock for 20 consecutive trading days was at least $ 12.25 .
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for the year ended december 31 , 2019 , we made a net investment in our lease fleet of approximately $ 916.5 million , which primarily includes new railcar additions and railcar modifications , net of deferred profit , and secondary market purchases ; and is net of proceeds from the sales of leased railcars owned more than one year at the time of sale . the leasing group 's lease fleet of 103,705 company-owned railcars was 96.0 % utilized as of december 31 , 2019 , in comparison to a lease fleet utilization of 98.5 % on 99,215 company-owned railcars as of december 31 , 2018 . our company-owned railcars include wholly-owned , partially-owned , and railcars under sale-leaseback arrangements . the total value of the railcar backlog at december 31 , 2019 was $ 1.8 billion , compared to $ 3.6 billion at december 31 , 2018 . the rail products group received orders for 10,220 railcars and delivered 21,960 railcars in 2019 , in comparison to orders for 28,795 railcars and deliveries of 20,105 railcars in 2018 . for the year ended december 31 , 2019 , our return on equity ( `` roe `` ) and pre-tax roe were 5.6 % and 9.0 % ( 1 ) , respectively , in comparison to 4.3 % and 6.3 % ( 1 ) , respectively , for the year ended december 31 , 2018 . for the year ended december 31 , 2019 , we generated operating cash flows from continuing operations and free cash flow of $ 396.7 million and $ 423.3 million ( 1 ) , respectively , in comparison to $ 274.2 million and $ 390.0 million ( 1 ) , respectively , for the year ended december 31 , 2018 . ( 1 ) non-gaap financial measure . see the non-gaap financial measures section within this form 10-k for a reconciliation to the most directly comparable gaap measure and why management believes this measure is useful to management and investors . see `` consolidated results of operations `` and `` segment discussion `` below for additional information regarding our operating results for the year ended december 31 , 2019. see part ii , item 7 of our 2018 annual report on form 10-k for a discussion of our results of operations and liquidity and capital resources as of and for the year ended december 31 , 2018 , including a comparison to the year ended december 31 , 2017 . 28 returns of capital to shareholders for the year ended december 31 , 2019 , returns of capital to shareholders in the form of dividends and share repurchases are summarized below : capital structure updates in connection with the company 's ongoing efforts to optimize its capital structure , in april 2019 , trinity rail leasing 2019 llc ( `` trl-2019 `` ) , a delaware limited liability company and a limited purpose , indirect wholly-owned subsidiary of the company owned through tilc , issued $ 528.3 million of trl-2019 secured railcar equipment notes . in october 2019 , trl-2019 issued an additional $ 386.5 million of trl-2019 secured railcar equipment notes , consisting of two classes of notes . these notes have a stated final maturity date of 2049. see `` liquidity and capital resources `` below for further information regarding these activities . litigation updates see note 15 of the consolidated financial statements for an update on the status of our highway products litigation . cyclical and seasonal trends impacting our business the industries in which we operate are cyclical in nature . weaknesses in certain sectors of the north american and global economy may make it more difficult to sell or lease certain types of railcars . additionally , adverse changes in commodity prices or lower demand for certain commodities could result in a decline in customer demand for various types of railcars . we continuously assess demand for our products and services and take steps to rationalize and diversify our leased railcar portfolio and align our manufacturing capacity appropriately . we diligently evaluate the creditworthiness of our customers and monitor performance of relevant market sectors ; however , weaknesses in any of these market sectors could affect the financial viability of our underlying leasing group customers , which could negatively impact our recurring leasing revenues and operating profits . due to their transactional nature , railcar sales from the lease fleet are the primary driver of fluctuations in results in the leasing group . results in our all other group are affected by seasonal fluctuations , with the second and third quarters historically being the quarters with the highest revenues . 29 recent market developments demand for railcars weakened in 2019 due to uncertainty associated with global tariffs and trade policies and declining industrial production . these economic factors , combined with declining railcar loading volumes and a growing supply of underutilized railcar assets in north america , are pressuring railcar lease rates and utilization , as well as orders for new railcar equipment . we currently expect this trend to continue in the near term . we believe that our integrated rail platform is designed to respond to cyclical changes in demand and perform throughout the railcar cycle . restructuring activities in the fourth quarter of 2019 , we implemented the initial phase of efforts to streamline certain functions to support our rail-focused strategy and to begin disposing of underutilized assets and facilities . in connection with our assessment of future needs to support our go-forward business strategy , we recognized a restructuring charge of approximately $ 14.7 million , primarily from write-downs related to underutilized assets associated with our non-operational facilities , and employee transition costs . we estimate that these actions will generate future annualized cost savings of approximately $ 8 million to $ 10 million . we expect to identify additional streamlining and cost savings opportunities in 2020 . story_separator_special_tag replace_table_token_20_th the changes in our operating assets and liabilities resulted in a net use of $ 79.0 million for the year ended december 31 , 2019 , compared to a net use of $ 142.5 million for the year ended december 31 , 2018 , primarily as a result of improved working capital management . investing activities . net cash used in investing activities from continuing operations for the year ended december 31 , 2019 was $ 993.3 million compared to $ 412.3 million for the year ended december 31 , 2018 . significant investing activities are as follows : we made a net investment in the lease fleet of $ 916.5 million during the year ended december 31 , 2019 , compared to $ 717.8 million in the prior year period . our net investment in the lease fleet primarily includes new railcar additions and railcar modifications , net of deferred profit , and secondary market purchases ; and is net of proceeds from the sales of leased railcars owned more than one year at the time of sale . short-term marketable securities decreased by $ 319.5 million for the year ended december 31 , 2018 . there were no investing activities related to short-term marketable securities during the year ended december 31 , 2019 . financing activities . story_separator_special_tag through tilc , tilc 's warehouse loan facility , and our revolving credit facility . after libor is phased out , the interest rates for these obligations might be subject to change . the replacement of libor with an alternative benchmark reference rate may adversely affect interest rates and result in higher borrowing costs under these agreements and any future agreements . 41 contractual obligation and commercial commitments as of december 31 , 2019 , we had the following contractual obligations and commercial commitments : replace_table_token_21_th ( 1 ) excludes unamortized discount and debt issuance costs . ( 2 ) includes fixed rate interest obligations and interest on variable rate debt based on the outstanding balances and the applicable rates at december 31 , 2019 . ( 3 ) includes $ 483.8 million in purchase obligations for raw materials and components , primarily by the rail products group . as of december 31 , 2019 and 2018 , we had $ 5.0 million and $ 11.8 million , respectively , of tax liabilities , including interest and penalties , related to uncertain tax positions . because of the high degree of uncertainty regarding the timing of future cash outflows associated with these liabilities , we are unable to estimate the years in which settlement will occur with the respective taxing authorities , and , accordingly , such amounts are excluded from the table above . see note 9 of the consolidated financial statements . on september 4 , 2019 , our board of directors approved the termination of the pension plan , effective december 31 , 2019. the pension plan is expected to be settled between late 2020 and early 2021 , subject to required governmental approvals . any potential cash contribution that may be required to settle all of the pension plan 's obligations , is not expected to exceed $ 15.0 million and is excluded from the table above . see note 10 of the consolidated financial statements . 42 critical accounting policies and estimates management 's discussion and analysis of financial condition and results of operations discusses our consolidated financial statements , which have been prepared in accordance with accounting principles generally accepted in the u.s. the preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities , the disclosure of contingent assets and liabilities at the date of the financial statements , and the reported amounts of revenues and expenses during the reporting period . management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances , the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources . actual results may differ from these estimates under different assumptions or conditions . we believe the following critical accounting policies , among others , affect our more significant judgments and estimates used in the preparation of our consolidated financial statements . estimate description judgment and or uncertainty potential impact if results differ income taxes we account for income taxes under the asset and liability method prescribed by asc 740. deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and other tax attributes using currently enacted tax rates . the effect of a change in tax rates on deferred tax assets and liabilities is recognized in the provision for income taxes in the period that includes the enactment date . our net deferred tax liabilities totaled $ 780.1 million as of december 31 , 2019 , which includes valuation allowances of $ 19.5 million . for further information regarding income taxes , see note 9 of the consolidated financial statements . management is required to estimate the timing of the recognition of deferred tax assets and liabilities , make assumptions about the future deductibility of deferred tax assets and assess deferred tax liabilities based on enacted law and tax rates for the appropriate tax jurisdictions to determine the amount of such deferred tax assets and liabilities . we assess whether a valuation allowance should be established against deferred tax assets based on consideration of all available evidence , both positive and negative , using a more likely than not standard . this assessment considers , among other matters : the nature , frequency and severity of recent losses ; a forecast of future profitability ; the duration of statutory carryback and carryforward periods ; our
| net cash provided by financing activities during the year ended december 31 , 2019 was $ 526.5 million compared to $ 291.1 million of cash used in financing activities for the same period in 2018 . significant financing activities are as follows : during the year ended december 31 , 2019 , we had total borrowings of $ 2,567.8 million and total repayments of $ 1,724.1 million , for net proceeds of $ 843.7 million , primarily to support our investment in the lease fleet and for general and corporate purposes . during the year ended december 31 , 2018 , we had total borrowings of $ 1,206.6 million and total repayments of $ 887.8 million , for net proceeds of $ 318.8 million , primarily related to proceeds from the issuance of debt in support of our investment in the lease fleet , partially offset by the cash settlement of our then-outstanding convertible notes of $ 646.6 million . we paid $ 82.1 million and $ 77.4 million in dividends to our common stockholders during the year ended december 31 , 2019 and 2018 , respectively . 39 we repurchased common stock under our authorized share repurchase programs totaling $ 224.7 million and $ 506.1 million during the year ended december 31 , 2019 and 2018 , respectively . the cash outlay for shares repurchased during year ended december 31 , 2019 excludes approximately $ 70.0 million related to the repurchased shares that were funded in november 2018 under the asr program but delivered in the first quarter of 2019. current debt obligations please refer to note 8 of the consolidated financial statements for a description of our current debt obligations . capital expenditures capital expenditures for 2019 were $ 1,219.2 million with $ 1,122.2 million utilized for net lease fleet additions , which includes new railcar additions and railcar modifications , net of deferred profit , and secondary market purchases . excluding proceeds from the sales of leased railcars owned more than one year of $ 205.7 million , our net investment in the lease fleet was $ 916.5 million .
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the economic environment presented unique challenges resulting from covid-19 , which negatively impacted rail north america 's financial results . rail north america did receive lease restructuring requests earlier in the year as some customers sought to lower costs and , in certain cases , reduce the size of their fleets . however , such requests dissipated in the second half of the year . to date , restructuring requests that have been approved did not have a significant impact on rail north america 's financial results . railcar repair facilities continued to operate throughout the year , but some facilities experienced periodic operating disruptions resulting from employee absences due to covid-19 issues . the frequency of these disruptions increased in the fourth quarter . as a result of the aforementioned factors , rail north america expects ongoing pressure on future railcar utilization , lease rates , and other key performance metrics , the magnitude and duration of which are still uncertain . the following table shows rail north america 's segment results for the years ended december 31 ( in millions ) : replace_table_token_6_th the following table shows the components of rail north america 's lease revenue for the years ended december 31 ( in millions ) : replace_table_token_7_th 29 rail north america fleet data at december 31 , 2020 , rail north america 's wholly owned fleet , excluding boxcars , consisted of approximately 103,700 cars . fleet utilization , excluding boxcars , was 98.1 % at the end of 2020 , compared to 99.3 % at the end of 2019 , and 99.4 % at the end of 2018. fleet utilization for approximately 14,300 boxcars was 95.8 % at the end of 2020 compared to 95.0 % at the end of 2019 , and 94.2 % at the end of 2018. utilization is calculated as the number of railcars on lease as a percentage of total railcars in the fleet . during 2020 , an average of approximately 101,700 railcars , excluding boxcars , were on lease , compared to 103,500 in 2019 , and 102,100 in 2018. changes in railcars on lease compared to prior periods are impacted by the utilization of new railcars purchased under our supply agreements or in the secondary market and the disposition of railcars that were sold or scrapped , as well as the fleet utilization rate . as of december 31 , 2020 , leases for approximately 20,000 tank cars and freight cars and approximately 2,300 boxcars are scheduled to expire in 2021. these amounts exclude railcars on leases expiring in 2021 that have already been renewed or assigned to a new lessee . in 2014 , we entered into a long-term supply agreement with trinity rail group , llc ( `` trinity `` ) , a subsidiary of trinity industries . under the terms of that agreement , we agreed to order 8,950 newly built railcars . as of december 31 , 2020 , all 8,950 railcars have been ordered and delivered . on may 24 , 2018 , we amended our long-term supply agreement with trinity to extend the term to december 2023 , and we agreed to purchase an additional 4,800 tank cars ( 1,200 per year ) beginning in january 2020 and continuing through the expiration of the extended term . at december 31 , 2020 , 1,891 railcars have been ordered pursuant to the amended terms of the agreement , of which 1,272 railcars have been delivered . in 2018 , we entered into a multi-year railcar supply agreement with american railcar industries , inc. ( `` ari `` ) , pursuant to which we will purchase 7,650 newly built railcars . the order encompasses a mix of tank and freight cars that are to be delivered over a five-year period , beginning in april 2019. ari 's railcar manufacturing business was subsequently acquired by the greenbrier companies , inc. ( `` greenbrier `` ) on july 26 , 2019 , and greenbrier assumed all of ari 's obligations under our long-term supply agreement . under this agreement , 450 railcars were to be delivered in 2019 , with the remaining 7,200 to be delivered ratably over the four-year period of 2020 to 2023. as of december 31 , 2020 , 4,035 railcars have been ordered , of which 2,297 railcars have been delivered . the agreement also includes an option to order up to an additional 4,400 railcars subject to certain restrictions . additionally , we acquired a fleet of 3,098 railcars from ecn capital corporation , with 2,832 of the railcars acquired in 2018 and the remaining 266 railcars in early 2019. the following table shows fleet activity for rail north america railcars , excluding boxcars , for the years ended december 31 : replace_table_token_8_th 30 the following table shows fleet statistics for rail north america boxcars for the years ended december 31 : replace_table_token_9_th the following table shows fleet activity for rail north america locomotives for the years ended december 31 : replace_table_token_10_th lease price index our lease price index ( `` lpi `` ) is an internally-generated business indicator that measures lease rate pricing on renewals for our north american railcar fleet , excluding boxcars . we calculate the index using the weighted-average lease rate for a group of railcar types that we believe best represents our overall north american fleet , excluding boxcars . the average renewal lease rate change is reported as the percentage change between the average renewal lease rate and the average expiring lease rate , weighted by fleet composition . story_separator_special_tag depreciation expense increased $ 2.3 million , primarily due to new railcars added to the fleet . other income ( expense ) in 2020 , net gain on asset dispositions decreased $ 0.5 million , attributable to lower net scrapping gains . net interest expense increased $ 5.3 million , due to a higher average debt balance , partially offset by a lower average interest rate . other expense increased $ 6.2 million , driven by the negative impact of changes in foreign exchange rates on non-functional currency items and higher net litigation costs related to the viareggio matter , which reflected the absence of insurance proceeds received in the prior year . see `` note 24. legal proceedings and other contingencies `` in part ii , item 8 of this form 10-k for further details about the viareggio matter . in 2019 , net gain on asset dispositions increased $ 1.9 million , attributable to the absence of the impairment for the maintenance facility in germany recorded in the prior year , partially offset by lower railcar scrapping gains , as a result of fewer railcars scrapped in 2019. net interest expense increased $ 4.7 million , due to a higher average interest rate and a higher average debt balance . other expense decreased $ 8.2 million , driven by the absence of the railcar maintenance facility closure costs recorded in 2018 and lower net litigation costs related to the viareggio matter , which reflected insurance proceeds received in 2019. see `` note 22. legal proceedings and other contingencies `` in part ii , item 8 of this form 10-k for further details about the viareggio matter . this was partially offset by the negative impact of changes in foreign exchange rates on non-functional currency items . investment volume investment volume was $ 216.0 million in 2020 , $ 215.7 million in 2019 , and $ 152.7 million in 2018. during 2020 , gre acquired 2,071 railcars ( including 374 assembled at the gre ostróda , poland facility ) , gri acquired 477 rail cars , and rail russia did not acquire any railcars , compared to 1,417 railcars at gre ( including 384 assembled at the gre ostróda , poland facility ) , 1,626 railcars at gri , and 26 railcars at rail russia in 2019 , and 847 railcars at gre ( including 316 assembled at the gre ostróda , poland facility ) , 1,001 railcars at gri , and 184 railcars at rail russia in 2018. our investment volume is predominantly composed of acquired railcars , but may also include certain capitalized repairs and improvements to owned railcars . as a result , the dollar value of investment volume does not necessarily correspond to the number of railcars acquired in any given period . in addition , the comparability of amounts invested and the number of railcars acquired in each period is impacted by the mix of the various car types acquired , as well as fluctuations in the exchange rates of the foreign currencies in which rail international conducts business . portfolio management segment summary portfolio management 's segment profit is attributable primarily to income from the rrpf affiliates , a group of 50 % owned domestic and foreign joint ventures with rolls-royce plc ( or affiliates thereof , collectively “ rolls-royce ” ) , a leading manufacturer of commercial aircraft jet engines . segment profit included earnings from the rrpf affiliates of $ 95.5 million for 2020 , $ 94.5 million for 2019 , and $ 60.5 million for 2018. financial results for the current year included a transaction involving the refinancing and sale of a group of aircraft spare engines at the rrpf affiliates . in this transaction , the rrpf affiliates sold 21 aircraft spare engines for total proceeds of $ 233.0 million in 2020. gatx 's 50 % share of the resulting pre-tax net gains was $ 35.3 million . portfolio management 36 did not make any additional investment in the rrpf affiliates in 2020 and 2019 , compared to $ 14.1 million in 2018. there were no dividend distributions from the rrpf affiliates in 2020 , compared to $ 27.5 million in 2019 and $ 35.2 million in 2018. covid-19 severely impacted global air travel during 2020. as a result , rrpf has granted significant rent deferrals and a number of its customers have declared bankruptcy or undertaken restructuring processes . despite this , rrpf maintained strong utilization , with 92.8 % of its engines on lease at the end of the year , and is focused on preserving a strong liquidity position in the current environment . rrpf continues to expect pressure on both engine utilization and lease rates , which will impact future operating results , the magnitude and duration of which are still uncertain . portfolio management also owns marine assets , consisting of five liquefied gas-carrying vessels ( the `` specialized gas vessels `` ) . during 2019 , the prior commercial management agreement with norgas carriers private limited , and related pooling arrangement , was terminated , and we entered into a new agreement with anthony veder group b.v. to commercially manage these vessels . while covid-19 had a significant impact on the gas shipping market in 2020 , there were signs of improvement in the second half of the year , as charter rates and utilization increased modestly . we expect covid-19 will likely continue to have a negative impact on future results , the magnitude and duration of which are still uncertain . portfolio management 's total asset base was $ 706.1 million at december 31 , 2020 , compared to $ 653.7 million at december 31 , 2019 , and $ 606.8 million at december 31 , 2018. the following table shows portfolio management 's segment results for the years ended december 31 ( in millions ) : replace_table_token_14_th 37 the following table sets forth the approximate net book value of portfolio
| net cash provided by financing activities during the year ended december 31 , 2019 was $ 526.5 million compared to $ 291.1 million of cash used in financing activities for the same period in 2018 . significant financing activities are as follows : during the year ended december 31 , 2019 , we had total borrowings of $ 2,567.8 million and total repayments of $ 1,724.1 million , for net proceeds of $ 843.7 million , primarily to support our investment in the lease fleet and for general and corporate purposes . during the year ended december 31 , 2018 , we had total borrowings of $ 1,206.6 million and total repayments of $ 887.8 million , for net proceeds of $ 318.8 million , primarily related to proceeds from the issuance of debt in support of our investment in the lease fleet , partially offset by the cash settlement of our then-outstanding convertible notes of $ 646.6 million . we paid $ 82.1 million and $ 77.4 million in dividends to our common stockholders during the year ended december 31 , 2019 and 2018 , respectively . 39 we repurchased common stock under our authorized share repurchase programs totaling $ 224.7 million and $ 506.1 million during the year ended december 31 , 2019 and 2018 , respectively . the cash outlay for shares repurchased during year ended december 31 , 2019 excludes approximately $ 70.0 million related to the repurchased shares that were funded in november 2018 under the asr program but delivered in the first quarter of 2019. current debt obligations please refer to note 8 of the consolidated financial statements for a description of our current debt obligations . capital expenditures capital expenditures for 2019 were $ 1,219.2 million with $ 1,122.2 million utilized for net lease fleet additions , which includes new railcar additions and railcar modifications , net of deferred profit , and secondary market purchases . excluding proceeds from the sales of leased railcars owned more than one year of $ 205.7 million , our net investment in the lease fleet was $ 916.5 million .
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the economic environment presented unique challenges resulting from covid-19 , which negatively impacted rail north america 's financial results . rail north america did receive lease restructuring requests earlier in the year as some customers sought to lower costs and , in certain cases , reduce the size of their fleets . however , such requests dissipated in the second half of the year . to date , restructuring requests that have been approved did not have a significant impact on rail north america 's financial results . railcar repair facilities continued to operate throughout the year , but some facilities experienced periodic operating disruptions resulting from employee absences due to covid-19 issues . the frequency of these disruptions increased in the fourth quarter . as a result of the aforementioned factors , rail north america expects ongoing pressure on future railcar utilization , lease rates , and other key performance metrics , the magnitude and duration of which are still uncertain . the following table shows rail north america 's segment results for the years ended december 31 ( in millions ) : replace_table_token_6_th the following table shows the components of rail north america 's lease revenue for the years ended december 31 ( in millions ) : replace_table_token_7_th 29 rail north america fleet data at december 31 , 2020 , rail north america 's wholly owned fleet , excluding boxcars , consisted of approximately 103,700 cars . fleet utilization , excluding boxcars , was 98.1 % at the end of 2020 , compared to 99.3 % at the end of 2019 , and 99.4 % at the end of 2018. fleet utilization for approximately 14,300 boxcars was 95.8 % at the end of 2020 compared to 95.0 % at the end of 2019 , and 94.2 % at the end of 2018. utilization is calculated as the number of railcars on lease as a percentage of total railcars in the fleet . during 2020 , an average of approximately 101,700 railcars , excluding boxcars , were on lease , compared to 103,500 in 2019 , and 102,100 in 2018. changes in railcars on lease compared to prior periods are impacted by the utilization of new railcars purchased under our supply agreements or in the secondary market and the disposition of railcars that were sold or scrapped , as well as the fleet utilization rate . as of december 31 , 2020 , leases for approximately 20,000 tank cars and freight cars and approximately 2,300 boxcars are scheduled to expire in 2021. these amounts exclude railcars on leases expiring in 2021 that have already been renewed or assigned to a new lessee . in 2014 , we entered into a long-term supply agreement with trinity rail group , llc ( `` trinity `` ) , a subsidiary of trinity industries . under the terms of that agreement , we agreed to order 8,950 newly built railcars . as of december 31 , 2020 , all 8,950 railcars have been ordered and delivered . on may 24 , 2018 , we amended our long-term supply agreement with trinity to extend the term to december 2023 , and we agreed to purchase an additional 4,800 tank cars ( 1,200 per year ) beginning in january 2020 and continuing through the expiration of the extended term . at december 31 , 2020 , 1,891 railcars have been ordered pursuant to the amended terms of the agreement , of which 1,272 railcars have been delivered . in 2018 , we entered into a multi-year railcar supply agreement with american railcar industries , inc. ( `` ari `` ) , pursuant to which we will purchase 7,650 newly built railcars . the order encompasses a mix of tank and freight cars that are to be delivered over a five-year period , beginning in april 2019. ari 's railcar manufacturing business was subsequently acquired by the greenbrier companies , inc. ( `` greenbrier `` ) on july 26 , 2019 , and greenbrier assumed all of ari 's obligations under our long-term supply agreement . under this agreement , 450 railcars were to be delivered in 2019 , with the remaining 7,200 to be delivered ratably over the four-year period of 2020 to 2023. as of december 31 , 2020 , 4,035 railcars have been ordered , of which 2,297 railcars have been delivered . the agreement also includes an option to order up to an additional 4,400 railcars subject to certain restrictions . additionally , we acquired a fleet of 3,098 railcars from ecn capital corporation , with 2,832 of the railcars acquired in 2018 and the remaining 266 railcars in early 2019. the following table shows fleet activity for rail north america railcars , excluding boxcars , for the years ended december 31 : replace_table_token_8_th 30 the following table shows fleet statistics for rail north america boxcars for the years ended december 31 : replace_table_token_9_th the following table shows fleet activity for rail north america locomotives for the years ended december 31 : replace_table_token_10_th lease price index our lease price index ( `` lpi `` ) is an internally-generated business indicator that measures lease rate pricing on renewals for our north american railcar fleet , excluding boxcars . we calculate the index using the weighted-average lease rate for a group of railcar types that we believe best represents our overall north american fleet , excluding boxcars . the average renewal lease rate change is reported as the percentage change between the average renewal lease rate and the average expiring lease rate , weighted by fleet composition . story_separator_special_tag depreciation expense increased $ 2.3 million , primarily due to new railcars added to the fleet . other income ( expense ) in 2020 , net gain on asset dispositions decreased $ 0.5 million , attributable to lower net scrapping gains . net interest expense increased $ 5.3 million , due to a higher average debt balance , partially offset by a lower average interest rate . other expense increased $ 6.2 million , driven by the negative impact of changes in foreign exchange rates on non-functional currency items and higher net litigation costs related to the viareggio matter , which reflected the absence of insurance proceeds received in the prior year . see `` note 24. legal proceedings and other contingencies `` in part ii , item 8 of this form 10-k for further details about the viareggio matter . in 2019 , net gain on asset dispositions increased $ 1.9 million , attributable to the absence of the impairment for the maintenance facility in germany recorded in the prior year , partially offset by lower railcar scrapping gains , as a result of fewer railcars scrapped in 2019. net interest expense increased $ 4.7 million , due to a higher average interest rate and a higher average debt balance . other expense decreased $ 8.2 million , driven by the absence of the railcar maintenance facility closure costs recorded in 2018 and lower net litigation costs related to the viareggio matter , which reflected insurance proceeds received in 2019. see `` note 22. legal proceedings and other contingencies `` in part ii , item 8 of this form 10-k for further details about the viareggio matter . this was partially offset by the negative impact of changes in foreign exchange rates on non-functional currency items . investment volume investment volume was $ 216.0 million in 2020 , $ 215.7 million in 2019 , and $ 152.7 million in 2018. during 2020 , gre acquired 2,071 railcars ( including 374 assembled at the gre ostróda , poland facility ) , gri acquired 477 rail cars , and rail russia did not acquire any railcars , compared to 1,417 railcars at gre ( including 384 assembled at the gre ostróda , poland facility ) , 1,626 railcars at gri , and 26 railcars at rail russia in 2019 , and 847 railcars at gre ( including 316 assembled at the gre ostróda , poland facility ) , 1,001 railcars at gri , and 184 railcars at rail russia in 2018. our investment volume is predominantly composed of acquired railcars , but may also include certain capitalized repairs and improvements to owned railcars . as a result , the dollar value of investment volume does not necessarily correspond to the number of railcars acquired in any given period . in addition , the comparability of amounts invested and the number of railcars acquired in each period is impacted by the mix of the various car types acquired , as well as fluctuations in the exchange rates of the foreign currencies in which rail international conducts business . portfolio management segment summary portfolio management 's segment profit is attributable primarily to income from the rrpf affiliates , a group of 50 % owned domestic and foreign joint ventures with rolls-royce plc ( or affiliates thereof , collectively “ rolls-royce ” ) , a leading manufacturer of commercial aircraft jet engines . segment profit included earnings from the rrpf affiliates of $ 95.5 million for 2020 , $ 94.5 million for 2019 , and $ 60.5 million for 2018. financial results for the current year included a transaction involving the refinancing and sale of a group of aircraft spare engines at the rrpf affiliates . in this transaction , the rrpf affiliates sold 21 aircraft spare engines for total proceeds of $ 233.0 million in 2020. gatx 's 50 % share of the resulting pre-tax net gains was $ 35.3 million . portfolio management 36 did not make any additional investment in the rrpf affiliates in 2020 and 2019 , compared to $ 14.1 million in 2018. there were no dividend distributions from the rrpf affiliates in 2020 , compared to $ 27.5 million in 2019 and $ 35.2 million in 2018. covid-19 severely impacted global air travel during 2020. as a result , rrpf has granted significant rent deferrals and a number of its customers have declared bankruptcy or undertaken restructuring processes . despite this , rrpf maintained strong utilization , with 92.8 % of its engines on lease at the end of the year , and is focused on preserving a strong liquidity position in the current environment . rrpf continues to expect pressure on both engine utilization and lease rates , which will impact future operating results , the magnitude and duration of which are still uncertain . portfolio management also owns marine assets , consisting of five liquefied gas-carrying vessels ( the `` specialized gas vessels `` ) . during 2019 , the prior commercial management agreement with norgas carriers private limited , and related pooling arrangement , was terminated , and we entered into a new agreement with anthony veder group b.v. to commercially manage these vessels . while covid-19 had a significant impact on the gas shipping market in 2020 , there were signs of improvement in the second half of the year , as charter rates and utilization increased modestly . we expect covid-19 will likely continue to have a negative impact on future results , the magnitude and duration of which are still uncertain . portfolio management 's total asset base was $ 706.1 million at december 31 , 2020 , compared to $ 653.7 million at december 31 , 2019 , and $ 606.8 million at december 31 , 2018. the following table shows portfolio management 's segment results for the years ended december 31 ( in millions ) : replace_table_token_14_th 37 the following table sets forth the approximate net book value of portfolio
| net cash provided by operating activities net cash provided by operating activities of $ 436.8 million increased $ 11.0 million compared to 2019. comparability among reporting periods is impacted by the timing of changes in working capital items . specifically , lower cash payments for employee compensation costs , sg & a expenses , and other operating expenses were partially offset by higher payments for interest expense and income taxes . portfolio investments and capital additions portfolio investments and capital additions primarily consist of purchases of operating assets , investments in affiliates , and capitalized asset improvements . portfolio investments and capital additions of $ 1,064.0 million increased $ 341.2 million compared to 2019 , primarily due to the trifleet acquisition of $ 203.2 million at other and more railcars acquired at rail north america . the timing of investments depends on purchase commitments , transaction opportunities , and market conditions . the following table shows portfolio investments and capital additions by segment for the years ended december 31 ( in millions ) : replace_table_token_24_th additionally , portfolio investments and capital additions for discontinued operations were $ 18.2 million , $ 18.9 million , and $ 15.8 million for the years ended december 31 , 2020 , 2019 , and 2018 . 44 portfolio proceeds portfolio proceeds primarily consist of proceeds from sales of operating assets and finance lease receipts , as well as capital distributions from affiliates . portfolio proceeds of $ 131.1 million for the year ended december 31 , 2020 decreased $ 119.2 million compared to the year ended december 31 , 2019 , primarily due to lower proceeds from railcar and locomotive sales at rail north america . the following table shows portfolio proceeds for the years ended december 31 ( in millions ) : replace_table_token_25_th other investing activity the following table shows other investing activity for the years ended december 31 ( in millions ) : replace_table_token_26_th ( 1 ) in 2019 , we purchased 49 railcars that were previously leased , compared to 3,412 railcars in 2018 . ( 2 ) proceeds from sales of other assets for all periods were primarily related to railcar scrapping .
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these factors include , but are not necessarily limited to , product demand , dependence on and competition within the primary markets in which monro 's stores are located , the need for and costs associated with store renovations and other capital expenditures , the effect of economic conditions , the impact of competitive services and pricing , parts supply restraints or difficulties , industry regulation , risks relating to leverage and debt service ( including sensitivity to fluctuations in interest rates ) , continued availability of capital resources and financing , disruption or unauthorized access to our computer systems , risks relating to protection of customer and employee personal data , risks relating to litigation , risks relating to integration of acquired businesses , including goodwill impairment and the risks set forth in item 1a . risk factors . except as required by law , we do not undertake to update any forward-looking statement that may be made from time to time by us or on our behalf . critical accounting policies we believe that the accounting policies listed below are those that are most critical to the portrayal of our financial condition and results of operations , and that required management 's most difficult , subjective and complex judgments in estimating the effect of inherent uncertainties . this section should be read in conjunction with note 1 to the consolidated financial statements which includes other significant accounting policies . inventory we evaluate whether inventory is stated at the lower of cost or market based on historical experience with the carrying value and life of inventory . the assumptions used in this evaluation are based on current market conditions and we believe inventory is stated at the lower of cost or market in the consolidated financial 22 statements . in addition , historically we have been able to return excess items to vendors for credit or sell such inventory to wholesalers . future changes by vendors in their policies or willingness to accept returns of excess inventory could require a revision in the estimates . carrying values of goodwill and long-lived assets we have a history of growth through acquisitions . assets and liabilities of acquired businesses are recorded at their estimated fair values as of the date of acquisition . goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses . the carrying value of goodwill is subject to annual impairment reviews , which we typically perform in the third quarter of the fiscal year . impairment reviews may also be triggered by any significant events or changes in circumstances affecting our business . we have only one reporting unit which encompasses all operations including new acquisitions . the goodwill impairment test consists of a two-step process , if necessary . we perform a qualitative assessment to determine if it is more likely than not that the fair value is less than the carrying value of goodwill . if the qualitative factors are triggered , we perform the two-step process . the first step is to compare the fair value to the book value of our reporting unit . if the fair value is less than its carrying value , the second step of the impairment test must be performed in order to determine the amount of impairment loss , if any . the second step compares the implied fair value of goodwill with the carrying amount of that goodwill . if the carrying amount of goodwill exceeds its implied fair value , an impairment charge is recognized in an amount equal to that excess . the loss recognized can not exceed the carrying amount of goodwill . we believe there is little risk of impairment . intangible assets primarily represent allocations of purchase price to identifiable intangible assets of acquired businesses and are amortized over their estimated useful lives . all intangibles and other long-lived assets are reviewed when events or changes in circumstances indicate that the asset 's carrying value may not be recoverable . if such indicators are present , it is determined whether the sum of the estimated undiscounted future cash flows attributable to such assets is less than their carrying values . a deterioration of macroeconomic conditions may not only negatively impact the estimated operating cash flows used in our cash flow models , but may also negatively impact other assumptions used in our analyses , including , but not limited to , the estimated cost of capital and or discount rates . additionally , as discussed above , we are required to ensure that assumptions used to determine fair value in our analyses are consistent with the assumptions a hypothetical marketplace participant would use . as a result , the cost of capital and or discount rates used in our analyses may increase or decrease based on market conditions and trends , regardless of whether our actual cost of capital has changed . therefore , we may recognize an impairment of an intangible asset or assets even though realized actual cash flows are approximately equal to or greater than our previously forecasted amounts . self-insurance reserves we are largely self-insured with respect to workers ' compensation , general liability and employee medical claims . in order to reduce our risk and better manage our overall loss exposure , we purchase stop-loss insurance that covers individual claims in excess of the deductible amounts , and caps total losses in a fiscal year . we maintain an accrual for the estimated cost to settle open claims as well as an estimate of the cost of claims that have been incurred but not reported . story_separator_special_tag labor productivity , as measured by sales per man hour , improved over the prior year as well . distribution and occupancy costs decreased as a percentage of sales from the prior year as we leveraged these largely fixed costs with the increase in sales from acquired stores . total material costs were relatively flat as a percentage of sales as compared to the prior year . this was due to a shift in mix to the lower margin service and tire categories , the latter due primarily to the acquisition of more tire stores , offset by a meaningful decline in product costs , particularly tires . operating expenses for fiscal 2014 were $ 224.6 million or 27.0 % of sales compared with $ 204.4 million or 27.9 % of sales for fiscal 2013. excluding the increase in operating expenses related to the stores acquired in fiscal 2014 and fiscal 2013 , operating expenses actually decreased by approximately $ 2.2 million . this demonstrates that we experienced leverage in this line on a comparable store basis through focused cost control and pay plans which appropriately adjust for performance . operating income in fiscal 2014 of $ 95.3 million increased 29.4 % compared to operating income of $ 73.7 million in fiscal 2013 , and increased as a percentage of sales from 10.1 % to 11.5 % for the reasons described above . net interest expense for fiscal 2014 increased by approximately $ 2.3 million as compared to the prior year , and increased as a percentage of sales from 1.0 % to 1.1 % . the weighted average debt outstanding for the year ended march 29 , 2014 increased by approximately $ 61 million from fiscal 2013 , primarily related to an increase in debt outstanding under our revolving credit facility to fund the purchase of our acquisitions , as well as increased capital leases related to our fiscal 2013 acquisitions . partially offsetting this increase was a decrease in the weighted average interest rate of approximately 40 basis points from the prior year due to a shift in the percentage of debt ( revolver vs. capital leases ) outstanding at a lower rate . our effective tax rate was 37.1 % and 36.3 % , respectively , of pre-tax income in fiscal 2014 and 2013. the difference primarily relates to the accounting for uncertain tax positions which may vary from year to year . net income for fiscal 2014 increased by $ 11.9 million , or 27.9 % , from $ 42.6 million in fiscal 2013 , to $ 54.5 million in fiscal 2014 , and earnings per diluted share increased by 26.5 % from $ 1.32 to $ 1.67 due to the factors discussed above . fiscal 2013 as compared to fiscal 2012 sales for fiscal 2013 increased $ 45.4 million or 6.6 % to $ 732.0 million as compared to $ 686.6 million in fiscal 2012. the increase was due to an increase of $ 99.6 million related to new stores , of which $ 95.3 million came from the fiscal 2012 and fiscal 2013 acquisitions . offsetting this was a decrease in comparable store sales of 7.3 % . additionally , there was a decrease in sales from closed stores amounting to $ 6.4 million . fiscal 2013 was a 52-week year , and therefore , there were 361 selling days as compared to 368 selling days in fiscal 2012. adjusting for days , comparable store sales were down 5.5 % . 25 as occurred in previous years , we completed the bulk sale of approximately $ 2.4 million of slower moving inventory to icon international , a barter company , in exchange for barter credits . the margin recognized in these transactions is typically less than our normal profit margin . the barter transaction that occurred in fiscal 2013 decreased gross profit and operating expenses by .1 % of sales . during the year , 144 stores were added and 10 were closed . at march 30 , 2013 , we had 937 company-operated stores in operation . we believe that the decline in comparable store sales for fiscal 2013 resulted mainly from the continued weak u.s. economy . with the continuation of high gasoline prices , lack of consumer confidence and high unemployment , we believe that customers are continuing to defer tire purchases and service repairs , especially on higher ticket items . additionally , we believe that the milder winter weather in 2013 and 2012 also led to consumers deferring tire purchases . while it appears that repairs and tire purchases are being deferred more and for longer than in prior years , most can only be deferred for a period of time due to safety issues or state inspection requirements . gross profit for fiscal 2013 was $ 278.1 million or 38.0 % of sales as compared with $ 276.4 million or 40.3 % of sales for fiscal 2012. the decrease in gross profit for fiscal 2013 , as a percentage of sales , is due to several factors . total material costs increased as a percentage of sales as compared to the prior year . this was due to a shift in mix to the lower margin service and tire categories , the latter due in part to the acquisition of more tire stores . distribution and occupancy costs increased as a percentage of sales from the prior year as we lost leverage on these largely fixed costs with lower comparable store sales . labor costs were relatively flat as a percentage of sales as compared to the prior year . operating expenses for fiscal 2013 were $ 204.4 million or 27.9 % of sales compared with $ 185.0 million or 26.9 % of sales for fiscal 2012. excluding the operating expenses related to the stores acquired in fiscal 2013 , operating expenses actually decreased by approximately $ 1.5 million , after adjusting for the extra week in fiscal
| net cash provided by operating activities net cash provided by operating activities of $ 436.8 million increased $ 11.0 million compared to 2019. comparability among reporting periods is impacted by the timing of changes in working capital items . specifically , lower cash payments for employee compensation costs , sg & a expenses , and other operating expenses were partially offset by higher payments for interest expense and income taxes . portfolio investments and capital additions portfolio investments and capital additions primarily consist of purchases of operating assets , investments in affiliates , and capitalized asset improvements . portfolio investments and capital additions of $ 1,064.0 million increased $ 341.2 million compared to 2019 , primarily due to the trifleet acquisition of $ 203.2 million at other and more railcars acquired at rail north america . the timing of investments depends on purchase commitments , transaction opportunities , and market conditions . the following table shows portfolio investments and capital additions by segment for the years ended december 31 ( in millions ) : replace_table_token_24_th additionally , portfolio investments and capital additions for discontinued operations were $ 18.2 million , $ 18.9 million , and $ 15.8 million for the years ended december 31 , 2020 , 2019 , and 2018 . 44 portfolio proceeds portfolio proceeds primarily consist of proceeds from sales of operating assets and finance lease receipts , as well as capital distributions from affiliates . portfolio proceeds of $ 131.1 million for the year ended december 31 , 2020 decreased $ 119.2 million compared to the year ended december 31 , 2019 , primarily due to lower proceeds from railcar and locomotive sales at rail north america . the following table shows portfolio proceeds for the years ended december 31 ( in millions ) : replace_table_token_25_th other investing activity the following table shows other investing activity for the years ended december 31 ( in millions ) : replace_table_token_26_th ( 1 ) in 2019 , we purchased 49 railcars that were previously leased , compared to 3,412 railcars in 2018 . ( 2 ) proceeds from sales of other assets for all periods were primarily related to railcar scrapping .
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these factors include , but are not necessarily limited to , product demand , dependence on and competition within the primary markets in which monro 's stores are located , the need for and costs associated with store renovations and other capital expenditures , the effect of economic conditions , the impact of competitive services and pricing , parts supply restraints or difficulties , industry regulation , risks relating to leverage and debt service ( including sensitivity to fluctuations in interest rates ) , continued availability of capital resources and financing , disruption or unauthorized access to our computer systems , risks relating to protection of customer and employee personal data , risks relating to litigation , risks relating to integration of acquired businesses , including goodwill impairment and the risks set forth in item 1a . risk factors . except as required by law , we do not undertake to update any forward-looking statement that may be made from time to time by us or on our behalf . critical accounting policies we believe that the accounting policies listed below are those that are most critical to the portrayal of our financial condition and results of operations , and that required management 's most difficult , subjective and complex judgments in estimating the effect of inherent uncertainties . this section should be read in conjunction with note 1 to the consolidated financial statements which includes other significant accounting policies . inventory we evaluate whether inventory is stated at the lower of cost or market based on historical experience with the carrying value and life of inventory . the assumptions used in this evaluation are based on current market conditions and we believe inventory is stated at the lower of cost or market in the consolidated financial 22 statements . in addition , historically we have been able to return excess items to vendors for credit or sell such inventory to wholesalers . future changes by vendors in their policies or willingness to accept returns of excess inventory could require a revision in the estimates . carrying values of goodwill and long-lived assets we have a history of growth through acquisitions . assets and liabilities of acquired businesses are recorded at their estimated fair values as of the date of acquisition . goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses . the carrying value of goodwill is subject to annual impairment reviews , which we typically perform in the third quarter of the fiscal year . impairment reviews may also be triggered by any significant events or changes in circumstances affecting our business . we have only one reporting unit which encompasses all operations including new acquisitions . the goodwill impairment test consists of a two-step process , if necessary . we perform a qualitative assessment to determine if it is more likely than not that the fair value is less than the carrying value of goodwill . if the qualitative factors are triggered , we perform the two-step process . the first step is to compare the fair value to the book value of our reporting unit . if the fair value is less than its carrying value , the second step of the impairment test must be performed in order to determine the amount of impairment loss , if any . the second step compares the implied fair value of goodwill with the carrying amount of that goodwill . if the carrying amount of goodwill exceeds its implied fair value , an impairment charge is recognized in an amount equal to that excess . the loss recognized can not exceed the carrying amount of goodwill . we believe there is little risk of impairment . intangible assets primarily represent allocations of purchase price to identifiable intangible assets of acquired businesses and are amortized over their estimated useful lives . all intangibles and other long-lived assets are reviewed when events or changes in circumstances indicate that the asset 's carrying value may not be recoverable . if such indicators are present , it is determined whether the sum of the estimated undiscounted future cash flows attributable to such assets is less than their carrying values . a deterioration of macroeconomic conditions may not only negatively impact the estimated operating cash flows used in our cash flow models , but may also negatively impact other assumptions used in our analyses , including , but not limited to , the estimated cost of capital and or discount rates . additionally , as discussed above , we are required to ensure that assumptions used to determine fair value in our analyses are consistent with the assumptions a hypothetical marketplace participant would use . as a result , the cost of capital and or discount rates used in our analyses may increase or decrease based on market conditions and trends , regardless of whether our actual cost of capital has changed . therefore , we may recognize an impairment of an intangible asset or assets even though realized actual cash flows are approximately equal to or greater than our previously forecasted amounts . self-insurance reserves we are largely self-insured with respect to workers ' compensation , general liability and employee medical claims . in order to reduce our risk and better manage our overall loss exposure , we purchase stop-loss insurance that covers individual claims in excess of the deductible amounts , and caps total losses in a fiscal year . we maintain an accrual for the estimated cost to settle open claims as well as an estimate of the cost of claims that have been incurred but not reported . story_separator_special_tag labor productivity , as measured by sales per man hour , improved over the prior year as well . distribution and occupancy costs decreased as a percentage of sales from the prior year as we leveraged these largely fixed costs with the increase in sales from acquired stores . total material costs were relatively flat as a percentage of sales as compared to the prior year . this was due to a shift in mix to the lower margin service and tire categories , the latter due primarily to the acquisition of more tire stores , offset by a meaningful decline in product costs , particularly tires . operating expenses for fiscal 2014 were $ 224.6 million or 27.0 % of sales compared with $ 204.4 million or 27.9 % of sales for fiscal 2013. excluding the increase in operating expenses related to the stores acquired in fiscal 2014 and fiscal 2013 , operating expenses actually decreased by approximately $ 2.2 million . this demonstrates that we experienced leverage in this line on a comparable store basis through focused cost control and pay plans which appropriately adjust for performance . operating income in fiscal 2014 of $ 95.3 million increased 29.4 % compared to operating income of $ 73.7 million in fiscal 2013 , and increased as a percentage of sales from 10.1 % to 11.5 % for the reasons described above . net interest expense for fiscal 2014 increased by approximately $ 2.3 million as compared to the prior year , and increased as a percentage of sales from 1.0 % to 1.1 % . the weighted average debt outstanding for the year ended march 29 , 2014 increased by approximately $ 61 million from fiscal 2013 , primarily related to an increase in debt outstanding under our revolving credit facility to fund the purchase of our acquisitions , as well as increased capital leases related to our fiscal 2013 acquisitions . partially offsetting this increase was a decrease in the weighted average interest rate of approximately 40 basis points from the prior year due to a shift in the percentage of debt ( revolver vs. capital leases ) outstanding at a lower rate . our effective tax rate was 37.1 % and 36.3 % , respectively , of pre-tax income in fiscal 2014 and 2013. the difference primarily relates to the accounting for uncertain tax positions which may vary from year to year . net income for fiscal 2014 increased by $ 11.9 million , or 27.9 % , from $ 42.6 million in fiscal 2013 , to $ 54.5 million in fiscal 2014 , and earnings per diluted share increased by 26.5 % from $ 1.32 to $ 1.67 due to the factors discussed above . fiscal 2013 as compared to fiscal 2012 sales for fiscal 2013 increased $ 45.4 million or 6.6 % to $ 732.0 million as compared to $ 686.6 million in fiscal 2012. the increase was due to an increase of $ 99.6 million related to new stores , of which $ 95.3 million came from the fiscal 2012 and fiscal 2013 acquisitions . offsetting this was a decrease in comparable store sales of 7.3 % . additionally , there was a decrease in sales from closed stores amounting to $ 6.4 million . fiscal 2013 was a 52-week year , and therefore , there were 361 selling days as compared to 368 selling days in fiscal 2012. adjusting for days , comparable store sales were down 5.5 % . 25 as occurred in previous years , we completed the bulk sale of approximately $ 2.4 million of slower moving inventory to icon international , a barter company , in exchange for barter credits . the margin recognized in these transactions is typically less than our normal profit margin . the barter transaction that occurred in fiscal 2013 decreased gross profit and operating expenses by .1 % of sales . during the year , 144 stores were added and 10 were closed . at march 30 , 2013 , we had 937 company-operated stores in operation . we believe that the decline in comparable store sales for fiscal 2013 resulted mainly from the continued weak u.s. economy . with the continuation of high gasoline prices , lack of consumer confidence and high unemployment , we believe that customers are continuing to defer tire purchases and service repairs , especially on higher ticket items . additionally , we believe that the milder winter weather in 2013 and 2012 also led to consumers deferring tire purchases . while it appears that repairs and tire purchases are being deferred more and for longer than in prior years , most can only be deferred for a period of time due to safety issues or state inspection requirements . gross profit for fiscal 2013 was $ 278.1 million or 38.0 % of sales as compared with $ 276.4 million or 40.3 % of sales for fiscal 2012. the decrease in gross profit for fiscal 2013 , as a percentage of sales , is due to several factors . total material costs increased as a percentage of sales as compared to the prior year . this was due to a shift in mix to the lower margin service and tire categories , the latter due in part to the acquisition of more tire stores . distribution and occupancy costs increased as a percentage of sales from the prior year as we lost leverage on these largely fixed costs with lower comparable store sales . labor costs were relatively flat as a percentage of sales as compared to the prior year . operating expenses for fiscal 2013 were $ 204.4 million or 27.9 % of sales compared with $ 185.0 million or 26.9 % of sales for fiscal 2012. excluding the operating expenses related to the stores acquired in fiscal 2013 , operating expenses actually decreased by approximately $ 1.5 million , after adjusting for the extra week in fiscal
| capital resources our primary capital requirements for fiscal 2014 were divided among the funding of acquisitions for $ 27.5 million , as well as the upgrading of facilities and systems and the funding of our store expansion program totaling $ 32.2 million . in fiscal 2013 , our primary capital requirements were divided among the funding of acquisitions for $ 163.3 million , as well as the upgrading of facilities and systems , including the completion of the approximate $ 4.6 million expansion of the rochester , new york office and warehouse facility which began in fiscal 2012 , and the funding of our store expansion program totaling $ 34.2 million . in both fiscal years 2014 and 2013 , capital requirements were primarily met by cash flow from operations and from our revolving credit facility . in fiscal 2015 , we intend to open approximately four new greenfield stores . total capital required to open a new greenfield service store ranges , on average ( excluding the acquired stores and bj 's locations ) , from $ 350,000 to $ 950,000 depending on whether the store is leased , owned or land leased . total capital required to open a new greenfield tire ( land and building leased ) location costs , on average , approximately $ 600,000 , including $ 225,000 for equipment and $ 150,000 for inventory . monro paid dividends of $ 14.2 million in fiscal 2014. in may 2014 , monro 's board of directors declared its intention to pay a regular quarterly cash dividend of $ .13 per common share or common share equivalent beginning with the first quarter of fiscal 2015. we also plan to continue to seek suitable acquisition candidates . management believes that we have sufficient resources available ( including cash flow from operations and bank financing ) to expand our business as currently planned for the next several years .
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60 results of operations consolidated financial results the following tables summarize total revenues , net income ( loss ) and net income ( loss ) attributable to icahn enterprises for each of our reportable segments and our holding company for the years ended december 31 , 2011 , 2010 and 2009. we consolidated the results of our gaming segment effective as of november 15 , 2010 and , therefore , our consolidated results of operations for the year ended december 31 , 2010 includes the results of operations from our gaming segment for the period november 15 , 2010 through december 31 , 2010. eliminations relate to the unrealized gains recorded by our investment segment for its investment in tropicana from the date of its acquisition of a controlling interest in tropicana through the date that its investment in tropicana was transferred to us . refer to `` distributions-in-kind `` above and note 3 , “ operating units - gaming , ” to the consolidated financial statements for further discussion . replace_table_token_6_th overview our operating businesses are managed on a decentralized basis . due to the structure of our business , we discuss the results of operations below by individual reportable segments . please refer to note 14 , `` segment and geographic reporting , `` to the consolidated financial statements for a reconciliation of each of our reporting segment 's results of operations to our consolidated results . please refer to note 3 , “ operating units , ” to the consolidated financial statements for a description of each of our reportable segments . investment icahn onshore lp , or the onshore gp , and icahn offshore lp ( or the offshore gp and , together with the onshore gp , the general partners ) act as general partner of icahn partners lp , or the onshore fund , and the offshore master funds ( as defined herein ) , respectively . the general partners do not provide such services to any other entities , individuals or accounts . interests in the investment funds ( as defined below ) are not offered to outside investors . interests in the investment funds had been previously offered only to certain sophisticated and qualified investors on the basis of exemptions from the registration requirements of the federal securities laws and were not ( and still are not ) publicly available . the “ offshore master funds ” consist of ( i ) icahn partners master fund lp ( or master fund i ) , ( ii ) icahn partners master fund ii lp ( or master fund ii ) and ( iii ) icahn partners master fund iii lp ( or master fund iii ) . the onshore fund and the offshore master funds are collectively referred to herein as the “ investment funds . ” 61 incentive allocations and special profits interest allocations historically , our investment segment 's revenues were affected by the combination of fee-paying assets under management , or aum , and the investment performance of the investment funds . the general partners ' incentive allocations and special profits interest allocations earned from the investment funds were accrued on a quarterly basis and were allocated to the general partners at the end of the investment funds ' fiscal year ( or sooner on redemptions ) assuming there were sufficient net profits to cover such amounts . as more fully disclosed in a letter to investors in the investment funds filed with the sec on form 8-k on march 7 , 2011 , the investment funds returned all fee-paying capital to their investors during fiscal 2011. payments were funded through cash on hand and borrowings under existing credit lines . as a result , no further incentive allocations or special profits interest allocations will accrue for periods subsequent to march 31 , 2011. the general partners waived the special profits interest allocations and incentive allocations for our interests in the investment funds and mr. icahn 's direct and indirect holdings . all of the special profits interest allocations and incentive allocations are eliminated in consolidation ; however , our share of the net income from the investment funds includes the amounts of these allocations . we consolidate certain entities within our investment segment . as a result , in accordance with u.s. gaap , any special profits interest allocations , incentive allocations and earnings on investments in the investment funds are eliminated in consolidation . these eliminations have no impact on our net income ; however , as our allocated share of the net income from the investment funds includes the amount of these allocations and earnings . as a result of the return of fee-paying capital as described above , a special profits interest allocation of $ 9 million was allocated to the general partners at march 31 , 2011. no further special profits interest allocation accrued in periods subsequent to march 31 , 2011. a special profits interest allocation accrual of $ 45 million and $ 154 million was made for the years ended december 31 , 2010 and 2009 , respectively . as a result of the return of fee-paying capital as described above , an incentive allocation of $ 7 million was allocated to the general partners at march 31 , 2011. no further incentive allocation will accrue in periods subsequent to march 31 , 2011. incentive allocations for the year ended december 31 , 2010 was $ 5 million . there were no incentive allocations for the year ended december 31 , 2009. our interests in the investment funds during fiscal 2011 , icahn enterprises invested $ 100 million in the investment funds . in december 2011 , icahn enterprises redeemed $ 150 million from the investment funds . as of december 31 , 2011 , we had investments with a fair market value of approximately $ 3.1 billion in the investment funds . story_separator_special_tag gaming as a result of our acquisition of additional shares of tropicana common stock on november 15 , 2010 , we are required to consolidate the results of tropicana as of such date . therefore , our consolidated results from operations for fiscal 2010 include the results of our gaming segment from the period november 15 , 2010 through december 31 , 2010. gaming revenues and expenses are classified in other revenues from operations and other expenses from operations , respectively , in our consolidated financial statements . gaming revenues and expenses for our gaming segment for fiscal 2011 and for the period november 15 , 2010 through december 31 , 2010 are summarized as follows : replace_table_token_10_th tropicana 's annual report on form 10-k and quarterly reports on form 10-q contain a detailed description of its business , products , industry , operating strategy and associated risks . tropicana 's filings with the sec are available on the sec 's website at www.sec.gov . during fiscal 2011 , we acquired additional shares of tropicana common stock . as of december 31 , 2011 , we owned approximately 65.1 % of the total outstanding common stock of tropicana . 66 weak economic conditions continue to adversely impact the gaming industry and tropicana . we believe tropicana 's guests have reduced their discretionary spending as a result of uncertainty and instability relating to the employment and housing markets . we can not predict whether , or how long , current market conditions will continue to persist . in addition , tropicana ac 's revenues have been negatively impacted by the introduction of table games in pennsylvania in mid-2010 , increased marketing and promotional activity from competitors within the atlantic city market and the opening of a new casino in new york city in the fourth quarter of fiscal 2011. the atlantic city market experienced year-over-year declines in casino revenue of 7.8 % for fiscal 2011 as compared to fiscal 2010. tropicana 's financial results are highly dependent upon the number of customers that it attracts to its facilities and the amounts those customers spend per visit . additionally , tropicana 's operating results may be affected by , among other things , overall economic conditions affecting the discretionary income of its customers , competitive factors , gaming tax increases and other regulatory changes , the opening of new gaming operations , the negative impact that certain predecessors ' bankruptcy filings had on its facilities , tropicana 's ability to reinvest in its properties , potential future exposure for liabilities of its certain predecessors that it assumed , its limited operating history and general public sentiment regarding travel and gaming . historically , tropicana 's operating results are the strongest in the third quarter and the weakest in the fourth quarter . in addition , weather and long-weekend holidays affect its operating results . casino revenues are one of tropicana 's main performance indicators and account for a significant portion of its net revenues . casino revenues represent the difference between wins and losses from gaming activities such as slot machines and table games . key volume indicators include table game volumes and slot volumes , which refer to amounts wagered by tropicana 's customers . win or hold percentage represents the percentage of the amounts wagered that is won by the casino , which is not fully controllable by tropicana , and recorded as casino revenue . most of tropicana 's revenues are cash-based , through customers wagering with cash or chips or paying for non-gaming services with cash or credit cards , and therefore are not subject to any significant or complex estimation . as a result , fluctuations in net revenues have a direct impact on cash flows from operating activities . other performance indicators include hotel occupancy , which is a volume indicator for hotels , and the average daily rate , which is a price indicator for the amount customers paid for hotel rooms . casino revenues were $ 507 million for fiscal 2011. casino revenues are comprised primarily of slot machine and table game revenues . slot machine revenue was $ 400 million and table game revenue was $ 97 million for fiscal 2011. overall slot machine hold percentage was 9.0 % and table games hold percentages was 15.2 % for fiscal 2011. room , food and beverage revenues were $ 194 million for fiscal 2011. hotel room occupancy percentage for fiscal 2011 was 66 % . our average daily room rate was $ 72 for fiscal 2011. rooms , food and beverages are often offered to high-value guests on a complimentary basis . the retail value of rooms , food and beverage provided to guests on a complimentary basis is included in gross revenues and then deducted as promotional allowances to arrive at net revenues . in the fourth quarter of fiscal 2011 , tropicana impaired certain real property and equipment by $ 5 million . in recording impairment charges related to real and personal property , tropicana used both the cost and market approach . components of sg & a for our gaming segment are summarized as follows : replace_table_token_11_th tropicana continues to monitor and reduce its sg & a expenses to maintain profitability in response to declining revenues due to the current weak economic conditions . 67 railcar replace_table_token_12_th ari 's annual report on form 10-k and quarterly reports on form 10-q contain a detailed description of its business , products , industry , operating strategy and associated risks . ari 's filings with the sec are available on the sec 's website at www.sec.gov . during fiscal 2011 , we acquired additional shares of ari common stock . as of december 31 , 2011 , we owned approximately 55.5 % of the total outstanding common stock of ari . the north american railcar market has been , and ari anticipates it to continue to be highly cyclical . ari has seen consistent
| capital resources our primary capital requirements for fiscal 2014 were divided among the funding of acquisitions for $ 27.5 million , as well as the upgrading of facilities and systems and the funding of our store expansion program totaling $ 32.2 million . in fiscal 2013 , our primary capital requirements were divided among the funding of acquisitions for $ 163.3 million , as well as the upgrading of facilities and systems , including the completion of the approximate $ 4.6 million expansion of the rochester , new york office and warehouse facility which began in fiscal 2012 , and the funding of our store expansion program totaling $ 34.2 million . in both fiscal years 2014 and 2013 , capital requirements were primarily met by cash flow from operations and from our revolving credit facility . in fiscal 2015 , we intend to open approximately four new greenfield stores . total capital required to open a new greenfield service store ranges , on average ( excluding the acquired stores and bj 's locations ) , from $ 350,000 to $ 950,000 depending on whether the store is leased , owned or land leased . total capital required to open a new greenfield tire ( land and building leased ) location costs , on average , approximately $ 600,000 , including $ 225,000 for equipment and $ 150,000 for inventory . monro paid dividends of $ 14.2 million in fiscal 2014. in may 2014 , monro 's board of directors declared its intention to pay a regular quarterly cash dividend of $ .13 per common share or common share equivalent beginning with the first quarter of fiscal 2015. we also plan to continue to seek suitable acquisition candidates . management believes that we have sufficient resources available ( including cash flow from operations and bank financing ) to expand our business as currently planned for the next several years .
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60 results of operations consolidated financial results the following tables summarize total revenues , net income ( loss ) and net income ( loss ) attributable to icahn enterprises for each of our reportable segments and our holding company for the years ended december 31 , 2011 , 2010 and 2009. we consolidated the results of our gaming segment effective as of november 15 , 2010 and , therefore , our consolidated results of operations for the year ended december 31 , 2010 includes the results of operations from our gaming segment for the period november 15 , 2010 through december 31 , 2010. eliminations relate to the unrealized gains recorded by our investment segment for its investment in tropicana from the date of its acquisition of a controlling interest in tropicana through the date that its investment in tropicana was transferred to us . refer to `` distributions-in-kind `` above and note 3 , “ operating units - gaming , ” to the consolidated financial statements for further discussion . replace_table_token_6_th overview our operating businesses are managed on a decentralized basis . due to the structure of our business , we discuss the results of operations below by individual reportable segments . please refer to note 14 , `` segment and geographic reporting , `` to the consolidated financial statements for a reconciliation of each of our reporting segment 's results of operations to our consolidated results . please refer to note 3 , “ operating units , ” to the consolidated financial statements for a description of each of our reportable segments . investment icahn onshore lp , or the onshore gp , and icahn offshore lp ( or the offshore gp and , together with the onshore gp , the general partners ) act as general partner of icahn partners lp , or the onshore fund , and the offshore master funds ( as defined herein ) , respectively . the general partners do not provide such services to any other entities , individuals or accounts . interests in the investment funds ( as defined below ) are not offered to outside investors . interests in the investment funds had been previously offered only to certain sophisticated and qualified investors on the basis of exemptions from the registration requirements of the federal securities laws and were not ( and still are not ) publicly available . the “ offshore master funds ” consist of ( i ) icahn partners master fund lp ( or master fund i ) , ( ii ) icahn partners master fund ii lp ( or master fund ii ) and ( iii ) icahn partners master fund iii lp ( or master fund iii ) . the onshore fund and the offshore master funds are collectively referred to herein as the “ investment funds . ” 61 incentive allocations and special profits interest allocations historically , our investment segment 's revenues were affected by the combination of fee-paying assets under management , or aum , and the investment performance of the investment funds . the general partners ' incentive allocations and special profits interest allocations earned from the investment funds were accrued on a quarterly basis and were allocated to the general partners at the end of the investment funds ' fiscal year ( or sooner on redemptions ) assuming there were sufficient net profits to cover such amounts . as more fully disclosed in a letter to investors in the investment funds filed with the sec on form 8-k on march 7 , 2011 , the investment funds returned all fee-paying capital to their investors during fiscal 2011. payments were funded through cash on hand and borrowings under existing credit lines . as a result , no further incentive allocations or special profits interest allocations will accrue for periods subsequent to march 31 , 2011. the general partners waived the special profits interest allocations and incentive allocations for our interests in the investment funds and mr. icahn 's direct and indirect holdings . all of the special profits interest allocations and incentive allocations are eliminated in consolidation ; however , our share of the net income from the investment funds includes the amounts of these allocations . we consolidate certain entities within our investment segment . as a result , in accordance with u.s. gaap , any special profits interest allocations , incentive allocations and earnings on investments in the investment funds are eliminated in consolidation . these eliminations have no impact on our net income ; however , as our allocated share of the net income from the investment funds includes the amount of these allocations and earnings . as a result of the return of fee-paying capital as described above , a special profits interest allocation of $ 9 million was allocated to the general partners at march 31 , 2011. no further special profits interest allocation accrued in periods subsequent to march 31 , 2011. a special profits interest allocation accrual of $ 45 million and $ 154 million was made for the years ended december 31 , 2010 and 2009 , respectively . as a result of the return of fee-paying capital as described above , an incentive allocation of $ 7 million was allocated to the general partners at march 31 , 2011. no further incentive allocation will accrue in periods subsequent to march 31 , 2011. incentive allocations for the year ended december 31 , 2010 was $ 5 million . there were no incentive allocations for the year ended december 31 , 2009. our interests in the investment funds during fiscal 2011 , icahn enterprises invested $ 100 million in the investment funds . in december 2011 , icahn enterprises redeemed $ 150 million from the investment funds . as of december 31 , 2011 , we had investments with a fair market value of approximately $ 3.1 billion in the investment funds . story_separator_special_tag gaming as a result of our acquisition of additional shares of tropicana common stock on november 15 , 2010 , we are required to consolidate the results of tropicana as of such date . therefore , our consolidated results from operations for fiscal 2010 include the results of our gaming segment from the period november 15 , 2010 through december 31 , 2010. gaming revenues and expenses are classified in other revenues from operations and other expenses from operations , respectively , in our consolidated financial statements . gaming revenues and expenses for our gaming segment for fiscal 2011 and for the period november 15 , 2010 through december 31 , 2010 are summarized as follows : replace_table_token_10_th tropicana 's annual report on form 10-k and quarterly reports on form 10-q contain a detailed description of its business , products , industry , operating strategy and associated risks . tropicana 's filings with the sec are available on the sec 's website at www.sec.gov . during fiscal 2011 , we acquired additional shares of tropicana common stock . as of december 31 , 2011 , we owned approximately 65.1 % of the total outstanding common stock of tropicana . 66 weak economic conditions continue to adversely impact the gaming industry and tropicana . we believe tropicana 's guests have reduced their discretionary spending as a result of uncertainty and instability relating to the employment and housing markets . we can not predict whether , or how long , current market conditions will continue to persist . in addition , tropicana ac 's revenues have been negatively impacted by the introduction of table games in pennsylvania in mid-2010 , increased marketing and promotional activity from competitors within the atlantic city market and the opening of a new casino in new york city in the fourth quarter of fiscal 2011. the atlantic city market experienced year-over-year declines in casino revenue of 7.8 % for fiscal 2011 as compared to fiscal 2010. tropicana 's financial results are highly dependent upon the number of customers that it attracts to its facilities and the amounts those customers spend per visit . additionally , tropicana 's operating results may be affected by , among other things , overall economic conditions affecting the discretionary income of its customers , competitive factors , gaming tax increases and other regulatory changes , the opening of new gaming operations , the negative impact that certain predecessors ' bankruptcy filings had on its facilities , tropicana 's ability to reinvest in its properties , potential future exposure for liabilities of its certain predecessors that it assumed , its limited operating history and general public sentiment regarding travel and gaming . historically , tropicana 's operating results are the strongest in the third quarter and the weakest in the fourth quarter . in addition , weather and long-weekend holidays affect its operating results . casino revenues are one of tropicana 's main performance indicators and account for a significant portion of its net revenues . casino revenues represent the difference between wins and losses from gaming activities such as slot machines and table games . key volume indicators include table game volumes and slot volumes , which refer to amounts wagered by tropicana 's customers . win or hold percentage represents the percentage of the amounts wagered that is won by the casino , which is not fully controllable by tropicana , and recorded as casino revenue . most of tropicana 's revenues are cash-based , through customers wagering with cash or chips or paying for non-gaming services with cash or credit cards , and therefore are not subject to any significant or complex estimation . as a result , fluctuations in net revenues have a direct impact on cash flows from operating activities . other performance indicators include hotel occupancy , which is a volume indicator for hotels , and the average daily rate , which is a price indicator for the amount customers paid for hotel rooms . casino revenues were $ 507 million for fiscal 2011. casino revenues are comprised primarily of slot machine and table game revenues . slot machine revenue was $ 400 million and table game revenue was $ 97 million for fiscal 2011. overall slot machine hold percentage was 9.0 % and table games hold percentages was 15.2 % for fiscal 2011. room , food and beverage revenues were $ 194 million for fiscal 2011. hotel room occupancy percentage for fiscal 2011 was 66 % . our average daily room rate was $ 72 for fiscal 2011. rooms , food and beverages are often offered to high-value guests on a complimentary basis . the retail value of rooms , food and beverage provided to guests on a complimentary basis is included in gross revenues and then deducted as promotional allowances to arrive at net revenues . in the fourth quarter of fiscal 2011 , tropicana impaired certain real property and equipment by $ 5 million . in recording impairment charges related to real and personal property , tropicana used both the cost and market approach . components of sg & a for our gaming segment are summarized as follows : replace_table_token_11_th tropicana continues to monitor and reduce its sg & a expenses to maintain profitability in response to declining revenues due to the current weak economic conditions . 67 railcar replace_table_token_12_th ari 's annual report on form 10-k and quarterly reports on form 10-q contain a detailed description of its business , products , industry , operating strategy and associated risks . ari 's filings with the sec are available on the sec 's website at www.sec.gov . during fiscal 2011 , we acquired additional shares of ari common stock . as of december 31 , 2011 , we owned approximately 55.5 % of the total outstanding common stock of ari . the north american railcar market has been , and ari anticipates it to continue to be highly cyclical . ari has seen consistent
| liquidity and capital resources holding company as of december 31 , 2011 , the holding company had $ 150 million invested in precious metals and $ 150 million invested in our real estate segment which remains on its balance sheet . in respect of the investment in precious metals , we have entered into certain commodity swap arrangements to hedge against market risk . in addition , we had investments in the investment funds with a total fair market value of approximately $ 3.1 billion as of december 31 , 2011 . as of december 31 , 2011 , we had cash and cash equivalents of $ 517 million and total debt of approximately $ 3.1 billion . as of december 31 , 2011 based on covenants in the indenture governing our senior notes , we could incur approximately $ 1.3 billion in additional indebtedness . see note 10 , “ debt , ” to the consolidated financial statements for additional information concerning credit facilities for us and our subsidiaries . on january 17 , 2012 and february 6 , 2012 , we issued an aggregate $ 700 million principal amount of the 2018 notes , or the additional 2018 notes . in connection with the issuance of the additional 2018 notes , we filed a registration statement on form s-4 with the sec on january 20 , 2012 , which has not yet been declared effective . the additional 2018 notes constitute the same series of securities as the 2018 notes for purposes of the indenture governing the notes and will vote together on all matters with such series . the additional 2018 notes have substantially identical terms as the 2018 notes . we are a holding company .
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with an ongoing commitment to corporate citizenship , the company has been named to the dow jones sustainability north america index for six consecutive years . fiscal 2017 performance reflected a higher gross profit in the grocery & snacks segment , offset by lower gross profits in the refrigerated & frozen , foodservice , and international segments . fiscal 2017 results were also impacted by lower sales volumes and the reduction of profits due to the divestitures of spicetec and jm swank in the first quarter of fiscal 2017. the improved operating performance reflected significantly lower selling , general and administrative ( `` sg & a `` ) expenses and lower interest expense , in each case compared to fiscal 2016. diluted earnings per share in fiscal 2017 was $ 1.46 , including earnings of $ 1.25 per diluted share from continuing operations and $ 0.21 per diluted share from discontinued operations . diluted loss per share in fiscal 2016 was $ 1.56 , including earnings of $ 0.29 per diluted share from continuing operations and a loss of $ 1.85 per diluted share from discontinued 18 operations . several significant items affect the comparability of year-over-year results of continuing operations ( see `` items impacting comparability `` below ) . in fiscal 2017 , we completed the spinoff of lamb weston holdings , inc. ( `` lamb weston `` ) through a distribution of 100 % of our interest in lamb weston to holders of outstanding shares of our common stock ( the `` spinoff `` ) . the transaction effecting this change was structured as a tax-free spinoff . we also completed several other acquisitions and divestitures during the year . see `` acquisitions `` below and `` divestitures and formation of ardent mills joint venture `` below . finally , we completed the relocation of our corporate headquarters to chicago , illinois in the first quarter of fiscal 2017. in the first quarter of fiscal 2017 , in anticipation of the spinoff , we reorganized our reporting segments . we now reflect our results of operations in five reporting segments : grocery & snacks , refrigerated & frozen , international , foodservice , and commercial . the results of operations for the lamb weston business have been reclassified to results of discontinued operations for all periods presented , and the assets and liabilities of the lamb weston business have been reclassified to assets and liabilities of discontinued operations for all periods prior to the spinoff . items impacting comparability items of note impacting comparability of results from continuing operations for fiscal 2017 included the following : charges totaling $ 304.2 million ( $ 257.7 million after-tax ) related to the impairment of goodwill and other intangible assets , gains totaling $ 197.4 million ( $ 68.4 million after-tax ) from the sales of the spicetec and jm swank businesses , charges totaling $ 93.3 million ( $ 60.2 million after-tax ) related to the early retirement of debt , charges totaling $ 63.6 million ( $ 41.4 million after-tax ) in connection with the `` scae plan `` ( as defined below ) , charges totaling $ 31.4 million ( $ 19.6 million after-tax ) , including an impairment charge of $ 27.6 million related to the production assets of the business , for the planned divestiture of the wesson ® oil business , charges totaling $ 13.8 million ( $ 8.5 million after-tax ) related to a pension lump sum settlement , a gain of $ 5.7 million ( $ 3.7 million after-tax ) in connection with a legacy legal matter , an income tax benefit of $ 91.3 million related to a tax adjustment of valuation allowance associated with the planned divestiture of the wesson ® oil business , and an income tax benefit of $ 14.6 million associated with a tax planning strategy that allowed us to utilize certain state tax attributes and certain foreign incentives . items of note impacting comparability of results from continuing operations for fiscal 2016 included the following : a charge of $ 348.5 million ( $ 215.1 million after-tax ) reflecting the year-end write-off of actuarial losses in excess of 10 % of our pension liability , charges totaling $ 281.8 million ( $ 178.2 million after-tax ) in connection with the `` scae plan `` , a charge of $ 50.1 million ( $ 31.6 million after-tax ) related to the impairment of the chef boyardee ® brand , charges of $ 23.9 million ( $ 15.4 million after-tax ) related to the repurchase of certain senior notes , a charge of $ 5.0 million ( $ 3.1 million after-tax ) in connection with a legacy legal matter , and income tax expense of $ 8.3 million related to legal entity changes for a business retained from private brands and a $ 2.7 million charge for the prior year implementation of a new tax position offset by the benefit of normal , recurring , income tax credits and deductions combined with a lower pre-tax level of earnings ( due in large part to the impact of the write-off of $ 348.5 million of actuarial losses under our method of accounting for pension benefits ) . 19 segment presentation of gains and losses from derivatives used for economic hedging of anticipated commodity input costs and economic hedging of foreign currency exchange rate risks of anticipated transactions is discussed in the segment review below . acquisitions in april 2017 , we acquired protein-based snacking businesses thanasi foods llc , maker of duke 's ® meat snacks , and bigs llc , maker of bigs ® seeds , for $ 217.6 million in cash , net of cash acquired , subject to a working capital adjustment ( the `` thanasi acquisition `` ) . story_separator_special_tag international incurred an operating loss for fiscal 2017 of $ 168.9 million and earned an operating profit of $ 66.7 million in fiscal 2016 . the operating loss in fiscal 2017 includes charges totaling $ 235.9 million for the impairment of goodwill and an intangible brand asset in our canadian and mexican operations . gross profits were $ 8.5 million lower in fiscal 2017 than in fiscal 2016 , driven by the impact of foreign exchange rates . operating profits were negatively impacted by $ 9.9 million from the impact of foreign exchange rates in fiscal 2017 relative to fiscal 2016 . 24 foodservice operating profit for fiscal 2017 was $ 105.1 million , an increase of $ 7.4 million , or 8 % , compared to fiscal 2016 . gross profits were $ 5.6 million lower in fiscal 2017 than in fiscal 2016 , driven by volume declines and product supply shortfalls . this was offset by an inventory write-down in fiscal 2016 at a foreign non-core popcorn business that we have since exited . operating profit of the foodservice segment was impacted by charges of $ 1.8 million in fiscal 2017 in connection with our restructuring plans . commercial operating profit was $ 202.6 million in fiscal 2017 and $ 45.4 million in fiscal 2016 . the company sold the spicetec and jm swank businesses in the first quarter of fiscal 2017 , recognizing pre-tax gains totaling $ 197.4 million . the spicetec and jm swank businesses comprise the entire commercial segment following the presentation of lamb weston as discontinued operations . there are no further operations in the commercial segment . interest expense , net in fiscal 2017 , net interest expense was $ 195.5 million , a decrease of $ 100.3 million , or 34 % , from fiscal 2016 . the decrease reflects the repayment of $ 2.2 billion , $ 550 million , and $ 473 million of debt in the third quarter of fiscal 2016 , the first quarter of fiscal 2017 , and the third quarter of fiscal 2017 , respectively , as well as the exchange of $ 1.4 billion of debt in connection with the spinoff of lamb weston during the second quarter of 2017. for more information about the debt exchange , please see note 6 `` discontinued operations and other divestitures `` to the consolidated financial statements contained in this report . income taxes our income tax expense was $ 254.7 million and $ 46.4 million in fiscal 2017 and 2016 , respectively . the effective tax rate ( calculated as the ratio of income tax expense to pre-tax income from continuing operations , inclusive of equity method investment earnings ) was approximately 32 % and 27 % for fiscal 2017 and 2016 , respectively . the effective tax rate in fiscal 2017 reflects the following : additional tax expense associated with non-deductible goodwill sold in connection with the divestitures of the spicetec and jm swank businesses , additional tax expense associated with non-deductible goodwill in our mexican and canadian businesses , for which an impairment charge was recognized , an income tax benefit for the adjustment of a valuation allowance associated with the planned divestiture of the wesson ® oil business , an income tax benefit for excess tax benefits allowed upon the vesting/exercise of employee stock compensation awards by our employees , beyond that which is attributable to the original fair value of the awards upon the date of grant , and an income tax benefit associated with a tax planning strategy that allowed us to utilize certain state tax attributes and certain foreign incentives . the effective tax rate in fiscal 2016 reflects the following : additional tax expense related to legal entity changes for a business retained from the private brands business , a charge for the prior year implementation of a new tax position , and an income tax benefit of normal , recurring , income tax credits and deductions combined with a lower pre-tax level of earnings ( due in large part to the impact of the write-off of $ 348.5 million of actuarial losses under our method of accounting for pension benefits ) . we expect our effective tax rate in fiscal 2018 , exclusive of any unusual transactions or tax events , to be approximately 32.5 % -33.5 % . 25 equity method investment earnings we include our share of the earnings of certain affiliates based on our economic ownership interest in the affiliates . our most significant affiliate is the ardent mills joint venture . our share of earnings from our equity method investment earnings were $ 71.2 million and $ 66.1 million for fiscal 2017 and 2016 , respectively . the increases are reflective of higher profits from the ardent mills joint venture due to more favorable wheat market conditions as well as improved operational effectiveness . results of discontinued operations our discontinued operations generated after-tax income of $ 102.0 million in fiscal 2017 and an after-tax loss of $ 794.4 million in fiscal 2016. results reflected the operations of lamb weston through the date of its spinoff in november 2016 , as well as the results of the private brands business prior to its divestiture in the second half of fiscal 2016. we incurred significant costs associated with effecting the spinoff . these costs are included in results of discontinued operations . we recognized a pre-tax charge of $ 1.92 billion ( $ 1.44 billion after-tax ) in fiscal 2016 , to write-down the goodwill and long-lived assets of the private brands business to the final sales price , less costs to sell , and to recognize the final loss . earnings ( loss ) per share diluted earnings per share in fiscal 2017 was $ 1.46 , including earnings of $ 1.25 per diluted share from continuing operations and $ 0.21 per diluted share from discontinued operations . diluted loss per share in fiscal 2016 was
| liquidity and capital resources holding company as of december 31 , 2011 , the holding company had $ 150 million invested in precious metals and $ 150 million invested in our real estate segment which remains on its balance sheet . in respect of the investment in precious metals , we have entered into certain commodity swap arrangements to hedge against market risk . in addition , we had investments in the investment funds with a total fair market value of approximately $ 3.1 billion as of december 31 , 2011 . as of december 31 , 2011 , we had cash and cash equivalents of $ 517 million and total debt of approximately $ 3.1 billion . as of december 31 , 2011 based on covenants in the indenture governing our senior notes , we could incur approximately $ 1.3 billion in additional indebtedness . see note 10 , “ debt , ” to the consolidated financial statements for additional information concerning credit facilities for us and our subsidiaries . on january 17 , 2012 and february 6 , 2012 , we issued an aggregate $ 700 million principal amount of the 2018 notes , or the additional 2018 notes . in connection with the issuance of the additional 2018 notes , we filed a registration statement on form s-4 with the sec on january 20 , 2012 , which has not yet been declared effective . the additional 2018 notes constitute the same series of securities as the 2018 notes for purposes of the indenture governing the notes and will vote together on all matters with such series . the additional 2018 notes have substantially identical terms as the 2018 notes . we are a holding company .
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with an ongoing commitment to corporate citizenship , the company has been named to the dow jones sustainability north america index for six consecutive years . fiscal 2017 performance reflected a higher gross profit in the grocery & snacks segment , offset by lower gross profits in the refrigerated & frozen , foodservice , and international segments . fiscal 2017 results were also impacted by lower sales volumes and the reduction of profits due to the divestitures of spicetec and jm swank in the first quarter of fiscal 2017. the improved operating performance reflected significantly lower selling , general and administrative ( `` sg & a `` ) expenses and lower interest expense , in each case compared to fiscal 2016. diluted earnings per share in fiscal 2017 was $ 1.46 , including earnings of $ 1.25 per diluted share from continuing operations and $ 0.21 per diluted share from discontinued operations . diluted loss per share in fiscal 2016 was $ 1.56 , including earnings of $ 0.29 per diluted share from continuing operations and a loss of $ 1.85 per diluted share from discontinued 18 operations . several significant items affect the comparability of year-over-year results of continuing operations ( see `` items impacting comparability `` below ) . in fiscal 2017 , we completed the spinoff of lamb weston holdings , inc. ( `` lamb weston `` ) through a distribution of 100 % of our interest in lamb weston to holders of outstanding shares of our common stock ( the `` spinoff `` ) . the transaction effecting this change was structured as a tax-free spinoff . we also completed several other acquisitions and divestitures during the year . see `` acquisitions `` below and `` divestitures and formation of ardent mills joint venture `` below . finally , we completed the relocation of our corporate headquarters to chicago , illinois in the first quarter of fiscal 2017. in the first quarter of fiscal 2017 , in anticipation of the spinoff , we reorganized our reporting segments . we now reflect our results of operations in five reporting segments : grocery & snacks , refrigerated & frozen , international , foodservice , and commercial . the results of operations for the lamb weston business have been reclassified to results of discontinued operations for all periods presented , and the assets and liabilities of the lamb weston business have been reclassified to assets and liabilities of discontinued operations for all periods prior to the spinoff . items impacting comparability items of note impacting comparability of results from continuing operations for fiscal 2017 included the following : charges totaling $ 304.2 million ( $ 257.7 million after-tax ) related to the impairment of goodwill and other intangible assets , gains totaling $ 197.4 million ( $ 68.4 million after-tax ) from the sales of the spicetec and jm swank businesses , charges totaling $ 93.3 million ( $ 60.2 million after-tax ) related to the early retirement of debt , charges totaling $ 63.6 million ( $ 41.4 million after-tax ) in connection with the `` scae plan `` ( as defined below ) , charges totaling $ 31.4 million ( $ 19.6 million after-tax ) , including an impairment charge of $ 27.6 million related to the production assets of the business , for the planned divestiture of the wesson ® oil business , charges totaling $ 13.8 million ( $ 8.5 million after-tax ) related to a pension lump sum settlement , a gain of $ 5.7 million ( $ 3.7 million after-tax ) in connection with a legacy legal matter , an income tax benefit of $ 91.3 million related to a tax adjustment of valuation allowance associated with the planned divestiture of the wesson ® oil business , and an income tax benefit of $ 14.6 million associated with a tax planning strategy that allowed us to utilize certain state tax attributes and certain foreign incentives . items of note impacting comparability of results from continuing operations for fiscal 2016 included the following : a charge of $ 348.5 million ( $ 215.1 million after-tax ) reflecting the year-end write-off of actuarial losses in excess of 10 % of our pension liability , charges totaling $ 281.8 million ( $ 178.2 million after-tax ) in connection with the `` scae plan `` , a charge of $ 50.1 million ( $ 31.6 million after-tax ) related to the impairment of the chef boyardee ® brand , charges of $ 23.9 million ( $ 15.4 million after-tax ) related to the repurchase of certain senior notes , a charge of $ 5.0 million ( $ 3.1 million after-tax ) in connection with a legacy legal matter , and income tax expense of $ 8.3 million related to legal entity changes for a business retained from private brands and a $ 2.7 million charge for the prior year implementation of a new tax position offset by the benefit of normal , recurring , income tax credits and deductions combined with a lower pre-tax level of earnings ( due in large part to the impact of the write-off of $ 348.5 million of actuarial losses under our method of accounting for pension benefits ) . 19 segment presentation of gains and losses from derivatives used for economic hedging of anticipated commodity input costs and economic hedging of foreign currency exchange rate risks of anticipated transactions is discussed in the segment review below . acquisitions in april 2017 , we acquired protein-based snacking businesses thanasi foods llc , maker of duke 's ® meat snacks , and bigs llc , maker of bigs ® seeds , for $ 217.6 million in cash , net of cash acquired , subject to a working capital adjustment ( the `` thanasi acquisition `` ) . story_separator_special_tag international incurred an operating loss for fiscal 2017 of $ 168.9 million and earned an operating profit of $ 66.7 million in fiscal 2016 . the operating loss in fiscal 2017 includes charges totaling $ 235.9 million for the impairment of goodwill and an intangible brand asset in our canadian and mexican operations . gross profits were $ 8.5 million lower in fiscal 2017 than in fiscal 2016 , driven by the impact of foreign exchange rates . operating profits were negatively impacted by $ 9.9 million from the impact of foreign exchange rates in fiscal 2017 relative to fiscal 2016 . 24 foodservice operating profit for fiscal 2017 was $ 105.1 million , an increase of $ 7.4 million , or 8 % , compared to fiscal 2016 . gross profits were $ 5.6 million lower in fiscal 2017 than in fiscal 2016 , driven by volume declines and product supply shortfalls . this was offset by an inventory write-down in fiscal 2016 at a foreign non-core popcorn business that we have since exited . operating profit of the foodservice segment was impacted by charges of $ 1.8 million in fiscal 2017 in connection with our restructuring plans . commercial operating profit was $ 202.6 million in fiscal 2017 and $ 45.4 million in fiscal 2016 . the company sold the spicetec and jm swank businesses in the first quarter of fiscal 2017 , recognizing pre-tax gains totaling $ 197.4 million . the spicetec and jm swank businesses comprise the entire commercial segment following the presentation of lamb weston as discontinued operations . there are no further operations in the commercial segment . interest expense , net in fiscal 2017 , net interest expense was $ 195.5 million , a decrease of $ 100.3 million , or 34 % , from fiscal 2016 . the decrease reflects the repayment of $ 2.2 billion , $ 550 million , and $ 473 million of debt in the third quarter of fiscal 2016 , the first quarter of fiscal 2017 , and the third quarter of fiscal 2017 , respectively , as well as the exchange of $ 1.4 billion of debt in connection with the spinoff of lamb weston during the second quarter of 2017. for more information about the debt exchange , please see note 6 `` discontinued operations and other divestitures `` to the consolidated financial statements contained in this report . income taxes our income tax expense was $ 254.7 million and $ 46.4 million in fiscal 2017 and 2016 , respectively . the effective tax rate ( calculated as the ratio of income tax expense to pre-tax income from continuing operations , inclusive of equity method investment earnings ) was approximately 32 % and 27 % for fiscal 2017 and 2016 , respectively . the effective tax rate in fiscal 2017 reflects the following : additional tax expense associated with non-deductible goodwill sold in connection with the divestitures of the spicetec and jm swank businesses , additional tax expense associated with non-deductible goodwill in our mexican and canadian businesses , for which an impairment charge was recognized , an income tax benefit for the adjustment of a valuation allowance associated with the planned divestiture of the wesson ® oil business , an income tax benefit for excess tax benefits allowed upon the vesting/exercise of employee stock compensation awards by our employees , beyond that which is attributable to the original fair value of the awards upon the date of grant , and an income tax benefit associated with a tax planning strategy that allowed us to utilize certain state tax attributes and certain foreign incentives . the effective tax rate in fiscal 2016 reflects the following : additional tax expense related to legal entity changes for a business retained from the private brands business , a charge for the prior year implementation of a new tax position , and an income tax benefit of normal , recurring , income tax credits and deductions combined with a lower pre-tax level of earnings ( due in large part to the impact of the write-off of $ 348.5 million of actuarial losses under our method of accounting for pension benefits ) . we expect our effective tax rate in fiscal 2018 , exclusive of any unusual transactions or tax events , to be approximately 32.5 % -33.5 % . 25 equity method investment earnings we include our share of the earnings of certain affiliates based on our economic ownership interest in the affiliates . our most significant affiliate is the ardent mills joint venture . our share of earnings from our equity method investment earnings were $ 71.2 million and $ 66.1 million for fiscal 2017 and 2016 , respectively . the increases are reflective of higher profits from the ardent mills joint venture due to more favorable wheat market conditions as well as improved operational effectiveness . results of discontinued operations our discontinued operations generated after-tax income of $ 102.0 million in fiscal 2017 and an after-tax loss of $ 794.4 million in fiscal 2016. results reflected the operations of lamb weston through the date of its spinoff in november 2016 , as well as the results of the private brands business prior to its divestiture in the second half of fiscal 2016. we incurred significant costs associated with effecting the spinoff . these costs are included in results of discontinued operations . we recognized a pre-tax charge of $ 1.92 billion ( $ 1.44 billion after-tax ) in fiscal 2016 , to write-down the goodwill and long-lived assets of the private brands business to the final sales price , less costs to sell , and to recognize the final loss . earnings ( loss ) per share diluted earnings per share in fiscal 2017 was $ 1.46 , including earnings of $ 1.25 per diluted share from continuing operations and $ 0.21 per diluted share from discontinued operations . diluted loss per share in fiscal 2016 was
| liquidity and capital resources sources of liquidity and capital the primary objective of our financing strategy is to maintain a prudent capital structure that provides us flexibility to pursue our growth objectives . if necessary , we use short-term debt principally to finance ongoing operations , including our seasonal requirements for working capital and a combination of equity and long-term debt to finance both our base working capital needs and our non-current assets . we are committed to maintaining an investment grade credit rating . during fiscal 2017 , we entered into a revolving credit agreement ( the `` credit agreement '' ) with a syndicate of financial institutions that provides for an unsecured revolving credit facility in a maximum aggregate principal amount outstanding at any one time of $ 1.25 billion ( subject to increase to a maximum aggregate principal amount of $ 1.75 billion with the consent of the lenders ) . this revolving credit facility replaced our existing revolving credit facility . we have historically used a credit facility principally as a back-up for our commercial paper program . as of may 28 , 2017 , there were no outstanding borrowings under the facility . the credit agreement contains customary affirmative and negative covenants for unsecured investment grade credit facilities of this type . it generally requires our ratio of ebitda ( earnings before interest , taxes , depreciation and amortization ) to interest expense to be not less than 3.0 to 1.0 and our ratio of funded debt to ebitda to be not greater than 3.75 to 1.0 ( provided that such ratio may be increased at the option of the company in connection with a material transaction ) , with each ratio to be calculated on a rolling four-quarter basis . as of may 28 , 2017 , we were in compliance with all financial covenants under the credit agreement . 29 as of may 28 , 2017 , we had $ 26.2 million outstanding under our commercial paper program . the highest level of borrowings during fiscal 2017 was $ 65.0 million .
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restaurant sales decreased $ 114,000 from the prior year due to the same store sales decrease . one restaurant was not included in same store sales while closed for a major remodel and sales decreased $ 339,000 from the prior year due to the closure . restaurant sales decreased $ 636,000 from the prior year due to the closure of two company owned stores in january and april 2018. the average menu price increase in fiscal 2019 over fiscal 2018 was approximately 3.7 % . additionally , net revenues for fiscal 2019 were decreased by $ 56,000 resulting from lower franchise revenues compared to fiscal 2018. fiscal 2019 and fiscal 2018 include franchise advertising contributions of $ 299,000 and $ 319,000 , respectively . average good times restaurant sales for company-operated restaurants open the entire fiscal year for fiscal 2018 and 2019 were as follows : fiscal year 2019 2018 company-operated $ 1,166,000 $ 1,173,000 during fiscal 2019 , company-operated good times restaurants ' sales for restaurants that had been open a full eighteen months ranged from a low of $ 765,000 to a high of $ 2,121,000. food and packaging costs : for fiscal 2019 , food and packaging costs increased $ 2,215,000 from $ 30,256,000 ( 30.7 % of restaurant sales ) in fiscal 2018 to $ 32,471,000 ( 29.6 % of restaurant sales ) . bad daddy 's food and packaging costs were $ 23,006,000 ( 28.8 % of restaurant sales ) in fiscal 2019 , up from $ 20,048,000 ( 29.7 % of restaurant sales ) in fiscal 2018. this increase is due to a greater number of operating weeks resulting from restaurants opened during fiscal 2018 and 2019. the decrease as a percent of sales is due to lower input costs , primarily ground beef and bacon , coupled with menu price increases and various purchasing initiatives during the year . 22 good times food and packaging costs were $ 9,465,000 ( 31.5 % of restaurant sales ) in fiscal 2019 , down from $ 10,208,000 ( 32.8 % of restaurant sales ) in fiscal 2018. compared to fiscal 2018 the cost index on our weighted basket of goods remained relatively flat during fiscal 2019. good times uses all-natural beef and did not see the same decline in costs as bad daddy 's . payroll and other employee benefit costs : for fiscal 2019 , payroll and other employee benefit costs increased $ 5,568,000 from $ 35,653,000 ( 36.2 % of restaurant sales ) in fiscal 2018 to $ 41,221,000 ( 37.5 % of restaurant sales ) . bad daddy 's payroll and other employee benefit costs were $ 30,224,000 ( 37.9 % of restaurant sales ) for fiscal 2019 , up from $ 24,861,000 ( 36.9 % of restaurant sales ) in fiscal 2018. the $ 5,363,000 increase was primarily attributable to the four new restaurants opened in fiscal 2019 and a full year of operations for restaurants opened in the prior fiscal year . the increase of 1.0 % in payroll and other employee benefit costs as a percentage of restaurant sales was mainly due to increased wages for both front of the house and back of house employees . colorado has a higher statutory minimum wage for tipped employees as compared to the other states in which we operate . we estimate that the colorado minimum wage for tipped employees results in higher total labor costs in our colorado restaurants of approximately 6.0 % of restaurant sales compared to our restaurants in jurisdictions subject only to federal minimum wage legislation . good times payroll and other employee benefit costs were $ 10,997,000 ( 36.6 % of restaurant sales ) in fiscal 2019 , up from $ 10,792,000 ( 34.7 % of restaurant sales ) in fiscal 2018. payroll and other employee benefits decreased approximately $ 281,000 in fiscal 2019 due to two company-owned restaurants that were closed in january and april of 2018. this was offset by a $ 486,000 increase in payroll and other employee benefit expenses primarily due to an increase in the average wage paid to our employees , which increased approximately 11 % in fiscal 2019 compared to fiscal 2018. the 11 % increase is attributable to a very competitive labor market in colorado and state mandated increases in the minimum wage rate . occupancy costs : occupancy costs include rent , real and personal property taxes , common area maintenance expenses , licenses and insurance expense . for fiscal 2019 , occupancy costs increased $ 1,094,000 from $ 7,261,000 ( 7.4 % of restaurant sales ) in fiscal 2018 to $ 8,355,000 ( 7.6 % of restaurant sales ) . bad daddy 's occupancy costs were $ 5,413,000 ( 6.8 % of restaurant sales ) for fiscal 2019 , up from $ 4,348,000 ( 6.4 % of restaurant sales ) in fiscal 2018. the $ 1,065,000 increase was primarily attributable to the four new restaurants opened in fiscal 2019 and a full year of operations for restaurants opened in the prior fiscal year . good times occupancy costs were $ 2,942,000 ( 9.8 % of restaurant sales ) in fiscal 2019 , up from $ 2,913,000 ( 9.4 % of restaurant sales ) in fiscal 2018. occupancy costs decreased approximately $ 57,000 in fiscal 2019 due to two company-owned restaurants that were closed in january and april of 2018. the decrease was offset by an $ 86,000 increase in occupancy costs primarily attributable to increases in property tax and common area costs . other operating costs : for fiscal 2019 , other operating costs increased $ 2,187,000 from $ 9,283,000 ( 9.4 % of restaurant sales ) in fiscal 2018 to $ 11,470,000 ( 10.4 % of restaurant sales ) . story_separator_special_tag we have never experienced any losses related to these contingent lease liabilities ; however , if a franchisee defaults , on the payments under the leases , we would be liable for the lease payments as the assignor or sub-lessor of the lease . currently we have not been notified nor are we aware of any leases in default under which we are contingently liable . however , there can be no assurance that there will not be defaults in the future , which could have a material adverse effect on our future operating results . critical accounting policies and estimates : our consolidated financial statements and accompanying notes are prepared in accordance with gaap . preparing consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenue and expenses . these estimates and assumptions are affected by the application of our accounting policies . our significant accounting policies are described in note 1 to our consolidated financial statements . critical accounting estimates are those that require application of management 's most difficult , subjective or complex judgments , often as a result of matters that are inherently uncertain and may change in subsequent periods . while we apply our judgment based on assumptions believed to be reasonable under the circumstances , actual results could vary from these assumptions . it is possible that materially different amounts would be reported using different assumptions . the following is a description of what we consider to be our most significant accounting policies . leases : we lease real estate for various restaurant locations under long-term non-cancelable leases from unrelated third parties . all of our real estate leases are classified as operating leases under asc 840—leases . the lease term begins on the date we become legally obligated for the rent payments or we take possession of the building or land , whichever is earlier . the lease term includes cancelable option periods where failure to exercise such options would result in an economic penalty . lease term is determined at lease inception and includes the initial term of the lease plus any renewal periods that are reasonably assured to occur . certain of our operating leases contain predetermined fixed escalations of the minimum rent during the term of the lease . for these leases , we recognize the related rent expense on a straight-line basis over the lease term and record the difference between the amounts charged to operations and amounts paid as deferred rent . most of our leases contain rent holidays , which typically begin on the possession date and end on the date the restaurant opens , during which no cash rent payments are due under the terms of the lease . rent holidays are included in the lease term when determining straight-line rent expense , and the rent incurred before the restaurant opens is charged to preopening costs . additionally , certain of our operating leases contain clauses that provide for additional contingent rent based on a percentage of sales greater than certain specified target amounts . we recognize contingent rent expense provided the achievement of that target is probable . deferred rent : the excess of cumulative rent expense ( recognized on a straight-line basis ) over cumulative rent payments made on leases is recognized as a deferred rent liability in the accompanying balance sheets . also included in deferred rent are lease incentives provided by landlords upon entering into leases , often related to landlord payments for tenant improvements that we commonly negotiate when opening new restaurants to help fund build-out costs . these costs typically include general construction to alter the layout of the restaurant , leasehold improvements , and other miscellaneous items . we capitalize leasehold improvements and record a deferred liability for the amount of cash received from the landlord , which is amortized on a straight-line basis over the lease term as defined above . the amortization of the deferred liability related to these tenant improvements is recorded as a reduction of rent expense . we make judgments regarding the probable term for each restaurant lease , which can impact the rent holiday and or escalations in payments that are taken into consideration when calculating the straight-line rent and the term over which leasehold improvements and deferred lease incentives for each restaurant are amortized . these judgments may produce materially different amounts of depreciation , amortization , and rent expense than would be reported if different assumed lease terms were used . non-controlling interests : non-controlling interests , previously called minority interests , are presented as a separate item in the equity section of the consolidated balance sheet . consolidated net income or loss attributable to non-controlling interests are presented on the face of the consolidated statement of operations . additionally , changes in a parent 's ownership interest in a subsidiary that do not result in deconsolidation are equity transactions , and that deconsolidation of a subsidiary is recorded as a gain or loss based on the fair value on the deconsolidation date . 28 income taxes : we account for income taxes under the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse . we provide a valuation allowance , if necessary , to reduce deferred tax assets to their estimated realizable value . we continually review the realizability of our deferred tax assets , including an analysis of factors such as future taxable income , reversal of existing taxable temporary differences , and tax planning strategies . we assessed whether a valuation allowance should be recorded against our deferred tax assets based on consideration of all available evidence , using a “ more likely than not ” standard .
| liquidity and capital resources sources of liquidity and capital the primary objective of our financing strategy is to maintain a prudent capital structure that provides us flexibility to pursue our growth objectives . if necessary , we use short-term debt principally to finance ongoing operations , including our seasonal requirements for working capital and a combination of equity and long-term debt to finance both our base working capital needs and our non-current assets . we are committed to maintaining an investment grade credit rating . during fiscal 2017 , we entered into a revolving credit agreement ( the `` credit agreement '' ) with a syndicate of financial institutions that provides for an unsecured revolving credit facility in a maximum aggregate principal amount outstanding at any one time of $ 1.25 billion ( subject to increase to a maximum aggregate principal amount of $ 1.75 billion with the consent of the lenders ) . this revolving credit facility replaced our existing revolving credit facility . we have historically used a credit facility principally as a back-up for our commercial paper program . as of may 28 , 2017 , there were no outstanding borrowings under the facility . the credit agreement contains customary affirmative and negative covenants for unsecured investment grade credit facilities of this type . it generally requires our ratio of ebitda ( earnings before interest , taxes , depreciation and amortization ) to interest expense to be not less than 3.0 to 1.0 and our ratio of funded debt to ebitda to be not greater than 3.75 to 1.0 ( provided that such ratio may be increased at the option of the company in connection with a material transaction ) , with each ratio to be calculated on a rolling four-quarter basis . as of may 28 , 2017 , we were in compliance with all financial covenants under the credit agreement . 29 as of may 28 , 2017 , we had $ 26.2 million outstanding under our commercial paper program . the highest level of borrowings during fiscal 2017 was $ 65.0 million .
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restaurant sales decreased $ 114,000 from the prior year due to the same store sales decrease . one restaurant was not included in same store sales while closed for a major remodel and sales decreased $ 339,000 from the prior year due to the closure . restaurant sales decreased $ 636,000 from the prior year due to the closure of two company owned stores in january and april 2018. the average menu price increase in fiscal 2019 over fiscal 2018 was approximately 3.7 % . additionally , net revenues for fiscal 2019 were decreased by $ 56,000 resulting from lower franchise revenues compared to fiscal 2018. fiscal 2019 and fiscal 2018 include franchise advertising contributions of $ 299,000 and $ 319,000 , respectively . average good times restaurant sales for company-operated restaurants open the entire fiscal year for fiscal 2018 and 2019 were as follows : fiscal year 2019 2018 company-operated $ 1,166,000 $ 1,173,000 during fiscal 2019 , company-operated good times restaurants ' sales for restaurants that had been open a full eighteen months ranged from a low of $ 765,000 to a high of $ 2,121,000. food and packaging costs : for fiscal 2019 , food and packaging costs increased $ 2,215,000 from $ 30,256,000 ( 30.7 % of restaurant sales ) in fiscal 2018 to $ 32,471,000 ( 29.6 % of restaurant sales ) . bad daddy 's food and packaging costs were $ 23,006,000 ( 28.8 % of restaurant sales ) in fiscal 2019 , up from $ 20,048,000 ( 29.7 % of restaurant sales ) in fiscal 2018. this increase is due to a greater number of operating weeks resulting from restaurants opened during fiscal 2018 and 2019. the decrease as a percent of sales is due to lower input costs , primarily ground beef and bacon , coupled with menu price increases and various purchasing initiatives during the year . 22 good times food and packaging costs were $ 9,465,000 ( 31.5 % of restaurant sales ) in fiscal 2019 , down from $ 10,208,000 ( 32.8 % of restaurant sales ) in fiscal 2018. compared to fiscal 2018 the cost index on our weighted basket of goods remained relatively flat during fiscal 2019. good times uses all-natural beef and did not see the same decline in costs as bad daddy 's . payroll and other employee benefit costs : for fiscal 2019 , payroll and other employee benefit costs increased $ 5,568,000 from $ 35,653,000 ( 36.2 % of restaurant sales ) in fiscal 2018 to $ 41,221,000 ( 37.5 % of restaurant sales ) . bad daddy 's payroll and other employee benefit costs were $ 30,224,000 ( 37.9 % of restaurant sales ) for fiscal 2019 , up from $ 24,861,000 ( 36.9 % of restaurant sales ) in fiscal 2018. the $ 5,363,000 increase was primarily attributable to the four new restaurants opened in fiscal 2019 and a full year of operations for restaurants opened in the prior fiscal year . the increase of 1.0 % in payroll and other employee benefit costs as a percentage of restaurant sales was mainly due to increased wages for both front of the house and back of house employees . colorado has a higher statutory minimum wage for tipped employees as compared to the other states in which we operate . we estimate that the colorado minimum wage for tipped employees results in higher total labor costs in our colorado restaurants of approximately 6.0 % of restaurant sales compared to our restaurants in jurisdictions subject only to federal minimum wage legislation . good times payroll and other employee benefit costs were $ 10,997,000 ( 36.6 % of restaurant sales ) in fiscal 2019 , up from $ 10,792,000 ( 34.7 % of restaurant sales ) in fiscal 2018. payroll and other employee benefits decreased approximately $ 281,000 in fiscal 2019 due to two company-owned restaurants that were closed in january and april of 2018. this was offset by a $ 486,000 increase in payroll and other employee benefit expenses primarily due to an increase in the average wage paid to our employees , which increased approximately 11 % in fiscal 2019 compared to fiscal 2018. the 11 % increase is attributable to a very competitive labor market in colorado and state mandated increases in the minimum wage rate . occupancy costs : occupancy costs include rent , real and personal property taxes , common area maintenance expenses , licenses and insurance expense . for fiscal 2019 , occupancy costs increased $ 1,094,000 from $ 7,261,000 ( 7.4 % of restaurant sales ) in fiscal 2018 to $ 8,355,000 ( 7.6 % of restaurant sales ) . bad daddy 's occupancy costs were $ 5,413,000 ( 6.8 % of restaurant sales ) for fiscal 2019 , up from $ 4,348,000 ( 6.4 % of restaurant sales ) in fiscal 2018. the $ 1,065,000 increase was primarily attributable to the four new restaurants opened in fiscal 2019 and a full year of operations for restaurants opened in the prior fiscal year . good times occupancy costs were $ 2,942,000 ( 9.8 % of restaurant sales ) in fiscal 2019 , up from $ 2,913,000 ( 9.4 % of restaurant sales ) in fiscal 2018. occupancy costs decreased approximately $ 57,000 in fiscal 2019 due to two company-owned restaurants that were closed in january and april of 2018. the decrease was offset by an $ 86,000 increase in occupancy costs primarily attributable to increases in property tax and common area costs . other operating costs : for fiscal 2019 , other operating costs increased $ 2,187,000 from $ 9,283,000 ( 9.4 % of restaurant sales ) in fiscal 2018 to $ 11,470,000 ( 10.4 % of restaurant sales ) . story_separator_special_tag we have never experienced any losses related to these contingent lease liabilities ; however , if a franchisee defaults , on the payments under the leases , we would be liable for the lease payments as the assignor or sub-lessor of the lease . currently we have not been notified nor are we aware of any leases in default under which we are contingently liable . however , there can be no assurance that there will not be defaults in the future , which could have a material adverse effect on our future operating results . critical accounting policies and estimates : our consolidated financial statements and accompanying notes are prepared in accordance with gaap . preparing consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets , liabilities , revenue and expenses . these estimates and assumptions are affected by the application of our accounting policies . our significant accounting policies are described in note 1 to our consolidated financial statements . critical accounting estimates are those that require application of management 's most difficult , subjective or complex judgments , often as a result of matters that are inherently uncertain and may change in subsequent periods . while we apply our judgment based on assumptions believed to be reasonable under the circumstances , actual results could vary from these assumptions . it is possible that materially different amounts would be reported using different assumptions . the following is a description of what we consider to be our most significant accounting policies . leases : we lease real estate for various restaurant locations under long-term non-cancelable leases from unrelated third parties . all of our real estate leases are classified as operating leases under asc 840—leases . the lease term begins on the date we become legally obligated for the rent payments or we take possession of the building or land , whichever is earlier . the lease term includes cancelable option periods where failure to exercise such options would result in an economic penalty . lease term is determined at lease inception and includes the initial term of the lease plus any renewal periods that are reasonably assured to occur . certain of our operating leases contain predetermined fixed escalations of the minimum rent during the term of the lease . for these leases , we recognize the related rent expense on a straight-line basis over the lease term and record the difference between the amounts charged to operations and amounts paid as deferred rent . most of our leases contain rent holidays , which typically begin on the possession date and end on the date the restaurant opens , during which no cash rent payments are due under the terms of the lease . rent holidays are included in the lease term when determining straight-line rent expense , and the rent incurred before the restaurant opens is charged to preopening costs . additionally , certain of our operating leases contain clauses that provide for additional contingent rent based on a percentage of sales greater than certain specified target amounts . we recognize contingent rent expense provided the achievement of that target is probable . deferred rent : the excess of cumulative rent expense ( recognized on a straight-line basis ) over cumulative rent payments made on leases is recognized as a deferred rent liability in the accompanying balance sheets . also included in deferred rent are lease incentives provided by landlords upon entering into leases , often related to landlord payments for tenant improvements that we commonly negotiate when opening new restaurants to help fund build-out costs . these costs typically include general construction to alter the layout of the restaurant , leasehold improvements , and other miscellaneous items . we capitalize leasehold improvements and record a deferred liability for the amount of cash received from the landlord , which is amortized on a straight-line basis over the lease term as defined above . the amortization of the deferred liability related to these tenant improvements is recorded as a reduction of rent expense . we make judgments regarding the probable term for each restaurant lease , which can impact the rent holiday and or escalations in payments that are taken into consideration when calculating the straight-line rent and the term over which leasehold improvements and deferred lease incentives for each restaurant are amortized . these judgments may produce materially different amounts of depreciation , amortization , and rent expense than would be reported if different assumed lease terms were used . non-controlling interests : non-controlling interests , previously called minority interests , are presented as a separate item in the equity section of the consolidated balance sheet . consolidated net income or loss attributable to non-controlling interests are presented on the face of the consolidated statement of operations . additionally , changes in a parent 's ownership interest in a subsidiary that do not result in deconsolidation are equity transactions , and that deconsolidation of a subsidiary is recorded as a gain or loss based on the fair value on the deconsolidation date . 28 income taxes : we account for income taxes under the liability method whereby deferred tax asset and liability account balances are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse . we provide a valuation allowance , if necessary , to reduce deferred tax assets to their estimated realizable value . we continually review the realizability of our deferred tax assets , including an analysis of factors such as future taxable income , reversal of existing taxable temporary differences , and tax planning strategies . we assessed whether a valuation allowance should be recorded against our deferred tax assets based on consideration of all available evidence , using a “ more likely than not ” standard .
| cash and working capital : as of september 24 , 2019 , we had a working capital deficit of $ 4,313,000. our working capital position benefits from the fact that we generally collect cash from sales to customers the same day , or in the case of credit or debit card transactions , within a few days of the related sale , and we typically have two to four weeks to pay our vendors . this benefit may increase when new bad daddy 's and good times restaurants are opened . we believe that we will have sufficient capital to meet our working capital , long term debt obligations and recurring capital expenditure needs in fiscal 2020. as of september 24 , 2019 , we had total commitments outstanding of $ 221,000 related to construction contracts for bad daddy 's restaurants currently under development . we anticipate these commitments will be funded out of existing cash or future borrowings against the cadence bank credit facility . financing : cadence credit facility : the company maintains a credit agreement with cadence bank ( “ cadence ” ) pursuant to which , as amended , cadence agreed to loan the company up to $ 17,000,000 with a maturity date of december 31 , 2021 ( the “ cadence credit facility ” ) . on february 21 , 2019 the cadence credit facility was amended , in connection with the rgwp repurchase ( see note 7 to the financial statements ) , to retroactively attribute ebitda previously attributed to non-controlling interests to the company for purposes of certain financial covenants . on december 9 , 2019 the cadence credit facility was amended in connection with the separation of the company 's former ceo , to amend the definition of “ consolidated ebitda ” for the purposes of financial covenants , to require certain installment payments , and to permit the company to make certain “ restricted payments ” ( as defined in the cadence credit facility ) .
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our deferred revenue at the end of 2020 was $ 41.5 million , compared with $ 43.3 million at the end of 2019. we generated cash flows from operations of $ 31.3 million during fiscal 2020. our cash and cash equivalents were $ 21.4 million at the end of 2020 , compared with $ 13.3 million at the end of 2019. our services are sold on a subscription basis with contract terms historically ranging from one to five years billed annually . we are increasingly moving toward a monthly billing model . this shift has been largely driven by our recent acquisition activity . we recognize revenue ratably on a monthly basis over the term of the subscription once service commences . 29 we attempt to grow our business by signing new customers to subscription services and or selling new or higher volume services to existing customers ( i.e . , “ upsell ” ) while retaining existing customers through renewal of their subscriptions for successive periods . our backlog consists of the total order value of contracted business that has not yet been recognized into revenue . backlog is calculated by adding to the existing contracted order value the total value of all orders booked in the period ( e.g . , quarterly ) less the value of revenue recognized for that period . although orders historically have been non-cancellable , occasionally we adjust backlog for customer bankruptcy or change of term , but these instances are rare and do not materially impact the backlog amount . the backlog will grow if the value of total orders added in a period exceeds the value of revenue recognized in that period . conversely , the backlog amount will decline if revenue recognized exceeds the total order value added for the period . a decline in backlog may result from fluctuations in total orders caused by timing of renewal orders or by the shortening of the average term of our contracts from a multi-year to an annual commitment or to a monthly billing and subscription model . as of december 31 , 2020 , our net dollar customer retention percentage was 100 % . we calculate this percentage by first identifying our current period renewal and upsell orders secured from existing customers and then combining these totals with billings for the period . we then compare this amount to the total orders that were due to renew and were then combined with scheduled billings . increasing retention is a key driver for the company to increase overall revenue and annual recurring revenue . deferred revenue is the value of contracted business that has been paid but has not been recognized as revenue . see description of the components of the backlog following in “ results of operations - backlog ” in this “ item 7 , management 's discussion and analysis of financial condition and results of operations . ” as of december 31 , 2020 , our annual recurring revenue ( arr ) was $ 237.7 million . we calculate arr by determining the annual or monthly revenue of subscription agreements that are active as of the end of the applicable period and multiplying by 1 or 12 depending on the term of such agreements . we monitor this metric to aid in determining to what extent individual customer relationships , considered in the aggregate , are growing or declining in financial magnitude . our operations and future prospects are further discussed throughout this “ item 7. management 's discussion and analysis of financial condition and results of operations . ” there are no assurances we will be successful in our efforts to achieve continued growth . our continued growth depends on the timely development and market acceptance of our products and services . see “ item 1a . risk factors ” for more information on the risks relative to our operations and future prospects . critical accounting policies and estimates in preparing our consolidated financial statements , we make estimates , assumptions and judgments that can have a significant impact on revenue , income from operations and net income , as well as the value of certain assets and liabilities on our consolidated balance sheet . the application of our critical accounting policies requires an evaluation of a number of complex criteria and significant accounting judgements by us . management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances ( including but not limited to the potential impacts arising from the recent covid-19 pandemic and public and private sector policies and initiatives aimed at reducing its transmission ) , the results of which form the basis for making judgements about the carrying values of assets and liabilities . we evaluate our estimates on a regular basis and make changes accordingly . senior management has discussed the development , selection and disclosure of these estimates with the audit committee of our board of directors . actual results may materially differ from these estimates under different assumptions or conditions . if actual results were to materially differ from these estimates , the resulting changes could have a material adverse effect on our consolidated financial statements . we consider accounting policies to be critical when they require us to make assumptions about matters that are highly uncertain at the time the accounting estimate is made and when different estimates that our management reasonably has used have a material effect on the presentation of our financial condition , changes in financial condition or results of operations . management believes the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our consolidated financial statements . story_separator_special_tag net income ( loss ) for 2020 was $ ( 6.4 ) million in 2020 compared with $ ( 14.6 ) million in 2019 and $ 15.4 million in 2018. the year-over-year improvement in our net loss was primarily due to revenue growth and the completion of prior year acquisition and integration related costs associated with our appriver purchase , as well as cost reductions in response to the covid-19 pandemic . our 2019 net loss is attributed to significant transaction and integration-related costs incurred to acquire appriver and deliveryslip in 2019 , amortization of intangible assets recognized from the same acquisitions as well as higher operating expenses and interest expense . our 2018 net income includes a $ 7.8 million tax benefit resulting from a decrease to our deferred tax asset valuation allowance based on our expected future profitability and ability to use net operating losses . net income ( loss ) attributable to common shareholders for 2020 was $ ( 15.5 ) million compared with $ ( 24.6 ) million in 2019 and $ 15.4 million in 2018. our 2020 and 2019 net loss attributable to common shareholders includes deemed and accrued dividends of $ 9.0 million , and $ 9.9 million , respectively , to preferred shareholders . net income ( loss ) per diluted share was $ ( 0.29 ) for 2020 compared to $ ( 0.46 ) for 2019 and $ 0.29 for 2018. unrestricted cash was $ 21.4 million on december 31 , 2020 . 34 results of operations revenue the following table sets forth a year-over-year comparison of our total revenues : replace_table_token_3_th the $ 45.1 million , or 26 % , increase in revenue in 2020 over 2019 was related in part to recognition of twelve full months in sales for the year ended december 31 , 2020 , attributable to our appriver business acquired in february 2019. the $ 103.0 million or 146 % increase in revenue in 2019 over 2018 was primarily related to our appriver acquisition in february 2019 , which contributed $ 97.8 million for the year-end december 31 , 2019. we additionally grew our revenue for these periods with continued success in our subscription-based business model with both steady additions to the subscriber base and with a high rate of existing customer renewals and the realization of previously contracted revenue in our backlog . in the year ended december 31 , 2020 , excluding our cloudally sales , we categorized our revenue in the following core industry verticals : 21 % healthcare , 17 % financial services , 3 % government sector and 59 % as other . in the year ended december 31 , 2019 , we categorized our revenue in the following core industry verticals : 23 % healthcare , 19 % financial services , 4 % government sector and 54 % as other . additionally , sales continued from a wide base of distributors . approximately 76 % and 74 % of our new business transacted in the year ended december 31 , 2020 and 2019 , respectively , resulted from our partner relationships . while we have continued to add new bundled price offerings to our product portfolio , our list pricing has remained generally consistent during the periods shown above . however , there are no assurances that potential increased competition in this market or other factors , including inflation , will not result in future price erosion . price erosion , should it occur , could have a dampening effect on order growth and the revenue derived from our new orders . revenue outlook : we expect continued growth in our existing offering and in our new products , along with increased sales from our partner channels to increase our business in 2021 and increase our year-over-year revenue . annual recurring revenue we measure the health of our subscriber base by the growth of our annual recurring revenue ( “ arr ” ) , which is defined as the aggregate annualized contract value attributable to recurring revenue contracts as of the end of the applicable reporting period . we calculate arr by determining the annual or monthly revenue of subscription agreements that are active as of the end of the applicable period and multiplying by 1 or 12 , depending on the term of such agreements . arr aids us in determining to what extent individual customer relationships , considered in the aggregate , are growing or declining in financial magnitude . arr is summarized in the table below : replace_table_token_4_th backlog our backlog was $ 83.4 million at december 31 , 2020 , compared to $ 89.4 million at december 31 , 2019. the backlog is comprised of contractual commitments that we expect to amortize into revenue . as of december 31 , 2020 , the backlog was comprised of the following elements : $ 41.5 million of deferred revenue that has been billed and paid , $ 12.9 million billed but unpaid , and approximately $ 29.0 million of unbilled contracts . the decline in backlog resulted from the shortening of the average term of our contracts from a multi-year to an annual commitment or to a monthly billing and subscription model . the backlog is recognized into revenue ratably as the services are performed . approximately 75 % of the total backlog is expected to be recognized as revenue during the next twelve months . 35 cost of revenue the following table sets forth a year-over-year comparison of the cost of revenue . replace_table_token_5_th cost of revenues is comprised of microsoft fees mostly associated with the resale of microsoft office365 and hosted exchange products , costs related to operating and maintaining the zixdata center , third party data center costs , a field deployment team , customer service and support , and depreciation expense of computer equipment and amortization of acquired technology . the $ 35.9 million increase in 2020 compared to 2019 reflected in the table above
| cash and working capital : as of september 24 , 2019 , we had a working capital deficit of $ 4,313,000. our working capital position benefits from the fact that we generally collect cash from sales to customers the same day , or in the case of credit or debit card transactions , within a few days of the related sale , and we typically have two to four weeks to pay our vendors . this benefit may increase when new bad daddy 's and good times restaurants are opened . we believe that we will have sufficient capital to meet our working capital , long term debt obligations and recurring capital expenditure needs in fiscal 2020. as of september 24 , 2019 , we had total commitments outstanding of $ 221,000 related to construction contracts for bad daddy 's restaurants currently under development . we anticipate these commitments will be funded out of existing cash or future borrowings against the cadence bank credit facility . financing : cadence credit facility : the company maintains a credit agreement with cadence bank ( “ cadence ” ) pursuant to which , as amended , cadence agreed to loan the company up to $ 17,000,000 with a maturity date of december 31 , 2021 ( the “ cadence credit facility ” ) . on february 21 , 2019 the cadence credit facility was amended , in connection with the rgwp repurchase ( see note 7 to the financial statements ) , to retroactively attribute ebitda previously attributed to non-controlling interests to the company for purposes of certain financial covenants . on december 9 , 2019 the cadence credit facility was amended in connection with the separation of the company 's former ceo , to amend the definition of “ consolidated ebitda ” for the purposes of financial covenants , to require certain installment payments , and to permit the company to make certain “ restricted payments ” ( as defined in the cadence credit facility ) .
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our deferred revenue at the end of 2020 was $ 41.5 million , compared with $ 43.3 million at the end of 2019. we generated cash flows from operations of $ 31.3 million during fiscal 2020. our cash and cash equivalents were $ 21.4 million at the end of 2020 , compared with $ 13.3 million at the end of 2019. our services are sold on a subscription basis with contract terms historically ranging from one to five years billed annually . we are increasingly moving toward a monthly billing model . this shift has been largely driven by our recent acquisition activity . we recognize revenue ratably on a monthly basis over the term of the subscription once service commences . 29 we attempt to grow our business by signing new customers to subscription services and or selling new or higher volume services to existing customers ( i.e . , “ upsell ” ) while retaining existing customers through renewal of their subscriptions for successive periods . our backlog consists of the total order value of contracted business that has not yet been recognized into revenue . backlog is calculated by adding to the existing contracted order value the total value of all orders booked in the period ( e.g . , quarterly ) less the value of revenue recognized for that period . although orders historically have been non-cancellable , occasionally we adjust backlog for customer bankruptcy or change of term , but these instances are rare and do not materially impact the backlog amount . the backlog will grow if the value of total orders added in a period exceeds the value of revenue recognized in that period . conversely , the backlog amount will decline if revenue recognized exceeds the total order value added for the period . a decline in backlog may result from fluctuations in total orders caused by timing of renewal orders or by the shortening of the average term of our contracts from a multi-year to an annual commitment or to a monthly billing and subscription model . as of december 31 , 2020 , our net dollar customer retention percentage was 100 % . we calculate this percentage by first identifying our current period renewal and upsell orders secured from existing customers and then combining these totals with billings for the period . we then compare this amount to the total orders that were due to renew and were then combined with scheduled billings . increasing retention is a key driver for the company to increase overall revenue and annual recurring revenue . deferred revenue is the value of contracted business that has been paid but has not been recognized as revenue . see description of the components of the backlog following in “ results of operations - backlog ” in this “ item 7 , management 's discussion and analysis of financial condition and results of operations . ” as of december 31 , 2020 , our annual recurring revenue ( arr ) was $ 237.7 million . we calculate arr by determining the annual or monthly revenue of subscription agreements that are active as of the end of the applicable period and multiplying by 1 or 12 depending on the term of such agreements . we monitor this metric to aid in determining to what extent individual customer relationships , considered in the aggregate , are growing or declining in financial magnitude . our operations and future prospects are further discussed throughout this “ item 7. management 's discussion and analysis of financial condition and results of operations . ” there are no assurances we will be successful in our efforts to achieve continued growth . our continued growth depends on the timely development and market acceptance of our products and services . see “ item 1a . risk factors ” for more information on the risks relative to our operations and future prospects . critical accounting policies and estimates in preparing our consolidated financial statements , we make estimates , assumptions and judgments that can have a significant impact on revenue , income from operations and net income , as well as the value of certain assets and liabilities on our consolidated balance sheet . the application of our critical accounting policies requires an evaluation of a number of complex criteria and significant accounting judgements by us . management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances ( including but not limited to the potential impacts arising from the recent covid-19 pandemic and public and private sector policies and initiatives aimed at reducing its transmission ) , the results of which form the basis for making judgements about the carrying values of assets and liabilities . we evaluate our estimates on a regular basis and make changes accordingly . senior management has discussed the development , selection and disclosure of these estimates with the audit committee of our board of directors . actual results may materially differ from these estimates under different assumptions or conditions . if actual results were to materially differ from these estimates , the resulting changes could have a material adverse effect on our consolidated financial statements . we consider accounting policies to be critical when they require us to make assumptions about matters that are highly uncertain at the time the accounting estimate is made and when different estimates that our management reasonably has used have a material effect on the presentation of our financial condition , changes in financial condition or results of operations . management believes the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our consolidated financial statements . story_separator_special_tag net income ( loss ) for 2020 was $ ( 6.4 ) million in 2020 compared with $ ( 14.6 ) million in 2019 and $ 15.4 million in 2018. the year-over-year improvement in our net loss was primarily due to revenue growth and the completion of prior year acquisition and integration related costs associated with our appriver purchase , as well as cost reductions in response to the covid-19 pandemic . our 2019 net loss is attributed to significant transaction and integration-related costs incurred to acquire appriver and deliveryslip in 2019 , amortization of intangible assets recognized from the same acquisitions as well as higher operating expenses and interest expense . our 2018 net income includes a $ 7.8 million tax benefit resulting from a decrease to our deferred tax asset valuation allowance based on our expected future profitability and ability to use net operating losses . net income ( loss ) attributable to common shareholders for 2020 was $ ( 15.5 ) million compared with $ ( 24.6 ) million in 2019 and $ 15.4 million in 2018. our 2020 and 2019 net loss attributable to common shareholders includes deemed and accrued dividends of $ 9.0 million , and $ 9.9 million , respectively , to preferred shareholders . net income ( loss ) per diluted share was $ ( 0.29 ) for 2020 compared to $ ( 0.46 ) for 2019 and $ 0.29 for 2018. unrestricted cash was $ 21.4 million on december 31 , 2020 . 34 results of operations revenue the following table sets forth a year-over-year comparison of our total revenues : replace_table_token_3_th the $ 45.1 million , or 26 % , increase in revenue in 2020 over 2019 was related in part to recognition of twelve full months in sales for the year ended december 31 , 2020 , attributable to our appriver business acquired in february 2019. the $ 103.0 million or 146 % increase in revenue in 2019 over 2018 was primarily related to our appriver acquisition in february 2019 , which contributed $ 97.8 million for the year-end december 31 , 2019. we additionally grew our revenue for these periods with continued success in our subscription-based business model with both steady additions to the subscriber base and with a high rate of existing customer renewals and the realization of previously contracted revenue in our backlog . in the year ended december 31 , 2020 , excluding our cloudally sales , we categorized our revenue in the following core industry verticals : 21 % healthcare , 17 % financial services , 3 % government sector and 59 % as other . in the year ended december 31 , 2019 , we categorized our revenue in the following core industry verticals : 23 % healthcare , 19 % financial services , 4 % government sector and 54 % as other . additionally , sales continued from a wide base of distributors . approximately 76 % and 74 % of our new business transacted in the year ended december 31 , 2020 and 2019 , respectively , resulted from our partner relationships . while we have continued to add new bundled price offerings to our product portfolio , our list pricing has remained generally consistent during the periods shown above . however , there are no assurances that potential increased competition in this market or other factors , including inflation , will not result in future price erosion . price erosion , should it occur , could have a dampening effect on order growth and the revenue derived from our new orders . revenue outlook : we expect continued growth in our existing offering and in our new products , along with increased sales from our partner channels to increase our business in 2021 and increase our year-over-year revenue . annual recurring revenue we measure the health of our subscriber base by the growth of our annual recurring revenue ( “ arr ” ) , which is defined as the aggregate annualized contract value attributable to recurring revenue contracts as of the end of the applicable reporting period . we calculate arr by determining the annual or monthly revenue of subscription agreements that are active as of the end of the applicable period and multiplying by 1 or 12 , depending on the term of such agreements . arr aids us in determining to what extent individual customer relationships , considered in the aggregate , are growing or declining in financial magnitude . arr is summarized in the table below : replace_table_token_4_th backlog our backlog was $ 83.4 million at december 31 , 2020 , compared to $ 89.4 million at december 31 , 2019. the backlog is comprised of contractual commitments that we expect to amortize into revenue . as of december 31 , 2020 , the backlog was comprised of the following elements : $ 41.5 million of deferred revenue that has been billed and paid , $ 12.9 million billed but unpaid , and approximately $ 29.0 million of unbilled contracts . the decline in backlog resulted from the shortening of the average term of our contracts from a multi-year to an annual commitment or to a monthly billing and subscription model . the backlog is recognized into revenue ratably as the services are performed . approximately 75 % of the total backlog is expected to be recognized as revenue during the next twelve months . 35 cost of revenue the following table sets forth a year-over-year comparison of the cost of revenue . replace_table_token_5_th cost of revenues is comprised of microsoft fees mostly associated with the resale of microsoft office365 and hosted exchange products , costs related to operating and maintaining the zixdata center , third party data center costs , a field deployment team , customer service and support , and depreciation expense of computer equipment and amortization of acquired technology . the $ 35.9 million increase in 2020 compared to 2019 reflected in the table above
| liquidity and capital resources overview based on our 2020 financial results and current expectations , including our assessment of the covid-19 pandemic potential impact on our company , we believe our cash and cash equivalents , cash generated from operations , and availability under our $ 25 million revolving facility ( which , as of december 31 , 2020 , was repaid in full and the entire undrawn balance of $ 25 million was available to fund working capital and for other general corporate purposes , including the financing of permitted acquisitions , investments and restricted payments , subject to the conditions contained in the credit agreement ) will satisfy our working capital needs , capital expenditures , investment requirements , contractual obligations , commitments , and other liquidity requirements associated with our operations through at least the next twelve months . we plan for and measure our liquidity and capital resources through an annual budgeting process and quarterly reviews , and we will continue to monitor our position to protect our company against uncertainties related to the covid-19 crisis . during 2020 , our cash flow from operations was $ 31.3 million , an increase of $ 17.3 million from the $ 14.0 million cash flow from operations during 2019. at december 31 , 2020 , our cash and cash equivalents totaled $ 21.4 million , an increase of $ 8.1 million from the december 31 , 2019 balance . the $ 8.1 million increase in our cash position is primarily attributable to our improved cash flow from operating activities in 2020 including management actions to reduce spending in response to the covid-19 crisis , as well as from increased spending in the prior year associated with due diligence , banking and other fees associated with our appriver acquisition in february 2019. for the year ended december 31 , 2020 , we achieved 26 % growth in revenue , 48 % gross margin and strong cash collections which increased our cash on hand level after investing back for business integration .
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in fiscal 2019 , our net revenue was derived primarily from sales of rf receivers and rf receiver systems-on-chip and connectivity solutions into broadband operator voice and data modems and gateways and connectivity adapters , global analog and digital rf receiver products for analog and digital pay-tv applications , radio and modem solutions into wireless carrier access and backhaul infrastructure platforms , high-speed optical interconnect solutions sold into optical modules for data-center , metro and long-haul networks , and high-performance interface and power management solutions into a broad range of communications , industrial , automotive and multi-market applications . our ability to achieve revenue growth in the future will depend , among other factors , on our ability to further penetrate existing markets ; our ability to expand our target addressable markets by developing new and innovative products ; changes in government trade policies ; and our ability to obtain design 42 wins with device manufacturers , in particular manufacturers of set-top boxes , data modems , and gateways for the broadband service provider and pay-tv industries , manufacturers selling into the smartphone market , storage networking market , cable infrastructure market , industrial and automotive markets , and optical module and telecommunications infrastructure markets . products shipped to asia accounted for 84 % , 81 % and 89 % of net revenue during the years ended december 31 , 2019 , 2018 and 2017 , respectively , including 60 % , 63 % and 71 % , respectively , from products shipped to china . although a large percentage of our products is shipped to asia , we believe that a significant number of the systems designed by these customers and incorporating our semiconductor products are then sold outside asia . for example , revenue generated from sales of our cable modem products during the years ended december 31 , 2019 , 2018 and 2017 related principally to sales to asian odms and contract manufacturers delivering products into european and north american markets . to date , all of our sales have been denominated in united states dollars . a significant portion of our net revenue has historically been generated by a limited number of customers . sales to customers comprise both direct sales to customers and indirect sales through distributors . in the year ended december 31 , 2019 , one of our direct customers , commscope , accounted for 14 % of our net revenue , and our ten largest customers collectively accounted for 63 % of our net revenue , of which distributor customers comprised 38 % of our net revenue . in the year ended december 31 , 2018 , commscope accounted for 18 % of our net revenue , and our ten largest customers collectively accounted for 61 % of our net revenue , of which distributor customers comprised 29 % of our net revenue . in the year ended december 31 , 2017 , commscope accounted for 25 % of our net revenue , and our ten largest customers collectively accounted for 58 % of our net revenue , of which distributor customers comprised 9 % of our net revenue . for certain customers , we sell multiple products into disparate end user applications such as cable modems , satellite set-top boxes and broadband gateways . our business depends on winning competitive bid selection processes , known as design wins , to develop semiconductors for use in our customers ' products . these selection processes are typically lengthy , and as a result , our sales cycles will vary based on the specific market served , whether the design win is with an existing or a new customer and whether our product being designed in our customer 's device is a first generation or subsequent generation product . our customers ' products can be complex and , if our engagement results in a design win , can require significant time to define , design and result in volume production . because the sales cycle for our products is long , we can incur significant design and development expenditures in circumstances where we do not ultimately recognize any revenue . we do not have any long-term purchase commitments with any of our customers , all of whom purchase our products on a purchase order basis . once one of our products is incorporated into a customer 's design , however , we believe that our product is likely to remain a component of the customer 's product for its life cycle because of the time and expense associated with redesigning the product or substituting an alternative chip . product life cycles in our target markets will vary by application . for example , in the cable operator modem and gateway sectors , a design-in can have a product life cycle of 24 to 48 months . in the industrial and wired and wireless infrastructure markets , a design-in can have a product life cycle of 24 to 60 months and beyond . critical accounting policies and estimates management 's discussion and analysis of our financial condition and results of operations is based upon our financial statements which are prepared in accordance with accounting principles that are generally accepted in the united states . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities , related 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 . we continually evaluate our estimates and judgments , the most critical of which are those related to revenue recognition , inventory valuation , income taxes and stock-based compensation . we base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances . materially different results can occur as circumstances change and additional information becomes known . story_separator_special_tag we will continue to assess the appropriateness of the use of the simplified method as we develop a history of option exercises . recently adopted accounting pronouncements in february 2016 , the fasb issued asu no . 2016-02 , leases ( topic 842 ) . the amendments in this update require a lessee to recognize in the statement of financial position a liability to make lease payments ( the lease liability ) and a right-of- 46 use asset representing its right to use the underlying asset . for leases less than twelve months , an entity is permitted to make an accounting policy election by class of underlying asset not to recognize right-of-use assets and lease liabilities . if a lessee makes this election , it should recognize lease expense for such leases generally on a straight-line basis over the lease term . we have made this election . also , in july 2018 , the fasb issued asu no . 2018-11 , leases ( topic 842 ) : targeted improvements , to provide an additional transition method . an entity can elect not to present comparative financial information under topic 842 if it recognizes a cumulative-effect adjustment to retained earnings upon adoption . we have also made this election . further , in january 2019 , the fasb issued asu 2019-01 , leases ( topic 842 ) : codification improvements , which clarified that post-adoption interim transition disclosures normally required in the year of adoption for the effect of a change in accounting principle on an entity 's financial statements are not required for the adoption of asc 842. the amendments in these updates are effective for us for fiscal years beginning with 2019 , including interim periods within those years , with early adoption permitted . we have completed our assessment of the impact of the adoption of asc 842. upon adoption , we recognized approximately $ 24.8 million of right-of-use assets and a net increase of $ 25.1 million in lease-related liabilities at january 1 , 2019. also , the impact of the adoption of asc 842 on our accumulated deficit and deferred tax assets at january 1 , 2019 was not material . lastly , the impact of the adoption of asc 842 on our consolidated results of operations for the year ended december 31 , 2019 was not material . in july 2018 , the fasb issued asu no . 2018-10 , codification improvements to topic 842 , leases , to clarify how to apply certain aspects of the new lease accounting standard . the amendments in this update , among other things , better articulates the requirement for a lessee 's reassessment of lease classification as of the effective date of a modification , clarifies that a change to an index or rate for variable lease payments does not constitute a resolution of a contingency that would result in the remeasurement of lease payments , and requires entities that apply topic 842 retrospectively to each reporting period and do not adopt the practical expedients to write off any prior unamortized initial direct costs that do not meet the definition under topic 842 to equity . the amendments in this update have the same effective date and transition requirements as the new lease standard summarized above . we have disclosed the impact of adoption of topic 842 on our consolidated financial position and results of operations as stated above . in july 2018 , the fasb issued asu no . 2018-09 , codification improvements , to clarify the codification and prevent unintended application of the guidance . an amendment to asc 718-740 , compensation—stock compensation—income taxes , clarifies that excess tax benefits should be recognized in the period in which the amount of the deduction is determined . the transition and effective date guidance is based on the facts and circumstances of each amendment . the amendment identified above will be effective for us beginning with fiscal year 2019. the adoption of the amendments in this update in year ended december 31 , 2019 did not have a material impact on our consolidated financial position and results of operations . in august 2017 , the fasb issued asu 2017-12 , derivatives and hedging ( topic 815 ) , which is intended to improve accounting for hedging activities by expanding and refining hedge accounting for both nonfinancial and financial risk components and aligning the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements . the amendments in this update became effective for us beginning with fiscal year 2019. the amendments in this update were required to be applied prospectively . the adoption of the amendments in this update did not have a material impact on our consolidated financial statements for the year ended december 31 , 2019. in july 2019 , the fasb issued asu no . 2019-07 , codification updates to sec sections—amendments to sec paragraphs pursuant to sec final rule releases no . 33-10532 , disclosure update and simplification , and nos . 33-10231 and 33-10442 , investment company reporting modernization , and miscellaneous updates , to align the fasb 's accounting standards codification with requirements of certain already effective sec final rules , which included requiring interim presentation of changes in stockholders ' equity and eliminating certain other disclosures . the amendments in asu no . 2019-07 were effective for us immediately in the third quarter 2019. we previously adopted the related sec final rules in our 2018 annual report and form 10-q for the three months ended march 31 , 2019. the adoption of the amendments in these updates did not have a material impact on our consolidated financial position , results of operations , and disclosures . recently issued accounting pronouncements in june 2016 , the fasb issued asu no . 2016-13 , financial instruments—credit losses ( topic 326 ) : measurement of credit losses on financial instruments , to require the
| liquidity and capital resources overview based on our 2020 financial results and current expectations , including our assessment of the covid-19 pandemic potential impact on our company , we believe our cash and cash equivalents , cash generated from operations , and availability under our $ 25 million revolving facility ( which , as of december 31 , 2020 , was repaid in full and the entire undrawn balance of $ 25 million was available to fund working capital and for other general corporate purposes , including the financing of permitted acquisitions , investments and restricted payments , subject to the conditions contained in the credit agreement ) will satisfy our working capital needs , capital expenditures , investment requirements , contractual obligations , commitments , and other liquidity requirements associated with our operations through at least the next twelve months . we plan for and measure our liquidity and capital resources through an annual budgeting process and quarterly reviews , and we will continue to monitor our position to protect our company against uncertainties related to the covid-19 crisis . during 2020 , our cash flow from operations was $ 31.3 million , an increase of $ 17.3 million from the $ 14.0 million cash flow from operations during 2019. at december 31 , 2020 , our cash and cash equivalents totaled $ 21.4 million , an increase of $ 8.1 million from the december 31 , 2019 balance . the $ 8.1 million increase in our cash position is primarily attributable to our improved cash flow from operating activities in 2020 including management actions to reduce spending in response to the covid-19 crisis , as well as from increased spending in the prior year associated with due diligence , banking and other fees associated with our appriver acquisition in february 2019. for the year ended december 31 , 2020 , we achieved 26 % growth in revenue , 48 % gross margin and strong cash collections which increased our cash on hand level after investing back for business integration .
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in fiscal 2019 , our net revenue was derived primarily from sales of rf receivers and rf receiver systems-on-chip and connectivity solutions into broadband operator voice and data modems and gateways and connectivity adapters , global analog and digital rf receiver products for analog and digital pay-tv applications , radio and modem solutions into wireless carrier access and backhaul infrastructure platforms , high-speed optical interconnect solutions sold into optical modules for data-center , metro and long-haul networks , and high-performance interface and power management solutions into a broad range of communications , industrial , automotive and multi-market applications . our ability to achieve revenue growth in the future will depend , among other factors , on our ability to further penetrate existing markets ; our ability to expand our target addressable markets by developing new and innovative products ; changes in government trade policies ; and our ability to obtain design 42 wins with device manufacturers , in particular manufacturers of set-top boxes , data modems , and gateways for the broadband service provider and pay-tv industries , manufacturers selling into the smartphone market , storage networking market , cable infrastructure market , industrial and automotive markets , and optical module and telecommunications infrastructure markets . products shipped to asia accounted for 84 % , 81 % and 89 % of net revenue during the years ended december 31 , 2019 , 2018 and 2017 , respectively , including 60 % , 63 % and 71 % , respectively , from products shipped to china . although a large percentage of our products is shipped to asia , we believe that a significant number of the systems designed by these customers and incorporating our semiconductor products are then sold outside asia . for example , revenue generated from sales of our cable modem products during the years ended december 31 , 2019 , 2018 and 2017 related principally to sales to asian odms and contract manufacturers delivering products into european and north american markets . to date , all of our sales have been denominated in united states dollars . a significant portion of our net revenue has historically been generated by a limited number of customers . sales to customers comprise both direct sales to customers and indirect sales through distributors . in the year ended december 31 , 2019 , one of our direct customers , commscope , accounted for 14 % of our net revenue , and our ten largest customers collectively accounted for 63 % of our net revenue , of which distributor customers comprised 38 % of our net revenue . in the year ended december 31 , 2018 , commscope accounted for 18 % of our net revenue , and our ten largest customers collectively accounted for 61 % of our net revenue , of which distributor customers comprised 29 % of our net revenue . in the year ended december 31 , 2017 , commscope accounted for 25 % of our net revenue , and our ten largest customers collectively accounted for 58 % of our net revenue , of which distributor customers comprised 9 % of our net revenue . for certain customers , we sell multiple products into disparate end user applications such as cable modems , satellite set-top boxes and broadband gateways . our business depends on winning competitive bid selection processes , known as design wins , to develop semiconductors for use in our customers ' products . these selection processes are typically lengthy , and as a result , our sales cycles will vary based on the specific market served , whether the design win is with an existing or a new customer and whether our product being designed in our customer 's device is a first generation or subsequent generation product . our customers ' products can be complex and , if our engagement results in a design win , can require significant time to define , design and result in volume production . because the sales cycle for our products is long , we can incur significant design and development expenditures in circumstances where we do not ultimately recognize any revenue . we do not have any long-term purchase commitments with any of our customers , all of whom purchase our products on a purchase order basis . once one of our products is incorporated into a customer 's design , however , we believe that our product is likely to remain a component of the customer 's product for its life cycle because of the time and expense associated with redesigning the product or substituting an alternative chip . product life cycles in our target markets will vary by application . for example , in the cable operator modem and gateway sectors , a design-in can have a product life cycle of 24 to 48 months . in the industrial and wired and wireless infrastructure markets , a design-in can have a product life cycle of 24 to 60 months and beyond . critical accounting policies and estimates management 's discussion and analysis of our financial condition and results of operations is based upon our financial statements which are prepared in accordance with accounting principles that are generally accepted in the united states . the preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities , related 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 . we continually evaluate our estimates and judgments , the most critical of which are those related to revenue recognition , inventory valuation , income taxes and stock-based compensation . we base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances . materially different results can occur as circumstances change and additional information becomes known . story_separator_special_tag we will continue to assess the appropriateness of the use of the simplified method as we develop a history of option exercises . recently adopted accounting pronouncements in february 2016 , the fasb issued asu no . 2016-02 , leases ( topic 842 ) . the amendments in this update require a lessee to recognize in the statement of financial position a liability to make lease payments ( the lease liability ) and a right-of- 46 use asset representing its right to use the underlying asset . for leases less than twelve months , an entity is permitted to make an accounting policy election by class of underlying asset not to recognize right-of-use assets and lease liabilities . if a lessee makes this election , it should recognize lease expense for such leases generally on a straight-line basis over the lease term . we have made this election . also , in july 2018 , the fasb issued asu no . 2018-11 , leases ( topic 842 ) : targeted improvements , to provide an additional transition method . an entity can elect not to present comparative financial information under topic 842 if it recognizes a cumulative-effect adjustment to retained earnings upon adoption . we have also made this election . further , in january 2019 , the fasb issued asu 2019-01 , leases ( topic 842 ) : codification improvements , which clarified that post-adoption interim transition disclosures normally required in the year of adoption for the effect of a change in accounting principle on an entity 's financial statements are not required for the adoption of asc 842. the amendments in these updates are effective for us for fiscal years beginning with 2019 , including interim periods within those years , with early adoption permitted . we have completed our assessment of the impact of the adoption of asc 842. upon adoption , we recognized approximately $ 24.8 million of right-of-use assets and a net increase of $ 25.1 million in lease-related liabilities at january 1 , 2019. also , the impact of the adoption of asc 842 on our accumulated deficit and deferred tax assets at january 1 , 2019 was not material . lastly , the impact of the adoption of asc 842 on our consolidated results of operations for the year ended december 31 , 2019 was not material . in july 2018 , the fasb issued asu no . 2018-10 , codification improvements to topic 842 , leases , to clarify how to apply certain aspects of the new lease accounting standard . the amendments in this update , among other things , better articulates the requirement for a lessee 's reassessment of lease classification as of the effective date of a modification , clarifies that a change to an index or rate for variable lease payments does not constitute a resolution of a contingency that would result in the remeasurement of lease payments , and requires entities that apply topic 842 retrospectively to each reporting period and do not adopt the practical expedients to write off any prior unamortized initial direct costs that do not meet the definition under topic 842 to equity . the amendments in this update have the same effective date and transition requirements as the new lease standard summarized above . we have disclosed the impact of adoption of topic 842 on our consolidated financial position and results of operations as stated above . in july 2018 , the fasb issued asu no . 2018-09 , codification improvements , to clarify the codification and prevent unintended application of the guidance . an amendment to asc 718-740 , compensation—stock compensation—income taxes , clarifies that excess tax benefits should be recognized in the period in which the amount of the deduction is determined . the transition and effective date guidance is based on the facts and circumstances of each amendment . the amendment identified above will be effective for us beginning with fiscal year 2019. the adoption of the amendments in this update in year ended december 31 , 2019 did not have a material impact on our consolidated financial position and results of operations . in august 2017 , the fasb issued asu 2017-12 , derivatives and hedging ( topic 815 ) , which is intended to improve accounting for hedging activities by expanding and refining hedge accounting for both nonfinancial and financial risk components and aligning the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements . the amendments in this update became effective for us beginning with fiscal year 2019. the amendments in this update were required to be applied prospectively . the adoption of the amendments in this update did not have a material impact on our consolidated financial statements for the year ended december 31 , 2019. in july 2019 , the fasb issued asu no . 2019-07 , codification updates to sec sections—amendments to sec paragraphs pursuant to sec final rule releases no . 33-10532 , disclosure update and simplification , and nos . 33-10231 and 33-10442 , investment company reporting modernization , and miscellaneous updates , to align the fasb 's accounting standards codification with requirements of certain already effective sec final rules , which included requiring interim presentation of changes in stockholders ' equity and eliminating certain other disclosures . the amendments in asu no . 2019-07 were effective for us immediately in the third quarter 2019. we previously adopted the related sec final rules in our 2018 annual report and form 10-q for the three months ended march 31 , 2019. the adoption of the amendments in these updates did not have a material impact on our consolidated financial position , results of operations , and disclosures . recently issued accounting pronouncements in june 2016 , the fasb issued asu no . 2016-13 , financial instruments—credit losses ( topic 326 ) : measurement of credit losses on financial instruments , to require the
| . net cash provided by operating activities consisted of positive cash flow from operations including $ 100.3 million in non-cash operating expenses and $ 28.6 million in changes in operating assets and liabilities , partially offset by net loss of $ 26.2 million . non-cash items included in net loss for the year ended december 31 , 2018 primarily included depreciation and amortization of property , equipment and intangible assets of $ 79.0 million , stock-based compensation of $ 31.7 million , and impairment of intangible assets of $ 2.2 million , partially offset by deferred income taxes of $ 12.1 million and excess tax benefits on stock-based awards of $ 2.0 million . cash flows from investing activities net cash used in investing activities was $ 7.0 million for the year ended december 31 , 2019 . net cash used in investing activities primarily consisted of $ 6.9 million in purchases of property and equipment . net cash used in investing activities was $ 7.8 million for the year ended december 31 , 2018 . net cash used in investing activities consisted entirely of $ 7.8 million in purchases of property and equipment . cash flows from financing activities net cash used in financing activities was $53.4 million for the year ended december 31 , 2019 .
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pursuant to the technology license agreement , we granted a nontransferable , non-sublicensable , irrevocable , and exclusive right and license to patented and non-patented manufacturing technologies involved in the manufacture of certain products for the china jv . in the fourth quarter of 2019 , we completed technology transfer for eksovest ( but not transfer of patented technologies ) . in 2019 , we booked a total of 98 eksogt and eksonr units , 17 of which were rental units and 25 of which were previously rented units that were converted to sales . in february 2020 , we announced the worldwide launch of our upgraded eksopulse platform , an innovative cloud-based information technology platform that measures and analyzes progress using the eksonr robotic exoskeleton . the improved analytics system provides an easy-to-use dashboard to chart activity in rehabilitation sessions , enhancing the clinician , institutional , and patient experience of the most clinically used exoskeleton . 2019 financing activities in january 2019 , and in connection with the china jv , one of the joint venture partner affiliates purchased an aggregate of 3,067,485 shares of our common stock at a price per share equal to $ 1.63 , for aggregate proceeds to us of $ 5.0 million . in may 2019 , we sold 6,666,667 shares of our common stock and warrants to purchase up to 6,666,667 shares of our common stock , or may 2019 warrants , at a combined public offering price of $ 1.50 per share for proceeds , net of expenses and underwriting discount and commission , of $ 9.0 million . in december 2019 , we sold 11,111,116 shares of our common stock and warrants to purchase up to 8,333,337 shares of our common stock , or december 2019 warrants , at a combined price of $ 0.45 per share for proceeds , net of placement agent fees and expenses , of $ 4.2 million . additional details discussed in note 13 in the notes to our consolidated financial statements , which appear under item 8 in this annual report on form 10-k , under the caption capitalization and equity structure – warrants . 38 since inception to december 31 , 2019 , we have sold 4.2 million shares of our common stock under our “ at the market offering ” program at an average price of $ 1.86 per share , for aggregate proceeds of $ 7.2 million , net of commission and issuance costs , to us . business we design , develop and sell exoskeleton technology to augment human strength , endurance and mobility . our exoskeleton technology serves multiple markets and can be used both by able-bodied persons as well as by persons with physical disabilities . we have sold or leased devices that ( i ) enable individuals with neurological conditions affecting gait ( stroke and spinal cord injury ) to rehabilitate , and in some cases , to walk again , ( ii ) assist individuals with a broad range of upper extremity impairments , and ( iii ) allow industrial workers to perform difficult repetitive work for extended periods . we believe that the commercial opportunity for exoskeleton technology adoption is accelerating as a result of recent advancements in material technologies , electronic and electrical engineering , control technologies , and sensor and software development . taken individually , many of these advancements have become ubiquitous in peoples ' everyday lives . we believe that we have learned how to integrate these existing technologies and wrap the result around a human being efficiently , elegantly and safely , supported by an industry leading intellectual property portfolio . we further believe that we can do so across a broad spectrum of applications , from persons with lower limb paralysis to able-bodied users . eksohealth today , the focus of our healthcare business is on rehabilitation robotics . we are leveraging our patented exoskeleton technology to develop and market products intended to enable patients with some form of lower limb impairment to rehabilitate earlier and with better outcomes than the current standard of care . our latest product , the eksonr , is a wearable bionic suit that allows our hospital and rehabilitation customers to provide in-patients and out-patients with sci and hemiplegia due to stroke the ability to stand and walk over ground with a full weight-bearing , reciprocal gait using a cane , crutches or a walker under the supervision of a physical therapist . walking is achieved by a user shifting their weight , balancing to walk as an unimpaired person would and initiating steps when safe to progress forward . if needed , some patients utilize sensors in the device which in turn initiate steps . battery-powered motors drive the legs , detecting the deficient neuromuscular function and providing the level of assistance necessary for a user to complete their step . users can expect to walk with aid from the device the first time they put on the eksonr exoskeleton ( after passing an assessment ) . physical therapists can transfer patients to or from their wheelchair and don or remove the eksonr in less than ten minutes . the eksonr is used by customers in both in-patient and out-patient settings . our customers believe that for patients with some motor ability preserved ( for example , after a stroke or an incomplete sci ) , the eksonr exoskeleton offers unique benefits to help therapists teach proper step patterns and weight shifts , allowing patients to potentially mobilize earlier and ultimately to walk again . story_separator_special_tag operating expenses sales and marketing expenses decreased $ 2.4 million , or 18 % , for the year ended december 31 , 2019 , compared to the same period of 2018 , primarily due to the absence of severance and related expenses in the comparable period of 2018 associated with the departure of the former president of our eksoworks business unit , our chief marketing officer and other marketing employees , a decrease in advertising and trade show activities , a decrease in clinical trial activities , and the absence of amortization expense related to intangible assets as intangible assets were fully amortized by december 31 , 2018. the decrease in sales and marketing expenses were partially offset by an increase in commissions associated with the higher level of sales in 2019. research and development expenses decreased $ 1.3 million , or 21 % , for the year ended december 31 , 2019 , compared to the same period of 2018 , primarily due to lower employee compensation expense from decreased headcount in the eksoworks business unit . 42 general and administrative expenses decreased $ 4.3 million , or 36 % , for the year ended december 31 , 2019 , compared to the same period of 2018 , primarily due to the absence of severance and related expenses in the comparable period of 2018 associated with former executive officers , lower external consulting costs associated with our business development activities in china , lower compensation expense from decreased headcount , and lower legal expenses . other income , net gain on revaluation of warrant liabilities of $ 6.4 million for the year ended december 31 , 2019 , related to warrants issued in 2019 and 2015. gain on revaluation of warrant liabilities of $ 1.1 million for the year ended december 31 , 2018 , related to warrants issued in 2015. gains and losses on revaluation of warrants are primarily driven by changes in our stock price . loss on modification of warrants of $ 0.3 million for the year ended december 31 , 2019 , was due to the reduction of the exercise price of the 2015 warrants ( refer to note 13. capitalization and equity structure in the notes to our consolidated financial statements ) . there was no comparable amount during the same period in 2018 . warrant issuance expense of $ 1.1 million for the year ended december 31 , 2019 was recorded in connection with our underwritten common stock and warrant financing in may 2019 and december 2019. we incurred $ 1.7 million in direct financing costs , which were allocated on a relative fair value basis between the common stock and warrant issuances , of which $ 1.1 million was allocated to warrants and expensed immediately . there was no comparable amount of warrant issuance expense for the same period in 2018 . other expense , net decreased $ 0.3 million , or 69 % , for the year ended december 31 , 2019 , compared to the same period of 2018 , due to unrealized gains and losses on foreign currency revaluations of our inter-company monetary assets and liabilities . financial condition , liquidity and capital resources since our inception , we have devoted substantially all of our efforts toward the development of exoskeletons for the medical and industrial markets , toward the commercialization of medical exoskeletons to rehabilitation centers and toward raising capital . we have financed our operations primarily through the issuance and sale of equity securities for cash consideration and through bank debt . liquidity and capital resources at december 31 , 2019 , we had working capital of $ 11.0 million , compared to working capital of $ 4.9 million at december 31 , 2018 . the increase in working capital is primarily due to higher cash balance from equity financings and an increase in accounts receivable due to an increase in sales . our cash and cash equivalents as of december 31 , 2019 consisted of bank deposits with third party financial institutions . as of december 31 , 2019 , of our $ 10.9 million of cash , $ 10.2 million was held domestically while $ 0.7 million was held by foreign subsidiaries . as of december 31 , 2019 , we had an accumulated deficit of $ 183.3 million and cash on hand of $ 10.9 million . largely as a result of significant research and development activities related to our advanced technology and commercialization of this technology into our medical device business , we have incurred significant operating losses and negative cash flows from operations since inception . we have incurred net losses of $ 12.1 million and $ 27.0 million for the years ended december 31 , 2019 and 2018 , respectively ( with gains from a decrease on common stock purchase warrant liabilities due to a drop in our stock price accounting for a $ 6.4 million decrease in net losses as of december 31 , 2019 ) . in the year ended december 31 , 2019 , we used $ 15.8 million of cash in our operations . as noted in note 9 in the notes to our consolidated financial statements under the caption long-term debt , borrowings under our long-term debt agreement have a requirement of minimum cash on hand equivalent to three months of cash burn . as of december 31 , 2019 , the most recent determination of this restriction , $ 3.6 million of cash must remain as unrestricted , with such amounts to be re-computed at each month end . after considering cash restrictions , effective unrestricted cash as of december 31 , 2019 is estimated to be $ 7.3 million . based on current forecasted amounts , our cash on hand will not be sufficient to satisfy our operations for the next twelve months from the date of issuance of these consolidated financial statements , which raises substantial doubt about our ability to continue as
| . net cash provided by operating activities consisted of positive cash flow from operations including $ 100.3 million in non-cash operating expenses and $ 28.6 million in changes in operating assets and liabilities , partially offset by net loss of $ 26.2 million . non-cash items included in net loss for the year ended december 31 , 2018 primarily included depreciation and amortization of property , equipment and intangible assets of $ 79.0 million , stock-based compensation of $ 31.7 million , and impairment of intangible assets of $ 2.2 million , partially offset by deferred income taxes of $ 12.1 million and excess tax benefits on stock-based awards of $ 2.0 million . cash flows from investing activities net cash used in investing activities was $ 7.0 million for the year ended december 31 , 2019 . net cash used in investing activities primarily consisted of $ 6.9 million in purchases of property and equipment . net cash used in investing activities was $ 7.8 million for the year ended december 31 , 2018 . net cash used in investing activities consisted entirely of $ 7.8 million in purchases of property and equipment . cash flows from financing activities net cash used in financing activities was $53.4 million for the year ended december 31 , 2019 .
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pursuant to the technology license agreement , we granted a nontransferable , non-sublicensable , irrevocable , and exclusive right and license to patented and non-patented manufacturing technologies involved in the manufacture of certain products for the china jv . in the fourth quarter of 2019 , we completed technology transfer for eksovest ( but not transfer of patented technologies ) . in 2019 , we booked a total of 98 eksogt and eksonr units , 17 of which were rental units and 25 of which were previously rented units that were converted to sales . in february 2020 , we announced the worldwide launch of our upgraded eksopulse platform , an innovative cloud-based information technology platform that measures and analyzes progress using the eksonr robotic exoskeleton . the improved analytics system provides an easy-to-use dashboard to chart activity in rehabilitation sessions , enhancing the clinician , institutional , and patient experience of the most clinically used exoskeleton . 2019 financing activities in january 2019 , and in connection with the china jv , one of the joint venture partner affiliates purchased an aggregate of 3,067,485 shares of our common stock at a price per share equal to $ 1.63 , for aggregate proceeds to us of $ 5.0 million . in may 2019 , we sold 6,666,667 shares of our common stock and warrants to purchase up to 6,666,667 shares of our common stock , or may 2019 warrants , at a combined public offering price of $ 1.50 per share for proceeds , net of expenses and underwriting discount and commission , of $ 9.0 million . in december 2019 , we sold 11,111,116 shares of our common stock and warrants to purchase up to 8,333,337 shares of our common stock , or december 2019 warrants , at a combined price of $ 0.45 per share for proceeds , net of placement agent fees and expenses , of $ 4.2 million . additional details discussed in note 13 in the notes to our consolidated financial statements , which appear under item 8 in this annual report on form 10-k , under the caption capitalization and equity structure – warrants . 38 since inception to december 31 , 2019 , we have sold 4.2 million shares of our common stock under our “ at the market offering ” program at an average price of $ 1.86 per share , for aggregate proceeds of $ 7.2 million , net of commission and issuance costs , to us . business we design , develop and sell exoskeleton technology to augment human strength , endurance and mobility . our exoskeleton technology serves multiple markets and can be used both by able-bodied persons as well as by persons with physical disabilities . we have sold or leased devices that ( i ) enable individuals with neurological conditions affecting gait ( stroke and spinal cord injury ) to rehabilitate , and in some cases , to walk again , ( ii ) assist individuals with a broad range of upper extremity impairments , and ( iii ) allow industrial workers to perform difficult repetitive work for extended periods . we believe that the commercial opportunity for exoskeleton technology adoption is accelerating as a result of recent advancements in material technologies , electronic and electrical engineering , control technologies , and sensor and software development . taken individually , many of these advancements have become ubiquitous in peoples ' everyday lives . we believe that we have learned how to integrate these existing technologies and wrap the result around a human being efficiently , elegantly and safely , supported by an industry leading intellectual property portfolio . we further believe that we can do so across a broad spectrum of applications , from persons with lower limb paralysis to able-bodied users . eksohealth today , the focus of our healthcare business is on rehabilitation robotics . we are leveraging our patented exoskeleton technology to develop and market products intended to enable patients with some form of lower limb impairment to rehabilitate earlier and with better outcomes than the current standard of care . our latest product , the eksonr , is a wearable bionic suit that allows our hospital and rehabilitation customers to provide in-patients and out-patients with sci and hemiplegia due to stroke the ability to stand and walk over ground with a full weight-bearing , reciprocal gait using a cane , crutches or a walker under the supervision of a physical therapist . walking is achieved by a user shifting their weight , balancing to walk as an unimpaired person would and initiating steps when safe to progress forward . if needed , some patients utilize sensors in the device which in turn initiate steps . battery-powered motors drive the legs , detecting the deficient neuromuscular function and providing the level of assistance necessary for a user to complete their step . users can expect to walk with aid from the device the first time they put on the eksonr exoskeleton ( after passing an assessment ) . physical therapists can transfer patients to or from their wheelchair and don or remove the eksonr in less than ten minutes . the eksonr is used by customers in both in-patient and out-patient settings . our customers believe that for patients with some motor ability preserved ( for example , after a stroke or an incomplete sci ) , the eksonr exoskeleton offers unique benefits to help therapists teach proper step patterns and weight shifts , allowing patients to potentially mobilize earlier and ultimately to walk again . story_separator_special_tag operating expenses sales and marketing expenses decreased $ 2.4 million , or 18 % , for the year ended december 31 , 2019 , compared to the same period of 2018 , primarily due to the absence of severance and related expenses in the comparable period of 2018 associated with the departure of the former president of our eksoworks business unit , our chief marketing officer and other marketing employees , a decrease in advertising and trade show activities , a decrease in clinical trial activities , and the absence of amortization expense related to intangible assets as intangible assets were fully amortized by december 31 , 2018. the decrease in sales and marketing expenses were partially offset by an increase in commissions associated with the higher level of sales in 2019. research and development expenses decreased $ 1.3 million , or 21 % , for the year ended december 31 , 2019 , compared to the same period of 2018 , primarily due to lower employee compensation expense from decreased headcount in the eksoworks business unit . 42 general and administrative expenses decreased $ 4.3 million , or 36 % , for the year ended december 31 , 2019 , compared to the same period of 2018 , primarily due to the absence of severance and related expenses in the comparable period of 2018 associated with former executive officers , lower external consulting costs associated with our business development activities in china , lower compensation expense from decreased headcount , and lower legal expenses . other income , net gain on revaluation of warrant liabilities of $ 6.4 million for the year ended december 31 , 2019 , related to warrants issued in 2019 and 2015. gain on revaluation of warrant liabilities of $ 1.1 million for the year ended december 31 , 2018 , related to warrants issued in 2015. gains and losses on revaluation of warrants are primarily driven by changes in our stock price . loss on modification of warrants of $ 0.3 million for the year ended december 31 , 2019 , was due to the reduction of the exercise price of the 2015 warrants ( refer to note 13. capitalization and equity structure in the notes to our consolidated financial statements ) . there was no comparable amount during the same period in 2018 . warrant issuance expense of $ 1.1 million for the year ended december 31 , 2019 was recorded in connection with our underwritten common stock and warrant financing in may 2019 and december 2019. we incurred $ 1.7 million in direct financing costs , which were allocated on a relative fair value basis between the common stock and warrant issuances , of which $ 1.1 million was allocated to warrants and expensed immediately . there was no comparable amount of warrant issuance expense for the same period in 2018 . other expense , net decreased $ 0.3 million , or 69 % , for the year ended december 31 , 2019 , compared to the same period of 2018 , due to unrealized gains and losses on foreign currency revaluations of our inter-company monetary assets and liabilities . financial condition , liquidity and capital resources since our inception , we have devoted substantially all of our efforts toward the development of exoskeletons for the medical and industrial markets , toward the commercialization of medical exoskeletons to rehabilitation centers and toward raising capital . we have financed our operations primarily through the issuance and sale of equity securities for cash consideration and through bank debt . liquidity and capital resources at december 31 , 2019 , we had working capital of $ 11.0 million , compared to working capital of $ 4.9 million at december 31 , 2018 . the increase in working capital is primarily due to higher cash balance from equity financings and an increase in accounts receivable due to an increase in sales . our cash and cash equivalents as of december 31 , 2019 consisted of bank deposits with third party financial institutions . as of december 31 , 2019 , of our $ 10.9 million of cash , $ 10.2 million was held domestically while $ 0.7 million was held by foreign subsidiaries . as of december 31 , 2019 , we had an accumulated deficit of $ 183.3 million and cash on hand of $ 10.9 million . largely as a result of significant research and development activities related to our advanced technology and commercialization of this technology into our medical device business , we have incurred significant operating losses and negative cash flows from operations since inception . we have incurred net losses of $ 12.1 million and $ 27.0 million for the years ended december 31 , 2019 and 2018 , respectively ( with gains from a decrease on common stock purchase warrant liabilities due to a drop in our stock price accounting for a $ 6.4 million decrease in net losses as of december 31 , 2019 ) . in the year ended december 31 , 2019 , we used $ 15.8 million of cash in our operations . as noted in note 9 in the notes to our consolidated financial statements under the caption long-term debt , borrowings under our long-term debt agreement have a requirement of minimum cash on hand equivalent to three months of cash burn . as of december 31 , 2019 , the most recent determination of this restriction , $ 3.6 million of cash must remain as unrestricted , with such amounts to be re-computed at each month end . after considering cash restrictions , effective unrestricted cash as of december 31 , 2019 is estimated to be $ 7.3 million . based on current forecasted amounts , our cash on hand will not be sufficient to satisfy our operations for the next twelve months from the date of issuance of these consolidated financial statements , which raises substantial doubt about our ability to continue as
| cash and cash equivalents the following table summarizes the sources and uses of cash for the periods stated ( in thousands ) : replace_table_token_4_th net cash used in operating activities net cash used in operations decreased $ 6.4 million , or 29 % , for the year ended december 31 , 2019 , compared to the same period of 2018 , primarily due to a decrease in employee-related costs as a result of lower average headcount , lower legal costs , a reduction in inventory , and a decrease in advertising , trade show , and clinical trial activities . net cash used in investing activities net cash used in investing activities decreased $ 0.1 million , or 54 % , during the year ended december 31 , 2019 , compared to the same period of 2018 , primarily due to lower hardware and software purchases due to lower headcount . net cash provided by financing activities net cash provided by financing activities of $ 19.0 million for the year ended december 31 , 2019 was from the sale of common stock and warrants for net proceeds of $ 9.0 million in connection with the equity financing in may 2019 , net proceeds of $ 4.2 million with the equity financing in december 2019 , net proceeds of $ 2.8 million from our “ at the market offering ” program , net proceeds of $ 5.0 million from equity investors associated with the jv agreement , and proceeds of $ 0.2 million from the exercise of stock options , partially offset by aggregate principal payments of $ 2.4 million against our term loan net cash provided by financing activities of $ 2.3 million
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we do , however , remain concerned about the retail climate for apparel and the united states economy in general . raw material prices remain volatile which adds uncertainty to our pricing and production strategies . we have evaluated these heightened risk factors in setting our expectations for the upcoming year , but it is impossible to predict the full impact these conditions may have on our business . earnings guidance for the fiscal year ending june 30 , 2012 , we expect net sales to be in the range of $ 500 to $ 520 million , an increase of 5 % to 9 % from fiscal year 2011 , all of which is expected to be organic growth . earnings are expected to be in the range of $ 2.00 to $ 2.15 per diluted share in fiscal year 2012. our fiscal year 2012 guidance is based on the following assumptions : 1 ) organic sales growth of 5 % to 9 % driven primarily by higher average prices . we expect to achieve sales growth in both our branded and basics segments ; 2 ) decline in gross margins of approximately 150 to 200 basis points for the year driven primarily from higher cotton and other raw material costs , partially offset by improved manufacturing costs as we gain efficiencies and further leverage our fixed expenses . we will be bringing in yarn with the highest cotton cost in our first quarter of fiscal year 2012 , and expect the cotton cost to decline over the remaining quarters . as this yarn flows through our manufacturing process and the finished goods are sold , we expect the highest cost inventory will be in our cost of sales during our second and third quarters of fiscal year 2012 , impacting gross margins most significantly in these quarters . 3 ) selling , general and administration costs are expected to decrease as a percentage of sales , as well as in gross dollars , from fiscal year 2011 due primarily to fiscal year 2011 including some one-time expenses that are not expected to repeat in fiscal year 2012 . 4 ) the effective tax rate for fiscal year 2012 is expected to be approximately 24 % . 5 ) capital expenditures are expected to be approximately $ 10 million for fiscal year 2012 , which includes about $ 4 to $ 5 million 16 to increase our textile and sewing capacity in order to meet expected sales growth . depreciation and amortization , including non-cash compensation , is expected to also be approximately $ 10 million . 6 ) fiscal year 2012 free cash flows are expected to be approximately $ 20 million and are expected to be used to reduce debt obligations and for other corporate purposes . in fiscal year 2012 , we will face challenging market conditions resulting from the volatile cotton market , inflationary pressures and general economic conditions which continue to impact discretionary spending . although we believe we have taken these risks , as well as other factors , into consideration as we determined our guidance for fiscal year 2012 , the significance of the challenges , many of which our outside of our control , creates heightened risk to the volatility of our earnings in the upcoming fiscal year . in addition , although we believe that the assumptions described above are reasonable , if any of the assumptions proves to be incorrect , our results will differ from our expectations . results of operations overview fiscal year 2011 marked another year of growth for delta apparel , inc. and our eighth consecutive year of record revenue . higher selling prices , coupled with continued marketing initiatives to gain new customers and expand business relationships with existing customers , drove organic sales growth of 7.1 % during fiscal year 2011 on top of the 14 % organic growth achieved in fiscal year 2010. the organic sales growth , coupled with the inclusion of revenue from the acquisition of the cotton exchange , resulted in record sales of $ 475.2 million , an increase of $ 50.8 million , or 12.0 % , from the prior year . our operating profit increased $ 5.1 million to $ 25.3 million , or 5.3 % of sales , in fiscal year 2011 , resulting in net income of $ 17.3 million , or $ 1.98 per diluted share . our effective tax rate was 23.6 % in fiscal year 2011 compared to 26.8 % in the prior year as we further developed our tax planning strategies . in addition to growing our top line and expanding our profits , we also continued to focus on managing the capital in the business . the rise of cotton prices during the year and resulting increases in selling prices significantly increased our net working capital requirements . even with the increased investment in working capital , we generated positive cash flows from operations during fiscal year 2011. we continued to invest in the growth of our business through the acquisition of the cotton exchange in july 2011 , and with capital expenditures to further expand our manufacturing capacity , lower our costs and improve our information technology platforms . overall , we believe we have many opportunities to continue our sales growth and further improve our profitability in the upcoming years . in fiscal year 2012 , we will face challenging market conditions resulting from the volatile cotton market , inflationary pressures and general economic conditions which continue to impact discretionary spending . we believe our broad channels of distribution and diversified product offerings , along with our prudent capital management , should serve us well during these more challenging times . quarterly financial data for information regarding quarterly financial data , refer to note 16 - quarterly financial information ( unaudited ) to the consolidated financial statements , which information is incorporated herein by reference . story_separator_special_tag note 2 to our consolidated financial statements includes a summary of the significant accounting policies or methods used in the preparation of our consolidated financial statements . revenue recognition revenues from product sales are recognized when ownership is transfered to the customer , which includes not only the passage of title , but also the transfer of the risk of loss related to the product . at this point , the sales price is fixed and determinable , and we are reasonably assured of the collectibility of the sale . the majority of our sales are shipped fob shipping point and revenue is therefore recognized when the goods are shipped to the customer . for sales that are shipped fob destination point , we do not recognize the revenue until the goods are received by the customer . shipping and handling charges billed to our customers are 21 included in net revenue and the related costs are included in cost of goods sold . revenues are reported on net sales basis , which is computed by deducting product returns , discounts and estimated returns and allowances . we estimate returns and allowances on an ongoing basis by considering historical and current trends . accounts receivable and related reserves in the normal course of business , we extend credit to our customers based upon defined credit criteria . accounts receivable , as shown on our consolidated balance sheet , are net of related reserves . we estimate the net collectibility of our accounts receivable and establish an allowance for doubtful accounts based upon this assessment . in situations where we are aware of a specific customer 's inability to meet its financial obligation , such as in the case of a bankruptcy filing , a specific reserve for bad debts is recorded against amounts due to reduce the net recognized receivable to the amount reasonably expected to be collected . for all other customers , reserves are determined through analysis of the aging of accounts receivable balances , historical bad debts , customer concentrations , customer credit-worthiness , current economic trends and changes in customer payment terms . in addition , reserves are established for other concessions that have been extended to customers , including advertising , markdowns and other accommodations , net of historical recoveries . these reserves are determined based upon historical deduction trends and evaluation of current market conditions . significant changes in customer concentration or payment terms , deterioration of customer credit-worthiness or further weakening in economic trends could have a significant impact on the collectibility of receivables and our operating results . inventories and related reserves we state inventories at the lower of cost or market using the first-in , first-out method . inventory cost includes materials , labor and manufacturing overhead on manufactured inventory , and all direct and associated costs , including inbound freight , to acquire sourced products . we regularly review inventory quantities on hand and record reserves for obsolescence , excess quantities , irregulars and slow moving inventory based on historical selling prices , current market conditions , and forecasted product demand to reduce inventory to its net realizable value . if actual market conditions are less favorable than those projected , or if sell-through of the inventory is more difficult than anticipated , additional inventory reserves may be required . goodwill and contingent consideration goodwill and definite-lived intangibles were recorded in conjunction with our acquisitions of junkfood clothing company and art gun . we did not record any indefinite-lived intangibles associated with either of these acquisitions . goodwill represents the excess of the purchase price and related costs over the value assigned to net tangible and identifiable intangible assets of businesses acquired . goodwill must be tested for impairment at least annually , or more frequently if events or changes in circumstances indicate that the carrying amount may be impaired , and is required to be written down when impaired . the goodwill impairment testing process involves the use of significant assumptions , estimates and judgments with respect to a variety of factors , including sales , gross margins , selling , general and administrative expenses , capital expenditures , cash flows and the selection of an appropriate discount rate , all of which are subject to inherent uncertainties and subjectivity . when we perform goodwill impairment testing , our assumptions are based on annual business plans and other forecasted results . we select a discount rate , which is used to reflect market-based estimates of the risks associated with the projected cash flows , based on the best information available as of the date of the impairment assessment . see note 2 ( m ) - significant accounting policies to the consolidated financial statements for further information regarding our remeasurement of contingent consideration and testing for goodwill impairment , which information is herein incorporated by reference . given the current macro-economic environment and the uncertainties regarding its potential impact on our business , there can be no assurance that our estimates and assumptions used in our impairment tests will prove to be accurate predictions of the future . if our assumptions regarding forecasted cash flows are not achieved , it is possible that an impairment review may be triggered and goodwill may be determined to be impaired . stock-based compensation stock-based compensation cost is accounted for under the provisions of fasb codification no . 718 , compensation – stock compensation ( “ asc 718 ” ) , the securities and exchange commission staff accounting bulletin no . 107 ( `` sab 107 `` ) , and the securities and exchange commission staff accounting bulletin no . 110 ( `` sab 110 `` ) . asc 718 requires all stock-based payments to employees , including grants of employee stock options , to be recognized as expense over the vesting period using a fair value method . we estimate the fair value of stock-based compensation using the black-scholes options pricing model
| cash and cash equivalents the following table summarizes the sources and uses of cash for the periods stated ( in thousands ) : replace_table_token_4_th net cash used in operating activities net cash used in operations decreased $ 6.4 million , or 29 % , for the year ended december 31 , 2019 , compared to the same period of 2018 , primarily due to a decrease in employee-related costs as a result of lower average headcount , lower legal costs , a reduction in inventory , and a decrease in advertising , trade show , and clinical trial activities . net cash used in investing activities net cash used in investing activities decreased $ 0.1 million , or 54 % , during the year ended december 31 , 2019 , compared to the same period of 2018 , primarily due to lower hardware and software purchases due to lower headcount . net cash provided by financing activities net cash provided by financing activities of $ 19.0 million for the year ended december 31 , 2019 was from the sale of common stock and warrants for net proceeds of $ 9.0 million in connection with the equity financing in may 2019 , net proceeds of $ 4.2 million with the equity financing in december 2019 , net proceeds of $ 2.8 million from our “ at the market offering ” program , net proceeds of $ 5.0 million from equity investors associated with the jv agreement , and proceeds of $ 0.2 million from the exercise of stock options , partially offset by aggregate principal payments of $ 2.4 million against our term loan net cash provided by financing activities of $ 2.3 million
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we do , however , remain concerned about the retail climate for apparel and the united states economy in general . raw material prices remain volatile which adds uncertainty to our pricing and production strategies . we have evaluated these heightened risk factors in setting our expectations for the upcoming year , but it is impossible to predict the full impact these conditions may have on our business . earnings guidance for the fiscal year ending june 30 , 2012 , we expect net sales to be in the range of $ 500 to $ 520 million , an increase of 5 % to 9 % from fiscal year 2011 , all of which is expected to be organic growth . earnings are expected to be in the range of $ 2.00 to $ 2.15 per diluted share in fiscal year 2012. our fiscal year 2012 guidance is based on the following assumptions : 1 ) organic sales growth of 5 % to 9 % driven primarily by higher average prices . we expect to achieve sales growth in both our branded and basics segments ; 2 ) decline in gross margins of approximately 150 to 200 basis points for the year driven primarily from higher cotton and other raw material costs , partially offset by improved manufacturing costs as we gain efficiencies and further leverage our fixed expenses . we will be bringing in yarn with the highest cotton cost in our first quarter of fiscal year 2012 , and expect the cotton cost to decline over the remaining quarters . as this yarn flows through our manufacturing process and the finished goods are sold , we expect the highest cost inventory will be in our cost of sales during our second and third quarters of fiscal year 2012 , impacting gross margins most significantly in these quarters . 3 ) selling , general and administration costs are expected to decrease as a percentage of sales , as well as in gross dollars , from fiscal year 2011 due primarily to fiscal year 2011 including some one-time expenses that are not expected to repeat in fiscal year 2012 . 4 ) the effective tax rate for fiscal year 2012 is expected to be approximately 24 % . 5 ) capital expenditures are expected to be approximately $ 10 million for fiscal year 2012 , which includes about $ 4 to $ 5 million 16 to increase our textile and sewing capacity in order to meet expected sales growth . depreciation and amortization , including non-cash compensation , is expected to also be approximately $ 10 million . 6 ) fiscal year 2012 free cash flows are expected to be approximately $ 20 million and are expected to be used to reduce debt obligations and for other corporate purposes . in fiscal year 2012 , we will face challenging market conditions resulting from the volatile cotton market , inflationary pressures and general economic conditions which continue to impact discretionary spending . although we believe we have taken these risks , as well as other factors , into consideration as we determined our guidance for fiscal year 2012 , the significance of the challenges , many of which our outside of our control , creates heightened risk to the volatility of our earnings in the upcoming fiscal year . in addition , although we believe that the assumptions described above are reasonable , if any of the assumptions proves to be incorrect , our results will differ from our expectations . results of operations overview fiscal year 2011 marked another year of growth for delta apparel , inc. and our eighth consecutive year of record revenue . higher selling prices , coupled with continued marketing initiatives to gain new customers and expand business relationships with existing customers , drove organic sales growth of 7.1 % during fiscal year 2011 on top of the 14 % organic growth achieved in fiscal year 2010. the organic sales growth , coupled with the inclusion of revenue from the acquisition of the cotton exchange , resulted in record sales of $ 475.2 million , an increase of $ 50.8 million , or 12.0 % , from the prior year . our operating profit increased $ 5.1 million to $ 25.3 million , or 5.3 % of sales , in fiscal year 2011 , resulting in net income of $ 17.3 million , or $ 1.98 per diluted share . our effective tax rate was 23.6 % in fiscal year 2011 compared to 26.8 % in the prior year as we further developed our tax planning strategies . in addition to growing our top line and expanding our profits , we also continued to focus on managing the capital in the business . the rise of cotton prices during the year and resulting increases in selling prices significantly increased our net working capital requirements . even with the increased investment in working capital , we generated positive cash flows from operations during fiscal year 2011. we continued to invest in the growth of our business through the acquisition of the cotton exchange in july 2011 , and with capital expenditures to further expand our manufacturing capacity , lower our costs and improve our information technology platforms . overall , we believe we have many opportunities to continue our sales growth and further improve our profitability in the upcoming years . in fiscal year 2012 , we will face challenging market conditions resulting from the volatile cotton market , inflationary pressures and general economic conditions which continue to impact discretionary spending . we believe our broad channels of distribution and diversified product offerings , along with our prudent capital management , should serve us well during these more challenging times . quarterly financial data for information regarding quarterly financial data , refer to note 16 - quarterly financial information ( unaudited ) to the consolidated financial statements , which information is incorporated herein by reference . story_separator_special_tag note 2 to our consolidated financial statements includes a summary of the significant accounting policies or methods used in the preparation of our consolidated financial statements . revenue recognition revenues from product sales are recognized when ownership is transfered to the customer , which includes not only the passage of title , but also the transfer of the risk of loss related to the product . at this point , the sales price is fixed and determinable , and we are reasonably assured of the collectibility of the sale . the majority of our sales are shipped fob shipping point and revenue is therefore recognized when the goods are shipped to the customer . for sales that are shipped fob destination point , we do not recognize the revenue until the goods are received by the customer . shipping and handling charges billed to our customers are 21 included in net revenue and the related costs are included in cost of goods sold . revenues are reported on net sales basis , which is computed by deducting product returns , discounts and estimated returns and allowances . we estimate returns and allowances on an ongoing basis by considering historical and current trends . accounts receivable and related reserves in the normal course of business , we extend credit to our customers based upon defined credit criteria . accounts receivable , as shown on our consolidated balance sheet , are net of related reserves . we estimate the net collectibility of our accounts receivable and establish an allowance for doubtful accounts based upon this assessment . in situations where we are aware of a specific customer 's inability to meet its financial obligation , such as in the case of a bankruptcy filing , a specific reserve for bad debts is recorded against amounts due to reduce the net recognized receivable to the amount reasonably expected to be collected . for all other customers , reserves are determined through analysis of the aging of accounts receivable balances , historical bad debts , customer concentrations , customer credit-worthiness , current economic trends and changes in customer payment terms . in addition , reserves are established for other concessions that have been extended to customers , including advertising , markdowns and other accommodations , net of historical recoveries . these reserves are determined based upon historical deduction trends and evaluation of current market conditions . significant changes in customer concentration or payment terms , deterioration of customer credit-worthiness or further weakening in economic trends could have a significant impact on the collectibility of receivables and our operating results . inventories and related reserves we state inventories at the lower of cost or market using the first-in , first-out method . inventory cost includes materials , labor and manufacturing overhead on manufactured inventory , and all direct and associated costs , including inbound freight , to acquire sourced products . we regularly review inventory quantities on hand and record reserves for obsolescence , excess quantities , irregulars and slow moving inventory based on historical selling prices , current market conditions , and forecasted product demand to reduce inventory to its net realizable value . if actual market conditions are less favorable than those projected , or if sell-through of the inventory is more difficult than anticipated , additional inventory reserves may be required . goodwill and contingent consideration goodwill and definite-lived intangibles were recorded in conjunction with our acquisitions of junkfood clothing company and art gun . we did not record any indefinite-lived intangibles associated with either of these acquisitions . goodwill represents the excess of the purchase price and related costs over the value assigned to net tangible and identifiable intangible assets of businesses acquired . goodwill must be tested for impairment at least annually , or more frequently if events or changes in circumstances indicate that the carrying amount may be impaired , and is required to be written down when impaired . the goodwill impairment testing process involves the use of significant assumptions , estimates and judgments with respect to a variety of factors , including sales , gross margins , selling , general and administrative expenses , capital expenditures , cash flows and the selection of an appropriate discount rate , all of which are subject to inherent uncertainties and subjectivity . when we perform goodwill impairment testing , our assumptions are based on annual business plans and other forecasted results . we select a discount rate , which is used to reflect market-based estimates of the risks associated with the projected cash flows , based on the best information available as of the date of the impairment assessment . see note 2 ( m ) - significant accounting policies to the consolidated financial statements for further information regarding our remeasurement of contingent consideration and testing for goodwill impairment , which information is herein incorporated by reference . given the current macro-economic environment and the uncertainties regarding its potential impact on our business , there can be no assurance that our estimates and assumptions used in our impairment tests will prove to be accurate predictions of the future . if our assumptions regarding forecasted cash flows are not achieved , it is possible that an impairment review may be triggered and goodwill may be determined to be impaired . stock-based compensation stock-based compensation cost is accounted for under the provisions of fasb codification no . 718 , compensation – stock compensation ( “ asc 718 ” ) , the securities and exchange commission staff accounting bulletin no . 107 ( `` sab 107 `` ) , and the securities and exchange commission staff accounting bulletin no . 110 ( `` sab 110 `` ) . asc 718 requires all stock-based payments to employees , including grants of employee stock options , to be recognized as expense over the vesting period using a fair value method . we estimate the fair value of stock-based compensation using the black-scholes options pricing model
| liquidity and capital resources credit facility and other financial obligations on may 27 , 2011 , delta apparel , soffe , junkfood , to the game , art gun and tcx entered into a fourth amended and restated loan and security agreement ( the “ amended loan agreement ” ) with the financial institutions named in the amended loan agreement as lenders , wells fargo bank , national association , as administrative agent , bank of america , n.a. , as syndication agent , wells fargo capital finance , llc , as sole lead arranger , and wells fargo capital finance , llc and merrill lynch , pierce , fenner & smith incorporated , as joint bookrunners . in connection with the amended loan agreement , israel discount bank of new york was removed from the syndicate of lenders under the credit facility , and bank of america , n.a . was added to the syndicate of lenders . pursuant to the amended loan agreement , the maturity of the loans under the previously existing credit facility was extended to may 26 , 2016 and the line of credit was increased to $ 145 million ( subject to borrowing base limitations ) , which represents an increase of $ 35 million in the amount that was previously available under the credit facility . under the amended loan agreement , provided that no event of default exists , we have the option to increase the maximum credit available under the facility to $ 200 million ( subject to borrowing base limitations ) , conditioned upon the agent 's ability to secure additional commitments and customary closing conditions . at july 2 , 2011 , we had $ 75.9 million outstanding under our credit facility at an average interest rate of 1.8 % , and had the ability to borrow an additional $ 59.1 million .
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this platform enables a user via a single “ identity ” to access and utilize services and features regardless of how the user is connected to the internet , whether it be from a desktop device or a mobile device . in january 2012 , our direct sales representatives began selling our hosted telecommunications products and services . we have experienced significant growth in our network services revenue quarter-over-quarter . revenues recognized during the three months ended march 31 , 2012 , june 30 , 2012 , september 30 , 2012 and december 31 , 2012 were $ 75,000 , $ 168,000 , $ 235,000 , and $ 327,000 , respectively . in june 2012 , we began selling broadband internet connection services and during the year ended december 31 , 2012 , the company generated approximately $ 26,000 in revenue from these services . as of december 31 , 2012 , our backlog is $ 2,374,000 as compared to $ 155,000 at december 31 , 2011. backlog represents contracts signed with no service or payment provided at december 31 , 2012 . 23 restructuring and other charges in july 2011 , we initiated plans to restructure and reduce costs in our operations as a result of the continued lack of profitability and other challenges in our seminar sales channel for our storesonline segment . restructurings began in the third quarter of 2011 in an effort to better position our company for long-term growth , future profitability , greater competitiveness and improved efficiency across our business . actions taken in connection with our restructuring plan include the suspension of our direct mail marketing campaigns and sales of our products and services through our storesonline seminar channel , refinement of our product portfolio focused towards recurring subscription-based products and services , and redeployment of our sales and marketing resources in an effort to increase our direct sales , inside sales , and online sales channels . through these initiatives we incurred aggregate pre-tax restructuring charges and transition expenses of approximately $ 1,259,000 during the year ended december 31 , 2011 , of which approximately $ 1,050,000 was recorded for inventory write-downs , unused direct-response advertising , and intangible asset impairment . the remaining amount relates to the abandonment of an operating lease agreement . there were no restructuring expenses for the year ended december 31 , 2012. critical accounting policies and estimates our consolidated financial statements have been prepared in accordance with us gaap and necessarily included certain estimates and judgments made by management . the following is a list of accounting policies that we believe are the most critical in understanding our consolidated financial position , results of operations or cash flows and that may require management to make subjective or complex judgments about matters that are inherently uncertain . revenue recognition in general , we recognize revenue when all of the following conditions are satisfied : ( 1 ) there is persuasive evidence of an arrangement ; ( 2 ) the product or service has been provided to the customer ; ( 3 ) the amount of fees to be paid by the customer is fixed or determinable ; and ( 4 ) the collection of our fees is probable . we recognize revenue from our web services and network services segments on an accrual basis and revenue from our storesonline segment on a cash basis . specifics to revenue category are as follows : software licenses and dvd training courses sold under eptas are recognized as revenue upon receipt of cash from customers and not at the time of sale . accounting guidance requires revenue to be deferred until customer payments are received as collection of the original principal balance is deemed not probable based on historical collection rates . we enter into agreements where revenue is derived from multiple deliverables including any mix of products and or services . for these arrangements , we determine whether the delivered item ( s ) has value to the customer on a stand-alone basis , and in the event the arrangement includes a general right of return relative to the delivered item ( s ) , whether the delivery or performance of the undelivered item ( s ) is considered probable and substantially in our control . if these criteria are met , the arrangement consideration is allocated to the separate units of accounting based on each unit 's relative selling price . if these criteria are not met , the arrangement is accounted for as a single unit of accounting which would result in revenue being recognized ratably over the contract term or deferred until the earlier of when such criteria are met or when the last undelivered element is delivered . the amount of product and services revenue recognized for arrangements with multiple deliverables is impacted by the allocation of arrangement consideration to the deliverables in the arrangement based on the relative selling prices . in determining our selling prices , we apply the selling price hierarchy using vendor specific objective evidence ( vsoe ) when available , third-party evidence of selling price ( “ tpe ” ) if vsoe does not exist , and best estimated selling price ( “ besp ” ) if neither vsoe nor tpe is available . we are typically not able to determine vsoe on our products and services . vsoe of fair value for elements of an arrangement is based upon the normal pricing and discounting practices for a deliverable when sold separately . we are typically not able to determine tpe for our products or services . tpe is determined based on competitor prices for similar deliverables when sold separately . generally , our offerings contain a significant level of differentiation such that the comparable pricing of products with similar functionality is difficult to obtain . furthermore , we are unable to reliably determine what similar competitor products ' selling prices are on a stand-alone basis . story_separator_special_tag selling and marketing expenses decreased 99 % or $ 17,716,000 , to $ 244,000 for the year ended december 31 , 2012 as compared to $ 17,960,000 for the year ended december 31 , 2011. selling and marketing expense as a percentage of revenue decreased to 2 % in the current year from 39 % in prior year . the decrease in total selling and marketing expenses as well as selling and marketing expense as a percentage of revenue are primarily due to the suspension of direct mail seminars in july 2011 , which resulted in a more significant reduction in selling and marketing expenses than the reduction in revenue as a result of the continuation of revenue received on the collection of principal on epta contracts . the selling and marketing expenses associated getting attendees to the seminars were a significant part of historical selling and marketing expenses . general and administrative general and administrative expenses consist of payroll and related expenses for executive , accounting and administrative personnel , legal , accounting and other professionals , finance company service fees , and other general corporate expenses . general and administrative expenses decreased 31 % or $ 3,118,000 , to $ 6,890,000 for the year ended december 31 , 2012 as compared to $ 10,008,000 for the year ended december 31 , 2011. the decrease is primarily due to a reduction in payroll and related expenses , accounting fees , legal , and servicing fees on our epta contracts . as of december 31 , 2012 , the company had 20 employees in customer support , and 27 in finance , legal and business development , collections , purchasing and other general administration . however , as of december 31 , 2011 , the company had 42 employees in customer support , and 31 in finance , legal and business development , collections , purchasing and other general administration . research and development research and development expenses primarily consist of payroll and related expenses , related to the development of new products and services for storesonline customers . research and development expenses decreased 62 % or $ 703,000 , to $ 437,000 for the year ended december 31 , 2012 as compared to $ 1,140,000 for the year ended december 31 , 2011. the decrease was primarily attributable to a decrease in our engineering head count dedicated to this segment . as of december 31 , 2012 , the company had 19 employees in engineering and it support . however , as of december 31 , 2011 , the company had 22 employees in engineering and it support . in addition to the overall reduction in headcount , more focus was placed on the development and improvement to our hosted telecommunications products and services during 2012. other income other income primarily relates to epta contracts , which generally carry an 18 % simple interest rate . other income decreased 59 % or $ 2,755,000 , to $ 1,934,000 for the year ended december 31 , 2012 as compared to $ 4,689,000 for the year ended december 31 , 2011. this decrease is primarily due to the decrease in outstanding epta receivables as cash is collected and uncollectable accounts are written off . operating results of crexendo web services segment ( in thousands ) replace_table_token_8_th 30 year ended december 31 , 2012 compared to year ended december 31 , 2011 revenue crexendo web services segment revenue increased 8 % or $ 190,000 , to $ 2,505,000 for the year ended december 31 , 2012 as compared to $ 2,315,000 for the year ended december 31 , 2011. the increase in revenue from the prior year is primarily due to an increase in direct sales representatives , which increased from an average of 8 direct sales representatives for the year ended december 31 , 2011 to an average of 17 sales representatives for the year ended december 31 , 2012. revenue from crexendo web services is generated primarily through search engine optimization services , link building , paid search management services , conversion rate optimization services , and website design and development services . a substantial portion of crexendo web services revenue is generated through six to twelve month service contracts . as such , crexendo web services revenues will initially be seen through fulfillment of our backlog . below is a table which displays the crexendo web services revenue backlog as of december 31 , 2012 and 2011 , which is expected to be recognized as revenue within the next twelve months ( in thousands ) : crexendo web services backlog as of december 31 , 2012 $ 1,135 crexendo web services backlog as of december 31 , 2011 $ 1,142 cost of revenue cost of revenue consists primarily of salaries and outsourcing fees related to fulfillment of our web services . cost of revenue increased 3 % or $ 58,000 , to $ 1,859,000 for the year ended december 31 , 2012 as compared to $ 1,801,000 for the year ended december 31 , 2011. selling and marketing selling and marketing expenses consist primarily of salaries and benefits , as well as advertising expenses . selling and marketing expense decreased 31 % or $ 814,000 , to $ 1,846,000 for the year ended december 31 , 2012 as compared to $ 2,660,000 for the year ended december 31 , 2011. the decrease was primarily attributable to a decrease in sales representatives and other marketing activity solely focused on crexendo web services sales with the increased focus on selling hosted telecommunications products and services starting in january 2012. general and administrative general and administrative expenses consist of payroll and related expenses for administrative personnel . general and administrative expenses increased 99 % or $ 1,822,000 , to $ 3,654,000 for the year ended december 31 , 2012 as compared to $ 1,832,000 for the year ended december 31 , 2011. general and administrative expenses for the year ended december 31
| liquidity and capital resources credit facility and other financial obligations on may 27 , 2011 , delta apparel , soffe , junkfood , to the game , art gun and tcx entered into a fourth amended and restated loan and security agreement ( the “ amended loan agreement ” ) with the financial institutions named in the amended loan agreement as lenders , wells fargo bank , national association , as administrative agent , bank of america , n.a. , as syndication agent , wells fargo capital finance , llc , as sole lead arranger , and wells fargo capital finance , llc and merrill lynch , pierce , fenner & smith incorporated , as joint bookrunners . in connection with the amended loan agreement , israel discount bank of new york was removed from the syndicate of lenders under the credit facility , and bank of america , n.a . was added to the syndicate of lenders . pursuant to the amended loan agreement , the maturity of the loans under the previously existing credit facility was extended to may 26 , 2016 and the line of credit was increased to $ 145 million ( subject to borrowing base limitations ) , which represents an increase of $ 35 million in the amount that was previously available under the credit facility . under the amended loan agreement , provided that no event of default exists , we have the option to increase the maximum credit available under the facility to $ 200 million ( subject to borrowing base limitations ) , conditioned upon the agent 's ability to secure additional commitments and customary closing conditions . at july 2 , 2011 , we had $ 75.9 million outstanding under our credit facility at an average interest rate of 1.8 % , and had the ability to borrow an additional $ 59.1 million .
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this platform enables a user via a single “ identity ” to access and utilize services and features regardless of how the user is connected to the internet , whether it be from a desktop device or a mobile device . in january 2012 , our direct sales representatives began selling our hosted telecommunications products and services . we have experienced significant growth in our network services revenue quarter-over-quarter . revenues recognized during the three months ended march 31 , 2012 , june 30 , 2012 , september 30 , 2012 and december 31 , 2012 were $ 75,000 , $ 168,000 , $ 235,000 , and $ 327,000 , respectively . in june 2012 , we began selling broadband internet connection services and during the year ended december 31 , 2012 , the company generated approximately $ 26,000 in revenue from these services . as of december 31 , 2012 , our backlog is $ 2,374,000 as compared to $ 155,000 at december 31 , 2011. backlog represents contracts signed with no service or payment provided at december 31 , 2012 . 23 restructuring and other charges in july 2011 , we initiated plans to restructure and reduce costs in our operations as a result of the continued lack of profitability and other challenges in our seminar sales channel for our storesonline segment . restructurings began in the third quarter of 2011 in an effort to better position our company for long-term growth , future profitability , greater competitiveness and improved efficiency across our business . actions taken in connection with our restructuring plan include the suspension of our direct mail marketing campaigns and sales of our products and services through our storesonline seminar channel , refinement of our product portfolio focused towards recurring subscription-based products and services , and redeployment of our sales and marketing resources in an effort to increase our direct sales , inside sales , and online sales channels . through these initiatives we incurred aggregate pre-tax restructuring charges and transition expenses of approximately $ 1,259,000 during the year ended december 31 , 2011 , of which approximately $ 1,050,000 was recorded for inventory write-downs , unused direct-response advertising , and intangible asset impairment . the remaining amount relates to the abandonment of an operating lease agreement . there were no restructuring expenses for the year ended december 31 , 2012. critical accounting policies and estimates our consolidated financial statements have been prepared in accordance with us gaap and necessarily included certain estimates and judgments made by management . the following is a list of accounting policies that we believe are the most critical in understanding our consolidated financial position , results of operations or cash flows and that may require management to make subjective or complex judgments about matters that are inherently uncertain . revenue recognition in general , we recognize revenue when all of the following conditions are satisfied : ( 1 ) there is persuasive evidence of an arrangement ; ( 2 ) the product or service has been provided to the customer ; ( 3 ) the amount of fees to be paid by the customer is fixed or determinable ; and ( 4 ) the collection of our fees is probable . we recognize revenue from our web services and network services segments on an accrual basis and revenue from our storesonline segment on a cash basis . specifics to revenue category are as follows : software licenses and dvd training courses sold under eptas are recognized as revenue upon receipt of cash from customers and not at the time of sale . accounting guidance requires revenue to be deferred until customer payments are received as collection of the original principal balance is deemed not probable based on historical collection rates . we enter into agreements where revenue is derived from multiple deliverables including any mix of products and or services . for these arrangements , we determine whether the delivered item ( s ) has value to the customer on a stand-alone basis , and in the event the arrangement includes a general right of return relative to the delivered item ( s ) , whether the delivery or performance of the undelivered item ( s ) is considered probable and substantially in our control . if these criteria are met , the arrangement consideration is allocated to the separate units of accounting based on each unit 's relative selling price . if these criteria are not met , the arrangement is accounted for as a single unit of accounting which would result in revenue being recognized ratably over the contract term or deferred until the earlier of when such criteria are met or when the last undelivered element is delivered . the amount of product and services revenue recognized for arrangements with multiple deliverables is impacted by the allocation of arrangement consideration to the deliverables in the arrangement based on the relative selling prices . in determining our selling prices , we apply the selling price hierarchy using vendor specific objective evidence ( vsoe ) when available , third-party evidence of selling price ( “ tpe ” ) if vsoe does not exist , and best estimated selling price ( “ besp ” ) if neither vsoe nor tpe is available . we are typically not able to determine vsoe on our products and services . vsoe of fair value for elements of an arrangement is based upon the normal pricing and discounting practices for a deliverable when sold separately . we are typically not able to determine tpe for our products or services . tpe is determined based on competitor prices for similar deliverables when sold separately . generally , our offerings contain a significant level of differentiation such that the comparable pricing of products with similar functionality is difficult to obtain . furthermore , we are unable to reliably determine what similar competitor products ' selling prices are on a stand-alone basis . story_separator_special_tag selling and marketing expenses decreased 99 % or $ 17,716,000 , to $ 244,000 for the year ended december 31 , 2012 as compared to $ 17,960,000 for the year ended december 31 , 2011. selling and marketing expense as a percentage of revenue decreased to 2 % in the current year from 39 % in prior year . the decrease in total selling and marketing expenses as well as selling and marketing expense as a percentage of revenue are primarily due to the suspension of direct mail seminars in july 2011 , which resulted in a more significant reduction in selling and marketing expenses than the reduction in revenue as a result of the continuation of revenue received on the collection of principal on epta contracts . the selling and marketing expenses associated getting attendees to the seminars were a significant part of historical selling and marketing expenses . general and administrative general and administrative expenses consist of payroll and related expenses for executive , accounting and administrative personnel , legal , accounting and other professionals , finance company service fees , and other general corporate expenses . general and administrative expenses decreased 31 % or $ 3,118,000 , to $ 6,890,000 for the year ended december 31 , 2012 as compared to $ 10,008,000 for the year ended december 31 , 2011. the decrease is primarily due to a reduction in payroll and related expenses , accounting fees , legal , and servicing fees on our epta contracts . as of december 31 , 2012 , the company had 20 employees in customer support , and 27 in finance , legal and business development , collections , purchasing and other general administration . however , as of december 31 , 2011 , the company had 42 employees in customer support , and 31 in finance , legal and business development , collections , purchasing and other general administration . research and development research and development expenses primarily consist of payroll and related expenses , related to the development of new products and services for storesonline customers . research and development expenses decreased 62 % or $ 703,000 , to $ 437,000 for the year ended december 31 , 2012 as compared to $ 1,140,000 for the year ended december 31 , 2011. the decrease was primarily attributable to a decrease in our engineering head count dedicated to this segment . as of december 31 , 2012 , the company had 19 employees in engineering and it support . however , as of december 31 , 2011 , the company had 22 employees in engineering and it support . in addition to the overall reduction in headcount , more focus was placed on the development and improvement to our hosted telecommunications products and services during 2012. other income other income primarily relates to epta contracts , which generally carry an 18 % simple interest rate . other income decreased 59 % or $ 2,755,000 , to $ 1,934,000 for the year ended december 31 , 2012 as compared to $ 4,689,000 for the year ended december 31 , 2011. this decrease is primarily due to the decrease in outstanding epta receivables as cash is collected and uncollectable accounts are written off . operating results of crexendo web services segment ( in thousands ) replace_table_token_8_th 30 year ended december 31 , 2012 compared to year ended december 31 , 2011 revenue crexendo web services segment revenue increased 8 % or $ 190,000 , to $ 2,505,000 for the year ended december 31 , 2012 as compared to $ 2,315,000 for the year ended december 31 , 2011. the increase in revenue from the prior year is primarily due to an increase in direct sales representatives , which increased from an average of 8 direct sales representatives for the year ended december 31 , 2011 to an average of 17 sales representatives for the year ended december 31 , 2012. revenue from crexendo web services is generated primarily through search engine optimization services , link building , paid search management services , conversion rate optimization services , and website design and development services . a substantial portion of crexendo web services revenue is generated through six to twelve month service contracts . as such , crexendo web services revenues will initially be seen through fulfillment of our backlog . below is a table which displays the crexendo web services revenue backlog as of december 31 , 2012 and 2011 , which is expected to be recognized as revenue within the next twelve months ( in thousands ) : crexendo web services backlog as of december 31 , 2012 $ 1,135 crexendo web services backlog as of december 31 , 2011 $ 1,142 cost of revenue cost of revenue consists primarily of salaries and outsourcing fees related to fulfillment of our web services . cost of revenue increased 3 % or $ 58,000 , to $ 1,859,000 for the year ended december 31 , 2012 as compared to $ 1,801,000 for the year ended december 31 , 2011. selling and marketing selling and marketing expenses consist primarily of salaries and benefits , as well as advertising expenses . selling and marketing expense decreased 31 % or $ 814,000 , to $ 1,846,000 for the year ended december 31 , 2012 as compared to $ 2,660,000 for the year ended december 31 , 2011. the decrease was primarily attributable to a decrease in sales representatives and other marketing activity solely focused on crexendo web services sales with the increased focus on selling hosted telecommunications products and services starting in january 2012. general and administrative general and administrative expenses consist of payroll and related expenses for administrative personnel . general and administrative expenses increased 99 % or $ 1,822,000 , to $ 3,654,000 for the year ended december 31 , 2012 as compared to $ 1,832,000 for the year ended december 31 , 2011. general and administrative expenses for the year ended december 31
| cash and cash equivalents cash and cash equivalents decreased 14 % or $ 1,218,000 , to $ 7,440,000 for the year ended december 31 , 2012 as compared to $ 8,658,000 for the year ended december 31 , 2011. for the year ended december 31 , 2012 , we used cash flows for operating activities of $ 446,000 compared to using cash flows for operating activities of $ 1,648,000 for the year ended december 31 , 2011 . 33 trade receivables trade receivables and long-term trade receivables , net of allowance for doubtful accounts , decreased 78 % or $ 12,079,000 , to $ 3,438,000 for the year ended december 31 , 2012 as compared to $ 15,517,000 for the year ended december 31 , 2011. long-term trade receivables , net of allowance for doubtful accounts , decreased 94 % or $ 5,702,000 , to $ 395,000 for the year ended december 31 , 2012 as compared to $ 6,097,000 for the year ended december 31 , 2011. we offered our customers an installment contract with payment terms between 24 and 36 months , as one of several payment options . the payments that become due more than 12 months after the end of the fiscal period are classified as long-term trade receivables . trade receivables will continue to decline as cash is collected on epta contracts . accounts payable accounts payable decreased 64 % or $ 735,000 , to $ 418,000 for the year ended december 31 , 2012 as compared to $ 1,153,000 for the year ended december 31 , 2011. the aging of accounts payable as of december 31 , 2012 and 2011 was generally within our vendors ' terms of payment . contractual obligations the following table summarizes our significant contractual obligations as of december 31 , 2012 : replace_table_token_10_th — ( 1 ) payments are included in the period in which they are contractually required to be made . actual payments may be made prior to the contractually required date .
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current year highlights during the year ended december 31 , 2018 , overall sales increased compared to the year ended december 31 , 2017 primarily from improved sales in our ris business and in japan . positive net flows drove an increase in our investment portfolio and investment yields improved , however , interest credited rates were higher . a favorable change in net derivative gains ( losses ) was primarily the result of changes in foreign currency exchange rates and interest rates . while u.s. tax reform positively impacted net income in both 2018 and 2017 , the impact in 2017 was significantly larger . in addition , our annual actuarial assumption review negatively impacted results when compared to 2017. our results for 2017 included a loss from the operations of brighthouse that is reflected in discontinued operations . 67 the following represents segment level results and percentage contributions to total segment level adjusted earnings available to common shareholders for the year ended december 31 , 2018 : _ ( 1 ) excludes corporate & other adjusted loss available to common shareholders of $ 704 million . ( 2 ) consistent with gaap guidance for segment reporting , adjusted earnings is our gaap measure of segment performance . for additional information , see note 2 of the notes to the consolidated financial statements . 68 year ended december 31 , 2018 compared with the year ended december 31 , 2017 consolidated results - highlights net income ( loss ) available to metlife , inc. 's common shareholders up $ 1.1 billion : favorable change in net derivative gains ( losses ) of $ 1.4 billion ( $ 1.1 billion , net of income tax ) favorable change in results from divested businesses of $ 936 million ( $ 650 million , net of income tax ) included in continuing operations favorable change in income ( loss ) from discontinued operations , net of income tax , of $ 986 million net tax-related benefit in 2017 of $ 1.3 billion due to u.s. tax reform net unfavorable change from our annual actuarial assumption reviews of $ 395 million ( $ 297 million , net of income tax ) adjusted earnings available to common shareholders up $ 1.2 billion ( 1 ) see “ — results of operations — consolidated results ” and “ — non-gaap and other financial disclosures ” for reconciliations and definitions of non-gaap financial measures . consolidated results - adjusted earnings highlights adjusted earnings available to common shareholders up $ 1.2 billion : the primary drivers of the increase in adjusted earnings were higher net investment income due to a larger asset base and higher investment yields , the favorable impact of u.s. tax reform , other favorable tax items , favorable refinements to dac and certain insurance-related liabilities , lower expenses and favorable underwriting , partially offset by higher interest credited expenses and the net unfavorable change from our annual actuarial assumption review . our results for the year ended december 31 , 2018 included the following : a $ 349 million benefit from the irs audit settlement related to the tax treatment of a wholly-owned u.k. investment subsidiary of mlic , which was comprised of a $ 168 million tax benefit and a $ 181 million interest benefit favorable impact from u.s. tax reform of $ 179 million , which includes a $ 78 million charge related to a revision in the estimate from the enactment of this reform favorable reserve adjustment of $ 62 million , net of income tax , relating to certain variable annuity guarantees assumed from a former joint venture in japan a $ 37 million , net of income tax , favorable net insurance adjustment resulting from reserve and dac modeling improvements in our individual disability insurance business expenses associated with our previously announced unit cost initiative of $ 284 million , net of income tax a $ 63 million , net of income tax , charge due to a current period increase in our incurred but not reported ( “ ibnr ” ) life reserves , reflecting enhancements to our processes related to potential claims a $ 60 million , net of income tax , increase in litigation reserves unfavorable impact from our annual actuarial assumption review of $ 42 million , net of income tax our results for 2017 included the following : a tax charge of $ 298 million related to u.s. tax reform net tax-related charges of $ 139 million consisting of ( i ) a $ 180 million net tax charge related to the repatriation of approximately $ 3.0 billion of cash following the post-separation review of our capital needs , partially offset by a tax benefit associated with dividends from our non-u.s. operations , and ( ii ) a $ 41 million net tax-related benefit from the finalization of certain tax audits 69 expenses associated with our previously announced unit cost initiative of $ 102 million , net of income tax a $ 73 million , net of income tax , charge for expenses incurred related to a guaranty fund assessment for penn treaty network america insurance company ( “ penn treaty ” ) a $ 90 million , net of income tax , charge to increase certain ris policy reserves a favorable reserve adjustment of $ 55 million , net of income tax , resulting from modeling improvements in the reserving process for our life business a charge of $ 36 million , net of income tax , for lease impairments a benefit of $ 12 million , net of income tax , related to a refinement to prior period reinsurance receivables in australia for a more in-depth discussion of our consolidated results , see “ — results of operations — consolidated results , ” “ — results of operations — consolidated results — adjusted earnings ” and “ — results of operations — segment results and corporate & other . story_separator_special_tag we are able to limit or close certain products to new sales in order to manage exposures . business actions , such as shifting the sales focus to less interest rate sensitive products , can also mitigate this risk . in addition , the company is well diversified across product , distribution , and geography . certain of our businesses reported within our latin america , emea , and asia ( exclusive of our japan business ) segments are not significantly interest rate or market sensitive ; in particular , they have limited sensitivity to u.s. interest rates . the company 's primary exposure within these segments is insurance risk . we expect our non-u.s. businesses to grow faster than our u.s. businesses and , over time , to become a larger percentage of our total business . as a result of the foregoing , the company expects to be able to substantially mitigate the negative impact of a sustained low interest rate environment in the u.s. on the company 's profitability . based on a near to intermediate term analysis of a sustained lower interest rate environment in the u.s. , the company anticipates adjusted earnings will continue to increase , although at a slower growth rate . low interest rate scenario in formulating economic assumptions for its insurance contract assumptions , the company uses projections that it makes regarding interest rates . included in these assumptions is the projection that the 10-year treasury rate will rise from 2.69 % at december 31 , 2018 to 4.25 % in 8 years , by 2026 and remains level afterwards and that 10-year yields will reach 2.76 % , 2.84 % and 2.93 % by december 31 , 2019 , 2020 and 2021 , respectively . also included is the projection that the three-month libor rate will move from 2.81 % at december 31 , 2018 to 2.63 % , 2.41 % and 2.46 % by december 31 , 2019 , 2020 and 2021 , respectively . the low interest rate scenario reflects an assumed 100 basis point decline in all interest rate maturities compared to the base scenario from december 31 , 2018 through december 31 , 2021 ( the “ low interest rate scenario ” ) . the following summarizes the impact of the low interest rate scenario on our u.s. dollar and non-u.s. dollar denominated positions . in addition , we have included disclosure on the potential impact on 2019 , 2020 and 2021 net income using the same low interest rate scenario on the mark-to-market of derivative positions that do not qualify as accounting hedges . below is a summary of the rates we used for the low interest rate scenario versus our base scenario through 2021. these rates represent the most relevant short-term and long-term rates for our base scenario which uses libor as the benchmark rate . see “ risk factors — economic environment and capital risks — difficult economic conditions may adversely affect our business , results of operations and financial condition — interest rate risk ” for information regarding the potential change from libor to sofr . replace_table_token_6_th the low interest rate scenario assumes the three-month libor to be 1.81 % and the 10-year u.s. treasury rate to be 1.69 % at december 31 , 2018. we assume the low interest rate scenario to be 100 basis points lower than the base scenario until december 31 , 2021 for all interest rate maturities . in addition , in the low interest rate scenario , we assume credit spreads to remain constant from december 31 , 2018 through the end of 2021 as compared to our base scenario . further , we also include the impact of low interest rates on our pension and postretirement plan expenses . we allocate this impact across our segments and it is included in the segment discussion below . the discount rate used to value these plans is tied to high quality corporate bond yields . accordingly , an extended low interest rate environment will result in increased pension and other postretirement benefit liabilities . however , these liabilities are offset by corresponding returns on the fixed income portfolio of pension and other postretirement benefit plan assets resulting in an overall decrease in expense . 75 hypothetical impact to adjusted earnings based on the above assumptions , we estimate an unfavorable combined long-term and short-term interest rate impact on our consolidated adjusted earnings from the low interest rate scenario of approximately $ 15 million in 2019 , $ 140 million in 2020 and $ 265 million in 2021. under the low interest rate scenario , our long-term businesses are negatively impacted by the larger gap between new money yields and the yield on assets rolling off the portfolio . however , there are positive offsets under the low interest rate scenario as short-term rates are much lower than the base scenario rates and the yield curve steepens beyond 2018. for example , our securities lending business performs better than our base scenario because it is driven by the slope of the yield curve rather than by the level of interest rates . in addition , derivative income is higher primarily due to our receiver swaps where we receive a fixed rate and pay a floating rate . further , the favorable derivative impact under the low interest rate scenario will decrease in 2020 and 2021 compared to 2019. this is driven by higher rates on forward derivative positions protection that begin in 2020. hypothetical impact to our mark-to-market derivative positions in addition to its impact on adjusted earnings , we estimated the effect of the low interest rate scenario on the mark-to-market of our derivative positions that do not qualify as accounting hedges . we applied the low interest rate scenario to these derivatives and compared the impact to that from interest rates in our base scenario . we hold a significant position in long-duration receive-fixed interest rate
| cash and cash equivalents cash and cash equivalents decreased 14 % or $ 1,218,000 , to $ 7,440,000 for the year ended december 31 , 2012 as compared to $ 8,658,000 for the year ended december 31 , 2011. for the year ended december 31 , 2012 , we used cash flows for operating activities of $ 446,000 compared to using cash flows for operating activities of $ 1,648,000 for the year ended december 31 , 2011 . 33 trade receivables trade receivables and long-term trade receivables , net of allowance for doubtful accounts , decreased 78 % or $ 12,079,000 , to $ 3,438,000 for the year ended december 31 , 2012 as compared to $ 15,517,000 for the year ended december 31 , 2011. long-term trade receivables , net of allowance for doubtful accounts , decreased 94 % or $ 5,702,000 , to $ 395,000 for the year ended december 31 , 2012 as compared to $ 6,097,000 for the year ended december 31 , 2011. we offered our customers an installment contract with payment terms between 24 and 36 months , as one of several payment options . the payments that become due more than 12 months after the end of the fiscal period are classified as long-term trade receivables . trade receivables will continue to decline as cash is collected on epta contracts . accounts payable accounts payable decreased 64 % or $ 735,000 , to $ 418,000 for the year ended december 31 , 2012 as compared to $ 1,153,000 for the year ended december 31 , 2011. the aging of accounts payable as of december 31 , 2012 and 2011 was generally within our vendors ' terms of payment . contractual obligations the following table summarizes our significant contractual obligations as of december 31 , 2012 : replace_table_token_10_th — ( 1 ) payments are included in the period in which they are contractually required to be made . actual payments may be made prior to the contractually required date .
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current year highlights during the year ended december 31 , 2018 , overall sales increased compared to the year ended december 31 , 2017 primarily from improved sales in our ris business and in japan . positive net flows drove an increase in our investment portfolio and investment yields improved , however , interest credited rates were higher . a favorable change in net derivative gains ( losses ) was primarily the result of changes in foreign currency exchange rates and interest rates . while u.s. tax reform positively impacted net income in both 2018 and 2017 , the impact in 2017 was significantly larger . in addition , our annual actuarial assumption review negatively impacted results when compared to 2017. our results for 2017 included a loss from the operations of brighthouse that is reflected in discontinued operations . 67 the following represents segment level results and percentage contributions to total segment level adjusted earnings available to common shareholders for the year ended december 31 , 2018 : _ ( 1 ) excludes corporate & other adjusted loss available to common shareholders of $ 704 million . ( 2 ) consistent with gaap guidance for segment reporting , adjusted earnings is our gaap measure of segment performance . for additional information , see note 2 of the notes to the consolidated financial statements . 68 year ended december 31 , 2018 compared with the year ended december 31 , 2017 consolidated results - highlights net income ( loss ) available to metlife , inc. 's common shareholders up $ 1.1 billion : favorable change in net derivative gains ( losses ) of $ 1.4 billion ( $ 1.1 billion , net of income tax ) favorable change in results from divested businesses of $ 936 million ( $ 650 million , net of income tax ) included in continuing operations favorable change in income ( loss ) from discontinued operations , net of income tax , of $ 986 million net tax-related benefit in 2017 of $ 1.3 billion due to u.s. tax reform net unfavorable change from our annual actuarial assumption reviews of $ 395 million ( $ 297 million , net of income tax ) adjusted earnings available to common shareholders up $ 1.2 billion ( 1 ) see “ — results of operations — consolidated results ” and “ — non-gaap and other financial disclosures ” for reconciliations and definitions of non-gaap financial measures . consolidated results - adjusted earnings highlights adjusted earnings available to common shareholders up $ 1.2 billion : the primary drivers of the increase in adjusted earnings were higher net investment income due to a larger asset base and higher investment yields , the favorable impact of u.s. tax reform , other favorable tax items , favorable refinements to dac and certain insurance-related liabilities , lower expenses and favorable underwriting , partially offset by higher interest credited expenses and the net unfavorable change from our annual actuarial assumption review . our results for the year ended december 31 , 2018 included the following : a $ 349 million benefit from the irs audit settlement related to the tax treatment of a wholly-owned u.k. investment subsidiary of mlic , which was comprised of a $ 168 million tax benefit and a $ 181 million interest benefit favorable impact from u.s. tax reform of $ 179 million , which includes a $ 78 million charge related to a revision in the estimate from the enactment of this reform favorable reserve adjustment of $ 62 million , net of income tax , relating to certain variable annuity guarantees assumed from a former joint venture in japan a $ 37 million , net of income tax , favorable net insurance adjustment resulting from reserve and dac modeling improvements in our individual disability insurance business expenses associated with our previously announced unit cost initiative of $ 284 million , net of income tax a $ 63 million , net of income tax , charge due to a current period increase in our incurred but not reported ( “ ibnr ” ) life reserves , reflecting enhancements to our processes related to potential claims a $ 60 million , net of income tax , increase in litigation reserves unfavorable impact from our annual actuarial assumption review of $ 42 million , net of income tax our results for 2017 included the following : a tax charge of $ 298 million related to u.s. tax reform net tax-related charges of $ 139 million consisting of ( i ) a $ 180 million net tax charge related to the repatriation of approximately $ 3.0 billion of cash following the post-separation review of our capital needs , partially offset by a tax benefit associated with dividends from our non-u.s. operations , and ( ii ) a $ 41 million net tax-related benefit from the finalization of certain tax audits 69 expenses associated with our previously announced unit cost initiative of $ 102 million , net of income tax a $ 73 million , net of income tax , charge for expenses incurred related to a guaranty fund assessment for penn treaty network america insurance company ( “ penn treaty ” ) a $ 90 million , net of income tax , charge to increase certain ris policy reserves a favorable reserve adjustment of $ 55 million , net of income tax , resulting from modeling improvements in the reserving process for our life business a charge of $ 36 million , net of income tax , for lease impairments a benefit of $ 12 million , net of income tax , related to a refinement to prior period reinsurance receivables in australia for a more in-depth discussion of our consolidated results , see “ — results of operations — consolidated results , ” “ — results of operations — consolidated results — adjusted earnings ” and “ — results of operations — segment results and corporate & other . story_separator_special_tag we are able to limit or close certain products to new sales in order to manage exposures . business actions , such as shifting the sales focus to less interest rate sensitive products , can also mitigate this risk . in addition , the company is well diversified across product , distribution , and geography . certain of our businesses reported within our latin america , emea , and asia ( exclusive of our japan business ) segments are not significantly interest rate or market sensitive ; in particular , they have limited sensitivity to u.s. interest rates . the company 's primary exposure within these segments is insurance risk . we expect our non-u.s. businesses to grow faster than our u.s. businesses and , over time , to become a larger percentage of our total business . as a result of the foregoing , the company expects to be able to substantially mitigate the negative impact of a sustained low interest rate environment in the u.s. on the company 's profitability . based on a near to intermediate term analysis of a sustained lower interest rate environment in the u.s. , the company anticipates adjusted earnings will continue to increase , although at a slower growth rate . low interest rate scenario in formulating economic assumptions for its insurance contract assumptions , the company uses projections that it makes regarding interest rates . included in these assumptions is the projection that the 10-year treasury rate will rise from 2.69 % at december 31 , 2018 to 4.25 % in 8 years , by 2026 and remains level afterwards and that 10-year yields will reach 2.76 % , 2.84 % and 2.93 % by december 31 , 2019 , 2020 and 2021 , respectively . also included is the projection that the three-month libor rate will move from 2.81 % at december 31 , 2018 to 2.63 % , 2.41 % and 2.46 % by december 31 , 2019 , 2020 and 2021 , respectively . the low interest rate scenario reflects an assumed 100 basis point decline in all interest rate maturities compared to the base scenario from december 31 , 2018 through december 31 , 2021 ( the “ low interest rate scenario ” ) . the following summarizes the impact of the low interest rate scenario on our u.s. dollar and non-u.s. dollar denominated positions . in addition , we have included disclosure on the potential impact on 2019 , 2020 and 2021 net income using the same low interest rate scenario on the mark-to-market of derivative positions that do not qualify as accounting hedges . below is a summary of the rates we used for the low interest rate scenario versus our base scenario through 2021. these rates represent the most relevant short-term and long-term rates for our base scenario which uses libor as the benchmark rate . see “ risk factors — economic environment and capital risks — difficult economic conditions may adversely affect our business , results of operations and financial condition — interest rate risk ” for information regarding the potential change from libor to sofr . replace_table_token_6_th the low interest rate scenario assumes the three-month libor to be 1.81 % and the 10-year u.s. treasury rate to be 1.69 % at december 31 , 2018. we assume the low interest rate scenario to be 100 basis points lower than the base scenario until december 31 , 2021 for all interest rate maturities . in addition , in the low interest rate scenario , we assume credit spreads to remain constant from december 31 , 2018 through the end of 2021 as compared to our base scenario . further , we also include the impact of low interest rates on our pension and postretirement plan expenses . we allocate this impact across our segments and it is included in the segment discussion below . the discount rate used to value these plans is tied to high quality corporate bond yields . accordingly , an extended low interest rate environment will result in increased pension and other postretirement benefit liabilities . however , these liabilities are offset by corresponding returns on the fixed income portfolio of pension and other postretirement benefit plan assets resulting in an overall decrease in expense . 75 hypothetical impact to adjusted earnings based on the above assumptions , we estimate an unfavorable combined long-term and short-term interest rate impact on our consolidated adjusted earnings from the low interest rate scenario of approximately $ 15 million in 2019 , $ 140 million in 2020 and $ 265 million in 2021. under the low interest rate scenario , our long-term businesses are negatively impacted by the larger gap between new money yields and the yield on assets rolling off the portfolio . however , there are positive offsets under the low interest rate scenario as short-term rates are much lower than the base scenario rates and the yield curve steepens beyond 2018. for example , our securities lending business performs better than our base scenario because it is driven by the slope of the yield curve rather than by the level of interest rates . in addition , derivative income is higher primarily due to our receiver swaps where we receive a fixed rate and pay a floating rate . further , the favorable derivative impact under the low interest rate scenario will decrease in 2020 and 2021 compared to 2019. this is driven by higher rates on forward derivative positions protection that begin in 2020. hypothetical impact to our mark-to-market derivative positions in addition to its impact on adjusted earnings , we estimated the effect of the low interest rate scenario on the mark-to-market of our derivative positions that do not qualify as accounting hedges . we applied the low interest rate scenario to these derivatives and compared the impact to that from interest rates in our base scenario . we hold a significant position in long-duration receive-fixed interest rate
| liquidity and capital sources in addition to the general description of liquidity and capital sources in “ — summary of the company 's primary sources and uses of liquidity and capital , ” the company 's primary sources of liquidity and capital are set forth below . see note 3 o f the notes to the consolidated financial statements for information regarding financing transactions related to the separation . global funding sources liquidity is provided by a variety of global funding sources , including funding agreements , credit and committed facilities and commercial paper . capital is provided by a variety of global funding sources , including short-term and long-term debt , the collateral financing arrangement , junior subordinated debt securities , preferred securities , equity securities and equity-linked securities . metlife , inc. maintains a shelf registration statement with the sec that permits the issuance of public debt , equity and hybrid securities . as a “ well-known seasoned issuer ” under sec rules , metlife , inc. 's shelf registration statement provides for automatic effectiveness upon filing and has no stated issuance capacity . the diversity of our global funding sources enhances our funding flexibility , limits dependence on any one market or source of funds and generally lowers the cost of funds . our primary global funding sources include : preferred stock in june 2018 , metlife , inc. issued 32,200 shares of 5.625 % non-cumulative preferred stock , series e ( the “ series e preferred stock ” ) with a $ 0.01 par value per share and a liquidation preference of $ 25,000 per share , for aggregate net proceeds of $ 780 million .
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a discussion regarding our financial condition and results of operations for the year ended december 31 , 2018 compared to the year ended december 31 , 2017 can be found under item 7 in our annual report on form 10-k for the fiscal year ended december 31 , 2018 , filed with the securities and exchange commission on february 21 , 2019. results of operations for the year ended december 31 , 2019 compared with the year ended december 31 , 2018 in 2019 , the company posted record sales , operating income , net income , diluted earnings per share , orders , backlog and operating cash flow . the company achieved these results from organic sales growth in both eig and emg , contributions from the 2019 acquisitions of gatan and pdt and 2018 acquisitions of spectro scientific , telular , forza , motec and soundcom , as well as from the company 's operational excellence initiatives . 25 the company 's record backlog , the full year impact of the 2019 acquisitions and continued focus on and implementation of operational excellence initiatives are expected to have a positive impact on the company 's 2020 results . net sales for 2019 were $ 5,158.6 million , an increase of $ 312.7 million or 6.5 % , compared with net sales of $ 4,845.9 million in 2018. the increase in net sales for 2019 was due to 2 % organic sales growth , a 5 % increase from acquisitions , partially offset by unfavorable foreign currency translation . eig net sales were $ 3,322.9 million in 2019 , an increase of 9.7 % , compared with $ 3,029.0 million in 2018. emg net sales were $ 1,835.7 million in 2019 , an increase of 1.0 % , compared with $ 1,816.9 million in 2018. total international sales for 2019 were $ 2,474.9 million or 48.0 % of net sales , an increase of $ 26.4 million or 1.1 % , compared with international sales of $ 2,448.5 million or 50.5 % of net sales in 2018. the increase in international sales was primarily driven by recent acquisitions . export shipments from the united states , which are included in total international sales , were $ 1,306.2 million in 2019 , an increase of $ 36.8 million or 2.9 % , compared with $ 1,269.4 million in 2018. orders for 2019 were $ 5,274.3 million , an increase of $ 222.5 million or 4.4 % , compared with $ 5,051.8 million in 2018. the increase in orders for 2019 was driven by the 2018 and 2019 acquisitions . the company 's backlog of unfilled orders at december 31 , 2019 was $ 1,717.9 million , an increase of $ 115.8 million or 7.2 % , compared with $ 1,602.1 million at december 31 , 2018. segment operating income for 2019 was $ 1,253.2 million , an increase of $ 107.3 million or 9.4 % , compared with segment operating income of $ 1,145.9 million in 2018. segment operating income , as a percentage of net sales , increased to 24.3 % in 2019 , compared with 23.6 % in 2018. the increase in segment operating income and segment operating margins for 2019 resulted primarily from the increase in net sales , as well as the benefits of the company 's operational excellence initiatives . cost of sales for 2019 was $ 3,370.9 million or 65.3 % of net sales , an increase of $ 184.6 million or 5.8 % , compared with $ 3,186.3 million or 65.8 % of net sales for 2018. cost of sales increased primarily due to the increase in net sales noted above . selling , general and administrative expenses for 2019 were $ 610.3 million or 11.8 % of net sales , an increase of $ 26.3 million or 4.5 % , compared with $ 584.0 million or 12.1 % of net sales in 2018. selling , general and administrative expenses increased primarily due to the increase in net sales noted above . consolidated operating income was $ 1,177.4 million or 22.8 % of net sales for 2019 , an increase of $ 101.9 million or 9.5 % , compared with $ 1,075.5 million or 22.2 % of net sales in 2018. interest expense was $ 88.5 million for 2019 , an increase of $ 6.3 million or 7.7 % , compared with $ 82.2 million in 2018. the interest expense increase for 2019 was primarily driven by the 2018 private placement senior notes issued in december 2018 ( $ 475 million and 75 million euros ) and january 2019 ( $ 100 million ) , partially offset by a decrease related to the repayment in full , at maturity , of $ 80 million in aggregate principal amount of 6.35 % private placement senior notes and $ 160 million in aggregate principal amount of 7.08 % private placement senior notes in the third quarter of 2018 , $ 65 million in aggregate principal amount of 7.18 % private placement senior notes in the fourth quarter of 2018 , and $ 100 million in aggregate principal amount of 6.03 % private placement senior notes in the fourth quarter of 2019. other expense , net was $ 19.2 million for 2019 , an increase of $ 13.6 million , compared with $ 5.6 million in 2018. the other expense , net increase for 2019 was primarily due to lower defined benefit pension income included in other expenses . 26 the effective tax rate for 2019 was 19.5 % , compared with 21.2 % in 2018. the lower rate for 2019 mainly reflects higher year over year tax benefits related to share-based payment transactions as well as lower tax cost on foreign source income . story_separator_special_tag in order to evaluate the sensitivity of the goodwill impairment test to changes in the fair value calculations , the company applied a hypothetical 10 % decrease in fair values of each reporting unit . the 2019 results ( expressed as a percentage of carrying value for the respective reporting unit ) showed that , despite the hypothetical 10 % decrease in fair value , the fair values of the company 's reporting units still exceeded their respective carrying values by 77 % to 1,074 % for each of the company 's reporting units . the impairment test for indefinite-lived intangibles other than goodwill ( primarily trademarks and trade names ) consists of a comparison of the fair value of the indefinite-lived intangible asset to the carrying value of the asset as of the impairment testing date . the company can elect to perform a qualitative analysis to determine if it is more likely than not that the fair values of its indefinite-lived intangible assets are less than the respective carrying values of those assets . the company elected to bypass performing the qualitative screen . the company may elect to perform the qualitative analysis in future periods . the company estimates the fair value of its indefinite-lived intangibles using the relief from royalty method using level 3 inputs . the company believes the relief from royalty method is a widely used valuation technique for such assets . the fair value derived from the relief from royalty method is measured as the discounted cash flow savings realized from owning such trademarks and trade names and not having to pay a royalty for their use . 32 the company 's acquisitions have generally included a significant goodwill component and the company expects to continue to make acquisitions . at december 31 , 2019 , goodwill and other indefinite-lived intangible assets totaled $ 4,789.4 million or 48.7 % of the company 's total assets . the company completed its required annual impairment tests in the fourth quarter of 2019 and determined that the carrying values of the company 's goodwill and indefinite-lived intangibles were not impaired . there can be no assurance that goodwill or indefinite-lived intangibles impairment will not occur in the future . other intangible assets with finite lives are evaluated for impairment when events or changes in circumstances indicate the carrying value may not be recoverable . the carrying value of other intangible assets with finite lives is considered impaired when the total projected undiscounted cash flows from those assets are separately identifiable and are less than the carrying value . in that event , a loss is recognized based on the amount by which the carrying value exceeds the fair value of those assets . fair value is determined primarily using present value techniques based on projected cash flows from the asset group . pensions . the company has u.s. and foreign defined benefit and defined contribution pension plans . the most significant elements in determining the company 's pension income or expense are the assumed pension liability discount rate and the expected return on plan assets . the pension discount rate reflects the current interest rate at which the pension liabilities could be settled at the valuation date . at the end of each year , the company determines the assumed discount rate to be used to discount plan liabilities . in estimating this rate for 2019 , the company considered rates of return on high-quality , fixed-income investments that have maturities consistent with the anticipated funding requirements of the plan . in estimating the u.s. and foreign discount rates , the company 's actuaries developed a customized discount rate appropriate to the plans ' projected benefit cash flow based on yields derived from a database of long-term bonds at consistent maturity dates . the company determines the expected long-term rate of return based primarily on its expectation of future returns for the pension plans ' investments . additionally , the company considers historical returns on comparable fixed-income and equity investments and adjusts its estimate as deemed appropriate . income taxes . the process of providing for income taxes and determining the related balance sheet accounts requires management to assess uncertainties , make judgments regarding outcomes and utilize estimates . the company conducts a broad range of operations around the world and is therefore subject to complex tax regulations in numerous international taxing jurisdictions , resulting at times in tax audits , disputes and potential litigation , the outcome of which is uncertain . management must make judgments currently about such uncertainties and determine estimates of the company 's tax assets and liabilities . to the extent the final outcome differs , future adjustments to the company 's tax assets and liabilities may be necessary . the company assesses the realizability of its deferred tax assets , taking into consideration the company 's forecast of future taxable income , available net operating loss carryforwards and available tax planning strategies that could be implemented to realize the deferred tax assets . based on this assessment , management must evaluate the need for , and the amount of , valuation allowances against the company 's deferred tax assets . to the extent facts and circumstances change in the future , adjustments to the valuation allowances may be required . the company assesses the uncertainty in its tax positions , by applying a minimum recognition threshold which a tax position is required to meet before a tax benefit is recognized in the financial statements . once the minimum threshold is met , using a more likely than not standard , a series of probability estimates is made for each item to properly measure and record a tax benefit . the tax benefit recorded is generally equal to the highest probable outcome that is more than 50 % likely to be realized after full disclosure and resolution of a tax examination . the underlying probabilities are determined based on the best
| liquidity and capital sources in addition to the general description of liquidity and capital sources in “ — summary of the company 's primary sources and uses of liquidity and capital , ” the company 's primary sources of liquidity and capital are set forth below . see note 3 o f the notes to the consolidated financial statements for information regarding financing transactions related to the separation . global funding sources liquidity is provided by a variety of global funding sources , including funding agreements , credit and committed facilities and commercial paper . capital is provided by a variety of global funding sources , including short-term and long-term debt , the collateral financing arrangement , junior subordinated debt securities , preferred securities , equity securities and equity-linked securities . metlife , inc. maintains a shelf registration statement with the sec that permits the issuance of public debt , equity and hybrid securities . as a “ well-known seasoned issuer ” under sec rules , metlife , inc. 's shelf registration statement provides for automatic effectiveness upon filing and has no stated issuance capacity . the diversity of our global funding sources enhances our funding flexibility , limits dependence on any one market or source of funds and generally lowers the cost of funds . our primary global funding sources include : preferred stock in june 2018 , metlife , inc. issued 32,200 shares of 5.625 % non-cumulative preferred stock , series e ( the “ series e preferred stock ” ) with a $ 0.01 par value per share and a liquidation preference of $ 25,000 per share , for aggregate net proceeds of $ 780 million .
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a discussion regarding our financial condition and results of operations for the year ended december 31 , 2018 compared to the year ended december 31 , 2017 can be found under item 7 in our annual report on form 10-k for the fiscal year ended december 31 , 2018 , filed with the securities and exchange commission on february 21 , 2019. results of operations for the year ended december 31 , 2019 compared with the year ended december 31 , 2018 in 2019 , the company posted record sales , operating income , net income , diluted earnings per share , orders , backlog and operating cash flow . the company achieved these results from organic sales growth in both eig and emg , contributions from the 2019 acquisitions of gatan and pdt and 2018 acquisitions of spectro scientific , telular , forza , motec and soundcom , as well as from the company 's operational excellence initiatives . 25 the company 's record backlog , the full year impact of the 2019 acquisitions and continued focus on and implementation of operational excellence initiatives are expected to have a positive impact on the company 's 2020 results . net sales for 2019 were $ 5,158.6 million , an increase of $ 312.7 million or 6.5 % , compared with net sales of $ 4,845.9 million in 2018. the increase in net sales for 2019 was due to 2 % organic sales growth , a 5 % increase from acquisitions , partially offset by unfavorable foreign currency translation . eig net sales were $ 3,322.9 million in 2019 , an increase of 9.7 % , compared with $ 3,029.0 million in 2018. emg net sales were $ 1,835.7 million in 2019 , an increase of 1.0 % , compared with $ 1,816.9 million in 2018. total international sales for 2019 were $ 2,474.9 million or 48.0 % of net sales , an increase of $ 26.4 million or 1.1 % , compared with international sales of $ 2,448.5 million or 50.5 % of net sales in 2018. the increase in international sales was primarily driven by recent acquisitions . export shipments from the united states , which are included in total international sales , were $ 1,306.2 million in 2019 , an increase of $ 36.8 million or 2.9 % , compared with $ 1,269.4 million in 2018. orders for 2019 were $ 5,274.3 million , an increase of $ 222.5 million or 4.4 % , compared with $ 5,051.8 million in 2018. the increase in orders for 2019 was driven by the 2018 and 2019 acquisitions . the company 's backlog of unfilled orders at december 31 , 2019 was $ 1,717.9 million , an increase of $ 115.8 million or 7.2 % , compared with $ 1,602.1 million at december 31 , 2018. segment operating income for 2019 was $ 1,253.2 million , an increase of $ 107.3 million or 9.4 % , compared with segment operating income of $ 1,145.9 million in 2018. segment operating income , as a percentage of net sales , increased to 24.3 % in 2019 , compared with 23.6 % in 2018. the increase in segment operating income and segment operating margins for 2019 resulted primarily from the increase in net sales , as well as the benefits of the company 's operational excellence initiatives . cost of sales for 2019 was $ 3,370.9 million or 65.3 % of net sales , an increase of $ 184.6 million or 5.8 % , compared with $ 3,186.3 million or 65.8 % of net sales for 2018. cost of sales increased primarily due to the increase in net sales noted above . selling , general and administrative expenses for 2019 were $ 610.3 million or 11.8 % of net sales , an increase of $ 26.3 million or 4.5 % , compared with $ 584.0 million or 12.1 % of net sales in 2018. selling , general and administrative expenses increased primarily due to the increase in net sales noted above . consolidated operating income was $ 1,177.4 million or 22.8 % of net sales for 2019 , an increase of $ 101.9 million or 9.5 % , compared with $ 1,075.5 million or 22.2 % of net sales in 2018. interest expense was $ 88.5 million for 2019 , an increase of $ 6.3 million or 7.7 % , compared with $ 82.2 million in 2018. the interest expense increase for 2019 was primarily driven by the 2018 private placement senior notes issued in december 2018 ( $ 475 million and 75 million euros ) and january 2019 ( $ 100 million ) , partially offset by a decrease related to the repayment in full , at maturity , of $ 80 million in aggregate principal amount of 6.35 % private placement senior notes and $ 160 million in aggregate principal amount of 7.08 % private placement senior notes in the third quarter of 2018 , $ 65 million in aggregate principal amount of 7.18 % private placement senior notes in the fourth quarter of 2018 , and $ 100 million in aggregate principal amount of 6.03 % private placement senior notes in the fourth quarter of 2019. other expense , net was $ 19.2 million for 2019 , an increase of $ 13.6 million , compared with $ 5.6 million in 2018. the other expense , net increase for 2019 was primarily due to lower defined benefit pension income included in other expenses . 26 the effective tax rate for 2019 was 19.5 % , compared with 21.2 % in 2018. the lower rate for 2019 mainly reflects higher year over year tax benefits related to share-based payment transactions as well as lower tax cost on foreign source income . story_separator_special_tag in order to evaluate the sensitivity of the goodwill impairment test to changes in the fair value calculations , the company applied a hypothetical 10 % decrease in fair values of each reporting unit . the 2019 results ( expressed as a percentage of carrying value for the respective reporting unit ) showed that , despite the hypothetical 10 % decrease in fair value , the fair values of the company 's reporting units still exceeded their respective carrying values by 77 % to 1,074 % for each of the company 's reporting units . the impairment test for indefinite-lived intangibles other than goodwill ( primarily trademarks and trade names ) consists of a comparison of the fair value of the indefinite-lived intangible asset to the carrying value of the asset as of the impairment testing date . the company can elect to perform a qualitative analysis to determine if it is more likely than not that the fair values of its indefinite-lived intangible assets are less than the respective carrying values of those assets . the company elected to bypass performing the qualitative screen . the company may elect to perform the qualitative analysis in future periods . the company estimates the fair value of its indefinite-lived intangibles using the relief from royalty method using level 3 inputs . the company believes the relief from royalty method is a widely used valuation technique for such assets . the fair value derived from the relief from royalty method is measured as the discounted cash flow savings realized from owning such trademarks and trade names and not having to pay a royalty for their use . 32 the company 's acquisitions have generally included a significant goodwill component and the company expects to continue to make acquisitions . at december 31 , 2019 , goodwill and other indefinite-lived intangible assets totaled $ 4,789.4 million or 48.7 % of the company 's total assets . the company completed its required annual impairment tests in the fourth quarter of 2019 and determined that the carrying values of the company 's goodwill and indefinite-lived intangibles were not impaired . there can be no assurance that goodwill or indefinite-lived intangibles impairment will not occur in the future . other intangible assets with finite lives are evaluated for impairment when events or changes in circumstances indicate the carrying value may not be recoverable . the carrying value of other intangible assets with finite lives is considered impaired when the total projected undiscounted cash flows from those assets are separately identifiable and are less than the carrying value . in that event , a loss is recognized based on the amount by which the carrying value exceeds the fair value of those assets . fair value is determined primarily using present value techniques based on projected cash flows from the asset group . pensions . the company has u.s. and foreign defined benefit and defined contribution pension plans . the most significant elements in determining the company 's pension income or expense are the assumed pension liability discount rate and the expected return on plan assets . the pension discount rate reflects the current interest rate at which the pension liabilities could be settled at the valuation date . at the end of each year , the company determines the assumed discount rate to be used to discount plan liabilities . in estimating this rate for 2019 , the company considered rates of return on high-quality , fixed-income investments that have maturities consistent with the anticipated funding requirements of the plan . in estimating the u.s. and foreign discount rates , the company 's actuaries developed a customized discount rate appropriate to the plans ' projected benefit cash flow based on yields derived from a database of long-term bonds at consistent maturity dates . the company determines the expected long-term rate of return based primarily on its expectation of future returns for the pension plans ' investments . additionally , the company considers historical returns on comparable fixed-income and equity investments and adjusts its estimate as deemed appropriate . income taxes . the process of providing for income taxes and determining the related balance sheet accounts requires management to assess uncertainties , make judgments regarding outcomes and utilize estimates . the company conducts a broad range of operations around the world and is therefore subject to complex tax regulations in numerous international taxing jurisdictions , resulting at times in tax audits , disputes and potential litigation , the outcome of which is uncertain . management must make judgments currently about such uncertainties and determine estimates of the company 's tax assets and liabilities . to the extent the final outcome differs , future adjustments to the company 's tax assets and liabilities may be necessary . the company assesses the realizability of its deferred tax assets , taking into consideration the company 's forecast of future taxable income , available net operating loss carryforwards and available tax planning strategies that could be implemented to realize the deferred tax assets . based on this assessment , management must evaluate the need for , and the amount of , valuation allowances against the company 's deferred tax assets . to the extent facts and circumstances change in the future , adjustments to the valuation allowances may be required . the company assesses the uncertainty in its tax positions , by applying a minimum recognition threshold which a tax position is required to meet before a tax benefit is recognized in the financial statements . once the minimum threshold is met , using a more likely than not standard , a series of probability estimates is made for each item to properly measure and record a tax benefit . the tax benefit recorded is generally equal to the highest probable outcome that is more than 50 % likely to be realized after full disclosure and resolution of a tax examination . the underlying probabilities are determined based on the best
| liquidity and capital resources cash provided by operating activities totaled $ 1,114.4 million in 2019 , an increase of $ 188.9 million or 20.4 % , compared with $ 925.5 million in 2018. the increase in cash provided by operating activities for 2019 was primarily due to higher net income of $ 83.4 million and lower deferred income taxes . free cash flow ( cash flow provided by operating activities less capital expenditures ) was $ 1,012.1 million in 2019 , compared with $ 843.4 million in 2018. ebitda ( earnings before interest , income taxes , depreciation and amortization ) was $ 1,388.3 million in 2019 , compared with $ 1,267.7 million in 2018. free cash flow and ebitda are presented because the company is aware that they are measures used by third parties in evaluating the company . ( see the “ notes to selected financial data ” included in item 6 in this annual report on form 10-k for a reconciliation of u.s. gaap measures to comparable non-gaap measures ) . cash used for investing activities totaled $ 1,150.9 million in 2019 , compared with $ 1,210.0 million in 2018. in 2019 , the company paid $ 1,061.9 , net of cash acquired , to acquire pdt in september 2019 and gatan in october 2019. in 2018 , the company paid $ 1,129.3 million , net of cash acquired , to acquire spectro scientific in november 2018 , telular and forza in october 2018 , motec in june 2018 , soundcom in april 2018 and fmh in january 2018. additions to property , plant and equipment totaled $ 102.3 million in 2019 , compared with $ 82.1 million in 2018 .
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profit margins may also be affected by fluctuations in the costs or availability of materials used to manufacture our products , product warranty costs , the cost of fuel , and changes in costs of other distribution or manufacturing-related services . our operating profits or losses may also be affected by the efficiency and effectiveness of our organization . historically , our operating expenses have been influenced by media costs to produce and distribute advertisements of our products on television , the internet and other media , facility costs , operating costs of our information and communications systems , product supply chain management , customer support and new product development activities . in addition , our operating expenses have been affected from time-to-time by asset impairment charges , restructuring charges and other significant unusual or infrequent expenses . as a result of the above and other factors , our period-to-period operating results may not be indicative of future performance . you should not place undue reliance on our operating results and should consider our prospects in light of the risks , expenses and difficulties typically encountered by us and other companies , both within and outside our industry . we may not be able to successfully address these risks and difficulties and , consequently , we can not assure you any future growth or profitability . for more information , see our discussion of risk factors located at part i , item 1a of this form 10-k. overview we are committed to providing innovative , quality solutions to help people achieve a fit and healthy lifestyle . our principal business activities include designing , developing , sourcing and marketing high-quality cardio and strength fitness products and related accessories for consumer use , primarily in the united states and canada . our products are sold under some of the most-recognized brand names in the fitness industry : nautilus ® , bowflex ® , schwinn ® and universal ® . we market our products through two distinct distribution channels , direct and retail , which we consider to be separate business segments . our direct business offers products directly to consumers through television advertising , catalogs and the internet . our retail business offers our products through a network of independent retail companies with stores and websites located in the united states and internationally . we also derive a portion of our revenue from the licensing of our brands and intellectual property . our net sales in 2014 were $ 274.4 million , an increase of $ 55.6 million , or 25.4 % , compared to net sales of $ 218.8 million in 2013 . net sales of our direct segment increased $ 38.9 million , or 28.5 % , compared to 2013 , primarily due to increased consumer demand for our cardio products , especially the bowflex max trainer ® . net sales of our retail segment increased by $ 16.4 million , or 21.4 % in 2014 , compared to 2013 , primarily due to growth in recently launched cardio products . income from continuing operations was $ 20.4 million , or $ 0.64 per diluted share , in 2014 , compared to $ 48.1 million , or $ 1.53 per diluted share , in 2013 . income from continuing operations in 2014 and 2013 included a $ 1.2 million and a $ 38.9 million credit related to the reversal of our deferred tax asset valuation allowance , respectively . without consideration of the reversal of our deferred tax asset valuation allowance , the improvement in our results from continuing operations in 2014 , compared to 2013 , was driven primarily by higher sales and increased operating income in both our direct and retail segments . net income was $ 18.8 million , or $ 0.59 per diluted share , in 2014 , compared to $ 48.0 million , or $ 1.52 per diluted share , in 2013 . net income in 2014 and 2013 included a $ 1.2 million and a $ 38.9 million credit related to the reversal of our deferred tax asset valuation allowance , respectively . 16 discontinued operations results from discontinued operations relate to the disposal of our former commercial business , which was completed in april 2011. we reached substantial completion of asset liquidation at december 31 , 2012. income from discontinued operations of $ 6.2 million in 2012 primarily represents a currency translation adjustment gain related to the liquidation of european subsidiaries . although there was no revenue related to the commercial business in 2014 , 2013 or 2012 , we continue to have legal and accounting expenses as we work with authorities on final deregistration of each entity , and product liability and other legal expenses associated with product previously sold into the commercial channel . critical accounting policies and estimates the preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions that affect the reported amounts of assets and liabilities , revenues and expenses , and related disclosures of contingent assets and liabilities in the consolidated financial statements . an accounting estimate is considered to be critical if it meets both of the following criteria : ( i ) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made , and ( ii ) different estimates reasonably could have been used , or changes in the estimate that are reasonably likely to occur from period to period may have a material impact on the presentation of our financial condition , changes in financial condition or results of operations . our critical accounting policies and estimates are discussed below . story_separator_special_tag the increase in general and administrative in 2013 compared to 2012 was primarily due to a $ 0.4 million increase in infrastructure costs and a $ 0.8 million increase in employee-related costs , partially offset by a $ 0.3 million one-time charge in 2012 for lease write-off costs . the decreases in general and administrative as a percentage of net sales in 2014 compared to 2013 and in 2013 compared to 2012 were primarily due to higher net sales . research and development replace_table_token_11_th replace_table_token_12_th the increases in research and development in 2014 compared to 2013 and in 2013 compared to 2012 were primarily due to our continued investment in additional engineering and product development headcount . we expect research and development expense to increase in 2015 compared to 2014 , as we continue to invest in new product development resources . 23 interest expense interest expense in both 2014 and 2013 was less than $ 0.1 million each year , and was for financing costs associated with capital equipment lease payments . negative interest expense of $ 0.1 million in 2012 arose from the early repayment in march 2012 of our increasing-rate senior discount notes . early repayment of the notes resulted in a lower average effective interest rate over the term of the notes than would have applied if the notes had been held to maturity . in prior periods , we used the average effective interest rate as if the notes were held to maturity in determining the amount of interest expense incurred . other income ( expense ) other income ( expense ) primarily relates to the effect of exchange rate fluctuations between the u.s. and canada . however , 2014 and 2013 also included gains of $ 0.1 million and $ 0.3 million , respectively , related to refunds of state sales taxes previously paid by us . income tax expense ( benefit ) dollars in thousands year ended december 31 , change 2014 2013 $ % income tax expense ( benefit ) $ 9,841 $ ( 32,085 ) $ 41,926 n/m dollars in thousands year ended december 31 , change 2013 2012 $ % income tax benefit $ ( 32,085 ) $ ( 226 ) $ ( 31,859 ) n/m n/m - not meaningful . our income tax expense in 2014 was primarily attributable to the income generated domestically and in canada , partially offset by a $ 1.2 million release of our domestic valuation allowance . income tax benefit for 2013 included a $ 38.9 million release of our domestic valuation allowance . income tax benefit for 2012 was primarily related to the expiration of statutes of limitation applicable to our liabilities for uncertain tax positions in certain jurisdictions . generally , we did not recognize u.s. income tax expense associated with our income from continuing operations for 2013 or 2012 due to the valuation allowance against the net deferred tax asset . each quarter , we assess the total weight of positive and negative evidence including cumulative income or loss for the past three years and forecasted taxable income and re-evaluate whether any adjustments or release of all or any portion of valuation allowance is appropriate . as a result of this evaluation , in the second quarter of 2013 , we concluded that a majority of the existing valuation allowance on our domestic deferred income tax assets was no longer required . accordingly , an income tax benefit of $ 38.9 million related to the reduction of our existing valuation allowance was recorded during 2013. further , in the fourth quarter of 2014 , after re-evaluating the potential realization of the remainder of our deferred income tax assets , we concluded that , as of december 31 , 2014 , a portion of the existing valuation allowance against state net operating loss deferred tax assets was no longer necessary . accordingly , an income tax benefit of $ 1.2 million was recorded in the fourth quarter of 2014 related to the reduction of our existing valuation allowance . the amount of valuation allowance offsetting our deferred tax assets was $ 6.2 million as of december 31 , 2014 . of the total remaining valuation allowance , $ 2.9 million primarily relates to domestic credit carryforwards as we currently do not anticipate to generate the income of appropriate character to utilize those credits . should it be determined in the future that it is more likely than not that our domestic deferred income tax assets will be realized , an additional valuation allowance would be released during the period in which such an assessment is made . in addition , $ 3.3 million of the remaining valuation allowance relates to foreign net operating loss carryforwards . there have been no material changes to our foreign operations since december 31 , 2013 and , accordingly , we maintain our existing valuation allowance on foreign deferred income tax assets in such jurisdictions at december 31 , 2014 . refer to note 12 , income taxes , to our consolidated financial statements included in part ii , item 8 of this report for additional information . story_separator_special_tag off-balance sheet arrangements in the ordinary course of business , we enter into agreements that require us to indemnify counterparties against third-party claims . these may include : agreements with vendors and suppliers , under which we may indemnify them against claims arising from our use of their products or services ; agreements with customers , under which we may indemnify them against claims arising from their use or sale of our products ; real estate and equipment leases , under which we may indemnify lessors against third party claims relating to the use of their property ; agreements with licensees or licensors , under which we may indemnify the licensee or licensor against claims arising from their use of our intellectual property or our use of their intellectual property ; and agreements with parties to debt arrangements
| liquidity and capital resources cash provided by operating activities totaled $ 1,114.4 million in 2019 , an increase of $ 188.9 million or 20.4 % , compared with $ 925.5 million in 2018. the increase in cash provided by operating activities for 2019 was primarily due to higher net income of $ 83.4 million and lower deferred income taxes . free cash flow ( cash flow provided by operating activities less capital expenditures ) was $ 1,012.1 million in 2019 , compared with $ 843.4 million in 2018. ebitda ( earnings before interest , income taxes , depreciation and amortization ) was $ 1,388.3 million in 2019 , compared with $ 1,267.7 million in 2018. free cash flow and ebitda are presented because the company is aware that they are measures used by third parties in evaluating the company . ( see the “ notes to selected financial data ” included in item 6 in this annual report on form 10-k for a reconciliation of u.s. gaap measures to comparable non-gaap measures ) . cash used for investing activities totaled $ 1,150.9 million in 2019 , compared with $ 1,210.0 million in 2018. in 2019 , the company paid $ 1,061.9 , net of cash acquired , to acquire pdt in september 2019 and gatan in october 2019. in 2018 , the company paid $ 1,129.3 million , net of cash acquired , to acquire spectro scientific in november 2018 , telular and forza in october 2018 , motec in june 2018 , soundcom in april 2018 and fmh in january 2018. additions to property , plant and equipment totaled $ 102.3 million in 2019 , compared with $ 82.1 million in 2018 .
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profit margins may also be affected by fluctuations in the costs or availability of materials used to manufacture our products , product warranty costs , the cost of fuel , and changes in costs of other distribution or manufacturing-related services . our operating profits or losses may also be affected by the efficiency and effectiveness of our organization . historically , our operating expenses have been influenced by media costs to produce and distribute advertisements of our products on television , the internet and other media , facility costs , operating costs of our information and communications systems , product supply chain management , customer support and new product development activities . in addition , our operating expenses have been affected from time-to-time by asset impairment charges , restructuring charges and other significant unusual or infrequent expenses . as a result of the above and other factors , our period-to-period operating results may not be indicative of future performance . you should not place undue reliance on our operating results and should consider our prospects in light of the risks , expenses and difficulties typically encountered by us and other companies , both within and outside our industry . we may not be able to successfully address these risks and difficulties and , consequently , we can not assure you any future growth or profitability . for more information , see our discussion of risk factors located at part i , item 1a of this form 10-k. overview we are committed to providing innovative , quality solutions to help people achieve a fit and healthy lifestyle . our principal business activities include designing , developing , sourcing and marketing high-quality cardio and strength fitness products and related accessories for consumer use , primarily in the united states and canada . our products are sold under some of the most-recognized brand names in the fitness industry : nautilus ® , bowflex ® , schwinn ® and universal ® . we market our products through two distinct distribution channels , direct and retail , which we consider to be separate business segments . our direct business offers products directly to consumers through television advertising , catalogs and the internet . our retail business offers our products through a network of independent retail companies with stores and websites located in the united states and internationally . we also derive a portion of our revenue from the licensing of our brands and intellectual property . our net sales in 2014 were $ 274.4 million , an increase of $ 55.6 million , or 25.4 % , compared to net sales of $ 218.8 million in 2013 . net sales of our direct segment increased $ 38.9 million , or 28.5 % , compared to 2013 , primarily due to increased consumer demand for our cardio products , especially the bowflex max trainer ® . net sales of our retail segment increased by $ 16.4 million , or 21.4 % in 2014 , compared to 2013 , primarily due to growth in recently launched cardio products . income from continuing operations was $ 20.4 million , or $ 0.64 per diluted share , in 2014 , compared to $ 48.1 million , or $ 1.53 per diluted share , in 2013 . income from continuing operations in 2014 and 2013 included a $ 1.2 million and a $ 38.9 million credit related to the reversal of our deferred tax asset valuation allowance , respectively . without consideration of the reversal of our deferred tax asset valuation allowance , the improvement in our results from continuing operations in 2014 , compared to 2013 , was driven primarily by higher sales and increased operating income in both our direct and retail segments . net income was $ 18.8 million , or $ 0.59 per diluted share , in 2014 , compared to $ 48.0 million , or $ 1.52 per diluted share , in 2013 . net income in 2014 and 2013 included a $ 1.2 million and a $ 38.9 million credit related to the reversal of our deferred tax asset valuation allowance , respectively . 16 discontinued operations results from discontinued operations relate to the disposal of our former commercial business , which was completed in april 2011. we reached substantial completion of asset liquidation at december 31 , 2012. income from discontinued operations of $ 6.2 million in 2012 primarily represents a currency translation adjustment gain related to the liquidation of european subsidiaries . although there was no revenue related to the commercial business in 2014 , 2013 or 2012 , we continue to have legal and accounting expenses as we work with authorities on final deregistration of each entity , and product liability and other legal expenses associated with product previously sold into the commercial channel . critical accounting policies and estimates the preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions that affect the reported amounts of assets and liabilities , revenues and expenses , and related disclosures of contingent assets and liabilities in the consolidated financial statements . an accounting estimate is considered to be critical if it meets both of the following criteria : ( i ) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made , and ( ii ) different estimates reasonably could have been used , or changes in the estimate that are reasonably likely to occur from period to period may have a material impact on the presentation of our financial condition , changes in financial condition or results of operations . our critical accounting policies and estimates are discussed below . story_separator_special_tag the increase in general and administrative in 2013 compared to 2012 was primarily due to a $ 0.4 million increase in infrastructure costs and a $ 0.8 million increase in employee-related costs , partially offset by a $ 0.3 million one-time charge in 2012 for lease write-off costs . the decreases in general and administrative as a percentage of net sales in 2014 compared to 2013 and in 2013 compared to 2012 were primarily due to higher net sales . research and development replace_table_token_11_th replace_table_token_12_th the increases in research and development in 2014 compared to 2013 and in 2013 compared to 2012 were primarily due to our continued investment in additional engineering and product development headcount . we expect research and development expense to increase in 2015 compared to 2014 , as we continue to invest in new product development resources . 23 interest expense interest expense in both 2014 and 2013 was less than $ 0.1 million each year , and was for financing costs associated with capital equipment lease payments . negative interest expense of $ 0.1 million in 2012 arose from the early repayment in march 2012 of our increasing-rate senior discount notes . early repayment of the notes resulted in a lower average effective interest rate over the term of the notes than would have applied if the notes had been held to maturity . in prior periods , we used the average effective interest rate as if the notes were held to maturity in determining the amount of interest expense incurred . other income ( expense ) other income ( expense ) primarily relates to the effect of exchange rate fluctuations between the u.s. and canada . however , 2014 and 2013 also included gains of $ 0.1 million and $ 0.3 million , respectively , related to refunds of state sales taxes previously paid by us . income tax expense ( benefit ) dollars in thousands year ended december 31 , change 2014 2013 $ % income tax expense ( benefit ) $ 9,841 $ ( 32,085 ) $ 41,926 n/m dollars in thousands year ended december 31 , change 2013 2012 $ % income tax benefit $ ( 32,085 ) $ ( 226 ) $ ( 31,859 ) n/m n/m - not meaningful . our income tax expense in 2014 was primarily attributable to the income generated domestically and in canada , partially offset by a $ 1.2 million release of our domestic valuation allowance . income tax benefit for 2013 included a $ 38.9 million release of our domestic valuation allowance . income tax benefit for 2012 was primarily related to the expiration of statutes of limitation applicable to our liabilities for uncertain tax positions in certain jurisdictions . generally , we did not recognize u.s. income tax expense associated with our income from continuing operations for 2013 or 2012 due to the valuation allowance against the net deferred tax asset . each quarter , we assess the total weight of positive and negative evidence including cumulative income or loss for the past three years and forecasted taxable income and re-evaluate whether any adjustments or release of all or any portion of valuation allowance is appropriate . as a result of this evaluation , in the second quarter of 2013 , we concluded that a majority of the existing valuation allowance on our domestic deferred income tax assets was no longer required . accordingly , an income tax benefit of $ 38.9 million related to the reduction of our existing valuation allowance was recorded during 2013. further , in the fourth quarter of 2014 , after re-evaluating the potential realization of the remainder of our deferred income tax assets , we concluded that , as of december 31 , 2014 , a portion of the existing valuation allowance against state net operating loss deferred tax assets was no longer necessary . accordingly , an income tax benefit of $ 1.2 million was recorded in the fourth quarter of 2014 related to the reduction of our existing valuation allowance . the amount of valuation allowance offsetting our deferred tax assets was $ 6.2 million as of december 31 , 2014 . of the total remaining valuation allowance , $ 2.9 million primarily relates to domestic credit carryforwards as we currently do not anticipate to generate the income of appropriate character to utilize those credits . should it be determined in the future that it is more likely than not that our domestic deferred income tax assets will be realized , an additional valuation allowance would be released during the period in which such an assessment is made . in addition , $ 3.3 million of the remaining valuation allowance relates to foreign net operating loss carryforwards . there have been no material changes to our foreign operations since december 31 , 2013 and , accordingly , we maintain our existing valuation allowance on foreign deferred income tax assets in such jurisdictions at december 31 , 2014 . refer to note 12 , income taxes , to our consolidated financial statements included in part ii , item 8 of this report for additional information . story_separator_special_tag off-balance sheet arrangements in the ordinary course of business , we enter into agreements that require us to indemnify counterparties against third-party claims . these may include : agreements with vendors and suppliers , under which we may indemnify them against claims arising from our use of their products or services ; agreements with customers , under which we may indemnify them against claims arising from their use or sale of our products ; real estate and equipment leases , under which we may indemnify lessors against third party claims relating to the use of their property ; agreements with licensees or licensors , under which we may indemnify the licensee or licensor against claims arising from their use of our intellectual property or our use of their intellectual property ; and agreements with parties to debt arrangements
| liquidity and capital resources as of december 31 , 2014 , we had $ 45.2 million of cash and cash equivalents , compared to $ 41.0 million as of december 31 , 2013 and $ 27.0 million of available-for-sale securities at december 31 , 2014 compared to none at december 31 , 2013 . cash 24 provided by operating activities was $ 34.4 million for 2014 , compared to cash provided by operating activities of $ 21.1 million for 2013 . we expect our cash and cash equivalents and available-for-sale securities at december 31 , 2014 , along with cash expected to be generated from operations , to be sufficient to fund our operating and capital requirements for at least twelve months from december 31 , 2014 . the increase in cash flows from operating activities for 2014 , compared to 2013 , was primarily due to improved operating performance and the changes in our operating assets and liabilities as discussed below . trade receivables increased $ 1.0 million to $ 26.3 million as of december 31 , 2014 , compared to $ 25.3 million as of december 31 , 2013 , due to higher revenue within our retail business . days sales outstanding ( `` dso '' ) at december 31 , 2014 were 17.6 days compared to 19.9 days as of december 31 , 2013 . the decrease in dso at december 31 , 2014 compared to december 31 , 2013 was due to a greater mix of direct revenue along with improved collections . direct sales are generally collected by credit card or funded by third party financing partners , resulting in cash receipt within a few days after product shipment . inventories increased $ 9.1 million to $ 24.9 million as of december 31 , 2014 , compared to $ 15.8 million as of december 31 , 2013 , due to higher revenue , additional products , and the opening of a new distribution center . a significant portion of this inventory was in-transit as of december 31 , 2014 , as the west coast port slowdown has delayed deliveries by 15-25 days .
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the las vegas economy , although severely impacted by the recession and housing crisis that spanned from 2008 to 2011 , began to stabilize in 2012 and , based on population and employment growth , was one of the fastest growing economies in the united states from 2015 to 2017. based on a recent u.s. census bureau release , nevada was second among all states in percentage growth of population from july 2015 to july 2017. in addition , based on preliminary data for december 2017 from the bureau of labor statistics , las vegas experienced a 3.1 % year-over-year increase in employment to 998,800 , which is an all-time high . this resulted in an unemployment rate of 4.9 % which has declined from 14.1 % in july 2011. businesses and consumers in las vegas continue to increase their spending as evidenced by 57 consecutive months of year-over-year increases in taxable retail sales from february 2013 to october 2017. home values have also improved significantly over the past several years with the median price of an existing single family home in las vegas up approximately 140 % at december 2017 compared to january 2012 , as reported by the greater las vegas association of realtors . the las vegas economy has shown recent improvements in employment , taxable sales and home prices , and we believe the stabilization of the local economy , positive trends in many of the key economic indicators and future projects and 41 infrastructure investments provide a foundation for future growth in our business . although we experienced improved operating results over the past few years due , in part , to more favorable local economic conditions , we can not be sure if , or how long , these favorable market conditions will persist or that they will continue to positively impact our results of operations . information about our results of operations is included herein and in the notes to our consolidated financial statements . our key performance indicators we use certain key indicators to measure our performance . gaming revenue measures : slot handle , table game drop and race and sports write are measures of volume . slot handle represents the dollar amount wagered in slot machines , and table game drop represents the total amount of cash and net markers issued that are deposited in table game drop boxes . write represents the aggregate dollar amount wagered on race and sports events . win represents the amount of wagers retained by us and recorded as casino revenue . hold represents win as a percentage of slot handle or table game drop . as our customers are primarily las vegas residents , our hold percentages are generally consistent from period to period . fluctuations in our casino revenue are primarily due to the volume and spending levels of customers at our properties . food and beverage revenue measures : average guest check is a measure of sales volume and product offerings , and represents the average amount spent per customer visit . number of guests served is an indicator of volume . room revenue measures : occupancy is calculated by dividing total occupied rooms , including complimentary rooms , by total rooms available . average daily rate ( “ adr ” ) is calculated by dividing total room revenue , which includes the retail value of complimentary rooms , by total rooms occupied , including complimentary rooms . revenue per available room is calculated by dividing total room revenue by total rooms available . 42 results of operations the following table presents information about our results of continuing operations ( dollars in thousands ) : replace_table_token_5_th n/m = not meaningful we view each of our las vegas casino properties as individual operating segments . we aggregate all of our las vegas operating segments into one reportable segment because all of our las vegas properties offer similar products , cater to the same customer base , have the same regulatory and tax structure , share the same marketing programs , are directed by a centralized management structure and have similar economic characteristics . we also aggregate our native american management arrangements into one reportable segment . the results of operations for our native american management segment are discussed in the section entitled “ management fee revenue ” below and the results of operations of our las vegas operations 43 are discussed in the remaining sections below . references herein to same-store basis represent results of operations excluding the impact of operations of palms from october 1 , 2016 , the date of acquisition , through december 31 , 2017 . net revenues . net revenues for the year ended december 31 , 2017 increase d by 11.2 % to $ 1.62 billion as compared to $ 1.45 billion for the year ended december 31 , 2016 primarily due to the acquisition of palms . same-store net revenues , which are further discussed below , increase d 3.5 % year over year , despite the negative impact related to construction disruption at palace station associated with the upgrade and expansion project that commenced during the fourth quarter of 2016. net revenues for the year ended december 31 , 2016 increase d by 7.4 % to $ 1.45 billion as compared to $ 1.35 billion for the year ended december 31 , 2015 , and same-store net revenues increased 4.6 % year over year . the increase in net revenues during 2016 is further discussed below . operating income . operating income increase d to $ 330.4 million for the year ended december 31 , 2017 as compared to $ 309.4 million for the year ended december 31 , 2016 . story_separator_special_tag during the year ended december 31 , 2017 , we recognized a $ 16.9 million net loss on extinguishment/modification of debt . this included losses on extinguishment/modification of debt of $ 27.2 million related to the redemption of the 7.50 % senior notes and $ 4.7 million related to credit facility amendments completed throughout the year , partially offset by a $ 14.9 million gain on debt extinguishment related to the restructured land loan recognized in june 2017. during the year ended december 31 , 2016 , we recognized a $ 7.3 million loss on extinguishment/modification of debt , primarily related to the refinancing of station llc 's credit facility in june 2016. as a result of the 2016 refinancing , station llc recognized a $ 6.6 million loss on extinguishment/modification of debt related to the extinguished portion of the debt . change in fair value of derivative instruments . during the year ended december 31 , 2017 , we recognized a $ 14.1 million net gain on the change in fair value of our interest rate swaps . the gain was primarily due to libor movements and our election to no longer apply hedge accounting beginning july 2017. provision for income tax . income tax expense totaled $ 134.8 million and $ 8.2 million for the years ended december 31 , 2017 and 2016 , respectively . the provision for income taxes in 2017 includes the unfavorable impacts of the tax cuts and jobs act due to the remeasurement of our u.s. federal deferred tax assets and liabilities to apply the new 21 % federal tax rate . we were formed on september 9 , 2015 and did not engage in any operations prior to the ipo . we first filed tax returns for tax year 2015 , which is the first tax year subject to examination by taxing authorities for u.s. federal and state income tax purposes . at december 31 , 2017 we held an economic interest of approximately 59.3 % in station holdco , which holds all of the economic interests in station llc . we have been designated as the sole managing member of both station holdco and station llc , and consolidate the financial position and results of operations of station llc and its subsidiaries and station holdco . the approximate 40.7 % ownership in station holdco is considered noncontrolling interest . station holdco is treated as a partnership for income tax reporting and station holdco 's members are liable for federal , state and local income taxes based on their share of station holdco 's taxable income . we are not liable for the noncontrolling interests ' share of station holdco 's taxable income . 47 net income attributable to noncontrolling interests . net income attributable to noncontrolling interests for the years ended december 31 , 2017 , 2016 and 2015 was $ 27.9 million , $ 63.8 million and $ 5.6 million , respectively . the decrease in net income attributable to noncontrolling interests in 2017 as compared to 2016 is primarily due to the decrease in station holdco 's net income as a result of the related party lease termination described above . net income attributable to noncontrolling interests for the period from may 2 , 2016 through december 31 , 2017 represents the portion of net income attributable to the ownership interest in station holdco not held by us , as well as the portion of mpm enterprises , llc 's ( “ mpm ” ) net income that was not attributable to us . net income attributable to noncontrolling interests for periods prior to may 2 , 2016 included the portion of mpm 's net income that was not attributable to us . adjusted ebitda adjusted ebitda for the years ended december 31 , 2017 , 2016 and 2015 for our two reportable segments and a reconciliation of net income to adjusted ebitda are presented below ( amounts in thousands ) . the las vegas operations segment includes all of our las vegas area casino properties and the native american management segment includes our native american management arrangements . replace_table_token_9_th the year over year increases in adjusted ebitda are due to the factors described above . adjusted ebitda is a non-gaap measure that is presented solely as a supplemental disclosure . we believe that adjusted ebitda is a widely used measure of operating performance in our industry and is a principal basis for valuation of gaming companies . we believe that in addition to net income , adjusted ebitda is a useful financial performance measurement for assessing our operating performance because it provides information about the performance of our ongoing core operations excluding non-cash expenses , financing costs , and other non-operational items . adjusted ebitda includes net 48 income plus depreciation and amortization , share-based compensation , write-downs and other charges , net , tax receivable agreement liability adjustment , related party lease termination , asset impairments , interest expense , net , loss on extinguishment/modification of debt , net , change in fair value of derivative instruments , provision for income tax and other , and excludes adjusted ebitda attributable to the noncontrolling interests of mpm . to evaluate adjusted ebitda and the trends it depicts , the components should be considered . each of these components can significantly affect our results of operations and should be considered in evaluating our operating performance , and the impact of these components can not be determined from adjusted ebitda . further , adjusted ebitda does not represent net income or cash flows from operating , investing or financing activities as defined by gaap and should not be considered as an alternative to net income as an indicator of our operating performance . additionally , adjusted ebitda does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity . it should be noted that not all gaming companies that report ebitda
| liquidity and capital resources as of december 31 , 2014 , we had $ 45.2 million of cash and cash equivalents , compared to $ 41.0 million as of december 31 , 2013 and $ 27.0 million of available-for-sale securities at december 31 , 2014 compared to none at december 31 , 2013 . cash 24 provided by operating activities was $ 34.4 million for 2014 , compared to cash provided by operating activities of $ 21.1 million for 2013 . we expect our cash and cash equivalents and available-for-sale securities at december 31 , 2014 , along with cash expected to be generated from operations , to be sufficient to fund our operating and capital requirements for at least twelve months from december 31 , 2014 . the increase in cash flows from operating activities for 2014 , compared to 2013 , was primarily due to improved operating performance and the changes in our operating assets and liabilities as discussed below . trade receivables increased $ 1.0 million to $ 26.3 million as of december 31 , 2014 , compared to $ 25.3 million as of december 31 , 2013 , due to higher revenue within our retail business . days sales outstanding ( `` dso '' ) at december 31 , 2014 were 17.6 days compared to 19.9 days as of december 31 , 2013 . the decrease in dso at december 31 , 2014 compared to december 31 , 2013 was due to a greater mix of direct revenue along with improved collections . direct sales are generally collected by credit card or funded by third party financing partners , resulting in cash receipt within a few days after product shipment . inventories increased $ 9.1 million to $ 24.9 million as of december 31 , 2014 , compared to $ 15.8 million as of december 31 , 2013 , due to higher revenue , additional products , and the opening of a new distribution center . a significant portion of this inventory was in-transit as of december 31 , 2014 , as the west coast port slowdown has delayed deliveries by 15-25 days .
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the las vegas economy , although severely impacted by the recession and housing crisis that spanned from 2008 to 2011 , began to stabilize in 2012 and , based on population and employment growth , was one of the fastest growing economies in the united states from 2015 to 2017. based on a recent u.s. census bureau release , nevada was second among all states in percentage growth of population from july 2015 to july 2017. in addition , based on preliminary data for december 2017 from the bureau of labor statistics , las vegas experienced a 3.1 % year-over-year increase in employment to 998,800 , which is an all-time high . this resulted in an unemployment rate of 4.9 % which has declined from 14.1 % in july 2011. businesses and consumers in las vegas continue to increase their spending as evidenced by 57 consecutive months of year-over-year increases in taxable retail sales from february 2013 to october 2017. home values have also improved significantly over the past several years with the median price of an existing single family home in las vegas up approximately 140 % at december 2017 compared to january 2012 , as reported by the greater las vegas association of realtors . the las vegas economy has shown recent improvements in employment , taxable sales and home prices , and we believe the stabilization of the local economy , positive trends in many of the key economic indicators and future projects and 41 infrastructure investments provide a foundation for future growth in our business . although we experienced improved operating results over the past few years due , in part , to more favorable local economic conditions , we can not be sure if , or how long , these favorable market conditions will persist or that they will continue to positively impact our results of operations . information about our results of operations is included herein and in the notes to our consolidated financial statements . our key performance indicators we use certain key indicators to measure our performance . gaming revenue measures : slot handle , table game drop and race and sports write are measures of volume . slot handle represents the dollar amount wagered in slot machines , and table game drop represents the total amount of cash and net markers issued that are deposited in table game drop boxes . write represents the aggregate dollar amount wagered on race and sports events . win represents the amount of wagers retained by us and recorded as casino revenue . hold represents win as a percentage of slot handle or table game drop . as our customers are primarily las vegas residents , our hold percentages are generally consistent from period to period . fluctuations in our casino revenue are primarily due to the volume and spending levels of customers at our properties . food and beverage revenue measures : average guest check is a measure of sales volume and product offerings , and represents the average amount spent per customer visit . number of guests served is an indicator of volume . room revenue measures : occupancy is calculated by dividing total occupied rooms , including complimentary rooms , by total rooms available . average daily rate ( “ adr ” ) is calculated by dividing total room revenue , which includes the retail value of complimentary rooms , by total rooms occupied , including complimentary rooms . revenue per available room is calculated by dividing total room revenue by total rooms available . 42 results of operations the following table presents information about our results of continuing operations ( dollars in thousands ) : replace_table_token_5_th n/m = not meaningful we view each of our las vegas casino properties as individual operating segments . we aggregate all of our las vegas operating segments into one reportable segment because all of our las vegas properties offer similar products , cater to the same customer base , have the same regulatory and tax structure , share the same marketing programs , are directed by a centralized management structure and have similar economic characteristics . we also aggregate our native american management arrangements into one reportable segment . the results of operations for our native american management segment are discussed in the section entitled “ management fee revenue ” below and the results of operations of our las vegas operations 43 are discussed in the remaining sections below . references herein to same-store basis represent results of operations excluding the impact of operations of palms from october 1 , 2016 , the date of acquisition , through december 31 , 2017 . net revenues . net revenues for the year ended december 31 , 2017 increase d by 11.2 % to $ 1.62 billion as compared to $ 1.45 billion for the year ended december 31 , 2016 primarily due to the acquisition of palms . same-store net revenues , which are further discussed below , increase d 3.5 % year over year , despite the negative impact related to construction disruption at palace station associated with the upgrade and expansion project that commenced during the fourth quarter of 2016. net revenues for the year ended december 31 , 2016 increase d by 7.4 % to $ 1.45 billion as compared to $ 1.35 billion for the year ended december 31 , 2015 , and same-store net revenues increased 4.6 % year over year . the increase in net revenues during 2016 is further discussed below . operating income . operating income increase d to $ 330.4 million for the year ended december 31 , 2017 as compared to $ 309.4 million for the year ended december 31 , 2016 . story_separator_special_tag during the year ended december 31 , 2017 , we recognized a $ 16.9 million net loss on extinguishment/modification of debt . this included losses on extinguishment/modification of debt of $ 27.2 million related to the redemption of the 7.50 % senior notes and $ 4.7 million related to credit facility amendments completed throughout the year , partially offset by a $ 14.9 million gain on debt extinguishment related to the restructured land loan recognized in june 2017. during the year ended december 31 , 2016 , we recognized a $ 7.3 million loss on extinguishment/modification of debt , primarily related to the refinancing of station llc 's credit facility in june 2016. as a result of the 2016 refinancing , station llc recognized a $ 6.6 million loss on extinguishment/modification of debt related to the extinguished portion of the debt . change in fair value of derivative instruments . during the year ended december 31 , 2017 , we recognized a $ 14.1 million net gain on the change in fair value of our interest rate swaps . the gain was primarily due to libor movements and our election to no longer apply hedge accounting beginning july 2017. provision for income tax . income tax expense totaled $ 134.8 million and $ 8.2 million for the years ended december 31 , 2017 and 2016 , respectively . the provision for income taxes in 2017 includes the unfavorable impacts of the tax cuts and jobs act due to the remeasurement of our u.s. federal deferred tax assets and liabilities to apply the new 21 % federal tax rate . we were formed on september 9 , 2015 and did not engage in any operations prior to the ipo . we first filed tax returns for tax year 2015 , which is the first tax year subject to examination by taxing authorities for u.s. federal and state income tax purposes . at december 31 , 2017 we held an economic interest of approximately 59.3 % in station holdco , which holds all of the economic interests in station llc . we have been designated as the sole managing member of both station holdco and station llc , and consolidate the financial position and results of operations of station llc and its subsidiaries and station holdco . the approximate 40.7 % ownership in station holdco is considered noncontrolling interest . station holdco is treated as a partnership for income tax reporting and station holdco 's members are liable for federal , state and local income taxes based on their share of station holdco 's taxable income . we are not liable for the noncontrolling interests ' share of station holdco 's taxable income . 47 net income attributable to noncontrolling interests . net income attributable to noncontrolling interests for the years ended december 31 , 2017 , 2016 and 2015 was $ 27.9 million , $ 63.8 million and $ 5.6 million , respectively . the decrease in net income attributable to noncontrolling interests in 2017 as compared to 2016 is primarily due to the decrease in station holdco 's net income as a result of the related party lease termination described above . net income attributable to noncontrolling interests for the period from may 2 , 2016 through december 31 , 2017 represents the portion of net income attributable to the ownership interest in station holdco not held by us , as well as the portion of mpm enterprises , llc 's ( “ mpm ” ) net income that was not attributable to us . net income attributable to noncontrolling interests for periods prior to may 2 , 2016 included the portion of mpm 's net income that was not attributable to us . adjusted ebitda adjusted ebitda for the years ended december 31 , 2017 , 2016 and 2015 for our two reportable segments and a reconciliation of net income to adjusted ebitda are presented below ( amounts in thousands ) . the las vegas operations segment includes all of our las vegas area casino properties and the native american management segment includes our native american management arrangements . replace_table_token_9_th the year over year increases in adjusted ebitda are due to the factors described above . adjusted ebitda is a non-gaap measure that is presented solely as a supplemental disclosure . we believe that adjusted ebitda is a widely used measure of operating performance in our industry and is a principal basis for valuation of gaming companies . we believe that in addition to net income , adjusted ebitda is a useful financial performance measurement for assessing our operating performance because it provides information about the performance of our ongoing core operations excluding non-cash expenses , financing costs , and other non-operational items . adjusted ebitda includes net 48 income plus depreciation and amortization , share-based compensation , write-downs and other charges , net , tax receivable agreement liability adjustment , related party lease termination , asset impairments , interest expense , net , loss on extinguishment/modification of debt , net , change in fair value of derivative instruments , provision for income tax and other , and excludes adjusted ebitda attributable to the noncontrolling interests of mpm . to evaluate adjusted ebitda and the trends it depicts , the components should be considered . each of these components can significantly affect our results of operations and should be considered in evaluating our operating performance , and the impact of these components can not be determined from adjusted ebitda . further , adjusted ebitda does not represent net income or cash flows from operating , investing or financing activities as defined by gaap and should not be considered as an alternative to net income as an indicator of our operating performance . additionally , adjusted ebitda does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity . it should be noted that not all gaming companies that report ebitda
| cash flows from investing activities during the year s ended december 31 , 2017 , 2016 and 2015 , we paid $ 248.4 million , $ 162.4 million and $ 129.9 million , respectively , for capital expenditures , which were primarily related to various renovation projects , including the upgrade and expansion project at palace station which commenced in october 2016 and redevelopment of palms , as well as the purchase of slot machines and related gaming equipment . during the year ended december 31 , 2017 we paid $ 23.4 million to a 50 related party to purchase the land subject to the ground leases on which each of boulder station and texas station is located . during the year ended december 31 , 2016 , we paid $ 305.9 million , net of cash received , for the acquisition of palms . also during the year ended december 31 , 2016 , fertitta entertainment sold a consolidated subsidiary , which held an aircraft and related debt , to a related party for $ 8.0 million in cash and collected $ 18.3 million of related party notes . during the year ended december 31 , 2015 , we received $ 26.3 million in proceeds from asset sales , primarily from the sale of land previously held for development . in addition , during the year s ended december 31 , 2017 , 2016 and 2015 , we paid $ 2.5 million , $ 2.7 million and $ 1.8 million , respectively , in reimbursable advances for the north fork project . cash flows from financing activities during the year ended december 31 , 2017 , we completed an aggregate $ 531.9 million upsizing and repricing of station llc 's credit facility and issued $ 550.0 million in aggregate principal amount of 5.00 % senior notes . we paid fees and costs related to the credit facility amendments and 5 % senior notes issuance of $ 24.6 million and $ 6.6 million , respectively .
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in 2020 , unit sales were down 5.4 % in copper wire versus 2019. in 2019 , unit sales increased 4.1 % in copper wire versus 2018. in 2018 , unit sales of copper wire sold increased 4.5 % versus 2017. general the company 's operating results are driven by several key factors , including the volume of product produced and shipped , the cost of copper and other raw materials , the competitive pricing environment in the wire industry and the resulting influence on gross margins and the efficiency with which the company 's plants operate during the period , among others . price competition for electrical wire and cable is significant , and the company sells its products in accordance with prevailing market prices . copper , a commodity product , is the principal raw material used by the company in manufacturing its products . the price of copper fluctuates , depending on general economic conditions and in relation to supply and demand and other factors , which causes monthly variations in the cost of copper purchased by the company . additionally , the sec allows shares of physically backed copper exchange traded funds ( “ etfs ” ) to be listed and publicly traded . such funds and other copper etfs like it hold copper cathode as collateral against their shares . the acquisition of copper cathode by copper etfs may materially decrease or interrupt the availability of copper for immediate delivery in the united states , which could materially increase the company 's cost of copper . in addition to rising copper prices and potential supply shortages , we believe that etfs and similar copper-backed derivative products could lead to increased price volatility for copper . the company can not predict copper prices in the future or the effect of fluctuations in the cost of copper on the company 's future operating results . wire prices can , and frequently do change on a daily basis . this competitive pricing market for wire does not always mirror changes in copper prices , making margins highly volatile . historically , the cost of aluminum has been much lower and less volatile than copper . the tables below highlight the range of closing prices of copper on the comex exchange for the periods shown . 13 comex copper closing price 2020 replace_table_token_3_th comex copper closing price 2019 replace_table_token_4_th comex copper closing price 2018 replace_table_token_5_th comex copper closing price 2020 by quarter replace_table_token_6_th comex copper closing price 2019 by quarter replace_table_token_7_th 14 results of operations the following table presents certain items of income and expense as a percentage of net sales for the periods indicated . replace_table_token_8_th the following discussion and analysis relate to factors that have affected the operating results of the company for the years ended december 31 , 2020 , 2019 and 2018. reference should also be made to the financial statements and the related notes included under “ item 8. financial statements and supplementary data ” of this annual report . additional information about results for year end 2018 and certain year-on-year comparisons between 2019 and 2018 can be found in “ management 's discussion and analysis of financial condition and results of operations ” in the company 's annual report on form 10-k for the year ended december 31 , 2019. net sales for the twelve months ended december 31 , 2020 were $ 1.277 billion compared to $ 1.275 billion during the same period in 2019 and $ 1.289 billion during the same period in 2018. copper unit volume , measured in pounds of copper contained in the wire sold , decreased 5.4 % in the twelve months ended december 31 , 2020 versus the twelve months ended december 31 , 2019. the 1.1 % decrease in net sales dollars in 2019 versus 2018 is primarily the result of a 2.0 % decrease in copper wire sales . sales dollars were driven lower primarily by a 5.8 % decrease in average selling price of copper wire , partially offset by a 4.1 % increase in copper wire pounds shipped . average selling prices for wire sold were primarily driven lower by falling copper commodity prices . cost of goods sold was $ 1.082 billion in 2020 versus $ 1.109 billion in 2019 and $ 1.099 million in 2018. the decrease in 2020 compared to 2019 was mainly driven by a decrease in material costs , and to a lesser extent , a decrease in labor and overhead costs year-over year . the decrease in 2020 from 2019 reflects a 5.4 % decrease in copper volume shipped , offset by a 2.6 % increase in the cost of copper purchased . the increase in 2019 compared to 2018 was mainly driven by an increase in labor and overhead costs , and to a lesser extent , a decrease in material costs year-over year . the material cost increase in 2019 from 2018 reflects a 4.1 % increase in copper volume shipped , offset by a 6.2 % decrease in the cost of copper purchased . gross profit percentage for the twelve months ended december 31 , 2020 was 15.2 % compared to 13.0 % during the same period in 2019 and 14.7 % during the same period in 2018. the average selling price of wire per copper pound sold increased 4.7 % in the twelve months ended december 31 , 2020 versus the twelve months ended december 31 , 2019 , while the average cost of copper per pound purchased increased 2.6 % . the average selling price of wire per copper pound sold decreased 5.8 % in the twelve months ended december 31 , 2019 versus the twelve months ended december 31 , 2018 , while the average cost of copper per pound purchased decreased 6.2 % . story_separator_special_tag phase two completion is anticipated in early 2022. total capital expenditures were $ 86 million in 2020. we expect total capital expenditures to range from $ 100 - $ 120 million in 2021 , $ 50 - $ 70 million in 2022 , and $ 40 - $ 60 million in 2023. our strong balance sheet and ability to consistently generate high levels of operating cash flow should provide ample allowance to fund planned capital expenditures . contractual obligations as shown below , the company had the following contractual obligations as of december 31 , 2020. payments due by period ( $ in thousands ) contractual obligations total less than 1 year 1-3 years 3-5 years more than 5 years purchase obligations $ 144,479 $ 144,479 — — — note : amounts listed as purchase obligations consist of open purchase orders for major raw material purchases and $ 60.2 million of capital equipment and construction purchase orders open as of december 31 , 2020 . 18 critical accounting policies and estimates management 's discussion and analysis of its financial condition and results of operations are based upon the company 's financial statements , which have been prepared in accordance with accounting principles generally accepted in the u.s. the preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes . actual results could differ from those estimates . see note 1 to the financial statements included under “ item 8. financial statements and supplementary data ” of this annual report . management believes the following critical accounting policies affect its more significant estimates and assumptions used in the preparation of its financial statements . inventories are stated at the lower of cost , using the last-in , first out ( lifo ) method , or market . the company maintains two inventory pools for lifo purposes . as permitted by u.s. generally accepted accounting principles , the company maintains its inventory costs and cost of goods sold on a first-in , first-out ( fifo ) basis and makes a monthly adjustment to adjust total inventory and cost of goods sold from fifo to lifo . the company applies the lower of cost or market ( lcm ) test by comparing the lifo cost of its raw materials , work-in-process and finished goods inventories to estimated market values , which are based primarily upon the most recent quoted market price of copper and other raw materials and finished wire prices as of the end of each reporting period . the company performs a lower of cost or market calculation quarterly . as of december 31 , 2020 , no lcm adjustment was required . however , decreases in copper and other material prices could necessitate establishing an lcm reserve in future periods . additionally , future reductions in the quantity of inventory on hand could cause copper or other raw materials that are carried in inventory at costs different from the cost of copper and other raw materials in the period in which the reduction occurs to be included in costs of goods sold for that period at the different price . revenue from the sale of the company 's products is recognized when goods are shipped to the customer , title and risk of loss are transferred , pricing is fixed or determinable and collection is reasonably assured . a provision for payment discounts and customer rebates is estimated based upon historical experience and other relevant factors and is recorded within the same period that the revenue is recognized . the company has provided an allowance for credit losses on customer receivables based upon estimates of those customers ' inability to make required payments . such allowance is established and adjusted based upon the makeup of the current receivable portfolio , past bad debt experience and current market conditions . if the financial condition of our customers was to deteriorate and impair their ability to make payments to the company , additional allowances for losses might be required in future periods . recent accounting pronouncements the financial accounting standards board ( “ fasb ” ) accounting standards codification ( “ asc ” ) is the sole source of authoritative u.s. gaap other than securities and exchange commission ( `` sec `` ) issued rules and regulations that apply only to sec registrants . the fasb issues an accounting standard update ( “ asu ” ) to communicate changes to the codification . the company considers the applicability and impact of all asus . the following are those asus that are relevant to the company . in june 2016 , the fasb issued asu no . 2016-13 , “ financial instruments - credit losses ( topic 326 ) , ” which makes significant changes to the accounting for credit losses on financial assets and disclosures about them . this asu requires immediate recognition of management 's estimates of current expected credit losses . under the prior model , losses were recognized only as they were incurred , which fasb has noted delayed recognition of expected losses that might not yet have met the threshold of being probable . the guidance affects all entities in all industries and applies to a wide variety of financial assets , including trade receivables . we adopted this new standard january 1 , 2020 and applied a loss rate model to compute the expected credit loss allowance of our short-term trade receivable balances , which we concluded are representative of one collective pool . this method is based on relevant information from past events , including historical experiences , current conditions , and reasonable and supportable forecasts that affect collectability . our evaluation of the new standard concluded that it had no material impact on our financial statements . in december 2019 , the fasb issued asu 2019-12 , “ simplifying the accounting for income taxes , ” which simplifies the accounting for
| cash flows from investing activities during the year s ended december 31 , 2017 , 2016 and 2015 , we paid $ 248.4 million , $ 162.4 million and $ 129.9 million , respectively , for capital expenditures , which were primarily related to various renovation projects , including the upgrade and expansion project at palace station which commenced in october 2016 and redevelopment of palms , as well as the purchase of slot machines and related gaming equipment . during the year ended december 31 , 2017 we paid $ 23.4 million to a 50 related party to purchase the land subject to the ground leases on which each of boulder station and texas station is located . during the year ended december 31 , 2016 , we paid $ 305.9 million , net of cash received , for the acquisition of palms . also during the year ended december 31 , 2016 , fertitta entertainment sold a consolidated subsidiary , which held an aircraft and related debt , to a related party for $ 8.0 million in cash and collected $ 18.3 million of related party notes . during the year ended december 31 , 2015 , we received $ 26.3 million in proceeds from asset sales , primarily from the sale of land previously held for development . in addition , during the year s ended december 31 , 2017 , 2016 and 2015 , we paid $ 2.5 million , $ 2.7 million and $ 1.8 million , respectively , in reimbursable advances for the north fork project . cash flows from financing activities during the year ended december 31 , 2017 , we completed an aggregate $ 531.9 million upsizing and repricing of station llc 's credit facility and issued $ 550.0 million in aggregate principal amount of 5.00 % senior notes . we paid fees and costs related to the credit facility amendments and 5 % senior notes issuance of $ 24.6 million and $ 6.6 million , respectively .
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in 2020 , unit sales were down 5.4 % in copper wire versus 2019. in 2019 , unit sales increased 4.1 % in copper wire versus 2018. in 2018 , unit sales of copper wire sold increased 4.5 % versus 2017. general the company 's operating results are driven by several key factors , including the volume of product produced and shipped , the cost of copper and other raw materials , the competitive pricing environment in the wire industry and the resulting influence on gross margins and the efficiency with which the company 's plants operate during the period , among others . price competition for electrical wire and cable is significant , and the company sells its products in accordance with prevailing market prices . copper , a commodity product , is the principal raw material used by the company in manufacturing its products . the price of copper fluctuates , depending on general economic conditions and in relation to supply and demand and other factors , which causes monthly variations in the cost of copper purchased by the company . additionally , the sec allows shares of physically backed copper exchange traded funds ( “ etfs ” ) to be listed and publicly traded . such funds and other copper etfs like it hold copper cathode as collateral against their shares . the acquisition of copper cathode by copper etfs may materially decrease or interrupt the availability of copper for immediate delivery in the united states , which could materially increase the company 's cost of copper . in addition to rising copper prices and potential supply shortages , we believe that etfs and similar copper-backed derivative products could lead to increased price volatility for copper . the company can not predict copper prices in the future or the effect of fluctuations in the cost of copper on the company 's future operating results . wire prices can , and frequently do change on a daily basis . this competitive pricing market for wire does not always mirror changes in copper prices , making margins highly volatile . historically , the cost of aluminum has been much lower and less volatile than copper . the tables below highlight the range of closing prices of copper on the comex exchange for the periods shown . 13 comex copper closing price 2020 replace_table_token_3_th comex copper closing price 2019 replace_table_token_4_th comex copper closing price 2018 replace_table_token_5_th comex copper closing price 2020 by quarter replace_table_token_6_th comex copper closing price 2019 by quarter replace_table_token_7_th 14 results of operations the following table presents certain items of income and expense as a percentage of net sales for the periods indicated . replace_table_token_8_th the following discussion and analysis relate to factors that have affected the operating results of the company for the years ended december 31 , 2020 , 2019 and 2018. reference should also be made to the financial statements and the related notes included under “ item 8. financial statements and supplementary data ” of this annual report . additional information about results for year end 2018 and certain year-on-year comparisons between 2019 and 2018 can be found in “ management 's discussion and analysis of financial condition and results of operations ” in the company 's annual report on form 10-k for the year ended december 31 , 2019. net sales for the twelve months ended december 31 , 2020 were $ 1.277 billion compared to $ 1.275 billion during the same period in 2019 and $ 1.289 billion during the same period in 2018. copper unit volume , measured in pounds of copper contained in the wire sold , decreased 5.4 % in the twelve months ended december 31 , 2020 versus the twelve months ended december 31 , 2019. the 1.1 % decrease in net sales dollars in 2019 versus 2018 is primarily the result of a 2.0 % decrease in copper wire sales . sales dollars were driven lower primarily by a 5.8 % decrease in average selling price of copper wire , partially offset by a 4.1 % increase in copper wire pounds shipped . average selling prices for wire sold were primarily driven lower by falling copper commodity prices . cost of goods sold was $ 1.082 billion in 2020 versus $ 1.109 billion in 2019 and $ 1.099 million in 2018. the decrease in 2020 compared to 2019 was mainly driven by a decrease in material costs , and to a lesser extent , a decrease in labor and overhead costs year-over year . the decrease in 2020 from 2019 reflects a 5.4 % decrease in copper volume shipped , offset by a 2.6 % increase in the cost of copper purchased . the increase in 2019 compared to 2018 was mainly driven by an increase in labor and overhead costs , and to a lesser extent , a decrease in material costs year-over year . the material cost increase in 2019 from 2018 reflects a 4.1 % increase in copper volume shipped , offset by a 6.2 % decrease in the cost of copper purchased . gross profit percentage for the twelve months ended december 31 , 2020 was 15.2 % compared to 13.0 % during the same period in 2019 and 14.7 % during the same period in 2018. the average selling price of wire per copper pound sold increased 4.7 % in the twelve months ended december 31 , 2020 versus the twelve months ended december 31 , 2019 , while the average cost of copper per pound purchased increased 2.6 % . the average selling price of wire per copper pound sold decreased 5.8 % in the twelve months ended december 31 , 2019 versus the twelve months ended december 31 , 2018 , while the average cost of copper per pound purchased decreased 6.2 % . story_separator_special_tag phase two completion is anticipated in early 2022. total capital expenditures were $ 86 million in 2020. we expect total capital expenditures to range from $ 100 - $ 120 million in 2021 , $ 50 - $ 70 million in 2022 , and $ 40 - $ 60 million in 2023. our strong balance sheet and ability to consistently generate high levels of operating cash flow should provide ample allowance to fund planned capital expenditures . contractual obligations as shown below , the company had the following contractual obligations as of december 31 , 2020. payments due by period ( $ in thousands ) contractual obligations total less than 1 year 1-3 years 3-5 years more than 5 years purchase obligations $ 144,479 $ 144,479 — — — note : amounts listed as purchase obligations consist of open purchase orders for major raw material purchases and $ 60.2 million of capital equipment and construction purchase orders open as of december 31 , 2020 . 18 critical accounting policies and estimates management 's discussion and analysis of its financial condition and results of operations are based upon the company 's financial statements , which have been prepared in accordance with accounting principles generally accepted in the u.s. the preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes . actual results could differ from those estimates . see note 1 to the financial statements included under “ item 8. financial statements and supplementary data ” of this annual report . management believes the following critical accounting policies affect its more significant estimates and assumptions used in the preparation of its financial statements . inventories are stated at the lower of cost , using the last-in , first out ( lifo ) method , or market . the company maintains two inventory pools for lifo purposes . as permitted by u.s. generally accepted accounting principles , the company maintains its inventory costs and cost of goods sold on a first-in , first-out ( fifo ) basis and makes a monthly adjustment to adjust total inventory and cost of goods sold from fifo to lifo . the company applies the lower of cost or market ( lcm ) test by comparing the lifo cost of its raw materials , work-in-process and finished goods inventories to estimated market values , which are based primarily upon the most recent quoted market price of copper and other raw materials and finished wire prices as of the end of each reporting period . the company performs a lower of cost or market calculation quarterly . as of december 31 , 2020 , no lcm adjustment was required . however , decreases in copper and other material prices could necessitate establishing an lcm reserve in future periods . additionally , future reductions in the quantity of inventory on hand could cause copper or other raw materials that are carried in inventory at costs different from the cost of copper and other raw materials in the period in which the reduction occurs to be included in costs of goods sold for that period at the different price . revenue from the sale of the company 's products is recognized when goods are shipped to the customer , title and risk of loss are transferred , pricing is fixed or determinable and collection is reasonably assured . a provision for payment discounts and customer rebates is estimated based upon historical experience and other relevant factors and is recorded within the same period that the revenue is recognized . the company has provided an allowance for credit losses on customer receivables based upon estimates of those customers ' inability to make required payments . such allowance is established and adjusted based upon the makeup of the current receivable portfolio , past bad debt experience and current market conditions . if the financial condition of our customers was to deteriorate and impair their ability to make payments to the company , additional allowances for losses might be required in future periods . recent accounting pronouncements the financial accounting standards board ( “ fasb ” ) accounting standards codification ( “ asc ” ) is the sole source of authoritative u.s. gaap other than securities and exchange commission ( `` sec `` ) issued rules and regulations that apply only to sec registrants . the fasb issues an accounting standard update ( “ asu ” ) to communicate changes to the codification . the company considers the applicability and impact of all asus . the following are those asus that are relevant to the company . in june 2016 , the fasb issued asu no . 2016-13 , “ financial instruments - credit losses ( topic 326 ) , ” which makes significant changes to the accounting for credit losses on financial assets and disclosures about them . this asu requires immediate recognition of management 's estimates of current expected credit losses . under the prior model , losses were recognized only as they were incurred , which fasb has noted delayed recognition of expected losses that might not yet have met the threshold of being probable . the guidance affects all entities in all industries and applies to a wide variety of financial assets , including trade receivables . we adopted this new standard january 1 , 2020 and applied a loss rate model to compute the expected credit loss allowance of our short-term trade receivable balances , which we concluded are representative of one collective pool . this method is based on relevant information from past events , including historical experiences , current conditions , and reasonable and supportable forecasts that affect collectability . our evaluation of the new standard concluded that it had no material impact on our financial statements . in december 2019 , the fasb issued asu 2019-12 , “ simplifying the accounting for income taxes , ” which simplifies the accounting for
| liquidity and capital resources the following table summarizes the company 's cash flow activities ( in thousands ) : replace_table_token_10_th the company maintains a substantial inventory of finished products to satisfy customers ' prompt delivery requirements . as is customary in the industry , the company provides payment terms to most of its customers that exceed terms that it receives from its suppliers . in general , the company 's standard payment terms result in the collection of a significant majority of net sales within approximately 75 days of the date of the invoice . therefore , the company 's liquidity needs have generally consisted of working capital necessary to finance receivables and inventory . capital expenditures have historically been necessary to expand and update the production capacity of the company 's manufacturing operations . the company has historically satisfied its liquidity and capital expenditure needs with cash generated from operations , borrowings under its various debt arrangements and sales of its common stock . we believe that the company has sufficient liquidity and do not believe covid-19 will materially impact our liquidity , but we continue to assess the covid-19 pandemic and its impact on our business , including on our customer base and suppliers . at december 31 , 2020 and 2019 , the company had no debt outstanding . the company is party to a credit agreement ( as amended , the “ credit agreement ” ) with two banks , bank of america , n.a. , as administrative agent and letter of credit issuer , and wells fargo bank , national association as syndication agent . the credit agreement extends through october 1 , 2021 , and provides for maximum borrowings of $ 150.0 million . in the third quarter of 2016 , the company signed a third amendment to the credit agreement , which , along with other minor changes , eliminated the restriction of maximum borrowings based on the amount of eligible accounts receivable plus the amount of eligible finished goods and raw materials , less any reserves established by the banks .
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among these patients , sy-1425 in combination with azacitidine was generally well-tolerated , with no evidence of increased toxicity relative to either as a single agent , including rates of myelosuppression that were comparable to single-agent azacitidine . as of the data cut-off , of the 18 rara-positive patients that were evaluable for clinical response , the overall response rate , or orr , was 67 % , with a composite complete response rate of 61 % , with 50 % of patients achieving complete response , or cr , and 11 % achieving a complete response with incomplete blood count recovery , or cri . the median time to initial response was 1.2 months , the median duration of response was 10.8 months , and the median overall survival , or os , among patients who achieved a cr or cri was 18 months . as of the data cut-off , of the 28 rara-negative patients that were evaluable for clinical response , the 78 orr was 43 % , with a composite complete response rate of 32 % , with 25 % of patients achieving cr and 7 % achieving cri . the median time to initial response was 3.0 months , and the median duration of response was 10 . 3 months . we also presented new translational data demonstrating that most rara-positive newly diagnosed unfit aml patients have a monocytic disease phenotype that is highly correlated with resistance to upfront treatment with venetoclax and azacitidine . these data suggest that the rara biomarker not only selects for patients who are more likely to respond to treatment with sy-1425 but also for patients who are less likely to respond to treatment with venetoclax and azacitidine . approximately 18,000 patients are diagnosed with unfit aml in the united states and europe annually and we expect the overall total addressable market opportunity for aml to grow to be in excess of $ 2 billion by 2029. at ash 2020 , we also announced that sy-1425 in combination with azacitidine was generally well-tolerated in the r/r aml patient population . among the 21 r/r aml patients who were evaluable for clinical response as of the data cut-off , the orr was 19 % , and the median os was 5.9 months . in hypomethylating agent , or hma , and venetoclax naïve patients , the orr was 43 % . based on these data and our assessment of ongoing areas of high unmet need , we are advancing sy-1425 in combination with azacitidine into a registration-enabling phase 3 clinical trial in rara-positive newly diagnosed hr-mds patients . hr-mds is a hematologic malignancy that is closely related to aml , and as in aml , about 30 % of hr-mds patients are rara-positive . approximately 15,000 patients are diagnosed with hr-mds in the united states and europe annually and we expect the total addressable market opportunity for hr-mds to grow to be in excess of $ 1 billion by 2029. we plan to enroll approximately 190 rara-positive newly diagnosed hr-mds patients in the double-blind placebo-controlled trial , randomized 2:1 to receive sy-1425 in combination with azacitidine or placebo with azacitidine , respectively . the primary endpoint of the trial will be the cr rate . we opened the phase 3 clinical trial for enrollment in february 2021 and are actively screening patients . the trial , if successful , could enable us to submit to the u.s. food and drug administration , or fda , a new drug application , or nda , as early as 2024 . in addition , we plan to advance sy-1425 in combination with venetoclax and azacitidine in rara-positive newly diagnosed unfit aml patients . the trial is designed with a single-arm safety lead-in to confirm the dosing regimen of the triplet to be used in the randomized portion of the phase 2 clinical trial , which will evaluate the safety and efficacy of sy-1425 in combination with venetoclax and azacitidine compared to venetoclax and azacitidine in approximately 80 patients randomized 1:1. the primary endpoint of the trial will be the composite cr rate . the trial will also evaluate the triplet as a salvage therapy in patients who do not respond to venetoclax and azacitidine . we expect to initiate the phase 2 clinical trial in the second half of 2021 , and we expect to report initial data from the trial in 2022. sy-2101 in december 2020 , we acquired from orsenix , llc , or orsenix , a novel oral form of ato , which we refer to as sy-2101 . sy-2101 is in development for the treatment of apl , a subtype of aml defined by a fusion of the rara and promyelocytic leukemia , or pml , genes . approximately 2,000 patients are diagnosed with apl in the united states and europe annually , representing a potential total addressable market opportunity for apl of approximately $ 250 million based on current pricing estimates . an intravenously administered , or iv , formulation of ato is approved for use in combination with all-trans-retinoic-acid , or atra , in patients with newly diagnosed apl and , while curative in more than 80 % of patients , its administration requires up to 140 two- to four-hour infusions over the typical course of induction and consolidation treatment . because sy-2101 is dosed orally once daily , we believe it has the potential to become the standard-of-care frontline therapy for apl by providing comparable efficacy with a substantially more convenient option that reduces the treatment burden on patients , improving access , and lowering costs to the healthcare system . in a phase 1 clinical trial , sy-2101 demonstrated bioavailability , pharmacokinetic , or pk , exposures similar to iv ato , and a generally well-tolerated safety profile . story_separator_special_tag for collaboration arrangements within the scope of asc 808 that contain multiple elements , we first determine which elements of the collaboration are deemed to be within the scope of asc 808 and those that are more reflective of a vendor-customer relationship and therefore within the scope of asc 606. for elements of collaboration arrangements that are accounted for pursuant to asc 808 , an appropriate recognition method is determined and applied consistently , generally by analogy to asc 606. for those elements of the arrangement that are accounted for pursuant to asc 606 , we apply the five-step model described above . 83 research and development expenses expenditures relating to research and development are expensed in the period incurred . research and development expenses consist of both internal and external costs associated with the development of our gene control platform and product candidates . research and development costs include salaries and benefits , materials and supplies , external research , preclinical and clinical development expenses , stock-based compensation expense and facilities costs . facilities costs primarily include the allocation of rent , utilities , depreciation and amortization . in certain circumstances , we are required to make nonrefundable advance payments to vendors for goods or services that will be received in the future for use in research and development activities . in such circumstances , the nonrefundable advance payments are deferred and capitalized , even when there is no alternative future use for the research and development , until related goods or services are provided . we record accruals for estimated ongoing research costs . when evaluating the adequacy of the accrued liabilities , we analyze progress of the work being performed , including the phase or completion of the event , invoices received and costs . significant judgements and estimates may be made in determining the accrued balances at the end of any reporting period . actual results could differ from our estimates . we may in-license the rights to develop and commercialize product candidates . for each in-license transaction , we evaluate whether we have acquired processes or activities along with inputs that would be sufficient to constitute a “ business ” as defined under u.s. gaap . a “ business ” as defined under u.s. gaap consists of inputs and processes applied to those inputs that have the ability to create outputs . although businesses usually have outputs , outputs are not required for an integrated set of activities to qualify as a business . when we determine that we have not acquired sufficient processes or activities to constitute a business , any up-front payments , as well as milestone payments , are immediately expensed as acquired research and development in the period in which they are incurred . warrants we account for our issued warrants as either liability or equity in accordance with asc 480-10 , accounting for certain financial instruments with characteristics of both liabilities and equity , or asc 480-10 , or asc 815-40 , accounting for derivative financial instruments indexed to , and potentially settled in , a company 's own stock , or asc 815-40. under asc 480-10 , warrants are considered liability if they are mandatorily redeemable and they require settlement in cash or other assets , or a variable number of shares . if warrants do not meet liability classification under asc 480-10 , we consider the requirements of asc 815-40 to determine whether the warrants should be classified as liability or equity . under asc 815-40 , contracts that may require settlement for cash are liabilities , regardless of the probability of the occurrence of the triggering event . liability classified warrants are measured at fair value on the issuance date and at the end of each reporting period . any change in the fair value of the warrants after the issuance date is recorded in the consolidated statements of operations as a gain or loss . if warrants do not require liability classification under asc 815-40 , in order to conclude warrants should be classified as equity , the company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under asc 815-40 or other applicable gaap . equity classified warrants are accounted for at fair value on the issuance date with no changes in fair value recognized after the issuance date . on december 8 , 2020 , through a private placement , we issued 10,312,500 shares of our common stock and , in lieu of common stock , pre-funded warrants to purchase an aggregate of 1,000,000 shares of common stock , and , in each case , accompanying warrants to purchase an aggregate of up to 2,828,125 additional shares of common stock ( or pre-funded warrants to purchase common stock in lieu thereof ) at a price of $ 8.00 per share and accompanying warrant ( or $ 7.99 per pre-funded warrant and accompanying warrant ) . the private placement resulted in aggregate gross proceeds of $ 90.5 million , before $ 0.4 million of transaction costs . 84 in the event of certain fundamental transactions , t he holders of warrants may require us to make a payment based on a black-scholes valuation , using specified inputs . the holders of the p re - f unded w arrants issued in the december 2020 private placement do not have similar rights . therefore , we accounted for the warrants as a liabilit y , while the p re - f unded w arrants met the permanent equity criteria classification . the pre-funded w arrants are classified as a component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued , are immediately exercisable , do not embody an obligation for us to repurchase those shares , and permit the holders to receive a fixed number of shares of common
| liquidity and capital resources the following table summarizes the company 's cash flow activities ( in thousands ) : replace_table_token_10_th the company maintains a substantial inventory of finished products to satisfy customers ' prompt delivery requirements . as is customary in the industry , the company provides payment terms to most of its customers that exceed terms that it receives from its suppliers . in general , the company 's standard payment terms result in the collection of a significant majority of net sales within approximately 75 days of the date of the invoice . therefore , the company 's liquidity needs have generally consisted of working capital necessary to finance receivables and inventory . capital expenditures have historically been necessary to expand and update the production capacity of the company 's manufacturing operations . the company has historically satisfied its liquidity and capital expenditure needs with cash generated from operations , borrowings under its various debt arrangements and sales of its common stock . we believe that the company has sufficient liquidity and do not believe covid-19 will materially impact our liquidity , but we continue to assess the covid-19 pandemic and its impact on our business , including on our customer base and suppliers . at december 31 , 2020 and 2019 , the company had no debt outstanding . the company is party to a credit agreement ( as amended , the “ credit agreement ” ) with two banks , bank of america , n.a. , as administrative agent and letter of credit issuer , and wells fargo bank , national association as syndication agent . the credit agreement extends through october 1 , 2021 , and provides for maximum borrowings of $ 150.0 million . in the third quarter of 2016 , the company signed a third amendment to the credit agreement , which , along with other minor changes , eliminated the restriction of maximum borrowings based on the amount of eligible accounts receivable plus the amount of eligible finished goods and raw materials , less any reserves established by the banks .
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among these patients , sy-1425 in combination with azacitidine was generally well-tolerated , with no evidence of increased toxicity relative to either as a single agent , including rates of myelosuppression that were comparable to single-agent azacitidine . as of the data cut-off , of the 18 rara-positive patients that were evaluable for clinical response , the overall response rate , or orr , was 67 % , with a composite complete response rate of 61 % , with 50 % of patients achieving complete response , or cr , and 11 % achieving a complete response with incomplete blood count recovery , or cri . the median time to initial response was 1.2 months , the median duration of response was 10.8 months , and the median overall survival , or os , among patients who achieved a cr or cri was 18 months . as of the data cut-off , of the 28 rara-negative patients that were evaluable for clinical response , the 78 orr was 43 % , with a composite complete response rate of 32 % , with 25 % of patients achieving cr and 7 % achieving cri . the median time to initial response was 3.0 months , and the median duration of response was 10 . 3 months . we also presented new translational data demonstrating that most rara-positive newly diagnosed unfit aml patients have a monocytic disease phenotype that is highly correlated with resistance to upfront treatment with venetoclax and azacitidine . these data suggest that the rara biomarker not only selects for patients who are more likely to respond to treatment with sy-1425 but also for patients who are less likely to respond to treatment with venetoclax and azacitidine . approximately 18,000 patients are diagnosed with unfit aml in the united states and europe annually and we expect the overall total addressable market opportunity for aml to grow to be in excess of $ 2 billion by 2029. at ash 2020 , we also announced that sy-1425 in combination with azacitidine was generally well-tolerated in the r/r aml patient population . among the 21 r/r aml patients who were evaluable for clinical response as of the data cut-off , the orr was 19 % , and the median os was 5.9 months . in hypomethylating agent , or hma , and venetoclax naïve patients , the orr was 43 % . based on these data and our assessment of ongoing areas of high unmet need , we are advancing sy-1425 in combination with azacitidine into a registration-enabling phase 3 clinical trial in rara-positive newly diagnosed hr-mds patients . hr-mds is a hematologic malignancy that is closely related to aml , and as in aml , about 30 % of hr-mds patients are rara-positive . approximately 15,000 patients are diagnosed with hr-mds in the united states and europe annually and we expect the total addressable market opportunity for hr-mds to grow to be in excess of $ 1 billion by 2029. we plan to enroll approximately 190 rara-positive newly diagnosed hr-mds patients in the double-blind placebo-controlled trial , randomized 2:1 to receive sy-1425 in combination with azacitidine or placebo with azacitidine , respectively . the primary endpoint of the trial will be the cr rate . we opened the phase 3 clinical trial for enrollment in february 2021 and are actively screening patients . the trial , if successful , could enable us to submit to the u.s. food and drug administration , or fda , a new drug application , or nda , as early as 2024 . in addition , we plan to advance sy-1425 in combination with venetoclax and azacitidine in rara-positive newly diagnosed unfit aml patients . the trial is designed with a single-arm safety lead-in to confirm the dosing regimen of the triplet to be used in the randomized portion of the phase 2 clinical trial , which will evaluate the safety and efficacy of sy-1425 in combination with venetoclax and azacitidine compared to venetoclax and azacitidine in approximately 80 patients randomized 1:1. the primary endpoint of the trial will be the composite cr rate . the trial will also evaluate the triplet as a salvage therapy in patients who do not respond to venetoclax and azacitidine . we expect to initiate the phase 2 clinical trial in the second half of 2021 , and we expect to report initial data from the trial in 2022. sy-2101 in december 2020 , we acquired from orsenix , llc , or orsenix , a novel oral form of ato , which we refer to as sy-2101 . sy-2101 is in development for the treatment of apl , a subtype of aml defined by a fusion of the rara and promyelocytic leukemia , or pml , genes . approximately 2,000 patients are diagnosed with apl in the united states and europe annually , representing a potential total addressable market opportunity for apl of approximately $ 250 million based on current pricing estimates . an intravenously administered , or iv , formulation of ato is approved for use in combination with all-trans-retinoic-acid , or atra , in patients with newly diagnosed apl and , while curative in more than 80 % of patients , its administration requires up to 140 two- to four-hour infusions over the typical course of induction and consolidation treatment . because sy-2101 is dosed orally once daily , we believe it has the potential to become the standard-of-care frontline therapy for apl by providing comparable efficacy with a substantially more convenient option that reduces the treatment burden on patients , improving access , and lowering costs to the healthcare system . in a phase 1 clinical trial , sy-2101 demonstrated bioavailability , pharmacokinetic , or pk , exposures similar to iv ato , and a generally well-tolerated safety profile . story_separator_special_tag for collaboration arrangements within the scope of asc 808 that contain multiple elements , we first determine which elements of the collaboration are deemed to be within the scope of asc 808 and those that are more reflective of a vendor-customer relationship and therefore within the scope of asc 606. for elements of collaboration arrangements that are accounted for pursuant to asc 808 , an appropriate recognition method is determined and applied consistently , generally by analogy to asc 606. for those elements of the arrangement that are accounted for pursuant to asc 606 , we apply the five-step model described above . 83 research and development expenses expenditures relating to research and development are expensed in the period incurred . research and development expenses consist of both internal and external costs associated with the development of our gene control platform and product candidates . research and development costs include salaries and benefits , materials and supplies , external research , preclinical and clinical development expenses , stock-based compensation expense and facilities costs . facilities costs primarily include the allocation of rent , utilities , depreciation and amortization . in certain circumstances , we are required to make nonrefundable advance payments to vendors for goods or services that will be received in the future for use in research and development activities . in such circumstances , the nonrefundable advance payments are deferred and capitalized , even when there is no alternative future use for the research and development , until related goods or services are provided . we record accruals for estimated ongoing research costs . when evaluating the adequacy of the accrued liabilities , we analyze progress of the work being performed , including the phase or completion of the event , invoices received and costs . significant judgements and estimates may be made in determining the accrued balances at the end of any reporting period . actual results could differ from our estimates . we may in-license the rights to develop and commercialize product candidates . for each in-license transaction , we evaluate whether we have acquired processes or activities along with inputs that would be sufficient to constitute a “ business ” as defined under u.s. gaap . a “ business ” as defined under u.s. gaap consists of inputs and processes applied to those inputs that have the ability to create outputs . although businesses usually have outputs , outputs are not required for an integrated set of activities to qualify as a business . when we determine that we have not acquired sufficient processes or activities to constitute a business , any up-front payments , as well as milestone payments , are immediately expensed as acquired research and development in the period in which they are incurred . warrants we account for our issued warrants as either liability or equity in accordance with asc 480-10 , accounting for certain financial instruments with characteristics of both liabilities and equity , or asc 480-10 , or asc 815-40 , accounting for derivative financial instruments indexed to , and potentially settled in , a company 's own stock , or asc 815-40. under asc 480-10 , warrants are considered liability if they are mandatorily redeemable and they require settlement in cash or other assets , or a variable number of shares . if warrants do not meet liability classification under asc 480-10 , we consider the requirements of asc 815-40 to determine whether the warrants should be classified as liability or equity . under asc 815-40 , contracts that may require settlement for cash are liabilities , regardless of the probability of the occurrence of the triggering event . liability classified warrants are measured at fair value on the issuance date and at the end of each reporting period . any change in the fair value of the warrants after the issuance date is recorded in the consolidated statements of operations as a gain or loss . if warrants do not require liability classification under asc 815-40 , in order to conclude warrants should be classified as equity , the company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under asc 815-40 or other applicable gaap . equity classified warrants are accounted for at fair value on the issuance date with no changes in fair value recognized after the issuance date . on december 8 , 2020 , through a private placement , we issued 10,312,500 shares of our common stock and , in lieu of common stock , pre-funded warrants to purchase an aggregate of 1,000,000 shares of common stock , and , in each case , accompanying warrants to purchase an aggregate of up to 2,828,125 additional shares of common stock ( or pre-funded warrants to purchase common stock in lieu thereof ) at a price of $ 8.00 per share and accompanying warrant ( or $ 7.99 per pre-funded warrant and accompanying warrant ) . the private placement resulted in aggregate gross proceeds of $ 90.5 million , before $ 0.4 million of transaction costs . 84 in the event of certain fundamental transactions , t he holders of warrants may require us to make a payment based on a black-scholes valuation , using specified inputs . the holders of the p re - f unded w arrants issued in the december 2020 private placement do not have similar rights . therefore , we accounted for the warrants as a liabilit y , while the p re - f unded w arrants met the permanent equity criteria classification . the pre-funded w arrants are classified as a component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued , are immediately exercisable , do not embody an obligation for us to repurchase those shares , and permit the holders to receive a fixed number of shares of common
| cash flows the following table provides information regarding our cash flows for the years ended december 31 , 2020 , 2019 and 2018 ( in thousands ) : replace_table_token_9_th net cash used in operating activities the use of cash in all periods presented resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital . net cash used in operating activities was $ 57.4 million during the year ended december 31 , 2020 , compared to $ 60.3 million during the year ended december 31 , 2019. the decrease in cash used in operating activities was primarily due to a $ 20.0 million collection of the advanced payment pursuant to our collaboration agreement with gbt , offset by higher operating expenses associated with our ongoing preclinical and clinical development activities and the asset acquisition of sy-2101 during the year ended december 31 , 2020. net cash used in operating activities was $ 60.3 million during the year ended december 31 , 2019 , compared to $ 40.3 million during the year ended december 31 , 2018. the increase in cash used in operating activities was primarily due to a $ 13.1 million increase in our net loss from continuing operations and proceeds received upon entry into the incyte target discovery collaboration during the year ended december 31 , 2018 that did not reoccur in 2019. net cash provided by ( used in ) investing activities net cash provided by investing activities was $ 46.7 million during the year ended december 31 , 2020 , compared to net cash used in investing activities of $ 11.7 million during the year ended december 31 , 2019. the change in net cash provided by investing activities was primarily due to our reinvestment of $ 50.0 million of our funds from marketable securities upon their maturities into cash equivalents
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the july follow-on offering , including the july additional shares , closed on july 20 , 2020 resulting in $ 52.2 million in gross proceeds , and approximately $ 49.4 million in net proceeds after deducting approximately $ 2.9 million in underwriting discounts and before giving effect to $ 0.9 million in other estimated expenses relating to the july follow-on offering . 32 on december 14 , 2020 , we entered into separate open market sale with each of jefferies llc , stifel , nicolaus & company , incorporated , bmo capital markets corp. , janney montgomery scott llc and d.a . davidson & co. , pursuant to which we may offer and sell , from time to time , shares our class a common stock having an aggregate sales price of up to $ 50,000,000. as of december 31 , 2020 , we had $ 50.0 million of availability remaining under the atm program . pursuant to the open market sale agreements , shares of our class a common stock may be offered and sold through the sales agents in transactions that are deemed to be “ at the market ” offerings as defined in rule 415 under the securities act of 1933 , including sales made directly on the nyse or sales made to or through a market maker other than on an exchange or , subject to the terms of a written notice from us , in privately negotiated transactions . executive overview we are an internally managed reit with a focus on acquiring and managing properties primarily leased to the usps . we believe the overall opportunity for consolidation that exists within the postal logistics network is very attractive . we continue to execute our strategy to acquire and consolidate postal properties that will generate strong earnings for our shareholders . geographic concentration as of december 31 , 2020 , we owned a portfolio of 726 postal properties located in 47 states leased primarily to the usps . for the year ended december 31 , 2020 , 10.0 % of our total of rental income was concentrated in pennsylvania . such geographical concentration could expose the company to certain downturns in the economies of those states or other changes in such states ' respective real estate market conditions . any material changes in the current payments programs or regulatory , economic , environmental or competitive conditions in any of these areas could have an effect on our overall business results . in the event of negative economic or other changes in any of these markets , our business , financial condition and results of operations , our ability to make distributions to our shareholders and the trading price of our common shares may be adversely affected . emerging growth company we are an “ emerging growth company , ” as defined in the jumpstart our business startups act of 2012 , or the jobs act and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “ emerging growth companies , ” including not being required to comply with the auditor attestation requirements of section 404 of the sarbanes-oxley act of 2002 , reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved . in addition , the jobs act also provides that an “ emerging growth company ” can take advantage of the extended transition period provided in the securities act of 1933 , as amended ( the “ securities act ” ) , for complying with new or revised accounting standards . in other words , an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies . we have availed ourselves of these exemptions ; although , subject to certain restrictions , we may elect to stop availing ourselves of these exemptions in the future even while we remain an “ emerging growth company . ” we will remain an “ emerging growth company ” until the earliest to occur of ( i ) the last day of the fiscal year during which our total annual revenue equals or exceeds $ 1.07 billion ( subject to periodic adjustment for inflation ) , ( ii ) the last day of the fiscal year following the fifth anniversary of our ipo , ( iii ) the date on which we have , during the previous three-year period , issued more than $ 1.0 billion in non-convertible debt or ( iv ) the date on which we are deemed to be a “ large accelerated filer ” under the securities exchange act of 1934 , as amended ( the “ exchange act ” ) . we are also a “ smaller reporting company ” as defined in regulation s-k under the securities act and have elected to take advantage of certain scaled disclosures available to smaller reporting companies . we may continue to be a smaller reporting company even after we are no longer an “ emerging growth company . ” we elected to be treated as a reit under the code beginning with our short taxable year ending december 31 , 2019. as long as we qualify as a reit , we generally will not be subject to federal income tax to the extent that we distribute our taxable income for each tax year to our stockholders . 33 factors that may influence future results of operations the usps we are dependent on the usps 's financial and operational stability . the usps is currently facing a variety of circumstances that are threatening its ability to fund its operations and other obligations as currently conducted without intervention by the federal government . story_separator_special_tag this increase is offset by a loss on early extinguishment of debt of $ 0.2 million incurred in connection with the ipo during the year ended december 31 , 2019. story_separator_special_tag style= `` font-family : times new roman , times , serif ; font-size : 10pt `` > our long-term liquidity requirements primarily consist of funds necessary for the repayment of debt at maturity , property acquisitions and non-recurring capital improvements . we expect to meet our long-term liquidity requirements with net cash from operations , long-term indebtedness including our credit facility and mortgage financing , the issuance of equity and debt securities and proceeds from select sales of our properties . we also may fund property acquisitions and non-recurring capital improvements using our credit facility pending permanent property-level financing . we believe we have access to multiple sources of capital to fund our long-term liquidity requirements , including the incurrence of additional debt and the issuance of additional equity securities . however , in the future , there may be a number of factors that could have a material and adverse effect on our ability to access these capital sources , including unfavorable conditions in the overall equity and credit markets , our degree of leverage , our unencumbered asset base , borrowing restrictions imposed by our lenders , general market conditions for reits , our operating performance , liquidity and market perceptions about us . the success of our business strategy will depend , to a significant degree , on our ability to access these various capital sources . in addition , we continuously evaluate possible acquisitions of postal properties , which largely depend on , among other things , the market for owning and leasing postal properties and the terms on which the usps will enter into new or renewed leases . 39 to maintain our qualification as a reit , we must make distributions to our stockholders aggregating annually at least 90 % of our reit taxable income determined without regard to the deduction for dividends paid and excluding capital gains . as a result of this requirement , we can not rely on retained earnings to fund our business needs to the same extent as other entities that are not reits . if we do not have sufficient funds available to us from our operations to fund our business needs , we will need to find alternative ways to fund those needs . such alternatives may include , among other things , divesting ourselves of properties ( whether or not the sales price is optimal or otherwise meets our strategic long-term objectives ) , incurring indebtedness or issuing equity securities in public or private transactions , the availability and attractiveness of the terms of which can not be assured . consolidated indebtedness as of december 31 , 2020 , we had approximately $ 125.0 million of outstanding consolidated principal indebtedness . the following table sets forth information as of december 31 , 2020 and 2019 with respect to the outstanding indebtedness of the company : replace_table_token_3_th explanatory notes : ( 1 ) on september 27 , 2019 , we entered into our credit agreement , which provides for revolving commitments in an aggregate principal amount of a $ 100.0 million and an accordion feature that permits us to borrow up to $ 200.0 million , subject to customary conditions . during the three months ended march 31 , 2020 , we amended the credit agreement in order to exercise a portion our accordion feature to increase permitted borrowings to $ 150.0 million from $ 100.0 million , subject to the borrowing base properties identified therein remaining unencumbered and subject to an enforceable lease . as of december 31 , 2020 , $ 150.0 million in aggregate principal amount under the credit facility was authorized and $ 78.0 million was drawn . our ability to borrow under the credit facility is subject to ongoing compliance with a number of customary affirmative and negative covenants . as of december 31 , 2020 , we were in compliance with all of the credit facility 's debt covenants . ( 2 ) as of december 31 , 2020 , the one-month libor rate was 0.15 % . ( 3 ) five properties are collateralized under this loan as of december 31 , 2020 with mr. spodek as the guarantor . on september 8 , 2021 and every five years thereafter , the interest rate will reset at a variable annual rate of wall street journal prime rate ( “ prime ” ) + 0.5 % . 40 ( 4 ) the loan is collateralized by first mortgage liens on four properties and a personal guarantee of payment by mr. spodek . interest rate resets on december 31 , 2022 to prime + 0.25 % . ( 5 ) the loan is collateralized by first mortgage liens on one property and a personal guarantee of payment by mr. spodek . interest rate resets on january 31 , 2023 to prime + 0.5 % . ( 6 ) in connection with the acquisition of a property , we obtained seller financing secured by the property in the amount $ 0.4 million requiring five annual payments of principal and interest of $ 105,661 with the first installment due on january 2 , 2021 based on a 6.0 % interest rate per annum through january 2 , 2025 . ( 7 ) in connection with the purchase of a 13-building portfolio , we obtained $ 4.5 million of mortgage financing , at a fixed interest rate of 4.25 % with interest only for the first 18 months , which resets in november 2026 to the greater of prime or 4.25 % . ( 8 ) the loan is collateralized by first mortgage liens on 22 properties . the interest rate resets in january 2027 to the greater of prime or 4.25 % . ( 9 ) the loan is secured by a cross-collateralized
| cash flows the following table provides information regarding our cash flows for the years ended december 31 , 2020 , 2019 and 2018 ( in thousands ) : replace_table_token_9_th net cash used in operating activities the use of cash in all periods presented resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital . net cash used in operating activities was $ 57.4 million during the year ended december 31 , 2020 , compared to $ 60.3 million during the year ended december 31 , 2019. the decrease in cash used in operating activities was primarily due to a $ 20.0 million collection of the advanced payment pursuant to our collaboration agreement with gbt , offset by higher operating expenses associated with our ongoing preclinical and clinical development activities and the asset acquisition of sy-2101 during the year ended december 31 , 2020. net cash used in operating activities was $ 60.3 million during the year ended december 31 , 2019 , compared to $ 40.3 million during the year ended december 31 , 2018. the increase in cash used in operating activities was primarily due to a $ 13.1 million increase in our net loss from continuing operations and proceeds received upon entry into the incyte target discovery collaboration during the year ended december 31 , 2018 that did not reoccur in 2019. net cash provided by ( used in ) investing activities net cash provided by investing activities was $ 46.7 million during the year ended december 31 , 2020 , compared to net cash used in investing activities of $ 11.7 million during the year ended december 31 , 2019. the change in net cash provided by investing activities was primarily due to our reinvestment of $ 50.0 million of our funds from marketable securities upon their maturities into cash equivalents
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the july follow-on offering , including the july additional shares , closed on july 20 , 2020 resulting in $ 52.2 million in gross proceeds , and approximately $ 49.4 million in net proceeds after deducting approximately $ 2.9 million in underwriting discounts and before giving effect to $ 0.9 million in other estimated expenses relating to the july follow-on offering . 32 on december 14 , 2020 , we entered into separate open market sale with each of jefferies llc , stifel , nicolaus & company , incorporated , bmo capital markets corp. , janney montgomery scott llc and d.a . davidson & co. , pursuant to which we may offer and sell , from time to time , shares our class a common stock having an aggregate sales price of up to $ 50,000,000. as of december 31 , 2020 , we had $ 50.0 million of availability remaining under the atm program . pursuant to the open market sale agreements , shares of our class a common stock may be offered and sold through the sales agents in transactions that are deemed to be “ at the market ” offerings as defined in rule 415 under the securities act of 1933 , including sales made directly on the nyse or sales made to or through a market maker other than on an exchange or , subject to the terms of a written notice from us , in privately negotiated transactions . executive overview we are an internally managed reit with a focus on acquiring and managing properties primarily leased to the usps . we believe the overall opportunity for consolidation that exists within the postal logistics network is very attractive . we continue to execute our strategy to acquire and consolidate postal properties that will generate strong earnings for our shareholders . geographic concentration as of december 31 , 2020 , we owned a portfolio of 726 postal properties located in 47 states leased primarily to the usps . for the year ended december 31 , 2020 , 10.0 % of our total of rental income was concentrated in pennsylvania . such geographical concentration could expose the company to certain downturns in the economies of those states or other changes in such states ' respective real estate market conditions . any material changes in the current payments programs or regulatory , economic , environmental or competitive conditions in any of these areas could have an effect on our overall business results . in the event of negative economic or other changes in any of these markets , our business , financial condition and results of operations , our ability to make distributions to our shareholders and the trading price of our common shares may be adversely affected . emerging growth company we are an “ emerging growth company , ” as defined in the jumpstart our business startups act of 2012 , or the jobs act and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “ emerging growth companies , ” including not being required to comply with the auditor attestation requirements of section 404 of the sarbanes-oxley act of 2002 , reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved . in addition , the jobs act also provides that an “ emerging growth company ” can take advantage of the extended transition period provided in the securities act of 1933 , as amended ( the “ securities act ” ) , for complying with new or revised accounting standards . in other words , an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies . we have availed ourselves of these exemptions ; although , subject to certain restrictions , we may elect to stop availing ourselves of these exemptions in the future even while we remain an “ emerging growth company . ” we will remain an “ emerging growth company ” until the earliest to occur of ( i ) the last day of the fiscal year during which our total annual revenue equals or exceeds $ 1.07 billion ( subject to periodic adjustment for inflation ) , ( ii ) the last day of the fiscal year following the fifth anniversary of our ipo , ( iii ) the date on which we have , during the previous three-year period , issued more than $ 1.0 billion in non-convertible debt or ( iv ) the date on which we are deemed to be a “ large accelerated filer ” under the securities exchange act of 1934 , as amended ( the “ exchange act ” ) . we are also a “ smaller reporting company ” as defined in regulation s-k under the securities act and have elected to take advantage of certain scaled disclosures available to smaller reporting companies . we may continue to be a smaller reporting company even after we are no longer an “ emerging growth company . ” we elected to be treated as a reit under the code beginning with our short taxable year ending december 31 , 2019. as long as we qualify as a reit , we generally will not be subject to federal income tax to the extent that we distribute our taxable income for each tax year to our stockholders . 33 factors that may influence future results of operations the usps we are dependent on the usps 's financial and operational stability . the usps is currently facing a variety of circumstances that are threatening its ability to fund its operations and other obligations as currently conducted without intervention by the federal government . story_separator_special_tag this increase is offset by a loss on early extinguishment of debt of $ 0.2 million incurred in connection with the ipo during the year ended december 31 , 2019. story_separator_special_tag style= `` font-family : times new roman , times , serif ; font-size : 10pt `` > our long-term liquidity requirements primarily consist of funds necessary for the repayment of debt at maturity , property acquisitions and non-recurring capital improvements . we expect to meet our long-term liquidity requirements with net cash from operations , long-term indebtedness including our credit facility and mortgage financing , the issuance of equity and debt securities and proceeds from select sales of our properties . we also may fund property acquisitions and non-recurring capital improvements using our credit facility pending permanent property-level financing . we believe we have access to multiple sources of capital to fund our long-term liquidity requirements , including the incurrence of additional debt and the issuance of additional equity securities . however , in the future , there may be a number of factors that could have a material and adverse effect on our ability to access these capital sources , including unfavorable conditions in the overall equity and credit markets , our degree of leverage , our unencumbered asset base , borrowing restrictions imposed by our lenders , general market conditions for reits , our operating performance , liquidity and market perceptions about us . the success of our business strategy will depend , to a significant degree , on our ability to access these various capital sources . in addition , we continuously evaluate possible acquisitions of postal properties , which largely depend on , among other things , the market for owning and leasing postal properties and the terms on which the usps will enter into new or renewed leases . 39 to maintain our qualification as a reit , we must make distributions to our stockholders aggregating annually at least 90 % of our reit taxable income determined without regard to the deduction for dividends paid and excluding capital gains . as a result of this requirement , we can not rely on retained earnings to fund our business needs to the same extent as other entities that are not reits . if we do not have sufficient funds available to us from our operations to fund our business needs , we will need to find alternative ways to fund those needs . such alternatives may include , among other things , divesting ourselves of properties ( whether or not the sales price is optimal or otherwise meets our strategic long-term objectives ) , incurring indebtedness or issuing equity securities in public or private transactions , the availability and attractiveness of the terms of which can not be assured . consolidated indebtedness as of december 31 , 2020 , we had approximately $ 125.0 million of outstanding consolidated principal indebtedness . the following table sets forth information as of december 31 , 2020 and 2019 with respect to the outstanding indebtedness of the company : replace_table_token_3_th explanatory notes : ( 1 ) on september 27 , 2019 , we entered into our credit agreement , which provides for revolving commitments in an aggregate principal amount of a $ 100.0 million and an accordion feature that permits us to borrow up to $ 200.0 million , subject to customary conditions . during the three months ended march 31 , 2020 , we amended the credit agreement in order to exercise a portion our accordion feature to increase permitted borrowings to $ 150.0 million from $ 100.0 million , subject to the borrowing base properties identified therein remaining unencumbered and subject to an enforceable lease . as of december 31 , 2020 , $ 150.0 million in aggregate principal amount under the credit facility was authorized and $ 78.0 million was drawn . our ability to borrow under the credit facility is subject to ongoing compliance with a number of customary affirmative and negative covenants . as of december 31 , 2020 , we were in compliance with all of the credit facility 's debt covenants . ( 2 ) as of december 31 , 2020 , the one-month libor rate was 0.15 % . ( 3 ) five properties are collateralized under this loan as of december 31 , 2020 with mr. spodek as the guarantor . on september 8 , 2021 and every five years thereafter , the interest rate will reset at a variable annual rate of wall street journal prime rate ( “ prime ” ) + 0.5 % . 40 ( 4 ) the loan is collateralized by first mortgage liens on four properties and a personal guarantee of payment by mr. spodek . interest rate resets on december 31 , 2022 to prime + 0.25 % . ( 5 ) the loan is collateralized by first mortgage liens on one property and a personal guarantee of payment by mr. spodek . interest rate resets on january 31 , 2023 to prime + 0.5 % . ( 6 ) in connection with the acquisition of a property , we obtained seller financing secured by the property in the amount $ 0.4 million requiring five annual payments of principal and interest of $ 105,661 with the first installment due on january 2 , 2021 based on a 6.0 % interest rate per annum through january 2 , 2025 . ( 7 ) in connection with the purchase of a 13-building portfolio , we obtained $ 4.5 million of mortgage financing , at a fixed interest rate of 4.25 % with interest only for the first 18 months , which resets in november 2026 to the greater of prime or 4.25 % . ( 8 ) the loan is collateralized by first mortgage liens on 22 properties . the interest rate resets in january 2027 to the greater of prime or 4.25 % . ( 9 ) the loan is secured by a cross-collateralized
| cash flows comparison of the year ended december 31 , 2020 and the year ended december 31 , 2019 the company had $ 2.2 million of cash and $ 1.1 million of escrows and reserves as of december 31 , 2020 compared to $ 12.5 million of cash and $ 0.7 million of escrows and reserves as of december 31 , 2019. cash flow from operating activities – net cash provided by operating activities increased by $ 6.5 million to $ 9.4 million for the year ended december 31 , 2020 compared to $ 2.9 million for the same period in 2019. the increase is primarily due to the addition of postal properties that were acquired since the ipo , all of which have generated additional rental income and related changes in working capital . cash flow to investing activities – net cash used in investing activities increased by $ 53.5 million to $ 126.2 million for the year ended december 31 , 2020 compared to $ 72.7 million for the same period in 2019. the increase was primarily due to the 261 postal properties that we acquired during 2020. cash flow from financing activities – net cash provided by financing activities increased by $ 24.7 million to $ 106.8 million for the year ended december 31 , 2020 compared to $ 82.1 million provided by the same period in 2019. the increase was primarily related to higher net borrowings during the year ended december 31 , 2020 offset by lower proceeds from equity offerings and higher payments of dividends since our ipo .
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we believe that our innovative , cloud-based approach disrupts the large market for business communications and collaboration by providing flexible and cost-effective solutions that support distributed workforces , mobile employees , and the proliferation of smart phones and tablets . we enable convenient and effective communications for organizations across all their locations and employees , enabling them to be more productive and more responsive to their customers . our cloud-based business communications and collaboration solutions are designed to be easy to use , providing a single user identity across multiple locations and devices , including smartphones , tablets , pcs and desk phones . our solutions can be deployed rapidly and configured and managed easily . through our platform , we enable third-party developers and customers to integrate our solution with leading business applications to customize their own business workflows . we have a portfolio of cloud-based offerings that are subscription based , made available at different rates varying by the specific functionalities , services , and number of users . we primarily generate revenues from the sale of subscriptions to our offerings . our subscription plans have monthly , annual , or multi-year contractual terms . we believe that this flexibility in contract duration is important to meet the different needs of our customers . for the years ended december 31 , 2019 , 2018 , and 2017 , subscriptions revenues accounted for 90 % or more of our total revenues . the remainder of our revenues has historically been primarily comprised of product revenues from the sale of pre-configured phones and professional services . we do not develop , manufacture , or otherwise touch the delivery of physical phones and offer it as a convenience for a total solution to our customers in connection with subscriptions to our services . we rely on third-party providers to develop and manufacture these devices and fulfillment partners to successfully serve our customers . we continue to invest in our direct inside sales force while also developing indirect sales channels to market our brand and our subscription offerings . our indirect sales channel consists of a network of resellers who sell our solutions . we also sell our solutions through carriers including at & t , inc. ( “ at & t ” ) , telus communications company ( “ telus ” ) , and bt group plc ( “ bt ” ) . in october 2019 , we entered into a strategic partnership with avaya holdings corp. ( `` avaya `` ) , which includes the introduction of a new solution avaya cloud office by ringcentral ( `` aco `` ) , which will be marketed and sold by avaya and its subsidiaries . in december 2019 , we entered into a strategic partnerhip with atos se ( `` atos `` ) , which includes the introduction of a co-branded unified communications as a service ( `` ucaas `` ) solution . we intend to continue to foster this network and expand our network with other resellers . we also participate in more traditional forms of media advertising , such as radio and billboard advertising . since its launch , our revenue growth has primarily been driven by our flagship ringcentral office product offering , which has resulted in an increased number of customers , increased average subscription revenue per customer , and increased retention of our existing customer and user base . we define a “ customer ” as one individual billing relationship for the subscription to our services , which generally correlates to one company account per customer . as of december 31 , 2019 , we had customers from a range of industries , including financial services , education , healthcare , legal services , real estate , retail , technology , insurance , construction , hospitality , and state and local government , among others . for the years ended december 31 , 2019 , 2018 and 2017 , the vast majority of our total revenues were generated in the u.s. and canada , although we expect the percentage of our total revenues derived outside of the u.s. and canada to grow as we continue to expand internationally . 42 the growth of our business and our future success depend on many factors , including our ability to expand our customer base to larger customers , continue to innovate , grow revenues from our existing customer base , expand our distribution channels , and scale internationally . key business metrics in addition to united states generally accepted accounting principles ( “ u.s . gaap ” ) and financial measures such as total revenues , gross margin , and cash flows from operations , we regularly review a number of key business metrics to evaluate growth trends , measure our performance , and make strategic decisions . we discuss revenues and gross margin under “ results of operations ” and cash flow from operations under “ liquidity and capital resources . ” other key business metrics are discussed below . annualized exit monthly recurring subscriptions we believe that our annualized exit monthly recurring subscriptions ( “ arr ” ) is a leading indicator of our anticipated subscriptions revenues . we believe that trends in revenue are important to understanding the overall health of our business , and we use these trends in order to formulate financial projections and make strategic business decisions . our arr equals our monthly recurring subscriptions multiplied by 12. our monthly recurring subscriptions equals the monthly value of all customer recurring charges at the end of a given month . for example , our monthly recurring subscriptions at december 31 , 2019 was $ 80.0 million . story_separator_special_tag the increase in headcount and other expense categories described herein was driven primarily by investments in our infrastructure and capacity to improve the availability of our subscription offerings , while also supporting the growth in new customers and increased usage of our subscriptions by our existing customer base . we expect subscription gross margin to be within a relatively similar range in the future . other cost of revenues and gross margin . cost of other revenues increased by $ 23.0 million , or 48 % , during fiscal year 2019 as compared to fiscal year 2018 . this was primarily due to the increase in services personnel costs of $ 11.1 million including share-based compensation expense , cost of product sales of $ 10.6 million , and overhead costs of $ 1.3 million . other revenues gross margin fluctuates based on timing of completion of professional services projects and discounting on phones . research and development replace_table_token_8_th research and development expenses increased by $ 35.3 million , or 35 % , during fiscal year 2019 as compared to fiscal year 2018 , primarily due to increases in personnel and contractor costs of $ 30.3 million and overhead costs to support our research and development efforts of $ 4.8 million . of the total increase in personnel and contractor costs , approximately $ 20.0 million was primarily driven by headcount growth and $ 8.2 million was due to higher share-based compensation expense . the increases in research and development headcount and other expense categories were driven by continued investment in current and future software development projects for our applications . given the continued emphasis and focus on product innovation , we expect research and development expenses to continue to increase in absolute dollars . 47 sales and marketing replace_table_token_9_th sales and marketing expenses increased by $ 110.0 million , or 33 % , during fiscal year 2019 as compared to fiscal year 2018 , primarily due to increases in personnel and contractor costs of $ 45.2 million , third-party commissions of $ 27.5 million , amortization of deferred sales commission costs of $ 10.4 million , costs associated with strategic partnerships and acquisitions of $ 10.3 million , advertising and marketing costs of $ 6.6 million , overhead costs to support our marketing efforts of $ 6.5 million , and travel costs of $ 2.8 million . of the total increase in personnel and contractor costs , approximately $ 31.9 million was primarily due to headcount growth and $ 11.0 million was due to higher share-based compensation expense . the increases in sales and marketing headcount and other expense categories were necessary to support our growth strategy to acquire new customers with a focus on larger customers , and to establish brand recognition to achieve greater penetration into the north american and international markets . additionally , we expect sales and marketing expenses to continue to increase in absolute dollars as we continue to expand our presence in north america , europe , and other markets . general and administrative replace_table_token_10_th general and administrative expenses increased by $ 39.3 million , or 38 % , during fiscal year 2019 as compared to fiscal year 2018 , primarily due to increases in personnel and contractor costs of $ 31.6 million , business fees and taxes of $ 3.5 million , professional fees of $ 2.1 million , and acquisition related costs of $ 2.4 million , partially offset by a decrease in overhead costs of $ 1.2 million when compared to prior year . of the total increase in personnel and contractor cost , approximately $ 19.1 million was primarily driven by headcount growth and $ 10.3 million was due to higher share-based compensation expense . we expect general and administrative expenses to continue to increase in absolute dollars as we continue to make additional investments in processes , systems , and personnel to support our anticipated revenue growth . other income ( expense ) , net replace_table_token_11_th nm - not meaningful other expense , net increased by $ 1.6 million during fiscal year 2019 as compared to fiscal year 2018 , primarily driven by an increase in costs associated with strategic partnerships and acquisitions of $ 10.6 million , interest expense of $ 4.4 million resulting from the amortization of debt discount and issuance costs of our 0 % convertible senior notes due 2023 ( “ notes ” ) , offset in part by $ 8.3 million non-cash gains recognized from our long-term investments , increase of $ 3.0 million in interest income earned on our cash and cash equivalents , and gain on foreign exchange of $ 1.6 million . 48 net loss net loss increased by $ 27.4 million during fiscal year 2019 , mainly due to higher share-based compensation expense of $ 33.3 million and non-recurring acquisitions and strategic partnership related expenses of $ 24.1 million , offset by growth in continuing operations , as discussed above . liquidity and capital resources as of december 31 , 2019 and 2018 , we had cash and cash equivalents of $ 343.6 million and $ 566.3 million , respectively . we finance our operations primarily through sales to our customers and a majority of our customers are billed monthly . for customers with annual or multi-year contracts and those who opt for annual invoicing , we generally invoice only one annual period in advance and all invoicing occurs at the start of the respective subscription period . revenue is deferred for such advanced billings . we also finance our operations from proceeds from issuance of stock under our stock plans , and proceeds from issuance of debt . we believe that our operations and existing liquidity sources will satisfy our cash requirements for at least the next 12 months . our future capital requirements will depend on many factors , including revenue growth and costs incurred to support customer growth , acquisitions and expansions , sales and marketing ,
| cash flows comparison of the year ended december 31 , 2020 and the year ended december 31 , 2019 the company had $ 2.2 million of cash and $ 1.1 million of escrows and reserves as of december 31 , 2020 compared to $ 12.5 million of cash and $ 0.7 million of escrows and reserves as of december 31 , 2019. cash flow from operating activities – net cash provided by operating activities increased by $ 6.5 million to $ 9.4 million for the year ended december 31 , 2020 compared to $ 2.9 million for the same period in 2019. the increase is primarily due to the addition of postal properties that were acquired since the ipo , all of which have generated additional rental income and related changes in working capital . cash flow to investing activities – net cash used in investing activities increased by $ 53.5 million to $ 126.2 million for the year ended december 31 , 2020 compared to $ 72.7 million for the same period in 2019. the increase was primarily due to the 261 postal properties that we acquired during 2020. cash flow from financing activities – net cash provided by financing activities increased by $ 24.7 million to $ 106.8 million for the year ended december 31 , 2020 compared to $ 82.1 million provided by the same period in 2019. the increase was primarily related to higher net borrowings during the year ended december 31 , 2020 offset by lower proceeds from equity offerings and higher payments of dividends since our ipo .
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we believe that our innovative , cloud-based approach disrupts the large market for business communications and collaboration by providing flexible and cost-effective solutions that support distributed workforces , mobile employees , and the proliferation of smart phones and tablets . we enable convenient and effective communications for organizations across all their locations and employees , enabling them to be more productive and more responsive to their customers . our cloud-based business communications and collaboration solutions are designed to be easy to use , providing a single user identity across multiple locations and devices , including smartphones , tablets , pcs and desk phones . our solutions can be deployed rapidly and configured and managed easily . through our platform , we enable third-party developers and customers to integrate our solution with leading business applications to customize their own business workflows . we have a portfolio of cloud-based offerings that are subscription based , made available at different rates varying by the specific functionalities , services , and number of users . we primarily generate revenues from the sale of subscriptions to our offerings . our subscription plans have monthly , annual , or multi-year contractual terms . we believe that this flexibility in contract duration is important to meet the different needs of our customers . for the years ended december 31 , 2019 , 2018 , and 2017 , subscriptions revenues accounted for 90 % or more of our total revenues . the remainder of our revenues has historically been primarily comprised of product revenues from the sale of pre-configured phones and professional services . we do not develop , manufacture , or otherwise touch the delivery of physical phones and offer it as a convenience for a total solution to our customers in connection with subscriptions to our services . we rely on third-party providers to develop and manufacture these devices and fulfillment partners to successfully serve our customers . we continue to invest in our direct inside sales force while also developing indirect sales channels to market our brand and our subscription offerings . our indirect sales channel consists of a network of resellers who sell our solutions . we also sell our solutions through carriers including at & t , inc. ( “ at & t ” ) , telus communications company ( “ telus ” ) , and bt group plc ( “ bt ” ) . in october 2019 , we entered into a strategic partnership with avaya holdings corp. ( `` avaya `` ) , which includes the introduction of a new solution avaya cloud office by ringcentral ( `` aco `` ) , which will be marketed and sold by avaya and its subsidiaries . in december 2019 , we entered into a strategic partnerhip with atos se ( `` atos `` ) , which includes the introduction of a co-branded unified communications as a service ( `` ucaas `` ) solution . we intend to continue to foster this network and expand our network with other resellers . we also participate in more traditional forms of media advertising , such as radio and billboard advertising . since its launch , our revenue growth has primarily been driven by our flagship ringcentral office product offering , which has resulted in an increased number of customers , increased average subscription revenue per customer , and increased retention of our existing customer and user base . we define a “ customer ” as one individual billing relationship for the subscription to our services , which generally correlates to one company account per customer . as of december 31 , 2019 , we had customers from a range of industries , including financial services , education , healthcare , legal services , real estate , retail , technology , insurance , construction , hospitality , and state and local government , among others . for the years ended december 31 , 2019 , 2018 and 2017 , the vast majority of our total revenues were generated in the u.s. and canada , although we expect the percentage of our total revenues derived outside of the u.s. and canada to grow as we continue to expand internationally . 42 the growth of our business and our future success depend on many factors , including our ability to expand our customer base to larger customers , continue to innovate , grow revenues from our existing customer base , expand our distribution channels , and scale internationally . key business metrics in addition to united states generally accepted accounting principles ( “ u.s . gaap ” ) and financial measures such as total revenues , gross margin , and cash flows from operations , we regularly review a number of key business metrics to evaluate growth trends , measure our performance , and make strategic decisions . we discuss revenues and gross margin under “ results of operations ” and cash flow from operations under “ liquidity and capital resources . ” other key business metrics are discussed below . annualized exit monthly recurring subscriptions we believe that our annualized exit monthly recurring subscriptions ( “ arr ” ) is a leading indicator of our anticipated subscriptions revenues . we believe that trends in revenue are important to understanding the overall health of our business , and we use these trends in order to formulate financial projections and make strategic business decisions . our arr equals our monthly recurring subscriptions multiplied by 12. our monthly recurring subscriptions equals the monthly value of all customer recurring charges at the end of a given month . for example , our monthly recurring subscriptions at december 31 , 2019 was $ 80.0 million . story_separator_special_tag the increase in headcount and other expense categories described herein was driven primarily by investments in our infrastructure and capacity to improve the availability of our subscription offerings , while also supporting the growth in new customers and increased usage of our subscriptions by our existing customer base . we expect subscription gross margin to be within a relatively similar range in the future . other cost of revenues and gross margin . cost of other revenues increased by $ 23.0 million , or 48 % , during fiscal year 2019 as compared to fiscal year 2018 . this was primarily due to the increase in services personnel costs of $ 11.1 million including share-based compensation expense , cost of product sales of $ 10.6 million , and overhead costs of $ 1.3 million . other revenues gross margin fluctuates based on timing of completion of professional services projects and discounting on phones . research and development replace_table_token_8_th research and development expenses increased by $ 35.3 million , or 35 % , during fiscal year 2019 as compared to fiscal year 2018 , primarily due to increases in personnel and contractor costs of $ 30.3 million and overhead costs to support our research and development efforts of $ 4.8 million . of the total increase in personnel and contractor costs , approximately $ 20.0 million was primarily driven by headcount growth and $ 8.2 million was due to higher share-based compensation expense . the increases in research and development headcount and other expense categories were driven by continued investment in current and future software development projects for our applications . given the continued emphasis and focus on product innovation , we expect research and development expenses to continue to increase in absolute dollars . 47 sales and marketing replace_table_token_9_th sales and marketing expenses increased by $ 110.0 million , or 33 % , during fiscal year 2019 as compared to fiscal year 2018 , primarily due to increases in personnel and contractor costs of $ 45.2 million , third-party commissions of $ 27.5 million , amortization of deferred sales commission costs of $ 10.4 million , costs associated with strategic partnerships and acquisitions of $ 10.3 million , advertising and marketing costs of $ 6.6 million , overhead costs to support our marketing efforts of $ 6.5 million , and travel costs of $ 2.8 million . of the total increase in personnel and contractor costs , approximately $ 31.9 million was primarily due to headcount growth and $ 11.0 million was due to higher share-based compensation expense . the increases in sales and marketing headcount and other expense categories were necessary to support our growth strategy to acquire new customers with a focus on larger customers , and to establish brand recognition to achieve greater penetration into the north american and international markets . additionally , we expect sales and marketing expenses to continue to increase in absolute dollars as we continue to expand our presence in north america , europe , and other markets . general and administrative replace_table_token_10_th general and administrative expenses increased by $ 39.3 million , or 38 % , during fiscal year 2019 as compared to fiscal year 2018 , primarily due to increases in personnel and contractor costs of $ 31.6 million , business fees and taxes of $ 3.5 million , professional fees of $ 2.1 million , and acquisition related costs of $ 2.4 million , partially offset by a decrease in overhead costs of $ 1.2 million when compared to prior year . of the total increase in personnel and contractor cost , approximately $ 19.1 million was primarily driven by headcount growth and $ 10.3 million was due to higher share-based compensation expense . we expect general and administrative expenses to continue to increase in absolute dollars as we continue to make additional investments in processes , systems , and personnel to support our anticipated revenue growth . other income ( expense ) , net replace_table_token_11_th nm - not meaningful other expense , net increased by $ 1.6 million during fiscal year 2019 as compared to fiscal year 2018 , primarily driven by an increase in costs associated with strategic partnerships and acquisitions of $ 10.6 million , interest expense of $ 4.4 million resulting from the amortization of debt discount and issuance costs of our 0 % convertible senior notes due 2023 ( “ notes ” ) , offset in part by $ 8.3 million non-cash gains recognized from our long-term investments , increase of $ 3.0 million in interest income earned on our cash and cash equivalents , and gain on foreign exchange of $ 1.6 million . 48 net loss net loss increased by $ 27.4 million during fiscal year 2019 , mainly due to higher share-based compensation expense of $ 33.3 million and non-recurring acquisitions and strategic partnership related expenses of $ 24.1 million , offset by growth in continuing operations , as discussed above . liquidity and capital resources as of december 31 , 2019 and 2018 , we had cash and cash equivalents of $ 343.6 million and $ 566.3 million , respectively . we finance our operations primarily through sales to our customers and a majority of our customers are billed monthly . for customers with annual or multi-year contracts and those who opt for annual invoicing , we generally invoice only one annual period in advance and all invoicing occurs at the start of the respective subscription period . revenue is deferred for such advanced billings . we also finance our operations from proceeds from issuance of stock under our stock plans , and proceeds from issuance of debt . we believe that our operations and existing liquidity sources will satisfy our cash requirements for at least the next 12 months . our future capital requirements will depend on many factors , including revenue growth and costs incurred to support customer growth , acquisitions and expansions , sales and marketing ,
| net cash provided by operating activities cash provided by operating activities is influenced by the timing of customer collections , as well as the amount and timing of disbursements to our vendors , the amount of cash we invest in personnel , marketing , and infrastructure costs to support the anticipated growth of our business , and the increase in the number of customers . net cash provided by operating activities was $ 64.8 million for the year ended december 31 , 2019 . this was driven by net loss of $ 53.6 million adjusted for impacts of non-cash adjustments of $ 205.5 million , partially offset by a net cash used for working capital of $ 87.0 million driven primarily by timing of cash payments to vendors and cash receipts and prepayments from customers and carriers . the non-cash adjustments resulted primarily from $ 101.4 million of share-based compensation , $ 37.9 million of depreciation and amortization , $ 30.1 million amortization of deferred sales commissions costs , $ 20.3 million amortization of debt discount and issuance costs related to our convertible notes , and $ 3.4 million loss and other related costs on investments . net cash provided by operating activities for the year ended december 31 , 2019 , decreased by $ 7.3 million as compared to the year ended december 31 , 2018 . this change reflects working capital benefits resulting from payments and collections timing , as well as approximately $ 37.0 million of one-time payments stemming from our recent partnerships . net cash used in investing activities our primary investing activities have consisted of our long-term investments , business acquisitions and purchase of intellectual properties , and capital expenditures and internal-use software . as our business grows , we expect our capital expenditures to continue to increase . 49 net cash used in investing activities was $ 296.8 million for the year ended december 31 , 2019 .
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million . hpp segment revenue change by product line for the twelve months ended september 30 was as follows : replace_table_token_4_th the hpp segment revenue increase of $ 2.4 million is attributed to : ( i ) $ 0.8 million in royalties on high-speed processing boards related to production of aircraft ; ( ii ) $ 1.1 million of additional part shipments to support the production of high-speed processing boards ; and ( iii ) $ 0.5 million of additional myricom product revenue . 14 ts segment revenue change by product line for the twelve months ended september 30 was as follows : replace_table_token_5_th the ts segment revenue increases in our u.s. and u.k. divisions of $ 11.7 million and $ 2.5 million , respectively , were partially offset by a $ 2.5 million decrease in revenue in our german division . the u.s. division product and service revenues increased by $ 10.0 million and $ 1.7 million , respectively , and the increase of 2.5 million in u.k. revenues is primarily attributed to product revenues . the german division revenue decrease is the result of lower product revenues . our total revenues by geographic area based on the location to which the products were shipped or services rendered was as follows : replace_table_token_6_th gross margins our gross margins increased by $ 5.9 million , or 3 % of revenues , to $ 25.0 million in fiscal year 2016 as compared to gross margins of $ 19.2 million in fiscal year 2015. the following table summarizes gross margin ( `` gm `` ) changes by segment for fiscal years 2016 and 2015 : replace_table_token_7_th the impact of product mix on gross margins within our hpp segment for the twelve months ended september 30 was as follows : replace_table_token_8_th 15 the increase in our hpp segment gross margins is primarily attributed to the impact of $ 4.3 million of royalties on high-speed processing boards for the equivalent of seven planes at approximately 100 % gross margin in fiscal year 2016 as compared to $ 3.5 million of royalties on high-speed processing boards for the equivalent of six planes in fiscal year 2015 , an increase of $ 1.1million in revenue at approximately 65 % gross margin on product shipments and a gross margin increase of $ 0.7 million attributed to a favorable mix of myricom product sales for the comparative period . the impact of product mix within our ts segment on gross margins for the twelve months ended september 30 was as follows : replace_table_token_9_th for fiscal year 2016 compared to fiscal year 2015 , the increase in our ts segment gross margins of $ 3.7 million resulted from a $ 3.7 million increase in our u.s. division that was the result of a favorable product mix and an increase in high gross margin service revenues . an increase in product revenues recognized by our u.k. division was mostly offset by an unfavorable product mix and a decrease in product revenues recognized by our german division mostly was offset by an increase in service revenue margins , which is primarily attributed to a favorable mix of service engagements that enabled higher utilization of internal resources , creating a net neutral effect on gross margins from the foreign divisions . engineering and development expenses the following table details our engineering and development expenses by operating segment for the fiscal years ended september 30 , 2016 and 2015 : replace_table_token_10_th the increase in engineering and development expenses in the hpp segment resulted from the timing of expenditures and increases in payroll related to hiring additional engineers . the fiscal year 2016 expenses are primarily for myricom engineering expenses incurred in connection with the development of new products . selling , general and administrative the following table details our selling , general and administrative ( “ sg & a ” ) expense by operating segment for the years ended september 30 , 2016 and 2015 : replace_table_token_11_th 16 for fiscal year 2016 compared to fiscal year 2015 , the hpp segment sg & a spending increase of $ 1.0 million is primarily attributed to increases of : $ 0.7 million in management bonuses , $ 0.2 million for salaries , wages and employee benefits , and $ 0.2 million of outside consulting expenses , partially offset by a net gain of $ 0.4 million on insurance proceeds from an officer life insurance policy and a $ 0.3 million decrease in the cash surrender value of the underlying officers life insurance policies . for fiscal year 2016 compared to fiscal year 2015 , the ts segment sg & a spending increase of approximately $ 1.2 million is substantially the result of an increase in our u.s. division of $ 1.6 million primarily attributed to variable selling expenses and management bonuses , partially offset by spending decreases of $ 0.4 million and $ 0.1 million in our u.k. and german divisions , respectively . the spending decrease in germany is primarily attributed to lower selling expenses and the decrease in the u.k. is attributed to lower administrative costs . other income/expenses the following table details our other income/expenses for the years ended september 30 , 2016 and 2015 : replace_table_token_12_th income taxes the company recorded an income tax expense of approximately $ 1.0 million , which reflected an effective tax expense rate of 27.7 % for the year ended september 30 , 2016 , which was lower than the statutory rate due in part to the tax benefit from research and development credits . for the year ended september 30 , 2015 , the income tax expense was approximately $ 0.2 million , which reflected an effective tax rate of 1,414 % . story_separator_special_tag engineering and development expenses engineering and development expenses include payroll , employee benefits , stock-based compensation and other headcount-related expenses associated with product development . engineering and development expenses also include third-party development and programming costs . we consider technological feasibility for our software products to be reached upon the release of the software , accordingly , no internal software development costs have been capitalized . 20 income taxes we use the asset and liability method of accounting for income taxes whereby deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases . deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled . the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date . we also reduce deferred tax assets by a valuation allowance if , based on the weight of available evidence , it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods . this methodology requires estimates and judgments in the determination of the recoverability of deferred tax assets and in the calculation of certain tax liabilities . valuation allowances are recorded against the gross deferred tax assets that management believes , after considering all available positive and negative objective evidence , historical and prospective , with greater weight given to historical evidence , that it is more likely than not that these assets will not be realized . in addition , we are required to recognize in the consolidated financial statements , those tax positions determined to be more-likely-than-not of being sustained upon examination , based on the technical merits of the positions as of the reporting date . if a tax position is not considered more-likely-than-not to be sustained based solely on its technical merits , no benefits of the position are recognized . in addition , the calculation of the company 's tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of jurisdictions . the company records liabilities for estimated tax obligations in the u.s. and other tax jurisdictions . these estimated tax liabilities include the provision for taxes that may become payable in the future . i ntangible assets intangible assets that are not subject to amortization are also required to be tested annually , or more frequently if events or circumstances indicate that the asset may be impaired . we did not have intangible assets with indefinite lives other than goodwill at any time during the two years ended september 30 , 2016 . intangible assets subject to amortization are amortized over their estimated useful lives , generally three to ten years , and are carried at net book value . the remaining useful lives of intangible assets are evaluated on an annual basis . intangible assets subject to amortization are also tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable . if the fair value of an intangible asset subject to amortization is determined to be less than its carrying value , then an impairment charge is recorded to write down that asset to its fair value . inventories inventories are stated at the lower of cost or market , with cost determined using the first-in , first-out method . the recoverability of inventories is based upon the types and levels of inventories held , forecasted demand , pricing , competition and changes in technology . we write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions . if actual market conditions are less favorable than those projected by management , additional inventory write-downs may be required . pension and retirement plans the funded status of pension and other post-retirement benefit plans is recognized prospectively on the balance sheet . gains and losses , prior service costs and credits and any remaining transition amounts that have not yet been recognized through pension expense will be recognized in accumulated other comprehensive income , net of tax , until they are amortized as a component of net periodic pension/post-retirement benefits expense . additionally , plan assets and obligations are measured as of our fiscal year-end balance sheet date ( september 30 ) . we have defined benefit and defined contribution plans in the u.k. , germany and in the u.s. in the u.k. and germany , the company provides defined benefit pension plans for certain employees and former employees and defined contribution plans for the majority of the employees . the defined benefit plans in both the u.k. and germany are closed to newly hired employees and have been for the two years ended september 30 , 2016 . in the u.s. , the company provides defined contribution plans that cover most employees and supplementary retirement plans to certain employees and former employees who are now retired . these supplementary retirement plans are also closed to newly hired employees and have been for the two years ended september 30 , 2016 . these supplementary plans are funded through whole life insurance policies . the company expects to recover all insurance premiums paid under these policies in the future , through the cash surrender value of the policies and any death benefits or portions thereof to be paid upon the death of the participant . these whole life insurance policies are carried on 21 the balance sheet at their cash surrender values as they are owned by the company and not assets of the defined benefit plans . in the u.s. , the company also
| net cash provided by operating activities cash provided by operating activities is influenced by the timing of customer collections , as well as the amount and timing of disbursements to our vendors , the amount of cash we invest in personnel , marketing , and infrastructure costs to support the anticipated growth of our business , and the increase in the number of customers . net cash provided by operating activities was $ 64.8 million for the year ended december 31 , 2019 . this was driven by net loss of $ 53.6 million adjusted for impacts of non-cash adjustments of $ 205.5 million , partially offset by a net cash used for working capital of $ 87.0 million driven primarily by timing of cash payments to vendors and cash receipts and prepayments from customers and carriers . the non-cash adjustments resulted primarily from $ 101.4 million of share-based compensation , $ 37.9 million of depreciation and amortization , $ 30.1 million amortization of deferred sales commissions costs , $ 20.3 million amortization of debt discount and issuance costs related to our convertible notes , and $ 3.4 million loss and other related costs on investments . net cash provided by operating activities for the year ended december 31 , 2019 , decreased by $ 7.3 million as compared to the year ended december 31 , 2018 . this change reflects working capital benefits resulting from payments and collections timing , as well as approximately $ 37.0 million of one-time payments stemming from our recent partnerships . net cash used in investing activities our primary investing activities have consisted of our long-term investments , business acquisitions and purchase of intellectual properties , and capital expenditures and internal-use software . as our business grows , we expect our capital expenditures to continue to increase . 49 net cash used in investing activities was $ 296.8 million for the year ended december 31 , 2019 .
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